• Key Insurance Company Limited (KEY) recorded a net profit of $9.38Mn for the quarter that ended June 30, 2023, marking a 5.8% decline in profitability. On the other hand, net profit for the six months ended June 30, 2023, was up 5.4% to $12.91Mn.
• In Q2 2023, KEY witnessed a 24.4% increase in insurance revenue compared to the corresponding period in 2022. Additionally, H1 2023 revenue increased by 22.7% to $238.82Mn. The non-motor segment showed significant strength, outpacing the prior year’s six months by 48.4%. Consequently, its share of revenue grew from 30.0% in 2022 to 36.3%.  Meanwhile, the motor segment, KEY’s backbone, grew by 11.7% over the six months ended 30 June 2022, accounting for 63.7% of insurance revenues.
• Insurance service expenses increased by 11.6% in the quarter ended 30 June 2023 and 13.0% in the six months ended 30 June 2023. The noted increase was largely attributable to the escalation in reinsurance costs as well as increased claims costs in certain segments. Notwithstanding these elevated costs, KEY reported an increased Profit Before Tax (PBT) of 9.5% in the six months ended 30 June 2023 relative to the corresponding period in 2022. The Company remains optimistic and is focused on driving profitable growth in the upcoming quarters.
• KEY’s stock price has decreased by 10.3% since the start of the calendar year. The stock closed Thursday’s trading session at $2.96 and currently trades at a P/E of 29.3x which is above the Main Market Financial Sector Average of 11.8x.
• Going forward, the company anticipates the increases in property rates to continue contributing positively to future results. Targeted measures are being deployed to improve claims results, and these actions are expected to positively impact performance as the year progresses.

(Source: JSE)

• Finance Minister Colm Imbert has confirmed that the Cabinet is actively considering the prospect of raising the minimum wage in the country. Imbert made the statement during a virtual news conference held on August 9.
• The current minimum wage in Trinidad and Tobago stands at $17.50 per hour. However, during the Labour Day celebrations, the Joint Trade Union Movement (JTUM) advocated for an increase to $30 per hour.
• 'We are looking at it (increasing the minimum wage); there has been a proposal,' Imbert said. However, he warned that it is a delicate balancing act as it could directly impact the government's wage bill and the overall economy.
• 'One of the things you have to understand is that in addition to helping people by increasing the minimum wage, that will help people on the lower end, it affects the other side. It has an effect on businesses and then it has an effect on the state sector because in some areas some of the state sector employees are paid at the minimum wage level and therefore anytime you increase the minimum wage the government's wage bill is going to go up so these are the things we have to balance but it is something we are actively looking at again I would say stay tuned for developments on that,' he said.
• Imbert was however tight-lipped on what the new minimum wage could be.
• A rise in Trinidad & Tobago's minimum wage could lead to greater inflationary pressures. Higher wage costs might prompt businesses to increase product prices. Additionally, workers with more income could boost demand for goods, potentially driving up prices if supply does not match demand. The government, too, might have to contend with a larger wage bill, especially if many state employees earn the minimum wage. This could lead to policy shifts, such as reduced spending coupled with new and/or increased taxes, with potential inflationary consequences.

(Source: Trinidad Express Newspaper)

• Guyana will soon be positioned to become a supplier of agrochemicals and the country has already set its sights on a lucrative market in Brazil.
• On Tuesday, August 8, during a bilateral meeting in the Dominican Republic, representatives from Guyana’s private sector signed several Memoranda of Understanding (MoUs); one of the agreements is for the establishment of a petrochemical plant in Guyana.
• President Dr. Irfaan Ali who led the private sector delegation at a conference shortly after the agreement was signed said that once the project comes to fruition, Guyana could supply agrochemicals to its neighbouring country Brazil.
• Agrochemicals are pesticides, herbicides, or fertilisers used for the management of ecosystems in the agriculture sector. Notably, the agrochemical market in Brazil was valued at US $13.5 billion in 2019.
• “Northern Brazil is a high consumer of agrochemicals and they require it from all over the globe. It would take them a very long time for transport and logistics. With an investment like that in Guyana, in 48 hours, we can be in the market,” Ali said.
• According to President Ali, as the two countries continue to solidify their partnerships, the people of the respective nations are set to benefit. “The value creation in these agreements is enormous.” The agreement is set to lead to job creation, particularly in specialized and highly skilled jobs which would lead to higher wages for some citizens.

(Source: Guyana Chronicle)

• The consumer price index rose 3.2% from a year ago in July, a sign that inflation has lost at least some of its grip on the U.S. economy. Prices accelerated a seasonally adjusted 0.2% for the month, in line with the Dow Jones estimate, the Bureau of Labour Statistics (BLS) reported Thursday. Nonetheless, the annual rate was slightly below the 3.3% forecast though higher than in June.
• Excluding volatile food and energy prices, core CPI also increased 0.2% for the month, matching the estimate and equating to a 12-month rate of 4.7%, the lowest since October 2021. The annual rate for the core also was slightly below a Dow Jones consensus estimate of 4.8%.
• Almost all of the monthly inflation increase came from shelter costs, which rose 0.4% and were up 7.7% from a year ago. Food prices also climbed 0.2% on the month, and the BLS said energy costs increased just 0.1% even though crude oil prices surged during the month and prices at the pump jumped as well.
• Used vehicle prices declined 1.3% and medical care services were off 0.4%. Airline fares fell 8.1% on the month, the same as in June, and are down 18.6% from a year ago after surging in the early days of the Covid pandemic.
• Together, the latest batch of data shows that while inflation has come well off its 40-year highs of mid-2022, it is still considerably above the 2% level where the Federal Reserve would like to see it and high enough that cuts in interest rates are unlikely anytime soon.
• The elevated rates have yet to put a dent in economic growth: The first half of 2023 had seen GDP post gains of 2% and 2.4% in the first two quarters, respectively, and the Atlanta Fed is tracking third-quarter growth of 4.1%. Payroll gains have been slowing but are still solid, and unemployment is near its lowest since late 1969.
• With that being said more economists are beginning to expect the U.S. can avoid a recession despite the aggressive rate hikes. Bank of America, Goldman Sachs and JPMorgan Chase all recently have forecast that a contraction is becoming less likely.

(Source: Reuters)

• The European Central Bank is on the back foot again and this time the bad news doesn't come from Greece, Italy or any of the usual suspects in the bloc's poorer south. The club's biggest member and supposed powerhouse, Germany, has been hit by a toxic mix of weak trading with key partner China, a slump in its large manufacturing and construction sectors and even some existential questions about a business model predicated on cheap fuel from Russia.
• Trouble in Germany is hobbling growth in the eurozone as a whole and threatening to push it into a recession, rather than the "soft landing" of moderate growth and inflation that the ECB had pencilled in and the United States is still hopeful of achieving. This is forcing a change of tune at the ECB -- from ruling out a pause in its steepest and longest streak of interest rate hikes to openly talking about one as soon as next month.
• Some of Germany's present misfortunes also originate in Russia, on which Berlin had relied for a third of its energy supply until the invasion of Ukraine jeopardized those cheap imports. Others run deeper and are home-brewed, relating to their over-reliance on exports, lack of investment and shortage of labour.
• Some of Germany’s troubles can be traced back to tighter monetary policy. The central bank has consciously dampened economic activity via higher rates in an attempt to bring inflation, which at one point last year was in double digits, to its 2% target. Higher borrowing costs hurt manufacturers particularly hard because they depend on investment and no euro zone country has a larger industrial sector than Germany.
• "To loosen monetary policy because Germany is in a difficult position would be unwise but to tighten it would add macro pressure to the micro-level pressures that beset the economy," Portes added. This puts the ECB in a situation where it must contemplate wrapping up its tightening cycle before witnessing the sustained drop in core inflation it said it wanted to see.

(Source: Reuters)

• LASCO Financial Services Limited (LASF) recorded a net profit of $18.82Mn for the first quarter ended June 30, 2023, representing a 77.3% year-over-year decline in profitability.
• Consolidated income for the period amounted to $574.35Mn, representing a slight improvement of 1.7% when compared to the corresponding quarter of the previous year. This growth was fueled by trading gains, new services and fees.
• Consolidated expenses for the quarter reached $506.53Mn, up $75.60Mn from the previous period. This increase was due to a $15.76Mn (+9.7%) rise in Selling and Promotional expenses, supporting new services. Additionally, administrative costs surged by 22.3%, or $59.81Mn due to the deployment of new services, operational cost inflations, and redundancy packages.
• LASF’s stock price has decreased by 25.4% since the start of the calendar year. The stock closed Wednesday’s trading session at $2.15 and currently trades at a P/E of 18.3x which is above the Junior Market Financial Sector Average of 17.0x.
• Several foundational activities were embarked upon in the first quarter, significantly increasing expenses. Notable among them were increased advertising, aimed at promoting key services in anticipation of growth in subsequent quarters. Additionally, a reduction in permanent staff positions due to reorganization aims to enhance efficiency and control future expenditures. As a result of these restructuring efforts and reduced fixed costs, an improvement in results is anticipated for the remainder of the financial year.

(Source: JSE)

• Fitch Solutions has slightly raised its end-2023 loan growth forecast for Brazil from 5.6% to 7.0%, as the company now expects lower interest rates in the second half of the year.
• The Banco Central do Brasil (BCB) is expected to reduce its policy Selic rate from the current 13.25% to 11.75% by year's end, revised from a previous estimate of 12.50%.
• While interest rates will remain historically high, the slowdown in credit growth will be less severe than earlier projections.
• Credit growth for both households and corporates has been on a steady downtrend since mid-2022, as the BCB’s aggressive rate hiking cycle has sharply increased the cost of borrowing. Average interest on new loans increased sharply, while rising rates also increased the cost of debt repayment to new all-time highs, reducing the willingness of households to take new loans.
• Notwithstanding, lending conditions will improve in 2024 as rates come down, consumers remain in good shape and the state-owned BNDES (Brazilian Development Bank) ramps up subsidised lending. Asset quality in the banking sector will also improve as interest rates moderate in the coming quarters, supporting the stability of the financial sector.

(Source: Fitch Solutions)

• Financial inclusion has long been discussed in relation to its positive impact on economies. The merits of financial inclusion are strongly rooted in empowerment when access to financial tools and credit are accessible and become enablers of positive societal and economic outcomes.
• According to the latest data provided by Mastercard and Americas Market Intelligence report, "The State of Financial Inclusion Post COVID-19", account ownership in the region has increased 20 percentage points, from 55% in 2017 to 74% in 2021, as cited from the latest Findex report. 
• This positive momentum is a clear indication that collaboration among ecosystem players has never been more relevant in accelerating the adoption and use of financial solutions across markets.
• However, the report highlights the prevalent gaps in access to the financial system in Latin America and the Caribbean, where 26% of adults still do not have an account.
• It is not just about having an account but rather about using it. Usage is a challenge in many countries, where large segments of the population may have an account but still use cash to pay for everyday daily necessities, and ownership of specific products such as credit cards or loans only reaches certain segments of the population in urbanised areas.
• Financial inclusion has become a foundational pillar for growth across the Latin American and Caribbean region and thus cannot be ignored. Countries are therefore faced with the task of striving to have a network of concurrent transactions that adequately promotes the acceleration of financial technology.

(Sources: Mastercard and Americas Market Intelligence)

• In July China's consumer sector fell into deflation and factory-gate prices extended declines as the world's second-largest economy struggled to revive demand and pressure mounted on Beijing to release more direct policy stimulus.
• China's post-pandemic recovery has slowed after a brisk start in the first quarter as demand at home and abroad weakened and a flurry of policies to support the economy failed to shore up activity.
• The consumer price index (CPI) dropped 0.3% year-on-year in July compared with the median estimate for a 0.4% decrease in a Reuters poll. It was the first decline since February 2021. Additionally, the producer price index (PPI) declined for a 10th consecutive month, down 4.4% and faster than the forecast 4.1% fall. China is the first G20 economy to report a year-on-year decline in consumer prices since Japan's last negative headline CPI reading in August 2021 and the weakness adds to concerns about the hit to business among major trading partners.
• "For China, the divergence between manufacturing and services is increasingly apparent, meaning the economy will grow at two speeds in the rest of 2023, especially as the problem in real estate re-emerges," said Gary Ng, Asia Pacific senior economist at Natixis. "It also shows China's slower-than-expected economic rebound is not strong enough to offset the weaker global demand and lift commodity prices."

(Source: Reuters)

• Millions of families are borrowing to cover basic bills and expenses, according to an analysis that warns Britain is entering a dangerous new phase of the cost of living crisis.
• Political attention has focused on the impact of interest rates on mortgage payers, but they are also having an impact on those on tight budgets. In many cases, the option of borrowing is being cut off.
• Nearly 6 million low-income families have unsecured debt, such as credit cards, overdrafts and personal loans from banks, credit unions and payday lenders. In May this year, they owed £14.2bn in total. Interest on this debt was £3.9bn, equivalent to about £675 a year per family.
• Using credit to pay bills is not preventing households from falling behind with payments. Three-quarters of the respondents report arrears with at least one household bill or lending commitment, with 44% in arrears with three or more bills. Meanwhile, 2.8 million low-income households said they had been refused a loan between May 2021 and May 2023.
• “Despite inflation falling back, we risk the tragedy of a second wave in this crisis, as millions of people struggle to maintain their borrowing given rising interest rates. The fragility of the current situation ought to be a preoccupation for policymakers everywhere, but on the contrary, it is in danger of being overlooked. While rising mortgage costs dominate the national conversation, the affordability of short-term credit should also be a factor of vital concern,” said Rachelle Earwaker, Senior Economist at JRF.

(Source: The Guardian)