Magna Africa Fund - Monthly Update December 2008

African markets were broadly higher in December, helped by a bounce in raw material prices and some evidence of consumer optimism, though Nigeria was a notable exception. Given the Magna Africa Fund’s exposure to Nigeria, its value fell by 6.7% over the month.

Abigail Hofman: Heroes and villains of 2008

Those of us involved in finance tend to treat the vagaries of investment banking as a matter of life and death.

In my November 2008 column, I mentioned that at the IMF meetings I had overheard Vikram Pandit sounding very upbeat. "I wonder if Pandit is an extremely optimistic person or in a cocoon of senior management denial?" I wrote.
Subsequently, an interesting Citi document crossed my desk entitled "Town Hall –Podium copy speaking notes". These were the notes for a speech that Vikram Pandit gave to employees on Monday, November 17 2008. "Exactly one week ago, our company’s leadership group got together to take stock of your accomplishments in 2008," the document starts. "We walked away with a clear sense that we are entering 2009 in
a strong position, much stronger than we entered 2008... Everyone walked away enthusiastic."
Later in the speech Pandit claims: "We have spent the last year ‘getting fit’... and are in a strong competitive position... We will be the long-term winner in this industry." There then follows a homily on banking that would make even a five-year old child cringe: "As I said, we are a bank. What does a bank do? A bank takes deposits and puts them to work..." And Citi’s chief concluded with a flourish: "Let’s show the world what we can do!" One week later, Citi was
effectively bailed out by the US Treasury after a 70% drop in its share price during the month of November.
Perhaps "cocoon of senior management denial" was an understatement.

Russia to create state corporation to manage the country’s financial

According to this morning’s Vedomosti, Russia will create a special state
corporation to manage its financial assets. The latter could include the two
components of the former Stabilization Fund (the National Wealth Fund and
Reserve Fund), pension savings and state debt. Therefore, the amount of
assets under management by the new corporation could be as high as R7 trln
($220 bln).
We believe the establishment of this new entity will provide more flexibility in
managing state assets. It will likely give the government more tools to support
the economy in the current difficult environment. However, given the expected
budget deficit for 2009 of around 5% of GDP, the creation of the new
corporation may also mean that state resources to finance growth after 2010
will be very limited.

Alfa Bank morning briefing 13 January, 2009

China exports plunge

China’s exports fell the most in almost a decade in December as the deepening global recession cut demand for its toys, clothes and electronics, Bloomberg reports Tuesday. Shipments dropped 2.8%, compared with a 21.7% gain a year earlier. Exports grew 17.2% for all of 2008, down from 25.7% in 2007. The fall has led to protests by fired workers, an exodus of 600,000 migrant workers from the manufacturing hub of Guangdong, and an urban unemployment rate of more than 9%. Premier Wen Jiabao pledged Jan 11 to add to Rmb4 trillion ($585bn) stimulus package to create jobs and avoid social instability.

Hedge funds’ stellar performers

Several hedge funds reported stellar returns last year even as the financial crisis claimed some big Wall Street names and credit markets seized up. Among the top performers were some relatively unknown names such as Cedar Hill Capital Partners, which rose more than 100%, and the Vicis Gamma fund, up about 90%, according to estimates from funds of hedge funds. Better-known star performers included Ionic Capital, up almost 20% last year with assets of $3.9bn after starting up in June 2007 with $600m. The average hedge fund across all strategies ended the year down 18.3% despite a slight, 0.4%, gain in December, according to Hedge Fund Research.

Generation L and its fearful future

Pop sociologists like to divide people born since 1945 into different groups. There are the baby boomers, there is Generation X, we may even be on to Generation Y by now. But, as far as I am concerned, we are all members of Generation L – that is, L as in lucky.

Those of us born in western Europe or the US have never really experienced hard times. Our parents and grandparents lived through world wars and the Great Depression. We have had decades of peace and prosperity.

Could that change? Perhaps Generation L has just had the luxury of an extended “holiday from history”, which is now coming to an end.

Rhodes Redux

Land is not in short supply in south Sudan, where Philippe Heilberg, a US businessman, has laid claim to 4,000 sq km of fertile territory in a deal with the family of a notorious warlord. But then neither was it when Cecil Rhodes extracted mineral rights from King Lobengula of the Ndebele and used these to push the frontiers of the British empire beyond the Limpopo river. Some 120 years later, Zimbabwe is still struggling to overcome a legacy of unequal land distribution.

Mr Heilberg is a former Wall Street banker whose private investment company, Jarch Capital, counts former CIA, State department and Pentagon officials on its board. He may be no Rhodes – his recent forays into Africa have yet to bear much fruit and include an acrimonious dispute over claims to an oil concession in south Sudan. His latest venture does, though, have a decidedly 19th-century flavour to it.

Indian corporate governance

Virtue is its own reward. The Indian market is down 13 per cent in the past week in dollar terms, largely because investor confidence in the quality of corporate information on the subcontinent has collapsed in the wake of the accounting fraud at Satyam, the country’s fourth-largest IT services firm. To say that the Indian market faces a quality of earnings issue is an understatement. After all, corporate profits have grown almost six-fold between 2003 and 2008, according to Morgan Stanley, and there is now justifiable concern about the extent to which this exceptional performance might result from artful book-keeping, particularly at some of the large family-controlled groups that dominate the Sensex index of 30 leading shares.

Iran to set aside 20% of oil revenues

Iran’s supreme leader Ayatollah Ali Khamenei has ordered that 20 per cent of oil and gas revenues should in future be set aside for a new investment fund, curbing the government’s ability to use this income to fund populist policies.

The order is part of a set of mandatory economic, social and political guidelines the top leader set for populist president Mahmoud Ahmadi-Nejad to be included in the country’s next five-year development plan which runs from 2010 to 2015.

The government is drafting the new plan and is expected to present it to the parliament in spring for final approval.

Dubai reveals budget deficit

An understated press conference to announce details of the 2009 budget should have been a run-of-the-mill event. But in the context of Dubai’s infamously opaque finances, Saturday’s statements were revolutionary.

Never before had the Dubai government opened up its books to this extent. Saturday provided another example of the government’s transparency drive, which is likely to develop further if the emirate is to receive a sovereign rating as planned this year.

Nasser Al Shaikh, director-general of the Dubai government’s finance department, outlined details of a Dh4.2bn ($1.2bn) deficit – the emirate’s first acknowledged budget deficit at 1.3 per cent of gross domestic product.

Abu Dhabi reaps the reward of being the last man standing

When the sequined Gold Singers slunk into the marble-clad Liwa Majlis ballroom at the Intercontinental to perform, I didn’t know whether to feel smug or worried.

I was informed by my neighbour at the dinner table, the elegant Cyba Audi of Arabiya television, who was also playing master of ceremonies for the night, that these four melodic starlets normally get out of bed only for royalty.

Etisalat wins Iran mobile licence

TEHRAN // A consortium including Emirates Telecommunications (Etisalat) has won an international tender for Iran’s third mobile telephone licence, the ISNA news agency reported yesterday.

The licence includes exclusive rights to use the new high-speed 3G standard; it is likely that Etisalat will invest at least US$1bn (Dh3.67bn) in developing a national network.

The new investment will mean Etisalat has a presence to the four largest economies in the Middle East– Saudi Arabia, Iran, the Emirates and Egypt.

Hotel occupancy in Dubai drops 14%

Dubai: Hotel occupancy rates in the Gulf's tourism hub Dubai fell 14 per cent in the third quarter compared to the same period a year earlier, latest data from the emirate's Department of Tourism showed.

The occupancy rate for hotel beds declined to 75.2 per cent from 83.1 per cent a year earlier, the data showed, while the number of guest-nights in hotels dropped 3.5 per cent.

UAE equity markets seesaw in lacklustre trading

Dubai: UAE stock markets continued to move sideways without any signal towards a trend, either negative or positive, as retail investors held sway in what was a lacklustre trading on Monday.

Only 197.77 million shares, valued at Dh308.08 million, changed hands on the Dubai Financial Market exchange. The DFM General Index moved up 1.23 per cent to close at 1,757.02.

The real estate index, led by Emaar Properties, Arabtec, Union Properties, rose 3.01 per cent. Emaar advanced 2.90 per cent to Dh2.48; Arabtec was up 4.66 per cent to end at Dh2.02. Union Properties increased 3.85 per cent to Dh0.85. Air Arabia gained 3.26 per cent to end at Dh0.95 and Dubai Financial Market company advanced 4.51 per cent to close at Dh1.39.