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Market free fall erases J$73b of wealth

Published:Friday | September 14, 2012 | 12:00 AM

Steven Jackson, Business Reporter

The stock market lost more value in August and while analysts are not ruling out further declines, they also say the floor is in sight.

Investors lost J$1.97 billion of their wealth on the main market of the Jamaica Stock Exchange, with only three active stocks hitting double-digit returns.

Market capitalisation dropped to J$551 billion, its lowest point year to date.

"If it hasn't hit rock bottom yet, it is very close," said Wade Mars, head of asset management and equity trading at Mayberry Investments. "Because we have a set of picks that we watch very closely, and we literally saw the turning point at end of August."

Mars said that select stocks in financial services and food industries offer strong earnings yet to be priced into the market.

Year to date, investors have lost close to J$73 billion of their wealth on the market.

The August dip represents the smallest one-month decline in the year, according to Kerian Nepaul, research analyst at PanCaribbean Financial Services, adding that small trades are driving the market. Since January, declines ranged from 61 to 24.7 per cent for the top 10 decliners over the period.

"It might be premature to say that the market has hit rock bottom. Year to date August, the main market has indicated a slower decline in the average prices of the stocks. August was one of the better months of the year - the number of stocks advancing was among the highest for the year, while the number of stocks declining was among the lowest for the same period," she said.

The main market index actually ticked up by 360 points to 85,871 points in the month, notwithstanding the fall in capitalisation, led by the near dormant penny stock Ciboney, which gained one cent or 50 per cent to close trading at three cents.

The other top-four advancing stocks were Gleaner, up 14.5 per cent; Scotia Investments, up 14.3 per cent; Supreme Ventures, up 10.4 per cent; and National Commercial Bank, up 5.6 per cent.

The junior market also lost J$700 million in the month with few stocks advancing, among them Dolphin Cove, up 7.5 per cent; Jamaican Teas, up 6.8 per cent; AMG Packaging, up 3.1 per cent and LASCO Manufacturing, up 1.9 per cent.

Nepaul said the month of August saw the lowest number of transactions going through the exchange, which had the third-lowest trading value year to date August.

"In a declining market, this may indicate that investors are offloading less of their stocks," she said.

"Market activities are slowing down as investors continue to hold on to their liquidity and wait for news concerning the macro-economic condition of Jamaica. Market activities are currently being driven by company news and liquidity needs.

Nepaul adds that now is a good opportunity to buy into strong companies with good long-term potential.

Comparatively, calendar year 2011 offered investors some of the best returns in the world mainly based on the junior market performance, led by the LASCO stocks.