Jamaica
News - Real Estate - Finance (January
7, 2005)
Stock market begins 2005 with a bang
The Jamaica Stock Exchange (JSE) Index and the
All Jamaican Composite (AJC) Index recorded all time highs of 116,525.81 and
125,764.88 points, respectively, in trading yesterday. A total of 32 stocks
traded, of which 25 advanced, four declined and 3 traded firm on a market volume
of 22,475,136 units valued at over $236.67 million.
"This is just the beginning of what is to
come," said Mayberry Investments research analyst Kiesa Ansine. "This
activity so early in the year points positively to where the market is
heading."
The market has been trending up since October
last year, Ms. Ansine said. What is occurring now is a continuation of that
general upward market movement.
Market indices were basically "flat"
in the first few days of trading last year, she said. By comparison, the JSE
Index rose 3.4 per cent this year, while the AJC Index is up 8.2 per cent.
BROADER ECONOMY
The key to this increase is the growing level of confidence in the market and
the broader economy, she said.
"A lot of things are going well,"
said Mark Walters, business consultant at M-VL Stockbrokers. Business confidence
is very high, according to the latest survey, interest rates are coming down and
the government can access funds in international markets without difficulty.
The memorandum of understanding with public
sector unions acting as a restraint on wage hikes is another positive factor for
the economy, Mr. Walters said. And underlying that confidence is the performance
of the companies listed on the exchange.
For at least the past five years, the first
three months in the year have been positive for the stock market, Ms. Ansine
said. The market may not leap during this period, but the general path is
upwards. Several stocks traded yesterday at 52-week highs on good volumes, Ms.
Ansine said. These included Carib Cement, D B & G Ltd., First Life Ins.,
Jamaica Broilers, Lascelles, Pan Caribbean Financial and Pan Jam.
For Jamaica Broilers, the price increase is
attributable to the fact that the best quarter historically has been the third
quarter (Sep/Oct to Dec/Jan). But there are other positive highlights for the
company, she said. "Plans are in place to purchase 20 acres of land at Port
Esquivel to accommodate the construction of silos," the Mayberry executive
said. These silos will be used to store grains which will enable the company to
reduce the costs associated with this important raw material which comprises 40
per cent of their cost structure.
PROCESSING NEEDS
"Most important, however, is the full ownership of the (company's)
cogeneration facility," she said. This means there will now be reliability
of electricity, steam and chilled air, critical to the processing needs of the
plant.
Apart from a handsome payout from its Carreras
holding, Lascelles de Mercado can look forward to the positive impact on liquor
sales from the expansion in tourism and an improvement in operational costs due
to the impact of Highway 2000, Mr. Walters said.
Pan Caribbean Financial Services enjoys good
prospects from the expansion of its financial network, the consultant stated.
The company may also be applying for a commercial banking licence, which could
have a positive impact on it.
There is talk of Grace, Kennedy spinning off
their financial sector, and of Hardware & Lumber increasing its capital base
and expanding its network across the island, he said. The Bank of Nova Scotia
has historically performed well through both good and bad economic conditions,
he said. One key factor behind the increased prices is that there is a limited
amount of shares available to be traded, Mr. Walters said. With this limited
supply, an increase in demand for stocks usually results in an increase in
prices.
And chasing that limited supply of stocks is a
market where liquidity is increasing. Ms. Ansine said the money supply is at a
good level now and is expected to increase next week from maturing debt
instruments.
"What is obvious now is that multiple stocks
are advancing at an impressive pace," she said. "These are prices we
should have been seeing from last year."
Donette Falconer-Johnson, senior equity trader
at Paul Chen-Young & Company was the only one expressing surprise at the
pace of the market advance. "Investors have to beware of the risks,"
she said. "At the pace the market is going up, unless some good results
come out in February, there might be a correction around the corner."
Investors need to carefully assess the market
segment that individual companies operate in to determine whether higher pricing
is justified, Mrs. Falconer-Johnson said.
"Don't get drunk with enthusiasm,"
Mr. Walters added. "There is no guarantee that this (market upsurge) will
continue ad infinitum."
Investments should be structured around a balanced portfolio of fixed income,
equities, real estate, he said. "Don't put all your eggs in one
basket."
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