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LOCAL FIXED INCOME REVIEWLOCAL MARKET REVIEW

FEATURES

WEEKLY MARKET ROUND-UP

All information contained herein is obtained by JMMB® Investment Research from sources believed by it to be accurate and reliable. All opinions and estimates constitute the Analyst’s judgment as of the date of the report. However, neither its accuracy and completeness NOR THE OPINIONS BASED THEREON ARE GUARANTEED. As such NO WARRANTY, EXPRESS OR IMPLIED, AS TO THE ACCURACY, TIMELINESS OR COMPLETENESS OF THIS REPORT IS GIVEN OR MADE BY JMMB® IN ANY FORM WHATSOEVER. JMMBITT is a member of the JMMB Group and a registered broker dealer with TTSEC.

Local Equity Market Review

ISSUE NO. 64 9th JULY, 2019

Last week, trading activity on the First Tier Market registered a volume of 1,336,000 shares crossing the floor of the Exchange valued at over $9,400,677.33. JMMB Group Limited (JMMB) topped as volume leader with 582,461 units (43.6% of market activity) followed by GraceKennedy Limited (GKC) with 233,651 units (17.49% of market activity) and Sagicor Financial Corporation (SFC) closed with 193,069 units (14.45% of market activity). Overall trading activity on the Trinidad and Tobago Composite Index resulted from trading in 22 stocks of which 9 advanced, 6 declined and 7 traded steady. For the third consecutive week, NCB Financial Group Limited (NCBFG) led as the value leader, advancing 2.25% or $0.22 to close the week at $9.99. National Flour Mills Limited (NFM) was in second place with an increase of 1.78% or $0.03 to close at $1.72. Prestige Holdings Limited (PHL) generated the largest decline of the week, down 5.06% or $0.48 to close at $9.00. On the TTD Mutual Fund Market, 141,120 CLICO Investment Fund (CIF) units traded with a value of $3,391,675.55, closing the week at unit price of $24.02 (↓1.15%). Also, 700 units in Calypso Macro Index Fund (CALYP) were traded with a value of $10,150.00. CALYP’s unit price closed at $14.50, unchanged from last week. Local indices weekly performances: � The Composite Index advanced by 6.55 points (↑0.47%) to close at 1,400.65. (YTD: ↑7.03%) � The All T&T Index declined by 0.85 points (↑0.05%) to close at 1,800.67. (YTD: ↑5.55%) � The Cross Listed Index advanced by 1.69 points (↑1.26%) to close at 135.34. (YTD:↑9.94%) �The SME Index by 0.00 points (0.00%) to close at 99.50. (YTD:↓0.50%)

Local Indices ended the week in positive territory. The Composite Index closed at 1,400.65, up 0.47% or 6.55 points. The All Trinidad and Tobago Index grew 0.05% to 1800.67 while the Cross Listed Index closed at 135.34.

Find New Treasury Bill issues and local bond activity summarized below.

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2 JMMB INVESTMENTSMARKET ROUND-UP

Local Fixed Income ReviewBonds No Government Bonds were traded on the Trinidad and Tobago Government Bond Market last week. Liquidity The Commercial Banks closed last week with an excess reserve of $3.4 billion compared to $4.4 billion last week, down by $1 billion.

International economic prospects appear less optimistic since the last meeting of the Monetary Policy Committee (MPC) in March 2019. The International Monetary Fund, in its April 2019 World Economic Outlook, revised global growth projections for 2019 downward to 3.3 per cent from 3.5 per cent. Further escalation of United States (US)-China trade frictions and rising tensions between the US and Iran have dampened economic sentiment and clouded the short term outlook for energy prices. Meanwhile, in the face of concerns regarding a potential slowdown of the US economy, the US Federal Reserve has adopted a much more dovish stance on monetary policy. Most market analysts are now predicting a cut in the US Fed funds rate, perhaps as early as July 2019, a stark reversal of market sentiment just a few months ago. Domestically, there is evidence of an energy-led recovery driven by the boost to natural gas production from the Juniper and more recently Angelin projects. This has helped to stimulate the production of petrochemicals, which had been earlier impacted by natural gas shortages. However, crude oil production has continued to steadily decline due to mature acreages. While available information suggests that the recovery of the non-energy sector is not yet fully established, some key sectors including construction are expected to respond positively to the stimulus provided by the announced acceleration in capital spending by the government in the second half of the current fiscal year (April-September 2019). Low inflationary conditions persisted over the first five months of 2019. There was a momentary uptick to 1.6 per cent in March 2019 (year-on-year) before headline inflation settled at 1.2 per cent in May. The short term perspective is for continued low inflation in the next few months, although adverse weather conditions could disturb output of domestic food crops and lead to a jump in prices of affected produce. The growth in private sector credit by the consolidated financial system slowed to 3.5 per cent in March 2019 (year-on-year) from 4.3 per cent in December 2018. In this context, one concern is that business credit has been on the decline—the year-on-year growth rate was -4.3 per cent in March 2019—while consumer credit grew by 6.0 per cent, and mortgage credit growth remained buoyant at 8.8 per cent. Liquidity among banks has been very comfortable. Commercial banks’ daily excess reserves at the Central Bank averaged $3,969 million in May compared with $2,762 million in March 2019. The Bank is keeping a careful watch on the evolution of liquidity, taking into account the dynamics of the public sector financing requirements, credit conditions and the still subdued inflationary pressures. The MPC in its deliberations noted that the nascent domestic recovery was still concentrated on the energy sector, in an environment of low inflation. On the external front, the change in the trajectory of US interest rates could release some of the pressure for defensive rate hikes that many emerging markets were experiencing. At the same time, other aspects of the external environment for Trinidad and Tobago remain quite complex in light of the US-China trade tensions, the unfolding situation with Iran and the economic spillovers from neighboring Venezuela. Taking these factors into consideration, the MPC agreed to maintain the repo rate at 5.00 per cent. The Bank will continue to carefully monitor and analyze international and domestic developments.

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Local Economic News Central Bank of Trinidad and Tobago - Central Bank maintains Repo rate at 5.00 per cent

Despite anaemic growth for the first half of 2019, one of Government’s top economic advisors, Ambassador Clyde Mascoll, is confident that the Barbados economy will take-off in the latter half of this year. Speaking at the Barbados Stock Exchange’s rebranding of its Junior Market to the Innovation and Growth Market at Savannah Hotel this morning, Mascoll explained that in just one year the Mia Mottley administration has restored the conditions necessary for growth. “The combination of increased spending, especially in an environment where there has been more than an expression of investor confidence, I think it is fair to predict that in the second half of this year there would be an upward movement,” said Mascoll, who did not say by how much he expects the economy to grow. Barbados has realised an average rate of growth of -0.7 per cent for the past decade. However, Mascoll explained that with confidence already restored, the other ingredients for economic growth, which are consumption and investment, should be added when Government’s income tax relief measures take effect this month. He argued that the new-found spending capacity will be a major beacon to illuminate the country’s economic growth path. “Barbadians seem hardly aware that starting this month there is going to be substantial tax relief. As of this month, a Barbadian earning $6250 will manage to save $350 and this is monthly relief. A Barbadian earning $10,000 will have $600 more in take-home pay. This is as a consequence of the change in the income tax structure. This is not anything to scoff at. In fact, this is the best tax relief in the history of Barbados,” said Mascoll, adding that this feat was especially impressive under an International Monetary Fund (IMF) programme. He added, “There is no IMF programme that I have ever heard of that within the space of ten months, gave tax relief to anyone. One typically associates an IMF programme with fiscal austerity, which means Government is expected to extract more taxes from the system. But starting July, the Government has allocated income to repay all Barbadians the Income tax arrears due between 2011 and 2016.” However, he made it clear that increased spending power alone was not going to do the trick, as some of Government’s other decisions, which have resulted in greater ease of doing business, coupled with a vibrant tourism sector, have all factored into his prediction. “When you look at the fact that consumption is the sole end of production and what Government is doing to inject this type of income into the economy, I cannot see anything but an upward trajectory. This is added to the fact that tourism is doing well, plus Government has made it easier, through various legislations such as at Town and Country Planning, for persons to invest,” he said. In underscoring the strength of the country’s fiscal position, the economist noted that Barbados’ debt to GDP ratio is now hovering at around 121 per cent, down from 170 per cent last year. The ambassador made it clear that the country’s fiscal position is strong and the concerns surrounding the wanton printing of money is now a thing of the past. He also gave Government kudos for the stabilizing the foreign reserves, which now stand at $1.2 billion, up from $400 million when Government took office in May 2018. He argued that while some may look to diminish this accomplishment by suggesting that the reserves are being propped up by borrowed funds, such persons should be reminded that “Barbados was in no position to borrow money from anyone a year ago” until the current administration started to address the country’s fiscal position.

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Regional Economic NewsBarbados Today - Mascoll predicts economic bounce this year

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Bloomberg: Stronger than forecasted U.S. June jobs report

The stronger than forecast U.S. June jobs report sent Treasury yields higher and scuppered the market’s most aggressive wagers on Federal Reserve rate cuts, but traders are still holding on to bets for a move this month. The rebound in nonfarm payrolls growth after June’s disappointing number led traders to step back from wagers on a half-point cut on July 31. But fed funds futures are still priced for the Fed to lower its policy rate by a quarter-point this month. The sell-off in Treasuries was most pronounced in shorter maturities, with the two-year rate shooting up almost 12 basis points, to 1.87%. The 10-year yield rose about 11 basis points to 2.04%, which would be the biggest jump since January on a closing basis. Yields on the long bond climbed 9 basis points. The jobs report “leaves a quarter-point cut firmly in place, but makes the case for a half-point cut less defensible in a data-dependent framework,” said Jonathan Cohn, head of interest-rate strategy at Credit Suisse Group AG. The labor report wasn’t strong all around. Cohn cited the uptick in the unemployment rate, to 3.7%, and weaker-than- anticipated average hourly earnings, which shows wage growth remains tame. Moreover, while the prior month’s payrolls number was revised, the move wasn’t up, but down, to 72,000. “The June figure was certainly a pleasant surprise and makes the Fed’s decision in a few weeks that much more difficult,” wrote Peter Boockvar, chief investment officer at Bleakley Financial Group. The rise in yields may have been exaggerated by thin trade on the day following the U.S. Independence Day holiday, and Credit Suisse’s Cohn says not to expect much more of an increase. He pointed out that inflation expectations remain low and uncertainties around the U.S.-China trade dispute persist. The U.S. labor figures drove yields higher in Europe as well. German 10-year yields jumped 5 basis points to -0.35%, after spending about a day below the the European Central Bank’s -0.4% deposit rate. The impact was most acute in the euro region’s peripheral bonds, with Italian notes paring one of their biggest weekly gains this year.

International Economic News