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Thursday 15th of June 2017 |
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Macro Thoughts
Fed raises rates for second time in 2017
Central bank defies weak inflation figures to maintain forecast for one further lift this year |
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"The curve is behaving as though there's a chance they follow through on their dots," said John Herrmann Africa |
“The curve is behaving as though there’s a chance they follow through on their dots,” said John Herrmann, director of rates strategy at MUFG Securities Americas Inc. “It signals investors think there’s some credibility of the Fed doing another hike this year and possibly one, two or maybe more in the next year or two.”
The yield spread between two- and 10-year notes narrowed to about 79 basis points, the least since September and bringing it within range of the lowest levels since 2007. The two-year yield, at 1.33 percent, is among the most sensitive to impending Fed policy decisions. Spreads between five-year yields and longer maturities also shrank.
The narrowing began earlier in the day after a weaker-than-forecast inflation report bolstered confidence in long-dated debt. A flatter yield curve can be a sign of diminished confidence in the economic outlook.
Herrmann said he sees the spread between two- and 10-year Treasuries flattening to 71.2 basis points, particularly if the Fed hikes again in September, as he predicts.
The benchmark 10-year yield, at 2.13 percent, posted its lowest closing level of 2017. The note held most of its gains after the core consumer price index fell to a 1.7 percent year-over-year rate in May, the lowest since 2015, according to Labor Department data released Wednesday.
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Samburu National Reserve is a game reserve on the banks of the Ewaso Ng'iro river in Kenya Africa |
The Samburu National Reserve is a game reserve on the banks of the Ewaso Ng'iro river in Kenya. On the other side of the river is the Buffalo Springs National Reserve. The park is 165 km² in size and is situated 350 kilometers from Nairobi. It ranges in altitude from 800 to 1230m above sea level.[1] Geographically, it is located in Samburu County.
In the middle of the reserve, the Ewaso Ng'iro flows through doum palm groves and thick riverine forests. It provides water, without which the game in this arid region could not survive.
The Samburu National Reserve was one of the two areas in which conservationists George Adamson and Joy Adamson raised Elsa the Lioness made famous in the best selling book and award winning movie Born Free.
The Samburu National Reserve is also the home of Kamunyak, a lioness famous for adopting oryx calves.
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Special counsel is investigating Trump for possible obstruction of justice, officials say @washingtonpost Law & Politics |
The special counsel overseeing the investigation into Russia’s role in the 2016 election is interviewing senior intelligence officials as part of a widening probe that now includes an examination of whether President Trump attempted to obstruct justice, officials said.
The move by special counsel Robert S. Mueller III to investigate Trump’s conduct marks a major turning point in the nearly year-old FBI investigation, which until recently focused on Russian meddling during the presidential campaign and on whether there was any coordination between the Trump campaign and the Kremlin. Investigators have also been looking for any evidence of possible financial crimes among Trump associates, officials said.
Trump had received private assurances from then-FBI Director James B. Comey starting in January that he was not personally under investigation. Officials say that changed shortly after Comey’s firing.
Conclusions
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Trump's incoherent foreign policy is upending the world @business Law & Politics |
In the beginning, it was almost possible to believe Donald Trump had a coherent worldview. There were those, like Walter Russell Mead in Foreign Affairs, who argued that the president had a purposeful, Andrew Jackson-inspired “America First” policy. Alliances and treaties, especially trade deals, would be measured according to a narrow definition of national interest rather than long-term global stability. This was a simplistic, nearsighted strategy, but at least it made some political sense. It was what his constituency wanted. The primacy of domestic electoral considerations has certainly been notable in Trump’s world. His withdrawal from the nonbinding Paris climate accord is a lot more popular in places he won, like southern Ohio and western Pennsylvania (with the exception of Pittsburgh), than it is in California, where there are more people working in solar energy than there are coal miners left in the entire nation.
But there is more—or, perhaps more accurately, less—to Trump’s foreign policy than that. There have been at least two other complicating factors. There is the suspicion that aspects of Trump’s global actions, especially his curious relationship with Russia, are tangled up with his personal business interests, including his debts. And, of course, there is the mix of ignorance, personal pique, toxic narcissism, and conspiracy theory that is the hallmark of Trumpery, both foreign and domestic.
But he’s squandered whatever promise he may have had. His America First populism has devolved into a distressing comfort with autocrats such as Vladimir Putin, Xi Jinping, and the Philippines’ Rodrigo Duterte. As he demonstrated on his recent Middle East trip and at his summit with the Chinese, Trump succumbs too easily to pomp and flattery. It was good that he took the opportunity to promote the emerging Israeli-Sunni détente; it was bad that he did it at the expense of Iran, where recent elections have strengthened democratic opposition to the military-religious dictatorship. (There are now more women than mullahs in the Iranian Parliament.) His melodramatic concern about jihadi terrorism apparently stops at the border of Saudi Arabia, which has funded radical madrasas and terrorist groups throughout the region. He’s also had nice things to say about the Pakistanis, even though their intelligence services harbor and fund the Haqqani Taliban network, which was allegedly responsible for the recent massive bombing in Kabul. His China policy is particularly strange. Unwittingly, he’s probably done as much to empower China as George W. Bush did to bolster Iran. Trump’s opposition to the Trans-Pacific Partnership, which would have created a strong trading—and, implicitly, security—bulwark against China, was particularly misguided. With American markets restricted, countries such as Taiwan, Vietnam, and Myanmar will more easily succumb to Chinese economic hegemony. And Trump’s faith that China will be able to restrain North Korea’s lethal puerility remains to be proven.
Conclusions
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MAN RAVAGED BY AMNESIA SOMEHOW ABLE TO HOLD DOWN DEMANDING LEGAL JOB Law & Politics |
WASHINGTON (The Borowitz Report)—An Alabama man whose brain was ravaged by severe amnesia is somehow able to function in an extremely demanding legal job, leading neurologists reported on Tuesday.
The man, whom neurologists are calling a “medical mystery,” has performed highly exacting tasks in one of the country’s top legal positions despite having virtually no short- or long-term memory.
Dr. Davis Logsdon, the chairman of the neurology department at the University of Minnesota Medical School, said that the Alabaman’s brain “defies explanation.”
“In all the medical literature, we have never seen an example of someone capable of holding down such a high-powered job while having no memory whatsoever of people he met, things he said, places he has been, or thoughts he has had,” Logsdon said. “It’s the stuff of science fiction.”
Logsdon said that his team of neurologists was studying video of the man in the hopes of understanding the paradoxical functioning of his brain, but Logsdon acknowledged that such a task was challenging. “After listening to him talk for hours, your own brain starts to hurt,” he said.
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08-MAY-2017 :: a Crude Oil Price Target of $32.00 a Barrel. @TheStarKenya Commodities |
The OPEC “Go-Go” days of Sheikh Yamani, his prayer beads and delphic pronouncements belong to yesteryear. Mohammed Sanusi Barkindo, the current OPEC secretary-general, is a poor imitation of Yamani and is playing with a set of cards that is stacked against him. Reserves have been depleted from Abuja to Riyadh, from Luanda to Caracas and in all the oil producing capitals in the world. So many capitals are fiddling while sitting on a tinderbox and playing with matches. e deputy Crown Prince was quoted on Al-Arabiyya about Iran: “How can I communicate with them while they prepare for the arrival of al-Mahdi al-Montazar?”
We have experienced a precipitous downside move and, in my opinion, the exponential recent momentum is signalling there is further to go. My price target is $32.00 a barrel. Crude oil prices in extremis move exponentially. is move has all the ingredients for turning exponential. Some thought they found a floor Friday, but I expect them to be rudely awakened.
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THE world appears to have passed peak booze @TheEconomist Commodities |
The volume of alcoholic drinks consumed globally fell by 1.4% in 2016, to 250bn litres, according to IWSR, a research firm. It is the second consecutive year of decline, and only the third since data started to be collected in 1994. The drop-off is caused by people drinking less beer, which accounts for three-quarters of all alcohol drunk by volume. Worldwide beer consumption shrank by 1.8% to 185bn litres last year. Yet because the drinking-age population of the world grew by 1% in that time, beer consumption per drinking-age adult declined even more, by 3.2%. The overall decline is almost entirely because of downturns in three of the five biggest markets. China, Brazil and Russia accounted for 99.6% of the global decrease in the volume of beer drunk in 2016.
Both economics and changing tastes play a part. China overtook America to become the world’s biggest market for beer by volume in 2001. It now quaffs a quarter of all beer. But consumption per person peaked in 2013 and dropped further last year. One reason is that Chinese drinkers are turning away from cheap local brews towards premium products and imported beers. Beer’s appeal is also waning among older drinkers. Over-30s are moving to wine and over-40s favour baijiu, the national spirit. Elsewhere, recessions have hit beer-drinkers’ pockets. In both Brazil and Russia, consumption by the average adult fell by 7%.
Beer-drinking patterns also change as countries grow richer. In a study in 2016, Liesbeth Colen and Johan Swinnen of the University of Leuven examined the effects of income growth and globalisation on beer consumption in 80 countries between 1961 and 2009. They found that as GDP per person increased in poorer countries, beer became more popular. But when it reached around $27,000 per person, consumption began to fall again, probably as people became more aware of the dangers alcohol poses to health. Consumers may also start to opt for more expensive drinks, such as wine, once they can afford them. And beer consumption rises as countries become more globalised, the authors found. When international drinks companies move in, punters may find a new favourite tipple.
For decades, consumers in emerging markets have driven beer sales ever upwards. The latest figures suggest that the froth is coming off.
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Qatar signs $12 billion deal to buy F-15 jets from U.S Reuters Commodities |
Qatar's Ministry of Defense said on Wednesday the country signed a deal to buy F-15 fighter jets from the United States for $12 billion.
The deal was completed despite the Gulf country being criticized recently by U.S. President Donald Trump for supporting terrorism.
U.S. Defense Secretary Jim Mattis and representatives from Qatar were set to meet Wednesday to seal the agreement, a source familiar with the deal told Reuters. Bloomberg News reported the deal was for 36 jets.
The sale will increase security cooperation and interoperability between the U.S. and Qatar, the Pentagon said in an emailed statement on Wednesday.
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12-JUN-2017 :: Rolling Over Qatar @TheStarKenya Commodities |
Returning to the Riyadh Summit where the kingdom committed fifth of its remaining forex reserves [which will fall off a cliff when Oil slumps towards $32.00 a barrel] to a purchase of ‘’beautiful’’ American arms speaks to a heist. The House of Saud’s protector has always been the US but this time an American president has excelled himself at extracting a mindbogglingly egregious price.I have to surmise that the emir of Qatar baulked at the price and that his adversaries are saying OK, we can always do it by force because this looks like a mugging in a dark alley, now.
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Shabab Kill 17 and Take Hostages in Somalia's Capital Africa |
MOGADISHU, Somalia — An assault by militants in the Somali capital, Mogadishu, began Wednesday evening with a car bombing at the gates of a hotel popular with foreigners and continued with gunfire at a nearby restaurant.
At least 17 people were killed and dozens of others were taken hostage, according to local officials and the emergency services. Special forces rescued more than 50 hostages, according to the state news media.
The attack occurred less than a week after militants from the Shabab extremist group killed dozens of people — both soldiers and civilians, including children — when they stormed a military base in northeastern Somalia.
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Investors Snap Up Assets of Nation Where Defaults Are New Normal Africa |
For a country that has missed several debt payments this year, Mozambique’s assets are performing remarkably well.
The southern African nation’s currency has posted the world’s biggest gain in 2017, while the price of its overseas bonds, which the government defaulted on in January, has soared about 30 percent, making them among the best-performing sovereign notes in emerging markets.
While policy makers have yet to start restructuring talks, investors have been encouraged by two things: the completion of an independent audit into Mozambique’s foreign debts and a $7 billion project signed off by an Eni SpA-led consortium to exploit one of the biggest natural gas discoveries in a generation. Interest rates that almost tripled since the start of 2016 have also helped lure yield hunters.
“The currency has rallied massively, which has helped the debt burden, and the deal with Eni is also positive,” said Phillip Blackwood, a managing partner at EM Quest Ltd., which advises Sydbank A/S on about $2.5 billion of emerging-market assets. The Danish lender bought Mozambican bonds after the default and sold some about a month later at a profit, Blackwood said.
The metical, which has strengthened about 20 percent this year to 60.295 per dollar, will probably appreciate further as coal exports increase and the audit by U.S. corporate investigation firm Kroll Inc. may entice international organizations, including the IMF, to resume aid packages, analysts at Standard Bank Group Ltd., including Penny Byrne and Walter de Wet, said in a note last month.
The bonds traded at about 76 cents on the dollar on Wednesday, up from as low as 50 cents in mid-January.
What’s buoyed them is investors refocusing on the fact that the country “sits on a crown jewel” when it comes to gas, said Aly-Khan Satchu, the chief executive officer of Nairobi-based Rich Management, an adviser to companies and wealthy individuals.
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Kenya Opposition Links President's Family to Ballot Contract Bloomberg Politics Kenyan Economy |
Kenya’s main opposition party linked President Uhuru Kenyatta’s family to a Dubai-based company awarded a tender to print ballot papers for this year’s elections, as it demanded the contract be canceled.
Kenyatta’s brother, Muhoho, “is the local contact for Al Ghurair and possibly a shareholder” in Al Ghurair Printing & Publishing Ltd., Musalia Mudavadi, a leader of the opposition National Super Alliance, told reporters on Wednesday in the capital, Nairobi. He also accused the president of influencing the award of the tender “in collusion with some technical staff” at Kenya’s electoral body.
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State warns diplomats against interfering with elections Kenyan Economy |
The government on Wednesday evening issued a veiled warning to diplomats and foreign entities against interfering with the elections, even as debate on the electoral commission’s tendering for ballot papers gathered steam.
At a scheduled briefing for envoys accredited to Nairobi, Foreign Affairs Principal Secretary Monica Juma invited them to support and audit the elections, but insisted there should be “space” for Kenyans to choose their leaders.
“Our election is the reaffirmation of the deepening governance on our continent.
We express our commitment, as had been repeatedly expressed by the President, to an election that is free, fair, transparent and credible; and most fundamentally, that will reflect the will of the people,” she told the ambassadors gathered at Intercontinental Hotel on Wednesday.
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Chinese investment in Africa: Beijing's testing ground @FT Kenyan Economy |
On Pate Island, off the coast of northern Kenya, there are light-skinned Africans with Chinese features, fragments of ancient Chinese porcelain, and even a place named “New Shanga”. All lend weight to a local story that shipwrecked sailors from the fleet of Zheng He, the 15th-century Chinese explorer, settled on the island many years before Columbus set foot in the US.
in Kenya, records show that huge ships reached the east African coast more than 500 years ago, swapping Chinese treasures for exotica such as ivory, ostriches and zebras. Indeed, there is a long if tentative history of contact between China and Africa, cemented under Mao Zedong in the 1960s with anti-colonial solidarity and the construction of engineering works, notably the 1,860km Tanzam railway linking Zambia with the Tanzanian coast.
The China-Africa relationship — partly spontaneous and partly the fruit of an orchestrated push from Beijing — is shifting the commercial and geopolitical axis of an entire continent that many western governments had all but given up on. While Europeans and Americans view Africa as a troubling source of instability, migration and terrorism — and, of course, precious minerals — China sees opportunity. Africa has oil, copper, cobalt and iron ore. It has markets for Chinese manufacturers and construction companies. And, perhaps least understood, it is a promising vehicle for Chinese geopolitical influence.
“To have 54 African [nations as] friends is very important for China,” says Jing Gu, director of the Centre for Rising Powers and Global Development in East Sussex, who contrasts Beijing’s mostly good ties with African governments with the tense relationship it has with neighbours from Tokyo to Hanoi.
Many, including some Africans, are suspicious of what they see as a neocolonial land grab, in which companies acting as proxies for the Chinese state extract minerals in return for infrastructure and finance that will saddle governments with large debts. The behaviour of Chinese actors in Africa, in common with those from the west, has often fallen short of the exemplary. There have been legitimate complaints about Chinese companies employing few locals, mistreating those it has and paying scant regard to the environment.
Nevertheless, there is a begrudging recognition that China has mostly benefited Africa and that the country’s participants on the continent have learnt lessons.
Beijing’s engagement with Africa is more multi-layered than is often recognised. China, Ms Jing says, has used Africa almost as a testing ground for its growing international ambitions, whether through peacekeeping missions or construction of the roads, ports and railways intended to bind much of the developing world, via a new Silk Road, to the Middle Kingdom.
Howard French, whose book China’s Second Continent charts the experience of about 1m Chinese entrepreneurs who have settled in Africa, agrees. “Africa has been a field where China can try various things in a very low-risk environment,” he says. “Africa has been a workshop of ideas that now have a much bigger scale and strategic significance.”
A few numbers illustrate the shift. In 2000, China-Africa trade was a mere $10bn. By 2014, that had risen more than 20-fold to $220bn according to the China Africa Research Initiative at Johns Hopkins School of Advanced International Studies in Washington, though it has fallen back because of lower commodity prices. Over that period, China’s foreign direct investment stocks have risen from just 2 per cent of US levels to 55 per cent, with billions of dollars of new investments being made each year. China contributes about one-sixth of all lending to Africa, according to a study by the John L Thornton China Center at the Brookings Institution.
Certainly, China has been attracted by Africa’s abundant resources: oil from Angola, Nigeria and Sudan, copper from Zambia and the Democratic Republic of Congo, and uranium from Namibia.
In recent months, Chinese companies appear to have made an effort to corner the market for cobalt, crucial for the production of electric car batteries, with multibillion-dollar purchases of stakes in mines in Congo, the world’s biggest producer. From Libya and Zambia to Ghana and Mozambique, Chinese businesses have gained a reputation for unbridled extraction, whether of old-forest timber, oil, gold or illegal ivory.
Yet the emerging China-Africa relationship goes well beyond commodities. One of the top destinations for Chinese investment in Africa is Ethiopia, a mostly resource-poor country of 100m people that is pursuing Chinese-style state-led development. Ethiopia has few resources of interest to China other than its strategic location and potentially large market, should its fast growth of the past 15 years prove sustainable.
Since 2000, Ethiopia has been the second-biggest recipient of Chinese loans to Africa, with financing for dams, roads, rail and manufacturing plants worth more than $12.3bn, according to researchers at Johns Hopkins. That is more than twice the amount loaned to oil-soaked Sudan and mineral-rich Congo. In fact, a far larger portion of US direct investment — 66 per cent vs 28 per cent for China — goes into mining.
China-Africa ties have proliferated in other areas. Beijing has 52 diplomatic missions in African capitals against Washington’s 49. Of the UN Security Council’s five members, China has the most peacekeepers on the continent, with deployments of more than 2,000 troops in Congo, Liberia, Mali, Sudan and South Sudan.
From Africa’s perspective, although China presents risk it brings tangible benefits in finance and engineers. More importantly, it brings choice. That is welcome for African governments that have, for decades, been locked in often unproductive relationships with foreign donors who have brought billions of dollars in aid, but also, in the 1980s and 1990s, brought what many view as the ruinously prescriptive Washington consensus of market-based development and reform.
“The narrative of donor and recipient has changed considerably with China,” says Dambisa Moyo, a Zambian economist whose 2009 book Dead Aid questioned the aid-based ties of Africa to Europe and the US. “African countries need trade and they need investment. To the extent that China, or anybody else — India, Turkey Russia or Brazil — bring new trading and investment opportunities to Africa, that’s good news.”
Jeffrey Sachs, director of the Earth Institute at Columbia University, calls China’s newfound enthusiasm “the most important single development for Africa in this generation”.
Beijing, he says, can help transform the continent. “They know how to build big projects,” he says, referring to the dams, ports, airports, railways, telecommunications networks and roads that Chinese groups are building in even the most obscure corners of the continent. “They know how to get them done.”
Throughout Africa, people on the streets and in power echo these sentiments. Beijing’s official policy of non-interference makes it an attractive partner to African leaders in countries from Angola to Zimbabwe fed up with lectures from former colonial powers about human rights or democracy.
A 2016 Afrobarometer survey of 36 African countries found that 63 per cent of Africans found China’s influence “somewhat” or “very” positive. Asked which countries provided the best development model for Africa, 30 per cent said the US and 24 per cent China, placing them number one and two. Yet there is disquiet about the rise of Chinese influence. “I think the Chinese know what they want. It is the Africans who don’t know what they want,” says PLO Lumumba, director of the Kenya School of Law. “China wants to control. China wants to be a world power,” he says, adding that African governments are taking on so much Chinese debt that they will be in economic and political hock to Beijing.
Godfrey Mwampembwa, a cartoonist better known as “Gado” whose political satire is syndicated all over Africa, says something similar. “It’s the same old story: now you have the Chinese conquering Africa, but what is Africa getting out of it?” In one of his cartoons, Lilliputian African leaders shake the hand of a towering Chinese figure. The caption reads: “We are equal partners.”
In an interview with the Financial Times last month, Uhuru Kenyatta, the Kenyan president who has used Chinese billions and engineering know-how to mount a huge infrastructure push, expressed concern at the fact that Africa has moved into trade deficit with China. Beijing he says, is “beginning to appreciate that, if their win-win strategy is going to work, it must mean that, just as Africa opens up to China, China must also open up to Africa”.
Mr French says Africans’ view of China “is still positive, but not as exuberant as it was”. People welcome the infrastructure, he says. But they insist their governments should not be taken for a ride, either by overpaying, accepting shoddy work or allowing Chinese companies to use all their labour and materials. Africans resent it, he says, when corrupt governments inflate the price of projects — as has been alleged with the $4bn Mombasa-Nairobi railway, inaugurated this month — to make space for kickbacks.
Still, he adds, Chinese companies have become more attuned to such issues than critics suggest. A decade ago, they thought that dealing with the government was enough. Now they realise, they also need to engage civil society and international non-governmental organisations on issues from local skills to the environment.
Chinese companies like to be seen to be transferring skills. Huawei, which earns 15 per cent of its global revenue in Africa, trains 12,000 students in telecoms a year at centres in Angola, Congo, Egypt, Kenya, Morocco, Nigeria and South Africa. According to Johns Hopkins researchers, 80 per cent of workers on Chinese projects are African, even if many are in low-skilled jobs such as trench-digging.
“I give the Chinese a fair amount of credit,” says Mr French. “They have been mounting quite a steep learning curve from almost no knowledge to becoming very sophisticated players.”
Ms Jing of the Centre for Rising Powers says China wants the relationship to be seen as mutually beneficial. “China is actively pursuing an African industrialisation strategy,” she adds. “It is hoping to transfer low-wage production to Africa in the next 10 years.”
The crucial thing for African governments, says Ms Jing, is to take control of their relationships, whether with the west or China. That means setting priorities, ensuring skills are transferred and negotiating with foreign partners on their own terms. “It is up to the Africans. They need to be clear about who can play what role,” she says. “It is not for outsiders to decide.”
The evolving China-Africa relationship is not monolithic, but conducted by multiple players with different agendas. On the one hand, there are 54 African countries and, on the other, various Chinese banks, state-owned enterprises, provincial governments, private companies and individuals. “When you look at what China is doing in totality you see chaos, not coherence,” says Minxin Pei, a Chinese scholar, who rejects the idea of a grand Chinese strategy for Africa.
Uwe Wissenbach, an expert on Chinese projects in Africa, also cautions against the idea of a Beijing “master plan”. The construction of the $4bn railway from Mombasa to Nairobi was Kenya’s idea rather than China’s, he says. Even though the railway may be extended to Uganda and possibly Rwanda, it is not a Beijing strategy to link east Africa. Rather, it was an opportunistic bid by state-owned China Road and Bridge Corporation for a lucrative contract, he says.
The absence of a sweeping strategy does not mean there is no state influence. Chinese leaders have been active in courting African governments. In 2015, Xi Jinping, China’s president, pledged $60bn for African projects over three years despite the downturn in commodity prices. Beijing has consistently encouraged Chinese companies, many with huge surplus capacity at home, to win contracts in Africa. “When the government says: ‘This is the new frontier; it’s lucrative and people should go there,’ then people do go there,” says Mr Wissenbach. Policy directives from Beijing come with cheap finance and an implicit state guarantee should African governments default on loans.
Rather than Beijing carving up the world, he suggests, what has emerged is a scramble for Chinese state funds. “In that sense, it is strategic but it’s also very opportunistic.”
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Kenya's opposition leader wants to dismantle white-owned ranches Quartz Africa Kenyan Economy |
The Kenyan opposition leader, Raila Odinga, has announced that he will dismantle white-owned ranches in Kenya if he wins in August’s general elections. Odinga said the violence that has engulfed the restive Laikipia region in central Kenya has been due to mismanagement by a handful of large-scale ranchers.
“These ranches are too big and the people don’t even live there,” Odinga told The Times newspaper. “They live in Europe and only come once in a while.”
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MPs stall Treasury's plan to bail out Kenya Airways Kenyan Economy |
Kenya Airways’ quest to have Parliament approve a Sh77.3 billion ($750 million) loan guarantee the Treasury has granted it was Wednesday left hanging in the balance after a House committee failed to agree on its legality.
Conclusions
This Proposed Re-Structuring is not going to fly. The Banks especially cannot get away with what is a heist.
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N.S.E Today |
The FED raised US interest rates a 1/4 point yesterday. The Price of Crude Oil tumbled to a 7 month Low. Global currency markets whiplashed bigly before the Dollar found its footing and then began to strengthen. The Nairobi All Share rallied +0.585% to close at 152.94 a fresh 23 month High. The Nairobi NSE20 Index +0.45% to close at a Fresh 11 month high of 3522.79. We are seeing better breadth in the market but one suspects the rebound is now maturing especially ahead of the August elections and heightened and adversarial politics.
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N.S.E Equities - Commercial & Services |
The Stumble lower in Kenya Airways shares was triggered by a Genghis Capital report which spoke of the Local Banks ending up with about 33% of the Equity and an exponential dilution of existing shareholders. It is egregious and inconceivable that Banks who lent to Kenya Airways with their eyes wide open and at commensurate interest rates should end up with the Lion's share of the equity in the NEWCO. It is also a perfect example of self-harm to dilute long suffering shareholders by such a crazy amount and speaks to the fact that minority shareholders [79,000] had no representation at the negotiations whilst the Banks were surely well represented. The Banks now have a GOK guarantee and that should be it. The GOK has to revisit the ratio structure. Kenya Airways which had stumbled -30.93% in June through this morning rebounded by the daily maximum of +9.38% to close at 5.25 with 384,700 shares traded and unserviced Buy Side Demand of just shy of 2m shares. The raison d'être for this rebound was Investors began to factor in that the current proposal will not fly.
Safaricom was the most actively traded share at the Exchange and firmed +1.09% to close at 23.25 and traded 16.061m shares worth 377.093m. I expect a continued re-rating higher in the share price and my target is 28.00. Safaricom is +21.4% in 2017 and underpins the Bull Market here in Nairobi.
Standard Group firmed +1.39% to close at 36.50 and is + a mouth-watering +121.21% in 2017 and the best performing counter at the NSE in 2017.
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N.S.E Equities - Finance & Investment |
National Bank has been on a tear this week [since the news broke that KCB was looking at an all share deal acquisition]. National Bank rallied a further +10% to close at 9.35 and that caps a +38.15% rally this month.
Equity Bank firmed +0.62% to close at 40.00 and score a 2017 closing high. Equity traded 5.419m shares worth 217.035m and is +33.33% in 2017. KCB Group eased -0.65% to close at 37.75 and traded 2.216m shares. KCB has corrected -5.625% since the National Bank story leaked.
Centum bounced +2.58% to close at 39.75 on strong volume action of 1.106m shares. On a PE of less than 4.00, this share has upside head room.
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N.S.E Equities - Industrial & Allied |
EABL rallied +1.63% to close at 249.00 the highest closing price in 2017. EABL has lagged the market rally and is playing catch up.
Mumias Sugar rallied +4.76% to close at 1.10 and as rallied +46.66% in June and tis late cycle rally speaks to the maturity of the bull market rally.
KenGen closed unchanged at 8.50 a 2017 closing High and sits pretty at +46.55% in 2017.
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