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Latest Rating Actions by CariCRIS
▪ Sagicor Financial Corporation Limited’s proposed bond issue initial rating assigned at CariAA ▪ Dominica Agriculture, Industrial and Development Bank’s rating reaffirmed at CariBB- ▪ Beacon Insurance Company Limited’s rating reaffirmed at CariA- ▪ The Government of the Commonwealth of Dominica rating reaffirmed at CariBB ▪ The Government of the Republic of Trinidad and Tobago rating reaffirmed at CariAA+ ▪ Eastern Caribbean Home Mortgage Bank’s rating reaffirmed at CariBBB+ ▪ Sagicor Group Jamaica Limited’s initial rating assigned at CariA ▪ NIF Holding Company Limited’s TT$4 billion issue rating reaffirmed CariAA ▪ Goddard Enterprises Limited’s rating reaffirmed at CariAA- ▪ NCB Global Finance Limited’s initial rating assigned at CariA ▪ RHAND Credit Union Co-operative Society Limited’s rating reaffirmed at CariBBB- ▪ Development Bank of Jamaica Limited’s rating upgraded to CariA- ▪ Bourse Securities Limited rating reaffirmed at CariA- ▪ PLIPDECO’s rating reaffirmed at CariA+
Please visit our website at www.caricris.com for the detailed Rationales on these and other ratings
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to increased efficiencies as a result of improved business operations
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REGIONAL
Trinidad and Tobago
CariCRIS gives Sagicor bond AA The Caribbean credit rating agency, CariCRIS yesterday assigned an initial credit ratings of CariAA (Foreign and Local Currency Ratings) on its regional rating scale and jmAAA on the Jamaica national scale, to the proposed debt issue of Sagicor Financial Corporation Ltd (SFC) of up to US$76 million or the Jamaican Dollar equivalent.
Unilever gains $0.78 Overall market activity resulted from trading in 15 securities of which eight advanced, four declined and four traded firm.
Guyana
Qatar Petroleum enters Guyana’s oil market QATAR Petroleum, a state-owned public corporation responsible for the oil and gas industry in Qatar, has entered into an agreement with Total for a share of exploration and production rights in two blocks offshore Guyana.
Justice Singh sworn-in as GECOM Chair Justice (Ret’d) Claudette Singh, SC, CCH was moments ago sworn-in as Chairman of the Guyana Elections Commission (GECOM) by President David Granger.
The Bahamas
Cut 'Terrifying' Bad Loan Rate by Over 50% The Central Bank's governor wants to further cut the "terrifying" 8.7 percent loan delinquency rate by more than half despite it having fallen to its lowest level in a decade.
Business Optimism Up but Profits Fall For 57% Despite 57 percent of businesses suffering a decline in first-half profits, a Central Bank survey has found that nearly-two-thirds believe the economy will improve during 2019’s final months.
St. Lucia
St Lucia lost Virgin Atlantic to Antigua and Havana Virgin Atlantic has announced a review to its global flying programme that will cease flying to Saint Lucia from June 8, 2020 ‘for the foreseeable future’.
Anguilla
Marketing Anguilla For the Next Tourism Season With the current tourism season now receding, the Anguilla Tourist Board has brought its international representatives to the island for what has been dubbed “The ATB 2019 Marketing Week”.
Anguilla Wins #1 Island in The Caribbean At Travel+Leisure World’s Best Awards The Hon. Victor F. Banks, Premier of Anguilla, joined Parliamentary Secretary, Cardigan Connor, and ATB Chairperson, Donna Banks, to receive the island’s latest accolade, as the #1 Island in the Caribbean, Bermuda and Bahamas in the 2019 Travel + Leisure World’s Best Awards, for a truly unprecedented third year in a row.
Dominica
CBI has been a lifeline for Dominica, says PM Skerrit Citizenship by Investment (CBI) has been a lifeline for Dominica, a sentiment that prime minister Roosevelt Skerrit expresses frequently.
The Dominican Republic
They finance US $ 69.6 million for several projects in the North The General Director of Multilateral Cooperation, Ambassador Antonio Vargas Hernández, informed that the Ministry of Public Works and Communications (MOPC) and the National Housing Institute (Invi), will execute a project “Improving Public Works to Reduce Disaster Risk,” for an amount of US $ 69.6 million.
The Dominican Republic continued
US$674.5M from bank reserve boosts credit: Central Bank The Central Bank on Thurs. told the economic agents and the public that its recently adopted monetary policy measures, which include the release of RD$34.4 billion (US$674.5 million) from the bank reserve and the reduction of 50 base points of the monetary policy rate, have “positively impacted the evolution of credit to the private sector in national currency.”
JMMB Financial Group country CEO reports positive results The new country CEO of the JMMB Financial Group, Juan José Melo Pimentel, said Tues. that all of its companies posted satisfactory results in 2018 and expects similar performance by yearend 2019.
Central Bank makes changes in bills of RD $ 2,000.00 and RD $ 200.00, and the RD $ 25.00 coin The Central Bank of the Dominican Republic (BCRD) reported that there will be changes in the RD $ 2,000.00 and RD $ 200.00 bills, of the series 2017, as well as in the RD $ 25 peso coins, also of the series 2017 , which will circulate successively from July 15, noting that both the indicated banknotes and the currency will coexist with the denominations of previous years.
Dominican Republic to tender potential gas and oil sites Today begins in Houston, Texas, a round with investors in which the Dominican Government expects to tender 14 blocks of gas and oil in three locations across the country, a process that will conclude in December.
Minimum wage climbs 14% in Dominican Republic The minimum wage for the private sector -currently around RD$10,000 (US$200) monthly- will climb 14% retroactive to July 1, according to the agreement reached Tues. between labour and management in the National Wages Committee.
Venezuela
Venezuela's PDVSA says Petropiar has started operations as blending facility Venezuelan state-run oil company PDVSA said on Monday the Petropiar extra-heavy crude upgrader, part-owned by U.S. oil company Chevron Corp (CVX.N), had begun operations as a blending facility.
INTERNATIONAL
United States
Futures drop as eyes shift to Fed meeting, Apple earnings U.S. stock index futures dropped on Tuesday, as worries about the scale of consensus at the Federal Reserve in favour of deeper cuts in interest rates ate into the positive sentiment that drove indexes to record highs last week.
Goldman Sachs says S&P 500 bull-run has legs but cuts earnings outlook Goldman Sachs said on Tuesday it has raised its 2019 target for the U.S. benchmark S&P 500 index .SPX by 3% to 3,100, implying a 24% gain for the year, but has lowered its earnings estimates citing weakness in economic activity and margin outlook.
Procter & Gamble sales, profit beat expectations; shares rise Procter & Gamble Co’s (PG.N) quarterly revenue and profit beat Wall Street expectations on Tuesday, boosted by price hikes and strong demand for its beauty products such as SK-II and Olay, sending its shares up about 4% before the opening bell.
ConocoPhillips adjusted profit falls on lower crude prices Independent oil and gas producer ConocoPhillips (COP.N) reported an 11.6% drop in quarterly profit on Tuesday, as fears of slowing global economy weighed on crude prices.
Higher consumer spending helps Mastercard beat quarterly profit estimates Mastercard Inc on Tuesday beat Wall Street estimates for quarterly profit, as a robust economy encouraged customers to spend more, boosting fee income for the world’s second-largest payment processor.
Under Armour cuts North America revenue forecast; shares fall 10% Sportswear maker Under Armour Inc (UA.N) (UAA.N) on Tuesday cut its full- year revenue forecast for North America, its biggest market, in the face of stiff competition from bigger rivals Nike Inc (NKE.N) and Adidas AG, sending its share down 10%.
United States continued
Exxon Mobil's second-quarter results expected to sag, spotlighting need for asset sales Exxon Mobil Corp’s plan to accelerate asset sales, a way of delivering needed cash to finance shareholder returns and major projects, is getting off to a slow start as oil companies pull back on big deals.
United Kingdom
BP profit again outstrips forecasts, lifted by higher oil output A strong rise in oil and gas production helped BP (BP.L) offset weaker crude prices and refining profit to again beat profit expectations on Tuesday, boosting its shares.
UK company insolvencies hit five-year high in second quarter The number of insolvent companies in England and Wales hit its highest in more than five years in the second quarter of 2019, according to data on Tuesday that showed businesses under rising financial pressure as Brexit nears.
Boris Johnson's no-deal Brexit gamble hits sterling The British pound GBP tumbled on Tuesday as investors bet Prime Minister Boris Johnson's Brexit brinkmanship with the European Union could trigger a messy divorce that would sow chaos through the world economy and financial markets.
Europe
Weak euro zone data backs Draghi's plan for more stimulus French growth slowed unexpectedly in the second quarter on weaker household spending and German consumer morale worsened for the third month in a row heading into August, adding to signs that the euro zone economy as a whole is cooling.
European shares hit by Bayer, Lufthansa; FTSE shines European shares slipped on Tuesday as grim forecasts from German giants Bayer and Lufthansa soured sentiment, while a battered pound helped London’s blue-chip index outperform for a second day.
Europe continued
Euro struggles ahead of Fed meeting The euro hovered on Tuesday around the 26-month low it reached last week against the dollar as investors awaited to see whether the Federal Reserve would signal the start of an interest rate-cutting cycle.
Euro zone economic sentiment declines as expected in July Euro zone economic sentiment continued to worsen as expected in July on less optimistic industry, services, retail trade and construction and inflation expectations among companies and consumers decreased as well, data showed on Tuesday.
French second-quarter growth slows unexpectedly to 0.2% French growth slowed slightly in the second quarter as consumer spending eased and companies drew down inventories, although economists expect income gains to help offset a weakening global outlook in the months to come.
China
China will boost economy but won't use property market for stimulus China will step up efforts to boost demand and support the economy but will not use the property market as a form of short-term stimulus, a top decision-making body of the ruling Communist Party said on Tuesday.
Japan
Japan government to earmark $40 billion to boost growth in FY2020/21 budget Japan will earmark 4.4 trillion yen ($40.52 billion) in the next fiscal year’s budget for measures to spur private demand as well as enhance science and technology as part of Prime Minister Shinzo Abe’s growth strategy, government sources with knowledge of the matter told Reuters on Tuesday.
Bank of Japan commits to easing further if inflation sputters, keeps policy steady The Bank of Japan held off on expanding stimulus on Tuesday but committed to doing so “without hesitation” if a global slowdown jeopardizes the country’s economic recovery.
Japan continued
SoftBank to pump second Vision Fund with proceeds from the first SoftBank Group Corp plans to use proceeds from its first Vision Fund to bankroll the $38 billion it has committed to the second, a source said, in a show of unflinching confidence in its huge tech bets commanding sky- high valuations when sold.
Nintendo quarterly profit drops 10% ahead of Switch Lite launch Japanese gaming company Nintendo Co Ltd on Tuesday reported a 10% decline in quarterly profit, far wide of market expectations, as a rise in costs dulled stronger sales of its hybrid home-portable Switch console.
Global
Oil prices boosted by expectations of Fed rate cut Oil prices rose for a fourth day on Tuesday on optimism the U.S. Federal Reserve will this week cut interest rates for the first time in more than 10 years, supporting fuel consumption in the world’s biggest oil user.
Oil prices boosted by expectations of Fed rate cut Tuesday 30th July, 2019 – Reuters
Oil prices rose for a fourth day on Tuesday on optimism the U.S. Federal Reserve will this week cut interest rates for the first time in more than 10 years, supporting fuel consumption in the world’s biggest oil user.
Brent crude LCOc1 rose 63 cents to $64.34 a barrel by 1127 GMT. It is set for a monthly fall of more than 3%, however, due to lingering worries about oil demand.
U.S. crude CLc1 was up 46 cents at $57.33 a barrel, but also set for a monthly decrease of around 1.8%.
“Regarding the Fed, the market has priced in a 25-basis point cut for Wednesday,” global oil strategist at BNP Paribas in London Harry Tchilinguirian told the Reuters Global Oil Forum.
“If the language we get from the Fed in post meeting comments is on the conservative, rather than accommodative side, the U.S. dollar is likely to continue to remain strong and continue to present a headwind for an advance in oil.”
While the Bank of Japan held off on expanding stimulus on Tuesday, it signalled its readiness to do so “without hesitation” if a global slowdown jeopardizes the country’s economic recovery.
U.S. central bankers will begin their two-day meeting later on Tuesday and are expected to lower borrowing costs for the first time since the depths of the financial crisis more than a decade ago.
U.S. President Donald Trump said a small rate cut “is not enough”.
Economic growth in the United States slowed less than expected in the second quarter, strengthening the outlook for oil consumption but, elsewhere, disappointing economic data has increased concerns about slower growth.
U.S. and Chinese negotiators also meet this week for their first in-person talks since agreeing to a truce to their trade dispute at a Group of 20 meeting last month.
However, expectations for progress during the two-day Shanghai meeting are low, so officials and businesses hope Washington and Beijing can at least detail commitments for “goodwill” gestures and clear the path for future negotiations.
Supply risks are still a concern as tensions remained high around the Strait of Hormuz, through which about a fifth of the world’s oil passes.
BP (BP.L) has not taken any of its own oil tankers through the strait since a July 10 attempt by Iran to seize one of its vessels, the British company’s Chief Financial Officer Brian Gilvary said on Tuesday.
Tensions spiked between Iran and the West after Iranian commandos seized a British-flagged oil tanker in the Gulf this month in apparent retaliation for the capture of an Iranian tanker by British forces near Gibraltar.
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Weak euro zone data backs Draghi's plan for more stimulus Tuesday 30th July, 2019 – Reuters
French growth slowed unexpectedly in the second quarter on weaker household spending and German consumer morale worsened for the third month in a row heading into August, adding to signs that the euro zone economy as a whole is cooling.
The lacklustre read-out of data from the zone’s two biggest economies on Tuesday backed European Central Bank President Mario Draghi’s assessment that the growth outlook is deteriorating, and the bank should inject more monetary stimulus.
In a further sign of weakness, euro zone economic sentiment deteriorated to hit its lowest level in more than three years in July, European Commission data showed on Tuesday.
“This adds to evidence from PMI data published last week that the euro zone economy will expand by a meagre 1% or so this year, strengthening the case for ECB action sooner rather than later,” said Melanie Debono from Capital Economics.
After the ECB changed forward guidance during its policy meeting last week, it is likely to cut rates in September and announce a fresh round of quantitative easing through bond buys in October, Debono added.
The French economy grew 0.2% in the April-June period, down from 0.3% in the previous three months, according to preliminary data from the INSEE statistics agency.
That was just below a Reuters poll of 28 economists, which had an average estimate of 0.3%.
Until now the French economy, the euro zone’s second largest, has proven more resilient than some neighbours such as Germany because it is less dependent on exports and thus less exposed to global swings.
But household spending, the traditional motor of French growth, grew only 0.2%, the slowest rate in a year despite a more than 10 billion-euro ($11.1 billion) package of measures launched by President Emmanuel Macron to boost purchasing power.
RECESSION FEARS
In Germany, growth is widely expected to have contracted in the second quarter and sentiment surveys suggest that the third quarter might not bring any improvement, raising the spectre of a technical recession in Europe’s largest economy.
The GfK consumer sentiment indicator, based on a survey of about 2,000 Germans, edged down to 9.7 from 9.8 a month earlier. It was the lowest reading since April 2017 and in line with market expectations.
Household spending and construction have become important drivers of growth in Germany as its exports falter in light of trade disputes and Brexit uncertainty. Domestic demand is boosted by record-high employment, above-inflation pay increases and low borrowing costs.
But the continued drop in consumer confidence signals that a slump in Germany’s export-dependent manufacturing is now creeping into other sectors of the economy.
“The trade war with the United States, ongoing Brexit discussions and the global economic slowdown continue to drive fears of a recession,” GfK researcher Rolf Buerkl said.
Consumers with jobs in export-driven sectors in particular, such as the car industry and their suppliers, are affected the most, he said. The propensity to buy as measured by the GfK also deteriorated to reach its lowest in nearly four years.
“The primary threat to consumer confidence is the persistently increasing fear of job losses,” Buerkl said. He warned that household spending could weaken in coming months if the trend continues.
In a further sign of cooling, annual consumer price inflation in July eased in five German states, preliminary data showed on Tuesday. The nationwide preliminary inflation figures are due at 1200 GMT.
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European shares hit by Bayer, Lufthansa; FTSE shines Tuesday 30th July, 2019 – Reuters
European shares slipped on Tuesday as grim forecasts from German giants Bayer and Lufthansa soured sentiment, while a battered pound helped London’s blue-chip index outperform for a second day.
Bayer (BAYGn.DE) slipped 3% as it became the latest agricultural supplies company to be affected by flooded farms in the United States and by trade disputes, saying its full-year earnings target has become harder to reach.
Airline Lufthansa (LHAG.DE) dropped 5.6% after posting a decline in second-quarter earnings and saying that the European market was likely to remain challenging this year.
That helped make Europe’s travel and leisure index .SXTP the biggest faller among major sectors, with a 1.1% drop that would be its worst in more than a month.
With concerns about global growth still bubbling among investors, a GfK survey showed German consumer morale worsening for the third month in a row heading into August as trade disputes bit in Europe’s biggest exporter.
Germany's main stocks index .GDAXI fell 0.5% by 0758 GMT, while the broader pan-European stocks STOXX 600 lost 0.4%.
“Most markets are down this morning,” said Simona Gambarini, a markets economist at Capital Economics. “The S&P closed lower yesterday. We have a few data releases regarding the eurozone that could push equity prices down but I think everyone is waiting for the Fed meeting.”
As evidence continues to build of the impact of a bruising trade war on global growth, expectations that major central banks will adopt accommodative policies have buoyed global markets since a sharp fall in May.
The U.S. Federal Reserve is widely expected to deliver a quarter-point cut in rates on Wednesday, although there is some lingering hope it could respond to President Donald Trump’s call for a bigger move - or at least point the way to more easing in the near future.
London's blue chip FTSE 100 .FTSE index was the big outperformer of the main indexes, touching fresh 11 month highs on the back of a 3% jump in shares for energy giant BP (BP.L).
The index, heavy with internationally-focused firms who get their revenue from abroad, was also supported by a drop in sterling to more than two- year lows on the rising possibility of a disorderly Brexit. [GBP/] [.L]
Ireland's main stock index ISEQ .ISEQ, which tends to fall when fears of a no-deal UK departure from the European Union grow, slid 1%
London-listed BBA Aviation (BBA.L) topped the STOXX 600 with a 5.5% jump after it announced a $1.37 billion deal to sell its aircraft parts unit to private equity firm CVC Capital Partners.
British household goods maker Reckitt Benckiser (RB.L) was the biggest weight on Europe’s main index after it reported lower than expected second-quarter sales and cut its full-year revenue target.
French stocks .FCHI dipped 0.2%, hit also by data showing the economy slowed slightly in the second quarter
Lenders were also among the biggest decliners in Europe .SX7P with bank- heavy indexes in Italy .FTMIB and Spain .IBEX both declining more than 0.6%.
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Euro struggles ahead of Fed meeting Tuesday 30th July, 2019 – Reuters
The euro hovered on Tuesday around the 26-month low it reached last week against the dollar as investors awaited to see whether the Federal Reserve would signal the start of an interest rate-cutting cycle.
Although the Fed is expected to lower rates in the United States when its two-day policy meeting ends on Wednesday, U.S. yields will remain above those in the euro zone, making the dollar a more attractive investment for yield-seeking traders, analysts say.
Money markets are convinced the central bank will cut the key benchmark rate by 25 basis points to between 2% and 2.25% on Wednesday, but it remains to be seen whether this is going to be a one- off cut or whether more cuts will follow.
Analysts from Bank of America Merrill Lynch expect the Fed to guide on Wednesday towards more “insurance cuts” in the coming meetings, which essentially means taking preventive measures by cutting rates “in the face of high uncertainties and a cloudy outlook,” they said in a note to clients.
Nearly three cuts are priced in the money markets by the end of this year.
The euro was flat at $1.1144 EUR=EBS, unmoved by lower regional German inflation data and weaker euro area economic sentiment gauges, but not far from the low of $1.1101 it reached last week.
The consumer price index declined across most key regions in Germany in July. Traders are waiting for the preliminary harmonized German inflation data at 1200 GMT, which according to the economists polled by Reuters could show a fall in inflation to 1.5% in July from 1.6% in June, on a year by year basis.
So far this month, the common currency has shed nearly 2% against the greenback. Building expectations that the European Central Bank may turn out to be more aggressive than the Fed in easing monetary policy contributed to euro falls.
The pound was the biggest mover in the foreign exchange market, plunging to a new 28-month low of $1.2120 GBP=D3 in Asian trading on growing concerns that Britain could crash out of the European Union without a transition agreement on Oct. 31.
Sterling was last down 0.3% at $1.2183. It was also weaker against the euro by 0.4% at 91.52 pence, having touched earlier a two-year low of 91.88 pence.
The Japanese yen was last up by 0.2% at 108.55 yen per dollar JPY=EBS versus the dollar after the Bank of Japan as expected maintained on Tuesday a pledge to keep short-term interest rates at a negative 0.1% via aggressive bond purchases.
The BoJ also said it would ramp up stimulus “without hesitation” if needed, but traders have repeatedly said that compared with other major central banks the BoJ has limited options left.
Elsewhere, the Australian dollar reached a six-week high of $0.6887 AUD=D3 against the U.S. dollar, but otherwise the rest of the forex market was relatively quiet.
The Swiss franc has stabilised after its recent run to two-year highs and was last up 0.1% at 1.1038 versus the euro EURCHF=EBS.
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Euro zone economic sentiment declines as expected in July Tuesday 30th July, 2019 – Reuters
Euro zone economic sentiment continued to worsen as expected in July on less optimistic industry, services, retail trade and construction and inflation expectations among companies and consumers decreased as well, data showed on Tuesday.
The European Commission’s monthly sentiment survey showed the overall index for the 19 countries sharing the euro at 102.7 points in July, down from 103.3 in June and 105.2 in May, a trend underlining the expected economic slowdown. Economists polled by Reuters had expected a deterioration to 102.6.
Last week, European Central Bank President Mario Draghi all but pledged to ease policy further amid the deteriorating growth outlook and even hinted at a reinterpretation of the ECB’s inflation target.
Officials told Reuters last week an interest rate cut in September appeared certain, while government bond purchases and a revamped policy message were also likely.
The fall of the sentiment index in July was caused mainly by lower optimism in industry, where the index fell to -7.4 from -5.6, an easing in services to 10.6 from 11.0 a fall in retail trade to -0.7 from 0.1 an in construction to 5.0 from 7.6.
Sentiment among consumers, however, improved to -6.6 from -7.2.
Separately, the Commission said its business climate indicator, which points to the phase of the business cycle, plunged to -0.12 points in July from 0.17 in June — its lowest reading since September 2013 and much lower than the expected 0.08 in a Reuters poll of economists.
The Commission said inflation expectations among euro zone consumers 12 months ahead fell to 20.6 in July from 21.9 in June and 23.2 in May and selling price expectations in the manufacturing sector declined to 1.7 in July from 3.2 in June and 5.3 in May.
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French second-quarter growth slows unexpectedly to 0.2% Tuesday 30th July, 2019 – Reuters
French growth slowed slightly in the second quarter as consumer spending eased and companies drew down inventories, although economists expect income gains to help offset a weakening global outlook in the months to come.
The euro zone’s second-biggest economy grew 0.2% in the April-June period, down from 0.3% in the previous three months, according to preliminary data from the INSEE statistics agency.
That was just below a Reuters poll of 28 economists, which had an average estimate of 0.3%.
Until now the French economy has proven more resilient than some of its euro zone neighbours such as Germany because it is less dependent on exports and thus less exposed to the swings in the global economy.
“At this point there is no reason to stress about growth at these levels,” France’s State Secretary of the Economy Agnes Pannier Runacher told LCI television, pointing to strong business investment.
Household spending, the traditional motor of French growth, grew only 0.2%, the slowest rate in a year despite a more than 10 billion-euro ($11.1 billion) package of measures launched by President Emmanuel Macron to boost purchasing power.
So far households have been largely saving income gains from the measures, largely made up of tax breaks - with a further 5 billion euros in income tax cuts due next year as well.
Meanwhile, businesses were undeterred by the weakening global economic outlook and nearly doubled their rate of investment to 1.2% after 0.7% in the first quarter.
“The support that investment lent the economy in the second quarter may not persist given global uncertainties,” Morgan Stanley economist Matthew Pennill wrote in a research note.
“But consumer spending is likely to recover in the coming months, given the prospect of further tax cuts ahead,” he added.
Exports grew 0.2% in the second quarter while imports were 0.1% higher, which meant foreign trade made no contribution to the overall growth rate.
While domestic demand added 0.4 percentage points to growth, companies running down their inventories rather than producing new goods knocked 0.2 percentage points off growth.
($1 = 0.8979 euros)
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Goldman Sachs says S&P 500 bull-run has legs but cuts earnings outlook Tuesday 30th July, 2019 – Reuters
Goldman Sachs said on Tuesday it has raised its 2019 target for the U.S. benchmark S&P 500 index .SPX by 3% to 3,100, implying a 24% gain for the year, but has lowered its earnings estimates citing weakness in economic activity and margin outlook.
The forecast would see Wall Street extend its decade-long bull run into another year and easily breach its intraday record of 3,027.98 set on Friday as investors bet on a boost from an expected rate cut from the Federal Reserve this week.
“The dovish Fed pivot has driven the equity market rally in 2019, and we expect low interest rates will continue to support above-average valuations going forward,” Goldman Sachs analysts wrote in a note.
Though Goldman expects markets to finish 2019 with the best annual performance since 2013, it sees a slowdown in 2019 earnings per share growth for S&P 500 companies at just 3%, a far cry from the 23% it recorded last year, when U.S. President Donald Trump’s corporate tax cuts fuelled gains.
The bank also expects corporate margins to contract by 39 basis points in 2019 due to rising input and labour costs and as companies face the effect of tit-for-tat tariffs by the United States and China in a protracted trade war, which increase costs.
“Most of the change in our earnings estimate is driven by weaker-than- expected economic activity, oil prices, and margins, particularly within semiconductors,” Goldman Sachs added.
Their economists however expect a modest rebound in U.S. and global economic growth and “idiosyncratic headwinds” within semiconductors to abate next year.
For 2020, the bank set a 3,400-point price target for the S&P 500, a 10% rise from its 2019 price target. It expects 2020 earnings growth of 6%, well below consensus of 11%.
“Negative EPS revisions typically accelerate after 2Q earnings season as investors and analysts shift their focus to the following calendar year.”
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Futures drop as eyes shift to Fed meeting, Apple earnings Tuesday 30th July, 2019 – Reuters
U.S. stock index futures dropped on Tuesday, as worries about the scale of consensus at the Federal Reserve in favour of deeper cuts in interest rates ate into the positive sentiment that drove indexes to record highs last week.
Initial price action pointed to losses of 0.2%-0.3% for the Dow and S&P, and a big half percent fall for the Nasdaq which included a dip in shares in Apple ahead of its quarterly results release later in the day.
Wall Street’s main indexes have had a slow start to the week, retreating on Monday, and participants are bracing themselves for what message the Fed will send if it pushes ahead with a well-telegraphed move to ease policy that has driven stocks higher since May.
With a quarter point reduction in rates fully priced-in, investors will watch for how Fed Chairman Jerome Powell manages debate about whether the stimulus is necessary and what that says about the attitude of the U.S. central bank to doing more in the months ahead.
“The rate cut, which nearly everyone expects tomorrow, is not so much based on current data as it is being cast as an insurance policy that is cheap to take, so the argument goes, because price pressures are low,” said Marc C. Chandler, Chief Market Strategist at Bannockburn Global Forex.
With inflation data due later on Tuesday, he pointed to an uptick in core inflation since January which the Fed could emphasize as a way of quelling expectations for more action.
As earnings season enters its third week, Apple Inc’s (AAPL.O) report after hours will provide a clear gauge on the impact of trade tensions with China on growth. Shares of the iPhone maker dipped 0.6%.
Although trade talks between the world’s two biggest economies resumed on Tuesday, expectations among traders for any breakthrough are limited.
Corporate earnings so far have been robust with nearly half of all S&P 500 companies that have posted second-quarter earnings, 76.1% have beaten bottom line estimates, according to Refinitiv data.
Goldman Sachs said on Monday it was lowering its earnings estimates for the benchmark index .SPX, citing weakness in economic activity and the outlook for margins but said Wall Street is still set to extend its decade-long bull run into another year.
Also on tap is a Commerce Department report, due at 8:30 a.m., which is expected to show U.S. consumer spending rose 0.3% in June after rising 0.4% in May.
The core personal consumption expenditures (PCE) data, the Fed’s preferred measure of inflation, is expected to be unchanged for the month of June.
At 7:19 a.m. ET, Dow e-minis 1YMcv1 were down 58 points, or 0.21%. S&P 500 e-minis EScv1 were down 10 points, or 0.33% and Nasdaq 100 e-minis NQcv1 were down 45.25 points, or 0.57%.
Among other stocks, shares in Merck & Co Inc (MRK.N) rose 3.1% after the drugmaker reported quarterly profit above expectations.
Procter & Gamble Co (PG.N) gained 4.1% after the consumer goods maker beat estimates for quarterly revenue boosted by price hikes and strong demand for its beauty products.
Pfizer Inc (PFE.N) was set to fall for another day, last down 2.3%, after Morgan Stanley downgraded the drugmaker’s stock to “equal-weight.”
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Procter & Gamble sales, profit beat expectations; shares rise Tuesday 30th July, 2019 – Reuters
Procter & Gamble Co’s (PG.N) quarterly revenue and profit beat Wall Street expectations on Tuesday, boosted by price hikes and strong demand for its beauty products such as SK-II and Olay, sending its shares up about 4% before the opening bell.
P&G, like other consumer goods companies, has been raising prices on its products to tackle soaring freight and raw material costs that have dented margins.
In the fourth quarter, organic sales, a closely watched metric which exclude items like acquisitions, divestitures and currency effects, rose 7%, its best in at least two years. Price hikes contributed 3 percentage points to the organic sales growth, the company said.
Organic sales in the beauty business rose 8%, boosted by demand for its super-premium SK-II brand and Olay skin care products.
In the fabric and home care unit, the company’s biggest business that sells Tide and Febreze air fresheners, organic sales climbed 10%.
The company’s net sales rose 3.6% to $17.09 billion in the fourth quarter, beating analysts’ average estimate of $16.86 billion, according to IBES data from Refinitiv.
The Pampers diaper maker reported a net loss attributable to the company of $5.24 billion, or $2.12 per share, for the quarter ended June 30, primarily due to non-cash accounting adjustments related to its Gillette Shave Care business. This compares to net income of $1.89 billion, or 72 cents per share, a year earlier.
Excluding items, the company earned $1.10 per share, beating the average analyst estimate of $1.05.
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ConocoPhillips adjusted profit falls on lower crude prices Tuesday 30th July, 2019 – Reuters
Independent oil and gas producer ConocoPhillips (COP.N) reported an 11.6% drop in quarterly profit on Tuesday, as fears of slowing global economy weighed on crude prices.
U.S. light crude CLc1 prices averaged $59.91 per barrel in the second quarter, 11.8% lower than a year earlier, while Brent crude LCoc1 averaged $68.47 per barrel, 8.7% lower than a year earlier.
That led to a drop in realized prices per barrel for the company, which earned $50.50 for each barrel sold in the latest quarter, compared with $54.32 a year earlier.
ConocoPhillips, the world’s largest independent oil and gas producer, said production, excluding Libya, rose to 1.29 million barrels of oil equivalent per day (boepd), an increase of 79,000 boepd from a year earlier.
Adjusted earnings fell to $1.14 billion, or $1.01 per share, in the second quarter ended June 30 from $1.29 billion, or $1.09 per share, a year earlier.
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Higher consumer spending helps Mastercard beat quarterly profit estimates Tuesday 30th July, 2019 – Reuters
Mastercard Inc (MA.N) on Tuesday beat Wall Street estimates for quarterly profit, as a robust economy encouraged customers to spend more, boosting fee income for the world’s second-largest payment processor.
The company’s gross dollar volume, the dollar value of transactions processed, rose 8.3% to $1.60 trillion in the second quarter.
Overall consumer spending, which accounts for more than two-thirds of U.S. economic activity, rose in April and May, while U.S. retail sales registered solid growth in every month of the quarter.
Around 26.80 billion transactions were processed, up nearly 21% from a year earlier. The gain was led by a 10% rise in the United States and a 31% jump in Europe.
Net revenue rose 12.2% to $4.11 billion, edging past analysts’ estimates of $4.08 billion.
The company's net income rose to $2.05 billion, or $2 per share, in the second quarter ended June 30, from $1.57 billion, or $1.5 per share, a year earlier. (bit.ly/2YrlOel)
On an adjusted basis, the company earned $1.89 per share. Analysts on average had expected a profit of $1.83, according to IBES data from Refinitiv.
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Under Armour cuts North America revenue forecast; shares fall 10% Tuesday 30th July, 2019 – Reuters
Sportswear maker Under Armour Inc (UA.N) (UAA.N) on Tuesday cut its full- year revenue forecast for North America, its biggest market, in the face of stiff competition from bigger rivals Nike Inc (NKE.N) and Adidas AG (ADSGn.DE), sending its share down 10%.
The company said it now expects a slight decline in North America revenue for fiscal 2019 compared with a prior forecast of flat revenue. Still, the company maintained its overall forecast.
Under Armour has been restructuring its operations to cut spending and inventories while reducing promotions as it struggles to keep its market share in the United States.
Sales in North America fell 3% to $816 million in the second quarter.
The company’s net loss narrowed to $17.3 million, or 4 cents per share, in the quarter ended June 30 from $95.5 million, or 21 cents per share, a year earlier.
Excluding certain items, Under Armour posted a loss of 3 cents per share, while analysts were expecting a loss of 5 cents.
Net revenue rose to $1.19 billion from $1.17 billion, roughly in line with analysts’ expectation.
Class A common shares of the Baltimore-based company have gained 55% so far this year.
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Exxon Mobil's second-quarter results expected to sag, spotlighting need for asset sales Tuesday 30th July, 2019 – Reuters
Exxon Mobil Corp’s (XOM.N) plan to accelerate asset sales, a way of delivering needed cash to finance shareholder returns and major projects, is getting off to a slow start as oil companies pull back on big deals.
On Friday, the largest U.S. oil company is expected to report a 79-cents-a- share profit, down from 92 cents a year earlier, according to data provider Refinitiv. With little cash from asset sales and a third straight quarter of weaker year-over-year earnings, Exxon cannot resume share buybacks sought by investors this year, said analysts.
Chief Executive Darren Woods this year set a target of raising $15 billion by trimming its portfolio through 2021, above the average $3.3 billion a year rate between 2017 and 2013. The sales could include more oil-producing properties, compared with prior deals mostly in refining and marketing, he said.
But those goals are proving difficult. In its first quarter, proceeds from sales were just $107 million, the lowest in at least 11 quarters, and analysts expect the second quarter to come in at a similar level. Exxon last quarter agreed to sell a U.S. Gulf of Mexico property for $200 million.
“There’s not enough cash flow for buybacks, which is what people want to see,” said Jennifer Rowland, analyst at Edward Jones, who has a “hold” rating on Exxon. Exxon may have to use debt to help fund its shareholder dividend, she said.
A package of offshore Gulf of Mexico oilfields that Exxon put on the market last autumn has languished, said analysts. More recently, the company has begun to market offshore properties in Nigeria and Norway, according to analysts and people familiar with the matter. Any one could raise several billion dollars in a sale, the people said.
Stephen Greenlee, who oversees divestitures as president of Exxon’s Upstream Business Development group, was not available to address the asset sales, an Exxon spokesman said.
Exxon shares are rated a “buy” by just 23% of analysts, below BP PLC’s (BP.L) at 71%, Chevron Corp’s (CVX.N) 74%, Royal Dutch Shell’s (RDSa.L) 80% and Total SA’s (TOTF.PA) 89%, according to Refinitiv.
“The market is not ready to pay what Exxon thinks these assets are worth,” William Turner, a vice president at researcher Welligence, said of the offshore U.S. properties. “A lot of the recent transactions in the Gulf of Mexico have been going at discounted valuations.”
Exxon’s pitches are not the only going unanswered, said a U.S. merger and acquisition advisor who requested anonymity speaking about M&A matters. “There has been less activity. I’m not sure if it is the bid/ask or something else; but they just aren’t there,” the person said.
There is no doubt Exxon’s cash could use a boost. Analysts slashed earnings forecasts to 79 cents a share from 97 cents after the company disclosed operating unit expectations this month.
“We expect another large funding gap this quarter,” wrote Cowen (COWN.O) analyst Jason Gabelman, who estimated Exxon’s organic free cash flow this quarter will not cover the $3.7 billion needed for dividends.
The two areas expected to show improved margins during the period, crude sales and refining, were offset by weaker natural gas prices and higher maintenance costs. The result was “another disappointing quarter,” wrote Biraj Borkhataria, analyst at RBC Capital Markets, in a client note.
Exxon has been investing to boost production in the Permian Basin, the top U.S. shale field, and in offshore Guyana. Exxon “is always countercyclical” and “has to be viewed in the long term,” said John Groton, director of equity research at Thrivent Asset Management, which holds Exxon shares. Exxon’s shares are up less than 1% over the last 10 years.
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UK company insolvencies hit five-year high in second quarter Tuesday 30th July, 2019 – Reuters
The number of insolvent companies in England and Wales hit its highest in more than five years in the second quarter of 2019, according to data on Tuesday that showed businesses under rising financial pressure as Brexit nears.
The Insolvency Service, a government agency, said 4,321 companies entered insolvency in the April-June period on an underlying basis, excluding bulk closures of personal service companies. This was up from 4,213 in the first quarter and marked the largest total since early 2014.
The figures showed fewer personal insolvencies, chiming with other data that show resilience among consumers but a muted picture of the business economy.
“Today’s figures are evidence of a difficult period for UK businesses,” Duncan Swift, president of insolvency and restructuring trade body R3, said.
“Businesses which stockpiled items ahead of the original Brexit deadline of 29 March will now be seeing those decisions have an impact on their cash flow levels.”
The number of personal insolvencies continued to decline after striking an eight-year high at the end of 2018, dropping to 30,937 in England and Wales in the second quarter from 31,346 in the first three months of 2019, the Insolvency Service said.
The fall masked some concerning trends, R3’s Swift said.
While the number of less-severe forms of insolvency such as individual voluntary arrangements and debt relief orders declined in the first quarter, the number of full-blown bankruptcies rose to their highest since late 2014.
The rate of individuals entering insolvency over the year to June rose to 26.2 per 10,000 adults from 25.8 in the first quarter — the highest rate since early 2012 and reflecting a spike in insolvency in late 2018, the figures showed.
“The situation is still serious for the UK’s personal finances,” Swift said.
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BP profit again outstrips forecasts, lifted by higher oil output Tuesday 30th July, 2019 – Reuters
A strong rise in oil and gas production helped BP (BP.L) offset weaker crude prices and refining profit to again beat profit expectations on Tuesday, boosting its shares.
BP’s second quarter contrasts with Total (TOTF.PA) and Norway’s Equinor (EQNR.OL), which posted sharp earnings drops, and builds on a steady recovery after deep cost cuts since the 2014 downturn, project start-ups and last year’s $10.5 billion purchase of BHP’s U.S. shale assets.
“At the midpoint of our five-year plan, BP is right on target,” Chief Executive Bob Dudley said in a statement.
By 0953 GMT, BP shares were up 3.1% to 543.5 pence, the top gainers in the FTSE 100 .FTSE index.
Although BP’s dividend remained unchanged at 10.25 cents per share, its Chief Financial Officer Brian Gilvary said the company would consider raising it towards the end of the year as proceeds from asset sales come through and debt is reduced.
BP’s results beat expectations for 10 quarters in a row, analysts at Bernstein said.
“Strong volume growth from accretive barrels and seamless execution remains underappreciated,” said Bernstein, which has an “outperform” recommendation on the stock.
Underlying replacement cost profit, the company’s definition of net income, reached $2.8 billion in the second quarter, exceeding a company-provided forecast of $2.46 billion.
The second-quarter profit was up from $2.4 billion in the previous quarter, while BP’s operating cash flow recovered to $6.8 billion in the quarter from $5.3 billion in the previous quarter as a result of a one-off working capital release.
HIGHER PRODUCTION
Second-quarter production rose to 3.8 million barrels of oil equivalent per day, 4% higher than a year earlier.
BP said it expects third-quarter 2019 reported production to be lower than second-quarter, reflecting maintenance activities as well as the impact of Hurricane Barry on operations in the Gulf of Mexico.
Benchmark Brent crude oil prices in the second quarter averaged around $69 a barrel, up from $63 the previous quarter but down from $74 a barrel a year earlier, BP said.
In the refining and marketing segment, known as downstream, profits dropped due to lower sales and refinery throughput as plants underwent maintenance ahead of a major change in marine fuel standards in 2020.
Global growth in oil demand slowed in the first half of the year to around 1 million barrels per day but has slightly recovered in the second half, CFO Gilvary told Reuters.
Despite the higher profit, BP’s debts rose in the first half of the year to $46.5 billion from $38.7 billion the previous year, mostly as a result of the BHP acquisition.
Gearing, the ratio between debt and BP’s market value, rose to 31% compared with 27.5%.
Shell (RDSa.L) reports results on Thursday, while Exxon Mobil (XOM.N) and Chevron (CVX.N) are scheduled for Friday.
STRAIT OF HORMUZ
BP has not taken any of its oil tankers through the Strait of Hormuz since a July 10 attempt by Iran to seize one of its vessels, Gilvary said.
Gilvary added that the company had no plans to take any of its tankers through the world’s most important waterway for oil shipments but was moving oil out of the region using chartered tankers.
Tensions spiked between Iran and Britain this month when Iranian commandos seized a British-flagged tanker.
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Boris Johnson's no-deal Brexit gamble hits sterling Tuesday 30th July, 2019 – Reuters
The British pound GBP tumbled on Tuesday as investors bet Prime Minister Boris Johnson's Brexit brinkmanship with the European Union could trigger a messy divorce that would sow chaos through the world economy and financial markets.
Sterling crashed through trading barriers, falling to an intraday low of $1.2120 in shallower overnight Asian trade, the lowest since March 2017. The pound has lost 3.6 cents since Johnson was named Britain’s new prime minister a week ago.
Ever since the 2016 EU referendum, the pound has gyrated to the rhetoric of the Brexit divorce: after the result was announced, it had the biggest one-day fall since the era of free-floating exchange rates was introduced in the early 1970s.
Since the 2016 vote, sterling has now lost 28 cents, one of the most significant falls for the currency in recent decades.
“We see more GBP weakness to come,” ING said in a note to clients. “The current sterling meltdown is in line with our view that GBP risks are heavily skewed to the downside given the Brexit uncertainty and rising odds of an early election (our base case).”
Johnson, who was hailed by U.S. President Donald Trump as Britain’s Trump, has promised to strike a new divorce deal with the European Union and to energize the world’s fifth-largest economy after what he casts as the gloom of Theresa May’s premiership.
On entering Downing Street on Wednesday, Johnson set up a showdown with the EU by vowing to negotiate a new deal and threatening that, if the bloc refused, he would take Britain out on Oct. 31 without a deal to limit economic dislocation.
TOUR OF THE UNION
He told reporters in Scotland on Monday that he wanted to get a new deal but that the government had to prepare for a no-deal Brexit.
When asked about his remark during the campaign for the party leadership that the odds on a no-deal Brexit were a million to one, he said: “Provided there is sufficient goodwill and common sense on the part of our partners, that is exactly where I would put the odds.”
Many investors say a no-deal Brexit would send shock waves through the world economy, tip Britain’s economy into a recession, roil financial markets and weaken London’s position as the pre-eminent international financial centre.
Supporters of Brexit say that while there would be some short-term difficulties, the disruption of a no-deal Brexit has been overplayed and that in the long-term, the United Kingdom would thrive if it left the European Union.
Johnson’s ascent has placed an avowed Brexiteer in charge of the British government for the first time since the 2016 EU Brexit referendum.
Johnson will tell Welsh farmers on Tuesday they will get a better deal after Brexit, part of a countrywide tour to win support for his “do or die” pledge to leave the European Union by Oct. 31.
“I will always back Britain’s great farmers and as we leave the EU we need to make sure that Brexit works for them,” Johnson said before arriving in Wales.
“Once we leave the EU on the 31st of October, we will have a historic opportunity to introduce new schemes to support farming – and we will make sure that farmers get a better deal. Brexit presents enormous opportunities for our country and it’s time we looked to the future with pride and optimism.”
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China will boost economy but won't use property market for stimulus Tuesday 30th July, 2019 – Reuters
China will step up efforts to boost demand and support the economy, but will not use the property market as a form of short-term stimulus, a top decision-making body of the ruling Communist Party said on Tuesday.
With China’s economic growth slowing to near 30-year lows, investors are waiting to see how much more stimulus Beijing will roll out, and if it will risk easing curbs on property markets to boost construction and investment.
Such a move could drive an even sharper build-up in household debt and risk property bubbles. The central bank reportedly told lenders last month not to lower mortgage rates further, but market watchers believe some cash-strapped local governments may be considering loosening restrictions on home buyers.
“China’s economic development is facing new risks and challenges, and downward pressure on the economy is increasing,” the official Xinhua news agency said on Tuesday, citing a Politburo meeting on the economy.
“Fiscal policy should be strengthened to improve efficiency and continue to implement the policy of tax and fee cuts,” it said, reaffirming that monetary policy will remain prudent to keep liquidity conditions ample.
The Politburo also said the government will take steps to cope with trade frictions, and work to stabilize employment, the financial sector, investment and market expectations.
Chinese and U.S. trade negotiators met in Shanghai on Tuesday for their first face-to-face talks since the two sides agreed on a tariff ceasefire late last month, though market expectations for any progress are low.
Beijing also will take various steps to boost domestic demand, including reforms to expand consumption and stabilize investment in the manufacturing industry, Xinhua said, without giving details.
China will balance its efforts to stabilize growth, promote reforms, adjust economic structures and prevent risks, it said.
“We should adhere to the principle that housing is used for living, not for speculation, implement the long-term mechanism for real estate, and will not use real estate as a short-term means of stimulating the economy,” the Politburo said.
Economic growth slowed to 6.2% in the second quarter, its weakest pace in at least 27 years, as demand at home and abroad faltered in the face of mounting U.S. trade pressure.
China is keeping all its economic policy tools within reach as the trade war with the United States gets longer and costlier, but still sees more aggressive action like interest rate cuts as a last resort should the dispute get worse, policy sources have told Reuters.
Central bank governor Yi Gang said recently that current interest rate levels are appropriate, amid speculation that China could trim rates soon if the U.S. Federal Reserve eases policy as widely expected on July 31.
With an eye on debt risks, Beijing has been leaning more heavily on fiscal stimulus during the current downturn, announcing tax cuts of nearly 2 trillion yuan and a quota of 2.15 trillion yuan for special bond issuance by local governments for infrastructure projects.
The central bank has cut banks’ reserve requirements (RRR) six times since early 2018, in a bid to spur bank lending, especially for small and private firms that are vital for economic growth and employment.
Analysts polled by Reuters expect further cuts in the RRR both in this quarter and next.
The Politburo also pledged to “guide” financial institutions to increase medium- and long-term financing for manufacturers and private enterprises.
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Japan government to earmark $40 billion to boost growth in FY2020/21 budget Tuesday 30th July, 2019 – Reuters
Japan will earmark 4.4 trillion yen ($40.52 billion) in the next fiscal year’s budget for measures to spur private demand as well as enhance science and technology as part of Prime Minister Shinzo Abe’s growth strategy, government sources with knowledge of the matter told Reuters on Tuesday.
In an effort to push more funding to growth sectors, the government will urge ministries to trim spending in other areas such as public works by 10 percent from this fiscal year, the sources said on condition of anonymity because they are not authorised to speak to media.
The proposed spending plan, which is set to be approved by Abe’s cabinet later this week, will be part of an outline on the budget for the next fiscal year that begins in April 2020.
The Ministry of Finance will gather spending requests from government ministries by the end of August in accordance with the outline.
This fiscal year’s budget spending reached a record 101.5 trillion yen including 2 trillion yen in steps to ease a blow from a planned sales tax hike to 10% from the current 8% in October. Next fiscal year’s budget is also expected to exceed 100 trillion yen for a second straight year, highlighting the difficulty in curbing fiscal spending at a time of rising economic strains.
The government will not set a ceiling for total expenditure, the sources said, meaning Abe must walk a tight rope as he seeks to balance the imperatives between growth and fiscal reform.
Some analysts say Abe will be willing to boost fiscal spending, depending on the extent to which Japan’s export-reliant economy is affected by the Sino-U.S. trade war and the strained relations between the United States and Iran.
As part of steps to rein in the industrial world’s heaviest public debt, which exceeds twice the size of Japan’s $5 trillion economy, the government has pledged to balance a primary budget excluding new bond sales and debt servicing costs by the fiscal year end to March 2026.
($1 = 108.5800 yen)
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Bank of Japan commits to easing further if inflation sputters, keeps policy steady Tuesday 30th July, 2019 – Reuters
The Bank of Japan held off on expanding stimulus on Tuesday but committed to doing so “without hesitation” if a global slowdown jeopardizes the country’s economic recovery.
Growing fallout from the U.S.-China trade war has prompted major central banks to signal more easing and put pressure on the BOJ, which has far less policy ammunition left to deal with a significant downturn.
BOJ Governor Haruhiko Kuroda said the central bank strengthened its commitment to act pre-emptively against risks to the economy, as protectionist policies and trade tensions were delaying an expected rebound in global growth.
“I don’t think Japan has lost momentum to hit the BOJ’s price goal, or that there is an imminent risk of this happening,” Kuroda told a news conference.
“But overseas risks are heightening. If this is prolonged, that could increase risks for Japan and threaten the economy’s momentum to hit our price goal. If this happens, we will ease policy without hesitation.”
As widely expected, the BOJ maintained its short-term interest rate target at -0.1% and a pledge to guide 10-year government bond yields around 0%.
It also kept intact its forward guidance, or a pledge central banks make on future monetary policy, committing to keep rates at current ultra-low levels at least through spring 2020.
But the BOJ added a line in its policy statement that it will ramp up stimulus without hesitation “if there is a greater chance the momentum for hitting its price target is lost.”
BOJ officials have recently said the central bank won’t hesitate to “consider” easing if the economy loses momentum for hitting its price target.
The new language in the statement is a stronger pledge because the central bank is committing to act immediately to forestall risks of a loss of momentum, Kuroda said.
“In a way, you can call it pre-emptive easing,” he added.
YEN MOVES KEY
The protracted Sino-U.S. trade war has hurt Japanese exports and business sentiment, casting doubt on the BOJ’s view that robust domestic demand will offset the pain from the global slowdown.
In a quarterly report on the outlook, the BOJ cut its inflation forecasts and warned that risks to the economy were skewed to the downside due to increasing overseas uncertainty.
Kuroda said heightening overseas risks will likely be the biggest trigger for additional easing.
“Global growth has slowed, particularly in Europe and China. As a result, Japanese exports to China have fallen and business sentiment has deteriorated,” he said. “The impact of the global slowdown is broadening.”
The BOJ could cut interest rates, ramp up asset buying, speed up money printing or combine the steps, Kuroda said.
“In any case, we will consider steps within our current policy framework,” with an eye on the potential downside to the banking sector, he said.
“We still have various means to ease policy.”
Years of near-zero rates have hurt financial institutions’ profits by narrowing their margin, leaving the BOJ with few tools to fight the next recession, let alone ramp up steps to accelerate inflation to its 2% target.
Easing by other central banks could also trigger an unwelcome yen spike that hurts Japan’s export-reliant economy.
The European Central Bank last week all but cemented market expectations for a September rate cut, while the U.S. Federal Reserve is seen cutting rates on Wednesday.
The yen was little changed versus the dollar on Tuesday after the BOJ announcement, trading near a three-week low.
“The BOJ probably wanted to save its ammunition because the yen wasn’t rising much,” said Hiroaki Mutou, chief economist at Tokai Tokyo Research Institute.
“If Fed moves trigger yen rises, the BOJ could either strengthen forward guidance, allow 10-year bond yields to move in a wider band, or do both,” he said.
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SoftBank to pump second Vision Fund with proceeds from the first Tuesday 30th July, 2019 – Reuters
SoftBank Group Corp plans to use proceeds from its first Vision Fund to bankroll the $38 billion it has committed to the second, a source said, in a show of unflinching confidence in its huge tech bets commanding sky- high valuations when sold.
The Japanese investment firm, led by artificial intelligence advocate Masayoshi Son, on Friday said it had secured pledges for a second Vision Fund totalling about $108 billion.
With over a third from SoftBank itself, however - using “distributions from Vision Fund 1 and other SoftBank assets”, said the source - that headline figure depends in part on proceeds from existing Vision Fund portfolio firms listing publicly at a brisk pace in a consistently buoyant market.
SoftBank gave no breakdown for the remaining $70 billion, only saying it had signed memoranda of understanding with Microsoft Corp and Japan’s three mega banks, as well as existing Vision Fund investors Apple Inc and Hon Hai Precision Industry Co Ltd (Foxconn).
One newcomer is Kazakhstan’s sovereign wealth fund with an investment likely under $3 billion, based on how much its government has earmarked for alternative assets.
“We are only investing a small amount, a few tens of billions of yen (few hundred million dollars), but SoftBank was insistent the amount shouldn’t be disclosed,” a senior executive at a Japanese financial firm said on condition of anonymity.
“Honestly speaking there’s a strong sense of it being to keep up relations - you can’t refuse them.”
SoftBank launched its first Vision Fund two years ago. It reached a headline figure of $100 billion due primarily to the sovereign wealth funds of Saudi Arabia and Abu Dhabi - neither of which were listed on Friday as backers of the second fund.
It has already invested much of that money in disruptive start-ups in areas like financial technology, healthcare and transportation, including U.S. ride-hailing firm Uber Technologies Inc and Chinese peer Didi Chuxing.
Uber is one of a number of portfolio firms to have conducted an IPO, along with messaging app maker Slack Technologies Inc and blood tester Guardant Health Inc.
“From around next year we should see IPOs of our investments nearly every month,” Son told Japan’s Nikkei newspaper on Saturday.
PAPER GAINS
SoftBank is an investor in the first Vision Fund but also general partner, collecting management performance fees. The two roles helped SoftBank’s internal rate of return to an industry-smashing 62% just two years into the fund’s 12-year lifespan.
But much of those returns are on paper - unrealized until, for the most part, shares in portfolio firms are sold following public listings. Moreover, those paper gains are at times driven upward by the internal revaluation of the portfolio companies.
SoftBank has said its valuations are often supported by co-investors or follow-on investment rounds by external parties. The two largest outside investors, Saudi Arabia and Abu Dhabi, use external valuers to double- check SoftBank’s methodology.
For cash, however, SoftBank does not need to rely solely on its portfolio firms floating. The fund returned over $5 billion to investors after exiting two investments - Indian e-commerce firm Flipkart and U.S. microchip designer Nvidia Corp.
The fund aims to continue returning capital during its life rather than a distributing lump sum after 12 years, said a second person with knowledge of the matter, including by employing margin loans using assets as collateral.
Such payouts would be in addition to the hefty 7% annual dividend paid to the fund’s preferred shares holders regardless of performance.
Moreover, SoftBank has time to channel cash into Vision Fund 2 considering investors are likely to face capital calls only when targets have been identified, as per the first fund.
All this will reduce SoftBank’s need to use debt for the second fund. Credit-rating firm Moody’s Investors Service put the ratio of SoftBank’s net debt compared to the value of its portfolio at 22% at the end of March. SoftBank puts the number at 16% and plans to keep it below 25%, the first person said.
PRE-VISION
Beyond the Vision Fund, other SoftBank assets include debt-laden U.S. wireless unit Sprint Corp, whose takeover by T-Mobile US Inc won antitrust approval on Friday, though the deal still faces opposition in the courts.
Its most notable asset is a stake in Chinese e-commerce giant Alibaba Group Holding Ltd, which is worth more than the market capitalization of SoftBank itself. Son has held that stake since 2000 but chose to sell a small portion in 2016 ahead of the acquisition of British chip designer Arm Holdings.
SoftBank had 3.9 trillion yen ($35.91 billion) in cash and cash equivalents as at the end of March.
($1 = 108.6000 yen)
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Nintendo quarterly profit drops 10% ahead of Switch Lite launch Tuesday 30th July, 2019 – Reuters
Japanese gaming company Nintendo Co Ltd on Tuesday reported a 10% decline in quarterly profit, far wide of market expectations, as a rise in costs dulled stronger sales of its hybrid home-portable Switch console.
Operating profit for the three months through June was 27.4 billion yen ($252.26 million), versus the 40-billion-yen average of 10 analyst estimates compiled by Refinitiv.
The Kyoto-based gaming company said it sold 2.1 million Switch consoles in the quarter, bringing the total installed base to 36.9 million units. It maintained its full-year sales forecast of 18 million units for the year ending March.
Looking to offset declining sales of its aging 3DS handheld console and expand beyond its core fanbase, Nintendo will in September launch the Switch Lite device, which cuts unit costs by dropping the Switch’s TV dock and detachable controllers.
The Switch Lite will retail in the United States at $199.99, compared with the Switch’s price of $299.99. Nintendo did not provide a sales forecast for the new device.
The launch comes as the famously secretive Kyoto-based gaming company shows signs of greater openness, tying up with mobile game developers for smartphone-based titles like Mario Kart Tour, which is due to be released this summer in partnership with DeNA Co Ltd.
While some analysts said that could prove a breakthrough hit, early download numbers for Nintendo’s most recent mobile title Dr Mario World, developed with Line Corp, have trailed earlier releases like Mario Run, data from Sensor Tower showed.
Nintendo’s expansion plans also include a partnership with China’s largest games maker, Tencent Holdings Ltd, that aims to sell the Switch in that country’s stunted console market. The two firms are set to exhibit at Shanghai’s ChinaJoy gaming expo in early August.
Last week, Tencent said it will work with Nintendo-backed The Pokemon Company on a new game, in a partnership that could capitalize on the popularity of Japanese characters in China.
On the Switch, analysts are looking to the release of the device’s first full Pokemon games - Pokemon Sword and Pokemon Shield - in November to further push sales.
Nintendo’s diversification drive comes as the global gaming market faces a shake-up as entrants like Google parent Alphabet Inc and Apple Inc move into game streaming services.
Many analysts nevertheless said games fans will continue to hew to traditional console manufacturers like Nintendo and Sony Corp with their exclusive games featuring well-established characters.
Nintendo’s shares closed up 0.7% ahead of the earnings announcement. Its share price has risen 39% year-to-date.
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Qatar Petroleum enters Guyana’s oil market Tuesday 30th July, 2019 – Guyana Chronicle
QATAR Petroleum, a state-owned public corporation responsible for the oil and gas industry in Qatar, has entered into an agreement with Total for a share of exploration and production rights in two blocks offshore Guyana.
Under the agreement signed on Monday, Qatar Petroleum will hold 40 per cent of Total’s existing 25 per cent participating interest in the Orinduik block and 40 per cent of Total’s existing 25 per cent participating interest in the neighboring Kanuku block.
Also in the Orinduik block, Tullow Oil [the operator] holds a 60 per cent participating interest and EcoAtlantic holds a 15 per cent interest.
In the Kanuku block Repsol [the operator] holds a 37.5 per cent participating interest and Tullow Oil, a 37.5 per cent interest.
According to reports on Qatar Petroleum’s site, the agreement is subject to customary regulatory approvals by the government of Guyana.
Speaking at the signing ceremony, Minister of State for Energy Affairs and President and Chief Executive Officer (CEO) of Qatar Petroleum, Saad Sherida Al-Kaabi stated: “We are pleased to expand our global exploration footprint into Guyana together with our valuable, long-term partner, Total, in these offshore blocks in this prospective basin.”
He added: “We hope that the exploration efforts are successful. I would like to take this opportunity to thank our partners and the government of Guyana for their collaboration in this effort, and we look forward to working together in these blocks.” In January 2018, when President David Granger had welcomed Mohammed Ahmad Al Hayki as Qatar’s non-resident Ambassador to Guyana, he had urged the State to invest in Guyana’s petroleum sector.
“Guyana is also to become, in the near future, a petroleum producing State… Guyana invites Qatar to examine ways of investing in the development of our emerging petroleum sector,” the President Granger told the Ambassador.
The Orinduik block is located 120 km offshore Guyana and has a total area of about 1,800 square kilometres, with water depths ranging from 70 to 1,400 meters. This year, two wells are to be drilled in the block by the Stena Forth drillship which arrived in Guyana in June. The drillship is expected to spud the Jethro Lobe prospect and the Joe prospect—located nearby — right after.
Meanwhile, just nearby is the Kanuku block which is located 100 km offshore Guyana and has a total area of about 5,200 square kilometres, with water depths ranging from 70 to 800 meters. Repsol, a Spanish oil company, is expected to drill in the block this year. Recently, Qatar Petroleum also signed an agreement to enter three exploration blocks in Kenya.
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Justice Singh sworn-in as GECOM Chair Monday 29th July, 2019 – Guyana Chronicle
Justice (Ret’d) Claudette Singh, SC, CCH was moments ago sworn-in as Chairman of the Guyana Elections Commission (GECOM) by President David Granger.
The historic swearing-in ceremony took place at the Ministry of the Presidency in the presence of Prime Minister Moses Nagamootoo; Leader of the Opposition, Bharrat Jagdeo; Commissioners of the Elections Commission; Ministers of Government; and a number of other national and diplomatic officials.
Justice Singh’s appointment has ended months of turmoil over the selection of a chairman following the resignation of Dr. Steve Surujbally.
With some 40 years of experience, Justice Singh is one of only three women to be appointed Senior Counsel in history of Independent Guyana.
She was called to the Bar in London in 1973 and admitted to the Bar in Guyana in 1976. Justice Singh served as the Deputy Solicitor General, as a Puisne Judge and a Justice of Appeal. During her tenure at the Chamber of the Attorney General (AG), she spearheaded the Modernisation of the Justice Reform Project and is currently serving as the Guyana Police Force’s Legal Advisor.
Her appointment comes at a time when the country is preparing for early elections in light of a No-Confidence Motion brought against Government last December. She will have to decide whether to have the Commission proceed with house-to-house registration or scrap it at this junction, ahead of elections.
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Cut 'Terrifying' Bad Loan Rate by Over 50% Monday 29th July, 2019 – Tribune 242
The Central Bank's governor wants to further cut the "terrifying" 8.7 percent loan delinquency rate by more than half despite it having fallen to its lowest level in a decade.
While describing the consistent decline in non-performing bank loans as "very encouraging", John Rolle said even a four percent delinquency ratio was "not complimentary" by international standards.
Pointing out that one consequence of high loan delinquency rates is higher interest rates and fees for Bahamian borrowers who are in good standing, he added that the proportion of outstanding bank credit in default locally is still more than double the ratio that would strike fear into developed country banks and their regulators.
Mr Rolle said a "comfort zone" for non-performing credit, which represents loans that are 90 days or more past due, would be "a rate that is less than half of what we are experiencing" now. Based on the governor's comments, this implies a rate of less than four percent - a ratio not seen by the Bahamian commercial banking industry since before the 2008-2009 recession.
"Today the Bahamas has seen a very encouraging drop in the delinquency rate in terms of the loans that are more than 90 days without a payment being made," Mr Rolle said during the Central Bank's latest quarterly economic briefing. "People who have fallen behind for three months or more, the rate of delinquency is below 9 percent.
"That figure at one point was above 14 percent. We've done a good job in reducing it. But internationally, even if the delinquency rate's at 5 per cent, that's a terrifying number. Yes, it's been reducing, and we want to see a further reduction.
"Thinking about a comfort zone we'd like to see; we'd need to be ultimately at a rate that's less than half of what we're experiencing" currently. Pressed further on this by Tribune Business, Mr Rolle added: "Four percent is even not complimentary by international standards.
"That delinquency rate means something else has to pay for the money [tied up in non-performing loans], whether it's fees, interest rates. There's always a cost with the percentage of loans out there that are not working."
The total value of non-performing Bahamian commercial bank loans peaked at just under $1bn in June 2014, but the Central Bank's latest economic developments report reveals that figure has been cut by around 50 percent to $491.8m or 8.7 percent of outstanding credit.
Total private sector arrears, which also includes bank loans between 30-90 days past due, fell by $28m or 3.9 percent in June alone to close the month at 12.2 percent of outstanding credit - a figure described by the Central Bank as "the lowest level recorded since November 2008" - almost 11 years ago.
Mr Rolle, meanwhile, reiterated that the Central Bank was continuing to push its commercial bank licensees to "take more aggressive steps" to clean-up the remaining pile of non-performing credit clogging their balance sheets.
This, he explained, would enable the banks to both increase lending to new, qualified Bahamian borrowers and fortify their ability withstand any future recessions. As a result, the Central Bank is prodding its licensees to accept higher losses on delinquent loans; take greater haircuts on the value of distressed properties; and making more aggressive efforts to sell- off such properties still on their books.
At least one Bahamian commercial bank appears to be heeding the Central Bank's call, with Scotiabank (Bahamas) recently advertising in the newspapers that it has sold another tranche of delinquent loans to Gateway Financial, the distressed debt acquirer, which is a joint venture between Sir Franklyn Wilson's Royal Star Assurance and Sunshine Finance and the Mexican firm, Ascendancy.
"Once that cloud is taken from the head of institutions," the Central Bank governor added of distressed credit, "we would expect the institution to have a better balance sheet to lend moving ahead, and more comfort. Part of the clean-up is making sure this is not hanging over the head of institutions and holding them back from lending."
Mr Rolle conceded that the foreclosure/repossession of homes subject to delinquent mortgages was "unpleasant” but reiterated that the protection of bank depositors and their funds - which ultimately finances borrowers and their purchases - was "the priority" for both industry and regulator.
"There are two sides to this: The borrower and the depositor," he explained. "The system's first obligation, when there are difficulties, is to make sure depositors do not lose their funds. We're trying to avoid any outcome where depositors lose money. They're the priority; to not leave question marks hanging over people's money. It's unpleasant but necessary to protect people's money."
Still, Mr Rolle said Bahamian commercial banks - the largest source of credit in the country - were only expected to recover their appetite for further lending "at a gradual pace". This was despite a $118.7m, or 14.6 percent, fall in total private sector loan arrears during the 2019 first half alone.
This dropped total loan arrears from 14.6 percent to 12.2 percent as percentage of total outstanding bank credit. Short-term arrears, in particular, fell by $93.5m or 31.9 percent, while non-performing loans more than 90 days past due dropped by $25.2m.
Mortgage arrears, in particular, fell by $60.6m during the 2019 first half, while problem consumer and commercial loans contracted by $33.8m and $24.3m, respectively.
Central Bank data, though, backs Mr Rolle's assertion that this has yet to translate into any significant uptick in lending. "During the first six months of 2019, total Bahamian dollar domestic credit fell by $72.5m compared to a reduction of $33.8m during the comparable period of 2018," it noted.
This confirms that the amount of outstanding credit to the Government, private sector and individuals continues to fall, meaning that new lending continues to be constrained. Net claims on the Government fell by $41.6m, while credit to the public corporations contracted by $12.8m.
Private sector credit again decreased by $18.5m, although the reduction was not as great as the $64.2m drop in the 2018 first half. While lending to businesses firmed by $26.7m compared to the prior year, 2019 first half credit for consumers and mortgages fell by $38.6m and $6.2m, respectively.
The fact it has taken over a decade to make significant inroads into the industry's 'bad loans' pile highlights the breadth and depth of the 2008- 2009 recession, which caught both the sector and wider economy off- guard and ill-prepared to quickly adjust.
Many Bahamian families and businesses already over-extended on credit fell into default as a result of job losses and/or reduced incomes, with many unable to get back on track even if their lender was able to restructure the debt.
Besides the economy's vulnerability to external shocks and over- borrowing, other causes of the non-performing loan crisis were identified as over-aggressive lending by the banks themselves between 2002 and 2007 coupled with real estate appraisal valuations that, in some instances, proved wildly optimistic.
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Business Optimism Up but Profits Fall For 57% Monday 29th July, 2019 – Tribune 242
Despite 57 percent of businesses suffering a decline in first-half profits, a Central Bank survey has found that nearly-two-thirds believe the economy will improve during 2019’s final months.
The findings, released as part of the regulator’s analysis of developments during the six months to end-June, gave a mixed picture of both the Bahamian private sector’s performance and outlook for the remainder of the year.
John Rolle, the Central Bank’s governor, described the results as “varied” and added: “Most surveyed businesses noted higher costs in their operations but stable to improved operating conditions.
“The outlook held by most firms was for stable to further improved conditions over the remainder of 2019, with lowered inflation expectations and healthier employment outcomes than in the first half of 2019.”
Increased operating costs are likely to have been driven by a combination of the VAT rate increase to 12 percent; the “pass through” effects of higher global oil prices in terms of energy and transportation costs; and potentially higher import prices driven by the US-China “trade war” and tariff hikes.
“Many businesses responded that the average cost of inventory, goods and services, wages and investments have increased during the last six months,” the Central Bank report on the survey said.
It added that 68 percent of companies surveyed had seen an increase in total wages and operating costs, with 57 percent experiencing a rise in average inventory costs. Some 45 percent had endured increases in the prices of goods and surveys, with 50 percent reporting that the cost associated with making investments had also grown.
The overall impression from the Central Bank’s findings was that the economy and trading conditions remain tough for most Bahamian companies, especially those in the domestic economy, although many have been able to hold the line on staffing and employee hours.
“Just over half of respondents (57 percent) noted a decline in profits, while 24 percent noted an expansion,” the Central Bank revealed of its survey size. “Sixty-eight percent and 55 percent, respectively, of businesses reported that average weekly hours and the total number of employees remained relatively the same.”
A further 71 percent of companies said debts owed to banks and other creditors remained unchanged, indicating that few have generated sufficient earnings to deleverage their balance sheets.
Yet against this backdrop “businesses were largely optimistic about the upcoming six months”, according to the Central Bank, “although many expect prices will continue to rise” - something that will not be warmly greeted by consumers already grappling with the high cost of living.
The survey found that 63 percent were optimistic of an improvement in overall business conditions during the 2019 second half, with 14 percent anticipating “no change” and a further 18 percent expecting the overall climate to “worsen”.
A further 50 percent expect domestic private sector employment to increase during the final six months of 2019, with 30 percent anticipating staffing levels will be unchanged and the remaining 20 percent predicting unemployment will worsen.
As for inflation, some 40 percent of businesses expect this to increase, with 35 percent predicting “no change” and the other 25 percent a reduction. This follows a 2019 first half in which 76 percent of companies interviewed endured inflation’s impact through cost increases, with 10 percent saying there was no impact and the final 14 percent disclosing that prices decreased.
When it came to the overall Bahamian business climate, 45 percent of respondents said there was “no change” and 32 percent said it had become “worse”. Just 23 percent saw an improvement, which stands in contrast to the seeming surge in business confidence for the 2019 second half.
Finally, 41 percent of Bahamian companies experienced “no change” in domestic employment conditions during the 2019 first half, with 32 percent seeing an increase and 27 percent suffering a decrease.
While cautioning that the survey was not representative of the entire business community due to the “small sample size”, the Central Bank said a cross-section of companies and individuals “covering most of the sectors of importance” had been included.
Mr Rolle, meanwhile, said efficiency rather than jobs was the most important measure of success for the domestic commercial banking industry, and suggested there was “considerable room” for improvement in the former.
“We don’t want our domestic financial system to be measured just on the number of people working in the sector,” he explained. “We want to look at how efficient the sector is. There is considerable room to be more efficient.”
The emphasis on efficiency, the Central Bank governor said, was necessary because of the commercial banking industry’s importance as a source of savings intermediation and the hub around which monies move.
As for the international financial services industry, Mr Rolle acknowledged that while there had been a reduction in the size of bank and trust company balance sheets as the sector adjusted to “tax transparency” and the new international regulatory environment, the Central Bank was more focused on how many institutions were transitioning to a physical presence in this nation.
“Just to look at the balance sheet can give an inaccurate perception of what is happening,” Mr Rolle explained. He added that consolidation at the head office level, involving mergers and acquisitions, had also affected the number of bank and trust company licensees in The Bahamas.
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St Lucia lost Virgin Atlantic to Antigua and Havana Monday 29th July, 2019 – Caribbean News Now
Virgin Atlantic has announced a review to its global flying programme that will cease flying to Saint Lucia from June 8, 2020 ‘for the foreseeable future’.
“The proposed changes mean we will increase flights from London Gatwick to Antigua boosting from three per week to four per week, from 8 June 2020. Our Havana service will also move from London Gatwick to Heathrow and will remain the UK’s only direct scheduled flight to Havana.
“It’s never easy to withdraw from a destination and it’s not a decision we’ve taken lightly, and we’d like to thank you for your loyalty in supporting this route over the last 21 years,” Virgin’s statement to partners continued.
“After June 7, 2020, flights to Grenada and Tobago will now connect through Antigua. Additional changes to our Gatwick network will include new routes to North America, together with joint venture partner Delta Air Lines. As we announced earlier this year, we intend to grow from London Gatwick with new routes to New York JFK and Boston,” the statement said.
A combination of government negotiating skills or lack there off, market savvy, Hewanorra International Airport (HIA) re-development project, changing dynamics in the tourism industry, local and international market influence, demonstrates that the claimed wizardry of Saint Lucia’s prime minister, a distorted tourism authority and a tourism minister of zero introspection shows that there not as powerful as they think they are beyond performative theatre.
With a government and policymakers that are indifference to facts of value but just triviality, leader of the opposition Philip J. Pierre explained the following.
“This development has a serious impact on Saint Lucia as a destination, particularly for flights coming in from the UK market. The UK market is unique in that the people from the UK spend a longer time 7 to 14 days. They also spend more money. They go out more. They’re not very much into the all-inclusive. And no matter how the government may try to spin this a replacement in that market segment is inevitable.
“The other factor is at what cost for a replacement airline(s) to service the route?”, Pierre stated. And secondary to HIA re-development project. Virgin Atlantic “has stopped coming so it means that your revenue projections have gone wrong even before you started, drawing on his experience as a management consultant on matters of risk factors and the opposition model of financing Public-Private Partnership (PPP) that an unwise government has shelved in exchange for a loan and an increase in the national debt.”
“This is not something that the opposition is happy about. But then we have a prime minister that does not listen and said we lost our right to speak following the general election, and as such has absolutely no regard, and doesn’t answer our letters. The result is affirmative inexperience and constant errors of a distasteful gift-wrapped empty box.”
“However, I want to say one thing. Government policy is very dynamic and when a government goes ahead and gives private enterprise state funds, [OJO Labs, Desert Star Holdings (DSH), Cabot Links], almost as if it’s a right; government gives the impression that there is state money to go around, choosing winners and losers, wittingly or unwittingly, this has a bearing on the actions of the private sector.”
“I want to reiterate. We are very saddened by the news of Virgin Atlantic going out of Saint Lucia, after 21 years following my successful negotiations to bring the airline to our shores.
“Further, local policy impacts heavily on what happens in the tourism industry; Saint Lucia’s number one earner and exporter. So meanwhile the government sometimes gives the impression that they are in control of what happens in tourism, many things transpire in the industry that the government has absolutely no influence on, including matters outside of Saint Lucia,” Pierre continued.
“Therefore, this is a very unfortunate day for the people of Saint Lucia and the government should explain to the public why suddenly, Virgin Atlantic has left our shores,” he said.
In a statement Friday [ July 27] Saint Lucia’s minister for tourism Dominic Fedee reads in full:
Over the past months, the government of Saint Lucia has been in talks with Virgin Atlantic as it relates to the airline’s flights to our destination.
During those talks, Virgin indicated to local tourism officials that in order to continue operating its existing five flights weekly in the winter months, and three in the off-season summer months, it would require EC$20 million or USD7.5 million over three years.
Two other options were presented to us which would mean a significant reduction in Virgin Atlantic flights to our shores and did not present the best return on a potential investment. It is our strong belief that agreeing to Virgin Atlantic’s demands for a multimillion-dollar subsidy would have opened the door for other airlines to also ask for subsidy.
In fact, upon hearing the news that Virgin Atlantic has requested subsidies from four Caribbean governments, namely Grenada, Tobago, Antigua, and Saint Lucia, other airlines have been in talks with respective governments.
While the government of Saint Lucia appreciates the need for governments to share the financial risk on new flights until the maturing of the route, Virgin’s requests goes against our principle having been in Saint Lucia for 21 years.
Saint Lucia presently supports Virgin Atlantic flights with marketing agreements annually but presently has no subsidy arrangements with any airline in any other tourism market. Virgin Atlantic represents seven percent of total UK arrivals.
To proactively address any fallout that may arise from the cancellation of the Virgin Atlantic flights, the government of Saint Lucia has been in very fruitful discussions with other carriers and has received very good feedback from at least one other airline to increase capacity from the UK Market in the very near future.
Year to date, May 2019, Saint Lucia has recorded an 18 percent growth from the UK market over the same period last year. We anticipate even further growth with our restructured marketing thrust to maximize more of our marketing spend on brand Saint Lucia.
From all indications, the demand for Saint Lucia in the UK Market among Caribbean destinations is second only to Barbados and continues to be one of the most aspirational Caribbean destinations for UK travelers.
We will continue to dialogue with Virgin Atlantic to arrive at a possible mutually beneficial relationship sometime in the future.
The optics of the matter and use of language is oblivious of the narrative to sway the authenticity to the reality that Virgin Atlantic will cease flying to Saint Lucia for the foreseeable future after 21 years.
The case study here is the equivalence to the impact on the economy, basic business civility, complacency, regional/international travel, uncompromising public policy and primary attributes of the government of Saint Lucia indifference to facts and data.
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CariCRIS gives Sagicor bond AA Tuesday 30th July, 2019 – Trinidad Express Newspapers
The CARIBBEAN credit rating agency, CariCRIS yesterday assigned an initial credit ratings of CariAA (Foreign and Local Currency Ratings) on its regional rating scale and jmAAA on the Jamaica national scale, to the proposed debt issue of Sagicor Financial Corporation Ltd (SFC) of up to US$76 million or the Jamaican Dollar equivalent.
In a news release yesterday, CariCRIS said SFC is seeking to issue a combination of US and Jamaican dollar debt in Jamaica, with total proceeds not exceeding US$76 million or the JMD equivalent. The facilities will be of short tenors (13 months) with fixed rates and bullet repayment of principal upon maturity.
The regional scale foreign and local currency ratings indicate that the level of creditworthiness of this proposed debt obligation, adjudged in relation to other obligations in the Caribbean is high. The Jamaica national scale rating indicates that the level of creditworthiness of this obligation, adjudged in relation to other debt obligations in Jamaica is the highest.
In the statement, CariCRIS said: 'SFC's ratings reflect the group's leading market position in the Caribbean with growing market share in international markets as well as its healthy financial performance, good capitalisation levels and adequate short-term liquidity metrics. 'The group's strong and effective enterprise risk management framework also supports the ratings. These rating strengths are tempered by SFC's exposure to weak economic conditions in some of the countries in which its subsidiaries operate.' CariCRIS said it assigned a stable outlook to the ratings, adding, 'The stable outlook is based on CariCRIS' expectation of continued revenue growth and profitability for SFC over the next 12 to 15 months. This will be supported by continued strong performance in Sagicor USA and Alignvest's US $450 million capital injection which will bear favourably on the Group's capital adequacy.'
Alignvest is a Toronto-based Special Purpose Acquisition Corporation (SPAC), which announced on November 27, 2018 that it has entered into an arrangement to acquire 100 per cent of the equity in Sagicor US$1.75 a share for total acquisition consideration of US$536 million. The arrangement involves Sagicor shareholders swapping their ownership of the company for equity in New Sagicor, which will be listed on the Toronto Stock Exchange. If the transaction receives regulatory approval, Sagicor will be delisted from the T& T, Barbados and London Stock Exchanges.
'Following the execution of this arrangement, SFC will continue to operate as before, with the added benefits of a US$450 million capital injection and a listing on the Toronto Stock Exchange,' said CariCRIS, adding, 'The listing on the Toronto Stock Exchange is expected to expand Sagicor's access to capital and facilitate more accurate price discovery for its shares.'
On June 4, 2019, Sagicor completed a definitive agreement with Alignvest by which Alignvest would acquire all the shares of Sagicor by way of a scheme of arrangement under the laws of Bermuda.
Sagicor was formed through the demutualisation of Barbados Mutual Life Assurance Society through an initial public offering on the Barbados Stock Exchange in 2002. The group, which was previously domiciled in Barbados, redomiciled in Bermuda in 2016 and currently operates in 19 countries across the Caribbean, USA and Latin America.
Through its subsidiaries, Sagicor offers individual life, health and annuity products, group life and benefits administration, banking and investment management services, and property and casualty insurance, amongst other services. In 2018, SFC derived its total revenue from Jamaica (38 per cent), the United States of America (28 per cent), Barbados (11 per cent), Trinidad and Tobago (11 per cent) and other Caribbean territories (ten per cent).
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Unilever gains $0.78 Tuesday 30th July, 2019 – Trinidad Express Newspapers
Overall market activity resulted from trading in 15 securities of which eight advanced, four declined and four traded firm.
The Composite Index advanced by 16.95 points (1.21 per cent) to close at 1,416.38. The All T& T Index advanced by 2.96 points (0.17 per cent) to close at 1,779.76. The Cross Listed Index advanced by 4.28 points (3.09 per cent) to close at 142.65. The SME Index remained at 90.
Trading activity on the first-tier market registered a volume of 309,223 shares crossing the floor of the Exchange valued at $3,669,347.20.
GraceKennedy Ltd was the volume leader with 130,000 shares changing hands for a value of $434,000, followed by JMMB Group with a volume of 57,080 shares being traded for $142,700. Trinidad Cement Ltd contributed 28,481 shares with a value of $69,778.45, while Guardian Holdings Ltd added 26,054 shares valued at $481,856.50.
Unilever Caribbean Ltd registered the day's largest gain, increasing $0.78 to end the day at $24.78. Conversely, Scotiabank registered the day's largest decline, falling $0.08 to close at $59.67.
CLICO Investment Fund was the only active security on the mutual fund market, posting a volume of 8,391 shares valued at $202,223.10. CLICO Investment Fund declined by $0.01 to end at $24.10. Calypso Macro Index Fund remained at $14.17.
The second-tier market did not witness any activity. The SME market did not witness any activity. CinemaOne remained at $9. The USD equity market did not witness any activity. MPC Caribbean Clean Energy remained at US$1.
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Marketing Anguilla For the Next Tourism Season Monday 29th July, 2019 – The Anguillian
With the current tourism season now receding, the Anguilla Tourist Board has brought its international representatives to the island for what has been dubbed “The ATB 2019 Marketing Week”.
It is a series of events not only to showcase tourism developments and opportunities in Anguilla, but to make an even stronger effort for marketing the island for the next tourism season. Marketing Week comes as Anguilla relishes its coveted vote as the Best Island in the Caribbean, for the third time in row, by the readers of the world-renowned Travel & Leisure magazine.
The week of activities started with a church service at the Maranatha Methodist Church at Blowing Point on Sunday, July 21. In addition to the congregation, the service was attended by many of Anguilla’s overseas marketing representatives; Governor Tim Foy OBE; Mr. Cardigan Connor, Parliamentary Secretary, Tourism; Mrs. Donna Banks, Chairperson of the Anguilla Tourist Board, other Board members and staff.
The lively service was conducted by the Rev. Dr. Wycherley Gumbs, Superintendent of the Anguilla Methodist Circuit. Among other matters, he challenged his listeners not only to be purpose-driven people in terms of being number one in tourism, but number one in terms of quality of life.
Mrs. Donna Banks spoke about the importance of marketing Anguilla as a tourism destination and the island’s new theme: BE. That is Beyond Extraordinary; Bespoke Experiences; Better Engagement; and Building Excitement.
She continued that theme at a full meeting of all of Anguilla’s overseas marketing representatives on the lawn of the Anguilla Tourist Board on Monday, July 22. “I welcome you to the 2019/2020 Annual Marketing Meeting of the Anguilla Tourist Board which runs from today [Monday] July 22 to Friday, July 26 under the theme ‘BE’”, she stated. “All of our overseas marketing representatives will be in Anguilla for the week to discuss plans for the upcoming year. These plans should enable the destination to achieve the goals and objectives that we set. There are a number of important events that are open to, and are designed specifically for, the wider tourism family.”
The Anguilla Tourist Board’s Chairperson continued: “Last Marketing Meeting held in September 2018, our theme was ‘Challenged to do business Unusual,’ and I believe that it what we did: enabling the Anguilla Tourist Board to play its part in the phenomenal growth of tourist arrivals for the past tourist season, and for 2019 in general thus far.
“The Anguilla Tourist Board, on July 17, 2019, was again proud to be the recipient of the 2019 Travel & Leisure Award for number one destination in terms of the Caribbean, Bahamas and Bermuda – and for the third consecutive year. I think Anguilla deserves a round of applause.”
She added: “As I said, the theme for the week is ‘BE’ – signifying a harmonious and effortless rhythm to delivering on our promise that Anguilla, as a destination, is beyond extraordinary; a harmonious and effortless rhythm to creating bespoke and luxurious travel experiences that are personalised and unique to the needs of our guests; a harmonious and effortless rhythm to actively seek out opportunities to better engage with our guests as well as our partners; and continuously, through innovative processes, help to build excitement and stir up passion for Anguilla, our home, and Anguilla as a destination of first choice for our guests.
“’BE’ sums up the work of the Anguilla Tourist Board, over the past four years, which has resulted in the restructuring of the organisation at the head office level as well as directing and re-charging the efforts of our international team. We will continue to build on our efforts to achieve even greater success.”
Mr. Cardigan Connor said Marketing Week gave Anguilla an opportunity to reflect on the past year and to look forward to the coming year. “Over the past three years, especially, from being voted as the number one island in the Caribbean by Travel & Leisure, I thought if that was the standard, there was room for improvement and that there was no reason why we should not stay in that top bracket.
“September 2017 gave us a challenge as to whether or not we were going to lie down and feel sorry for ourselves, or whether we were going to get up and rebuild. Rebuild we did, and I think that one of the reasons that made us the most attractive island still, in 2018, was the will of the people, government working with the private sector and you, our marketing representatives, who carried that positive message that Anguilla is alive and kicking. I want to thank you for that and, naturally, with being voted Best Island in the Caribbean in 2019, three times in a year, how can I not thank you again.”
The feature speaker, at the opening ceremony for Marketing Week, was famed Travel Editor, CBS Radio broadcaster and Emmy Award winner, Mr. Peter Greenberg.
During his presentation he offered a number of suggestions to Anguilla which he thought might further expose and develop the island’s tourism industry and answered several questions.
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Anguilla Wins #1 Island in The Caribbean At Travel+Leisure World’s Best Awards Monday 29th July, 2019 – The Anguillian
The Hon. Victor F. Banks, Premier of Anguilla, joined Parliamentary Secretary, Cardigan Connor, and ATB Chairperson, Donna Banks, to receive the island’s latest accolade, as the #1 Island in the Caribbean, Bermuda and Bahamas in the 2019 Travel + Leisure World’s Best Awards, for a truly unprecedented third year in a row.
The Award, honouring the top travel destinations and companies around the globe, was presented at a special reception to celebrate the winners, hosted by Travel+Leisure on July 16, 2019 at the new Times Square EDITION in New York City. Anguilla also claimed the #6 position on the Top 15 Best Islands in the World list.
Since December 2018, Anguilla has achieved record-breaking tourist arrivals every month through May 2019, the latest month for which visitor arrivals are available.
Anguilla’s spectacular coastline is featured on the cover of the World’s Best Awards August 2019 issue of Travel + Leisure; the magazine goes on sale July 19 and can be viewed online at this link: https://www.travelandleisure.com/worlds-best.
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CBI has been a lifeline for Dominica, says PM Skerrit Monday 29th July, 2019 – Caribbean News Now
Citizenship by Investment (CBI) has been a lifeline for Dominica, a sentiment that prime minister Roosevelt Skerrit expresses frequently.
“ The small Caribbean island’s remarkable recovery after hurricane Maria in 2017 would not have been possible” and that “had it not been for the CBI programme, which demonstrated its resilience because, […] within 90 days after the hurricane, we were back in business in respect to the CBI programme,” he said.
During an interview on Dominica’s Broadcasting Service (DBS), prime minister Skerrit revealed how Dominica’s CBI programme has supported Dominican children to study abroad, from an allocation of $26 million distributed for education, entirely from CBI, for students studying overseas in countries like Canada, the United Kingdom, and the United States.
Prime minister Skerrit emphasised how CBI had helped the island recover following hurricane Maria in 2017. This included rebuilding thousands of homes, as well as the ‘Housing Revolution’ initiative which aims to build 5,000 new climate-resistant home, whose construction created jobs along the way.
CBI also helped Dominica establish and expand its eco-tourism sector and improve employment prospects with long-term effect.
Since 1993, Dominica’s CBI programme has been enabling carefully vetted global individuals and their immediate relatives to acquire second citizenship through either a one-time non-refundable contribution into the government’s economic diversification fund or buying into selected real estate, currently counting seven unique hotels.
The government-legislated programme is one of the oldest in existence and has been internationally recognised by experts at the Financial Times’ PWM magazine for its high efficiency, affordability, and due diligence standards. A special independent report, titled the CBI Index, ranked Dominica as the world’s best offering for economic citizenship for the last two consecutive years.
Funds generated from the programme are channelled into the socio- economic advancement of the island including job creation, healthcare, education, climate change, ecotourism, and infrastructural development.
Importantly, Dominica’s government transparency of usage of CBI receipts is often referred to as a model of how a CBI programme should be managed. For over two decades, Dominica has had a stellar reputation within the economic citizenship industry, as foreign investors choose the island’s CBI programme for its longevity, efficiency, and integrity.
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Venezuela's PDVSA says Petropiar has started operations as blending facility Monday 29th July, 2019 – Reuters
Venezuelan state-run oil company PDVSA said on Monday the Petropiar extra-heavy crude upgrader, part-owned by U.S. oil company Chevron Corp (CVX.N), had begun operations as a blending facility.
The facility, which used to produce upgraded crude destined mainly for the U.S. market, is expected to produce some 130,000 barrels-per-day (bpd) of heavier Merey crude with an API gravity of 16, PDVSA said in a statement, adding that the first Merey shipment from the plant of 520,000 barrels had been loaded.
Reuters last month reported that PDVSA planned to convert Petropiar into a facility that blended heavy and light oils to make Merey, a grade favored by Asian refiners, citing internal company documents detailing the strategy.
Petropiar once made up to 210,000 bpd of exportable “synthetic” crude out of tar-like oil from the OPEC nation’s Orinoco Belt, home to one of the largest crude reserves in the world.
But PDVSA struggled to find buyers for that grade after the United States, previously the largest customer for Venezuelan crude, sanctioned PDVSA in January to pressure socialist President Nicolas Maduro to step down.
The Treasury Department last week renewed Chevron’s license to continue operating Petropiar and its three other joint ventures with PDVSA despite the sanctions for three months. It had previously been set to expire on July 27.
In the statement, PDVSA said the conversion of Petropiar to a blending facility was “part of the socialist efforts underway at the upgraders of the Jose Antonio Anzoategui industrial complex” where its four extra-heavy crude upgraders are located.
It did not say whether it planned to convert the other upgraders, which include the Petrocedeno facility part owned by France’s Total (TOTF.PA) and Norway’s Equinor (EQNR.OL) and the Petromonagas plant part- owned by Russia’s Rosneft into blending facilities as well.
The Petrosanfelix upgrader, wholly owned by PDVSA, has been offline for months.
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They finance US $ 69.6 million for several projects in the North Tuesday 30th July, 2019 – Dominican Today
The General Director of Multilateral Cooperation, Ambassador Antonio Vargas Hernández, informed that the Ministry of Public Works and Communications (MOPC) and the National Housing Institute (Invi), will execute a project “Improving Public Works to Reduce Disaster Risk,” for an amount of US $ 69.6 million.
He explained that the aforementioned project will be financed through a ‘blending’ composed of a loan from the European Investment Bank (EIB) for an amount of US $ 50 million and non-refundable cooperation from the European Union (EU) for US $ 19.6 million.
He said that with the initiative, the Government of President Danilo Medina, will bring tranquillity to the inhabitants of the communities in the prioritized provinces of Monte Cristi, Puerto Plata, Espaillat, and Duarte, with the construction of infrastructure works and resilient housing that were affected by Hurricanes Matthew and Maria, in 2016 and 2017.
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US$674.5M from bank reserve boosts credit: Central Bank Friday 26th July, 2019 – Dominican Today
The Central Bank on Thurs. told the economic agents and the public that its recently adopted monetary policy measures, which include the release of RD$34.4 billion (US$674.5 million) from the bank reserve and the reduction of 50 base points of the monetary policy rate, have “positively impacted the evolution of credit to the private sector in national currency.”
It said that as of July 24 RD$12.5 billion of the reserve have been disbursed, or more than 36% of the total released, distributed to the productive sectors.
“These resources have been channelled to Manufacturing (RD$3.3 billion), Commerce and SME (RD$2.9.5 million), Agriculture (RD$2.4 billion), Consumption (RD$1.9 billion), Export (RD$1.7 billion) and Acquisition sectors Housing (RD$223 million, RD$110.1 million for low-cost housing and RD$112.9 million for housing up to RD$8 million),” the Central Bank said.
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JMMB Financial Group country CEO reports positive results Wednesday 24th July, 2019 – Dominican Today
The new country CEO of the JMMB Financial Group, Juan José Melo Pimentel, said Tues. that all of its companies posted satisfactory results in 2018 and expects similar performance by yearend 2019.
The group of four companies ended the period with RD$305.15 million in funds under its administration, with a total equity of RD$35.5 million.
He said the group includes the companies JMMB Stock Market, JMMB Funds, JMMB AFP BDI and JMMB Bank.
Individual performance
Melo added that JMMB Bank Savings and Credit Bank closed with a 27.7% and 34.5% growth in its loan portfolio whereas its level of arrears was 1.27%, or second-lowest among the Savings and Credit Banks of the country.
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Central Bank makes changes in bills of RD $ 2,000.00 and RD $ 200.00, and the RD $ 25.00 coin Tuesday 16th July, 2019 – Dominican Today
The Central Bank of the Dominican Republic (BCRD) reported that there will be changes in the RD $ 2,000.00 and RD $ 200.00 bills, of the series 2017, as well as in the RD $ 25 peso coins, also of the series 2017 , which will circulate successively from July 15, noting that both the indicated banknotes and the currency will coexist with the denominations of previous years.
As regards the RD $ 2,000.00 bill, the Central Bank specifies that from July 15 of this year it will contain the isotype (International System of Typographic Picture Education) with the visual identity of the BCRD, which will be printed with magnetic optically variable ink, presenting a drop effect and giving the sensation of undulating sand; at the same time, changing the position of the bill, a change of colour from green to blue.
The BCRD indicates that the isotype will be accompanied by the denomination value in numerical characters and that the bill will keep the same security measures as the others of the same value that currently circulate.
As for the RD $ 200.00 bill, the Central Bank states that as of September 15, 2019, it will contain the isotype with the visual identity of the BCRD printed with optically variable ink. When the bill changes position, the isotype produces a colour change from pink to green. It will be accompanied by the value of the denomination in numerical characters.
Another modification, in this case, is the variation in the size of the image of the Mirabal sisters and the relocation of their names with respect to series prior to 2017. This banknote will keep the same security measures as the RD $ 200.00 bills that are currently circulating.
The change in the RD $ 25.00 coin currency will occur from September 30 of the current year, and will consist of the inclusion of the registration of DOMESTIC PESOS under the National Coat of Arms, in compliance with Article 229 of the Constitution of the Republic and Article 25, literal c), of the Monetary and Financial Law No.183-02.
The BCRD states that both bills and the currency, of the series 2017, will coexist with those of the same denomination of previous years, which will maintain their purchasing force for the payment of public and private obligations.
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Dominican Republic to tender potential gas and oil sites Wednesday 10th July, 2019 – Dominican Today
Today begins in Houston, Texas, a round with investors in which the Dominican Government expects to tender 14 blocks of gas and oil in three locations across the country, a process that will conclude in December.
The consulting firm Wood Mackenzie will accompany the Energy and Mines Ministry (MEM) in the process
“The bidding blocks are located in the Cibao basin, with six intra-territorial zones, in the Enriquillo basin with three exploration regions on land, in the Azua basin, with an intra-territorial area and in the San Pedro basin, composed of four maritime zones,” the MEM said in a statement.
It adds that the periods of exploration of the blocks will be from seven to 10 years, periods that will be divided into three phases. “At the end of each (period), the operating company will have the power to terminate the contract or waive its part of the block.”
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Minimum wage climbs 14% in Dominican Republic Tuesday 9th July, 2019 – Dominican Today
The minimum wage for the private sector -currently around RD$10,000 (US$200) monthly- will climb 14% retroactive to July 1, according to the agreement reached Tues. between labour and management in the National Wages Committee.
The increase will not be retroactive as the last time and will take effect at once and not in instalments.
The parties, unions and employers, agreed to resolve the issue of the reclassification of companies within two months.
The agreement caps nearly a year of talks in which labour initially demanded a 30% increase.
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