WITH interest rates remaining at a 12-year high there has been a sharp decline in the general activity seen on the Jamaica Stock Exchange (JSE) as buyers retreat and sellers seek cash.

There has been a flood of new investors in the equity markets over the last four years, following several highly touted public offerings and people seeking greater returns on their money. This resulted in a lot of market liquidity, which describes the ease with which one can sell an asset and get cash.

However, the rise in interest rates has started to have a noticeable effect in the markets as fewer buyers seek to purchase stocks and more persons seek to sell their equity stakes. This rise in supply and reduction in demand has in turn translated into reduced prices and lower trading value for equities on the JSE.

An example can be referenced with the JSE’s own stock on August 25 which fell 4.4 per cent on Friday to close at $9.56. The stock traded at a new 52-week low of $9.10 and up to $9.97, with 86,890 units changing hands. When one examined the queues for the stock after market close, there were only four buy orders seeking to purchase 66,216 units worth $528,563.18, relative to 38 sell orders seeking to dispose of 447,165 units worth $6.25 million.

When one examined other stocks, Pan Jamaica Group had six buy orders worth $1.16 million compared to 19 sell orders worth $41.60 million; Barita Investments had 18 buy orders worth $4.67 million compared to 35 sell orders worth $59.90 million; Seprod had 13 buy orders worth $4.83 million compared to 34 sell orders worth $12.82 million; and FosRich had 33 buy orders worth $2.38 million compared to 70 sell orders worth $16.81 million. This means that someone with substantial volumes might have to sell shares at a substantial discount or ask their broker to arrange a sale with another private individual to get cash.

For August 25, only $57.56 million was traded on the Main Market and $12.29 million on the Junior Market, which means $69.85 million traded across both markets. About 65 per cent of the value traded was related to Stanley Motta Limited, Barita Investments, and Jamaican Teas Limited. For context, there was $213.09 million traded on August 26, 2022.

Monday, August 28 was not drastically different compared to Friday as only $59.99 million was traded on the Main Market and $11.62 million on the Junior Market, for a combined value of $71.61 million. The JSE stock closed Monday down 3.03 per cent to $9.27 as it hit a new 52-week low of $8.25, a price not seen since August 2018. By the end of trading on Monday the JSE had 13 buy orders worth $1.31 million relative to 40 sell orders worth $6.75 million.

“With high interest rates you’ll find a segment of the market being attracted to short-term money market securities like BOJ [Bank of Jamaica] CD’s [certificate of deposit]. It was 8.94 per cent as at the end of March but up to the last auction CD rates have pushed above 10 per cent, so with that being said there has been quite a bit of negative pressure on the local equities market,” said assistant general manager of treasury and trading at JMMB Group Greig Lindo at a recent investor briefing.

QWI Investments Limited, Sagicor Select Funds Limited (Financial and Manufacturing and Distribution), and Mayberry Jamaican Equities Limited have also seen a reduction in their net asset values (NAV) as most of these fund-like structures are tied to JSE securities.

Up to the end of July the value of securities traded on the Main Market was down 63 per cent to $20.67 billion, with the number of trades also cut in half. Only 11 out of 48 securities were up on the Main Market at the end of July. A similar story was seen on the Junior Market where only $6.62 billion of shares were traded, a 60 per cent decline, with trades falling by a similar margin. A total 17 out of 47 securities were up on the Junior Market.

The decline in stock prices has also been reflected by a drop in dividend income across the market, with Sagicor Select Funds noting a sharp drop for the financial stocks. This is against the backdrop of a 30-day BOJ certificate of deposit offering 7.50 per cent and treasury bills offering 7.80 per cent yields over 180 days. Even corporate issuers like NCB Financial Group are offering 10.75 per cent bonds over two years.

Even the JSE’s financials reflect the decline in market activity with a 30 per cent decline in cess income to $189.08 million for the first six months up to June.

“We anticipate that as interest rates trend down and other market turbulences subside, investors and companies will be more active in the market which will result in improved performance,” the JSE report stated.

The fall in market prices has also resulted in a shake-up in the largest companies on the JSE by market capitalisation. Massy Holding is now the largest company on the Main Market and overall exchange, with a market cap of $198.14 billion, and remains above NCB Financial Group, Sagicor Group Jamaica, Scotia Group Jamaica, and Guardian Holdings Limited as the largest securities.

Lasco Manufacturing Limited has reclaimed its number one spot on the Junior Market with a market cap of $21.49 billion, surpassing Lasco Distributors, Fontana, FosRich and Derrimon Trading Company as the largest stocks. FosRich, which was the largest company by market cap at the start of the year, has seen its stock price cut in half, pushing its market cap to $9.69 billion.

The largest stocks by market capitalisation, such as Massy Holdings Limited, GraceKennedy Limited, Sagicor Group Jamaica Limited, and NCB Financial Group Limited had a balanced amount of value on the buy and sell sides.

Despite the relative resilience of some of the larger stocks in 2023, the different indices have come under significant pressure. The JSE Index was down 11 per cent to 316,989.72 points, which left the market cap at $1.60 trillion on Monday. The JSE Combined Index was down 10 per cent to 330,852.33 points for a market cap of $1.78 trillion; and the JSE Financial Index was down 19 per cent to 69.93 points with a market cap of $858.52 billion.

This put the JSE among the second worst-performing stock index in the world, just behind Colcap Colombia which is down 14 per cent year to date (YTD) and ahead of the OMX 25 (Copenhagen Stock Exchange Index) which is down 9.45 per cent according to countryeconomy.com. The best-performing index was the UCI (Uzbekistan Composite Index) up 66.83 per cent YTD.

The Trinidad and Tobago Stock Exchange (TTSE) All T&T Index was down 7.42 per cent YTD at 1,858.84 points with a market capitalisation of TT$91.41 billion ($2.08 trillion). The Caribbean Index — which combines the indices of the Jamaican, Barbados, Eastern Caribbean, Guyana and TTSE — was down 5.99 per cent YTD with a market cap of US$29.30 billon.