Shane Ingram, Guest Writer
With just a few days left before the close of trading for 2006, 'the bulls' came out charging in this week's activity on the Jamaica Stock Exchange (JSE).
Upbeat demand from institu-tional investors pushed the JSE through the psychological 100,000 points barrier on Thursday to mark the first time since February 3, 2006 that the Main Index has broken 100,000 points. Investors subscribing to technical analysis will also be interested to note that the week's movement has pushed the main market gauge through its most immediate resistant point, which suggests that profitable upside potential exists on the immediate horizon.
Whether through clairvoyance or precise judgment, Thursday's bullish behaviour on the JSE was immediately supported by Friday morning's announcement by the Bank of Jamaica of another cut in signal interest rates.
Rates were cut 30 basis points across the spectrum of BOJ open market instruments in what the central bank described as a "background of continued robust economic performance and favourable medium term economic outlook."
In particular, the BOJ contends that its action is reinforced by a seven-year low 5.3 per cent point-to-point inflation rate for the 12-month period to November 2006.
The composure in foreign exchange market, buttressed by some US$2.3 billion in reserves as at December 20, as well as prospects for continued macro-stability, also supported the rate cut at this time.
Higher yielding assets
As rates decline, institutional buyers are even more compelled to seek higher yielding assets as indications are for further rate cuts given that inflation outturn is likely to better projections.
Stocks are generally viewed as profitable investment vehicles at this time and so there was renewed interest in Bank of Nova Scotia, Lascelles deMercado, Dehring Bunting & Golding, Cable & Wireless Jamaica and National Commercial Bank.
Although CWJA was the typical volume leader, the jumps in Lascelles played a greater role in the sizeable gains in the main market gauges.
Meanwhile, the positive movement in DB&G and BNSJ was seen by many as an indication that some of the cash from the offer was slowly re-entering the market.
With many participants looking to reposition in the stock, DB&G marked a new 52-week high of $28.01 in the week's proceedings. Investors also pushed BNSJ closer to $27.00 in an apparent convergence of the stock prices toward $30.00.
Against this backdrop, there is little reason to believe that investors will be taking a vacation from the market this year - at least not the institutional investors.
As more of the cash re-enters the market, supplies are likely to tighten and thereby force prices higher going into the New Year. And of course, next week will see triple-switching conditions, that is, the coalescing of the end of a month, quarter, and the year.
With brokers looking to close the year on a high, be prepared for a very brisk and positive last trading week of 2006.
Shane Ingram is an equity analyst/broker in the stockbrokeridge unit of Dehring Bunting and Golding Limited. Email: singram@mydbg.com
