Business

Stocks

Despite signs of continued economic improvements, as evidenced by the recent release of some key economic and financial data, the performance of the equities market to date may appear, to some, to be lagging by comparison.

There has been a revaluation in the local currency, and inflationary pressures have abated. This was followed recently by Bank of Jamaica lowering its benchmark rate by an additional 50 basis points to nine per cent. However, the expected favourable response by equity investors to these developments appears to be muted.

Although it may appear that the stock market has been lagging, there has been an improvement in stock market valuation since the start of the year. A key indicator of market performance is the price-to-earning ratio (P/E) that compares stock prices with earnings on a per-share basis.

It tells how much investors are willing to pay for a unit of earnings and is considered a key valuation tool. A higher P/E would indicate higher stock-price valuation. Since the beginning of the year, valuations have actually increased significantly with the market P/E currently, at 12.7 times earning, up from 8.6 times, or a 49 per cent increase since December 2009. This ratio could climb higher should company earnings improve and more favourable economic and financial development materialise.

The local equities market declined last week, with the main JSE index shedding 1.20 per cent or 1,058.96 points to 86,866.44 points.

Global Bonds

Low but improving trading activity marked global bond market trading last week. Trading activity, though, continues to be centred mainly on the GOJ 2017s and 2019s.

A summary of overall trading in the euro bond market is as follows:

GOJ nine per cent 2015 had no trades but closed with lower bids at $102.00 and offers at $104.00.

GOJ 10.625 per cent 2017s traded flat at $113.00 with low volumes; closing bids were at $112.00 and offers at $114.00.

The eight per cent 2019 also traded moderately at $100.50, with closing bids at $99.00 and offers at $101.00.

The tax-free 11.635 per cent GOJ 2022s did not trade but closed with lower bids at $131.00 and offers at $137.00.

There were no trades on the GOJ 9.25 per cent 2025s. Closing bids were at $101.50 while closing offers were $104.00.

The Air J 9.38 per cent 2015s traded at $102.00. Closing indicative bids and offers were at $101.50 and $103.00, respectively.

There were no reported trades on the eight per cent GOJ 2039s. Closing bids were at $90.00, while offers were at $92.50.

There were no trades on the GOJ 11 per cent 2012s and the GOJ 10.50 per cent 2014s. However, the closing offer on the latter was $104.50.

Government of Barbados Global 2021s reported no trades. Indicative bids were $105.00, while indicative offer closed lower at $107.00.

State-owned Trinidad & Tobago Petrotrin Corporation Global 2019s traded at $116.00, with closing bids at $115.00, while the 2022s closed with a bid of $95.00.

Foreign Exchange

There was continued weak demand from end-users in foreign exchange market trading. In light of the marginal appreciation earlier in the week, some demand came into the market from dealers who took US$ positions on the premise that the market has bottomed. The USD traded in the range of $85.60 and $85.80s during the week.

On Thursday, the weighted averageexchangeratewas $85.83 /US$1.

Written for Sunday Business by Vivian Bedassie, executive wealth adviser at NCB Capital Markets Limited.

bedassieve@jncb.com