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Macro Thoughts

Home Thoughts

"I have stretched ropes from steeple to steeple; Garlands from window
to window; Golden chains from star to star ... And I dance." -- Arthur
Rimbaud

Jet fighters from the U.K., Denmark, France and Poland will begin
flying air patrols over the Baltic states tomorrow "as part of
collective defense measures," the North Atlantic Treaty Organization
said in a statement today. Canadian jets are deploying to Romania "as
part of NATO efforts to reassure allies" in Central and Eastern
Europe, the alliance said.

The U.S. will defend its NATO allies "no ifs, ands or buts," U.S. Vice
President Joe Biden said today at an Atlantic Council conference in
Washington.

Secretary of State John Kerry said at the conference yesterday that
unlike Ukraine, which isn't a NATO member and where alliance nations
have ruled out war, a move against a treaty ally would have grave
consequences.

"We have to make it absolutely clear to the Kremlin that NATO
territory is inviolable," Kerry said. "We will defend every single
piece of it."

Under Article 5 of the 1949 North Atlantic Treaty, the U.S. and all
other members would consider an armed attack on any one of them an
attack on all.

Since the fall of the Soviet Union in 1991, NATO has extended its
membership to nations once dominated by the Soviet Union, including
the Baltics, Poland, Hungary, the Czech Republic, Slovakia, Romania,
Bulgaria, Albania and Slovenia. Georgia, a former Soviet republic that
fought a five-day war with Russia in 2008 over breakaway regions, is
seeking fast-track NATO membership as a result of the Ukraine crisis.

"I think this is also about shattering NATO and potentially shattering
the EU, because if he were to do something in the Baltics and we did
not respond, that's the end of Article 5, that's the end of NATO,"
Hadley said, addressing the Atlantic Council, a Washington-based group
that promotes trans-Atlantic relations, shortly before Biden spoke.

"Potentially this is not just about reestablishing some kind of
Russian empire," Hadley said. "It's also quite frankly an effort to
see how far he can go to disrupt NATO and perhaps even disrupt" the
European Union.

''We in Europe are very much in agreement that a military resolution
of the problems cannot happen," German Chancellor Angela Merkel said
today in Aachen, Germany. "It's not on the agenda. War is no solution,
and so we have to find other ways."

Conclusions

Its getting very hardball. And evidently a big Piece of Ukraine is set
to remain a kind of dystopian Grey Zone.

Ukraine says its government forces are continuing an "anti-terror"
operation in the eastern city of Sloviansk.
http://www.bbc.com/news/world-europe-27250026

Pro-Russian gunmen have shot down at least two helicopters, reportedly
capturing one pilot.
http://www.bbc.com/news/world-europe-27250026

Two days before Xi toured Kashgar, he vowed in a Politburo meeting to
"resolutely crack down on terrorism and separatism with high intensity
to safeguard national security".

In this 30 April 2014 photo released by Xinhua News Agency, Chinese
President Xi Jinping visits a Mosque
http://news.bbcimg.co.uk/media/images/74568000/jpg/_74568748_022096202ap.jpg

I see the pivot to Asia as the encirclement of China, then the
shrinking of its operating theatre and then lighting the tinderbox
that is the periphery and Xinjiang might well morph into China's
Afghanistan
http://www.rich.co.ke/media/docs/038NSX0212.pdf

Beijing is unhappy at the U.S. State Department's 2013 country reports
on terrorism, published last month, which said China's cooperation on
fighting terrorism "remained marginal"
http://www.reuters.com/article/2014/05/02/us-china-xinjiang-idUSBREA4102L20140502

While the conflict could appear to be religious in nature, "Behind the
Headlines: Drivers of Violence in Central African Republic" argues
that religion is an outcome, not a cause of the conflict. Past and
current crises are the result of an internal struggle for state power,
revenge, and access to natural resources of diamonds, ivory, oil, and
timber.
http://www.enoughproject.org/blogs/enough-project-analyzes-natural-resources-and-armed-groups-fueling-violence-car

The final words spoken between air traffic control and the cockpit of
missing Malaysia Airlines flight #MH370 have been released Audio
http://www.theguardian.com/world/video/2014/may/01/missing-mh370-final-flight-exchange-released-audio

A radio message instructing the aircraft to switch to the Ho Chi Minh
air zone was met with the response 'Goodnight Malaysian three seven
zero'. The flight disappeared without a trace with 239 people on board
on 8 March

Euro 1.3858
Dollar Index 79.58
Japan Yen 102.44
Swiss Franc 0.8800
Pound 1.6884
Aussie 0.9272
India Rupee 60.19 The rupee rose 0.7 percent this week to 60.2025 per
dollar as of 10:08 a.m. in Mumbai and climbed 0.2 percent from April
30, according to prices from local banks compiled by Bloomberg. It was
the biggest weekly advance since March 28
South Korea Won 1031.20
Brazil Real 2.2334
Egypt Pound 7.0091
South Africa Rand 10.4942

Dollar Index 3 Month Chart INO 79.58 [trading like David Gower
played cricket - laid back]
http://quotes.ino.com/charting/index.html?s=NYBOT_DX&v=d3&t=c&a=50&w=1

The U.S. central bank reduced monthly asset buying to $45 billion on
April 30 with the fourth straight $10 billion cut, and policy makers
said further reductions in measured steps are likely.

Euro versus the Dollar 3 Month Chart 1.3858
http://quotes.ino.com/charting/index.html?s=FOREX_EURUSD&v=d3&t=c&a=50&w=1

Gold 1 Year Chart INO 1283.05 [Breakdown risks are elevated]
http://quotes.ino.com/charting/index.html?s=FOREX_XAUUSDO&t=c&a=50&w=1&v=d12

Bullion for immediate delivery fell 0.1 percent to $1,283 an ounce at
2:18 p.m. in Singapore, declining a fifth day, according to Bloomberg
generic pricing. Prices are set to retreat 1.6 percent this week.

Gold has still rallied 6.7 percent in 2014 on concern earlier this
year that the U.S. economy was stalling and as tensions between
Ukraine and Russia escalated, boosting demand for a haven.

Conclusions

I think 2014 will be a 2nd down Year for Gold.

Crude Oil 6 Month Chart INO 99.39 [anything above 100.00 is in fact a Sell]
http://quotes.ino.com/charting/index.html?s=NYMEX_CL.M14.E&v=d6&t=c&a=50&w=1

WTI for June delivery was at $99.40 a barrel in electronic trading on
the New York Mercantile Exchange, down 2 cents, at 3:45 p.m. Seoul
time. The contract slid 32 cents to $99.42 yesterday. The volume of
all futures traded was less than 1 percent below the 100-day average.
Prices have decreased 1.2 percent this week.

Al Mirqab Capital SPC, a company controlled by Qatar's royal family,
made a cash offer valuing Heritage Oil Plc (HOIL) at 924 million
pounds ($1.55 billion).
http://www.bloomberg.com/news/2014-04-30/qatar-s-al-mirqab-agrees-to-buy-heritage-oil-for-1-5-billion.html

The offer of 320 pence a share, recommended by Heritage's board, is a
25 percent premium to yesterday's closing price, Heritage said today
in a statement. Heritage today reported a profit of $100.4 million for
2013 on sales of $431.9 million.

Heritage holds stakes in onshore oil fields in Nigeria and exploration
rights in Papua New Guinea. Tony Buckingham, the company's founder and
chief executive officer, will retain a 20 percent holding and serve as
an adviser for at least five years.

Frontier Markets

Kerry at a meeting today in Ethiopia's capital, Addis Ababa, agreed
with East African foreign ministers that a peacekeeping force must be
swiftly deployed in South Sudan.

"A legitimate force, that has the ability to make peace, needs to be
on the ground as soon as possible," Kerry told reporters. The
Ethiopian, Ugandan and Kenyan foreign ministers said they must work
out the details on the "timing, manner and size" of the force, said
Kerry.

A U.S. official, who wasn't authorized to speak on the record, said a
list of individual names was being discussed and could include Kiir
and Machar.

Kerry, whose trip will also take him to Angola and the Democratic
Republic of Congo, will be working to persuade South Sudan's neighbors
to apply sanctions as well. Without regional support on sanctions, the
official acknowledged that any U.S. move to punish South Sudanese
leaders will be less effective.

Throughout, Kerry will be working on arrangements for the first
U.S.-Africa leaders' summit, which Obama has planned for August.

Premier Li Keqiang to Visit Ethiopia, the African Union Headquarters,
Nigeria, Angola and Kenya
http://www.fmprc.gov.cn/mfa_eng/zxxx_662805/t1151542.shtml

Foreign Ministry Spokesperson Qin Gang announces:

At the invitation of Hailemariam Dessalegn, Prime Minister of the
Federal Democratic Republic of Ethiopia, Goodluck Jonathan, President
of the Federal Republic of Nigeria, José Eduardo dos Santos, President
of the Republic of Angola and Uhuru Kenyatta, President of the
Republic of Kenya, Premier Li Keqiang of the State Council will pay
official visits to the aforementioned four countries from May 4 to 11,
2014.

At the invitation of Mohamed Ould Abdel Aziz, Rotating President of
the African Union and President of the Islamic Republic of Mauritania
and Nkosazana Dlamini-Zuma,Chairperson of the African Union
Commission, Premier Li Keqiang will pay an official visit to the
African Union Headquarters on May 5.

At the invitation of Klaus Schwab, Executive Chairman of the World
Economic Forum, Premier Li Keqiang will attend the Plenary Session of
the 24th World Economic Forum on Africa in Abuja, capital of Nigeria
on May 8 during his visit there.

More than 60 agreements will be signed with Ethiopia, Nigeria, Angola
and Kenya during Li's week-long visit - his first tour to Africa since
rising to the post in March last year - according to officials from
the Chinese Foreign Ministry and Commerce Ministry.

But deputy minister of commerce Zhang Xiangchen said yesterday that
China would focus more on the general livelihood of the African public
- in addition to its interests in oil and natural resources.

"We are paying more attention to livelihood issues," Zhang told a
press briefing on Li's trip. "This is what the African nations need.
They believe that economic and livelihood development are equally
important. They can boost the economy with enterprises and business
activities, but they need government input to boost living standards.

"Over the past years, China focused on building landmark architecture.
We will still be doing so in the future, but we will also keep a
closer look at issues relating to the public," he said.

Sudan's pound slumped to a record against the dollar in the black
market as the war in South Sudan threatens to curb inflows from oil
shipments.
http://www.bloomberg.com/news/2014-04-29/sudan-pound-sinks-in-black-market-as-rebels-threaten-oil-fields.html

The currency changed hands at 9.1 pounds per dollar yesterday in the
capital, Khartoum, according to two money changers who both trade on
the streets of the city where most residents buy their foreign
exchange. That compares with about 8.2 on March 31, they said by
phone. The official rate is about 5.7, according to central bank data.

South Sudan's oil fields have become a key target for insurgents
opposed to President Salva Kiir, with rebel leader Riek Machar vowing
to seize crude-producing areas to starve the military of revenue. The
landlocked nation exports its oil via pipelines that cross Sudan to a
port on the Red Sea. Transit fees for the shipments may earn Sudan
about $1.4 billion in 2014, or 25 percent of total export earnings,
according to the International Monetary Fund.

"Sudan has a severe foreign-currency crisis, our currency inflows are
lower than our needs," Ezz al-Din Ibrahim, a Khartoum-based economist
and former state minister of finance, said in a phone interview.
"Transit fees mitigate this problem and also increase the central
bank's ability to support the local currency."

"Throughout April, official exchange offices weren't offering
dollars," Abdallah Aly, a black-market trader in Khartoum, said by
phone yesterday. "That's why the rate got so high."

South Africa All Share Bloomberg +7.15% 2014
http://www.bloomberg.com/quote/JALSH:IND

Anadarko halts South Africa oil spending pending clarity on oil law
http://af.reuters.com/article/investingNews/idAFKBN0DG18G20140430?sp=true

"We have suspended our expenditures in South Africa until the
petroleum law and fiscal terms are more clear," Tom Fletcher,
exploration manager for east Africa at Anadarko, told an energy
conference in Nairobi on Wednesday.

Speaking to reporters on the conference sidelines, he said: "We are
just looking for a little more clarity - what's going to happen with
the fiscal regime down there - before we invest large dollars in South
Africa."

Dollar versus Rand 3 Month Chart INO 10.50125 Last [10 before 11]
http://quotes.ino.com/charting/index.html?s=FOREX_USDZAR&t=c&a=50&w=1&v=d3

Egypt Pound versus The Dollar 3 Month Chart INO 7.0067
http://quotes.ino.com/charting/index.html?s=FOREX_USDEGP&v=d3&t=c&a=50&w=1

Egypt EGX30 Bloomberg +23.17% [Africa's best in 2014]
http://www.bloomberg.com/quote/CASE:IND

8,256.14 106.05 +1.30%

Nigeria All Share Bloomberg -4.20% 2014
http://www.bloomberg.com/quote/NGSEINDX:IND

A bomb explosion near Nigeria's capital, Abuja, left at least nine
people dead and 11 others injured yesterday, the country's emergency
agencies said @Bloomberg
http://www.bloomberg.com/news/2014-05-02/nigerian-blast-near-capital-leaves-kills-nine-injures-11-1-.html

The blast occurred near the location where an April 14 car bomb killed
at least 75 people and injured more than 100 others. That attack was
claimed by the Boko Haram Islamist militant group, which has been
waging a violent campaign in the past five years to impose Shariah, or
Islamic law, in Africa's biggest economy.

"There is no change in plans" to hold the World Economic Forum on
Africa in Abuja this month, spokesman Alem Tedeneke said in an
e-mailed response to questions late yesterday. The meeting is due to
be attended by President Goodluck Jonathan, Ghanaian President John
Dramani Mahama, Rwandan President Paul Kagame, and Africa's richest
man Aliko Dangote.

Witnesses said that moments before the explosion, a man had parked
the bomb-laden car and walked away via @AP
http://www.bbc.com/news/world-africa-27249097

That comment could have been made by the Al-Shebaab.

Both Boko Haram and Al-Shebaab represent a risk that David Lipton did
not touch on, that being asymmetric risks. The recent bombings in
Abuja and last years attack on Westgate confirm the potency of
asymmetric risks. African markets have taken these risks in their
stride. They might stumble if these asymmetric risks ratchet higher.

China's Cnooc 0883.HK -1.08%  expects to start first crude output at
its Ugandan Kingfisher oil field in late 2018, nearly a year later
than expected as the foreign companies developing the country's oil
sector struggle with infrastructure bottlenecks, a company executive
said Wednesday.
http://online.wsj.com/news/articles/SB10001424052702303948104579533223864492250

KAMPALA Uganda--China's Cnooc 0883.HK -1.08%  expects to start first
crude output at its Ugandan Kingfisher oil field in late 2018, nearly
a year later than expected as the foreign companies developing the
country's oil sector struggle with infrastructure bottlenecks, a
company executive said Wednesday.

First output from the $2 billion oil field isn't expected until late
2018, as the company moves to complete a number of pre-development
infrastructure projects, including access roads, pipelines and an
airstrip in the remote Lake Abertine rift basin, according to Jin
Weigen, Cnooc vice president in charge of finance.

The delay is the latest setback to hit Uganda's nascent oil industry,
whose development has been held back since 2009, due to a number of
hurdles, ranging from tax disputes between government and oil
companies to disagreements over development plans and refining
options.

"We expect first crude by the end of 2018, but this will also depend
on the completion of a crude pipeline to the refinery" Mr. Jin said.

"Stelios gave me a call. We spent an afternoon Googling Africa,
African aviation, African economics," Fastjet Chief Executive Ed
Winter told Reuters on Wednesday.
http://af.reuters.com/article/topNews/idAFKBN0DG1EN20140430?sp=true

Tensions between two Congos as Brazaville deports 50,000 to DRC
http://www.theguardian.com/world/2014/may/02/tensions-between-two-congos-as-brazaville-deports-50000-to-drc

A boat on the Congo river between Brazzaville and Kinshasa, the
capitals of the two Congos. Photograph: Jerome Delay/AP
http://www.theguardian.com/world/2014/may/02/tensions-between-two-congos-as-brazaville-deports-50000-to-drc

In 2006, Seychelles became the first country in sub-Saharan Africa,
other than South Africa, to issue bonds @madeitinafrica
http://www.howwemadeitinafrica.com/?p=38488

A year later Ghana followed, raising US$750m in Eurobonds. Since then
they have been joined by Gabon, Senegal, Côte d'Ivoire, the Democratic
Republic of Congo, Nigeria, Namibia and Zambia.

In September 2012, Zambia made a splash on the international private
market, launching a 10-year bond at $750m. Rwanda followed suit in
2013 with a $400m Eurobond issued on the Irish Stock Exchange. Zambia
is considering issuing a $1bn Eurobond this year to finance its budget
deficit. It also plans to spend over $600m on developing power, road
and rail infrastructure. Kenya is finalising plans for its debut entry
into the Eurobond market, seeking up to $1.5bn to finance
infrastructure projects.

Nigeria first entered the markets in 2011 with a 10-year Eurobond. "We
look to come [to the market] regularly, every two years," Finance
Minister Ngozi Okonjo-Iweala told the Financial Times. In 2012,
African countries raised about $8.1bn from issuing bonds, says
Moody's, a global credit rating agency. In total, more than 20% of the
48 countries in sub-Saharan Africa have sold Eurobonds, according to
the International Monetary Fund (IMF).

And of course, there is our big Wembley stadium moment with the
eurobond, which is now imminent 20-JAN-2014
http://www.rich.co.ke/media/docs/038NSX2001.pdf

I incline to the view that the Kenya government should slot the
Eurobond market the full $2bn. This eurobond issue will release the
pressure cooker that is the domestic bond and interest rate markets--we
should see a good rally in interest rates.

These Earnings outpaced consensus Estimates and @KCBGroup will set a
Fresh All Time High as early as today

Kenya Commercial Bank share price data here +3.703% 2014
http://www.rich.co.ke/rcdata/company.php?i=MjE%3D

Par Value:                  5/-
Closing Price:           90.00
Total Shares Issued:          23727000.00
Market Capitalization:        2,135,430,000
EPS:             9.01
PE:                9.988

Full year Earnings through 31st December 2013
Full Year Revenue 5.158992b versus 4.432877b +16.38%
Full Year Other Income 83.738m versus 51.704m +61.956%
Full Year Profit before Tax 333.442m versus 224.170m +49.191%
Full Year Profit After Tax 213.843m versus 133.543m +60.13%
Full Year Earnings Per Share 9.01 versus 5.63 +60.03%
FY Dividend 1.75 a share

Conclusions

Compelling results. The share price has rallied +20% in anticipation
and its probably fairly priced on a PE of 10.00.

The Nairobi All Share ran 0.476% higher and has set a Fresh Record
Closing High of 151.85.
The Nairobi All Share has been on a hot streak and is +11.12% in 2014.
The Nairobi NSE20 Index firmed 10.95 points to close at 4959.91.
The Nairobi NSE20 Index is +0.66% in 2014 and has been outpaced by the
All Share.
Equity Turnover was 916.508m and that follows on from 1.263b the
previous session.
The High volume action validates the Bullish Move.
Kenya Commercial Bank and Equity Bank traded 60.325% of the total
Turnover today at the Securities Exchange.

Sasini Tea and Coffee improved 2.97% to close at 17.35 and traded
11,000 shares. Sasini is +18.43% this year.

Safaricom closed unchanged at 13.10 and traded 6.018m shares worth
78.813m. Safaricom is +20.737% in 2014 and 0.75% below a record High
set on a number of occasions last month. Full Year Earnings will send
the Price through 13.50.

TPS Serena bounced 2.48% higher to close at 41.25

Kenya Commercial Bank rallied 2.0408% to regain an All Time Closing
High of 50.00 [previously reached in 2013] and traded shares at an all
time Intra day high of 51.00 +4.081%. Kenya Commercial was the most
actively traded share at the Securities Exchange with 5.929m shares
worth 296.465m. KCB reported Q1 2014 Earnings after the market closed
wednesday which comfortably outpaced consensus estimates. KCB reported
a +33.72% Q1 2014 Profit before Tax expansion. Kenya Commercial Bank
has rallied +8.108% over the last 4 weeks.
CFC Stanbic rallied 3.88% to set a Fresh more than 5 year High at
134.00 and traded 63,100 shares. CFC Stanbic is +54.022% in 2014.
Equity Bank firmed 0.6535% to close at 38.50 and was trading at
session highs of 39.00 +1.96% at the Finish Line. Equity Bank traded
6.631m shares worth 256.422m. Equity Bank has rallied 21.259% over the
last 4 weeks.

Housing Finance firmed 0.7% to close at 36.00 and saw well above the
moving average volume of 1.726m shares traded. HFCK is +14.285% in
2014.

CIC Insurance was the biggest gainer at the Exchange and rallied 3.98%
to close at a Fresh All Time High of 10.45 and traded 1.177m shares.
CIC Insurance has posted a blistering +75.63% Rally in 2014.

EABL firmed 1.365% to close at 297.00 and was trading at session highs
of 299.00 +2.05% at the Finale. EABL has rallied 12.5% over the last 4
weeks and this is a 2014 closing High. EABL has rallied +34.289% since
closing at a 52 week low in the 3rd week of February this Year.

Bamburi Cement closed unchanged at 170 and traded 249,200 shares.
Bamburi Cement has retreated 19.0476% so far in 2014 and significantly
underperformed the benchmark Indices.

Crown Paints Kenya closed unchanged at 90.00 and remains +20% in 2014.
Crown Paints reported good Full Year Earnings where Full Year Revenue
increased +16.38%  and Full Year Profit After Tax expanded +60.13% to
213.843m.