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Tuesday 24th of March 2020

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Macro Thoughts

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What if "whatever it takes" isn't enough? @bw

After a halting start, governments and central banks have finally been
coming to grips with the economic consequences of the coronavirus
The Covid-19 disease is more than a health crisis. What seemed like an
alarmist scenario a month ago—a global recession—now appears a
And the extreme measures needed to limit infections may intensify the slump.
Maurice Obstfeld, the International Monetary Fund’s former chief
economist, says you’d have to be optimistic to believe we’re
experiencing something akin to the recession caused by the financial
crisis, when global output in 2009 shrank 0.1%, according to IMF data.
As governments restrict travel and close restaurants while
manufacturers prepare for temporary shutdowns, major economies are now
experiencing a “hard stop,” which could inflict a toll that may be
closer to the 9% contraction Greece endured at the height of its
sovereign debt crisis, he says.
“We are seeing a collapse of economic activity as countries try to get
a handle on this disease,” Obstfeld says, pointing to the plunge in
industrial production and consumption in China as evidence of what
lies ahead for Europe and the U.S.
The extent of the damage, he says, will depend in large part on the
scope and duration of the outbreak. But a lot relies on governments
acting in unison to roll out aggressive measures that ease the pain
for big businesses ( think airlines) as well as the little guy (your
neighborhood bartender).
At the same time, central banks need to do everything in their power
to prevent what began as a health crisis from morphing into a
financial meltdown.
After some foot-dragging, policymakers in Europe and the U.S. are
swinging into action. Central banks have cut rates and enacted
measures to ensure stressed markets continue to function.
Following a March 16 videoconference call, the leaders of the Group of
Seven nations vowed to do “whatever is necessary” to protect lives as
well as livelihoods.
The statement echoed former European Central Bank President Mario
Draghi’s 2012 vow, in the throes of the European debt crisis, to do
“whatever it takes” to preserve the euro.
But the G-7 declaration, which was replete with grand promises rather
than tangible actions, didn’t spark a relief rally the way Draghi’s
pledge did.
The Dow Jones Industrial Average closed down 13% on March 16, as U.S.
markets recorded their biggest single-day fall since the 1987 crash.
That the G-7 statement came just hours after the U.S. Federal Reserve
announced its second emergency rate cut in 12 days raises an ominous
question: What if this time whatever it takes is not enough?
During the global financial crisis, much of the credit for preventing
a slip from recession into depression went to the decisive actions of
groupings such as the G-7 and G-20, which repeatedly signaled their
resolve to eschew protectionism and beggar-thy-neighbor policies like
currency devaluations.
More than a decade later, it’s plain to see that the bonds among
historical allies have been frayed by the trade wars and heightened
mistrust—which risks taking the response to the present crisis down a
dangerous nationalist path.
By calling SARS-CoV-2 a “Chinese virus” and abruptly imposing travel
restrictions on visitors from China and Europe, President Trump has
further strained those relationships.
Chinese officials have complained of unfair discrimination and ordered
the expulsion of American journalists.
The Europeans, who were irritated that Washington hadn’t consulted
with them on the travel ban, introduced their own restrictions a few
days later, and a raft of other countries including Canada have
followed suit.
Another factor working against a concerted effort is that the U.S.—and
Trump, a self-proclaimed anti-globalist—presently holds the rotating
presidency of the G-7.
It doesn’t help either that Saudi Arabia, which is at the helm of the
G-20, has decided to wage a destabilizing price war against U.S. shale
oil producers.
“Right now I don’t think—given the Trump presidency—anyone imagines
the G-7 or the G-20 as an effective coordinating device for a response
to this crisis,” says Adam Tooze, a Columbia University economic
historian and the author of Crashed, an account of the 2008 crisis.
“The only way to put this is it’s quite disillusioning.”
It’s not just the Americans and the Saudis who could undermine
attempts at collective action. In what Obstfeld calls a “Europe First”
moment, the European Union recently banned exports of face masks and
other protective gear to countries outside the bloc.
Although the move was meant to ease the flow of precious supplies
within the EU, it was also evidence of something potentially more
“It’s not surprising that after three years of President Trump tearing
down international cooperation the Europeans would not have a lot of
trust in any sort of U.S. leadership role or be willing to put their
interests at the mercy of international cooperation,” says Obstfeld,
who’s now at the University of California at Berkeley.
“But it’s really sad, and it doesn’t bode well for the future and
trust between countries once we as individual nations get through this
There are signs that such tussling may be only just beginning. Die
Welt am Sonntag and other German media reported on May 15 that the
Trump administration had sought to acquire a German company developing
a coronavirus treatment to secure its sole use for the U.S., prompting
an intervention by Berlin.
Tooze and others see in that a portent of a bigger fight to come, one
that will likely take the trade restrictions from the realm of safety
equipment into the far more challenging arena of intellectual property
and medicines that pharmaceutical companies are racing to develop.
“The major players are acting as if their interests are not aligned,”
says Daniel Drezner, a Tufts University political scientist.
That is one of the major ways in which this crisis is different from
2008, says Drezner, author of The System Worked: How the World Stopped
Another Great Depression.
Then, national interests were both interlinked by globalization and
aligned in stopping a meltdown of the financial system.
The economic model being tested—free-market liberalism—was also not
facing the same assault from populist alternatives such as Trump’s
“America First” brand of capitalism.
Although many expect the current economic shock to be short and sharp,
there are also concerns that it may have other, longer-lasting
At the Institute of International Finance, chief economist Robin
Brooks and his team have been tracking huge outflows of money from
emerging markets that could trigger old-fashioned balance-of-payments
crises similar to the ones that engulfed Mexico and most of Asia in
the 1990s.
Brooks also frets that governments in developed economies are moving
too tentatively and on parallel tracks, which will dilute the potency
of measures to offset the downturn.
“We need with greater urgency globally a fiscal response, and it needs
to be coordinated,” he says. “There’s no reasons for delay now. We
know this thing is coming, and it is coming hard.”
In December 2008 the IMF’s managing director, Dominique Strauss-Kahn,
pushed for a coordinated global effort by governments to spend an
additional 2% of global gross domestic product, or $1.2 trillion, and
economists increasingly say something of the same order is needed now.
As of March 17 governments had announced stimulus measures adding up
to just under $3 trillion, or 3% of global GDP.
Included in that total is a $1.3 trillion package proposed by the
Trump administration that will still have to get through a divided
Congress in an election year.
While financial markets have been underwhelmed by the response so far,
it’s worth remembering that the U.S. had been in recession for almost
a year by the time the G-20 nations convened in Washington in November
2008 to coordinate policies in the aftermath of the global financial
“If we had that amount of time with the coronavirus, we’d feel pretty
lucky,” says Tooze. Today, “the sheer pace is staggering.”
Obstfeld says the sudden stop in economic activity hitting Europe and
the U.S. now looks a lot like an accelerated version of what happens
in a classic emerging-market crisis when countries abruptly lose
access to capital markets.
Which is why he worries the world’s biggest economies may be about to
experience a Greece-like shock, with all its consequences, from
sharply rising inequality to a realignment of the political order.
An inadequate policy response—with less fiscal stimulus than needed
and the erection of more barriers to trade—would mean a contraction
that could be deeper and longer than the one the U.S. suffered in the
Great Recession.
An adequate one may mean a rapid recovery and avoiding the economic
doldrums that followed the last crisis. “That,” Obstfeld says, “would
require a lot more coordination between countries.”
BOTTOM LINE - Governments have announced trillions in stimulus
measures to blunt the economic hit from the coronavirus. The medicine
might be more potent if their actions were coordinated.

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22-MAR-2020 :: COVID-19 and a Rolling Sudden Stop #COVID19

DB's Torsten Sløk argues that Open Table reservations are a good
proxy for what's happening with discretionary spending, and the global
economy as a whole. @RobinWigg


If so we are in a LOT of trouble.

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The Global Economy is coming to a sudden Stop. #COVID19

We are moving from a World of Hyper Connectedness to a World of
Quarantine. A complete Quarantine is the only way to vaccine this
c21st World of ours

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24-FEB-2020 :: The Viral Moment has Arrived #COVID19

At this point I would venture Gold is correlated to the #Coronavirus
which is set to turn parabolic and is already non linear and
exponential ~

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The @NYSE is perfectly correlated to its President's [in]competence #COVID19

To watch the Daily Briefing is to understand that the Control Machine
has a Novice, a hubristic @POTUS  in charge of the Console and @NYSE
cannot tolerate it a moment longer. The @NYSE is perfectly correlated
to its President’s [in]competence #COVID19 https://j.mp/2WD1tl0

Home Thoughts

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22-MAR-2020 :: COVID-19 and a Rolling Sudden Stop #COVID19
Law & Politics

The Internet collapsed the World and shifted time into real time.
"With every natural disaster, health scare, now comes the inevitable
"information bomb" - live feeds take over real space, and technology
connects life to the immediacy of terror the ultimate expression of
speed" Paul Virilio
What is clear now is that the Malcolm @Gladwell moment has definitively arrived
"Tipping Point" moment in an epidemic when a virus reaches critical
mass. It's the boiling point. It's the moment on the graph when the
line starts to shoot straight upwards
it only took four days do go from 200,000 to 300,000 confirmed cases...@RemiGMI
''viruses exhibit non-linear and exponential characteristics'The
number of countries with at least 500 active cases is increasing every
day @RemiGMI
The Images coming out of Italy are apocalyptic and heartbreaking and
contaminating our minds like the Virus itself
UN's Economic Commission for Africa reckons the continent's average
GDP growth rate will fall to 1.8% this year from 3.2%.
I calculate SSA will contract in 2020
How much do we need to haircut FY SSA 2020 Remittances? 10%? 20% >25%

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Currency Markets at a Glance WSJ
World Currencies

Euro 1.0839
Dollar Index 101.572
Japan Yen 110.50
Swiss Franc 0.9775
Pound 1.1666
Aussie 0.5945
India Rupee 76.1825
South Korea Won 1249.71
Brazil Real 5.1433
Egypt Pound 15.75
South Africa Rand 17.6185

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In the past month, Mexican Peso has fallen 25%, Indonesia's Rupiah 17% and South Africa's Rand 15%. Why are these moves so big? @RobinBrooksIIF
Emerging Markets

Typically foreign investors sit tight & don't sell their EM holdings.
Not this time. Huge & unprecedented selling that swamps 2008/9 & 2018
EM sell-off.

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2-SEP-2019 :: the China EM Frontier Feedback Loop Phenomenon. #COVID19
Emerging Markets

China EM Frontier Feedback Loop Phenomenon. This Phenomenon was
positive for the last two decades but has now undergone a Trend
The Fall-out is being experienced as far away as Germany Inc. The ZAR
is the purest proxy for this Phenomenon.
African Countries heavily dependent on China being the main Taker are
also at the bleeding edge of this Phenomenon.
This Pressure Point will not ease soon but will continue to intensify.

Frontier Markets

Sub Saharan Africa

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Africa Needs $100 Billion Stimulus to Combat Virus @business

Africa needs an immediate emergency economic stimulus of $100 billion
to combat the impact of the coronavirus pandemic and almost half of
that could come from waiving interest payments for countries on the
continent, according to the United Nations Economic Commission for
The waiver of interest payments, estimated at $44 billion for 2020,
and the possible extension of the waiver to the medium term, would
provide immediate fiscal space and liquidity to the governments, in
their efforts to respond to the Covid-19 pandemic, the ECA said Monday
in a statement after the continent’s finance ministers had a virtual
meeting on March 19.
The waiver should include not only interest payments on public debt,
but also on sovereign bonds, it said.
Government debt as a percentage of gross domestic product in
sub-Saharan Africa has doubled in the past decade but countries in the
region will have to shelve plans for further Eurobond issuance as
yields surge and the spread of the coronavirus limits travel.
External debt payments consumed an average 13% of African governments’
revenue before the outbreak, data compiled by the U.K.-based Jubilee
Debt Campaign showed.
For fragile states, the ministers agreed on the need to consider
waiving principal and interest and encourage the use of existing
facilities in the World Bank, International Monetary Fund, African
Development Bank and other regional institutions.
Given the limited health infrastructure and the fact that most of the
pharmaceuticals and medical supplies consumed in Africa are imported,
they called on the international community to support the upgrade of
the health infrastructure and to provide direct support to the
existing facilities.
“Without coordinated efforts, the Covid-19 pandemic will have major
and adverse implications on African economies and the society at
large,” the ECA said.

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02-MAR-2020 :: The #COVID19 and SSA

The First Issue is whether The #CoronaVirus will infect the Continent.
We Know that the #Coronavirus is exponential, non linear and
multiplicative.what exponential disease propagation looks like in the
real world.
Real world exponential growth looks like nothing, nothing, nothing ...
then cluster, cluster, cluster ... then BOOM!

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This is how patients going to Wilkins hospital are being picked. Ambulances don't even have stretchers,There is no water at Wilkins, folks using buckets @daddyhope

This is how patients going to Wilkins hospital are being picked.
Ambulances don’t even have stretchers, but  @MthuliNcube and Mnangagwa
are happy to allocate US$16 million to buying luxury cars for
ministers who already had cars! There is no water at Wilkins, folks
using buckets

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@CBKKenya projects that economic growth will halve to 3.4% in 2020 due to #Covid_19-related uncertainty and disruptions. @bankelele

It lowers its CB rate to 7.25% (from 8.25%) and bank cash reserve
ratio to 4.25% (from 5.25%) to increase liquidity to the economy.

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Absa Bank Kenya Plc reports FY 2019 EPS unchanged Earnings here

Par Value:                  2/-
Closing Price:           10.20
Total Shares Issued:          5431536000.00
Market Capitalization:        55,401,667,200
EPS:             1.37
PE:                 7.445

Absa Bank Kenya Plc FY 2019 results through 31st December 2019 vs.
31st December 2018
FY Kenya Government Securities 79.221471b vs. 63.230224b +25.291%
FY Loans and advances to customers (net) 194.894941b vs. 177.353969b +9.890%
FY Total assets 373.981791b vs. 324.839666b +15.124%
FY Customers’ deposits 237.738654b vs. 207.407834b +14.624%
FY Loans and advances to customers interest income 22.544646b vs.
21.527991b +4.722%
FY Government securities interest income 8.101769b vs. 7.382300b +9.746%
FY Total Interest income 31.023921b vs. 29.061293b +6.753%
FY Customer deposits expenses [6.454616b] vs. [6.126393b] +5.358%
FY Net Interest income 23.178539b vs. 21.992411b +5.393%
FY Fees and commissions income on loans and advances 1.410349b vs.
1.052491b +34.001%
FY Other fees and commissions 4.710388b vs. 4.572316b +3.020%
FY FX trading income 3.640577b vs. 3.279548b +11.008%
FY Total non-interest income 10.588312b vs. 9.702070b +9.135%
FY Total operating income 33.766851b vs. 31.694481b +6.539%
FY Loan loss provision [4.200588b] vs. [3.870757b] +8.521%
FY Staff costs [10.158447b] vs. [9.768076b] +3.996%
FY Total operating expenses [21.485616b] vs. [21.048750b] +2.075%
FY Profit before tax and exceptional items 12.281235b vs. 10.645731b +15.363%
FY Exceptional items [1.528986b] vs. –
FY Profit after tax and exceptional items 7.456077b vs. 7.416042b +0.540%
EPS 1.37 vs. 1.37 –
Dividend per share 1.10 vs. 1.10 –
Net NPL and advances 3.109474b vs. 4.280497b -27.357%

Message from the directors:

The separation from Barclays PLC continues to have an impact on our
financial results.
This includes a substantial change spend, as we invest in the systems
required to be separated, the Transitional Service Agreement costs
wepay to Barclays PLC for the provision of various services during the
separation period together with the costs incurred for branding.
In this period, we have reported separation costs of Shs 1.5 billion;
this is reported as an exceptional item in the financial statements.
We are pleased with our financial outcomes, which are a validation
that our strategy is working.

• Excluding the one-off exceptional item of Shs 1.5 billion related to
the transition expenses, our Normalised PAT
is Shs 8.5 billion or 15% up from 2018.
• Pre provision profit is Shs 16.5 billion; 14% growth from 2018.
• Normalised Return on Equity (ROE) is 18.4% an improvement from 16.8%
in 2018 while normalized cost to
income ratio is 51%
• Total assets have grown by 15% and customer deposits is 15%.
• Since 2018 to end of 2019, our stock price out performed all key
indices at 39% growth.
The Directors note that an interim dividend of Shs 0.20 per ordinary
share of the company was paid on October 11 2019. As such, subject to
the approval of the shareholders, the directors have resolved to
recommend to members at the forthcoming Annual General Meeting a final
dividend for the year of Shs 0.90 per ordinary share of the company.
The Capital Markets Authority (CMA) advised in a press statement dated
18 March 2020 that AGMs scheduled for March, April and May 2020 be
deferred to a later date. In view of this the date of the AGM will be
advised later
The above consolidated statement of comprehensive income and statement
of financial position are extracts of the Bank's financial statements
which have been audited by Ernst & Young LLP and can be accessed on
the institution's website www.absabank.co.ke


• Excluding the one-off exceptional item of Shs 1.5 billion related to
the transition expenses, our Normalised PATis Shs 8.5 billion or 15%
up from 2018.

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by Aly Khan Satchu (www.rich.co.ke)
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March 2020

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