Market wrap
Equities
November 2007 may be one to remember as the market looks to reverse its downward trend.
The Main JSE Index opened the trading week at a eight-month high of 100,856.19 points as buyers pushed GraceKennedy and Lascelles to 12-month peaks. Lascelles continued to benefit from its strong upward momentum while GraceKennedy spiked to a 52-week high of $70, amid news that it had sold its 25 per cent stake in the remittance, cambio and bill payments businesses to Western Union for approximately US$29 million.
However, prices corrected toward the weekend on account of more tempered bidding.
Meanwhile, institutional players exchanged positions in Carreras when it was learned that the Revenue Court ruled that the company should pay the Taxpayer and Assessment Department (TAAD) $2.17 billion in unpaid taxed for the years 1997 to 2002. The report initially depressed the stock before the market concluded that the outcome was much better than originally projected liability of $5.72 billion.
Although showing some signs of imminent but temporary price correction, Mayberry Investments also featured in the volume leaders' category almost on a daily basis, possibly related to favourable expectations arising from the company's decision to upsize the rights issue to 380 million at $3 per preference share.
In other developments, Life of Jamaica reported a 75 per cent rise in third-quarter profits it enjoyed only a stint at $8 before retreating to $7.50.
It means the market should expect favourable earnings from associated companies First Jamaica and Pan Jamaica Investment in the week ahead.
National Commercial Bank should also publish earnings early in the week, and all signs point north to higher profits.
Already, buyers have threatened to take this one over $24.
FX MARKET
Despite tight local liquidity conditions and an intervention from the central bank to the end of the week, the Jamaican dollar lost approximately six cents last week, closing at about $71.25.
As the end of October neared, the local currency strengthened, closing as high as $71.12, before demand for the greenback re-emerged, causing the Jamaican dollar to slide further.
The Bank of Jamaica's intervention kept the rate stable by mopping up the 'sudden' excess liquidity. With two months left in 2007, we expect the local currency to weaken in line with seasonal trends.
USD BOND MARKET
During the week of October 29, approximately €10.2 million entered the market owing to coupon payments on GOJ 10.50 per cent, and the 2014 global bonds.
This liquidity led to increased demand for the GOJ 2012 and 2014 sovereign bonds throughout the week and resulted in prices increasing by a minimum of 12.5 basis points on both tenors.
The most significant movement, however, occurred in the prices of the US Dollar-denominated GOJ 2015 and GOJ 2025 bonds, which increased by 120 and 75 basis points, respectively.
Pundits opine that fund managers continue to shift their portfolio compositions to seek after yield potential in the context of lower premiums and shorter durations.
Next week coupons in the amount of about US$21.15 million will be paid to local investors on FV US$400 million of GOJ 2011 global bonds.
With liquidity levels buoyed by these inflows, GOJ bond prices should continue to rally in the coming weeks.
Compiled by Shane Ingram, Craig Clarke and Clay Moodie of Dehring, Bunting & Golding. Email: info@mydbg.com
Taken from The Sunday Gleaner, November 11, 2007
