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Satchu's Rich Wrap-Up
Wednesday 02nd of March 2016

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Macro Thoughts

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Central banks have tried almost everything, but in the current deflationary climate monetary policy is impotent and policy makers are proving the ineffectiveness of pushing on a string

That's good news for Treasuries and the dollar, but bad news for
equities and commodities.

Home Thoughts

“Storytellers are a threat. They threaten all champions of control,
they frighten usurpers of the right-to-freedom of the human spirit --
in state, in church or mosque, in party congress, in the university or
wherever.” ― Chinua Achebe, Anthills of the Savannah

“It is the storyteller who makes us what we are, who creates history.
The storyteller creates the memory that the survivors must have -
otherwise their surviving would have no meaning.”― Chinua Achebe

“I believe in the complexity of the human story and that there’s no
way you can tell that story in one way and say, This is it. Always
there will be someone who can tell it differently depending on where
they are standing; the same person telling the story will tell it
differently. I think of that masquerade in Igbo festivals that dances
in the public arena. The Igbo people say, If you want to see it well,
you must not stand in one place. The masquerade is moving through this
big arena. Dancing. If you’re rooted to a spot, you miss a lot of the
grace. So you keep moving, and this is the way I think the world’s
stories should be told—from many different perspectives.”

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Is the Trump show ready for prime time? Politico
Law & Politics

In south Georgia, Donald Trump’s field coordinator is a convicted
felon who recently slammed the businessman as greedy, self-centered
and “solipsistic.” In Iowa, the campaign official tasked with picking
Trump’s convention delegates is a former contestant on Trump’s
“Apprentice” television show with no prior political experience. In
the upcoming caucus states, Trump’s field operation is trying to
organize without the help of his top two staffers from Iowa, who
dropped off the campaign’s payroll in mid-February when their
contracts weren’t renewed. And in Florida, Trump’s team is trying to
woo mail-in voters, but they’re using outdated data to do it.

In short, Trump’s campaign remains the ramshackle, build-as-you go
organization that it has been from the beginning.

''This sh-- is working, so they are not incentivized to change,” said
the person involved with the billionaire’s political operation.


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London Outpaces New York as `Soft Power' Capital, Deloitte Says
Law & Politics

“London is a global city, arguably the world’s foremost business hub,”
said Angus Knowles-Cutler, Deloitte’s senior partner in London.

Its strength lies in many people having traveled to the U.K. for
education as well as the vitality of its burgeoning digital scene,
said Deloitte. Business leaders with time in London on their resume
now work in 134 countries versus 120 from onetime New Yorkers.

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Barclays's Banking Moonshot Bloomberg Gadfly

Jes Staley wants Barclays to be big and diversified. But it's a bet
that requires time and money. Even if the bank's new CEO is right in
the long run, investors are unlikely to keep the faith.

Considering the amount of optimism riding on Staley's first big
results presentation -- sell-side analysts expect him to deliver a
bigger stock price gain over the next 12 months than any other
European bank chief -- it was always going to be tough for the
JPMorgan veteran to deliver.And the disappointing announcements came
in spades: a cut to the dividend for the next two years, a big dollop
of one-time losses and litigation charges -- and a commitment to
investment banking as a key plank of the business.There was a sop to
the bulls betting on a radical Staley-led restructuring of Barclays:
the bank will cut its majority stake in its Africa unit and is
stuffing several business lines including Barclaycard's Southern
European unit into its non-core division.Even this will take more time
and more money. It may take "two to three years" to sell the Africa
stake, Staley said on Tuesday, while the swelling of the bad bank will
lead to 1 billion pounds ($1.4 billion) in total extra costs.Selling
the African business -- which generated a better return on equity than
the investment bank last year -- makes little sense now. As my Gadfly
colleague Duncan Mavin has argued, it will be hard for Barclays to
find a buyer willing to pay a premium when commodities markets are in
turmoil and the rand has plunged. Selling looks desperate rather than

Barclays is one of the cheapest banks in Europe, trading at 0.4 times
book value (only Deutsche Bank is cheaper at 0.3). Lloyds, which
focuses on the British consumer, trades at a premium, or 1.2 times
book value.

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Currency Markets at a Glance WSJ
World Currencies

Euro 1.0859
Dollar Index 98.48
Japan Yen 114.20
Swiss Franc 0.9993
Pound 1.3966
Aussie 0.7231
India Rupee 67.655
South Korea Won 1227.70
Brazil Real 3.9220
Egypt Pound 7.8299
South Africa Rand 15.5611

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Russia's Economy Is Tanking, So Why Is Putin Smiling?
Emerging Markets

With Russia mired in the longest recession in two decades, there
hasn’t been a lot of good economic news lately. But there’s one
indicator that’s looking up, and it’s the one that matters most to
Vladimir Putin: His hard-currency reserves.

The central bank held $379 billion in foreign exchange and gold as of
Feb. 19, up $29 billion from lows touched last April, making Russia
the only major emerging market with a gain.

While China and Saudi Arabia have spent tens of billions of dollars to
shore up their currencies, the central bank in Moscow has gone cold
turkey on intervention. Since blowing more than $67 billion in a
failed effort to steady the currency at the end of 2014, Russia hasn’t
spent a penny to prop up the ruble. In fact, it bought some foreign
currency last spring.
“No amount of spending of currency reserves can stabilize the ruble,”
Dmitry Tulin, first deputy governor of the central bank, said last
month, a few weeks after the currency dropped to new lows. “It’s very
easy to fire your whole arsenal quickly, but that would yield only a
temporary, Pyrrhic victory.”

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In 2016 Africa must end its addiction to commodities, or it will be the 1980s all over again

The period of the worldwide commodities’ boom between the years 2000
and 2015 represents the second lost opportunity for Africa.  There was
a similar boom between 1960 and 1980 immediately after the end of
colonialism.  The major decline of commodity prices during the second
half of the 1970s left Africa with major commercial debts and with
little revenue to maintain basic services.  The current decline of
prices tells us that Africa has not learned the lesson of the earlier

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Barclays' BAGL stake has a market value of about $4.9 billion. That would be too big for Atlas Mara to swallow whole

Barclays' BAGL stake has a market value of about $4.9 billion. That
would be too big for Atlas Mara to swallow whole -- its London-listed
shares have a market capitalization of about $318 million. Still, as
Barclays scans potential buyers, Diamond will surely be on the short
list. He told Bloomberg News last week that the tough economic climate
and weak markets make this "a better entry point" for investing in
Africa's banking industry. Building out Atlas Mara from Barclays'
discarded units could be too tantalizing to resist.

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South Africa comments Smart Company

“South Africa has been struck by a perfect storm. There is no escaping
the fact that a President who was lord and master of his domestic
domain via a very effective patronage machine and a policy of high
velocity rotation has reached his limits in terms of the markets in
particular,” he says.

“The markets are the message and they are voting on a continuous basis
against the ‘Zupta’ economy. The Rand has crashed, SA is headed to
‘junk’ status and the point is that the model is broken and the Pilot
out of his depth. This policy making Failure is compounding the

He however also linked South Africa’s woes to the slowdown in China.
Metals and mining contribute more than 50 per cent of exports.

On Friday last week mining giant Anglo American Platinum said it
planned to cut at least 2,000 jobs at two mines in South Africa as the
firm reels from sharply falling prices.

The job losses are the latest in a series of cutbacks by the company.
South Africa’s mining sector has shed thousands of jobs in the wake of
falling demand due to China’s declining economic growth, as well as
enduring debilitating strikes over wages and poor energy supplies.

South Africa produces 70 per cent of the world’s platinum, which has
fallen in price by almost a half in five years.

“South Africa has a very high correlation with China and therefore at
the sharp-end of the Africa China related slow-down. I am afraid like
Barclays (who are effecting a stop-loss) that this going to get worse.
The Rand is going lower, inflation is going higher as are interest
rates and GDP is going to contract,” Mr Satchu told Smart Company.

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29-FEB-2016 Barclays' Exit a Vote of No Confidence in Zuma @TheStarKenya

Many reasons have been given including the fact that the sale of
Barclays Africa will add as much as 0.8 percentage points to Barclays’
core capital ratio, that the African unit’s return on equity of 9.3%
last year was below the bank’s target rate of 11%, that Africa
translates into Barclays carrying 100% of the ‘’reputational risk’’
without 100% control. For example, in South Africa the UK bank has a
minority of board seats.

The real reason in my view is the Zuma ‘’Zupta’’ volatility. The
Barclays Africa exit is a vote of no confidence in South Africa’s
President Jacob Zuma and by extension in South Africa’s gateway

Two days before South Africa’s Finance minister Pravin Gordhan
presented his budget last Wednesday, Zuma described Van Rooyen as the
most qualified finance minister his administration has had. Unless the
president is stopped, Barclays PLC’s move might well be the first in
what becomes an Avalanche of Exits.

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14-DEC-2015 :: Acrimonious Exit of Nene Hits Africa's Economy @TheStarKenya

The signal emitted by Nene’s unceremonious sacking,

has criss-crossed the world and imperiled the South African Economy.
The economy which was barely growing is going to contract. The cost of
living and the cost of borrowing is going to spike big.

The first- and second-round effects are going to shudder South Africa Inc.

And the scariest part for South Africans is this: The presi- dent just
doesn’t get it.

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@SAPresident Zuma

Worst drought in more than a century cut South African farming output
and hurt manufacturing, curbing growth in the continent’s
second-largest economy to an annualized 0.6 percent in the fourth


Agriculture contracted an annualized 14 percent in the final three
months of last year and “we can see the pass-through to
manufacturing,” Statistician General Pali Lehohla told reporters on
Tuesday in Pretoria, the capital. The decline is “a big number. The
drought has an impact both in terms of employment and industrial
output,” he said.

Growth in gross domestic product eased from 0.7 percent in the third
quarter, the statistics office said in a report. The median estimate
of 18 analysts surveyed by Bloomberg was for GDP to expand 0.9
percent. The economy grew 1.3 percent for the whole of last year.

Manufacturing, which makes up about 13 percent of the economy,
contracted for three of the four quarters in 2015, declining an
annualized 2.6 percent in the final three months of last year. Mining
came out of recession in the fourth quarter, expanding 1.5 percent,
mainly due to a recovery in electricity generation, according to the
statistics agency.

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The Angolan kwanza is Africa’s most overvalued currency, based on the cost of a bucket of fried chicken in the oil-producing nation.

The currency’s official rate is 72 percent overvalued against the
dollar, according to the KFC Index published on the website of Sagaci
Research. The gauge, whose compilers say it is inspired by The
Economist Big Mac Index, measures a currency’s value on a purchasing
power parity basis, using the cost of a 12-piece meal at KFC outlets.
The Yum Brands Inc. fast-food franchise has restaurants in 18 African

The kwanza has weakened 17 percent against the dollar this year,
adding to last year’s 24 percent decline, after the government in
January allowed the currency to devalue because of the collapse in oil

“The economy is doing pretty poorly and struggling, but the government
and the central bank are artificially supporting the currency at
current levels,” Julien Garcier, managing director of Sagaci Research,
said Tuesday by phone from Kenya’s capital, Nairobi.

The KFC Index also shows South Africa’s rand is 48 percent undervalued
against the dollar, the most under-priced currency on the continent.
The Big Mac Index estimates the undervaluation at 57 percent. The
currency weakened 26 percent over the past 12 months.

“Overall the South African economy is not exporting much and not
developing as much value as it should,” Garcier said. “The government
let the value of the rand go down to the current level and they’re not
supporting it.”

The index found that Kenya’s shilling is 1 percent overvalued, while
the exchange rates of neighboring Uganda and Tanzania are 17 percent
and 13 percent undervalued respectively.

The Sagaci data also showed that black-market exchange rates indicated
that the Angolan kwanza should be trading closer to 440 a dollar,
against a KFC Index implied rate of 270.9. It traded at 162.13 per
dollar at 10:09 a.m. in Luanda, the southwest African country’s
capital, on Tuesday.

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Egypt EGX30 Bloomberg -12.71% 2016

In Nigeria, all anyone can talk about is the dollar—and the fate of
the naira QUARTZ


Although the central bank’s official rate is set at 198 naira to the
dollar, on the unofficial parallel markets—which dominates most
currency activity here—traders took 345 naira to the dollar at the
start of the week of Feb. 22. It soon dropped further, reaching almost
400 naira. But then it strengthened and settled back near 300 naira by
the end of the week. It’s now hovering around 340 naira to the dollar

“In our home market of Nigeria we increased sales by 3.2 percent
against the worst economic crisis the country has faced in many years,
which demonstrates that the Nigerian market is very robust.”


Nigeria All Share Bloomberg -13.28% 2016


Suntan Beach, Badagry in Lagos, Nigeria Photograph: Andrew Esiebo


Ghana Stock Exchange Composite Index Bloomberg -1.30% 2016


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Kenya Commercial Bank reports FY PAT 2015 +16.465% Earnings
Kenyan Economy

Par Value:                  1/-
Closing Price:           39.50
Total Shares Issued:          2984227692.00
Market Capitalization:        117,876,993,834
EPS:             6.086
PE:                 7.016

KCB Group FY 2015 results through 31st December 2015 vs. 31st December 2014

FY Loans and advances to customers 345.968686b vs. 283.732205b +21.935%
FY Customer deposits 424.390833b vs. 377.271886b +12.489%
FY Loans and advances income 46.191995b vs. 36.574907b +18.764%
FY Total interest income 56.383933b vs. 47.475715b +18.764%
FY Customer deposit expense [15.295887b] vs. [10.633005b] +43.853%
FY Total interest expense [17.147978b] vs. [11.527020b] +48.763%
FY Net interest income/ [loss] 39.235954b vs. 35.948695b +9.144%
FY Fees and commission on loans and advances 5.366204b vs. 4.635350b +15.767%
FY Other fees & commission 8.793785b vs. 8.103867b +8.513%
FY Foreign exchange trading income 4.067466b vs. 4.149902b -1.986%
FY Total other operating income 23.380514b vs. 22.001159b +6.269%
FY Total operating income 62.616468b vs. 57.949854b +8.053%
FY Staff costs [15.310898b] vs. [13.993445b] +9.415%
FY Other operating expenses [11.738084b] vs. [11.079231b] +5.947%
FY Loan loss provision [4.713807b] vs. [5.058270b] -6.810%
FY Total other operating expenses [36.078896b] vs. [34.162425b] +5.610%
Profit before tax and exceptional items 26.537573b vs. 23.787429b +11. 561%
Profit after tax and exceptional items 19.623071b vs. 16.848863b +16.465%
EPS 6.49 vs. 5.63 +15.275%
FY Dividend 2 shillings a share unchanged
Liquidity ratio 48.3% vs. 43.7% +4.600%

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$90m disbursed on mobile repayment of 98.5% @JoshuaOigara @KCBGroup ~ this is the model we want to take #Ethiopia
Kenyan Economy

From KCB Investor Relations PDF

31b in Agency transactions versus 14b in 2014
Agency Transactions +134%
Mobile Banking Transactions +98%
Mobile Loan Applications 3,527,074 in 2015 versus 150,531 in 2014
International Credit Rating at par with the sovereign Rating
Surpassing 10m Customers across KCB Group
Entry into Ethiopia via Representative office
18% Balance sheet contribution from our Subsidiaries
Total Assets South Sudan 6% [versus 14%] Rwanda 3% Tanzania 4% Uganda
4% Burundi 1%
Total Assets 2015 Kenya 82% [75% in 2014] IBs 18% [25% IN 2014]
Kenya 88% of Profits South Sudan 8% [versus 6%] Rwanda 2% Uganda 2%
Cost to income now 50.1%


Strong numbers. Mobile is showing an exponential Trajectory.
This is a solid Bank.

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N.S.E Today

The Nairobi All Share surged +1.346% to close at 143.71 a 7 week closing High.
The Nairobi NSE20 Index spiked +1.25% to close at a 7 week High of 3932.86.
Todays move was made on meaningful volume of 903.331m.
Kenya Commercial Bank reported FY Earnings and sprung +3.16% higher.
KenGen +3.571% and KenolKobil +2.8571% both closed at 2016 Highs.

N.S.E Equities - Commercial & Services

Safaricom surged +2.47% to close at 16.55, a 3 and a half week closing
High. Safaricom traded 12.237m shares and sits right up against a 2016
closing High of 16.70. A Push to Fresh 2016 Highs is imminent and a
break above 16.70 will be a bullish chart development.

N.S.E Equities - Finance & Investment

Kenya Commercial Bank reported FY 2015 Earnings this morning
pre-market Opening and at the Hilton Hotel. KCB reported a +16.465%
Full Year Acceleration in profit After Tax. Some interesting detail
was gleaned from this morning's Investor Briefing. The CEO Joshua
Oigara spoke about how we have entered ''an Age of Algorithmic
Banking'' and that KCB was prepared for the Uberisation of the
economy. These comments need to be contextualised against an
exponential Mobile Banking Trajectory which saw Mobile Banking
Transactions surge +98% Year on Year. Mr. Oigara spoke of $90m
disbursed being disbursed via the Mobile platform and of a repayment
rate of 98.5%.  Mobile Loan Applications clocked 3,527,074 in 2015
versus 150,531 in 2014. ''This is the model we want to take Ethiopia''
said the CEO. KCB were bullish about prospects in Ethiopia having
opened a Representative Office in 2015. DR Congo and Mozambique are
near term Entry Targets. The Currency Devaluation in South Sudan meant
South Sudan shrank to 6% of Total Assets [versus 14%] previously
though its contribution to Group Profits increased to 8% from 6%. The
Chairman made the point that KCB understands how to operate in
challenged markets. These were strong and shapely results and
naturally the Market responded appropriately and rallied the stock
+3.16% to close at a 6 week high of 40.75 with 3.982m shares worth
163.111m changing hands. The decision by Barclays PLC to downshift its
Africa position might also create Opportunities for Bolt-On
Acquisitions. KCB has traction.

Barclays Bank where the Parent Barclays PLC has confirmed it is
seeking to down-shift its shareholding retreated -2.8% to close at
12.15 and traded 457,700 shares. Barclays Kenya has retreated -5.813%
this week as uncertainty increased around the Barclays PLC decision.
Barclays Bank Kenya is a strong Franchise but evidently with such a
big block of shares now effectively on the market and it not being
clear who might prove a natural Buyer, we might continue to see a
down-side drift.

N.S.E Equities - Industrial & Allied

Kengen which reported H1 Earnings at the beginning of the week rallied
+3.571% to close at a Fresh 2016 High of 7.25. KenGen has rebounded
+31.81% since closing at a 2016 Low on the 27th of January. KenGen
traded 653,400 shares and was trading at 7.50 +7.14% at the Closing

KenolKobil rallied +2.8571% to close at a Fresh 2016 High of 10.80 and
on muscular volume action of 3.372m shares. KenolKobil was trading at
session highs of 11.00 +4.76% at the Finish Line. KenolKobil is
excising its DRC and Tanzania Operations, which Kestrel believe will
be an earnings accretive move and is now +12.5% in 2016.

EABL firmed +0.74% to close at 270.00 and was pushing on at 274.00
+2.24% at the Finish. EABL was well traded with 432,900 shares
changing hands. It was a Pleasure to catch up with Charles Ireland
last night and what I can mention on the record is that he is finally
happy with my Hedge [We are neighbours]. We finally have a Gardener.

by Aly Khan Satchu (www.rich.co.ke)
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March 2016

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