Dennise Williams, Staff Reporter
FOR THOSE looking to invest in shares, waiting for the quarterly statements published in newspapers may not be enough. Announcements made every three months regarding profits or losses or reduction in profits or a slowdown in losses is important information.
But a serious investor will be keen to watch what is happening in the daily news. Changes in management, new products, new competitors, cross-listings in other stock exchanges can have an immediate impact on share prices.
Stockbrokers tell Sunday Business that their serious clients are on the phone with them as soon as news breaks. Said Delroy Josephs of Barita Investments, "Share prices can move significantly with negative or positive news. For example, the news that Michael Lee-Chin bought National Commer-cial Bank moved the share price from $6 to $14.90 and it is now settling in the $13 region.
"The announcement that NCB bought the Mutual Life Towers and will list on the Trinidad & Tobago stock exchange are moving the share price up." Mr. Josephs told Sunday Business "That what you are really buying is future expectations. If the news is positive, investors expect to profit."
At Dehring Bunting & Golding, the sentiment is the same expectations are the guiding force. Said an account executive, "New products can increase share prices, but it depends on how profitable the new product is expected to be. At the end of the day it is about profits."
Consider the case with Jamaica Producers Trading (JPT). Our contact at DB&G explained that, "Last year JPT began producing frozen drinks for the United Kingdom (UK). This showed up very well in the financials and the result (combined with other positive news such as the profitable sale of a bloc of Jamaica Money Market Brokers shares) was that their share prices more than doubled."
CROSS-LISTINGS
Cross-listings can really drive a share price because of differentials in the currencies of the countries the stocks are listed on. Take the case of Jamaica Money Market Brokers (JMMB) and Capital and Credit Merchant Bank (CCMB).
According to Wain Iton, general manager of the Jamaica Stock Exchange (JSE), the attractiveness of those two stocks is their attractiveness to investors in Trinidad and Tobago. Additionally, "Both companies are performing well. JMMB and CCMB are making better than anticipated profits." First Caribbean (formerly CIBC), also benefited from cross-listing. The share price at J$55 affords a selling gain of J$7 when the stock is bought for US$0.35 in Barbados and resold in Jamaica. This encourages investors to jump back and forth between CARICOM stock exchanges.
Stockbrokers told Sunday Business that confidence drives share prices, so naturally, bad news has the expected effect of dragging down share prices. But in the world of stock exchanges, bad news isn't as clear-cut as one would think.
In the situation of Cable and Wireless (Ja) Ltd., bad news takes the form of good news about its competitor. Again, Barita shed light on this situation.
"In the last 52-week run of 2002 and early 2003, C&W was trading at a high of $1.18. But the more inroads that Digicel has made in Jamaica, the more C&W has taken hits. Right now the share price is about $0.80. So everything good for Digicel is negative for C&W. Investors wonder if C&W is going out of business."
HOSTILE TAKE-OVERS
However, the typical scenario for bad news, according to Mr. Joesphs, includes "hostile take-overs, strikes and lower profits [which] cause confidence to be lost in the company."
However, the protracted squabble between Grace, Kennedy & Company and a group of shareholders at Kingston Wharves Limited appeared to have a neutral effect on the share price. As explained by Mr. Joesphs, "The squabble over KWL never caused the share price to rise or fall. The stock was never a high profile company. In fact most of the investors are people in the shipping industry. The price is at about $1 and the fuss was really about a change in management. The fight was carried in the media but it wasn't a really exciting issue and did not create a demand on the stock to either buy or sell. To small investors the perception was that it was a change in management even though contentious."
But the effect of the ordinary sort of bad news that Jamaicans are accustomed to (murders and roadblocks) doesn't have a direct affect on the stock market but a more insidious effect. Said, Mr. Iton, "Rising crime doesn't have an effect on individual share prices. But what is negative for the economy as a whole prevents the stock market from becoming buoyant."
And what about the ubiquitous cocktail circuit? The place where exclusive, money-making information is passed on between the 'big man' leaving the 'little man' with stale information with which to make decisions.
A MYTH
Well, according to Barita Investments, this is just a myth. "In Jamaica, we try to be transparent. There is no insider trading because the Jamaica Stock Exchange is regulated properly. The news comes to everybody one time. Look at the case of the Pan Caribbean/ Sigma merger. Pan Caribbean was trading at $4 and upon the news release it traded at about $7. The merger was no secret news. And the market saw that the asset base of the merged entity would increase and reacted positively."
In fact, stockbrokers believed that it was actually media houses that have information before anyone else as companies first give press releases to the media to be published.
