Stock Market Posted Positive Result for June 2011 Quarter

KINGSTON — The Jamaica Stock Exchange (JSE) widely regarded as a critical barometer of investor confidence, recorded increases in all its indices for the June 2011 quarter, relative to the previous quarter and for the similar period last year.

Data contained in the latest Quarterly Monetary Policy Report (QMPR) of the Bank of Jamaica (BoJ) indicated that except for the cross listed index, which captures companies listed on the regional exchanges, all JSE indices recorded higher growth for April to June, with the Junior Market Index recording the sharpest increase of 35.9 per cent relative to a decline of 3.8 per cent for the March quarter.

The report noted that the improved performance of the indices was also reflected in the acceleration of the volume of stocks traded; a slower rate of decline in the value of transactions; and a positive outturn for the advance-to-decline ratio during the review quarter.

“For the quarter, the volume of stocks traded grew by 22.8 per cent relative to 2.0 per cent in the previous quarter. The value of transactions declined marginally by 1.8 per cent, following a sharp reduction of 23.4 per cent for the March 2011 quarter. Also, for the June 2011 quarter, the advance-to-decline ratio was 25:10 compared to a ratio of 17:16 for the prior quarter,” the report stated.

The ‘Finance and Other’ category accounted for six of the top 10 advancing stocks recording average price appreciation of 25.8 per cent and 117.6 per cent, respectively.

Stocks from Manufacturing and Communications accounted for the highest price depreciation among the 10 top declining stocks, recording average price declines of 20.2 per cent and 25.1 per cent, respectively, for the quarter.

With respect to monthly returns on the Main JSE Index for the quarter, the performance averaged 0.8 per cent. The Central Bank’s QMPR observed that this compared favourably to average monthly returns of 0.5 per cent from money market securities and a capital appreciation of 0.06 per cent on foreign currency investments.

Additionally, during the review period, several announcements were made by the JSE including the listing of Honey Bun Limited (HONBUN) and the intention of National Commercial Bank Jamaica Limited (NCBJ) to cross-list on the New York Stock Exchange.

Since these announcements, the share prices of HONBUN and NCBJ have appreciated by 2.9 per cent and 9.7 per cent, respectively. Correspondingly, on June 29, 2011, AMG Packaging and Paper Company Limited, a box manufacturing company, issued its Initial Public Offer (IPO), which had an oversubscription rate 3.7 times the initial offer.

The Central Bank’s analysis of the performance of the stock market for the review quarter identified several developments, which sustained interest in the equities market. These included the continued decline in rates on domestic fixed income securities, stability in the foreign exchange market and “better than expected earnings” which served to increase the attractiveness of equity investments.

“This performance was influenced by a continued decline in relatively stable interest rates, sustained stability in the foreign exchange market and positive corporate earnings of several listed companies during the review period relative to the prior quarter,” the report stated.

The performance of the market also reflected the level of liquidity in the market reinforced by the appetite of investors seeking attractive investments in the emerging low interest rate environment. The high level of liquidity was reflective of limited Government activity in the money markets, the report noted further.

Other developments identified by the Central Bank report included the disclosure by the JSE of a new trading platform to be implemented by end-2011 and the planned listing of Proven Investments Limited (PIL) on July 14, 2011 on the Main JSE.

In addition, the Board of Directors of Pan-Jamaica Investments Trust Limited (PJAM) and First Jamaica Investments Limited (FJI) announced that both companies have entered into an arrangement whereby all the assets and liabilities of FJI will be transferred to, and vested in, PJAM.

In comparison to the two other major stock exchanges in the region, the report pointed to mixed results for the quarter ended June 2011. “In Trinidad and Tobago, the Composite Index advanced by 8.9 per cent relative to growth of 4.4 per cent in the prior quarter. This positive result for Trinidad and Tobago can be attributed to favourable earnings performance in addition to subdued repo rates. For Barbados, the Local Index declined by 0.8 per cent compared to growth of 10.0 per cent for the March 2011 Quarter."

By Allan Brooks, JIS Senior Reporter