The positive momentum that characterised the domestic stock market in 2019 was not seen in 2020. Local stocks rallied in 2019, with all the indices posting positive returns, driven by the Cross-Listed Index that advanced by 19 per cent, while the All Trinidad and Tobago Index increased by 9.6 per cent. Much of the buoyancy in 2019 was supported by capital raising and acquisition activities as the Jamaica Money Market Brokers Group Ltd (JMMBGL) successfully launched its Additional Public Offering (APO) which was oversubscribed. Also, Republic Financial Holdings Ltd (RFHL) acquired Cayman National Corporation and several of Scotiabank’s subsidiaries located in the Caribbean.
In 2020, many developments affected local stocks, the primary one being the Covid-19 pandemic with the resulting negative impact on revenues and earnings from the lockdown and stay-at-home measures implemented. All the stock indices ended the year down, with the Cross-Listed index leading the way, recording a loss of 18.36 per cent, followed by the All T&T Index with a loss of 5.16 per cent.
On a sector basis, the energy sector was the worst performer, with a loss of 29 per cent, driven by Trinidad and Tobago Natural Gas Ltd (NGL), the only stock in the energy sector. NGL’s performance was due to depressed global energy prices arising from weak demand and lower natural gas production.
Comprising four stocks—ANSA Merchant Bank Ltd (AMBL), Guardian Holdings Ltd (GHL), JMMBGL and National Enterprise Ltd (NEL)—the non-banking sector followed with a loss of 13.42 per cent.
The performance in 2020 was weighted down by declines in NEL and JMMBGL that suffered share price declines of 45.7 per cent and 25.3 per cent respectively. NEL’s operations were negatively impacted by the Covid-19 pandemic which saw the earnings from their investee companies contract whilst JMMBGL’s decision to halt dividends for two quarters negatively affected investor sentiment and its share price.
Manufacturing II was the only sector that ended the year in positive territory, with a gain of 25 per cent, driven by the share price performance of Trinidad Cement Ltd (TCL), the sole stock in the sector.
For the year, TCL’s share price increased from $2.00 at the end of 2019 to $2.50 at the end of 2020, a 25 per cent gain, primarily due to better than expected financial results arising from cost reductions and reduction in their debt.
Top performer and major decliner
National Flour Mills (NFM) was the best-performing stock on the domestic stock exchange in 2020, up 59.3 per cent or $0.80 to close at $2.15 at the end of the year. TCL was the second best performer with a gain of 25 per cent, followed by AMBL that advanced by 11.5 per cent.
The major decline for the year was Guardian Media Ltd (GML) down 54.4 per cent or $4.08 to close 2020 at $3.42, followed by NEL and One Caribbean Media (OCM) both posting declines in excess of 40 per cent.
Trading activity on the First Tier Market for 2020 declined sharply by 20.36 per cent to 61,252,867 shares traded compared to a 6.58 per cent increase in 2019.
This contraction is the largest reduction in the last five years, with the last decline occurring in 2018 when the number of shares traded fell by 3.78 per cent to 72,161,979 shares traded.
The value of shares traded also fell, as it declined by 5.40 per cent in 2020 to $1.04 billion from $1.10 billion in 2019 and is the second consecutive decline after contracting by 4 per cent in 2019.
Local equity markets outlook
The fallout from the Covid-19 pandemic is expected to linger well into the year 2021. Consequently, the majority of companies may continue to grapple with lower economic activity and foreign exchange challenges in 2021. As such, investor sentiment may be subdued which may translate into the continued pessimism that characterised 2020.
However, there is a unique opportunity for investors to capitalise on such anticipated bearish signals and buy when the market is down, allowing previously expensive stocks to be purchased at a discounted price.
Buying at the prevailing lower prices also facilitates a reduction in the average acquisition cost, and in turn increase returns as markets recover to a more normalised position.
First Citizens Bank Ltd (hereinafter “the Bank”) has prepared this report which is provided for informational purposes only and without any obligation, whether contractual or otherwise. The content of the report is subject to change without any prior notice. All opinions and estimates in the report constitute the author’s own judgment as at the date of the report. All information contained in the report that has been obtained or arrived at from sources which the Bank believes to be reliable in good faith but the Bank disclaims any warranty, express or implied, as to the accuracy, timeliness, completeness of the information given or the assessments made in the report and opinions expressed in the report may change without notice. The Bank disclaims any and all warranties, express or implied, including without limitation warranties of satisfactory quality and fitness for a particular purpose with respect to the information contained in the report. This report does not constitute nor is it intended as a solicitation, an offer, a recommendation to buy, hold, or sell any securities, products, service, investment or a recommendation to participate in any particular trading scheme discussed herein. The securities discussed in this report may not be suitable to all investors, therefore Investors wishing to purchase any of the securities mentioned should consult an investment adviser. The information in this report is not intended, in part or in whole, as financial advice. The information in this report shall not be used as part of any prospectus, offering memorandum or other disclosure ascribable to any issuer of securities. The use of the information in this report for the purpose of or with the effect of incorporating any such information into any disclosure intended for any investor or potential investor is not authorised.
We, First Citizens Bank Limited hereby state that (1) the views expressed in this Research report reflect our personal view about any or all of the subject securities or issuers referred to in this Research report, (2) we are a beneficial owner of securities of the issuer (3) no part of our compensation was, is or will be directly or indirectly related to the specific recommendations or views expressed in this Research report (4) we have acted as underwriter in the distribution of securities referred to in this Research report in the three years immediately preceding and (5) we do have a direct or indirect financial or other interest in the subject securities or issuers referred to in this Research report.