CHRISTMAS has traditionally been a time of benevolence, when things look a bit better all around, even on the stock market. However, as the end of the year draws closer, the expected Christmas rally is moving slowly on the stock market this year.

From the week of Monday, December 13 to Friday, December 17, all four indexes on the Jamaica Stock Exchange (JSE) declined. The JSE market Index, which comprises all ordinary companies, closed at 83,581.976 on December 17, a total of 2,199 lower than the 85,780.93 at which it opened at the start of the week.

The JSE Select Index, measuring the Index’s 15 most liquid companies; the JSE All Jamaican Composite Index, comprising Jamaican companies; and the JSE Cross Listed Index, comprising foreign companies, all declined for the week, trading volumes as low as 474,786, 511,691, and 108,175, with the lowest number of trades on the cross listed index.

In Monday’s trading session the situation had not changed much, with all Indexes declining further. The JSE Market Index declined by 364.13 points (0.44 per cent) to close at 83,217.84. The JSE Select Index declined by 10.46 points (0.50 per cent) to close at 2,102.29. The JSE All Jamaican Composite declined by 599.00 points (0.77 per cent) to close at 77,498.92 and The JSE Cross Listed Index was flat at 0.00 points (0.00 per cent) to close at 863.01.

However, noted investor and financial analyst John Jackson said the declines in the stock exchange indicate a seasonal change rather than an indication that stocks are actually doing worse this Christmas. According to Jackson, a number of factors have contributed to the decline in the indexes which are capitalisation weighted.

“Today’s trading is an indication of the type of trading activity that one would expect at this time of the year,” Jackson said on Tuesday.

He said while stocks traditionally trade higher at the end of summer to the end of the year, some activity in the market may have affected how it is performing now. One such is what he calls ‘misinformation’ regarding the reasons for company results showing negative growth.

“Some people who speak to the company results do not take the time to dissect the numbers to see what is really taking place. A lot of the time, profit decline is due to the fall in interest rates from last year and the devaluation of stocks this year, which did not happen last year,” Jackson said in reference to the effect of the Jamaica Debt Exchange (JDX), which took place in February. The JDX caused a real decline in interest rates from as high as 24 per cent to just under 17 per cent.

He also noted that there may have been some cannibalisation of the main market following eight listings on the Junior Market this year, causing some investors to sell stocks they own in order to purchase shares of the newly listed companies.

“Some people might have actually sold stocks to buy stocks like Dolphin Cove and Cargo Handlers,” said Jackson. Both these Initial Public Offers (IPOs) were announced and completed during December this year and both were oversubscribed.

Jackson said that in particular, Dolphin Cove, which was sold at $3 per share, was an indication that the market thought stocks priced below $3 were cheap. The IPO was oversubscribed to the tune of $620 million (or 206.9 million shares), almost three times the amount on offer. A total of 526 applications were received from both the general public and reserved share applicants for the IPO.

“Dolphin Cove showed that people do not have to give away their stocks for people to buy them,” he said.

Additionally, Jackson said people are not particularly investor savvy to know what the investment options are. He argued that the JSE should exhaust all possible means at its disposal to inform and educate people about the virtues of investing in stocks.

“You need more people to come to the market and the way to do that is to get more publicity across the board,” said Jackson. “The Junior listing of Dolphin Cove demonstrated very well that one of the things that the Stock Exchange needs to do is to find all possible means of publicising the virtues of Stock Exchange investing.”

He added that more companies should promote their listings in the newspapers via a one-page prospectus and application form so that people can actually get all the information in one place. He also recommended having agents outside of Kingston in order to give more Jamaicans access to investing.

However, according to Jackson, the Main Market Indexes should rally soon. He said normal business cycle activities as well as some window dressing by fund managers should result in an improvement in the overall indexes come the end of the year and into January.

“Once the market is satisfied that it’s time to invest in stocks the main market will take care of itself,” he said. “All elements seem to be in place for a rise in the market. I would not be surprised to see an index growth and towards the end of the year to see a rally.”

Preference shares trades were also flat for 13 of the 14 securities listed on the market last week, the exception being the Scotiabank Jamaica variable preference share. Scotia closed the week with total volumes traded in the share reaching 90,080. The week opened with the price of the share at $1.20, but closed with the share price 14.17 per cent higher at $1.37.

Already, despite a subdued market, Jamaica Money Market Brokers (JMMB) is hoping to get a share of the Christmas bonuses this year with the offer of its 8.5 and 8.75 per cent redeemable preference shares. The offer opens on January 3, and closes on January 7, 2011.

Keith Duncan, CEO of JMMB, promised investors who purchase the shares a minimum 15 per cent growth in profitability within the next three years.

“Therefore we are saying to the investing public, take a good hard look at our pref shares but you must also take a good, hard look at our common stock, it is cheap,” said Duncan. “You should be buying it now. We are expecting that you should see our stock price move significantly. Our stock is actually trading below book value. It is a good buy and the preference share is an excellent buy. In a stable macroeconomic environment we can give investors stable flows that they can plan on.”