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Wednesday 14th of August 2019 |
Afternoon, Africa |
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Macro Thoughts |
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The Feedback Loop Phenomenon Africa |
Last Monday I wrote ''The most important currency to watch right now is the USDCNH [and] It could slice through 7.00 like a hot knife through Butter. The Offshore USDCNH market popped through 7 on Monday [sending a shiver through Global markets - The Markets emit signals and the Signal the market was emitting was that there was a precise correlation coefficient between a weaker Yuan and weaker S&P 500 Futures] and closed on Friday at 7.0985. On Thursday, China set its yuan fixing [onshore] weaker than 7 for the first time since 2008. President Trump finally pulled the Trigger on citing China as a currency Manipulator. ''We're in that bizarro world where you can be a currency manipulator if you fail to manipulate your currency'' tweeted @TonyFratto It is clear that the Chinese have been keeping the Renminbi [Yuan] artificially high. George Magnus writing in Bloomberg's Quint China allowing the yuan to slide below 7 to the dollar is a watershed moment for currency markets that's symbolically equivalent to the U.S. and other countries abandoning the gold standard in the interwar period, or the collapse of the postwar Bretton Woods system of fixed exchange rates four decades ago. The implications for the global economy are equally significant. The world’s major currencies aren’t tethered in the way they were in those periods, but gold and Bretton Woods both served as anchors for the world’s monetary system, and their demise reflected the economic and political disarray of their times. Today, the yuan is semi-pegged to the U.S. dollar. The arrangement serves as an anchor for China’s financial system, now the world’s largest by assets; for many currency systems in Asia and around the world; and for U.S.-China economic and financial relations. If that mainstay ruptures, it’s liable to set off chain reactions inside and outside China. That’s why the loosening in currency policy by the People’s Bank of China this week, while it may seem unremarkable for most people, is an important development. Late last Year, the View was “This is all on Xi’s shoulders,” said Trey McArver, co-founder of Beijing-based research firm Trivium China. “Xi has personally said that he would handle relations with the United States and at this point, he has failed. Those relations are spiraling out of control.” [Bloomberg] What is clear is that Xi Jinping has repelled the US Advance and this past week's Yuan Price Action was a message delivered with finesse and subtlety and whose import cannot be ignored. Given that neither President Trump nor Xi Jinping have it seems any desire to back up, the risks are skewed as follows. We should expect more volatility in the Feedback Loop that was characterised by Bloomberg Businessweek thus The chaos cycle -Powell speaks -Trump tweets -China reacts -Markets freak The Point is this the Yuan is now the Catalyst and China has signalled it will be a shock absorber. Xi Jinping was also signalling he had control of the Console. The direction of Travel for the Chinese currency is therefore lower. The Yen and the Swiss franc considered safe havens in troubled times have been in demand and Sterling was described as ''drinking at the last chance saloon'' and closed on Friday with its its nose just in front of 1.2000. Gold [safe haven] crossed $1,500.00 for the first time since April 2013. G7 Sovereign Bonds tilted further and deeper into negative Territory. So this Bid for Safe-haven assets has intensified and a weaker Yuan will only intensify this impulse as it courses through the veins of the Foreign Exchange markets. China has exerted the Power of Pull over a vast swathe of the World over the last two decades. We can call it the the China, Asia, EM and Frontier markets Feedback loop. This Feedback Loop has been largely a positive one for the last two decades. With the Yuan now in retreat [and in a precise response to Trump], this will surely exert serious downside pressure on those countries in the Feedback Loop. To wit, Emerging market stocks closed down for 11 days running , 12 being an all-time record which was narrowly missed. The Purest Proxy for the China, Asia, EM and Frontier markets Feedback loop Phenomenon is the South African Rand aka the ZAR. The rand was down 0.4% to 15.1121 per dollar by 12:05 p.m. in Johannesburg, its weakest level on a closing basis since Sept. 2018. The rand is also the most volatile currency in the world, with the one-week implied volatility climbing a fourth day. The Rand is at risk of a further asymmetric downside move.
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Is it possible prosecutors have lost track of Ghislaine Maxwell @VanityFair Law & Politics |
Those who know her say that it’s possible she is as much of a Houdini as Epstein. Both of them liked having secrets, and the way those secrets kept people off balance. “Jeffrey always wanted to give the impression that he was an international man of mystery—‘I control everyone and everything, I collect people, I own people, I can damage people,’” says an ex-girlfriend. The nature of the relationship between Epstein and Maxwell, the favorite daughter of embezzling press baron Robert Maxwell, who died when he fell or was pushed from his yacht, the Lady Ghislaine, is not well known. Multiple victims claim she was both part of the sex trafficking ring, often bringing girls to Epstein, and a sexual participant. But Epstein told of-age women he courted that Maxwell was a former girlfriend fallen on hard times, and that he had taken it upon himself to maintain her position in society. “Ghislaine floated in and out of the house with the keys, and even though Jeffrey told me they didn’t have a sexual relationship, she’d drop under her breath that she was sleeping in his bed from time to time,” says an ex-girlfriend. Another woman in Maxwell’s orbit says she used to joke about keeping herself rail thin because Epstein liked thin girls. Maxwell, whose father was Jewish, liked to shock. “She said, ‘I do it the way Nazis did it with the Jews, the Auschwitz diet. I just don’t eat.’” On the weekends in the 1990s, Maxwell would have her Rollerblades FedExed to Epstein’s island in the Caribbean, and said she got her helicopter’s license so she could transport anyone she liked without pilots knowing who they were. Maxwell also said the island had been completely wired for video; the friend thought that she and Epstein were videotaping everyone on the island as an insurance policy, as blackmail. A source close to Maxwell says she spoke glibly and confidently about getting girls to sexually service Epstein, saying this was simply what he wanted, and describing the way she’d drive around to spas and trailer parks in Florida to recruit them. She would claim she had a phone job for them, “and you’ll make lots of money, meet everyone, and I’ll change your life.” The source continues, “Ghislaine was in love with Jeffrey the way she was in love with her father. She always thought if she just did one more thing for him, to please him, he would marry her.”
Maxwell had one other thing to tell this woman: “When I asked what she thought of the underage girls, she looked at me and said, ‘they’re nothing, these girls. They are trash.’”
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Ebola Bond Pays Investors Millions While Congo Battles Outbreak @business. Africa |
A new way of financing the fight against global diseases lured investors with annual returns of more than 11%. The deadly Ebola outbreak in Africa is highlighting shortcomings of so-called pandemic bonds in halting contagions. After the worst Ebola outbreak on record, the World Bank two years ago began selling the high-yielding securities, modeling them on catastrophe bonds that pay out in response to insurance claims for events like hurricanes. The pandemic bonds, the first ever, are triggered by patterns in deaths from infectious diseases. While the $320 million sale was hailed as a way to fight disease with finance, the funds are locked up by an arcane formula -- one that may rarely be satisfied by actual events. Bondholders are collecting rich interest payments even as the Democratic Republic of Congo is struggling to arrest an Ebola virus outbreak that’s killed more than 1,800 people the past year, and threatens to spill into neighboring nations. “It was a lot of hype,” said Olga Jonas, a senior fellow at the Harvard Global Health Institute in Cambridge, Massachusetts, who was previously the World Bank’s economist coordinating avian and pandemic influenza. “They wanted to announce a new initiative that would impress the world.” Mukesh Chawla, the World Bank’s senior adviser for pandemic financing and the facility’s coordinator, defended the bonds and explained they are part of an innovative financing mechanism designed to provide early, rapid funding to combat major disease outbreaks. It helps fill a gap after the initial outbreak and before large-scale humanitarian relief assistance can be mobilized, he said. The World Bank sold the bonds, due July 2020, as part of an overall effort, called the Pandemic Emergency Financing Facility, to aid countries in the early stages of a global contagion diseases like SARS, bird flu and Ebola The issue was a bondholder’s dream; with U.S. Treasury yields near record lows, it offers a return found only in shaky junk-rated bonds, sold from the best credit in the world and with a payout formula that was hard to trigger. The transaction was 200% oversubscribed, according to the World Bank. While other funds from the facility flow to relief organizations relatively easily -- after as few as 30 Ebola deaths in one country -- triggering its $425 million insurance fund is more complicated. A final arbiter, Boston-based AIR Worldwide Corp., scours WHO’s reports to determine whether the outbreak fulfills requirements for the payout. The premiums for the bonds -- one of 11.5%, the other 6.9% -- cost about $36 million a year, paid by donor countries including Germany and Japan, Chawla said. It’s a relatively low price in the market for catastrophe bonds, he said. Catastrophe bonds pay some of the highest coupons in the fixed-income world, and mostly attract specialist fund managers. Investors demand substantial yields to compensate for the risky and unpredictable nature of disasters. Losses are typically triggered by insurance claims, but the World Bank’s bond requires meeting a range of conditions. Those conditions, such as the requirement for deaths in two countries, protect the pandemic insurance fund from inappropriate use, said Andre Rzym, a portfolio manager at Man AHL, which oversees $29.9 billion. The Congo’s Ebola epidemic is driven by non-medical issues that may not lead to global spread, he said. For example, a $95 million tranche insuring against an Ebola virus outbreak pays investors more than $1 million each month. For the funds to flow to Congo, the disease must cause at least 20 deaths in at least one other country within a specified time window. Deaths must also increase at a minimum rate during this period, shown by a formula that looks like this While Ebola continues to spread, just three infections have been confirmed in a neighboring country, all traced back to Congo. The example suggests that the bond’s conditions make it unlikely that the insurance funds would become available early, when they would do the most good, said Andrew Farlow, an economist at the University of Oxford who studies pandemics.
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Mobile Phones Are Replacing Bank Accounts in Africa @BBGAfrica Africa |
It doesn’t look like the hub of an online bank. But that’s what the yellow and blue metal kiosk becomes when Albert Agane locks himself behind the metal bars every day at 6 a.m. From his perch along a dusty suburban thoroughfare in Accra, the 28-year-old helps fellow Ghanaians withdraw or deposit cash for accounts they operate from their mobile phones. All they need do is text. Mobile money is the fastest-growing source of income for wireless-network operators like MTN Group Ltd. and Vodafone Group Plc’s Safaricom unit, outpacing data since many Africans don’t have the latest smartphones. They need agents like Agane because ATMs and bank branches are out of reach, or too costly. “In a village, where there are no banks, you can go to an agent and transact,” said Agane, who earns a commission of about 1 percent for moving as much as 20,000 cedis ($3,700) a day. “Once people have phones there’s no need for a bank account.” The service has become an indispensable part of how Africa’s 1.2 billion people live, from buying funeral cover to borrowing money. The number of registered users in Ghana soared 11-fold between 2013 and 2017, International Monetary Fund data shows. Across the continent in Kenya, where it was pioneered, the value of such transactions amounts to almost half of gross domestic product, according to the World Bank. Sub-Saharan Africa has more mobile-money accounts than anywhere else in the world with about 396 million registered users at the end of 2018, a 14% increase from a year earlier, according to the GSM Association. As it catches on around the world, South Asia saw 29% growth in 2018, and it was 38% for East Asia and the Pacific. “There are a lot of partnership opportunities with immense revenue potential for both mobile-network operators and banks,” said Patrick Quantson, head of digital transformation at the Accra-based unit of Standard Bank Group Ltd., Africa’s largest lender. “The mass appeal of mobile-money services and the mode of delivery also presents an opportunity to scale financial products to all market segments, at incredibly lower costs.” It’s easy to see why Agane—one of 182,000 mobile-money agents—is busier than the ATMs around Ghana’s capital city. There are more than 1,740 such outlets per 100,000 people in the country, compared with only 11.7 ATMs and 8.7 bank branches, the IMF data show. “We’ve seen that people in the informal sector, who would have kept their money under pillows, move into mobile money,” said Eli Hini, general manager for mobile financial services at MTN Ghana, which controls about 78% of the active-customer market. “Now, when there are floods people don’t lose their money. They’d rather get interest paid on it.” Banks don’t lose out because the mobile-phone companies park deposits with them, giving them cheaper access to funding. MTN and Sanlam Ltd., Africa’s largest insurer, last month announced that the continent’s biggest wireless network operator will offer funeral and other life-cover products through its digital channels spanning 237 million subscribers in 21 markets. Vodafone’s Johannesburg-based Vodacom Group last year bought a stake in Safaricom, based in Nairobi, from its parent to gain access to its M-Pesa money-transfer service, helping to double earnings from financial services. Vodacom last year made 11 billion transactions worth 2 trillion rand ($134 billion) to 36 million customers. The potential stretches to Nigeria, Ethiopia and Egypt, where reforms could add 110 million mobile-money accounts in the next five years, the GSM Association said in February. There’s more to come, said Martison Obeng-Agyei, who heads Vodafone Cash in Accra. There were about 31 million mobile-voice subscriptions in the country of 29 million people, and 12.1 million active mobile-money accounts at the end of 2017, from just 345,400 five years ago, Bank of Ghana data show. “There’s huge prospects,” he said. “One of the things that was lacking in our financial system was the ability to move funds around. Businesses have been established because of mobile money.” While Agane hasn’t been robbed in his four years as an agent, he stays alert. A company comes around to exchange hard cash for electronic money to lower the chances of being targeted, like a vendor Agane heard of across town, who was attacked with a cutlass.
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The Feedback Loop Phenomenon Africa |
China has exerted the Power of Pull over a vast swathe of the World over the last two decades. We can call it the the China, Asia, EM and Frontier markets Feedback loop. This Feedback Loop has been largely a positive one for the last two decades. With the Yuan now in retreat [and in a precise response to Trump], this will surely exert serious downside pressure on those countries in the Feedback Loop.
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.@MoodysInvSvc's rates @_Helios Sh5 billion college hostels note issue @BD_Africa Africa |
Global ratings agency Moody’s has offered a stable rating for a Sh5 billion medium-term note set for issue by property developer Acorn Group and London-based private equity fund Helios to fund construction of university hostel units in Nairobi. Moody’s local currency rating of B1 Stable for the note is a rung higher than Kenya’s sovereign rating of B2 Stable, due to a partial guarantee being made to investors through GuarantCo. Acorn and Helios target is to build up to 3,800 university hostel units in Nairobi at a cost of about Sh7.4 billion. They have already put up more than 1,000 units in Ruaraka, Jogoo Road and Parklands under the Qwetu brand. "The Acorn student housing transaction is an important milestone in the development of the local capital markets for private financing of infrastructure in Kenya," said Moody's vice president and senior credit officer Christopher Bredholt in a statement. "The partial guarantee provided by GuarantCo enhances noteholder recovery and supports a rating above Kenya's B2 sovereign bond rating". The partial guarantee that has aided the rating will see bondholders recover up to 50 percent of their principal and interest in case of a default.
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