• A sweeping bill passed by the U.S. Senate on Sunday, August 7^th,2022, is intended to fight climate change, lower drug prices, raise some corporate taxes, bring down inflation over the medium to long term, and cut the deficit, rating agency Moody's Investors Service told Reuters on Monday, August 8th, 2022.
• The Senate on Sunday, August 7th,2022, passed the $430 billion bill, a major victory for President Joe Biden, sending the measure to the House of Representatives for a vote, likely Friday. They are expected to pass it and send it to the White House for Biden's signature.
• The legislation, known as the Inflation Reduction Act, however, will not bring down inflation "this coming year or next year," said Madhavi Bokil, senior vice president at Moody's Investors Service. "We do think that this act will have an impact (of cutting inflation) as it increases productivity," she said, adding her horizon was two to three years.
• However, it was argued by the Republicans, that the bill will not address inflation, and have denounced it as a job-killing, left-wing spending wish list that could undermine growth when the economy is in danger of falling into recession.
• Nonetheless, Bokil mentioned that the spending bill was complementary to another bill recently passed by Congress, which aimed to subsidize the U.S. semiconductor industry and boost efforts to make the United States more competitive with China.

(Source: Reuters)

• Prime Minister, the Most Hon. Andrew Holness, says the opening of the Kingston Logistics Park (KLP) is a significant investment and will bring more economic growth and job creation for the country.
• The Kingston Logistics Park, which incorporates 18,000 square metres of warehouse space, falls under the wider Logistics Hub Initiative (LHI) designed to position the country as a global destination in cargo trans-shipment and logistics services.
• The Park includes a border-protection centre, which houses the Jamaica Customs Agency (JCA) and the Container Security Initiative, which is a collaboration between the JCA and the United States Government.
• The development will see the country using its local and natural resources to build its logistics industry and cement itself as an important logistics node. This will result in the creation of a new industry that will provide higher quality jobs and a new stream of foreign exchange revenues that will make the economy more robust to withstand shocks.

(Source: JIS News)

• Local insurers, Key Insurance Limited (KEY) and Caribbean Assurance Brokers Limited (CABROKERS), reported improvements in their bottom line for the six months ended June 2022. KEY reported a net profit of J$12.25Mn (EPS$0.02), a 576.3% year-over-year improvement, while CABROKERS recorded a net profit of J$4.45Mn (EPS $0.02) versus a loss of J$21.32Mn in 2021.
• Both KEY (20.6%) and CABROKERS (17.9%) saw double-digit increases in revenues as business activity increased. KEY’s improved performance was attributable to improvement in both the insurance and investment segments of the business, while CABROKERS saw improved commission income from all four areas (International, Individual Life and General and Employee Benefits).
• Administrative and other expenses for KEY increased by 20.3% while CABRROKERS operating expenses increased by a marginal 1.2%. KEY also saw a 25.4% uptick in claims expenses for the review period.
• Both companies will have to navigate the headwinds impacting the global and local economy to ensure that shareholders’ value is protected. We expect KEY will continue to reposition its investment portfolio to optimize yields and drive interest income considering the rising interest rate environment. There will also be sustained efforts to improve underwriting practices to drive lower underwriting losses in the coming quarters and better value for shareholders.
• CABROKERS is targetting customer retention and business development strategies to enhance future profitability. This includes a focus on improved customer satisfaction through digital transformation and the creation of faster, more personalized service to drive revenues.
• KEY’s stock price has decreased by 4.6% since the start of 2022, while CABROKERS’ has increased by 10.8% to close Friday’s trading session at $3.84 and $2.52, respectively. KEY currently trades above the Main Market Financial Sector Average of 10.3x at a P/E of 12.0x. On the other hand, CABROKERS currently trades below the Junior Market Financial Sector Average of 13.6x at a P/E of 8.1x.

(Sources: JSE & NCBCM Research)

• Fitch Solutions revised its end-2022 interest rate forecast for Brazil from 13.75% to 14.00%, after the Banco Central do Brasil (BCB) left the door open to extending its hiking cycle through its September meeting. The total hikes in the BCB’s hiking cycle since February 2021 currently amounts to 1,175bps, one of the most aggressive cycles in the world.
• It is anticipated that the BCB will enact one final 25bps rate hike at its September meeting, as inflation expectations are not expected to moderate significantly for Q1 2024 - the period on which the BCB has indicated that they are focused on, mitigating the impact of temporary tax measures. Furthermore, Brazil's labour market has performed admirably this year, providing the bank additional leeway to raise interest rates.
• The BCB will begin progressively lowering its benchmark rate in 2023, to reach 11.00% by the end of the year. This is a significant increase above Fitch's earlier prediction of 9.75%, reflecting both the higher end point for 2022 and the higher inflation revision for 2023, which will likely push the BCB to take a more gradual approach. Given that rates are expected to stay relatively high in the medium term, borrowing costs in Brazil will remain high, impacting the country's economic development prospects.

(Source: Fitch Solutions)

• The Central Bank’s governor yesterday trimmed the Bahamian economic growth forecast for 2022 “to at least 5%” from 6% while warning that the cost-of-living crisis facing many families has yet “to peak”.
• John Rolle, speaking as the regulator unveiled its half-yearly economic and financial update, said Bahamians should expect to see higher US inflation rates, which are running at 40-year record highs and hit 9.1% last month, increasingly reflected in the price of goods and services sold locally.
• While official measures place Bahamian inflation below 5% (the Central Bank’s report pegged it at 3.8% for the year to April 2022), the country’s dependence on US imports – and inability to influence prices itself - means consumers should brace for further increases.
• According to Mr Rolle, while Bahamian inflation has "not yet reached the same level indicated in the US," the average inflation rate in The Bahamas will continue to move a bit higher in the near term.
• One counter to inflation, and where the country has seen some “head off” has been on electricity (energy) costs that have been somewhat contained via the fuel hedging initiatives employed by Bahamas Power & Light (BPL) and Grand Bahama Power Company.
• It is unclear, though, how long BPL will be able to hold fuel costs at their current level given the ongoing doubts about the status of its fuel hedging initiative and whether the Government is subsidising the utility’s fuel costs - something it is supposed to be blocked from doing by law under regulations passed in 2020.
• Low-income Bahamians, especially, but also those in the middle class as well as on fixed incomes such as pensioners, have been hit hard by food and gas price increases in the wake of COVID-19. Wages have largely remained stagnant, which has resulted in living standards for many eroding while the cost of living remains high.
• As for the overall economic outlook, the Central Bank governor indicated that despite the slight revision downwards the economy is projected to grow at a healthy pace of at least 5% in 2022, and gains are also expected in 2023, continuing to reflect a bounce back from COVID-19.

(Source: The Tribune)

• 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)