How to Buy Stocks in Jamaican
I got very excited the day I found out I could become a part-owner in any publicly traded company. Well, that wasn’t really how it was put to me so let’s backtrack a little. In the Summer of 2013, while working as a Student Assistant in the Department of Physics at the UWI Mona, I was introduced to the Jamaica Stock Exchange (JSE). Supervisor Dr. L. Clarke showed it to me via their website, www.jamstockex.com. The website listed companies in which persons could buy shares and be counted as shareholders.
For starters, a publicly traded company is any commercial entity that makes a percentage of its ownership available for purchase through an institution known as a Securities Dealer. In Jamaica, the primary securities dealer is the Jamaica Central Securities Depository Limited (JCSD). A stock, otherwise known as a share is simply a legal certificate that represents a portion of the company’s ownership. In Jamaica, the institution that deals in taking companies public is the Jamaica Stock Exchange or the JSE, it is not unlike the famous New York Stock Exchange, just smaller. Through the offices of the JSE, companies may “list”, that is, make Ordinary or Preference Shares. shares available to the public for purchase.
An Ordinary share differs from a Preference Share in that, they have higher associated risk. We will investigate this further in a subsequent article. In contrast to ordinary shares, preference shares tend to have predefined returns, such as 7% or 9.5% and retain their value over longer periods of time. Ordinary shares on the other hand tend to have more volatile prices, often the price of an ordinary share will change multiple times in a single business day. This is due to an activity called Trading, where one person buys a few shares with the intent to sell them at a higher price later. Like commodities, share prices are often driven by supply and demand.
Opening an Account:
In Jamaica, shares are bought primarily through Brokers/Brokerage Houses. In many cases, commercial and merchant banks will offer this service through a separate arm. Any well informed Teller can direct you to someone who works in that arm of the financial institution once you express your interest in acquiring shares. Alternatively, you may approach an institution whose sole business is in share trading and other money market instruments.
To open the account, you will need to provide the following documents:
Tax Payers Registration Number (TRN), proof of identification, such as, passport, driver’s license or national voters ID, and proof of address. For the latter, any bill or letter with your name and address on it, no later than three months, will do. You may also choose to use a recent utility bill as it fits the previously mentioned criteria.
Some institutions require that you open the account with no less than Jamaican ten thousand dollars (Ja$10,000), others might require more or less. Once you have all the above, opening the account will simply be a matter of signing a few dotted lines.
Purchasing your first Shares:
Once the account has been opened and activated (In some cases this takes one to three business days, in other cases it is immediate), you may choose to purchase shares in any of the over fifty (50) companies on the stock exchange. It is HIGHLY recommended that you speak with a financial adviser prior to making any investment decision. While you may choose to purchases shares in a company simply because you like the company or you have a good feeling about them, it is not advisable. (Disclaimer: Speak to your Financial Adviser)
In Jamaica, you are required to purchase a minimum of one hundred (100) units of shares in a company if you are interested in acquiring their shares. We call this a block of shares. You will only be able to place an order with your Broker if you are requesting 100+ shares. As an example, let us say there is a company, XYZ Ltd, and you wish to purchase shares in that company. Let us further assume that XYZ’s shares sell at $1.00 per share (this is not unrealistic), if you wish to purchase shares in XYZ then you must have enough funds to purchase 100 XYZ shares and cover the expenses of the trade.
Fees, Fees, Fees:
All transaction on an equity account with regard to stock purchases and sales attract a commission fee for the Broker, CEST Fee, and General Consumption Tax (GCT). Commissions range from Broker to Broker so it is always best to find out what they charge. Typically, the commission is going to be a percentage of the value of the transaction. GCT is, at the time of this writing, sixteen point five percent (16.5%). As a safe bet I tend to calculate the amount it would cost me to own a particular set of shares in a particular company using the following formula.
[(Number of Units desired * cost per shares) + commission] + 20%.
Purchasing shares/stocks in Jamaica is a relatively simply process:
- Make a conscious decision to act on your interest in owning shares.
- Research the available securities dealers and choose one to partner with.
- Open your Equity Account.
- Ask your Broker’s and/or Financial Advisers’ advise on which stocks are a good buy.
- Estimate the cost you will have to pay to acquire your desired number of units.
- Fill out the necessary forms giving permission for your Broker to place the order (or do it yourself online).