NCB Capital Market Chief Executive Officer Angus Young sees “strong buy opportunities” popping up across various sectors in Jamaica.

The investment professional said while Jamaica has faced uncertainty over the last two years from heightened geopolitical tensions to aggressive monetary policy tightening to curb elevated inflation, the country has entered 2024 in the “doldrums” and that the differing views between earnings going up and stock prices coming down create strong buy opportunities for those willing to be greedy when others are fearful.

“The tide is turning, and we believe that as cooling inflation supports the prospects of a change in the interest rate environment for the second half of 2024 and corporate earnings and the local economy continue to grow, it should catalyse a reversal in the trajectory of stock prices and support a revival of primary market activity.

That is, we expect that Jamaica’s stock market will move out of a bearish territory back into bullish territory and we at NCB Capital Markets will be ready to play our role in positioning issuers and investors to benefit from this transition,” he said.

The Bank of Jamaica has kept the policy rate steady at 7 per cent since 2022, decisions which have fed into depressed stock valuations. Young reasoned that with the current kind of headwinds that Jamaica is experiencing, the motivation to take elevated levels of risk by buying equity has diminished. Consequently, the stock market has continued its downward trend, reaching levels not seen since August 2018.

Since the BOJ initiated rate hikes in October 2021, the JSE Main Market has experienced a decline of approximately 22 per cent and there was an 11 per cent decrease in 2023 alone.

“Higher interest rates have also led to declining main market PE multiples, even in high-performing sectors. This downtrend in PE multiples, despite positive earnings, suggests potential buying opportunities in the market.

He pointed to sectors such as manufacturing, distribution, and entertainment which have shown stable upward trends in earnings.

Young said the depressed valuations also led to a bearish market for primary issuers on the capital market, both in the debt and equity space. Lower valuations and PE multiples mean they will get less value for their investment.

Due to these dynamics, the JSE’s primary market activity has declined from a peak of nine IPOs in 2019 to just one in 2023, underscoring weakened sentiment from both issuers and investors, Young said, as issuers are hesitant due to low multiples, choosing to raise private equity immediately and considering going public in the future when markets are more favourable.

Notably, year-to-September 2023 financial performance for most companies has been strong while stock prices have fallen, even for companies with promising growth prospects.

“However, this contradiction between corporate earnings trending positively and the stock market’s negative performance is creating a growing value proposition. This environment is laden with potential opportunities as earnings improve, PE multiples decline, and the overall value proposition in the stock market continues to grow,” he said.