Gains in May but…
Market still bearish
Published:Wednesday | June 10, 2020 | 12:52 PM
Stock market investors traded nearly $3 billion worth of shares in May, a lower value than the market’s pre-COVID activity, but the first month of real recovery for the JSE index since the fallout began in March.
Sixteen stocks made gains of more than 20 per cent in the month, which would have allowed opportunities for investors to recoup portions of their lost portfolio values.
The JSE Combined Index climbed by 13 per cent to close May at 381,314 points, from 337,506 points on March 25 when the market hit bottom – but not enough for a return to a bull market, which would have required a gain of 20 per cent or more.
The market also gave up some of its gains in the first week of June, and is still down 25 per cent year-to-date, even with the phased reopening of the economy that began June 1.
Meanwhile, financial firms are weighing options on whether to raise funds in a bearish stock market. There are no imminent initial public offerings, but a few additional public offerings, APOs, are under consideration.
MARKET WATCH
On Tuesday, property conglomerate PanJam Investment Limited said it would continue to watch market conditions before making a decision on whether or not to proceed with its APO.
On the weekend, securities firm Barita Investments Limited said its board would decide on June 12 whether to launch an APO.
Proven Investments Limited, which had earlier refunded orders for its APO after the coronavirus entered Jamaica and market conditions began to change, closed the APO on Friday without taking up any subscriptions. Launched on March 11, it was intended to raise US$50 million to US$75 million to finance new acquisitions and projects.
“At this time, we are happy with how the virus is being managed and remain confident of a solid post-COVID-19 outcome. However, while the management of the pandemic is promising, equity market conditions remain weak, so we are choosing to monitor and stay out at this time,” said Proven CEO Christopher Williams.
In May, the top five stocks, all of which made gains above 30 per cent, were: IronRock Insurance, up 79 per cent to $3.85; General Accident Insurance, up 50 per cent to $6.11; food service company Express Catering, up 34.5 per cent to $4.39; renewable energy company Wigton Windfarm, up 34 per cent to $0.94; and ice cream maker Caribbean Cream, up 32 per cent to $2.81.
Rounding out the top 10 were Kingston Wharves, Eppley, Main Event Entertainment Group, Medical Disposables & Supplies, and Seprod.
The stock market, which was at its highest on January 2 this year at 508,130 points, began to slide gradually even before the pandemic reached Jamaica. The first case of the virus was detected on March 10.
The Bank of Jamaica, BOJ, in its assessment of financial markets in the first quarter, said equity returns to investors between January and March was lower than fixed income returns for the first time in years.
“As a consequence of the impact of the COVID-19 pandemic, average quarterly return on equity investments, measured by the change in the average of the daily index values from one quarter to the next, reflected a decline of 20.7 per cent relative to alternative options such as foreign currency and money market investments,” said BOJ.
“More precisely, the average quarterly return on foreign currency investments and 30-day private money market repo securities yielded positive rates of 1.9 per cent and 0.67 per cent, respectively, for the March 2020 quarter,” the central bank said in its Quarterly Monetary Policy Report.
Brokerage house NCB Capital Markets Limited says that of the 52 companies that released quarterly earnings, released up to last Friday, just over half reported improved results; of that, 22 recorded year-over-year increase in profit, 14 recorded contractions, and 16 reporting losses.
The brokerage also noted that financial firms were posting bad results, while the performance of manufacturing companies was mixed.
“Despite the disruption to business activity caused by the COVID-19 pandemic since the latter part of March, the manufacturing and distribution sector seem to have had a relatively better quarter than others did, with eight companies recording an increase in earnings, five seeing contractions, and only two reporting losses,” NCB Cap said.
“Meanwhile, the out-turn for the financial sector was less favourable, with nine companies reporting losses, relative to four reporting contractions, and four reporting higher earnings. This was mainly due to the fall-off in the price of assets held by these institutions.”
During May, the value of share trades on the market was S2.8 billion, less than the $3.9 billion for the month of April, and less than half the $6.8 billion of shares that traded in March. Stock market wealth has fallen from around $2.1 trillion to $1.66 trillion as at the end of May.