EQUITIESA 52-week high in Lascelles deMercado ensured that the main market gauges lost only modest value this week.
Although no official new developments supported the robust demand, the fact that institutional investors spent over $80 million to acquire shares of Lascelles was enough to trigger market-wide demand for the stock.
Investors also chased shares in Mayberry Investments (MIL) as they forecast MIL to register healthy trading gains for the September quarter given its heavy holdings in Lascelles. The Main Indices received additional support from National Commercial Bank which recovered from the profit-taking activities that depressed the stock in prior weeks.
Notwithstanding, the advance-to-decline ratio was mostly negative in the shortened trading week. Scotia Group was under selling pressure mid-week, sending the stock to a low of $21.
FirstCaribbean Jamaica also shed 23.3 per cent in the week, falling victim to its wide bid-ask-spread as well as modest profit taking on the part of retail clients. Overall market volumes were thin with as little as 1.9 million trading Thursday.
With the September quarter complete, analysts will be busy over the next few weeks predicting third-quarter profits for listed companies earning cards are not expected in the market until mid-November, market movements over the next few weeks should indicate the likely winners and losers.
FIXED INCOME
Last week, the Bank of Jamaica's 364-day Treasury Bill auction closed at an average yield of 14.06 per cent, against the backdrop of an oversubscription amount of approximately J$3.099 billion from the money market.
Investors who placed bids for yields of between 13.75 per cent and 14.25 per cent were able to receive full and (in the case of those at 14.25 per cent) partial allotments.
The auction result, while viewed as a favourable development in the context of the BoJ 's attempts to normalise the Treasury-Bill Yield Curve, has not erased concerns surrounding the continuing decline in the value of the local currency
It is against this backdrop that the BoJ announced its offer of a variable rate certificate of deposit (VR CD) on October 12. The inducement for the investing community here is the quarterly coupon reset at 1.625 per cent and a peg to the WATBY on the GOJ 90-day Treasury Bill.
The presence of the new VR CD, coupled with auction-payment obligations on Friday led to an increase in 30-day reverse repo rates from 11.90 per cent at the start of the week to 12.50 per cent as at the end of the week. Overnight rates traded within a band of six to nine per cent.
The highlight of next week's activity will be the tender of two BoJ Treasury Bills for 90 days and 180 days on October 24, 2007.
GoJ BONDS
GoJ global bond prices traded firm week over week, as both the local and international brokerage community anxiously anticipated the results of the next Federal Reserve meeting. The general market consensus is that the Fed will cut interest rates by another 50 basis points, as continuing credit losses give credence to the posit that such a move will buoy economic growth.
If a rate cut does occur, GoJ bond yields should register declines on the heels of a return of demand in the medium term. This week, liquidity conditions in the U.S. dollar fixed-income market will improve as a result of coupon payments of US$250 million on the GoJ 2025 bonds, payable October 17.
Local bond prices should find support from these additional flows. The GoJ 2025 bond is the only tenor to register volatility this week - these prices increased by an average of 25 basis points, and reflect the willingness of clients to increase their portfolio holdings at reduced premiums immediately following the coupon payment date.
Compiled by Shane Ingram and Clay Moodie of investment bank Dehring Bunting & Golding. Email: info@mydbg.com
