Investors shifting fund to equities and bonds
Published:Friday | January 3, 2025 | 12:09 AMNeville Graham - Gleaner Writer
Dealmaker Dan Theoc expects 2025 to attract institutional investors back to the stock market and longer term bonds for inflation-beating opportunities.
Theoc, who heads the investments banking division at Mayberry investments, expects the momentum to accelerate in 2025, forecasting at least 10 public offerings to the market. They include West Indies Petroleum, Tropical Battery and Chukka Cove as expected to approach the equities market within 60 to 90 days, he said.
“Those three are the most imminent,” Theoc said, adding that Carimed is likely to follow within six months. Altogether, he anticipates other listings, but the timing will depend on market conditions.
Theoc thinks West Indies Petroleum could aim for $10 billion, Tropical Battery $1.9 billion, and Chukka Cove $3 billion.
In addition to the offerings, Theoc said he has detected a shift in the equities market towards blue-chip stocks with heavy dividend payouts. He said that stocks like Scotia Group Jamaica (SGJ) and Carreras rose some 40 and 50 per cent, respectively, in 2024. These stocks generally pay dividend yields trending to five and 10 per cent a year respectively. The run-up in price will arguably reduce that yield in the near term.
“I think maybe from April to June next year we’re going to see the stock market coming back big time, because a lot of the big pension funds have been holding back for the last two years,” Theoc told the Financial Gleaner, adding that the biggest outlook is capital appreciation.
Giving his assessment of 2024 securities market activity, he said Mayberry raised $27 billion in 2024, in fixed income instruments for clients by way of corporate notes, bonds and preference shares with fixed interest rates.
Theoc maintains that investors can lock in deals in the equities and bond market that put them ahead of inflation. Inflation stood at 4.3 per cent over 12 months to November. Inflation peaked at 11.8 per cent in April 2022 following the start of the pandemic.
Theoc said he managed to do deals with an average interest rate of between 11 to 12 percent for corporate bonds. He admits that it was high but said the deal becomes attractive when extending time frame to five years, with only interest payments without amortisation.
“What I feel is going to happen next year is we’ll probably see like a 200, maybe even a 300-basis points fall at those interest rates,” he predicted, noting that he will be going to go back to the market by the end of January 2025, to raise $2 billion for Mayberry.
“We’re going to try that at 10 or 10.5 percent, or so, because the interest rates are trending down,” he added.
Regarding fixed-income 30-day certificates of deposit (CD), the average rates declined from 10 per cent in April 2024 of this year, down to 6.5 per cent at the end of the year. He said as the rates keep going down, investors are going to want to lock in higher yielding instruments for three to five-year tenors. Theoc estimates that about $160 billion gets turned over on the weekly auctions for 30-day CDs. Some of these funds will find a new home.
“There’s a lot of people who still have money on short-term notes, and those people, I think, you can tempt to go to a two or three-year note. If you say to them, hey, rather than earning the six-and-a-half per cent or six-and-a-quarter per cent, come and earn 10 per cent, but you need to invest for a minimum of two years or three years,” Theoc explained.
Theoc said that once there are deals with interest rates at 10 or more then clients will invest. He gave examples such as Dolla Financial Services; a $2.5 and billion dollars raise, Zodiac Caribbean, where the raise was $5 billion; and Mayberry itself, which raised some $6 billion at an average interest rate of about 11 per cent.