Sterling Investments profits despite Brexit
Published:Tuesday | August 16, 2016 | 12:00 AMSteven Jackson
Sterling Investments Limited (SIL), an offshore investment firm listed on the Jamaica Stock Exchange (JSE), announced that net profit for the first half of 2016 almost doubled to $63.2 million.
The company benefited from improvements in global bond prices during the first half of the financial year, despite the decline in asset prices around the time of the vote by Britons to leave the European Union (EU).
"This development shocked the markets and caused asset prices around the world to tank. There was some recovery in asset prices shortly after; however, there are major concerns due to the uncertainty this has created," said Charles Ross, CEO of Sterling Asset Management, investment manager for SIL.
The year-to-date improvement in the international bond market reached a plateau when the United Kingdom (UK) voted 52 per cent in favour of Brexit on June 23.
Exiting the EU is a process that will take two years or more, but the vote was enough to send markets reeling.
Consequently, on August 4, the Bank of England cut its benchmark interest by 25 basis points to 0.25 per cent and announced an asset-purchase programme of up to £435 billion, designed to stimulate the UK economy.
SIL also benefited from the depreciation of the Jamaican dollar as the company continued to invest in its core US dollar fixed-income assets on behalf of its shareholders, which include large pension funds, retirees and high net worth investors.
SIL's net profit for the three months ended June 2016 grew to $44 million - almost double the J$22.3 million earned one year ago for the three months ended June 2015.
The Jamaican dollar depreciated against the US dollar by $5.96 or 5.0 per cent for the first six months of 2016. This resulted in unrealised foreign exchange gains of $41.3 million for SIL, a 237 per cent increase, relative to the same period last year. The US dollar has strengthened against most major global currencies on the back of stronger jobs and housing data as well as continued economic weakness in other developed and emerging economies.
SIL's gross revenue totalled $83 million at half-year compared to $53 million in the previous period. Management said bond trading in the second quarter of the year was done amid improved bond prices and expectations of continued central bank accommodation in Europe.