Financial markets to function amid shutdown - - No disruption to trading of stocks - Forex flows expected to fall, but BOJ ready to fill the gap

Amid the national shutdown, the central bank is asking financial companies to hold back on issuing debt in foreign currency, but has otherwise assured them it has measures in place to ensure they have adequate supplies of foreign exchange and Jamaican currency.

On the equities side of the capital market, the Jamaica Stock Exchange, JSE, will remain open for trading, even while downscaling activities such as listing ceremonies, which would be limited in size, to reduce possible exposure to the coronavirus.

Jamaica earns most of its foreign exchange from remittances and tourism and late Tuesday, the Bank of Jamaica issued a statement saying the public should expect those flows to decline.

“With the sharp contraction in the tourism industry and the likely disruption to remittance inflows, the supply of foreign exchange to the market will fall in the near term. The central bank will support the foreign exchange needs of businesses in the real sector through sales to authorised dealers and cambios, as needed,” the BOJ said in a statement.

Earlier Tuesday, the stock exchange also advised companies to make informed decisions – guided by their articles of association – about the holding of annual general meetings, saying the company law allows for up to 15 months from the date of its last AGM to convene its next one and for new companies they have up to 18 months after incorporation to convene their the first AGM.

Not shutting down

“We have no intentions at this time to shut down, but we are working remotely from home,” JSE Group Managing Director Marlene Street Forrest told the Financial Gleaner.

“In light of COVID-19, we are discouraging large social gatherings at the JSE therefore a listing ceremony would be scaled down and instead electronic means would be used for viewers,” she said.

As for AGMs, there were no indications up to yesterday that any of the three scheduled for this week for listed companies, on March 19 and March 20, had been postponed.

Prime Minister Andrew Holness on Tuesday announced a one-week shut down of Government services, except for the essential services, to take effect today Wednesday as a containment measure against the spread of COVID-19. The Prime Minister also asked the private sector to do the same.

Even before that announcement, Jamaicans were already taking steps to maintain the social distance recommended by health authorities. For businesses and other organisations that distancing has seen them implementing work from home programmes, some of which were being accelerated Tuesday in response to the shutdown.

As for the Jamaican stock market, as the potential financial and economic effects of the virus began to seep in, share prices have been sliding nearly consistently since January. The combined market was down 25.5 per cent from its peak this year – falling from 508,130 points on January 2 to a fresh low of 378,292 points on March 17.

Amid the slide into bear market territory – which is defined as a drop in market value of over 20 per cent, driven by uncertainty – at least one company has put off going to the market with an offer new shares. Proven Investments Limited, which aims to raise up to US$75 million from an additional public offering, or APO, has cited “the heightened disruption triggered by the intensification of the COVID-19 pandemic” as its reason for the postponement.

Additionally, there are suggestions by stock analysts that toll concession company TransJamaican Highway, which executed a successful IPO this month that raised $25.12 billion, should delay the stock’s listing beyond March.

Such a delay would go against the policy direction that the JSE had been heading in, of narrowing the timeline between the closing of an IPO and the listing of the stock for trading, but the exchange seems willing to at least hear TransJamaican’s case, were one to be made.

“The Listing Committee will meet to consider this listing on Wednesday [March 18], barring any unforeseen circumstances,” said Street Forrest.

“If that request is made it will be deliberated,” she added.

Street Forrest told the Financial Gleaner that based on JSE rules, the application for listing of a stock must be made within 15 days after the allotment of shares have been made by the issuer to subscribers to the offer; and the listing is effected within five days of the JSE approving the stock for trading.

The allotments of the TransJamaican shares were made last week. Today’s consideration by the JSE Listing Committee, suggests the TransJamaican listing should happen by next Wednesday, March 25, assuming the meeting is held and the application is approved; and assuming no extension is granted.

The thinking is that the TJH stock could sink if listed this month, as the overall market continues to find its new floor, according to analysts who spoke to the Financial Gleaner.

There are expectations that Jamaica could see disruptions to normal life for several months, a sentiment that will likely continue to drive market activity.

Since January, the stock market has shed $500 billion of its over $2 trillion of value. What that means is market investors have lost half-trillion dollars of their wealth in just over two months.

BOJ meanwhile wants investment companies to postpone new issues of foreign exchange denominated debt “until the flows in the market can accommodate” such capital market transactions, but has not indicated the time horizon over which it expects those debt arrangers to hold back.

steven.jackson@gleanerjm.com