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The Government of the Republic of Trinidad and Tobago’s rating reaffirmed at CariAA+

The Government of Saint Lucia’s ratings for its proposed bond issues assigned at CariBBB

Goddard Enterprises Limited’s rating reaffirmed at CariAA-

Development Bank of Jamaica Limited’s rating reaffirmed at CariBBB+

The Government of Saint Lucia’s rating reaffirmed at CariBBB

The Government of the Commonwealth of Dominica’s rating reaffirmed at CariBB+

Bourse Securities Limited’s rating reaffirmed at CariA-

Eastern Caribbean Home Mortgage Bank’s rating reaffirmed at CariBBB+

RHAND Credit Union Co-operative Society Limited’s rating reaffirmed at CariBBB-

Point Lisas Industrial Port Development Corporation Limited’s rating reaffirmed at CariA+

The Government of the British Virgin Islands’ initial issuer rating assigned at CariAA-

NCB Capital Markets Limited’s initial issue rating assigned at CariBBB-

VENTURE Credit Union Co-operative Society Limited’s rating reaffirmed at CariBBB-

Benefits of a CariCRIS Rating to a Manufacturing Entity:

Access to an independent assessment of the Company which

can lead to increased efficiencies as a result of improved

business operations

Access to improved terms from suppliers

Access to improved terms for lines of credit

DATE WORKSHOP

Latest Rating Actions by CariCRIS

COUNTRY

Please visit our website at www.caricris.com for the detailed Rationales on these and other ratings

CariCRIS’ credit ratings and daily Newswire can also be found on the Bloomberg Professional Service.

REGIONAL

Trinidad and Tobago

ATTIC wants an insurance court

An insurance court and a special motor vehicle offence court to save

time and money are among recommendations from the Association of

T&T Insurance Companies (ATTIC) for the fiscal year ahead.

T&T up two places in Global Services Location Index

The potential of T&T within the Business Process Outsourcing (BPO) industry

has received further validation with the recent release of AT Kearney’s

Global Services Location Index (GSLI) report, which ranks this country at

number 40.

TTMA optimistic about Budget

The T&T Manufacturers’ Association (TTMA) is optimistic that positions

presented during its pre-Budget talks with Government can chart a way

forward for the nation’s economy.

Jamaica

5,000 JOBS

Musson breaks ground for US$30-M Tech Park

Stanley Motta Ltd, subsidiary of the Musson Group, is investing US$30

million in an integrated Tech Campus at 58 Half-Way-Tree Road in

Kingston.

Jamaica improves 5 places in Global Competitiveness Report

Jamaica has improved its score by five places in the latest Global

Competitiveness Report, moving to 70th position compared to 75 last

year.

NCB Financial Group Raises $18b, Lists Bond On JSE

A new bond issued by NCB Financial Group Limited raised $18.4 billion for

the banking group, and was subsequently listed on the Jamaica Stock

Exchange, JSE, on Wednesday.

Barbados

‘Digital currency can transform regional economies’

Governor of the Eastern Caribbean Central Bank (ECCB) Timothy Antoine

said Barbados and the rest of the region can transform their economies

by introducing a regional digital currency.

The Bahamas

$500m Developer Targets Ginn Property Acquisition

A Canadian-based developer with $500 million in assets has emerged as

the potential buyer for the former Ginn sur mer project in Grand Bahama’s

West End, Tribune Business can reveal.

Accounting Firm Plans 25% Staff ‘Ramp Up’.

A Bahamian accounting firm is aiming to “ramp up” staffing levels through

25 per cent growth over the next year, as it eyes opportunities in the

digital space.

Haiti

Competitiveness, Haiti last of the Latin America and Caribbean Region

Wednesday the World Economic Forum published its Report on the Global

Competitiveness Index (2017-2018). With a general average of 3.22 Haiti

ranks 128th among the 137 economies analyzed accounting for 98% of

the world Gross Domestic Product (GDP) and in the last position with

Venezuela in the Latin America and Caribbean Region...

St. Lucia

Saint Lucia named “Caribbean’s leading honeymoon destination 2017”

For the fourth consecutive year, the island of Saint Lucia has been named

the “Caribbean’s Leading Honeymoon Destination 2017” by the World

Travel Awards (WTA).

Panama

Panama in top 30 economically free countries

In the midst of its current corruption pandemic, Panama was listed on

Thursday, September 28 as one of the top 30 “most economically free”

countries in the world.

Dominica

Business as usual for Dominica’s Citizenship by Investment Unit despite

post-hurricane challenges

In keeping with the stability and resilience for which the citizenship by

investment (CBI) programme and the island of Dominica is known, the

Citizenship by Investment Unit (CIU) is back in full operation, following the

direct hit by Hurricane Maria last week.

CDB affirms support for Dominica

President of the Caribbean Development Bank (CDB), Dr Warren Smith,

has reaffirmed the institution’s support for the government and people of

Dominica, after participating in a Caribbean Community (CARICOM)

high-level mission to that country on Tuesday.

British Virgin Islands

BVI to upgrade building codes in the aftermath of Hurricane Irma

Plans are being made to review and upgrade the British Virgin Islands’

building codes following the devastating impact of Hurricane Irma.

INTERNATIONAL

United States

U.S. economy accelerates in second quarter; hurricanes expected to slow

growth

The U.S. economy expanded a bit faster than previously estimated in the

second quarter, recording its quickest rate of growth in more than two

years, but the momentum likely slowed in the third quarter due to the

impact of Hurricanes Harvey and Irma.

Trumpflation strikes back: dollar set for best week of the year

The dollar was set for its biggest weekly rise in 2017 and stocks rose across

the world after U.S. President Donald Trump proposed the biggest tax

overhaul in three decades in the United States.

United States Cont’d

Futures mixed, eyes on Trump tax progress

U.S. stock index futures were mixed on the last trading day of the month as

concerns lingered about President Donald Trump’s tax plan making

progress through Congress.

U.S. shale hinders hopes for oil market rebalancing: Reuters poll

Oil prices are unlikely to rise much beyond this month’s two-year highs this

year, as concern among analysts persists that growing U.S. shale output

will hamper the rebalancing between global crude supply and demand,

a Reuters poll showed.

United Kingdom

UK growth slows to four-year low as BoE prepares rate rise

Britain’s economy grew at its slowest pace since 2013 in the 12 months

after last year’s Brexit vote, data showed on Friday, painting a subdued

picture as the Bank of England prepares to raise interest rates for the first

time in a decade.

Sterling skids as weak data feeds November rate hike doubts

Sterling skidded on Friday, hitting a one-week low against the euro after

data showed Britain’s economy recorded its weakest annual growth since

2013 in the second quarter of the year.

Europe

Euro zone inflation miss supports case for ECB caution

Euro zone inflation undershot expectations in September, Eurostat data

showed on Friday, highlighting that price growth remained week and

supporting the European Central Bank’s case for only gradual removal of

stimulus.

Need to make "very significant progress" on bad loans - ECB's Nouy

Euro zone banks need to make faster progress in reducing their pile of

bad loans, the European Central Bank’s top bank supervisor said on

Friday.

China

Chinese creditors find even state-backed credit protection has its limits

Since the collapse more than two years ago of China’s second-biggest

loan guarantor, the state-backed Hebei Financing Investment Guarantee

Group, creditors including powerful financial institutions have been trying

to get billions of dollars of their money back. They have failed.

Japan

Looming election may be nail in coffin for Japan's fiscal reform

Even as a new party under a populist female leader scrambles the

outlook for Japan’s general election next month, one thing is clear: the

winner will loosen a grip on the government’s runaway debt as lawmakers

forego higher taxes or boost spending.

Global

Bullish oil streak propels Brent to strongest third-quarter in 13 years

Oil edged higher on Friday as tensions around Iraqi Kurdistan threatened

the region’s crude supplies, helping Brent prices to their strongest third-

quarter performance since 2004.

‘Digital currency can transform regional economies’ Thursday 28th September, 2017 – Barbados Today

Governor of the Eastern Caribbean Central Bank (ECCB) Timothy Antoine

said Barbados and the rest of the region can transform their economies

by introducing a regional digital currency.

Antoine told a one-day Bitt seminar at the Barbados Hilton Resort today

that in order to achieve at least five per cent economic growth and

single-digit unemployment, the region needed to embrace digital

currencies such a bitcoin.

“This region we long call the Caribbean needs economic transformation,

and I want to see it in my lifetime,” he said, pointing out that if anything,

the recent devastating hurricanes highlighted the need for

transformation.

“As we speak at this moment this region is averaging less than two per

cent growth per annum. We need to get to at least five per cent and that

is the goal of the ECCB. I know that is Jamaica’s target as well. We have

to transform this region, and I certainly believe blockchain technology has

the potential to help us do that.

“So how are we going to do that transformation? It has to be a quantum

leap. It can’t be some of the incremental things I see happening at this

moment. It is just not going to work . . . we have to quantum leap using

technology available to us.”

Speaking on the topic The Future is Now: Leveraging Blockchain For

Economic Transformation, the regional banker said the eight-member

ECCB was currently engaged in discussions with the Barbados-based

financial technology firm Bitt for a pilot blockchain currency in the Eastern

Caribbean Currency Union.

He explained that it would explore the development of a digital dollar for

the Eastern Caribbean dollar using technology that would be subjected

to rigorous testing to determine its sustainability “for broad base

implementation”.

Antoine also said the issue had the attention of the Caribbean

Community (CARICOM), which had established a working group to

examine the possibility and report to the leaders at their next summit.

He acknowledged that for a digital currency to take root in the region a

number of regulations would have to be put in place, and there must be

greater cooperation, as well as buy-in from all stakeholders.

In a brief presentation Parliamentary Secretary in the Ministry of Finance

Senator Jepter Ince said Barbados could not escape the new technology,

pointing out that digital currency had the opportunity to transform

economies.

He also called on CARICOM to “think about a digital currency”, adding

that it could “go parallel with the Barbados dollar as well as the Eastern

Caribbean dollar.

“Those are the type of things we want to happen and those are the type

of things we must consider. I am confident it is here to stay,” Ince said.

Chief Executive Officer of the US-based internet retailer Overstock.com

Patrick Bryne said Barbados and the rest of the region had the opportunity

to become the first to have a digital currency, given the extensive work

that was being carried out by Bitt.

Adding that Bitt was ready to launch its digital wallet, merchant payment

process and digital asset exchange systems come December, Bryne said

“this means that you, the Caribbean, Barbados and the Eastern

Caribbean, have a unique opportunity still . . . to be the first in the world”.

He said there were several benefits, including easier and cheaper transfer

of funds, a reduction in tax avoidance, financial inclusion, lower possibility

of counterfeiting and better measurement of economic data, as well as

increased opportunity for financial operators to know their customers.

He pointed out that several central banks around the world had already

begun to examine the possibility of incorporating blockchain technology

in the regulated financial system.

<< Back to news headlines >>

ATTIC wants an insurance court Friday 29th September, 2017 – Trinidad and Tobago Guardian

An insurance court and a special motor vehicle offence court to save

time and money are among recommendations from the Association of

T&T Insurance Companies (ATTIC) for the fiscal year ahead.

The association lists as priority areas crime/law and order; agriculture and

food security; healthcare services and hospitals; economic growth, job

creation, competitiveness and innovation; poverty reduction; and human

capital development.

“An insurance court could promote the speedier processing of insurance

claims as currently, insurance claims clog the courts and there have been

an increase in legal action at the High Court to overturn such

judgements,” ATTIC said in the 17-page document it submitted to

Government

“The protective services are loath to issue tickets because of the time

required to appear in court and this directly impacts on the number of

police officers who are on patrols. ATTIC would like to recommend that

Government establishes a special court system to deal with all motor

vehicle offences including traffic offenders, vehicular accidents and all

court cases which pertain to motor vehicles.”

The association said this would reduce congestion in the judicial system

and ensure the speedy resolution of any motor vehicle related offence.

ATTIC suggested registration of motor vehicle garages as one way to

regulate the industry and ensure repair shops are compliant. Additionally,

they have proposed changes to the format of motor certificates to

alleviate fraud.

By imposing more stringent penalties on persons driving without insurance

or driving with a fraudulent certificate, ATTIC urged the law-makers to

enforce penalties against persons found to be producing and selling

fraudulent certificates..

In the areas of disaster management and recovery, fire and flood

prevention, ATTIC said establishment of a country disaster relief fund

would provide a level of protection. They also suggested a tax deduction

for residential and commercial building owners who retrofit their properties

against the hazards of earthquakes and hurricanes, using properly

certified builders and contractors.

<< Back to news headlines >>

T&T up two places in Global Services Location Index Friday 29th September, 2017 – Trinidad and Tobago Guardian

The potential of T&T within the Business Process Outsourcing (BPO) industry

has received further validation with the recent release of AT Kearney’s

Global Services Location Index (GSLI) report, which ranks this country at

number 40.

For the second consecutive year, T&T has been acknowledged in the now

eighth edition of the study, titled The Widening Impact of Automation,

which analyses and tracks the off-shoring landscape in 55 countries.

The 2017 ranking moves this country up two places from the previous year,

extending the nation’s credibility and lead over long-term, nearby players

such as Jamaica and Canada.

What works in T&T’s favour is its English-speaking, highly skilled labour, as

well as its proximity to the Latin American and Caribbean markets, and

overall financial competitiveness.

This latest ranking signals once more the country’s increasing international

profile as a BPO service provider and underscores the leading role the

expansion of the financial sector will play in achieving ongoing economic

prosperity.

“This is a major achievement for T&T as we continue to promote our

country as a competitive location for financial services,” said Aliyah

Jaggassar, who spearheads the development of the local Finance and

Accounting (F&A) BPO sector as the Vice President - BPO Shared Services

Development at the T&T International Financial Centre (IFC). “Additionally,

the report is a key tool used by companies across the world in deciding

where to locate their offshore operations.”

The GSLI is based on metrics in three categories: financial attractiveness,

people skills and availability, and business environment.

According to the index, Asian countries continue to dominate with India

remaining in the top spot followed by China and Malaysia in second and

third positions.

The research also addresses the challenges that the global sector faces

from automation, highlighting that the jobs which will be impacted reside

in the major outsourcing centres where there is a concentration of low-

skilled, repetitive jobs.

“This analysis is important as it confirms we are on the right track.

The job opportunities that the Trinidad and Tobago IFC is creating locally

to achieve its goal of developing the financial services sector will

generate high-value employment within the F&A BPO sector,” Jaggassar

added.

<< Back to news headlines >>

TTMA optimistic about Budget Friday 29th September, 2017 – Trinidad and Tobago Guardian

The T&T Manufacturers’ Association (TTMA) is optimistic that positions

presented during its pre-Budget talks with Government can chart a way

forward for the nation’s economy.

In a media release yesterday, the business group said it had also

participated in the conversation the Government had with various

stakeholders on Wednesday and welcomed that initiative which it said

“could not come at a more opportune time.”

“The TTMA looks forward to the details in the budget, which would be

read on October 3. The observations made from the pronouncements by

the Prime Minister and Minister of Finance have been that the business

community of Trinidad and Tobago should continuously work to grow the

sector of the non-energy economy, to increase production, employment

and foreign exchange and in so doing aid in the diversification drive.”

The group said it supports the positions on these matters and is committed

to working with the Governmentto create an enabling environment that

would allow the business community, and the country as a whole, to be

placed on a sustainable path of economic growth and development.

The TTMA said it welcomed the position of Government to put measures in

place that would assist the growth and development of the

manufacturing sector, including creation of a framework that would offset

the burden of any additional taxes.

TTMA president Christopher Alcazar said: “The Association remains resolute

that although this is a difficult time, the Minister of Finance will deliver

some critical points in the budget presentation as discussed with us and

which we feel would point us in the right direction to allow the

manufacturing sector to be among the leaders in the diversification

drive.”

<< Back to news headlines >>

Business as usual for Dominica’s Citizenship by Investment Unit despite

post-hurricane challenges Thursday 28th September, 2017 – Caribbean News Now

In keeping with the stability and resilience for which the citizenship by

investment (CBI) programme and the island of Dominica is known, the

Citizenship by Investment Unit (CIU) is back in full operation, following the

direct hit by Hurricane Maria last week.

Owing to the rigorous processes that have been established over years of

refinement, the Unit has had minimal disturbance to the processing of

applications, and continues to provide the product that has been widely

acclaimed as the world’s best citizenship by investment programme.

Infrastructural damage to the department’s building is minimal, and all

lines of communications have been restored, including emails and phone

lines.

Prime minister of Dominica, Roosevelt Skerrit, applauded the Unit for its

proactive response: “We’re getting on the with the job. My team is

amazing. They may have lost their homes, but they have not lost their will

to work. We will continue to provide a programme of exceptional service

and quality, and as far as we’re concerned its business as usual.”

The CIU, which is responsible for the processing of all citizenship

applications and due diligence procedures, continues to enhance their

processes with a recently launched online submission portal.

Emmanuel Nanthan, coordinator of the Unit, attributes the programmes

stability to its rigorous processes: “The streamlining of our processes has

meant that we have been able to work with minimal disturbance despite

everything going on outside our windows. We are fortunate to have

robust frameworks that have enabled business to carry on.”

The prime minister continued, by explaining that the quick response by the

Unit is steeped in the cultural makeup of the broad Dominican

community: “We are an incredibly strong and resilient community – one

that is bigger than just our small island nation, with networks and friends all

around the world. Some may be surprised by our ability to carry on, but

we are not. The Dominican people are not crippled by the events of the

past week. As the British would say, we have kept calm. And now we’re

carrying on.”

Dominica’s CBI programme was recently ranked the top programme in

the world by the Financial Times’ Professional Wealth Management

magazine. The four indicators for which the programme received 100

percent – ease of processing, minimum investment outlay, due diligence,

and mandatory travel or residence – remain unchanged and unaffected

by the latest hurricane events.

<< Back to news headlines >>

BVI to upgrade building codes in the aftermath of Hurricane Irma Thursday 28th September, 2017 – Caribbean News Now

Plans are being made to review and upgrade the British Virgin Islands’

building codes following the devastating impact of Hurricane Irma.

Speaking on local radio on Monday, premier and minister of finance, Dr

Orlando Smith, said, “This hurricane that hit us is the scale we have never

seen before, it was a Category 5, and it was really devastating.

Interestingly just before that, we had intense flooding, again, such as we

never had before in the BVI. Times have changed, and global warming is

definitely affecting us and we now have to look at where we are as a

country and make the adjustments to suit the times in which we live.”

The territory’s leader stated, “We have to take lessons from what has

happened, certainly with Irma and review our building codes. We have

lost and received damage to about 70 percent of our buildings, and that

now gives us an opportunity to build smarter and stronger.”

The premier said just a few months ago, he received a copy of the first

draft of the new building code because he had some concerns about

the way buildings were being constructed.

He added, “But now we have to review that again, and when we do that,

we will want to involve the community and get your contributions so that

in the end, we will be able to build stronger and better.”

Also speaking in support of the building code review, junior minister for

trade, investment promotion and consumer affairs, Marlon Penn, said,

“We have an opportunity to rebuild and to do new things and rebuild

green. Our rebuilding efforts have to take into effect the impact of global

warming, as we have seen the impact of global warming first-hand.”

Sharing similar sentiments was the junior minister for tourism, Archibald

Christian, who said that the Category 5 hurricanes seem to be the new

norm, but the territory now needs to build to withstand a Category 5 plus.

He added, “We need to build stronger and better, and it will take the

efforts of professionals to assist us. We have a number of engineers here in

the territory, as well as those from the region and internationally but it

can’t be business as usual anymore when it comes to building. We need

to be building bunkers now that can withstand a Category 5 hurricane

and above.”

<< Back to news headlines >>

5,000 JOBS

Musson breaks ground for US$30-M Tech Park Friday 29th September, 2017 – Jamaica Observer

Stanley Motta Ltd, subsidiary of the Musson Group, is investing US$30

million in an integrated Tech Campus at 58 Half-Way-Tree Road in

Kingston.

The location is being constructed to predominantly house business

processing outsourcing (BPO) companies. Associated services of the

facility will include a day-care centre, ATM and financial services, health

care and food service companies.

Stanley Motta, which yesterday broke ground for the development that

stretches across 236,000 square feet of land, touts the facility as the largest

Tech Park in the Caribbean. Dubbed 58HWT, the new construction adds

to investment of more than US$100 million by the Musson Group over the

last two years.

Stanley Motta has already signed off on a lease arrangement with BPO

company Alorica, which provides global service in the communications,

financial services, health care, hospitality, retail, and technology

industries.

Currently Alorica employs 1,000 agents for its operation in Portmore, St

Catherine. It plans to add another 5,000 employees for its new site in

Kingston.

“My plan to go live is in the first or second week of December. We will start

in the areas of technology, customer service and sales with about 1,500 to

2,000 agents by the end of the first quarter 2018,” Jamaica Country Lead

Gilberto Gianareas told the Jamaica Observer.

He added that the company is already in dialogue with the HEART

Trust/NTA to host 20 graduates from its call centre training course at the

Portmore location.

Alorica — which currently operates centres in Mexico, Guatemala,

Honduras, Dominican Republic, Antigua, Panama, Brazil, and Uraguay —

hopes to make Jamaica its flagship site for the region. Gianareas also

reckons that Jamaica has the potential to generate big business from

email and chat support services.

“I don't think it's seen that way yet, but this will be a world-class facility for

the BPO industry,” he told the Caribbean Business Report.

“I think after we grow and we see the business and the industry mature a

little, then we can start bringing other kinds of business here. One of the

things that I want to grow here is email and chat. By having English-

speaking agents we can definitely grow a lot more in the email and chat

business, which is becoming a big thing in the BPO industry,” Gianareas

continued.

Speaking at the event, Prime Minister Andrew Holness noted that in

February 2016, 8,000 square feet of space existed within the BPO sector

with 44 companies employing approximately 18,500 workers. By March

2017, that number moved to 1,300,000 square feet led by expansion and

the addition of six new BPO players.

“We added just under 5,000 jobs to average about 22,000 jobs in the

sector — that is the pace of growth that has happened within a year,”

Holness said. “Being the minister responsible for the Port Authority of

Jamaica and the Factories Corporation of Jamaica, I know of plans for

250,000 new square feet of space, and we will be retrofitting 50,000

additional square feet.”

He added that from the public sector side, Jamaica is looking at an

average of 300,000 square feet new space, while the private sector also

has plans for 800,000 new spaces and another 250,000 square feet.

Factories Corporation of Jamaica will be embarking on four main projects

at Naggo Head and Caymanas in St Catherine, Garmex Free Zone in

Kingston, and the Old Goodyear complex in St Thomas which is to be

transformed into the new town centre. West Indies Home Contractors

(WIHCON) is to oversee 37,000 square feet of construction to house a BPO

centre in Portmore on behalf of Canadian firm Advantage

Communications Inc.

“By the time I go to Standing Parliament to deliver my budget

presentation in 2018, we should have additional space of 1,350,000

square feet adding another 25,000 new jobs conservatively estimated. So I

want you to appreciate that there is momentum in the industry. This is not

the limit of our potential,” the Prime Minister said.

“This year we created almost 35,500 new jobs, the highest new job

creation in the history of Jamaica. Much of that came from the services

sector — BPO, tourism — and the return of bauxite. Jamaica has all the

resources right here to grow and sometimes we are our biggest obstacle,

but if we can get consensus we can remove one of the obstacles, which

is divisive and petty politics,” Holness continued.

<< Back to news headlines >>

Jamaica improves 5 places in Global Competitiveness Report Friday 29th September, 2017 – Jamaica Observer

Jamaica has improved its score by five places in the latest Global

Competitiveness Report, moving to 70th position compared to 75 last

year.

The decline shows a steady improvement since 2012 when Jamaica

placed 97 out of 144 countries, improving to 94 in 2013, 86 in 2014,

levelling at 86 in 2015, then improving by 11 places last year.

The results of the 2017/18 report were published by the World Economic

Forum on Wednesday. Jamaica placed between Iran and Morocco.

The new ranking makes Jamaica the highest rated in the Caribbean out

of the four countries listed. Last year Barbados ranked as the highest

Caribbean country at 72, but it was not included in this year's report. The

second-highest rated Caribbean country was Trinidad and Tobago at 83,

an improvement of 11 places compared to 94 last year.

Last year, Barbados was the highest ranking (Latin American and

Caribbean) LAC economy for a number of areas, including infrastructure,

labour market efficiency, and technological readiness, but was the lowest

ranked for market size. Barbados was not listed this year, but Jamaica led

the LAC for labour market efficiency.

The Dominican Republic fell 12 places to 104, down from 92.

But the lowest-rated Caribbean country was the DR's neighbour, Haiti

which at 128 was listed in the worst 10 performing countries, dominated

mainly by Africa.

Jamaica ranked quite highly for the pillar of financial market

development for — placing 31, slightly down from last year's 30. But

Jamaica performed poorly for macroeconmic environment at 111 and for

market size at 116.

Unsurprisingly, perhaps, the most problematic issue for doing business in

Jamaica is seen as crime and theft, followed by tax rates, corruption, and

access to financing.

The least problematic factor is seen as public health. Restrictive labour

regulations and policy instability are also seen as minor problematic

factors.

Drilling down further into the report, at 130 Jamaica ranks towards the

bottom of the globe for the business costs of crime and violence, and

likewise for organised crime, placed at 132. But both show slight

improvements over last year.

Jamaica also ranks very poorly for government debt as a percentage of

GDP at 129.

The high rate of prevalence of HIV is also a cause of concern, placing

Jamaica at 118. But on the topic of disease, Jamaica placed close to the

top of the world for the low incidence of tuberculosis — ranking 6th in the

world.

Even higher than that was Jamaica's ranking of second for the number of

procedures needed to open a business.

Apart from Barbados, most Caribbean countries, including Cuba,

Guyana, Belize and other Caricom states are not included in the report.

Costa Rica was the highest-rated regional country at 47, up from 50 last

year. Panama followed at 50, falling eight places since last year, just

ahead of Mexico at 51. Meanwhile, Canada placed 14, up from 15 .

The small island economy of Mauritius was the highest-ranked country

from Africa at 45, equal to last year.

The world's most competitive economy was Switzerland, followed by the

United States (moving up one space from third) and Singapore. Finishing

out the top 10 economies were Netherlands at 4, Germany, Hong Kong,

Sweden, the United Kingdom (down one space from seven last year),

Japan and Finland.

The least competitive economy was Yemen, currently in civil war, at 137.

Several African countries were in the bottom 10, including Mozambique at

136, Chad, Liberia, Mauritania, Malawi, Lesotho, Sierra Leone, Burundi at

129. Venezuela, once one of the wealthiest economies in South America,

was ranked at 127 — an improvement of three places over last year.

The report is created with input from various partner institutes in each of

the listed countries. In Jamaica the partner institute is the Mona School of

Business & Management (MSBM) at The University of the West Indies, with

the assistance of Michael Williams, acting executive director; William

Lawrence, director, Professional Services Unit; and Patricia Douce, project

administrator, Professional Services Unit.

<< Back to news headlines >>

NCB Financial Group Raises $18b, Lists Bond On JSE Friday 29th September, 2017 – Jamaica Gleaner

A new bond issued by NCB Financial Group Limited raised $18.4 billion for

the banking group, and was subsequently listed on the Jamaica Stock

Exchange, JSE, on Wednesday.

It's the largest debt security to list on the nascent JSE bond trading

platform, alongside a small pool of corporate bonds.

The placement and listing were arranged by subsidiary NCB Capital

Markets Limited. It's the first big fundraising disclosed by the parent

company since the restructuring of the conglomerate was finalised earlier

this year, placing the banking, insurance and wealth subsidiaries under

the umbrella of NCB Financial Group.

NCB Financial will use the funds raised for corporate activities, but there is

no definitive acquisition target in mind, said NCBCap CEO Steven

Gooden.

"The raise was for general corporate purposes. NCBFG is a relatively new

company and as such, we are building out capacity to pursue various

investment opportunities," said Gooden.

He added that the US-indexed bond, which is denominated in Jamaica

dollars, is likely the largest offer made to sophisticated investors in the

Jamaican market. It is also the largest from a member of the NCB family,

in which the last big fundraising was a $10-billion bond issued by NCBCap

itself in May.

The NCB Financial offer opened in July and closed a month later in the

third week of September. The bond will pay interest at six per cent per

annum until maturity

in four years. The Financial Gleaner understands that the issue was timed

to attract the added liquidity that flowed into the market as a result of the

early redemption of roughly US$520 million worth of Government of

Jamaica bonds in August.

"A number of institutional investors participated in the offer, including fund

managers and securities dealers," Gooden said.

NCB Financial Group is Jamaica's largest banking conglomerate with

assets of $665 billion in the June quarter.

The group's liabilities amount to $553 billion, of which more than half, or

$293 billion, is customer deposits, while another $104 billion relates to

repos.

NCB's last big acquisition was a 29.99 per cent stake in Guardian Holdings

Limited of Trinidad in May 2016, at a cost of $28 billion.

<< Back to news headlines >>

CDB affirms support for Dominica Thursday 28th September, 2017 – Caribbean News Now

President of the Caribbean Development Bank (CDB), Dr Warren Smith,

has reaffirmed the institution’s support for the government and people of

Dominica, after participating in a Caribbean Community (CARICOM)

high-level mission to that country on Tuesday.

Smith was part of a delegation that met with the prime minister of

Dominica, Roosevelt Skerrit, in Roseau to discuss rehabilitation and

recovery efforts for the country following Hurricane Maria.

“CDB stands in solidarity with the government and people of Dominica as

the country seeks to rebuild and recover from this devastating disaster.

We are acutely aware of the significant damage that Hurricane Maria has

caused, and have mobilised resources for emergency relief and

immediate response. CDB reaffirms our continued support for Dominica to

help the country rebuild more resiliently in the months and years to

come,” Smith said on his return to CDB’s headquarters.

CDB has begun making preparations to assist with the restoration of

essential services including water and sanitation, and lend technical

experts to support the recovery efforts.

Water and sanitation

The Bank’s focus will include the restoration of the water supply in Roseau,

where damage to the treatment plant at Antrim and associated pipelines

has cut off water in the capital. CDB, which was in the process of

upgrading the plant and equipment through its Third Water Project, is

discussing with the Dominica Water and Sewerage Company Limited,

ways to overcome the current logistical challenges to conduct the works,

which will be critical in getting the water system running again in Roseau.

Technical expertise

CDB is in discussions with private consultants and development partners to

provide short and medium-term assistance, including engineers and other

technical experts, to assist line Ministries in Dominica in the recovery effort.

The Bank is also discussing with regional utility groups and engineering

associations opportunities for providing financial support and human

resources to assist with recovery in Dominica.

CDB has also discussed with the government of Dominica the option of re-

prioritising the use of undisbursed balances on existing disaster

rehabilitation loans for post-Maria recovery works.

The high-level delegation that visited Dominica included Dr Keith Mitchell,

prime minister of Grenada and chairman of CARICOM; Adriel Brathwaite,

attorney general of Barbados; Irwin LaRocque, secretary-general,

CARICOM; and Ronald Jackson, executive director, Caribbean Disaster

Emergency Management Agency (CDEMA).

<< Back to news headlines >>

$500m Developer Targets Ginn Property Acquisition Thursday 28th September, 2017 – Tribune 242

A Canadian-based developer with $500 million in assets has emerged as

the potential buyer for the former Ginn sur mer project in Grand Bahama’s

West End, Tribune Business can reveal.

Multiple contacts confirmed that Skyline Investments, a Toronto-based

real estate investor/developer, with a focus on hotel and resort

development, has been negotiating with the $4.9 billion Ginn project’s

two owners for several months.

Skyline and its senior executives are understood to have given a three-

hour presentation on their plans to the Minnis Cabinet on Tuesday, with

the Government’s reaction understood to be favourable.

Cabinet ministers, and Bahamian professionals involved in negotiations to

close the purchase, were tight-lipped yesterday when contacted by this

newspaper.

K P Turnquest, deputy prime minister and minister of finance, replied:

“Unfortunately, I’m not at liberty to talk about that” when the matter was

raised with him. Kwasi Thompson, minister of state for Grand Bahama, also

declined to comment when contacted by Tribune Business.

Gail Lockhart-Charles, the Bahamian attorney for Skyline, told this

newspaper via e-mail that she was “unable to comment” on this

newspaper’s inquiries regarding her client’s interest in West End.

Still, Tribune Business sources said the Cabinet presentation suggested that

Skyline’s negotiations had advanced to the point where a sales

agreement had either been signed, or was at the point of being

concluded. Once that happens, the parties to a real estate deal typically

have 60 to 90 days to close.

Should the purchase be concluded, it would end the near-decade

standstill endured by West End since the original developer, Bobby Ginn

and his Ginn Clubs & Resorts, defaulted on their project financing in the

wake of the 2008-2009 recession.

It would also mark the first positive foreign direct investment (FDI) for

Grand Bahama in years, and provide some relief from the continued

Grand Lucayan closure that will mark its one-year anniversary next week.

Obie Wilchcombe, former minister of tourism and ex-West End MP, told

Tribune Business he had been aware of Skyline’s interest in the former Ginn

property prior to the election, although no formal proposals had been

submitted to the Christie administration.

Acknowledging that Skyline had been furthest advanced in its

negotiations prior to May 10, Mr Wilchcombe said: “I’ve heard about

them, but they made no formal inquiries of us.

“They had done some preliminary work and inquiries, and I was made

aware, as the MP and minister of tourism, that they were having meetings

and having persons survey the property, looking at the potential of it all.”

Tribune Business sources said a Skyline team has been present on Grand

Bahama for several months, conducting due diligence, and Mr

Wilchcombe said: “We understood they’d exhibited a real, significant

interest.

“There are 2,000 acres of land just sitting there. It’s been long-standing. It’s

a prime property, and if we get a good company interested in

developing the property, and developing a relationship with the

community and working with the people of the community, that will be

fantastic.

“It’s a property that is waiting for something to happen, and if we can find

a good investor with the money and good vision for the property, and a

willingness to work with the community, we’ll welcome it.”

Mr Wilchcombe said any Ginn sur mer purchaser would inherit a solid

foundation, given that the original developer had invested $200 million in

developing infrastructure that is already in the ground. Numerous

potential buyers have ‘sniffed’ the property over the years, but Skyline is

the first to take a serious look.

Tribune Business sources yesterday suggested that what had once been a

$60-$80 million purchase price for Ginn sur mer had dropped to around

$40-$45 million, with Skyline understood to have agreed a deal in that

range.

Negotiations have involved the added complication of dealing with two

vendors. What would have been the core project is owned by Lubert-

Adler, the Philadelphia-based investment bank that was Ginn’s financing

partner.

It holds 280 acres that were earmarked as the site for the hotels and

casino, and its landholdings also include key amenities such as the airport,

marina and utilities.

Lubert-Adler also controls the Old Bahama Bay Resort, the golf course, the

existing marina, commercial facilities such as the restaurants and retail,

and associated operational facilities.

But a Credit Suisse-led lending syndicate took possession of the remaining

1,476 acres at the former Ginn sur mer project after Ginn Development

Company defaulted on its $276 million loan.

It effectively inherited the real estate component of the Ginn project, and

hired Replay Resorts to master plan the property. Bill Green, Replay

Resorts’ chief operating officer, failed to return messages seeking

comment yesterday.

Lubert Adler and Credit Suisse have worked together in the belief this is

the best way to maximise their exit price - and potential recovery - by

selling the former Ginn sur mer as one.

Skyline Investments, which is listed on the Tel Aviv Stock Exchange,

describes itself on its website as having $500 million in assets. It specialises

in real estate investment and development related to the hotel/resort

industry.

It describes itself as “sourcing new acquisition opportunities to grow and

diversify its cash flow in North America”, with an emphasis on

geographical diversification.

Current properties include the Hyatt Regency at The Arcade in Cleveland;

the Renaissance Cleveland Hotel; Bear Valley Ski Resort in California, plus

a variety of mixed-use resort developments throughout Canada.

Skyline’s plans for the Ginn sur mer property are unclear, although its

development will likely be less high-rise than the original developer’s.

<< Back to news headlines >>

Accounting Firm Plans 25% Staff ‘Ramp Up’. Thursday September 28th, 2017 – Tribune 242

A Bahamian accounting firm is aiming to “ramp up” staffing levels through

25 per cent growth over the next year, as it eyes opportunities in the

digital space.

Michele Thompson, Ernst & Young’s (EY) Bahamas managing partner, told

Tribune Business in a recent interview that the company was already

aiming to grow its workforce from “just over 60” to around 80 by year-end.

She added that EY was targeting Bahamians leaving colleges and

universities, and those graduating from the University of the Bahamas

(UoB), in a bid to develop a strong cadre of local talent.

“One of the things we’re very keen on is doing a lot of growth from the

ground up,” Ms Thompson said, explaining that EY’s Bahamian affiliate

had been able to use the firm’s international links to attract business.

While ‘assurance’ was a “staple service line”, she added that Value-

Added Tax’s (VAT) introduction had created “an opportunity to do more”

in the area of taxation, while advisory and transaction advisory presented

further growth possibilities.

Dan Scott, managing partner for EY’s financial services group, which

includes the Bahamas, told Tribune Business that the digital/technology

field presented “leadership” opportunities for both the Bahamas and his

firm.

In particular, he suggested that the Bahamas seek to attract “small

campuses of technology firms”, while this nation’s relatively small size

could allow it to become “a beacon of light” to others on e-government.

With cybersecurity, and technology’s constant evolution, presenting

continual challenges for the private sector, Mr Scott said: “We think there

is a significant opportunity in the Bahamas to jump ahead and think

through this.

“Is there not the opportunity to think about attracting small campuses of

technology firms to establish themselves here, and develop intellectual

capacity and intellectual property?”

Mr Scott’s thoughts align closely with the Minnis administration’s plans, the

Speech from the Throne having talked about creating ‘technology hubs’ -

especially in Grand Bahama.

It is also eager on improving e-government, both in terms of different

agencies communicating with each other and their interface with the

private sector and public. The International Monetary Fund’s (IMF) recent

Article IV statement identified this area as vital for the Bahamas to

improve its ‘ease of doing business’.

“The reality is the world’s changing fast,” Mr Scott told Tribune Business. “I

was talking to someone this morning who said that every 18 months, the

world’s data doubles, and the ability to manage that doubles.

“The ability to manage it is doubling every 18 months, and the cost of

doing it is getting cut in half every nine months. That’s the reality in which

we work today.”

Noting the Government’s e-government intentions, Mr Scott said the

Bahamas’ relatively small size could enable quick reforms and allow it to

“become the beacon to other countries in the region and elsewhere”

should it “jump in” and execute properly.

He praised the Bahamas as having “relatively good talent, and in

abundance that we can access” compared to the remainder of the

Caribbean. “When you look at places like the Bahamas, how do you

access the right talent, nurture it, grow it and invest in it?” Mr Scott asked.

“We are really confident to grow our practice here. Some people say

that’s a phenomenon, and I’m not sure others are doing the same thing,

but we’re excited about it. I think we’re in an environment here that we

understand, is friendly and has great talent.

“Quite a lot of the work executed here is not necessarily incorporated in

the Bahamas. Michelle and her team have been on the road building a

client network. That’s been the big growth engine.”

<< Back to news headlines >>

Competitiveness, Haiti last of the Latin America and Caribbean Region Thursday 28th September, 2017 – Haiti Libre

Wednesday the World Economic Forum published its Report on the Global

Competitiveness Index (2017-2018). With a general average of 3.22 Haiti

ranks 128th among the 137 economies analyzed accounting for 98% of

the world Gross Domestic Product (GDP) and in the last position with

Venezuela in the Latin America and Caribbean Region...

According to the report, poor performance in Haiti is caused by poor

performance in infrastructure (136th, average: 1.8), financial market

development (134th, 2.5), technological maturity (134th, 2), the efficiency

of the goods market (135th, 3.8), the sophistication of firms (137th, 2.6) and

the weakness of innovation (137th, 2.1).

With a GDP of $ 8.3 billion and a per capita GDP of $ 761.2, Haiti's

economy fails to compare with its neighbor the Dominican Republic,

which for an equivalent population has a GDP of $ 72.2 billion and a GDP

per capita of 7,159.5 dollars (104th in the world ranking with an average of

3.9). Note that in the Latin American and Caribbean economies, Chile

remains the leading economy in terms of competitiveness in the Region

and 33rd in the world followed by Costa Rica (47th in the world)

Over the past five years, Haiti has not done better than maintaining at the

bottom of the ranking (142th out of 144 in 2012-2013, 143th out of 148 in

2013-2014, 137th out of 144 in 2014-2015 and 134th out of 140 in 2015-

2016). Haiti is ahead: Burundi (129th), Sierra Leone (130th), Lesotho (131st),

Malawi (132nd), Mauritania (133rd), Liberia (134th), Chad (136th) and

Yemen (137th).

In the overall ranking, on the podium the 3 most competitive countries

remain the same: Switzerland ranks first among the most competitive

economies in the world followed by the United States (2nd) and

Singapore (3rd).

Recall that the ranking of the Global Competitiveness Report is based on

the World Competitiveness Index (ICM) launched in 2005 by the World

Economic Forum. The ICM ranking, is the result of a combination of

national data collected in 12 different areas: institutions, infrastructure,

macroeconomic environment, health, primary education, higher

education and vocational training, market efficiency of goods, the

efficiency of the labor market, financial market development,

technological maturity, market size, business sophistication and

innovation.

<< Back to news headlines >>

Saint Lucia named “Caribbean’s leading honeymoon destination 2017” Thursday September 28th, 2017 – St. Lucia News Online

For the fourth consecutive year, the island of Saint Lucia has been named

the “Caribbean’s Leading Honeymoon Destination 2017” by the World

Travel Awards (WTA).

The island has received the recognition in eight out of nine years since

2009. World Travel Awards celebrates its 24th anniversary this year and is

acknowledged across the globe as the ultimate travel accolade.

World Travel Awards Caribbean & North America Gala Ceremony had

been scheduled to take place at Beaches Turks & Caicos Resort Villages

& Spa on Saturday 16th September, but was cancelled because of

Hurricane Irma.

World Travel Awards President & Founder, Graham E. Cooke, said: “We

congratulate the winners while commiserating with our friends in the

Caribbean Islands and Florida, Georgia, South Carolina, North Carolina

and Alabama, devastated by the recent hurricanes. The heart wrenching

images of areas that have suffered destruction are very saddening to all

of us at World Travel Awards. Our thoughts are with all those adversely

affected.”

Saint Lucia was nominated in two other categories for Leading Cruise

Destination and Luxury Island Destination, along with nine Saint Lucian

resorts and tour operators who were also finalists in their categories.

Agnes Francis, Executive Chair of the Saint Lucia Tourist Board said: “This is

a real honour. We are thrilled to have been recognised. We echo the

sympathy and support for our sister islands at their time of recovery.

However, 75% of the Caribbean region remains open for business and

relies on tourism to thrive so we look forward to continuing to welcome

holidaymakers and honeymooners.”

World Travel Awards Ceremonies are widely regarded as the best

networking opportunities in the travel industry, attended by government

and industry leaders, luminaries and international print and broadcast

media.

World Travel Awards was established in 1993 to acknowledge, reward and

celebrate excellence across all sectors of the tourism industry. Today, the

World Travel Awards brand is recognised globally as the ultimate hallmark

of quality, with winners setting the benchmark to which all others aspire.

Each year World Travel Awards covers the globe with a series of regional

ceremonies staged to recognise and celebrate individual and collective

successes within each key geographical region.

<< Back to news headlines >>

Panama in top 30 economically free countries Thursday 29th September, 2017 – Newsroom Panama

IN THE MIDST of its current corruption pandemic, Panama was listed on

Thursday, September 28 as one of the top 30 “most economically free”

countries in the world.

In its annual report on Economic Freedom in the World, the Freedom

Foundation and the Canadian Fraser Institute assessed 159 countries and

Panama ranked 29th .

According to the Freedom Foundation, Hong Kong and Singapore are

again in first positions with first and second place, respectively. New

Zealand, Switzerland, Ireland, the United Kingdom, Mauritius, Georgia,

Australia and Estonia make up the balance of the 10 freest countries.

“In countries where people are free to pursue their own opportunities and

make their own choices, they lead more prosperous, happy and healthy

lives, “said Fred McMahon, of the Fraser Institute.

The report was prepared by James Gwartney of Florida State University;

Robert Lawson of Southern Methodist University; and Joshua Hall of West

Virginia University.

The Freedom Foundation said that the Economic Freedom report is based

on the data collected in the year 2015 and the measure of economic

freedom – which included variables such as level of personal choice,

ability to enter the market, property security, rule of law, regulations”

The countries with the lowest positions within the index are Iran, Chad,

Burma, Syria, Libya, Argentina, Algeria, the Republic of the Congo, the

Central African Republic and Venezuela.

Some “tyrannical countries” such as North Korea or Cuba could not be

classified within this index due to lack of data, said the Foundation.

Other evaluations highlighted by the Foundation were the United States

and Canada that tied in position 11; Germany is 23, Japan 39, France 52,

India95, Russia 100, China in the 112 and Brazil occupied the position 137.

“According to research conducted by academic journals, people living in

countries with high levels of economic freedom enjoy greater prosperity,

greater political and civil liberties, and longer lives, “the report said.

The Fraser Institute produces the annual report on World Economic

Freedom in cooperation with the Economic Freedom Network, an

independent group of researchers educational institutes in almost 100

countries and territories.

<< Back to news headlines >>

U.S. economy accelerates in second quarter; hurricanes expected to slow

growth Friday 29th September, 2017 – Reuters

The U.S. economy expanded a bit faster than previously estimated in the

second quarter, recording its quickest rate of growth in more than two

years, but the momentum likely slowed in the third quarter due to the

impact of Hurricanes Harvey and Irma.

Gross domestic product increased at a 3.1 percent annual rate in the

April-June period, the Commerce Department said in its third estimate on

Thursday. The upward revision from the 3.0 percent rate of growth

reported last month reflected a rise in inventory investment.

“The destruction caused by Hurricanes Harvey and Irma and the resulting

disruption ... are expected to be a drag on third-quarter growth,” said Jim

Baird, chief investment officer at Plante Moran Financial Advisors in

Kalamazoo, Michigan. “Nonetheless, the economy remains on track.”

Economic growth last quarter was the quickest since the first quarter of

2015 and followed a 1.2 percent pace in the January-March period.

Economists estimate that Harvey and Irma, which struck Texas and Florida,

could cut as much as six-tenths of a percentage point from GDP growth in

the third quarter.

Harvey was blamed for much of the decline in retail sales, industrial

production, home-building and home sales in August. Further weakness is

anticipated in September because of Irma.

Rebuilding efforts are, however, expected to boost GDP growth in the

fourth quarter and in early 2018. Signs of increasing inventory investment

by businesses could soften the storms’ punch to the economy.

In a separate report on Thursday, the Commerce Department said

wholesale inventories jumped 1.0 percent in August after rising 0.6 percent

in July. Inventories at retailers shot up 0.7 percent after being unchanged

in July. The department also said the goods trade deficit fell 1.4 percent to

$62.9 billion in August.

That leaves an upside risk to growth estimates for the July-September

quarter, which are below 2.5 percent.

“The data available so far suggest that the firming in real inventory

accumulation between second quarter and third quarter could be

significant and could add over a full percentage point to growth in the

third quarter,” said Daniel Silver, an economist at JPMorgan in New York.

Harvey and Irma continue to impact the labor market and are expected

to cut into job growth this month. In a third report, the Labor Department

said initial claims for state unemployment benefits increased 12,000 to a

seasonally adjusted 272,000 for the week ended Sept. 23.

Still, the labor market remains strong. Claims have now been below the

300,000 threshold, which is associated with a robust labor market, for 134

straight weeks. That is the longest such stretch since 1970, when the labor

market was smaller.

Economists had expected that the second-quarter GDP growth rate

would be unrevised at 3.0 percent.

Prices for longer-dated U.S. Treasuries were trading lower and the dollar

.DXY slipped against a basket of currencies. Stocks on Wall Street were

mixed.

ROBUST CONSUMER SPENDING

With GDP accelerating in the second quarter, the economy grew 2.1

percent in the first half of 2017. Even so, economists believe growth this

year will fall short of President Donald Trump’s ambitious 3.0 percent

target.

Trump on Wednesday proposed the biggest U.S. tax overhaul in three

decades, including lowering the corporate income tax rate to 20 percent

and implementing a new 25 percent tax rate for pass-through businesses

such as partnerships to boost the economy.

But the plan gave few details on how the tax cuts, which could cost

about $1.5 trillion over a decade, would be paid for without increasing

the budget deficit. That sets up what is likely to be a bruising battle in the

U.S. Congress.

“The plan’s price tag would also result in an increase in the national debt,

which could make it difficult to pass as is. Odds are the proposal will be

scaled back,” said Ryan Sweet, senior economist at Moody’s Analytics in

Westchester, Pennsylvania.

Growth in consumer spending, which makes up more than two-thirds of

the U.S. economy, was unrevised at a 3.3 percent rate in the second

quarter as an increase in spending on services was offset by a downward

revision to durable goods outlays.

Amid robust consumer spending, businesses accumulated a bit more

inventory than previously reported to meet the strong demand. Inventory

investment added just over one-tenth of a percentage point to GDP

growth in the second quarter. It was previously reported to have been

neutral.

Growth in business spending on equipment was unchanged at a rate of

8.8 percent, the fastest pace in nearly two years.

Investment on non-residential structures was revised to show it increasing

at a 7.0 percent pace, up from the previously reported 6.2 percent rate.

There were minor revisions to government spending, exports and imports.

Investment in homebuilding was weaker than previously reported, with

outlays falling at a 7.3 percent rate rather than at a 6.5 percent pace.

(Reporting by Lucia Mutikani; Editing by Paul Simao)

<< Back to news headlines >>

Trumpflation strikes back: dollar set for best week of the year Friday 29th September, 2017 – Reuters

The dollar was set for its biggest weekly rise in 2017 and stocks rose across

the world after U.S. President Donald Trump proposed the biggest tax

overhaul in three decades in the United States.

In a year when the U.S. currency has taken a beating partly because of

Trump’s inability to get backing from other lawmakers for his spending

measures, the tax plan helped push stocks up while safe-haven U.S.

Treasuries sold off.

The dollar index, a trade-weighted basket of the dollar against its rivals,

has gained more than 1 percent this week, putting it on track for its best

weekly performance since December and wiping out a chunk of its year-

to-date losses.

“Trump’s fiscal package continues to drive markets,” said Societe

Generale Analyst Guy Stear. “U.S. bond yields have climbed both as a

direct response to tax cut fears and as the market’s wider risk appetite

returned.”

He said the sharp rise in 10-year Treasury yields, which hit a two-month

high of 2.36 percent on Thursday, was driving the dollar higher.

The euro edged up 0.1 percent to $1.1796, having traded above $1.20 as

recently as Sept. 20. The yen fell 0.2 percent to 112.53 per dollar.

Sterling lost half a percent to as low as $1.3364 after UK economic growth

for the second quarter was revised down to 1.5 percent from a previous

estimate of 1.7 percent.

A weaker euro helped European exporters and nudged the pan-

European STOXX 600 index up to a two-month high.

That helped push world stocks up 0.14 percent. MSCI’s all-country world

index, which tracks shares in 46 countries, has gained for 11 consecutive

months - its longest winning run since 2004, as global growth keeps

investors interested in the stock market.

Euro zone stocks hit their highest in three months, on track for a quarterly

gain after falling back in the second quarter.

Analysts at Deutsche Bank expect earnings for the STOXX 600 to grow 11

percent in 2017, with the pick-up in global growth and rebound in

commodities outweighing the negative effect of the stronger euro.

Earlier, Asian shares regained some poise after a tough week. MSCI’s

broadest index of Asia-Pacific shares outside Japan bounced 0.4 percent,

but was still down 1.7 percent for the week so far. For the quarter, it looked

set to gain 4.7 percent.

In euro zone bond markets, lower-than-expected German inflation data

released on Thursday led many to speculate that the corresponding figure

for the bloc as a whole, due on Friday, would also disappoint.

Investors will be keeping a close eye on the Spanish region of Catalonia,

where separatist groups urged supporters to defy efforts to block an

independence referendum on Sunday.

“At the moment, there is no significant market impact from the tensions,

but if the Catalan police and the Spanish police are standing there in

front of the polling stations and discussing whether to block the station or

not, this will be an issue,” said DZ Bank Strategist Sebastian Fellechner.

Gold, under pressure due to the stronger dollar, was set for its biggest

monthly fall of the year. The metal was last all but flat at $1,287 an ounce.

(Additional reporting by Wayne Cole in Sydney, Saikat Chatterjee, Helen

Reid and Nigel Stephenson in London, editing by Larry King)

<< Back to news headlines >>

UK growth slows to four-year low as BoE prepares rate rise Friday 29th September, 2017 – Reuters

Britain’s economy grew at its slowest pace since 2013 in the 12 months

after last year’s Brexit vote, data showed on Friday, painting a subdued

picture as the Bank of England prepares to raise interest rates for the first

time in a decade.

The world’s fifth-biggest economy was just 1.5 percent bigger than a year

earlier in the second quarter, the weakest year-on-year expansion in more

than four years and down from a rate of 1.8 percent in the first three

months of the year.

Britain’s Office for National Statistics had previously estimated second-

quarter growth at 1.7 percent, and none of the economists polled by

Reuters before the data had expected such a big downward revision.

Friday’s data also showed a monthly fall in output for the services sector in

July, boding poorly for third-quarter growth.

Sterling fell after the data and prompted some economists to reconsider

their prediction of a rate hike at the end of the BoE’s next meeting on

Nov. 2.

“I‘m sticking to my call for a hike in November, but I‘m much more

nervous now than I was prior to this data release,” Scotiabank’s Alan

Clarke wrote in a note to clients.

However, the weak data might not stand in the way of the BoE raising

interest rates from their record low 0.25 percent.

BoE Governor Mark Carney said on Friday the economy was on track for a

rate hike “in the relatively near term”, two weeks after the BoE jolted

markets by flagging a rate rise “in the coming months,” despite weak

growth this year.

The BoE has downgraded its estimate of how fast Britain’s economy can

grow without generating excess inflation because of the impact of Brexit,

so Friday’s weaker growth picture is not necessarily fatal for the chances

of a November rate rise.

REVISING THE PAST

A major annual set of revisions of Britain’s official data showed show

stronger business investment, net exports and household savings, but also

a larger current account deficit.

Britain sucked in 23.2 billion pounds ($31.0 billion) of foreign finance in the

three months to June, far above economists’ 16 billion pound forecast,

and the first-quarter deficit was revised up to 22.3 billion pounds from 16.9

billion.

Business investment grew by an annual 2.5 percent in the second quarter,

compared with an earlier estimate that it had stagnated, and

households’ savings ratio was a relatively healthy 5.4 percent in the

second quarter.

Net exports contributed 0.4 percentage points to quarterly growth,

compared with earlier estimates of zero, and an inflationary squeeze on

consumers may be easing, with real household disposable income up 1.6

percent in the latest quarter, the most since 2015.

Nonetheless, the broader picture remains one of consumers under

pressure from a steep rise in inflation caused by the fall in the pound since

last year’s Brexit vote. Disposable income has fallen year-on-year for the

last four quarters, the longest period since 2011.

Overall quarterly GDP growth was unrevised at 0.3 percent, and the

services sector - which makes up 80 percent on the economy -

contracted by 0.2 percent in July.

Separately, mortgage lender Nationwide said house prices - a bellwether

for consumer demand - rose at their slowest rate in four years this month,

and the Bank of England said mortgage approvals fell in August.

“It would be unprecedented for the central bank to tighten policy with

the data pointing to such anemic economic growth,” Chris Williamson,

chief economist at financial data company IHS Markit, said. “However,

policymakers continue to fuel expectations that interest rates will rise soon

in response to higher-than-expected inflation,” he said.

(Reporting by David Milliken; Editing by Toby Chopra)

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Euro zone inflation miss supports case for ECB caution Friday 29th September, 2017 – Reuters

Euro zone inflation undershot expectations in September, Eurostat data

showed on Friday, highlighting that price growth remained week and

supporting the European Central Bank’s case for only gradual removal of

stimulus.

Inflation in the 19-member currency bloc held steady at 1.5 percent this

month, missing expectations for 1.6 percent and trending well below the

ECB’s target of almost 2 percent.

With inflation heading lower in the coming months, likely bottoming out

below 1 percent early next year, the ECB is in a difficult spot: strong

economic growth would warrant policy tightening but weak consumer

prices call for continued stimulus.

The likely compromise is a small reduction in asset buys from next year,

accompanied by a pledge to keep monetary policy easy for even

longer.

Indeed, the ECB is due to decide in late October on policy for next year

with rate setters pointing to recalibration. This suggested that only small

changes are coming and the bank will may not even point to the

eventual end of asset buys.

Underlying inflation, holding steady at 1.3 percent last month, is also a

worry for policymakers as there is hardly any price pressure in the pipeline.

The ECB expects inflation to drop possibly as low at 0.8 percent in early

next year, mostly on base effect, before rising to 1.4 percent by the end of

the year, its projections show.

The ECB’s problem is that while the bloc has created over 7 million jobs

since the worst days of its crisis, slack in the labor market remains large,

keeping a lid on wages and ultimately inflation.

The euro’s 12 percent rise against the dollar could also pull down prices,

particularly for imported industrial goods, which could then feed into core

inflation, or inflation excluding volatile food and fuel prices.

Looking to keep borrowing costs low and encourage spending, the ECB

has bought over 2 trillion euros worth of bonds in the past two and a half

years, mirroring similar asset buying schemes by the U.S. Federal Reserve or

the Bank of Japan.

But inflation has responded slower than policymakers had hoped even just

a few months ago indicating that the bank has either lost some control

over inflation or that hidden slack in the economy is bigger than thought.

The bank has undershot its target for nearly five years and expects to miss

at least until the end of the decade. Markets are even more pessimistic

with longer-term forecasts suggesting a miss well into the next decade.

(Reporting by Jan Strupczewski and Balazs Koranyi, Editing by Angus

MacSwan)

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Chinese creditors find even state-backed credit protection has its limits Friday 29th September, 2017 – Reuters

Since the collapse more than two years ago of China’s second-biggest

loan guarantor, the state-backed Hebei Financing Investment Guarantee

Group, creditors including powerful financial institutions have been trying

to get billions of dollars of their money back. They have failed.

The creditors say they have been stonewalled by the group, including its

most important stakeholders, the Hebei provincial government and the

local office of SASAC, a state-run organization that manages government

assets.

“Basically, financial institutions are all trapped with a feeling of

powerlessness when dealing with defaulting big state-owned enterprises,”

said one manager who works for a national institution and who traveled

with a group of creditors to the northern region to urge authorities to

produce a debt-workout plan. Reuters spoke to more than a dozen

creditors of Hebei Financing for this story.

The sides have not even been able to agree on how much debt is owed

by Hebei Financing. When Hebei Financing collapsed, it said it owed 32

billion yuan ($4.83 billion), but nine creditors told Reuters that they

estimated the debt was as high as 60 billion yuan.

The Hebei provincial government and the Hebei office of SASAC, or the

State-owned Assets Supervision and Administration Commission, did not

respond to several requests seeking comment. A Hebei Financing

communications official declined to comment.

The experience of these creditors is a cautionary tale in a country where

for decades state debt has been considered as good as guaranteed.

China’s debt has soared since the global financial crisis to well over twice

the size of the economy, much of it the result of borrowing by state

companies, leading to a rise in state defaults. But Hebei Financing’s

collapse shows that the financial protection of the state has its limits and

state-backed does not necessarily mean immediate payment for

creditors.

Instead, other factors play a role, complicating attempts to develop a

debt workout plan. These include the local government’s fiscal position

and its reliance on the indebted company for tax revenues and local

employment and whether the central government gets involved. Courts

are usually reluctant to hear a case, pushing creditors back to seek

redress from the debtor.

While private firms can be pushed into bankruptcy, a state default is a

much more tangled affair with many state institutions and differing

degrees of willingness to support a failing state firm, said Ying Wang, senior

director of Asia-Pacific corporates coverage at Fitch Ratings.

“The sanctity of state debt as risk free is now being eroded,” Wang said.

“The idea has definitely changed, as investors have seen cases of state-

owned enterprise defaults,” she said.

China’s debt has risen so fast that The Bank for International Settlements

warned last year that China was heading for a banking crisis and in

August this year the IMF described debt levels as “dangerous”, although

the central government is enforcing a policy of debt reduction.

Based on bond data, defaults by state firms are on the rise and as a

proportion of overall defaults are the fastest-growing in China. From zero

defaults in 2014, they jumped to 28 in 2016 on more than 19 billion yuan of

debt, according to data from China Chengxin International Credit Rating

Co.

Bonds provide just a small window into the growing problem of state

defaults because most credit by far is in the form of bank lending.

Debt guarantee firms like Hebei Financing were set up in China largely to

support the private sector, the country’s biggest investor and urban

employer. Without a debt guarantee, many private firms are viewed by

the state-dominated banking sector as too much of a credit risk to be

offered loans at viable rates. Ironically, banks prefer to lend to state firms

on the basis that their credit worthiness is guaranteed.

About a third of China’s 7,000 debt guarantee companies are state-run.

Moody’s ratings service estimated state and private debt guarantee

companies backed about 2.2 trillion yuan in debt at the end of 2016.

“POWERLESSNESS”

Hebei Financing collapsed after the region’s economic growth slumped

from more than 11 percent in 2011 to 6.5 percent in 2014. Failing to

anticipate the slowdown, thousands of firms defaulted on their loans.

As defaults piled up and financial institutions turned to Hebei Financing for

repayment, the company stopped honoring its pledges to around 1,000

firms, wreaking widespread havoc on the gritty region of steel mills and

factories north of Beijing.

In October 2015, the chief executive of a Beijing-based asset

management firm was stabbed by a frustrated investor who lost money in

defaulted products guaranteed by Hebei Financing.

Creditors said that since Hebei Financing’s collapse, there has been little

meaningful communication. The company and provincial government

have refused to release information on the company’s financial position,

its clients and has ignored pleas for a formal debt restructuring process,

several creditors said.

Feeling frustrated and ignored, a group of creditors decided to take

action in September 2016. Executives from these companies, which

included a state-owned bank, state-owned and private securities, trust

firms and asset managers, traveled to Hebei unannounced, hoping to

meet with Hebei Financing officials, who had refused previous requests for

a meeting.

The first three meetings of four planned that day were no shows. Officials

from Hebei Financing, the Hebei provincial government and its bureau of

finance declined to meet the executives, these creditors said.

But the final meeting of the day seemed to hold out more promise. An

official from the local office of SASAC, Hebei Financing’s biggest

shareholder, said he would talk with the creditors – at the reception of the

SASAC office.

What happened shocked the creditors, they said. Instead of discussing

the debt problem, the official told the group he couldn’t help collect any

of the debt and they should take their grievance to Hebei Financing,

prompting some creditors to become angry.

“(We) don’t have the right, or administrative authority to help collect your

debts,” the manager at the institution recalled the SASAC official as

saying. “From the very beginning, your contracts weren’t signed with

SASAC, right?”

The manager recalling the meeting said “a sense of powerlessness was

my deepest feeling. There wasn’t even a communication channel.”

IMPACT

The latest statement from Hebei Financing’s parent group on Dec 23, 2016

said provincial departments and city governments were still working on

the problem.

The collapse of Hebei Financing had a debilitating impact on companies

that had relied on its guarantees.

One of those, Jialong High-Tech Industrial Co Ltd, a lighting glass maker in

the coastal Hebei city of Qinhuangdao, has been left heavily in debt.

Its bank accounts were frozen as the head of the company was detained

as part of the investigation into Hebei Financing. Contact numbers for

Jialong did not work and Reuters could not ascertain the firm’s legal

representative.

To survive, the firm has cut its workforce to less than 200 from 1,500,

workers said. Creditors and employees at the firm say it has postponed

salary payments, although some workers are sticking by the firm.

“I have worked here since the very beginning,” a man surnamed Kou

said.

”In the old days, the company never delayed salary payments.

So I have faith in the company. That’s why I‘m still staying,” he said.

(Reporting Shu Zhang and Matthew Miller: Editing by Anne Marie

Roantree and Neil Fullick)

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Bullish oil streak propels Brent to strongest third-quarter in 13 years Friday 29th September, 2017 – Reuters

Oil edged higher on Friday as tensions around Iraqi Kurdistan threatened

the region’s crude supplies, helping Brent prices to their strongest third-

quarter performance since 2004.

Global benchmark Brent crude LCOc1 was up 1 cent at $57.42 a barrel at

1122 GMT, notching up a third quarter gain of around 20 percent.

The contract had reached its highest in more than two years earlier in the

week, resulting in a fifth consecutive weekly gain. This performance is

Brent’s longest weekly Bull Run since June 2016.

U.S. crude CLc1 traded flat at $51.56 a barrel, on track for its strongest

third quarter in 10 years and its longest streak of weekly gains since

January.

“Oil prices remain firm with the backdrop of tensions between

Iraq/Turkey/Iran and Kurdistan still threatening to halt up to 600,000 barrels

per day of production from the semi-autonomous region,” said Jamie

Campbell, Head of Natural Resources at Panmure Gordon.

Iraq’s Kurds endorsed secession by nine to one in a referendum on

Monday that has angered Turkey, the central government in Baghdad,

and other powers, who fear the vote could lead to renewed conflict in

the oil-rich region.

Turkish President Tayyip Erdogan called the vote illegitimate and has

threatened to break with past practice and deal only with the Baghdad

government over oil exports from Iraq.

“No rapid solution to the crisis can be expected, which should continue to

lend support to the oil price,” analysts at Commerzbank wrote.

Most oil that flows through a pipeline from Iraq to Turkey comes from

Kurdish sources and a cut-off would severely damage the Kurdish

Regional Government, which relies on sales of crude for almost all its hard

currency revenues.

So far, oil flows through the pipeline have been normal.

Oil price gains have also been supported this month by anticipated

renewed demand from U.S. refiners that were resuming operations after

shutdowns due to Hurricane Harvey.

Even more bullish views have already started to appear in the oil options

market that has seen a spike in activity at $100 a barrel, indicating some

oil bulls are betting the price could trade around that level by this time

next year.

However, Middle Eastern oil producers are concerned the recent price

rise will incentivize more U.S. shale production and push prices lower

again.

(Additional reporting by Aaron Sheldrick in Tokyo; Editing by Dale Hudson

and Adrian Croft)

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Futures mixed, eyes on Trump tax progress Friday 29th September, 2017 – Reuters

U.S. stock index futures were mixed on the last trading day of the month as

concerns lingered about President Donald Trump’s tax plan making

progress through Congress.

Trump proposed the biggest U.S. tax overhaul in three decades, calling for

tax cuts for most Americans, but drew criticism that the plan favors

business and the rich and could add trillions of dollars to the deficit.

U.S. Treasury Secretary Steven Mnuchin said Trump’s proposal for a cut in

the corporate income tax rate to 20 percent was “not negotiable.”

The dollar was on track for its biggest weekly rise in 2017 on hopes of tax

cuts, while the three major Wall Street indexes were set to lock in gains for

the month and the quarter.

U.S. stocks have held steady at record levels even as concerns about a

standoff with North Korea, political mayhem in Washington and timing of

the interest rate hikes caused brief setbacks.

Investors will turn their focus to economic data including the personal

consumption expenditures price index that could provide more clues on

future path of interest rate hikes.

A Commerce Department report due at 8:30 a.m. ET (1230 GMT) is likely to

say consumer spending, which accounts for more than two-thirds of U.S.

economic activity, edged up 0.2 percent in August after a slight rise of 0.4

percent in July.

Even as inflation remains stubbornly below the Federal Reserve’s 2-

percent target, a recent speech by Fed Chair Janet Yellen boosted the

odds of a rate hike in December.

Financial markets are pricing in a roughly 77 percent probability of

December move, up from 71.4 percent a week ago, according to CME

Group’s FedWatch tool.

Another report due at 10:00 a.m. ET is the final reading of University of

Michigan survey of consumers sentiment for September that is expected

to remain unchanged at 95.3.

Fed’s Philadelphia President Patrick Harker, a voting member of the rate-

setting committee this year, is expected to speak on economic outlook

later in the day.

Nvidia (NVDA.O) was up 1.35 percent in premarket trading after Citigroup

raised its price target on the stock.

KB Home (KBH.N) rose 3 percent after the homebuilder’s profit and

revenue came above estimates, prompting a slew of price-target raises.

Electronics and furniture retailer Conn’s (CONN.O) was up 5.26 percent

after Oppenheimer upgraded the stock to “outperform”.

Futures snapshot at 7:00 a.m. ET:

Dow e-minis 1YMc1 were down 7 points, or 0.03 percent, with 12,723

contracts changing hands.

S&P 500 e-minis ESc1 were down 0.75 points, or 0.03 percent, with 94,300

contracts traded.

Nasdaq 100 e-minis NQc1 were up 9.25 points, or 0.16 percent, on volume

of 18,478 contracts.

(Reporting by Sruthi Shankar in Bengaluru; Editing by Anil D'Silva)

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U.S. shale hinders hopes for oil market rebalancing: Reuters poll Friday 29th September, 2017 – Reuters

Oil prices are unlikely to rise much beyond this month’s two-year highs this

year, as concern among analysts persists that growing U.S. shale output

will hamper the rebalancing between global crude supply and demand,

a Reuters poll showed.

Brent crude is expected to average $52.60 a barrel in 2017, a touch higher

than last month’s forecast of $52.53. For 2018, the North Sea crude was

seen averaging $54.40 a barrel versus the previous month’s forecast of

$54.48.

The monthly poll of 36 analysts and economists projected Brent to

average over $60 a barrel by 2020.

This week, Brent hit its highest since July 2015, driven by demand for

refined products and views of a quickly balancing oil market following

production cuts led by the Organization of the Petroleum Exporting

Countries.

OPEC and 11 rival producers, including Russia, have committed to output

cuts of 1.8 million barrels per day (bpd) until March 2018 to help global

supply align with demand.

Meanwhile, U.S. shale production is set to rise for the 10th month in a row

in October to a record 6.1 million bpd.

“We expect higher output from shale oil, Libya and Nigeria will remain the

main threat to OPEC efforts to limit global supply,” said Daniela Corsini,

Commodity Market Economist at Intesa Sanpaolo in Milan.

“Given its sensitivity to (U.S. futures) prices, shale oil will represent the most

effective tool of the rebalancing process and will contribute to keep

crude prices in a relatively narrow range,” Corsini added.

Brent, which has averaged $52.48 so far in 2017, is on track for a more

than 20 percent gain in the third quarter of this year, its largest rise in the

July-September period since 2004.

“With high adherence by OPEC members to the output cut decision in

recent months, the market is seen tightening ... With the rise in prices, we

expect the U.S. to continue pumping higher output, thus impacting

market rebalancing,” said Rahul Prithiani, Director at CRISIL Research.

The premium of Brent to U.S. West Texas Intermediate (WTI) crude has

grown to its widest since August 2015, at around $7 a barrel.

Analysts see this spread narrowing to trade steadily around $2.72 a barrel

for 2017 and $2.79 in 2018.

WTI futures are forecast to average $49.88 a barrel in 2017 and $51.61 in

2018, versus last month’s forecasts of $50.01 and $51.92 respectively for

the same period.

The discount of WTI to Brent mostly stemmed from the impact of Hurricane

Harvey, which temporarily knocked out nearly 25 percent of U.S. refining

capacity on the Gulf Coast last month, denting crude demand.

“The impact of major hurricanes like Harvey and Irma will be short term

and will dissipate as refineries in the U.S. resume full operations over the

coming weeks,” said Abhishek Kumar, a Senior Analyst at Interfax Energy

in London.

OCBC had the highest 2017 Brent forecast at $57 per barrel, while Julius

Baer had the lowest at $48.80.

(Reporting by Karen Rodrigues in Bengaluru; Editing by Amanda Cooper

and Dale Hudson)

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Sterling skids as weak data feeds November rate hike doubts Friday 29th September, 2017 – Reuters

Sterling skidded on Friday, hitting a one-week low against the euro after

data showed Britain’s economy recorded its weakest annual growth since

2013 in the second quarter of the year.

The pound fell to $1.3357 after the data release from $1.3423 before,

leaving it 0.6 percent lower on the day. Against the euro, it slipped to

88.35 pence, down 0.8 percent on the day.

“Today’s GDP figure delivered a stark warning of the trouble that lies

ahead for the UK,” said Anthony Kurukgy, Senior Sales Trader at Foenix

Partners.

“The last time the UK GDP figure read 1.5 percent was almost four years

ago in an economy that was moving away from the shadows of the 2008

financial crisis. A modern-day crisis now hangs over the UK economy.”

Friday’s data showed year-on-year gross domestic product growth slowed

to 1.5 percent in the second quarter from 1.8 percent in the first three

months of the year.

The pound was already on the back foot after Bank of England Governor

Mark Carney said on Thursday that the economy was on track for an

interest rate rise in the “relatively near term”. That cooled expectations of

a hike in November, when the Bank releases its next quarterly Inflation

Report.

Sterling nevertheless remains on track for its strongest month against the

dollar in 2-1/2 years, after climbing more than 3 percent since the start of

September on expectations the BoE would raise interest rates before the

end of the year.

Carney had said at September’s policy meeting that a hike was likely to

come over the “coming months”.

Most economists now expect the BoE to raise its Bank Rate to 0.50 percent

from 0.25 percent at its next policy meeting on Nov. 2.

Carney’s tone this week has been more cautious than at the last BoE

meeting, however. On Thursday he said the Bank could not by itself nullify

the hit to the economy from Brexit.

Sterling was lifted on Thursday by signs of progress in divorce negotiations

between Britain and the EU, with the bloc’s chief negotiator Michel Barnier

Barnier saying the two sides had ”had a constructive week“, though they

were ”not there yet.

“In light of recent favourable developments, we judge that upside risks for

the pound are building heading into year-end,” wrote MUFG currency

economist Lee Hardman in a note to clients.

(Reporting by the London Markets team; Writing by Jemima Kelly; Editing

by Saikat Chatterjee and Catherine Evans)

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Need to make "very significant progress" on bad loans - ECB's Nouy Friday 29th September, 2017 – Reuters

Euro zone banks need to make faster progress in reducing their pile of

bad loans, the European Central Bank’s top bank supervisor said on

Friday.

“Now that the economic growth is back in Europe (..) we need to see

very significant progress in addressing not performing exposures. This is

very important,” Daniele Nouy told a conference in Brussels.

(Reporting by Francesco Guarascio @fraguarascio; editing by Foo Yun

Chee)

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Looming election may be nail in coffin for Japan's fiscal reform Friday 29th September, 2017 – Reuters

Even as a new party under a populist female leader scrambles the

outlook for Japan’s general election next month, one thing is clear: the

winner will loosen a grip on the government’s runaway debt as lawmakers

forego higher taxes or boost spending.

Prime Minister Shinzo Abe wants to use the revenue from a planned sales-

tax hike not to pay down debt but to spend more on education and

other popular programmers.

Tokyo Governor Yuriko Koike, whose “Party of Hope” is challenging Abe’s

ruling coalition by effectively absorbing Japan’s largest opposition party,

wants to put off the tax hike altogether.

“Japan has yet to emerge from deflation as consumption, which makes

up a large portion of the economy, remains weak,” she told a briefing on

Thursday, criticizing Abe for doing little to prop up household income.

The debate is shifting to how much more to spend and in what areas,

rather than on what is acceptable within the limits set by Japan’s public

debt, which at well over twice the size of its economy is the biggest

among industrialized nations.

“Regardless of who wins, there will be increased spending because that’s

how you win votes,” said Koichi Haji, chief economist at NLI Research

Institute.

“Very few lawmakers call for fiscal reform,” Haji added. “That may be fine

now, but there’s no telling when loss of market trust in Japan’s finances

could trigger a spike in bond yields.”

Japan’s ballooning public debt has not bothered the bond market much

so far, as investors trust the country can repay public debt with its huge

current account surplus and abundant domestic savings.

But the long-term risk is that snowballing social security spending for a fast-

ageing population will strain government finances, making it more

vulnerable to a sudden spike in borrowing costs that would hurt the

economy.

Japanese government bond (JGB) prices tumbled on Thursday, with the

benchmark futures posting their biggest fall in three months, as investors

braced for bigger spending.

WHITHER THE THREE ARROWS?

Abe came into office in 2012 vowing to eradicate two decades of

economic stagnation with “Abenomics” -- his three policy arrows of fiscal

spending, monetary stimulus and structural reforms. While the fiscal and

monetary support reflated the economy, critics say Abe has made little

progress on structural reforms.

In announcing a snap election for Oct. 22, Abe said he will proceed with

the sales tax hike in 2019 but divert more proceeds to education and child

care, and less on debt payment.

He acknowledged it was now “impossible” to fulfill his promise to balance

the budget -- excluding debt service and new bond sales -- by March

2021 as planned.

Finance Minister Taro Aso said Japan will delay the timing for meeting the

target by several years, with a new deadline to be set by the middle of

next year.

“What’s worrying is that the delay (in achieving the fiscal target) would

make it impossible for the government to put the brakes on spiraling fiscal

spending,” said Hideo Kumano, chief economist at Dai-ichi Life Research

Institute.

“The government may resort to bigger fiscal stimulus if a pull-back in

demand after the 2020 Tokyo Olympic Games pushes the economy into a

downturn.”

Finance ministry officials charged with drafting the state budget are

relieved Abe will proceed with the tax hike, but stress the need to set a

new deadline to keep spending in check.

“It’s a good thing that the premier has stuck with a primary balance goal,

even with a delay,” a senior ministry official said. “Japan’s fiscal discipline

will remain intact as long as we set a new timeframe.”

FISCAL DISCIPLINE

Koike’s new party, on the other hand, calls for freezing the sales tax hike,

makes no mention of balancing the budget and proposes boosting “wise

spending” - without giving details.

“An opposition win would mean even bigger spending and a collapse of

Japan’s fiscal discipline,” said a ruling party lawmaker close to Abe.

Critics say the Bank of Japan’s ultra-easy policy is partly to blame for a

lack of discipline in Japan’s fiscal spending.

Politicians so far are paying no price for being lax about spending

because the BOJ pins the 10-year bond yield at zero, essentially letting the

government borrow for free.

BOJ Governor Haruhiko Kuroda says his bank isn’t printing money to

bankroll public debt.

But some policymakers worry that the central bank could be forced to

maintain its ultra-easy policy for longer than it wants, for fear that slowing

its bond buying could trigger a spike in bond yields and push up

government borrowing costs.

“Once the economy slumps, there will be demands for more fiscal

spending. Lawmakers may pressure the BOJ to keep its monetary spigot

open,” said a former BOJ executive who retains close contact with

incumbent policymakers.

Rating agency S&P says Abe’s decision to ditch the fiscal target

timeframe won’t affect Japan’s sovereign debt ratings.

But Kim Eng Tan, senior director of sovereign ratings at S&P in Singapore,

warns against complacency.

“I have no real concern right now about delaying the primary budget

target,” he said. “However, it does prolong the period in which finances

are at risk to a sudden increase in interest rates.”

(Additional reporting by Stanley White and Kaori Kaneko; Editing by Bill

Tarrant)

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