TRADING activity on the Jamaica Stock Exchange (JSE) partially recovered in the first half of 2025, with the main market’s turnover reaching $50.7 billion — more than double 2024’s slump and now above the 2019 pre-pandemic peak of $41.6 billion.

Yet this rebound coincided with deepening market pessimism. Market capitalisation, however, contracted by 2.29 per cent month-on-month to $1.68 trillion in June 2025 — reflecting waning investor confidence. The average prices of stocks fell 1.5 per cent month-on-month in June 2025, compounding a 4.68 per cent year-to-date drop. This aligned with 72 per cent of Main Market stocks — 37 of 52 companies — trading lower, led by AS Bryden and Lasco Distributors, while the benchmark JSE Index fell 5.5 per cent.

The divergence was starkest in June, when nearly 60 per cent of all listed stocks — 67 of 110 — fell despite block trades surging 9.6 per cent in volume year-on-year — with institutional activity capturing 18 per cent of total market value, the highest share in three years.

While the surge in block trades suggests institutional repositioning rather than systemic liquidity failure, the concentration of trading activity tells a deeper story.

Analyst John Jackson attributes this to “big investors repositioning portfolios” amid structural pressures: dwindling corporate profits and election uncertainty.

“Well I don’t think it’s a liquidity market failure,” Jackson asserts, noting that capital is fleeing unprofitable stocks. “Investors have been reacting to what’s taking place… many companies have not had a good 2024 fiscal year in terms of profitability. Profits are the primary driver of stock prices irrespective,” he told Jamaica Observer.

His assessment aligns with data showing 31 of 52 main market firms with lower quarterly profits year-on-year. With most delivering “sluggish” or declining earnings, capital retreated from equities — particularly in the Junior Market where volumes collapsed 54 per cent from a year earlier.

Even as the Bank of Jamaica (BOJ) cut interest rates from 7 per cent to 5.75 per cent over the last year, triggering brief rallies in rate-sensitive stocks like Scotia Group, which gained 18 per cent in the 12 months to June 2025, the rotation from fixed income to equities remained narrow and hesitant.

For Jackson, this reflects a market caught between monetary easing and profit weakness: “Bank of Jamaica still maintains a relatively tight monetary policy,” he notes, “allowing interest rates on certain bonds to be attractive to some players”.

Corporate bonds offered institutional investors yields of up to 10 per cent — significantly above equities’ returns — providing a safety net for cautious players. Jackson explains: “Why risk putting money in the market? If [institutions] see 10 per cent on fixed interest… they wouldn’t be aggressively buying stocks.”

Jackson further emphasised the scarcity of compelling investment opportunities on the Main Market, noting that persistent headwinds — including profit volatility and sector-specific risks — have diminished near-term appeal for most stocks.

“I mean, you have Scotia Group that has performed well, and NCB haven’t performed badly from a profit standpoint, but there’s a lot of negative overhanging that stock. Sagicor is showing some improvement this year. It’s a little early to say, what is going to happen to that, but I believe it could be up. You have Jamaica Broilers that was apparently doing well and then they get knocked out of the water by a bomb and therefore, the attractive elements that are left, you have to wade through them very carefully, and you have to then prepare to wait for the pay-offs somewhere down the road,” he told Sunday Finance.

This dynamic persists even amid monetary easing: “When interest rates are high the market loses momentum. When interest rates are down — and yes they’ve come down somewhat — there is a tendency to move into stocks. But when you’re not getting profit growth… people won’t be attracted because they’ll wait longer for returns.”

Election uncertainty amplified hesitancy, with the benchmark index swinging 3.6 per cent daily during June — exceeding May’s 2.1 per cent average. “There’s probably hesitancy regarding general election… polls have been tight,” he notes, leaving investors awaiting “clear enough signals”.

Glimmers of hope exist. Carreras’ 72.5 per cent one-year surge and Sagicor’s 4.5 per cent year-to-date gain, both fuelled by improved profits, prove capital follows earnings. Jackson believes “after election we will have some better activity”, but stresses recovery hinges on fundamentals: “The economy is rebounding, interest rates are coming down… but stock performance hasn’t kept pace with decent profits.” For now, BOJ’s rate cuts have merely opened a narrow door — one only companies with earnings momentum can walk through.

The downturn accelerated after May, aligning with historical patterns Jackson notes.

“After mid-May the market tends to go into a hunk… investors ‘go on holiday’ until August.” June volume plunged 26.6 per cent month-on-month.

Jackson observes: “There’s hesitancy regarding the general election… One poll shows one party leading, another shows the opposite.” Foreign investors retreated amid election uncertainty, with the USD Equities Index falling 11.05 per cent year-on-year. Simultaneously, Junior Market volume plunged 57.3 per cent month-on-month — aligning with Jackson’s observation that after mid-May, investors go on holiday until August.