Durrant Pate/Contributor

QWI Investments has managed to significantly reduce its portfolio losses in the second quarter ended March 2023, as conditions improved in the United States and Trinidad & Tobago markets for many of the stocks held in the overseas portfolio.

For the half year, QWI’s Jamaican investments produced J$159 million of realised and unrealised losses. These losses were only partially offset by J$82 million of unrealized gains in the overseas portfolios.

The net asset value (NAV) of the company’s shares declined by 3.9 per cent up to the end of March 2023, which is better than the 6.3 per cent decline in the Jamaica Stock Exchange (JSE) Combined Index during the quarter.

Unrealised exchange losses totalled J$6 million versus J$24 million of gains a year ago. Administration costs declined to J$38 million (2022 – J$56.9 million), mainly due to lower investment management expenses and lower administration management costs. 

Marginal improvement in NAV

For the year to date, QWI recorded a deferred tax credit of J$59.6 million. QWI’s NAV rose marginally for the March quarter, resulting from a net profit of J$5.8 million.

This largely reflects the substantial position it has in companies listed in Jamaica rather than overseas. The Jamaican market, as reflected in the JSE Combined Index, declined 4.4 per cent in the quarter and 6.3 per cent for the six months to March 2023.

These declines were offset, in part by gains in QWI’s overseas portfolio totalling almost 24 per cent for the half year. QWI’s Jamaican investments produced J$54 million of realised and unrealised losses in the quarter. These losses were totally offset by J$55 million of unrealised gains in the overseas portfolios.

The NAV of the company’s shares remained unchanged at J$1.22 at the end of March 2023, which is better than the 4 .4 per cent decline in the JSE Combined Index during the quarter. Market conditions during the quarter locally were generally unfavourable.

This resulted in unrealised losses on the Jamaican portfolio. Higher interest rates since April 2022 have been the primary cause of falling share prices locally. In the USA, interest rates actually declined in both the quarter and the half year.

Equity capital down

QWI ended the period with equity capital of J$1.67 billion, down from J$1.73 billion at the end of September 2022. This decline resulted from the unrealised portfolio losses already mentioned.

During the half year, QWI gradually increased its holdings of equities listed in the US and Trinidad. These holdings stood at US$3.0 million at March 2023. The portfolio includes positions in several leading information technology companies, retailers, aerospace and services companies.

Investments in all stocks amounted to J$1.9 billion with 76 per cent represented by Jamaican listed stocks. QWI is holding approximately $74 million in balances at its banks and brokers.

Borrowings, inclusive of bank overdrafts, at  the end of March 2023 amounted to J$312 million, all denominated in Jamaican dollars, a $34 million reduction from September 2022.

Outlook for remainder of 2023

The outlook by QWI’s investment committee is that the rate of US inflation is clearly in decline, and ongoing reductions in American home prices and home rental inflation will soon add to these changes, resulting in even lower rates. The cost of services in the US, which largely reflects trends in wages, has not yet shown the declines seen in the prices of some goods and commodities.

The committee states that, “in the first half, QWI’s USA share portfolio benefitted from the trend towards lower USA inflation and interest rates which, together with improved profit performance at several of the companies in which we invest, resulted in higher share prices in the quarter. Local interest rates also began declining in March 2023, as inflation returned to the 6 per cent mark at the top end of the Bank of Jamaica’s target range.”

More importantly for investors, inflation since November last year is running at less than one per cent per annum to March. QWI’s Investment Committee continues “to be encouraged by the ongoing buoyancy in visitor arrivals and the improved profit results being posted by several companies in 2022 compared to 2021. We remain optimistic about the prospects for many of our largest Jamaican holdings. “