By Andrew Green, Staff ReporterTHE FALL in value of the Jamaica dollar is bedevilling investor strategies for entering today's Local Registered Stock auction, say analysts.
For investors to keep their funds in Jamaican investments, they have to get a return equal to or better than the return they would get in a foreign currency investment, Wednesday Business was told. But uncertainty about the future value of the currency is now making it difficult to determine what is an appropriate return.
"I think bids are going to be all over the place," said Lissant Mitchell, assistant vice- president for treasury at Pan Caribbean. "Some people will go in above 40 per cent."
The Ministry of Finance and Planning is inviting tenders are for a total of $1 billion in Local Registered Stock today. The instrument runs for 22 months from May 16.
"The market is looking at 35-36 per cent," said Donette Scarlett, Manufacturers Sigma Merchant Bank senior manager for treasury and asset management. She said the instrument was attractive to smaller investors because it was relatively short term, and to pension funds as the interest payments are made twice yearly.
"Based on the rapid depreciation of the dollar, we have to try to determine what is a good yield," said Patrick Burke, equities trader at Edward Gayle & Company. He also said, "We expect most yields at 35-36 per cent."
But Lissant Mitchell said, "I think you are looking at about 33 per cent yield to maturity. That is where I think it is going to come out at."
The differences in projections are due to the uncertainty about determining what is an appropriate yield for investors.
"You can get an interest rate of 36-40 per cent, but if the currency moves 10 per cent in 3 weeks, that is what is going to drive the investment decision whether you hold US or Jamaican investments," Mr. Mitchell said. If the currency continues its present slide, some current investors in Jamaican dollar instruments will end up relative losers, Mr. Mitchell said.
