Wednesday, 31 December 2008

Silk Invest Ltd acquires a majority interest in Danfonds Frontier Funds SPC

Silk Invest Ltd, a specialist asset management firm regulated by the FSA, has acquired Danfonds Frontier Fund SPC, a Cayman based hedge fund, in an all equity deal.

Danfonds Frontier Fund SPC will be renamed Silk Invest Frontier Fund SPC and Danfonds Investment Management (Cayman) Limited will be renamed Silk Invest (Cayman) Limited.

Zambia to get S&P rating

Zambia will get its first credit rating from Standard & Poors in 2009. A sovereign rating is long overdue. Zambia could possibly get a B/B+ credit. It has had good economic growth, modest budget deficits and now has low debt. Its political history, with its Presidential elections and volatile exchange rate will probably work against it.

Asian Frontier Markets 2009 - Hong kong

Daniel Broby, Chief Investment Officer of Silk Invest, will speak at the Asian Frontier Markets 2009 - Hong kong.

5 March 2009 - Day 1
Macro view on Asian Financial Liberalization
Understanding Vietnam’s Market Fluctuation
Frontier Market in the context of Global Financial Crisis
Panoramic view on Cambodian Market
Investment Strategies in Frontier Market
Mitigating Idiosyncratic Risk in Frontier Market
Encouraging better investments in Bangladesh Market

6 March 2009 - Day 2
Positive positioning: Asian Frontier Markets in attracting Foreign Investors
Exploring the potential of Capital market on pre-emerging countries
Evolution Hedge Funds in Frontier Market
Kazakhstan: Leading Central Asia market
Most preferred Asset Class in Frontier Market by Mainstream Investors
Forecasting Asian Frontier Market
Lessons Learned: Investment Strategies in African Frontier Markets

Tuesday, 30 December 2008

Unity Bank

Unity Bank Plc and Shenzhen Energy are looking to Nigeria's power industry and discussing a potential JV. Shenzhen Energy Group has strong expertise in gas-turbine powered plants. Unity Bank has already assisted Shezhen Energy Group to secured a site in Geregu, near Ajaokuta in Kogi State, to build a power plant.

Sunday, 28 December 2008

Soveriegn wealth funds rumours

Shares in Qatar, Oman and Saudi Arabia all rose sharply on rumors local soveriegn wealth funds intend to buy shares in local companies. Oman Telecommunications and Saudi Basic Industries Corpóration were the biggest benefitiaries of the rumours.

Bahrain real estate market

The Bahrain real estate market is not in as bad shape as the UAE. Buyers do not want to commit right now and the market is in mild decline. That said, the majority of homes in the Kingdom have been bought by owner-occupiers and speculator activity has been restrained, although it does exist. One aspect that has helped the Bahrain market so far is he presence of the U.S. Navy’s Fifth Fleet. Despite falling house prices, there is a shortage of housing and that makes the long term picture look brighter.

In the north, various new developments are being constructed on reclaimed land. This does not help the increasing demand in low cost housing, so investors are keenly watching demand.

Friday, 26 December 2008

Misr National Steel - Ataqa takover

Misr National Steel - Ataqa is to be aquired by Red Sea Steel for LE 370.6 million ($67 million). The takeover values in Ataqa at LE 247.09 a share. Ataqa is listed on the Egyptian stock exchange but few will benefit from the massive premium as there have been no transactions in the shares throughout 2008!

Iraq announces 100 bps interest rate cut

Iraq's central bank will cut interest rates by one percentage point to 14 percent on Jan. 4. The good news is that Iraq's core inflation fell to 12.7 percent rate in November, from 13.6 percent in October.

Maridive and Oil Services

Maridive has begun work on the the EPC contract with Aramco Saudi Arabia to develop the Manifa oil fields (a US$400 million deal). Although the Egyptian economic environment is not great and oil price weak, the company claims the offshore support market is still healthy and that demand of offshore support services is supported by short supply. Indeed, the 3 new AHTS support vessels it bought were instantly hired to new clients at daily charter rates!

One to watch when oil prices recover...

Thursday, 25 December 2008

Arabtec Holding predicts impressive full year

Arabtec, a UAE construction firm, predicted a net profit of $272.3 million and announced a one for one bonus issue (in lieu of a dividend). This represents an 87 per cent above last years figure. The gloomy talk about the credit crunch, however, saw the shares fall 9.93 per cent on Tuesday before rebounding 14% today.

UAE Christmas sell off.

Not much Christmas cheer in the UAE as the stock market ended the 25th Dec lower, following six trading days of losses. There are few bids for stocks at the moment and there are sellers who want to get out of the market before the end of the year.

Wednesday, 24 December 2008

Saudi Arabia moves into deficit

BMI has just produced a piece of research downgrading Saudi Arabian growth. As can be ssen, government spending is taking a dive into fiscal deficit(of 1.2% of GDP). This is the first time since 2002 and will force the country to forcing it to use the sovereign wealth fund or build up public debt to match the gap. Still, most ountries would die for problems like that right now. The economy is still growing and should weather the storm.

Olympic group

Producing economically sensitive goods like washing machines, refrigerators, electric water heaters and gas cookers is going to be a tough business in the next few quarters. Egyptian Olympic group will face some tough times. Indeed, its third-quarter profit already fell 60 percent, mostly on cost increases on its marketing and salary side. Still, things may not be that bad as it has just announced it will buy back up to 3 million shares representing 5 percent of the company's capital. The shares in jumped 17.46 percent on the news!

Qatar Islamic Bank raises more capital

In an all too familiar pattern the Qatar Islamic Bank issued shares worth 3.8 billion riyals to Qatar´s sovereign wealth fund. Qatar Islamic shareholders the issue of about 39.38 million new shares at a price of 97 riyals to the Qatar Investment Authority. This is part of Qatar's $5.3 billion plan plan shore up investor confidence in the banking sector.

Emaar buyback cancelled?

The UAE stock market regulator cancelled Emaar Properties' 10 percent share buyback licence after the firm failed to buy shares in time. Emaar only bought 200,000 shares, or 0.003 percent of its capital. It is not clear why the cmpany did not buy the shares. It apparently has cash on its balance sheet and was recently rated by a credit agency (see earlier report on this blog). The stock is not that illiquid, so 200,000 shares is fairly pathetic. Seems the company may be having cash flow issues.

Tuesday, 23 December 2008

Merry Christmas

In Akan (Ghana) Afishapa
In Arabic Milad Majid
In Zimbabwe Merry Kisimusi
In Afrikaans (South Africa) Geseënde Kersfees
In Zulu (South Africa) Sinifisela Ukhisimusi Omuhle
In Swazi (Swaziland) Sinifisela Khisimusi Lomuhle
In Sotho (Lesthoto) Matswalo a Morena a Mabotse
In Swahili (Tanzania, Kenya) Kuwa na Krismasi njema
In Amharic (Ethiopia) Melkam Yelidet Beaal
In Egyptian (Egypt) Colo sana wintom tiebeen
In Yoruba (Nigeria) E ku odun, e hu iye' dun!

Columbia cuts interest rates 50bps

Colombia's central bank cut 50bps cut from its benchmark interest rate taking it from 10.00% to 9.50. This is the start of monetary easing, despite world wide cuts and inflationary pressures.

Etisalat wins Iranian license

UAE telecom Etisalat, as part of a consortium, won the bid for Iran's third mobile telephone licence.

Etisalat was the first telecom operator in the Gulf to introduce a mobile phone service, and was one of the early adopters of GSM technology. Since then it has established itself as a regional pioneer by introducing both 3G and MMS, and most recently, a BlackBerry service in 2006

Guinea coup

Guinea's constitution has been suspended following the death of President Lansana Conte in a military coup. The self styled National Council for Democracy and Development claim they will put in place a government of national unity.

The military officers criticized the government’s inability to revise contracts with mining companies. Guinea is a big Bauxite producer. Guinea is a member of the West African Economic and Monetary Union (UEMOA) established in January 1994, and comprising eight West African countries (Benin, Burkina Faso, Côte d’Ivoire, Mali, Niger, Senegal, Togo, including Guinea) and capital markets are covered by the Regional Stock Exchange (BRVM) in Abidjan.

Monday, 22 December 2008

Reuters poll predicts GCC GDP growth

A new poll of 11 economists shows that economists expect real economic growth in Saudi Arabia, the United Arab Emirates and Kuwait to slow - but remain positive!

The good news is that the sconomies are still expected to expand. What is clear, however, is that the Gulf is sensitive to the oil price. Obviously, a fall in oil prices from $147 a barrel to $34 a barrel has an impact.

The forecasts are for real growth of 2.4 percent in Saudi Arabia, 2.7 percent in the UAE and 3.5% in Bahrain. Qatar, the world's top exporter of liquefied natural gas, is expected to see the fastest GDP growth next year at 9.5 percent!

We will monitor the extent of the slowdown in the non-oil sectors. across the Gulf will be a key element to monitor," said Giyas Gokkent, chief economist at National Bank of Abu Dhabi.

Al-Rajhi Bank

Al-Rajhi Bank, the largest Gulf Arab bank, has fallen 70% so far this year. The concern is that last years record profitablity will suffer the same fate as happened to its net profit in December 2006. At that time the bank had a run of negative results on the back of a 2006 regional stock market crash which slashed its brokerage and fund management revenue.

Although the bank continues to develop its investment and banking side, unfortunately(market rumours are that) its subsidiary, Bakheet Financial Services, boosted lending when interest rates were low and there were record oil receipts. In other words, they may face the same problem again.

Emaar Properties rating downgraded

Standard & Poor's Rating Services revised its outlook of the Middle East's largest development company from stable to negative. The good news is that it reaffirmed the 'A-' long-term corporate credit ratings!

The revision is natural in the current environment and obviously reflects a rapid weakening of the real estate markets in Dubai. A prolonged downturn could hurt Emaar's development model. Right now, the company has a healthy financial position.

Emaar Properties made headlines around the world for building the world's tallest tower in Dubai.

MSCI Arabian Markets Real Estate Capped Index

A new property index has just been launched that should help gauge what is going on in GCC's market. The MSCI Arabian Markets Real Estate Capped Index is a free float-adjusted, market capitalization index, and contains more than 60 leading real estate securities of the largest and most liquid companies from 11 Arab countries. The Index will be calculated daily.

Zain in Ghana

Zain has now launched the services that were developed as part of its investment of $420 million (the cost of rolling out its network across Ghana). Its new commercial services are supported by a 3.5G backbone. Zain's new Ghana network will offer its customers ultra high-speed internet access and the ability to make video-calls and use rich multimedia content including the ability to send video clips, music and pictures

Sunday, 21 December 2008

Botswana cuts interest rates 50bps

The Central Bank of Botswana has reduced interest rates by half a percent from 15.5 to 15 percent.

Although inflation remains above the bank’s medium-term objective range of 3 – 6 percent and the country has price stability is projected there is a chance that the impact of the increase in the alcohol levy would outweigh the effect of the recent decrease in fuel prices. It is therefore possible to see a temporary rise in inflation at the same time as a monetary easing.

Bank PHB acquires Spring Bank

Nigerian Bank PHB acquired Spring Bank following the fulfillment of all the conditions of its offer. The N21 billion bid was on the bac of its initial stake of 33 percent in Spring Bank which.

The takeover and the injection of management into Spring Bank plc, should arrest the latters decline. Bank PHB has delivered a far better return to shareholders in the last three years.

Renaissance Capital writes that Bank PHB’s acquisition of Spring Bank is not only a good deal for Bank PHB and Spring Bank’s shareholders but also for customers, regulators, and employees. The new bank will have an expanded distribution network and extended product offerings

Saturday, 20 December 2008

Will Nigerian banks continue their foreign expansion?

The diversification of Nigerian banks out of its own borders using their strengthened balance sheets may be slowing due to the credit crisis. Ten out of the 24 licensed commercial banks in Nigeria now own at least one full-fledged licence in a foreign country. They are First Bank of Nigeria, FBN, Union Bank of Nigeria, UBN; Bank Intercontinental; Access Bank; Platinum Habbib Bank; Bank PHB, the United Bank for Africa, UBA, Guaranty Trust Bank, GTB, Zenith Bank, Oceanic Bank and FinBank. Nigerian bankers are breathing a sigh of releif that they came late to the international leverage party and are now re-evaluating their strategy.

The trend to own international branches was started by the problems Nigerian businesses have in transfering money internationally following clamp downs on international money laundering. This will not go away. By opening branches, the banks faciliated the acquisition of property and eliminated the cost of engaging a correspondent bank.

Perhaps now, the bank will use their balance sheets to domestic finance the oil and gas sector!

Friday, 19 December 2008

KenGen to build new plants

KenGen’s is to build a USD 460 m coal plant in Mombasa. The facility will be 300MW

Plans are also underway to add a third unit of 35 MW to the 70 MW Olkaria II Geothermal Power Plant. This emanated from the excess steam available in both Olkaria II and Olkaria I geothermal fields. The World Bank has already approved the funding for the project.

Kuwait credibility on the line

The Kuwaiti decision to refer the Petrochemical Industries - Dow Chemical joint venture to the Fatwa and Legislation Department threatens its cancellation. The project has become a micocosm of Kuwaiti politics. There is serious friction between the parliament and the cabinet. At the same time, the political and economic outlook for Kuwait is weak. There is disappointment in Emir Sabah's failed efforts to implement reforms.

As far as the Petrochemical Industries - Dow Chemical joint venture goes, the whole Kuwaiti business environment is concerned about an undermining of the concept of contract sanctity. Still, the Kuwaiti government is confident that the deal will move forward, especially since it considers that all the financial concerns expressed by the parliament have been addressed.

Republic of Gabon Eurobond delays payment

The Republic of Gabon delayed the interest payment on its 2017 Eurobondby for one week. The action follows a dispute with CECF Transgabonais. Gabon has a history of late debt service payments.

The dispute is over a contract which CECF Transgabona had to manage the national rail system, but was withdrawn five years ago.

Tuesday, 16 December 2008

Saudi Arabia cuts interest rates 50bps

The Saudi Central Bank reduced its benchmark repurchase rate to 2.5 percent from 3 percent and lowered the reverse repurchase rate to 1.5 percent from 2 percent today. This follows 2 1/2 percentage points of cuts since Oct. 30.

Aviva Corporation's merger with Northern Energy Mining Inc. scrapped

Botswana's Aviva Corporation's proposed merger with Northern Energy Mining Inc. (NEMI) has been cancelled following the discover of 'errors' realised in the books of Northern Energy. It was Nothern Energy who advised Aviva that errors in determining its partners' historical cash calls at its Peace River Coal Limited Partnership had effectively reduced what it believed its particpation was in the venture, thereby making them worth substantially less than was thought.

Equador defaults

Suppose it is about time someone defaultd. President Rafael Correa made his country the first Soveriegn in the current credit crisis to announced that the government will not make payments on some of its bonds. Specifically, the $30 million coupon on the 2012 bonds. The 2012, 2015 and 2030 bonds, with a nominal of $3.86 billion, will alos default.

The Equadorian government will present a debt restructuring proposal which we expect will result in a substantial haircut for investors!!! The government is likely to have a fight on its hands as the country is not short of funds to pay the interest...

Nigeria currency slide worsens

The weekly auctions and uas of the reserves have failed to stabilize the naira. The Nigerian Central Bank has ordered the country's banks to reduce foreign exchange positions to reduce local demand for dollars.

Monday, 15 December 2008

Kenya government announces share sales

Kenya’s government plans to sell sharesin National Bank of Kenya Ltd., East African Portland Cement Co. Kenya Pipeline Co., Consolidated Bank, the Development Bank of Kenya and Kenya Electricity Generation Co. It will also sell shares in five sugar companies.

Volume up after Eid holiday in Oman

The Muscat Securities Market opened for trading after Eid Al Adha holidays on substantially increased turnover. The number of shares traded increased by 56.4 per cent based on 38 traded securities.

The market was weak but AES Barka rose 3.5 per cent and Oman Cables Industry rose by 2.3 per cent.

Botswana suffers from diamond price collapse

Demand for diamonds, Botswana’s principle export, has forced the well run country's Finance Ministry to fall back on its USD 10.2 billion reserves. With inflation at 13.1% the country will no longer remain isolated from the global credit crunch.


It apears that OPEC is reaching out, in desperation at the current oil price, to Russia. It has asked Russia to consider a cut of 300,000 barrels a day. If Russia joined OPEC, the oil price would certainly react. Indeed, Dmitry Medvedev has said Russia may join 'suppliers organisations' in the future.

Sunday, 14 December 2008

Update on our (outsourced) back office

Close followers of Danfonds will know that it has outsourced its back opperations to GlobeOp Financial Services S.A., a leading independent provider of business process outsourcing, financial technology services and analytics to hedge funds and asset
managers. In view of the turmoil in financial markets, we though it useful to highlight their financial stregth, as announced for the year ending 31 December 2008.

$95 billion in Assets under Administration¹ (AuA) as at 30 November 2008
$1 billion of new client assets anticipated in December
Strong balance sheet with $47 million in cash as at 30 November 2008 and no debt

Thursday, 11 December 2008

Aldar Properties PJSC and Sorouh Real Estate PJSC rated buy by Citigroup

Looks like there are some property bulls left. Aldar Properties PJSC and Sorouh Real Estate PJSC, Abu Dhabi’s biggest developers, have been rated “buy” by Citigroup Inc. The rationale for the recommendation is that they trade at a discount to their net asset value. Citigroup estimated Aldar’s net asset value per share at
16.6 dirhams and Sorouh’s at 5.6 dirhams.

Citigroup argue that the current share prices of Aldar and Sorouh imply a property price collapse, zero developer margin and no future low-cost land grants.

Orascom Telecom starts operations in North Korean

Orascom Telecom surged 11.11 percent on the news that it would begin operations in North Korea. As a market, North Korea has one of the lowest telecom penetration rates in the world, hence the excitment. That said, part of the jump in Orascom could simply be bottom fishing, as the stock has fallen a staggering 74 percent this year!

Mood in the Gulf

With oil prices at levels below $50 a barrel, further weakness in the Dubai real estate market, as well as general concerns over public and private debt levels, it is not surprising the mood remains depressed in the Gulf. That said, Kuwait's court order to close its market for a day, and the Kuwait Investment Agency cash injection, have helped; as indeed did the Saudi Arabian announcements on the soundness of its fiscal position.

Borse Dubai struggling with its financing of OMX acquisition

Borse Dubai is in talks with HSBC and other banks to fund a syndicated loan to refinance the $3.78 billion loan it took to acquire Nordic exchanges group OMX jointly with Nasdaq.

The original financing, agreed in March matures on Feb. 28 2009. Difficult credit conditions will make it hard and or costly to raise such an amount. Borse Dubai may have to pay up over 450 basis points over LIBOR with a maturity of just one year.

Wednesday, 10 December 2008

African currencies

Year to date movements against USD.

Nigeria naira -7.8%
Kenya shilling -18.6%
Ghana cedi -21.0%
CFA franc -11.6%
Morocco dirham -9.7%
Mauritius rupee -12.8%
Botswana pula -24.4%
Zambia kwacha -20.9%


Angolan reforms are slowly improving and diversifying the economy. Deployment of a $1billion World Bank loan to aid in diversification, and establishment of two funds to collect oil revenues should keep things bouyant. The banking sector is looking interesting.

GDP growth of 11.8% in 2009, down from 15% in 2008. One single company, Sonangol, which has a turnover of $17 billion, represents almost a third of GDP. Sonangol takes a 51% stake in all production from Cabinda, as well as from offshore concessions.

Ecobank and Nedbank form alliance

In a move that follows Ecobanks stalled ambitions (shortfall on its rights issue) to become a pan African bank, Ecobank has formed an alliance with South Africa's No. 4 banking group, Nedbank.

The alliance between Nedbank, which is strong in southern Africa, and Ecobank, which operates in west, east and central Africa, would create a network of 1,000 branches and banking outlets in 30 countries in the continent.

Tuesday, 9 December 2008

Morgan Stanley Capital International Frontier Index - Proposed new entrants

Morgan Stanley Capital International stock benchmark for frontier markets looks set to include Ghana, Botswana, Jamaica and Trinidad & Tobago by May 2009.

The classification was created by MSCI for stock markets that have less-developed economies and financial markets than emerging markets, and that typically have more restrictions on foreign stock ownership.

Rating agencies review corporates in GCC States

The rating agencies are looking into various GCC institutions and may adjust some ratings. Moody’s believes that governments will intervene before a default occurs, but over the long term particular institutions may not be viable and may be merged or taken in “a sort of orderly bailout”.

Talk of a GCC liquidity crisis is probably more to do with investor confidence than traditional fundamentals. The other issue is transparency and the level of disclosure. Rating government-related entities in the region hinges on the assessment of the level of government backing they might receive, which can be tricky.

Currently there are conflicting rumours about the likelihood of mergers between real estate companies, the role of Abu Dhabi and the scale of Dubai’s government debt.

Eveready East Africa Ltd profits before tax fell 91%

Eveready East Africa Ltd., Kenya's largest maker of dry cell batteries, fell 91%percent because of increased competition and post-election violence.

Net income for the year ended Sept. 30 declined to 17.84 million Kenyan shillings, or 0.085 shillings a share.

The Company saw an 18% reduction in revenues for the 1st six months of the year. The short fall was caused by unfair competition from large quantities of zero rated duty imports of very low priced batteries

Monday, 8 December 2008

Nigeria acts to manage the naira

Central Bank of Nigeria intervened in the Nigerian foreign exchange markets, purchasing $912 million worth of naira at a rate of 130/USD. Nigeria’s history of multiple exchange rate regimes make it imerative that the Central bank give better guidance on what is going on in its currency. In the past, there have been unregulated parallel markets. The potential for such informal currency arrangements arrising again are a concern.

Maghreb Minerals in discussions about its future

The Tunisian AIM listed Maghreb Minerals is in discussions with its principal shareholders regarding the future of the business. Firebird Global Master Fund Ltd. and Firebird Global Master Fund II LLP together hold 24.06 percent of Maghreb’s issued capital.

Maghreb has limited financial resources and, in current market conditions, external funding will be difficult to secure.

Sunday, 7 December 2008

Sovereign Trust Insurance Plc acquires Acen Insurance Plc

After several rebuffs by the shareholders of Acen Insurance Plc, the acquisition by Sovereign Trust Insurance Plc is set to go ahead. The agreed terms are 1 Sovereign Trust share for 85 shares in Acen Insurance.

Acen Insurance Plc was de-listed from the Nigerian Stock Exchange for falling short of certain listing requirements, in a clean up exercise by the Exchange two months ago. Hopefully, Sovereign Trust knows what it is letting itself in for.

Attijariwafa Bank expands branch network

Morocco's Attijariwafa Bank has just bought Credit Agricole's African branches. The transaction includes assets in Congo, Cameroon, Gabon, Senegal and a consideration of 250 million euros.

In turn, Credit Agricole is purchasing 24 percent of Credit du Maroc, held by Wafa Assurance (the insurance branch of Attijariwafa Bank) for 144 million euros.

Saturday, 6 December 2008

Calm ahead of Eid al-Adha holiday

Arab stock markets closed ahead of a week-long holiday marking Eid al-Adha in a relatively calm mood.

Saudi shares trimmed losses, mainly in response to remarks by King Abdullah that the Saudi economy was still 'strong'.

Jordanian shares saw some 'buying by foreigners, and Kuwaiti stocks rebounded on reports that the state-owned Kuwait Investment Corporation planned to buy equities after the holiday with USD 20 billion.

Friday, 5 December 2008

Cambodia to start stock exchange

Cambodia will start its stock exchange in 2009. The country is in the process of finalising securities rules and has broken ground on the exchange building.

Mauritius just misses double digit inflation

November inflation hit 9.9% in Mauritius for a second month running. Goods prices rose as a result of the lagged impact of currency depreciation.

We expect inflation will fall significantly next year. The central bank has cut its benchmark rate from 8.25% to 7.75%, so that is already discounted.

Saudi pharmaceutical industry

The USD 1bn Saudi pharmaceutical market is structuraly well positioned to benefit from growing population and rising demand fo health care in the region. The local players remain focused on basic medicines but this is no bad place to be in a country where the governement has only recently become focused on the cost of treatment.

There are 27 pharmaceutical manaufacturing companies in the Kingdom. The largest are Saudi Pharmaceutical Insdustries and Medical Appliances Corporation (SPIMACO), TABUK, Al Jazeera, Dal Al Dawa and Riyadh Pharma. Riyadh is the fastest growing. SPIMACO is our prefered listed name with over 170 brands under license from names such as Eli Lilly, Schering-Plough and GlaxoSmithKine.

Saudi Arabia is on the USTR Watch List for infringement of intelectual property rights.

Thursday, 4 December 2008

Iraq revisited

Danfonds had a one on one with Bjorn Englund, the manager of the Babylon fund, today in Copenhagen. Bjorn is one of those managers who inspires confidence and is prepared to push the traditional boundaries of investment out to their geographic limits.

Iraq is not a stock picking market but rather a politically driven one. We therefore prefer to access it through a basket or a fund such as Babylon. Although an oil resource story, the listed companies are largely banks. These are generally small. Even Dar El Salam Investment Bank, owned 70% by HSBC, is only USD 248m. Commercial Bank of Iraq, however, sounded more interesting to us, standing on a PE of 5 and PB of 1. There is, as they say, a price for everything.

Wednesday, 3 December 2008

Zambeef sales + 69%

Zambeef delivered yet another impessive turnover number, up by 69% to ZMK 493.7m The beef division contributed 32% to total gross profit. The Company buys young heifers and steers from commercial farmers throughout the Zambia which are fattened in feedlots for 90 days prior to slaughter. The division has continued to grow significantly both in terms of volumes and profit, and the Company has plans to make further investments in this area, which we support.

Zamchick Inns continues to perform extremely well. There is reason to believe that the profitability of this division will continue to grow as the number of Zamchick Inns increase.

Tuesday, 2 December 2008

Nigerian Breweries Plc

Nigerian Breweries Plc had sales of NGN 102bn for the 9 months ended September 30, 2008, a 32% increase. The company is benefiting from continued investments and improved operating efficiencies, resulting in an increase in operating profit of 45%.

Monday, 1 December 2008

Performance update

The yellow line is the one to focus on - Danfonds frontier fund SPC, model portfolio with hedging contribution.

Tanzanian Breweries

Tanzania Breweries Ltd ignored increased operations costs and grew its sales revenue for six months by 21 per cent from $183.4 million to $222 million

UAE banking sector

The UAE banking system is undergoing a period of stress. Many of the banks have been expanding rapidly, adding branches across the UAE. There has been a lot of product innovation and these products require an overhaul of existing IT systems at the same time as their in conversion to Basle II.

Other key metrics include:

1) Loan growth to stay below 10%,
2) Capital adequacy will have to grow to 11% in 2009 and 12% in 2010.
3) Significant wage inflation


Emaar, the Dubai real estate company, has fallen over 75% this year. All the fundamentals point down. Land has turned negative, the secondary market is bad, developers are in trouble, discount rates are rising, and construction costs are up.

Emaar has grown thanks to its international sales. The company therefore has to turn to cash preservation and cost rationalisation, something they have not been good at in the past.

Time to buy? Not yet!

Benue Cement Company (Dangote Industries Ltd.)

Benue Cement Company (controlled by Dangote Industries Ltd.) reporting a 119% increase in sales to N9.8bn ($83.9m) and a 174% increase in PBT to N4.8bn ($40.9m) in the period to the end of the third quarter.

Benue Cement Company is not yet operating at full production capacity and are slowly ramping up the second kiln which will take production towards 3 million tons. As to its newly commissioned plants it intends to cut prepayments to postpone the start of
construction to avoid flooding the market with new supply.

Friday, 28 November 2008

Qatar Telecom increases offer for PT Indosat Tbk

Qatar Telecom lifted its offer price to raise its stake in PT Indosat Tbk. Qtel is in the process of holding a tender offer for Indosat shares up to its maximum allowed limit.

Indonesia limits foreign ownership in the telecommunication sector, to a maximum of 65 percent for mobile phone operators and 49 percent for fixed-line operators.

Government support for Oman stock market

Oman is planning to set up a $390m investment fund backed by the government and other investors to support the Muscat Stock Market, which has lost a third of its value this year.

Oando wins merit award (again)

Oando has won the Nigerian Stock Exchange Presidential Merit Award for the Best Quoted company in the Downstream Petroleum Marketing Sector. It also won the award in2001, 2003, 2004 and 2006.

Oando is clearly showing the way with its adherence to post-listing requirements and corporate governance.

Oando’s is Nigeria’s foremost integrated energy company. It is the nation’s leading oil retailer, with one in every five litres of petroleum products being sold or distributed by Oando via its 500 retail outlets.

MENA fertilizer production

Fertilizer production in MENA have increased at a CAGR of 3.5% in the last seven years, against the world CAGR of 2.8%. The region’s share in the world’s total capacities is now 12%.

The major reasons for the increase in capacity are needless to say the ample availability of gas in the region and abundance of raw materials such as Potash and Phosphate, supported by high demand for fertilizer from the South & East Asian regions.

Our prefered name in the region is the Arab Potash Company in Jordan.

Thursday, 27 November 2008

PA Resources finds oil in Tunisia

Swedish oil company PA Resources struck oil at its Didon North prospect offshore in Tunisia. Logging and pressure data prove the presence of an oil column of 14 metres.

The discovery confirms the exploration potential in the Zarat area, where oil discoveries have been made at the Zarat and Elyssa as well as at Didon.

PA Resources is operator and has 100 percent of the Zarat permit, but Tunisian state oil company ETAP can acquire up to a 55 percent working interest if a discovery is deemed commercial.

Royal Jordanian Airlines

Samer Majali, President/CEO of Royal Jordanian, gave an upbeat view of the airlineon the back of recent lower fuel prices. The airline is witnessing an increase in the number of passengers and that the company has registered growth in all operational indicators this year.

The load factor increased from 71 per cent to 73 per cent, the number of passengers increased by 18 per cent and the flight frequency by 14 per cent.

Wednesday, 26 November 2008

Bail out for Dubai?

Abu Dhabi may provide Dubai with a credit facility to repay short-term debt. Goldman Sachs, Morgan Stanley, UBSand Credit Suisse Group are helping advising on the restructure the $80 billion debt of Dubai and its state-owned companies.

Ecuador facing political instability

After seven years of economic stability, Ecuador is trying to consolidate all political power in the hands of the President. President Rafael Correa is bent to consolidate all political power within his hands. There are deep division between the country's sierra region and the coast. In addition, there is indigenous unrest. This does not look like good news for the economy.

Sanitas has free cash flow yield of 30.6%

We have just screened out universe for Free Cash flow yields. There are some suprising results. One of the highest FCF yields is Sanitas, a Lithuanian company.

Sanitas is a Generic Pharmaceuticalcompany. It has modern manufacturing facilities in Lithuania, Slovakia and Poland, producing a variety of medicines often though of as defensive.

Not much wrong with the company, other than being in a small illiquid market exposed to foreign currency risk. The compny even converted its outstanding loans from banks Bank Polska Kasa Opieki S.A. and Bank Zachodni WBK at favourable terms. Maybe there is real value out there?

Dubai property crash

It was only a matter of time. Prices in Dubai are heading south. In particular, property prices on the Palm Jumeirah, the 'eighth wonder of the world', have plummeted by as much as 40pc since September. A four-bedroom house on the Palm,(developed by the Nakheel Group), is now selling for 10 million UAE dirhams (£1.8m), down from 15 million dirhams in September.

Saturday, 22 November 2008

African Explosives secures largest contract

Zambia's African Explosives Ltd has signed its biggest ever explosives contract to supply the Lumwana copper mine.

AEL intends to invest more than $6-million to upgrade its production and deliver the required quantities of bulk emulsion. The company will build a bulk emulsion manufacturing plant in the mine's light industrial area. The plant, which was established for commissioning in September 2008, will have a capacity of 3 000t of bulk emulsion each month.

We understand that African Explosives does not make explosives for military use.

Kenyan core banking capital adequate

At yesterdays experts' seminar on the impact and opportunities of the global financial crisis on the Kenyan economy the Central Bank Governor, Prof Njuguna Ndung'u stated that "it is upto the banks to decide how much capital they require". The feeling was that, as Equity Bank, Kenya Commercial Bank, Diamond Trust and Fina Bank are all expanding branches, they must have adequate capital.

Overall, the seminar felt that the direct impact of the financial crisis on Kenya would be volatility in the exchange rate, lower exports (horticulture).

Thursday, 20 November 2008

Nigerian government support for financial market

The Nigerian government has injected nearly 1. 7 trillion Naira into iits financial system and had taken numerous regulatory and supervisory actionssince the sell off in its market began.

Wednesday, 19 November 2008

Zain recognised for its African roll out

Zain Group was awarded the Best Pan African Initiative Campaign of the Year Award for its African borderless mobile network which now links 16 countries.

The award reflect the renewed vigour from the rebranding from Celtel to Zain.

Monday, 17 November 2008

Iraqi stock markets are rising as security increases

As security increases in Iraq the local stock market is up - apparently as much as 40% in the month of September, when the global financial crisis were raging through the rest of the world.

It is now becoming more and more official that things in Iraq are really improving. There were already some clear indications in the summer, when many of the major US news stations cut down on their staff in Iraq. Sorry to be blunt, but most of their news coverage included people - especially Americans - getting blown up. Since that number is falling, the number of stories fell and the need for journalists fell. Now the Journalist have to write the positive stories to get attention. Like this wonderfull story from CBS news.

Friday, 14 November 2008

Nigeria's foreign reserves rise

Nigeria's foreign currency reserves rose this week to 59.7 billion dollars said the Central Bank of Nigeria. The rise breaks a trend over the last months still dropping crude oil prices in the international market. Oil prices have more than halved since hitting record levels of above 147 dollars in July on concerns about the faltering global economy. Since the beginning of 2006, militant attacks have cut Nigeria's oil output from 2,6 million barrels to around 1,9 million barrels.

Thursday, 13 November 2008

Major roadbuilding through Kazakhstan

The Asian Development Bank is extending 700 million U.S. dollars to Kazakhstan to help build a "new Silk Road" that will transform the country's economy.

The "Central Asian Regional Economic Cooperation Transport Corridor I" will run 2,715 kilometers, from the city of Khorgos on Kazakhstan's border with China to the western border with Russia

This new silk road will boost trade between Beijing and Brussels, and create extraordinary economic opportunities for the people of Kazakhstan and their neighbors. The improved road will increase travel speed, and reducing freight transport costs by 50 %.

The new road, spanning the world's largest landlocked country, is expected to be comparably transformative by 2020, the road is expected to increase domestic product in Kazakhstan, and to increase the GDP of neighboring Central Asian countries.

The overall investment for the road project is approximately 6.7 billion dollars. Other financiers behind the overall corridor development plan include the government of Kazakhstan, the private sector, the World Bank, and European Bank for Reconstruction and Development.

Safaricom sales +20% and EBITDA +15%

The company was hit by time costs below he line. We are encouraged that the numbers of subscribers to the company’s services reached 11,96 millions. This is the first release of numbers after the company was listed. Kenya is pushing mobile-phone companies to expand their service, to help boost Economic growth. The market for mobile-phone subscribers expects to double to about 25 million in the next few years.

The current price puts the stock on a PE multiple of 10.5x which is at a reasonable discount to the 12.8x average.

Wednesday, 12 November 2008

Naïade Resorts Ltd

Mauritius has specialised in up-market tourism, 67% of which come from Europe and the UK. The sector has sold off on the back of the credit crisis and economic implications. We believe that at current levels value is starting to emerge. Our favoured name is Naïade Resorts Ltd, the third largest market capitalisation.

Tuesday, 11 November 2008

Danfonds in Kenya

This week and next week we are visiting companies in Kenya. Internet access is very slow, hence we will not report as much as normal. We have found out from Safaricom that there will be a new underwater high speed connection to Kenya within a year, but that is a long time to wait. Word on the ground is that the Co-Operative Bank IPO is really struggling.

Thursday, 6 November 2008

Unique Trust oversubscribed 170%

The Initial Public Offer of Unique Trust, UT Financial Services, closed with a strong over-subscription. This is not surprising as it is an indigenous Ghanaian businesses champion. Still, its good going in the current current turbulent financial environment, reflecting the bouyant Ghana market in general.

We met with the charismatic Chief Executive Officer, Prince Kofi Amoabeng, a few months ago in Accra. He is focused and a great salesman. This will prove a very interesting company to follow.

Seychelles inflation hits 40%

Seychelles', already in selective default, expects to see annual inflation to rise to 40 percent this month from 30 percent in previously. The central bank is likely to increase interest rates .

Economic slowdown in the United States and Europe and the oil price spikehave hit travel to the islands.

Wednesday, 5 November 2008


The Euromoney Nigeria conference that we attended yesterday was fascinating in its upbeat nature despite the carnage in the stock market. Turns out the property market is still on rising sharply. Also, although there is some USD 20bn in margin loans, even if all that were written off, the banks would still be over capitalised. Infrastructure and private equity are clearly the place to be.

Ukraine bail out being impacted by politics

The politicians in Ukraine seam to be struggling to agree the IMF bail out. This begs the question, will Ukraine default? Ukrainian Government Eurobonds Prices Spread to UST10 USA, more than 3.000 b.p. Yield to maturity 34%.

Tuesday, 4 November 2008

Bank PHB Plc (Nigeria)

Bank PHB Plc announced its results for the 12-month period ended June 30, 2008 and we are pleased to note that its total assets exceeded N1 trillion, 172 per cent higher than last year.

Bank PHB’s total assets plus contingents hit an all time high of N1.15 trillion, 140 per cent more than N479 billion in June 2007.

The growth in assets is similar to that seen throughout the industry growth in the last three years due to the consolidation in the Nigerian banking industry. The bank was formed by themerger of Habib bank and Platinum bank.

Access bank's exposure to margin loans

Access Bank disclosed its exposure to the margin lending that has been plaugeing the Nigerian stock market.

As at 30th September 2008, total stock-collateralised margin loans from Access bank to investors and brokers stood at N55.695bn ($476.0m). That is 8.6% of total
assets and 18.4% of total loans. The bank claims the value of collateral against these loans exceeded exposure, giving them a coverage ratio of 125%.

Makes you wonder what the systemic Nigerian exposure is when Access bank claim they are conservative. No wonder the maket has been falling. Could easily be $10bn on margin loans!

Monday, 3 November 2008

Telekom Networks Malawi Ltd +75% on IPO

Telekom Networks Malawi Ltd (TNM) listed today closing at MKW 3.50 on an IPO Issue Price of MWK 2.00.

The premium is attributed to the failed bid by a consortium led by Telekom Malaysia to acquire a majority stake.

The company has raised over MK2.4bn of new share capital which will be applied directly into continued improvement and expansion of its telecommunications services. we note that the company is set for growth through continued improvement of service, growth in subscribers and expansion of its existing mobile network. Its core capacity shoudl increase from 1 million subscribers to 1.5 million subscribers by 31 December 2009.

The Co-operative Bank IPO struggling

The Co-operative Bank KES 35bn IPO was launched on Thursday 30 October but may be facing possible local under-subscription.

In any IPO, the capital markets regulations specify that at least 40% of the shares must be taken up by local investors which presents the company with a problem. In the event that all the 40% of the shares are not taken up, balance can be applied for by foreign investors after approval is granted by the Capital Markets Authority (CMA).

Zimbabwe gold mining sector on verge of collapse

Zimbabwe's gold mining industry, Africa's third biggest nine years ago, is fighting with the central bank to pay for the gold the government has bought. Gold mining companies are obliged by law to sell their gold to the central. The central bank owes more than 30 million dollars to the mines. Without the payments, one of the countries most reslient industries stands to go bankrupt.

Kenyan Shilling to weaken further?

The report on the post election violence earlier this year calls for prosecutions of ten lawmakers and cabinate level politicians. Although a good thing in the long run, such action will pur pressure on the Kenyan Shilling short term.

Friday, 31 October 2008

How low can the oil price go?

The last global recession the world had was in 2001. Nymex crude oil prices, which had gone above $35 a barrel in September and October 2000, fell briefly below $20 a barrel in late 2001 before recovering in April 2002 to above $26 a barrel.

The oil price required for a marginal cost player to return its cost of capital is $65-75 per barrel.

Economic necessity is often cited as important in the price level. The lowest breakeven oil price that would bring the 2008- 2009 budget into balance in Saudi Arabia is $30 per barrel. The level in the UAE is $40 and in Qatar it is $55. The average breakeven for GCC is $50 per barrel.

Harmony Gold turns into profit

Africa's third largest gold miner managed to pull the rabbit out of the hat by delivering third quarter net income of 490 million rand (USD 40.3 million), recovering from a loss the preceding quarter.

At first blush, the results look respectable after production increased and disposed of assets in Papua New Guinea. This disposal obscures the key take away from the results. The company is shifting its focus from exploration to buying producing assets. This strategy is less risky. That said, it shifts the focus to costs, such as labour and power, which are rising in double digits. In short, it shifts the focus from ‘promise tomorrow’ to ‘predictable cash flow and unpredictable costs’.

Thursday, 30 October 2008

Danfonds model performance update

Performance is stated before net positive contribution of hedgeing. Shown relative to EM.

Heritage Oil to drill in Kurdistan

Heritage Oil Limited, an independent upstream exploration and production company in our portfolio, announced that it plans to drill an exploration well in the Kurdistan Region of Iraq.

They have secured a rig to commence drilling the Miran West-1 exploration well. Obviously, this is high risk but it looks to us like a high-impact exploration with the potential for billions of barrels of oil from the licence.

Slowdown in global trade shipments on the way

The collapse in the price of dry containers is a direct result of (1) the ability of frontier and emerging trade partners to get letters of credit and (2) the sharpe reduction in consumer confidence and resulting squeeze on inventories.

It is easy to understand why a banker will not extend a letter of credit for a shipment of natural rubber from the ivory coast when they find it difficult to get credit themselves. Unfortunatley, this is extremely bad news for frontier economies.

Wednesday, 29 October 2008

NASDAQ OMX Group Conference in Dubai

The first NASDAQ investor conference in Middle East will be held in Dubai on November 20. The conference to be held jointly with the Dubai International Financial Exchange, (DIFX), will also feature a discussion of the DIFX's new equity derivatives initiative and the regional potential for exchange traded funds.

The Bell Ceremony will take place at the Dubai International Financial Centre and will be broadcast live in New York's Times Square.

CFAO Ghana Limited posts 398% growth

CFAO Ghana Limited is into a bit of everything, distribution and servicing of automobiles, the installation of Otis elevators. The company has leading brands including Renault, Mitsubishi and Bridgestone tyres. CFAO Ghana Limited also undertakes car rentals and other related activities. The company company has just delivered an impressive 398% growth in net profit.

The company has adoption measures resulting in improved efficiency with expenses falling by 15%

There is, however, some slippage since the first two quarters. The even less inspiring performance of the company’s stock is due to retail selling in a thin market. The parent company of CFAO Ghana Limited, CFAO S.A. France holds about 82% of the issued shares .

Tuesday, 28 October 2008

Nigeria removes 1% trading limits

The NSE removed the 1% maximum daily downward limit on individual stocks, reverting to the previous limits of 5% maximum daily price movements. The suspension had led to a significant fall in liquidity on the exchange from US$100m per day to less than US$15m per day. Following the announcement, equity prices fell immediately by about 5% across the board.

Monday, 27 October 2008

FNB Namibia acquired by First Rand Holding Ltd

Great news - fundamental value wins out. Actually, this ws one of our portfolio companies!!! FirstRand Bank Holdings Limited has just purchased FNB Namibia Holdings Limited shares (1 389 953) held by TransNamib Holdings Limited for a consideration of N$11.55 per share. As can see, the stock price is bucking the globl trend.

Frontier market index update

Zimbabwe up 187% in a week

Time for some good news (or light relief). In these turbulent times its always good to look at the Zimbabwe stock market, bacause it almost always goes up thanks to its high inflation rate. The Industrials closed the index was up 187% last week led by gains in Old Mutual, KMAL, Pelhams, and ABCH.

Sunday, 26 October 2008

Gulf Bank suspended

The Kuwait Central Bank stepped in to rescue the country's second largest lender. The bank had incurred significant losses from trading in derivatives and its shares were suspended on Saturday. A Central Bank order said trading in Gulf Bank shares is suspended pending an investigation into the derivatives deals that caused the losses.

The Central Bank and Gulf Bank say the measures were merely preventive and were misinterpreted. Despite the government guarantee, hundreds of depositors led a run on the bank.

The bank's losses are estimated at up to KD 200 million ($749 million). Derivatives customers were unwilling or unable to fulfill their obligations to cover their losses.

Friday, 24 October 2008

Nigeria's view on OPEC production cut

Kengen falls another 7%

Kenya Electricity Generating Company Limited (KenGen), the leading electric power generation company in Kenya, is still in free fall despite having a great cash generating ability. It produces 80 percent of electricity consumed in the country. Its not even a cost of production issue as it is largely in hydro, geothermal, thermal and wind.

The death of the carry trade...

Thursday, 23 October 2008

Kuwait rushes to aid of Investment firms

Kuwait's banks are considering proposals to support investment firms in a bid to stabilize them during the financial crisis. The proposal will be forwarded to the Central Bank of the State of Kuwait this week.

The global financial crisis has impacted the Kuwait Stock Exchange as hot money and speculators rushed for the exit. Investment firms have overextended themselves by providing facilities to investors.

Zambia shrugs of copper decline

Zambia, Africa's biggest copper producer, obviously gets impacted by the dramatic 60%decline in the copper price. Indeed, the government has just cut its forecast for economic growth to 6 percent. Previous forecasts indicated growth of 7 percent this year, up from 5.4 percent in 2007. No forcast was made for 2009 but the country will struggle to achieve the same number as 2007.

Wednesday, 22 October 2008

United Arab Emirates

The United Arab Emirates economy is said to maintain growth despite the global crisis, a report issued by Morgan Stanely optimistically predicted.

According to Morgan stanley, the UAE economy is expected to grow by 6% in 2009, while the inflation rates will drop from 12% currently to 9.7% by next year. The basis of the optimism is that the country has surpluses in its internal and external accounts.

We, however, are extremely concerned about the UAE property market and would suggest that Morgan Stanley are behind the curve on this one...

Monday, 20 October 2008

Why isn’t the price of gold surging?

Gold is an important part of some frontier market economies (e.g. Tanzania). Gold is stubbonly at $800 an ounce, down 22% since its high of $1,030 on March 17. The weakness might be that inflation might be the next big scare. After all, every central bank is flooding the credit markets with liquidity. Printing money in this way always leads to inflation in either goods and services and/or assets.

Inflation: The price we pay will have to pay avoid deflation and a liquidity trap? Worth thinking about.

Tabreed Bahrain (Bahrain District Cooling Company)

Tabreed Bahrain, the GCC regional district cooling technology providerannounced it will seek a capital increase to finance its rapid expansion.

Tabreed Bahrain has signed a series of contracts with some of the biggest commercial projects in Bahrain. It has just won the Lavalin Gulf Contractors contract to construct a district cooling plant for Bahrain Financial Harbour. This will prove particulaly challenging as any one who has been there know that the buildings are constructed very close together, meaning cooling will be distributed via a pipe network radiating out from a centrally located plant.

Friday, 17 October 2008

Reuters believes remittances will fall

Reuters reports that it believes remittances which total some $40 billion per year (or even $50bn), could become a victim of a spiralling crisis in global financial markets. There are an estimated 30 million Africans living abroad. For remittances, the fear is that when the recession hits Europe and the United States traditionally resilient flows could "ebb as migrants’ purse strings are pulled tighter and tighter".

Ivory coast sees 60% slump in cocoa shipments

Not sure if this is due to failure to get letters of credit, the success of Ghana in stopping illegal smuggling or a crop failure. Bloomberg reports that Cocoa deliveries to Ivory Coast's ports for shipment fell about 60 percent in the last week from the same period a year earlier.

Arrivals at the ports of Abidjan and San Pedro from farms in the country, were estimated at 16,000 metric tons in the week ended Oct. 12, compared with about 40,000 tons a year earlier. Data is reliable as it comes from the state-run Bourse du Café et du Cacao which we visited earlier in the year.

7 Up bottling Company Ltd

The 7 Up bottling company, well known in the Nigerian food beverages and tobacco sector, posted a profit after tax of N1.608 billion versus N1.219 last year. In effect, an increase in profit of 32 percent. Profit before tax grew by 26.53 percent

Thursday, 16 October 2008

Outlook for iraq deteriorates dramatically

A drastic deterioration has occured in the Iraqi government's fiscal outlook for 2009. The fiscal deficit for 2009 is now forcst at 14.0% of GDP. This compares with a 5.7% surplus in 2008. Oil sales account for over 80% of Baghdad's income and so revenues are declining sharply.

Bahrain's commercial banks are well capitalized

Bahrain's commercial banks are well capitalized based on the fact that they have not used the central bank's repo facility

The central bank's Web site says 'These reports indicate that liquidity conditions remain normal.' Commercial banks have been urged to report earnings as soon as possible to reassure markets of their financial position.

Something for the technically minded

The beta used in financial modelling in frontier markets presents us with one of the biggest challanges. It is also difficult to explain the issue. Take a look at this chart used to determine the beta for Nigeria. The best fit line is almost arbitary, meaning we can't trust the resulting beta.

Wednesday, 15 October 2008

Barclays Kenya

Probably a good time to focus on well run banks. Barclays Kenya is one we like based on the company management. That said, it is priced at 2.9x book, which following the global banking sell off is just absurdly high. Still, unlike other banks in the world, it still has earnings growth potential of 25% CAGR over the medium term.

Tuesday, 14 October 2008

Lebanon fails to find a president

Lebanon's BLOM stock index fell 4.2% on Tuesday due to concern's over the presidential elections. Elections were postponed for the eighth time to December 17 to give rival leaders more time to reach a deal (to make the army chief president?).

Sri Lanka to tap markets

Jason Wulterkens, a frontier markets commentator, reports that Sri Lanka’s government will start its first overseas bond sale.

The issue will be difficult to get off the ground. Fitch Ratings gave Sri Lanka a negative outlook due to its political situation way back in 2006. Obviously, things have changed. Yields on the government 7.6 percent local-currency bond due in August 2009 are 16.2 percent. Still, there is a price for everything... That said, the issue will be especially difficult in view of the credit crisis and the fact that fighting has escalated in recent months.

Iceland plunges 77% in one day - A new frontier market!

Iceland's benchmark stock index plunged 77 percent, the biggest decline on record. Trading resumed rfollowing a three-day suspension and the nationalization of the country's largest banks.

Kaupthing Bank hf, Glitnir Bank hf and Landsbanki Islands were nationalised with debts equivalent to as much as 12 times Iceland's GDP.

We welcome Iceland to the frontier markets club....


One would have expected that Sonatel's earnings would benefit from the sales increase of 12.8% y-o-y. This was less than the 18.6% achieved in H107 and there has been a considerable increase in amortisation expenses. As a result, the company's net income (on a consolidated basis) decreased by 30.4%.

Sonatel's partnership with Orange and France Telecom mean that the company will keep it in good stead as the expected weakening in the regional growth outlook drag on its earnings.

Nigeria delists dormant companies

As part of measures to protect investors and shareholders from dormant companies, the Nigerian Stock Exchange has delisted nine moribund companies from the stock exchange.

The companies were delisted because of low liquidity and a failure to update shareholders with corporate information on a regular basis.

The following companie were delisted: Intra Motors, ADC Plc, Grommac, Onwuka Hi-Tek and Nigerian Lamps, Nigerian Yeast & Alcohol company, Security Assurance Plc, Sun Insurance Plc and Nigerian Textile Mills Plc.

IMF says major global economic slowdown coming

Not surprisingly the IMF chief economist, Olivier Blanchard, has predicted a major global economic slowdown. That said, he believes emerging and frontier economies are still expected to provide a source of resilience, since they were benefiting from strong productivity growth and improved policy frameworks before the credit crisis started. The latest IMF World Economic Outlook observes that the world economy is rapidly decelerating due to the high energy and food prices, so the slowdown is already here.

Monday, 13 October 2008

Is Rwanda about to invade the Democratic Republic of Congo?

Tension and military activity continued to build up in eastern Congo. DRC authorities had seen concentrations of Rwandan troops gathering at the border.
give tacit justification to Nkunda's activities during the week.

On Tuesday, Rwanda's Foreign Affairs Minister Rosemary Museminali told a meeting of Kigali-based diplomats of an alliance between DRC forces and remnants of Ex-FAR (the Rwanda army of the late president Juvenal Habyarimana) and Interahamwe militiamen who spearheaded the 1994 genocide in Rwanda.

Nobel prize goes to International trade guru

The Nobel prize for economics has just been awarded to Prof. Krugman. He is well known in academia for his work in trade theory, which provides a model in which firms and countries produce and trade because of economies of scale and for his textbook explanations of currency crises and New Trade Theory, all of which is relevant to Frontier Markets.

Krugman was a critic of the "New Economy" of the late 1990s. Krugman also criticized the fixed exchange rates of the Asia nations and Thailand before the 1997 East Asian financial crisis.

Krugman is optimistic that frontier markets will not suffer a protectionist backlash.

Sunday, 12 October 2008

Rwanda auctions telecom license

Zain, LarryCom, MilliCom and Telecel Globe (Orascom Telecom) have all submitted bids for a telecom license in Rwanda. the authorities are said to be disappointed by the response but four bidders are enough to effect an orderly auction.

Friday, 10 October 2008

Nigerian bail out plan

First Bank of Nigeria Plc, Union Bank of Nigeria Plc, Zenith Bank Plc, Intercontinental Bank Plc, United Bank for Africa Plc and GTBank Plc have agreed to invest N600 billion into the market. Each bank is investing N100 billion

Ugandan shilling continues fall

The fall in coffeee prices (yes, even coffee is collapsing) has hit the Ugandan shilling hard, down, 4,3% yesterday alone,

Thursday, 9 October 2008

Iranian market +31.74% YTD

ITs difficult to find any good news, Even Iran's resillinet markte is down 2.95% this week. Still, its up 31.74 this year. Now that's a real uncorrelated country!


Icelandic equity trading will be suspended until Oct. 13 after the government seized Kaupthing Bank hf, the country's biggest bank.

Iceland is getting closer to becoming the first nation to go bankrupt as a result of the credit crisis. Fitch Ratings cut Iceland's long-term sovereign default ratings to "BBB-," from "A," putting them firmly in "junk" territory. Moody's has also cut Iceland's sovereign rating to "A1," from "Aa1," and even this is under review.

Wednesday, 8 October 2008

Once more unto the breach

Once more unto the breach, dear friends, once more,
Or close Wall Street with your sub prime debt!
In markets there's nothing so becomes a man
As modest stillness and humility,
But when the blast of panic blows in our ears,
Then imitate the action of the tiger:
Stiffen the sinews, summon up the blood,
Disguise fair nature with hard-favored rage;
Then lend the eye a terrible aspect:
Let it pry through the portage of the head
Like a savvy investor; let the brow o'erwhelm it

(Appologies to Shakespear)

Danfonds performance (excluding positive contribution from hedging)

Though markets. Even so, the long side of our model portfolio is proving 'relatively' resilient. The hedgeing is kicking in quite nicely, as South Africa and Turkey (where we go short the indexes) have had some dramatic falls (which we gain from). The currency side of things, however, is all over the place at the moment. The extreme volatility and uncertainty in international financial markets, combined with slowing global economic growth, continue to weigh heavily on frontier currencies.

FTSE/JSE All Africa Index Series

Another new index! The FTSE/JSE All Africa Index Series was launched yesterday, designed to represent the performance of the top African companies listed on the stock exchanges of qualifying African countries. Each country is capped at a maximum of 40% of the index.

More interesting from our perspective is the sister inex, the FTSE/JSE All Africa ex South Africa 30 Index. This includes just the top 30 largest eligible companies, by market capitalisation, listed on the stock exchanges of qualifying African countries excluding South Africa. It has a maximum of 7 stocks permitted per country.

Commodity prices

Oil, Copper, aluminum and nickel are slumping on speculation that a global economic recession will curtail commodity demand. Crude oil for November delivery fell $4, or 4.5 percent, to $86 a barrel

Platinum and some agricultural commodities have fallen below their production costs. Short term bad news for commodity rich frontier markets.

Egypt falls 18% in two days

The Egyptian market, more an emerging than a frontier market, has collapsed 18% in two days. It is now more than 50% down since May.
The biggest losers were Cairo Oil down 64.16%, EG Development down 57.92%, Nile Cotton 51% and ALX Spin and Weaving 50.98%.

Big seller in LonZim PLC

This is what happens whan you have an illiquid stock and a forced or panic seller. Take a look at the volume (bottom bars) and the impact of the seller on the stock price (line chart).

Kuwait cuts its repo rate by 100bps

Kuwait's central bank cut its repo rate by 100 basis points to 2.5 percent and its its discount rate by 125 basis points to 4.25 percent. Concerns about the credit crunch are particulalry acute in Kuwait right now.

Tuesday, 7 October 2008

Nigerian Stock Exchange and Securities and Exchange Commission discuss stock market bail out

Nigerian Stock Exchange and Securities and Exchange Commission meet in crisis talks today on a plan to plan bail out the Nigerian stock market.

The Federal Government has been trying to stem the negative trend for two months with a variety of meaures. It now appears they are appealing to the private sector for help. The plan will involve the Central Bank of Nigeria and market operators including banks. The market is down 31 per cent since its high.

Muscat Securities Market hard hit

The Muscat Securities Market benchmark MSM-30 index fell by 7.29 per cent yesterday following a 6.7 per cent fall on Monday.

Names we follow include Oman Telecommunications Co, down 6.54 per cent, Oman Flour Mills down 10 per cent and United Power also down 10 per cent. Turnover was high and breadth poor. The top fallers by volume traded were BankMuscat and Galfar Engineering.

What happens to frontier economies in a depression?

It has become fashionable to cite the Great Depression as a feasible scenario following the credit crisis. The question we get asked is how will this impact frontier markets. The answer is that we can look back to what happened to the Frontier markets of the 1930's. Academic evidence shows that industrialization actually accelerated in many less-developed countries during the Great Depression and subsequent decades. This industrialization resulted from the less-developed countries being delinked from the international economy. This delinking caused countries in parts of Latin America, Africa, and Asia to shift production away from exports such as agricultural products and minerals and toward production of manufactured goods.

East African currencies

East African currencies are suffering amid worsening fundamentals and the global financial market turmoil. Risk aversion has manifested itself in the region with severe pressure on the Kenyan, Tanzanian and Ugandan shillings.

Nigerian banks

Nigeria's banks have won approval to restructure margin loans extended to stock market traders. They will now avoid having to recognise the losses suffered in recent stock market declines as non-performing loans. The extension is up to the end of 2009.

The high level of margin lending in Nigeria has hit the banking sector shares hard in recent weeks.

The websites of the 25 Nigerian banks are listed below.

I'm from the government and I'm here to help

In these times of crisis what differentiates frontier markets from developed markets? Quite a lot actually. Still, you are unlikely to hear the frightening phrase "I'm from the government and I'm here to help" coming from the frontier market space.

Safaricom - the risks of a fifth license increases

The reports that the Kenyan government is considering scrapping a law requiring foreign telecoms investors to is prompting speculation that a fifth license is close to being awarded. A fifth mobile licence would be a negative for Safaricom. The market is already crowded with four licenses.

Jordanian real estate

The Jordanian real estate sector has been the the driver of Jordanian economy. Indeed, the construction sector accounts for 4.4 % of the GDP. The majority of the activity is occuring in Amman, which accounted for 39.6 % of total building.

The bad news is that it the real estate market is now slowing dramatically. Numbers for 2008 are negative. In 2007, the value of real estate transactions only grew by 7.7 %; this compares to steeper growth rates of 48.6 %, 75.0 % and 53.8 % recorded in the years 2006, 2005 and 2004, respectively.

Monday, 6 October 2008

Ecobank delays closing

Ecobanks rights issue has been extended to 31st October in view of current market conditions.

Latvian solution for weak banks - make them weaker???

Latvia's central bank has proposed to cut the mandatory reserve requirement from 5 percent to 2 percent in an effort to free up money for lending. seems to us that this just makes the banks weeker without addressing the problem, which is one of confidence.

Credit spreads excellerate their widening in Africa

Ghana's US$ Global 2017 sovereign bond has seen its spread over 10-year US treasuries widen to 613bps over the past several weeks from 484 on September 1.

Gabon's has also seen a 231 bps jump to 773 bps above US 10-year treasury bonds, between September 30 and October 6.

Kenya Commercial Bank

In view of the stated acquisition objectives of Ecobank, we have been looking around for possible targets. Kenya Commerical Bank would fit the bill but would also be a bit bigger takeover than most in the market are looking for.

It has a strong balance sheet, a competent and effective mangement team and 145 branches. In addition, it owns subsidiaries in Tanzania, Sudan and Uganda, as well as plans for Rwanda. The bank has experienced declining capital adequacy ratios as a result of the Kenyan specific issues and its own rapid growth. Timing could prove interesting. The bank has a 59% free float, although government approval would be needed as they have a 26% stake.

Sunday, 5 October 2008

Deyaar Development PJSC

Its not all doom and gloom (yet) in the Dubai property market. Deyaar Development PJSC has announced the real estate company's financial results for the three months ending on September 30, 2008. Net profit for the third quarter of 2008 reached $84.9 million, an increase of 26 percent compared to $67.2 million in the second quarter of 2008, and up 56 percent compared to $54.5 million in the third quarter of the previous year.

Friday, 3 October 2008

Dubai's $20 billion (Dh73.47bn) roll over

The UAE and particularly Dubai has a large amount of short-term debt to roll over which despite its good rating is an issue with a liquidity crisis going on.
In particular, there is a lot of concern about the state of the real estate market. Dubai Holdings is the name most in the frame. DP World and Nakheel are probably okay because the UAE government would almost certainly come to their rescue if they faced roll over issues.

The Reuters/Jefferies CRB index - Commodities

More bad news for the Frontier Markets that are generally rich in commodities. The Reuters/Jefferies CRB index has fallen dramatically in the past few weeks. Commodity prices are coming off on concerns that there will be a global economic recession. The firmer dollar placed more downward pressure on prices, with the index falling 10% this week. Copper prices are at a 19-month low, crude oil is set for its largest weekly decline in four years, and platinum dropped to its lowest in three years.

Thursday, 2 October 2008


Namibian GDP is expected to grow at 3,9 per cent on the back of the mining sub-sector, which consists mainly of uranium, zinc, copper, gold, lead and silver. That said, all is not looking up. The diamond industry will see output decline due to reduced onshore mining, and the electricity sub-sector does not look good either due to high import and operational costs.

Namibia's economy had remained resilient during the second quarter of 2008, with agriculture, mining and the services sector keeping the economy steady.

Abu Dhabi banking consolidation on the way?

Speculations that Abu Dhabi's three leading banks may merge has now reached feaver pitcg. In the past couple of days the rumour mill has been working overtime. They say that the Abu Dhabi Commercial Bank (ADCB) and First Gulf Bank may be merged, while other see a merger happening with National Bank of Abu Dhabi.

The share prices of Abu Dhabi Commercial Bank rose 8.62 per cent. The Abu Dhabi based banks have strong balance sheets and have delivered good earnings.

MSCI Frontier Emerging Markets APEX Index

MSCI Barra announced today that it has launched the MSCI Frontier Emerging Markets Index, and a more tradable proxy for this benchmark - the MSCI Frontier Emerging Markets APEX Index.

The MSCI Frontier Emerging Markets Index is designed to serve as a benchmark covering all countries from the MSCI Frontier Markets Index and the lower size spectrum of the MSCI Emerging Markets Index.

In addition to the countries from the MSCI Frontier Markets Index, the following countries from the MSCI Emerging Markets Index will be included in the new MSCI Frontier Emerging Markets Index: Argentina, Colombia, Egypt, Jordan, Morocco, Pakistan, Peru, and the Philippines.

Zimbabwe market plummets 50% on one day.

We are getting so used to the Zimbabwe stock exchange being up 50% every day as a result of te hyper inflation, that declines like this come as a double surprise. The 50% fall yesterday was the direct result of the 137% depreciation in the OMIR to 1.367m/USD.

The movement in the OMIR rate was in response to the future make up of the Cabinet, and Mbeki’s resignation.

Telekom Networks Malawi

Yet another Telekon IPO. This time its Telekom Networks Malawi. TNM intends to raise up to MWK 2.5bn. The offer is expected some time this month.

Malawi has one of the lowest penetration levels in Africa at only 7.6%. The penetration levels are expected to increase on the back projected GDP per capita growth of 8.1%.

Press Corporation currently owns 37% of the company. They will get diluted to 35% post IPO but in our opinion the increased liquidity is good news for them as well.

Wednesday, 1 October 2008

Uganda Clays Ltd

Uganda Clays Ltd is completing its new Shs 25 billion automatic Clay making production plant in in Kamonkoli in Budaka District. It will be the first such factory of the its kind in Africa and will be producing quality tiles, full bricks and half brick.

Tuesday, 30 September 2008

A few words on the credit crisis

Even if the bailout had been passed, it would have been far from over. A few stats..

(1) Total credit market debt owed was $51,019.0bn, or 3½ times nominal GDP.
(2) Domestic nonfinancial sectors owed $32,397.1bn.
(3) The financial sectors owed $16,522.7bn and the “rest of the world” owed $2,099.1bn.
(4) The largest amounts of the total debt are in mortgages ($14,804.2bn), corporate and foreign bonds ($11,330.2bn), Agency- and GSE-backed securities ($7,889.0bn), and Treasury securities ($5,250.6bn).

Monday, 29 September 2008

Bahrains banking sell off

AHLI United Bank, which accounts for more than 50% of Bahrains index, has lost over 20% this year. Still, its better than its competitor, Arab Banking Corporation, which has fallen by more than 66%.

Yield on Nigerian 91-day T-bills falls to 9.23 pct

Yield on Nigerian 91-day T-bills drops to 9.23 pct. I guess you would call that a flight to quality in this market.

Finance Bank Zambia expands into DRC

More cross border expansion in the African banking sector. Finance Bank Zambia has applied for a licence to operate in the Democratic Republic of Congo. The bank has started negotiations with Central Bank of Congo and hopes to start operations in Q1 2009.

Friday, 26 September 2008

Ghana sets up a $300 million debt facility

Ghana has set up a $300 million debt facility with JPMorgan Chase & Co. and Renaissance Capital. At the same time, Ghana repurchased $228 million of debt issued by it former state-owned telecom operator, Ghana Telecom, recently sold to Vodafone Group Plc as debt-free.

TAA frontier market allocations total $19.9 billion

According to Bradley Durham, managing director at EPFR Global, total assets invested in frontier market strategies totaled $19.9 billion as of July 31, up from $11.6 billion at year-end 2007 and $2.9 billion at year-end 2005. Some of the money flowing to frontier markets has come from broader emerging market strategies. Allocations to these markets as part of global emerging markets strategies have increased to 2.6% in 2008 from 0.9% in 2004.

Among investors either considering or already investing in these equity markets are the $160.3 billion California State Teachers’ Retirement System, Sacramento, and the $15.5 billion Kentucky Retirement Systems, Frankfort.

The biggest managers putting money to work in them include T. Rowe Price Group Inc., Baltimore, with $878 million in frontier markets; Acadian Asset Management, Boston, $150 million; and Franklin Templeton Investments, San Mateo, Calif., $100 million.

African Banker Awards

Danfonds has been nominated for the award Investment Fund / Private Equity Fund of the Year for this year’s African Banker Awards. The winner will be announced on the 10th October. Danfonds Frontier funds SPC will be represented at the award ceremony in Washington by Investment Director, Brice Beumo. Danfonds is amongst 4 companies nominated for the award. All excellent funds. The others are in alphabetical order:

· AfricaInvest
· Currency Exchange Fund
· ECP Africa Fund II

The African Banker Awards are designed to recognise the reforms, rapid modernization, consolidation, integration and expansion of the African Banking sector. These awards will help to establish the corporate identity of leading banks and bankers from Africa who are increasingly playing crucial roles in the world banking system.

Thursday, 25 September 2008

Lebanese real estate

Lebanese growth is being propped up by its real estate boom. This is as fragile as other booms have proved to be. Consumer and investor sentiment remains very wary, observing the real estate bust in the US. At the same time, politics don't look good. Sporadic acts of violence and the presence of 10,000 Syrian troops continue to deter investors.

A market to wait for opportunity?

Trading volumes in Tanzania

Talk about uncorrelated. In fact, some countries are totally being overlooked in current market conditions. Tanzania is one of them. Today, the market recorded activity in only five names. TWIGA, TCC, and Swissport led the pathetic volume. DCB traded only 174,538 shares of which 75.37% where on the Foreign Board.

Wednesday, 24 September 2008

Standard & Poor’s assigns AA+ rating for SAR 1 billion 5 year-floating rate notes

Another good rating for a large liquid bond in the GCC. Standard & Poor’s has assigned an AA+ rating for a SAR 1 billion 5 year-floating rate note issued by BNP Paribas Riyadh branch. This rating is the first of its kind in Saudi Arabia.

The rating agency highlighted the Saudi operations of BNP Paribas s being strong and highly diversified with a sound financial position, characterized by contained risk, satisfactory profitability, adequate capitalization, and high financial flexibility.

Monday, 22 September 2008

EMPEA Webcast

EMPEA Webcast
Risk Management in Emerging Markets Private Equity
An EMPEA event with PricewaterhouseCoopers

Emerging market investing involves a unique set of risks outside of those typically encountered in developed markets. Investors and managers must therefore anticipate and mitigate risks endemic to emerging markets to diminish the likelihood of incurring undesirable outcomes and costs and increase the probability of seizing potential opportunities.


A word on our currency hedging

Our currency hedging strategy in this market is focused on the premise that banking crises are almost always bad news for currencies. In addition, banking crises in emerging market countries tend to be associated with currency capitulation. So its long the 'boring frontier markets' and short the currencies bouyed by FDI with poor budgetary outlooks.

Sunday, 21 September 2008

Recent stock market movements

Frontier markets did not enjoy the same bounce as the rest of the world on Friday. The MSCI Emerging Markets Index 5.6 percent rise was hard to match. That said, it is always instructive to look at which frontier markets stocks rose most in such fast markets.

Mumias Sugar surged around 8%, Kengen was +8.75%, Bank of Baroda up 8.28%, and KPLC closed up 10% and traded 50,700 shares worth 8.365m. Now we know where the hot international money is going...

Thursday, 18 September 2008

Crisis - What crisis?

The Botswana stock exchange has proved to be totally uncorrelated with this weeks unfolding credit crisis in developed markets and associated volatility.

CNBC Interview: Are There Opportunities in the Frontier Markets?

As the world's developed markets tumble on the financial crisis in the US, how are the frontier markets, or the less-developed emerging markets, faring? Daniel Broby, CEO of Danfonds, sees opportunities in these markets in the long term.

Nigeria acts to ease monetary conditions

In a bid to stop the selling in its markets, Nigeria has just cut rates by 50bp to 9.75% and injeted 150bn Naira into the banking system. At the same time it has halved bank reserve requirements to 2% and lowered liquidity ratios for banks to 30% from 40%!

Pakistan American relations

On Tuesday, the Pakistan's military ordered its forces along the Afghan border to repulse all future American military incursions into Pakistan. American forces have recently been violating Pakistani sovereignty. Clearly.. an unwelcome a potentially dangerous turn in events.

Tuesday, 16 September 2008

Latin American Frontier spreads.

Another interesting credit crisis metric. Sovereign spreads across Central America are remarkably tight. The spreads on Costa Rican and Guatemalan sovereign bonds are 286 bps. Panamanian sovereign risk trades 245 bps over Treasuries, and El Salvador is at 325. Hmm...

Frontier markets best performers in the last month

Monday, 15 September 2008

Movement for the Emancipation of the Niger Delta

Movement for the Emancipation of the Niger Delta have announced an escallation in hostilities. They say, "Following a previous warning that any attack on our positions will be tantamount to a declaration of an oil war, the Movement for the Emancipation of the Niger Delta has declared an oil war in response to the unprovoked aerial and marine attacks on a MEND position in Rivers State of Nigeria on September 13, 2008 by the armed forces of Nigeria."

Just how an oil war is going to be any different from the criminal attacks that have been a regular feature of this group remains to be seen.

Qatar's Doha Securities Market falls 13% in two days

Looks like the fast money is finally coming out of Qatar's Doha Securities Market. In fact, it looks like it has gone into freefall. On Sunday the DSM fell 6.2%, and today it dropped a further 7.1% to close at 8,216.

Middle Eastern equities continue to be hit by falling oil price

Middle Eastern equities fell further over the weekend and this Monday despite having strong Sovereign fundamentals. The falling oil price, (sharply down again today), the global economic slowdown, and the turmoil caused by the collapse of Lehman Brothers (not to mention losses at AIG and takover of Merrills) are all contributing to reducing the regions risk appetite.

Friday, 12 September 2008

Romanian Credit Default Swaps

One CDS we are watching closely. The outlook for the Romanian 5-Year credit default swap has deteriorated dramatically. The spread has widened from key support at 250bps on September 10, widened to 256bps today. Going forward, it could still widen, possible as high a 330bps.

Romania's Economy and Finance Minister, Varujan Vosganian, recently estimated economic growth rate at around 8.5 and 9.1 percent. Romania could end this year with an economic advance of 8 percent.

Sonatel sell off

Senegal based Sonatel has been collapsing since the sentencing on September 3 of former managing director of US-based ITXC on charges of bribery relating to seven western African telcos between 2001 and 2003. Of these, Sonatel is the listed company affected by the judgement's revelations of problems of governance and corruption.

The decline has dragged down the 38-company west African regional bourse, BRVM. This has sold off considerably in recent days, having broken through support.

BioEnergy Africa Limited

Mozambiques BioEnergy Africa Limited has just raised £8.6 million through a placing of 68,825,600 Shares at 12.5 pence per share. The Company has a market capitalisation of approximately £41.5 million.

The funds raised will be used to develop its first project, the 30,000ha Massingir Fuel Ethanol Project in Mozambique. Sugar cane is considered the most efficient, commercially viable ethanol feedstock and southern Africa has the potential to be one of the most cost effective regions for sugar cane production.

Thursday, 11 September 2008

Saudi Basic Industries Corp (SABIC AB)

Take a look at this. Earnings going north and price going south. Leaves the frontier markets largest market capitalisation company on a PE 0f 9.57.

Kenya facing famine

As if the riots and rising prices were not enough to contend with, we understand that many parts of Eastern Province are facing severe famine. Prolonged drought has led to massive crop failure.

Worst-hit areas are in the northern frontier districts of Chalbi, Moyale, Marsabit, Laisamis, Garbatulla and Isiolo. There are also problems in the Ukambani districts of Kitui, Mwingi, Machakos and Makueni.

The Ghana Commercial Bank,

What do you do if your business is being held back by virtue of the government being the biggest shareholder and also biggest lender from your bank. The Ghana Commercial Bank's solution is to ask for more capital and for more business from the government. Unfortunately for the Ghana Commercial Bank, the Government is not too pleased with its branch expansion program ouside of the country. It is also, quite rightly, not keen to expand this cosy relationship.

We visited the Ghana Commercial Bank last month. To us, the solution is for the government to dispose of its stake and to put the government's refinery loan on a commercial footing.

Wednesday, 10 September 2008

Zimbabwe dual listings.

The Old Mutual Group has been operating in Zimbabwe for more than 100 years and is by far the best known dual listing. Old Mutual is a diversified international financial services group listed on the stock exchange in London , South African, Malawi , Namibia and Zimbabwe. The disposal of Old Mutual shares in London and/or South Africa is the most common way to get funds out or into the country at a free market exchange rate. This is normally done with the approval of the Ministry of finance to raise foreign currency to redeem loans. Other dual listings include Cargill Zimbabwe, a local subsidiary of the United States agriculture giant, African Banking Corporation (ABC) chaired by top ZANU-PF businessman Oliver Chidawu and in which the World Bank affiliate International Finance Corporation has a 10% shareholding; and Vulya Investments.

Dubai International Financial Centre 2012 Sukuk

The Dubai International Financial Centre 2012 Sukuk is one of the benchmark bonds in the GCC. As the price of oil has fallen and the credit crisis worsened, the spread has widened against LIBOR to 307bps. Prior to last summer and the credit crisis, when oil was significantly higher, the spread was only 44pbs.

The Suruk is interesting as it is very liquid. The high level of international interest in the USD 1.2bn Sukuk means some 67% of its investors are from outside the region.

DIFC Investments' 5-year al-Mudarabah Sukuk has a rating of 'A1' from Moody's and 'A+' from Standard & Poor's.

Tuesday, 9 September 2008

Access bank launches mobile banking in Kenya

Access bank is going mobile. Kenya's Central Bank Governor Njuguna Ndung'u launched of the country's first formal mobile banking service. In Kenya, people already use mobile phone chips in an informal way. The prepaid chips are used as a from of money transfer. A very exciting develop, especially as more people have mobile phones than have bank accounts!

Monday, 8 September 2008

Linkage Assurance Plc

Regular readers will know we are not too keen on the Nigerian insurance market. Well, Linkage Assurance Plc has just announced an increase in turnover of 258.49 percent. A cynic might say this could have been at the expense of margin. Not right.. Profit before tax attained a new high of N304.8 million against N76.4increasing 298.95 percent.

Democratic Republic of Congo considers first IPO

The government of Democratic Republic of Congo is planning to privatise some of its mining assets. Victor Kasongo, deputy minister of mines, said the government wanted to transform state-owned mining companies into commercial entities. New management would be drafted in to turn round such assets and then would then be floated through an initial public offering. In short, the first mining flotation should happen in less than 12 months. Sounds interesting.

Frontier Market's roadshow

In order to raise awareness of Frontier Markets and Danfonds activities in new Emerging Markets, we are holding a number of one on one's and presentations over the comming months. Please contact us for further details on +45 44209881.

Stockholm 9th Sept
London (City) 17th, 18th Sept
Jersey 19th Sept
London (Docklands) 22nd Sept
New York 24th, 25th, 26th and 27th Sept
London (West end) 29th Sept
London All day conference
Geneva 3rd Oct

Friday, 5 September 2008

A stock to die for...

FSG Limited, the biggest funeral services provider in Botswana, plans to raise 36 million pula through an initial public offering to finance the construction of cemeteries and expand into Zambia.

FSG will begin trading stock on the Botswana exchange Oct. 6, becoming Africa's first publicly traded funeral company.The Gaborone-based company will sell about 30 percent of its 120 million shares for 1 pula apiece prior to listing on the Botswana Stock Exchange. The company has 50 percent of the market.

Allocations to ME/Africa Funds rise to USD 733m in Q2

According to HFN, hedge funds focused on the Middle East and Africa had their highest total of new allocations in the second quarter of 2008. HFN have caluclated that total assets for hedge funds investing in Africa and the Middle East rose 18.78%in the second quarter, with new allocations of USD 733 million.

Ukrainian Parliament splintered

Ukraine has returned to political theater and stocks were suspended today to prevent further falls. We are looking for a semblance of stability in order for the market to stabilise... but the fundamentals are now looking interesting. First half results are showing impressive top and bottom line growth.

Ukrainian Parliament splintered two nights ago with Yulia Timoshenko's block siding with Party of Regions in passing a legislation to reduce Presidential powers. In short, the rift was caused by an attempt to shift power more from the president to parliament as well as the tension caused by the Russia - Georgia conflict.

Impressive financials coupled with low valuations in a market down over 50%! Watch this space.

Thursday, 4 September 2008

GCC Financials

Banking and finance companies represent 40 percent of the 150 largest market capitalisation companies in the GCC region.

Al-Rajhi Bank has the highest market cap of US$32 billion. Kuwait Finance House has a market capitalisation of US$21.68 billion, and in third place is National Bank of Kuwait (US$18.7 billion).

Other large banks and financial companies include Samba Financial Group (US$16.26 billion), Emirates NBD (US$16.23 billion), SABB (US$14.22 billion), Qatar National Bank (US$13.96 billion), Riyad Bank (US$13.1 billion), Saudi French Bank (US$11.66 billion) and National Bank of Abu Dhabi (US$10.72 billion).

Iamgold bids for Euro Resources

Botswana Stock Exchange listed and Toronto-based Iamgold has made a bid of BWP 1.20 a share for Euro Resources, which has a royalty agreement on its Rosebel mine. Euro Resources, a French company, was up 26% on the back of the announcement.

Clearly, this clears up the capital structure and obviously Iamgold knows what the mine is worth, so it looks like its good news for everyone.

Bank of Georgia

Bank of Georgia, the country's leading universal bank, released announced first half net profit increased 86.2% year on year. The bank’s ROAE was 17.3% and CAR was 25.8%. It will be interesting to see how this impresive growth was affected in the second half by the troubles.

We understand that on September 1, the Central Bank of Georgia sold more dollars in August than in any other month in at least nine years. The US$187.2 million that was sold amounted to almost 13% of Georgia's US$1.5 billion reserves. .

Wednesday, 3 September 2008

Zambian Breweries (Zambrew)

Zambian Breweries is diversifying into soft drinks.

The company has announced plans to invest USD 60m over the next 2 years on re-designing Northern Breweries. Zambrew will invest a USD 20m will of this in soft drink production facilities. These will consist of a 42 000 bottles per hour packing line.

Globacom rumours

Nigerian entrepreneur Mike Adenuga Jnr is rumoured to be implementing his plan to build a pan-African telecoms giant by acquiring Telkom of South Africa.

The idea is that if Globacom can do a deal based on Telkom's 50% stake in Vodacom. Globacom cannot bid for the Vodacom shares directly, as Vodacom's other 50%-owner, Vodafone, has the first right of refusal. So it can only access Vodacom by acquiring Telkom outright.

Telkom, so far, has claimed it has not entered any discussions. That said, rumours suggest Telekom's CEO and Adenuga had now met. Talk is that Globacom proposes that the new entity, to be called Vodaglo would be equally owned by Globacom and Telkom.

The question now is whether Telkom's shareholders, which include the South African government's 39%, would be interested in the bid by Nigeria's second-largest cellular operator.

Tuesday, 2 September 2008

Alka Banerjee on frontier markets

Alka Banerjee, vice president of Global Equities, Standard & Poor's Index Services was recently inteviewed on what distinguishes a frontier market from an emerging market.

She replied "there is as yet no real defined number or threshold that can actually tell you that this is frontier versus this is emerging. The frontier markets concept came into existence in the mid-1990s when the IFC decided to focus on markets which were typically not part of the regular emerging markets—those that had established stock exchanges, had a trading history, but were very small and illiquid."

When Banerfee was asked if frontier markets provide a new level of noncorrelated returns? she replied "they absolutely provide diversification. Emerging markets have over the years become far less of a diversification strategy than they were 10 years ago—or even five years ago. Now emerging markets tend to correlate upwards of 85 to 95 percent with developed market performance. It varies across markets, but the correlation numbers for frontier markets can be in the range of 40 to 60 percent, which is a huge diversification."