Incentives may be needed to get junior stock market going

With the Barbados market “starved” for more local equity investment options, one firm is welcoming Government’s plan to revive the junior market on the Barbados Stock Exchange (BSE), saying it should provide more opportunities for Barbadians.

However, Investment Director of Fortress Fund Managers Roger Cave said it may need fiscal incentives to get it going.

“It would be wonderful to see it happen and I know our junior market on the stock exchange has existed for many years but we had very few listings,” he said.

“For it to happen unfortunately, it is going to need fiscal incentives as we have seen in Jamaica, [which] has been very successful with their junior market. It shouldn’t be what’s needed but maybe it is what’s needed to give it a kick start. So we do wish that it would happen because from where we sit in Fortress, we are starved for investment opportunities,” he said.

In her Budget presentation earlier this year, Prime Minister Mia Mottley announced her administration’s plan to breathe new life into the junior stock market, as she noted that it “has not taken off in Barbados” over the years.

“In part, this is because the costs, the reporting and conditions over how much equity has to be offered remain too onerous in our view. The new digital technologies, however, provide new opportunities to try and get this right and to create markets where Barbadians can trade small or large ownership stakes in Barbadian businesses,” she said.

Pointing to the Jamaica experience, Mottley said it was not beyond Barbados “to get it right” given the level of liquidity in the local banking system.

“We aim to work with the Barbados Stock Exchange and Small Business Association to establish a vibrant, low cost exchange, with more competitive fees, reporting and equity conditions. We are also prepared to offer, perhaps through others, technical assistance for firms to meet the conditions of listing on the junior stock exchange. And separately, we need to support the arrival of low cost brokers who will help small investors trade these shares,” said Mottley.

In an interactive session with the media on Wednesday, Cave said reviving the junior market on the BSE was “a great idea”, but said maybe to jump-start it a bit of fiscal incentives may be required.

The junior market was rebranded in June 2019 to become the Innovation and Growth Market, as a precursor to the development of that segment of the stock exchange.

It is not yet clear exactly when the junior market would be open for business, but officials of the BSE and the Small Business Association have been in discussions with the aim of having it active by the second half of this year.

Chief Investment Officer of Fortress Fund Managers Peter Arender also welcomed the idea, saying it would expand the share of the local capital market.

He cited tax policy as one incentive that could help to breathe life into the junior stock market here, adding that “Jamaica seem to be good example of how that’s happened”.

That country’s junior market was established in 2009 and companies benefit from a 10-year tax break, with firms being exempt from paying corporate income tax for the first five years and only 50 per cent for the remaining period.

“The thing to remember though is that nothing happens on its own and the tax policy can help,” said Arender.

However, he said “It all starts with having companies that are healthy and profitable, and maybe even have operations outside of Barbados and it all kind of goes back to the growth story. If we grow and we are growing regionally and we have companies that can list I think we would absolutely be all for that because everybody does better when there are more securities to be able to buy on the exchange.” (MM)