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Macro Thoughts

Home Thoughts

The lone ranger? As scouts of elephant society, older male elephants
tend to roam alone but they’re far from anti-social; research has
found bonded males have a big repertoire of "affiliative" behaviours
including putting their trunks over each other's heads & intertwining
trunks

The United States on Monday announced criminal charges against China’s
Huawei Technologies Co Ltd, escalating a fight with the world’s
biggest telecommunications equipment maker and coming days before
trade talks between Washington and Beijing.
The Justice Department charged Huawei and its chief financial officer
Meng Wanzhou with conspiring to violate U.S. sanctions on Iran by
doing business with Tehran through a subsidiary it tried to hide and
that was reported on by Reuters in 2012 and 2013.
In a separate case, the Justice Department said Huawei stole robotic
technology from carrier T-Mobile US Inc. Huawei has said that the two
companies settled their disputes in 2017.
Acting Attorney General Matthew Whitaker said the alleged criminal
activity at Huawei “goes back at least 10 years and goes all the way
to the top of the company.”

The evidence is abundant and clear that Huawei rewarded employees for
stealing technology and has been covering it up for years:

Sirloin steaks, Catena Zapata Nicolas Malbec [2014] Huawei
Technologies Co. and Wanzhou Meng

You will recall that Presidents Trump and Xi Jinping enjoyed a much
anticipated ''Truce'' Dinner at the G20 in Buenos Aires and quaffed a
Catena Zapata Nicolas Malbec [2014] wine with their sirloin steaks and
finished it all off with caramel rolled pancakes, crispy chocolate and
fresh cream, a dinner that ran over by 60 minutes and one where the
dinner Guests broke out into spontaneous applause thereafter.

"It's been 40 years, but I still remember climbing the fences of
Tehran University so I could see what was happening," recalled Majid
Heidarnik, now a teacher in Iran's holy centre of Qom.
He was among the millions who lined the streets of the Iranian capital
on February 1, 1979, hoping to catch a glimpse of their beloved
"Imam", Ayatollah Ruhollah Khomeini, as he returned from more than 14
years in exile.
Just 10 days earlier, Shah Mohammad Reza Pahlavi had fled Iran
following mass uprisings and now the country was braced for the return
of the man who had spearheaded the Islamic revolution and would soon
bring an end to 25 centuries of monarchical rule.
Caught up in the revolutionary fervour, Heidarnik would soon abandon
his computing major at university to join a seminary.
"We were there to see the one person who dared to resist and protest.
We were about to see our leader in the flesh," he told AFP.
There was excitement, but also anxiety -– would the plane carrying
Khomeini back from Paris be allowed to land, would it be shot out of
the sky by the military who were still nominally supporting the shah?
Visiting Khomeini's mausoleum in southern Tehran recently -– as he
does once a year -– 62-year-old farmer Golberar Naghipour remembered
it as a nervous time.
"We were crying out of happiness, but we were worried as well. The
country was still under the control of the shah's regime."
The Behesht-e Zahra cemetery, where many opponents of the shah were
buried, was Khomeini's first destination after his Air France plane
landed. It was there that he made a fiery speech declaring the
monarchy must finally be ended.
"I will designate the government, I will slap this (shah's) government
in the face," Khomeini declared.
An austere and charismatic cleric, Khomeini had wedded the fashionable
rhetoric of the radical left at the time -– anti-Western,
anti-colonial, oppressed versus oppressor -– with the historic imagery
of Shiite Muslim martyrdom, to build a revolutionary vision of
politicised Islam.
His mausoleum built next to the cemetery, where he was buried after
his death in June 1989, is a sprawling and magnificent building
decorated in the traditional Islamic manner.
Even now, nearly three decades after his death, which prompted the
biggest funeral in modern Iran's history, many come to visit the newly
renovated building to pay their respects.
But 40 years on, Khomeini's vision of the Islamic Republic is still a
work-in-progress for some.
"It is called the Islamic Republic, but it has yet to be realised,"
said Heidarnik.
The anniversary of the revolution comes at a difficult time, with
Iran's economy hit by the return of sanctions following US President
Donald Trump's withdrawal from the 2015 nuclear deal with world
powers.
That has added to long-standing problems of mismanagement and
corruption, which has brought criticism from all sides of the
political spectrum -– with many accusing Iran's current officials of
abandoning the ascetic example of their revolutionary founder.
"When the people see the cost of living rising, they should see that
everyone is suffering, there shouldn't be any difference (between
classes). There are some people who preach about Islamic and austere
living and yet they live like aristocrats," Heidarnik said.
For the pilgrims at Khomeini's mausoleum, it is above all his image as
a selfless and incorruptible leader that remains most powerful.
"The Imam made so many sacrifices for the country, but wanted nothing
for himself," said Maryam Yazdan-nejad, a 57-year-old housewife from
the northwestern city of Mashhad, who visits the shrine every year or
two.
"If only -- if only! -- some of the officials today had the same
nature as the Imam had," she added.
For Heidarnik, there is no question the blame lies squarely with
Iran's enemies, who he says are seeking to divert the country away
from Islam.
"Unfortunately infiltrators have penetrated, be it in the economy, the
education system or the political system," he said.
"But we were subjugated to the rule of monarchies for 2,500 years. It
has only been 40 years since the revolution -- that's nothing in
comparison.
"God willing, we will realise the Islamic Republic in its entirety."

“Revolution must be distinguished from revolt, coup d’état, palace
takeover. A coup or a palace takeover may be planned, but a
revolution—never. Its outbreak, the hour of that outbreak, takes
everyone, even those who have been striving for it, unawares. They
stand amazed at the spontaneity that appears suddenly and destroys
everything in its path. It demolishes so ruthlessly that in the end it
may annihilate the ideals that called it into being.”
― Ryszard Kapuściński, Shah of Shahs

Euro 1.1437
Dollar Index 95.68
Japan Yen 109.29
Swiss Franc 0.9916
Pound 1.3157
Aussie 0.7167
India Rupee 71.125
South Korea Won 1116.53
Brazil Real 3.7619
Egypt Pound 17.623
South Africa Rand 13.6717

While Holding PIF still holds the shares, it was left w/ little
exposure if the stock price falls; potential gains were also capped if
stock rises

Emerging Markets

Frontier Markets

The intellectual father of the new Zeitgeist that propelled Brexit, Le
Pen, the @Mov5Stelle  in Italy, Gert Wilders in the Netherlands, is
Vladimir Putin. In the Middle East, it is Putin who is calling the
shots in Aleppo, and in a quite delicious irony it looks like he has
pocketed Opec as well.

Conclusions

And now he is making a move on Africa.

Zimbabwean President Emmerson Mnangagwa is being defied by members of
his ruling party who are orchestrating a violent crackdown after
demonstrations this month despite his vow to act against abuses by the
security forces, government and military officials said.
Door-to-door raids in urban townships by police and men in military
uniform are continuing more than a week after a three-day stay-away
was called following a more than doubling of fuel prices, the people
said on the condition of anonymity. Abuses range from beatings to
rape, according to human rights organizations including the Crisis in
Zimbabwe Coalition.
The continuing crackdown signals a split in the Zimbabwe African
National Union-Patriotic Front. Mnangagwa, is trying to court
investors to rescue an economy close to collapse. Opposing him are
military and party officials who want to retain tight control after
ousting long-time ruler Robert Mugabe in late 2017 and benefit from
illicit diamond sales, access to scarce hard currency and control over
lucrative fuel imports, the people said.
“The reform agenda is being opposed by hard-line elements within
Zanu-PF and the state,” said Piers Pigou, senior consultant for
Southern Africa at the Brussels-based International Crisis Group.
“They say it’s a liberal agenda that will not provide a broad-based
solution for Zimbabweans.”
Those who are defying Mnangagwa know that he will take the blame,
either directly or because he’s failing to rein them in, the officials
said. The president’s only hope is to persuade them to accept harsh
economic reality -- or fire them, they said.
“This is a result of the division. It’s a good cop, bad cop routine,”
Pigou said. “While there may be hard-line elements, it’s his
government. He has chosen the cabinet.”

Zimbabwe said it will soon allow companies and individuals to trade
dollars electronically, as it looks to ease a crippling scarcity of
foreign exchange that’s sent the economy into meltdown.
The value of bond notes and RTGS$ have plunged, even though the
government says they should be worth the same as real dollars. Bond
notes now trade at 3.76 dollars on the black market, according to
marketwatch.co.za, a website run by financial analysts.

There are $9.3 billion of Zollars in banks compared to $200 million in
reserves, official data showed, a mis- match that creates a premium
for the U.S. dollar and fans the black market.

Political analyst, David Moore, says Zimbabwean President Emmerson
Mnangagwa’s credibility is diminishing – as tensions continue to rise
over inflation rates and a hike in fuel prices.
Violent protests erupted earlier this month following a massive hike
in fuel prices.
Economists say Zimbabwe’s inflation rate has hit 290% – the second
highest in the world after Venezuela. Inflation is being driven mostly
by the shortage of foreign currency.

Authorities say at least 30 people have died in the unrest, which
started on Dec. 19 after the government tried to raise bread prices,
while rights groups and local opposition figures say at least 45 have
been killed. Hundreds have been injured and hundreds more detained.
“The current protests represent the biggest and deepest challenge to
Bashir’s rule because they indicate that the crisis has reached a new
level,” analyst Khalid al-Tijani said.
Bashir’s critics blame him for Sudan’s marginalisation and an economic
meltdown that saw inflation soar to 72 percent by the end of 2018 and
left the country unable to pay for food imports.
“We say to the youth, this country is yours, protect it, and if it
goes up in smoke we won’t be refugees, we will die here,” he said this
month, dressed in white robes and waving his trademark cane.

President Bashir whose Prop is not a scarf but a Jig is hanging on by
his fingertips. He has managed to claw his way back into position
before and is a political Harry Houdini otherwise he would not have
lasted more than three decades but its clear these are “the last days”
or “end times.”

The southern African copper producer’s dollar debt has made a total
return of 10.3 percent since the end of December, more than any of the
other 75 nations in the Bloomberg Barclays Emerging Markets USD
Sovereign Bond Index (if you exclude the defaulted bonds of Venezuela,
which have soared on hopes of a regime change).
Its eurobonds have proved irresistible for the likes of NN Investment
Partners, which manages about $270 billion of assets from The Hague,
and London-based Merian Global Investors, which said this month they’d
been “unjustifiably beaten up.”
Yields on the government’s $1 billion of notes maturing in 2024 have
dropped almost 260 basis points to 13.37 percent. That’s helped drive
down Zambia’s spreads over U.S. Treasuries. Investors are still
showing signs of nervousness -- at 988 basis points, those spreads are
easily the highest in emerging markets among countries that aren’t in
default.

Dollar versus Rand 6 Month Chart INO 13.667
http://quotes.ino.com/charting/index.html?s=FOREX_USDZAR&v=d6&t=c&a=50&w=1

Egypt Pound versus The Dollar 3 Month Chart INO 17.6267
http://quotes.ino.com/charting/index.html?s=FOREX_USDEGP&v=d3&t=c&a=50&w=1

Buhari on Friday said a court order from the Code of Conduct Tribunal,
which is looking into the asset declaration allegations, directed him
to suspend the judge.

Lagos — His name is Jubril al Sudani, they said. The real president is
dead. A clone, an impostor imported from Sudan, has been running the
country for months.
That was the rumour that made the rounds late last year, laid to rest
only after Nigerian President Muhammadu Buhari was forced to make a
statement promising that he had, in fact, not been cloned — although,
as the conspiracy theorists noted, that is exactly what the clone
president would have said.
Considering the timing, this is expected: it is how you know general
elections approach in Africa’s biggest economy and most populous
country. With less than one month to go, such wild accusations have
become all too common, and discussions about the merits of the various
candidates are ever more heated.
Of course, none of the above matters if the election is rigged. “Our
elections don’t even come close to being free and fair,” argues Cheta
Nwanze, who heads the research desk at SBM Intelligence.
International observers have already expressed concern about the 2019
election. Previous elections have been marred by vote rigging, voter
intimidation and assaults on observers and journalists. The closer the
result — and all signs suggest that this will be a tight race — the
more serious these concerns will become.

Ghana’s central bank unexpectedly cut its benchmark interest rate to a
six-year low, bucking the worldwide trend toward tightening and
pushing the local currency close to the weakest on record.
The Bank of Ghana reduced the rate by 100 basis points to 16 percent,
Governor Ernest Addison told reporters Monday in the capital, Accra.
All eight economists surveyed by Bloomberg said the rate would be
held.
“The bank’s latest forecast shows that inflation will remain within
the target band barring any unanticipated shocks,” Addison said.
“Immediate risks to the disinflation path are well contained and the
current conditions provide scope to translate some of the gains to
macro-economic stability to the economy.”
While the inflation rate in the world’s second-biggest cocoa producer
rose for the first time in four months in December, it remained inside
the central bank’s target band of 6 percent to 10 percent for the
ninth consecutive month.
The cedi weakened 0.2 percent to 5.0075 per dollar at 11:58 a.m. in
Accra. A close at this level would be the weakest on record.

What Our Economist Says:

“The cut was earlier than expected given the risks to the cedi from
the sustained twin fiscal and current-account deficits.  We also
expected the delayed release of the rebased consumer-price index to
give greater clarity about the trajectory of inflation. Lower
transport prices should push down inflation further in the first
quarter, and this is likely to have been a contributing factor for the
decision to cut.

Key Insights

The MPC said economic growth is expected to “remain strong,” in 2019.
The International Monetary Fund sees the economy expanding 6 percent,
and the National Treasury estimates 6.1 percent.
The committee sees inflation, which was an annual 5.7 percent in
December, remaining within the target bank of 2.5 percent to 7.5
percent because of lower food prices and declining crude oil prices
internationally.
Private-sector credit grew at 2.4 percent in 2018, the lowest rate
since 2016, missing the central bank’s target of 8 percent; it’s
expected to strengthen in 2019, “with the anticipated higher economic
activity and easing credit risk,” Njoroge said.

The Key levers with regard to the Shilling are the Price of Fuel [We
have to write a cheque every month], inward Remittances [flew off the
chart last year and its not clear to me if that Bump will turn out to
be ''amnesty'' affected] and I think we underestimate the regional
''safe-haven'' status that the Kenya Shilling has earned. A move below
a 100.00 would catch a lot of People off-guard.

Nairobi All Share Bloomberg +4.82% 2019
http://www.BLOOMBERG.COM/quote/NSEASI:IND

I recall visiting a Carpet Weaver Collective somewhere in Cappadoccia
and one of the Weaver's explained to me that Knot density is the
thing. And Kenya certainly can feel like the rug with the highest knot
density which is a silk Hereke masterpiece by the Özipeks workshops,
having an incredible density of approximately 10,000 kpsi, with a
production time of about 15 years. Lets try and unpick some knots and
pull apart some threads.
Of course, what happened at the DUSIT complex was a shot across the
Bows. Don De Lillo wrote about this about Terror

''Terror's response is a narrative that has been developing over
years, only now becoming inescapable. It is our lives and minds that
are occupied now. This catastrophic event changes the way we think and
act, moment to moment, week to week, for unknown weeks and months to
come, and steely years. Our world, parts of our world, have crumbled
into theirs, which means we are living in a place of danger and rage''
“I used to think it was possible for an artist to alter the inner life
of the culture. Now bomb-makers and gunmen have taken that territory.”
― Don DeLillo, Mao II
The Truth of the Matter is more people die on the roads everyday.
Terror is a Mind Game.  The response was professional and effective.
The City moved forward. I extend my condolences to all who lost their
lives. A lot now depends on whether this was a one off or not.

The Politics which took a new Trajectory post the ''Hand-Shake'' and
always remains front, centre and frankly supersized in the scheme of
things culminated with this headline in Bloomberg [bye-lined by David
Herbling and Eric Ombok]

''Stroke of a Pen Upsets Kenyan Deputy's Presidential Ambitions''
History teaches us that incumbency has all the advantages and the
likes of the Africa Confidential are characterising it as ''Three's a
crowd'' Its a fluid political situation and a number of chess-pieces
are being moved.

Over the last few months, there has been a significant reduction in US
rate expectations. Expectations around growth have tilted lower. This
downshifting has seen the US interest curve shift significantly lower
and this in turn has boosted Frontier and SSA Sovereign debt prices
and lowered yields. For example, Kenya's 30 Year Eurobond denominated
in Dollars was close to 10% and has rallied about 100 basis points off
those levels. Therefore, from a tactical perspective it was good to
see the Treasury move with despatch to seize the opportunity. We
learnt last week that  Kenya is seeking proposals for issuance of
$2.5bn Eurobond - source  ''They want to assess whether it would be
cheaper to borrow in euros or dollars''  the source told Reuters.
Kenya also announced that it had picked Standard Bank and TDB for $1
Billion of Syndicated Loans. Thats a $3.5b call right there. Now its
obvious we are fully loaded and this is a phenomena that's not unique
to us. How we now deal with the balance sheet is key. However, a $3.5b
call now is tactically the right call, it kicks the can down the road.

The Nairobi Securities Exchange has opened 2019 bright eyed and
bushy-tailed. The All Share is +4.31% in 2019 and at a 10 week high
and the NSE20 Index +2.6% in 2019 and at a 4 month high. There has
been a flurry of activity. India's Bharti Airtel is in talks to buy
Telkom Kenya. Bharti Airtel is keen to fatten up its Africa business
ahead of an IPO. Banking is seeing some consolidation with the planned
merger between CBA and NIC and a Buy Out of Jamii Bora. Private Equity
has taken a big bite of the Kantaria's Prime Bank. Digital Banking
stays red-hot.  Safaricom, notched up one million users for its new
overdraft feature on the M-Pesa platform in just eight days, Safaricom
launched the new overdraft feature called Fuliza on Jan. 7 this year.

“We got a million (customers) by day eight and by day eight we had
lent $10 million. Now we are probably at $15 million,” CEO Bob
Collymore told Reuters in an interview.

“If you don’t have enough cash, you simply draw down from the
overdraft and you keep drawing down until you have got to your
overdraft limit, which is predetermined by an algorithm.”

I attended the East African Breweries Investor Briefing and
interviewed a very svelte and front foot CEO Andrew Cowan at the newly
minted Serena Nairobi. Buy Notes have been landing with some
regularity in my inbox of late. EABL reported a +18.256% headline
revenue gain to 41.574b and a +33.448% spike in H1 Profit before Tax.
They lifted the Interim dividend +25% and cash and cash equivalents
rocketed from 4.584b to 8.757b +91.034%. Plenty of Innovation and a
granularity around its offerings of which Uganda Waragi Pineapple is
an example but which I have yet to partake. Tanzania was also kicking
on with the Serengeti trademark at No.1 in country. Of course, they
placed a $140m bet on the Lake Economy via their Kisumu investment.
Performance will build through the second half I am sure and therefore
Fridays price surge is sustainable.