Apr 2004 Financial News

Jamaica - Investors expect more rate cuts

Apr 19, 2004

The money market traded fairly cautiously last week, as investors awaited details of the 2004/05 fiscal year budget presented to Parliament by the minister of finance Omar Davies on Thursday.

The budget did not seem to have much of an impact. Hence short-term rates traded in a fairly narrow band for most of the week; the dealer rate continued to trade mostly at 14.50 per cent, peaking at 14.75 per cent.

Given the continued market liquidity, the overnight rate lost three percentage points, to close the week in the 5-7 per cent band.
In anticipation of further cuts in interest rates, investors tried to position their investments towards the longer end of the market, where rates are more attractive.

With high levels of maturity expected later this month, the monetary authorities announced two new instruments - one of them, an unlimited fixed rate investment debenture (series Af) to be floated April 20 to 27, 2004. The 24-month instrument will pay 17 per cent with the principal to be repaid at maturity on April 27 2006. Interest will be paid quarterly.
The other instrument - a local registered stock (LRS) will be auctioned on Wednesday April 28.
The LRS will coincide with this month's six-month treasury bill auction - on April 28, 2004. Details on both auctions will be made available at a later date.

Foreign exchange market

After trading at $60.72/US$1 for three of the four trading days, the Jamaican dollar strengthened on Friday - the first trading day after the budget to close at J$60.70/US$1.
The gain was despite the liquid Jamaican dollar conditions prevailing in the market.
On Thursday, the Bank of Jamaica announced that its net international reserve (NIR) for March 2004 increased 6.4 per cent over February to US $1.57 billion.

Stock market

With evidence of profit-taking the Jamaica Stock Exchange (JSE) main index declined by 919.44 points or 0.88 per cent to close at 103,343.71 points last week.
With 32 stocks trading, 14 advanced, 17 declined and 1 traded firm.

Market volume for the week was approximately 76 million units, valued over $911.3 million. The volume leader was once again Cable & Wireless with over 13.3 million of its stock units representing 17.46 per cent of trades changing hands. Jamaica Broilers followed with over 13.2 million units representing 17.27 per cent of the trades, and Life of Jamaica with over 11.09 million units or 14.51 per cent of trades.

Hardware & Lumber was the price leader, gaining $3.95 or 31.98 per cent on the week, to close trading at $16.30. Carib Cement was next with an increase of $1.60 or 20.25 per cebnt to close at $9.50. This was followed by Dehring, Bunting & Golding, which increased by $3.12 or 19.651 per cent to close at $19.
Ciboney Group had the largest price depreciation as it declined by $0.01 or 20 per cent to close trading at $0.04. Jamaica Producers Group was next having shed $6 or 13.04 per cent of its value to close at $40. Gleaner followed with an 11.11 per cent decline, or $0.30 to close at $2.40.

Caribbean news

There are fears of an increase in inflation in Trinidad and Tobago, following a report from the central bank that food prices had soared 12 per cent during 12 months to September 30, 2003.
In addition, there is wage pressure in the liquid natural gas sector of the twin island republic. However, the government says it is putting measures in place to ensure that inflation does not exceed 7 per cent in 2004. In 2003 inflation was 3.8 per cent.
International news

The UK unemployment level fell to a new low of 4.8 per cent at the end of February 2004. This is one of the lowest unemployment rates of any industrialized country currently, according to the BBC news. Average earnings are also rising - by 4.9 per cent to the year ended February 2004. The Bank of England is expected to increase interest rates amid fears of inflationary pressure.

US stock market

Two of the three US stock market indices declined last week: the Nasdaq by 57.71 points or 2.81 per cent to close at 1,995.74 points; and the S& P's 500 by 4.75 points or 0.41 per cent to close at 1,134.57 points.
The Dow Jones rose 9.94 points or 0.09 per cent to close at 10,451.97 points

Source: Jamaica Observer
http://www.jamaicaobserver.com/magazines/Business/html/20040418T230000-0500_58715_OBS_INVESTORS_EXPECT_MORE_RATE_CUTS.asp