Scotia Group to pay $7.6b in dividends

Scotia to make big payout.

Scotia Group will be paying a whopping $7.6 billion in dividend in July. According to the latest quarterly report by the banking group the directors approved an interim dividend of 51 cents per share and a special dividend of $1.94 per share.
The directors state that the special dividend is to payout years of accumulated surplus that has built up over the years. The payments comes against the drop ground of net profit for the April quarter coming in a $3.295 billion versus $3.3 billion in 2018 and $5.6 billion compared to $6.76 billion year to date in 2018 with the latter being boosted by one off gain from sale of a subsidiary of $753 million.
The group reports an eleven percent growth in its loan portfolio to reach $189 billion from $171 billion in April 2018, but just 3.4 percent since October last year.
The decision to make the special payment is not surprising with the sharp cut in cash reserves requirement at the country’s central bank and the low levels of interest rates that currently prevail in the economy.

Richard Byles next BOJ governor

BOJ interest rate & cash reserves cut will help push demand in the economy.

Word reaching IC Insider.com is that the next Governor of Jamaica’s central bank will be the past CEO of Sagicor Group, Richrad Byles.
Byles has a bachelors degre in economics from the University of the West Indies and a Master degree  in National Development and Planning from the University of Bradford. He is widely accepted to have played a major role in transforimng both the PanJam group and Sagicor Group.
Bryan Wynter who serves as the current governor of the central bank demits office later this year.

Sharp slash to interest rates

Bank of Jamaica slashed their overnight policy interest rate by a hefty 50 basis points to 0.75 percent per annum, effective 20 May 2019.
This decision reflects Bank of Jamaica’s assessment that inflation will remain low for until the end of 2020 as well as provide added stimulant for faster economic growth.
The reality is that there is a huge disparity between the move by the central bank and government policy. While the central bank lowers the rate to stimulate the economy, the government has artificially helped in keeping bank lending rates much higher than needed by taxing customers of banks by high taxes on banks that is resulting in interest rates being around 3 percent points higher than they should. This is where the focus needs to be and not on lowering on savings rate.
Low inflation is here to stay, despite the central bank’s continued focus on an excessively high 4 to 6 percent range. The lowering of interest rates is hurting savers particularly pensioners who have to rely on savings.
According to Bank of Jamaica, the decision is intended to stimulate an even faster expansion in private sector credit which should lead to higher economic activity, consistent with the inflation target. The move also comes at the same time that the bank announced the lowering of the cash reserves that commercial banks need to keep with the central.
What are the implications, investors looking for yields on local bonds will be getting less on the dollar for savings. Stocks will become more attractive as dividends in a number of cases are paying more than Treasury bill rates that sits at 2 percent per annum. Real estate will benefit from more demand as an alternate form of investing.

Prices in Jamaica plunged for December

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Prices in Jamaica on average, fell sharply by 1 percent in December last, bringing inflation as measured by the country’s Consumer Price Index to 2.4 percent for the calendar year. The fall in inflation for December occurred across several main categories of goods and services.
The movement in the index for the fiscal year-to-date was 2.7 percent. The rate of increase on average is well below the target set by the government for the central bank to aim at, for the fiscal year of 4 to 6 percent. Had it not been for a spike in the rate of exchange between April and September last year, the rate for the year would have been even lower than the final numbers reported.
Food and Non Alcoholic Beverages and the Transport division declined by 1.5 percent. The fall in Food and Non-Alcoholic Beverages resulted from a decline of 6.2 percent in Vegetables, Starchy Foods due to increased supplies of agricultural produce the Statistical Institute of Jamaica (STATIN) stated. The decrease in the Transport was due to lower prices for petrol, while Housing, Water, Electricity, Gas and Other Fuels fell by 1.3 percent, due mainly to reduced rates for electricity, sewage and water rates.

BOJ senses pick up in GDP growth

Image courtesy of arztsamui/FreeDigitalPhotos.net

Economic activity may has picked up pace in the latter half of the year compared with the first half, with a strengthening in real GDP growth and employment over the second half of the year, Bank of Jamaica is suggesting.
The central bank was commenting on the increase in money in circulation for December. “This projected acceleration in the growth in real currency demand for December 2018 is consistent with the higher growth rate that has been evident between August and November 2018,” the central bank stated. Economic growth in the June quarter was preliminarily placed at 2.2 per cent by the Statistical institute of Jamaica.
The bank went on to say, “when the forecasted change in the general level of consumer prices is taken into account, the projected real growth in currency for the 2018 is 10.5 percent, which is higher than the real growth of 7.3 percent for the previous year.”
The projected currency stock of $128 billion at end-December 2018 represents an annual growth of 15.5 percent, an acceleration when compared with the 12.9 percent recorded at December 2017.
Bank of Jamaica projects that the value of currency issued by the Bank will increase by approximately $18 billion (or 16.5 percent) in December 2018 to end the month. The central bank states that the projected growth for the month is broadly consistent with the 16.5 percent growth recorded for December 2017 as well as the five-year average growth rate of 17.3 percent for December.
BOJ net issued $4.2 billion in currency for December up to 14, this year (representing a 3.8 percent growth for the month to date). This compares to net currency issue of $1.4 billion over the same period in 2017.

Crude oil sinks below U$49

The price of crude oil on the world market sank to US$48.49 in early morning trading, the lowest levels since October 2017. The price peaked at US$76.10 in early October this year.
The trend suggests that the price will go even lower with increasing supplies said to be coming from production in the USA and concerns that the global economy is slowing and would use less oil.
The change in price has significance for the Caribbean region that are mostly net importers of oil, as well as Trinidad and Tobago who are producers of oil, and will earn far less income from the lower price. For Jamaica, it is likely to tame inflation as it did in November, when the country recorded zero inflation. It will also make the Bank of Jamaica’s inflation target of 4 to 6 percent targeting for the current fiscal year that the Country’s Central bank states was set by the Minister of Finance and the Public Service in September 2017, far more challenging than it was before.
If the price remains below the US$50 mark for a prolong period, then Jamaica could save somewhere in the region of US$$300 million per annum and that could positively affect the exchange rate, for the local currency.

Early Xmas present for Jamaicans

Imports of fuel fell in 2016

Consumers are set to get early Christmas present thanks to a sharply appreciating local dollars and a big drop in the price of oil.
The price of West Texas Crude oil is now down to 55.73 per barrel for the first time in almost a year. The price was at US$55.33 at the start of November last year and started to climb sharply after December to hit US$71 by mid-May this year and just over US$76.40 at the beginning of October before it started a steep decent to today’s level. The technical chart suggest that it could go lower still with excess supplies on the world market and slowing demand.
The cut in price has several implications for Jamaica that is a big importer of the product. It could mean savings in Foreign exchange around US$40 million per month at the current price. It will ease consumers cost as prices of petrol and electricity fall, but government will collect less taxes from petrol and GCT from JPS bills.
The fall also has implications for Bank of Jamaica with their inflation targeting, pitched extremely high originally at more than 4 percent and revised recently down to 3.5 percent on the low end for the fiscal year to March 2019. Those targets seem off as the fall in the price of oil coupled with the sharp revaluation of the local dollar is set to push the country through another round of deflation once more.

Some banks offloading US dollars

National Commercial Bank sold off US$ on Thursday.

The Jamaican dollar closed below the J$130 to the US dollar on Thursday, with the selling rate to buyers ending at an average of $129.62. The rate fell as National Commercial Bank bought just US$6.2 million and sold $14.8 million while JN Bank offloaded US$5.3 million while buying a mere $190,000.
On Wednesday, Scotiabank offloaded nearly US$23 million against buying $13.6 million. For the week to date, dealers bought US$182 million and sold US$204 million. In the previous full week, purchases amounted to $192 million and selling $188 million. With one more day of trading to come for this week, inflows will be well ahead of last weeks’ level which included purchases of US$10 from Bank of Jamaica (BOJ). No sale of foreign exchange was done by the central bank this week, and none are planned for the next four weeks. BOJ sold US$19 million to the market up to November 15 last year.
For the current week dealers also bought 5.9 million of Pound sterling and sold 3.4 million and purchased $21.2 million Canadian dollars and sold $18.9 million.
In 2017, for the first four days of the fourth week of October, purchases of all dealers and Cambios amounted to $196 million which including purchases from BOJ of US$10 million with sales of US$179 million.

BOJ FX auction rate drops $1 to $132.75

The average rate for the sale of the US$10 auction sale by Bank of Jamaica in its regular B-FXITT Standard Intervention on Wednesday, fell by $1 to $132.74 this week from $133.75, in the previous week’s auction.
The central bank offered US$10 million to eligible bidders that attracted 31 bids amounting to $21.5 million, 17 bids were accepted and resulted in an average rate of $132.74. the out turn suggest that rates in the spot market for foreign exchange could decline in the next series of trading.
Interestingly, the highest bid was priced at $133.90 and the lowest at $130.83. The lowest bid that was successful was at $132.30 and received just 16.3 percent of the amount applied for.
The final scheduled auction for October will be on the 17th when US$10 million will be auctioned.
In trading on the foreign exchange market on Tuesday, dealers bought $46.28 million in US dollar currency at an average of $132.39, slightly below the rate in today’s auction. Dealers sold US$46.94 million at an average rate of $133.34 overall, trading of all currency amounted to just over $55.3 million for both selling and buying. In trading on Monday, US dollars purchase amounted to just US$20 million at an average rate of $131.11 and sale of US$34 million at $133.99.
On Monday overall, trading of all currencies, amounted to just over $25 million and US$36.74 million, buying and selling respectively.

NIR steady despite BOJ sales

Jamaica’s Net International Reserves slipped by just US$32 million in September according to data just released by the country’s central bank – Bank Of Jamaica ( BOJ).
According to BOJ the NIR stood at US$3.027 billion at the end of September down marginally from US$3.027 billion at the end of August. Reserves amounts to just over 19 weeks of Goods & Services Imports, the central bank states.
The change comes against the back ground of sale of US$41 million in B-FXITT weekly auction of foreign currency.