Barita Insights: Weekly Newsletter July 31, 2020

In Jamaica, we see services, such as medical consultations, online teaching and exercise classes, being provided through various internet applications. Also, we observe that companies are starting to embrace technology to keep connected to consumers. For instance, BookFusion an open e-book platform, enhanced its digital platform to allow students to interact more easily with educational content. Also, Jamaica’s latest medical facility Health Renew Medical Center will be operating in a paperless environment offering tele and virtual medicine (which refers to the treatment of various medical conditions without seeing the patient in person), thus creating a higher standard of care for patients. Jamaica has also joined the United Nations family to ensure that no citizen is left behind in the ever-growing digital world and that every citizen can benefit from the new opportunities it presents.

The COVID-19 outbreak has forced workers around the globe, across different sectors, to work from home in an effect to slow infection rates. While before the outbreak, remote work was considered a perk; this pandemic has now made it a daily routine. Still, the rapid onset of COVID-19 has made the transition from the office space to home quite difficult for some as their technology was not prepared to cope with the entire workforce being remote. As a developing country, we were forced to adapt by either integrating or developing our virtual private networks (VPNs), voice over internet protocol, virtual meeting and work collaboration tools such as Microsoft teams. These tools have not only helped to boost productivity but also helped bridge a global gap during the age of globalization.

Remote work is not without its challenges. Lack of cybersecurity and timely tech support can pose an issue, as revealed by a recent lawsuit filed against Zoom (an American communications technology company which provides videotelephony and online chat services). Remote work can also complicate some labour laws, especially those associated with providing a safe work environment. Employees may even experience loneliness which could affect their work-life balance. If remote work becomes widely accepted after the COVID-19 pandemic,

1. We could see some downward pressure on our commercial real estate yields to the extent that demand softens on outright contracts. Consequently, this would ultimately have a negative impact on individual investors and funds with exposure to the commercial real estate sector;
2. Employers may hire people from regions with cheaper labour cost, while beneficial to corporations as they are now able to allocate relatively high-level tasks to any outside organization in a different geographic location, it may cause some Jamaicans to seek employment elsewhere.

How has the widespread use of Tech affected markets?

Working from home also means individuals will have more access to other stay at home stocks, for instance, Netflix and Amazon. Investor’s anticipation that these stocks would do well has caused the tech-heavy Nasdaq 100 to outperform the S&P 500 as investors focus the big five tech companies including Apple, Microsoft, Facebook, Amazon and Alphabet (Google). Notably, it’s not just the Nasdaq 100, the concentration of market cap in the biggest tech companies is contributing to gains in other indexes. For instance, the S&P 500 gets 22% of its value from the big five tech companies and is up 46% from its March 23rd lows.

While we do not have a large number of companies in our technology space, investors should look to companies that are beneficiaries of the crisis. Given the closure of our borders, consumers would have switched consumer-focused towards e-commerce, as such, Mailpac Group Limited is well- positioned to capitalize. Also, investors should be looking at companies that show resilience in the face of the crisis. For instance, Wigton Windfarm Limited, as the company’s primary product is not directly impacted COVID-19 since they operate in the energy sector. Finally, investors should be aware of companies that have good rebound potential post-crisis. We recommend Wisynco as it has one of the biggest distribution networks, if not the largest, in Jamaica, complemented by a large portfolio of consumer goods. They are also heavy suppliers to the tourism industry, which recently reopened. Thus, we expect to see a similar recovery with the company’s earnings.