Cross-listed stocks are helping support the market

The year 2016 was expected to be a challenging one for the stock market in Trinidad and Tobago, with several economic headwinds testing the confidence of investors. Against all odds, the local market demonstrated considerable resilience, with the main driver of market momentum coming from the cross-listed index. The T&T Composite Index (TTCI) advanced by 4.06%, with the All T&T Index, a sub-index of companies domiciled in T&T, declining by 5.86%. The cross-listed index, which accounts for 23% of the TTCI, posted an impressive gain of 57.89%. While 2017 has started in similar fashion, it is evident that more tests of confidence lie ahead.

Resilient Market

Trading activity on the T&T Stock Exchange (TTSE) has been robust, catalysed to some extent by institutional investors seeking yields from equities amid a relative dearth of new T&T dollar bond issues. The value of shares traded in 2016 was the highest in the past five years at TT$1.16bn ($173.3m). Activity has continued at a steady pace into 2017, and appears set to match or even exceed 2016. The most actively traded sector was banking, which accounted for 47% of market capitalisation and 26.8% of trade value. Trading in mutual funds was the next most actively traded sector, accounting for 18.3% of market activity. A large component of this activity was due to trading in the CLICO Investment Fund (CIF) – comprising Republic Financial Holdings shares and government bonds – which is valued for its relatively stable price and dividend properties. The conglomerates sector, which is 15.7% of the TTCI, accounted for just over 14% of all trade by value, while manufacturing, which is 14.4% of the TTCI, also contributed 14% of traded value.

Market Entry

New listing activity saw the introduction of the Calypso Macro Index Fund (CALYP) in January 2016. CALYP was listed on the TTSE’s TTD Mutual Fund Platform at a price of TT$25 ($3.74), with 20.2m units issued. The fund was created to allow investors with a medium- to long-term investment horizon the opportunity to participate in a portfolio of local and global stocks. Trading activity for CALYP was muted in 2016, accounting for 2.7% of traded value, which was expected given the medium-term nature of the listing.

Divestment Under Way

As part of the financing programme envisioned by the T&T government, a more detailed divestment agenda was put forward by Colm Imbert, minister of finance, in his FY 2016/17 budget speech. A further divestment of state-owned First Citizens Bank was offered to the public via additional shares. The offer was made in March 2017 at a price of TT$32 ($4.78) per share, in-line with the market price at the time, for a total of 48.5m shares, or 20% of the company. However, the offering failed to attract enough buyers, and in April 2017 had raised TT$1.03bn ($153.9m). If fully subscribed, the offer would have generated proceeds of TT$1.5bn ($224.1m).

In addition, Imbert outlined the divestment of the National Gas Company of T&T’s 51% stake in T&T NGL Limited (TTNGL), which is a holding company listed on the TTSE whose sole investment is a 39% share of Phoenix Park Gas Processors. TTNGL is the sole constituent of the energy sector in the local market. The proposed sale would amount to 78.95m shares, with the expectation of generating TT$1.55bn ($231.6m). Other notable initiatives included the intention to divest 20% of Trinidad Generation Unlimited to local institutional investors such as the National Insurance Board of T&T and the T&T Unit Trust Corporation. While no mention was made of an offer to the public, an initial divestment could open up such a possibility.

In addition to those initiatives highlighted in the 2016/17 budget, other opportunities could surface as state divestments continue. The fate of CL Financial and its related assets remains undecided, leaving the door open for institutional blocks of shares such as Angostura Holdings, which is one of the Caribbean’s leading rum producers with a product portfolio including several international and domestic brands, and Republic Financial Holdings Limited to change hands.