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Stock market loses $5 billion on Monday

THE JAMAICA Stock Exchange, JSE, now hovers at just above pandemic lows following its slide on Monday that wiped out $5 billion in market value. Suffering its biggest day of losses in at least 12 months, to start the new quarter, the depreciation pushed the index to 1.5 per cent above the crash levels of 2020.

The JSE market continues to suffer from interest rate adjustments which allow investors to make solid returns risk-free by holding government paper.

“The performance of the US and Jamaican equity markets were influenced by the more restrictive monetary policies by their central banks,” indicated the Bank of Jamaica, (BOJ, in its recently released Financial Stability Report.

Central Banks across the world have increased benchmark interest rates to cool inflation which rose in response to US printing of money, but also supply chain bottlenecks that rocketed shipping and commodity prices.

In Jamaica, the BOJ increased interest rates 14-fold, from 0.5 per cent to 7.0 per cent, since September 2021 in a series of rate movements. Last month, the BOJ announced that it would keep rates stable at 7.0 per cent, signalling a pause in rate hikes.

That said, the JSE Combined Index lost 0.01 per cent of its value on Tuesday, after sliding 2.66 per cent on Monday, which wiped out $5.0 billion in value on the market worth roughly $1.9 trillion, according to JSE datasets.

The last time the market dipped close to that quantum was 2.4 per cent on January 4, 2023, and 2.0 per cent on May 24, 2022.

On the day, heavy declines marked Monday’s trading session, with 53 stocks declining and 35 advancing. For instance, 11 stocks declined by more than 10 per cent. Leading the declines was ISP Finance and JPS preference shares, both down 21 per cent.

Earlier in the year, brokerage firm NCB Capital Markets warned clients to expect volatility in the year, due to interest rate movements.

“Furthermore, despite expectations for a peak, both inflation and interest rates are expected to remain elevated relative to historical and target levels for much of the year. Against this background, we recommend that investors focus on assets in defensive sectors, value stocks, and growth stocks with strong outlooks, income-generating opportunities, alternatives, and diversification,” stated NCB Capital in it market bulletin.

Growth stocks are fast-growing companies, mainly on the junior market, and value stocks are firms with large balance sheets on the main market.

The Financial Gleaner sent queries to four brokerage houses for comment, but did not get a reply at print deadline.

Specifically, the 2.66 per cent dip on the JSE Combined Index to 343,122 points hovered at 1.6 per cent above the low point of around 337,500 points on March 25, 2020, at the onset of the pandemic. Comparatively, the index, which is now 35 per cent below the August 8, 2019 peak of 528,300.

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