Contagion From the EM Sell-Off Spreads to Africa's Local Markets - BLOOMBERG
By Paul Wallace
Zambia among worst hit as currencies, bonds feel pressure
Nigeria’s naira at weakest since November even as oil rises
The rout that started in emerging markets last month is now roiling stocks and currencies across Africa.
The pain’s visible in foreign-exchange markets. While South Africa’s rand was hit early on, other less-liquid currencies are also under pressure. Most have reversed or pared the gains against the dollar they posted in the first quarter.
Zambia’s kwacha, in particular, is struggling. It’s weakened 8.9 percent since the end of March, among the worst globally. While investors were previously attracted by the kwacha’s carry returns, they’re now exiting a country struggling with what the International Monetary Fund described as a debt problem.
Egypt, Ghana and Kenya are also showing strain. Egypt’s stocks, which had risen steadily since the pound was devalued in November 2016, have fallen more than 9 percent since late April. Ghanaian equities were world beaters in the first quarter, but have since slipped along with the cedi, as have Kenya’s shilling and stocks.
Most African currencies have weakened since the end of March
Nigeria is another case in point. Despite Brent crude’s 15 percent rise in 2018 to about $80 a barrel, the OPEC member’s currency is under pressure for the first time this year. The naira has fallen to its weakest level since November on the black market and foreign reserves halted their continuous rise since September. The West African country’s main stock index is near a five-month low as international funds reduce their exposure, according to Exotix Capital.
Nigerian stocks fall to lowest level in more than four months - REUTERS
LAGOS (Reuters) - Nigeria’s main stock index fell to its lowest level in more than four months on Friday after shares in banking and consumer goods companies declined.
The index which fell for the seventh straight session, recovered some ground but closed down 1 percent. Stocks had fallen 1.28 percent in late trades, sliding to 39,213 points, a level not seen since January.
Offshore investors have been exiting local assets as yields on Nigeria’s treasuries have fallen to around 12 percent from as high as 18 percent a year ago due to government action to lower borrowing costs and U.S. interest rate rises.
Traders expect the bear market to continue, even as the capital flight has also put the local naira currency under pressure.
Stocks fell widely on Friday with 41 companies declining and 12 firms advancing. Julius Berger and Transcorp each shed 5 percent while Fidelity Bank fell 7.7 percent.
Reporting by Chijioke Ohuocha; Editing by Toby Chopra
South Africa investigates $80 million bitcoin scam - REUTERS
JOHANNESBURG, May 25 (Reuters) - South African authorities are investigating an alleged cryptocurrency scam that defrauded investors of 1 billion rand ($80 million) with promises of huge returns that never materialised, police said on Friday.
The fraud investigation involves a company named BTC Global, which told clients they would earn 2 percent per day, 14 percent a week and 50 percent in a month, the police said.
A search for the company on the internet showed its services had been suspended.
The website lists Steven Twain as the “primary trader”. A request for comment by Reuters sent to an email address listed on the website as belonging to Twain received no response.
“Members of the public are believed to have been targeted as part of the scam and encouraged by agents of BTC Global,” the police said in a statement.
“Some of the investors got paid in terms of the agreement. However, the payments suddenly stopped.”
Local technology news website mybroadband.co.za had reported in March that more than $50 million was lost by investors in BTC Global.
“This may prove to be the tip of the iceberg with potentially thousands more yet to discover they’ve lost money,” police investigator Yolisa Matakata said.
The investigation follows a case this week where kidnappers demanded a ransom in bitcoin of nearly $120,000 to release a South African teenage boy.
On Thursday South Africa’s central bank said it was in the process of determining whether cryptocurrencies complied with its financial surveillance and exchange control regulations. ($1 = 12.4837 rand) (Reporting by Mfuneko Toyana Editing by Joe Brock/Keith Weir)
Increasing debt in many African countries is a cause for worry - THE ECONOMIST
Africa in the red
Unfortunately the keenest borrowers are also feckless spenders
Mar 8th 2018| KAMPALA
“A FOOL’S bargain.” That is how Idriss Déby, Chad’s president, now describes the state oil company’s decision to borrow $1.4bn from Glencore, an Anglo-Swiss commodities trader, in 2014. The loan was to be repaid with future sales of crude, then trading above $100 a barrel. But two years later, as the price dived, debt payments were swallowing 85% of Chad’s dwindling oil revenue. For weeks schools have been closed and hospitals paralysed, as workers strike against austerity. On February 21st, after fractious talks, Chad and Glencore agreed to restructure the deal.
Chad’s woes recall an earlier era, when African economies groaned beneath unpayable debts. By the mid-1990s much of the continent was frozen out of the global financial system. The solution, reached in 2005, was for rich countries to forgive the debts that so-called “heavily indebted poor countries”, 30 of which were in Africa, owed to the World Bank, IMF and African Development Bank. With new loans and better policies, many of these countries turned their economies around. By 2012 the median debt level in sub-Saharan Africa (as defined by the IMF) fell to just 30% of GDP.
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Today the median debt level is over 50% of GDP. That is low by international standards, but interest rates are generally higher for African countries, which collect relatively little tax. Economic growth slowed in response to lower commodity prices. As a consequence, there is much less revenue to service debts. The pace of borrowing has picked up. The IMF reckons that five sub-Saharan African countries are already in “debt distress”, with nine more at high risk of joining them.
Lending to Africa surged after the financial crisis, when interest rates in rich countries sank to historic lows. Fund managers chased the high yields of African government bonds and the profits from a commodities boom. The biggest lenders to Africa had long been Western governments. But since 2006, 16 African countries have sold their first dollar-denominated bonds to foreign investors. Interest rates in the rich world remain low, so several countries are scrambling back to the market this year. Senegal’s $2.2bn Eurobond was five times oversubscribed on March 6th.
Borrowing makes sense for poor countries if it finances things like roads, schools and hospitals, which improve welfare and support economic growth. But the keenest borrowers in Africa are also feckless spenders. Take Ghana, which racked up debt as it ran an average annual budget deficit of 10% from 2012 to 2016. When a new government entered office last year, it found a $1.6bn “hole” in the budget. The new chairman of the state cocoa board found that a $1.8bn loan meant to fund cocoa production in 2017 was “all gone”.
Ghana got a three-year loan of $918m from the IMF in 2015, ensuring a degree of transparency. Commercial loans are easier to hide. In Mozambique, three state-owned companies borrowed $2bn in deals arranged by European banks. Most of this was done in secret. The proceeds were squandered on overpriced security gear and a bogus fleet of trawlers. An audit could not trace $500m. The once-buoyant economy sank and Mozambique defaulted on its debt last year.
A study of 39 African countries from 1970 to 2010 found that for every dollar borrowed, up to 63 cents left the continent within five years. The money is often siphoned out as private assets, suggests Léonce Ndikumana, one of the researchers, based at the University of Massachusetts, Amherst. Some banks seem more interested in juicy fees than good governance.
China’s involvement in Africa has made it harder to assess the situation. Countries such as Zambia and Congo-Brazzaville have taken out opaque loans from Chinese companies. Angola has borrowed more than $19bn from China since 2004, mostly secured against oil. Such loans often have built-in clauses to review repayments as prices fluctuate, says Deborah Brautigam of the China-Africa Research Initiative at Johns Hopkins University. But there is little precedent for restructuring Chinese loans. Nor is China a full member of the Paris Club, which co-ordinates the actions of creditors when things go wrong.
Though much of the money borrowed by states comes from foreign investors, some is provided by local banks. They find it easier to buy government bills than to assess the reliability of businesses or homebuyers. Moody’s, a ratings agency, estimates that African banks’ exposure to sovereign debt is often 150% of their equity. So a sovereign-debt crisis could fast turn into a banking one.
Disaster can still be averted in most African countries. Abebe Shimeles of the African Development Bank warns against sudden spending cuts, which would leave half-finished infrastructure projects to rust. Research from the IMF suggests that the least costly way to deal with fiscal imbalances in Africa is to raise meagre tax-to-GDP ratios, which have crept up by just a couple of percentage points this century.
Other proposals aim to make lenders share more risk with borrowers by, for example, linking interest payments to growth or commodity prices. Some suggest changing laws in America and Britain, where most debt is issued, so that countries are not liable for loans agreed to by leaders acting without due authority. Organisations such as the IMF could be more robust, speaking out early when countries seem to be in a downward debt spiral.
As it is, the costs of bad borrowing rarely fall on leaders or their lenders, which often makes politicians borrow (and steal) more. “It’s the common man that actually bears the brunt,” says Bernard Anaba of the Integrated Social Development Centre, a Ghanaian advocacy group. The people of Chad, now paying for Mr Déby’s foolish bargain, would surely agree.
This article appeared in the Middle East and Africa section of the print edition under the headline"On the rise again"
Tillerson’s sack won’t affect Nigeria-US relations – FG - PUNCH
Olalekan Adetayo, Abuja
The Federal Government on Wednesday said the recent sack of Rex Tillerson as the United States Secretary of State would not affect the relationship between the US and Nigeria.
The Minister of Foreign Affairs, Geoffrey Onyeama, said this in an interview with State House correspondents at the Presidential Villa, Abuja.
Onyeama said Nigeria expected all the discussions held during Tillerson’s recent visit to Nigeria as regards both countries relations to stand.
The minister said, “Rex Tillerson’s sack won’t affect the discussions held because government is a continuum, as we all know.
“When he came, it was the United States that was speaking and clearly we expect with every expectation that everything he has said as regards US/Nigeria relations reflects the position of the United States, reflects the position of the president of the United States, so we don’t see any change happening.”
Nigeria ranked 91st happiest country in the world - DAILY POST
Nigeria has been ranked 91st happiest country in the world, according to an annual survey issued on Wednesday by the United Nations.
The survey report placed Finland at the top and Burundi at the bottom of the happiness index. Finland rose from fifth place in 2017 to oust Norway from the top spot.
The survey also found Americans were getting less happy even as their country became richer.
The UN Sustainable Development Solutions Network’s 2018 World Happiness Report ranked 156 countries according to their scores for things such as GDP per capita, social support, healthy life expectancy, social freedom, generosity and absence of corruption.
The 2018 top-10, as ever dominated by the Nordics, is Finland, Norway, Denmark, Iceland, Switzerland, Netherlands Canada, New Zealand, Sweden and Australia.
The U S. came in at 18th, down from 14th place in 2017. Britain was 19th and the United Arab Emirates 20th.
One chapter of the 170-page report is dedicated to emerging health problems such as obesity, depression and the opioid crisis, particularly in the U. S. where the prevalence of all three has grown faster than in most other countries.
While income per capita has increased markedly in the U. S. over the last half-century, the happiness index has been hit by weakened social support networks, a rise in perception of corruption in government and business and declining confidence in public institutions.
“We obviously have a social crisis in the U. S, more inequality, less trust, less confidence in government,” the head of the SDSN, Prof. Jeffrey Sachs of New York’s Columbia University, told Reuters as the report was launched at the Vatican’s Pontifical Academy of Sciences.
“It’s pretty stark right now. The signs are not good for the U.S. It is getting richer and richer but not getting happier,” he said.
Asked how the current political situation in the United States could affect future happiness reports, Sachs said: “Time will tell, but I would say that in general that when confidence in government is low, when perceptions of corruption are high, inequality is high and health conditions are worsening … that is not conducive to good feelings.”
For the first time since it was started in 2012, the report, which uses a variety of polling organisations, official figures and research methods, ranked the happiness of foreign-born immigrants in 117 countries.
Finland took top honours in that category too, giving the country a statistical double-gold status.
The foreign-born were least happy in Syria, which has been mired in civil war for seven years.
“The most striking finding of the report is the remarkable consistency between the happiness of immigrants and the locally born,” said Prof. John Helliwell of Canada’s University of British Columbia.
“Although immigrants come from countries with very different levels of happiness, their reported life evaluations converge towards those of other residents in their new countries,” he said.
“Those who move to happier countries gain, while those who move to less happy countries lose.”
Dollar surges past 107 yen before U.S. price data - REUTERS
LONDON (Reuters) - The dollar surged against the yen on Tuesday, heading for its biggest single-day rise in five months, before inflation data later in the day that may alter expectations for U.S. interest rate moves this year.
Markets have priced in 75 basis points of rate rises in the United States so far this year, and analysts say stronger-than-expected inflation data might cement the case for a fourth increase in 2018 after strong jobs data last week.
“The broader story remains that of U.S. monetary policy normalization in the backdrop of an improving economy, and a further decline in currency market volatility would only fuel more risk taking appetite,” said Commerzbank’s FX strategist Thu Lan Nguyen.
The dollar rose to a two-week high and was up 0.7 percent on the day at 107.28 yen, its biggest single-day rise since late October. Even so, the yen was set for a 5 percent gain against the dollar so far this year.
Against a basket of currencies .DXY, the dollar gained just 0.1 percent at 90.02.
The yen came under some pressure from a scandal involving Prime Minister Shinzo Abe. It weakened by 0.3 to 0.5 percent against other major currencies after Japan’s ministry of finance said on Monday it altered documents for a sale of state-owned land linked to Abe’s wife.
However, Marc Chandler, global head of currency strategy at Brown Brothers Harriman in New York said that“many see the eruption of the scandal that threatens senior government officials as yen-positive because it weakens those that ostensibly want to depreciate the yen through monetary policy.”
Morgan Stanley strategists said a further deterioration in Abe’s political situation might see the yen“forcefully return towards its previous upward trend.”
Elsewhere, the renewed drop in currency volatility prompted investors to bet on higher-yield currencies. The Australian dollar AUD=D3 recovered from three-month lows and the euro EURCHF= gained nearly 2 percent in the last 10 trading sessions against the Swiss franc.
The euro EUR=EBS was broadly flat around $1.2329 against the dollar on the day.
A key focus for investors is the U.S. consumer price data due at 1230 GMT. Median forecasts by economists polled by Reuters forecast annual core CPI inflation USCPFY=ECI of 1.8 percent in February, flat compared with January.
A higher reading could stoke expectations the Federal Reserve will raise rates four times this year rather than three. A rate increase at its meeting on March 20-21 has been long considered a done deal. Another increase in June is almost fully priced in.
But traders are also aware that the prospects of more U.S. rate hikes may not lift the U.S. currency, considering other factors weighing on the currency.
One big issue is U.S. President Donald Trump’s tariff on steel and aluminum, which many investors worry could trigger retaliatory moves by U.S. trade partners and hurt the economy.
Elsewhere, sterling slipped 0.1 percent against the euro on the day, after the EU’s chief Brexit negotiator, Michel Barnier, said that Britain cannot retain the benefits of the European Union after it leaves the bloc in 2019.
Reporting by Saikat Chatterjee; additional reporting by Hideyuki Sano and Masayuki Kitano in Tokyo; editing by Larry King
Sterling falls ahead of Hammond's economic update - REUTERS
LONDON (Reuters) - Sterling slipped on Tuesday as traders shied away from taking out big positions ahead of U.S. inflation data and a half-yearly update on the public finances from the British finance minister.
Philip Hammond is expected to announce an improvement in the country’s slow economic growth outlook in the run-up to Brexit while stressing that his priority remains to ease the pounds in public debt.
The spring statement will burden of Britain’s 1.7 trillion be the focus today. In terms of the implications for the pound, it will be limited,” said Lee Hardman, an analyst at MUFG, while adding that an upgrade to economic growth could“at the margins be supportive” for sterling.
With Britain stuck in negotiations with the European Union to try to agree the terms of a transition deal to cover the period after it leaves the bloc, Brexit continues to overshadow other influences on the pound.
The junior Brexit minister Robin Walker said on Monday that Britain was very close to agreeing the details of the implementation period with the EU for its transition out of the bloc. Britain is due to leave in March 2019.
Renewed concerns about the state of Brexit talks after the EU rejected some British proposals for a trade deal last week have weighed on the pound in recent weeks, as has a recovery in the dollar.
Sterling fell 0.2 percent to $1.3879 as the dollar pushed higher.
A focus for investors is the U.S. CPI data due at 1230 GMT. Median forecasts by economists polled by Reuters point to annual core CPI inflation of 1.8 percent in February, which would be flat from January.
Against the euro, sterling dropped 0.1 percent to 88.85 pence per euro.
Societe Generale’s Kit Juckes said Hammond’s statement, due at 1230 GMT, had been downgraded from a“major event to a mere speech”. The euro versus sterling remained“stuck in a range”, he said.
Reporting by Tommy Wilkes; Editing by Alison Williams
Another Exchange Jumps on Bitcoin Bandwagon - WSJ
Startup trueEX says it plans to offer derivatives on bitcoin
A bitcoin-related product is the latest gambit of trueEX co-founder and Chief Executive Sunil Hirani, a serial entrepreneur. PHOTO: MIKE SEGAR/REUTERS
March 12, 2018 11:35 a.m. ET
A startup exchange active in the derivatives market is expanding into bitcoin, the latest sign that market operators remain excited about cryptocurrencies despite bitcoin’s recent price slump.
New York-based trueEX LLC on Monday announced plans to offer derivatives on bitcoin and other “digital assets.” That makes it at least the sixth U.S. trading venue to jump into cryptocurrency derivatives in recent months.
Bitcoin’s price has fallen in half since hitting a high of nearly $20,000 in December, when investor mania for the digital currency hit a recent peak. But even with bitcoin’s value bobbing around $10,000, more financial firms have been eager to offer new products tied to the volatile digital currency.
Chicago-based exchange giants CME Group Inc. CME -1.31% and Cboe Global Markets Inc.CBOE -0.58% launched bitcoin futures in December. Their contracts let traders bet on the price of bitcoin without directly holding the digital currency, all on a regulated marketplace.
Some lesser-known players have also launched or planned to launch bitcoin derivatives, including LedgerX, a startup bitcoin-options exchange; Cantor Exchange, a small trading venue owned by broker Cantor Fitzgerald LP; and Nadex, owned by London-based IG Group .
Like its predecessors, trueEX is betting that Wall Street banks and money managers want to be able to trade bitcoin on a regulated market, without the risks that often come with cryptocurrency exchanges, such as theft.
The move is the latest gambit by trueEX co-founder and Chief Executive Sunil Hirani, a serial entrepreneur who helped bring derivatives trading from the phone to the screen over the past two decades and has more recently been eyeing opportunities in cryptocurrencies.
TrueEX initially plans to offer a type of contract called a “non-deliverable forward” linked to bitcoin prices. Such contracts are popular in foreign-exchange trading. They allow two parties to agree to pay each other in the future an amount based on the value of two currencies, such as the dollar and the euro.
The plan is under review by the Commodity Futures Trading Commission, which regulates trueEX, the company said in a statement.
Bitcoin vs. Regulators: Who Will Win?
As bitcoin has emerged from the underground world of nerds and criminals to become a mainstream investment, the risk of hacks and scandals has also blossomed. What's a government to do? The WSJ's Steven Russolillo travels the world (sort of) to see how regulators are responding to the remarkable rise of cryptocurrencies. Video: Sharon Shi and Crystal Tai
Despite the budding interest in bitcoin, many on Wall Street are still wary of trading the cryptocurrency because of its uncertain legal status, as well as the risk that their holdings could be stolen by hackers. Investors have lost more than $700 million worth of digital currencies this year in hacks of cryptocurrency exchanges in Japan and Italy.
The bitcoin-futures market remains small compared with that for bitcoin itself. In February, about $75 million worth of CME’s futures changed hands each day, on average, while the comparable number at Cboe was around $62 million. Meanwhile, an average of over $1 billion worth of bitcoin changed hands daily on major cryptocurrency exchanges last month, according to blockchain.info, a bitcoin data and services provider.
Founded in 2010, trueEX isn’t the first exchange to try to launch non-deliverable forwards on bitcoin. TeraExchange LLC, a startup trading platform, introduced a similar product in 2014 but it never gained traction.
Mr. Hirani has a history of building successful ventures. In 1999 he co-founded Creditex, one of the first electronic-trading venues for credit-default swaps—a type of derivative that can used to be bet on whether a company or group of companies defaults on its debt. Nine years later, he sold Creditex to Intercontinental Exchange Inc. for $513 million.
He returned to his entrepreneurial roots with trueEX, which sought to take advantage of postcrisis regulations that pushed more derivatives trading onto electronic platforms.
The company is now the sixth-largest venue for the trading of interest-rate swaps in the U.S., having traded $9 trillion of them last year, according to industry group FIA.
Write to Alexander Osipovich at firstname.lastname@example.org
U.S. Dollar Weakens as Investors Seek Second Opinion on Inflation - WSJ
Investors look ahead to consumer price data and reports on wholesale prices, retail sales
By Daniel Kruger
The U.S. dollar edged lower Monday as investors sought confirmation about the pace of inflation after last week’s weaker-than expected report on wage growth.
The WSJ Dollar Index, which measures the U.S. currency against a basket of 16 others, declined for a second consecutive day, dropping 0.2% to 83.63. The currency lost 0.2% against the euro and and 0.4% versus the British pound and Japanese yen.
The Labor Department will release data on the consumer price index Tuesday which could confirm that inflation remains tepid, even as the job market remains tight. The dollar weakened Friday after a Labor Department report showed that wages rose 2.6% from a year earlier in February, below economists’ estimates, and the annual wage gain in January was revised down to a 2.8% increase. The report also showed that nonfarm payrolls rose a seasonally adjusted 313,000 last month, the strongest monthly gain since July 2016.
Investors will also be looking to reports on wholesale prices and retail sales, in a wave of data arriving before a two-day Federal Reserve meeting that concludes March 21. Policy makers are expected to raise interest rates at the meeting and are scheduled to release updated forecasts for the path of monetary policy and economic growth.
“The markets are taking a step back because it’s going to be a very eventful data week for the U.S.,” said Paresh Upadhyaya, who manages currencies for Amundi Pioneer Investments. ”We’re sort of in a holding pattern.”
The inflation data are particularly important, as many private economists have forecast the Fed will raise interest rates four times this year, compared with the three increases policy makers penciled in at their December meeting. Should Fed officials signal they intend to accelerate the pace of monetary tightening, it could give a boost to the dollar, which had declined 2.5% through March 9. Higher interest rates typically support a nation’s currency by offering a greater rate of return.
Write to Daniel Kruger at Daniel.Kruger@wsj.com