JMMB changes advice on Barbados

AFTER PREVIOUSLY ADVISING INVESTORS to stay clear of Barbados, JMMB, one of the Caribbean’s leading brokerage houses, is now urging them to “begin to take a cautious look at Barbados again”.

Jamaica-based JMMB, which says it represents more than 220 000 “individual, corporate and institutional” investors, issued the advice while noting that Barbados’ economic situation appeared to be improving.

While the absence of an investment grade credit rating remains a concern for bondholders, current six to seven per cent yields for bonds are being seen as enticing.

In a recent analysis, JMMB Investment Research’s senior economist and sovereign research manager, Jermaine Burrell, said “the recovery of Barbados’ major source markets should provide a boost to economic activity in the coming years despite the austerity measures put in place”.

“. . . We note that Barbados has faced challenging times over the last three to four years. Successive downgrades, pushing the sovereign from investment grade to highly speculative grade have hit bondholders and likely led to capital losses. Nonetheless, current yields in the high six to seven per cent range are fairly attractive for a sovereign with a history of taking tough decisions and recovering from crises,” Burrell said.

“Historically the Bajan economy, because of its openness and heavy reliance on the US and Europe, has done well when its major trading partners have done well. Consequently 2015 and beyond could usher in a period of renewed growth and improvement. It is our view that investors should begin to take a cautious look at Barbados again; there may be opportunities on the horizon.”

This advice is a major change from Burrell and JMMB. In a series of reports dating back to September 2013 – authored by Burrell – the investment firm had issued an “underweight recommendation” and advised investors to “reduce their exposure and wait on the sidelines until the murky waters become clear” for Barbados.

The decision was tied to a credit rating downgrade by Moody’s and problems caused by what was seen as Barbados’ reliance on short term debt.

In the most recent analysis issued in September, Burrell said the recovery in tourism “should improve Barbados’ attractiveness as an investment option”.

“Recent contractions in government spending (austerity measures) to reign in the fiscal deficit and debt numbers along with reforms to improve the business environment (privatisation of state owned entities) could provide further beneficial effects to the economy,” he added.