The Aussie dollar is looking more like the South Pacific peso at the moment, but Australia is not alone in fending off the commodity currency backlash.
South Africa’s market is under similar pressure, and South African Reserve Bank governor Gill Marcus is not having a good time of it when it comes to guiding the markets out of the turmoil. Read more
An interesting anomaly is popping up in the world of Eastern Europe, Middle East, and Africa (EEMEA) flows, note Bank of America Merrill Lynch on Friday:
Investors are puzzled by the lack of EEMEA FX appreciation in spite of G-10 central bank printing. Waiting for the flow may be like Waiting for Godot: you wait and wait, but he never comes. Global rebalancing, deleveraging and higher US rates are responsible for this, in our view. In sum, the flow trends are consistent with the poor performance of EEMEA FX—and insofar as they are unlikely to change, currencies are likely to remain weak. Read more
It’s hard to look at the labour situation in South Africa and not be alarmed at how it’s already impacting the wider economy. What started as pay dispute at Impala Platinum, has spread across the country’s mining industry, including a massacre at the Lonmin mine, and strikes (many illegal) are now impacting transportation and the auto industry. Moody’s has already downgraded the sovereign debt, partly because of the social unrest. Read more
It seems like more or less anything can be deemed an asset class these days.
Here’s the latest one from Citigroup analysts: ‘Carbs’. No that’s not McDonalds and Coca Cola, but Canada, Australia, Russia, Brazil and South Africa, i.e. the world’s top commodity players. Read more
Glencore has confirmed its interest in taking over South Africa’s Optimum Coal for $1.2bn, in a deal that would transform the company’s position at one of the world’s largest coal ports, reports the FT. Glencore and Cyril Ramaphosa, the South African billionaire, are prepared to offer R34 a share for Optimum, a second-tier domestic coal miner, in a deal valuing the company at R8.56bn ($1.2bn). This is Glencore’s first major takeover following its flotation, writes the Telegraph. It adds that in adherence with South African rules on black ownership, Glencore’s bid was made via an investor group and its local Black Economic Empowerment partner, Ramaphosa. Read more
George Osborne is recruiting international support for his unyielding stance on deficit cutting. In an article published in the FT on Monday, Mr Osborne calls for “hard decisions on spending, entitlements and taxation in countries with large budget deficits”. The article is co-authored with the finance ministers of Australia, Canada, Singapore and South Africa. The FT says the article comes at the same time as two reports, published on Monday, suggest that the UK economy will remain stagnant in the near future. In a survey by the Chartered Institute of Personnel and Development and KPMG, the professional services firm, the balance of employees planning to increase staffing levels has shifted from positive to negative. The Monthly Business Trends Indices published by BDO, an accounting firm, was also gloomy. The report, which is prepared by the Centre for Economics and Business Research and aggregates other business surveys, documents continuing pessimism in both manufacturing and services.
In which FT Alphaville gets to ask once more why the sovereign crisis in Greece, where Greek banks are in danger, isn’t setting off contagion in Emerging Europe.
Where exposure to Greek banks happens to be rife. Read more
Jacob Zuma, South Africa’s president, said embattled Libyan leader Muammer Gaddafi told him he would give a ceasefire plan “a chance”, after Zuma led an African Union delegation to Tripoli on Sunday in search of a solution to the Libyan crisis, reports the FT. As Gaddafi’s forces advanced on the strategic rebel-held city of Ajdabiya in the east, and Anders Fogh Rasmussen, Nato secretary-general, said there was no military solution to the conflict, the African Union presented Gaddafi with its own “road map” for a resolution. Zuma, joined by four other African leaders, said the Libyan delegation led by Gaddafi said it had to give a “ceasefire a chance.” Zuma was also due to hold talks with the rebels, but diplomats said they were unlikely to accept the AU plan as it would involve a continued role for Gaddafi. Read more
Walmart has offered to buy a 51 per cent stake in Massmart, South Africa’s third-biggest retailer, for 16.5 bn rand ($2.34bn), Bloomberg reports. Massmart will maintain its listing on Johannesburg’s bourse, the news agency added. In a statement Walmart said it had “irrevocable” support for its 148 rand per share offer from shareholders representing 35 per cent of Massmart, while another 15 per cent had offered “non-binding” support to the bid. Walmart is hoping that South Africa will act as a base for expansion into African markets. Reuters adds that Grant Pattison, Massmart’s chief executive, has said the company would retain its South African management after the deal. Read more
South Africa’s finance minister has announced steps designed to curb the appreciation of the rand, promising to loosen exchange controls and increase foreign reserves, the FT reports. The plans outlined by Pravin Gordhan in a budget policy statement to parliament on Wednesday represent a softening of his stance. The minister had warned of the dangers to the global economy of countries taking unilateral steps to devalue their currencies. The rand rose to R6.76 to the dollar this month – a 33-month high. Gordhan promised to consider loosening exchange controls and changing the current lifetime allowance of R4m ($590,000) for overseas investment for South Africans to an annual limit. Read more
HSBC has abandoned plans to buy Nedbank in South Africa, Bloomberg reports, following a two-month period of talks with majority owner Old Mutual. HSBC won’t proceed with its bid after a period of exclusivity ended, Old Mutual said in a statement today. The bank had not been in a position to make an offer for Nedbank before the period of exclusivity finishes, according to people close to the UK group, the FT reported. They said due diligence on the South African bank’s operations had proved more complex than expected. The move could leave the way clear for UK rival Standard Chartered to gain the upper hand in the bidding to buy Nedbank, HSBC executives have conceded. StanChart had previously been interested in buying Nedbank. Read more
Mike Duke, chief executive of Walmart, sought to reassure investors on Wednesday that the pursuit of international growth by the world’s largest retailer would not come at the expense of investment returns, the FT reports. Speaking at a meeting of analysts and investors, Duke said the retailer saw “tremendous upside” for future growth in emerging markets such as China, Brazil and Mexico, but that “every decision, every investment that international is looking at has a focus on growth and returns”. His comments follow the retailer’s R32bn ($4.6bn) offer for Massmart, South Africa’s third-largest retailer, which led several Wall Street analysts to question the likely returns on the investment, that would be its largest ever single deal in an emerging market. Read more
Walmart offered more than $4bn for South African wholesaler Massmart Holdings on Monday as the world’s largest retailer seeks to expand in fast-growing Africa, reports Reuters. Massmart, South Africa’s third-largest listed store group by value, owns chains such as Game and Makro and has been among the most aggressive South African retailers in expanding into the rest of sub-Saharan Africa, and now operates in 14 countries. There had long been speculation that Walmart would try to expand in Africa, with Massmart seen as a likely target. The two companies said Walmart had offered R148 per share for Massmart, valuing the company at R28.9bn ($4.1bn) or a premium of nearly 10 per cent above the share price at Thursday’s close of R134.75. Read more
South Africa’s trade minister on Tuesday embraced China’s surging investment in Africa, saying that Beijing was not pursuing a neocolonial policy and its growing interest in the continent would bring huge benefits, reports the FT. The trade minister is part of a delegation led by South African President Jacob Zuma that includes almost 400 business executives and 11 cabinet members, the biggest group yet to accompany a South African leader abroad. South Africa’s $6.57bn in exports to China last year were almost entirely made up of natural resources while its $9.45bn of imports from China were value-added manufactured goods, according to South African data. Read more
Europe’s largest lender is on the brink of grabbing a big banking stake in Africa’s largest economy, Reuters reports, after HSBC announced it was negotiating to take a majority stake in South Africa’s Nedbank. The stake would give HSBC a stake in increasing trade flows between Latin America and China, says the FT. On the other hand — it’s the last chance the bank has to build up a big presence in the South African market, Lex observes. Read more
Naspers, the rapidly expanding South African media group, on Wednesday said it had taken a substantial stake in Digital Sky Technologies, the internet company that controls Russia’s leading internet, e-commerce and social networking sites, the FT reported. Naspers exchanged its existing 39.3 per cent stake in its Russian unit, Mail.ru, which it co-owned with DST, and paid a further $388m to acquire a 28.7 per cent stake. Following the deal, DST will own 99.9 per cent of Mail.ru. Read more
Africa’s top 40 companies — ranging in size from $350m to $80bn and already regional players in mining, consumer industries and services — are emerging as competitors on the global stage, the FT said, citing research by the Boston Consulting Group. The report also identified a group of fast-growing nations which it describes as the “African Lions” – Algeria, Botswana, Egypt, Libya, Mauritius, Morocco, South Africa and Tunisia. Their collective per capita GDP, at $10,000, is already higher than the average for the Brics. Read more
Continuing our recent theme of financial analysts-turned-soccer-experts, we bring you a Friday edition of 2010 World Cup predictions, FT Alphaville writes. Brazil looks like a winner — thanks to some rather… odd quant criteria. Read more
China on Thursday confirmed its biggest investment in South Africa for more than two years. Jidong Development Group, China’s second largest cement maker, and the China Africa Development Fund will acquire a majority stake in a new R1.65bn ($221m) cement plant, the FT said. Chinese banks will fund the venture alongside South Africa’s NedBank. Read more
China will on Friday formally announce its largest investment in South Africa for two years, entrenching its position as the resource-rich continent’s most important economic and commercial partner, the FT has learnt. The China Africa Development Fund and the Jidong Development Group will help build a new cement plant worth at least Rmb1.5bn. China emerged as South Africa’s largest trading partner last year. Read more
The number of foreign visitors to the football World Cup in South Africa will be about 110,000 fewer than originally forecast, the FT said, citing a report by consultancy group Grant Thornton. The recession, slow ticket sales in Africa and high prices will combine to depress the number of arrivals for the event in June, the report said. Read more
A World Cup without beer is like cricket without Pimm’s. Or a night out in Essex without an alcopop, says FT Alphaville. But how much does hosting a World Cup football tournament actually boost local beer sales? According to Sanford Bernstein analysts Trevor Stirling, Joao Valli and Melissa Yates, the World Cup-beer-boosting effect can be quantified to exactly 180 basis points on average. Read more
What happens when your favourite emerging market gets the nod to host a major world sporting event? Sadly, surprisingly little; trends matter more.
A Citi note on Tuesday cuts through South Africa’s World Cup fever: Read more
The joys of the World Cup are plenty.
Those in England can beam with pride as Wags go shopping, chairs are thrown through restaurant windows, and much of the country’s media succumb to collective hysteria and mouth-foaming jingoism. Read more
The 2010 World Cup will add at least 0.5 percentage points to South Africa’s GDP growth, analysts at Bank of America Merrill Lynch said in a note on Monday.
But while the sporting event will boost retail sales and other consumption spending as well as tourism, it is likely to have a negative effect on industrial production, as the charts below illustrate: Read more
From UBS, showing size of fiscal stimulus against interest rates.
Speaking of emerging market economies in the 1990s, we may be having a repeat.
This is from Sean Corrigan, chief investment strategist at Diapason Commodities Management. Read more
Old Mutual is to sell its controlling stake in South Africa’s second-largest short-term insurer to the Royal Bafokeng Nation, a rural community whose ancestral lands cover some of the world’s largest platinum deposits. The R8bn deal, to be announced on Thursday, adds lustre to one of the more inspiring black economic empowerment stories of post-apartheid South Africa. Unlike many empowerment groupings, the RBN have ploughed their investments back into improving life for their community’s 300,000 people. The deal, which will see the RBN take control of Mutual & Federal, will be the first time that a big South African financial services company has been taken over by a black-owned group. But the deal may fuel speculation that Old Mutual is keen to reduce the size of its South African exposure. Read more
Private equity is just getting going in South Africa. The value of funds under management jumped almost a third last year to R56.2bn from R42.5bn in 2005, according to industry body Savca.
The profile of private equity funding has grown in South Africa, even though it remains a tiny piece of the global picture, points out a story in an FT special report. The value of investments as a percentage of GDP is 1.7 per cent, higher than the Asia-Pacific region’s 0.9 per cent and continental Europe’s 1.5 per cent. (The US and UK come in at 2.8 per cent and 2.7 per cent respectively.) Read more