Market performance and the Guyana...

sector was significant. It grew by 16.58 per cent from mid-June 2016 to mid-June 2017 and by 14 per cent from mid-December to mid-June 2017. The services sector exhibited much slower growth during the same time periods. It grew by less than one per cent in the period mid-June 2016 to mid-June 2017 and by 5.2 per cent in the shorter time-period of mid-December 2016 to mid-June 2017. As a consequence, the manufacturing sector is projected to expand its contribution to the GDP from six per cent to eight per cent while the contribution of the services sector would remain constant.

If one were to use the valuation of the manufacturing companies against the contribution of the manufacturing sector to GDP, it could give rise to a difference about the valuation of the stocks. The manufacturing data used excludes the contribution of rice and sugar. So, the focus is on other manufacturing which is where beverages and other products are measured. When measured against the adjusted manufacturing GDP, the companies in the manufacturing sector might be significantly overvalued while those in services are woefully undervalued.

Aggregate numbers

Another thing about the aggregate numbers is that they can mask the impact that industries might have on the values. The beverage industry dominates the manufacturing sector. It accounts for 93 per cent of the value of the sector in the Index with the result that the growth in the sector is reliant on the performance of the beverage industry. Even within that small grouping, significant variations can be observed. For example, the value of the Index has been influenced by the performance of Banks DIH stocks. It grew 73 per cent from June 2016 to June 2017 and by 55 per cent from December 2016 to June 2017. During the same time periods, DDL stocks grew 12 per cent and nine percent respectively. The stocks of the other two manufacturing companies, CCI and SPL, remained virtually unchanged. If these variations reflect economic behaviour, then it is obvious that not all parts of the manufacturing sector are performing the same.

The situation in the services sector is even more telling. The industries in the service sector that make up the LSI are more homogeneous which means that the same factors should affect the companies. Four of the five companies are commercial banks while one provides distribution services. One observes extreme performance in the services sector as was the case with the manufacturing sector. The performance of most of the commercial banks was flat with the result that the value of the companies in the services sector grew less than one per cent from midJune 2016 to mid-June 2017. However, one company, Republic Bank, gained 24 per cent in the six-month period. DBL gained seven per cent in the same timeperiod. The mixed behaviour of the stocks seems to suggest that the performance of the economy was likely to be variable.

Management competence

One has got to keep in mind that the performance of companies is also a consequence of the competence of their management. Poor performance is not always a result of the condition of the economy. It is also about good decision-making, good risk management and good internal controls. In essence, it is about good leadership. Good leadership adds value to a company all the time. Poor leadership does not.