BY THE end of September, regional stock exchange figures show the composite index in Barbados has risen 7.5 per cent, Trinidad has risen 12.5 per cent and Jamaica up 15.9 per cent.
These results compare marvellously against major international markets which have seen a 29 per cent drop in the United States S&P 500, a 28.7 per cent drop in the FTSE (London Stock Exchange), and an 11 per cent decrease in the Nikkei 225 (Japan) indexes. This is a clear example of how uncorrelated the Caribbean markets are with international markets and the potential diversification benefits from investing in Caribbean equities.
The Fortress Market Update shows the returns investors would have realised by investing in the Top 10 performing companies in each stock market. The analysis evaluates the movement in the share price from the beginning of the year to the end of the above-mentioned month and converts the return to US dollars. The returns do not include dividends or transaction costs. The discussion below refers to local currency.
BARBADOS
Top five performers year to date are Life of Barbados (up 88.9 per cent), West Indies Rum Distillery (40.9 per cent), Barbados Dairy Industries Limited (20 per cent), BS&T (13.6 per cent), and Barbados Farms Limited (10.5 per cent). The Barbados market year to date has produced an excellent 7.5 per cent overall increase in the index. Most of this has been driven by the sale of LOB and the rejuvenation of large cap players like BS&T. Bargains in today's market are becoming harder to come by but during the year the market produced some opportunities to investors to pick up some of the stocks at reasonable prices. Many have come under heavy selling pressures reducing their prices to levels of negative returns from their January 1 beginnings and astute investors have taken advantage of the sell offs. BS&T and Banks Holdings both trading at attractive valuations are good examples of such an occurrence.
Analyst estimates on these two stocks are for expected earnings of $0.32 and $0.40 respectively. At their lows $2.55 for Banks and $2.85 for BS&T during the year, some investors were and are still getting a deal on their purchases. Dividend yields are attractive (surpassing the bank rates) and the potential for favourable capital appreciation to the long-term shareholder is highly likely. Of good mention this past quarter are the results of Insurance Corporation of Barba-dos with an increase in net income of 34.52 per cent on the half year results mainly due to increases in underwriting and net investment income.
TRINIDAD
Top five performers on the TTSE were Grace, Kennedy (up 75.4 per cent), Life of Barbados (74.4 per cent), WITCO (62.3 per cent), LJ Williams 'A' (47.4 per cent) and Point Lisas Develop-ment (40.4 per cent). The third quarter has seen the fall through of the take-over bid for Trini-dad Cement, the mounting negative news reports surrounding BWIA's financial position and a second share offer for National Enterprises.
Even before the meeting held in August to remove the 20 per cent restriction on holdings in the company was rejected by shareholders, TCL's share price plummeted from its high of $6.69 to its current price of $5.00. For an investor holding the shares, it is rather hard to determine what position to take. Consensus is to hold. BWIA's 6M02 results revealed losses of TT$54.3 million obviously still reeling from September 11. Investors should note that these results were as at June 30 and do not reflect the effect of the strike during crucial periods in July and August, These events certainly will exacerbate the mounting losses the company will incur. Strategies to be implemented in saving the airline from receivership will run in similar fashion to others in the industry where voluntary paycuts, suspension of certain routes, shelving of leased planes, and reduction of catering costs will need to be implemented.
National Enterprises went to the market in early September to further divest Governments interest in the venture. The targets were for 50 million to 75 million shares to be offered at a price of $4.75. The offer silently closed on September 20 and to date there has been no word from officials of the success of the issue. Turn-offs for the issue were mainly dealing with the underlying investments in the company. TSTT is entering a competitive environment it has never seen before hence driving revenues/ profits southward, Tringen is being faced by a projected fall in the price for ammonia, and National Flour Mills is in decline suffering from competition from imports. The sole highlight of the NEL investments would be derived from the 20 per cent ownership in the Natural Gas Company
JAMAICA
The top five performing stocks on the JSE to date are Montego Bay Ice (up 194.1 per cent), Pegasus Hotels (175.5 per cent), Kingston Wharves (144.2 per cent), Radio Jamaica (124.1 per cent), and Grace, Kennedy (106.2 per cent). The market is up almost 16 per cent for the year to date.
The Jamaican market slacked off from its earlier bull run as many stocks have now either flattened out or fallen. Demand appears to have dwindled in this past quarter most likely sparked by the effects of the reverse repo utilised by the central bank to protect the currency in early September. With the increase in rates for local fixed income securities, investors clamoured back into the fixed income market thereby deflating the stock exchange. In company news, Life of Jamaica Holdings - the company formed by the LOB/Barbados Mutual joint venture to acquire 76 per cent of LOJ made an offer to remaining shareholders to purchase their shares at a price of $0.10 per share. At the then price of $2.50, shareholders were urged not to accept the offer.
In September, settlement procedures were sped up where settlement for transactions now occurs three days from the date of the transaction (T+3) as opposed to the old cycle of T+5.
Fortress Mutual Fund Ltd. is a mutual fund investment company incorporated in Barbados. The Fund provides a practical route for individuals to invest in domestic and international direct foreign portfolio investment in the Caribbean.
- Fortress Mutual Fund analysis
Local exchange registers impressive third quarter
