• One positive out the pandemic is how little damage it has inflicted on average household and corporate balance sheets in Europe. 
• In the past, recessions were followed by protracted weakness as they left households and businesses with significantly higher debt and lower-income and capital. So far this has not been the case with the COVID-19 crisis, largely thanks to the extraordinary policy response by governments and central banks. 
• The new IMF staff research, observes the resilience of private sector balance sheets. It uses a simple balance sheet vulnerability index, which combines measures of leverage (or indebtedness) and liquidity. Based on the index it can be seen that despite the collapse in GDP in European Union countries and the United Kingdom in 2020, business and household balance sheets in Europe were slightly affected on average. 
• Even in the worst phase of the crisis last year, the index for the corporate sector in Europe only fell marginally and by the end of 2020, the index improved. European household balance sheets also improved on aggregate in 2020, despite higher unemployment and shorter working hours. People stayed home more and spent less, while policy measures supported their income. 
• The question arises if business and household balance sheets did not bear most of the losses from the COVID-19 crisis in Europe, then who did? The short answer is the public sector. The public accumulated more debt to mitigate the effects of the pandemic.

(Source: IMF)

• The global economic recovery remains strong, as such Fitch Solutions has maintained its 5.7% global growth forecast despite several upward revisions, mostly in Europe. The cause of the upward revisions was mostly attributed to faster than anticipated vaccination programmes.  However, Fitch's estimate remains below the consensus (6.0%) as they believe that while growth will continue over the coming quarters it is in the process of peaking. 
• Although purchasing managers' index readings remain quite positive across the 26 economies that Fitch tracks regularly, readings declined in 10 economies from April to May 2021, which suggests that activity in several economies may be peaking. 
• In particular, it can be highlighted that there are mounting downside risks to growth in emerging markets given a sharp rise in COVID-19 infections amid a slow vaccine rollout, rising nominal interest rates as central banks tighten policy in response to rising inflation and increasing political risk. 
• In terms of cross-asset strategy, Fitch’s views remain unchanged from June 2021, and risk appetite has remained fairly positive, but they note some minor shifts. For example, the decline in US bond yields, which was likely a re-pricing of growth and inflation to the downside. This could provide some support to equity markets over the coming months but could also be signaling some challenges to the US and global growth. 
• Moreover, low nominal bond yields and elevated inflation that compress real bond yields in the US could see the US dollar index continue to trade sideways over the near term. Emerging markets are also now facing several risks that could weigh on the performance of their assets.

(Source: Fitch Solutions)

• The All-Jamaica Consumer Price Index (CPI) rose by 0.7% for June 2021 contributing to the point-to-point inflation rate of 4.3%, which is a drop from the 5.0% reported in May 2021, but still within the target range. 
• A 1.9% increase in the heavily weighted index for “food and non-alcoholic beverages‘’ division was a major contributor due in part to an upward movement of 4.0% in the index for the class ‘Vegetables, tubers, plantains, cooking bananas and pulses’. 
• Higher prices for items within the class ‘Restaurant, cafes and the like’ resulted in the 5.9% increase in the index for the division ‘Restaurant and Accommodation Services’. Additionally, increased petrol prices contributed to the 0.4% increase in the index for the ‘Transport’ division. 
• However, these increases were tempered by the 2.4% decline in the index for ‘Housing, Water, Electricity, Gas and Other Fuels’ division, which resulted mainly from the fall in electricity, water, and sewage rates. 
• For the review period, the calendar year-to-June inflation rate was 2.4%, and the fiscal year to date inflation was 1.9%. 
• Inflation is projected to average 4.8% over the next two years according to Bank of Jamaica. The inflation forecast anticipated that commodity (oil and grains) price inflation would accelerate in the context of global supply chain disruptions and increasing demand as economies reopen, leading to higher domestic transport and processed food inflation. However, this was expected to be tempered by subdued domestic agricultural food price inflation, based on expectations of favourable weather conditions.

(Source: STATIN & BOJ)

• For the first quarter ending May 2021, Kremi’s net profit doubled to $54.16Mn (EPS: $0.14). 
• This came on the back of a 27.6% (increase in revenues, which the company attributed to strong product demand, as it has taken the initiative to engage key suppliers, whose supply chains and prices are being affected by the ongoing pandemic. 
• Direct and operating expenses grew by 16.9% (or $49.37Mn) and 34.7% (or $36.28Mn), respectively. Opex grew owing to higher transportation costs due to higher consumer demand, salary increases, staff related expenditure and the full annualized cost for the new Ocho Rios depot. 
• Kremi stock price has appreciated by 36.4% since the start of the year to a price of $5.72 and currently trades at a P/E ratio of 16.8x earnings which is in line with the junior market manufacturing sector average.

(Source: Company Financials) 

• Fitch Solutions has downwardly revised its 2021 real GDP growth forecast for Cuba to 1.0%, from 2.7% previously, as the country grapples with a severe spike in COVID-19 cases and social unrest. 
• This follows an 11.0% contraction in 2020, the worst in Cuba since 1993, as the arrival of the pandemic brought the island’s tourism industry to a halt and US sanctions cut off remittance inflows, generating hard currency shortages that undermined imports and private consumption. 
• While Cuba’s rebound will gain steam in H221 and 2022 as vaccinations pick up domestically and abroad, leading to 4.2% growth in 2022, US sanctions relief is highly unlikely in the coming quarters. 
• Over the longer term, a recent economic reform push could boost Cuba’s growth trajectory if the government keeps the reforms in place post-pandemic.

(Source: Fitch Solutions)

• Minister of Health of Bahamas Renward Wells gave a recent update on the mixing of vaccines to the people. The Bahamas awaits a tranche of Pfizer doses from the World Health Organization’s (WHO) COVAX Facility and it could offer beneficiaries of AstraZeneca a second dose of the US-manufactured vaccine (Pfizer), as studies have shown that vaccine mixing offers strong immune protection. 
• In a statement, he pointed to existing studies where mixing of AstraZeneca and Pfizer were found to have been “very effective”. However, he did not definitively say whether The Bahamas would adopt the measure. Canada, Spain and South Korea have approved dose-mixing due to concerns about rare but possible blood clots linked to the AstraZeneca vaccine. 
• As per the preliminary results of the CombivacS Spanish study, the presence of antibodies in the bloodstream was between 30 & 40 times more in people who got the follow-up Pfizer shot than others in the control group, who only got one AstraZeneca dose. 
• The presence of neutralizing antibodies rose sevenfold after a Pfizer dose — more than double the effect observed when receiving a second dose of AstraZeneca. Nearly 700 volunteers between the ages of 18 and 59 participated in the state-backed study, with around 450 given a Pfizer dose. 
• Amid concerns about coronavirus variants, including the Delta strain, Wells said the vaccines have proven effective against all five variants of concern, maintaining that it is not a matter of if but when the Delta variant is confirmed in The Bahamas. 
• However, the World Health Organization’s chief scientist advised against mixing and matching COVID-19 vaccine doses on Monday, calling it a “dangerous trend” given the limited data about the long-term health impact.

(Source: West Indies and Caribbean News)

• Bank of England policymakers signaled that stimulus measures may have to be trimmed back soon to keep inflation from overheating. Recently data showed that the inflation rate in the U. K has surpassed the 2% benchmark and is at 2.5%. 
• Micheal Sanders a British economist and an external member of the Bank of England's Monetary Policy Committee indicated that the Bank of England may have to consider curtailing its stimulus program “in the next month or two” to contain inflation as the economy rebounds. 
• Saunders’ comments suggest that the Monetary Policy Committee will have to debate an early end to the 150 billion pound ($208 billion) bond purchase program, a move that would put the Bank of England in the vanguard of global central banks withdrawing stimulus. His remarks stood out against the previous position of the Bank’s policymakers led by Governor Andrew Bailey, who has described some of the surges in inflation as “temporary.” 
• Saunders’ highlighted that both the labour market and the economy have been recovering which suggests that inflation may remain well above the target in two or three years unless the Bank of England acts. 

(Source: Bloomberg)

• Based on the Institute of International Finance (IIF) report, the global issuance of sustainable debt is on track to surpass $1 trillion this year with green bonds dominating. Green bonds are used to finance climate-related or environmental projects, and they make up the lion's share of all new issuance, at 35%, led by Germany, China, and France. 
• The surge in issuance is a result of corporations and financial institutions being put under pressure from investors to increase their activity in sustainable debt. As a result, sustainable debt sales more than doubled year-on-year in the first half of 2021 to over $680 billion, closing in on the $700 billion issued during the whole of last year.  
• The main participants are sovereigns, financial institutions, and utilities, however, firms from elsewhere in the energy sphere, as well as materials and consumer discretionary sector, are quickly joining the fray. A key factor to note is that emerging markets still represent less than 15% of the sustainable debt universe and as such developing countries have some catching up to do.

(Source: Reuters)

• For its financial year ending March 2021, Medical Disposables and Supplies Limited (MDS) reported a net profit $69.61Mn (EPS: $0.26), which translates to 101.4% (or $35.06Mn) increase over the same period last year. This was primarily due to the $62.08Mn gain realized on the acquisition of Cornwall Medical and Dental Supplies Limited. MDS now owns 60.0% of the company, and will carry the operation through a newly formed subsidiary called Cornwall Enterprise Limited. 
• Gross margin rose 7% reflecting a 5.1% reduction in cost of sales, which offset the impact of a 2.4% decline in revenues earned from the sale of the company’s products.  
• However, administrative, selling and promotional, as well as finance costs all increased by 4.3%, 22.0%, and 45.6%, respectively. Consequently, the company would have realized a year over year decline in net profit of about $22Mn, if the effects of the one-off gain from business acquisition is excluded. 
• The acquisition of Cornwall Medical and Dental Supplies Limited is expected to increase the company’s market share and expand its distribution network as it will add three pharmacies in the western section of the island, and begin offering dental services. This bodes well for future revenue and bottom-line growth in terms of the new clients acquired and the ability to cross-sell dental services to existing clients. 
• MDS stock price has risen by 18.2% since the start of the year and currently trades at a P/E ratio of 19.2x earnings, which is below the junior market distribution sector average of 26.4x earnings.

(Source: Company Financials & NCBCM Research)

• For the first quarter of 2021 (January-March), Jamaica’s total spending on imports and earnings from exports declined relative to the same period in 2020. 
• Imports for the first 3 months of 2021 were valued at US$1,316.8Mn, a decline of 2.3% when compared to Q1 2020. This decline was largely attributable to lower imports of “Consumer Goods” and “Transport Equipment” which fell by 13.9% and 20.3%, respectively. 
• The top 5 import partners during the period were the USA, Brazil, China, Colombia, and Japan and they accounted for 65.1% of imports. Jamaica imported a total of US$857.3Mn worth of goods from these countries, compared to US$872.7Mn recorded for 2020. The 1.8% decline in imports from these trading partners was due largely to the reduction in the imports of kerosene type jet fuel from the USA. 
• Total exports for the review period was flat at US$354.6Mn relative to the first quarter of 2020. 
• The top 5 destinations for Jamaica’s exports were the USA, the Netherlands, Canada, Puerto Rico, and the United Kingdom. Exports to these countries increased by 10.1% to US$271.5Mn when compared to the first quarter of 2020.This was due mainly to increased exports of alumina to the Netherlands.

(Source: STATIN & NCBCM Research)