The main market of the Jamaica Stock Exchange hit three new record closing highs this past week and is showing signs of climbing higher, much higher in fact.
That is a development that the general public is unaware of and smart investors cant take advantage of to make big gains in the months and probably years ahead.
The market has never had all the stars as lined up as they are now. Low Interest rates, the lowest on record in Jamaica, low inflation rate, a fluid foreign currency market. Liquid Jamaican dollars, of which the Governor of the country’s central bank Bryan Wynter, puts at $50 billion within the Banking sector. But it get even better. According the Wynter, interest rates are likely to go down some more as the high liquidity situation dictates it. The Jamaican dollar has been trading within a band of J$125 to 130 to the US dollar, a situation Wynter sees as likely to be the norm for sometime to come. Wynter who was speaking at special briefing on Friday, indicated that Jamaicans had better start getting used to this new development as there is enough foreign currency available in the system. A development which he things the new foreign exchange auction B-Fxitt, that the central bank manages has helped to foster with much more transparency in the market aided by market intelligence by both buyers and sellers as well as the central bank. But the new B-Fxitt is not the only factor at play. Not only that, according to the governor even as the bank cut the compulsory take form dealers by 10 percentage points, BOJ has not suffered lower intake as a result of increased flows, some of which Wynter attributes to the selling of US dollars by locals to go into more profitable form of local investments. Government’s tight fiscal discipline has gone a long way to creating and environment of stability within the economy and among the business sector.
Unbeknown to many, is the increased spending by government in March, well above what was originally planned. For investors this means more money in the hands of consumers, more sales and profit for listed companies, that now seems to be showing up in the coffers of corporate Jamaica.
So where is the stock market in all of this? The junior market is up 8 percent year to date, but main market stocks have just crawled a mere 3 percent, the latter wont being performing so poorly much longer. This short term chart shows two channels that the market is trading within. The market is trading closer to the upper resistance line shown in red. The lower blue line has been steering the market slightly side wards with an upward bias. A very important feature, which is not shown in the attached chart, is an extremely bullish formation shown on a longer term chart. That chart shows the market now caught up in a wedge formation with the top being around 335,000 points using the all Jamaica Composite index. With the recent market moves, it appears that the wedge is going to give way and herald a huge rise upwards in the market and that in going to happen within a few weeks, probably after first quarter results are released starting in late April.