Monthly Archives: September 2012

Emerging & Frontier Markets Today 2012.09.28

Chart of the day — Inka Cola

Ranking America’s Top 50 startups – WSJ

“He knew that this was wrong. He probably could have told you the exchange rates from that morning. But he also knew that it had a rightness in it. For official accounting purposes, the two currencies are considered equivalent. Their respective values might fluctuate on a given day, of course, but it couldn’t be said that the CUP was worth less than the CUC That’s partly what he meant. He also meant that if you’re going to fly to Cuba from Miami and rub it in my face that our money is worth one twenty-fifth of yours, I’m gonna feed you some hilarious communist math and see how you like it. Cubans call it la doble moral. Meaning, different situations call forth different ethical codes. He wasn’t being deceptive. He was saying what my wife forced him to say. She had been a bit breezy, it seemed, in mentioning the unevenness between the currencies, which is the kind of absurdity her family would laugh at affectionately in the kitchen. But they don’t have to suffer it anymore. And he was partly reminding her of that, fencing her off from a conversation in which Cubans would joke together about the notion that the CUP and the CUC had even the slightest connection to each other. That was for them, that laughter. So, a very complex statement, that not-quite-lie. After it, he was totally friendly and dropped us at one of the Cuban-owned tourist hotels on the edge of Havana.” — John Jeremiah Sullivan in the NYT Magazine. I wish I could have this guy writing my Street Markets 101 column. Continue reading

Update to the African Mobile Revolution

I don’t know how this has escaped me for so long, but apparently in June this year, Gallup and the Gates Foundation published a survey of 11 African nations that attempted to compare payment behavior across Sub-Saharan Africa.

There’s a lot of interesting data in here for those who want it. Here’s a sample:


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Street Markets 101: Ground Zero in Argentina

I’m very excited to introduce the second installment of Street Markets 101 today (go here for the first installment), submitted by a guest writer in Argentina who for professional and security reasons is unable to use a real name. I modified this to suit a different editorial format for publishing last week on Seeking Alpha under my name with the headline, “A Street Level View Of Argentina’s Economy, The Peso And ARGT” (see here for the Seeking Alpha version) , but I could not have done it without the help of the source. Today, I present the original unabridged version. Without further adieu:

Ground Zero in Argentina

By Che Misterio

The nationalization of YPF, the falsification of economic data, inflation, mounting street protests and the volatile commodity prices…. these are all fascinating points for the international community to examine in any assessment of the unfolding crisis in Argentina. What has failed to reach the general audience is the impact of the CFK government upon the layman, particularly beyond the confines of Buenos Aires.

I am an economist and live in the “provinces”. I am not Argentine, but am intrigued by the ability of the Argentines to adapt to economic mis-management effectively and creatively. I assume this is simply due to a century of practice. Consider the following impacts on the layman:
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Emerging & Frontier Markets Daily Digest is on half speed for the next month

I’m on a book deadline for the next month so I kind of can only have half an antenna up for daily digest stuff. Otherwise I’ll continue putting up what I can and those of you who are emailers of things (you know who you are), please continue pushing things in front of me as you please.

For those of you who are not emailers of things, but desperately want to be, off the top of my head, I’m generally on the lookout for any of the following:

Market news and ideas that aren’t already being flogged to death by the usual suspects (general rule: anything currently being discussed by the NY Times, CNBC or any of the glossies, I’m usually not interested in unless it’s very very special, such as Top Trader).

All things black market and informal economy.

Anyone else tired of this whole “[X] is the new [Y]” theme.

Anyone with new insights on how the Mexican economy is a house of cards waiting to be blown down by some big bad fiery hot Latin salsa-dancing narco wolf looming large in sheep’s clothing, as well as how I can pack more metaphors and cliches into this sentence.

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Assessing the Private Equity Scene in Africa

From Avanz Capital, a rather thorough profile of the private equity scene in Africa. To begin with, South Africa clearly rules the roost:

Here’s a good global frame of reference for the overall environment:

There are 158 private equity funds (115 fund managers) in Africa with a total of $32.9 billion in capital closed since 2002 or currently being raised (avg. fund size is $216.5 million). Of the 158 funds, 60% have a fund size below $200 million, 32% are in the middle market ($200-800 million) and only six have fund sizes above $800 million. This compares to emerging Asia where there are 427 funds (286 fund managers) with a total of $184.3 billion in capital closed since 2002 or currently being raised (avg. fund size is $475 million). Latin America has a similar number of funds to Africa at 165 and number of fund managers at 110 but the total capital closed since 2002 or being raised currently at $54.0 billion and the average fund size of $330 million are nearly double that of Africa. Continue reading

Emerging & Frontier Markets Today 2012.09.24

“I turned £2,000 into £82,000 – then blew the lot in 10 minutes” — The Guardian UK

Highlights of high profile African business deals from the first half of 2012 spanning IPOs, investments, funds, mergers and acquisitions, bonds and exits — The Africa Report

Black market for autos thrives in Mexico — USA Today

Brazil’s Soft Power Dynamics in Africa — Diplomatic Courier
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Quote of the day: The real problem with electric cars

Dr. Richard Mignogna, renewable energy guru, writes:

“Much has been written in the popular and technical press lately about the emerging electric vehicle, both pro and con. In spite of wishful thinking, don’t expect significant penetration any time this decade. There is probably a role for EVs but it is not the widespread consumer market. Rather, it is more likely to be various fleet applications such as delivery vehicles or limited urban transit applications. For all but the most dedicated clean energy afficionados and hobbyists, or those who can afford a third vehicle, how many consumers can afford to pay the prices being charged for a vehicle with such limited capability? Most cannot. Second, there is still the issue that, in most places, the electricity used to recharge an EV will come predominantly from coal. So, the environmental benefits, at best, are muted. But, cost and performance aside, there is another difficulty with an electric transportation infrastructure that few seem to speak about. If you loved Big Oil, you will really love Big Monopoly Electric Utility extending its dominance to the transportation sector. Gasoline prices have at least been shown to be sufficiently elastic that they respond to consumer demand. And, within a limited range, consumers still have a choice of providers. Hence, there is at least some semblance of a free market at play — even if it is an oligopoly. In contrast, a consumer’s only choice for recharging that overpriced EV is the local monopoly utility and to pay whatever its regulator-approved rate is. Good luck there. So, there is a use for electro-motive transportation. It just isn’t the one everyone is talking about.”
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Emerging Markets as the Gateway Drug for Frontier Markets Investing

A long time ago, in a galaxy far, far away, this is what Bloomberg television looked like:

And honestly, I really miss it. It’s the straight dope, no bells, no whistles, no extra swooshing sound effects, no bubbly blondes. Hey, no, hang on—I have nothing against attractive women on television, but you’re either going focus on style or you’re going to focus on substance. You must pick one. And if you put a hot blonde on the screen, the odds are that the target audience—men—are not going to pay attention to what she’s saying. That’s just the way it is.

Anyway, the FT guys might have gone a bit to the opposite extreme, but the “nut graf” of this discussion, in a manner of speaking, comes at 3:00 into the segment, when they start discussing search for yield and market crowding taking the spotlight away from proper credit risk analysis.

And also, let’s just be clear here: in the lexicon of finance, “search for yield” is just the finance geek’s politically correct way of saying greed. Can we agree on that? Yes, I know, it’s the whole fiduciary responsibility to your investors and all that jazz, but really at the end of the day what we’re talking about is how to make more money because buying S&P spiders or USTs just isn’t doing it for you anymore. Right?

But I digress. Here’s the exchange that has my attention: Continue reading

Plain English: Quantitative Easing Explained

Kudos to Ed Dolan for putting together this highly readable and stripped down tutorial on quantitative easing:

See more from Ed Dolan’s blog here.

Emerging & Frontier Markets Today 2012.09.19

Wealthy Nigerians spend US$6.5 billion on private jets — Punch

How the global banking system defeated foreign policies and saved Iran — The Economic Times (India)

In many African countries, where local currencies are weak and volatile, the dollar serves as a second currency, used in anything from international trade to domestic business and living. A number of them are now introducing increasingly stringent rules against the use of the greenback in domestic transactions, as they look to bolster weak local currencies. Read on for a discussion of Angola, Mozambique, Ghana, Zambia — This is Africa

Great political risk analysis of South Africa — Jay Ulfelder in Foreign Policy Continue reading

Must See TV, South Africa edition: Top Trader debuts

As a general rule, I kind of hate everything reality TV represents, but I have to admit…this is pretty cool. CNBC Africa has just debuted its first ever reality series, “Top Trader”, which features 8 aspiring traders from across South Africa competing for a 250,000 ZAR prize in the JSE all share index.

Here’s part I of the first episode, which is not much more than an introduction to the eight contestants and three mentors:

Here’s part II of the first episode, which goes a little deeper. Seems to me the one to watch is the guy with the shirt that says, “FAT CHICKS–FUN ‘TIL YOUR FRIENDS FIND OUT”:

Something about the stripped-down production ethic of this makes it way easier to swallow than any remotely close equivalent in the American or British canon.

I can’t believe the reality TV racket actually came up with something that I’m going to watch with any regularity. And from CNBC no less.

China’s economic weakness is a bigger problem than economic growth

Tsinghua University’s Patrick Chovanec on CNN and NPR talking about China’s economic slowdown:

“Everybody in principle says that China needs to move from export and investment-led growth to domestic consumption-led growth. The problem is the entire Chinese economy is geared toward channeling resources away from household sector to fund and boost investment and production. And shifting those resources back to the household sector means first of all some significant structural changes to the Chinese banking system, the Chinese tax system, exchange rates, but it also means cutting the legs out from under the investment boom and the growth that China has in the interest of long term growth. And that has been something very difficult for Chinese leaders to swallow when push comes to shove.”

And then the most telling comment from the NPR interview: Continue reading

Emerging & Frontier Markets Today 2012.09.18

Everything you need to know about the income inequality debate —

“When the currency is allowed to depreciate gradually, it reflects increased confidence on the part of the central bank to allow market forces to control its value as fundamentals improve,” Nour Mohei-El-Din, assistant general manager for treasury at BNP Paribas Egypt, said by phone yesterday. “That, in turn, boosts investor sentiment and drives demand for pound- denominated assets like NDFs and treasury bills.” — Bloomberg

Downtown Juarez restoration underway — El Paso Times

Reserve accumulation by the top-50 emerging central banks has begun growing again for the first time since mid-2011 and should top $108 billion in September after strong inflows of around $13 billion in each of the first two weeks. Global trade balances are at their cyclical lows and that is reflected in the dwindling current account surpluses in the developing world. But as risk sentiment has improved in the past six weeks, there has been a pick up in fixed income and equity investment flows to emerging markets, compared to the developed world. — Reuters
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Chart of the day: Kenya interest rates, inflation, gettin’ jiggy wid it

Interest rates and inflation in Kenya are sliding fast, as the following charts show:

So what’s the shilling been up to? As the former baseball great Bill “Spaceman” Lee once said, “Believe none of what you hear and only half of what you see.”:

Chart source: oanda.

Anyone care to explain what’s wrong with this picture? Don’t higher interest rates lead to currency appreciation, or is Kenya stuck on that archaic outdated notion of interest rate parity? Maybe this is what happens with markets that scare mainstream money: they actually function according to theory. Could this be?


Emerging & Frontier Markets Today 2012.09.17

Stop whatever you’re doing and check out Radio Jarocho rocking the Kennedy Center in Washington yesterday here.

Seriously? The Bank of England is listing its opening for the governorship on the Economist’s Jobs board —

Special Report: Doing Business in Liberia — FT

A selection of political candidates running for office in this year’s elections in Brazil: James Bond, Macgaiver, Jimmi Carter Santarém Barroso, John Kennedy Abreu Sousa, Chiang Kai Xeque Braga Barroso, Ladi Gaga, and Elvis Didn’t Die — NYT
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Map of Muslim protests around the world, as of right now

Apparently these are in response to the now famous 14 minute anti-Islam video making the rounds. Interesting that India, with the third largest Muslim population in the world, is still quiet. Also, we shouldn’t be surprised to see Nigeria added to this in due course:

Sourced from the Atlantic Wire here.

Emerging & Frontier Markets Today 2012.09.14

“While Western nations and international agencies admire her drive from afar, they hold little sway in Nigeria. Ngozi Okonjo-Iweala’s ability to fight corrupt interests is constrained by her lack of support from wealthy figures such as ex-state governors, military officers and ruling party hacks who use huge patronage – or sometimes violence – to drive politics back stage.” — Reuters

“America’s strength has rested on its ability to attract and draw upon the talents of the rest of the world. As Lee Kuan Yew once told me, China can draw upon a pool of 1.3 billion people, but the U.S. can draw upon a pool of seven billion, and then recombine them with a creative diversity that is not possible with ethnic Han nationalism. I think he is right.” — The Big Think interviewing Joseph Nye

Armed conflict cost Colombia $115B over 10 years — Colombia Reports Continue reading

Photo of the Day: The importance of copy editing

Just in from an anonymous reader:

All Hail Agustín Carstens, Master Politician Extraordinaire

Proceso had a story yesterday that just boggles the mind. Here’s the lede, translated:

“The governor of the Bank of Mexico (Banxico), Agustin Carstens, said that the administration of Felipe Calderón leaves the “table set” for the administration of Enrique Peña Nieto to make the economy grow at levels above 6%.”

Ignoring the obviously lengthy experience Mr. Carstens has in setting tables, the rest of the article is filled with the usual blather sucking up to Mexico’s econospinmeister-in-chief, with some light mention of all the things that Mexico should do in the next administration but in all likelihood won’t so I really see no reason to rehash any of it further.

BUT this spectacle does solidify a few things: Continue reading

Emerging & Frontier Markets Headlines 2012.09.13

“While we are skeptical that China will return to double-digit growth anytime soon, if ever, current indicators are not signaling a hard landing. While there are significant risks to the Chinese market – an opaque banking system and a real-estate crash being two – I feel that the slowdown in growth is already reflected in the price of Chinese equities. Should the economy decelerate further, I would revisit my view. But for now, I think the bad news is already baked into the price.” — Russ Koesterich

Nigeria to borrow $600 million from China’s Export-Import Bank, most of which will be used to build a railway servicing the capital Abuja and surrounding areas. The loan was agreed at 2.5 percent over a period of 20 years, with a grace period of seven years. — Reuters

Only $1.9bn in private equity funds were raised in the first six months of the year, a steep decline from the $4.9bn raised during the same period a year ago, according to the Latin American Private Equity & Venture Capital Association. Cate Ambrose, president of LAVCA, attributed the decline to a number of factors, most notably greater participation from mega funds last year. Brazil’s Vinci Partners, Gavea Investimentos, BTG Pactual and Carlyle Group were among those that raised billion-dollar funds in 2011. “2011 was an extraordinary year,” Ms Ambrose told beyondbrics. “There are still not that many Latin American funds that can raise more than $1bn. So obviously, if you raise $1bn last year, then you are not going raise $1bn again this year because someone has to go and invest the $1bn that has already been raised first.” — beyondbrics
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