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.

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

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.

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.

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.

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.

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.

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.

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%.

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

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.