Frontier Markets Blog

Sudan stock exchange goes electronic

2012-01-05T04:07:00.000-08:00

FEATURE-Khartoum bourse woos foreign funds with electronic trade

Wed Jan 4, 2012 9:00am EST
* New computer system to be launched this month
* Plans eventually to introduce commodities trade
* Aims to attract investment from Gulf
* But liquidity, trading hours, custody are obstacles
* Shahamas may remain more attractive for many

By Ulf Laessing (Reuters article)
KHARTOUM, Jan 4 (Reuters) - Glancing at stock market prices scribbled in columns on large white boards, Sudanese broker Maha Abdul-Rahim hopes a new electronic trading system will bring more money to the Khartoum Stock Exchange.

The bourse plans to launch a computer-based trading system next week, ending the practice of having brokers write share price offers on boards -- if a deal is reached, a bourse employee crosses out the numbers and prints out a paper to be signed by buyer and seller.

"The new system will achieve more transparency. You will know the identity of sellers," said Abdul-Rahim, while signing papers after the daily one-hour trading session.

In manual trade, brokers often agree informally on a share sale with buyers and sellers before they come to the small trading room on the 11th floor of a commercial building and offer their shares. Stock market officials hope a more transparent electronic trading system will attract foreign investors from centres such as Abu Dhabi or Dubai.

"Cross-listings will be easier, as will access," said General Manager Osman Hamad Khair, ushering a visitor into the new trading room as technicians made final tests before launch on Sunday.

The bourse is tiny, with a total market value of around 6.4 billion Sudanese pounds ($2.1 billion). That compares with about $350 billion for the Saudi Arabian stock market, the biggest Arab bourse.

In a second expansion step, the Khartoum bourse, which was launched in 1995, also wants to establish trading platforms for gold and other minerals and Sudan's main agricultural export products, such as gum arabic and maize. Khair gave no time frame.

The launch of the electronic system has been delayed for more than a year, which officials blame on a U.S. trade embargo complicating technology imports. U.S. sanctions were imposed over a decade ago amid charges that Sudan sponsored terrorism.

LIQUIDITY
Sudan hopes the electronic system will attract enough investment to help overcome the economic crisis caused by the secession of South Sudan in July, which deprived Sudan of most of its oil production. Annual inflation hit 19 percent in November, while the Sudanese pound has fallen against the dollar on the black market as oil revenues have dried up.

Most Western firms shun Sudan because of insurgencies in three parts of the vast African country, tensions with South Sudan, and the U.S. sanctions. So China and Arab countries are the country's main trading partners.

Khair said the bourse was preparing to sign more cooperation agreements with Arab stock exchanges such as Qatar to allow cross-listings of stocks and technical assistance. Such deals already exist with Abu Dhabi and Oman; among the small number of cross-listed stocks are telecommunications firm Sudatel , also listed in Abu Dhabi, and Al Salam Bank Sudan, also listed in Dubai.

Currently, foreign portfolio investment in Sudan focuses on short-term Islamic bonds, so-called shahamas, which are sold by the central bank on behalf of the government to fund its budget -- desperate for cash, it offers a yield of almost 20 percent. No precise data exists but officials say foreign investors account for up to 30 percent of purchases of shahamas.

"There are some foreign investors from the United Arab Emirates and Saudi Arabia," said broker Abdul-Rahim. "They mostly buy shahamas....I think the economy and currency need to stabilise for more foreigners to come."

British fund manager Silk Invest, which focuses on emerging and frontier markets around the world, says it is considering investment in Sudanese stocks, though limited liquidity and trading hours as well as concern over custody of securities are challenges.

"We have Sudatel and Sudanese Free Zones & Markets on our radar screen, but as yet have made no investments in Sudan," said Chief Investment Officer Daniel Broby.

"The latter, a sharia-compliant duty free zone, is exposed to a number of areas that we see as growing strongly in the country, namely consumer goods, readymade clothes, toys, perfumes and cosmetics."

The biggest obstacle is the lack of liquidity of most stocks. In the first week of December, only 22 share deals were done worth a total of 523,354 pounds, compared to 112 shahama deals worth 44.74 million pounds, according to official data.

The Khartoum stock exchange's benchmark share index is almost unchanged compared to a year ago. Many shares do not trade for weeks, or longer. The stock of Animal Resources Bank, a large local bank, has not moved for two years, said a bourse official, pointing to a white board.
"Stocks are often not easy to sell. There was big interest in Sudani until 2006 when they paid high dividends. Now they are investing a lot and the stock has fallen and there is not much interest any more," Abdul-Rahim said.

"Most people buy shahamas because they are guaranteed by the central bank."
Even with the launch of the electronic system, bourse officials and bankers say more will be needed to improve transparency. For example, the bourse wants ownership of the market to move from the finance ministry to an independent board, but a new securities bill is still waiting for government and parliamentary approval, Khair said.
"Regulations are still from 1994," he said.

Few of the more than 50 listed firms have investor relations departments, and corporate earnings data often ends up in newspapers or with brokers before being published on the bourse's website.

Khaled Zada, head of treasury and foreign relations at Bank of Khartoum, one of the heavyweight stocks listed on the bourse, said the new trading system was only a first step.
"They need more regulation, more solid companies, more specific enforcements."

Nigeria to introduce short selling

2011-09-01T07:07:00.000-07:00

THE Nigerian Stock Exchange has arranged to permit securities lending and short selling activities.

Securities lending allows a broker-dealer in possession of a particular security to earn enhanced returns on the security through finance charges.

Mr. Oscar Onyema, NSE chief executive officer, said the Exchange is collaborating with industry participants to ensure a smooth take off of the proposed initiatives.

The Cardin-Ludgar provision to help eliminate corruption in frontier markets

2011-08-31T03:41:00.000-07:00

Frontier markets recieved a big boost with passage of the Wall Street Reform Conference Report. In this the Senate approved a measure, authored by U.S. Senator Benjamin L. Cardin, Chairman of the Commission on Security and Cooperation in Europe, and Senator Richard Lugar to increase transparency in the oil, gas and mining industries.

The Cardin-Lugar Energy Security Through Transparency provision will add stability to markets through greater information and predictability and help protect investors from undue risks associated with corrupt or unstable governments in oil-rich or mineral-wealthy countries.

The provision requires extractive companies listed on U.S. stock exchanges to disclose, in their SEC filings, payments made to governments for oil, gas and mining.

Pakistan situations worsens

2011-08-23T08:09:00.000-07:00

Violence and disagrements on taxation between the provinces and central government are stressing Pakistan. The central bank governor has resigned, becasue the government has asked the central bank to print money to pay its bills. This is not good. His replacement is a professional banker, but he is an advocate of lower interest rates (focusing on growth not rising inflation). The markets dont like that either. Elections have to be help before Feb/March 2013. The politicians want to buy their victory in the way Musharaf did.

There are shortages in many things. Skills, finance, governance, electricity, gas and water. Against a backdrop of a poor economy, this is a dangerous cocktail.

The 18th amendment to the constitution has not been implemented well (provincial decentralisation) and this is leading to more friction. US/Pakistan relations have also deteriorated a lot, threatening USD 1.5bn of aid a year, some of it already being held back.

The real risk of a military coup is now very high.

Are frontiers a safe haven

2011-08-09T08:06:00.000-07:00

A BrightTALK Channel

A webcast

Stock splits in China.....

2011-07-15T03:38:00.000-07:00

China's largest hypermarket operator, which priced its Hong Kong IPO at the top of its range and secured cornerstone investment from GIC, has delayed the offering due to an accounting error in the prospectus. The retailer is thought to have overstated its earnings per share for three years in a row, after forgetting to include a stock split in its calculations!

Mauritius International Investment Forum (MIIF) on 15 and 16 June 2011

2011-06-11T10:28:00.000-07:00

The Mauritius Board of Investment plans to hold the Mauritius International Investment Forum on 15 and 16 June 2011. The Forum will showcase Mauritius as an attractive investment destination with focus on promoting the traditional sectors, the emerging value-added activities, as well as future industries. It will also position Mauritius as the natural gateway to invest in the region. Lord Meghnad Desai of the UK House of Lords, Dr Paul Romer, renowned Economist from the US, and Daniel Broby, one of the top frontier market investors will be the Guest Speakers at the Forum.

Website: http://www.miif.mu

Are frontier bonds going to decouple from EM bonds?

2011-06-01T02:59:00.000-07:00

Silk Road Fixed Income Fund versus EM bond universe.

North Sudan seizes disputed Abyei

2011-05-23T07:47:00.000-07:00

Sudan's northern army seized control of the disputed, oil-producing Abyei region, forcing thousands to flee and bringing the country's north and south to the brink of full conflict. Khartoum sent tanks into Abyei town, the area's main settlement, on Saturday, the United Nations said after weeks of growing tension and accusations of skirmishes by both sides.

Control over Abyei remains the biggest point of contention in the countdown to the secession of south Sudan, expected in July. Southerners overwhelmingly voted to declare independence from the north in a January referendum , promised in a 2005 peace deal that ended decades of north-south civil war.

FRONTIER MARKETS: EYE ON AFRICA

2011-05-18T06:07:00.000-07:00

2nd June 2011 12:00 - 15:00

Bloomberg are holding a lunchtime event focusing on African Frontier Markets on 2nd June 2011. Hear from experts in the market on opportunities and growth.

http://www.bloomberg.com/promo/May/43697805/index.html

MSCI Frontier Markets Indices

2011-05-17T08:22:00.001-07:00

There will be three additions to and 24 deletions from the MSCI Frontier Markets Index. The three additions to the MSCI Frontier Markets Index are Banca Transilvania (RO), Qatar Fuel Co (QA) and Distilleries Co Sri Lanka (LK).

The MSCI Frontier Markets Small Cap Index will have 36 additions and 33 deletions.
As announced as part of the February 2011 Quarterly Index Review, due to persistent deterioration of liquidity, MSCI will exclude Trinidad & Tobago from the MSCI Frontier Markets Indices. MSCI Trinidad & Tobago Index will be maintained as a stand-alone country index.

Commodity outlook

2011-05-17T08:20:00.001-07:00

Harare CFO Forum (27th May 2011)

2011-05-14T23:54:00.000-07:00

Event Program
08.00 Coffee & Registration

08.45 Chairman’s Welcoming Address

09.00 Macro Outlook: Tough decisions for your company’s economic future

Mr Daniel Broby, Chief Investment Officer, Silk Invest (UK)

Benefits for delegates will include:

•Current thinking and wisdom on issues that are essential for the effectiveness of the finance executives the businesses they drive.
•Learning strategies to help them build their businesses despite the challenging financial environment
•Gain a unique insight into the thinking of fellow financial management professionals during the interactive panel sessions
•Network and exchange ideas with their peers, discovering new angles to address their most pressing issues.
10:15 Challenges and opportunities for Today’s CFOs

Mr Nigel Chanakira, President and Founder of Kingdom Financial Holdings

11:00 Midmorning teas and Sandwiches

11.45 The Zimbabwe Economy- Past, Present and Future

Mr H W Mungoshi,Chief Economist, ZESA

13.00 Networking Lunch

14.15 The FD’s role in attracting new business and revenue streams

Discussion Group

•An interactive discussion group looking at the following areas:
•How can the FD directly through his own personal efforts attract new business?
•How can the FD help others to attract new business? How can we best add value in each of the Marketing P’s (Product, Price, Place, Promotion, People, Process, Physical evidence)?
•What are we good at that helps attracts new business? And what do we FD’s have a tendency to do – and need to watch out for – which goes against this aim?
•How can we best use target setting and design of the company compensation systems to attract new business? Is it true, what gets measured by us gets done?
•Would it help if we could be more entrepreneurial…should we be? How do we best get any concerns we have in an opportunity without being seen as a blocking mechanism on all things new?
•Does our desire for planning things and our eye for detail act for or against attracting new business?

15.30 Afternoon Teas and Coffees with Biscuits and Scones

16:00 Speaker

17:00 Chairman’s Vote of Thanks

17.15 Speed meets

17:30 Networking drinks reception

Entertainment by Victor Kunonga (Zimbabwe leading Jazz Artist)

The Forum seeks to provide the Chief Finance Officers and Finance Managers in the region an independent strategic debate. The forum speakers and program of plenary sessions will inspire finance executives to focus on opportunities that exist. A range of carefully selected topics will form the thrust of the discussions during the interactive sessions.

The CFO Forum is an event specifically designed to address the increasing needs and demands of the senior finance executive.

With years of economic slowdown, Zimbabwean businesses are subjected to painful boom-and-bust cycles. A prolonged economic surge has left the country with a legacy of stubbornly low productivity growth and a reduced appetite for professional excellence.

Zimbabwean financial executives are facing the inevitable challenges of sharper competition, low productivity and financing constrains? What can financial managers do to avoid the complacency trap and help steer their businesses in the right direction? Join many other CFOs and national and international speakers as we address the growth agenda, identify what successful businesses have done to reposition for sustainable growth, and fast-forward into the future to look at the key trends that will shape corporate Zimbabwe.

IMF on global imbalances..

2011-04-26T06:12:00.000-07:00

The IMF has issued the following observation “The pre-crisis pattern of global imbalances is re-emerging. Growth in economies with large external deficits, like the US, is still being driven by domestic demand. And growth in economies with large external surpluses, like China and Germany, is still being powered by exports. As tensions between countries increase, we could see rising protectionism – of trade and of finance. And as tensions within countries increase, we could see rising social and political instability within nations – even war."

Frontier markets are the place to be in 2011

2011-01-14T07:15:00.001-08:00

Whilst most asset allocators are making cautious predictions for 2011, some are calling for increased allocation to those emerging markets left behind by the BRIC euphoria. In particular, new emerging markets, or frontier markets, are fast becoming an investment theme in their own right.

Frontier markets represent some 4% of global GDP, around $2.5 trillion when combined. These off benchmark emerging markets are typically nascent economies that are just starting on the process of industrialisation. According to Daniel Broby, Chief Investment Officer of Silk Invest, this means that they will enjoy above average growth for the next 5 – 15 years if they get their act together.

A number of frontier markets have either new or established stock exchanges and the investment universe is far larger than most imagine. Indeed, only last week saw the launch of a new stock exchange in Laos. Countries like Iraq, Lebanon and Zimbabwe have sustained their exchanges throughout a decade of troubles. Thanks to greater use of technology, global investors can get access to such markets and benefit from the mispriced risk.

Although the immediate opportunity is in the public markets; private equity, fixed income, and property all offer attractive returns. A number of new funds have been launched to capitalise on this theme including the Silk Road Frontier Fund, the BlackRock Frontiers investment trust and Schroder ISF Frontier Markets Equity.
The frontier markets are particularly attractive to long horizon institutional investors. That said, these are markets where stock picking and local presence is a pre-requisite. Investors should look to have an overweight exposure and not market time. Investment risks include illiquidity and political surprise, but the returns of a expected returns of a diversified portfolio far out way these in the long run.

Frontier markets webcast

2011-01-13T00:51:00.001-08:00

IPE Webcast Series Presents: A Unique Opportunity in Frontier Markets (Silk Invest Limited)
Date:
Tuesday, January 25, 2011
Time:
14:00 UK Time, 9 am EST

Presentation by:
Zin Bekkali
Daniel Broby
Baldwin Berges
Interviewer:
Brendan Maton

Register for this event.Frontier markets have shown remarkable resilience during the recent global economic downturn and have in line with their emerging markets peers sustained their long term convergence trend. African, Arab and Asian frontier countries are increasingly able to strengthen their competitive advantages and carve out a place in the global economy.

The case for frontier markets is however not well understood and many of these markets are selling today at significant valuations discounts in comparison with the rest of the world. This is evident across asset classes and can be showcased when looking at dividend yields which are typically twice the global average or interest rate spreads which are still pricing in a very high risk premium.

This paradox of above average growth and valuation discounts, represents a unique window of opportunity for investors to start looking at these markets. The capital markets in frontier markets are relatively young but are relevant for investors. Their combined market capitalization is bigger than many of the favourite emerging markets and the fixed income universe has reached critical size.

Silk Invest is built around the conviction that the world is turning upside down and that investors should add frontier markets to their portfolios. Silk Invest will host this webcast to share its views on the markets and showcase its approach to get access to the best investment opportunities.

The webcast will allow you to take a closer look at frontier markets and obtain a better understanding of the realities and the fundamental drivers of these fast-growing economies that are increasingly opening up to global investors.

During the webcast, Silk Invest will provide insights and perspectives on:

• The macro case for investing in frontier markets with a special focus on Africa, the Middle East and Central Asia
• The development of capital markets and accessibility of the frontier countries
• Investment opportunities in equities, fixed income and private equity
• The appropriate investment approach for frontier markets and how investors can capture the benefits of this high economic growth

Laos stock exchange goes live

2011-01-10T07:09:00.000-08:00

Two stocks are listing on the new laos stock exhange that opened this year. Banque Pour Le Commerce Extereiur Lao, or BCEL, and, EDL-Generation Co both offer interesting exposure. More state-controlled businesses could be listed within a few years, and the market could end up with 10 or 15 companies listed.

When Laos is analysed by frontier funds like Silk Invest's "Silk Road Frontiers Fund", it is largely because of its potential as a major exporter of hydropower in an energy-hungry region. Thailand, Vietnam and China are growing power demand rapidly, and Laos, with its network of fast-flowing rivers, is viewed as a "hydropower play".

Growing microfinance scandal

2011-01-04T07:34:00.000-08:00

The Indian micorofinance scandal is starting to get more international press. In the last six monthe more than 70 people have committed suicide to escape payments or end the agonies their debt has triggered, according to the Society for Elimination of Rural Poverty, an Indian government agency that compiled the data on the microfinance-related deaths from police and press reports.

African governance

2010-12-02T06:08:00.000-08:00

The Mo Ibrahim Foundation is offering a prize of almost €4 million in recognition of contributions to good governance in sub-Saharan Africa. The Mo Ibrahim Prize for Achievement in African Leadership to former African executive Heads of State or Government who have demonstrated exemplary leadership, including delivering security, health,education and economic development to their constituents, and democratically transfer power to their successor. The prize will consist of €3.8 million over 10 years and a further €150,000 a year thereafter, making it
the largest prize in the world.

Sub-Saharan africa to grow 5.5% in 2011

2010-10-08T01:26:00.000-07:00

The International Monetary Fund cut its 2011 growth forecast for Sub-Saharan Africa to 5.5 percent, but the number is still impressive. The IMF had previously estimated growth of 5.9 percent for 2011.Africa’s growth rate is forecast to almost double this year as demand from China and India drive up prices of commodities such as copper and platinum, and exports rebound from last year’s global recession.

Laos opens stock exchange

2010-10-07T05:37:00.000-07:00

Laos, the smallest economy in Southeast Asia, is starting its first stock exchange in early 2011. Landlocked Laos is seeking global investors to help pay for infrastructure projects and create jobs for its 7 million citizens, nearly half of whom are younger than 16. Rio Tinto Group and Electricite de France SA are among companies that have boosted investments in mines and power plants to tap into the nation’s rivers and other natural resources.

Laos’ economy may expand 7.5 percent in 2011 from an estimated 7.4 percent this year and a 5.5 percent pace in 2009, boosted by electricity sales to Thailand and higher prices of copper, gold and silver, the Asian Development Bank said in a report on its website.

2nd Annual Investing in Frontier Markets

2010-08-20T04:17:00.000-07:00

Assessing favorable regions and products in a diverse market

16th & 17th September 2010, London, UK

An expert speaker panel which includes:

Daniel Broby, CIO, Silk Invest
Peter Westin, Chief Equity Strategist/Economist, Aton Capital
Raphael Kassin, Head of Emerging Market Debt, Reyl Asset Management
Douglas Bennett, Director, Frontier Market Fund Managers
Clemente Cappello, CIO and Portfolio Manager, Sturgeon Capital
Javier Garcia, Fund Manager, Julius Baer Black Sea Fund, Swiss & Global Asset Management
Ayo Salami, Chief Investment Officer, Duet Asset Management
Frank Senyo Dewotor, Portfolio Manager (Africa), Fulcrum Asset Management
Mohammed Hanif, Chief Investment Officer/CEO, Insparo AM
Slim Feriani, CEO, Advance Emerging Capital
Khaled Abdel Majeed, Managing Partner, MENA Capital
Douglas Clayton, CEO, Leopard Capital
Keith Gubbin, CEO, Africa Asset Management
Chris Derksen, Head of Frontier Markets, Investec Asset Management
Kenneth Spurling, Managing Director / CEO, FDSH Asset Management Limited
Alisher Ali, Managing Partner, Eurasia Capital Management

Frontier market EM yields

2010-08-13T06:14:00.000-07:00

The announcement of a CFA 5 billion Cote d'Ivoire bonds 2009-2014 6,95% listed on the BRVM selling at only a 3% discount makes one wonder if yields can get much lower in frontier markets (Cote d'Ivoire defaulted in the not to distant past).

Some think that it is completely mad to think that frontier market yields cannot go to lower levels, even with them having the inverse government debt picture of developed markets. We disagree. Consider that in the past, at the peak of the developed markets bull period in bonds (the ultimate lows in yields), the curve gots so flat that the average spread between the long bond and Fed funds rate was only 100bps. It would seem that just as the BB frontier bond universe was over-looked and hence had the greatest return potential, the pick up in the frontier yeilds, and in particular the local and corproate yields, are still attractive. With the structural case, thhe long end of the frontier universe now also carries with it a compelling total return opportunity (inflation expectations are still far too high).

All change at the NSE

2010-08-12T07:25:00.000-07:00

The Nigerian Securities and Exchange Commission ordered the Director-General of the NSE to leave her post. Local media reported that the former CEO, Mrs Okereke-Onyuke was accused of mismanaging the accounts of the NSE, which she has led for 10 and served for 27 years after coming from the New York Stock Exchange.

Local press reported drama at the Lagos trading floor as officials of SEC and the Economic and Financial Crimes Commission, accompanied by armed police and plain-clothes security officer came to enforce the dismissal.

The cleaning up of insitutions like the NSE is a pre-requisite for Nigeria's economic future.

Bloomberg Africa Equity Focus Day

2010-06-02T02:58:00.000-07:00

In the World Cup month of June, Bloomberg is turning the spotlight on Africa.
It is holding its Africa Equity Focus Day at 16th June 10:30 - 13:00 with 4 experts on the Continent:

Daniel Broby - CIO Silk Invest
Plamen Monosvki - CIO of Renaissance Investment Management (Renaissance Capital)
Farooq Oreagba - Head of Strategy & Business Development Directorate, Nigerian Stock Exchange
Michael Fidance - Head of Emerging Market Cash Trading, HSBC

They will present their views and perspectives about investing in Africa. The seminar will be followed by a Lunch. Bloomberg users can sign up under BU or reply to my message.

Venue Bloomberg
Citygate House
39-45 Finsbury Square, London

Essential Africa: Capital Markets Conference

2010-05-28T11:53:00.000-07:00

Rainbow Consulting is hosting a half day investment conference:
London, Friday 11 June 2010, 8.45 am to 2.00 pm

Registration link

http://www.africanrainbow.org/index.php?option=com_docman&task=doc_download&gid=77.

Time

Topic Speaker(s)
9.00 am
Welcome
Katharine Pulvermacher
Founder & Chief Executive
African Rainbow Consulting

9.15 am
Key Economic and Political Indicators
An institutional investor’s perspective on Africa, covering the many changes that are transforming the landscape

Ritesh Anand
Founder & Chief Executive
Invictus Capital

9.45 am
Trading African Securities
Investors, be aware: liquidity, transparency, regulation and transaction costs in emerging markets may surprise you.

Daniel Broby
Chief Investment Officer
Silk Invest

Coffee & Refreshments
10.30 am
Development Finance Institutions:
International donors are major investors in Africa. Do they crowd out private investment or act as a catalyst?

Mavis Owusu-Gyamfi
Deputy Director, Private Sector Development
UK Department for International Development (DFID)

11.15 am
Private Equity and Venture Capital
What hurdles confront PE and VC funds trying to access the international marketplace
Guy Fraser-Sampson
CASS Business School

11.45 am
Investment in SMEs and Microfinance
The “missing middle” and the base of the pyramid offer a tantalising win-win for investors and investees alike.

Peter Hinton
CEO, Summit Development Group
Howard Finkelstein
Director, Microfinance Club of New York

12.30 pm
Closing Remarks
Mrs. Ruth Barry
Commercial Director
African Rainbow Consulting

Lunch

Speakers
Ritesh Anand
Ritesh Anand is founder and CEO of Invictus Investment Management, a pan-African focussed listed equity fund. Ritesh spent over seven years in various roles at the Wellcome Trust, most recently as Investment Manager for Africa and the Middle East.

Prior to moving to the UK, Ritesh worked as a fund manager for First Mutual Asset Management in Zimbabwe, where he was responsible for four unit trust funds and managed segregated pension funds. Ritesh received his BSc (Honours) in Economics from the University of Warwick, MSc in Strategic Management from the University of Derby and completed the Executive Finance Program at London Business School.

Ruth Barry
Ruth Barry is Commercial Director of African Rainbow Consulting Limited. She holds a Business Diploma from Kings College London and an MSc in Residential and Commercial Property from City University. Ruth is a qualified mediator (Regents College) and also studied Pharmacy and Medicine as an undergraduate at Chelsea College. She has extensive experience in negotiating and managing financial transactions in the property sector, having worked for more than a decade in local and international real estate investment, including developing residential and commercial blocks in city centres and country areas. In her earlier career, Ruth organised fortnightly sales events for commercial and residential property in Europe and East Africa, where she was born and raised.

Daniel Broby
Daniel Broby is Chief Investment Officer of Silk Invest. Silk Invest is a specialist in frontier market investments. He runs a team based in London, Egypt, South Africa and Morocco. He joined Silk Invest having sold the hedge fund he founded (Danfonds Frontier Markets SPC) to the company. Prior to that he worked for Renaissance Investment Management (UK) Limited, where he was Chief Executive Officer. He held various roles and responsibilities throughout the RIM group, principally those of Chief Investment Officer, Head of Asset Management and Director of the Renaissance Africa Fund. His roles involved extensive travel to and from offices in Moscow, Kiev, Nairobi, Geneva and London. In addition to the day to day management of the group's various investment teams, he also oversaw the successful launch of the Renaissance Africa Fund, the Global Macro Fund for RIM (UK) and the successful launch of the offshore Renaissance Russia Infrastructure Fund for RIM.

Daniel has an MPhil in economics and an MSc in investment analysis. He was a board member of CFA (UK) for over 10 years. He was the CFA Institute's President Council Representative for Europe, Middle East and Africa for four years and was presented with the Institute's Society Leader Award in 2006. He now serves as a member of the Capital Markets Policy Council. He was elected an individual member of the London Stock Exchange in 1990 and is a Fellow of the Securities Institute, a Fellow of CFA UK and a Visiting Fellow at Durham University.

Howard J. Finkelstein
Howard J. Finkelstein has been practicing law for nearly 30 years, more than 25 for large law firms. On January 1, 2009, Howard resigned his partnership at Akerman Senterfitt to open up his own law practice, focusing on structuring capital market instruments to bring Western capital to microfinance institutions (MFIs) worldwide. He is a piomeer in the securitization of microfinance-related obligations. His work has helped to bring nearly $1 billion to MFIs worldwide.

Mr. Finkelstein sits on the Board of Directors of the Microfinance Club of New York, Secretary of Microlumbia, Inc., and on the Advisory Boards of Green Microfinance, Lend for Peace, Frogtek LLC and African Rainbow Consulting.

Guy Fraser-Sampson
Guy Fraser-Sampson has held many investment posts over the years, including Investment Controller with the Abu Dhabi Investment Authority. He is also well known for having set up and run for several years the international operations of a leading fund of funds manager.

He currently teaches various investment modules at Cass Business School in the City of London, and performs consultancy assignments around the world for investors, investment managers and government bodies. He is the author of two investment books: Multi Asset Class Investment Strategy and Private Equity as an asset class (currently in its second edition).

Peter Hinton
Peter Hinton has 25 years of commercial experience including 15 years of banking, SMEs and private equity in Africa. He is currently CEO of Summit Development Group, an investment fund that SDG invests in financial institutions across Sub-Saharan Africa in order to transform them into leading banks that provide financial services to SMEs and the financially excluded. Prior to that he was with Enterprise Banking Group , African Banking Corporation, CDC Capital Partners, Africa Trading and BHS. Peter is a Chartered Accountant with a degree in Economics & Accountancy and a master’s degree in Development Economics.

Mavis Owusu-Gyamfi
Mavis Owusu-Gyamfi is currently responsible for setting DFID ’s policy direction on private sector development (PSD) and managing a team of technical specialists that provide advice to key partners in developing countries, the international community and the UK government. Prior to this she led the team responsible for managing the Department’s portfolio to support economic growth in Nigeria. She has extensive experience in private sector led growth and has provided technical advice to governments in East, West and Southern Africa as well as the Eastern Caribbean. This included facilitating the first PSD Strategies in Ghana and Tanzania and successfully managing economic development portfolios exceeding $400m in a number of countries.

She is a political economist by training and an MPhil graduate of the Institute of Development Studies at the University of Sussex. Her publications include Binding Constraints to Growth in Nigeria (Palgrave Macmillan, 2008) and Growth and Competitiveness (World Bank, 2007).

Katharine Pulvermacher
Katharine Pulvermacher is the Founder and Chief Executive of African Rainbow Consulting Limited. She obtained her MSc in Economics with reference to Africa with Distinction from the School of Oriental and African Studies in London, where she also completed the first stage of her PhD focusing on poverty alleviation. Katharine ran a highly successful investment research and marketing programme targeting institutional investors in the main capital markets for eight years. Her published research spans asset allocation, commodities and most recently, public private partnerships in Africa.

As an undergraduate at the University of Cape Town, she studied Social Work, Psychology and Sociology, and ran adult literacy classes in her spare time. She is an experienced trainer and group facilitator, has taught at university level in South Africa and the United Kingdom, and ran social reinsertion programmes for the long-term unemployed in the French department of Aude. In addition to her “new-born” - African Rainbow - Katharine is a mother of two sons, whose travels in Africa are almost as extensive as her own.

Mauritius, Tourist Haven, Banks on Image Makeover

2010-05-26T06:56:00.000-07:00

Daniel Broby of Silk Invest speaks to Reuters on Mauritius. http://frontiermarkets.thomsonreuters.com/Pages/MauritiusBanksonImageMakeover.aspx

Low Global Interest Rates, Rising Commodity Prices Seen Helping Frontier Markets Outperform

2010-05-26T06:53:00.000-07:00

North Korea - the forgotten frontier market

2010-05-25T01:01:00.000-07:00

North Korea and South Korea have been in a suspended state of war for some time. Tensions with North Korea escalated in response to tension over the sinking a South Korean warship in March. North Korea, led by Kim Jong-il, is the last Stalinist dictatorship. It set off a nuclear device in 2006 and has since test-fired a ballistic missile. It now looks like the war could flare up again. President Lee said if his country's waters, airspace or territory were violated he would immediately exercise his right of self-defence. Barack Obama has ordered that the 28,000 U.S. troops in South Korea be put on alert.

Dead Aid

2010-04-30T07:06:00.001-07:00

Mauritius

2010-04-22T04:11:00.001-07:00

THE EUROMONEY MAURITIUS CONFERENCE 2010

ACCESSING GROWTH MARKETS- THE ROLE OF GLOBAL BUSINESS CENTRES

30th March 2010

The Waldorf Hilton Hotel, London

Panel 1: The Global Growth Environment
This session was chaired by Christopher Garnett, Director, Euromoney Conferences and focused on the global growth environment. Speakers included Daniel Broby, Chief Investment Officer, Silk Invest; Richard Fairgrieve, Director, Global Emerging Markets, Blackfriars Asset Management; Slim Feriani, Chief Executive Officer, Advance Emerging Capital and Liam Halligan, Chief Economist, Prosperity Capital Management

Panel I proved to be an excellent platform to set the scene for the rest of the day. Panelists analysed the main risks that the global economy is currently going through and expressed their invaluable views on where they believed the global downturn currently stands.

According to Richard Fairgrieve, the world has not come out of the economic crisis yet. As investors, it is very important to see the world from its various horizons. It is important to split emerging markets from the rest of the world. Since emerging markets have the reserves, they will continue to grow at a faster pace. In previous years, emerging markets have grown by 4-5% while those of the West grew by only 2%.

According to Slim Feriani, major risks are still present in the developed and Western world. We live in a global village and there is currently lots of talk about decoupling. The reality is that if Western countries do not grow then the export engine of the emerging economies is going to be hit. The economic crisis has in some ways played a positive role for emerging markets as it has forced them to look inward and concentrate on their domestic and regional markets.

For Daniel Broby, the end of the game is what matters. During the crisis, the Mauritian tourism sector was hit by 10%. However, there had been a very pragmatic approach by the Government to tackle this crisis. For instance, hotels and services were upgraded to make the country more attractive. Slim Feriani pointed out that places like Istanbul and Turkey have had tangible progress as compared to what they were 10 years ago. Confidence and stability has helped the economies to grow.

The shift in the flow of capital and investment from the West to the East, the growing importance of emerging markets like India and China as well as the way major capital markets around the world are re-inventing themselves to take advantage of the new economic landscape were examined. Slim Feriani reiterated that as investment managers, they are cautious and conservative in their approach to invest. They have structures in Nigeria as well as in Mauritius. Mauritius is a stable country but not necessarily the most cost effective platform. There has been a major transformation in Africa. It is predicted that in 10 years from now, Nigeria will boom as long as politics and stability improves. However, the fact remains that while some African countries are progressing; some have gone backward, for example Zimbabwe.

For Daniel Broby, African economies such as Botswana and Mauritius have been successful as there has been a high correlation between democracy and success. It was further highlighted that for Global Business Centres to remain and enhance their competitiveness, factors like transparency, regulatory framework, consistency and extensive networks of bilateral agreements should be taken into consideration.

Reuters codes: Silk Invest

2010-04-22T03:49:00.000-07:00

Silk - African Lions Fund A0RAC3X.DX LU0389403337.LUF
Silk - African Lions Fund A0RAC4X.DX LU0389403410.LUF
Silk - Arab Falcons Fund A0RAC6X.DX LU0389403683.LUF
Silk - Arab Falcons Fund A0RAC5X.DX LU0389403501.LUF
Silk - Arab Falcons Fund A0YETMX.DX LU0485224678.LUF
Silk - Arab Falcons Fund A0YETYX.DX LU0485223860.LUF
Silk - Road Income Fund A0X918X.DX LU0445778870.LUF

COMESA Investment Forum

2010-04-14T04:01:00.000-07:00

The 3rd COMESA Investment Forum at Sharm El Sheikh, Egypt, just closed on a positive note. There were over 800 delegates from 65 countries.

Earlier during the Forum, the former president of Botswana, one of the most successful African countries, said that Africa was bursting with business and investment opportunities and offered the best return on investment in the world.

Nassif Sawiris, Chairman and CEO of Orascom Development, called for a clearer legal environment if Africa is to attract more investment. He added that more transparency in contract enforcement was needed to reassure investors of the security of their ventures.

Video: The investment case for Africa

2010-03-31T00:56:00.001-07:00

Daniel Broby, Silk Invest, "The Case for Investment in New Emerging Markets—Africa and the Middle East" from CFA Ireland on Vimeo.

Silk Arab Falcons fund one year performance +22.01%

2010-03-26T04:15:00.001-07:00

Silk African lions fund one year performance +34.19%

2010-03-26T04:13:00.000-07:00

Kenya cuts interest rate

2010-03-24T07:42:00.000-07:00

Kenya's central bank unexpectedly cut its key interest rate by 25 basis points to 6.75 percent on Tuesday, saying downside risks to the economic recovery called for measures to support growth.

The direction and magnitude of movements of the CBR will send the appropriate signal that inflation is not the significant threat it once was.

African mining Indaba attracts 4,000 delegates

2010-02-03T08:49:00.000-08:00

Clearly, Africa is the new investment destination. The African Mining Indaba started with optimism and around 4,000 delegates versus 3,800 last year. This is the first big mining conference to be held since the end of the global financial crisis,

Formal talks on day one all involved commodity forecasting, and delivered a steady stream of observations about rare metals, uranium, iron ore, gold and copper. Somewhat predictably most forecasts were optimistic about the outlook, though a clear message was that 2010 will be a year when supply issues dominate demand.

Silk Road Income Fund awarded ‘Golden Bull’

2010-02-02T08:01:00.000-08:00

Silk Invest’s Luxembourg SICAV, the Silk Road Income Fund, has been awarded the ‘Golden Bull’ prize for innovation at the ‘Finanzen Nacht’ ceremony in Munich. Hailed by the German press as the “Oscar of the financial world”, the award is sponsored by Euro, Germany’s leading finance publication. The gala evening was attended by over 500 delegates.

The Silk Road Income Fund was launched in October 2009. It gives investors exposure to a range of frontier fixed income markets, previously inaccessible to mainstream European investors in the shape of a UCITS compliant fund.

The award winning hedge fund was launched to compliment Silk Invest’s equity offerings, namely the African Lions and Arab Falcons funds. As its name implies, the geographic remit of the fund is Africa, the Middle East and the Central Asia, leveraging of Silk Invest’s position as a market leader in these geographies

The Silk Road Income Fund aims to manage 60-80 holdings across 25 countries. The target portfolio is to achieve annual returns of 16.5% with a duration of 3.4 years and an average rating of “BB+”.

African Development Bank USD benchmark bond

2010-02-02T07:58:00.000-08:00

The African Development Bank plans to sell three-year bonds denominated in U.S. dollars. The Tunisia-based lender has hired Daiwa Capital Markets, Deutsche Bank AG, Goldman Sachs and UBS AG to manage the sale. The sale is expected to be be benchmark in size, which typically means at least $500 million.

Zimbabwe forgets to withdraw Capital Gains Witholding Tax

2010-01-18T05:50:00.000-08:00

When the revised Zimbabwe Stock Exchange transaction charges were announced in the 2010 national budget proposals, there was a general inference that the Capital Gains Withholding Tax would be withdrawn. This was previously 1% of sale proceeds in the case of marketable securities. For some unexplained reason the legislation covering the applicability of Capital Gains Withholding Tax on marketable securities has in fact not been changed and accordingly, the tax must continue to be levied. It therefore costs 1.73% to enter the market and 2.48% to exit. That's a total cost in and out of 4.21%. Not exactly a level that will encourage a flood of money into the country.

The new frontier of Investing

2010-01-12T02:05:00.000-08:00

Click here for - Link to great article on frontier markets.

Frontier market settlement periods

2010-01-10T02:49:00.000-08:00

Bahrain T+2 49% Foreign Investment Ceiling in general, 10% for a single entity

Bulgaria T+2 Foreign Investment Ceiling100% in general

Colombia T+3 to T+6 Foreign Investment Ceiling100% in general

Croatia T+3 Foreign Investment Ceiling 100% in general

Jordan T+2 Foreign Investment Ceiling 100% in general, with restrictions of 50% or 49% on certain sectors.

Oman T+3 Foreign Investment Ceiling Up to 70% with some further restrictions at
company level

Pakistan T+2 Foreign Investment Ceiling 100% in general

Romania T+3 Foreign Investment Ceiling 100% in general

Sri Lanka Sales T+4 Purchases T+3 Foreign Investment Ceiling 100% in general, with restrictions of 40% on certain sectors .

United Arab Emirates T+2 Foreign Investment Ceiling 49% in general, some individual companies may have different restrictions

Vietnam T+3 Foreign Investment Ceiling 49% in general, 30% for banks

The re-establishment of Morocco’s historic trading routes

2010-01-04T05:18:00.000-08:00

All tariff barriers between Morocco and the EU will come down in 2012. The opportunity that this represents is immense; akin to a rebuilding of the silk routes of the past. Co-incidence with this, the kingdom has undertaken a number of strategic liberalizations and a revision of its legal framework that investors should now take notice of. This, combined with the modernization of its infrastructure and a new focus on upgrading the educational system, will result in medium term GDP growth of at least 5.5% annually. That is pretty impressive for a country that, only ten years ago, was considered as an undeveloped nation. Zin Bekkali, the Moroccan CEO of London based Silk Invest, believes that this can be translated into investment performance going forward. Indeed, that is why Silk Invest has placed its Maghreb hub office in Casablanca.

Bekkali points out that the Moroccan investment theme is one of convergence. The open sky agreement with the EU is the most talked about convergence between the EU and Morocco. This is because it represents cross border transportation and that brings the geographies closer together. Domestically, however, even equally important improvements have been made in infrastructure. These improvements have been made both in the road and the rail system. In the 1990’s 40km of train track were laid per year. This year that figure will be 160km. By 2011 the distance covered by new track will be 320km.

Hesham Saad, the lead manager of the Silk Falcons fund, points out that although Morocco has a diversified economy it is a net importer of oil. As a result, it has to focus on its biggest asset, its geographic positioning. This is historically where the country has been most successful. The country now appreciates this and the new vision is to become a strategic hub for the region, particularly in services. This is why the ports, railways and roads are the focus of so much attention. USD 16bn a year is now being spent on infrastructure. The port of Tangiers is the largest such project. After only three years in operation, Morocco’s position as a shipping destination has improved from 76th to 30th place.
In addition to the convergence programs with the EU, Morocco has numerous free trade agreements with amongst others the US. Equally interesting is its commercial and cultural links with many of the Arab countries. At the corporate level, Moroccan companies are expanding into Sub Saharan Africa, leveraging the country’s status as a hub. Maroc Telecom and Attijariwafa bank are clear leaders in this trend. The telecom operator is expanding through Africa buying majority stakes in telecom companies in Mauritania, Burkina Faso, Gabon and Mali and prospecting in other African countries. While Attijariwafa bank, Morocco largest private bank, and the seventh largest bank in Africa in terms of total assets, has been very active in Africa acquiring majority stakes in major banks in Tunisia, Senegal, Gabon, Cameroun, Ivory Coast, Mali and Congo. This should enable Attijariwafa Bank to become a leading regional bank in both North Africa and Africa as a whole and contribute to local economic development.

Daniel Broby, Chief Investment Officer at Silk Invest notes that in the past, Morocco has been accused of a lack of transparency and a less than level playing field. He claims this is now changing. He points, for example, to the fact that the English language is now being jointly used with French for public tenders. Broby also says IFRS is now mandatory for listed companies (in a country where 30% of companies used to fail to produce international annual reports).

Corruption is being addressed by a powerful government commission. Taib Fassi-Fihri, the Minister for Foreign affairs and Co-operation, points out that the country is benchmarking its ‘openness’ policy on EU regulations and norms. Still, all is not perfect. More has to be done to improve justice, upgrade corporate to best practice and to simplify procedures at the government level. The point, however, is that the political will exists to do this within the country’s democratic framework.

Wages are 8 – 10 times less the European levels and the labour force is very young. As a result, the country is particularly suited to added value industries. Tourism is obvious but agriculture and outsourced manufacturing are clearly areas which will grow strongly going forward.

According to Silk Invest, revenue per capita has doubled over the last ten years. As a result, increasingly, growth is also being driven by internal demand. The country has low and stable inflation around 1.2%, a balanced budget and has reduced government debt substantially. Foreign exchange reserves now represent 7.4 months of imports.

The financial sector was one of the first to be modernised. Following the centrally co—ordinated reforms, it is now both dynamic and robust. Ismail Douiri, Vice President of the Moroccan Banking Association, said that Moroccan banks had “resilience due to the careful regulation in which we operate, thereby avoiding the first phase of contagion.“ The minimum solvency ratio was increased from 8% to 10% one year before the credit crisis began. Banking loans have increased fourfold in ten years. The capital backing this was largely raised in the local institutional market.

Abdeltif Stitou, Silk Invest’s Chief Operating Officer and also a Moroccan, point out that the capital markets are developing at a rapid rate. There has been a historically strong link between the state and the private sector. Thanks to new tax breaks the number of listed companies will likely double by 2015. Karim Hajji, Managing director of the Casablanca Stock Exchange, points out that the capital markets in Morocco are the oldest in Africa. The current stock exchange goes back 80 years and now has a market capitalization of $85bn.

Valuations in the Moroccan market reflect a fair amount of the growth ahead. The market has been a laggard in 2009, actually falling by 3% (as at 9th November) against a world where most markets have risen. That said, Zin Bekkali notes that over the last ten years returns have averaged 15% per annum. His company’s Silk Arab Falcons fund allocates 8.5% to Morocco and the Silk African Lions fund allocates 9.3%.

Youssef Lahlou, a portfolio manager at Silk Invest based in Casablanca, points out that “the Moroccan Stock Exchange should benefit from a return of international investors looking to diversify their holdings in the MENA region”. He invests in companies relatively sheltered from the impact of the financial crisis. In Lahlou’s opinion the real estate sector is one of the most interesting in Morocco. With a shortage of 1.5 million housing units especially in the low-income and the mid-range segments, companies operating in this sector (especially Addoha and Alliance) are set to reap the fruits of the accelerating demand. This should also benefit companies in the cement and Iron and Steel sectors.

The Silk Invest funds are also positioned to benefit from the financial sector. Moroccan Banks such as Attijariwafa bank and BCP will continue to growth rapidly, with more than 100 branches opening yearly. They will continue to develop their activity in sub-Saharan Africa. The region has helped Morocco promote growth and reach economic stability, allowing it to average over the past five years a growth rate in excess of 6%.

According to Youseff Lahou another success story out of Morocco is Maroc Telecom (the country’s largest Market Capitalization stock). The group, present in several Sub-Saharan countries, has been able to sustain strong annual earnings growth, over the last few years, thanks to an improvement in the Group’s operating performance, solid sales growth, primarily due to an increase in subscriber numbers which reached 14.5 million in 2008 against 8.2 million in 2005 (i.e. an increase of 77%) and a much tighter control over operating costs.

In conclusion, Morocco looks set to be one of the winners in the post credit crisis world. The next ten years will see a rapid convergence with Southern Europe. The Silk route is being re-invented and companies close to the capital markets, those in the emergent sectors, look set to enjoy above average growth.

Algeria takes big leap backwards

2009-11-24T08:14:00.000-08:00

Algeria has created an investment fund to nationalize subsidiaries of foreign groups who would decide to leave the country. Fifteen years after having liberalized its economy, Algeria is taking a step backwards. Algeria has stiffened conditions for foreign investment and for transfer of capitals, and appears ready to nationalize certain foreign companies. The Egyptian group Orascom, whose Algerian subsidiary Djezzy, has been targeted. Algiers notified Orascom of a tax adjustment of nearly USD600 million for the years 2005, 2006 and 2007. The Egyptian group is accused of having transferred hundreds of millions of dollars in dividends.

Besides Orascom, other foreign groups, particularly French ones, could be affected by partial or total nationalization moves, such as French banks Société Générale and BNP Paribas as well as Renault and Peugeot.

Shortage of currency in Malawi

2009-11-13T01:47:00.000-08:00

A shortage of foreign currency in Malawi is beginning to undermine the fixedexchange rate policy that has been in place for more than two years.The kwacha has weakened slightly against the dollar. On the black market, the currency is trading at 190.

The shortage of foreign currency means Telekom Networks Malawi, the country’s second largest mobile phone operator, has halted expansion of its network because it was unable to import equipment.

Oil in Kenya?

2009-11-10T06:11:00.000-08:00

Now they are even exploring for oil in Kenya. Africa Oil Corp's Bogal-1 oil exploration well operated by China owned CNOOC spudded on October 28, 2009. The well is expected to reach total depth of 5,500 meters within approximately 6 months.

Block 9 covers an area of 27,778 square kilometers in the centre of the Anza Basin. The Anza Basin is a NW-SE trending rift basin along trend with the prolific Mesozoic play of southern Sudan. The basin is over 580 kilometers long and 150 kilometers wide with a potential prospective area in excess of 50,000 square kilometers. Experts believe they may have proven the existence of natural gas and possibly oil.

Angola to open up new oil exporation

2009-11-04T02:32:00.001-08:00

Angola plans to start exploring for onshore oil in the enclave of Cabinda sometime next month, according to state-owned oil company Sonangol. Sonangol will first carry out seismic studies in the regions of Necuto and Buco Zau to determine the existence of oil. Sonangol recently partnered with Esso to study the possibility of exploring for oil in the basin of River Kwanza, where studies had shown the existence of about 6mn barrels of oil. Earlier in the year, Sonangol said it was considering exploration in the Cassanje and Okavango river basins. Prior to the Angolan civil war, which began in 1975, Angola pumped around 80,000 bpd from the Kwanza river basin, but the war ultimately forced a halt in production.

Angola to

2009-11-04T02:32:00.000-08:00

Frontier markets update

2009-10-28T03:20:00.000-07:00

The MSCI World Index of advanced -nation equities has surged 65% from this year's low on March 9, while the MSCI Emerging Markets Index has leaped 96%. The Reuters/Jefferies CRB Index of 19 commodities has added 33%.

Emerging markets have outperformed and have seen massive amounts of inflow. But when your main stream markets like Brazil (Bovespa +68%), China (Shangahai +64%), Russia (RTS +83%), South Africa ( Top 40 +24%), start to mature and look top heavy, investors will start looking towards 2nd tier and 3rd tier frontier markets that have been on the back burner. These frontier markets such as Ghana ( GSE -46%), Nigeria (NSE All Share -30%), Kenya (NSE -14%), Morocco (Madex -3.3%), should attract some fund interest and more inflow.

Ukraine - over the worst

2009-10-09T06:59:00.000-07:00

Ukraine's economy is now recovering from a very low bottom, and real economic growth is likely by November. Ukraine's international reserves are at around $29 billion, one quarter of GDP. Ukraine runs no risk of default for the next year, even without IMF money. Its budget deficit is below the limit of 6% of GDP for this year. The bank country's restructuring is proceeding.

The only concern is that without a November IMF disbursement, financing the deficit will present a challenge.

Ukraine is approaching presidential elections. The two dominant presidential candidates are Yanukovych and Tymoshenko, while the voters have given up on the erratic Yushchenko, who regularly vetoes almost all government decisions even when they correspond to his own policies. The conventional wisdom is that Yanukovych will win the first round with a large but not absolute majority, while Tymoshenko is best placed to win the second round.

Ivory Coast acts on defaulted debt

2009-09-29T01:50:00.000-07:00

The Ivory Coast has reached a deal to restructure Euro 2.2bn of defaulted sovereign debt with the London Club of commercial creditors. Holders of the six Brady bonds will be able to swap the debt for a new USD denominated bond maturing 31 December 2032. The exchange is scheduled to take place no later than 31 March 2010 and follows an agreement with the Paris Club of sovereign creditors earlier this year.

The Ivory Coast is going to offer a discount of 20 percent on the exchangeable debt. There will be 34 semi-annual payments on the new bond, starting from 30 June 2016. Interest will begin to accrue from 31 December 2009. The outstanding debt consists of three Euro-denominated and three dollar-denominated bonds maturing in 2018 and 2028.

MSCI Frontier Emerging Markets Index

2009-08-24T06:21:00.000-07:00

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.

2009-08-20T07:22:00.000-07:00

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

2009-08-14T08:03:00.000-07:00

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

2009-08-11T04:23:00.000-07:00

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

2009-08-11T03:27:00.000-07:00

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

2009-08-07T03:10:00.000-07:00

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!

2009-08-07T01:52:00.000-07:00

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

2009-08-02T00:19:00.000-07:00

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

2009-08-01T04:45:00.000-07:00

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

2009-07-31T05:38:00.000-07:00

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

2009-07-31T02:26:00.000-07:00

This is an interesting visual from the Economist..

Zimbabwe sees strong trading volumes

2009-07-28T05:55:00.000-07:00

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

2009-07-15T07:24:00.000-07:00

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.

2009-07-15T05:53:00.001-07:00

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%!

2009-07-14T05:31:00.000-07:00

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...

2009-07-08T04:27:00.000-07:00

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

2009-07-01T02:03:00.000-07:00

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

2009-06-24T08:25:00.000-07:00

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

2009-06-23T05:33:00.000-07:00

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

2009-06-22T08:42:00.000-07:00

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

Auerbach Grayson open access to Iraq

2009-06-19T08:05:00.000-07:00

Auerbach Grayson, a New York brokerage, has just become the first international company to trade in Iraqi securities.

Auerbach has signed an agreement with Rabee Securities, a Baghdad brokerage, through which it will provide research and trade execution.

Rwanda stock exchange starts

2009-06-19T04:31:00.000-07:00

The first company began trading on the Rwandese bourse yesterday. Kenya Commercial Bank is currently cross-listed both Uganda and Tanzania and joins a number of Kenyan companies seeking to gain a regional presence.

New Saudi bond market opens

2009-06-14T04:39:00.000-07:00

Saudi Arabia new bond market opened yesterday. Foreigners can tap the new investment tool in the Middle East's largest economy for the first time. The first bond session yesterday involved SR21billion (Dh20.5bn), including SR16bn bonds by Saudi Arabian Basic Industries CorporationSaudi Arabian Basic Industries Corporation and SR5bn by Saudi Electricity CompanySaudi Electricity Company.

Dubai and Abu Dhabi have spearheaded one of the largest bond issues in the region over the past two months.

The launching of a bond market in Saudi Arabia is the latest in a series of moves announced by the CMACMA to develop its financial market.

African debt

2009-06-09T10:49:00.001-07:00

Interesting slide from African Economic Forum 2009.

New beginning in Arab US relations

2009-06-06T04:31:00.000-07:00

President Barack Obama’s call for a “new beginning” in relations with the Muslim world set a nice tone for relations between the US and the Arab world. The address, form the golden-domed Grand Hall of Cairo University called on all to societi end the “cycle of suspicion and discord”.

Citing a verse in the Koran that tells Muslims to “speak always the truth,” Obama said that that to move forward, “we must say openly to each other the things we hold in our hearts, and that too often are said only behind closed doors.”

He outlined six friction points between the U.S. and the Muslim world:

Violent extremism
Iran’s pursuit of nuclear arms
Democracy in Muslim nations
Religious freedom
Rights of women

African Development Bank AGM

2009-05-29T07:32:00.000-07:00

The Annual General Meeting of the African Development Bank was held on 13-14 May in Dakar, Senegal. The theme of this year’s meetings was Africa and the financial crisis.

At a general level, there was much discussion over the shape and timing of the world economic recovery, and concomitant impact for risk appetite. This discussion came from both sides, African policymakers and private sector investors.

There was some scepticism over the extent to which the recovery is sustainable and the degree to which optimism shown in the market had diverged from fundamentals. African policymakers, for their part, recognised the impact of the global crisis on Africa, after earlier periods of denial and complacency. Policy reversals were now seen as the biggest threats in the region, but so far signs for most countries were encouraging.

Air Arabia

2009-05-28T06:57:00.000-07:00

Silk Invest has Air Arabia in its Arab Falcons fund. We met with the company's Director of Finance and Administration to review how things were going in the light of the recent uptick in oil prices (a big component in any airlines costs).

The company has a natural fuel hedge. In effect, when oil price is high, margins are down but revenues go up as the economy is strong. That said, the company hedged 50% of its fuel for this year at USD 55. Good news.

The biggest takeaways are that this is actually a different business model from the European low cost airlines. Firstly, only 30% of tickets are sold through internet. The company has an extensive general sales agent network that adds a fee to the basic prices it distributes. This is difficult to duplicate and is very powerfull in the GCC and India where internet penetration is low. Another big difference is that the Middle East does not close airports at night. As such, the company flys 24/7. Its planes fly 14 hours a day, the highest in the world. (that is twice most other airlines!!!) Its distances are longer on average, versus the small 'hops' in Europe. This means four flights a day, instead of six. As a result, turnaround times are less critical. The other big difference is that it is a 'dry airline'. As such, it does not get revenue from drink sales. By the way, this is not a negative, its customers like that! That said, it gets 2% revenue from excess bagage sales. The final difference is that Sharjah airport owns 17% of company, so new competitors flying our of Dubai can't compete on price as it gets discounted landing fees.

Equity bank grows into slowdown

2009-05-26T07:05:00.000-07:00

Kenya’s Equity Bank results for the quarter to March 2009 saw operating income
rise 52% and Profit After Tax rise 26%.

There was a 59% fall in loan loss provisions but a 126% rise in staff costs. Needless to say, the cost income ratio rose to 64% compared to 60% for FY 2008. Total NPLs, worryingly rose by 164% against a bigger Total balance sheet(up 45% year)

The slowing domestic economy is starting to have an impact. Although the bank delivered a good bottom line progression, there were clearly growing pains in this set of results.

Safaricom slips despite higher revenue

2009-05-26T01:48:00.000-07:00

Safaricom saw a 23.9% year on year decline in net profits to Kshs 10.6 billion, and a 30.5% decline in earnings.

Revenue was, however, up 14.8%, boosted by an 83% growth in revenues from SMS, MPESA and data, which accounted for 12.9% of the total revenues.

Revenue market share remained at a steady 83%. The weakness was largely down to a fall of 23% in ARPU.

Orascom Construction improves construction margins

2009-05-18T05:16:00.000-07:00

Orascom Construction significantly beat expectations growing net profit by 40%. The margin imporved accross the board. The margin was a function of a higher than expected contribution from fertilisers on the back of stronger volumes and a higher margin reported by the construction segment.

Although construction suffered from lower bookings, it experienced significantly higher margins. These may well prove fragile in the current economic environment, but clearly they have already gone in the opposite direction of almost any other construction company anywhere in the world.

Afromedia IPO

2009-05-15T03:50:00.000-07:00

Good to see IPO's resurface after so long.

Afromedia Plc, a pioneer and leading out-of-home media company is finally set to list on the Nigerian Stock Exchange. The company began as part of the UACN group in 1929. It is one of the most experienced out- of- home advertising agencies in Nigeria. The board has its Chairman as Onaolapo Soleye, former Minister of Finance.

The company would be listing 4,035,497,307 Ordinary Shares of 50 Kobo each at N2.92 per share on Monday May 18 2009.

Oman Telecom

2009-05-14T02:31:00.000-07:00

Oman Telecom reported a slow down in service revenue of 2.5%. This was not offset by the strong 20% rise in net international interconnection income and 52% growth in local net interconnection income.

Insurance claims from last years cyclone helped. Earnings declined by 1.2%. Excluding the one off cyclone payments, profits were 10% lower yoy.

Egyptian remittances rise!

2009-05-13T01:04:00.001-07:00

The doomsayers are wrong once again. The predicted collapse in remittances has not occured. Indeed, net remittances from Egyptians working abroad reached USD 2.3bn in Q1, up from USD 1.9bn a year earlier. Net unrequited transfers jumped by 9.9% y/y.

Is Kuwait's USD 5.2bn stimulus package sufficient?

2009-05-13T00:41:00.000-07:00

Nassar Al-Kharafi, who controls nearly 16 percent of National Bank of Kuwait, the emirate’s biggest bank, and 10 percent of Global Investment House, has quesyioned the effectiveness of the countries $5.2 billion stimulus package. The 15-year guarantee against losses on existing credits and investments "won’t stave off economic catastrophe" he claimed in an interview with Institutional Investor.

Oman gives boost to construction

2009-05-12T03:12:00.000-07:00

Oman's Economy Ministry awarded OMR 598mn (USD 1.55bn) in construction and infrastructure projects including the Muscat International Airport and the Al Duqm Master Plan. The plan will stimulate growth by 11%. This move underlys one of our observations in the region; namely that infrastructure spend will decouple the construction industry from the global cycle.

Oil and gas continues to contribute 45% to the national GDP.

The lure of Africa’s long term story

2009-05-11T22:49:00.000-07:00

The Financial Times reported an upbeat story by Dr. Ayo Salami who maintains a market cap-weighted index of African Companies (sub-Saharan Africa excluding South Africa). Although the index was down 40% last year companies in the index grew their earnings per share by 32%.

Dr. Salami sees continuing growth in consumer demand and recommends companies like brewers, cement and food staples.

Orascom Construction Industries fertizer push

2009-05-08T08:02:00.000-07:00

The fertilizer industry in Egypt is supported by the cheap natural gas and phosphate rock.

Orascom Construction Industries, one of the bigger players in the fertilizer market, has signed a deal with the Egyptian Financial and Industrial Corporation to make up to 78,000 tons of ammonia annually. The company currently operates plants capable of producing a total of 2mn tons of nitrogen-based fertilizers annually. The group also has an investment in a facility in Nigeria.

The Egyptian government has approved a strategy allowing ten new phosphate fertilizer plants in the country, worth some USD 1.8bn.

World Bank predicts Middle East growth at 3.9%

2009-05-08T07:56:00.000-07:00

In its global economic outlook the World Bank predicts the Middle East region is will grow by 3.9% in 2009, versus 5.8% in 2008.

The bank predicts the global downturn will cause both commodity prices and inflation to decline. Oil prices are seen averaging USD 75 a barrel in 2009.

Benso Oil Plantation Limited of Ghana

2009-05-08T07:16:00.000-07:00

Palm Oil, one of the third world's most traded commodities, has a bad year, falling 66%. It is not surprising, therefore, that Benso (part of Unilever Ghana) took it on the chin. First quarter profits slumped 56%. Still, it could have been worse. Only problem is Ghana is such an illiquid stockmarket that the stock will take time to react to underlying fundamantals.

Standard Chartered Bank Ghana

2009-05-01T03:04:00.000-07:00

Full year results for Standard Chartered Bank Ghana were held back by numerous charges. Earnings only rose 0.5%. One off IT and restructuring charges of GHS 14.0m (US$11.0m) were made.

On the positive side, net interest income rose 19% and the loan book rose 60%.
The headline cost/income ratio rose to 61% but adjusting for the charges the cost/income ratio fell to 49%.

We visted the company last year and like the management and approach.

Silk Invest investment tour - Morocco

2009-04-21T01:11:00.000-07:00

The Silk Invest Maghreb team spent a very constructive day visiting existing and potential investment in Cassablanca. The whole economy is still growing strongly and optimism is in start contrast to developed markets. The purchasing power of the lage farming sector has been boosted by record rains and hence crop yiels. Morocco's production of soft wheat, durum wheat and barley has doubled.

At the same time, Morocco is still seeing direct investment from Gulf countries and asset sales by the government. Indeed, the whole Silk route theme is very strong. Firms like Maroc Telekom and Attijariwafa bank, the two largest companies, are expanding into Africa. For example, Maroc Telekom owns majority stakes in Gabon Telekom and Burkina Faso's Onatel.

We did witness some weaknesses. These include the high unemployment, rapid growth in banking loan books and the 'informal' sector of the economy. That said, valuations were attractive and more importantly underpinned by strong earnings growth. Delta (infrastructure) is expected to grow earnings by 64% and consrvative Attijariwafa Bank by 26%.

Visit to Addoha

2009-04-21T01:00:00.000-07:00

We visited Moroccan property developer Addoha. The company is Morocco's leading real estate firm that benefits from the government-backed social housing drive. The recent boom in leisure, hotel and high-end housing projects is driving earnings forward.

We were particularly impressed with the company's one-stop-shop, where all the services requires to buy a house are under one roof (including credit assessment and legal). Clearly, something banks and/or property developers can learn from wherever they are in the world.

Tunisia

2009-04-19T01:06:00.001-07:00

African Oxygen faces challenging year.

2009-04-14T01:33:00.000-07:00

African Oxygen, the Silk African Lions largest holding, is putting up a great show in the face of the economic downturn. Although profits are down by 10% on the back of a decline in operating margin, revenues increased by 18%. Although we expect further deterioration towards the end off the year, on the back of commodity prices, we are happy with the groups 32% gearing and expect the stock to perform well from here.

Is Angola planning a devaluation?

2009-04-13T07:58:00.000-07:00

Angola's President Jose Eduardo dos Santos dismissed central bank governor Amadeu Mauricio with immediate effect. This could be a prelude to devaluation. Efforts to keep the kwanza stable have weighed on the country's foreign reserves, which have fallen to $13.96 billion from $18.9 billion at the end of 2008. The kwanza has been pegged at around 75 to the U.S. dollar in recent years.

Surprise cut in Nigeria benchmark interest rate

2009-04-08T11:47:00.000-07:00

Nigeria cut its benchmark interest rate to 8.0 percent from 9.75 percent. The Monetary Policy Committee reduced the reserve requirement to 1 percent from 2 and lowered the liquidity ratio for banks to 25 percent from 30.

Liquidity is an issue for the banking sector right now with interbank lending rates at 18 percent.

Suez canal sees revenue slump

2009-04-07T01:36:00.000-07:00

The Suez Canal's revenues fell 22% Y-o-Y to USD327 million. The number of vessels passing through the Canal fell 15%. Canal revenues have deteriorated rapidly since late last year due to declining global trade activity.

The canal is a major contributor to Egyptian economic growth, contributing 0.7 percentage points to Egypt’s 7.2% growth in FY2007/08.

Workshop on 'Risk Management in Islamic Banking'

2009-04-06T03:48:00.000-07:00

The Central Bank of Bahrain 'CBB' will play host to a workshop entitled 'Risk Management in Islamic Banking' which will take place at the Bahrain Institute for Banking and Finance from 14 - 16 April 2009.