Last week the CEO and president of PanCaribbean Donovan Perkins spoke at the Jamaica Stock Exchange’s Best Practices Awards held at the Jamaica Pegasus Hotel in New Kingston. Below is the full text of his address.

IT is my pleasure to welcome you to our seventh annual awards, and I take this opportunity to wish you all a very Merry Christmas. I look forward to these awards in December every year… because they recognise excellence amongst companies listed on our Exchange… and also acknowledge our stockbrokers… who play an important role in advising investors and executing their market orders.

I want to commend the management team at the JSE for conceiving this idea, for putting together the Committee that does the work in preparation for this ceremony, and for executing it so well each year. This has undoubtedly become one of the major award ceremonies on the corporate calendar.

As a result of these awards…a process that is guided under the leadership of Prof Ying…we have seen significant improvements each year in the annual reports…in three areas…for companies listed on the stock exchange. They are:

First — we note that the quality of financial analysis and insights into the company’s business has improved tremendously…

Secondly — There is an increased level of disclosure on the company’s corporate governance architecture and activities related to the board’s oversight.

The third area… is the improvement in the range of financial ratios and statistics that are supplemented by comments on the strategic direction… helping investors on whether they should buy, hold or sell shares.

Tonight, I want to also take this opportunity to speak very briefly on three areas of our economy — these are:

First — the outstanding performance of the Stock Exchange’s Junior Market.

Secondly — the pending tax reform.

And finally, domestic interest rates…I get really excited when I speak on topics like interest rates….

Junior Market

As you may recall, our Junior Market was launched in April 2009… with the first company being listed seven months later in October 2009.

The Junior Exchange currently has 12 companies listed operating in six different industries — finance, manufacturing, retail, tourism, insurance and transportation — and I wish to congratulate Mayberry for the work they have done in bringing the majority of these companies to the Junior Market.

So far, these companies have raised $1.9 billion in equity through the exchange, and the market capitalisation of our Junior Market is currently a whopping $23.8 billion.

The average daily volume traded so far for 2011 is approx 1.3 million units (actual = 1,268,069 units) while the average daily value traded is $5.1 million (actual = $5,123,414).

Using the ratio of Value Traded to Total Market Capitalisation, the Junior Market is twice as active as the Main Exchange.

The average YTD price appreciation for each individual stock on the Junior Market has been 89 per cent (Actual = 89.44 per cent) with only one stock declining. And for the past 12 months, eight of the Junior Market companies have paid dividends with an average yield of four per cent.

In summary, since January of this year, the Junior Market is up over 99 per cent while companies listed on our main board returned a respectable 13 per cent for the same period.

That’s excellent news and we hope that more companies will come to the market in 2012.

On To Tax Reform

The New Year approaching is set to be another challenging year for our country and its businesses. I believe that despite these challenges, 2012 will have its share of opportunities.

Tax reform under the IMF agreement will come into effect on April 1, and is expected to result in, amongst other things, a lower corporate tax rate.

I believe that if that reduction occurs, it will have a material positive impact on many of the listed companies’ earnings, earnings per share and dividends. So investors should follow these developments closely as they will present investment opportunities for those companies that will benefit from lower tax rates.

As It Relates to Interest Rates

Across the world — central banks have been coordinating efforts to cut rates, provide liquidity and stimulate their local economies… and so have we to some extent in Jamaica. I believe there is still room for further reduction in domestic interest rates for several reasons.

In my opinion, the leadership of the Bank of Jamaica has done an excellent job in its role in supporting our economy. In particular, the BOJ has managed liquidity, exchange rates and our interest rate environment exceptionally well.

Lower domestic rates will help to reduce the borrowing cost of our Government. As we are all aware, Jamaica has run significant fiscal deficits for the last two decades — and this has restricted our ability to invest adequately in the areas of education, health, infrastructure and security.

Secondly, lower interest rates are good for housing, and this is the area of the most significant unmet demand in Jamaica today. I was told recently that our housing needs in Jamaica conservatively exceed 250,000 solutions.

According to the PIOJ, the construction sector represents eight percent of GDP… and ranks 7th of our 14 industries measured. The Construction industry is one of the largest employers of skilled and semi-skilled labour in Jamaica. So… lower rates help this sector and supports families seeking to build their net worth through home ownership.

Third, lower borrowing rates will encourage business expansion which helps to grow employment and expand the country’s tax base.

Finally, lower interest rates are also good for the share price of listed companies and hopefully will encourage more companies to list. This is good for our stock market, good for the JSE, and good for Jamaica…Risk equity remains one of the most important factors in economic development.

An over-reliance on debt has its risks, as is now obvious to all.

The BOJ has displayed its considerable skills in managing the economic variables, and has maintained stability notwithstanding the global uncertainty. Despite the recent jump in global equity markets, many observers continue to refer to this new decade as “the lost decade”, because of the apparent structural problems plaguing most economies, including ours. And time and tough decisions are required to fix the problems faced in the US, Europe and back home here in Jamaica.

I am well aware of all the arguments against lower rates in Jamaica (in fact, I once supported most of those views myself), but while I believe it is a necessary PART of the solution, by itself, it remains insufficient.

We here in Jamaica, have sufficient understanding of the challenges facing our country and we know the required steps to put us on a path to prosperity. With the will, courage, planning and cooperation — we must all play our respective roles so that Jamaica, this land we love, on the verge of our 50th year as an independent country… must regain its rightful place as one of the best countries in the world.