BRIDGETOWN, Barbados, July 31, 2008 – One of Barbados’ leading investment firms is predicting challenging times ahead for the region’s three major equity markets over the short-term.
In its latest quarterly report, Fortress Fund Managers Limited has told its Caribbean Growth Fund shareholders that “looking forward over the short-term, we see little opportunity for further gains from regional stock markets”.
The Caribbean Growth Fund is just over a decade old and holds around BDS$250 million (US$125 million) in assets both in cash and shares in public and private companies that have their principal activities in the Caribbean, including major names such as Sagicor, Neal & Massy, and Royal Bank of Canada.
The report stated that over the last 12 months the Barbados, Trinidad and Jamaica stock markets all recorded positive, double-digit growth, and the recent past had been “very strong” for the fund.
However, the investment manager warned that exogenous shocks presented by the international markets threatened to undermine those gains.
“We believe that while share prices of most regional companies are currently reasonable, that future earnings will soon come under severe pressure because of the weak US economy and high energy prices and commodity prices, which will soon negatively affect most of the Caribbean, with the exception of Trinidad and Tobago,” it said.
Along with the high energy and food costs and downturns in the economies of the United States, the United Kingdom and Europe, the Fortress report also raised the concern over whether the righting of the real estate markets being seen in the developed world might start to occur in this region.
It also questioned how the region would manage the impact on our vital tourism industry that would result from the negative fallouts facing the global airline and travel industries from high energy prices.
“Most of the Caribbean countries can be considered small with fragile economies and high levels of indebtedness, and the headwinds listed above will present enormous challenges for the region in the months to come,” warned the fund managers.
Fortress also cautioned its Caribbean Growth Fund shareholders that short-term declines would be “unavoidable”, but they were also offered the carrot that such a climate could also provide “some of the best investment opportunities”.
“Investors in this Fund must have a long-term focus and therefore they must be prepared for volatility and declines in the short-term, but we look forward to taking advantage of the many opportunities that will arise in the months ahead,” stated Fortress.