Issue No. 37

For the month ended August 2023, the TT Composite Index declined by 2.20%, driven by the negative growth generated from the TT Cross Listed Index and All T&T Index of 2.62% and 2.09% respectively. Contractions in the share price of Trinidad and Tobago NGL Limited (NGL) of 18.32% and Massy Holdings Limited (MASSY) of 6.73% drove the All T&T index downwards, while a 5.80% drop in NCB Financial Group Limited’s (NCBFG) share price was the main contributor to the downswing in the TT Cross Listed Index. In August, market activity resulted from 24 securities trading of which 5 stocks increased, 18 declined and 1 held firm.

During the month, ANSA McAL Limited (AMCL) released its half year financial results ended June 2023. The Group posted improved results during the period, generating an EPS of $1.13, up from $0.16 in HY 2022. The company is expected to pay $0.30 dividend per share on September 8^th, 2023.

We maintain that despite the overall contraction in the local market, the resilience amongst some released company earnings data provides some attractive equity valuations for investors.

Buoyant consumer spending and a surge in business activities helped the US economy to maintain its momentum in the second quarter of 2023. The continued resilience of the US economy showed fewer signs of a recession as the Q2 GDP grew 2.1%, according to the government’s second estimate for the period, following its 2.0% growth in Q1 2023. 

Chairman of the US Federal Reserve, Jerome Powell, noted that the US central bank is prepared to continue increasing interest rates even further, if appropriate, until inflation tapers toward the Fed’s 2% target. This raises the risk of borrowing costs remaining higher or possibly climbing within the short term. He further acknowledged that even though inflation has fallen off from its peak levels, it remains too high. US inflation, as measured by US CPI Index, increased marginally in July to 3.2%, compared to 3.0% in June 2023 as a result of higher energy and food prices.

The S&P 500 Index posted a negative return of -1.77% in August as investors reacted to an increase in rates. Contractions were recorded across all sectors with Utilities and Consumer Staples sectors delivering the biggest declines this month of -6.2% and -5.2% respectively.

Crude oil prices increased 2.24% month on month, climbing to US $83.63 per barrel in August from US $81.80 per barrel in July. According on the International Energy Agency (IEA) August Report, the improved macroeconomic sentiment coupled with OPEC supply cuts and all-time high world oil demand has contributed to the steady oil price increases. 

Within the short to medium term, we maintain that the projected fall in global oil inventories is likely to continue to put some upward pressure on crude oil prices. 

Local short-term yields on the July GORTT yield curve rose month on month. Notable movements were recorded on the 3-month rate, which moved from 0.82% in June 2023 to 0.86% in July 2023 while the 1-year rate climbed from 1.40% in June 2023 to 1.52% in July 2023. The 10-year TT yield narrowed, slipping from 5.20% to 5.17%. Local headline inflation, measured on a year-on-year basis, stood at 5.8% in June 2023.

Net Official reserves slid 1.5% from $6.6 billion in June, the equivalent of 8.3 months import cover, to $6.5 billion in July, the equivalent of 8.1 months import cover. Liquidity also contracted, dropping 21.9% from $7.0 billion in June to $5.5 billion in July.

Demand for local fixed income securities, GORTT, GORTT agencies or corporate issues, remain strong as investors continuously seek fixed income assets to preserve capital in a volatile investing environment. The corporate bond market is expected to remain relatively inactive with only few issues for the year thus far.

At the beginning of the month, the credit rating agency, Fitch, cut the US government’s debt to AA+, highlighting its concerns for the lack of governance and the ballooning fiscal deficit. Despite this, US Investment Grade corporate spreads, as measured by the CSI BBB Index, remained stable at 1.65% month on month. At the end of August, the US 10-year Treasury yield rose to 4.09% on August 31^st from 3.97% on July 31^st, on the heels of better-than-expected economic data. The US spread between the 2-year yield and 10-year yield points narrowed at the end of August, now at a 0.76% spread vs a 0.91% spread in July. The curve is expected to remain inverted within the medium term as the FED’s primary focus is fighting inflation.

Fund of the Month

Scotia Money Market Fund (US$)

-Short Term Fixed Income Instruments

-Low Risk

- Capital Preservation, Liquidity