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Sharp Contraction In Exports Will Produce Deep Recession In Jamaica Published: 03 July 2020

  • Declining exports and private consumption will push Jamaica into a significant recession in 2020.
  • Fitch Solutions has revised down its 2020 real GDP growth forecast to -5.1% y-o-y, from -2.6% previously, as the Covid-19 pandemic halts tourism activity and exacerbates the contraction in bauxite production.
  • Risks remain to the downside as the global economic recovery could be derailed by a second wave of the coronavirus in H220.

(Source: Fitch)

ISP Reports a 34.1% Contraction in Q1 Profits Published: 03 July 2020

  • For the three months ended March 31, 2020, ISP Finance Services Limited reported a 34.1% (or $5.45Mn) contraction in net profits to $10.54Mn (EPS: $0.10) from $15.99Mn (EPS: $0.15) made in the previous year.
  • This performance was driven by a 2.0% (or $1.58Mn) decline in total operating income as well as a 5.4% (or $3.37Mn) increase in total operating expenses.
  • The stock has declined 62.9% since the start of the year and closed trading at $12.00 on Thursday. At this price ISP currently trades at a P/E of 70.6x earnings which is above the Junior Market Financial sector average of 31.2x earnings.

 (Source: ISP Financials)

Peruvian Sol Will Average Weaker As Short-Term Growth Outlook Worsens Published: 03 July 2020

  • It is expected that the Peruvian sol (PEN) will trade sideways in the coming months as a deep global recession and low copper prices cap the upside from improving investor risk sentiment.
  • In the longer term, the expectation is that the unit will return to a more modest rate of depreciation against the US dollar as a minimal real interest rate differential with the US and relatively expensive valuation offset higher copper prices and capital inflows.
  • Fitch revised its 2020 average forecast to PEN3.44/USD, from PEN3.40/USD previously, and its end-2020 FX forecast to PEN3.45/USD, from PEN3.40/USD, implying the sol will hold its value after depreciating 4.1% in the year to date. 

 (Source: Fitch)

BRAZIL INSIGHT: Debt Could Near 100% of GDP in Extended Slump Published: 03 July 2020

  • Brazil’s public debt reached a record-high of 80.8% of GDP in May. The bulging primary deficit, the effect of a weaker currency on the external debt, and the contraction in GDP largely outweigh the benefits of an exceptionally low-interest rate for debt dynamics.
  • The debt-to- GDP ratio is poised to rise even further in the coming months. The critical question is how and when the government will be able to fix the problem.
  • Bloomberg’s economists expect public debt to reach 91.7% of GDP by year-end. This reflects their forecast for a 6.4% contraction in the GDP, a primary deficit of 10% of GDP, and a rather benign assumption that the currency strengthens to 4.80 reais per U.S. dollar.
  • The primary deficit will rapidly rise from 3.9% of GDP in May to at least 10%at the end of the year, with most of the slump coming through August.

 (Source: Bloomberg)

U.S. manufacturing activity hits 14-month high Published: 03 July 2020

  • U.S manufacturing activity rebounded in June, hitting its highest level in more than a year as the broader economy reopened, but rising COVID-19 infections threaten the recovery.
  • The Institute for Supply Management (ISM) said its index of national factory activity jumped to a reading of 52.6 last month from 43.1 in May. That was the strongest since April 2019 and ended three straight months of contraction.
  • A reading above 50 indicates growth in manufacturing, which accounts for 11% of the U.S. economy. Economists polled by Reuters had forecast the index rising to 49.5 in June.

 (Source: Reuters)

Record jobs gain of 4.8 million in June smashes expectations; unemployment rate falls to 11.1% Published: 03 July 2020

  • Nonfarm payrolls soared by 4.8 million in June and the unemployment rate fell to 11.1% as the U.S. continued its reopening from the coronavirus pandemic, the Labor Department said Thursday.
  • The jobs growth marked a big leap from the 2.7 million in May, which was revised up by 190,000. The June total is easily the largest single-month gain in U.S. history. The numbers capture the move by all 50 states to get activity moving again after the virus seized up much of the U.S., particularly service-related industries.

 (Source: CNBC)

Increased Costs Wipe out K.L.E profits for Q1 Published: 02 July 2020

  • K.L.E. Group Limited reported net loss of $19.07Mn (EPS: -20¢) for the three months ended March 31, 2020, despite a 46.1% (or $22.94Mn) increase revenue. This represents an almost hundredfold decline when compared to the $198k made in the same period of the previous year.
  • The main contributor to this performance was an 83.9% (or $30.56Mn) increase in administrative expenses, a 57.9% (or $8.11Mn) increase in the cost of sales, a 19.5% (or $1.02Mn) increase in finance and depreciation costs as well as a 43.8% (or $2.8Mn) decline in other operating income.
  • The company’s stock price has risen by 2.9% since the beginning of the year to end Wednesday’s trading session at $1.80. The stock currently trades at a P/B of 2.27x, which is slightly below the Junior Market average of 3.0x earnings.

 (Source: K.L.E Financials)

Mexico revokes license of savings bank arm of Grupo Famsa Published: 02 July 2020

  • Mexican financial authorities said on Tuesday they had revoked the license of the savings bank arm of retailer Grupo Famsa, which last week announced it was seeking Chapter 11 bankruptcy protection in the United States.
  • In a statement, the financial authorities said the license for Banco Ahorro Famsa had been withdrawn due to inappropriate risk management and operations, as well as loans granted to “related parties of the group above regulatory limits.”
  • The bank had also kept improper records, and repeatedly failed to comply with regulatory provisions, the central bank, the finance ministry and banking regulator said jointly.

 (Source: Reuters)

IDB funds COVID-19 recovery in T&T Published: 02 July 2020

  • The Inter-American Development Bank (IDB) said Wednesday that it granted a $100 million loan for Trinidad and Tobago to finance its response to the COVID-19 pandemic and promote an economic recovery after the health crisis has passed.
  • Trinidad and Tobago will use part of the money to support household income and business liquidity during the pandemic through tax refunds, salary grants, food stamps and rental assistance. It will also use the loan to buy medical equipment and hire medical staff, the IDB said in a press release.
  • The loan will also go to implementing the Fair Trading Act (FTA), which involves promoting competition in local markets, lowering the cost of essential goods for consumers and increasing private sector productivity.

 (Source: Latinfinance)

Coronavirus will cost global tourism at least $1.2 Published: 02 July 2020

  • The world’s tourism sector could lose at least $1.2 trillion, or 1.5% of the global gross domestic product (GDP), having been placed at a standstill for nearly four months due to the coronavirus pandemic.
  • The UN’s trade and development body warned that the loss could rise to $2.2 trillion or 2.8% of the world’s GDP if the break in international tourism lasts for eight months, in line with the expected decline in tourism as projected by the UN World Tourism Organization (UNWTO).
  • The United Nations Conference on Trade and Development (UNCTAD) estimates losses in the most pessimistic scenario, a 12-month break in international tourism, at $3.3 trillion or 4.2% of global GDP.

 (Source: UNCTAD)