JAMAICAN investors, particularly those entering the stock market in recent years, are showing more maturity when it comes to investing.

Analysts have confirmed that there is increasing sophistication in how investors — particularly those with less than five years of trading experience — approach investment opportunities on the Junior Market of the Jamaica Stock Exchange (JSE), a development that has challenged brokerage houses to put more muscle behind identifying ‘Grade A’ companies to bring to market.

GK Capital Management Limited, the investment and advisory subsidiary of GraceKennedy Limited, has singled out itself as one such company that has recently refocused its attention on Grade A companies. The company is said to be keeping watch on businesses experiencing high levels of profitability, growth or great potential in terms of outlook.

The conversation around investor maturity comes amid an initial public offerings (IPO) by Omni Industries Limited and an additional public offering (APO) from NCB Financial Group. On Friday, NCBFG announced that its APO will be extended by one week, making the new closing date June 3 while Omni’s IPO was oversubscribed and closed early.

“Jamaica has been through 50 plus IPOs in the last 10 to 15 years. I think investors now are a lot more discerning, a lot more mature; but a great opportunity will always find favour. Does it mean that once a company goes public they are always going to have money thrown at them? I don’t believe so. I believe that the strength of the opportunity will determine the investor’s reaction,” Vice-President of Investor Relations Ryan Strachan told the
Jamaica Observer.

According to data published by the JSE, the number of individuals taking interest in the Jamaican stock market continues to rise. In 2022, there were 283,613 Jamaica Central Securities Depository (JCSD) accounts, compared to 246,407 in 2021 reflecting an increase of 37,206 new accounts year on year.

The JSE also reported that 25,038 new accounts were opened in 2020, even though the data does not capture individuals who may have multiple accounts.

Jamaica started seeing growing interest in the equities market from as far back as 2009 when the JSE launched the Junior Market to encourage and promote investment in local entrepreneurship. The interest continued to grow based on Jamaica’s improved macroeconomic outlook.

“About 2015 or 2016, inflation in Jamaica started to decline and interest rates fell with that, and so the traditional returns that investors would have seen on fixed income instruments, government paper, etc, was also coming down. Eventually, monies started to move the equities market…into stocks,” Simon Johnson, founder of Stocks on the Rocks, told the Sunday Finance.

Then there were the listings of Wigton Windward and TransJamaican Highway, which, with support from the Government, garnered interest from more than 30,000 Jamaicans.

“Companies started to list on the Junior Market, some of which people were more familiar with. They were listed at attractive valuations and so the returns improved which was followed by increased interest in the stock market,” Johnson said.

“There was a time when the average return that an investor would make on an IPO was over 90 per cent over a short period of time,” he continued.

Previously, smaller equity raises would often see immediate success, with companies experiencing significant price increases within days of listing. Many were investing based on the ‘hype and advertisement’ the companies got, Mikol Mortley, economic and financial analyst at National Commercial Bank Jamaica Limited said, and not so much on the financials or outlook of the companies.

However, recent equity raises have shown a more measured response.

“The market has grown in how it views equity raises,” Mortley explained. “It’s not a case where companies can expect to double in value within three days anymore.”

Change in market dynamics

Much of that changed when seasoned investment analysts like Johnson started to host private financial literacy sessions online through his business Stocks on the Rocks. Media personality Kalilah Reynolds also ventured into her own business — Money Media Limited — and developed a niche by creating content focused on educating Jamaicans on investment strategies, also online.

Other private groups include Earnings Season otherwise called ‘BrickTalk’; Wealth Watch; and Learn, Grow and Invest. Traditional media, broadcast and print also played an important role, and some brokerage houses also started to host investor sessions online.

The shift indicated that investors were looking beyond the initial hype and focusing on long-term growth potential and solid business models. They are also said to be prioritising due diligence and strategic investment decisions.

“We can definitely credit the growth to the increase in financial literacy programmes in recent times. Jamaicans were no longer reliant on just the JSE to send out information or the brokerage houses. We started to see increasing investment discussions primarily on Twitter, many explainer series that touched on topics like why you should invest and what is the benefit of doing so,” Johnson said.

Johnson’s company — Stocks on the Rocks — has spent much of the last few years travelling to vulnerable communities across the island to share investing principles and strategies with the ordinary Jamaican.

Investor experience

Johnson said that in addition to educational sessions, investors are also learning from their own experiences.

“We have had quite a few IPOs, some have listed and done well, some not so well, some suspended. And so people have a greater understanding of how the market works because of their own experience. They now know what to look for in a company and they also know what they want as it relates to their own investment journey,” he said.

“As it relates to financials, I don’t know if people are better at reading and assessing financials because financial analysis is still a relatively technical subject. But what I can say is that there are more avenues explaining what investors should look for,” Johnson continued.

Furthermore, local companies are also finding creative ways to engage investors in their financial performance. One such company that is leading the way in this regard is One Great Studio, he said.

Looking forward, Johnson said brokerage houses can do more to break down financial information on listed companies for young investors as well as to increase the number of companies on which they conduct financial analysis.

“If there are 100 companies on the market, brokerage houses don’t cover all of them, they usually cover just a few but I believe they can spread the coverage to those companies that we don’t really hear much about.”

He adds that listed companies should be just as open to discussing negative performances as they are with highlighting positive financial results.