• The Central Bank of Trinidad and Tobago warned yesterday that higher prices, particularly imported inflation, will pose a challenge to the economy in 2022. In outlining the outlook for this year in its January Economic Bulletin, the Central Bank said: 'The international shortage of shipping containers, higher shipping costs (freight and insurance) are expected to persist into the early months of 2022, alongside some pressure on prices of international agricultural commodities. The widely expected rise in interest rates in the US and other areas will also feature in the calibration of domestic monetary policy and affect the public sector debt dynamics. 
• Following the prolonged lockdown period in 2021, Trinidad and Tobago is expected to grow in 2022. Growth is expected to be fairly broad-based. On the energy front, higher natural gas production is expected, as several projects being undertaken by major players are anticipated to come on stream in the first half of 2022. 
• Full-year production in non-energy sectors will also surpass 2021 levels once there are no major reversals towards significant restrictions on mobility. At the same time, the nature of businesses will evolve in the direction of more electronic transactions and lower onsite activities, posing a challenge to the survival of some firms that are slow to adapt. 
• Higher prices, particularly imported inflation, will however pose a challenge. The international shortage of shipping containers, higher shipping costs (freight and insurance) are expected to persist into the early months of 2022, alongside some pressure on prices of international agricultural commodities. 
• Energy commodity prices are anticipated to remain relatively firm over the short to medium term. Though crude oil prices lost momentum in late 2021, demand will likely be driven by the continued increase in global economic activity. Colder temperatures during the winter months are also expected to bolster prices. Crude oil production from the Organization of Petroleum Exporting Countries and associated entities (OPEC+) is expected to increase by 400,000 barrels per day in January 2022, which should aid in closing some of the gaps between demand and supply but may exert some downward pressure on prices.

(Source: TT Central Bank)

• Despite the devastating economic effects of the unprecedented flooding last year and the impact of the COVID-19 pandemic on international trade, Guyana’s rice exports still secured over $42Bn in earnings for 2021. 
• Agriculture Minister, Zulfikar Mustapha said the primary focus will be on increased production and rebuilding the sector to improve profitability on a sustainable basis. Towards this end, he said plans are in the pipeline to plant 185,000 hectares that will produce 1,091,500 tonnes of paddy or 709,475 tonnes of rice. 
• Mustapha said there will also be increased attention to maintaining and expanding the marketing and trade of rice and its by-products locally and internationally, as his ministry projects to export 86% of the rice production this year. 
• Additionally, there will be increased research on new varieties and best practices together with quality seed production and mitigating losses due to pests and disease, certification of laboratories and mills will all contribute to this growth. By the autumn crop 2022, he said a new high-yielding candidate variety of paddy with excellent quality traits is expected to be identified and released in the autumn crop of 2024.

 (Source: Kaieteur News)

• US Consumer prices surged more than expected over the past 12 months, indicating a worsening outlook for inflation and cementing the likelihood of substantial interest rate hikes this year. The consumer price index for January, which measures the costs of dozens of everyday consumer goods, rose 7.5% compared to a year ago, the Labor Department reported Thursday. That compared to Dow Jones estimates of 7.2% for the closely watched inflation gauge. It was the highest reading since February 1982. 
• Stripping out volatile gas and grocery costs, the CPI increased 6%, compared to the estimate of 5.9%. Core inflation rose at its fastest level since August 1982. The monthly CPI rates also came in hotter than expected, with the headline and core CPI both rising 0.6%, compared to the estimates for a 0.4% increase on both measures. 
• Stock market futures declined following the report, with rate-sensitive tech stocks hit especially hard. Government bond yields rose sharply, with the benchmark 10-year Treasury note touching 2%, its highest since August 2019. Markets also got more aggressive in pricing rate hikes ahead. 
• The chances of a 0.5 percentage point Fed rate hike in March rose to 44.3% following the data release, compared to 25% just before, according to CME data. Chances of a sixth quarter-percentage-point hike increased to about 63%, compared to about 53% before the release.

(Source: CNBC News)

• The European Commission on Thursday raised its inflation expectations for this year but is still expecting prices to move below the European Central Bank’s target of 2% in 2023. The Brussels-based institution said inflation will hit 3.5% this year from a November forecast of 2.2%. 
• The debate over inflation in the 19-member bloc is fierce. On the one hand, some argue that current inflationary pressures will ease and a degree of loose monetary policy is needed. Others counter that the ECB needs to tighten monetary policy after consecutive historic monthly highs in inflation. 
• The commission noted that after reaching a record rate of 4.6% in the fourth quarter of last year, inflation in the euro area is projected to peak at 4.8% in the first quarter of 2022 and remain above 3% until the third quarter of the year. 
• As the pressures from supply constraints and high energy prices fade, inflation is expected to decline to 2.1% in the final quarter of the year, before moving below the European Central Bank’s 2% target throughout 2023. As such, the commission estimated that annual inflation in the euro area will rise from 2.6% in 2021 to 3.5% in 2022, before then falling to 1.7% in 2023. 
• These numbers, however, point to an upward revision in the ECB’s inflation forecasts at its next meeting in March. Market participants will be closely following the meeting to understand whether the ECB will cut its bond-buying program or adjust any other terms of its policy. Whatever the central bank decides to do could have a massive impact on the recovery of the eurozone economies, some of which were particularly hit by the pandemic.

(Source: CNBC News)

• Seprod reported a net profit from continuing operations of $2.14Bn for its 12 months ending December 31, 2021, which represents a $713.66Mn (or 25.1%) reduction relative to the corresponding period in 2020. However, the 2020 financial performance includes a one-off gain of J$762.27Mn from the sale of a property. Therefore, after stripping out this one-off gain, the unaudited full-year profit for 2021 is estimated to have grown by 2.0% year over year. 
• Seprod achieved revenues of $42.91Bn, an increase of $5.17Bn or 13.7% over the corresponding period in 2020.  However, its gross margin decreased by 2 percentage points owing to higher commodity prices which influenced a 17.0% increase in direct costs. Management noted that the company absorbed some of these higher costs which resulted in lower margins. However, the increase in direct cost would have contributed to the decline in the company’s bottom-line. 
• The company’s topline performance was commendable given the fire at Facey Merchandise’s distribution centre (Facey Commodity Company Limited is a subsidiary of the Seprod Group) on October 9, 2021, that wiped out over 86% of the finished goods inventory, which also included the Christmas stocks. This would have adversely affected the company's topline line. Though revenue grew, the fire at Facey would have resulted in lower revenue growth than expected.   
• Seprod’s stock price has declined by 4.45% since the start of the calendar year. The stock closed Wednesday’s trading session at $61.88 and currently trades at a P/E of 21.3x earnings which is below the Main Market Distribution & Manufacturing Average of 23.2x.

(Source: Company Financials)

• The Ministry of Agriculture and Fisheries has reported a major increase in agricultural production for the last quarter of 2021. Preliminary estimates for domestic crop production for the October to December quarter of 2021 show an increase of 18.2% over the corresponding quarter of 2020, moving from 161,639 tonnes to 190,990 tonnes. 
• Significant contributors to the increased production were condiments 12,755.7 tonnes (50.2%), fruits 16,123.8 tonnes (36.5%), and vegetables 67,498.5 tonnes (24.1%). Jamaica’s overall domestic crop production moved from 697,678.8 tonnes in 2020 to 770,456.2 tonnes in 2021, representing a 10.4% increase. This was reaped from 50,623.3 hectares, representing an 8.1% increase in the area reaped. 
• Giving growth projections of the sector in the short term, Minister of Agriculture and Fisheries, Pearnel Charles Jr said indications from field production remain vibrant, and barring any unforeseen extreme weather conditions, the strong growth experienced in the last quarter will continue into the first quarter of 2022. 
• Overall, an increase in food production throughout the year bodes well for players in the agricultural sector -especially those that supply hotel chain-, as demand from tourism is anticipated to return as the sector recovery gains further momentum in 2022.

(Source: JIS)                                                 

• The Bahamas is looking to save $59Mn per year via a $200Mn guarantee from the Inter-American Development Bank (IDB) to underwrite a proposed foreign currency bond issue. 
• The IDB’s $200Mn guarantee was linked to The Bahamas’ efforts to make the necessary reforms that would unleash the so-called Blue Economy as a key component of its post-COVID revival. According to the IDB, “the sovereign guarantee structure will provide important economic and financial benefits to the Government of the Bahamas.” 
• The expected savings for The Bahamas using the IDB sovereign guarantee (compared with a scenario of using a standalone non-guaranteed bond) is estimated at 96 basis points, which implies annual savings of $59Mn in net present value terms. 
• Such savings would equate to an interest coupon that would be almost one percentage point higher than without the IDB’s sovereign guarantee. The maximum guaranteed amount will be up to $200Mn to be financed from the ordinary capital resources of the IDB. 
• This financial structure could generate a superior combination of resource mobilisation, and cost reduction for the Bahamas’ Government.

(Source: The Tribune)

• U.S. investors are snapping up funds that invest in dividend-paying stocks as they search for stable income from alternatives to bond markets, which are being roiled by the prospect of rate rises. According to Refinitiv Lipper, investors bought $6.9Bn in U.S. dividend funds in January, the highest net purchases since October 2006. The Schwab US Dividend Equity ETF and SPDR S&P Dividend ETF led inflows, receiving about $1.7Bn each last month, while First Trust Rising Dividend Achievers ETF obtained $1.0Bn. 
• There has been elevated volatility in global equity markets this year on concerns over higher yields and inflation levels, which tend to squeeze corporate profit margins. Dividend funds are seen as safe and offering some stability in that scenario, as they hold well-established companies that have better pricing power and a track record of providing stable income. 
• Dividend funds' higher inflows were also due to the recent investor shift towards what is called value stocks, and away from the growth stocks, the latter referring to equities with higher potential which had outperformed during the initial rapid recovery from the coronavirus pandemic. 
• Economists predict moderate growth this year, prompting investors to look back at stocks trading at affordable levels, or value stocks, which often also offer higher dividends. Sectors such as energy and banks, which have high dividend yields, are expected to enjoy revenue growth this year, benefitting from higher interest rates and inflation levels.

(Source: Reuters)

• British households are facing the worst cost of living crisis for decades, as soaring inflation, declining real wages and an energy crisis eats into household incomes. 
• Inflation in the U.K. has soared to levels not seen for decades, with the latest reading hitting an annual 5.4% for December, the highest it has been since March 1992. 
• Welfare payments that are linked to inflation will increase by 3.1% in April, the government announced this month, in line with the Consumer Prices Index reading from September 2021. State pensions will also be increased by 3.1%. 
• The latest official data showed that average earnings, when adjusted to account for inflation, fell by around 1.0% in November from a year earlier, the first decline in wages since the height of the coronavirus pandemic. 
• Meanwhile, taxes on earned income are set to increase by 1.25 percentage points from April to help fund health and social care costs. It’s a move that Prime Minister Boris Johnson is reported to be pushing ahead with, despite pressure to U-turn from lawmakers within his party. 
• Last Thursday saw Ofgem, the regulator for the U.K. energy sector, raise its energy price cap by 54%, meaning millions of households’ annual energy bills will increase by around £700 from April. Given the U.K.’s reliance on natural gas as an energy source, the country has been hit particularly hard by a gas shortage that pushed wholesale prices up to record highs across Europe last year.

(Source: CNBC News)

• QWI Investments Limited reported a net profit of $83.04Mn (EPS $0.06) for its first quarter ending December 31, 2021, a 9.5% decline the same period last year. 
• The lower outturn was influenced by a $14.4% reduction in gains from investments. QWI's investment portfolio has high exposure to Jamaica equities (75% of its total portfolio). Throughout QWI’s first quarter the Jamaican stock market declined, which resulted in lower stock prices, and subsequently, adversely affected the company’s topline. However, looking at the company’s top five Jamaican stock holdings, which includes only main market stocks, only Caribbean Cement experienced a significant decline during the quarter. 
• Earnings were also eroded by a surge in administrative expenses surged from $10.62Mn to $32.32Mn due to increased insurance and investment management expenses. Of note that no fees were incurred in Q1 FY 2020-21 for the services of the Investment Committee.
• QWI’s stock price has declined by 1.59% since the start of the calendar year. The stock closed Tuesday’s trading session at $0.87 and currently trades at a 42% discount to its net asset value (NAV). The most recent NAV per share was $ 1.50 as of January 28, 2022.

 (Sources: Company Financials and JSE)