By Andrew Green, Staff Reporter 
Keith Collister, business development manager for First Global Stockbrokers. Right: Sterling Asset Management chief executive officer, Charles Ross. - File Photos
THE PUSH to invest in United States dollar denominated securities has ended, leading investment advisors say.
The hike in interest rates locally has stopped a slide in the value of the Jamaican dollar. But it also halted the shift into US dollar investments as Jamaican dollar fixed interest investments became more attractive overnight.
"A lot of people were converting (to US dollar investments) prior to last week Monday," said Hope Wint, Manufacturers Sigma Merchant Bank manager for asset trading. But the "opportunity for everyone" created by the hike in interest rates caused a shift in investment direction.
Investors are generally not selling their existing US dollar holdings, Miss Wint said. But additional money is not going in that direction.
The Bank of Jamaica hiked its reverse repurchase (repo) rates on 90 day and 120 day instruments by 4.1 per cent and 3.8 per cent respectively last week Monday. The bank said then that the increase was in response to instability in the foreign currency market caused by low tourism inflows and speculative activity.
The increase also had a "spillover" effect as it also caused a hike in 30 day repo rates, said Nigel Goffe, senior account executive at Barita Investments. Investors are now earning significantly more from such investments.
The previous movement into US dollar investments had been partly due to "pre-election jitters,' Miss Wint said. There is some element of speculation as investors try to determine the impact on their investments of the outcome of the upcoming election.
But the main cause was the attractive on US dollar denominated fixed interest investments, she said.
This was against the background of gradually declining interest rates in the Jamaican dollar investments such as the repos.
Another impact of the interest rate hike has been on the stock market, said Sterling Asset Management chief executive officer, Charles Ross. The upward trend in the market has shifted and the stock market could possibly now "start drifting sideways with a downward bias."
"I had not expected a stock market plunge," Mr. Ross said. The interest rate hike could be expected to slow stock market investment, but "many institutional investors need to get back into the stock market."
The fact that several institutional investors need to increase their holding in stocks to have a more balanced portfolio will provide a basic support for the market, Mr. Ross said. Further support comes from other Barbados and Trinidad, said Mr. Goffe. There is a definite interest in Jamaican stocks from the rest of the region.
"Interest in Grace, Kennedy stock in particular, has quite surprised me." Mr. Goffe said. It represented 8 per cent of all trades on the Trinidad and Tobago market during August and represented on of the top three companies in price appreciation for the year.
"I am a little negative about stocks mainly because of the interest rate rise," said Keith Collister, business development manager for First Global Stockbrokers. "But the rates are not expected to remain elevated for the long term."
The interest rate increase has been applied on 90 day and 120 day instruments, Miss Wint said. This suggests the increase "will be short lived."
And as company earnings remain strong, Mr. Collister said, an interest rate reversal in the medium term would be a major positive for the stock market.
