By Dennise Williams, Staff ReporterTHE 150 million Eurobond issued in London and Frankfurt yesterday is good news for the country, Keith Collister, financial analyst explained to Wednesday Business.
Mr. Collister said European investors had dismissed the
negative impact of Hurricane Ivan. Denominated in euros,
the instrument has a coupon of 10.5 per cent and maturing in October 2014.
"The strong take-up of the euro issue is particularly impressive
as it has occurred despite
the recent hurricane," he said. "Our Eurobonds actually rallied
strongly in the latter part of September after the Minister of Finance's strong statement that he is not changing the fiscal targets, which is surprising considering the economic situation is clearly going to be more challenging as a result, suggesting that he has regained his credibility, at least with European investors. In my opinion, with this bond issue he has shrewdly decided to meet his external fund raising target
before the inevitable negative effect of the hurricane on the
fiscal numbers."
SMART MOVE
By targeting Germans in
particular, the largest buyers of euro-denominated investments, the Government and their bankers made a smart move, he said. "According to the well-respected magazine Latinfinance, the Jamaicans and their bankers have convinced Europeans, mainly Germans, that they have one of the bond world's best-kept secrets a rare jewel among a group of highly volatile single B credits."
The bottomline is that with higher oil prices, and the costs of the hurricane, the nine per cent inflation target is likely to be exceeded, he said. This prospect, combined with the danger of a fiscal over-run, meant that there was the potential for greater pressure on the exchange rate, and a reversal of the trend of declining interest rates.
"While in the near term, the achievement of the deficit
numbers will be challenging. Hopefully this opportunistic issue should ensure that the
virtuous circle of lower interest rates and ultimately faster growth has not been derailed, and that we can look forward to much stronger growth next year as the planned foreign direct investment boom kicks in," Mr. Collister said. "If this scenario is correct, it will also make it likely that we will end the year with my target of the Jamaica All Share Index doubling this year still intact."
