Kimberly Ramkhalawan
October 25, 2022
kramkhalawan@caribmagplus.com
The Trinidad and Tobago Stock Exchange turned 40 this year, and instead of reflecting where the market has come from, it sought to highlight the day by hosting several lecture sessions on the current state of the market and the factors that could be affecting investor behaviour and trends around the globe.
Feature speaker during its afternoon session, Steve Edwards who is a Senior Investment and Strategist, and part of the Analytics Asset Strategy Team, at Morgan Stanley’s Wealth Investment Office in New York spoke to the global emerging market equities reaching a turning point.
Providing a Quantitative Analysis and Global perspectives of emerging markets, Edwards says currently there is a “macro-economic backdrop and a point of transition with a potential sunsetting of the US Dollar as being very strong closer to the end of the tightening cycle.”
He explained this meant that some of the more common themes that have been typical for investing in the last decade are changing at this point, instead he shared what were some of the types of companies, investors are seeking, including intermediate opportunities in emerging markets, stock level, and what tends to work.
Edwards shared that history shows in the last twenty years when there has been volatility in the markets, central banks often respond to ease policy and easy financial conditions thereby providing support to equity markets, which is often referred to as the Fed input. However, he noted that Fed input meant there was “deeper out of the money or below current levels, making it a challenging environment, prompting caution to be taken”, while currently these gauges are pointing in a downward direction. Investors are very hungry for emerging markets willingness to add capital to their markets over time, whereas in developed markets tend to be fickler looking for more entry points. Pointing to factors where rates have risen causing equity market valuations to adjust accordingly, and inflation has experienced strong acceleration, Edwards says thoughts are on what is coming next, and what can be considered feeding these trends. Highlighting the importance of what was working in the last ten years, still going to work going forward, catalysts brokers should look for, strength in emerging markets is the lowering US Dollar which while incredibly strong, safe haven currency and fed policies are high. Emerging markets have moved from diverging from international developed markets which he says are very currency sensitive to become less sensitive reflective that emerging markets in general are much better than funding situations than developed markets. Developed markets he says are currently in trouble as they have a significant amount of debt to GDP, while many emerging markets in countries are in a better shape. And not even a large-scale issue with this level of liquidity seen, showing the maturation of emerging markets. Edwards says with diversities of the sectors of emerging markets there is better balance. He makes mention that compared to the global financial crisis and what emerged from it ten years ago, there is a faster cycle this round compared, even with the impact of the pandemic being felt.
Also exploring the impact of the pandemic on investor habits, a panel comprising of Dr.Marlene Forrest, Managing Director at the Jamaica Stock Exchange, Marlon Yarde, Managing Director, Barbados Stock Exchange, George Edwards, General Manager, Guyana Association of Securities Companies and Intermediaries Incorporated and Trevor Blake, Managing Director at the Eastern Caribbean Securities Exchange along with TTSE CEO, Eva Mitchell, shared a similar view held among smaller exchanges like themselves of the issue of having an accelerated technology implemented as a result of challenges brought on by the pandemic.
Dr.Forrest says implementing technology at that level for smaller exchanges can be costly as they had to ensure there was curated content for its e-campus. She says striking a balance in costs and having an effective service requires being a vibrant exchanger and ensuring values and volumes are at profitable levels. They also touch on reaching the gaps across varying generations where they can keep up technologically, while ensuring it remains attractive to investors and keep up internally, regionally and internationally as “capital can go where it can find a home and find it quickly where it can find a home”.
For CEO of the TTSE, Eva Mitchell, while plans were already in train prior to the pandemic while she estimated the activity on its Trading Online Platform, TOP, at one time saw 27 percent increase during one month alone. However, she too cites the issue they say is capitalizing and maintaining the interests among the various generations in following their investment portfolios online.
In moderating for its third panel session, ‘Leveraging the Capital Market to enhance the potential for SME growth’, Maria Daniel, highlighted the importance of having investment opportunities in meeting the Sustainable Development Goals and combating climate change includes eradicating poverty.
On the demand side you would have the people who may not do much for you, where there might be, supply sides like SMEs are struggling in the last decade to scale up because of not having the proper capital. According to NCB Capital Markets Executive Vice President of Regional Investments Banking and New Markets, Angus Young, getting more companies to come on board means changes to the market culture. He says the current TT environment remains very buoyant, low interest rates mean capital is relatively cheap, and cites a poor culture of paying attention to governance and statutory policies. He says eventually this will change, forcing people to find ways to “re-engineer their balance sheets”. Two factors locally and internationally, one the volatile environment which has become the new normal, and two, significant geo-political environment along with volatile energy prices. Re-engineering to handle these recent volatility rates, requires re-weighting of their debt and equity, with an opportunity to deleverage through the SME exchange, something the TTSE has teamed up with NCB, and its Central Bank to gain interest among these small and medium sized businesses. Panelists Nirad Tewarie, President of AMCHAMTT, says there was a need to deepen and widen the capital market and segments, and in order to get the listings, having the money between the banks and the exchanges, private equity, the investors and venture capitals all can aid the growth of the exchange. In the push for more private equity investment, he says this can aid businesses develop better governance, connections and strategies while at the same time encourage banks to get better customers through private equity funding growth at the exchange level.
