|
Morning Africa |
Register and its all Free.
If you are tracking the NSE Do it via RICHLIVE and use Mozilla Firefox as your Browser. 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 http://www.rich.co.ke
Macro Thoughts |
read more |
|
14-MAY-2018 :: That makes Africa look more like Italy than China via Economist Africa |
Markets have certainly been moving around a lot of late. Everyone has been transfixed by the Price of Oil with the benchmark Brent Crude contract topping a 3 and 1/2 year high and $77.00 a barrel last week. President Trump whose political raison d'être is to expunge and delete the Name of Barrack Hussein Obama from the record, delivered a unilateral hard exit from the nuclear agreement with Iran lifting Crude Oil prices. In fact, President Trump has flipped Obama's Oil warfare strategy [You will recall Oil prices touched $32.00 a barrel in President Obama's term in part to bring a recalcitrant Russia to heel and neuter Saudi resistance to his JCPOA deal] on its head. Trump, I suspect, is seeking to assist the Crown Prince of Saudi Arabia up the greasy Kingdom of Saud Pole and the Kremlin is I am sure not complaining.
The US Dollar has been strengthening across the board. Emerging Markets Bonds which in late January this year touched a record Low spread versus the equivalent US Treasury [just above 200 basis points versus 5 year US Treasuries] blew out. The Spread is at 275 basis points. Argentina [which incredibly sold a Century Bond just last year] after dialling up interest rates to an eye popping 40%, has capitulated and dialled up the IMF's Madam Lagarde. At this point in the cycle, the IMF's importance for many Countries cannot be gainsaid. Turkey's Lira crashed to all time Lows. Countries that have been flying by the seat of their pants are now being caught with their pants down. This has all the ingredients for baking a good old fashioned crisis. The Signal in the noise is the yield on 10 Year US Treasuries, which Yield is around 3%. If we move to 3.5%, we could see a further round of blood letting.
SSA Governments have tapped the Eurobond markets for more than $15b so far this year, which is a record haul for any year ever and its not even June. The IMF in its latest Africa update judged 6 countries to be in debt distress; Chad, Eritrea, Mozambique [they have lashings and lashings of Natural Gas which means there is a Pathway out of this], Congo Republic, South Sudan and Zimbabwe [There is sufficient goodwill for Zimbabwe to exit this position]. Interestingly, the IMF's ratings for Zambia and Ethiopia were changed from moderate to "high risk of debt distress." In Zambia's case, Eurobond yields are nudging double digits and President Lungu is resisting the only option that is really available, which is the IMF.
During the IMF's Release, its Africa Head said “The question I ask is why isn’t a country growing at 6 or 7%?”
Faster Growth is a Panacea. In fact after growing just 1.4% in 2016 [a more than 20 Year Low GDP Print] the IMF is projecting growth across sub-Saharan Africa of 3.4% this year. SSA aggregate figures are driven by the Big 3 Economies of South Africa [about which I am constructive because of the swing from a scenario of vicious Zuma discount to a Ramaphoria premium], Nigeria and Angola. All 3 Countries are bouncing off the bottom. The Proof of the Pudding will be in the Eating, however, and the sustainability of the rebound. The IMF expects that income per person will shrink in all three in 2018, for the fourth consecutive year. That means the Average Individual is empirically worse off for the 4th consecutive year. The Economist correctly concludes
''There is reason to worry, then, when the IMF says that regional growth will hover below 4% for the next few years. Since populations are rising, income per person will creep up by barely 1% a year. That makes Africa look more like Italy than China. Better keep praying''
The Daily Maverick cites Nigeria as an example
''For example, Nigeria, Africa’s largest economy, is home to almost 200 million people. Its population is growing at 2.61% per year, with a median age of 18. But Nigeria’s economy is set to grow by just 2% in 2018. The implications of this are nothing short of disastrous''
Bloomberg's annual Misery Index places six African countries in its top 10 most miserable countries globally in 2018.
Last week, when Delegates were asked at a @MoodysInvSvc conference in Lagos [via Bloomberg's Paul Wallace] what they thought were the biggest risks for African borrowers. They were not worried about external shocks so much as homegrown ones.
Africa has fully loaded the balance sheet. Notwithstanding a record breaking Eurobond raise in 2018, Its as plain as day that the current scenario is a little like Argentina's Century Bond moment, a last Hurrah! African Governments need to improve their ROI because Envelope space could evaporate momentarily and in a blink of any eye.
|
read more |
|
Computers drive trading in coffee and cocoa markets @FT Commodities |
Are computers driving the cost of your chocolate bar or cappuccino?
Specialised markets such as cocoa and coffee are becoming the next frontier for the waves of buying and selling generated by algorithmic trading, which has long since carved out a presence in currencies, equities and interest rates.
The trend enjoys a powerful tailwind thanks to the money flowing into systematic macro and an array of quantitative funds, which are seeking new opportunities to boost their returns. It is also triggering dramatic shifts in prices for coffee, cocoa and sugar, sparking concern that these commodities are being divorced from their fundamentals of supply and demand, traders and brokers say.
“People are looking for more niche markets to deploy that money,” said Michael Coleman, who manages a Singapore-based $140m discretionary hedge fund Merchant Commodity Fund. Many of the computer-driven strategies are searching for risks and returns uncorrelated with other financial markets.
One group of computer-driven funds active in the commodities markets are the trend-following “commodity trading advisers” or managed futures funds. The number of CTA managers trading niche markets has more than doubled to about 10 over the past couple of years, and although still relatively small, those funds manage about $15bn, according to Tom Wrobel, director of alternative investments consulting at Société Générale Prime Services.
The advance of computer-driven trading, where algorithms execute trades in anticipation of a market rising or falling, has also been spurred by the retreat of investment banks and discretionary hedge funds which in the past supported market making in commodities markets.
Alongside commodities trading houses, they historically used assets and global networks to take advantage of dislocations in futures prices, such as selling raw materials into an exchange where prices were excessively high. Yet many of the trading houses that once helped balance the market now focus on profits from processing the raw materials rather than taking advantage of price distortions, said brokers.
In the cocoa market, for example, Anthony Ward, the UK-based trader dubbed “Chocfinger” and known for his multimillion dollar bets, blamed the rise of algorithmic trading for making profits harder to come by when he closed his fund last year.
A number of important players in agricultural markets are also feeling the heat. Producers, such as cocoa farmers and cattle ranchers, and end users of the commodities including food companies — who also rely on the market to hedge their risks — have experienced surprising price shifts.
Many traders and brokers say computerised trading has driven sharp changes in prices for cocoa, coffee and sugar markets, which have taken market participants by surprise.
In the cocoa market, the New York price has jumped more than 50 per cent since the start of the year to a 19-month high of almost $3,000 a tonne. That punched the New York market to a record spread over the price of cocoa quoted in London, which was trading at about £1,800 a tonne.
Jonathan Parkman, co-head of agricultural commodities at broker Marex Spectron, said the New York cocoa market’s recent run up from the $2,500 a tonne it was trading at in March “had absolutely nothing to do with fundamentals”.
Normally, London cocoa trades at a premium to New York, but the inversion suggested a shortage in the US market, sending a signal to exporters to ship their beans there in order to meet a scramble for supplies that did not really exist.
That comes as the coffee and sugar markets have experienced a sharp rise in bearish positions built by “managed money” — a market category that includes speculative funds, to record levels.
One reason why momentum-surfing funds are turning to niche assets reflects how their price movements are not correlated to other financial markets.
Ewan Kirk, chief investment officer of Cantab Capital, the flagship fund belonging to GAM, and whose systematic funds manage $4.8bn, said: “Commodities are particularly interesting because they are very different from everything else,” adding that soft commodities in particular were “a very valuable source of diversification”.
High-frequency traders, who transact small positions in a space of milliseconds, are another group who have pushed into the agricultural commodities markets.
Jean-Jacques Duhot, chief investment officer at Arctic Blue, a systematic commodity-focused fund with $200m of assets under management, said that “high-frequency [traders] have started to enter the commodities space in a significant way”.
Such automated trading firms generate high levels of volume, amplifying short-term volatility. “They are very short-term participants, leading to higher intraday volatility,” he added.
Those who have seen the tectonic shift in other financial markets say a further push of computer-driven trading into commodities markets, including smaller ones such as cocoa and coffee, is inevitable.
“Algorithmic trading has moved from fixed income to equities,” said Thomas Lehrkinder, senior analyst at Tabb Group, a capital markets consultancy. “The next natural step is commodities.”
One consequence of the sharp swings in prices is a drop in the volume of hedging flows from those who buy and sell the physical commodities. The rise in intraday price volatility is making it difficult for some producers and food companies to maintain their hedging positions, while others are reluctant to take positions in the face of the frequent unusual market moves.
“There’s less hedging in the market, that’s for sure,” said Mr Duhot.
Not everyone is alarmed. Some market veterans argue that despite the rise in volatility, the ultimate direction of the price is always determined by the fundamentals of supply and demand.
“The fact of the matter is that we need speculators,” said Derek Chambers, the former head of cocoa at commodity traders Sucden. A cocoa trader for five decades, Mr Chambers said: “Over time the fundamentals come into play in the market. Nobody is bigger than the market.”
|
read more |
|
Angolan newspaper Expansao had an intriguing front page cover this week. It declared, "Every Angolan owes $745 to China." Quartz Africa Africa |
It also listed debt to other countries, but debt to China was more than seven times what’s owed to the next creditor, Israel. By some estimates Angola owes some $25 billion to China. Since resuming ties in 1983, Angola has taken $60 billion from China in loans and investments. The issue for Angola isn’t just that it’s borrowing a lot from China, it’s also the nature of the debt. As Africa’s second largest oil producer, Angola’s agreement with China is such that it uses oil to pay off the debt rather than selling on the open market and generating cash. This is all well and good when oil is $100. But it’s risky when oil prices fall. It has caused a liquidity crisis in the recent past, as well as spikes in inflation.
Meanwhile, as of the end of the first quarter, about 55% of Kenya’s external debt was to China.
The concern is Uhuru Kenyatta’s government and others before had been naive in their lopsided dealings with the Chinese, despite infrastructure construction and other benefits. “Many African leaders have also been endeared to China by the latter’s deep pockets, most of whom have grown wary of lectures from their traditional donors from the West. China’s cash comes with no strings attached.”
|
read more |
|
Tanzania cancels licence of @BarrickGold , @Glencore nickel project @ReutersAfrica Africa |
The licence for the Kabanga nickel project in northwestern Tanzania was among 11 retention licences cancelled by the government under the Mining (Mineral Rights) Regulations of 2018, which were approved in January.
A retention licence is granted to holders of a prospecting licence after they identify a mineral deposit within the prospecting area which is potentially of commercial significance but cannot be immediately developed due to technical constraints, adverse market conditions or other economic factors.
“The Mining Commission would like to inform all owners of retention licences that the licences have been cancelled,” commissions chairman Idris Kikula said in a statement.
Barrick Gold Corp and Glencore Plc which own the 50-50 joint venture project were not immediately available for comment. Their licence was due to expire in May 2019.
|
read more |
|
TPG's Rise Fund makes its first Africa investment @FT Kenyan Economy |
The Rise Fund, the impact fund run by private equity group TPG Growth, has made its first investment in Africa, leading a $47.5m deal to buy an unspecified stake in digital payments provider Cellulant.
The deal, which also included Endeavour Catalyst and Satya Capital, is the largest involving a fintech company that does business only in Africa, according to the Rise Fund.
“Much of the [fintech investment] activity in recent times in Africa has been specifically in the consumer lending space,” said Yemi Lalude, TPG’s managing partner for Africa. “This is different from that. What Cellulant has is a payment platform that enables people who have not had access to financial payments to get access in a way that is transparent.”
Cellulant was founded in 2004 with operations in Kenya and Nigeria. It now works in 11 countries with 94 banks and seven mobile money platforms that have a combined potential customer base of 130m. It focuses on facilitating mobile payments and ecommerce.
Ken Njoroge, Cellulant co-founder and chief executive, said the new capital would be used to scale up the company’s operations and expand into two more countries this year.
“The payment market on the continent is [worth] anywhere between $20bn and $40bn over the next couple of years while all of the fintech players in the market [currently] collectively generate a little shy of $2bn,” he said.
Mr Lalude said TPG’s investments were “usually up to seven years, and this would be similar to that”.
TPG formed the Rise Fund last year, attracting some $2bn in capital. It aims to be “committed to achieving measurable, positive social and environmental outcomes” while delivering “competitive financial returns”. Its board members include entrepreneur Richard Branson, singer Bono and Jeffrey Skoll, the first president of online auction website eBay.
Mr Lalude said one of the attractions of Cellulant for the Rise Fund was that many of its 40m customers had no access to formal financial services before they started using Cellulant products and services.
Aly-Khan Satchu, a Nairobi-based investment adviser, said he was not surprised Cellulant had attracted the attention of a major private equity group, noting that Mr Njoroge had “built a successful business, grown it organically and delivered for big corporates across the continent”.
Cellulant’s existing shareholders include Velocity Capital Private Equity, Progression Capital Africa Limited and TBL Mirror Fund.
Magister Advisors acted as transaction advisers to Cellulant while Orrick and KPMG provided advised The Rise Fund.
|
read more |
|
N.S.E Today |
Millions of voters in Burundi will go to the polls this week in a referendum that could allow president Pierre Nkurunziza to stay in power until 2034. Meanwhile, as of the end of the first quarter, about 55% of Kenya’s external debt was to China [Quartz Africa] The Rise Fund, the impact fund run by private equity group TPG Growth, has made its first investment in Africa, leading a $47.5m deal to buy an unspecified stake in digital payments provider Cellulant.[FT] Ken Njoroge, Cellulant co-founder and chief executive, said the new capital would be used to scale up the company’s operations and expand into two more countries this year. “The payment market on the continent is [worth] anywhere between $20bn and $40bn over the next couple of years while all of the fintech players in the market [currently] collectively generate a little shy of $2bn,” he said. Private sector credit growth touched a high of 25.8% in June 2014, and has averaged 14.0% over the last five-years, but has dropped to 2.0% levels after the capping @CytonnInvest The Nairobi All Share retreated a further -0.79% to close at 175.34. The Nairobi All Share is +2.418% in 2018 but has corrected -10.8% since clocking an All Time on the 5th of last month. The Nairobi NSE20 Index eased -19.97 points to close at 3582.36. Equity Turnover registered 468.46m signalling supply side is getting exhausted on this 5 week down move.
|
|
N.S.E Equities - Commercial & Services |
Safaricom eased -1.8% to close at 27.25 and traded 6.003m shares worth 164.473m. Safaricom is +1.869% in 2018 and has corrected -16.793% since clocking an All Time High of 32.75 on 5th April, which was coincident with a record close for the Nairobi All Share. Buyers can safely step up at tis price level. The FY Earnings Release was muscular.
WPP-Scangroup PLC was marked down -5.405% to close at 17.50 on light trading of 1,100 shares.
|
|
N.S.E Equities - Finance & Investment |
StanBic Holdings which reported a stellar Q1 2018 Start, firmed +1.666% to close at 91.50 and traded 132,700 shares.
|
|
N.S.E Equities - Industrial & Allied |
KenGen firmed +0.63% to close at 8.00 and traded 174,800 shares. We are trading at range lows and a meaningful bounce is expected in the near term. KPLC eased -2.189% to close at 6.70 a Fresh 2018 closing Low. KPLC looks overstretched to the downside.
EABL closed unchanged at 251.00 [+5.46% in 2018] and traded 237,200 shares.
KenolKobil rallied +1.57% to close at 19.40 and traded 2.121m shares. KenolKobil has surged +38.57% in 2018 on a stake-building operation by the Tanzanian Rajabaly Brothers. Also supporting the rally has been some excellent execution and the imminent listing of Vivo Energy at a price which justifies a higher valuation for similar African Businesses. Total Kenya rallied +2.189% to close at 35.25. Total Kenya has rallied an eye-popping +50.00% in 2018.
--
|
|
|
|
|