• The Bank of England raised interest rates by the most in 27 years on Thursday, August 4^th, 2022, despite warning that a long recession is on its way, as it rushed to smother a rise in inflation which is now set to top 13%.
• The BoE had previously expected inflation to peak at above 11% and almost no growth in Britain's economy before 2025 at the earliest. In its new forecasts, the BoE saw inflation falling back to 2% in two years as the hit to the economy took its toll on demand.
• However, reeling from a surge in energy prices caused by Russia's invasion of Ukraine, the BoE's Monetary Policy Committee voted 8-1 for a half percentage point rise in Bank Rate to 1.75% - its highest level since late 2008 - from 1.25%.
• The pound slid after the move, which was accompanied by a warning that a UK recession will begin in the fourth quarter and last through next year.
• The BoE warned that Britain was facing a recession with a peak-to-trough fall in output of 2.1%, similar to a slump in the 1990s but far less than the hit from COVID-19 and the downturn caused by the 2008-09 global financial crisis.

(Source: Reuters)

• China deployed scores of planes and fired live missiles near Taiwan on Thursday, August 4, 2022, in its biggest drills in the Taiwan Strait, a day after U.S. House of Representatives Speaker Nancy Pelosi made a solidarity trip to the self-ruled island.
• China's military confirmed multiple firings of conventional missiles in waters off Taiwan as part of planned exercises in six zones set to run until noon on Sunday. It activated more than 100 planes, including fighter jets and bombers, and over 10 warships, state broadcaster CCTV said.
• Taiwan's defence ministry said it scrambled jets to warn away 22 Chinese fighter aircraft that crossed the Taiwan Strait median line into its air defence zone and said troops fired flares late on Thursday, August 4, 2022, to drive away four drones that flew above the area of its Kinmen islands, off the southeastern coast of China.
• Nonetheless, responding to the Chinese drills, President Tsai Ing-wen said Taiwan would not provoke conflicts but would firmly defend its sovereignty and national security.

(Source: Reuters)

• One-on-One Educational Services is seeking to raise approximately $358.25Mn by inviting subscriptions for up to 380Mn Shares which represents 20% of its business. The IPO is priced at $1 per share while a few applicants from one reserved pool will be offered the share at a discounted price of $0.80.
• Of the J$380Mn shares on offer the majority are reserved for strategic partners, lead broker Sagicor Investments Limited, teachers, trainers and its employees, while just under a third (J$121.25Mn) of the shares will be available to the general public. The Company intends to apply to the Jamaica Stock Exchange (“JSE”) for admission of the Shares to the Junior Market.
• Headquartered in Kingston, the company’s online learning platform offers personalized digital education and training solutions for governments, businesses, and individuals across the Caribbean. Clients benefit from e-learning courses, online training, instructional design services, and expert tutors and trainers.
• The company intends to use the funds raised by the IPO to capitalize on long-standing strategic growth identified by investing in next-generation learning content for new and existing markets as well as investing in adaptive learning technology using machine learning and artificial intelligence ideas to personalize learning.
• The offer is scheduled to open on August 12, 2022, and close on August 19, 2022. A copy of the Prospectus is available on the JSE website.

(Source: JSE)

• Fitch increased its 2022 real GDP growth prediction from 1.5% to 2.0% as a result of Mexico's Q2 2022 real GDP growth print exceeding its forecasts. The preliminary Q2 2022 growth numbers of 2.1% y-o-y, exceeded the 1.5% y-o-y prediction.
• Private consumption will continue to be the main source of growth in 2022, although its percentage point contribution will drop to 1.4 from 4.9 in 2021. Retail sales and labour market statistics imply that private consumption remained strong (+7.2%) in Q2 2022 despite rising inflation, which was supported in part by record remittance inflows.
• In Q1, real exports expanded 10.1% y-o-y, outpacing 5.8% growth in imports, and monthly trade data for Q2 suggests export demand from the US remained robust. However, in H2 Fitch forecasts that private consumption in the US will slow as elevated inflation, Fed tightening and weaker sentiment weigh on household purchasing decisions. Combined with an ongoing rebalancing from goods toward services in the US, the demand for Mexico’s goods exports will moderate.
• That said, Fitch revised its 2023 growth forecast from 2.0% to 1.7%, reflecting the Agency's weaker outlook for the US and its view that inflation and interest rates will remain elevated next year. It will also be influenced by trade tensions with the US and Canada, who have requested a dispute settlement mechanism under the USMCA trade deal regarding Mexico’s energy policy. The 2023 growth forecast for the US has been lowered from 1.8% to 1.6%, which will result in weaker demand for Mexican exports and a deceleration in remittance growth.
• Additionally, inflation will come down slowly in 2023, from 7.4% y-o-y at end-2022 to 4.4% at end-2023, averaging 5.7%. This remains well above Banxico’s 3.0% target, and as such the bank will be slow to loosen interest rates, cutting to only 8.50% by the end of the year.

(Source: Fitch Solutions)

• Despite claims that there is no sugar shortage, the Bank of Guyana (BoG) quarterly report has documented quite the opposite recording a fall in production not only for sugar but rice as well – two of the country’s largest export commodities.
• Guyana reported decreases in the production of rice and sugar by 53.1% and 47.7% respectively. The country’s central bank noted that the substantial decline in rice production was attributed to the adverse effects of flooding in the previous year, which meant farmers were prevented from sowing all available lands for the first crop of 2022.
• When it comes to sugar, it was explained that the 47.7% drop in production was as a result of the halt on grinding at the Uitvlugt sugar estate, caused by mechanical issues. These challenges, the BoG revealed, had a major impact on the country’s total production as the estate was responsible for 25% of the output.
• Of note, the bank explained that the Guyanese economy recorded a mixed output performance from its major sectors during the first three months of 2022. According to the report, “As oil and gas activities continued, the non-oil economy experienced moderate growth on account of economic activities regaining momentum from the full reopening of the economy coupled with fiscal measures to alleviate the rising costs of production and services.”
• Importantly, despite the decline in Q1 2022, strong exports from the oil sector will lead to significant GDP growth in 2022

(Source:  Kaieteur News)

• Lumber prices continued their descent on Wednesday, August 3, 2022, falling as much as 5% to a new 2022 low of $495 per thousand board feet. The essential building commodity has seen a wild ride since the start of the COVID-19 pandemic, with prices peaking at a record high of $1,733 per thousand board feet as demand for homes picked up and supply chain woes plagued sawmills across Canada.
• Since lumber's May 2021 peak, it's been nothing but downhill for the commodity, with a peak-to-trough decline of 71%. The weakness accelerated in 2022 as higher mortgage rates helped cool down the booming housing market, which fueled demand for lumber as homebuilders sought to cash in on the demand spike.
• Lumber prices continuing to downtrend remain good news for up-and-coming home buyers that have been boxed out of the market due to rising home prices and a limited supply of homes for sale. The recent surge in mortgage rates hasn't helped with affordability, but the average 30-year fixed mortgage rate has fallen more than 50 basis points from its peak in June, offering some relief.
• Ultimately, the housing market is on its way back to normal, and that means lumber prices are likely to remain back in the normal trading range before 2020 of $200-$600 per thousand board feet.

(Source: Insider)

• Federal Reserve officials voiced their determination again on Wednesday, August 3, 2022, to rein in high inflation. However, one noted a half-percentage-point hike in the U.S. central bank's key interest rate next month might be enough to march on toward that goal.
• San Francisco Fed President Mary Daly said in an interview with Reuters, "if we just see inflation roaring ahead undauntedly, the labour market showing no signs of slowing, then we'll be in a different position where a 75-basis-point increase might be more appropriate. But I go in with the 50 in mind as I look at the data coming in."
• Whether the Fed will plough ahead with a third straight 75-basis-point rate hike at its Sept. 20-21 policy meeting - a pace unmatched in more than a generation - or dial back a bit is of central interest to investors, businesses, and consumers who are increasingly fearful that the central bank's inflation fight may trigger a recession.
• Several policymakers, including Daly, have shown stiffening resolve this week to continue the aggressive monetary tightening, with nearly all of them uniformly flagging that the central bank remains determined to press ahead with rate hikes until it sees strong and long-lasting evidence that inflation is on track back down to the Fed's 2% goal.

(Source: Reuters)

• Mayberry Investments Limited (MIL) and Victoria Mutual Investments Limited (VMIL), both reported improvements in their financial performances for the 6 months ended June 2022. Net profit improved for Q2 for both companies but VMIL saw a decline in its YTD performance owing to the very low net profit recorded in Q1.
• MIL and VMIL recorded net profit attributable to shareholders of J$3.21Bn (EPS $2.67) and J$250.71Mn (EPS$0.17), respectively, for the six months ending June 30, 2022. These were 101.6% and 5.2% above and below, respectively, the outturns in 2021.
• MIL’s H1 result was driven by a 280.2% increase in net unrealized gains on investments from the Group’s investment in associates and financial instruments, reflecting capital appreciation on equities. The overall decline in VMIL’s bottom line was tempered by an 86.1% increase in income from net fees and commissions. This was attributable to the strong execution of both debt and equity-related transactions in the review period.
• Both MIL (25.7%) and VMIL (31.4%) saw double-digit increases in interest income. The improvement in interest income for MIL outpaced the noticeable increase in interest expense which jumped by 22.9% evidenced by a higher net interest margin (moved from 30.4% to 31.9%). VMIL, on the other hand, saw a 61.9% increase in interest expense which lowered its net interest margin (moved from 35.8% to 20.9%). Operating expenses also increased by 60.6% and 20.0% for MIL and VMIL, respectively.
• The investment companies will look to build on their Q2 performances in the recovering economy; however, the high inflationary environment will continue to pose challenges. MIL expects the strong performance of stocks in its portfolio to be sustained through capital appreciation and dividend income. Revenues could also be driven by higher net fees and commission income which grew by 15.9% in H1 due to significant growth in equity commission and loan processing fees, as well as higher selling fees for IPO transactions.
• Partnerships formed and investments made by VMIL in Q2 should help to influence improvements in profitability in coming months. This includes its private equity investment in Home Choice Enterprise Limited during Q2, as well as its partnership with London-based Actus Partners (Actus) to successfully close a new Caribbean private equity fund focused on Small and Medium Enterprises (SMEs). Carilend Caribbean Holdings Company Limited, (Carilend), a leading Caribbean fintech in which VMIL acquired a 30% stake in 2019, has also partnered with Massy Finance to offer 100% web-based personal loans in Trinidad and Tobago. These partnerships and investments are expected to boost profits in the coming quarters.
• MIL’s stock price has increased by 23.7% since the start of the calendar year while VMIL has decreased by 15.5%. MIL and VMIL closed Tuesday's trading session at $9.71 and $5.18, respectively. MIL currently trades below the Main Market Financial Sector Average of 10.7x at a P/E of 3.2x while VMIL trades above at 14.0x.

(Sources: JSE & NCBCM Research)

• Jamaica’s second city has been ranked the top summer travel recovery city of 2022 based on the Summer Travel Outlook Report that was produced for the World Travel Market (WTM) by ForwardKeys (provider of travel trends and analysis).
• The report showed a comparison between international tourist arrivals for Q3 2022 and Q3 2019, noting Montego Bay to be among the most resilient destination cities with a positive growth of 23%.
• The report also shared that Punta Cana, Dominican Republic, and Cancun, Mexico, placed second and third, with 19% and 14% increases, respectively. Twenty cities were listed in the report, with Cairo, Egypt, and Dehli in India rounding out the top 5, cities.
• Meanwhile, Tourism Minister, Edmund Bartlett who recently shared that a part of the sector’s recovery strategy was meeting with long-standing tourism partners to get a feel of market sentiment and projections, has expressed delight with the news.
• The country has seen vastly improving figures for arrivals and earnings over the last year; the country welcomed more than 1.5Mn visitors in 2021 and raked in over US2.095Bn in earnings. The Tourism Minister noted also that the industry is “now more than before, poised for a full recovery”.  The news is expected to support tourists’ arrival to the city and Jamaica at large which will be an added boost for local shops and businesses.

(Source: JIS News)

• Guyana’s promising business openings with its newfound oil wealth have resulted in an influx of foreign investors scoping opportunities to make a big investment in the country. Those breaks have mostly been seized by investors from the United States of America, Canada, the United Kingdom, China and other big countries across Europe with new interest from Africa, Asia and the Middle East.
• However, the tiny European nation of Austria has its sights set on the opportunities in Guyana. Dr Andreas Schmid, the Austrian Trade Commissioner to Guyana, has announced his plans to organize a trade trip for Austrian businesses to visit Guyana in 2023, saying that "Guyana is a high potential commercial partner for Austrian enterprises.”
• Dr Schmid stated that Austria is not keen on the opportunities in the oil and gas sector, but noted that Guyana "is truly on a growth path with sustainable development. As a result, Austria serves as a capable partner in assisting the expanding economy because the nation has a dependable market and technological partners in a variety of industries”, the Trade Commissioner stated.
• Although bilateral trade exchanges between the two states have been small in the past and further setback by the COVID-19 pandemic, the Trade Commissioner believes that projects such as the hospital and the first-time import of Guyanese oil to Austria in 2021 were a positive outlook for improved bilateral trade.
• Guyana’s bilateral trade has also increased in recent years with other countries such as the USA, Canada, China, and India. There have been other trade missions, including one from Canada earlier this year, and the establishment of several joint business chambers with the support of governments to increase business activities.

(Source: Newsroom)