Issue No.16

For the month ended November 2021, the TT Composite Index returned 2.08%, led upwards by the Trinidad and Tobago All T&T Index which climbed by 3.21%. The share prices of First Citizens Group Financial Holdings Limited (FCGFH) and Scotiabank Trinidad and Tobago (SBTT) drove the index higher, rising by 12.32% and 6.99% respectively. Conversely, the TT Cross Listed Index was down -0.64% during November 2021, as Grace Kennedy Limited (GKC) and NCB Financial Group Limited (NCBFG) declined by -2.55% and -0.74% respectively. At the end of the month NCBFG released their year end financial results. The company’s EPS declined from JA$8.01 in 2020 to JA$6.25 in 2021 which weighed on the share’s price. During the month 11 stocks increased, 11 declined and 3 held firm.

In November the government announced the end of the State of Emergency in T&T. Businesses are now able to extend operating hours but many remain restricted by the rules of “Safe Zone” locations. To date over 646,000 citizens or 46% of the population have had at least one dose of the vaccine, with the government now recommending booster shots for all persons. In the past few weeks, daily deaths and new coronavirus cases have increased substantially raising concerns of further restrictions over the short term. We continue to encourage persons to vaccinate as further advances in this area should bode positively for increased economic activity and by extension the markets.

In Q3 2021 U.S GDP was reported to be 2% quarter over quarter, substantially lower than the prior quarter’s growth of 6.7%.  A new coronavirus variant named Omicron has been identified as a variant of concern by the World Health Organization (WHO). Analysts believe the economic impact of the latest strain will depend more on the policy response, as opposed to health implications of the virus itself. So far, the Fed appears to have remained on the pathway to conclude its taper, or a reduction in asset purchasing program, mid-2022 and to be begin raising interest rates by the end of next year. The Federal Reserve Chairman has reiterated the message that the Central Bank’s aim is to keep inflation in check.

The S&P 500 Index reported a negative return of -0.83% in November as the market priced in the possibility of new lockdown measures in the near term in response to the Omicron variant.  All sectors declined apart from the Technology sector. The Communications sector was the worst performer, falling by -7.3%. The Energy and Healthcare sectors also declined, by -5.2% and -4.9% respectively.

Crude oil prices have pulled back after closing at a YTD high of US$84.65 per barrel on October 26^th. Oil prices dipped on speculation that a rapid spread of a more deadly strain of the coronavirus could derail the global economy and reduce oil demand. Nonetheless, investor reaction in the last few days suggests that the economic impact of the Omicron variant may prove less drastic than initially feared . If restrictions on mobility increase due to the new variant, there is a risk of a more meaningful drag on global economic activity. We maintain that moving forward, growth is likely to slow from its average in the first half of the year as the delta variant persists, supply shortages remain, and pandemic stimulus tapers off.  

Fund of the Month

Scotia T&T Growth and Income Fund

1. Equity and Fixed Income Investment.

2. Medium-High Risk.

Short term TTD rates declined marginally over the month. The 1-year rate slipped further downwards from 0.45% to 0.42%. The rate has a one year low of 0.22% in December 2020 and a high of 0.54% in March 2021. Local food inflation now stands at 5.7% due to international commodity prices, higher shipping costs, transportation delays and adverse weather conditions.

Throughout the year demand for plain vanilla GORTT and GORTT agencies securities remained strong. The corporate bond market remained relatively dormant with few issues coming to market during the year. System liquidity stood at TT$7.8BN as at the end of November, down marginally from TT$8.1BN a month prior, but still up significantly form the pre-pandemic norm of circa $3.5BN. 

US Investment Grade corporate spreads, as measured by the CSI BBB Index, grew by 13.36% over the month of November as bonds sold off on expectations of high rates going forward as the Fed unwinds its pandemic support programs. The US 10-year Treasury yield however decreased over the period, from 1.55% on October 31^st to 1.44% on November 30^th. Yields have been holding in a range of 1.4% to 1.6% despite a surge in inflation and the strength behind the economic recovery as uncertainty surrounding the Omicron variant saw a flight to safety by investors. Notably, the Fed has recently changed its tone on inflation with Federal Chairman Jerome Powell stating that price increases have spread more broadly, and the risk of higher inflation has increased, suggesting a bringing forward of the monetary policy tightening cycle.