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With the country missing its fiscal targets last year, Jamaican government bonds are not among the favoured emerging markets' debt instruments that international investment bank, Bear Stearns, is pitching to its clients, the company's head of Emerging Markets and Fixed Income Research, Dr. Carl Ross, told a group of local investors.
"Throughout 2006, I was very bullish on Jamaica," said Ross. But, a couple of months ago, Bear Stearns rated Jamaica at 'underperform', "because we were somewhat dismayed and alarmed by the 2006/2007 fiscal numbers," said the Bear Stearns executive last Thursday.
The deficit last year was 5.4 per cent of GDP, double the target Dr .Omar Davies had projected at the top of the year.
Ross says he advises his clients not to bet on Jamaican debt, whose bonds trade at a higher yield of 7.5 to 8.5 per cent compared to its peer group, including Brazil, Turkey, Uruguay, Dominican Republic and Indonesia, and above Bear Stearns' own High Yield Index — which trades at roughly six per cent.
"What I have been basically telling people recently is that you should own [Jamaica] for the carry, for the incremental yield that you are getting over other countries and over the benchmark index," said the investment banker at an emerging markets seminar hosted by NCB Capital Markets at the Terra Nova.
He notes that while deterioration is not expected, investors should not bet on significant improvement in Jamaica's fundamentals.
Improve
"I think there is a good chance that the fiscal numbers are going to improve this year but what it means is that Jamaica's improvements in fundamentals are not happening as fast as other countries so we had to tone down our recommendations."
Standard and Poor and Moody's recently reaffirmed their ratings for Jamaica, with stable outlooks and the Bear Stearns executive noted that this is a good sign that the international ratings agencies have confidence in the country's ability to manage its fiscal slippage.
However, Ross noted that in a peer group analysis of single B sovereigns, Jamaica lagged behind other emerging markets in practically every single macro economic variables - GDP growth, fiscal deficits, current account deficits.
For example, for 2007, Uruguay has a projected real GDP growth of around 12 per cent, Dominican Republic and Turkey are targeting 10 per cent, while Brazil and Indonesia estimate growth will round out at just over five per cent.
Grow
In contrast, Jamaica's GDP is expected to grow at about 2.5to 3.0 per cent.
The countries external debt is at 80 per cent of GDP, significantly higher than its peers which fell in the 60 per cent band. Brazil was the lowest, at just under 20 per cent.
Turning to investmen in emerging debt, Ross pinpointed five recommendations for attractive buys: low-risk countries such as Guatemala and Barbados and slightly riskier Dominican Republic, Belize and Venezuela.
"Throughout 2006, I was very bullish on Jamaica," said Ross. But, a couple of months ago, Bear Stearns rated Jamaica at 'underperform', "because we were somewhat dismayed and alarmed by the 2006/2007 fiscal numbers," said the Bear Stearns executive last Thursday.
The deficit last year was 5.4 per cent of GDP, double the target Dr .Omar Davies had projected at the top of the year.
Ross says he advises his clients not to bet on Jamaican debt, whose bonds trade at a higher yield of 7.5 to 8.5 per cent compared to its peer group, including Brazil, Turkey, Uruguay, Dominican Republic and Indonesia, and above Bear Stearns' own High Yield Index — which trades at roughly six per cent.
"What I have been basically telling people recently is that you should own [Jamaica] for the carry, for the incremental yield that you are getting over other countries and over the benchmark index," said the investment banker at an emerging markets seminar hosted by NCB Capital Markets at the Terra Nova.
He notes that while deterioration is not expected, investors should not bet on significant improvement in Jamaica's fundamentals.
Improve
"I think there is a good chance that the fiscal numbers are going to improve this year but what it means is that Jamaica's improvements in fundamentals are not happening as fast as other countries so we had to tone down our recommendations."
Standard and Poor and Moody's recently reaffirmed their ratings for Jamaica, with stable outlooks and the Bear Stearns executive noted that this is a good sign that the international ratings agencies have confidence in the country's ability to manage its fiscal slippage.
However, Ross noted that in a peer group analysis of single B sovereigns, Jamaica lagged behind other emerging markets in practically every single macro economic variables - GDP growth, fiscal deficits, current account deficits.
For example, for 2007, Uruguay has a projected real GDP growth of around 12 per cent, Dominican Republic and Turkey are targeting 10 per cent, while Brazil and Indonesia estimate growth will round out at just over five per cent.
Grow
In contrast, Jamaica's GDP is expected to grow at about 2.5to 3.0 per cent.
The countries external debt is at 80 per cent of GDP, significantly higher than its peers which fell in the 60 per cent band. Brazil was the lowest, at just under 20 per cent.
Turning to investmen in emerging debt, Ross pinpointed five recommendations for attractive buys: low-risk countries such as Guatemala and Barbados and slightly riskier Dominican Republic, Belize and Venezuela.
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