Prudence Barnes, Gleaner Writer
Glenford McLeish, managing director of JMMB Securities Ltd. - RUDOLPH BROWN/CHIEF PHOTOGRAPHER
THE STOCK market is on a downward trend, prompting unease among some investors, but Glen McLeish, managing director of JMMB Securities Limited, is urging investors to "stick it out", noting that "those investors who ride out the bearish run currently being experienced by the stock market will reap the benefits."
He also suggested a diversified portfolio in the form of a mutual fund as one of the means of safeguarding against the volatility in the market, as well as persons carrying out due diligence to ensure that the fundamentals of their stocks remain solid.
The main JSE indices have been trending downward, with the JSE Composite down some 6.86 from where it stood in August one year ago. "The market is generally down somewhere in the region of 26 per cent. That reflects the fact that most stocks have declined over the year," he said. "If you hold on to the stocks, over time you will recover."
This view is a more pessimistic one than that which Mr. McLeish had expressed earlier in the year, when the prospects for growth and inflation were much better. While acknowledging the challenges facing financial sector stocks, he had said lower interest rates and good earnings should have propelled the market forward.
DECLINE
Now JMMB's share price has also undergone a decline by some 10 per cent. This is despite the fact that for the three-month period ending June 30, 2005, the group achieved after-tax profits of $441.8 million, a 105.1 per cent increase over the comparative prior year quarter.
Mr. McLeish said the market is currently experiencing a correction, adding that "long-term investors should not be unduly troubled."
Discouraging speculating in stocks, he said "over the long run the market will outperform fixed income investment as it has done in Jamaica. Our market has also outperformed comparative international markets over the long run, including the NASDAQ and S&P."
What individuals should examine is whether the fundamentals of the companies and the markets changed. "You would be concerned if taken together, the fundamentals as to management, the industry and sector in which the company operates, have changed radically."
Noting that the market responds to major events and macroeconomic factors, he said areas of the economy like the financial sector are facing challenges with changes in its landscape occasioned by relatively low interest rates and currency stability, added to an intense level of competitiveness in the sector. "Foreign exchange until recently has been pretty stable. With stability in currency it means that it is much more challenging to generate revenues from foreign exchange trading, but even so a number of firms have still generated revenue," he said.
OIL PRICES
In addition to some of the factors affecting the financial companies, the issue of oil prices is also eroding the profit margins in the manufacturing sector, and with it, the confidence of investors in some of those stocks, he said.
Still, he remains optimistic about the market.
JMMB Securities Limited was established in 2002 as a subsidiary of the Jamaica Money Market Brokers, serving over 11,000 equities clients both locally and internationally. Through JMMB's associate company Caribbean Money Market Brokers (CMMB), JMMBSL also trades on the Trinidad and Barbados Stock Exchanges and offers the first open-end indexed mutual fund comprising stocks of the JSE Select Index.
"Given that JMMB is in the stockbrokerage business, what it does is to add that dimension of financial services and financial services products to the suite of products that JMMB itself offers."
JMMB's annual report indicated that JMMBSL executed transactions on the Jamaica Stock Exchange valued at over $4.14 billion as at March 31, 2005, an increase of 42.3 per cent over the $2.91 billion traded in the previous 13 months. According to the report, the JMMB Select Index Fund which tracks the 15 most liquid blue chip stocks on the Jamaica Stock Exchange, Select Index grew to $418 .85 million in aggregate net profits under management, representing an increase of 160.5 per cent over the previous year.
When the parent company made the move to go public in December 2002, it was JMMBSL which acted as lead broker in one of the largest public offers on the Jamaica Stock Exchange, involving over 254 million of ordinary stock units. Again, when JMMB ventured into the regional equities market JMMBSL partnered with CMMB Securities to facilitate listing of JMMB on the Trinidad and Tobago Stock Exchange.
The company also facilitated, along with CMMB, the listing of Capital and Credit Merchant Bank on the T&T Stock Exchange in October 2003, and is currently handling the portfolio Manpower and Maintenance Services Limited which is set to go public.
CROSS TRADING
"Cross trading has allowed us to be able to get our clients into cross listed stocks. This gives them opportunities for further diversification both in terms of individual companies but also in terms of country risk," he said, adding that "they can also seek to trade on price differentials in the market."
The main indices in Trinidad and Tobago and Barbados are up 3.89 per cent and 6.27 per cent respectively, he said.
Mr. McLeish, however, cautioned against a simple comparison, citing Jamaica's record highs last year, and the market correction. He further insisted that the fundamentals in the Jamaican economy remain good, including the Government's push to have a balanced budget for 2005/2006. The market, he said, needed to ride out the bearish phase.
