Weathering Wall Street - Financial firms say not blown over by US crisis - Jamaican market loses $44b of value in September

Published: Friday October 3, 2008

Sagicor Financial Corporation, the parent firm for Sagicor Jamaica Life Insurance Company and the Pan Caribbean Financial Services Group, yesterday told the Jamaica Stock Exchange that it projects to lose up to US$5.7 million on investments held with troubled US banks, but that the exposure was too minuscule to materially impair its capital.

Two other crosslisted regional firms, Guardian Holdings and GraceKennedy Limited, told the JSE that they had no exposure to any of the US institutions that have been rocked by America's liquidity crisis, and that their capital was not at risk.

No exposure

At the same time, the brokerage house, Mayberry Investments, explained that it, too, faced no exposure to the American banks marked as distressed, saying that a filing with the stock exchange this week was merely a declaration of all the foreign exchange assets held by the firm: US$189 million.

"We were asked to indicate the size of our US dollar holdings, and that is what we did," Mayberry's CEO told the Financial Gleaner.

"Anything that we invest in we try to ensure that it's sovereign or double or triple 'A'," Peart said.

World nervous

Jamaican investors, like those around the world, have grown nervous in the face of the distress on Wall Street under the weight of supreme mortgage crisis and itstoxic derivatives that caused the collapse of of some of America's largest and most iconic financial houses and forced the Bush administration to ask Congress for US$700 billion to buy up dud loans.

That is in additional to hundreds of billions already forked out to shore up banks and insurance companies.

In Jamaica, where the stock exchange has lost lost more than J$44 billion or 5.47 per cent of its value in the past month, the JSE asked listed companies for their foreign exchange exposure and whether this might be impacted by America's crisis.

So far, firms have largely said that they expect no material impairment and only Sagicor - a big regional group with US$3.94 billion in assets and US$602 million in equity - has specifically said that it expects a loss on its US exposure and to give a figure.

Guardian, another powerhouse in insurance, owns assets of TT$23.8 billion and has equity of TT$4.1 billion.

Sagicor Financial told the JSE that it exposure to firms "known to be in financial distress" was US$9.4 million, or a mere 0.332 per cent of its total investments of US$2.8 billion.

"The company's estimate of projected losses and impairment of capital is US$5.7 million," said Sagicor in the filing, posted by the stock exchange after the end of trading. That is less than one quarter of one per cent of its overall financial investment

Of the projected loss, Sagicor said that it had realised US$2.1 million in one bank and was monitoring the broader situation closely.

"SFC has ... been advised that given the company's total exposure is less than 0.5 per cent of total financial investments, its exposure to the financial crisis is not material," it said.

On the day when the market dipped 2.84 per cent (the main JSE index closed at 98,009.36 points), Sagicor Financial did not trade. However, its two Jamaican subsidiaries slipped. PCFS was down a dollar at $18, while Sagicor Life of Jamaica lost four cents, closing at $7.26.

The Port-of-Spain-based Guardian Holdings Limited said that none of the US$40 million in its international portfolio of equities - two per cent of total group investment and one per cent of assets - was in AIG, Merrill Lynch, Lehman Brothers, Freddie Mac, Fannie Mae or Bear Stearns, the most visible and global names of the American crisis.

While the investments were not immune to the volatility in global markets from the America's problem, Guardian explained, "We do not consider a material risk for the group." The company, whose last price in Jamaica was J$320, did not trade on the day.

Financial crisis

GraceKennedy, which lost $4.89 to close at $65.10, told the exchange that the company did not face "any direct exposure to US financial institutions ... subject of the US financial crisis reported in the media, which could potentially lead to losses or impairment of capital for the group in general and, in particular, for its financial entities, including First global Bank Limited and First global Financial Services Ltd".

It was a similar point Peart made, expanding on Tuesday's bald posting by the stock exchange which said that the Mayberry did not "project any material losses or impairment of capital arising from its foreign currency holdings at this time".

Peart stressed that Mayberry, which at the end of June had assets of $29.1 billion, held most of its foreign exchange obligations in government of Jamaica bonds and gilt-edged instruments.

"They are domiciled in double A rated agencies," Peart said. "Our leading counterparties are Deutsch Bank and CitiBank."


Source: Jamaica Gleaner
http://www.jamaica-gleaner.com/gleaner/20081003/business/business2.html