MSCI Frontier Emerging Markets Index

The annual country review for the MSCI Frontier Emerging Markets and MSCI Frontier Emerging Markets APEX Indices is upon us. There will be no changes in the country composition of the MSCI Frontier Emerging Markets Index.

Following improved trading liquidity, Mauritius will be added to the MSCI Frontier Emerging Markets APEX Index, while Nigeria will be deleted from the index due to the introduction of restrictions and low liquidity in Nigeria's Foreign Exchange Market.
The MSCI Frontier Emerging Markets APEX Index is a tradable proxy index reflecting investment opportunities within the frontier markets and lower size spectrum of the emerging markets. It is designed to serve as a liquid proxy to the broader MSCI Frontier Emerging Markets Index.

Oando grows top line 59% y/y.

Oando reported better-than-expected results. Sales grew 12.9%59% y/y. Oando’s Q2 PBT ws N2.8bn as a result of a sequential increase in the PBT margin of 11 basis points. A higher-than-expected tax rate of 30% meant that net earnings actually only grew by 8.7%.

The upstream businesses as well as Gas & Power helped offset slight weakness in the marketing business.

Five bank CEO's fired in Nigeria

In a dramatic move, the Central Bank of Nigeria has fired the CEOs of 5 banks for allowing margin lending exposure to get out of hand. It has indicated that these banks will be recapitalised with a total of NGN 400bn in tier 2 capital. The affected banks are Intercontinental Bank, Union Bank of Nigeria, Oceanic International Bank, Finbank (First Inland Bank) and Afribank. .

Nigeria to support indigenous oil industry

Proposals in draft nigerian legislation designed to encourage “indigenous” producers looks set to become law. The change will effect the re-licensing some of the more than 300 fields that have been discovered but not yet developed.

It is expected that, the Nigerian company, Oando will be the biggest beneficiary.

Total output in Nigeria’s oil sector, sub-Saharan Africa’s largest, is at about 1.7mb/d at most, cut to just over half of capacity by unrest and funding issues.

Sugar continues to hit new highs

The sugar price is now close to its ‘81 Peak. Damaged crops from India to Brazil mean the world won’t have enough sugar for a second straight year. Global demand will exceed output by as much as 5 million metric tons.

Mauritius to introduce futures trading

A giant leap for a frontier market. The Stock Exchange of Mauritius will soon start trading in futures. The first futures contracts will be on the SEM-7 index and on some of the most liquid stocks traded on the official market. The SEM-7 is made up of the largest companies by market capitalization, including Mauritius Commercial Bank, Naiade Resorts, New Mauritius Hotels, and State Bank of Mauritius.

Nigeria sees decline in telephone lines!

This is not something that we have seen before. Nigerian active lines actually declined in April. If you consider this as a proxy for household consumption, that is not good news. Admittedly the fall was just 75,000. That said, we are used to hearing the number going up. In the previous months there had been increasesaroungg the one million level.

The Case for Frontier Market Fixed Income

Working Paper Series
Date posted: August 01, 2009 ; Last revised: August 01, 2009

Abstract:
Frontier market debt is becoming increasingly attractive as an asset class, supported by the economic development of the less developed emerging markets. Analysis of the constituents of this off-benchmark asset class shows that allocation to it can potentially result in higher yield and better diversification. The authors argue that frontier fixed income should be included in strategic asset allocation using a technique known as reverse asset allocation.

Keywords: Emerging Market, Debt, fixed income, frontier markets, asset allocation

JEL Classifications: B00
Citation

Broby, Daniel P. and, Bates, John., White Paper: The Case for Frontier Market Fixed Income(July 31, 2009). Available at SSRN: http://ssrn.com/abstract=1441894

Investment in Serbia

There are only seven companies in Serbia that rank in the top 500 in Eastern Europe. Investors look for more choice. Maybe with the future IPO's of JATA, Telekom and Galenika that will change. Of the 800 joint stock companies, which are listed on the BSE, only 34 have sufficient trading volume. For example, if I would now like to buy Messer Technogas, on the basis of the current valuation on the BSE, one would need a year to build a small position of around 100,000 dollars. This will change when Serbia develops active domestic investors, who buy and sell regularly. In the meantime, why would anyone buy such an illiquid company although it has value?

On the positive side, six-month bonds issued by the Ministry of Finance with a yield of 13.99 percent is not bad.

To see the rest of Daniel Broby's (CIO of Silk Invest) interview with Blic, Serbia's leading newspaper, see the following link.

http://www.blic.rs/ekonomija.php?id=101139

Silk Invest sees renewed bond issuance in Nigeria

The Nigerian banks are starting to pile into their local bond markets. Guaranty Trust Bank is seeking approval for a N200bn ($1.3bn) debt issue. This follows similar plans at First Bank (N500bn) and marks a much anticipated return for the banks who have dormant in issuance for three years. Likewise, Access Bank has also drafted plans to issue debt.

We would caution that a major credit risk is the potential for over-issuance of debt. In the interim, however, we look forward to observing the development of a much needed yield curve in Nigeria which will enable the banks to see longer term business objectives met as well as the potential for investors to play relative value investment strategies.

Global recession not impacting frontier markets

This is an interesting visual from the Economist..

Zimbabwe sees strong trading volumes

Accordins to Renaissance Capital, Zimbabwe is now the third biggest equities market in sub-Saharan Africa, based on turnover. Volume has jumped from USD 50,000 to USD 1.3 million per day. The market value of shares listed has jumped from a bargain basement USD 1bn to USD 4bn in seven months.

Air Arabia expects stong Moroccan growth

Air Arabia wants its Air Arabia (Maroc) to become as big as it is within five years. The Dubai-listed carrier, the Gulf Arab region's largest low-cost airline, plans to expand by three to four aircraft per year. Moroccan shareholders own 51% of Air Arabia (Maroc), including family-owned holding company Holmarcom. The remaining 49% is held by listed Air Arabia and a Bahraini bank. Air Arabia (Maroc) will help meet growing demand for travel to Morocco the government expects to exceed 2008's record 8m visitors in 2009 and is aiming for almost 10m tourists in 2010.

Africa shrugs off worst of equity market correction.

It is good to see that equity markets appear to have finished the short term correction. Take a look, however, at how robust Africa has been in the sell off!

Botswana’s gross domestic product plunges 22%!

Botswana's GDP fell by 22% compared to Q4 2008. The decline in GDP was due to decreases in mining and quarrying industry, water and electricity, general government, hotels and restaurants. Manufacturing fell by 15% while mining and quarrying industry contributed most to the decline at 68.6%.

Almarai delivers again...

Almarai delivered 2Q SAR287m net profit in-line. Lower There was a positive surprise on the operating expenses front. SG&A as a % of sales improved significantly from 19.3% to 17.7%. The company is increasing its focus on cost controls to offset slowing sales growth.

Almarai, although a Saudi company, is the largest integrated dairy foods company in the world!

IMF say Tunisia is prudent and strong

The IMF has just noted in a report the Tunisian economy’s resilience. It said it reflects a strong posture of structural reforms and prudent fiscal and monetary policy stances.

Tourism, remittances and FDI have held up far better than expected. In addition, reserves of USD 9 billion are considered high. The IMF predicts growth of 3%

Botswana cuts interest rates 150bps

The Bank of Botswana reduced rates by 150bp to 11.5%. It is expected that inflation will maintain a downward trend.

This is the third consecutive rate cut by the Monetary Policy Committee since rates topped, a total of 300bps.

Uganda's National Insurance IPO

Uganda will sell a 40% government stake in Uganda's National Insurance in mid-July to list it on the Uganda Securities Exchange. In 2005, Uganda sold a 60% stake in the company to Nigeria's Industrial and General Insurance company.

United Nations looks to African agricultural expansion

The UN believes that the savannah, spanning 25 African nations, could be used to boost commercial farming. A new report says that some 400 million hectares in the Guinea Savannah zone - stretching from Senegal to South Africa - are ripe for commodity production. At present, only 10 per cent of that area is actually being farmed.

Africa can now make use of new technologies and improved business climates