Infrastructure fund, solution for projected excess liquidity


Infrastructure fund, solution for projected excess liquidity

Wednesday, June 26, 2019

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C hief executive officer of NCB Capital Markets (NCBCM), Steven Gooden, is advising that the increasing liquidity in the economy might result in heightened risk to the financial market, if left unchecked.

This, he says, is against the background of the local administration seeking to reduce the debt to GDP to 60 per cent by the end of the fiscal year 2025/26, which will see Government repaying over $600 billion which will get back into the system.

In addition, Gooden said it is expected that there will be a significant injection of direct foreign investment as Jamaica is becoming increasingly attractive to international investors.

The NCB Capital Markets executive was speaking at the Development Bank of Jamaica's Private Equity and Infrastructure Development Conference which was held recently at the Jamaica Pegasus hotel in New Kingston.

“If there are not enough assets to absorb liquidity, challenges could develop. For example, we could run the risk of the more traditional local currency denominated assets becoming overpriced, especially as regulations prevent institution investors from investing large sums overseas,” he said.

He noted that the local capital market is an ideal driver to accelerate economic expansion and provide capital for infrastructural development with strong socio-economic benefits through the construction of roads and houses; improvements in water and sewer systems; as well as projects focused on energy, telecommunications, public transport, among others.

This, Gooden said, would help to absorb excess liquidity and allow for orderly pricing of assets, while minimising the likelihood of conservative investors chasing riskier assets for yields.

As a result, he said NCBCM would soon be launching a multi-billion-dollar infrastructure fund to facilitate Jamaicans and members of the diaspora owning prime infrastructural assets island wide.

“These projects would be ideal for financing through the Capital Markets via equity and long-dated financing solutions,” he noted.

In its continued thrust to enable local investors to gain access to its regional portfolio of commercial real estate assets, NCB Capital Markets recently provided a $650 million bridge loan to Eppley Caribbean Property Fund Ltd for the acquisition of three commercial properties in Jamaica and one in Barbados.

In closing, Gooden called on the Government to review the divestment process for public assets for greater transparency and efficiency.

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