THE JAMAICAN dollar fixed income market experienced tight liquidity conditions this week. There were inflows of J$1.729 billion from BoJ COSH maturities, LRS maturities and LRS coupon payments. Consequently, secondary market repo rates trended upwards. At the close of trading on Thursday, thirty-day secondary market repo rates ranged within a band of 26% to 31% compared with the range of 25% to 30% at the beginning of the week. Overnight secondary market repo rates increased to within a band of 20% to 60% compared with 15% to 50% on Monday.
In the coming week, approximately J$2.489 billion is expected to enter the system from BoJ COSH maturities, coupon payments and maturities on LRS VR: 2032/2033A Tr.1, 2032/2033A Tr.2, 2003G, 2004D and LRS FR: 15.5% 2009AA, 15.125% 2012AA, 13.75% 2004AD, 14.25% 2009AH and 14.375% 2014AG.
ECONOMIC NEWS
This week the Ministry of Finance released the fiscal results for the first four months (April to July) of this fiscal year. Revenues continued to outperform the budget, up 3.0% or J$1.228 billion. Tax revenues, the major source of revenues, were up 2.4% or J$901.8 million above budget. Total expenditures were 0.5% or J$299 million better than budgeted. However, interest cost, the major area of expenditure, was 5.9% or J$1.56 billion worse than budgeted. Overall, the fiscal balance was 8.0% or J$1.527 billion better than budgeted.
US DOLLAR FIXED
INCOME MARKET
The US dollar fixed income market experienced moderate liquidity levels at the beginning of the week. However, as the week progressed, liquidity levels increased due to large inflows. The main inflow was a $100 million GoJ 2003 Promissory Note that matured on September 3, 2003. There was also a US$14.5 million GoJ 2007 Eurobond coupon payment, which came due on
September 1, 2003. Consequently, secondary market repo rates traded within the range of 7% and 7.50% throughout the week.
There was increased activity in the GoJ Eurobond market this week. Investors were particularly interested in GoJ 2005 and 2007 Eurobonds. This interest was sparked as a result of the well renowned Mandalay Advisors report which noted that the short term Jamaican Eurobonds were undervalued. The Mandalay report stated that "Longer dated bonds are close to fair value, but the 2005 and 2007 bonds are very cheap to fair value given our view of Jamaica as a B+/B1 credit. We don't think there is any significant default risk in the near-term, and so investors should take advantage of the current yield curve shape and take an overweight position in Jamaican debt". Consequently, the GoJ 2007 and GoJ 2011 Eurobonds appreciated by 2 points, while the GOJ 2005, 2017 and 2022 Eurobonds appreciated by at 1.5 points.
The recently announced, Government of Jamaica 11.75% Fixed Rate US$ denominated local bond subscription period will end on September 5, 2003. Investor response to the instrument thus far has been fair. Investors see this instrument as a good buy based on the following reasons:
It can be used to facilitate repurchase agreements.
The rate of return is competitive in comparison to the rates currently offered on the US Fixed Income market and it falls attractively on the yield curve.
MOVEMENT OF INDICES
All three JSE market indices advanced this week. The main JSE Index, All Jamaica Composite and Jamaica Select Indices advanced by 0.64% to 55,430.62, 1.11% to 51,364.36 and 1.62% to 1,5,63.07 points respectively. National Commercial Bank Jamaica Limited (230.99 index points), Bank of Nova Scotia Limited (88.11 index points) and First Caribbean International Bank Jamaica (81.44 index points), were the major contributors to the increase in the main JSE index.
UNITS TRADED
During the week 34,881,510 units traded with a market value of $198,576,298.82, representing a decrease in value of 57.3% over the previous week (close of trading on Thursday). Cable and Wireless Jamaica Limited, Jamaica Money Market Brokers and Life of Jamaica Limited accounted for the large volume of transactions, which took place this week. Eleven stocks advanced, eleven declined, eight traded firm and ten did not trade. At the close of trading on Thursday, total market capitalisation was $421.512 billion, an increase of 1.2% compared with the previous week.
TOP PERFORMERS
Carib Cement Company Limited, Caribbean Metal Products and Pan Caribbean financial Services were the top performers gaining 60.00%, 12.73% and 10.00% respectively, to close at $2.00, $3.10 and $5.50. The main losers were Pan Jam Investment Limited, Jamaica Producers Group Limited and The Gleaner Company Limited, down 8.33%, 8.00% and 7.98% respectively, to close at $16.50, $23.00 and $1.50.
The Finance, Conglomerate and Communication sectors dominated trading activity this week, accounting for 80.1%, 8.0% and 5.4% respectively, of the total value traded in the market. The shares of Jamaica Money Market Brokers Limited and National Commercial Bank Jamaica Limited (38.55% and 15.75% of market value respectively) dominated trading in the Finance sector. Trading in the shares of Grace Kennedy & Company Limited (6.84% of market value) dominated trading in the Conglomerate sector. In the Communication Sector, trading in the shares Cable and Wireless Jamaica Limited (4.76% of market value) dominated trading.
CROSS LISTINGS
At the close of trading on Thursday, Grace, Kennedy and Company (GKC), Guardian Holdings Limited (GHL), Jamaica Money Market Brokers Limited (JMMB), Royal Bank of Trinidad & Tobago (RBTT), and Trinidad Cement Limited (TCL) closed at TT$4.95, TT$20.910, TT$1.00, TT$24.12 and TT$6.00 respectively on the Trinidad Stock Exchange (TTSE). Three stocks advanced, one traded firm and one declined. The advancing stocks were GKC, GHL and RBTT which increased by TT$0.05, TT$0.11 and TT$.09 respectively. JMMB traded firm and TCL declined by TT$0.15 compared to the Wednesday before. The TTSE does not trade on Mondays and Thursdays. TT$6.30 is equivalent to US$1.00.
FOREIGN EXCHANGE MARKET
At the open of trade on Monday the Jamaican dollar sold for $59.45 to US$1.00. There was high demand for US dollars earlier in the week. As a result the Jamaican dollar lost ground against its US dollar counterpart and traded as high as J$59.60 to US$1.00. However, on Tuesday the Bank of Jamaica intervened to stem the slide of the Jamaican dollar, by selling US dollars into the market at a rate of J$59.45 to US$1 for resale at J$59.50 to US$1.00. As the week progressed, the demand for the US dollar declined due to the tight liquidity conditions in the Jamaican dollar fixed income market. At the close of trade on Thursday, the Jamaican dollar was trading at $59.50 to US$1.00.
Disclaimer:
All information contained herein is obtained by JMMB's Investment Research Group from sources believed by it to be accurate and reliable. All opinions and estimates constitute the Analyst's judgment as of the date of the report. However, neither its accuracy and completeness nor the opinions based thereon are guaranteed. as such no warranty, express or implied, as to the accuracy, timeliness or completeness of this report is given or made by JMMB in any form whatsoever.
Note: JMMB may make markets and effect transactions, or have positions in securities mentioned herein. In addition, employees at JMMB may have positions and effect transactions in the securities mentioned herein. Unless otherwise stated, all rates quoted are indicative and do not constitute an offer to buy or sell. All rights reserved 2003 by JMMB. Additional information is available upon request. JMMB is a registered trademark of Jamaica Money Market Brokers Limited.
