Dec 2016 Financial News

Can 2016 top 2015? Remembering the 2015 equities market

Dec 02, 2016

The stock market in 2016 has subsided to a muted roar whencompared to the feverish increase in valuation seen in 2015.

Since January 2016, the impressive price appreciation of a few stocks does not mask the fact that the stock market in 2016 is performing below last year.

For 2015, all indices of the Jamaica Stock Exchange (JSE) increased dramatically, with the exception of the Cross Listed Index.

Specifically, the JSE Main Market expanded by 97.4 per cent following a decline of 5.3 per cent recorded for the previous year, with stronger growth in the Junior Market.

In 2015, equities offered an average return of 91.1 per cent, while the Jamaican dollar vis-a-vis the US dollar depreciated by 5.0 per cent. In addition, the average interest rate in the 30-day private money market was 6.3 per cent at the end of 2015.

Up to September 2016, however, market activity showed slower growth for the year, with the value of transactions and volume of stocks traded for the JSE Main Market recording respective declines of 2.2 per cent and 13.6 per cent.

The number of transactions for the year ended September 2016, however, increased to 10.9 per cent.

Notably, the sharp increases in the JSE indices during 2015 were mainly reflected in the fourth quarter. For 2016, the jury is still out with the year having three months of data outstanding, but it is not expected that 2016 will match the bull run of last year when the performance of the JSE attracted the attention of the world.

The difference was principally in increased investor appetite for equities in 2015, influenced by higher company profits by large corporates as well as announcements of planned mergers and acquisitions, as noted by the Bank of Jamaica (BOJ) in its 2015 annual report.

In the final quarter 2015 the planned acquisition of Desnoes & Geddes Ltd by Heineken Sweden (AB) was announced, as was that of Dolphin Cove Jamaica Ltd by the Dolphin Discovery Group of Mexico, as well as the merger of Radio Jamaica Ltd and the media arm of Gleaner Jamaica Ltd.

Late last year as well, changes in the minimum retail repo transaction size (investors with less than $1 million to spend) were shut out of this market; plus legal and regulatory enhancements for collective investment schemes also served to increase the attractiveness of equities.

In 2015, the number of transactions and the value of stocks traded grew by 35.5 per cent and 59.7 per cent, relative to reductions of 12.1 per cent and 10.0 per cent, respectively, for the previous year. In contrast, the volume of stocks traded declined by 11.2 per cent following growth of 52.7 per cent for 2014.

For all of last year’s furore, up to September 2016 the equities market continued to demonstrate strong growth with all indices, with the exception of the Cross Listed Index, recording growth ranging between 70.8 per cent and 143.8 per cent.

Volume trading this year is comparatively higher, influenced by stock splits among listed companies which almost entered the double digits. The smallest among them included GraceKennedy which did a two-for-one split, with the latest and the largest being Eppley which split by a factor of 150.

In its quarterly monetary policy report for the September quarter, the BOJ notes that generally higher company profits reflected in consistent dividend payments also augured well for the performance of the equities market for the quarter.

In addition, announcements of stock splits for companies listed on the Main and Junior markets also influenced the outturn for the review period.

And, as happened in 2015, investments in equities continued to provide greater return relative to foreign currency and domestic money market investments.

Equities offered a return of 65.1 per cent, while GOJ global bonds offered an average return of 5.6 per cent. In addition, the average interest rate in the 30-day private money market was 5.5 per cent up to September 30.

 

Source:
BY AVIA COLLINDER
collindera@jamaicaobserver.com
Business reporter
Jamaica Observer
Friday December 2, 2016    

http://www.jamaicaobserver.com/business/Remembering-the-2015-equities-market_82281