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JSE’S Suite of Fixed Income Instruments to Expand by June Published: 30 January 2024

  • The Jamaica Stock Exchange (JSE) will become the first Caribbean marketplace to facilitate the issuance of green, blue, and other sustainable coloured bonds by the end of June 2024. Minister of Finance and the Public Service, Dr. the Hon. Nigel Clarke, who made the disclosure, said this forms part of the Government’s framework to ensure that financing is available for sustainable initiatives.
  • The colours include; blue, which represents marine and green, which represents climate, among others. This will be a very important step because investors who invest in these kinds of instruments want to know that the criteria for calling something green or blue are very firmly established
  • Clarke indicated that the JSE “is being supported by the Inter-American Development Bank (IDB) to develop the infrastructure.”
  • The Government is working on creating a financial facility as part of efforts to incentivise investments in Jamaica for sustainable projects and working towards partnerships with multilateral and bilateral to provide funding in a way that the Government can leverage its contribution several fold, noted Dr. Clarke. “Those funds will be available on concessional terms for investing in projects that have a green or blue lens, or features to them to incentivise investment in Jamaica that is sustainable”.
  • The move aligns with an emerging theme in the global investment space, that of environmental, social, and governance (ESG), which encourages sustainable practices in key areas. It will serve to attract funding from investors who are particularly interested in projects with these mandates.

(Source: JIS)

Fitch forecasts weakened economic outlook for Latin America in 2024 Published: 30 January 2024

  • Rating agency Fitch Ratings forecasts a decline in economic growth across Latin America this year amid dampened demand, high borrowing rates, and considerable exposure to China and the U.S., which are also facing a slowdown. The agency put its average 2024 growth forecast for the region at 1.5%, down from 2.3% in 2023.
  • Fitch Managing Director Shelly Shetty said that expected declines in larger economies like Mexico and Brazil have weighed down the region's overall forecast. Fears of a recession in Argentina, under the new government of Javier Milei, also had an impact.
  • Shetty added that in the medium term, Latin America had several aspects working in its favor, including relative geopolitical calm, a wealth of commodities needed for the "green transition," and a shift in manufacturing from Asia to Mexico.
  • However, the agency stressed that much of the region could struggle to capitalize on these advantages due to state interventionism, limited reform, and political disagreement, with the notable exception of Brazil.

(Source: Reuters)

Pilot Plan for Reduced Work Week Begins in February Published: 30 January 2024

  • There are only a few days left until the start of the Reduced Workweek Pilot Plan in the Dominican Republic, which will seek to improve the health and well-being of workers and the productivity of companies.
  • This plan proposes the reduction of weekly working hours from 44 to 36, which translates into eight hours less.
  • The program, which will start on the first day of February, will operate for six months, divided into two phases: three months of execution in five companies, where some 400 employees will receive 100% of their salary, a reduction of 20% of their working hours and the maintenance of 100% of productivity.
  • The other three months will be taken for the survey and processing of the results of the pilot plan, the analysis of which will be made by the Pontificia Universidad Católica Madre y Maestra (PUCMM) (English: Mother and Teacher Pontifical Catholic University).
  • According to the Ministry of Labor, the educational institution will analyze the health and welfare of the worker, the reconciliation between work and family life, absenteeism, and the contribution to the environment.
  • Some companies have already adopted this work model (four days on and three days off), allowing them to maintain a constant productivity rate. With this reduction in hours, workers could have more time to spend with their families, attend to personal matters, reduce absenteeism, and increase their health capabilities, both physical and psychosocial (mental).

(Source: Dominican Today)

Strong US Economic Outlook Buffers Stocks Against Rising Yields –Goldman Published: 30 January 2024

  • A strong economic outlook is helping U.S. stocks weather a rise in Treasury yields, though that could change if factors such as tighter monetary policy drive yields higher or if they move up too fast, Goldman Sachs strategists said.
  • The S&P 500 and 10-year Treasury yield had been negatively correlated - meaning they have moved in opposite directions - since long-term yields began rising last July, Goldman equity strategists led by David Kostin said in their latest weekly kickstart note.
  • The S&P 500 sold off sharply over that period as yields marched to a 16-year high in October, making stocks relatively less attractive. Equities staged a swift rebound when yields, which move inversely to bond prices, tumbled in the final months of the year.
  • In 2024, however, stocks have hit record highs even as the 10-year yield has risen about 30 basis points to 4.2%. One reason for stocks' resilience is the improving economic outlook, Goldman's strategists said.
  • Returns have been substantially stronger when economic growth expectations are improving rather than weakening, regardless of whether the yield curve steepened or flattened, the strategists said.
  • "As investors worry less about the potential for Fed tightening, growth expectations should become a more important driver of yields, contributing to a less negative correlation between stocks and yields in 2024," they wrote.
  • In a separate note, Goldman's economists raised their fourth-quarter economic growth estimate to 2.4% from 2.1%.

(Source: Reuters)

China Evergrande Ordered To Liquidate In Landmark Moment For Crisis-hit Sector Published: 30 January 2024

  • A Hong Kong court on Monday ordered the liquidation of property giant China Evergrande Group, with over US$300Bn in total liabilities, dealing a fresh blow to confidence in the country's fragile property market as policymakers step up efforts to contain a deepening crisis. This deal follows Evergrande's inability to offer a concrete restructuring plan more than two years after defaulting on its offshore debt and following several court hearings.
  • Evergrande, which has $240Bn of assets, sent a struggling property sector into a tailspin and dealt a blow to the economy when it defaulted on its debt in 2021. The liquidation ruling creates further uncertainty for China's already fragile capital and property markets.
  • Justice Chan appointed Alvarez & Marsal as the liquidator, emphasizing the need for a restructuring plan. This move raises questions about how Chinese authorities will treat foreign creditors and adds complexity to the process, especially with Evergrande's chairman under investigation for suspected crimes.
  • Evergrande's shares plummeted to 20%, prompting a halt in trading for its listed subsidiaries. The decision's repercussions extend beyond financial markets, affecting Evergrande's daily operations, property management, and electric vehicle units. The ruling's potential effects on creditors, shareholders, and the broader Chinese economy are also highlighted.

(Source: Reuters)

Government to Sell Some of Its Shares in Several Infrastructure Entities Published: 26 January 2024

  • The Government intends to, over the next 12 months, list on the Jamaica Stock Exchange (JSE) some of its shares in several infrastructure entities.
  • These entities include South Jamaica Power, TransJamaican Highway, and the Jamaica Public Service Company (JPS). The listing is expected to be done via a special infrastructure vehicle, which is to be created for the stock offering of the government assets.
  • Making the announcement at the 19th regional JSE Investments and Capital Market Conference at The Jamaica Pegasus Hotel in New Kingston on January 24, Minister of Finance and the Public Service, Dr. the Hon. Nigel Clarke, said the requisite approvals have been received, including from Cabinet.
  • He went on to state that the Government of Jamaica, through various institutions, owns 10.0% of South Jamaica power, 20.0% of TransJamaican Highway, and 19.0% of JPS.
  • In the meantime, he said the Jamaica Mortgage Bank's (JMB) initial public offering on the Jamaica Stock Exchange is also expected over the next 12 months.
  • The JMB was established in 1971 as a private limited liability company under the Companies Act of 1965 with an authorised share capital of $5Mn. On June 5, 1973, under Act of Parliament No. 16 of 1973, the Bank was converted to a statutory corporation.

(Source: JIS)

  Finance Minister Tables Fourth Supplementary Estimates Published: 26 January 2024

  • Minister of Finance and the Public Service, Dr. the Hon. Nigel Clarke, tabled the Fourth Supplementary Estimates for fiscal year 2023/24 in the House of Representatives on Tuesday (January 23).
  • The Fourth Supplementary Estimates proposes a total expenditure of approximately $1.091Trn, a reduction of $2.5Bn on the approved Budget, following the submission and approval of the Third Supplementary Estimates in September 2023.
  • In a statement to the Lower House, Dr. Clarke informed that the reduction in the Budget is mainly due to an estimated shortfall in revenues for the fiscal year, as compared with the Third Supplementary Estimates, which raised revenues.
  • The Fourth Supplementary Estimates is comprised of recurrent expenditure of $302.2Bn, up $2.1Bn from $300.2Bn; compensation of employees remains flat at $404.2Bn ($404.5 billion previously); interest payments of $172.7 billion, up $2.6Bn from $117.1Bn, and capital expenditure of $59.3Bn, down $7.4Bn, from $66.6Bn.
  • There is also an increase in debt service of a total of $3Bn, which is mainly due to higher interest rates on external variable rate debt.
  • Under the Fourth Supplementary Estimates, the targeted fiscal balance of 0.3% of gross domestic product (GDP) remains the objective as the Government continues its efforts to meet the medium-term debt-to-GDP target of 60.0% by fiscal year 2027/28.

 (Source: JIS)

Improving External Demand Outlook Will Drive Stronger 2024 Growth In the Dominican Republic Published: 26 January 2024

  • From an estimated 2.5% in 2023, Fitch Solutions forecasts real GDP growth in the Dominican Republic will accelerate to 3.4% in 2024 on the back of continued policy loosening and tailwinds from resilient US demand in the first half of 2024.
  • The 2024 forecast is a significant upward revision from the 2.7% previously forecasted but still below consensus expectations of 4.4%.
  • This largely reflects the view that a US economic slowdown in the latter half of 2024 will weigh on Dominican headline growth, primarily through weaker exports and private consumption.
  • That said, more resilient US demand in H1 2024, will sustain the tourism sector boom seen in the post-pandemic recovery for the Dominican Republic for several more months before slowing in the back end of the year.
  • Overall, robust tourism and broader hospitality sectors will help sustain low levels of unemployment at an average of 6.2% in 2024. In addition, a tight US labour market will continue to drive inbound remittance growth, which reached 8.1% of GDP in 2023, from an average of 7.4% between 2015 and 2019.
  • Risks to the Dominican Republic’s 2024 growth forecast are mostly dependent on the performance of the US economy and the actions of the US Federal Reserve, although factors affecting international energy prices will also play a role.

 (Source: Fitch Solutions)

General Motors to Invest $1.4 Billion In Brazil By 2028 Published: 26 January 2024

  • General Motors (GM) is set to invest 7Bn reals (US$1.42Bn) in Brazil between this year and 2028 in a bid to boost "sustainable mobility", the company said on Wednesday, January 24,.
  • The sum will fund a "complete renewal" of the automaker's vehicle portfolio in Latin America's largest economy and will help develop technologies and create new businesses.
  • The automaker did not provide a forecast for when it will start producing electric and hybrid vehicles in the country. It was noted that this decision will depend on the evolution of the local market.
  • The announcement represents a victory for President Luiz Inacio Lula da Silva, who has been focusing efforts on reigniting Brazil's domestic industry. Lula welcomed the news, saying the investment will have a significant impact on development and social inclusion.
  • GM's bet is part of the first phase of what it called a new investment cycle in Brazil, which aims to "strengthen the company's competitiveness and the sustainability of its operations and products."

 (Source: Reuters)

ECB Sticks To Inflation Fighting Even As Rate Cuts Loom Published: 26 January 2024

  • The European Central Bank (ECB) held interest rates at a record-high 4% on Thursday and reaffirmed its commitment to fighting inflation, even as the time to start easing borrowing costs approaches.
  • The ECB ended its fastest-ever cycle of rate hikes in September and it has been adamant, including on Thursday, that it is too soon to discuss a reversal since price pressures have not been fully extinguished and many wage negotiations have yet to conclude.
  • "The consensus around the table was that it was premature to discuss rate cuts," ECB President Christine Lagarde told her regular news conference following the decision, insisting that future decisions would depend on incoming data. "We need to be further along the disinflation process to be confident that inflation will be at target - sustainably so."
  • Policymakers speaking on condition of anonymity after the meeting said they were open to a change in rhetoric at their next meeting, paving the way for an interest rate cut possibly in June, if upcoming data confirms inflation has been vanquished.
  • Notably, in a possible sign that the tone was starting to change, a reference in previous statements to elevated domestic price pressures and strong labour cost growth had been taken out on Thursday. Lagarde had, however, cautioned against over-interpreting such omissions and urged observers to focus more on what content was left in the statement.
  • Investors are betting that the ECB is getting it wrong on both growth and inflation and will be forced to U-turn and deliver five rate cuts in rapid succession from early spring, with bets on an April rate cut increasing after Lagarde's press conference.
  • However, the discrepancy in rate expectations stems from a different outlook on growth and how much past rate hikes are slowing economic activity across the 20 countries that use the euro currency - not least in Germany, where the closely watched Ifo survey pointed to worsening business sentiment.

 (Source: CNBC)