THE local stock market lost $15.1 billion in market capitalisation during May as it was affected by last week’s civil unrest and weak earning reports, analysts say.

Its the first month-over-month decline for the year and resulted in market capitalisation dropping from $579.4 billion on April 30 to $564.3 billion on Monday representing a 2.6 per cent decline. Top declining stocks included Salada Foods, Jamaica Producers Group and Pegasus down 16.58 per cent, 13.3 per cent and 12.45 per cent respectively. The top stocks only advanced between 6.6 per cent and 0.43 per cent headed by Mayberrry.

In fact, decline intensified during the week ended Friday, May 28 as all three indices on the Jamaica Stock Exchange (JSE) declined, with the main JSE Market Index decreasing 463.30 points or 0.53 per cent. Market volume was just 10.97 million units valued at $82.41 billion, a major decline from heavy trading activity which characterised the market in early May. Twenty-five stocks traded during the week with 10 advancing, nine declining and six holding firm.

In addition to the week being shortened because of a public holiday — Labour Day, the week was marred by violence erupting across sections of the Corporate Area, arising from a joint police/miltiary operation to apprehend alleged drug lord and former Tivoli Gardens strongman Christopher ‘Dudus’ Coke. But it was unfavourable earning releases which played an integral role in souring investor appetite, said Vernon James, vice-president, sales and client services at NCB Capital Markets.

“The civil unrest experienced in sections of the nation’s capital last week, is likely to have contributed to the weak trading activity observed during the week,” James told the Business Observer. “It should be noted, however, that volumes were similarly low in the prior week as investor sentiment had been weakened by the generally unfavourable earnings releases.”

Scotia Group and its wealth management division Scotia DBG, impacted by a weak economy and the Jamaica Debt Exchange (JDX) programme which has caused lower yields on securities, last week reported second-quarter netprofit declines of 11 per cent and 64 per cent respectively. The week also saw conglomerate GraceKennedy post a 11 per cent net profit decline against the background of recession-battered regional consumer market.

However, while the civil unrest had a minimal immediate impact, analysts say there could be an impact in the short to medium term.

Jamaica Money Market Brokers senior equities trader Donette Johnson said the unrest may have an impact down the road, depending on how the situation is handled.

“A possible long-run consequence is a fallout in business confidence which could filter into the market,” she said.

Among highlighting the fact that revenues were lost due to the closure of a number of businesses in the corporate area, James noted a confluence of macro-economic fallouts which could hamper the market.

“The unrest might have also supported further declines in GOJ Global bond prices which could adversely affect the results of financial companies,” said James, adding that there is also the issue that the recent occurrences could reduce the chances of the country meeting the International Monetary Fund targets given that tax revenues and revenues from tourism will be affected. As a result, we may see some adverse effects of this in the near to medium term.”

The development is a setback on a market which has experienced a slight rebound since the advent of the JDX in February, benefiting from a loss of investor appetite in Government paper. The Market Index has advanced by 2,722.86 points to 86, 044.82 points year to date, a three per cent increase. But it has risen by 14 per cent since it hit a 75,166.03 points low in January.

“The JDX programme was completed in February 2010 and the rebound in the market started then. Having seen the main JSE hit a low of 75,166.03 points in January, by the end of February, the main index had rebounded to 79,094.74 and has been on an upward trajectory since,” noted Johnson.

Said James: “The stock market proved a valuable alternative to fixed-income investments following the decline in interest rates. Further, there were opportunities to pick up good stocks at heavily discounted prices,” but, he added “since the earnings season, investor sentiment has seemingly weakened and we are seeing a pullback in prices.”