WITH lingering uncertainties about the macroeconomic climate after a tough year, Jamaica’s stock market could endure another rough ride in 2013, say analysts.

Scepticism about the signing of an International Monetary Fund (IMF) agreement and lack of liquidity were identified as factors resulting in the sluggishness of the Jamaica Stock Exhchange (JSE) last year.

Indeed, the main JSE Market Index and the JSE Junior Market declined by three per cent and 14 per cent respectively during 2012. On the year’s last trading day, on Monday, only eight of 35 companies on the main index closed higher or at the same price at which they started the year. Even worse, a mere two of 12 stocks on the Junior Market ended 2012 at a higher price or traded firm.

“The main reason for the decline in the stock market was depressed investor confidence, stemming from the absence of an IMF agreement and the reduced likelihood that an agreement could be reached during the year as the year’s end approached. While not providing any improvement to the stagnant economy, an IMF agreement provides investors some comfort that the government’s policies have credibility,” said Nicole Thompson, research manger at Victoria Mutual Wealth Management (VM Wealth).

So crippling was the uncertainty in 2012, it was not offset by mostly positive financial results over the period, noted Thompson.

“Uncertainty will continue to play a large roll in market sentiments, and, by extension, market performance. In fact, as the market gets more jittery with the absence of an IMF agreement and there being no definitive word from the IMF as to when such an agreement can be reached, the stock market could see even further declines,” warned Thompson.

Annya Walker, assistant vice-president of research, strategic planning and projects at NCB Capital Markets, told the Business Observer that investors remain cautious about taking advantage of undervalued stocks or selling overvalued ones because of the uncertainty in the economic enviroment, and as such are taking a wait-and-see approach. Furthermore, the overall illiquidity in the arket has had an adverse impact on stock prices on the Junior Market, despite the favourable earnings results from some of these companies, she added.

“The current economic environment has essentially led investors to seek less risky investment options as they seek to balance capital preservation and investment returns. This has manifested itself in persistently lower trading volumes and prices,” said Walker.

“If the current economic conditions persist, the general ‘flight to safety’ by investors is likely to adversely impact the performance of the local equities market,” she warned.

Of course, some investors may still have come out big winners in 2012 despite the bearish market.

Investors who held or bought Lascelles de Mercado stocks at the beginning of the year would have had capital gains of up to 48 per cent following the acquisition of the spirits division of the company by Italian spirits company Campari, noted Walker.

“Additionally, these shareholders will also benefit from payments to be made once the other divisions have been divested,” said Walker, adding that “Carreras stocks also offer consistent and strong dividend yield of around eight to 10 per cent”.

Access Financial and Guardian Holdings also had strong capital gains of 26 per cent and 40 per cent respectively.

There are also some positive indicators on the Jamaican stock market which leave room for cautious optimism going forward, say the industry insiders.

JSE General Manager Marlene Street-Forrest noted that volumes traded was higher by about 7.35 per cent among both the main market and Junior Market combined, while the value traded was up 20.36 per cent.

“We had mixed fortunes. Although the indices declined, in terms of volume traded and in terms of value traded on the Junior market it was still positive territory,” said Street-Forrest.

What’s more is that the market added four new listings — three (C2W Music, Purity, Kingston Live Entertainment Group) on the Junior Market and one (Paramount Trading) on the main market, she said.

“We do believe that you will still see persons coming to raise funds in the market, based on the fact that persons understand that is a cheaper and more stable point of funding, especially in a crisis,” said the JSE general manager, who has made a “conservative” estimate that the Junior and main markets will add four and two new listings respectively in 2013.

VM Wealth’s Thompson said new initial public offerings (IPOs) in the pipeline can bring more attention to the market and increase vibrancy, while Walker of NCB Capital noted that awareness of the Junior market is still strong, although it has lost some of its initial lustre.

“Wider information dissemination on the equity market, especially as it relates to the recent IPOs, has generated interest among a new demographic of investors. Young professionals and individuals having greater access to information allows for the opportunity of the JSE to appeal to a new kind of investor,” said Walker.