• Emerging markets investors are increasingly concerned about the outlook for economic growth in developing countries and are clinging to high cash levels with scarce plans to deploy funds in the months to come, an HSBC (Hongkong and Shanghai Banking Corporation) poll showed on Thursday. 
• Nonetheless, respondents expected central banks in many emerging markets to continue to raise interest rates. “The feeling among investors is that while the growth outlook is dimmer and inflation is less of a concern than at the beginning of the year, EM countries will continue to hike rates because they are trying to pre-empt Fed tightening and avoid a repeat of the taper tantrum we saw in 2013-2014," Murat Ulgen, global head of EM research at HSBC said. 
• Central banks in Brazil, Russia, Hungary and Mexico, among others, have already hiked rates this year to counter inflation pressures and currency depreciation. Respondents cited the U.S. Federal Reserve hiking interest rates and tapering its pandemic bond purchase as the biggest risk for emerging markets, ahead of COVID or higher-than-expected inflation. 
• While the number of respondents holding more than 5% of their portfolio in cash decreased to 45% from 48%, investors willing to keep cash levels unchanged for the next three months stood at six out of ten, the highest in at least a year. Investors also reduced overweight positions in fixed income assets and added to overweight positions in equities and currencies, according to the poll. HSBC conducted the survey between June 8-July 23, asking 124 investors from 119 institutions representing $506 billion of emerging market assets under management.

(Source: Reuters)

• China will raise export tariffs for pig iron and ferrochrome, and remove export tax rebates for 23 steel products from Aug. 1, the second adjustment in three months as it seeks to ensure domestic supply while controlling output to curb emissions. Export tariffs for high-purity pig iron will be lifted to 20% from 15%, and for ferrochrome will be increased to 40% from 20%, the Ministry of Finance said in a statement on Thursday. 
• The country will also cancel export tax rebates for 23 steel products, including some cold-rolled coils and silicon steel which have higher added-value compared with carbon steel. "The changes aim to promote upgrade and high-quality development of the steel industry," said the finance ministry. 
• China, the world's top steel producer had already adjusted its tariffs on May 1, when it removed export tax rebates for 146 steel products, hiked pig iron and ferroalloys export tariffs and exempt some temporary import tariffs. The adjustments came as the country wants to ensure domestic supplies when curtailing production for fewer carbon emissions. 
• However, as steel demand and prices are still well supported by the global economic recovery, the country's steel products exports picked up 23% in June after a 34% drop in May. Meanwhile, steel output in the first half also jumped 11.8% in China, making it harder to keep to the promise of no rise in annual crude steel production in 2021. 
• The rise in steel prices will raise the costs of construction materials in the domestic market, causing a rise in development costs for commercial and residential buildings. However, these costs will likely be passed on to consumers considering the strong demand influencing robust growth in the construction sector, resulting in an increase in real estate prices, particularly for new construction.

(Source: Reuters & NCBCM Research)

• Owing to a 25.5% increase in revenues, for the first quarter ending June 2021, Lasco Manufacturers reported a net profit of $401.76Mn (EPS: $0.10), a 17.5% increase over Q1 2020.  
• However, despite the higher revenues, gross margin declined to 36.0% from 39.0% in the prior year due to higher raw materials and shipping costs, which were not immediately recovered through selling price increases. Nevertheless, admin expenses were well contained, falling by 2.1%, which along with an increase in “other income” helped to augment the bottom-line. 
• Higher material and shipping costs due to rising demand relative to supply stemming from the reopening of economies across the world could keep input costs elevated over the near term. Nevertheless, this could be offset by higher revenues influenced by the reopening of schools in September. The government has committed to reopen schools, once it is able to contain the number of new COVID-19 cases and vaccinate a sufficient portion of the population. It is planning to distribute up to 1.4Mn doses of the COVID-19 vaccine by September 30. 
• Lasco Manufacturing stock price has appreciated by 35.1% since the start of the year and closed Wednesday’s trading session at a price of $5.20 per share. At this price, the stock trades at a P/E ratio of 14.7x earnings, which is below the junior market manufacturing sector average of 16.5x earnings.

(Source: Company Financials & NCBCM Research)

• Minister of Health and Wellness, Dr. the Hon. Christopher Tufton, says that approximately 1.4Mn doses of vaccines – both double and single doses, are expected in the island over the next few months up to the end of September. “The target is to deliver doses to 900,000 Jamaicans between now and the end of September. It’s an ambitious target, but I believe with the support of the population and all of society, we can achieve that target,” he said. 
• Tufton, who was addressing a virtual press conference hosted by Prime Minister, the Most Hon. Andrew Holness, on Monday (July 26), noted that as soon as new batches of vaccines arrive, the programme will be opened up to all Jamaicans who qualify, aged 18 years and over. He noted that once “we get to the 900,000, plus those who have already benefited, then we will be somewhere in the region of 50% of target, given that we are looking at 1.95Mn or so”. 
• If the government is able to deliver on the distribution of these 1.4Mn doses, this could help to fast-track the country’s economic recovery, as it will put the government in a better position to relax COVID-19 containment measures.

(Source: JIS & NCBCM Research)

• On July 28, 2021, the IMF Executive Board completed the first review under the two-year Precautionary and Liquidity Line (PLL) arrangement for Panama which was approved on January 19, 2021 in the amount equivalent to US$2.7 billion (SDR 1.884 billion). 
• The PLL serves as insurance against extreme external shocks stemming from the COVID-19 pandemic, with access in the first program year equivalent to about US$1.35 billion (0.942 billion SDR). The authorities intend to continue treating the arrangement as precautionary. 
• According to the IMF, the performance under the program has been strong and Panama continues to meet the PLL qualification criteria. The authorities remain resolute in implementing the strong policies under the PLL.

(Source: IMF)

• Mexico's state oil company Petroleos Mexicanos (PEMEX) on Wednesday reported net profit of $722.5 million for the second quarter, swinging from a loss in the same period last year, thanks to higher crude prices and production. 
• The company said the 14.4-billion-pesos profit was driven by higher income from international sales, which doubled from a year earlier due to higher crude prices and a slight rise in oil volumes exported. 
• However, PEMEX's debt rose from the first quarter of the year, reaching $115.1 billion at the end of the April-to-June period due to the use of short-term financing. Despite this, PEMEX has said it will not resort to the bond markets this year for refinancing as it plans to receive capital injections from the government through the fourth quarter, which should lead to a net debt reduction, a long-standing but so far unfulfilled goal. 
• Given its weak liquidity, and negative free cash flow. which will rise in the next three years due to high debt maturities and lower operating cash flow derived from the expansion of its refining business, on July 27^th Moody’s downgraded PEMEX’s corporate family rating and the senior unsecured ratings on the company's existing notes, from Ba2 to Ba3 (S&P Equivalent: BB-). 
• The agency also maintained the negative rating outlook on PEMEX's Ba3 ratings primarily based on the negative outlook on Mexico's Baa1 rating given the importance of the sovereign's credit strength and ongoing support to PEMEX's ratings.

(Source: Reuters & Moody’s)

• The U.S. trade deficit in goods increased in June as imports continued to rise amid strong economic activity, suggesting trade likely remained a drag on growth in the second quarter. The U.S. economy has rebounded more quickly from the pandemic compared to its global rivals, thanks to massive fiscal stimulus, low interest rates and vaccinations against COVID-19. But bottlenecks in the supply chain have hampered manufacturers' ability to boost production, drawing in more imports. 
• "The widening in the advance nominal goods deficit in June is further evidence that net exports will be a drag on second- quarter GDP," said Ryan Sweet, a senior economist at Moody's Analytics in West Chester, Pennsylvania. 
• The goods trade deficit increased 3.5% to $91.2Bn last month, the Commerce Department said on Wednesday. Imports of goods advanced 1.5% to $236.7Bn. There were increases in imports of food, industrial supplies and capital goods. 
• However, imports of motor vehicles and consumer goods fell. While that could hint at a possible moderation in consumer spending in the months ahead, the drop could reflect a global shortage of semiconductors, which has weighed on the production of motor vehicles and some household appliances. 
• Spending during the pandemic shifted to goods from services, with Americans cooped up at home, but with nearly half of the United States population fully vaccinated against the coronavirus, demand for services is picking up.  That has raised optimism among some economists that fewer goods will be imported in the coming months and allow the trade gap to shrink. However, the Delta variant of the virus is driving a resurgence in new infections across the country, which could limit demand for services. 
• "We expect the overall trade deficit to narrow in the coming months as consumers rotate their spending towards services and greater vaccine diffusion abroad encourages stronger export growth," said Mahir Rasheed, a U.S. economist at Oxford Economics in New York. "However, risks from sticky supply chain disruptions and the rapid spread of the Delta variant could slow trade flows."

(Source: Reuters)

• The International Monetary Fund warned Tuesday that there’s a risk inflation will prove to be more than just transitory, pushing central banks to take pre-emptive action. 
• The issue is currently dividing the investment community, which has been busy contemplating whether a recent surge in consumer prices is here to stay. In the U.S., the consumer price index came in at 5.4% in June, the fastest pace in almost 13 years. In the U.K., the inflation rate reached 2.5% in June the highest level since August 2018 and above the Bank of England’s target of 2%. 
• Higher prices increase the chances that central banks will start to curb their ultra-accommodative monetary policies, such as a tapering of market-friendly stimulus like asset purchases. 
• Speaking earlier this month, U.S. Federal Reserve Chair Jerome Powell said the jobs market was “still a ways off” from where the central bank would like to see it before it reduces stimulus. He added that inflation would “likely remain elevated in coming months before moderating.” The IMF had already pointed out earlier this month that if the U.S. were to provide more fiscal support then this could increase inflationary pressures even further and lead to a hike in interest rates earlier-than-expected. 
• IMF Chief Economist Gita Gopinath said in a blogpost Tuesday that “more persistent supply disruptions and sharply rising housing prices are some of the factors that could lead to persistently high inflation. She also warned that “inflation is expected to remain elevated into 2022 in some emerging market and developing economies, related in part to continued food price pressures and currency depreciations.”

(Source: CNBC Economy)

• The GOJ created history, on July 23, 2021, with the successful completion of a catastrophe bond (CAT bond) issuance through the World Bank (International Bank for Reconstruction and Development (IBRD)) that secured US$185.0Mn in financial protection against major hurricanes. 
• The Jamaican government is the first in the Caribbean and the first island state in the world to independently access the CAT bond market. The bond was issued under the World Bank’s “capital at risk” notes program and will provide the GOJ with critical disaster insurance protection against losses from named storms across three Atlantic hurricane seasons up to December 2023. 
• This historic transaction transfers financial risk associated with tropical cyclones and hurricanes to the international capital market. Along with the other layers of disaster risk financing that have been put in place, the CAT bond strengthens Jamaica’s ability to finance the emergency costs of hurricanes and tropical cyclone, which improves the country’s economic resilience against these economic shocks.

(Source: Ministry of Finance)

• Medical Disposables & Supplies Limited (MDS) has advised that the Company was appointed as the distributor for the following product lines: Simply and Benjamin’s Cosmetics Jamaica Black Castor Oil (JBCO). 
• Both Simply and JBCO are local brands. The Simply brand is a line of everyday essential products, manufactured in Jamaica, that fall within the categories of personal care, home remedies and flavourings. These include items such as Rubbing Alcohol, Olive Oil and Vanilla, etc. The JBCO personal care range of products are made with authentic Jamaican Black Castor Oil and other natural oils which promote healthy hair and skin. This includes JBCO Shampoo, Conditioner, Beard Oil, Beard Wax and Oils. 
• The addition of this distribution arrangement bodes well for the company’s thrust to grow revenues and increase its bottom-line.

(Source: JSE)