African markets are again powering higher and our asset allocation for the Lions fund is strongly benefitting from the decision to increase our positioning in Nigeria and Kenya, two of the better performers YTD. Below is an overview of the African markets as of March 11.
Data provided by African Alliance
The Nigerian Cavalry has Arrived!
The Central Bank of Nigeria (CBN) has released a statement on the recent development of the establishment of Assets Management Corporation of Nigeria (AMCON). The statement highlights the passage of the AMCON bill is on track and would likely to be completed within 1Q10. The AMCON is an investment vehicle with the aim to absorb the non-performing loans (NPLs) from the troubled banks and inject the much needed capital and liquidity into these banks.
The evaluation of the assets is expected to be based on the collateral and the reasonable value for the underlying collateral as determined by the AMC. CBN sent a draft bill for the establishment of AMCON to National Assembly for passage into law in 2009. Although it was initially anticipated to be passed into law by end of 2009, the process was somewhat delayed. In our opinion, the delay was partly due to the absence of President Yar’Adua which resulted in a political vacuum, and partly due to the thorough process that the bill has to pass through.
We believe that the peaceful transition of political leadership from President Yar’Adua to Acting-President Jonathan is a positive development for the ongoing reform, since Jonathan is also supportive of the reform. The authorised capital of the AMCON shall be NGN10bn (50% subscribed to by CBN and 50% by Ministry of Finance) and the corporation shall operate for a period of 10 years from the commencement of the act and cease to exist at the expiration of the period.
Needless to say this development is very positive for the market as it locks up one of demons that has been pestering sentiment in the recent past.
The Middle of the World
Dubai seems to be coming back to life with signs of considerable volume increases on its market. Given that the world very much uses Dubai as a proxy for the entire region, in the same logic, this could well be the herald of good upside in te next few weeks. Then again, while I have given up most hope that markets have the ability to respond to any logic at all ; saying that this market is undervalued by trading at only 20% of its 5 year high is becoming quite an understatement. We have been saying this for some time now but we believe investors are starting to agree with us. From my personal experience that stems from the numerous recent meetings and visits with investors, there is no longer that utter look of confusion when we speak about the prospects for the Middle Eastern region, I genuinely feel they opening up to the idea of investing again (actually, there have been more investors coming into our Arab Falcons fund). When they look into these markets again, they will probably also like what they see in Saudi Arabia and Kuwait. Another place to watch is Oman, it seems to be waking up from a long conservative nap and is feeling more progressive, you should hear more about this market in the coming weeks.
We always insist on focusing on the long term potential for Dubai’s as a hub which is located smack in the middle of where the growth is. Consider the following: as can be seen on the map, within a flight radius of 4 hours there are 9 of the world’s top 20 countries in terms of population, representing roughly 75% of the world’s population! (approx 5.2bn out of 6.8bn world population)
When you come to terms with these numbers the whole Dubai project intuitively starts making sense again. The city is indeed located in the middle of the (new) world! It has the infrastructure and the value proposition that many are attracted to as a place to do business or for a shopping and leisure holiday. With regards to Dubai as a tourist destination, may I underline that I am not referring to the European tourist here but rather to the Indian or Pakistani who needs a break from their notoriously noisy and crowded cities or the Moscovite who has had enough of -30°c during the winter, which lasts for most of the year.
With regards to the market, it is expected that Dubai World may present its “first concrete proposals” to UAE banks today as part of its debt restructuring plan. There are reports that Dubai World has requested meetings with ENBD and ADCB to present its proposals, which will probably include options ranging from immediate repayment of part of the debt to full repayment over a longer period. Stay tuned for more.
Please find attached our weekly updates which cover our markets of focus in detail. Our updates can also be found on our website.
With regards to next week, please note that we will not be issuing a weekly update, this is due to the fact that our entire team is getting together in London for our bi-annual strategy meeting, our focus will be on how to continue to improve our investment activities and service in general.
With kind regards from the Silk Invest team!
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