The Trinidad & Tobago Business Guide (TTBG, 2009-10)

FINANCIAL MARKETS
A year to remember
Trinidad and Tobago’s markets tended to take fright in
the second half of 2008, but confidence and optimism
could well return during 2009 By Nesha Debysingh
It was a historic year. Global financial markets came under extreme strain after the US financial
crisis, triggered by the bursting of an incredibly inflated real estate bubble, led to recession
and sparked global panic and economic slowdown. The net effect was mounting investor
fears, unprecedented volatility, and steep declines in the value of all major asset classes. Local
capital markets, which initially demonstrated impressive resilience in the face of a deteriorating
international economic picture, eventually succumbed in the latter half of 2008.
Stock market
A relatively flat first quarter 2008 was followed by a remarkably buoyant second quarter. The
Trinidad and Tobago Stock Exchange (TTSE) composite index was up a notable 17.13 per cent
by June. However, this bullish trend was reversed completely during the last two quarters of the
year, resulting in an overall return of -14.16 per cent for 2008 (see graph 1). The All Trinidad
and Tobago index compared favourably, reporting a decline of 3.83 per cent for the same period,
highlighting the substandard performance of cross-listed stocks.
The first quarter brought closure to two major transactions on the regional stock exchange.
After a very intense bidding war between Ansa McAl and Neal and Massy, the future of Barbados
Shipping and Trading was decided by the end of the quarter, with Neal and Massy winding up
its offer to purchase shares from minority shareholders. The other major event providing impetus
for activity in the second quarter was the unanimous vote by RBTT shareholders to return the
bank to its former owners, the Royal Bank of Canada (RBC).
Activity spiked during the second quarter, with 28 stocks advancing and a mere five declining.
RBTT shareholders looked forward to a combination of cash and share payouts by June 23:
anticipation of this excess cash had many investors borrowing and reinvesting in the local stock
market from as early as March. Combined with the fact that many companies had been trading
Figure 13: Performance of the TTSE composite index 2008
at below fair value in the general lethargy of
the local market over the last couple of years,
this resulted in a spike, with the composite
index reporting a quarterly return of 15.06
per cent.
This impressive show of resilience in the
face of the turmoil in international stock
markets coincided with a welcome run up
in oil prices, which peaked at US$145.29
per barrel on July 3. However, Trinidad and
Tobago’s apparent immunity to the effects of
the global economic slowdown disappeared
rapidly as a subsequent spiralling decline in
international oil prices triggered panic and
loss of confidence among local investors.
This provided juicy fodder for speculation
about the probability of a contraction in the
local economy and a general fear of holding
risky assets, which included TT equities.
Contributing the most to the decline of
the TTSE composite index in 2008 were the
trading sector (down 28.71 per cent) and
manufacturing II (down 27.17 per cent).
Trading volumes increased significantly
as selling pressures dominated. For 2008,
a total of 135,289,997 shares traded, an
increase of 13 per cent from 119,312,440
shares in 2007.
Decliners outnumbered advancers, with
18 shares declining and 13 stocks advancing.
The largest decliners were the National
Commercial Bank of Jamaica (-60 per cent)
and Prestige Holdings (-51.3 per cent). The
steep declines in the second half of 2008
for fundamentally sound companies such
as Sagicor Financial Corporation, Neal and
Massy and Republic Bank left investors and
other market players mystified. It was a clear
example of irrational fear overriding what
would otherwise have been seen as “once in
a lifetime” buying opportunities.
The Trinidad and Tobago Stock Exchange,
in line with international standards,
moved from three days a week to daily
trading, though this did not seem to add
any sustainable traction to overall market
activity. There was also a proposal to trade
depositary receipts on the local exchange.
09/10 TTBG 35