The Effects of the Pandemic on the Stock Markets
By now, we would have all become accustomed to the terminology “Covid-19” being tossed around daily. For more than a year, we have endured countless measures implemented in an effort to minimize the spread of this deadly virus. We have observed the Covid-19 protocols and conformed to curfew and lock-down restrictions. .
Many of us have experienced life-impacting changes directly related to the unset of the Coronavirus. We have seen pay cuts, job losses, sharp contractions in business activities within certain sectors leading to decreased revenue and even bankruptcy filings. On the heels of the stock market crisis in 2008, many investors, out of fear of Deja Ju, panic sold their positions in equities (in some cases even at a loss) and decided to maintain cash positions instead. Investor confidence changed and by extension, the market sentiment dropped from the highs of the boom of 2019’s stellar stock market performance. Industries such as tourism, entertainment, banking, travel and energy to name a few, arguably took the biggest hit.
Contrary to the common belief that the entire market has been bleeding red, some outliers thrived and returned great results for 2020 despite the pandemic. Companies within the consumer staples, consumer discretionary, health care/pharmaceuticals and technology space are examples of sectors that saw an uptick in demand and performance.
Let us take one of our local conglomerates, Grace Kennedy, as an example. For the year ending December 31, 2020, GK’S net profit attributable to shareholders rose 38.57% to $6.22Bn year over year. The strong performance in the company’s food portfolio, led by increased demand as shopping activities heightened during lock-down measures, was a major contributor to their record performance. Pre-covid, GK’S stock was trading at $60.02 (March 9, 2020 closing price), fast-track almost a year and the stock closed at $90.00 on March 8, 2021. This appreciation in the stock price translates to a 50% return….during a pandemic.
A similar story is told by the likes of Fontana and Seprod. Fontana has become the one-stop shop for many households, especially since the implementation of their brand new Waterloo Square location. The enhanced demand for pharmaceuticals caused by the Corona-virus contributed to the boost in revenues. Investor confidence remained positive and we saw a stock price appreciation of 21% (March 9, 2020-March 8,2021). Seprod Group revenue increased by 16.43% giving rise to an adjusted net profit growth of 2.40x year over year to $2.34Bn.
With improved export numbers, expansion of distribution operations due to the incorporation of Facey Consumer and increased revenues as product demand grows, Seprod is poised for continued growth in 2021. Pre-covid, SEP was trading at $40.60 (March 9, 2020), today the stock trades at about $82.43 (April 22, 2021 close price).
In the Managing Director of the Jamaica Stock Exchange, Marlene Street Forrest’s opening remarks of the 16th JSE investments and Capital Markets Conference, she said “The COVID-19 pandemic has opened our vistas in our mode of operation,” The same stands true for several businesses that were forced to pivot and adjust to the changing landscape. The increased reliance on technology and its implementation in business processes became prevalent. With many countries faced with lockdown measures and stay at home orders, businesses had to resort to video conference services such as Zoom and Microsoft Teams. A 12-month look at the stock price movement for both ZOOM & MSFT would show an appreciation of 94% & 50% respectively.