By Al Edwards, Business Co-ordinatorBUOYED BY the country's fiscal accounts performing $2.95 billion better than budgeted for the month of April and the Government's efforts to bolster the local dollar, credit research house Bear Stearns has given the Jamaican economy an encouraging thumbs up.
In a document sent to the Financial Gleaner, Bear Stearn's senior managing director, Gregory Fisher noted, "things continue to get a bit better each day. Better currency... lower rates... more liquidity... improving economic numbers... all things that we have been waiting to see for quite some time. As far as the Jamaican Globals are concerned, it looks like we are in the "express elevator to the top mode. All the locals are buying with very few on the sell side. Most of the US institutions have already sold the bonds or they are holding for the long haul. We have moved more paper in the last two days (Monday and Tuesday) than we have since the Budget."
Carl Ross also pointed to the strong performance of the fiscal numbers for the month of April. Revenues were up 17 per cent year on year (inflation was six per cent for the year on year period) even though most of the new tax measures in the fiscal year 2003/04 budget were not implemented until May.
"Total expenditures were up only eight per cent for the month, which surprised us, because there is usually a lot of expenditure pressure in the initial months of the fiscal year due to timing issues related to cash vs. accrual accounting. We think it is early to get bullish on the fiscal outlook for Jamaica, but April's numbers support our view of near term stability in the credit. We believe that revenue numbers will continue to look good in the coming months, with the biggest risk to the budget coming from the expenditure side (especially debt service, depending on interest rates)."
Mr. Fisher observed that there are many shorts out there when it comes to the Jamaican Globals and hazards a guess of US$40 million or so as far as the US accounts are concerned.
"All the locals seem to be looking for Jamaican 07's but due to no supply, we have seen accounts settling for the 05's, 11's or 22's. That's the good news. The bad news is that we have no more bonds to sell. My guess is with the shorts beginning to taste their own blood and given the fact that there seems to be more liquidity in Jamaica creating non-stop buyers, the Jamaican Globals will go even higher... actually much higher in my opinion.
"I would be shocked to see any Jamaicans trading below par in the coming days. I am not even sure if we are going to see an eventual S&P downgrade... if we do, it is already built into the story.. if not, I think it would be a huge positive."
