Ashford W. Meikle, Staff Reporter
The Jamaica Stock Exchange (JSE) building on Harbour Street, downtown Kingston.
LAST WEEK Thursday, for the first time in fourteen months, the main Jamaica Stock Exchange Index fell below 100,000 points, losing 172.74 points as it quietly closed the trading day at 99,843.65 points. The declining trend continued on Friday and this week with the index losing 65.60 points to close at 98,788.04 points yesterday.
Since it charged to the 100,000 mark during the bull run of April last year, that figure has become a benchmark of investor confidence in the equities market.
In an attempt to put into context the continued decline of the index against the background of the results announced by companies recently, Wednesday Business turned to a number of analysts and industry personnel to find out just what exactly is happening in the market.
According to analyst Keith Collister, "The constant flow of bad macroeconomic news over the last six to nine months has depressed sentiment, with the result that investors have become more unwilling to look at future as opposed to current earnings."
That's the view shared by equity trader at First Global Financial Services Limited, Neilson Rose. He told Wednesday Business that investors' confidence and psychology have been affected by expectations that interest rates will go up, and the uncertainty as to whether the government will be able to keep the rates stable and the likely impact on the exchange rate.
"The inability of investors to answer these questions with certainty has seen most of them staying short with their funds, thus giving them the ability to take advantage of opportunities when the direction becomes clear. In addition, with the Government floating so many debt instruments, the liquidity is being taken out of the system. All these factors tend to impact the stock market negatively," concluded Rose.
Yet another factor, according to research analyst at Mayberry Investments Limited (MIL), Kiesa Ansine, has been the less than spectacular performance of some listed companies.
IPO STOCK MIL HARDEST HIT
According to Ansine, "Fundamentally, the power and pace of some companies' quarterly performance up to September fell out for the most part, with the recent IPO stock MIL being hardest hit. Many companies had a strong first quarter (January to March) however, performance started to wane, and so companies like Pan Caribbean, GraceKennedy, First Jamaica Investments, Lascelles and JMMB contributed more dominantly to the fall in the stock market."
Describing the current situation as being a "graveyard mood," Ansine acknowledged investor fatigue.
"Long-time investors have taken large losses, while new investors prefer to stay liquid by sitting on the sidelines and keeping their money in cash or cash equivalent securities until market conditions improve. So those who are in can't get out, and those who aren't in don't want to get in. Those investors with the risk appetite to trade are possibly burnt out."
For the remaining months of the year, the consensus is that the market will continue to remain soft.
Argues Rose, "Where the market is headed is a little difficult to predict. However, with no major change to the macro fundamentals expected within the next six months the market could continue trade much the way it is now. This could see some stocks continue to trade in little bands up or down, with the lower ends of the bands changing from time to time. Therefore the market could lose further ground still in the short term."
And while Collister acknowledges that "The fall of the index through 100,000 is negative psychologically and the technical 'trading action' has been very poor over the last few months," he argues that "most of the damage to the stock market has already occurred. One of the most difficult things in stock market investing is trying to pick bottoms, which is like trying to catch a falling knife, so while I believe the market will bottom with a further fall of less than 10 per cent, perhaps less than five per cent, this is a difficult call."
Ansine, for her part, noted that "The summer month company performance for the most part was soft, some companies are flat out. So far for the final quarter, things are not appearing to be any better. And so 'stop- loss' targets on certain stocks are being adjusted lower. Few company surprises resembling those of NCB's loan recovery are in store and corporate acquisitions and mergers to facilitate investor demand may not be realised by the end of the year. Only one IPO is anticipated before year-end. Also, the market is not having another earnings season until next year."
