T-bill rates mixed at auction

Interest on Treasury bills rose again in the latest auction held on 21 August 2013. On offer were two instruments seeking to raise $400,000 each for 91 Days and the other of 185 Days duration. Both instruments were oversubscribed.

The average rates came out at 7.34, down from 7.995 percent for the 91 day at the July auction and is back at the level in June. This is a pretty sharp decline, as $771.75 million chased $400 million on offer. But investors who placed bids as high as 7.75 percent were able to get some of their bids filled. Full allotment took place at 7.74923 percent.

The 185 Days instrument came out at an average rate of 8.1255 percent, slightly up from the 182 days instrument issued in late July at 7.88 percent.  Investors, however, got rates ranging from 6.729 to 8.50 percent in full and partial allotment as high as 8.657 98 percent. A total of $400 million were on offer and bids amounting $768 million were tendered.

Related posts | T-bill rates move up again

JSE: Market down but not out

Wednesday, 21 August 2013 | Prices on both the main & junior markets took a dive today as declining stocks barely outnumbered advancers once more, with 7 advancing and 8 declining. In the process, the market took back more than it gained on Monday and Tuesday. The number of stocks trading amounted to 5.2 million valued at just $15.4 million as General Accident, Cable and Wireless and Jamaican Teas traded relatively large volumes.

The All Jamaican index fell by 814.28 to close at 85,179.80, the main market index was down by 462.79 points to 85,214.09 and the junior market down 12.12 point to close at 781.99.

Trading was moderate in the main market with Cable & Wireless trading 1.4 million units as it closed at 18 cents up 3 cents from the last price on Tuesday. Caribbean Cement scored another 52 weeks high as the stock hit $2.65 at the end of trading, a gain of 43 cents as 147,400 units traded. Carreras is holding around the $49 region as 23,931 units traded firm at $49.10, Grace Kennedy traded 40,255 units at $56.99, up 4 cents. National Commercial Bank traded 53 311 units at the closing price of $18.5, off a cent, Sagicor Life Jamaica had 93,000 units trading while losing 60 cents in closing at $8.40, Scotia Group 16,500 firm at $21.01. Scotia Investments traded 8,000 units and gained 14 cents to close at $26.15. However, the stock traded in Trinidad at the equivalent of $32.70, a huge differential. JMMB, which did not trade, is selling in Trinidad at $9 equivalent compared with $8 in Jamaica.

JSEIndicesAug21Junior market | General Accident with 1.87 million shares valued at $3.47 million was the big mover in the junior market as the stock traded firm at $1.85. The market was characterised by selling as 6 junior market stocks fell in price with none advancing. Blue Power Group traded 3,300 units at $9.20, slipping a cent from the last traded price on Tuesday. Caribbean Cream traded 99,207 units at $1.05, down 2 cents, Caribbean Producers traded firm at $2.03 with 162,100 shares, Jamaican Teas lost 40 cents on trading 977,993 units valued at $3.9 million, Lasco Distributors traded at $1.45 at the close down a cent with 92,000 shares, Lasco Financial Services closed at $1.50 off 2 cents while trading 28,272 units and Lasco Manufacturing closed at $1.60 with 57,000 units as the stock closed off a cent.

Eppley closed with a bid of $400 for 423 shares but has not traded since listing on July 29.

IC bid-offer Indicator| At the end of trading, the Investor’s Choice bid-offer indicator shows that bids for 6 stocks were higher with 1 stocks having offers lower than their last selling price.

TTSE: Trinidad Cement still in demand

Wednesday, 21 August 2013 | Trinidad Cement was once more in strong demand on the Trinidad & Tobago Stock Exchange trading 687,568 shares for a value of $1,340,308 and trading firm at $1.95 Overall Market activity resulted from trading in 13 securities of which 5 advanced, 1 declined and 7 traded firm as 776,230 units traded valued at $2,523,278.

Jamaica Money Market Brokers, which has come in for increased buying following strong first quarter results, traded up to 57 cents an increase of 7 cents with a volume of 30,000 shares valued at $17,100. Another Jamaican company in demand is Scotia Investments with 19,924 shares trading with a value of $40,844; the stock was up 2 cents to close at $2.05. National Enterprises accounted for 10,500 shares valued at $168,000 and traded firm at $16. Neal & Massy traded 2301 shares and gained a cent to close at $58.94, while Prestige Holdings contributed 6,100 units as the price held firm at $9.35, Republic Bank added 1,970 units as the priced held firm at $110.01 and Scotia Bank saw 6,023 units changing hands at a cent lower at $69.99.

TTSEAug21Clico Investment Fund increased by 8 cents to end the day at $21.38 as 3,554 shares valued at $75,972 traded. Guardian Holdings lost, falling $0.40 to close at $15.50, a new 52 weeks low as 2,650 units traded.

IC bid-offer Indicator | At the end of trading, the Investor’s Choice bid-offer indicator shows that bids for 4 stocks were higher with 2 stocks having offers lower than their last selling price.

BOJ: Economy likely declined in Q2

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Economic activity for the June 2013 quarter is estimated to have declined within the range of negative 0.8 percent to positive growth of 0.2 percent the central bank said in its latest report on the economy. This performance compares to average decline of 0.7 per cent for the four preceding quarters.

The weak performance of the economy continued to reflect low external and domestic demand. Low domestic demand reflected the impact of depressed real wages and high unemployment the central bank said. The data compares with a decline of 1.3 percent that the Statistical Institute of Jamaica said occurred in the March quarter and an estimated decline within the range of -1.2 per cent and -0.2 per cent by BOJ.

The preliminary out turn compares with the central bank’s forecast for the quarter of real GDP growth within the range of -0.5 per cent to 0.5 per cent for the June 2013 quarter.  This performance it then said should reflect expansions in Mining & Quarrying and Construction offset by contractions in Hotels & Restaurants and Agriculture, Forestry & Fishing.

BOJ600x250The central bank outlined the various areas of growth or contraction. For the review period, contractions are estimated for the tradable and non-tradable industries. The performance of tradable industries primarily reflected declines in Export Agriculture, Manufacturing and Hotels & Restaurants. Electricity & Water Supplies and Domestic Agriculture drove the contraction in the non-tradable industries.

Agriculture, Forestry & Fishing is assessed to have contracted further in the June 2013 quarter, relative to average quarterly decline of decline of 2.1 per cent for the preceding four quarters. The decline in the industry was largely associated with unfavourable weather conditions, weak global demand and the continued impact of the coffee rust disease. Specifically, the outturn for the review quarter reflected contractions of 5.7 per cent and 41.0 per cent in domestic and export crop production, respectively. This compares to an expansion of 12.7 per cent in domestic crop production and a decline of 20.4 per cent in export crop production in the June 2012 quarter. The estimated decline in export crop production largely reflected a contraction of 41.3 per cent in sugar cane milled relative to a decrease of 20.4 per cent in the corresponding quarter of 2012. The fallout in sugar cane milled reflected the earlier commencement of the crop year relative to the corresponding period in 2012.

For the review quarter, Hotels & Restaurants is estimated to have contracted marginally relative to growth of 4.7 per cent in the June 2012 quarter. Of note, the industry’s performance was reflective of estimated declines in both sub-industries. The fall in Hotels was inferred from declines of 0.2 per cent and 0.4 per cent in stop-over visitor arrivals and visitor expenditure, respectively, relative to the corresponding quarter in 2012.

With the exception of the March and December 2011 quarters, Electricity & Water Supply is assessed to have contracted since the March 2010 quarter. The performance of the industry in the June 2013 quarter reflected decreases of 2.3 per cent and 0.1 per cent in electricity consumption and water production, respectively. Lower electricity consumption was primarily influenced by disruptions in transmission due to technical losses and theft. Continued drought condition hampered water production during the review period.

Following five consecutive quarters of growth averaging 0.7 per cent, output for Finance & Insurance Services is estimated to have contracted in the June 2013 quarter. The downturn was largely institutions’ participation in the National Debt Exchange in February 2013.

Mining & Quarrying is estimated to have recorded growth in contrast to the contraction of 9.7 per cent in the June 2012 quarter. The improvement in the industry was primarily reflective of increased capacity utilization of 40.6 per cent in the alumina industry relative to 37.4 per cent in the June 2012 quarter. This improvement reflected normalization at one alumina plant that had encountered technical difficulties in the corresponding period of 2012. Against this background, total alumina production increased by 8.6 per cent. However, due to maintenance activity at the bauxite plant, crude bauxite production declined by 4.4 per cent. In this context, total bauxite production grew by 2.2 per cent during the period.

For the June 2013 quarter, marginal growth is assessed within Construction compared to a contraction of 4.2 per cent in the preceding June quarter. The performance of the industry mainly reflected the impact of infrastructural development programmes and hotel projects such as Highway 2000, Riu Palace Jamaica and Memories White Sand Resort.

Related posts | Economy probably contracted 2.5% in Q2 | Mining & Agriculture dent GDP badly | BOJ: Little or no growth to June | BOJ estimates GDP decline in Q1

BOJ confirms IC Insider FX report

Jamaica’s central bank purchased US$193.6 million (net) from the market in the context of tight Jamaica Dollar liquidity during the June quarter putting the Net International Reserves at end of June to US$1.003 billion, US$119 million above the outturn for end of March 2013. The increase is in line with what IC Insider surmised in our post “What’s BOJ up to in FX & money market?” that it was the central bank driving the exchange rate movement. The Bank’s gross reserves at end-June 2013 amounted to US$1.88 billion, representing 12.9 weeks of projected goods and services imports.

The central bank in its latest release on the economy stated that “given periodic episodes of demand pressures, the Bank offered two USD indexed bonds and nine VR instruments as part of its liquidity management programme. These actions would have also constrained the pace of adjustment of the exchange rate”.

BankofJamaicaBOJThe Bank estimates that there was a decline of US$72.4 million in Net Private Capital (NPC) flows during the quarter. NPC flows declined in the context of heightened concerns regarding the near-term outlook for the exchange rate. This reduction was, however, constrained by tight Jamaica Dollar liquidity which limited the ability of investors and merchants to hedge against further movements in the exchange rate. In this regard, the net open foreign currency position of authorized dealers (AD) is estimated to have declined by US$207.3 million during the quarter. Most of the reduction in AD positions occurred in June. These developments contributed to an increase of 10 per cent in average per diem purchases to US$28.8 million relative to the March 2013 quarter. Concurrently, average per diem sales increased by 25.1 per cent to US$32.3 million, the BOJ statement concluded.

Related posts | What’s BOJ up to in FX & money market? | BOJ offers 3 new CDs | BOJ raises rates to attract money

Government may wipe out deficit

Jamaica could wipe out its fiscal deficit for the 2013/14 fiscal year if measures announced by the Government achieve the targets set. A primary surplus, the target that has been set, will translate to a surplus before interest cost of around $100 billion. The Minister of Finance spoke of a potential $17 billion savings from the swap out of old loans into loans with lower interest rates that would reduce interest cost to around $100-120 billion.

According to the Minister of Finance, the first debt exchange in 2009 saw the average coupon on outstanding domestic debt decline by an average of 650 basis points to 12.5 per cent. The JDX resulted in $700 billion domestic debt refinanced from an average of 18 per cent to 12 per cent; 25 new benchmark securities replaced 350 illiquid bonds; and 99.2 per cent participation — the highest on record world-wide.

The estimated annual interest cost savings for the Government was projected at $41 billion. In fact the government saved vastly more in the first full year as interest rates fell sharply afterwards.

The new debt exchange earlier in February of this year (JDX2) along with the tax package should see interest rates across the system fall as more funds are taken out of the economy with limited need to borrow new funds. This won’t happen immediately but over the course of the year. This will mean lower borrowing cost but also lower withholding taxes for government. The wiping out or virtual wiping out of the fiscal deficit will mean government will be borrowing no new funds from the local economy and could well repay some to the system.

Pressure will be eased off the Jamaican dollar and people should not be surprised if there is some revaluation of the dollar. The JDX2 debt exchange will not have the same impact as the first one on the business sector. For one, interest rates were in the mid-teens to mid-twenties when the first one was implemented. JDX2 is expected to save $17 million less than the $41 million estimated back in 2009 and is worth far less in real terms as inflation has made the savings worth about 50 percent or so less. Banks are less dependent on government paper for income as they have aggressively expanded their loan portfolio.

The tax package is a poor commentary on the government’s views on increased production and productivity. To add taxes on businesses that our main trading partners don’t have to bear is a direct hit on the country’s competitiveness. Increasing cost on production is clearly not the way to go but that is exactly what’s been done.

All in all, the main objectives of cutting the fiscal deficit quickly are right but many of the methods being implemented are the wrong medicine.

Related posts | Fiscal deficit target exceeded again | Gov’t raking in taxes | GOJ: Deficit cut

Image courtesy of StuartMiles/FreeDigitalPhotos.net

Profit up, margins shrink at Seprod

Shrinking margins and lower gross profit could not prevent Seprod from enjoying a bump in profit of $312 million in the June quarter versus $161 million in 2012 and $542 million for the six months period versus $453 million in 2012.

Seprod got a boost of $107 million from the sales of equities in the June quarter. Also in the quarter, they benefitted from a gain of $54 million from holding of assets in foreign currency. Finance and other operating income rose to $112 million in the quarter, up from $80 million in 2012 and for the six months, $206 million versus $167 million. Management has kept selling and administration cost under control with both areas falling in the latest quarter and just rising slightly for the year to date period. Selling expenses which came out at $100 million for the quarter was $6 million less than in 2012 and admin cost came out at $372 million versus $374 million in 2012. For the six months, selling expenses climbed by $4 million to $198 million and admin went to $784 million up from $751 million in 2012. Finance cost moved up to $42 million from $26 million in the June quarter and in the six months period, it rose from $48 million in 2012 to $82 million in the latest period.

Revenues | Revenues were down 2 percent in the first quarter, falling to $3.7 billion and off by $74 million from the year ago period. However, revenues increased by a healthy 17 percent to $3.7 billion in the June quarter and is up 7 percent for the 6 months to June.

The biggest issue the company is currently having is a sharp fall in profit margin. To June 2012, gross profit as a percentage of direct cost was 28.2 percent and has fallen to 24 percent for the 6 months to June this year and to only 21 percent versus 24 percent in the June quarter. The deterioration has occurred in the distribution segment as profit stagnated at $99 million, a slight 3 percent rise in that area while sales rose 11.5 percent. In the manufacturing segment, profit is up by 12.5 percent to $893 million and revenues is up 3.5 percent to $4.7 billion.

Earnings per share for the 6 month period is $1.05 and the full 12 months to December should be around $1.80-$2.

Finances | Seprod has $3.9 billion in cash and investments. Borrowing is at $2.26 billion up a billion dollars from June 2012. Current assets are well in excess of current liabilities by 3 to 1 and equity stands at a strong $9.6 billion.

Longer term | Seprod has never been one of those sexy companies but it has done remarkably well since listing back in the 1990s. It appears that for 2014 and beyond a lot is being predicated on the fortunes of the sugar operations in St Thomas where the target for sugar production is the processing of 300,000 tonnes of canes that should work out to around 25,000 tonnes of sugar. Management indicates that the expanded canes farms are already planted and the production should be coming in the 2014 crop. The group acquired Bowden Estates with 3,000 acres along with another property in the area and lands that were in bananas have now been planted out in canes. Management states that the sugar company is critical to them as a foreign exchange earner that can supply foreign currencies for the group when needed.

Related posts | Seprod’s dividend consideration | What’s really up at Seprod?

FX: Stable rates all round

Tuesday, 20th August 2013 | Trading on the forex market resulted in fairly stable rates on Tuesday for buying and selling the three main foreign currencies. Trading in US dollars brought in $27 million at 7 cents more on average as the rate settled at $101.29 and $26.7 million selling at a cent more than Monday’s average rate as it closed at $101.94. The change in trading the Canadian dollar was somewhat different from the US dollar as it took 10 cents on average to purchase the Canadian at $96.41 as purchases amounted to $756,000 and sales took place at 36 cents less than Monday’s average rate for $563,000 at the average rate of $98.26. The pound fell on both the buying and selling rates as it cost dealers 6 cents less at $157.09 in buying £1.26 million while the selling of £716,000 took place at 27 cents more at $159.46.

Overall the equivalent of $30 million were purchased and $28.66 million were sold.

FX_TRADE+Currency+Aug20There was no change in the lowest selling rates for the Canadian dollar and Pound and none in the highest selling rate for the US dollar. The highest buying rate for the US dollar was off 5 cents to $102.45 and the low price was $83.92 but the lowest selling rate was at $98 down $1.50. In the case of the Canadian, it took 25 cents more in buying the currency at the highest rate which ended up at $98.95 and 11 cents less for the highest selling rate of $102.40 but $3.25 more for the lowest selling rate of $95.70. For the Pound all 3 rates declined with the highest buying moving down by 80 cents to $159.90, the highest selling was down $3.65 at $162.73 and the lowest at $154, off 35 cents.

FX_TRADE+HighLow+Aug20

JSE: Moderate gains

Tuesday, 20th August 2013 | The market closed off today as stocks of 28 companies traded with a volume of 3.69 million valued at $20.57 million. There were 8 stocks advancing and 10 declining as all the indices gained moderately except for the junior market. The cross listed had no trades.

The All Jamaica Index gained 533.18 points and closed at 85,994.08 and the JSE Market Index increased by 303.03 to close at 85,676.88 the Junior Market closed down by 15.33 closing at 794.11.

Main market | Cable & Wireless traded 401,991 units firm at 15 cents, Carreras had 50,460 units changing hands at $49.10 valued at $2.478 million, Caribbean Cement accounted for 75,913 as the stock traded as high as $2.50 before it closed at $2.22, up 12 cents, Desnoes & Geddes traded 386,000 units valued at $1.74 million and lost 2 cents to close at $4.50, Grace Kennedy traded 6,050 units lost 4 cents to close at $56.95, Jamaica Money Market Brokers saw 577,150 units changing hands valued at $4.9 million and closed at $8 down 10 cents for the day. National Commercial Bank 29,696 shares traded with a closing price of $18.51, down 5 cents. Pan Jamaican Investment Trust had just 7,539 units trading firm at $51.10. Sagicor Life Jamaica Limited 7,720 saw trading at $9, which is down 50 cents from Monday’s traded price but the offer at the end of trading was $8.45 for 26,000 units. Scotia Group had one of the largest trades in monetary terms as 299,551 units changed hands at a closing price of $21.01 to cost $6.37 million, the stock traded firm.

JSEIndicesAug20Junior market | Trading picked up in the junior market on Tuesday with the Lasco companies picking up in volume as profit taking in the shares appears to be ending while demand is returning for them. Consolidated Bakeries traded 354,230 units, the most since June 28 and closed at $41.41, up a cent. Blue Power traded up to $9.60 but closed at $9.21, up 3 cents in trading 36,100 units. The company posted improved quarterly results yesterday and investors seemed to have been responding positively to them. Cargo Handlers closed at $13, up 38 cents in trading 3,000 units, Dolphin Cove lost 80 cents in late trading to close at $8.20 with only 1,200 shares trading. Lasco Distributors closed at $1.46 in trading  574,199 units, Lasco Financial Services traded 376,901 firm at $1.52, Lasco Manufacturing closed at $1.59, down a cent in trading  379,616 units.

IC bid-offer Indicator | At the end of trading, the Investor’s Choice bid-offer indicator shows that bids for 1 stock was higher with 2 stocks having offers lower than their last selling price. This is the weakest this signal has been since we started tracking and suggests a ‘sideways market’ at this time.

Related posts | Blue Power profit up 20%

TTSE: Trinidad Cement still holds sway

Tuesday, 20th August 2013 | Trinidad Cement stock price has more than doubled since late June. Yet it continues to be in demand as the stock led today’s trading with 455,377 units changing hands valued at $884,472. The stock traded firm at $1.95. Scotiabank Trinidad & Tobago with a volume of 113,314 shares accounted for the bulk of money invested in the market amounting to $7,931,980 as the stock closed firm at $70.

Trading in the market remained moderate with the stocks of 9 companies changing hands, with 3 advancing, 2 declining and 4 trading firm resulting in a volume of 700,215 shares crossing the floor of the Exchange valued at $9,269,574.

Scotia Investments Jamaica, contributed 69,392 shares with a value of $142,155 as it put on 1 cent to close at $2.03 but traded as high as $2.05, while Grace Kennedy added 33,692 shares valued at $111,288 while losing 9 cents to close at $3.30. National Flour traded 20,140 firm at 70 cents.

TTSEAug20Unilever Caribbean with a mere 500 units trading gained $0.23 to end the day at $55.25 as the bid at the end of trading was at $55.28 for 1,000 shares. Clico Investment Fund, posted a volume of 5,300 shares valued at $112,890 and declined by 20 cents to end at $21.30.

JMMB did not trade on Tuesday but had a bid for 458,940 units at 50 cents the same as Monday’s last traded price and an offer of 143,000 units at 57 cents.

IC bid-offer Indicator| At the end of trading, the Investor’s Choice bid-offer market sentiment indicator shows that bids for 3 stocks were higher with 2 stocks having offers lower than their last selling price.