Slippery slide for local stocks in 2020 - JSE finishes near bottom of global exchanges list

It’s been a slippery slide for the local stock market over the past two years and the pandemic has made matters that much worse. From the best performing exchange in the world in 2018 repeating a spectacular feat it first accomplished in 2015, to the fifth best in 2019, the Jamaica Stock Exchange, JSE, performed near the bottom of the pile of 88 global exchanges in 2020. This is based on data from Countryeconomy, an open-source data centre, cross-referenced with Bloomberg and JSE data. The JSE index decline this year placed it at second to last of the 88 exchanges globally.

In terms of assets classes, local equities took the brunt of the pandemic-induced hit in 2020 as investors became skittish, uncertain of how the global economic downturn will end. With the market down some 25 per cent over the year, the optimists think 2021 might be a year of recovery.

New listings and capital raises on the JSE are seen as an important element of that recovery. At year end, there were four latest listings collectively aiming to raise $9.5 billion from the market, with others lined up. This should spur confidence and growth in the overall index and spill over into 2021, according to analysts at NCB Capital Markets.

“These companies coming to the stock market for capital is indicative of a resurgence of confidence in the market. It is expected that this will continue into 2021, as several companies have announced intentions to raise money from the market, such as FESCO, Proven, RJR Group, and so on. Interestingly, a number of these companies are coming to market for capital to finance expansion opportunities,” explained NCB Capital.

Key Insurance seeks to raise $670 million; Alliance Financial Services $2 billion though the offer has been suspended; Sygnus Credit at least $3.3 billion and Derrimon Trading went to the market for $3.5 billion. This week, Proven Investment’s additional public offering, APO, was back on the market with a January 8 opening date for a net raise of just under US$30 million or about $4.2 billion. These offers would add to the estimated more than $1.8 trillion market capitalisation of the combined JSE companies.

NCB Capital analysts are adding that while it may be too early to say whether these transactions reflect an improvement in business confidence, it is clear that companies are reacting to the pandemic by strengthening their balance sheets and are finding investment opportunities in the crisis.

“Furthermore, with global vaccine distributions starting, the global economy should begin to recover along with business confidence. We are likely to see more companies coming to the market in 2021,” according to NCB Capital analysis.

The fall in the JSE Combined Index puts it at the second-worst market in the world in 2020. Of the 88 exchanges analysed by the Financial Gleaner, Semdex from the Mauritius Stock Exchange performed the worst, down 25 per cent, followed by the JSE Combined index which declined 24 per cent year to date. EGX from the Egypt Stock Exchange also lost 23.5 per cent year to date.

The IBC Caracas index in Venezuela led the world with increased year-to-date performance, up 1,300 per cent, but analysts have traditionally discounted its performance due to hyperinflation in the South American country. The second-best performer was the Nasdaq in the United States, up 43 per cent year to date. That market received support from the Federal Reserve in addition to consumers receiving stimulus packages. The Nasdaq exchange in the US was buoyed by massive jumps by Tesla, Zoom, Amazon and other companies, seen as poised to grow in a post-COVID world.

Globally, 37 exchanges among the 88 surveyed made positive returns for the year.

Since January to start of December, the only JSE stocks making triple-digit returns were Key Insurance, up 256 per cent, and Pulse Investments, up 224 per cent, according to JSE monthly summary data ending November 30. Others making double-digit gains were Margaritaville Turks, Eppley, Seprod, Barita, Portland JSX, MPC Caribbean Clean Energy Limited, Caribbean Flavours & Fragrances Limited, and Caribbean Cream.

The JSE indicated that the market felt the economic impact of the pandemic, but that it would implement growth initiatives and new product development to prepare the market for recovery. The JSE intends to launch a semi-private platform for the trading of privately placed bonds.

The JSE Combined Index closed at 395,614 points on December 31. It suffered its worst day on March 25, when the market closed at 337,506 points, down 33 per cent from its high of 508,131 on January 2. The market showed small recovery towards year end. While some stocks have rebounded to near-normal levels, including Barita Investments which doubled from March lows towards pre-COVID levels. Other large capital stocks, such as NCB Financial Group, continued to trade at or near one-year lows. The NCB stock moves the market, as it accounts for roughly one-quarter of the overall market capitalisation. It hit an all-time high of $249 in July 2019 but trading at $140.91 on the last day of the year. Year to date, NCB declined some 28 per cent.

steven.jackson@gleanerjm.com