Home' Trinidad and Tobago Guardian : January 21st 2016 Contents BG6 NEWS
BUSINESS GUARDIAN www.guardian.co.tt JANUARY 21 • 2016
By the end of 2015, T&T s economy
was facing four situations which
have flowed into this year: a reces-
sion, prediction of a decline in per-
formance of companies on the T&T
Stock Exchange, an increase in the
repo rate and subsequent increase in the prime lend-
Effective January 10, Republic Bank Ltd (RBL)
increased its prime lending rate to 9.5 per cent and
Bank of Baroda revised its prime lending rate to
nine per cent from January 6.
Chief executive of JMMB Investments, Ronald
Carter, said despite these developments there are
still opportunities for investment.
"There remain select opportunities in the mar-
ket---specifically issuers, including some of the extra-
regional exchanges---that we anticipate will provide
a positive return," he told the Business Guardian.
Commenting on predictions of challenges for the
T&T Stock Exchange this year, Carter said if an
investor is looking at the pure index, initial public
offerings (IPO) tend to generate interest. He gave
the example of the First Citizens IPO where there
was a "100 per cent pop" within the first 45 days
after it was offered to the investing public.
"All IPOs are not the same. I think we have a
market that does differentiate, and differentiates
even more so in a challenging economic environment.
They will differentiate between good issuers and
moderate issuers. IPOs tend to generate a lot of
interest if it s a good company."
Between June and December 2015, there were
monetary policy announcements from the Cental
Bank in which the repo rate was increased as fol-
• June 2015---4 per cent
• July 2015---4.25 per cent
• September 2015---4.50 per cent
• December 2015--- 4.75 per cent
Carter said he is not agreement with increasing
"The reality is that we are in a slowing economy
and increasing interest rates are not going to help
that. I would like to see that rate of increase slow
such that it can certainly support the economy. I
think we ve seen interest rates rise significantly."
The Central Bank uses changes in the repo rate
to signal to the banking system the direction in
which it wishes short-term interest rates to go. If
the Central bank does not increase its rates, the
other banks won t, Carter said.
"As the repo rate goes up, you will see some of
the banks adjust. I do not anticipate that, in the
absence of a further repo rate increase, they will
continue increasing. We are in turbulent times but
it s not doom and gloom. This is part of normal
economic cycles and the onus is on all of us to
ensure that we manage our affairs prudently and
to even more so invest our savings.
"I think commercial prime on average is now 9.25
per cent, so we have seen significant increases and
that s not good for growth. The other reality we
need to be aware of is that we are in different parts
of the economic cycle (compared) to the United
States. The US is in a positive growth cycle. Their
economy is growing, ours is not," he said, adding
that for that reason it would be difficult for T&T
to catch up with the US market in terms of interest
According to Carter, 2016 will be a soft year in
terms of equity returns.
"However, that s not to say there are no positive
trends on select investment opportunities. In par-
ticular, you see positive trends on our stock mar-
He said trends have shown that investors generally
hold on to their investments until they mature.
"On the fixed income space we know interest
rates are rising. That means the value of your bond
portfolio is going down. For the hold-to-maturity
investor, which is typically most individuals, that s
not a concern because if you buy a five-year bond
and you are holding to maturity you really need
only concern yourself with default risk," he explained.
"If you decide, for example, on a state-owned
Trinidad company paying yields of eight per cent
maturing in 2019, as interest rates rise the value of
that bond is going to go down. If you are waiting
till 2019, it makes no difference to you. It is a matter
of your time horizon in terms of your investment."
Carter said the US market continues to show
strong growth and the Federal Reserve has "done
an excellent job by assuring that it would not raise
interest rates unless the economy continues to do
He added: "We expect to see moderate continued
growth in terms of corporate earnings in the US.
There will continue to be a positive return on the
The eurozone on the equity side will be a very
good market to invest in, he said, but added: "We
understand that in the environment that we are in
there are significant downside risks. China is slowing,
continued softness in some of the emerging market
economies and a strengthening dollar also presents
a further downside risk."
for investment in
midst of decline
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