• Economic underperformance relative to budget assumptions and lower than expected oil revenue is straining Mexico's budget framework and underscores challenges the government faces in meeting its non-financial public sector (NFPS) primary surplus targets, says Fitch Ratings.
• The recent announcement that the government will use part of the stabilization fund (FEIP) to offset lower than expected revenues without further spending cuts should allow the 2019 primary surplus target to be met. However, the decision also highlights the trade-off facing the government between maintaining fiscal targets and supporting the economy.
• The Ministry of Finance revised downward its 2019 real GDP growth forecast to 1.1% from 1.6% this week, following the release of 2Q19 data, which showed the economy expanded by just 0.1% QoQ (0.4% YoY). This means that Mexico barely grew in 1H19 and only narrowly avoided a technical recession as the economy contracted by 0.2% QoQ in 1Q19.

(Source: Fitch)

• Fiscal consolidation measures and slowing global growth will weigh on real GDP growth in Costa Rica in the coming quarters.
• However, the investment will likely remain robust as Costa Rica's competitive tourism, agriculture, and manufacturing sectors and a more accommodative monetary policy environment attract foreign investment.
• Fitch has revised down its 2019 real GDP growth forecast to 2.6% y-o-y, from 2.9% previously, and its 2020 forecast to 2.9%, from 3.0% previously, to reflect a more downbeat view on private consumption and external demand. 

(Source: Fitch)

• Traders in Asia are bracing for a full-fledged currency war after a slide in China’s yuan past the 7 per dollar mark raised the prospect of policymakers allowing their exchange rates to weaken to remain competitive.
• Currencies slumped across the region Monday, with South Korea’s won tumbling to the weakest in three years after the offshore yuan plunged almost 2% to an all-time low of 7.1114. The yen and Treasuries rallied amid a flight to safety.
• “Without a doubt, the global currency war is here, and it’s a natural extension of the trade war that’s just taken a turn for the worse,” said George Boubouras, director at Salter Brothers Asset Management Pty in Melbourne.
• Fear over trade and currency wars is prompting monetary action around the globe. Various central banks have since cut their rates: New Zealand’s dropped its benchmark rate by 50 basis points; Thailand by 25 basis points and India’s by an unconventional 35 basis points. 

(Source: Bloomberg)

• Brent crude closed in a bear market on Tuesday as the trade war ramps up investor concern over consumer and industrial demand.
• Bloomberg reported China will probably start avoiding imports of U.S. crude oil as tit-for-tat tensions ratchet up, according to traders who supply American crude to China.
• On the geopolitical front, U.S. Secretary of State Michael Pompeo will hold a joint press conference with the U.K.’s new Foreign Secretary Dominic Raab later today as the two nations agree to work together on maritime security in the Persian Gulf.
• The effort would aim to protect tankers passing through the world’s most important chokepoint for oil from the showdown with Iran.
• Meanwhile, Trump imposed further sanctions on Venezuela, freezing the government’s assets in the U.S. It is unclear whether the move will affect companies such as Chevron Corp., which was just granted a three-month waiver allowing it to continue producing oil and gas in the country.

(Source: Bloomberg)

• For the six-month period ended June 30, 2019, Caribbean Cement Company Ltd (CCC) reported an unaudited net profit of $1.50Bn (EPS: $1.76), a 42.2% increase from the $1.05Bn (EPS: $1.18) reported for the corresponding period in 2018.
• The performance over the period was primarily driven by a 4.0% YoY improvement in revenue which came in at $9.13Bn for the period. Notably, the performance over the six month period can also be attributed to the strong performance in Q1 which accounts for 75.4% of total profit for the period.  
• Despite a 6.0% YoY improvement in revenue for the second quarter the company’s profit contracted 47.6% when compared to the previous year due to a sharp increase in finance charges (+66.9%) and higher Depreciation, impairment and amortization costs (+19.1%).  The increase in finance costs was due to foreign exchange losses and higher interest expense. 
• The stock has risen 88.23% since the start of the calendar year, closing Wednesday’s trading session at $79.81 per share. At its current price, the stock now trades at a P/E of 22.92x earnings which is below the Main Market Industrials and Materials sector average of 28.50x earnings.

(Source: CCC Financials)

• Grace Kennedy’s net profit for the six-months ended June 2019 decreased to $2.27Bn (EPS: $2.03), down 7.3% from $2.45Bn (EPS: $2.17) in 2018.
• Though there was a 6.5% increase in revenue from $48.37Mn to $51.49Mn, profit was negatively impacted by the newly adopted accounting standard on leases, IFRS 16, which led to additional expenses of $115.00Mn in addition to, post-employment benefit expenses relating to IAS 19 increasing by $189.00Mn.
• Even though there is a decrease in profit, the Group expects to meet its 12-month profit target for 2019 and plans to pay a dividend of 40 cents per share which is equivalent to $397Mn on September 26, 2019.
• The stock has increased 12.08% year to date, closing Wednesday’s trading session at $71.17 per share. At its current price the stock now trades at a P/E of 14.98x earnings which is below the Main Market Conglomerate sector average of 22.90x earnings.

(Source: GraceKennedy Limited Financials)

• Nicaragua’s fiscal deficit will remain wide in 2019, as a severe economic contraction will weigh on government revenues.
• While the February 2019 passage of a tax and pension reform is likely to improve the country’s long-term fiscal trajectory, the impact in 2019 is likely to fall short of government projections.
• Fitch Solutions forecast Nicaragua’s fiscal deficit will narrow slightly to 3.8% of GDP in 2019 and 3.6% in 2020, from 4.0% in 2018.

(Source: Fitch)

• Trade between China and the Dominican Republic was US$1.4 billion in the first six months, a 44.1% jump, said Chinese ambassador Zhang Run. He said with the confidence in the country’s political stability, trade relations will develop at a considerable pace.
• The diplomat spoke in a meeting with the Dominican Republic Merchants Federation chaired by Iván García, who said they’ll continue doing business with greater legal certainty and confidence with Chinese exports to the country. “We will propel exports from the country to the Asian nation.”

(Source: Dominican Today

• Having waited all week for an update on how the latest round of trade talks between the U.S. and China were going, President Donald Trump answered that question emphatically with a series of tweets.
• Trump said the U.S. will impose 10% tariffs on another $300Bn of Chinese goods not already subject to levies. The final list of which has yet to be released but it is likely to include consumer goods and tech.
• The effects of Trump’s tweets were seen in Treasury yields which dropped the lowest levels since 2016; oil also took a beating and is now on track for a loss this week, and stock traders were caught in the midst of a brutal 48 hours between the Federal Reserve decision and the tariffs.
• It leaves an already-struggling global economy steeling itself for more difficulties and has analysts asking questions about when China’s currency may break through a key level against the dollar and what kind of opportunities it may bring for stock investors.

(Source: Bloomberg)

• Another topic on the tip of market watchers’ tongues all week has been no-deal Brexit, the increased threat of which has sent the pound tumbling lower.
• The Bank of England decision on Thursday left markets confounded and likely only adds further to the uncertainty as the central bank effectively decided not to assume no-deal outcomes in its latest inflation reports, even as markets do just that.
• The markets’ reactions appear warranted given the signals from the U.K.’s government, which has doubled its spending on preparations for leaving the European Union without a deal in place, but that’s been complicated by the government's majority being cut to one.

(Source: Bloomberg)