Week. Market Analysis and Commentary. Jamaican Stock Market 95,000 JS E MI JS E AJC JS E S E L. Week ending March 12, 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 March 12, 2010 Jamaican Stock Market 95,000 85,000 75,000 65,000 55,000 1,200 Jan-09 Feb-09 Apr-09 Jun-09 Aug-09 Sep-09 Nov-09 Jan-10 Mar-10 Weekly Movement in Indices Indices Closing Levels Change JSE Market Index 85, , All Jamaican Composite 80, , 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 26,996, % JBG 3,231, % SGJ 1,467, % $ Change % Change Winner: KW $ % Winner: BRG $ % Loser: JLA 7.5% -$ % Loser: CBNY -$ % 3,300 3,000 2,700 2,400 2,100 1,800 1,500 Market Analysis and Commentary There was no retreat last week as the bullish trend continued on the local stock exchange. Stocks appreciated 7.2% on average with just 3 of the 36 stocks which changed hands witnessing a decline in price. Of the remaining stocks, 28 closed higher and 5 traded fl at. The JSE Market Index advanced by 3, points or (3.74%), while the Jamaica Composite Index gained 4, points or (6.04%) and the JSE Select Index added points or (4.96%). The lower interest rate environment and the signing of the IMF agreement have signifi cantly boosted interest in local equities. Investors are seemingly overlooking the weaker earnings prospects for listed companies which are expected as a result of the contraction in the local economy, increased taxes as well as the Jamaica Debt Exchange program. Stocks could continue to trend higher over the next few weeks as the expectation is for further reduction in domestic interest rates. Since the start of the year, market interest rates as determined by the monthly 3-months and 6 months Treasury Bill auction have already declined by 532bps and 578bps respectively. Rates could fall even further in the auction for March as investors align their bids to refl ect the likelihood of further cuts by the Bank of Jamaica. Apart from the lower interest rates, stock market activity could also receive a boost from the expected increase in unit trust product offerings following the recent lifting of the moratorium on unit trusts by the Financial Services Commission. This could result in increased demand for equities, resulting in further price appreciation. Market activity has been quite robust in the past three weeks. This however, has mostly been driven by heavy trading in particular stocks. Last week, JMMB accounted for the 65.3% of the 41.34Mn units which traded as the company s Employee Share Option Plan purchased 23.12Mn units (1.6% of total issued shares) to facilitate the benefi t initiative for employees members who have exceeded company targets. Prospects for Dividend Payments in 2010 One of the most pressing issues at shareholders meetings is the issue of dividend payments. It would seem as if investors have become heavily reliant on this source of cash-fl ow in light of the possible decline in other income sources as a result of the global recession. Further, the under performance of most stocks (until recently) meant that investors have been looking to dividends to augment their returns. In what might have seemed like an attempt to satisfy shareholders request, there was an increase in total dividend payments in The total dollar value of dividend payments for listed companies increased from approximately $43.13 in 2008 to $60.62 at the

2 end of The combined effects of the increased payout as well as the decline in stock prices resulted in an increase in dividend yields from approximately 7.4% to 10.8%. Will this continue in 2010? There may however be a reversal of the trend in the current year. Board members will have to consider the impact of higher taxes and weaker consumer spending on the cash fl ow of the company. In addition, participation in the recent domestic debt exchange program will likely mean that expected infl ows will be reduced in As such, shareholders could see a reduction in dividend payments this year as companies retain cash to ensure a strong and stable capital base. This has already been seen as at least one company-national Commercial Bank Jamaica deviated from its usual pattern of making quarterly payouts to shareholders in the fi rst quarter of the bank s FY2009/10. Foreign Exchange Market Selling Close: Close: Change 05/03/10 12/03/10 J$/US$1 $89.75 $ $0.01 J$/CDN$1 $87.42 $ $0.67 J$/GBP 1 $ $ $0.57 There was a slight improvement in liquidity conditions in the foreign exchange market last week refl ecting both an easing in demand pressures and increased supply levels. The increase in supply was due mainly to the increase in US$ infl ows from the tourism and sugar industry along with buyers focusing more on keeping J$ to meet the tax obligations. During the week the J$ traded as high as J$89.85/US$1.00 with a low of J$89.65/US$1.00. The weighted average exchange rate closed the week at J$89.75/US$1.00. Although there may be reduction in dividend payments this year, shareholders may still see an increase in total returns. This as the capital appreciation component of the equation could offset the decline in dividend yields. As such, it may still be benefi cial for shareholders to maintain their positions in good stocks as the likelihood of further capital appreciation is high given the increased interest in the local equities market. NIR Little Changed in February Data released by the Bank of Jamaica showed that the Net International Reserves (NIR) was little changed in February. The NIR declined by just US$6.3Mn to end the period at US$1,559.71Mn. The current level of reserves is equivalent amount to 17.4 weeks of goods and services imports and is above the traditional benchmark of 12 weeks. J$ Money Market The JMD broker market remained moderately liquid throughout the course of last week. The liquidity levels were further enhanced by the infl ows from the maturity of the GOJ 12.00% Treasury Bond. Brokers continue to execute trades along the shorter end of the curve. GOJ Bonds Bids on Jaman global bonds were much stronger this week as buyers confi dence returned and offers dwindled. The 25s traded moderate volumes at while the 39s traded minimal volumes at 90. There were also some trading on the 19s at 98 and 17s at 111. Buying interest closed the week strong and we expect prices to move higher as supplies remain constrained. 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 Petrotrin can t afford $12b lawsuit T&T Stock Market Indices Published: 8 Mar ,300 1,200 1,100 1, ` The Oilfi eld Workers Trade Union (OWTU) is demanding a public enquiry into the operations of Petrotrin in light of a reported $12 billion lawsuit fi led against the local company by World GTL. On March 2, the Guardian reported exclusively that the lawsuit, fi led in the United States Federal Court in Manhattan, World GTL Incorporated and its subsidiary, World GTL (St Lucia), was in connection with the gas-to-liquid plant located at Pointe-a-Pierre. The company is seeking compensation against Petrotrin for alleged fraud, negligent mis-representation, breach of contract, unjust enrichment, negligence and expropriation. 600 Jan-09 May-09 Sep-09 Oct-09 Nov-09 Dec-09 Jan-10 Feb-10 Mar-10 All T&T Index Composite Index Activity on the Trinidad & Tobago stock exchange got off to a slow start last week but saw a signifi cant improvement in end week trading. Friday s trading session recorded a volume of 1.92 million shares with a corresponding market value of $25.54 million, the highest daily traded value for the year thus far. National Enterprises Ltd (NEL) was the day s top performer with 1.54 million shares changing hands while ANSA McAL Ltd (AMCL) followed with 200,468 shares. Despite increased activity, there were mixed results at the end of trading. For the week, the Trinidad Composite Index advanced by 4.39 points (0.55%) and the Cross-listed index inched up 1.05 points (1.92%). On the other hand, the All T&T Index declined by 0.53 points (0.05%). Overall market activity resulted from trading in 18 stocks of which 7 advanced, 6 declined and 5 traded fi rm. Grace Kennedy Limited was the biggest gainer this week with the share price jumping 32.45% to $4.00 while marginal increases were witnessed in the FCIB and NCBJ moving up by 1.29% and 1.00%, respectively. National Flour Mills Limited fell 3.03% to TT$0.96 while TCL and SFC lost 2.50% and 1.98% to close the week at TT$3.51 and TT$10.39, respectively. EXCHANGE RATE: Exchange Rate TT$1/J$ Last week Petrotrin issued a statement saying they were not in receipt of this complaint. Ancel Roget, president general, OWTU, on Thursday called on Government to say who was enriched, what were the breaches and what was promised regarding the gas-to-liquid project. He said if the enquiry reveals any corruption, then it must be taken to the courts and those who are found guilty must make a jail. Roget was speaking at a news conference called on Thursday to specifi cally deal with the state of the Petrotrin as it relates to the lawsuit fi led by World GTL. Costly lawsuit, overruns Roget said the company can ill-afford a lawsuit of that magnitude because it is drowning in debt from other court actions as well as cost overruns of its upgrade of the refi nery project. Petrotrin is also facing cost overruns through their refi nery upgrade project of some $7 billion. That has not been explained and you would recall that last year, the company had to go on an additional borrowing to complete the project because of cost overruns of some $850 million, borrowed at a cost of some six per cent. Security, medical issues He said all issues of health and safety of workers on that plant and surroundings were ignored and resulted in the death of John Marshall, which is included in the lawsuit, from acute respiratory distress syndrome due to toxic fumes inhalation. Petrotrin has denied Marshall s death had anything to do with plant construction and exposure to toxic fumes. Roget said there are moves to contract out the security and medical departments. Arnold Corneal, manager, corporate communications, Petrotrin, said the issue of privatising the security and medical departments were discussed as part of the company s strategic plan. 3

4 International News Economic data released during the week pointed towards the possibility of monetary policy changes for the Central Bank of Asia s big two, China and Japan- but in different directions. Strong GDP growth in China s fourth quarter has increased infl ationary pressures and strengthened expectations of near term monetary policy tightening. Chinese consumer price infl ation increased to 2.7% for the 12 months to February compared to the 1.5% reported in January. However, widening defl ation in which declining prices could lead to falling profi ts, rising unemployment and declining incomes, may force the Bank of Japan (BOJ) to maintain lower rates and provide greater support to the economy. During the 90 s the BOJ had lowered interest rates in an effort to spur economic activity- a move which did little to stem the contraction in the economy. That said, although the zero interest rate policy ended in 2006, Japan in particular may be more willing to maintain rates at the current 0.1% level as it attempts to avoid a repeat of the extended defl ationary period which lasted almost a decade throughout the 90 s. Advanced retail sales increased by 0.3% from the decline of 0.5% in the previous month Retail sales jumped 0.8% despite the severe snow storms from 0.6% in the previous month. Initial jobless claims fell to 462K from 469K last week. US Trade balance narrowed to $37.3Bn from $40.2Bn last month. U.S. Foreclosure Filings Increase at Slowest Pace in Four Years March 11 (Bloomberg) U.S. foreclosure fi lings rose at the slowest pace in four years in February as the government sought to reduce record bank seizures, RealtyTrac Inc. said. A total of 308,524 properties received a notice of default, auction or seizure last month, or one in 418 households, the Irvine, California-based seller of default data said today in a statement. Filings rose 6 percent from a year earlier, the smallest increase since RealtyTrac began tracking annual changes in January They declined 2 percent from January. The Obama administration s main effort to keep people in their homes resulted in more than 830,000 trial loan modifi cations for delinquent borrowers through January, according to the Treasury Department. Still, fi lings were up for the 50th straight month in February on an annual basis and topped 300,000 for the 12th consecutive month, RealtyTrac said. U.S. Trade Defi cit Unexpectedly Shrinks March 11 (Bloomberg) The trade defi cit in the U.S. unexpectedly narrowed in January as imports fell for the fi rst time in fi ve months, indicating demand is cooling following the fastest pace of growth in six years. The gap shrank 6.6 percent to $37.3 billion from $39.9 billion in December as refi neries imported the fewest barrels of crude oil in a decade, Commerce Department fi gures showed today in Washington. Exports decreased for the fi rst time in nine months, on fewer shipments of aircraft and autos. Japan s Economy Grows 3.8%, Less Than First Estimated March 11 (Bloomberg) Japan s economy expanded less than initially estimated in the fourth quarter as companies pared spending and stockpiles as defl ation deepened. Gross domestic product rose at an annual 3.8 percent pace, slower than the 4.6 percent reported in preliminary fi gures last month, the Cabinet Offi ce said today in Tokyo. The GDP defl ator, a gauge of price trends, fell a record 2.8 percent. The report suggests business spending remains the weak link of an economic recovery that has begun to spread from exporters to households. Renewed demand in Asia is helping Japanese companies such as Canon Inc. and Honda Motor Co., which may minimize an economic slowdown in the coming months as government stimulus measures fade. Retail Sales in U.S. Unexpectedly Rose in February March 12 (Bloomberg) Sales at U.S. retailers unexpectedly climbed in February as shoppers braved blizzards to get to the malls, signaling consumers will contribute more to economic growth. Purchases increased 0.3 percent, the fourth gain in the past fi ve months, Commerce Department fi gures showed today in Washington. Figures for the prior two months were revised down, taking some of the shine off of today s data. Sales excluding autos rose 0.8 percent, exceeding all estimates. A report last week that showed the economy lost fewer jobs than anticipated in February signaling employment is on the verge of accelerating, a development that would spur spending in coming months. Macy s Inc. was among retailers that beat estimates last month as customers overcame the weather to shop for Valentine s Day gifts and spring merchandise, a sign the expansion is broadening beyond manufacturing. U.S., U.K. Move Closer to Losing Rating, Moody s Says March 15 (Bloomberg) The U.S. and the U.K. have moved substantially closer to losing their AAA credit ratings as the cost of servicing their debt rose, according to Moody s Investors Service. The governments of the two economies must balance bringing down their debt burdens without damaging growth by removing fi scal stimulus too quickly, Pierre Cailleteau, managing director of sovereign risk at Moody s in London, said in a telephone interview. Under the ratings company s so-called baseline scenario, the U.S. will spend more on debt service as a percentage of revenue this year than any other top-rated country except the U.K., and will be the biggest spender from 2011 to 2013, Moody s said today in a report. 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