Scotia says attractive return on investment still possible in Jamaica even as economic slowdown is forecast
Even with forecast of a slowdown in economic growth for Jamaica, Scotia Investment says it’s still possible for investors to get attractive returns.
Addressing high net worth clients at a breakfast investment briefing on Wednesday, Scotia Investment’s senior financial analyst, Tamika Walker Mowatt, said the temporary closure of the ALPART Alumina Refinery in Nain, St Elizabeth for modernisation and upgrading, coupled with the slowdown in major infrastructure works and global events, will dampen economic growth in the months ahead.
Statistical Institute of Jamaica (STATIN) data show that the Jamaican economy grew 1.3 per cent for the June quarter, while economic growth for the March quarter was 1.7 per cent. But projections by the Planning Institute of Jamaica are for the economy to grow in the region of 0.7 per cent for the remainder of the fiscal year.
However, Mowatt Walker is expecting gains in the tourism and agriculture sectors to carry the Jamaican economy forward at a moderate pace in the months ahead and she is expecting that the low-interest rate environment will continue to present opportunities for the equities and bonds markets locally.
Additionally, the Scotia financial analyst projected that company earnings will continue to grow, while those with high-interest loans will likely move to refinance to benefit from lower interest rates, as well as, raise capital by going to market with initial public offerings (IPOs).
These factors, she emphasised, will keep the investment outlook for the local economy in positive territory and will auger well for investors looking for viable options.
With this positive outlook she said it’s still possible for aggressive investors or those with a larger appetite for risk to make as much as 12 per cent return per annum on their portfolios.
Citing examples, Mowatt Walker said an aggressive investor would likely have a portfolio that comprises an investment mix of 80 per cent growth stocks, 14 per cent speculative stocks and six per cent on fixed income.
For the moderate investor, their portfolio would likely comprise of the following investment option mix: 46 per cent growth, 16 per cent speculative, 27 per cent income and 11 per cent cash. Such an investor can expect returns of about nine per cent per annum.
As for the conservative investor, their portfolio would likely comprise the following stock options: 42 per cent income, 32 per cent cash, 18 per cent growth and eight per cent speculative. As is expected, the return for this category will be much lower, at about four per cent per annum.
Commenting on the performance of the economy for the long term, Mowatt Walker pointed out that though the country has made significant gains under two agreements with the International Monetary Fund (IMF), she warned that lingering structural weaknesses in the economy, low productivity, crime and natural disasters will pose problems for economic growth.