Ashford W Meikle, Business Reporter

With investors attracted t investments, it will be another bearish year on the Jamaica Stock Exchange, says assistant vice for research at First Global Financial Services, Dean McDonald.

"It is my view that the stock market will trend in a similar fashion to what we saw in 2006," he said in a presentation at a FGFS-sponsored investment forum on Monday night at the Jamaica Pegasus hotel.

"There are a number of variables affecting the stock market ... including real estate, mutual funds and other poled investments in the market place which have essentially led to a diversion of funds from the stock market."

Last year, the main JSE Index closed at about 100,678 points, ending the year at 3,800 points below its starting point. So far, the index, which closed at 90,615 points on Wednesday, has experienced a year to date decline of just over 10 per cent.

Budget concerns

Investors have been disappointed by the financial results of a number of listed companies, which have underperformed, said McDonald.

"And, there has been some concerns about the budget as it pertains to the increase in GCT as well as the uncertainty of elections," he said.

Notwithstanding the lacklustre equities market, McDonald told investors that now was not the time to be turned off from the market.

"We have been encouraging our clients to take advantage of the market - as P/E multiples [fall] prices are becoming much more attractive - it is really the time to buy slowly to take advantage of the capital appreciation in the last few months of the year."

He based the prediction of past market performance, citing last year's data as example.

Between December 2005 and August 2006, the JSE Index dropped almost 20 per cent, to just over 84,000 points. However, by the end of the year, this decline had narrowed to 3.67 per cent. In fact, according to McDonald, between August and December 2006, the Index went up by almost 20 per cent.

"The point I am making is that the market will remain soft going into the summer months - traditionally it has done that," he said.

"Butwe believe that conditions will pick up towards the last quarter of the year."

As for other areas of the market, he suggested investment in real estate, citing 100 per cent financing offered by building societies and the pending increase in NHT benefits.

"The demand for housing will remain strong which will drive prices higher," noted McDonald.

Looking at the macro-economy outlook for 2007, he projected a 3.2 per cent GDP growth and a 7.0 per cent inflation rate, slightly higher than the 5.8 per cent recorded last year.

ashford.meikle@gleanerjm.com