Week. Market Analysis and Commentary. Jamaican Stock Market JS E MI JS E AJC JS E S E L. Week ending April 23, Weekly Movement in Indices

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1 JSE Main & Composite Indices Jamaican Select Week Annya Walker Research Manager Tel: Simone Hudson Research Analyst Tel: Richard Gordon Research Analyst Tel: Week ending April 23, 2010 Jamaican Stock Market 95,000 85,000 75,000 65,000 55,000 1,200 Jan-09 Feb-09 Apr-09 Jun-09 Jul-09 Sep-09 Nov-09 Dec-09 Feb-10 Apr-10 Weekly Movement in Indices Indices Closing Levels Change JSE Market Index 87, , All Jamaican Composite 85, , Jamaica Select Index 2, JSE Cross Listed Index Most Active Stocks JS E MI JS E AJC JS E S E L Top Winners & Losers This Week Units Traded % JMMB 12.25% 10,000, % SGJ 7,477, % GLNR 4,508, % $ Change % Change Winner: SALF $ % Winner: HL $ % Loser: CCC -$ % Loser: CCFG -$ % 3,300 3,000 2,700 2,400 2,100 1,800 1,500 Market Analysis and Commentary The volume of activity seen last week on the local equities market was little changed from the previous week. However, more than half the stocks that traded recorded gains and there was an improvement in the advance/decline ratio. The most notable among them were Salada Foods (+21.74%) and Hardware and Lumber (+8.70%) which helped to counter declines in 9 other stocks. As a result, the three major stock market gauges registered modest gains week over week. The JSE Main Index advanced 1, points (1.29%); The Jamaican Composite Index gained 1, points (2.12%); and the JSE Select Index added points (2.53%). On the other hand, the JSE Cross Listed Index declined by 0.11 points (0.01%) on the back of a $0.02 fall in FirstCaribbean International Bank. A total of 39 stocks changed hands, of which 21 closed higher, 9 declined and 9 traded fl at. Market volume amounted to 41,135,393 units, and had a corresponding market value of roughly $372.75Mn. Jamaica Money Market Brokers Limited 12.25% was the volume leader with 10.00Mn units (24.31%) followed by Scotia Group Jamaica with 7.48Mn units (18.18%) and Gleaner Company with just under 4,51Mn units (10.96%). NCBJ Profit Up 13.9% for The Second Quarter National Commercial Bank Jamaica reported net profi t of $2,554.11Mn (EPS: $1.03) for the second quarter of the FY2009/10. The performance during the period was driven by growth in net interest income which increased 8.6% primarily on the back of a reduction in interest expenses. With just 6 weeks of the JDX impact included in the March quarter, interest income declined by 5%. The group s loan portfolio also shrank by 1.5% refl ecting the decline in loan demand resulting from the contraction in the local economy. The factors tempering further earnings growth were a 30.3% reduction in gains on Foreign Currency and a 12.8% increase in operating expenses. For the fi rst half of the year, Net profi t has increased 15.1% to $5,325.19Mn (EPS: $2.16). In terms of the segments, the group s wealth management division recorded a 162% increase in operating profi t and contributed 25% to the overall results. This was followed by the Corporate Banking segment which saw a 16.8% increase in segment results and contributed 20.6%. The Directors of NCBJ approved a dividend of $0.61 per stock unit. Dividend is payable on May 20, 2010 for stockholders on record as at May 07, Time to Alter the J$/USD$ Mix in Your Portfolio? Recently, several developments may have been prompting investors

2 to reassess the J$/USD mix in their portfolio. One of these, is the signifi cant decline in rates offered on domestic J$ instruments following the Jamaica Debt Exchange. In April of last year, there was the option to invest in a one year BOJ Repo at 22.67%. Today, the only tenor being offered on the BOJ s menu is the 30-day instrument at a 10% rate. With the rates on J$ instruments relatively comparable to yields offered on USD denominated instruments such as GOJ Global bonds, some investors went ahead and increased their USD exposure. Capital gains would have also been signifi cant if investments were made in late 2009 to early Further, there is also the likelihood of gains arising from the depreciation of the local currency particularly over the medium term. This has been one of the main advantages of investing in hard-currency. However, the revaluation of the local currency since March, and the expectation of a slower pace of depreciation in the local currency in 2010 has increased the attractiveness of J$ investments. Further, individuals who are unable to afford the USD minimum $10,000 required for GOJ Global bond investment, would have been earning low single digit interest rates on USD investment. So given the current developments, what is the appropriate USD/J$ mix? Using a US$5,000 investment in our calculations and an estimated 4% annual depreciation in the J$, we arrive at the conclusion that J$ equivalent returns on 30-day investments are likely be marginally higher than US$ investment over a three month period. As such, investors would be better off placing a slightly higher weighting on J$. It should be noted however that because only short maturity instruments are available and with the outlook for lower interest rates, investors face substantial reinvestment risk by investing in Jamaica dollars. In addition, an increase in USD rates could change the dynamics even for smaller investments. That said, it is important to note, that proper currency diversifi cation is necessary in order to minimize exposure to foreign exchange risks. That said, it may be advantageous to make tactical adjustments to your portfolio in order to take advantage of developments in the market. J$ Money Market At the opening of the instruments offered by GOJ, the JMD broker market became very tight as brokers rushed to seize early take up of the various securities. As such, overnight rates rose to a high of 7.00% and 30 day rates to a high of 10.50%. However, at the end of the week, moderate liquidity volumes returned to the market due the maturity of the GOJ Treasury Bonds. Foreign Exchange Market Selling Close: Close: Change 16/04/10 23/04/10 J$/US$1 $89.15 $ $0.08 J$/CDN$1 $89.25 $ $0.21 J$/GBP 1 $ $ $0.82 Demand for the US$ continued to wane in foreign exchange market trading last week. In this context, supply was more than adequate to meet the existing demand. The selling rate fell below the $89 mark during the period, recording a high of $89.10 and a low of $ On Friday, the weighted average selling rate closed at $89.07, $0.08 below the previous week s close. GOJ Bonds There was more profi t taking on GOJ globals this week as there were sellers for most bonds along the curve. The 19s were offered at 102 while 15s traded at and 17s at There was also some trading in 36s at 101 while 25s traded at The local USD money market remains very liquid but given current prices we may continue to see profi t taking. Indicative Levels Bid Offer Offer Yield* % % % % % % % % % % *NB: The rates quoted above are opening indicative levels on the international market and are subject to change as market conditions vary throughout the trading session. Additionally, the prices quoted to clients of NCB Capital Market Limited (NCBCML) are adjusted to refl ect the costs associated with completing the transaction on the respective client s behalf. 2

3 All T&T Index Composite Index Weekly Trinidad & Tobago Update T&T Stock Market Indices 1,300 1,200 1,100 1, ` Jan-09 Jun-09 Oct-09 Nov-09 Dec-09 Jan-10 Mar-10 Apr-10 All T&T Index Composite Index Consumer Price Increases in Trinidad March on Data released by the Central Statistical Offi ce indicate that Headline Infl ation rose by 5.1% in March from 4.8% in February. The main impetus to the increase was the movement in food prices which rose 6.9% in March relative to 6.3% in February. The island has been experiencing a severe drought which has resulted in increases in the prices of fruits and vegetables. However, this was partially offset by reductions in the prices of bread and cereals, meat, fi sh and oils and fats. Core infl ation, which excludes food prices, was 4.1%, virtually unchanged from the previous month. The rate of increase in the sub-index for alcoholic beverages and tobacco slowed to 12.2% (year-on-year) in March while the prices of footwear and clothing declined by 0.5%. The T&T stock market indices recorded marginal gains last week. The Composite Index gained 2.83 points to close at points; the All T&T Index advanced 2.77 points 1,166.15; and the Cross Listed Index rose 0.34 points to close at Market activity resulted from trading in 22 stocks of which 5 advanced, 3 declined and 15 traded fi rm. From a total of 214 trades, overall volume amounted to 2,628,184 units valued at over TT$15.67Mn. National Commercial Bank Jamaica was the volume leader with 61.91% of total volumes, followed by Jamaica Money Market Brokers with 11.60% and Trinidad Publishing Company with 9.74%. Stock Market News On April 22nd, 2010 a bond issued by the Government of the Republic of Trinidad and Tobago with a face value of TT$794 million was listed on the Stock Exchange. The bond s issue price was and has a fi xed coupon of 5.95% which is paid semi-annually. The instrument has a tenure of 13 years. The upward trend in infl ation continues against the backdrop of a protracted weakness in private sector credit demand. In the twelve months to February 2010, private sector credit contracted by 3.6%. The Central Bank noted that the persistent arid weather conditions, will continue to have a negative impact on domestic food production, leading to further increases in the retail prices of several items. The Central Bank also acknowledges that, underlying conditions of weak domestic demand and abundant spare capacity could exert downward pressure on non-food prices. Against this background, the Bank decided to maintain the Repo rate at 5.0%. (Source: The Trinidad & Tobago Central Bank) EXCHANGE RATE: Exchange Rate TT$1/J$

4 International News The charge of sub-prime mortgage fraud against Goldman Sachs continues to be the centerpiece of attention in the US fi nancial market. But with the slew of earnings releases from several big name companies exceeding analysts expectations, the S&P500 and Dow Jones Industrial Average Index managed to shrug off the Goldman debacle and fi scal challenges in Greece. The index touched its 52-week high for the sixth consecutive week. Fiscal challenges in Greece continued to be a major issue as a European Union-led $60 billion bailout may fail to ease concerns about the debt-ridden nation s ability to end the crisis. EU statistics show Greece s 2009 fi scal defi cit was deeper than expected, at 13.6% of GDP vs % previously reported. The International Monetary Fund (IMF) has raised its forecast for global growth but noted that failure of nations to contain soaring public debt could possibly have severe consequences for the global economy. According to the IMF, the global economy is projected to expand 4.2% in 2010, the fastest pace since 2007, up from the 3.9% projection made in January. Economic data was rather subdued this week with the highlight being the drop in US jobless claims. Existing home sales for March also showed improvement, but fi nancial analysts are still not convinced this momentum can be sustained without further stimulus from the Government ahead of the expiration of the second-round stimulus this month. Despite clear signs of improved corporate earnings, the slow upward trend in the stock market continues to refl ect the ongoing caution by investors. Dow Jones index and S&P both increased to 52-week high of 11,204.3 points and 1, points respectively. Oil prices added just over US$1 to close the week at US$ EUR weakened this week to $1.33 while the GBP appreciated marginally to $ Canada Growth Lets Carney Signal U.S. Rate Divergence April 21 (Bloomberg) Canada will raise interest rates before the U.S. Federal Reserve for the fi rst time since 2002, as the country s economy rebounds from a global recession faster than other Group of Seven countries. The Bank of Canada said yesterday the time for keeping its policy rate at a record low 0.25 percent is passing. The Canadian dollar today rose to the highest level since June 2008 as investors bet Governor Mark Carney will raise lending rates at the next meeting on June 1, opening a gap with the Fed. Canada s economy has been supported by a banking system rated the world s soundest by the World Economic Forum for two straight years, housing prices that have returned to nearrecord levels, and rising demand and prices for many of the commodities the country exports such as oil and copper. Carney raised his growth forecast for 2010 to 3.7 percent from 2.9 percent and said the economy will expand 3.1 percent in U.K. Jobless Benefi t Claims Fall More Than Expected April 21 (Bloomberg) U.K. jobless claims fell more than forecast in March while a wider measure of unemployment climbed to a 16-year high, giving ammunition to both Prime Minister Gordon Brown and challenger David Cameron in the run-up to the May 6 election. The number of people collecting jobless benefi ts fell 32,900 from February to 1.54 million, the Offi ce for National Statistics said today in London. The median forecast in a Bloomberg News survey of 26 economists was for a 10,000 drop. Unemployment measured by International Labour Organization methods rose to 2.5 million in the quarter through February. Greek Budget Defi cit Revised to 13.6%, May Top 14% April 22 (Bloomberg) The European Union said Greece s budget defi cit last year was worse than previously forecast and may top 14 percent of gross domestic product, fueling investor concern about a default and sending its bond yields soaring. The EU s statistics offi ce said Greece s defi cit was 13.6 percent of GDP last year, topping the government s twoweek-old forecast of 12.9 percent and the EU s November prediction of 12.7 percent. Uncertainties about the quality of the Greek data may lead to a further revision of as much of 0.5 percentage point, Luxembourg-based Eurostat said. Greece s widening defi cit and questions about the accuracy of its economic data have undermined the credibility and enforcement of the EU s budget rules and contributed to the 6.9 percent slide in the euro this year. The EU and the International Monetary Fund offered Greece as much as 45 billion euros ($60 billion) in emergency loans to assure investors the country can make its debt payments and shore up the euro. U.S. Economy: Tax Credit Drives Existing Homes Sales April 22 (Bloomberg) Sales of U.S. previously owned homes rose in March for the fi rst time in four months as buyers took advantage of a government tax credit and the weather improved. Purchases climbed 6.8 percent to a 5.35 million annual rate, exceeding the median forecast of economists surveyed by Bloomberg News, data from the National Association of Realtors showed today in Washington. New applications for jobless benefi ts declined and producer prices rose, Labor Department reports showed. A homebuyer incentive worth as much as $8,000 for contracts closed by the end of June may provide a short-term boost to the industry that helped trigger the worst recession since the 1930s. Housing s outlook for the second half of the year will be linked to a rebound in hiring, indicating a recovery will probably take years to develop as foreclosures climb. 4

5 NCB Capital Markets Ltd (formerly Edward Gayle and Co.) established in 1968 is Jamaica s oldest stockbrokers. The company became a part of the NCB Group in 1994 and a fully owned subsidiary in October In December 2002, the then Edward Gayle and Co. was merged with another NCB subsidiary, NCB Investments. The products distributed by this combined subsidiary cover the traditional money market product offerings (J$ and US$ Repos), primary dealer services, stock brokerage and investment advisory services. Edward Gayle was renamed NCB Capital Markets Ltd. in October NCB Capital Markets Limited ( NCBCML ) through its representative(s) has provided information to you on various financial products and services and investment opportunities for information and educational purposes only. While NCBCML has made every effort to ensure that the information provided to you is accurate and based on research and analysis that we have carried out or derived from sources that we believe to be accurate and reliable, NCBCML makes no representations or warranties about the accuracy, completeness or suitability for any purpose of the information published and will not be liable for any loss which you or anyone else may suffer in reliance on the information we have provided to you. This Report does not take into account the specific investment objectives, financial situation or particular needs of any specific recipient and therefore this Report should not be regarded by recipients as a substitute for the exercise of their own judgment or for obtaining advice directly from one of our investment advisors. Important Disclosures: The views expressed in this report are the views of NCB Capital Markets Ltd at the date of this report. In accordance with Section 39 (I) of the Securities Act of 1993, NCB Capital Markets Limited hereby states that it is a subsidiary of NCB Jamaica Ltd. and to that extent may be regarded as interested in the acquisition or disposal of the shares of NCB Jamaica Ltd. However, the company acts in a proper and professional manner in making any recommendations regarding shares listed on the Jamaica Stock Exchange. Share prices may fluctuate and past performance is not necessarily a guarantee of future returns. 5