JSE year-end slump fails to dampen 2019 outlook:
IN THE past month, the Jamaican stock market has skidded by more than 20,000 points, or more than five per cent, which means that investors have shed a portion of the $1.6 trillion in wealth amassed up to the end of November.
But for the year to date, as of Christmas Eve equity investors were still around $300 million richer, overall, from the net gains in stock value over the period, nine of which have delivered triple-digit growth.
The stock market did not hit 400,000 points this year as some had expected, but came close for the main tracking indices at 397,517 points for the JSE Combined Index on December 4, and 394,548 points for the JSE Main Market Index on December 5. At Christmas Eve, with another three days of trading left to factor for this year, the combined index was down to 373,623 points
The top stocks and the gains made year to date are: Barita Investments, up more than 280 per cent; Derrimon Trading, 250 per cent; SSL Venture Capital Jamaica, 260 per cent; Salada Foods, 160 per cent; CAC 2000, 160 per cent; Kingston Wharves, 130 per cent; Palace Amusement, 130 per cent; Indies Pharma, 110 per cent; and Pulse Investments, 100 per cent.
These gains occurred within the context of the Bank of Jamaica lowering interest rates in 2018, the last being a 25 basis point cut to 1.75 per cent on December 20.
Market analysts polled by the Financial Gleaner expect the Jamaica Stock Exchange to deliver another year of solid performance in 2019, given the current macroeconomic conditions.
“Consumer and business confidence will continue to underpin a strong capital market provided that
interest rates remain low,” said Paul Simpson, founder and group president and CEO of Cornerstone United Holdings Jamaica Limited, the company that recently acquired Barita Investments Limited.
The outlook for listed companies remains favourable due to the “tremendous stability of the fiscal and monetary dynamics”, supported by growth in the economy, Simpson said.
“Capital will continue to rotate out of government paper into businesses via the markets for corporate paper and equity,” he said.
Barita’s own market value has climbed above $21 billion in the year, from $3 billion.
Many of the stocks on the JSE are trading close to their full market value when compared with their peers. In fact, 27 of the 35 main market stocks are currently trading at or above the market average of 19 times what they earn in annual profit, while 11 of 37 junior market stocks are trading above the market average of 26 times earnings, as estimated by the Financial Gleaner using December research data from brokerage firms Barita Investments and VM Wealth.
The central bank’s lowering of interest rates was seen as a key factor in the decision made by several listed companies to refinance their debt with cheaper borrowings.
As to the potential headwinds for stocks next year, Mayberry Investments CEO Gary Peart sees foreign exchange volatility as the greatest threat to gains on the JSE. Through the year to Christmas Eve, the JSE Combined Index has improved
by 27 per cent to 373,623.27 points; the JSE Index was up 28 per cent to 368,728.41; Junior Market Index rose 16 per cent to 3,176.89, while the JSE USD Equities Index declined 7.0 per cent to close at 155.04 points.
At market close on Thursday, stocks fell by another 6,039 points on the Combined Index but was still well in the black year-to-date.
Some of the gains were driven by new listings, which included Elite Diagnostic, Everything Fresh and Indies Pharma Jamaica on the junior market, and Sygnus Credit Investments, Mayberry Jamaica Equities and Stanley Motta on the main market.
As of November 30, the stock market was capitalised at just under $1.6 trillion, with the junior market accounting for nearly $139 billion of the total. Market wealth in 2017 reached 1.19 trillion, $114 billion of which was contributed by junior market companies.
The JSE led the world in gains in 2015 in a field of 92 other global exchanges. Its performance over the past five years also outpaces all other markets.