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Sagicor Select Funds foresees more market uncertainty

Renewed uncertainty will weigh on stocks, according to the managers of the two Sagicor Select funds that track the performance of two sectors on the Jamaica Stock Exchange.

“Things are getting better, but market fears still have a chokehold on the markets,” said Tara Nunes, CEO of Sagicor Investments Jamaica Limited, creator of the funds.

Sagicor Select Funds Limited was Jamaica’s first LEF, or listed equity fund. One of the two funds, SELECTF, tracks financial stocks, while the other, SELECTMD, tracks manufacturing and distribution stocks. They both listed on the JSE main market at separate times in 2019, but the equities they track span various indices.

Jamaica’s stock market descended into bear territory soon after the pandemic began in 2020. Fears subsided somewhat at the end of 2021, but recent flare-ups in Europe and recession concerns have clouded the outlook, Nunes said.

“Once again this is dragging down market sentiment,” she said. “Looking forward, there still exists a great deal of uncertainty in the market,” she cautioned Sagicor Select shareholders on Thursday.

Year to date, the main market of the JSE is down 2.1 per cent, closing Friday at 387,817 points. The combined index, however, is off by just 0.36 per cent in the same period, at 399,666 points, due to offsets by junior stocks, which are up 20 per cent. The combined index includes main market, junior market, cross-listed and USD stocks

This year, the positive market developments have included a return to initial share offering and investor bullishness, said Nunes at Sagicor Select Funds’ annual general meeting. But the market should also benefit from the March withdrawal of COVID-19-related curfews to stem the spread of the virus, she noted, saying that the return to normalcy should act as a stimulant for economic activity and positively impact company earnings.

Even so, the Sagicor Investments CEO thinks the best picks will come from value stocks rather than growth stocks. In Jamaica, value stocks tend to roam in the JSE Main Market, which contains more stable, large cap stocks that pay dividends. The JSE Junior Market holds fast-growing stocks, which are less liquid and more volatile to price fluctuations, and often do not usually pay dividends.

“A defensive or conservative strategy is recommended. With a preference for value stocks versus growth, Sagicor Select Funds gives you an opportunity to stick to the recommendations of holding value stocks while giving you exposure to growth stocks as well,” Nunes said.

As for the Sagicor Select funds, both are currently trading below their $1 IPO price and also trading below their value in their financial accounts. SELECTF closed trading at $0.46 per share on Thursday, but the net asset value, or NAV, stood at $0.77. SELECTMD closed trading at $0.66 on Thursday when its NAV was $1.12.

“In 2019, I take my little money, $400,000, and saw the IPO at $1, and I said this cannot lose money. Now, instead of it doubling, it’s worth $300,000,” said a shareholder, who identified herself as a retired teacher, at the AGM.

Sagicor Group’s research and strategy manager, Jodian Aris, said that the funds were now performing better than in 2021 but that the market kept the stock depressed. She added that investing in the fund should be with a long-term horizon.

In 2021, the JSE Manufacturing Index grew 21 per cent for the year while the JSE Financial Index dipped four per cent. As of Friday, the financial index was down 5.39 per cent year to date, whereas the manufacturing-distribution index had gained 7.49 per cent.

“We have seen the manufacturing and distribution sector being able to withstand the negative impact of the crisis,” Nunes said.

She said that from a macroeconomic sense, the financial sector in Jamaica grew at 1.9 per cent in 2021 compared to a decline of 3.8 per cent in 2020 and 3.7 per cent growth in 2019, the highest in five years. This, however, was still below the overall growth in the national economy, which expanded by 4.6 per cent in 2021, she added, quoting official data.

“We anticipate continued growth in the sector, however, we face the headwinds of new COVID-19 variants, the ongoing Russian/Ukraine crisis, and supply bottlenecks in the global supply chain,” Nunes said.

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