Category: Market News

China has dominated the media in 2018 and with trade discussions with the U.S still ongoing that is not likely to change for 2019. The country has been taking some hits in the markets recently which is not surprising as China has a lot of interests outside of the homeland. Here are a few factors that have the Chinese market on a wild ride.

Recent Tariffs

The recent Trade War between the US & China have negatively impacted both countries, however, Chinese manufacturers are feeling the hit more as the manufacturing index continues to decline. Toy manufacturers are calling the trade war ‘hell’ as business has slowed down and have taken into consideration moving their plants outside of China and to nearby countries, such as Vietnam, in order to avoid tariffs. Both countries have until March 2019 to come to a final decision in regards to the negotiations, however, if a decision has not been made, Trump will call for a recession, which expert analysts are deeming completely unnecessary. Founder of Cribstone Strategic Macro, Michael Harris in an interview with CNBC’s Squawk says “(Trump) has reduced his negotiating power with China. If we see a resolution on China, which would be crazy for Trump not to pursue that, because if there is a recession in History it will be called the Trump Recession because this is not a required recession.”

World Bank Says No

Despite being the second largest economy in the entire world, China has borrowed over $7.8 billion over the last 3 years. The Trump administration has kept an eye on the borrowing pattern of China and has partnered with the World Bank to properly control what seems to be China’s excessive borrowing. As a nation that lends billions to aid in the development of other countries, lawyers are concerned with how this may impact the economy, “We must end the World Bank’s lending to China, especially at a time when Beijing itself saddling itself with countries with predatory debt on unfair terms. Growing the Chinese economy is not the World Bank’s job.” says Brad Sherman who is a member of the House Financial Services and Foreign Affairs committee.

Apple Woes

The most recent dip in price for Apple is partly due to consumers in Chinese consumers believing that the phone is not worth the ‘high’ prices it is being sold for. Fact is, China makes up approximately 20% of Apple’s global market, so when 20% of your consumers stop buying your products, what are you left with? The undiscounted prices of iPhones have resulted in Huawei becoming the number one vendor in China. The patriotic, Chinese consumers have now adapted to what is being referred to as the ‘Huawei Effect’, not only are they contributing to the growth of a local brand, but the price of Huawei’s products play a significant role in consumer demand. This may boost the overall Chinese market within the next couple of years as Huawei developers aim to produce 5G capable phones within the year, leaving Apple with hopes of producing same by 2020 – “Apple will also be left behind on (the) 5G tech integration curve as Chinese brands will be at least a couple (of) years ahead,” according to research director Neil Shah.

 

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Telecommunications provider Digicel Group disclosed a new deal that has been largely accepted by irate bondholders, which includes concessions on a better interest rate for one bond and for the other, reducing the amount of debt set for an extension.

The new bond swap offer also cuts the amount of debt to be refinanced by a third.

“Digicel received from holders valid and unrevoked tenders of $1.89 billion aggregate principal amount of the existing 2020 notes,” said the telecoms in a statement aimed at overseas bondholders.

Digicel reported 94.7 per cent acceptance of its bond refinancing offer on December 19. Other bondholders had up to Friday, December 21 to participate in the swap that extends the maturity of the debt by two years.

Initially, Digicel was seeking to refinance US$3 billion of its bonds but was forced to revise its offer after bondholders revolted.

The new plan sees up to US$1 billion of 2020 notes extended to 2022 at the initial offer rate of 8.25 per cent. That tranche was originally targeted to swap US$2 billion of bonds for longer maturities.

The second tranche of debt remains at US$1 billion and will be extended from 2022 to 2024. The difference, however, is in the interest rate, which will move from 7.125 per cent being swapped for 9.125 per cent. The original offer was to increase the interest rate to 8.25 per cent.

In September, independent bondholders hired the law firm Akin Gump to seek better refinancing terms from the telecoms. That group of independent bondholders represented some 60 per cent of the funds set for refinancing.

Digicel Group’s leverage hovers at 6.7 times gross debt-to-EBITDA. The original refinancing offer was expected to eventually cut that by ‘one turn’ to 5.7 times, but with the new offer, it’s unclear what precise debt levels will result from the transaction.

One very vital aim of any company is to grow in value and to return to its shareholders. That is exactly what our Junior Market player Access Financial Services Limited [JSE: AFS] is doing.

Operating through 25 branches and one of the leading providers of personal and business loans in Jamaica, Access Financial (AFS) has dispensed over J$ 15 billion dollars to its customers. The company has funded many individuals and SME businesses, which has aided in the development of the economy; the more money in circulation, the more money spent, and the more companies being funded, the higher the rate of creation of jobs.

In an effort to maintain market competitiveness, Access Financial (AFS) has a significant interest in a Florida based consumer finance firm. Though full details of the transaction are not yet available, we can confidently say ‘it’s a good look’. Not only has the company now broadened its access offshore but will now claim another piece of the market share, thus increasing market sentiment.

The Junior Market is known for holding companies that provide growth to its investors, and Access Financial (AFS) will certainly not be pardoned. Recently, two other acquisitions were finalized, Micro Credit Ltd and the assets of its rival, Damark Ltd, resulting in an 11% increase in their loan booked from J$ 26 billion. Even though all companies involved are within the Microfinancing industry, diversification in their risk profiles made a significant difference, growing loans 5% over what was expected in that period.

In the first quarter ended June 30, 2018 (Q1 2018), Access Financial (AFS) reported an exceptional 16% increase in Net Profit to J$ 217 million from J$ 188 million for the same period of 2017. This was attributable to the simultaneous increase in revenues and a decrease in expenses, something most companies dream of. Operating income increased by a whopping J$ 58 million in Q1 2018 over Q1 2017 and a just as good J$ 26 million decrease in Operating Expenses.

Can there be more?

Yes!

Though the company’s ROE fell by 8% year-over-year, they have still managed to boast an excellent 40% ROE in Q1 2018 and a J$ 0.10 or 15% increase in EPS year-over-year. There was also an increase of J$ 665 million in their asset base due to focusing on the betterment of their strategies and shifting their market positions.

With their positive news, growth and strong financials, Access Financials has now set a precedent for what is to come.

Over the past year, AFS’s stock price has seen a slow but steady growth of $5.30. Closing yesterday at J$ 45.50, we will have to watch and see how the market reacts.

Can the company maintain its momentum?

Will Access be denied the positive market reaction with its new ventures?

I am eager to see!

Are you?

 

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Jamaica’s Independence welcomed broadcast television on August 6, 1963, through successful execution by then public broadcasting firm Jamaica Broadcasting Corporation (JBC). Due to financial constraints, content was imported from the United States and UK. RJR Communications Group, now taking the spot as market leader in the industry, has introduced modern technologies, innovation and investigative journalism. The Group was established in 1897, and listed on the Jamaica Stock Exchange [JSE] in 1994.

But since then how has their presence in the market benefited shareholders?

RJR Communications Group is the largest communications group in Jamaica, boasting five radio stations, television channels such as; Television Jamaica (TVJ), Jamaica News Network (JNN) and RETV, The Gleaner, and The Star, and an online streaming platform One Spot Media. Subsidiary company Multimedia Jamaica Limited, also forms part of the group, geared towards providing new enhanced technologies and business solutions to the market. The company participated in a merger process between RJR communications and The Gleaner Company [JSE:1834] in 2016. Managing Director Gary Allen, stated that the intention of the merger was “…to accelerate the pace of innovation to deliver superior products and services within the marketplace..”

Has the company successfully achieved that?

Radio Jamaica Limited [JSE:RJR], home to over 12,000 shareholders is most notably challenged by a ‘soft market’, that is flooded with more sellers than buyers, who are unattracted by the company’s performance; noticeable in the slow movement in capital growth. Year-to-date, the stock price has fallen by 18%, and within the last 6 months the only stock that fell by 22%. Even with exclusive rights to the recently concluded FIFA World Cup 2018, the company reported a disappointing 10% increase in profits. The company’s unaudited financial statements for the quarter ending June 2018, reported an after-tax loss of $70 million, 48% higher than the corresponding quarter in 2017. RJR has also seen a reduction in income by 47%.

Why are shareholders still standing by RJR?

The shareholders that remain loyal to the company are optimistic that the company’s broad stream of income and presence within the diaspora, will eventually make a turnaround in the future.

Are shareholders willing to go further with RJR?

Between 2014 and 2018, the stock has traded at a high of $6.00 in January 2016-assumed to be in anticipation of the merger and a low of $0.87 on October 23, 2018. Since the merger, the share price has fluctuated significantly.

As the market moves away from print media and television, it is imperative that RJR constantly adjusts its strategy to keep up with these changes to remain competitive. Without this adjustment, the share price and profits will continue to fall, as shareholders loses interest in the company. The potential to rise to become a top performing stock is possible, however is RJR willing to be reactive and utilize its resources to make an improvement?

 

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One of our technology giants International Business Machines Corporation (IBM) [NYSE: IBM], headquartered in New York, is now another company that has been added to the list as acquiring.

IBM’s business includes, but not limited to, manufacturing and marketing hardware and software products. The company has invented several products we have used in the past and are now using, including the floppy disk, hard disk drive, dynamic random-access memory and one of the most widely used technologies for bank transactions, the automated teller machine (ATM). They also specialize in research and holds the record, as of 2018 and for 25 consecutive years, for the most U.S. patents generated by a business.

As we know, one strategy companies use in order to deepen their market penetration and sentiment, is by acquiring or merging with companies that are sharper in different key areas of a company.

This is one strategy IBM is using.

According to numerous financial sites and blogs, including Bloomberg, IBM has made an announcement that they are soon to have significant interest in an open-source software company, Red Hat [NYSE: RHT]. The deal includes IBM purchasing the company for US$ 190.00 per share.

How much does this work out to?

US$ 34 Billion! Yes, Billion. That is approximately J$ 4.63 Trillion! That figure would cover the cost  of 184,000 houses at J$ 25 Million, send over 300,000 students to medical school or just money to do or buy absolutely anything you wanted for the rest of your life. This would be life changing money to secure generations’.

But! That is nothing for IBM. They see it as an investment and it sure is one.

Recently, market sentiment had decreased for Red Hat, even with a market cap of almost US$ 20.5 Billion and being the leading Linux company, they had not only missed its revenue estimates but missed the target set by Wall Street.

However, this is going to be the biggest open-source business deal ever!

One person who would more than be confident about this acquisition would be the CEO of IBM. Ginni Rometty, CEO of IBM, is more than confident about the deal and expressed how he feels about the it and the benefits it will bring. He said “The acquisition of Red Hat is a game-changer. It changes everything about the cloud market. IBM will become the world’s #1 hybrid cloud provider, offering companies the only cloud solution that will unlock the full value of the cloud for their businesses.”

This gives IBM the cutting edge over many companies who have not even reached half way through their cloud journey. Here, the company has found a way to not only drive growth but also boost the value of its business. It is through this, that the company can also establish different strategies and processes, creating more efficiency through the integration of all parts of the business; pushing them to their highest level possible, all from the beginning of the process chain to the very end.

Red Hat’s CEO also commented and is pleased with the deal being conducted with IBM. He believes that this acquisition will provide them with the resources and capabilities needed to broaden market share and bring more knowledge about open source in today’s world. Despite this acquisition however, Red Hat still wishes to maintain their commitment and uniqueness they brought to the technology world.

Though IBM’s revenue has decreased by a little over 2% year-over-year to 18.76 Billion for their last quarter, the company still has 5.5 times the market share of Red Hat, provides investors with a 38% return based on stock price and is a great dividend play of 5%. This of course is a stock for investors with a risky appetite but is also great for income.

IBM closed on October 26, 2018 at 124.79, just 1 dollar away from its 52-week low. It may just be a time to BUY!

 

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The term veganism is used to define a lifestyle adopted by an individual that excludes all animal by-products, inclusive of dairy, meat, materials made from animal skin, as well as anything that has been clinically tested on animals.

In recent years, the decision to go ‘vegan’ has become quite popular amongst consumers, and for various reasons. While most have chosen the vegan lifestyle for the sake of animal-cruelty, others have adopted this route as a healthier way of life.

Of course, the option to go vegan has definitely put a damper on sales for dairy and meat producers. In 2017, after 92 years of operations, Elmhurst, one of America’s longest-running dairies made the decision to switch to entirely produce and distribute plant-based milk. This was after being impacted by the 7% decline in the index in 2015, and a projected 11% through to 2020. Dairy producers succumbed to trying different methods of manufacturing milk, such as drying, donating the excess, along with additional sales, to try and appeal to consumers.

However, this has not ceased the significant fall in sales leaving a vast surplus of milk. The fall in demand for milk can be used as a strategy for creameries to reinvent themselves. After conducting extensive research, beverage analyst, Elizabeth Sisel, concludes “While consumer trends are not favouring dairy milk, brands have an opportunity to re-engage consumers by developing innovative offerings that focus on improving already favourable aspects such as taste profile and nutritional value. It’s also important for brands to highlight that dairy milk is not just beneficial for bone health, but may also provide other benefits for consumers’ overall well-being as compared to non-dairy milk”.

On a brighter note, veganism has made some positive changes to the market. Now operating as Elmhurst Milked, CEO Henry Schwartz is in full support of the direction the market is moving towards, stating “We strongly believe that plant-based foods are the future and our goal is to vastly improve upon non-dairy alternatives by making them more delicious and nutritious, thus bringing more sustainable and healthful options to households across America.” Plant-based dairy alternatives have made a notable profit on the market. With a surge of 20% in growth, producing $700million in sales, producers are building a solid foundation for investors.

In 2018, the US Vegan Climate Index (VEGAN) was established to differentiate companies that contribute to the usage of animals for production from those trying to decrease their carbon footprint. This is done through a screening process where investment professionals look in depth into corporations that may be associated with or that partakes in activities involving the exploitation of animals.

Any company that is found to be capitalizing on the endangerment of animals is excluded from this index. Since 2013 VEGAN has unfailingly scored higher returns than that of the Solactive US Large Cap Index. VEGAN’s 10% return since the beginning of 2018 is above 8.7% for Solactive.

According to Bruce Friedrich, executive director at the Good Food Institute, a US-based non-profit organization that promotes the use of plant-based products, “The growth of the plant-based sector in 2017 exceeded even my optimistic projections. The news from the meat industry itself was especially encouraging and 2018 is sure to continue the accelerating growth of plant-based meat.”

 

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Once known as the largest retailer in America, Sears Holding Corporation [NASDAQ: SHLD] filed for bankruptcy last week,  after a long wave of excessive borrowing, drastic fall in sales and an inability to compete within the booming e-commerce market.

Founder Richard Sears started the business by selling jewellery. The creativity and successful business model executed by Sears, led to the opening of many retail stores, the first in 1925.  Soon after, competitors of the large conglomerate were wiped out of business as Sears provided what the market wanted in one location.

Throughout its lifespan, Sears has made many acquisitions the most notably is K-Mart in 2005.  K-Mart grew as quickly as Sears, opening 3,500 stores across the 50 states dominating the retail market.

On October 15, 2018, the 125-year-old company filed a Chapter 11- Business Bankruptcy, with an estimated $1 billion in assets and $10 billion in debt. For years, the company has suffered from record low sales, increase competition and snowballing debt.

The recent announcement by outgoing CEO Edward Lampert states that “…a difficult retail environment, unsatisfactory operating performance, and legacy liabilities…” has impacted the business and resulted in filing for bankruptcy. Some features of the restructuring plan include, Lampert, stepping down as CEO, and 142 stores to close by year-end, with the fate of 250 stores still unknown.

In 2004, a business week story named Lampert “the next Warren Buffet”, however that positive sentiment was short-lived as news spread about poor management practices and limited knowledge of business operations has contributed to the business failure even as he generously injected $1B into the business to keep Sears afloat.

Similar to Sears obliterating many general stores back when it started, the same is happening to the American retailers as competitors like Amazon take over.

Amazon.com Inc [NASDAQ: AMZN] success, comes from Jeff Bezos ability to keep abreast of the shifts from in-store shopping to online shopping and have consistently been adjusting [AMZN’s] business model to accommodate these changes.

The American e-commerce company reported an increase in net income by 1186.3% when compared to the same quarter one year prior. Sears,  however, has underperformed in both the S&P 500 and the Retail industry, with a net income -$508m, a 103.2%decrease, when compared to the same quarter last year. The stock’s performance over the last year has fallen by 94.56%.

Chapter 11 is not the dark hole where businesses go to die. There have been successful restructuring as in the case of General Motors [NYSE: GM], who triumphantly exited Chapter 11-Bankruptcy after 40 days.

Regardless of the result, this is a strong warning to businesses and investors alike to pay attention to industry trends? Consumers are no longer following the traditional means of shopping, brick and mortar no longer has the pull and no business is too big to fail.

Who’s next?

Macy [NYSE: M]?

J.C. Penney [NYSE: JCP]?

 

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What started out as a small company utilizing the advantages of sea transportation in Downtown Kingston in 1945, Kingston Wharves Limited [JSE: KW] has transformed into a group of companies offering services that include inventory management, warehousing, warehousing rental arrangements, product repackaging, inventory control and distribution for international clients, with labelling and assembling.

In the last 12 years, Kingston Wharves has been named the Caribbean’s leading multipurpose port six (6) times. Considered one of the largest, state of the art ports in the English-speaking Caribbean, this multi-purpose port is now well on its way to earning yet another title by utilising the increasing popularity of technology to become paperless.

KW in collaborating with the Government of Jamaica (GOJ) announced plans to build a 300,000 sq. ft. warehouse in the Special Economic Zone. The Special Economic Zone (SEZ) is an area designated for businesses that will receive subsidies/ incentives from the government. In addition to tax holidays, companies within the SEZ adhere to policies that include increases in investing, trading, job creation and effective administration along with labour and customs regulations.

Chief Operating Officer, Mark Williams, “(KW) has made considerable investments in its infrastructure including the opening of its state-of-the-art US$30million total logistic facility which offers a more efficient retrieval and delivery process.”

Trading as low as J$30.05 earlier this year, Kingston Wharves price has increased by 146%!

In Quarter 2 of this year, KW net profits increased by 14%. Terminal Operations recorded $855 million in profit, 18% or $128million more than 2017’s. Kingston Wharves’ Logistics & Services Department was not left out of the race with an increase of 22%  in revenues and a 3% increase to $197million in profits.

Not limited to just the Caribbean, KW currently partners with over 40 shipping ports worldwide and several local businesses such as Automotive Logistics, the evolution of their clientele since launching the 2 logistics hubs in December of last year.

The development of the Global Auto Logistics Centre (GALC) at the end of 2017 aids local automotive dealers, such as JetCon and ATL Automotive, to increase revenue by putting in place a channel to increase the volume of vehicles being brought into the company  and capitalizing on lower pre-inspection rates and storage facilities that fall under the SEZ.

Shareholders are eager to witness the future profitability of Kingston Wharves Limited. “I believe that the synergies at KW will allow for a window to better serve customers and grow our presence in the Jamaican market.” – William Brown, Chairman of Pas Cargo Jamaica.

Contributing writer: Abigail Coke

Several thousands of supporters globally joined forces on Thursday, November 1, 2018, to protest Google Inc. [NASDAQ: GOOGL] following a recent New York Times publication highlighting the way in which one of the world’s largest corporations handles sexual misconduct.

The case of Andrew “Andy” Rubin shocked the world, initiating a global walkout. After multiple reports of inappropriate relationships with subordinates going back to decades.

As the ‘father of Androids’, it was no secret that Rubin had significant leverage in the companies he is a part.

In 2014, his many reports came to light, Google gave him the option of resigning with a compensation package of US$90m to be paid out in monthly installments over 4 years, the $360 million worth of shares that were given to him over the years, and the delayed repayment of the $14 million that they had lent him to purchase a beach estate in Japan, and investing heavily in his next business venture still intact.

History shows that the company has a habit of giving male executives who have been reported for sexual harassment hefty exit packages to “sweep the problem under the rug”. In the last decade, three (3) of the company’s top male executives have been the subject of credible reports made by female staff, two (2) of which have since left the company, with compensation.

The third, on the other hand, remains as one of the top executives. David Drummond’s career at the organization has not slowed down. Joining the company in 2002 as a legal counsel, the now Chief Legal Officer for Alphabet Inc. and Chairman of Google’s Venture Capital Fund, CapitalG seems to be reaping benefits, not accountability.

Employees, as well as outsiders, are enraged with the tactless way Google handles sexual misconducts. With 1,500 confirmed supporters, organizers were warmed by the support of several thousand worldwide. Arranged to start in Tokyo, employees from the various offices in Europe and the United States began to protest at 11:10 am across the respective time zones.

“Time’s up”, “Not O.K. Google” and “Don’t be evil” are just some of the terms written on hundreds of thousands of signs. An email sent out by Google to its employees stated that since 2016 over 48 people have been fired without any compensation from the company for sexual misconduct claims.

This email, however, only fuelled the angered protestors more.

One of Google’s engineers for over 10 years, Liz Fong-Jones, an activist on workplace issues, spoke out saying “When Google covers up harassment and passes the trash, it contributes to an environment where people don’t feel safe in reporting misconduct. They suspect that nothing will happen, or worse, that the men will be paid, and the women will be pushed aside.”

The time for women to tolerate unwanted advances has ended.

The time for excuses like, “oh that’s just how he is”.

The time for being silent has ended.

The time for inequality has ended.

The time for bias has ended.

Time’s Up.

FosRich Company Limited (JSE: FOSRICH) is at again!

On December 19, 2017, the company officially listing on the Jamaica Stock Exchange (JSE) junior market after a successful public offering led by Jamaica’s second oldest brokerage house, Stocks and Securities Limited (SSL).

The lighting, electrical and solar energy products company led by managing director and founder, Mr Cecil Foster, was oversubscribed by $100 million and closed within a minute after opening. The aim was to raise over $200 million at $2 per share with an offer of 20% of the company or 100,455,111 shares. The intended use of the proceeds was to expand the industrial electrical and energy solutions divisions which leads one to speculate that talks of becoming a manufacturer may be in that area.

At the recent monthly Mayberry Investor Forum, Mr Foster was tight-lipped about the product they will be manufacturing however he had this to say, “We are going to be engaged in local manufacturing of a certain product line that is used every day in Jamaica”.

At this point, your guess is as good mine as to what that may be. This bold step to venture into the manufacturing industry is a part of FosRich’s three-year growth plan.

According to Mr Foster, the company “lose about 30 – 35%  from not manufacturing it here, so that alone puts us in a spot to approach the market. The market is $20 billion to $30 billion and all we want to do within the first year and a half is get 3%  of the market. I cannot tell you what it is now, but we eventually want to export to the Caribbean”. With hopes to start as early as next year, Mr Foster made it clear that financing the expansion will be done in a “unique way”.

Despite fierce competition, FosRich is determined to shine bright and grab a niche in the market segment for itself. The plan to go all out in the sale of industrial cables, wall and floor panelling will see the company going up against competitor giants led by the Chinese, Spanish and local developers who service large projects.

But they have done well for themselves and undertaken projects which includes a partnership with financial institutions to helping homeowners go green through renewable energy solutions. FosRich served as the local contractor to supply floodlights at Sabina Park in Kingston and supplied the Jamaica Public Service Company Limited (JPSCo) with LED energy saving smart streetlights among others.

As FosRich continues on its successful path, it saw profit going up 153% at $10.4 million the third quarter of the year when compared to $4.1 million of the same period last year. Revenue also grew to $353 million when compared to $232 million.

In spite of this incredible performance, Mr. Foster stated that “We feel if we strengthen the core business at FosRich, then we can do numbers that don’t look like baby numbers. We are positioning ourselves to be that preferred credible person in the market”.

 

 

Halloween might be around the corner, but the spook-fest has already started for some investors after the market pullback a few days ago.

The Federal Reserve is expected to increase rates three times in 2019, and therefore, a tighter financial market is anticipated for the foreseeable future.

This means that there will be greater competition for capital as the yield on short-term bonds increases and also contributes to falling equity prices.

Investors have reset their return requirements across asset classes, given the heightened ambiguity and rising short-term yields.

Part of the recent equity market drop was due to concerns about the intensity of the U.S.-China trade dispute. Many multinational corporations are allegedly concerned that market uncertainty will affect not only price but also earnings.

Trade tensions may not eradicate global growth but pose a threat to trade protectionism which directly impacts many corporate organisations.

The decline in MSCI World Index last week was the index’s second-largest weekly drop in 2018, although global equities remain in positive territory year-to-date.

Equity markets have seen a sharp rotation in leadership, with momentum shares under-performing. The rise in 10-year U.S. Treasury yields at the start of last week came after Fed officials’ hawkish commentary which pushed up market expectations for the path of U.S. policy rates. The rise in market yields has been driven by higher real rates and a higher term premium, often associated with increased uncertainty.

Corporate earnings are supported by sustained above-trend global growth which adds to the equities over fixed income preference as well as portfolio resilience strategy recommended.  Poor Q4 performing companies risk unforgiving market sentiments straight into 2019.

While risk cannot be excluded in investing, investors are recommended to choose quality equity exposures such as companies with resilient earnings and stronger balance sheets. As mentioned earlier, investors should consider going short on fixed income corporates and private placements.

Ideally, the rise in yields should eventually point to higher returns across asset classes long-term. This shift in market dynamic reinforces SSL philosophy on building greater resilience in portfolios.

 

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Blockchain technology is a digitised, decentralised, public ledger of all cryptocurrency transactions, creating blocks and records them in chronological order.

Blockchain allows market participants to keep track of digital currency transactions without central recordkeeping. Each node is connected to the network and gets a copy of the blockchain and downloaded automatically.

Initially created as an accounting method for the virtual currency Bitcoin, Blockchain has the potential to be used outside of cryptocurrency with the assistance of a distributed ledger technology (DLT).

As we know, the technology is primarily used to verify transactions within digital currencies, though it is possible to digitize, code and insert practically any document into the blockchain, doing so by creating a permanent record that cannot be changed; furthermore, the record’s authenticity can be verified by the entire community using the blockchain instead of a single centralized authority.

ADVANTAGES

Electronic ledgers are much cheaper to maintain than traditional accounting systems; the employee headcount in back offices can be greatly reduced.

Nearly fully automated DLT systems result in far fewer errors and the elimination of repetitive confirmation steps.

Blockchain allows for the reduction of transaction cost by eliminating third-party intermediaries and overhead cost for exchanging assets; blockchains have the significantly reduce transaction fees.

DISADVANTAGES

Massive Energy Consumption as Blockchain miners attempts trillion of solutions per second to validate transition, thus requiring a considerable amount of computer power.

Despite strong encryption and permission blockchains, cybersecurity is still a concern to the public given data is decentralised and there is a fear of entrusting personal data to a blockchain solution.

Due to blockchain creating permanent records, resolving challenges such as transaction speed, data limits, the verification process is much more complicated.

Currently, all remote transactions, financial or otherwise, rely on the authentication from a central authority for the execution of both parties’ transaction. But, with the birth of the blockchain system, gave rise to a new system referred to as ‘Smart Contracts’ which was more associated with the cryptocurrency Ethereum. With that said, according to Investopedia, it is a “self-executing contract between buyer and seller, directly written into lines of code. The code and the agreements contained therein exist across a distributed, decentralised blockchain network.” That being said, Smart Contracts provides a quick and seamless alternative for multiple parties across different countries for conducting transactions without the central bank, legal system or external enforcement forces authentication, by permitting trusted sales and agreements to be carried out after the parties have met pre-existing conditions defined in the blockchain system. Furthermore, they render transactions traceable, transparent, and irreversible.

Currently, companies are adopting the use of the revolutionary Blockchain technology, some of which include giants such as Amazon.com Inc. [NASDAQ: AMZN], Alibaba Group Holding Ltd. [NYSE: BABA], Microsoft Corp [NASDAQ: MSFT], International Business Machine Corp [NYSE: IBM], all finding uses of the system to make their internal processes more efficient and meeting the needs of consumers unquenching thirst for convenience.

Moreover, stock exchanges have started adopting the use of the tech, with the first one to test its system Nasdaq Inc. [NASDAQ: NDAQ]. Additionally, within our shores, the Jamaica Stock Exchange [JSE: JSE] announces its intention to explore cryptocurrency.

What are your views, do you think Blockchain technology will create the avenue for what financial institutions, stock exchanges, corporations, and consumers have been searching for decades to have an efficient and seamless transaction process across borders?

 

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Formerly known as the ‘Kingston Stock Exchange’, the Jamaica Stock Exchange began trading on February 3, 1969. The 49-year-old company became publicly owned in June 2008, listing on its own exchange under the ticker JSE.

Six years later, JSE became the 16th member of the United Nations Sustainable Stock Exchanges (SSE). Their aim, to provide a platform that allows efficient and effective communication amongst various stock exchanges in countries worldwide.

In 2015, Bloomberg rated the Jamaica Stock Exchange (JSE) as the number one stock exchange in the world!

The stock exchange surged more than 80%, surpassing the performance of other indexes globally such as the Dow Jones Industrial Average and Euro Stoxx 50.

What are some other factors that contributed to this excellent performance?

The Jamaica Stock Exchange (JSE) launched the Caribbean’s first online trading platform in May of 2015. This certainly caught the attention of investment ‘gurus’ around the world as well as local retail investors. With the tax break given to companies that list, business has been booming for JSE as entrepreneurs utilise the markets rather than take the typical loans avenue. Launching its Junior Market in 2009, which jumped 160% in 2015, allows for smaller companies to list in order to raise capital, despite being unable to meet the criteria to list on the bigger markets.

Fast forward to October 2018; Jamaica once again has dominated the world of investments!

In the last five years, the Jamaica Stock Exchange (JSE) has remarkably exceeded the 73% and 86% rally of the S&P 500 and Vietnam’s Ho Chi Minh Stock Exchange, respectively.  Soaring its way to the top with a massive 233% rally, which produced a 19% increase in dollar value alone for this year.

Jamaica’s index outperformed approximately 100 other equity gauges according to Bloomberg.

While the country struggles with issues such as crime, brain drain and debt, trading has become instrumental in the average Jamaican’s life. Since 2015, approximately 22 companies have listed on the stock exchange with another four slated for the quarter four of 2018.

The finance ministry in conjunction with the International Monetary Fund (IMF) aims to achieve an annual economic growth of 5% by 2020. This will take a combination of strategic moves from both the public and private sector as well as a reduction in debt levels.

Jamaicans are shifting from saving to investment mode due to low-interest rates and financial literacy.

“The world is discovering the potential of our beloved country, the largest English-speaking Caribbean island set squarely in the centre of the Americas.” – Jean Lowrie-Chin of Jamaica Observer wrote in 2015.

 

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2018 proved considerably eventful as the stock markets experienced several pullbacks during the first quarter. While Quarter 2 was generally more favourable,  as NASDAQ, S&P 500 and oil markets captured most of the growth. Naturally, as the markets go up, Gold moved in the opposite direction. The price rose by 4% in the first three months of the year, only to finish in June by -4%.

Three factors stand out that affect Gold’s performance:

1. A strengthening US dollar;
2. Higher investor threshold for headline risk;
3. Soft physical gold demand.

In the long-term gold’s has a positive relationship to economic

growth but in the short-term, its performance is sensitive to risk and uncertainty. The dual nature of gold could benefit from key macroeconomic trends developing in the second half of the year.

Investors should position for:

• positive but uneven global economic growth;
• trade wars and their impact on currency;
• rising inflation and an inverted yield curve.

Also, gold’s recent pullback is supportive of consumer demand, as low prices tend to spur buying; at the same, it may provide attractive entry levels for investors.

Drivers of the gold price are grouped into four categories:

1. Wealth and economic expansion;
2. Market risk and uncertainty;
3. Opportunity cost;
4. Momentum and positioning.

The dollar has strengthened over the past few months, making its most significant appreciation since the last quarter of 2016. It would be easy to apportion this trend to higher US interest rates, but rates have been increasing consistently since the end of 2016 – a period during which

the US dollar generally depreciated.

Instead, the dollar strength is due to a combination of two factors:

• continued easy monetary policy in other parts of the world;
• an understanding that the US may be better placed to benefit from trade wars.

In the face of continuing stock price rises, US bond markets seem to be placing a greater probability on higher inflation and lower growth. While it’s impossible to time the market, investors have generally profited from holding gold during periods of economic deceleration.

Current key trends support gold demand and while the summer period tends to be a quiet period for gold trading, the price has tended to increase in September-November as consumers prepare for a traditional buying period and investors re-balance their portfolios before the end of the year.

 

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Things continue to look up as Mayberry Jamaica Equities Limited [JSE: MJE] recently borrowed $2.2 billion in cash for new investments in stocks on the local stock market. This coincides with a B rating from Standard and Poor’s credit rating for Jamaica; an upgraded outlook to positive from stable.

CEO of Mayberry Investments Limited Gary Peart explained that “We got it at 7.25% for five years” with expectations that the gains in the market will outperform the cost of funds borrowed. The explanation behind the S&P upgrade was due to the combination of modest GDP growth and better external liquidity, agreeing with Peart’s statement that, “The economy is going in the right direction”.

MJE holds minority positions in some companies listed on the JSE mainly, Caribbean Producers Jamaica Limited [JSE: CPJ], JMMB Group Limited [JSE: JMMB], Caribbean Cement Company Limited [JSE: CCC] and Supreme Ventures [JSE: SVL]. Despite not directly saying which stocks they will be investing in, Peart mentioned that some of his top ‘buy’ picks are Stationery and Office Supplies [JSE: SOS], NCB Financial Group [JSE: NCBFG], IronRock Insurance [JSE: ROC] and of course the recent July listing MJE itself.

Mayberry Jamaica had initially considered selling a portion of its equity holdings but decided against it due to their bullish stance on the market foreseeing five to six years of consecutive growth. A prediction of what could possibly be the longest bull run in Jamaica’s history. MJE net asset value earlier this month was $10.61 per share, up 12 percent from $9.48 prior to listing on the Jamaica Stock Exchange [JSE].

With this increase in the span of three months, they are optimistic the upward trend will continue. For the bearish investors who may have concerns about the market pulling back, Peart recommended they invest in high dividend-yield stocks making it a win/win for everyone.

At Mayberry Investment’s Monthly Investor Forum, Mr Peart encouraged attendees to look towards the stock market rather than continuing with the typical savings account earning a meagre two per cent average interest rate on deposits.

He highlighted how much more profitable it would be if persons actually invested in commercial banks rather than just putting down their money for safekeeping. Agreeably, he admitted that in recent times it may be hard to find value on the stock market but with the services of a broker, investors can navigate these pitfalls.

Interested in buying MJE?

Contact SSL to get started.

 

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You may think we are referring to the rubbery material that stretches when you pull it but instead, we are referring to one of the year’s top performing first-day IPO in US history. It is the recently listed Dutch-based company, Elastic B.V. [NYSE: ESTC].

Elastic makes the power of search – the ability to find relevant information and insights from a large amount of data – available for a diverse set of applications and use cases. Much like other search engines such as Google, Yahoo, Bing!, etc. Elastic is determined to answer all your questions thoroughly. The truth is, you have been using Elastic without even realising.

On October 5th 2018, the first day of trading, the stock skyrocketed to a whopping 94% increase after listing at US $36.00 to close at $70.00. Before listing, the company had adjusted its IPO price a few times before deciding on 7 million shares at $36 per unit.

Furthermore, the company raised $252 million and ended the day with a market capitalisation of almost $4.9 billion. The proceeds will be geared towards the acquisition of or investment in technologies and solutions, research and development, working capital, sales and marketing activities.

Elastic is the latest tech company to go public contributing to what is referring to as the best year for tech IPOs since 2014. As a data service provider, Elastic equips other companies with relevant information after sifting through massive amounts of data.

According to its prospectus, the company will help in your everyday life, here’s how:

Have you ever wondered who detects those nearby drivers and riders when using Uber or Uber Eats? Elastic.

How is Tinder so efficient in finding those matches for you? Elastic powers those algorithms used to guide you to the perfect match.

Have you ever noticed how simple it is to shop online with Walgreens? Elastic helps you to find the right products to add to your cart.

With over 5,500 customers in 80 countries and industries, the company is helping individual developers and organisations. Reporting a growth of 81% year-over-year and revenue of $159.9 million in fiscal 2018 an increase from $88.2 million in 2017.

If the 6-year-old Elastic continues on a high, its biggest shareholder, co-founder and former CEO Steven Schuurman, who has almost 19 per cent could well be on their way to becoming a billionaire. Under the brand Elastic Stack, its portfolio of search products includes Elasticsearch, Kibana, Beats and Logstash with over 350 million downloads.

Considering this impressive start, Elastic tweeted “Today was a grand day. Thank you to everyone for joining us on this journey. We look forward to what happens next.”

Indeed, we will be looking on as well wondering if Elastic can stretch to the levels of some of its giant competitors like public cloud companies Alphabet Inc. (NASDAQ: GOOGL) and Amazon.com Inc (NASDAQ: AMZN).

 

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Geoffrey, the Giraffe, made the news once again as talks about a possible revival of the iconic Toys R Us [TOYs].

Are you emotional as I am?

It’s no secret that the 60-year-old American toy company has been going through a rough patch, closing their last 800 stores on June 29, 2018, liquidated its merchandise and completely sold everything in their stores. After making several efforts to restructure, issue bonds and introduce new products, the company made a tough decision to discontinue operations after there were halts in investments, billions of dollars in debt and the market shifting from brick and mortar.

The bankruptcy auction slated to take place this month was cancelled due to unattractive bids on the company’s assets. The lenders who are now in control of the retail giant are trying their very best to revive the brands of Toys R Us and Babies R Us so that they can maximize the value of both companies by opening new retail stores.

Seth Freeman, Senior Managing Director at Glass Ratner Advisory & Capital group, said “The company did generate operating profit—and without debt, its profitability would be easier to maintain” but the concern remains, how long will the revival take place and will they find retail space in time Christmas, one of their most profitable seasons.

We are less than 3 months away!

The good news is this generation is still aware of the brand, the bad news is the markets are shifting from brick and mortar. Toys are always in demand as children are born every day however post-millennials gravitate towards the digital world.

But not everyone is sentimentally happy about this [TOYs] rival. Thousands of former Toys R Us employees are still waiting for a total of $75 million in severance pay and some go as far as to call the re-emergence as a “PR stunt”.

The company is reported to be $7.9 billion in debt versus $6.6 billion in assets when it filed for bankruptcy in it’s last years. While the brand name and Geoffrey have value these are not liquid, so unless the company sheds it’s debt and major costs, a turnaround may not be feasible.

There’s a saying “Once bitten, twice shy”, but how eager will suppliers be to resume trading with [TOYs]? It is only fair to be a bit sceptical about providing goods to a company that failed. It may be a risk worth taking for hedge funds and angel investors but how sustainable will the company be?

Can Santa pull off a Christmas miracle?

Or is Amazon [NASDAQ: AMZN] forever on Santa’s nice list?

 

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Climate change is and has been one of the most urgent threats facing the earth today. More specifically, Global Warming is not a threat for the future but a present reality.

Can you imagine what the world will look like or be if we do not act now?

Every country today, including Jamaica, has become even more conscious of their surroundings. This has brought a world-wide cohesion with countries making every effort to slow down, stop or even reverse the depletion of the environment; one specific ban is that of plastic bags.

In the United States, most of the supermarkets and other retailers have already transitioned from the distribution of plastic bags to consumers, issuing paper bags or reusable bags which are purchased. Likewise, in the United Kingdom, consumers are either forced to bring their own bags, carry their goods in their hand or pay 0.10 GBp (10 pence) or sometimes even 0.20 GBp for a plastic bag.

We see here that the trend in these countries does not fully ban the use, but only deters consumers from their usage because of the cost associated. However, effective January 1, 2019, the Jamaican government will ban the use of plastic altogether and will charge any company if they are caught using it.

What does this mean?

Plastics have always been the cheaper and more convenient packaging option. Persons would not only be able to take their groceries in loads but later be used as garbage bags. This ban will both hurt retailers as well as consumers. Companies will now have to source an alternative way to package their products (usually more expensive than plastic) and therefore, as the company’s expense increases, so too do the cost of the items to consumers.

On the other hand, changing for the better sometimes costs you more. Companies or individuals can take this change as a market opportunity to provide alternative packaging, valued at around JMD 3 Billion. In the 60’s and 70’s, most of the bags that were being used were of paper material.

Jamaica Packaging Industries Limited (JPI) is wondering whether the country will revert to using same; the company already conducts the importation of paper bags from Latin America in small quantities and is looking to increase the supply due to the projected level of demand. Similarly, our well-known junior market packaging company AMG Packaging & Paper Company [JSE: AMG] is also doing their research and feasibility study.

Plastic bags not only pollute our water and land, but they are harmful to wildlife, marine life, human health and is very costly to remove from the environment. This ban can be the source of saving money, energy and building businesses, which will, in turn, boost our economy.

 

 

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Investors are craving and anticipating influential marijuana companies that are listed on the stock exchange or are planning to sell their shares via an Initial Public Offering.

This surge may be due to the big day October 17, 2018. October 17th is not only Ziggy Marley’s, son of reggae icon Bob Marley, birthday but also marks the day Canada will legalise recreational marijuana for purchase and consumption to Canadians age 18 and over.

Naturally, there will be limitations to this bill, such as the amount you can possess or grow at home. However, this action represents a shift how weed is perceived as well as an exciting stock market journey, which will lead to further growth and development for the country.

The news of the Great White North’s intentions to legalise cannabis for recreational purposes broadcasted in late June. This resulted in a significant advancement in stock prices for major companies in Canada such as Canopy Growth Corporation [TSE: WEED], Aphria Inc [TSE: APH] and Cronos  Group Inc [TSE: CRON]. WEED has increased its stock price by 35%, APH 36% and CRON 52 % since the word began spreading of the legalisation to come.

Canopy Growth Corporation had extended an arm on the New York Stock Exchange [NYSE: CGC] in May 2018. This too popped 15% and is now trading at US$49.09. This increase may also be due to the brewers of Corona, one of the top selling beers in the world, announcing going big with its stake in Canopy Growth Corp. by an additional 4 billion USD!

Undoubtedly a stock to watch.

Aphria Inc has announced that it will be acquiring all ordinary shares of LATAM Holdings Inc, a company owning cannabis licenses and assets in Jamaica, Colombia and Argentina. This will increase the value of Aphria with now a more diversified approach in cultivating the herb internationally.

Marijuana in Jamaica typically known as ‘ganja’ is a popular element of the Rastafarian culture and is legal to be used for religious practices. Ganja has been legalised for medicinal uses in the country and has since many companies emerging and taking up the opportunity to cultivate this intriguing plant. Popular companies such as Kaya Herb House, a tourist attraction for the viewing and partaking of all things ganja as well as Medicanja, medicinal marijuana firm which is planning on going public on the Jamaica Stock Exchange [JSE] very soon.

While investing in cannabis stocks may be attractive to the more aggressive or the lovers of the herb.

A few may question, how long will this “high” last on the overly hyped marijuana industry?

 

 

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Apple Inc [NASDAQ: AAPL], is one of the leading technology companies listed on the U.S market. The $1 trillion company is renowned for its robust data protection software, and innovative techniques which keep consumers who are edging for the latest gadgets happy, but what does this trillion milestone mean for loyal consumers?

Investors who purchased AAPL shares five years ago would have experienced an average of 229% return on investment! A value, which outweighs the cost of anxiously awaiting the next release of a new product and then cashing out hundreds to finance the purchase.

“Life is easier with an iPhone” is just one of the selling points of Apple. Users commend the robust privacy protection software, responsive updates to annoying glitches, user-friendly experience and sleek, cutting-edge designs, that the company continues to focus on.

Apple Inc is in the race to continue supplying millennials and with competitors like Microsoft, Google or Samsung, who are just as focused on creating futuristic technology, the markets can quickly shift from one player to the next.

Why not invest in a $1 Trillion company that will reap returns, pay dividends, brand loyalty? In comparison to the starting price of US$ 999 for the newly released iPhone X, the stock last traded at $232.02 on October 3, 2018; a mere fraction of what it costs to be a shareholder in the company.

Though not the 1st company to hit a $1 Trillion market capitalisation, the conversation is now, how prepared is the company to continuously invest in research and development?

Note that past results are not a determinant of future performance. However, a slow-down in the growth of the smartphone market-Apple’s highest income generator is not anticipated any time soon. Apple has displayed its resilience to change and is no doubt a stock to keep for the future.

As we await 2019’s release of more high-end gadgets and software that improves and continue to prove Iphone’s commitment to making life more comfortable; whether as an investor or as a loyal customer, there is a benefit to look forward to.

 

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