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Wednesday 09th of November 2016
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Morning Africa |
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0930-1500 KENYA TIME
Normal Board - The Whole shebang
Prompt Board Next day settlement
Expert Board All you need re an Individual stock.
The Latest Daily PodCast can be found here on the Front Page of the site
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HyperNormalisation 2016 @Youtube Africa |
The term "hypernormalisation" is taken from Alexei Yurchak's 2006 book
Everything was Forever, Until it was No More: The Last Soviet
Generation, about the paradoxes of life in the Soviet Union during the
20 years before it collapsed.[3] A professor of anthropology at the
University of California, Berkeley,[4] he argues that everyone knew
the system was failing, but as no one could imagine any alternative to
the status quo, politicians and citizens were resigned to maintaining
a pretence of a functioning society.[5] Over time, this delusion
became a self-fulfilling prophecy and the "fakeness" was accepted by
everyone as real, an effect which Yurchak termed
"hypernormalisation".[6]
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At Roku, the lobster and Waygu-stuffed high-roller roll. Source: Sushi Roku Africa |
Dish: High-Roller Roll
Some off-the-menu dishes are relatively secret; others are not. For
eight years, the Vegas branch of the West Coast chain Sushi Roku has
offered the High Roller roll to anyone who knows about it and is
willing to shell out $250—some high-roller tables will be offered it
as a verbal special by the server. The outrageous roll is filled with
just about every extravagant ingredient you can think of: lobster
tail, Wagyu Kobe beef, tuna, Osetra golden caviar, and truffle oil,
and it’s decorated with edible gold leaf, so it looks fancy, too.
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"The payment capacity is virtually nil." Mozambique WSJ Africa |
Investors are preparing to fight Mozambique’s plan to restructure
their $726 million of bonds a second time, threatening a stalemate
that could delay the country’s access to much-needed aid.
Bondholders are forming a committee to prepare for a potential default
and say they won’t negotiate debt relief now because they mistrust the
government’s financial disclosures and want it to seek relief from
other creditors first, according to people familiar with the matter.
“We are trying to convey a sense of urgency because we think it’s in
everyone’s interest to find a quick solution,” says Ian Clark, a
lawyer at White & Case LLP who represents Mozambique in the
restructuring talks. “The payment capacity is virtually nil.”
The bonds and loans were arranged by Credit Suisse Group AG and
Russian lender VTB Group. Credit Suisse declined to comment on the
loans. A spokeswoman for VTB said: “Mozambique confirmed to us that
they were following the necessary internal and external legislation
and that comprehensive information on the loans was disclosed to
creditors and investors.”
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Rand Takes Over Mantle of World's Most Political Currency Africa |
Move over Mexico. With the U.S. election campaign over, South Africa’s
rand has replaced the peso as the currency poised for the biggest
politically driven price swings.
The peso, considered a barometer for investors’ views on Donald
Trump’s chances, has been roiled as the presidential candidate’s
fortunes ebbed and flowed. Now it’s the rand’s turn, with a measure of
expected volatility over the next three months rising above that of
the Mexican currency as the focus shifts to South Africa’s President
Jacob Zuma and his battle with Finance Minister Pravin Gordhan for
control of the country’s purse strings.
The rand has closely tracked Zuma’s fortunes over the past three
months, advancing when his position weakened and selling off when
Gordhan seemed threatened. The volatility is significant because it’s
making the rand a tough trade and rating companies preparing to review
the country’s creditworthiness have cited political uncertainty as a
major risk.
“The rand is a real measure of the political risk premium,” said
Guillaume Tresca, the Paris-based senior emerging-market strategist at
Credit Agricole SA’s corporate- and investment-banking unit. “You buy
the rand or you sell the rand for nine, 10 days or one week, because
you know it can flip very rapidly, just on the politics.”
Politics is increasingly becoming a driver of currency moves around
the world now that central banks are starting to pull back from
monetary stimulus. Turkey’s lira slumped to a record last week as
police rounded up opposition leaders, while the British pound has
weakened more than any other major currency this year as the nation
contemplates an exit from the European Union.
When South Africa’s Gordhan was charged with fraud on Oct. 11, the
rand plunged 4 percent, only to rally 2.8 percent when the charges
were withdrawn three weeks later. The currency then jumped 1.1 percent
when Zuma dropped a court bid to block the release of a graft
ombudsman’s report that implicates him in unethical conduct, sparking
widespread calls for him to step down.
Three-month implied volatility for the rand versus the dollar, based
on the price of options contracts to buy or sell the currency, rose to
19.3 percent on Monday, more than the peso’s 17.5 percent and the
highest among emerging-market peers, suggesting traders see no end to
price fluctuations soon.
“Politics is key, particularly with South Africa on watch and the
credit rating agencies still deciding on whether to downgrade South
Africa to junk status,” said Lee Hardman, a currency strategist at The
Bank of Tokyo-Mitsubishi UFJ in London. “Certainly, more recently
political developments in South Africa have created more volatility
for the currency.”
Zuma has lurched from crisis to crisis. S&P Global Ratings and Fitch
Ratings, which both rate the country’s debt at the lowest investment
level, are reviewing their assessments in December. Judging by the
reaction of the rand, investors believe that Zuma’s exit would
strengthen Gordhan’s hand in his efforts to bring spending and debt
under control and avert a debt downgrade to junk, according to Peter
Attard Montalto, Africa economist at Nomura International Plc.
“Markets are likely to rally strongly on anything that looks” like
Zuma’s exit is closer, he said. “In our view, this overplays the role
of Jacob Zuma in stopping reform in South Africa and over-estimates
the change that will come. Nevertheless, South Africa assets can rally
strongly on cabinet resignations, protests and calls for resignation
and of course the actual event itself.”
Zuma is unlikely to give up without a fight, further clouding the
outlook for the rand, said Tresca at Credit Agricole. The currency
will probably weaken about 8 percent by year-end to 14.35 per dollar,
from 13.37 on Monday, according to the median forecast of 31
economists in a Bloomberg survey. Predictions ranged from 13 to 18 per
dollar. The rand weakened 0.5 percent to 13.4247 by 7:06 a.m. in
Johannesburg Tuesday.
“My concern is that it’s not the end of the story at all, it’s just
the beginning,” Tresca said. “I don’t think that Zuma will do nothing.
He will find another way to strike back. The rand will remain very
hard to trade.”
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Egypt EGX30 Bloomberg +44.11% 2016 Africa |
Egypt's blue chip stock index surged in early trade on Tuesday to its
highest level since June 2008, buoyed by hopes for inflows of foreign
capital after the Egyptian pound was devalued at the end of last week.
The EGX30 index rose 3.2 percent to 10,165 points, bringing its gains
since last Wednesday's close to 19.2 percent.
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Inside Africa Moody's Africa |
Looking across the whole of the Nigerian banking sector, Moody's
expects non-performing loans (NPLs) to increase to around 12% over the
next 12 months, compared to the 5% as of December 2015 recorded in
central bank data. The forecast rise in NPLs stems from lower oil
prices, a weakening naira, slower GDP growth and rising inflation.
Competitiveness amongst commodity exporters has deteriorated the most.
With the fall in global copper prices, Zambia's (B3 negative) position
on the WEF's Global Competitiveness Index fell 22 places, having
experienced public finance stress, domestic electricity shortages and
election-related policy uncertainty. The region's oil producers also
saw their places drop, with Gabon (B1 negative), Cameroon (B2 stable)
and Nigeria (B1 stable) declining five, five and three places to
108th, 119th and 127th respectively. In general, a sharp and sustained
weakening of commodity prices can adversely impact the overall GCI
score of a commodity exporting country by negatively affecting the
macro economic environment and, as a result of budgetary pressures,
the level of investment in public infrastructure, health and
education.
On aggregate, the World Bank expects growth in the SSA will slow to
1.6% in 2016, down from 3% last year and wellbelow the 5% average of
the past decade. South Africa (Baa2 negative) and Nigeria are
responsible for the majority of this drop, given that they account for
around 50% of the region's output.
The picture is not universally negative. Oil-importers, Botswana (A2
stable) and Rwanda (B2 stable) have actually posted sustained
improvements in competitiveness since the financial crisis. Moreover,
those who have recorded the largest competitiveness improvements are
also expected to be amongst the fastest growing economies in the
region, with the World Bank forecasting GDP growth above 6% next year
for Rwanda, (Côte d’Ivoire Ba3 stable), Ethiopia (B1 stable) and
Tanzania (unrated).
Growing cash and liquidity challenges in the Zimbabwean banking sector
have intensified ahead of the government’s planned introduction of
bond notes – a new means of exchange with which the Reserve Bank of
Zimbabwe (RBZ) aims to ease these shortages. The bond notes are to be
backed by a $200 million off-shore facility. However, the authorities'
lack of credibility is a major obstacle to the introduction of the
bond notes. Concerns among the population that the notes represent the
first step towards the return of a domestic currency have exacerbated
deposit withdrawals and cash hoarding.
What are the key credit risks? First, with protracted balance of
payments pressures, dollar shortages are likely to intensify. An
inability of enterprises and households to obtain sufficient cash for
daily transactions will weaken economic activity and dampen growth, in
turn lowering government revenues. There is also a non-negligible risk
of additional foreign exchange controls – especially in key export
industries – such as shift to full transfer of exports earnings to the
central bank’s nostro accounts. Payment delay from counterparties in
Zimbabwe, with balances in nostro accounts falling, is another key
risk.
On 18 October, Zambia (B3 negative) Finance Minister Felix Mutati
disclosed that he expected his country’s 2016 fiscal deficit on the
commitment basis (that is, including arrears) to breach 10% of GDP
this year. That is well above the 3.8% target announced in the 2016
budget speech in the fall of 2015, and exceeds our own March 2016
projection of a 7% deficit
The Mozambican metical has been one of the currencies that has
depreciated the most globally against the US dollar, depreciating 42%
to 77 metical against the US dollar since the end of 2015.
DRC As of August 2016, FX reserves had declined to $514 million from
$767 million in December 2015, providing import coverage of only about
1 month, down from 1.8 months at the end of 2015, according to the
IMF. The Congolese franc has also been under increased pressure,
depreciating 9.1% against the US dollar between the end of 2015 and
August 2016. This compares with a stable exchange rate against the
dollar maintained over the 2010-2015 period (see Exhibit 1). In
September alone, the local currency depreciated by 3.6%. Government
debt remains low and is expected to reach 14% of GDP by the end of
2016. However, the high share of foreign currency denominated total
government debt (over 70%) exposes the debt trajectory and external
debt service to exchange rate volatility.
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The formation of an opposition alliance that unites CORD's Odinga with Mudavadi could be a "game changer" in Kenyan politics, Machel Waikenda Kenyan Economy |
The formation of an opposition alliance that unites CORD’s Odinga with
Mudavadi could be a “game changer” in Kenyan politics, Machel
Waikenda, a former director of communications in Kenya’s ruling party,
said in an opinion article published in the Nairobi-based Star
newspaper Nov. 1. Kenyatta beat Odinga with less than a million votes
in 2013, while Mudavadi obtained almost half a million ballots.
“There has been an assumption that Uhuru stands a clear chance to be
re-elected,” Waikenda said. If the alliance becomes a reality, “the
opposition would form a force that can easily give Uhuru and Ruto a
run for their money come August.”
An opinion poll commissioned by the Star newspaper and published on
Monday found that 47 percent of Kenyans would back Kenyatta’s ruling
Jubilee party next year, compared with about 40 percent for the
proposed alliance.
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U.S. Economy |
President Donald Trump certainly upended Pollsters, Pundits and the
entire media echo chamber not unlike the BREXIT Vote. In fact, 24
hours before the Presidential vote and the BREXIT Vote, both outcomes
were at 4-1 i.e a 20% probability. This new Populist Zeitgeist has
legs and Marine Le Pen and FREXIT, ITALEXIT all look much more likely
than ever before. What is clear is that the Internet has been a
significant disruptor allowing Populist Politicians to go over the
Top. The Narrative is no longer controlled, its being written as we
speak and its being written by the likes of Trump and Nigel Farage. We
are now at an Inflexion Point and its plain to see.
The markets are having to adjust to a New Normal and this New Normal
is very unpredictable. It is this unpredictability which is surging
volatility in financial assets. The immediate reaction to the Trump
news was a big Flight into what are perceived as Safe Haven Assets.
Gold, the Yen and the Euro rallied sharply as Investors looked for a
safe harbour. The Dow Jones suffered its biggest one day loss and that
was even before it opened for trading. The Mexico Peso which has
exhibited a near 100% inverse correlation to a Trump win got smashed
more than 10%. The Markets are now a Prisoner of the Populist Rhetoric
and I would have thought this new Trend accelerates.
President Trump will surely reset the Geopolitical World Order, he has
already spoken of being able to get along with President Putin and the
Baltic States and Poroshenko in Ukraine will be worried that they
might well be thrown under a Bus, The Geopolitical Grandmaster
Vladimir Putin is a very big Winner. The ''Rebels'' in Syria who
interestingly are not Syrian will surely be extinguished in a foreign
Land and President Assad has outlasted another American President.
With respect to the Economic Order, it is also clear that President
Trump was carried to the White House on a wave of anti-globalisation.
He will surely continue to surf that wave and this will place enormous
pressure on global Trade. President Trump will surely be an America
First Champion. Mexico is at the Bleeding Edge and thats why we saw
such an outsize move in the Peso.
Africa was not mentioned once in the three Presidential debates and
Africa will be hoping to maintain PEPFAR and more recent Obama gains
such as AGOA and Power Africa. I have to expect a scaling back of US
economic support for Africa. I surmise that economic support gets
downshifted and Africom and its counter-terrorism agenda upshifted.
We have now entered a Trump Portal into a whole new Normal. |
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