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Macro Thoughts

Home Thoughts

It invokes a word inevitably applied to Miró: “poetic,” redolent of
the magic, residual in us, of childhood rhymes, with or without
figurative elements.

Peace appears to have been given a chance in South Asia. Pakistani
Prime Minister Imran Khan, striving to play the statesman, has not
only released a captured Indian pilot but also detained several
alleged Pakistani militants.
 Still, there’s good reason to worry that Indian Prime Minister
Narendra Modi might once again ratchet up tensions against a
nuclear-armed neighbor as he approaches the most crucial election of
his political life.
And Modi’s militant nationalism, loudly amplified by Indian television
anchors, isn’t the only flammable element in a volatile situation.
India’s burgeoning military-intellectual complex also deserves the
world’s close and skeptical scrutiny.
One wing of this community consists of superannuated and clearly bored
generals, titillating hyper-patriotic television anchors and
themselves with visions of do-or-die wars and glorious victories.
Their jingoism far exceeds the capacity of the Indian military, which,
an internal report recently revealed, is encumbered with “vintage”
equipment.
Perhaps more worrying, though, are the credentialed members of what a
recent report by Brookings India identified as India’s “strategic
community.”
Though much more sober than the fire-breathing talking heads on cable
TV, they seem equally attracted to the “temptation,” as U.S. President
Dwight Eisenhower put it in his classic warning against the
military-industrial complex, of “some spectacular and costly” military
action.
Perched in privately funded think tanks, many of these connoisseurs of
“surgical strikes” did not seem in the least shocked or disturbed that
an Indian leader who has, as the Economist put it last week, “made a
career of playing with fire” was now playing with Armageddon by
launching airstrikes into Pakistan.
Rather, they echoed the Hindu nationalist consensus that India was now
finally dictating the terms of engagement with its rival -- a
triumphalism shattered the very next day when Pakistan raised its own
threshold for conflict with India by striking within Indian territory
and bringing down an Indian warplane.
Eisenhower’s fear in 1961 of vested interests acquiring “unwarranted
influence” is freshly pertinent in today’s New Delhi. With hopes
rising that India would soon be a superpower closely allied to the
U.S., as well as a strategic counter-weight to China, much Indian and
foreign money has gone into creating a luxurious ecosystem for
strategic experts and foreign-policy analysts.
There’s ample reason to fear that such an often murkily funded and
influential security establishment outside government won’t serve the
cause of democracy and peace in the Indian subcontinent.
In the U.S., a series of reports by the New York Times in 2016 alleged
that on all kinds of issues, including military sales to foreign
countries, think tanks were “pushing agendas important to corporate
donors, at times blurring the line between researchers and lobbyists.
” If intellectual dishonesty mars analysis in Washington, D.C., it can
be expected to be more pervasive in New Delhi, where the line between
paid service for corporate donors and research work is even fuzzier.
It may seem melodramatic to fear that a few well-connected
intellectual racketeers might endanger democracy and social stability.
But, America under President Donald Trump confirms that Eisenhower was
right to worry that an axis of government, corporations and
intellectuals-on-hire might skew national priorities, or that,
pathologically obsessed with an enemy, his country might degenerate
into “a community of dreadful fear and hate.”
Already by 1984, George F. Kennan, arguably America’s finest diplomat,
was lamenting that the “habit” of constantly preparing for “an
imagined war” with the Soviet Union had “risen to the status of a vast
addiction of American society.”
This habit, Kennan presciently warned, “would be difficult to
eradicate in the future,” long after the U.S.S.R. had disappeared.
In India, Hindu nationalist politicians and their sympathizers in the
media have similarly turned an imagined punitive war on Pakistan into
another vast addiction, and the military-intellectual complex
increasingly aggravates this national habit.
Focused on Islamabad’s backing for the militant insurgency in Kashmir,
they’ve successfully externalized a problem that is primarily
domestic: the Modi government’s resolve to suppress, rather than
address, Kashmiri demands for democracy and civil liberties.
Ajai Shukla was one of the very few mainstream Indian writers on
security issues to point out that “the wider story in a crisis with
such potential devastation is that the Modi government has launched a
nationwide anti-Muslim agenda that regards Muslims as unpatriotic,
Pakistan as a cunning and implacable foe and Kashmiri separatists as
its willing tools.”
Thus, Shukla argues, Kashmiris protesting against Indian brutality
have come to be widely seen as “Muslim traitors, rather than the
manifestation of a political problem that has to be discussed and
resolved, not militarily crushed.”
Zealously pushing a military solution to a political problem, India’s
political, media and security establishment suffered a debacle last
month.
They ought to “learn,” as Eisenhower exhorted, “how to compose
differences not with arms, but with intellect and decent purpose” --
above all in Kashmir, which is the key, now more than ever, to the
health of civil society in both India and Pakistan.

The Indian Sub-continent entered unprecedented Territory, we witnessed
the first  tit-for-tat air strikes between India and Pakistan since
the 1971 war. The First Casualty in any War is the Truth and when I
dialled up Indian and Pakistan TV, it was mind boggling, the decibel
level was at 11. Planes were shot down, an Indian Air Force Pilot Wing
Commander Abhinandan who sports the most compelling handle-bar
moustache I have ever seen was captured and then released. The Indian
Army said they killed hundreds of Militants in their attack but has
provided no evidence and Pakistan is suing the Indians for
''eco-terrorism'' Of course, Narendra Modi is up against an Election
and his entire political raison d'être has been built on the basis of
Make India [or is Hindutva?] great again. He cannot back down or it
will be a Jimmy Carter type moment. On the other side, we have a
neophyte Prime Minister Imran Khan whom I must admit has displayed a
very deft touch.

The US has sent a pair of B-52 strategic bombers on two separate
missions in close proximity to China, in an action that is likely to
draw criticism from Beijing, which is currently locked in a trade
dispute with Washington.
Two US Air Force B-52H Stratofortress long-range bombers, based in
Guam, participated in “routine training missions” on Monday by flying
through the disputed airspaces over the South and East China Seas.
As one bomber “conducted training in the vicinity of the South China
Sea,” the other practiced off the coast of Japan in “coordination with
the US Navy and alongside our Japanese air force,” US Pacific Air
Forces said in a statement.
The Pacific Command’s so-called 'Continuous Bomber Presence Missions'
are designed to ensure the air force’s rapid global strike capability
and act as a means of deterrence.
China views such overflights as clear provocations and as a show of
force aimed at challenging Beijing's sovereignty in the region.
The B-52 maneuvers could further inflame tensions with China at the
height of a bitter trade dispute where the ongoing negotiations have
yet to bear any concrete results.

The SNP's Deidre Brock asks the PM why a reported visit to Downing
Street by the former Cambridge Analytica boss did not feature in
government transparency data.

An infomediary works as a personal agent on behalf of consumers to
help them take control over information gathered about them. The
concept of the infomediary was first suggested by John Hagel III in
the book Net Worth.
However, Facebook has been hawking this information as if it were an
intermediary. This is its ‘’trust gap’’. That gap is set to widen
further. Facebook is facing an existentialist crisis.

Information warfare will not be couched in rationale of geopolitics,
the author suggests, but will be "spawned" - like any Hollywood drama
- out of raw emotions. "Hatred, jealousy, and greed - emotions, rather
than strategy - will set the terms of [information warfare] struggles"

I am sure Nicholas Maduro must be asking himself, what did it take to
get Chairman Kim a seat at Trump's dinner table. And the Point is
this, it took nuclear Weapons. And the Choice is binary, Dinner
''Grilled Sirloin with Pear Kimchi Marinated tender sirloin grilled
with sauce, served with kimchi fermented inside a pear'' or death ask
Muammar and Saddam.

Soon 5G mobile internet will be everywhere.
Huawei is a pioneer but is accused of being a gateway for China to spy
on Western nations.
Is the firm guilty? Or the victim of unfair rumours?

The African Union headquarters in Addis Ababa is a shiny
spaceship-like structure that glistens in the afternoon sun. With its
accompanying skyscraper, it stands out in the Ethiopian capital.
Greetings in Mandarin welcome visitors as they enter the lifts, and
the plastic palm trees bear the logos of the China Development Bank.
Everywhere, there are small indications that the building was made
possible through Chinese financial aid.
In 2006, Beijing pledged $200m to build the headquarters. Completed in
2012, everything was custom-built by the Chinese - including a
state-of-the-art computer system.
For several years, the building stood as a proud testament to
ever-closer ties between China and Africa. Trade has rocketed over the
past two decades, growing by about 20% a year, according to
international consultancy McKinsey. China is Africa’s largest economic
partner.
But in January 2018, French newspaper Le Monde Afrique dropped a bombshell.
It reported that the AU’s computer system had been compromised.
The newspaper, citing multiple sources, said that for five years,
between the hours of midnight and 0200, data from the AU’s servers was
transferred more than 8,000km away - to servers in Shanghai.
This had allegedly continued for 1,825 days in a row.
Le Monde Afrique reported that it had come to light in 2017, when a
conscientious scientist working for the AU recorded an unusually high
amount of computer activity on its servers during hours when the
offices would have been deserted.
It was also reported that microphones and listening devices had been
discovered in the walls and desks of the building, following a sweep
for bugs.
The reaction was swift.
Both AU and Chinese officials publicly condemned the report as false
and sensationalist - an attempt by the Western media to damage
relations between a more assertive China and an increasingly
independent Africa.
But Le Monde Afrique said that AU officials had privately expressed
concerns about just how dependent they were on Chinese aid - and what
the consequences of that could be.
In the midst of all of this, one fact remained largely unreported.
The main supplier of information and communication technology systems
to the AU headquarters was China’s best-known telecoms equipment
company - Huawei.
Huawei “served as the key ICT provider inside the AU’s headquarters”,
said Danielle Cave of the Australian Strategic Policy Institute, in a
review of the alleged incident.
“This doesn’t mean the company was complicit in any theft of data.
But… it’s hard to see how - given Huawei’s role in providing equipment
and key ICT services to the AU building and specifically to the AU’s
data centre - the company could have remained completely unaware of
the apparent theft of large amounts of data, every day, for five
years.”
“When I first started out 30 years ago… we didn’t really have any
telephones. The only phones we had were those hand-cranked phones that
you see in old World War II films. We were pretty undeveloped then.”
A few kilometres away in Dongguan, Huawei’s latest campus is even more
eye-catching. The site - designed to accommodate the company’s 25,000
R&D staff - comprises 12 “villages”, each of which recreates the
architecture of a different European city, among them Paris, Bologna
and Granada.
It’s as if Silicon Valley had been re-imagined by Walt Disney.
Sometime in the early 90s, Huawei won a government contract to provide
telecoms equipment for the People’s Liberation Army.
By 1995, the company was generating sales of around US$220,000, mainly
from selling to the rural market.
The following year Huawei was given the status of a Chinese “national
champion”. In practice, this meant the government closed the market to
foreign competition.
It was 1 December 2018. US President Donald Trump and China’s
President Xi Jinping were dining on grilled sirloin followed by
caramel rolled pancakes at the G20 summit in Buenos Aires.
They had a lot to discuss. The US and China were in the middle of a
trade war - imposing tariffs on each other’s goods - and growth
forecasts for both countries had recently been cut as a result. This
was adding to the fear of a slowing global economy.
In the event, the two leaders agreed a truce in the trade war, with
Donald Trump tweeting that “Relations with China have taken a BIG leap
forward!”
But thousands of kilometres north in Canada, an arrest was taking
place that would throw doubt on this rapprochement.
Meng Wanzhou, Huawei’s chief financial officer and Ren Zhengfei’s
eldest daughter, had been detained by Canadian officials while
transferring between flights at Vancouver airport.
The arrest had come at the request of the US, who accused her of
breaking sanctions against Iran.
US Secretary of State Mike Pompeo recently cautioned against Huawei,
saying, “If a country adopts this and puts it in some of their
critical information systems, we won’t be able to share information
with them.”
Australia went a step further last year, and banned equipment
suppliers “likely to be subject to extrajudicial directions from a
foreign government”.
“There’s no way the US can crush us,” he says. “The world needs Huawei
because we are more advanced. Even if they persuade more countries not
to use us temporarily we could just scale things down a bit.”

Presidents Trump and Xi Jinping enjoyed a ‘’truce’’ dinner at the G20
in Buenos Aires, where dinner Guests broke out into spontaneous
applause thereafter.
At the same moment, Canadian authorities were making the arrest of
Wanzhou Meng, chief financial officer of Huawei Technologies at the
request of US Authorities. The US is seeking extradition of Wan- zhou
Meng after convincing Canada to arrest her. Canada confirmed she was
in custody shortly after the Globe and Mail reported she had been
arrested in connection with violating sanctions against Iran. Meng is
the daughter of the founder of Huawei, a national champion in China.
Bloomberg said ‘’While the US routinely asks allies to extradite drug
lords, arms dealers and other criminals, arresting a major Chinese
executive like this is rare -- if not unprecedented’’.
“This is sending a signal that there is a new game” said Dennis Wilder
An important market for Huawei has been Africa. In fact, Huawei is the
bloodstream of Africa’s telecom infrastructure. How this plays out in
Africa is now an ‘’above the radar’’ issue

The World is just so fluid and fast moving and in fact the velocity
makes me plain dizzy. Lets start with what CNN's Stephen Collinson
headlined Trump's Hanoi Hail Mary failed to score. This was of course
the big Set Piece in Hanoi. Before Trump walked away, Trump and Kim
did manage to dine together and partook of Shrimp Cocktail, Chilled
shrimp, romaine leaves, thousand island dressing, diced avocado, fresh
lemon and herbs, Grilled Sirloin with Pear Kimchi Marinated tender
sirloin grilled with sauce, served with kimchi fermented inside a
pear. Dessert was a Hot runny centered chocolate cake, chocolate
crumble, with fresh berries and vanilla ice cream all washed down with
Dried Persimmon Punch. The Gastronomy of these Big Set-Piece
Geopolitical Events is unputdownable as are the Optics.

I am sure Nicholas Maduro must be asking himself, what did it take to
get Chairman Kim a seat at Trump's dinner table. And the Point is
this, it took nuclear Weapons. And the Choice is binary, Dinner
''Grilled Sirloin with Pear Kimchi Marinated tender sirloin grilled
with sauce, served with kimchi fermented inside a pear'' or death ask
Muammar and Saddam.

Kim was surely counting on President Trump being a soft touch because
after all at the very moment they were sitting down for a chat,
Michael Cohen [The erstwhile Consiglieri] was opening with the
following  in front of the House Oversight Committee

Euro 1.1303
Dollar Index 96.90
Japan Yen 111.75
Swiss Franc 1.0048
Pound 1.3172
Aussie 0.7045
India Rupee 69.9725
South Korea Won 1127.73
Brazil Real 3.8401
Egypt Pound 17.469
South Africa Rand 14.2599

Vancouver, which has seen significant new taxes and regulations
implemented in recent years, compounded most recently by hikes to
foreign buyer tax and stamp duty in the early part of last year, was
unsurprisingly our weakest prime market in 2018. We expect to see
prime prices stabilise in 2019 as recent price falls mean local buyers
will identify buying opportunities.

Canada will face "grave consequences" [Xinhua: (Ch.) 严重后果] if it does
not immediately release Meng Wanzhou. The Vancouver Real Estate market
which has boomed for decades on the back of Chinese demand looks
horribly exposed. The temptation to ''mug'' the handsome Justin
Trudeau is something the Crown Prince of Saudi Arabia could not resist
and it seems Xi is experiencing the same impulse.

Single malt whisky increasingly being seen as an investment of passion
by high-net-worth collectors particularly Asia.
The Knight Frank Rare Whisky 100 index, which tracks auction sales in
the UK and was created for us by Rare Whisky 101, rose 40% in value
during 2018 and has increased by almost 600% over the past 10 years.
A single bottle of The Macallan sold for over £1 million at auction in
London last year highlighting how much collectors are prepared to pay
for the rarest whiskies.
Sales of Scotch whisky to India, China and Singapore rose by 44%, 35%
and 24% respectively in the first half of 2018 according to the Scotch
Whisky Association, with single malts totalling almost 30% of total
exports.

Emerging Markets

Frontier Markets

It is authority that provokes revolution.  is occurs when a feeling of
impunity takes root among the elite: We are allowed anything, we can
do anything.  is is a delusion, but it rests on a certain rational
foundation. For a while it does indeed look as if they can do whatever
they want. Scandal after scandal and illegality after illegality go
unpunished.  e people remain silent... They are afraid and do not yet
feel their own strength. At the same time, they keep a detailed
account of the wrongs, which at one particular moment are to be added
up.  The choice of that moment is the greatest riddle of history -
Ryszard Kapuściński, Shah of Shahs.

The government has put in place measures to liberalize the currency,
curb spending and improve the management of state-owned companies he
said in an interview with Bloomberg TV in Washington. Last month the
country scrapped its insistence that local securities known as bond
notes and their electronic equivalent trade at par with the dollar and
allowed them to be exchanged in an inter-bank market that has seen the
rate oscillate at about 2.5 to the dollar.
“Zimbabwe is certainly on its way to a better place on the fiscal
front because we are managing to walk the talk,” he said in an upbeat
interview. “Zimbabwe is the cheapest buy in Africa and it has just
gotten cheaper. I think we are back in the game.”
While Zimbabwe’s finances have improved, with the government recording
an average monthly budget surplus of around $100 million for the last
four months, according to Ncube, that isn’t evident on the street. In
January the government more than doubled fuel prices, sparking the
worst urban riots since 1995, and state teachers and doctors went on
strike over pay. In addition to fuel, staples like bread are also in
short supply.
Inflation, which peaked at an estimated 500 billion percent in 2008,
has risen sharply to 56.9 percent in January. In reality the price
growth is probably significantly faster, according to Steve H. Hanke,
a professor of applied economics at Johns Hopkins University in
Baltimore. That’s because most commerce takes place at the
black-market exchange rate, which is currently between 3.41 and 3.55
local currency units to the dollar.

Zimbabwe on Wednesday said the extension of U.S. sanctions on its
government was regrettable but Harare would keep talking to Washington
and the European Union to remove the measures it says have stifled its
economy.
According to U.S. officials, there are 141 entities and individuals in
Zimbabwe, including Mnangagwa and Mugabe, under U.S. sanctions.
The government says the sanctions law bars U.S. officials from voting
for Zimbabwe to access funds from foreign lenders like the
International Monetary Fund and World Bank, hobbling its economy,
which is gripped by a severe shortage of dollars.
With high inflation and a shortage of cash in circulation eroding
ordinary citizens’ spending power, the fragile state of the economy is
at the heart of the country’s political troubles.
Manzou, however, said the government was not giving up on mending ties
with the West and had last month started informal dialogue with the EU
in Harare, a precursor to formal talks that could see the country
receive budgetary support in future.
The EU has retained sanctions on Mugabe, his wife and arms supplier
Zimbabwe Defence Industries as well as an arms embargo on Zimbabwe,
which Manzou blamed on “hawks within the EU bloc,” whom he did not
name.

It's the first Washington lobbyist to be hired by Zimbabwe in a decade.

Dollar versus Rand Chart INO 14.261
https://quotes.ino.com/charting/index.html?s=FOREX_USDZAR&t=f&a=&w=&v=d12

Egypt Pound versus The Dollar 3 Month Chart INO 17.47
http://quotes.ino.com/charting/index.html?s=FOREX_USDEGP&v=d3&t=c&a=50&w=1

Egypt EGX30 Bloomberg
http://www.bloomberg.com/quote/CASE:IND

Nigeria All Share Bloomberg +2.20% 2019
http://www.bloomberg.com/quote/NGSEINDX:IND

Ghana Stock Exchange Composite Index Bloomberg -2.37% 2019
http://www.bloomberg.com/quote/GGSECI:IND

(Reuters) - African fuel retailer Vivo Energy Plc reported a 2 percent
rise in 2018 gross profit on higher volumes and forecast low to mid
double-digit percentage volume growth for the current year despite
tough market conditions in Morocco.
The company, which distributes and markets Shell-branded fuels and
lubricants in Africa, said gross profit rose to $624 million last year
from $614 million a year earlier.
Vivo energy, a result of a partnership between energy trader Vitol
Group and Africa-focused private equity firm Helios Investment, said
adjusted core earnings rose by 6 percent to $400 million on volumes up
4 percent at 9.351 billion litres of fuel.
That helped offset supply disruptions and thinner retail margins in
its largest market, Morocco.
The company expects volumes to hit around 10 billion litres this year
following the completion of its acquisition of a subsidiary of South
African retail firm Engen Ltd on March 1.
That expanded its network by 230 stations in 8 new countries outside
South Africa.
Last year, Vivo’s chief executive said the firm still eyed entry into
the Nigerian and South African markets.
Its gross cash unit margin last year dipped 1 percent to $74 per
thousand litres, which Vivo Energy blamed on consumer activism in
Morocco.
It forecast a gross cash unit margin in the high $60s per thousand
litres for 2019.
The FTSE-250 company, which also has a secondary listing on the
Johannesburg Stock Exchange, added that the core earnings contribution
from the Moroccan retail unit was lower in 2018 at 18 percent versus
29 percent in 2017, and that it expected the metric to fall further
this year.
“Pressure on Moroccan retail pushed down our unit margin there by 4
percent starting towards the middle of the third quarter. There is
speculation of re-regulation but we’re assuming that does not happen,”
Chief Financial Officer Johan Depraetere said on a call.
Vivo Energy on Wednesday stuck to its plan to open between 80 to 100
new retail service stations across 23 countries in which it operates.
It said its board had recommended a final dividend of 1.3 dollar cents
per share, bringing the full year dividend to 1.9 dollar cents per
share or about 30 percent of attributable net income.

After ending 2018 as the biggest gainers among more than 70 countries
in the Bloomberg Barclays Emerging Markets USD Sovereign Bond Index,
they’re at the bottom so far this year. The $727 million of securities
due in 2023 have lost 6.9 percent in price terms, which compares with
the average return in emerging markets of 3.3 percent.

Mozambique’s attorney-general started a lawsuit in London against
Credit Suisse and other companies involved with the loans. The
impoverished southern African nation wants the guarantee on one of
them -- worth $622 million to a firm named ProIndicus -- to be
canceled. Credit Suisse, which arranged the Ematum and ProIndicus
debt, denies wrongdoing and says the three bankers deceived it.

The saga has dampened investors appetite for the bonds, the price of
which has dropped to about 85 cents on the dollar from 93 cents at the
beginning of 2019. It’s also seemingly stalled the restructuring.
Holders had hoped by now to finalize a swap into a longer-dated
Eurobond maturing in 2033 and another instrument giving them a share
of Mozambique’s future revenue from exports of liquefied natural gas.
As long at the tuna scandal drags on, their hopes may be be dashed.

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 do- llars’’ 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.

Meanwhile the Kenya Shilling crossed the psychologically important
100.00 mark last week. We underestimate the regional safe haven status
of the currency and I have noticed that these downside moves in the
Tanzanian Shilling are being mirrored by the strengthening of the
Kenya Shilling. The GOK appears to be inclining towards heavier
issuance in the Kenya Shilling with a tax Free Infrastructure Bond
slated for sale. If this is the thinking, then I expect the Shilling
to strengthen further as Kenya taps offshore funds. The Charts signal
a move as far as 92.00 but that might be too bold.

Nairobi All Share Bloomberg +10.09% 2019
http://www.BLOOMBERG.COM/quote/NSEASI:IND

Flights resume after strike at Kenya's main airport grounds thousands
of passengers  Reuters

India has withdrawn MFN status from Pakistan and therefore, Pakis- tan
will surely be a bigger buyer of Kenyan tea.