Observers say FX market is liquid

ForEx trading as at Friday 4 May, 2013 | Sale of foreign exchange was greater than the amounts purchased, but the selling rate for the US dollar slipped yet again, in a two-week long appreciation of the beleaguered currency. The closing average rate of the US dollar against the Jamaican dollar is now down to $99.19 compared to yesterday’s $99.26, the currency sold for an average rate of $99.36 on Monday and is well off the low of J$99.81 reached on April 12th. The Jamaican dollar has appreciated every day this week.

Amounts traded | Authorized dealers purchased more funds today than on Thursday, US$34.14 million vs. $32.8 million, but sales amounted to $38.65 million. Only $26.54 million was sold on Thursday. Based on the trend seen from last week and evident all of this week, the currency may well end up below $99 to US$1 during next week. Where it will end? No one really knows, except may be central bankers?  One person within the financial system told ICInsider.com that some corporations and individuals have been squeezed holding the US dollar when Bank of Jamaica launched the index bond which sucked liquidity out of the market for Jamaican dollars.

What is really happening? |  ICInsider.com spoke to two persons within the financial sector who are in a position to say what’s going on. One said that corporate clients are no longer demanding FX as they did before since the announcement that the IMF board would be reviewing Jamaica’s application for funding. Individuals who had bought FX earlier are now offloading, fearing further revaluation of the Jamaican dollar. Even financial institutions are off loading into the market. Both respondents said that supply is adequate to meet demand as such persons are not rushing to buy now as they may purchase what they need later at a lower price.

Developments are really worth watching as liquidity returns to the market with far more positive sentiment that before April.

T&T: Monthly inflation slows

CENTRAL BANK HOLDS REPO RATE AT 2.75%

Headline Inflation slowed a month-on-month basis for two consecutive months to 0.2 per cent increase in March compared with an increase of 0.3 per cent in February. Food inflation, the main driver of headline inflation, rose to 12.9 per cent in March 2013, up from 10.6 per cent in February. This was mainly attributed to faster price increases for vegetables (24.2 per cent compared with 17.8 per cent in February 2013), fish (5.7 per cent compared with 4.8 per cent in February 2013) and food products not elsewhere classified (40.1 per cent compared with 31.9 per cent in February 2013). Slower price increases were recorded for meat (6.0 per cent compared with 6.9 per cent in February 2013) and oils and fats (0.8 per cent compared with 1.6 per cent in February 2013). In contrast, prices declined for milk, cheese and eggs (-1.5 per cent), fruits (-2.7 per cent) and sugar, jam and confectionery (-3.0 per cent). The lower month over month inflation rate would have given the Central Bank some comfort in keeping the repo rates at the current levels for some time longer even as liquidity increased in the system

The latest data on retail prices released by the Central Statistical Office indicate that there was a slight increase in the rate of inflation for the twelve month period. Headline inflation, measured by the twelve-month increase in the Index of Retail Prices, rose to 6.9 per cent in March 2013 from 5.9 per cent in the previous month.

Core inflation | Core Inflation which excludes the influence of food prices, remained relatively unchanged, inching up to 2.2 per cent in March from 2.1 per cent recorded in February. There was an uptick in the price increase for alcoholic beverages and tobacco (4.1 per cent compared with 2.0 per cent in February) while prices decelerated for health (6.0 per cent compared with 6.1 per cent in February). Growth in private sector credit remained relatively slow in February 2013. On a year-on-year basis, credit granted by the consolidated system to the private sector increased by 2.1 per cent from 1.9 per cent in the previous month. Among the major loan categories, lending for real estate mortgages rose at a robust rate of 13.4 per cent compared with 11.6 per cent in January, while the pace of growth in consumer lending slowed, to 2.9 per cent compared with 3.2 per cent in January 2013. However, business lending declined on a year-on-year basis for the third consecutive month, by 2.1 per cent in February 2013.

Liquidity | Liquidity levels in the financial system, though still high, retreated in the first three weeks of April 2013. Commercial banks’ excess reserve balances held at the Central Bank fell to a daily average of $5,236 million in April 1-23 compared with a daily average of $6,043 million in March. Central Bank intervention in the foreign exchange market via sales of US$60 million to authorised dealers helped to remove $383 million in excess liquidity from the system. Commercial banks remained adequately liquid and therefore did not require funds from the inter-bank market or the repo window. The Central Bank plans to undertake additional measures in the coming months to withdraw excess system liquidity.

Interest rates | Short term interest rates declined further in April 2013. The interest rate on 91-day treasury bills fell to 0.15 per cent in April 2013 from 0.18 per cent in March 2013 and the 182-day treasury bill rate declined to 0.36 per cent in March 2013 from 0.46 per cent in January. With rates in US comparative markets also declining, the differential between TT and US three-month t-bills remained unchanged at 0.10 per cent in April 2013. While economic activity is expected to pick up gradually over the course of 2013, the recovery is likely to be subdued. Continued stability in core inflation suggests that underlying inflationary pressures remain well contained. In these circumstances, the Central Bank views the present accommodative monetary stance as appropriate and has decided to maintain the ‘Repo’ rate at 2.75 per cent. The Bank will continue to keep economic and monetary conditions under close review in the coming months.

Sagicor Investments get big NDX hit

The debt swap that Sagicor Investments participated in — the GOJ’s National Debt Exchange (NDX)  — was costly for the group, not only did they get a big hit resulting in a one-time trading loss of $423 million, they also suffered reduced interest income amounting to $71 million in the quarter to March and a reduction of gross interest income going forward of approximately $57 million per month.

For the three-month period, net Interest Income was $717 million compared to $752 million in the prior year. Income earning assets was $76.9 billion compared to $77.5 billion in the prior period. Net interest margin contracted to 3.73% versus 3.88% in 2012, largely due to NDX.

Non-interest income before NDX losses, was $249 million compared to $337 million in the prior period. This decline was due largely to reduced trading opportunities in quarter. The par value of JA$ securities exchanged was $31.9 Billion. The par value of US$ securities exchanged was US$77.4 million.

Asset management, credit and service fees, trust services and FX trading and translation gains recorded improved results compared with 2012. Fixed income trading, equity trading and stock brokerage posted lower revenues. Non-interest expense increased by 8% to $494 million compared to $457 million for the prior year. Depreciation and amortisation charges associated with branch relocations and technology improvements, rose by $10 million. The current period was also impacted by asset tax charge of $30 million while there was none in Q1, 2012.

Loan Quality | Non-performing loans and leases amounted $712 million representing 7.7% of the portfolio (BOJ December 2012 industry average is 6.8%) versus $548 Million or 5.7% of the portfolio at December 2012. Subsequent to the end of the quarter there was a reduction of $100 million in the Non-performing loans as revealed by the company in their quarterly financial report.

Balance Sheet & Capital | Total Assets were $88.6 billion, up $0.3 billion since December 2012. Securities portfolios increased by 2% to $72.0 billion while our credit portfolio declined to $8.9 billion, from $9.3 billion at December 2012. Interest bearing liabilities now stand at $75.2 billion, up $0.8 billion compared to $74.4 billion at December 2012.

Stock Outlook | We estimate that the company will earn around $2.50 per share for the year ending December and with a price of $15.57 there is still value in holding the stock for medium to long term growth as well as excellent dividend payment.

Sharp moves up at BNS Jamaica

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Scotia Group Jamaica Limited (SGJ) has advised that Mrs. Jacqueline Sharp, former Senior Vice President and Chief Financial Officer, has been appointed to the position of Executive Vice President and Chief Financial Officer and Chief Administrative Officer of SGJ effective May 1, 2013.

She served as Financial Controller in the Insurance arm for a number of years before taking over the top financial position of the group in 2008.

JSharp+BNSPrior to joining the banking group Mrs Sharp worked for a number of years at Security Brokers, a former member of the Jamaica Stock Exchange. Between 1988-91, she attended University of the West Indies and hold a BSC in accounting and CFA certification.

IMF Approves US$932.3 Million for Jamaica

May 1, 2013 | Press Release No.13/150

The Executive Board of the International Monetary Fund (IMF) today approved a four-year Extended Fund Facility (EFF) arrangement for Jamaica to support the authorities’ comprehensive economic reform agenda. The EFF arrangement amounts to SDR 615.38 million (about US$932.3 million). The financing arrangement forms a critical part of a total funding package of US$2 billion from Jamaica’s multilateral partners including the World Bank and the Inter-American Development Bank, with each having preliminarily agreed to allocate US$510 million over the next four years. The Executive Board approval enables an initial disbursement by the IMF of an amount equivalent to SDR 136.75 million (about US$207.2 million).

Following the Executive Board’s discussion, David Lipton First Deputy Managing Director and Acting Chair of the Board, stated:

“For most of the past three decades, Jamaica has suffered from very low growth, high public debt, and serious social challenges. Key factors behind these problems have been Jamaica’s unsustainable debt burden, low competiveness, a weak business climate, and lack of policy credibility. During 2012/13, the authorities started to tighten fiscal policy and prepared a comprehensive four-year economic reform program to address these challenges.

“The main objective of the program is to put public debt on a firmly downward trajectory and thereby create a virtuous cycle of debt sustainability and higher economic growth. The authorities’ multi-layered reform agenda comprises ambitious fiscal consolidation, improvement in competitiveness, debt reduction, and improved social protection programs.

“Achieving higher and sustained growth is key to increase the welfare of Jamaicans and ensure the country’s long-term macroeconomic stability. The authorities’ growth agenda integrates ambitious fiscal consolidation with structural reforms to reduce impediments to growth and facilitate strategic investments.

Jamaica_coat_of_arms_280X150“While the full benefits of the reform agenda may take time to materialize, the reforms are urgently needed to ensure a more prosperous future for Jamaica. To enhance sustainability of the reform agenda, fair burden sharing of the reform effort is essential. A central component of the program is the authorities’ package of measures to promote social coherence that includes a floor on social spending, an improved social safety net, and programs to increase employment.

“The authorities recognize that safeguarding the financial sector is also critical. They have established a Financial Sector Support Fund to offer assistance, if needed, to financial institutions participating in the recent debt exchange.

“Although the risks to the program are high, the implementation of the prior actions, the frontloaded nature of the reform agenda, and the envisaged collaboration with development partners should help foster the successful implementation of the program.”

To read full text of the IMF’s press release, click here.

Daily Trading 3 May, 2013

JSE | Prices up for 15 stocks 

Stocks prices were on the up in today’s trading as advancing stocks outnumbered declining ones 3 to 1 and 15 stocks recorded gains ranging from a high of 30 cents to a low of 1 cent. Only 5 stocks declined between 40 cents to 1 cent. There was trading in 26 stocks overall. In spite of advancing stocks being dominant, the main market indices actually fell moderately with just the junior market and the combined indices moving up. The decline in the indices is based on the average prices the stock exchange uses in its computation. The changes reported here are based on the last selling prices of each stock.

Moved up | AMG Packaging moved up to $4.10 gaining $0.29, Barita gained 23 cents to close at 3.20, Blue Power moved up to $5.80 on a 30 cent move. National Commercial Bank gained 25 cents, and closed at $18.35, Paramount gained 20 cents to close at $3.20. Scotia group climbed 30 cents closing at $21.30.

Carreras slipped 40 cents to close at $55.40 and D&G 19 cents in closing at $4.11.

A total of 2,251,800 shares traded of which Cable & Wireless accounted for 1,196,164 units at a mere value of $7,396,967. Grace traded 50,375 units valued $2.77 million, Jamaican Teas traded 352,084 units valued at $1.4 million, Sagicor Life traded 74,470 units, valued at $566,676, Desnoes & Geddes traded 112,193 units valued at $461,113.

TTSEMay3+Grace is one of the eight stocks to close trading with a bid that is higher than the last selling price. It also closed the same way on the Trinidad market today and so has Carreras with a $56 bid versus the last sale at $55.60. Others with bids above the last sale price are Ciboney, Jamaica Producers, Lasco Distributors, Mayberry, Pan Jamaican, Scotia Investments.

TTSE | Slow market in T&T

In another day of slow trading on the Trinidad market, 6 securities traded. Two stocks advanced, 1 declined and 3 traded firm.

Sagicor Financial Corporation, the Barbados based company, accounted for the bulk of 165,679 shares traded in the market with a value of TT$1,715,841.10. The company traded 121,877 shares, valued at TT$841,051.30 and lost $0.09 to end the day at $6.90. Trinidad Cement traded a volume of 15,000 shares valued at TT$14,250. One Caribbean Media accounted for 15,000 shares with a value of TT$249,000, while Guardian Media saw 10,000 shares changing hands at a value of TT$197,500.

Clico Investment Fund enjoyed the day’s largest gain, increasing $0.12 to end the day at $21.12. Clico Investment Fund was the only active Mutual Fund, posting a volume of 299,358 shares valued at TT$6,322,506.10 as the price  advanced by $0.12 to end at $21.12.

The following stocks had bids that were higher than the last selling price. Ansa Merchant Bank, Berger, Grace Kennedy, Scotia Investments.

TTSEMay3+Real

ForEx Market | J$ continues appreciation

It took slightly less Jamaican dollars to buy a US dollar than it did yesterday, as the average selling price ended at J$99.26 in today’s trading. The appreciation comes against the back drop of the announced IMF agreement that was approved by the fund yesterday.

ForExSummaryMay3In yesterday’s trading, there were more selling of the currency than purchased by US$7.3 million. Today there was a US$6 million surplus of purchases over sales as purchases came in at US32.8 million while sales amounted to US$26.5 million. It also means that for the week-to-date, inflows into the market is almost equal with outflows. Last week the inflows and outflows were evenly matched.

The highest rates paid for US dollars in the market decreased somewhat according to the BOJ data. The highest buying rate fell to $99.40 and the highest selling was down to $104.22. The lowest selling rate was $82.66 and lowest buying $81.33.

ForExDEtailsMay3

Debt swap for Caribbean Producers

CPJ is following the example of the Government of Jamaica in pursuing a debt swap. This one, unlike that of the government’s, will not result in any loss in capital for the holders of the debt. The board recently gave approval for the company to raise $500 million in floating rate secured promissory note. The proceeds will be used to retire loans they current have including related parties loans which climbed to US$12.3 million at the end of March.

But loan capital is not what the company needs, it needs more equity capital. At the end of March, loans and advances by related parties amounted to nearly US$24 million, equity is less than half of that at US$11.7 million. Cash flow is about US$5 million for this year most of which has already been utilized in long term capital expenditure.

Stock Outlook | The working capital on paper is well within accepted norms. The only problem is that liquid funds are not plentiful, with less than US$1 million dollars on the books. The directors are causing the company to skate on thin ice which is what is happening. Seeking a debt swap may save on the interest cost but will merely dent the poor debt to equity ratio, which is well out of line and prudence dictates should be put right fast, not later.

Caribbean Producers Profit down

Caribbean Producers reported reduced profits for the March quarter and for the nine months to March. The company reported sales of US$50.148 million for the nine months versus US$49.8 million in 2012. The latest quarter revenues came in at US$19.4 million just ahead of US$19.2 garnered in 2012 even as they rolled items from their expanded portfolio of products. Profit after tax was US$1.26 million in the 2013 quarter and US$1.73 million in the same quarter of 2012. Year to date after tax profit is US$1.8 million versus US$2.56 million in 2012.

The company indicated in its quarterly report to shareholders that they were able to squeeze cost savings from the manufacturing operations resulting in a 14.6 percent improved gross profit amounting to US$14.5 million bettering 2012 by US$1.8 million. The gross margin moved from 25.5 percent to 29 percent for the nine months period. Selling and administrative expenses climbed 25 percent mainly due to the expansion and introduction of the meat processing plant which had to employ persons at the commencement phase. The factory was commissioned during the March quarter.

The company’s Lady Musgrave Road retail operations started in December last year and comprises a bar, super mart and a deli. Management states that the financial results are improving each month since opening.

Even as the company maintains the accounting and sales in US dollars, it seems clear that the devaluation of the Jamaican dollar over the past several months has had a negative effect on the results. The end result is that the devaluation cost is passed on to customers, which means that customers would switch to suppliers who price their goods in Jamaican dollars in their search for lower prices.

Stock Outlook | The company should go on to earn around 27-30 cents per share for the full year but should see a boost for the next year which starts in July as revenues from new operations start to come in and reduce the impact of overheads incurred.

The stock which is trading around $2 may remain anchored at these levels for a while, additionally, the company needs to seriously address the poor debt to equity and working capital ratio and not by extending the loans profile.

Caribbean Producers Jamaica Ltd | Importers of wines, liquors, and other products that are used primarily in the hotel sector. They also produce juices and now have a meat processing plant which is used for processing beef and pig’s meat. The company is listed on the junior market of the Jamaican Stock exchange.

NDX hits out Barita’s profit

Government’s debt swap forced Barita Investments to take a $240 million hit in February as they wrote off investment gains that were on their books, prior to the swap. The swap meant that investments had a value that was higher than the face value at which government acquired them at, resulting in the loss. The write-off severely impacted the company’s results for both the quarter and for the six months period. Accordingly, Barita recorded a loss in both periods.

The company stated in a release to shareholders, that without the impact of the National Debt Exchange, the financial performance would have surpassed the prior year to date profit of $143 million.

Barita posted losses of $98 million for the second quarter of the financial year and had year to date losses of $20 million. The company was able to grow its income with the main drivers being dividend income, increasing by $13 million, foreign exchange trading and translation gains, which increased by $78 million and unit trust operations. Operating expenses at the end of the second quarter were $240 million compared to $226 million for the same period of 2012. The company reported that cost savings in the curtailment of expenses contributed positively to the bottom line.

Management stated that they continue the diversification of the revenue streams by increasing product offerings and growing non-interest income. Funds under management for the Money Market and Capital Growth funds, maintained a level of nearly $3 billion. Barita Unit Trusts Management Company recorded significant improvements in our top and bottom line performances where revenues grew by 15 percent and profits increased by 20 percent for the quarter the company stated.

Balance Sheet | The asset base showed a $1.5 billion or 10 percent decrease over prior year, from $14.2 billion to $12.7 billion, while liabilities also decreased by $1.1 billion or 9 percent. As at the end of March 2013, shareholders equity stood at $1.38 billion.

Stock Outlook | The company, with the loss to date, faces a difficult task this year as all indications points to lower profits for the year ending in September than for 2012. The stock, at best, is a hold at this stage.

Talk Back | If you have a response to our stock outlook, please leave a comment below.

Daily Trading 2 May 2013

JSE | Proven dominates

In a slow and uneventful day on the Jamaica Stock Exchange, Proven 8 percent preference shares almost dominated trading with 995,382 units trading at a value of $5 million, but that was not to be, as the ordinary shares did even better with 510,650 units switching hands at 11 US cents each with a value of US$56,171.50. Grace Kennedy, with $1.44 million coming from 26,858 shares, was the next most traded stock followed by Scotia Group with 28127 shares valued at $591,087, investors spent $524,777 on National Commercial Bank’s 28,933 units and Kingston Wharves traded 82,298 units valued at $493,788. NCB traded between $18.10 and $18.50 while it last traded at $18.10, Sagicor Life between $7.60 and $8 and closed at $7.60, Scotia Group closed at $21, but traded between $21 and $21.30, while Lasco Manufacturing traded between $10.50 and $10.70 at which it last traded.

JSEINdicesMay2Carreras gained 97 cents to close at $56 to be the largest price mover on the day. Desnoes & Geddes traded up 24 cents to close at $4.30 on 10,000 shares, Lasco Manufacturing closed at $10.70, slipped by 35 cents. Other prices changes were moderate. 7 stocks gained while 5 declined to maintain the positive advance to decline ratio for the week to date.

A stand-off between buyers and sellers continued on the local stock exchange today, as the market slowly claws its way back from this year’s low, reached when the government announced new budgetary measures to increase revenues and reduce interest cost. In the process, the all Jamaican composite index gained 465.66 points at the end of trading to end up at 82,489.34, the JSE index closed up 264.51 points at 83,813.92. The junior market slipped nearly 4 points to close at 623.90 on a day of slow trading when 856,224 ordinary shares valued at $9,104,725.61 traded. In addition there were 1.02 million preference shares trading valued at $51.47 million. This is a slight increase over Wednesday when 725,220 traded at $5.09.

Eight stocks closed the day with bids above last selling price. This is down from 9 on Wednesday.

TTSE | Higher prices on cards for T&T stocks

At the end of today’s trading, 7 stocks in the main market have no offers, while there are 5 stocks that have bids above the last selling price, indications that higher prices are ahead for this market where trading has been slow but with tight supplies.

Trading activity on the main market of the Trinidad & Tobago stock exchange was very low, with only 165,916 shares crossing the floor of the Exchange with a value of $4,549,069.45. Only 8 securities traded with Angostura Holdings increasing by climbing $0.39 to end the day at $9.50, 3 declined moderately and 4 traded firm. Neal & Massy Holdings was the volume leader with 70,650 shares for a value of $4,168,350, followed by Trinidad Cement with a volume of 55,000 shares traded for $52,250. First Caribbean International Bank contributed 29,381 shares with a value of $235,048, while Sagicor Financial Corporation traded 9,130 shares valued at $63,842.45.

Clico Investment Fund was the only active security on the Mutual Fund Market, posting a volume of 131,400 shares valued at $2,759,667.40 while declining by $0.01 to end at $21.00.

TTSEMay2