First of all, let us extend our wishes for a happy Eid to all Muslims! The month of Ramadan has now come to an end and there was little to no business activity during the past few days as festivities move to the forefront. However, last week ended on a strong note across the MENA markets!
More good news was heard regarding the Saad group of Saudi Arabia, recently notorious for debt-related problems, seems to have worked out an agreement with its creditors after a few long weeks of uncertainty that kept the markets nervous across the GCC . Stay tuned for more on this as yet another cloud that has been hanging over market sentiment may well have been cleared.
Chinese capital continues to be put to work in Africa. The Government of Ghana has applied for a USD 2 billion loan facility from China to finance the execution of development projects in the run-up to oil production in late 2010. The Minister for Finance and Economic Planning (Dr. Kwabena Duffour) revealed that the application was submitted to the China Exim Bank which is expected to review the application. The loan will likely be awarded provided China gets a participation of Chinese oil firms in the country’s nascent upstream oil and gas sector. The granting of the loan (along with Word Bank and IMF loans) is likely to lead to a rise in Ghana’s external reserves and boost investor confidence in the Ghanaian Cedi.
Another China-related development is unveiling itself in Mauritius with the setup of the China Economic Trade & Cooperation Zone. The Mauritius-China multi-sector project, Jin Fei, which will see the setting up of an economic zone in Mauritius, was officially launched this week. The project will be financed by 3 companies which are, Taiyuan Iron & Steel Group Co Ltd (TISCO), Shanxi Coking Coal Group (SCCG) and Tianli. Through the setting up of a business hub in Mauritius, these companies will gain access to African markets at preferential rates and would also take advantage of the Double Tax Agreement treaties which the country has with various jurisdictions. The Jin Fei project is expected to be completed by 2016 and would not only generate increased export earnings for Mauritius but is also likely to create a number of 34,000 new jobs over the next 6 years.
Nigeria finally seems to be getting back on its feet after a few horrendous weeks for its markets. We have spoken about this before and you probably know we think overall valuations are very attractive at this point (we have also been building up an exposure to Nigeria over the past weeks) so hopefully it is now time sit back, relax and enjoy the ride. There still may be some turbulence as a degree of uncertainty about some financial industry players persists but the non-performing loans (NPLs) that have deteriorated the sector’s asset quality will be likely be a mostly something from the past by December 2010. This is because the current measures taken by the CBN to clean up banks’ balance sheets and the increased focus of the sector on risk management will reduce the bank’s appetite for very risky assets in the future. The Governor of Central Bank of Nigeria along with the CEO’s of the five banks taken over by the CBN made an official visit to the exchange during the week. His visit was in continuation of the road show and he equally used the opportunity to clear the air on issues surrounding the Five Banks. He made it clear that the two mandates handed over the new management of the five banks are recovery and re- engineering. The report on the 14 of the remaining banks will be released by the end of the month.
Please refer to our weekly updates for more detail on the development across the African and MENA markets. The updates can be found in our products updates section.
We look forward to keeping you updated
With kind regards
Baldwin
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