May 2013 Financial News

Financial stocks in a slump (Jamaica)

May 24, 2013

Financial stocks fizzled in the March quarter, and the Bank of Jamaica (BOJ) is blaming it on the weak economy and currency fluctuations.

The top declining stocks during the period were all financial corporations hurt by the wider economy, the central bank said. However, real sector stocks proved to be more sturdy.

Sagicor Investments declined 33.7 per cent, followed by Scotia Group down 27.7 per cent, National Commercial Bank down 27 per cent, Jamaica Money Market Brokers down 24.5 per cent, and Mayberry down 20 per cent.

Finance stocks accounted for five of the top-10 declining stocks, recording an average price reduction of 15.8 per cent, said the BOJ.

"The relatively poor perfor-mance of the equities market mainly reflected the impact of subdued investor sentiment resulting from weak domestic economic activity, accelerated depreciation in the exchange rate, uncertainty regarding the upcoming budget and the lengthy negotiations between the IMF and the Government of Jamaica," stated the BOJ Quarterly Monetary Policy Report issued last week.

"Additionally, the recently concluded National Debt Exchange (NDX) would have had a negative impact on stocks in the financial sector. Notably, for the review quarter, all financial-sector stocks, with the exception of one institution, recorded declines in share prices."

The advance:decline indicator deteriorated to a ratio of 9:21 in the review quarter relative to 17:11 in the previous quarter.

"On the other hand, of thenine stocks that advanced, manufacturing and others accounted for five of these stocks and recorded respective average appreciation of 5.6 per cent and 40.5 per cent for the review quarter," stated the BOJ.

These stocks included Pulse up 60 per cent, Palace Amusement up 58.3 per cent, Hardware & Lumber up 27.9 per cent, LIME Jamaica up 25 per cent, Carreras up 5.8 per cent, Kingston Wharves up 10 per cent and Salada Foods up 0.12 per cent.

The central bank said that weak demand led it to ease its monetary policy stance during the March 2013 quarter. The BOJ cut its policy rate by 50 basis points to 5.75 per cent on February 25, following the settlement of transactions under the National Debt Exchange which reduced interest rates on selected domestic Government of Jamaica securities.

The average yields on all tenors of GOJ Treasury bills fell sharply reflecting declines of 94, 185 and 96 basis points, to yield 5-6 per cent, said the BOJ.

"Notwithstanding the success of the NDX, the foreign-exchange market remained unsettled in the context of continued uncertainty regarding the timing and content of an agreement with the IMF. As a consequence, the weighted average selling rate for the US dollar depreciated by 6.0 per cent to US$98.89 at the end of the March 2013 quarter. In spite of this depreciation, consumer price inflation was 2.7 per cent for the March 2013 quarter, marginally higher than the 2.6 per cent for December 2012 quarter."

Inflation for the quarter was driven mainly by drought conditions on some agricultural crops, as well as higher interna-tional commodity prices, said the BOJ.

The JSE Combined Index lost more than 10,000 points or 11 per cent to end at 83,492 points in the quarter. Stock market wealth diminished by J$99b or 16 per cent to J$514b.

Comparatively, selected foreign stock markets saw increased activity during the March 2013 quarter.

"In the USA, the Dow Jones and the S&P 500 rose by 11.3 per cent and 10.0 per cent, respectively. Similarly, the FTSE 100 Index and the Nikkei 225 Index increased by 8.7 per cent and 19.3 per cent, respectively," said the BOJ.

"The increase in selected US stock indices was largely concentrated in the first half of the quarter, partly associated with favourable reports regarding corporate earnings in the USA."

The Dow is currently performing at unprecedented highs above 15,000 points.

Post the first quarter, the Jamaican stock market has regained some value, coinciding with the sign-off on the new US$932m IMF programme. The JSE Combined Index has regained more than five per cent of lost value as of Wednesday.


Source:
steven.jackson@gleanerjm.com
Jamaica Gleaner
Friday May 24, 2013

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