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Oil Prices Hit A Nine-Month Low On Recession Fears   Published: 27 September 2022

 

  • Oil prices hit nine-month lows on Monday, driven down by an expected decline in fuel demand as rising interest rates raise the likelihood of global recession, with further price pressure coming from a surging U.S. dollar.
  • Brent crude futures for November settlement slipped by 82 cents, or 1%, to $85.33 a barrel at 1110 GMT. The contract fell as low as $84.51, the lowest since Jan. 14.
  • S. West Texas Intermediate (WTI) crude for November delivery dropped 74 cents, or 0.9%, to $78. WTI dropped as low as $77.21, the lowest since Jan. 6.
  • Both contracts slumped by about 5% on Friday. The dollar index that measures the greenback against a basket of major currencies climbed to a 20-year high on Monday. A stronger dollar tends to curtail demand for dollar-denominated oil.

(Source: Reuters)

Express Catering Limited (ECL) sees a strong first quarter for FY2023   Published: 25 September 2022

 

  • ECL reported a net profit of US$652.8k for its first quarter ending August 31, 2022, which represents an increase of 15.5% relative to the prior period. This increase in profitability was mostly attributed to the 35.0% increase in revenues.
  • Revenue increased as total passengers accessing the departure lounge of Sangster International Airport during the quarter was 37.4% higher than the similar period last year. This higher trend in total passenger arrivals is expected to continue throughout the company’s financial year. 
  • Additionally, construction is underway for a few new food outlets and some will be open in time for the winter season. These include the Bob Marley One Love food outlet, Freshens and Bento Sushi which are expected to contribute positively to the company’s revenues and bottom line.
  • ECL’s stock price has increased by 4.7% since the start of the calendar year. The stock closed Thursday’s trading session at $5.35 and currently trades at a P/E of 48.2x which is above the Junior Market Sector Average of 20.2x.

(Source: JSE and NCBCM Research)

Barbados Issues World's First Pandemic-Protected Bond Published: 25 September 2022

  • Barbados has issued the world's first government bond with a clause allowing payments to be suspended in the event of another global pandemic, a move expected to attract interest from dozens of other countries ravaged by the COVID-19 crisis.
  • The country’s new bond - finalised in a deal with bankers on Wednesday - is likely to leave an even bigger imprint, especially with smaller, tourism-dependent countries that were pushed to the brink of economic collapse during the COVID-19 pandemic.
  • The bond, to be repaid over the next 15 years, will be the first to allow a government to suspend its payments if another outbreak similar to COVID-19 happens. Payments can be suspended for up to two years at a time and twice if necessary, but it cannot be cancelled altogether.
  • Most notably, credit guarantees provided by the Inter-American Development Bank and an organisation called The Nature Conservancy (TNC) means Barbados can borrow more cheaply, saving itself between $40-$50 million compared to its replaced old bond.
  • That money will be used specifically for protecting and rehabilitating the surrounding Caribbean Sea, according to the terms of the deal, making it what is known as a 'blue bond'.

(Source: Reuters)

Mexico's Banxico Will Hike To 10.00% By End-2022 Due To Price Pressures, More Aggressive Fed   Published: 25 September 2022

 

  • Fitch anticipates that Banxico will hike by 75bps (to 9.25%) at its meeting on September 29, and then to 9.75% on November 10 and to 10.00% on December 15. This is an upward revision compared to the previous forecast that policymakers would only take the rate to 9.50% by the end of the year.
  • The revision is buoyed by surprisingly strong inflationary pressures that will encourage policymakers to tighten policy further and more aggressive rate hikes by the US Federal Reserve (Fed) over the remainder of the year, which will prompt Banxico to step up its own rate hiking cycle in response. 
  • Notably, while the spike in inflation this year has been driven in part by higher food and fuel prices following the Russian invasion of Ukraine, core price pressures have also continued to gain steam, suggesting that price pressures are broad-based and likely to persist. 
  • Risks to the forecast for 2022 remain to the upside but are more balanced in 2023. In the near term, Fitch forecast two risks: firstly, inflation continues to accelerate or comes down more slowly than currently forecast. Secondly, the US Fed opts for even more aggressive hikes than currently forecast. In either scenario, Banxico would likely hike the rate past 10.00% by end-2022.

(Source: Fitch Solutions)

Bank Of England Raises Rates To 2.25%, Despite Likely Recession   Published: 25 September 2022

 

  • The Bank of England raised its key interest rate to 2.25% from 1.75% on Thursday and said it would continue to "respond forcefully, as necessary" to inflation, despite the economy entering a recession.
  • The BoE estimates Britain's economy will shrink 0.1% in the third quarter - partly due to the extra public holiday for Queen Elizabeth's funeral - which, combined with a fall in output in the second quarter, meets the definition of a technical recession.
  • Economists polled by Reuters last week had forecast a repeat of August's half-point increase in rates, but financial markets had bet on a three-quarter-point rise, the biggest since 1989, barring a brief, failed attempt in 1992 to support the sterling.
  • The BoE move follows the U.S. Federal Reserve's decision on Wednesday to raise its key rate by three-quarters of a percentage point, as central banks worldwide grapple with post-COVID labour shortages and the impact of Russia's invasion of Ukraine on energy prices.
  • The BoE now expects inflation to peak at just under 11% in October, below the 13.3% peak it forecast last month before Liz Truss won the Conservative Party leadership and became Britain's prime minister with a promise to cap energy tariffs and cut taxes.

(Source: Reuters)

 

EU approves up to $5.2 billion in public funding for hydrogen projects   Published: 25 September 2022

 

  • The European Commission on Wednesday approved up to 5.2 billion euros (roughly $5.2 billion) in public funding for hydrogen projects, a move it said could unlock a further 7 billion euros of investments from the private sector.
  • The executive arm of the EU said the bloc’s flagship project to support the research, deployment and construction of hydrogen infrastructure, referred to as IPCEI Hy2Use, had been prepared by 13 member states that will supply the public funding.
  • The commission said IPCEI Hy2Use would support the construction of “large-scale electrolysers and transport infrastructure, for the production, storage and transport of renewable and low-carbon hydrogen.”
  • The initiative will focus on developing “innovative and more sustainable technologies for the integration of hydrogen into the industrial processes of multiple sectors” like glass, cement and steel.

(Source: CNBC)

Main Event Profitability Improves Buoyed By the Recovering Entertainment Industry Published: 21 September 2022

  • Main Event Entertainment Group (MEEG) reported a net profit of $103.94Mn for its nine months ending July 31, 2022, which represents a $94.77Mn increase relative to the prior period. This increase was mainly attributed to an 84.6% increase in revenues.
  • The improved performance of the nine months was underpinned by increased activity from the recovering entertainment industry. The entertainment industry has seen a strong return of outdoor events and lifestyle experiences after a nearly 2-year hiatus, and this has had a positive effect on MEEG. In fact, its third-quarter revenue outturn of $601.53Mn represents the highest quarterly outturn in the company’s history.
  • The entertainment industry is expected to continue recovering in the coming months and is expected to be supported by other recovering industries such as tourism which bodes well for entertainment services companies like Main Event. However, the high inflation environment presents risks to consumers' spending on non-discretionary services such as entertainment services.
  • MEEG’s stock price has increased by 85.4% since the start of the calendar year. The stock closed Tuesday’s trading session at $8.34 and currently trades at a P/E of 22.5x which is above the Junior Market Sector Average of 20.7x.

(Source: JSE and NCBCM Research)

 

 

Record Remittances To Keep Mexico's Current Account Deficit Modest, Despite Wide Trade Deficit    Published: 21 September 2022

 

  • Fitch modestly revised its forecast for Mexico’s 2022 current account deficit from 0.9% of GDP to 0.7%, with the expectation that strong remittance inflows will offset a wider goods and services trade deficit.
  • In 2023, the current account deficit will widen slightly, to 0.8%, as a slowdown in remittances, driven by weaker growth in the US, outweighs the impact of a slightly narrower goods and services trade deficit.
  • These projected current account deficits are notably narrower than the 1.6% of GDP averaged in the decade before the pandemic, posing little risk to Mexico’s external position.
  • Importantly, the Agency does not foresee a major risk to Mexico’s external account stability, given modest deficits and stable stock of reserves; however, a dispute settlement consultation between Mexico, the US and Canada is a downside risk to exports in the medium term.

(Source: Fitch Solutions)

Oil Prices Drop In Advance Of Expected Fed Rate Hike   Published: 21 September 2022

 

  • Oil prices dipped on Tuesday, following other risk assets lower, as the dollar stayed strong and investors anticipated more central bank interest-rate hikes designed to quell inflation.
  • The U.S. Federal Reserve is likely to raise interest rates by another 75 basis points on Wednesday to rein in inflation. Those expectations are weighing on equities, which often move in tandem with oil prices. Other central banks, including the Bank of England, meet this week as well.
  • Higher rates have bolstered the dollar, which remained near a two-decade high against peers on Tuesday, making oil more expensive for holders of other currencies.
  • "The oil market is caught between downward concerns and upside hopes. The concerns are driven by the aggressive monetary tightening in the U.S. and Europe, which is increasing the likelihood of a recession and might weigh on oil demand prospects," said Giovanni Staunovo, commodity analyst at UBS.

(Source: Reuters)

UN Secretary-General Says ‘Polluters Must Pay,’ Calls For Extra Tax On Fossil Fuel Profits   Published: 21 September 2022

 

  • The U.N. secretary-general said Tuesday that developed economies should impose an extra tax on the profits of fossil fuel firms, with the funds diverted to countries affected by climate change and households struggling with the cost-of-living crisis.
  • In a wide-ranging address to the U.N. General Assembly in New York, Antonio Guterres described the fossil fuel industry as “feasting on hundreds of billions of dollars in subsidies and windfall profits while households’ budgets shrink and our planet burns.”
  • Fossil fuel firms and their “enablers” needed to be held to account, he went on to state. “That includes the banks, private equity, asset managers and other financial institutions that continue to invest and underwrite carbon pollution.”

(Source: CNBC)