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This week, we at Bourse review the performance of local and international equity markets in 2019. Strong price advances of both Cross-listed and locally-domiciled stocks propelled an impressive market rally on the Trinidad and Tobago Stock Exchange (TTSE). Internationally, major regions overcame several economic and geopolitical hurdles to post strong returns.

TTCI supported by Cross-Listed Stocks

The Trinidad and Tobago Composite Index (TTCI) recorded returns of 12.7 per cent in 2019. The Cross-Listed Index drove TTCI returns, advancing 19.0 per cent on account of a 27.3 per cent appreciation in NCBFG (which comprises 52.8 per cent of the Cross Listed Index). The All T&T Index advanced 9.6 per cent, compared to its 1.4 per cent decline in 2018.

Major movers in 2019

Market leaders in 2019 included Jamaica Money Market Brokers Group Ltd (JMMBGL, up 46.9 per cent), GraceKennedy Group (GKC, up 36.2 per cent) and National Commercial Bank Financial Group (NCBFG), which improved 27.3 per cent. Meanwhile, the market laggards for the year included Guardian Media Ltd (GML, down 50 per cent), National Enterprises Ltd (NEL, down 28.0 per cent) and Trinidad Cement Ltd (TCL), which fell 26.7 per cent. Notably, the top three advancing stocks were Jamaica-based stocks, driven by positive investor sentiment among other factors.

Several major transactions were concluded in 2019 by publicly listed companies, including:

• The acquisition of SFC by Alignvest Acquisition Corporation (AQY) was completed, with subsequent listing on the Toronto Stock Exchange (TSX).

• NCBFG’s acquisition of a controlling interest of approximately 62 per cent in Guardian Holdings Ltd (GHL)

• Republic Financial Holdings Ltd’s (RHFL) acquisition of a majority interest (74.99 per cent) in Cayman National Corporation, as well as the acquisition of the Bank of Nova Scotia’s operations in several Caribbean countries

• JMMBGL’s Additional Public Offering (APO), which raised an approximate US$88.7m in new equity, used to partially fund a 22.6 per cent stake in ‘New Sagicor’.

International Markets Advance

2019 also delivered robust gains across most international market regions. Buoyed by lower US interest rates, investors overcame concerns surrounding US-China trade tensions and Britain’s potential exit from the European Union in one of the best equity market performances in recent history. US markets (S&P 500) advanced 28.9 per cent, with European markets climbing 19.9 per cent. Asia (excluding Japan) (up 15.4 per cent) and Latin America (up 13.7 per cent) also delivering healthy returns.

US markets bullish

US equity markets advanced in 2019, with the market reaching a peak on December 27th (up 29.2 per cent), eventually closing the year at 28.9 per cent. Investor sentiment was generally more positive last year, as the Fed surprisingly cut interest rates three times in 2019. Although the US-China trade war created some uncertainty in the market, 2019 ended with a ‘phase one’ trade resolution deal set to be signed in 2020.

Asian Markets advance despite slower growth

At the end of 2019 China’s stock market advanced 34.4 per cent in USD terms. India, one of the world’s fastest growing economies, recorded slower-than-expected growth in 2019. Despite this, Indian stocks closed the year 14.4 per cent higher in local currency or 11.9 per cent in USD. Taiwan, a beneficiary of the US-China trade tensions and consequently higher imports at the first half of the year, experienced market growth second only to China, advancing 25.9 per cent in USD at year end.

Latin America led by resurgent Brazil

Latin American markets also fared well in 2019, led by Brazilian stocks. Passing the heavily anticipated pension reform bill aimed at reducing its hefty deficit bill, Brazil is expected to save approximately US$195b in expenditure over the next decade. The South American giant also intends to simplify its complex tax system in an effort to stimulate foreign and domestic investment. Resultantly, the Brazilian market rallied 26.9 per cent in USD terms.

Colombian markets advanced 24.1 per cent in USD terms, while Mexican stocks gained 8.1 per cent in USD. The Mexican economy experienced relatively muted growth in 2019, but was buoyed by successive rate cuts by its Central Bank. Chile faced significant headwinds in 2019 amid widespread protests and civil unrest which disrupted economic growth. These led to the Chilean market being the worst performing in Latin America, with the market declining 15.6 per cent in USD terms.

European Markets climb in spite of ‘Brexit’ jitters

Although experiencing slower economic growth in 2019, UK stocks posted returns of 16.7 per cent in 2019. A member of the unflattering ‘PIIGS’ grouping (Portugal, Italy, Ireland, Greece and Spain), Italy was Europe’s best performing major market in 2019, advancing 26.8 per cent in USD terms. Spain—another member of the PIIGS grouping—saw its stock market climb 9.6 per cent in USD terms. Both countries benefited from the European Central Bank’s accommodative stance on Monetary Policy and a historically low main deposit rate of -0.5 per cent.

Investor Considerations

While a benign US interest rate environment could be supportive of global stock markets, lingering uncertainties—including the US-China trade stand-off and Brexit developments—could make 2020 a roller-coaster ride for investors. The US presidential race and flaring up of geopolitical tensions (most recently US-Iran) could also weigh on investor sentiment.

Following a year of robust equity market returns, international investors might consider reallocating their portfolio to lower risk assets classes including investment grade bonds, USD repurchase agreements or even USD income mutual funds. For investors intent on remaining in equities, diversification can help reduce the impact of volatility. This may be achieved using a wide variety of equity-focused country, regional and even global Exchange Traded Funds (ETFs). Investors should consult a trusted and experienced advisor, such as Bourse, to find out more information.

Next week, we provide the Bourse View of local equity markets in 2020.

For more information on these and other investment themes, please contact Bourse Securities Ltd, at 226-8773 or e-mail us at invest@boursefinancial.com.

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