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Satchu's Rich Wrap-Up
 
 
Thursday 27th of October 2016
 
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Between the New York close and the start of trading in Tokyo, foreign-exchange volumes dwindle to just 2 percent of peak turnover, according to Aite Group
Africa


The plunge in Britain’s pound earlier this month shows what’s at
stake. At about 7 a.m. Singapore time -- while London dealers were
sleeping and those in New York were finishing up their day -- sterling
slumped more than 6 percent in just two minutes, reaching a 31-year
low. After that, traders are more wary of leaving automatic sell
orders known as stop-losses in place at times when fewer people are
working and bouts of extreme volatility are more common.

“It’s always been a danger zone with respect to stop losses; certainly
after this, people will think about it even more,” said Anthony Hall,
head of foreign exchange, rates and credit in Asia Pacific at UBS
Group AG, the world’s third-biggest currency trader. “If you think
about how the structure of the market’s changing, how you would have
executed orders and left stop losses in the past is no longer
applicable today.”

The severity of the pound’s drop suggests that algorithms triggered an
avalanche of automatic sell orders, adding to the downward pressure on
the world’s fourth-most traded currency, according to UBS and
Singapore-based DBS Group Holdings Ltd. UBS processed its highest
volume of trades in a minute as sterling plunged, Hall said.

“Movements like this recent pound crash will likely happen again at
some point in time,” said Peter Soh, head of foreign exchange in
Singapore at DBS. “Looking back, say five years ago, moves of this
intensity were unheard of.”

What’s changed is that post-2008 crisis regulations have caused global
investment banks to pull back from dealing, while electronic traders
take on a growing share of the $5.1 trillion-per-day market in their
place. Lenders have backed off because, under the Volcker Rule, they
are restricted from trading for profit with their own money. Computer
traders have stepped in, more than tripling currency volumes in the
last three years, according to Aite Group.

Liquidity across all currencies and foreign-exchange products hits a
low of $16 billion from 8 a.m. to 9 a.m. Sydney time, which is
currently two hours ahead of Tokyo, according to Javier Paz, a senior
analyst in Salt Lake City, Utah at Aite Group. That’s before desks in
the island state, Tokyo and Hong Kong are fully staffed. Liquidity
climbs steadily, reaching about $550 billion at the London open. That
compares with a peak of about $750 billion at the so-called 4 p.m. fix
in London, when markets in the U.S. are also open, he said.

read more




12-SEP-2016 :: Mirrors on the ceiling, The pink champagne on ice @TheStarKenya
Africa


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.

read more



12-SEP-2016 Therefore, my second trade of the year 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'
Africa


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.

Home Thoughts

read more






And if that was not enough, he announced a new alliance - Philippines, China and Russia - is about to emerge; "there are three of us against the world."
Law & Politics


Duterte replied in kind; “Even as we arrive in Beijing close to
winter, this is the springtime of our relationship,” he told Xi at the
Great Hall of the People.

Conclusions


Duterte has blown up the Pivot.

read more





"I never had a failure," Mr. Trump said in one of the interviews, "because I always turned a failure into a success," glossing over the serial bankruptcies of his businesses in the 1990s.
Law & Politics


In an especially telling passage, Ivana recalls the first time she
went skiing with Mr Trump, who expected to outshine her. He had no
clue that she was in fact accomplished on the slopes.

“So he goes and stops, and he says, ‘Come on, baby. Come on, baby,’”
she recalled. “I went up. I went two flips up in the air, two flips in
front of him. I disappeared. Donald was so angry, he took off his
skis, his ski boots, and walked up to the restaurant. ... He could not
take it. He could not take it.”  Only later did they retrieve his
abandoned gear from the piste.

Mr Trump is meanwhile heard to brutally dismiss other men who, in his
mind, have either slipped from their once high perches or embarrassed
themselves publicly. One was Arsenio Hall, once a successful nighttime
TV host who had virtually vanished from view until Mr Trump brought
him on set for his Celebrity Apprentice series a few years ago.

“Dead as a doornail,” was his assessment of Mr Hall, “dead as dog
meat.” He went on, showing disgust over empathy: “Couldn’t get on
television. They wouldn’t even take his phone call.”

He summoned similar disdain for a well known Wall Street banker who
got drunk at a charity event at the Waldorf Hotel and had to be
carried out with all of Manhattan society and his peers in the
financial world looking on. (Mr Trump does not drink.)

read more



Pope Francis the manager - surprising, secretive, shrewd
Law & Politics


Father Ernest Simoni, a 88-year-old Albanian, was watching Pope
Francis on television this month when, to his astonishment, he heard
the pontiff mention his name.

Francis announced that the simple, white-haired Roman Catholic priest,
who had spent many years in jail during Albania's communist
dictatorship, was to become a cardinal.

It was the first that Simoni, or any of the other 16 new cardinals
named by Francis at the same time, had heard of their elevation to the
prestigious rank.

"I did not believe either my ears or eyes," Simoni told Reuters in
Albania. "The pope said it, but I could not believe it. 'Can he be
talking about another Ernest?' I said to myself."

But more significantly, the pope had also kept nearly the entire
Vatican hierarchy in the dark about his decision, which he announced
on Oct. 9 to thousands of pilgrims.

The episode illustrates how Francis has used his own distinct
management style to try to shake up the Church since his election in
2013. He is keeping his cards close to his chest as he tries to push
through a progressive agenda to make the Church more welcoming in the
face of conservative opposition.

Conclusions

read more






Currency Markets at a Glance WSJ
World Currencies


Euro 1.0904
Dollar Index 98.67
Japan Yen 104.48
Swiss Franc 0.9942
Pound 1.2215
Aussie 0.7632
India Rupee 66.895
South Korea Won 1141.23
Brazil Real 3.1406
Egypt Pound 8.8790
South Africa Rand 13.9280

read more





Here's How @GoldmanSachs Lays People Off
International Trade


The first “plant layoff” notice came in February: 43 people would lose
their jobs.

The second arrived six weeks later, increasing the cuts to 109
workers. Then a third, in April, for 146 more. And a fourth, in June:
98. Three more notices followed, including 20 dismissals announced
last week.

The “plant” in question -- Goldman Sachs Group Inc.

read more




Tata Sons former boss Cyrus Mistry says group could see $18 billion in writedowns - letter
Emerging Markets


Group companies in the salt-to-software Tata Sons conglomerate faces
potential writedowns to the tune of close to $18 billion due to
investments in unprofitable businesses, according to an internal
letter that ousted Chairman Cyrus Mistry sent to the company's board.

Mistry was shunted out of the company on Monday by the Tata Sons board
for reasons not officially made public by the group, however, sources
told Reuters that Mistry had lost favor with family patriarch Ratan
Tata and the powerful trusts, which own two-thirds of the group.

Mistry said in the letter that Indian Hotels Co, passenger-vehicle
operations of Tata Motors Ltd, the loss-making European steel
operations of Tata Steel, its telecom venture and a ultra mega western
Indian power plant of Tata Power are "legacy hotspots" of the company.

"A realistic assessment of the fair value (of) these businesses could
potentially result in a write down over time of about Rs118,000 crores
($18 billion)," said Mistry in an e-mail seen by Reuters.

A spokesman for Tata Sons declined to comment. A spokeswoman for Cyrus
Mistry declined to comment.

Frontier Markets

read more


Zitamar News @ZitamarNews Mozambique 26 October: Bankrupt
Africa


Good afternoon. We wrote in May that the three controversial
state-backed loans, to ProIndicus, EMATUM, and MAM, “threaten to
bankrupt Mozambique.” That threat has now become reality: as of
yesterday, the government officially cannot pay. And its options at
this point look dire.

Public debt now stands at 130% of GDP, against the IMF’s threshold for
sustainability of 40%. To get to that level, Mozambique would have
somehow to make almost $9 billion of debt disappear. Thankfully, and
despite what the government’s advisors say, that does not appear to be
a precondition to normalising relations with the IMF.

The presentation the government made to its creditors in London
yesterday, with its upbeat assessments of the country’s prospects as a
gas exporter - is simply asking them to make the same mistake again.
Or, in the case of EMATUM investors who fell for the swap deal in
March, for the third time.

Conclusions

In 2014 Mozambique was a Poster Child

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Akinwumi A. Adesina @akin_adesina Korea backs the High 5 priorities of African Development Bank and puts up $10 billion for Africa. Thanks a lot Korea!
Africa


An all-party standing ovation for FinMin at presentation of a medium
term budget also unprecedented. #MTBPS2016 (he's looking chipper)
‏@ferialhaffajee

https://twitter.com/ferialhaffajee/status/791249371115425793

@SAPresident has apparently met his match in Pravin Gordhan

https://twitter.com/alykhansatchu/status/791263803723874305

read more


Gordhan Squeezes Taxpayers to Avoid South Africa Junk Rating
Africa


South Africa will increase taxes and limit spending as it tries to
fend off a junk credit rating after signaling it will miss budget
deficit, debt and growth targets for the next three years.

Additional taxes, details of which will be announced in February, will
raise an extra 43 billion rand ($3.1 billion) over the next two years,
while the government’s expenditure ceiling will be trimmed by 26
billion rand, Finance Minister Pravin Gordhan said in his mid-term
budget speech Wednesday in Cape Town. He lowered growth forecasts
until 2018 and projected wider fiscal deficits.

The Treasury forecasts a fiscal gap of 3.4 percent of gross domestic
product in the current year, and that it will narrow to 2.7 percent by
March 2019. The February budget targeted a deficit of 3.2 percent this
year, 2.8 percent in fiscal 2018 and 2.4 percent the year after that.
The growth forecast was trimmed by 0.4 percentage points for each year
until 2018, with an expansion of 0.5 percent projected this year,
rising to 2 percent by 2018.

The growth slowdown “reflects global realities -- a protracted
slowdown in trade, lower commodity prices and a high risk of external
volatility,” the Treasury said. “It is also the result of continued
structural constraints and low levels of investor confidence.
Perceptions of elevated political risk and concerns about the ability
of public institutions to make decisions on difficult trade-offs and
manage change have undermined confidence.”

read more


South Africa All Share Bloomberg +1.69% 2016
Africa


Dollar versus Rand 6 Month Chart INO 13.9280

http://quotes.ino.com/charting/index.html?s=FOREX_USDZAR&v=d6&t=c&a=50&w=1

Egypt EGX30 Bloomberg +17.86% 2016

http://www.bloomberg.com/quote/CASE:IND

Nigeria All Share Bloomberg -5.31% 2016

http://www.bloomberg.com/quote/NGSEINDX:IND

Ghana Stock Exchange Composite Index Bloomberg -12.68% 2016

http://www.bloomberg.com/quote/GGSECI:IND

Uganda Shilling has sneaked back to Feb-2016 election levels! Daudi Nanami ‏

https://twitter.com/DaudiNanambi/status/791231432517685248

read more


Three investors lined up to buy Crane Bank - government
Africa


The government has confirmed that at least three prospective investors
have already expressed interest in acquiring the troubled Crane Bank.
Finance minister, Matia Kasaija, told a meeting organised by the
Uganda Bankers Association (UBA) yesterday. Mr Kasaija said government
would run the bank until the right investor is found.

“We are going to run that bank and it will survive. Once it has
survived, we have already seen people who want to come in and invest
some money. We already have three suitors who want to come and put in
money. The bank will remain. No bank is going to be closed,” he said.

read more





Doing Business 2017 report released on Tuesday showed that Kenya was placed at position 92 out of 190 countries surveyed, with Mauritius and Rwanda outpacing Kenya at 49th and 56th place respectively.
Kenyan Economy


Kenya's standing has improved by 21 places in the latest World Bank
Ease of Doing Business report, signalling that a raft of business
reforms initiated by the government may be paying off.

read more



"The board is studying the Deloitte audit report in order to make factual corrections and establish the truth. After that, we shall take the appropriate action," Mr Joseph said
Kenyan Economy


“Restoring KQ will not happen automatically. We have to look at areas
like on-time performance, our debt, pricing and the destinations we
fly to. KQ can be salvaged. It is a great airline with a new fleet.”

read more


@KenyaAirways reports H116 Loss after tax 4.783b Earnings here
Kenyan Economy


Par Value:                  5/-
Closing Price:           6.75
Total Shares Issued:          1496469035.00
Market Capitalization:        10,101,165,986
EPS:             -17.53
PE:                 -0.385

H1 Revenue 54.748b vs. 56.720b -3.477%
H1 Direct costs [32.758b] vs. [34.794b] -5.852%
H1 Fleet ownership costs [8.497b] vs. [13.143b] -35.350%
H1 Overheads – Other [10.446b] vs. [10.959b] -4.681%
H1 Total operating costs [53.799b] vs. [58.896b] -8.654%
H1 Operating profit/ [Loss] 949m vs. [2.176b] +143.612%
H1 Finance costs [3.752b] vs. [3.476b] +7.940%
H1 Fuel derivatives [251m] vs. [1.312b] -80.869%
H1 Other costs [1.677b] vs. [4.897b] -65.755%
H1 Loss before income tax [4.726b] vs. [11.856b] +60.138%
H1 Loss after tax [4.783b] vs. [11.952b] +59.982%
H1 Net profit margin [8.71%] vs. [21.1%] -12.400%
H1 Loss per share [3.20] vs. [7.99] -59.950%
H1 Gain/ [loss] on hedged exchange differences on borrowings 1.545b
vs. [15.047b] -110.268%
H1 Total comprehensive income for the period [3.238b] vs. [27.898b] -88.393%
Total assets 158.568b vs. 158.415b +0.097%
Total equity [38.905b] vs. [35.667b] -9.078%
Cash and cash equivalents at the end of the period 12.425b vs. 7.467b +66.399%

Company Commentary


Kenya Airways records an operating Profit of 949m -
Passenger numbers grew 4.2% to 2.2m
Cabin Factor +3.3% to 71.5%
14 percentage points increase in Intra Africa Traffic
Yields down 7%
Operating margin improved by 5.6 percentage points

Conclusions

An Improvement in the Trajectory but the big ticket challenges remain -

read more


@KenyaAirways share price data here +37.75% 2016 15 month Highs share data here
Kenyan Economy


Par Value:                  5/-
Closing Price:           6.75
Total Shares Issued:          1496469035.00
Market Capitalization:        10,101,165,986

read more


Nairobi ^NSE20 Bloomberg -20.69% 2016
Kenyan Economy


3,204.69 +0.70 +0.02%

Every Listed Share can be interrogated here

http://www.rich.co.ke/rcdata/nsestocks.php

read more



Drought Threatens Output Target in World's Biggest Tea Exporter
Kenyan Economy


Tea production in Kenya, the world’s biggest exporter of the black
variety of the leaves, may miss the government’s targeted 25 percent
increase this year as an extended dry spell damages the crop. Coffee
output will also be hurt.

The La Nina weather phenomenon, which causes dryness in eastern
Africa, is replacing the rain-inducing El Nino effect that resulted in
heavy rainfall from October to December and helped boost tea output in
the Central and Rift Valley growing regions by more than a third in
the first eight months of 2016 from a year earlier.

La Nina may cut precipitation in the final three months of this year,
and “the tea leaves are becoming dry and falling off,” Johnson Irungu,
the Agriculture Ministry’s director of crops, said in an Oct. 25
interview in the capital, Nairobi. Production volumes shrank after the
bumper harvest in the first quarter, meaning the industry may fall
short of a 500 million-kilogram (1.1 million-pound) government target
for the year, he said.

Kenya is the world’s largest grower of the leaves after China and
India, but exports 95 percent of its output, making it the biggest
shipper of the crop. Last year, the East African nation produced 399.5
million kilograms and made $1.24 billion from exports. It harvested
308.1 million kilograms in the first eight months of 2016.

The average African tea price dropped 16 percent this year to $2.29
per kilogram at the latest weekly auction in Mombasa, the world’s
biggest for the leaves. Revenue may decline this year if prices at the
auction don’t pick up, Irungu said.

Kenya’s coffee crop is also being damaged by the drought, according to
industry officials.

“If the dry spell continues then coffee leaves will fall off and the
coffee quality and quantity will drop further,” Coffee Research
Institute Director Gichuru Elijah said in an interview. “We are
slightly worried.”

read more



 
 
N.S.E Today


Internationally Bond Yields in the UK and in Europe have been backing
up, admittedly off seriously repressed levels.
The Dollar is at a 7 month high as Investors bet a rate hike is a
Racing Certainty in December in the US.
President Zuma might well have met a worthy Adversary in his Finance
Minister Pravin Gordhan who is making the President look very exposed
in a Sun Tzu way.
If the President is brought under control then the rand could rally
very sharply.
The Nairobi All Share firmed +0.24 points to close at 136.82.
The Nairobi NSE20 Index ticked -3.14 points lower to close at 3201.55.
Equity Turnover clocked 283.17m and has been on mute in October.



N.S.E Equities - Commercial & Services


Kenya Airways reported H1 16 Earnings this morning. H1 16 Revenue
shaded -3.477% lower to register 54.748b. Kenya Airways reported an
operating Profit of 949m. The Loss before Income Tax improved +60.138%
to clock -4.726b. Passenger numbers grew +4.2% to 2.2m.

“Restoring KQ will not happen automatically. We have to look at areas
like on-time performance, our debt, pricing and the destinations we
fly to. KQ can be salvaged. It is a great airline with a new fleet.”
Chairman Michael Joseph.

Clearly this is a significant improvement although Kenya Airways was
unable to snap a sequence of losses. Total Equity remains negative at
-38.905b. though Cash and cash equivalents improved +66.399% to clock
12.425b

The Trajectory has improved but it remains a big turnaround. Kenya
Airways which had surged +37.75% to a 15 month high in 2016 through
this morning, Kenya Airways retreated -8.148% to close at 6.20 and
traded 1.936m shares. The Point to note is that Kenya Airways was
trading at 6.75 and unchanged at the Finish Line, signalling this bout
of profit taking might prove very short.

Safaricom closed unchanged at 20.00 and traded 6.139m shares worth
122.764m. I attended the Betway Kenya Launch yesterday in the company
of the CEO of Safaricom [amongst others] and Betting has certainly
lifted SMS Revenues into strong double digit growth territory.
Safaricom report H1 2016 Earnings November 4th.

Marshalls EA surged by the daily limit of +9.75% to close at 9.00 and
traded the grand total of 100 shares giving a ticket value of $9.00.
Marshall's reported a FY Loss for the Year of 17.431m and Cash and
cash equivalents at the end of the year declined -33.277% to just
7.940m .

Sameer Africa traded a chunky block of 812,900 shares to close
unchanged at 2.50.



N.S.E Equities - Finance & Investment


Barclays Bank rebounded 1.89% to close at 8.05 on heavy volume action
of 4.336m shares. Barclays Bank is -30.51% on a Total Return basis
through 2016 and evidently someone is calculating this might be
overdone. Barclays Bank trades on a Trailing PE of just above 5.00.
Standard Chartered firmed +1.604% to close at an  8 week High of
190.00. StanChart traded 18,200 shares with Buyers outpacing Sellers
by a wide margin. StanChart has been seen as a Safe Haven for
Investors during this period of enormous turbulence and downside price
action in the banking Sector.



N.S.E Equities - Industrial & Allied


KenGen eased -0.84% to close at 5.90 and was well traded with 2.7m
shares changing hands. KenGen posted strong Earnings with meaningful
double digit gains in Revenue. Investors will lift the price when they
start to see through the dividend pass.



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