Home' Trinidad and Tobago Guardian : January 2nd 2014 Contents JANUARY 2014 • WEEK ONE www.guardian.co.tt BUSINESS GUARDIAN
COMMENTARY | BG3
Chief editor-business: ANTHONY WILSON
Editing and design: NATASHA SAIDWAN
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Last year was a relatively good year for investors in
the local stock exchange, as it is estimated that
some 4,500 brokerage accounts were opened by
new investors as a result of the establishment of
the Clico Investment Fund in January 2013 and over
7,000 new accounts were opened by investors who bought First
Citizens shares in September.
Not only did the local stock market attract new investors,
but it also reported decent returns with the All T&T Index
increasing by about 18 per cent and the Composite Index up
by over 11 per cent.
This followed the performance of the local stock market in
2012, when T&T-headquartered stocks were up by 15.5 per
cent and the Composite Index advanced by 5.14 per cent. In
2011, the All T&T Index jumped by 24.77 per cent, while the
Composite Index added 21.21 per cent.
As of December 27, 2013, therefore, this means that in the
last three years the index of the shares of companies based in
T&T would have recorded a capital gain of 69.5 per cent, while
the index of all the shares listed on the local stock market would
have added 41.7 per cent. These returns do not include the div-
idend income that investors would have received from their
While the local economy s performance in the last three years
has been anaemic at best, T&T stocks have performed well
because there is a great deal of money chasing after relatively
few high-quality shares. At a time when money held in savings
accounts or in income mutual funds earns less than 1 per cent,
there has been a particular affinity for high dividend-paying
From what I can determine, in the same three-year period
the increase in the value of the S&P 500, the US stock market
index based on the market capitalisations of the 500 largest
listed companies, was about 46 per cent.
This means that between the end of 2010 and the end of
2013, it would have been more profitable for the average local
investor to have held a portfolio of T&T stocks than to have
pursued the diversification that some analysts are promoting.
It would be useful for those promoting diversification away
from the local stock market to note that T&T citizens investing
in the US stock market are required to pay a tax of 15 per cent
on their qualified dividends and long term capital gains, whereas
neither capital gains nor dividends are taxed in this jurisdic-
While T&T stocks have outperformed most foreign stocks
over the last three years, the more relevant issue for local
investors is whether local stock will continue to outperform
foreign stocks over the next three years.
It can be argued that the answer to that question depends
on the policy decisions taken by the Government in the next
If the Government continues to pursue a systematic programme
of divestment of state-owned companies---which has been pro-
moted in this space for close to ten years---there is no doubt
in my mind that the local stock market will continue to out-
perform foreign stocks.
The evidence of the impact of divestment on the returns of
local investors can be demonstrated by the experience of the
initial public offering (IPO) of shares in First Citizens, the
majority state-owned commercial bank, which was listed on
the local market in September.
A middle-income local investor who spent $33,000 acquiring
1,500 First Citizens shares in September would have an invest-
ment that was worth $60,375 at the end of 2013. In addition,
that local investor would be receiving a cheque for $1,635 at
the end of this month, as the bank is paying out a dividend
of $1.09 a share, based on its earnings for the year ending Sep-
If the Government were to follow through on the commitments
made by Minister of Finance Larry Howai in the 2014 budget,
there is no doubt that the average middle-income T&T investor
would generate more gains by keeping their money onshore
rather than taking it offshore, which is what a senior stockbroker
advised this week.
Just to refresh your recollection, this is what Mr Howai said
in the budget presentation: "Our capital market policy for gen-
erating high levels of savings and for promoting the efficient
allocation of those savings is an ongoing activity.
"First, we will take steps as soon as it is appropriate to make
an Initial Public Offer of a newly established company into
which the National Gas Company of Trinidad and Tobago will
transfer the 39.0 per cent shareholding in Phoenix Park Gas
Processors Company Limited, which it is purchasing from
"Second, as soon as the technical work on the restructuring
of the Home Mortgage Bank and the Trinidad and Tobago Mort-
gage Finance Company Limited is completed, we will make an
IPO for the Trinidad and Tobago Mortgage Bank."
That means that for the average, local middle income investor,
there would be at least two opportunities to make invesments
in newly listed companies. And the minister did not even
mention a possible second offering of shares in First Citizens
or the tantalizing possibility that shares in Methanol Holdings
(Trinidad) Ltd, the majority Clico-owned methanol producing
company based in Point Lisas, could be sold on the local market
Given the importance of MHTL and its Oman-based subsidiary
MHIL---Clico s 56 per cent stake in which is worth at least $12
billion---to the repayment of the $20 billion in taxpayers dollars
that the Government spent in saving CL Financial, an update
on the MHTL arbitration in London would have been most
useful. Of course, an update on what is going to become of
Clico s traditional insurance portfolio, the Cabinet Note on the
divestment of CL Financial s assets and whether the Government
intends to proceed with the establishment of Atrius would also
have been welcome at the end of a year of increasing uncertainty
on these issues.
What would have been useful at this time, as well, would
be if the Ministry of Finance were to issue a firm schedule of
the IPOs so that local investors would be able to plan how they
are disposing of their surplus capital in 2014. In the absence
of a schedule, local investors are going to be pressured by brokers
looking to shill foreign stocks for high commissions.
It would also be very useful if the Minister were to provide
some more explanation of the four state enterprises that he
said are going to be sold to private sector interests.
According to Mr Howai: "There are a number of State Enter-
prises whose requirements for expanding trade and for securing
specialist skills, technology and finance can be met by the
private sector. Those enterprises with scale and technology
intensive activities needing capital to expand would be exposed
to strategic investors.
"To that end, Government has identified four state enterprises
with commercial remits which operate under market conditions,
have become mature and can now transition to another stage
"During the course of the coming year, we will begin the
process of seeking strategic investors for: the Vehicle Maintenance
Company of Trinidad and Tobago; the National Helicopter
Services Limited; the National Flour Mills Limited (NFM); and
the Point Lisas Industrial Port Development Corporation Limited
There is no doubt that the vehicle maintenance and the hel-
icopter companies would benefit from being privatised. A strong
argument can be made that the Government should insist that
shares in those two companies should be offered to the investing
public by the acquirers. Local investors already have the oppor-
tunity of purchasing shares in NFM and Plipdeco.
Will 2014 be another
good year for local stocks?
Larry Howai, Minister of Finance
Subhas Ramkhelawan, Chairmain of the T&T Stock Exchange
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