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CPJ Records a Rebound in Profitability for the 2021/22 Financial Year Published: 17 October 2022

  • CPJ reported a net profit attributable to owners of the company of US$7.51Mn for its financial year ending June 30, 2022, which represents a turnaround from the US$2.26Mn net loss realized in its last financial year. The favourable results were driven primarily by a recovery in demand from the hospitality and retail sectors.
  • The company saw a US$61.78Mn or 106.2% increase in its gross operating revenue. This was supported by improvements in its IT infrastructure, the opening of CPJ Market stores, and the launching of its B2B & B2C platforms. This assisted the company in both reaching a larger client base as well as improving its customer experience.
  • Going forward, the company is expected to open a new CPJ Market story in Drax Hall as well as upgrade its infrastructure including its trucking fleet. The company expects to see growth in line with tourism and as such, it is actively seeking ways to enhance its business service delivery.
  • CPJ’s stock price has increased by 1.7% since the start of the calendar year. The stock closed Thursday’s trading session at $13.26 and currently trades at a P/E of 12.9x which is below the Main Market Distribution & Manufacturing Average of 15.4x.

(Source: Company Financials)

Loan Growth To Moderate In 2023, Though Risks To Mexican Banking Sector Are Limited Published: 17 October 2022

  • Fitch Solutions revised its end-2022 forecast for loan growth in Mexico from 8.2% to 11.6% y-o-y, which will underpin 14.1% growth in total assets. The revision reflects the strong rally across asset, loan and deposit growth in the year through July 2022, as a result of favourable base effects after a sharp contraction in 2021 as well as the relatively robust performance of the Mexican economy in H1 2022.
  • However, given that inflation was forecasted to stand at 8.6% y-o-y at end-2022, the growth in loans and assets will be notably slower – though still positive – in real terms. In 2023, Fitch forecasts that loan growth will slow to 8.4% y-o-y, due to less favourable base effects and the impact of a weakening economic outlook and high-interest rates. 
  • The agency forecasts the Banco de México (Banxico) will hike its benchmark interest rate from 9.25% currently to an all-time high of 10.00% by end-2022, and lower it to only 9.50% by end-2023. This will raise the cost of borrowing throughout the Mexican economy, reducing loan demand. Additionally, weaker economic growth is anticipated as growth slows from 2.0% in 2022 to 1.4% in 2023 and elevated inflation will reduce appetite for consumer loans while lingering concerns about the direction of policy under President Andrés Manuel López Obrador (AMLO) will reduce investment.
  • Fitch currently forecasts a 45-50% chance of a recession in the US in 2023. This would weigh heavily on Mexico’s economic outlook; while it could lead Banxico to cut rates more aggressively than expected to support growth
  • Additionally, high debt servicing costs given elevated interest rates could lead to more households and businesses falling behind on repayments. While non-performing loans are currently contained, at only 2.34% this figure will pick up in the months ahead.
  • While elevated interest rates in late 2022 and 2023 will suppress loan volumes and increase non-performing loans, they will also raise banks’ margins and profitability. In addition, indicators such as the asset-to-equity ratio and capital as a percentage of total liabilities stood at 9.2% and 10.9% in July 2022, compared to averages of 9.5% and 10.5% in 2015-19, respectively. Overall, the banking sector has adequate capital levels and a solid regulatory framework, which should support its stability.

(Source: Fitch Solutions)

Latam Ministers Call For Finance Tools To Protect Against Climate Disasters   Published: 17 October 2022

 

  • Finance ministers across Latin America and the Caribbean called on the Inter-American Development Bank (IDB) to look at new finance tools to mitigate the economic shock of climate disasters.
  • Ministers also urged the IDB to continue backing projects that protect the environment, with the regional lender having historically invested nearly $10Bn in this area. "We need products with incentives," Uruguay's finance minister Azucena Arbeleche said further noting that "An underdeveloped country is not going to indebt itself to pursue this path when it has short-term emergencies."
  • Jamaican finance minister Nigel Clarke called for "risk transfer instruments" that would allow Caribbean countries to protect fiscal sustainability, even after natural disasters. Among the hardest hit by rising temperatures, Caribbean nations are preparing to seek compensation at the COP27 climate talks, as climate change inflicts increasingly devastating blows to its tourism industry.
  • Though Latin America and the Caribbean are relatively minor contributors to greenhouse gas emissions, the IDB estimates that rising temperatures, sea levels and changing rainfall patterns will in 30 years cost the region some 2%-4% of annual GDP.
  • Ministers also discussed initiatives their countries were taking to combat economic turmoil and climate disasters. Uruguay's finance minister Arbeleche stated that the government was preparing to issue a sovereign bond with interest rates linked to environmental actions. Colombia's financial minister Jose Antonio Ocampo indicated that the sovereign was looking at developing alternative exports and growing the country's eco-tourism sector to diversify from oil income.

(Source: Reuters)

Five EU countries propose two options to cap gas prices Published: 17 October 2022

  • Greece and four other EU countries made a joint request to the European Commission to explore two options to cap soaring gas prices and propose possible solutions in a bid to tame surging energy costs.
  • The European Union will unveil proposals next week to launch joint gas buying within months and develop an alternative gas price benchmark, but a meeting of EU countries left it unresolved whether the package would include a gas price cap.
  • In a letter addressed to the European Union's executive arm on Thursday, the energy ministers of Greece, Italy, Belgium, the Netherlands and Poland proposed amending references to the Dutch Title Transfer Facility (TTF) gas price in the relevant contracts through a legal and/or regulatory EU measure.
  • Brussels says a new index is needed since the main TTF benchmark is guided by pipeline supply and is no longer representative of a market that includes more liquefied natural gas.

(Source: Reuters)

 

As markets fret, Fed officials reject the idea of rising financial stability risks   Published: 17 October 2022

 

  • Federal Reserve officials are pushing back on investors' mounting concerns that the U.S. central bank's aggressive campaign to counter high inflation is setting the stage for a market crack-up.
  • Central bankers' confidence is countered by wide-ranging fears among market participants who see bond market liquidity strains, damaging asset price declines as well as a range of problems in markets abroad. Some see this landscape as dire enough to call for the Fed to slow or even consider stopping its interest rate increases, something officials have so far shown no appetite for as they contend with the worst inflation surge in 40 years.
  • "We have to be monitoring things in the financial markets, and we have to be looking for vulnerabilities as you're increasing rates," Cleveland Fed President Loretta Mester told reporters on Tuesday, especially in an environment where all the world's major central bankers are moving in the same direction toward tighter monetary policy.

(Source: Reuters)

MJE Realizes 539.4% Increase in Bottom-line YTD   Published: 13 October 2022

 

  • Mayberry Jamaica Equities (MJE) reported a net loss of $2.31Bn in its most recent quarter, owing to net unrealised losses on investments in associates of J$2.2Bn and net unrealised losses on local equities of J$102Mn due to slowed market activity amidst the ongoing challenges of uncertainty in global and local markets.
  • However, for its nine months ending September 2022, the company realized a net profit of J$4.14Bn (+539.4%) owing gains on investments in associates recorded in Q1 and Q2 2022.
  • The company could report another quarter of losses in Q4 as performance may continue to fall off due to the slowdown in equity and bond markets as interest rates continue to rise.
  • MJE’s stock price has increased by 44.3% since the start of the calendar year. The stock closed Wednesday’s trading session at $13.00 and currently trades at a P/E of 2.6x which is below the Main Market Financial Sector Average of 11.4x.

(Source: Company Financials)

IMF Raises Latam 2022 Growth Forecasts; Sees Inflation Dip In 2023   Published: 13 October 2022

 

  • The International Monetary Fund on Tuesday raised its 2022 economic growth forecasts for Latin America (Latam) and the Caribbean and lowered its growth projection for 2023 on shifting commodity prices and external financing conditions.
  • The IMF lifted its growth estimate for this year to 3.5% from the 3.0% forecast in July, but its projection for global output growth this year was unchanged at 3.2%. In the region, Brazil is seen growing 2.8% this year, a 1.1pp increase from the July estimate, while Mexico is seen growing 0.3pp slower at 2.1%.
  • For next year, the IMF's projection for output expansion in Latam and the Caribbean was lowered by 0.3pp to 1.7%. Globally, the figure dropped from 0.2pp to 2.7%.  This year's improved regional forecast rests on "stronger-than-expected activity in the first half of 2022 on favourable commodity prices, still-favourable external financing conditions, and the normalization of activities in contact-intensive sectors.
  • However, growth in the region is expected to slow in late 2022 and 2023 as partner country growth weakens, financial conditions tighten, and commodity prices soften. The World Bank projections showed Latam and the Caribbean regional economic output growing by 3% this year and slowing to 1.6% in 2023, a growth rate described as “insufficient to significantly reduce poverty”.
  • Inflation continues to be a concern across developed and emerging markets, according to the IMF's outlook. For emerging and developing economies, the fund sees inflation rising to 9.9% in 2022 from 5.9% in 2021, before declining to 8.1% next year. Consumer prices are projected to end the year up 14.6% and expected that rate to slow to 9.5% next year.
  • Importantly, the 2023 revision to the inflation forecasts for Latin America and the Caribbean, up by 2.2 percentage points, was the largest for any region.

(Source: Reuters)

Moody’s Doubles Down On Bahamas’ ‘Overly Optimistic’ Forecasts   Published: 13 October 2022

 

  • Moody’s has doubled down on concerns that The Bahamian Government’s Budget revenue forecasts are “overly optimistic” and that its debt servicing payments will be higher than projected due to the rise in global interest rates.
  • The credit rating agency, fresh from downgrading The Bahamas deeper into ‘junk’ status over concerns the Government may be unable to access the debt financing it requires, also suggested that the Davis administration’s plans to restrain public spending “will weigh on growth” and thus slow down economic expansion.
  • The economic recovery is a key driver of fiscal consolidation in fiscal year 2023. A continued uptick in tourism inflows will drive the recovery at the same time as construction and foreign-led investment projects ramp up. These factors, in addition to increased tax collection supported by the re-introduced Revenue Enhancement Unit, underpin the Government’s expectation that recurrent revenue will expand by 14.1% in fiscal year 2023
  • However, the Ministry of Finance last week suggested the Moody’s downgrade, which was based on fears that The Bahamas’ access to borrowing is being squeezed, is not warranted because the Government’s borrowing plan for the 2022-2023 fiscal year shows it is aiming to avoid the global bond markets over the next nine months due to the adverse high-interest rate environment it would face.
  • Nevertheless, Moody’s noted that “assuming that the tourism sector carries this momentum through the upcoming peak season, economic activity will continue to pick up. We forecast real GDP growth of 7% in 2022. Although the sector’s recovery, which will support the broader economy’s growth, is subject to risks of inflation in tourism source markets and a potential outbreak of a new coronavirus variant, we expect inflows to continue to converge with their pre-pandemic levels in the remainder of 2022.”

(Source: The Tribune)

U.S. Mortgage Interest Rates Rise To The Highest Level Since 2006   Published: 13 October 2022

 

  • The average interest rate on the most popular U.S. home loan rose to its highest level since 2006 as the housing sector continued to bear the brunt of tightening financial conditions, data from the Mortgage Bankers Association (MBA) showed on Wednesday.
  • Mortgage rates have more than doubled since the beginning of the year as the Federal Reserve pursues an aggressive path of interest rate hikes to bring down stubbornly high inflation.
  • Those actions, designed to cool the economy sufficiently to curb price pressures, have weighed heavily on the interest-rate-sensitive housing sector as expectations for Fed tightening have led to a surge in Treasury yields. The yield on the 10-year note acts as a benchmark for mortgage rates.
  • The average contract rate on a 30-year fixed-rate mortgage rose by 6 basis points to 6.81% for the week ended Oct. 7 while the MBA's Market Composite Index, a measure of mortgage loan application volume, fell 2.0% from a week earlier and is down roughly 69% from one year ago.

(Source: Reuters)

Boe's Pill: UK Fiscal Policy Must Not Threaten Credibility Published: 13 October 2022

  • Britain's government must ensure that its tax cuts and higher spending do not threaten the public finances over the long term or the effectiveness of the Bank of England, the central bank's chief economist, Huw Pill, said on Wednesday.
  • The BoE was forced to intervene in Britain's government bond market on Sept. 28 after prices slumped, threatening a fire sale of assets by pension funds which had been caught out by the speed of the move.
  • While bond yields have risen globally all year, the sharp slump came immediately after finance minister Kwasi Kwarteng's first fiscal statement, which lacked the usual independent forecasts and included 45 billion pounds ($49.7 billion) of unfunded tax cuts.
  • Pill said that while the energy support package - which will cost 60 billion pounds over the next six months - did reduce some short-term inflation risks and economic dangers, it also added to inflation pressure in the medium term and put pressure on the public finances.

(Source: Reuters)