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Investor confidence remains weak

Published:Wednesday | September 3, 2014 | 12:00 AM
The Jamaica Stock Exchange at Harbour Street, Kingston. -FILE

McPherse Thompson, Assistant Business Editor

The performance of the equities market for the quarter ended June 2014 reflected continued weak investor confidence, according to the Bank of Jamaica (BOJ) quarterly monetary policy report released by Governor Brian Wynter last week.

That was despite positive macroeconomic developments including three consecutive quarters of economic growth and achievement of the targets and structural benchmarks under the International Monetary Fund (IMF) programme up to the March 2014 quarter, it said.

Jamaica has, in fact, now recorded its fourth consecutive quarter of economic growth, the Planning Institute of Jamaica reported in late August.

For the year ended June 2014, all the Jamaica Stock Exchange (JSE) indices declined by between 11.6 per cent and 26.7 per cent, the report said.

In particular, the JSE main index declined by 18.6 per cent to close at 70,739 points relative to a fall of 8.2 per cent for the year ended March 2014 and an average annual decline of 3.8 per cent for the previous five June quarters, the BOJ said.

In addition, the all-Jamaica composite and the JSE select indices declined by 11.6 per cent and 12.9 per cent respectively for the year ended June 2014. The cross-listed, junior and combined indices declined by 26.7 per cent, 10 per cent and 17.9 per cent respectively.

Referring to the weak investor confidence, the report said in this regard, higher returns on money market and foreign currency investments provided more attractive investment options relative to equity investments.

Annual returns on Jamaica dollar money market securities and foreign currency investments averaged 9.1 per cent and 12.8 per cent respectively, relative to average returns of negative 19.8 per cent on equity investments for the year. The BOJ said its continued offering of variable rate certificates of deposit at attractive premiums also provided an investment option.

All market indicators of the JSE main index reflected weak performance for the year ended June 2014. The value of transactions increased marginally by 0.9 per cent while the volume of stocks traded and the number of transactions declined by 1.5 per cent and 1.8 per cent respectively, relative to the year ended March 2014. The decrease in the market performance indicators for the review year was partly attributable to the delisting of FirstCaribbean International Bank in March 2014, the central bank said.

The advance to decline ratio was 4:21 for the year ended June 2014. Four of the top-10 declining stocks belonged to finance and recorded an average price depreciation of 23.4 per cent occurring in the context of mixed earnings performance.

In contrast, two of the top-four advancing stocks belonged to manufacturing, recording an average price appreciation of 95.3 per cent, reflecting companies with improved earnings performance.

According to the June 2014 IMF Staff report prepared for the consideration of the executive board, Jamaica's reform agenda under the four-year extended fund facility remains complex and challenging.

They noted that a large fiscal adjustment has been put in place, important tax reforms and a fiscal rule have been introduced, and the exchange rate has been allowed to adjust in an effort to restore competitiveness.

"However, investor confidence remains tentative and tangible signs of a growth and job creation dividend from the painful reform efforts are urgently needed," the IMF Staff report added.