Local stock market in uncharted waters

Published: Tuesday October 14, 2008

The global stock market meltdown has local investors in a grim mood these days.

Five days before traders' screens on New York's Wall St turned red as markets around the world plummeted despite the best efforts to slow a selling stampede, the stock market in Trinidad's Wrightson Rd also took a nose-dive.

The market suffered a record loss, with the Composite Index and the All T&T Index witnessing their largest declines since inception.

The Composite was down 35.96 (3.41 per cent) to 1,018.30 and the All T&T fell by 62.54 (4.39 per cent) to 1,361.61.

What seemed to rattle investors was that the slide was exacerbated by just modest trading in two banking stocks- Republic Bank which experienced its largest decline for the year, and Scotiabank which also suffered a steep decline.

Republic Bank plummeted $9.20 to $90 while Scotiabank slipped $2.75 to $36.

On the heels of the sudden turbulence on the local Stock Exchange, stock prices hurtled downward last Friday in markets in the United States, Europe and Asia even as US president George W Bush assured Americans and others around the globe that the United States and other wealthy countries were dealing aggressively with what has become a near panic.

Trinidad and Tobago Stock Exchange CEO Wain Iton acknowledged last Monday's steep decline of 35 points in the local stock market but said it was critical to note that just three trades in Republic Bank Ltd prompted a nine per cent fall in the banking sector stock.

"We had a big drop and it prompted us to deal with how shares are traded," Iton told the Business Express during a telephone interview last week. "What it means is that we have to look at a mechanism for market protection since three transactions pulled down a stock."

National Commercial Bank Jamaica Ltd added to the poor performance of the banking sector while in the non-banking sector, there were declines in National Enterprises Ltd, Sagicor Financial Corporation, Agostini's Ltd and Neal & Massy Holdings.

There are a couple of reactions that brought some measure of comfort in the stock slide last week.

"Most market indices are down between 25 per cent to 40 per cent but in Trinidad and Tobago the Composite Index and the All T&T Index are up four per cent and 14 per cent respectively," Iton said.

Data supplied by the Stock Exchange showed declines in trading in recent times but Iton also noted that 16 or 17 stocks had appreciations while only eight or nine declined.

"We're not seeing people running to sell shares even though we are in deep, uncharted waters," Iton said, adding that while investors are panicked by the turbulence in the world markets, in this country, investors were not rushing to dump their shares.

Stockbrokers and investment advisors are also suggesting that the fears on Wall St and other bourses around the world may have trickled down to the local stock market.

Christiane Salloum, analyst at CMMB Securities and Asset Management Ltd in Port of Spain said in her third quarter review of the market last week that it seemed a logical conclusion that many local investors may have panicked.

They would then have sold off their local shareholdings with the hope of getting out of characteristically risky investments.

Of striking significance this quarter was the fact that listed companies such as Neal & Massy Holdings, Sagicor and Guardian Holdings Ltd all experienced declines, moving farther away from their fair values and leaving analysts and traders mystified.

But Stock Exchange general manager Iton's advice to investors was to be careful and not panic in the face of a global rout of financial markets.

With regard to the declines in the US, European and Asian stock markets last Friday, he said the situation was "cataclysmic and nobody has a handle on it".

He noted the 8.4 per cent and 8.6 per cent declines in the FTSE and DAX markets as well as the fall in the Dow by 4.5 per cent.

While he acknowledged US president George W Bush's pledge to stabilise the economy, and that it was still early, Iton admitted that he did not know how countries like Trinidad and Tobago could escape the impact of a global slowdown.

He suggested that remittances and tourism would be affected as the credit crisis and economic turbulence affected jobs in the United States.

Minister in the Ministry of Finance Mariano Browne said on Friday the interventions by the US, the UK and other countries in Europe to address the financial turmoil was unprecedented and he was confident their actions would result in the markets becoming more stable.

In a statement, he admitted the international financial situation was changing by the hour but the key decision makers had been in communication to treat with the necessary issues as this remained a financial market crisis at its core but had the potential to affect the real sector.

Browne maintained that Trinidad and Tobago would respond positively to the global slowdown because of the resilience and resourcefulness of its people as well as the country's strong external reserves and import cover of US$8.52 billion or 11 months.

Over at the Stock Exchange, he advised investors in the country to be "vigilant, cautious and careful with their money".

"We are in uncharted waters. I haven't seen anything like this in my lifetime," he said.


Source: Trinidad Express Newspapers
http://www.trinidadexpress.com/index.pl/article_business_mag?id=161387282