• Declines in bonds and stocks are sending investors into defensive products such as credit swaps, convertibles and even cash as they seek refuge from the market’s recent gyrations. 
• BlackRock Inc's iShares iBoxx $ Investment Grade Corporate Bond ETF has fallen by nearly 7% year-to-date to its lowest level since April 2020, as expectations of higher interest rates and persistent inflation dim the allure of bonds across the fixed-income spectrum. That is in line with losses across major stock indexes, which have also been hit by worries of tighter Fed policy. The S&P 500 has dropped 7.3% year-to-date and the Nasdaq Composite is down by about 11%. 
• The side-by-side tumbles have dealt another blow to a decades-old strategy that relied on a mix of bonds and stocks to take the sting out of equity declines, with bond prices ideally moving higher during periods of stock market volatility. 
• The search for defensive products comes amid worries of more volatility across asset markets, as an expected 150-175 basis points in rate increases over the next year threatens to further buoy bond yields and weigh on stock valuations. 
• For some investors, anticipation of more wild swings in asset prices has heightened the appeal of credit swaps, which are used to insure against the risk of corporate defaults.

(Source: Reuters)

• Jamaica earned US$1.24Bn from exports between January and September 2021. This was 22.9% higher than the US$1.01Bn for the corresponding period in 2020. Statin highlighted that the outturn was largely due to a 96.8% increase in the value of exports in the category ‘Mineral Fuels’, which totaled US$400.7Mn. 
• The value of domestic exports climbed by 14.5% to just over US$1.13Bn and accounted for 89.3% of total outflows. The rise was mainly due to higher outturns from the manufacturing and agriculture industries, up 30.5% and 8.1%, respectively. At US$1.13Bn, total domestic exports for the first nine months of 2021 was 74.5% of its full 2019 value. 
• The top-five destinations for Jamaican exports were the United States of America (USA), the Netherlands, Canada, the United Kingdom, and the Russian Federation. Exports to these countries increased by 10.7% to US$912.7Mn, largely resulting from increased shipments of bunker ‘C’ fuel to the USA and alumina to the Netherlands. 
• As the global economy continues to recover in 2022, Jamaica’s total exports is also expected to increase with strong support from higher demand for local manufactured and agriculture goods.

(Source: JIS and Statin)

• For the 3 months ending December 31, 2021, BIL reported a net profit of $1.07Bn which is a 4.9% or $49.79Mn increase relative to the prior period. The bottom-line was supported by growth in revenue lines such as net interest income, fees and commission income and foreign exchange trading gains. 
• The company reported a significant fall in gains on investment activities which fell by 55.1% ($368.58Mn) over the period. The company attributed this decline to the impact of higher central bank interest rates which led to increased market volatility. However, despite this decrease, the company’s operating revenue increased by 3.9% due to a 28.7%, 8.6% and 61.5% expansion in net interest income, fees and commission income, and foreign exchange gains, respectively. 
• The overall improvement in operating revenues helped to offset the increase in operating expenses, particularly staff (11.4%) and administrative (11.3%) costs. This increase in costs is in line with the group’s continuous investment into people and processes to ensure greater efficiency and competency. 
• In 2022, we expect macroeconomic variables such as higher inflation and interest rate hikes to have an adverse impact on some business lines and positive impact on others. BIL could realise an increase in net interest income from its credit portfolios. However, the rising interest environment will likely limit gains on fixed income securities, possibly lowering trading gains. However, further economic recovery especially in the local market, is expected to support demand for financial services and products which will help to temper the challenges from the rising interest rate environment. 
• BIL’s stock price has declined by 7.3% since the start of 2022. The stock closed Wednesday’s trading session at $90.98 and currently trades at a P/E of 27.7x earnings which is above the Main Market Financial Sector Average of 15.2x

(Source: Company Financials and NCBCM Research)

• Trinidad and Tobago has expressed great optimism that its tourism industry will return to pre-pandemic levels following the lows of 2020 and 2021. 
• Trinidad's tourism sector has been hit hard by the COVID-19 pandemic, putting hundreds of employees on the breadline and forcing the closure of many tourism businesses, virtually changing the face of tourism. However, Chief Executive Officer, Kurtis Rudd, noted that with the country's borders reopening on July 17, 2021, after a 17-month closure to curb the spread of COVID-19, and the lifting of the State of Emergency, the country's tourist sites and attractions are now back on stream. 
• The country recorded 375,202 and 356,044 tourist arrivals in 2017 and 2018 respectively. However, with the onset of the pandemic in March 2020, along with the closure of T&T's air and sea ports to foreigners, arrivals dropped to 88,036 in 2020, and 2021 also saw arrivals plunging to 40,618. 
• With the country reopening, the focus is to rebuild the tourism industry through strategic marketing, new airlift, building synergistic stakeholder relationships and the improvement of product and service quality. Other mechanisms being implemented are the development and implementation of national tourism industry health safety standards, the nationwide tourism stakeholder sensitization sessions and continuous training of stakeholders to ensure competitiveness and sustainability.

(Source: Trinidad Express Newspapers)

• The consolidated figures for the year 2021 demonstrate the strength of the economic relationship between the Dominican Republic and the United States, with increases in almost all areas, including remittances, trade, and tourism. 
• The United States was by a large margin the largest issuer of foreign investment received by DomRep from January to September of last year. Foreign direct investment (FDI) from the US reached US$1,021Mn, 41% of the total investments captured in that period, which is the highest percentage in a decade. 
• From January to December 2021, the exchange of goods between the two countries reached a record of US$16.79Mn, an increase of US$4.00Mn in relation to 2020, for a year-on-year rise of 32%. Exports represented US$6,347Mn last year, 20% more compared to 2020, and 14% compared to the volume of 2019. 
• The high inflows of FDI in the Dominican Republic and growing trade relationship will continue to contribute to job creation and employment, technology transfer and overall higher economic growth for the nation.

(Source: Dominican Today& NCBCM)

• Consumer spending bounced back sharply in January as rising inflation and a post-holiday surge kept cash registers ringing, the Commerce Department reported Wednesday. Retail sales for the month rose 3.8%, much better than the 2.1% Dow Jones estimate. 
• The numbers are not adjusted for inflation; the 0.6% rise in the consumer price index for the month helped push a reversal from the 2.5% sales decline in December, which was revised lower from the initially reported 1.9% drop. 
• On a year-over-year basis, retail sales overall rose 13%, pushed higher by a 33.4% surge in gasoline station sales and a 21.9% burst in clothing stores. The numbers came with the economy facing the worst inflation in 40 years, which helps feed into the retail sales numbers. 
• The Federal Reserve is expected to enact multiple interest rate hikes this year to combat rising prices, with markets looking for the central bank to boost its benchmark short-term borrowing rate by perhaps half a percentage point in March. 
• In nominal terms, real spending increased at a 3.3% annualized pace from October 2021 through January 2022, according to Capital Economics. However, the firm cautioned that, when adjusted for inflation, real spending actually declined at a 6.8% pace during the period.

(Source: CNBC News)

• Supply chain issues for homebuilders appear to be getting worse, and that is weighing on confidence in the industry. Builder confidence in the single-family, newly built housing market fell 1 point in February to 82 on the National Association of Home Builders/Wells Fargo Housing Market Index. That is the second straight month of declines, but anything above 50 is considered positive. 
• Production disruptions are so severe that many builders are waiting months to receive cabinets, garage doors, countertops and appliances. These delivery delays are raising construction costs and pricing prospective buyers out of the market. Surging lumber prices are also adding thousands of dollars to the cost of new homes. 
• Homebuyers are already contending with rising interest rates. The average rate on the popular 30-year fixed mortgage just crossed over 4%, well over a full percentage point higher than it was a year ago. Add higher rates to higher home prices, and some buyers are simply unable to afford it. This is why rental demand is currently so high. 
• Higher interest rates in 2022 will further reduce housing affordability even as demand remains solid due to a lack of resale inventory.

(Source: CNBC News)

• Supply chain issues for homebuilders appear to be getting worse, and that is weighing on confidence in the industry. Builder confidence in the single-family, newly built housing market fell 1 point in February to 82 on the National Association of Home Builders/Wells Fargo Housing Market Index. That is the second straight month of declines, but anything above 50 is considered positive. 
• Production disruptions are so severe that many builders are waiting months to receive cabinets, garage doors, countertops and appliances. These delivery delays are raising construction costs and pricing prospective buyers out of the market. Surging lumber prices are also adding thousands of dollars to the cost of new homes. 
• Homebuyers are already contending with rising interest rates. The average rate on the popular 30-year fixed mortgage just crossed over 4%, well over a full percentage point higher than it was a year ago. Add higher rates to higher home prices, and some buyers are simply unable to afford it. This is why rental demand is currently so high. 
• Higher interest rates in 2022 will further reduce housing affordability even as demand remains solid due to a lack of resale inventory.

(Source: CNBC News)

• For the month of January, the All-Jamaica Consumer Price Index (CPI) increased by 0.6%. January’s outturn meant that point-to-point inflation was 9.7% in the 12 months to January 2022, up from the 7.3% reported in December 2021. This puts inflation outside the BOJ’s target range of 4% to 6%, for the 6^th consecutive month. 
• For the month of January, the rise in inflation was largely driven by the 8.4% increase in the index for the ‘Restaurants and Accommodation Services’ division as tourism activity increased relative to the prior period. The inflation rate was also impacted by a 0.6% increase in the ‘Transport’ division which resulted from increased petrol prices. However, the rise in the point to point inflation rate was influenced by increased prices in the: Food and Non-Alcoholic Beverages (9.9%), Transport’ (13.8%) and Housing, Water, Electricity, Gas and Other Fuels (10.9%), divisions. 
• The current breach in the inflation range is in-keeping with expectations, as the BOJ noted on December 20, 2021, that inflation was projected to successively breach the target for the next 8 to 10 months. The elevated rates will likely be driven by continued transmission of high international commodity and shipping prices to domestic processed food, food-related services and energy price inflation, as well as a recovery in domestic demand. 
• The BOJ has already increased its policy rate by 200 basis points to 2.5% per annum, and it is anticipated that it will increase the rate further at its next policy decision meeting on February 18^th. This decision will be driven by the sustained expectation for future breaches of the inflation range. It will also be influenced by high inflation expectations for the 12 months ahead, which rose to 8.9% in the November Survey from 8.2% in the prior survey. Fitch Solutions currently forecasts another 25bps increase in the rate in 2022, but we expect the total rate hike for this year to surpass this amount.

(Source: Statin and NCBCM Research)

• JMMBGL reported a net profit attributed to equity holders of $8.28Bn for its 9 months ending December 31, 2021, which represents a 115.1% or $4.43Bn increase relative to the prior period. 
• All revenue lines increased, including net interest income, trading gains and fees and commission income. This was facilitated by increased economic activity relative to the prior period, as well as accommodative monetary policies for most of the period (since BOJ did not start raising rates until the last quarter of this 9-month period). 
• In particular, a growth in the loans and investment portfolios bolstered the 18.4% increase in net interest income, and an improvement in investor sentiments and demand for emerging market assets as global interest rates remained low, influenced the 44.7% increase in gains on traded securities. Fees and commission income was 58% higher and reflected increased economic activity as well as significant growth in managed funds and collective investment schemes across the Group. 
• The Group also recorded a 24.2% (or $2.58Bn) increase in operating costs as it transitioned to growth mode from a cost-containment strategy in the prior year, which was incorporated to dampen the effects of the pandemic. It was however able to convert the strategic spend into higher revenues relative to costs, as its operating revenues increased by 32.9%, and operating efficiency improved to 60.2% from 64.4%. 
• We expect JMMBGL to continue to benefit from the economic recovery in its main operating markets, in particular Jamaica and the Dominican Republic. Both economies are forecasted to experience real GDP growth of 5.5% and 2.7%, respectively, in 2022, which will help to fuel greater employment and corporate financial recovery, and in turn raise demand for financial services. It could realise an increase in net interest income from banking services as central banks have switched from their more accommodative policy. However, its securities business could simultaneously record reduced net interest income as its cost of funds may rise faster than its asset yields, contracting spreads and tempering the overall improvement in profitability. 
• JMMBGL’s stock price has increased by 11.8% since the start of the calendar year. The stock closed Tuesday’s trading session at $44.09 and currently trades at a P/E of 7.2x earnings which is below the Main Market Financial Sector Average of 15.1x

(Source: Company Financials and NCBCM Research)