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JMMBGL Reports Increase In 2020/21FY Net Profit Published: 17 June 2021

  • For its financial year ending March 2021, JMMBGL reported a 7.3% (or $512.34Mn) YoY increase in net profit attributable to shareholders to $7.51Bn (EPS: $3.84). This was driven by 4.3% expansion of operating revenue, an 8.8% reduction in operating expenses and a $1.69Bn increase in the share of profit from associate (Sagicor Financial Corp). 
  • Net interest income (12.7% or $1.18Bn), and gains on securities trading (10.0% or $615.56Mn) as the company capitalized on trading activities were the main drivers of the expansion in operating revenues. Additionally, a $315.06Mn rise in the net gain from financial assets at fair value, which is a turnaround from a net loss of $267.98Mn in the prior year, also bolstered the revenue performance. 
  • The containment of operating expenses also played a role in the positive outturn,  with expenses declining by 8.8% (or $1.40Bn), largely due to a drop in staff costs (15.0%). The Group continued to focus on extracting operational efficiencies across all entities through the launch of its standardization and process improvements project. 
  • The market has been reacting to the positive results. Since its posting on June 15th, the stock has appreciated by over 11.0%, however year to date, it has risen by just 7.0% to  $37.14 as at yesterday’s close. This translates to a P/E ratio of 9.7x earnings, which is below the main market financial sector average of 17.7x earnings.

(Source: Company Financials)

Point to Point Inflation Back Within Target Range for the Month of May Published: 17 June 2021

  • The All-Jamaica Consumer Price Index (CPI) rose by 1.2% for May 2021 contributing to the point-to-point inflation rate of 5.0% which is a significant increase over the 3.8% reported in April 2021, and now puts inflation at the midpoint of the 4%-6% target range. 
  • A 3.4% increase in the index for the heavily weighted ‘Housing, Water, Electricity, Gas and Other Fuels’ division caused by a rise in electricity, water and sewage rates, was the main impetus behind the increase in the index. 
  • The ‘Food and Non-Alcoholic Beverages’ index also saw a notable rise (1.2%) due to higher prices for starchy tubers. Additionally, a7% rise in the index for the ‘Transport’ division supported by higher fuel prices following the vaccine-led recovery in global oil prices, also contributed to the increase in the CPI. 
  • For the review period, the calendar year-to-date (YTD) inflation rate was 1.7%, and the fiscal year to date inflation was 1.2%, while the point-to-point (May 2020 – May 2021) rate was 5.0%. 
  • In its May 2021 Monetary Policy Press Statement, the BOJ indicated expected inflation for the June quarter within the range of 3.5% to 4.5%. This is down slightly from the previous forecast of 4.0%-5.0%, based on expectations that agricultural price increases over this period will be smaller than previously anticipated due to better weather conditions. Recently announced price increases for some processed foods, driven by higher imported commodity prices and freight costs, have been taken into account beyond this forecast horizon. However, the forecast is still for inflation to remain within the target range of 4 to 6% throughout the year.

(Source: Statin & BOJ)

IMF Concludes Fifth Review Under the Extended Fund Facility for Barbados Published: 17 June 2021

  • The Executive Board of the IMF concluded the fifth review of its Extended Fund Facility (EFF) for Barbados. The completion of the review allows the Barbadian government to drawdown SDR 17.00Mn (about US$24.00Mn), bringing total disbursements to the equivalent of SDR 288.00Mn (about US$415.00Mn). 
  • The four-year extended arrangement under the EFF was approved on October 1, 2018, and is for an amount equivalent of SDR 322.00Mn (about US$464.00Mn). The disbursement will help the sovereign to meet the balance of payment needs, boost resources for essential COVID-19-related outlays, and catalyze additional support from development partners. 
  • Despite the economic challenges, Barbados has continued to implement its comprehensive Economic Recovery and Transformation (BERT) plan aimed at restoring fiscal and debt sustainability, as well as increasing reserves and growth. The government is targeting a debt-to-GDP ratio of 60% by 2033 through a combination of fiscal consolidation, policies to boost growth, reform of public finances and debt restructuring. 
  • However, factors such as the depressed economy, especially as tourism remains below pre-pandemic levels, and high unemployment, will challenge the government’s ability to reach its primary balance target of 6% over the medium term, which could set back its goal to reach the targeted debt level by 2033.

(Source: IMF & NCBCM Research)

PREPA Privatization A Risk To Stability, But Could Yield Economic Dividends For Puerto Rico Published: 17 June 2021

  • The handover of Puerto Rico’s electric utility company, PREPA, to privately-owned LUMA Energy increases the risk of political instability, given resistance to the privatization among significant segments of the population. 
  • There are also risks to the popularity of Governor Pedro Pierluisi, who has backed the agreement and is in a relatively fragile political position. 
  • In the long term, LUMA’s success operating Puerto Rico’s power grid will influence the cost and reliability of electricity, which could attract higher investments to the territory.

(Source: Fitch Solutions)

Fed Keeps Rates, Bond Purchases Steady; Signals Hikes in 2023 Published: 17 June 2021

  • The Federal Reserve kept interest rates unchanged in the range of 0% to 0.25% and monthly bond buying steady at $120 billion, but signaled that two rate hikes could be on the cards by the end of 2023 amid forecast for a faster economic growth and inflation. 
  • The Fed has come under pressure to signal a willingness to begin taking its foot off the stimulus accelerator at a time when inflation is running at its hottest rate in years. The central bank appears to be taking note, bringing forward its forecasts for rate hikes to 2023. 
  • The Fed hiked its interest-rate outlook in 2023 to 0.6% from previous projections of 0.1% in March, signaling two 0.25% rate hikes in 2023, the Fed’s Summary of Economic Projections showed. 
  • The economy is expected to grow by 7.0% in 2021, up from previous estimates of 6.5%, while the forecast for 3.3% growth in 2022 was maintained. For 2023, the Fed sees growth of 2.4%, up from 2.2% previously. 
  • Despite acknowledging the faster pace of growth and inflation, the central bank continues to bet that the factors boosting price pressures -- including the reopening and weaker comparison last year, or base effects -- will be fleeting, and ultimately result in inflation averaging around its 2% target.


Canada May Inflation Accelerates At Fastest Pace In A Decade Published: 17 June 2021

  • Inflation in Canada in May accelerated at its fastest pace in a decade for a second month in a row, driven by surging shelter and vehicle prices, data showed on Wednesday. 
  • Canada's annual inflation rate accelerated to 3.6%, from 3.4% in April, Statistics Canada said. That was slightly ahead of analyst expectations that the annual rate would rise to 3.5%. "The whole base-effect narrative is getting pretty tired. We're dealing with durable month-over-month increases that could be supply-chain driven in Canada," said Derek Holt, vice president of Capital Market Economics at Scotiabank. 
  • Shelter prices rose 4.2% in May, the largest jump since 2008, Statscan said. This as the homeowners' replacement cost index rose 11.3%, the largest yearly increase since 1987. The jump in inflation comes as many Canadian provinces continued to face shutdowns in May amid a harsh third wave of COVID-19 infections. Most regions have now begun to reopen. 
  • CPI common (is a measure of core inflation that tracks common price changes across categories in the CPI basket), which the Bank of Canada calls the best gauge of the economy's underperformance, was 1.8%, just below analyst expectations of 1.9%. CPI median was 2.4% and CPI trim (is a measure of core inflation that excludes CPI components whose rates of change in a given month are located in the tails of the distribution of price changes) was 2.7%. 
  • The Bank of Canada targets the 2% mid-point of a 1-3% inflation control range. It expects inflation to stay around 3% through the summer before easing later in the year.

(Source: Reuters)

Prime Minister Holness Highlights Importance of the Global Services Sector Published: 16 June 2021

  • Prime Minister, the Most Hon. Andrew Holness, has said that the global services sector (GSS) is a priority on the island’s growth agenda, demonstrated by the Government’s increased support of the sector since the onset of the COVID-19 pandemic on the island last year. 
  • He highlighted that in the face of the pandemic, the government moved quickly to provide support to the sector by allowing workers movement during curfew hours, enabling operators to continue to support critical verticals such as logistics, healthcare, banking and finance, and security. 
  • He further noted that the government enabled work from home through a bond waver on computers from the special economic zones and provided support to JAMPRO in the skills development programme, which puts Jamaicans on a pathway to upgrade their skills, provide higher-value services to the sector and transition up the value chain. 
  • Holness argued that these measures have helped to secure the jobs of about 43,000 employees, maintain stability within the sector and safeguard foreign exchange earnings on the island. 
  • Notably, the sector has rebounded from temporary declines last year, to return to pre-pandemic numbers. The Prime minister further noted that the sector will play a key role in the nation’s digital transformation with the deployment of digital tools and services that enable a fully transformed digital economy, in keeping with the Vision 2030 Jamaica National Development Plan.

Source: (JIS News)

Work On Tobacco Control Bill Progressing Well Published: 16 June 2021

  • Minister of Health and Wellness, Dr. the Hon. Christopher Tufton, has said that the work of the Joint Select Committee of Parliament on the Tobacco Control Bill is progressing well. He noted that he has seen “progress” in the submissions from several interest groups and that the manufacturing company, Carreras Group, is scheduled to address the Committee. The bill could lead to a significant rise in costs, a reduction in demand and lower profits for local cigarette distributor, Carreras Limited. 
  • Tufton advised that at the end of the deliberations, Jamaica will have a comprehensive legislation that is going to regulate how the tobacco trade is practiced, how the laws are enforced, the fines to be charged and restrictions to be imposed on activities such as advertising and smoking in certain locations. 
  • The intent of reforming the tobacco legislation is to help address issues associated with non-communicable diseases (NCDs), such as cardiovascular diseases, cancers, chronic respiratory diseases and diabetes. These NCDs are caused by four major behavioural risk factors, including tobacco use, which is also the most preventable. 
  • Tufton has also highlighted that the law will also put Jamaica in a position to satisfy its obligations under the World Health Organization (WHO) Framework Convention on Tobacco Control Treaty (FCTC) and generally restrict consumption of tobacco, because of the ill effects of consuming the product.

(Source: JIS News & NCBCM Research)

Slow Recovery Ahead For Saint Lucia As Tourism Gradually Rebounds Published: 16 June 2021

  • The Saint Lucian economy will slowly recover from the COVID-19 pandemic in 2021 as tourism and other service exports begin to gain steam. Against this background, Fitch Solutions has revised its real GDP growth forecasts to 4.4% in 2021 and 7.5% in 2022, from 4.1% and 4.4% previously. In 2020, the St. Lucian economy contracted by an estimated 23.8%. 
  • In an effort to mitigate the economic damage from the pandemic, Prime Minister Allen Chastanet implemented a Social Stabilization programme, estimated at 3.0% of GDP, in April 2020 to bolster household incomes, extend wage subsidies and offer a short-term moratorium on corporate and income tax payments. 
  • His administration supplemented the initial package with the July 2020 Economic Recovery and Resilience Plan, worth approximately 11.5% of GDP, to strengthen public assistance for businesses and households. 
  • However, the market will not fully regain its pre-pandemic level of output until 2024, largely in line with the broader outlook for smaller Caribbean markets that rely on tourism.

(Source: Fitch Solutions)

Strong Export Growth & H2 2021 Consumption Rebound To Power Trinidad & Tobago Recovery Published: 16 June 2021

  • Real GDP in Trinidad & Tobago (T&T) is expected to grow by 4.4% in 2021, from an estimated 8.0% contraction in 2020, as energy exports strengthen. T&T experienced its largest recession since 1983 in 2020, as the COVID-19 pandemic significantly undermined demand for its energy exports and local public health restrictions limited mobility and commercial activity in the non-energy sector. 
  • Global economic growth is projected to reach 5.7% in 2021 as the impact of the pandemic in developed markets (DM) fades, which should, boost energy demand. As a result of the global economic recovery, Fitch Solutions’ Oil and Gas team forecasts upstream production, including crude, natural gas plant liquids (NGPL) and other liquids, will grow by 3.1% in 2021. 
  • However, the downside risk posed by T&T’s slow vaccination programme to the non-energy sector is significant. The twin island republic is currently facing a nationwide lockdown which began in  May and could undermine the recovery because of its effects on the non-energy sector. Already, the 2021 real GDP forecast has been revised down to 4.4%, from 5.3% previously. It is anticipated that the country will grow by 2.0% in 2022. 
  • Structurally lower natural gas prices and concerns about the business environment will limit investment in the coming years, constraining long-term growth.

(Source: Fitch Solutions)