Ashford W. Meikle, Staff Reporter
Left: Chairman of Mayberry Investments Limited, Chris Berry. Mayberry's initial public offerings sparked much interest in the stock market and was oversubscribed. - WINSTON SILL/FREELANCE PHOTOGRAPHER
Right: Rezworth Burchenson was one of the analysts who advised investors to curb their enthusiastic expectations of the stock market in 2005. - IAN ALLEN/STAFF PHOTOGRAPHER
LAST YEAR was a bittersweet one for the local stock market.
It was a year in which investors' confidence in the equities market was eroded: many investors were left holding the proverbial bag, wiped out as a result of the Dyoll crisis which saw the company suspended from trading on the Jamaica Stock Exchange for the better part of the year.
The year started with a bang as anxious investors flocked to the equities market. The main JSE index opened the first trading day of the year at 112,655.51 points. By the end of the week, the index had gained 3.4 per cent pushing up to 116,525.81 points.
"This is the beginning of things to come," gushed one enthusiastic broker. "This activity so early in the year points positively to where the market is heading."
BULL RUN
Still, no one could be blamed for such enthusiasm given the performance of the JSE the previous year. Many investors were still caught up with the euphoria of the historic Bull Run in 2004, which saw the JSE charging pass 100,000 points.
In fact, a senior executive at one of the larger financial institutions projected that the Index would grow by about 20 to 25 per cent. Even well-respected stock market guru, John Jackson, felt that the JSE Market Index would rise by 50 per cent.
But some experts were cautious, arguing that it was unlikely that investors would see repeat of 2004.
"One thing is certain is that the gains recorded in 2004 will not be recorded in 2005," predicted vice president and general manager of Pan Caribbean Asset Management Limited, Rezworth Burchenson in an interview with this newspaper.
ECONOMIC FACTORS
Financial analysts pointed to unfavourable macro economic factors as stymieing the market.
"Local equity prices receded in 2005 within a backdrop of challenging economic conditions stemming from bouts of inflation, deteriorating external balances, declining fiscal balances and muted GDP growth," argued Dehring Bunting and Golding analysts, Shane Ingram and Vernon James.
The first three months of the year was dominated by the much anticipated initial public offerings (IPO) of Mayberry Investments Limited and First Global Financial Services Limited.
In fact, in February, the financial company's private placement raked in $1.3 billion in two and a half days resulting in the offer closing early.
In that same month the JSE suspended trading in the shares of the Dyoll Group from the stock exchange. It was to remain so for the next eight months until the JSE lifted the ban in October.
There was still healthy enthusiasm in the market at the beginning of the second quarter as Mayberry's IPO came to the market in April. That, too, was oversubscribed, with the average investor only managed to get only about 20 per cent of the shares applied for. Ironically, by the end of the year, Mayberry's stock would have shaved almost 37 per cent off its IPO price of $5.05.
By the end of the quarter, when the extent of the Dyoll debacle became known - with a billion plus deficit - and the recommendation of the Financial Services Commission (FSC) that the company be liquidated, investors were numbed as the summer months approached and the market entered into the doldrums.
But if it were bad in the preceding nine months of the year, by the fourth quarter in the year things got worse.
The resumption of trading in Dyoll shares on October 11 did little to woo back investors. In fact, the stock, which traded at $14.50 when it was suspended, traded at $1.82 by the end of December.
On November 10, for the first time in fourteen months, the main Jamaica Stock Exchange Index fell below 100,000 points, losing 172.74 points, closing the business day at 99,843.65 points. (Since it charged to the 100,000 mark during the Bull Run of April last year, that figure has become the de facto benchmark of investor confidence in the equities market.)
The declining trend continued into the next week and by the middle of November the market had plunged to 98,788.04 points a 14 per cent decline since the start of the year.
The situation was described by analyst Kiesa Ansine as being 'graveyard mood', Acknowledging investor fatigue, analyst Kiesa Ansine described the situation as "graveyard mood."
"Long-time investors have taken large losses, while new investors prefer to stay liquid by sitting on the sidelines and keeping their money in cash or cash equivalent securities until market conditions improve. So those who are in can't get out, and those who aren't in, don't want to get in. Those investors with the risk appetite to trade are possibly burnt out."
To be sure, there was the traditional, predictable end of year rally. But it was not enough to salvage the 7.7 per cent decline for the year of the JSE Index for 2005 which closed the last trading day of the year at 104,510.39 points.
