Bitten by fall off in share prices of most of securities in the Fund

Durrant Pate/Contributor

Losses are mounting at Sagicor Financial Select Fund, as net losses for the year-to-date (YTD) period January to September have climbed to J$347.6 million.

This represents a fall-off of more than 100 per cent relative to a net loss of J$127.0 million for the corresponding period in 2021. This deterioration principally resulted from unrealised depreciation of J$387.7 million in the value of investments, as most of the securities in the Fund recorded a decrease in prices.

Furthermore, this negative performance is expected to transcend with the economic uncertainty globally and rising interest rates. Dividend income was J$64.2 million, an uptick of 3.6 per cent relative to the corresponding period in 2021.

NCB non-dividend payment biting

Despite the increase in dividend income, the Fund continues to be impacted by a few companies reserving dividend payments, such as NCB Financial Group. Interest income YTD amounted to J$0.8 million, representing a 22.7 per cent increase year-over-year.

The growth in interest income reflects the rising interest rate environment as well as the Funds participation in the Bank of Jamaica’s 30-day Certificate of Deposit. Total expenses for the nine-month period amounted to J$24.8 million, a decrease of 26.8 per cent relative to the comparable period in 2021.

This decline was largely due to no transaction costs associated with rebalancing and a marginal decline in management fees and trustee fees. At the end of September 2022, Sagicor Financial Select Fund had total assets valued at J$3.79 billion.

This comprised financial assets held by the fund of J$3.71 billion. Cash and cash equivalent recorded a sharp increase to J$74 million relative. The assets were financed by equity of $3.77 billion and liabilities of J$24.8 million.

Financial sector performance

During the combined three quarters, the Finance & Insurance Services industry increased by 1.1 per cent. This was partly due to growth in commercial banks, which largely resulted from an increase in interest income, fees and commissions.

However, there was a decline in insurance services as a result of the fall in life insurance activities. Loans and advances (including domestic and foreign currency denominated loans) to the non-financial private sector by deposit-taking institutions (DTIs) expanded by 9.3 per cent at May 2022.

Relative to gross domestic product, the stock of private sector loans at May 2022 was 44.6 per cent, below the ratio of 46.0 per cent a year earlier. The growth in total loans and advances was underpinned by expansions in loans of 11.9 per cent and 5.8 per cent to individual and the productive sector, respectively.

Growth in loans to the productive sector was mainly attributed to increases in loans to the Distribution and Professional & Other Services industries. During the September 2022 quarter, the US-Equities index was the sole index of nine JSE indices to record an increase in value.

The JSE Main Index declined by 5.9 per cent and the Junior Market Index decreased by 2.8 per cent. This reflected a general downward movement in stock prices. Both the Financial Index and the Manufacturing & Distribution index fell during the quarter, reflecting dips in large cap stocks.