• China's promised "basket of measures" to defuse local government debt risks is likely to include special bond issuance, debt swaps, loan rollovers, and something Beijing loathes: dipping into the central budget.
• Local governments are fundamental to China's economy with Beijing tasking provincial and city officials with meeting ambitious growth targets. With that being said, after years of over-investment in infrastructure, plummeting returns from land sales and soaring COVID costs, economists say debt-laden municipalities now represent a major risk to China's economy.
• Chinese leaders last month pledged, without detailing, to help ease their debts, signalling worries over a potential chain of municipal debt defaults destabilising the financial sector. Economists took that message as being more constructive than in April when Communist Party leaders demanded "strict control" of local debts. The implication, they say, is that Beijing has realised it needs to urgently throw cash at the problem.
• That could represent a major breakthrough in finding a way out of China's municipal debt crisis, with Beijing having for years demanded that local administrations sort themselves out. "The local debt problem is complex so you cannot simply say you don’t want to take responsibility," said Guo Tianyong, professor at the Central University of Finance and Economics in Beijing, explaining the politburo's directions.
• The extent of any central government involvement, and any conditions attached to it, are still subject to debate, two policy advisers told Reuters. Whether the package of measures will be a short-term or multi-year plan also remains unknown.

(Source: Reuters)

• Brazil has resisted gathering momentum in the BRICS group of major emerging economies to add more member countries, but the debate over admission criteria seems inevitable at this month's summit, three Brazilian government officials told Reuters.
• The group including Russia, India, China and South Africa, has been hailed by some as a counterweight to traditional diplomatic forums like the G7. BRICS makes decisions by consensus, so Brazil's assent will be key to any expansion.
• The BRICS group accounts for more than 40% of the world population and about 26% of the global economy and offers an alternative forum for countries outside diplomatic channels seen as dominated by traditional Western powers. Its influence and economic heft have more nations eager to join.
• China, looking to increase its political clout at a time of trade tensions with the United States, has long pushed to expand BRICS membership. Russia, isolated diplomatically over its war in Ukraine, is also embracing the chance to court allies.
• South Africa, which chairs the group this year, held a "Friends of BRICS" meeting in June with several countries eager to join. Even India, which was wary of rapid expansion, may have come around to the idea in principle, sources said.
• However, Brazil is concerned the group will lose its stature if other nations are let in. Some 30 countries have said they are interested and 22 of them have formally applied, as Algeria did last month.
• "An expansion could transform the bloc into something else," said a Brazilian official, who asked not to be named. "Brazil's position has been concerned with the cohesion of the group and preservation of our space in a group of important countries."
• Diplomats were told to go back to the drawing board and design a process for admitting new members acceptable to the entire group. Without an agreement, the matter is not expected to be settled at this month's summit.

(Source: Reuters)

• Colombia's central bank unanimously held the benchmark interest rate at 13.25% for the second time in a row on Monday, July 31, amid slowing inflation which has removed pressure for further hikes but remains too high for borrowing cost cuts.
• Inflation remains at high levels compared to the bank's long-term 3% target, the board said in a statement, and the economic slowdown in the second quarter may have been larger than predicted.
• "We expect to continue to monitor the behaviour of inflation, given we still have an increase in fuel prices that is still having an effect, and we hope there won't be any reversal in the inflation rate, so we can consolidate the downward tendency," said Finance Minister Ricardo Bonilla, who represents the government on the board.
• All 26 analysts consulted in a recent Reuters poll expected the bank to hold the rate after 12-month inflation through June slowed to 12.13%, the lowest level since last September.
• The bank's technical team may update its growth and inflation predictions for this year and 2024 in its quarterly monetary policy report due by the end of this week. Most analysts expect the board will start cutting the rate in September or October to avoid a greater impact on growth. The bank's technical team currently predicts growth could slow to 1% this year, far below the 7.3% expansion in 2022.
• The board hiked its benchmark rate by 1,150 basis points between September 2021 and this April, mirroring positions taken by monetary policy authorities around the world, to try to contain inflationary pressures. The board is expected to reduce the rate to 11.75% by the end of this year, before lowering it further to 7.25% at the end of 2024, those polled by Reuters have said.

(Source: Reuters)

• The United States and its Western allies are looking to China to help resolve the calamitous domino effect of Russia’s exit from a crucial U.N.-backed agriculture deal.
• Beijing, one of Moscow’s most strategic allies and the world’s second-largest economy, was the indisputable top recipient of Ukrainian agricultural products under the landmark agreement known as the Black Sea Grain Initiative. After nearly a year in place, Russia ditched the agreement last month, citing frustrations that the deal only benefited Ukraine.
• The agreement eased Russia’s naval blockade in the Black Sea and established a maritime humanitarian corridor which saw the passage of more than 1,000 ships carrying nearly 33 million metric tons of Ukrainian wheat, barley, corn and sunflower meal.
• Since the inception of the July 2022 deal, which was brokered nearly six months into Russia’s full-scale war, Chinese ports have welcomed 8 million metric tons of Ukrainian agricultural products, the lion’s share according to data provided by the United Nations.
• “China is the biggest buyer of Ukrainian grain and so with the breakdown of the Black Sea Grain Initiative, the pressures on Beijing are going to be extreme in terms of food price inflation,” David Riedel, founder of Riedel Research Group, said in an interview with CNBC.
• “They may have been stockpiling a little bit ahead of the breakdown in that agreement but that’s a stockpile of weeks not months,” he said. “I would be very concerned about food price inflation in China,” Riedel added.
• U.S. Ambassador to the U.N. Linda Thomas-Greenfield told reporters on Tuesday that the Biden administration will prioritize the world’s mounting food crisis triggered in part, by the collapse of the Black Sea Grain Initiative. The U.S. will have an opportunity to do so at the helm of the United Nations Security Council, a scheduled, one-month-long rotating presidency.
• “We know food security is national security,” Thomas-Greenfield said, adding that “Russia has launched a full-scale assault on the world’s bread basket and it is dead set on depriving the world of Ukraine’s grains.”

(Source: CNBC)

• Supreme Ventures has begun to build out its gaming infrastructure in Ghana. The company says its partner, Game Park Limited, has commissioned its state-of-the-art draw studio, dubbed the "Black Star Studio".
• With the studio's opening, the company has started offering its "Pick 4" game to Ghanaians. SVL is the technical service provider for Game Park Limited and the provider of the games being offered by the company
• Game Park Games utilises SVL's certified proprietary software as the gaming platform and is set to launch additional SVL products over the next six months.
• This expansion bodes well for SVL as Game Park has plans to introduce additional SVL games to its market which comprises about 33 million people.

(Source: RJR News)

• GraceKennedy Limited (GK) has announced that it has come to an agreement to acquire UNIBEV Limited, a privately owned Jamaican manufacturing company which specializes in fully integrated beverage solutions. The transaction, which remains subject to customary closing conditions, will place GK in an even stronger strategic position within the Jamaican spring water market.
• UNIBEV is involved in all aspects of the beverage manufacturing process, including, sourcing raw materials, and packaging. Its manufacturing facility, located in Spring Garden, Portland, includes a Blue Mountain spring water source and is International Bottled Water Association (IBWA) certified.  This will be GK’s sixth manufacturing facility in Jamaica, once completed.
• Group CEO Don Wehby explained that the acquisition is critical for GK as the company advances its position in the growing spring water market in Jamaica. The company is strategically building on its recent investment in the space, following the acquisition of 876 spring water and an increased stake in Catherine’s Peak.
• GK acquired the 876 spring water brand from UNIBEV and Bliss Limited in 2021. GK also became the majority owner of the Catherine’s Peak Spring Water brand in February this year, after increasing its stake in Catherine’s Peak Bottling Company Limited, from 35% to 70%.
• GK continues to seize opportunities to grow its beverage brands by expanding its manufacturing segment. In addition to the opportunities presented for its spring water business, the acquisition of UNIBEV fits in perfectly with its manufacturing transformation strategic plan, which aims to bolster its competitive advantage, and firmly establish GK as a regional powerhouse in food and beverage manufacturing.

(Source: JSE)

• Fitch Solutions has revised its Short-Term Political Risk Index (STPRI) score for Costa Rica from 61.1 to 62.1 out of 100, indicating an overall lower level of political risk in the market.
• The upward revision comes on the back of lower and falling inflation, which has boosted the ‘Social Stability’ component of the index from 53.8 to 57.5 out of 100.
• Inflation has fallen dramatically from its multi-year peak of 12.1% y-o-y recorded in August 2022 to an average of 5.9% in Q123 and 0.8% in Q223. Most of this is driven by falling global commodity prices including food and fuel as well as base effects following a period of persistently high inflation. 
• Fitch believes that inflation will average 3.1% in 2023, closer to the 2017-21 average of 1.7%. Low inflation typically bodes well for social stability by minimising the extent of discontent and reducing the risk of any unforeseen change in public opinion that may lead to unrest, especially given unemployment consistently exceeds 10.0% (10.6% in Q123).
• That said, risks of another downward revision to the ‘Security/External Threats’ component of the index are increasing given the continually rising homicide rates in the country.

(Source: Fitch Solutions)

• The Bank of England raised its key interest rate by a quarter of a percentage point to a 15-year peak of 5.25% on Thursday, its 14th back-to-back increase, and warned that borrowing costs were likely to stay high for some time.
• While the U.S. Federal Reserve and the European Central Bank signalled that their rate hikes were nearing an end when they both raised borrowing costs by a quarter-point last week, the BoE's Monetary Policy Committee (MPC) gave no such suggestion it was about to pause as it continues to battle high inflation.
• "The MPC will ensure that Bank Rate is sufficiently restrictive for sufficiently long to return inflation to the 2% target," the BoE said in fresh guidance.
• Governor Andrew Bailey stressed that message, even as the BoE saw the economy growing only minimally in the coming years.
• "I don't think it is time to declare it's all over," he told a press conference, adding it was "far too soon" to speculate about the timing of any rate cuts. Bailey also said "we might need to raise interest rates again but that's not certain".
• British inflation hit a 41-year high of 11.1% last October and has fallen more slowly than elsewhere, standing at 7.9% in June, the highest of any major economy.
• Deputy Governor Ben Broadbent said keeping relatively high rates over an extended period was key for cutting inflation.
• Despite the BoE's message, financial markets - which had seen a more than one in three chance of a half-point rate rise to 5.5% - focused on how the BoE had for the first time described its policy stance as "restrictive".
• Investors moved to price in slightly less BoE tightening, with rates seen peaking at 5.75% and two-year bond yields down, although investors still saw a two-in-three chance that rates would rise to 5.5% next month. Sterling was little changed on the day.

(Source: Reuters)

• Private sector companies added far more jobs than expected in July which was pushed higher by a boom in leisure and hospitality jobs.
• Job gains for the month came to 324,000, driven by a 201,000 jump in hotels, restaurants, bars and affiliated businesses. That total was well above the Dow Jones consensus estimate of 175,000, though it marked a decrease from the downwardly revised 455,000 in June.
• Services-related industries dominated job creation during the month as the economy continues its transition back from being goods-oriented in the early days of the Covid pandemic. The sector was responsible for 303,000 jobs in the month.
• Along with the big move in leisure and hospitality, information services added 36,000 positions; trade, transportation and utilities grew by 30,000; and the other services category, which encompasses things such as dry cleaning, housekeeping and the like, contributed 24,000.
• The report provides another indication that the U.S. jobs market has retained its strength despite an extended Federal Reserve campaign to slow the economy and bring down inflation.
• “The economy is doing better than expected and a healthy labour market continues to support household spending,” said Nela Richardson, ADP’s chief economist.

(Source: CNBC)

• Regency Petroleum Company Limited (RPL) recorded a net profit of $5.27Mn for the second quarter ended June 30, 2023. This represents a 65.8% yoy decrease in profitability. Similarly, profit for the six months ending June 2023 decreased by 35.6% to $25.01Mn
• Revenue for the quarter was down marginally by 0.1% yoy to $179.79Mn despite larger volumes sold. This was due to the fall-off in fuel prices over the period. However, revenues for the six months increased by 9.4% yoy to $363.27Mn and were driven by larger volumes that offset falling prices.
• Higher trucking costs driven by inflation and increased business activity were the main reasons for the 4.6% increase in direct cost over the three months ending June 2023. Similarly, higher trucking cost was the main driver for the 12.6% increase in direct cost over the six months. Consequently, this led to the fall-off in gross margin to 15.1% (from 18.9%) and 16.4% (from 18.8%) over the three months and the six months ending June 2023, respectively.
• For the quarter, operating expenses were 98.3% higher yoy at $12.24Mn as the company incurred fees related to being publicly listed such as directors' fees, higher audit and accounting fees, along with higher bank charges (given rising interest rates), advertising and promotion, as business ramps up. For the six months ended June, total operating expenses grew 114.3% from $11.33Mn to $24.29Mn.
• RPL’s stock price has increased by 57.9% since the start of the calendar year. The stock closed Wednesday’s trading session at $2.51 and currently trades at a P/E of 78.4x which is above the Junior Market Distribution Sector Average of 15.6x.
• The company recently announced its partnership with JusGas Distributors Limited which will be the primary distributor of its bulk LPG products in the corporate area of Kingston & St. Andrew. This partnership will provide the opportunity to build new relationships with businesses in the KSA region which will be a critical space for growth in the future.

(Source: JSE)