In the local stock market, the Composite Index continued along its expansionary path as it posted a return of 1.54 per cent in Q1 2021, up from 0.45 per cent in Q4 2020. The expansion was bolstered by a turnaround in the All T&T index as it climbed 0.43 per cent over the quarter compared with a loss of 1.22 per cent in the prior quarter. The Cross Listed shares continued their rally, however at a slower pace, registering a quarterly gain of 3.89 per cent, slightly down from 4.13 per cent in the last quarter of 2020.
The stocks with the largest share price gains over the first quarter of 2021 were GraceKennedy (GKC), Guardian Holdings Ltd (GHL) and Trinidad Cement Ltd (TCL) with returns of 28.31 per cent, 22.92 per cent and 20.33 per cent respectively. This exuberance however did not span across all stocks with Trinidad and Tobago NGL (NGL), WITCO (WCO) and LJ Williams B (LJWB) leading the declines over the quarter ended March 2021, down by 12.47 per cent, 7.01 per cent and 6.67 per cent respectively.
International market review
The momentum evident in the last quarter in 2020 failed to carry over into the new year. The year began with much uncertainty following the violence incited by protesters as they stormed the United States Capitol in the first week of January. In the first month of 2021 also saw the emergence of several Covid-19 variants with a higher degree of transmissibility, thus reducing the effectiveness of the Covid-19 vaccines.
Stock price volatility in so called meme stocks, also arose in the first quarter, as several companies including a video game retailer, experienced soaring prices over a very short time period. The impetus for the rally in the stock prices was not based on fundamental or economic factors however, but were fueled by investor chatter and opinions on online discussion forums. Optimism recovered in the latter period of the quarter with the vaccine rollout, the confirmation of the US$1.9 trillion fiscal support package and with a promise of US$2 trillion in infrastructure spending to come.
US equities posted positive returns in Q1 2021 as the S&P 500 Index gained 5.77 per cent, down from 11.69 per cent in the last quarter of 2020. European equities also advanced in the first quarter, with the UK FTSE up 3.92 per cent and the German DAX Index with a return of 3.55 per cent.
Information Technology, which drove the market for the majority of 2020 failed to perform in Q1 2021, climbing by 1.7 per cent quarter on quarter, following an 11.5 per cent gain in Q4 2020. The energy sector maintained its dominance as it posted some of the biggest gains in the quarter, surging by 29.3 per cent in the quarter, exceeding the prior quarter gain of 25.8 per cent. The financial services sector was the second best performer with a quarterly return of 15.4 per cent, followed by industrials (11.0 per cent), materials (8.6 per cent) and telecommunications (7.8 per cent).
The yield on US ten-year Treasuries maintained their upward trajectory in the first quarter of 2021 as it climbed more than 80 basis points as improvements in the labour market and other indicators stoked investor confidence about the economic outlook.
Equity markets outlook
The vaccine rollout across the world should help several countries to achieve a rebound in economic activity as populations start to gain some immunity to the Covid-19 virus by the second half of the year, allowing economies to curiously reopen. As it pertains to the US, growth may be more acute due to the substantial fiscal stimulus package. As a result, international equities are expected to remain along an upward trend. The biggest threat to stocks are the Covid-19 variants and inflationary pressures.
Locally, the continued challenge to source foreign currency, the rising infection rate and anaemic energy production levels may continue to weigh on investor sentiment. To guard against possible volatility or negative sentiment, a well-diversified portfolio should be maintained and dips in the stock market can be utilised to rebalance into securities or sectors that are under-represented.
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.Quarterly Returns: 31 December 2020 to 31 March 2021
Q2 2020 Q3 2020 Q4 2020 Q1 2020
TT Composite Index -0.50% 0.50% 0.45% 1.54%
All T&T Index 1.68% 1.40% -1.22% 0.43%
Cross Listed Index -4.84% -1.43% 4.13% 3.89%
Combined JSE Index 1.94% -0.91% 3.95% 0.70%
S&P 500 Index 19.95% 8.47% 11.69% 5.77%
UK FTSE Index 9.07% -5.18% 10.13% 3.92%
German DAX 23.90% 3.65% 7.51% 3.55%
US 10 Yr Treasury (bps) - 1.65 2.40 24.00 82.90
Crude (US$bbl) 39.27 40.22 48.52 59.16
Source: Bloomberg, Trinidad and Tobago Stock Exchange, Jamaica Stock Exchange
Trinidad and Tobago Stock Exchange Largest Gains and Declines: December 31, 2020 to March 31, 2021 —Source: Trinidad and Tobago Stock Exchange