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Central banks are suppressing bonds' yields Sep. 12, 2016 By ALY-KHAN SATCHU @TheStarKenya
John Maynard Keynes, who is widely considered one of the founders of
modern macroeconomics, said: “The market can stay irrational longer
than you can stay solvent.”
Julian Hart Robertson, the founder of Tiger Management and a legendary
hedge fund manager, said: “Our mandate is to find the 200 best
companies in the world and invest in them, and find the 200 worst
companies in the world and go short on them.
''If the 200 best don’t do better than the 200 worst, you should
probably be in another business.” Robertson bet the bank against the
Nasdaq rally in 2000 and lost his shirt.
He was right, but the market stayed irrational, then went exuberantly
irrational before correcting. If you look around the world today, it
is clear that we are in the middle of an extraordinary monetary policy
experiment, where central bank governors Haruhiko Kuroda in Japan,
Mario Draghi in Europe and others have become 21st century’s monetary
wizards, suppressing bonds’ yields, and buying up every bond they can
get their hands on.
Some argue that what we have witnessed is a stealthy nationalisation
of bond markets, in particular. Developed bond market prices are no
longer trading on fundamentals, but on the basis of demand and supply,
and the perception that the central banks will continue to be a source
of ‘’infinite’’ demand.
In my younger days, I used to like to party, and I can remember within
a party, you would have the first rush, and then again in the early
hours you might find another surge. Finally, you might start to hear
the birds, and it was at that moment you knew it was all over. Like
the inestimable prince said: ‘’Party like its 1999.’’
A lot of risk calculations are based on Value at Risk (VAR).
Essentially, you overlay a volatility measure over the portfolio, and
you calculate how much money is on the line.
Central banks have suppressed volatility therefore in real terms;
investors are now holding bigger positions at these current
artificially suppressed levels. If volatility spikes, positions are
going to be reduced en masse. Or to put it another way and to borrow
the lyrics from the Eagles Hotel California:
Mirrors on the ceiling,
The pink champagne on ice
And she said “We are all just prisoners here, of our own device”
Last thing I remember, I was
Running for the door
I had to find the passage back
To the place I was before
“Relax,” said the night man,
“We are programmed to receive.
You can check-out any time you like,
But you can never leave! “
What is clear is that we are at the fag-end of this party. German
10-year bund yields turned positive for the first time since July.
According to Deutsche Bank, developed market bonds and equities are at
their most expensive ever.
Therefore, my second trade of the year (my first was to be long, the
Yen from January) is to buy put options on 10-year bonds because this
is going to pop, and when it pops, the wizardry won’t work anymore,
and at that moment there is going to be one heck of a move.
The author is a financial analyst. www.rich.co.ke
Bruno had realized the startling sweetness of their exchange at the last instant, like the condensed milk at the bottom of his glass
In fact, Bruno realized as he waited for the butler to open the door
to Falk’s rooms, he had dreamed, not of a situation, or of a lost
person or place, but merely of an image. Bruno had dreamed a reverse
sunset, a black sunset.
The black sun had been haloed in purple, sinking against a field of
yellow. In his dream he’d watched it sink below its horizon, only to
abruptly re-center in his field of vision and begin its lonely plummet
again. It was this that had brought the profound melancholy upon him.
“O.K., Magister Ludi, I read you. You see nothing beyond the horizon
of the board. Now I’m going to clamber into your minimalist Zen-master
rock garden and we’ll see if I can muss your hair a little.”
Do Ideas Still Matter in the Year of Trump (and Clinton)? @POLITICOMag
Law & Politics
The Trump phenomenon is about cultural resentment, anger and most of
all Trump. It’s primal-scream politics, a middle finger pointed at The
Other, a nostalgia for a man-cave America where white dudes didn’t
have to be so politically correct. Trump isn’t selling detailed
nine-point policy plans or a coherent worldview; he doesn’t read books
or even briefing papers. He’s just telling America we’re losers and
selling us Winning. Saturday Night Live used to have a fake pundit
whose solution to every problem was to “FIX IT!” Now life is imitating
Since his election, barely a week has gone by without the prime minister going viral. @BW
Law & Politics
Canadian government is becoming an experiment in virocracy—rule
through social media.
Trudeau’s exploitation of social media is different from his American
counterpart’s. Here’s a quick summary of his biggest hits since he
became prime minister last October: He was photographed hugging panda
cubs, he gave a (possibly prepared) answer revealing his knowledge of
quantum computing, he smiled while performing the peacock yoga pose on
a conference table, and he went jogging with the president of Mexico
in suggestively short shorts.
There have been embarrassing viral flubs as well: a cringeworthy
push-up video for the Invictus games, the time he put his hand on his
wife’s bum at the Ottawa Press Gallery Dinner, and, infamously,
Elbowgate, in which Trudeau “manhandled” a fellow MP (accidentally
brushed might be a more accurate description) and apologized, in a
distressingly Canadian way, four times for it. These are hardly the
long-running garbage fires of Trump, but traditionally, they would be
gaffes. They don’t appear to have affected Trudeau adversely. Being a
meme actually helps him.
So why does Trudeau do it if he doesn’t need to? His opponents have
claimed it’s simple vanity, a mania for attention, the Trudashian
effect. But already, less than a year into his government, it’s
obvious that condescension is misplaced. In his short tenure, Trudeau
has demonstrated the political effectiveness of virocracy as a
governing strategy—a way of overcoming criticism and skirting
controversy by the sheer power of viral personality.
Trudeau’s dominance of social media has made him wildly popular. A
poll in the middle of the summer claimed that he would “win 80 percent
of seats if an election were held today.”
Here’s the foremost of Trudeau’s lessons so far: If you can control
the viral space, traditional politics don’t matter. Virality provides
one of the greatest political covers ever.
Trudeau’s virocracy is welded to technocracy—this is his other
important innovation, and the key for anyone who wants to follow his
lead. Recently, at a party in Ottawa to celebrate Barack Obama’s
speech to Parliament, I happened to be talking to an economist and
former adviser to conservative politicians, a man who had twice voted
for Stephen Harper, Trudeau’s Conservative predecessor. Trudeau had
come to see him to seek his advice about pension plans. The economist
had started sketching out proposals, stopping himself at an option he
considered politically unviable. “No,” Trudeau told him. “Don’t worry
about the politics. That’s my job. You just tell me what you think the
right thing to do is.”
He possesses an odd combination of total narcissism and complete lack
of ego. If I were his political opponents, I’d fear him deeply. He can
get things done with the Canadian people barely noticing, whether they
like it or not.
The shirtless episodes seem silly; that’s just what Trudeau wants. His
achievements, which have received nowhere near the attention of his
constant photo opportunities, are real, and they’re substantial. In
the first six months, he enacted massive child-care grants for the
poor; reinstated the long-form census, which the previous government
had canceled; and brought in 25,000 Syrian refugees.
Trudeau’s skill at media manipulation is a legitimately significant
national asset. His recent trip to China was a huge success: Chinese
social media implored its audience to “lick the screen.”
Trump may yet pick up on Trudeau’s techniques. But for now, because he
can’t provide a broader platform or a consistent one, the billionaire
is devolving into a viral celebrity who’s hijacked politics rather
than a viral leader.
Trudeau is beyond both Clinton and Trump; he’s the next generation,
using virality to govern, not simply to win campaigns. Politicians in
other parts of the world are experimenting with virality, too. Ramzan
Kadyrov of Chechnya uses social media both to project a cuddly persona
and to issue stern warnings to toe the official line. Vladimir Putin
benefits from state-sponsored “internet brigades” who troll critics of
his regime. Boris Johnson could have been Britain’s first viral
politician if he’d espoused a policy that experts could actually
I was saying as much last week but in fewer words.
Prime Minister Trudeau is an extraordinary Exponent of Viral Soft Power.
HOW PUTIN AND XI OUTSMARTED OBAMA AND THE WEST AT G20 SUMMIT Newsweek
Law & Politics
On September 4-5, the G20 held its annual summit in Hangzhou, China,
President Xi Jinping’s home.
G20 summits tend to be meaningless, but this one appears to have been
outright harmful. The signature event was when President Barack
Obama’s Air Force One was not met with a staircase—and it went
downhill from there.
Ironically, the G20 summit communiqués have become both longer and
emptier. This year’s communiqué was a delight for us connoisseurs. The
G20 declared in 14 pages and 48 articles that it favored everything
good and opposed everything bad. This communiqué makes United Nations
General Assembly statements appear insightful and daring.
This communiqué was so empty that even the host, China, was initially
too embarrassed to publish it. Instead, it offered a slightly more
substantial statement by Xi of barely two pages.
The fundamental problem with the G20 is that it has no least common
denominator. Since four member countries are fully-fledged
authoritarian states (China, Egypt, Russia and Saudi Arabia), it has
no common values.
Slightly more substantially, the G20 reaffirms its “determination to
ensure a rules-based, transparent, non-discriminatory, open and
inclusive multilateral trading system with the World Trade
Organization playing the central role.”
But several G20 countries, notably Brazil, India and Russia, are
leading protectionists, which this communiqué ignores. Needless to
say, the two big U.S.-sponsored regional trade agreements currently
underway, the Trans-Pacific Trade Partnership and the Trans-Atlantic
Trade and Investment Partnership, are not mentioned, which is a bone
As chairman, Xi took the privilege to steamroll his poor guests,
claiming that the G20 had overtaken the G-7, the bloc of democratic
industrial states. Since the G20 meeting is not relevant, while many
important people had gathered, the bilateral meetings dominated the
Xi took the lead in this game. By contrast, Obama had only three
official bilateral meetings, with Xi, British Prime Minister Theresa
May and Russian President Vladimir Putin.
The surprise was the rookie, Putin. In Brisbane, Australia, in 2014,
he had been the outcast because of his military aggression against
Ukraine. Hangzhou marked his homecoming, where he broke his
international isolation without changing his behavior.
He did two one-on-one meetings in Vladivostok, Russia, on September 3,
with Japan’s Prime Minister Shinzo Abe and South Korea’s President
Park Geun-hye. In Hangzhou, he stormed the stage with bilaterals with
Xi, Turkish President Recep Tayyip Erdogan, Saudi Prince Mohammed bin
Salman bin Abdulaziz, German Chancellor Angela Merkel, French
President François Hollande, May, Obama and Egyptian President Abdel
Fattah el-Sissi, and topped it off with Argentine President Mauricio
Apparently, Putin was the most popular politician in Hangzhou, and the
many photos show that he loved every minute of it.
The ultimate Western humiliation was that the five leaders of Brazil,
Russia, India, China and South Africa met, while the G-7 leaders who
were all present did not bother to organize a joint meeting.
As a final humiliation to the G20 summit, North Korea’s President Kim
Jong Un, who had been on the agenda, shot off three mid-range
ballistic missiles in the Sea of Japan.
Among the many important issues missing in the communiqué are Syria,
Ukraine, Western sanctions on Russia and the South China Sea island
The West got nothing and would have benefited from staying out. It is
time for the West to relearn diplomacy. It could check if Xi and Putin
Congo's President Is Preparing for War Against His Own People Foreign Policy
In the meantime, there are worrying signs that Kabila and his
associates are readying themselves for a street fight. The government
recently imported new surveillance cameras from China, as well as
drones, anti-riot gear, water cannons, and tear gas from unnamed
parties. It claims that the new equipment will help it safely and
nonviolently disperse protests, but Congo’s security forces are not
known for their restraint. In January, for instance, protests against
a draft election law requiring a new census before presidential
elections are held — an endeavor that would take years in a massive,
infrastructure-poor country like Congo — provoked a violent crackdown
in which more than 40 people were killed.
Hans Hoebeke, a researcher at the International Crisis Group focusing
on Congo, described the newly acquired crowd-control arsenal as part
of a larger attempt “to keep the senior levels of the army on the side
of regime” in the event of popular unrest. He cited gifts of expensive
new cars to top commanders as another facet of this strategy.
Meanwhile, the government has moved aggressively to silence its
critics over the last year, arresting Congolese activists and civil
society leaders on dubious charges. It has also denied visas to
multiple foreign journalists, expelled noted Congo researcher Jason
Stearns after he published a report linking the army to civilian
massacres, and revoked the work permit of Ida Sawyer, a researcher for
Human Rights Watch who has lived in Congo since 2008.
“I do think that Kabila and the people around him want to stay in
power, and I would say at whatever the cost,” Hoebeke said. “If he
leaves, the whole construction of the majority around him would
South Sudan Leaders Amass Great Wealth as Nation Suffers, Report Says NYT
Leaders of the two sides responsible for mass killings and rapes in
the South Sudan conflict have amassed enormous wealth inside and
outside the country, at least some of it illegally, according to an
investigative report released on Monday by a Washington advocacy
The families and top associates of the principal opponents in the
conflict, President Salva Kiir and his rival and former vice
president, Riek Machar, own multimillion-dollar properties, drive
luxury cars and stay at expensive hotels, “all while much of their
country’s population suffers from the consequences of a brutal civil
war and, in many places, experiences near-famine conditions,”
according to the report.
Seychelles opposition wins first vote in decades Reuters
Opposition parties have swept to victory in Seychelles parliamentary
elections, shaking up the political landscape after decades of control
by President James Michel’s party.
The win by the Linyon Demokratik (LDS) coalition, which was announced
on Sunday, follows growing public frustration over economic
inequality, analysts said.
It has not triggered an immediate change in the government appointed
by the president, but lawmakers will be able to use their powers to
challenge new ministerial appointments and block legislation,
including budgets that the opposition has objected to in the past.
Analysts said Michel might soon decide to reshuffle the cabinet to
reflect changes in the Indian Ocean archipelago.
"It's historic because it’s the first time that we have a transition
of power in one of the branches of government – the legislature," said
Roger Mancienne, leader of LDS.
Michel conceded defeat. "The people have spoken, the people have
decided and the people’s decision is supreme and my party respects the
people’s opinion," he said.
In the vote for a 33-seat parliament, the Electoral Commission said
LDS secured 19 seats and Michel's Parti Lepep won 14. The result
followed three days of voting that ended on Saturday.
Seychelles' economy, which depends heavily on tourism, is forecast to
expand by 3.3 percent in 2016, according to IFM figures.
02-NOV-2015 The Seychelles @TheStarKenya
I am writing this article from Mahe, which is the one of 115 islands
that make up the Seychelles archipelago, which lies 1,500 Kilometres
off East Africa. Seychelles has a population of 90,024 and that is the
smallest population of any independent African state. The minister for
Finance, Trade and The Blue Economy Jean-Paul Adam informed me that
the Seychelles receives tourists three times its population every
year. If Kenya was to receive the same ratio of tourists, we would be
welcoming 120 million tourists a year. The minister described to me
how the Seychelles navigated the 2008 financial crisis [debt to GDP
soared close to 125 per cent] and the Republic defaulted, but now runs
an annual surplus of over five per cent. The debt-to-GDP ratio is in
the 40 per cent range [after some help from the Paris Club and the
IMF]. Let us hope Seychelles in 2008 is not a Harbinger for some
countries on the mainland continent.
Luster Wears off Tanzanian President's Anti-Corruption Drive Bloomberg
Tanzanian President John Magufuli’s quick action to stem corruption
and government waste won praise from so many graft-weary East Africans
that it triggered the internet meme #WhatWouldMagufuliDo. Now, there
are growing concerns that the man nicknamed “bulldozer” is going too
This year, the government has banned three newspapers for reasons
including “inflammatory” reporting and ordered the closure of two
radio stations for allegedly broadcasting seditious content. In June,
police outlawed all protests as the main opposition planned rallies
against what it called Magufuli’s “dictatorship,” the same month that
the state jailed a 40-year-old man for insulting the president.
The pace at which Magufuli is instituting regulatory reforms and
seeking to boost tax revenue is also raising uncertainties among
investors who are struggling to speak to the government and understand
what it’s trying to do on a range of issues, according to Roddy
Barclay, an analyst at London-based research consultancy
“Magufuli’s shine, based mostly on his corruption crusade, is
definitely coming off,” Jared Jeffery, an analyst at South
Africa-based NKC African Economics, said in an e-mailed note.
Magufuli took charge of Africa’s third-biggest gold producer in
November with pledges to hasten development of the East African
nation’s nascent natural-gas industry, increase revenue collection and
diversify the mostly agrarian economy. Under his predecessor, Jakaya
Kikwete, economic growth averaged 7 percent a year between 2010 and
2015 and the country largely avoided the political controversies
suffered by regional neighbors, including the regional powerhouse,
That political stability may be threatened by an opposition growing
increasingly critical of Magufuli. Chadema, as the main opposition
group is known, threatened a “Day of Defiance” on Sept. 1 to protest
against measures it describes as “high-handed.” The party postponed
the protest by a month, saying it would wait for the outcome of talks
initiated by religious leaders to convince the president to yield more
political space for the opposition.
The presidency dismissed the opposition’s criticism of Magufuli and
said the Magufuli is simply trying to instill more discipline in the
country’s labor force.
“The president is saying Tanzanians should go to work,” Gerson Msigwa,
the president’s spokesman, said by phone on Sept. 5. “We can’t stand
here conducting politics all the time without working.”
The stand-off between Magufuli and Chadema could derail the economy if
the tensions deteriorate, according to Moses Kulaba,
executive-director at Governance and Economic Policy Center, a
research group based in Dar es Salaam-based,the commercial capital.
“They should try to see if there is a way of pursuing other means to
resolve the situation,” Kulaba said. “You don’t want to create an
impression that there’s also political uncertainty because that
increases your political risk. If the situation continues as it is,
the government will be forced to back down.”
Magufuli’s aggressive push to register immediate results with his
economic reforms also poses risks for private businesses, Barclay at
africapractice said in an Aug. 30 research note. In June, the
government unveiled a range of new taxes in the oil and gas,
telecommunications and financial services industries to support a
planned 31 percent increase in spending.
At the same time, decision-making is being centralized within the
president’s office and the influence Magufuli exerts over the way his
administration functions has created discord, said Barclay. That means
that some policies and strategic decisions are being driven by a
political agenda, he said.
“There is a clear risk that short-term gains for government could come
at the cost of long-term investment,” Barclay said. “And with
government officials across the spectrum under enormous pressure to
deliver results and increase revenue generation, conversations which
were previously being held along technical lines are now increasingly
being driven by a political agenda.”
Middle East's leaders cross the Red Sea to woo east Africa Jason Burke
For Nairobi’s commuters, summer has brought more woes than usual.
Along with the demonstrations, road accidents and downpours that
frequently cause gridlock in Kenya’s capital, there has been an almost
weekly shutdown as foreign VIPs fly in. “Of course people are annoyed
… but some rather like it. We are getting the feeling that we are
finally returning to centre stage,” said Charles Onyango-Obbo, a
publisher and journalist.
Many of the visitors have been from the US, China and other nations
long seen as players in the region, but an increasing number are from
the Middle East, their visits underlining a dramatic twist in the
centuries-old battle between foreign powers for influence, trade,
resources and military assets in a strategically sensitive part of the
In five weeks over June and July, Kenya received Iranian ministers,
delegations from Gulf monarchies and the leaders of both Turkey and
Israel. Other states in east Africa have seen a similar flow of
“There is a significant new layer of engagements,” said Ahmed Soliman,
a Horn of Africa expert at London’s Chatham House thinktank.
The shift is a result of many factors. The chilly aftermath of the
Arab spring, the Syrian civil war, and particularly the conflict in
Yemen have all combined to push Middle Eastern states to seek
advantage through alliance, trade and cultural outreach beyond their
immediate neighbourhood. So, too, has intensifying rivalry between
Sunni Muslim Saudi Arabia and Shia Iran, economic pressures on
individual states and the arrival of new leaders keen to make their
At the same time, experts say, China is more cautious than before, the
US distracted, the United Nations overstretched, and the European
Union weak. This has opened up new space, with commercial
opportunities ranging from melon farming to port development adding to
the attraction. The change is not necessarily good news for the UK and
other western nations.
“Confronted by their own conflicts, [countries in the Muslim world]
have decided to secure their own interests in the Horn of Africa.
Whether the western interest in counter-terrorism, good governance and
economic growth can find common ground … so as to sustain a momentum
towards stability and coherence … is one of the great challenges that
we collectively face,” wrote Alexander Rondos, EU special
representative for the Horn of Africa, recently.
Turkey is one of the major players in this new scramble for influence.
Personally leading the effort, President Recep Tayyip Erdoğan has made
Somalia a focus, visiting the battered failed state three times.
Immediate rewards have included major contracts for Turkish firms, a
close relationship with powerful politicians and officials in Somalia
who share a moderate Islamist ideology with the Turkish leader, and
compliance from Somali authorities when requested to shut schools
linked to Fethullah Gülen, the US-based Islamist cleric blamed by
Erdoğan for the coup attempt in July.
Sinan Ülgen, an expert at Carnegie Europe in Istanbul, said Turkey’s
ultimate aims were grander: “Turkey wants to be seen as a champion of
victimised people of the Islamic religion everywhere. It is about
improving soft power and image. Turkey has become one of the biggest
providers of humanitarian assistance in the world. That is a valuable
attribute. What’s done in Somalia does not stay only in Somalia.”
There is competition. The United Arab Emirates (UAE), spurred by its
own security concerns, is also moving fast to establish influence in
east Africa. If Turkey is backing the ruling alliance in forthcoming
Somalian elections, the UAE appears to favour opposition candidates.
“It hasn’t been recognised outside the region, but it is Middle
Eastern states which will have real influence in the polls, not the
US, UN, EU or UK,” said one Kenya-based veteran observer of Somali
In another development shaking up the regional status quo, the UAE is
building physical bridgeheads too, opening a major military base in
long-isolated Eritrea. This could accelerate the slow reintegration of
the secretive, repressive state into the international community – or
Then there is Saudi Arabia, now under the leadership of King Salman.
The kingdom’s decades-old relationship with the US has chilled and its
rivalry with Iran intensified in recent years. When assembling a
military alliance against Houthi rebels in Yemen, who are allied with
Iran, the kingdom enlisted the support of a series of east African
Somalia and Sudan both dumped alliances with Iran earlier this year in
favour of new ties with Saudi Arabia. Somalia received pledges from
Riyadh of aid worth $50m within hours of the decision. Heavily
sanctioned Sudan may have gained billions – a crucial financial
“What we are seeing is a shift in … agendas of major players in the
Gulf. There’s a historical context to the relationship … but the
[region] is now being seen as part of their ‘near abroad’, and an
important sphere of influence,” said Soliman.
“[Saudi Arabia] and other Gulf states have developed specific new
relationships with Sudan, Somalia and Eritrea. This has generated a
reaction in countries like Ethiopia and Kenya, which see behind this
new tilt towards the Gulf a loss of their relative influence as well
as a growing threat of Wahhabi-driven radicalisation in the region,”
One of the most active of the new players in east Africa is Israel.
Benjamin Netanyahu, the rightwing prime minister, has led a push for
better relations across Africa, particularly in the east, where he has
reinforced ties with old allies such as Kenya.
Nimrod Goren, of the Israeli Institute for Regional Foreign Policies,
said that Israel’s efforts in Africa were part of a broader desire to
look for “non-traditional” allies. A recent recognition that African
nations could be a source of support – not inevitable opposition – at
the UN is one key factor. “It is not a new phenomenon that [Middle
Eastern powers] are engaged in Africa. What is a new phenomenon is
that Israel is able to play the game as well,” Goren said.
Haaretz, the Israeli newspaper, reported last week that Israel was
lobbying the US and Europe to improve relations with Sudan following
its shift against Iran.
Though the new dynamic is changing the region, commentators warn
against writing off the major players such as China and the US just
yet. “For 10 years I’ve been driving past the US embassy on my way to
work. The queues [for visas] never get any shorter. Until … all the
other guys have those kind of queues, they are not going to win this,”
Robed women petrol-bomb police station in Kenya's Mombasa
Three robed women tricked their way into a Mombasa police station
where they stabbed one officer and set fire to the building with a
petrol bomb before being shot dead, an officer and a witness said on
Police also recovered an unexploded suicide vest from one of the
attackers, spokesman George Kinoti said in a statement.
The city of Mombasa, with a large Muslim population on the coast of
Kenya, has been targeted by Islamist militants in recent years
although the frequency of attacks has subsided.
Under the pretext of reporting a stolen phone, the women walked into
the police station on Saturday morning, a knife and petrol bomb
concealed in their traditional Buibui robes.
"While being questioned by officers, one drew a knife and the other
threw a petrol bomb at the police officers," Patterson Maelo, Mombasa
County Police Commander, told reporters.
"The station caught fire. Police shot the three and killed them. Two
officers are in hospital with wounds. Presumably it is a terror
Two bullet-proof jackets and an unused petrol bomb were recovered from
the dead suspects, Coast regional commander Nelson Marwa told
The Facts as presented are opaque.
Kenya urged to issue a fresh sovereign bond @BD_Africa
“Kenya needs to take its opportunity with both hands and immediately.
Kenya has seen yields on its 10-year dollar euro bond fall
dramatically to just around 7 per cent, this is an outstanding level
[add 50 basis points for a concession and you get a rate around 7.6
per cent] for the Treasury CS to fill his boots,” CEO advisory firm
Rich Management Ltd Aly-Khan Satchu said.
International Monetary Fund Country Representative Armando Morales
told Bloomberg news that Kenya must get all the financing it needs
well ahead of elections, analyse the Fed very carefully and be
prepared to act on the sale as soon as the market allows.
CBA drives down cost of loans with KBRR pricing
Commercial Bank of Africa (CBA) will from tomorrow (Wednesday) price
both new and existing loans at 12.9 per cent per annum, having opted
to use a different pricing formula in compliance with the new law that
sets the floor for deposits and caps lending rates at a maximum four
percentage points above the base rate.
The mid-sized lender has opted to calculate the applicable lending
rates using the Kenya Bank Reference Rate (KBRR) – which currently
stands at 8.9 per cent – as the base rate in a move that is expected
to stir fresh competition among the lenders.
Rival banks, including KCB, Co-op, Barclays, CfC Stanbic, and National
Bank, have recently priced their loans at a maximum of 14.5 per cent,
having chosen to use the Central Bank Rate (currently standing at 10.5
per cent) as the base rate.
The differences in pricing arise from the fact that the Banking
(Amendment) Act 2016, which comes into force tomorrow, caps lending
rates at four percentage points above the benchmark rate; and sets the
floor for deposit rates at 70 per cent above the base rate, but the
Central Bank is yet to state whether the CBR or the KBRR is the base
rate referred to in the law.
CBA argues that KBRR, introduced in July 2014 by the Central Bank of
Kenya as the ‘base lending rate,’ is the correct tool to use in
calculating the cost of credit. “CBR is the benchmark rate used to
conduct monetary policy and has never been the benchmark price for the
credit market. I believe KBRR is the true representation of the base
rate,” said Isaac Awuondo, the CBA group managing director.
Commercial Bank of Africa Group managing director Isaac Awuondo. PHOTO | FILE | NATION MEDIA GROUP
Though using the KBRR looks disadvantageous to CBA when it come to the
pricing of loans, it on the flipside, leaves it with a lighter deposit
rates burden because banks using CBR as the base must pay depositors
higher returns starting at 7.35 per cent.
KBRR is calculated as an average of the CBR and the two-month weighted
moving average of the 91-day Treasury bill rate.
The Central Bank of Kenya, through the Monetary Policy Committee (MPC)
reviews the KBRR every six months, with the last review having been
done in July 2016.
The CBR on the other hand, is the interest rate the regulator charges
as a lender of last resort to banks. The rate is reviewed and
announced by the MPC at least every two months or whenever necessary,
and is used as a policy tool to curb inflation, stabilise the local
currency, and manage liquidity.
@HFGroupKE share price data here
Par Value: 5/-
Closing Price: 16.40
Total Shares Issued: 352416667.00
Market Capitalization: 5,779,633,339
H1 2016 Earnings
Total Assets 71.302429b vs. 66.018469b +8.004%
Loans and advances to customers (net) 53.465918b vs. 49.983574b +6.967%
H1 Loan loss provision [304.998m] vs. [283.364m] +7.635%
H1 Total other operating expenses [1.613163b] vs. [1.360279b] +18.591%
H1 Profit before tax and exceptional items 889.690m vs. 658.980m +35.010%
H1 Profit after tax and exceptional items 612.553m vs. 485.140m +26.263%
EPS 3.51 vs. 2.79 +25.806%
DPS vs. 0.65
Gross NPL and advances 5.363759b vs. 4.159032b +28.967%
Net NPL and advances 3.356270b vs. 2.934349b +14.379%
Liquidity ratio 21.77% vs. 27.30% -5.530%
Total shareholders funds 10.984947b vs. 9.947037b +10.434%
+27.16% H1 PBT
Loan Book grew 7% to 53.5b
Customer Deposits +6.00% to 39.8b
Banks NPLs 5.3b versus 4.1b
HFDI completed construction of KMall Eastlands
On a Forward PE Multiple of less than 4 This is a very inexpensive stock.
The Central Bank of Kenya has set the CBR Rate [10.5%] as the base
rate for loan charges rather than the KBRR rate [8.9%].
Kenya’s central bank said lenders should peg their loans to its
Central Bank Rate, or CBR, in line with a new law capping costs and as
the International Monetary Fund warned that legislation limiting how
much lenders charge for credit risks impeding access to loans.
“The cap will be set at four percentage points above the CBR,”
according to a circular sent to lenders on Sept. 13 seen by Bloomberg.
“The interest rates indicated in the Banking (Amendment) Act 2016,
will apply on an annual basis.”
“Linking deposit and lending rates to the central bank’s policy rate
may compromise the independence of the central bank, and hamper its
ability to enact monetary policy towards achieving its main
objectives, that is to maintain price and financial stability and to
support the economy,” the IMF's Furusawa said in Nairobi, during a
ceremony to mark the Central Bank of Kenya’s 50th anniversary.
The Nairobi All Share firmed +0.09 points to close at 131.58.
The Nairobi NSE20 Index firmed +15.55 points to close at 3223.80.
Equity Turnover was 372.808m.
N.S.E Equities - Commercial & Services
Safaricom was the most actively traded share at the Exchange.
Safaricom closed unchanged at 19.00 and traded 8.092m shares.
Bloomberg reported during the Trading session that Visa had introduced
a Mobile-Money Product called the mVisa app which will initially
facilitate transactions for people with accounts in four banks,
including KCB Group Ltd. and Co-operative Bank of Kenya Ltd. The
company estimates 84 million of Africa’s mobile-phone users still pay
by cash. This news led to some softness into the closing Bell with
Safaricom trading 18.65 -1.64% at the Finish.
Kenya Airways had 1,162% more Buyers than Sellers and the share price
rallied +6.84% to close at 3.90 and was trading session highs of 4.00
+9.59% at the close. Kenya Airways traded 43,800 shares. Price moves
often are strong Signals in the Noise.
TPS Serena firmed +3.49% to close at 17.75 and was trading at 18.35
+7.00% at the Finale. Trading was thin with little being shown on the
N.S.E Equities - Finance & Investment
Equity Group eased -0.95% to close at 26.00 and traded 3.286m shares.
Equity remains -27.77% since the Interest rate Bill was signed by the
KCB Group ticked -2.65% lower to close at 27.50 and traded 441,000 shares.
N.S.E Equities - Industrial & Allied
EABL rebounded +2.54% to close at 242.00 and was trading at session
highs of 250.00 +5.93% at the Finish. EABL's bullish thrust was on
good volume of 274,100 shares worth 66.375m. EABL had become badly
oversold and caught up in the market sell-off. A return to equilibrium
should signal a meaningful Rally.
Trans-Century rallied a further +5.13% to close at 10.25 and like a
Phoenix rising from the ashes Trans-Century an eye-popping +127.77%
since the 26th of last month.
KenGen firmed +0.75% to close at 6.65 and traded 764,200 shares.
KenGen has ramped +10.833% higher this month and traded shares as high
as 7.10 +7.58% during the session. My Fair Value Price is around 10.00
which means there is plenty of scope to the Upside.
Flame Tree Group Holdings (FTGH:NSE) announced the opening of its new
plastic water tank facility, a branch of Rino Tanques Lda, in Nampula,
Group CEO Heril Bangera said; “FTGH as a whole is very excited with
this development. In Mozambique, we have not been able to cater to the
northern part and as such we will now be able to strengthen our market
position by covering a bigger geographical area of the country. The
factory will manufacture the full range of plastic tanks, from the 100
liters to 10,000 liters in its new facility.”
“Although Mozambique’s currency has devalued significantly this year,
we as a company are looking at long-term growth and believe that our
business can accommodate such fluctuations”, CEO Heril Bangera stated.
FTG closed unchanged at 4.70.
Atlas Africa has halted the construction of its Chancho bottling plant
in Ethiopia, this follows after the tax authorities issued an agency
notice of USD 2.4m for its subsidiary TEAP Glass Plc. The confiscation
by the Ethiopia Revenue and Customs Authority arose from a tax claim
on Ardan Risk and Support Services which Atlas Africa acquired three
years ago. Atlas closed unchanged at 1.05.