New metrics being developed to track regional stock exchanges
Following the successful launch of the Caribbean Exchange Index (CXNI), there is currently additional work taking place by five regional exchanges to develop new sub-indices to track the performance of different listed companies across the Caribbean.
Stock market sub-indices measure the performance of a group or basket of individual stocks and give a wider view for an investor to assess the state of a particular sector against the overall market. The CXNI combines the values of the Jamaica Stock Exchange (JSE), Trinidad & Tobago Stock Exchange (TTSE), Barbados Stock Exchange (BSE), and the Eastern Caribbean and Guyanese stock exchanges to allow investors a wider view of the regional stock markets.
In a bid to give a more granular view of the region, there are currently plans for the five exchanges to work on the creation of sub-indices to track specific sectors of listed companies.
“Right now, we have one index that can track the performances of all five exchanges. What we want to do is build out into different sub-indices which would represent the performances across different sectors, similarly to how it is with the S&P index. So, we want to have a regional financial sector index, a regional manufacturing index, a regional medical industry index, so that local, regional, and international investors can see the performances of the different industries that form part of this general overall index,” said Mitchell, in an interview with the
Jamaica Observer last Thursday at the JSE’s 19th Regional Investments and Capital Markets Conference held at the Jamaica Pegasus hotel.
The genesis of the regional index was driven by TTSE Chief Executive Officer Eva Mitchell and JSE Managing Director Marlene Street-Forrest in January 2021. The CXNI was eventually launched in October 2022 at the TTSE’s 40th anniversary conference where the index started with 1,000 points and a market capitalisation of US$31.04 billion. It ended 2022 at 992.61 points before declining 5.50 per cent to 931.96 points in 2023 with a market capitalisation of US$29.60 billion. The CXNI closed Friday at 929.01 with a market capitalisation of US$29.44 billion.
Different stock exchanges have worked on developing sub-indices for their respective markets over the years. The JSE launched the JSE Financial Index in March 2019 to track the performance of financial companies listed on both the main and junior markets while launching the JSE Manufacturing and Distribution (M&D) Index in October 2019 to track companies across both markets involved in manufacturing and distribution. These eventually led to Sagicor Select Funds Limited listing its class B shares (SelectF) and class C shares (SelectMD) which were meant to track the composition of the respective financial and M&D indices. Both indices were originally launched at 100 points each with the M&D Index trading at 103.76 points with a market capitalisation of $736.55 billion while the financial index lags at 69.44 points and a market capitalisation of J$856.60 billion as of Tuesday.
TTSE pushing ahead in 2024
While it works alongside the other exchanges on different initiatives, the TTSE is pushing forward on several developments for its market in 2024 with the most noteworthy event being the change from a T+3 to T+2 settlement cycle on April 15. The settlement cycle simply refers to the time it takes for cash to be settled and shares to be transferred to the new owner following a transaction. Thus, a trade which occurred on Monday will now be settled on Wednesday instead of Thursday.
“It’s something that we’re really excited about. We’re now aligned to what I would say is international standards. We have the US, Canada and I think the JSE is moving to T+1. It’s a gradual shift for us because investors, brokers, the entire ecosystem that is involved in the trades process must be comfortable with the move. The plan is to move to T+1, but, like I said, it’s gradual and this is good for us because it reduces the risk of settlement; it makes sure that the turnover is faster,” Mitchell explained.
The current push to digital has been working excellently for the TTSE as it has exceeded its expectations of having five per cent of trades being processed on its online platform called “TOP” to 32 per cent of trades in 2023. TOP went live in July 2020 and has already assisted in the current reality with retail investors making up 80 per cent of trades on the TTSE. The first fully digital government bond issuance in 2023 also saw its bond market recording a 10 per cent increase in trading values. The TTSE will be hosting its third conference in October at which time it expects to highlight different topics at home and across the region.
“Over the last three years we’ve been heavily focused on building our retail participation, especially with this new digital age and the different type of investor which appears to be more speculative. We’ve directed a lot of our efforts and focus around that particular pool,” Mitchell highlighted on the success of TOP for her market.
The TTSE entered into a partnership with the Trinidad and Tobago Chamber of Industry and Commerce earlier this month to work with their members on providing insights about the potential of using equity capital. The TTSE SME Market currently has two companies listed with the market having the same tax benefits as seen on the JSE’s Junior Market, which includes a five-year tax remission and a 50 per cent remission on the tax rate for the remaining five years.
“Most of our companies listed on our stock exchange have demonstrated that type of resilience even though we experience down markets in 2023. I would like to say that if you want to build that resilience, you have to consider equity financing. In order for you to remain agile, you have to look at your funding options and equity is something that should be considered in order for you to have that agility and to balance-proof yourself for unforeseen events like COVID. Look at us, look at the benefits of the SME market, understand the importance of equity capital and have a discussion with us,” Mitchell closed.