Archive for the 'Commodities' Category
October 22nd, 2010 by Tom Minney
Thomson Reuters (thomsonreuters.com), a leading source of trading information, is providing real-time prices and data from the Global Board of Trade (www.gbot.mu) a multi-asset class exchange based out of Mauritius. The agreement for this was announced following the official opening of the Global Board of Trade exchange on 15 October. GBOT “offers a range of commodity derivative products including metals, energy, agri-soft and currency derivative products.”
Finance professionals using Thomson Reuters Eikon or Thomson Reuters 3000 Xtra desktops will be able to access real-time data from GBOT for gold and silver contracts and five currency futures: EUR/USD, GBP/USD, JPY/USD, ZAR/USD and USD/MUR. The data includes bid and ask prices, volumes, latest trades and related information and news on the commodities and currencies.
Russell Haworth, Managing Director of Middle East & Africa, Thomson Reuters, commented in a press release: “Thomson Reuters is proud to be a part of this historic moment for the Global Board of Trade and welcomes the agreement which will help bring the data from this new multi-asset-class exchange to the rest of the world. Mauritius is well positioned to become a hub for trading in the continent.
“Thomson Reuters is encouraged by the growth prospects for Africa and the increasing demand for information and insight into this vibrant market. We are committed to helping their financial markets further develop and prosper.”
Joseph Bosco, Managing Director and Chief Executive Officer of GBOT commented: “Having Thomson Reuters on board to disseminate real-time data from GBOT to its global network is a very significant development for us. As an international multi-asset exchange from Mauritius, we will ensure global investors get access to the fastest growing economies of Africa. We will definitely benefit from the wide reach and network of Thomson Reuters. We are proud to associate with a reputed information services provider like Thomson Reuters and look forward to working together to create mutually beneficial opportunities”.
GBOT is the latest African exchange to be added to Thomson Reuters real-time data offerings, and follows the recent starts of real-time data offerings from the Lusaka, Nairobi, Nigerian and Ghana stock exchanges.
March 15th, 2010 by Tom Minney
LIVE FROM SECURITIES AFRICA/CITIBANK 5TH ANNUAL AFRICAN INVESTMENT CONFERENCE, LONDON
Experts launching the 5th Annual Africa Investment Conference, organized by Securities Africa and Citigroup, said they could see more growth coming in the 2nd biggest continent.
David Cowan, Africa Economist with Citigroup Global Markets, says that African countries had survived the global downturn, firstly because their financial systems were not so leveraged. However, impacts through the real sector are starting to show, where private sector credit growth has slowed dramatically in the second half of 2009 and banks are using surplus funds to buy government securities, collapsing yields.
He notes that the agricultural and informal sectors have held up well and “still account for a large, and growing, percentage of GDP”. Commodity prices are rebounding, either short term or part of a long-term “super cycle”, and the decision is not yet in, whether this brings more blessings or curses, especially as many countries are oil importers.
The slowdown in remittances and aid has not been as bad as expected, with multilaterals such as African Development Bank, World Bank and International Monetary Fund, stepping up funding. African countries are largely in strong fiscal positions, and this has not changed much despite efforts to help their economies through the crisis. Although many central banks eased rates, in many cases the commercial banks did not follow! Some countries missed the chance to introduce structural reforms. Inflation is likely to be low in the first half of 2010, but could pick up depending on food prices.
He says “growth should continue to pick up” for 2010-11, and this could be fast in some countries although constraints such as power shortages will continue to hold it back. There could be more spending, especially as many countries face elections in coming months, and political uncertainty could restrain some foreign investment, particularly portfolio inflows. Africa is not likely to be competitive in manufacturing, but could have advantages in food as the Northern hemisphere switches to healthier eating more fruit and vegetables, and Africa could also add value and benefits to food products.
Commodity prices are likely to be drivers of growth and Africa could benefit from a period of high and stable commodity prices, depending on governments making necessary structural changes to get the best benefits. There is also a rebalancing from external to internal growth drivers.
Securities Africa’s Dexter Mahachi sees better government, increased accountability and more democracy as a major driver of African growth. “They are managing their finances better” he says, adding this provides a good platform for sustained and better economic growth rates. “Consumer stocks across Africa have attracted investor interest, consumer stocks in Ghana, Kenya, Nigeria. There has been quite a boom in growth and urbanization in all these countries.
“For 2010-2011 we expect the bullish outlook to continue improving. The fundamental picture is not economic growth from more resources, but also economic growth from better policies”.
March 13th, 2010 by Tom Minney
The Nairobi Stock Exchange (www.nse.co.ke) has set mid-2010 as the target to launch a commodities exchange. It will be a joint effort by the National Cereals Produce Board (www.ncpb.co.ke), the Kenya Agricultural Commodities Exchange (www.kacekenya.com), Eastern African Grain Council (www.eagc.org) and NSE.
The exchange aims to protect farmers against price turbulence, including seasonal variations in prices for farm produce that diminish earnings and cause tonnes of produce to go to waste. The trading platform will feature futures contracts on commodities, whether in stores or in the fields, so that a farmer can sell his produce ahead, locking in a specific price. Her or his responsibility is then to deliver the produce to the required quality and quantity on time. It also reduces the role of middlemen who buy commodities low during the market gluts often seen in harvest season.
According to a report in Business Daily newspaper (www.businessdailyafrica.com), Dr Adrian Mukhebi, the KACE chairman, says: “The plan is at an advanced stage and the market should open before June this year.” Deloitte & Touche is searching for two senior managers who will act as the link between NCPB and the commodities exchange. This is part of a restructuring proposal for NCPB that splits its commercial wing from the strategic reserve function as well as the establishment of the commodities exchange.
NCPB will use its silos and warehouses to store produce earmarked for trading at the commodities exchange.
“The market will initially trade major grains produced in East Africa, including maize, wheat, rice and beans but will ultimately trade other agricultural commodities, including inputs such as fertilizers and seeds,” said Dr Mukhebi.
The paper also quotes some sceptics, who say the policy framework is not ready and the project is being rushed after the great success of the nextdoor Ethiopian Commodity Exchange (www.ecx.com.et). It cites Mr Daniel Mbithi, the secretary of the Kenya Coffee Planters and Traders (KCPT) association which runs Nairobi Coffee Exchange: “We do not have the necessary legal framework for this market. The current sense of urgency is merely the product of recent reports that a similar market has been established in neighbouring Ethiopia,” he said.
Legal and regulatory frameworks could include a Commodities Exchange Act and a Warehouse Receipts Act, as well as investments in infrastructure such as roads and in NCPB facilities to fit them with modern equipment like sievers and driers to enable hold grains for longer periods.
Dr Mukhebi, however, said the commodities exchange would be regional in outlook and would benefit farmers from Kenya, Tanzania, Uganda, Rwanda and Burundi. “We have also partnered with the EAC Secretariat to catalyse the establishment of a harmonised legal and regulatory framework for the exchange in the region.”
In 2008, the Eastern Africa Grain Council, in partnership with NCPB and Lesiolo Grain Handlers set up a pilot maize receipt warehousing in Nakuru but the project funded by Equity Bank has performed below expectation due to prolonged drought and government price controls. However, Government reportedly increased the price it offered beyond the price offered at Lesiolo and the initiative died.
February 25th, 2010 by Tom Minney
The Ethiopian Commodity Exchange (www.ecx.com.et) was to host a consultative meeting of representatives from different African commodity exchanges this week on 25 February to form the African Commodity Exchanges Association. The CEO of the ECX, Dr Eleni Gabre-Madhin, was reported to have told a press conference in Addis Ababa that Ethiopia could offer to host the secretariat for the association. United States Agency for International Development (www.usaid.gov) sponsored the gathering.
The idea was first brought up at a United Nations Conference on Trade and Development (www.unctad.org) forum in Lusaka in September 2009. Its theme was: “Improving the Functioning of Commodity Markets in Eastern and Southern Africa through Warehouse Receipt Systems and Market-based Interventions.”
The previous day, 24 February, was a daylong “knowledge forum” held with the United Nations Development Programme (www.undp.org). This would involve sharing experience, best practices and challenges of establishing and working with commodity exchanges in Africa.
Participants were to come from Ghana, Nigeria, Uganda, Zambia, Tanzania, Sudan and Zimbabwe. Executives of the National Derivatives and Commodities Exchange of India and the South African Futures Exchange are also expected to take part. ECX has recently hosted groups from Kenya, Zimbabwe, Sudan, Ghana and the Philippines to look at Ethiopia’s experience and see how it helped the market.
Takele Teshome, programme analyst on Food Security and Recovery at the UNDP, reportedly says UNDP is funding the ECX with $1.5 mln a year, since 2008.
Last week on 17 February the ECX launched Direct Specialty Trade (DST), a new platform where producers of specialty coffee can transact directly with international buyers seeking to purchase premium beans on a fully traceable basis. In a press release by the ECX, Dr. Eleni said by coordinating buyers and seller, DST adds value to farmers, who can benefit from greater competition and to buyers, who can discover truly special coffees.
DST also enables trade of certified coffees, such as Organic certified, Fair Trade, RainForest, among others. She said DST is established as a monthly bidding session in which small farmer cooperatives and commercial growers may deposit specialty grade coffees in advance in ECX warehouses A condition for participation in DST is that farmers will receive a minimum of 85% of the final export price, a historic first for Ethiopia’s coffee farmers who normally are believed to receive below 40%, among the lowest share of the final price in the world. DST is an innovative way to enable direct trade that is reliable, fully traceable, transparent, and sustainable.
According to the release, on the first day, 44 lots of specialty coffee that came for the first DST session, their sellers being 35 primary cooperatives and 9 commercial growers, while 27 registered international buyers, representing coffee importers and roasters in North America, Europe, and Japan came to buy the high-quality coffee. The lowest price given was $2.15 dollars while the highest went as high as $4.02, according to Fortune newspaper (www.addisfortune.com).
Dr. Eleni said international buyers pre-register for the DST session and are able to order samples and to participate in a cupping session prior to the bidding: “DST closes the real gap between farmers seeking to benefit from the international market and buyers interested in tracing these coffees to their origin. DST also raises the visibility and profile of all Ethiopian coffee, and thus is a clear win-win for all.”
January 8th, 2010 by Tom Minney
The fast-growing Ethiopian Commodity Exchange (www.ecx.com.et) on 31 December sold 150 full membership seats for a total of Birr 34 million (US$2.7 million). The new members include 69 suppliers, 45 exporters, 24 local traders and 12 cooperatives and commercial farmers, according to Ethiopia’s Fortune newspaper (www.addisfortune.com).
Coffee exporter Muluneh Kaka made the highest bid, offering Birr 3.3 million for a seat.
A full membership seat gives individuals, companies, public enterprises, cooperative unions and commercial farmers the right to transact any commodity through the exchange. The membership seat is permanent and transferable and is the basis for the ECX to function. Whoever is a member, either full or limited, can trade through the ECX.
The seat sale was initially announced in September 2009 at the ECX annual member’s forum and the initial price was set at Birr 50,000, but there were not many takers. Dr Eleni Gabre-Madhin, CEO of the exchange, told the newspaper they decided to make the sale public, instead of selling only to the members, and interest blossomed: “The membership value has significantly increased… This shows us the value businesspeople give to be a member of the ECX. …Participants came with their own presumptive value for becoming a member.”
She said people who bought the seats will have to be trained by ECX and score at least 70% in a certification examination. Results will be known after two weeks and seats awarded to successful buyers.
There are two classifications of traders: full members can trade any commodities they like and limited members can only trade one commodity. In each classification there are trading members who can only trade on their own account and intermediary members who can trade either on their own account or on behalf of clients.
January 8th, 2010 by Tom Minney
An exchange that will be able to trade a basket of commodity and currencies derivatives for trading on its platform and could later add trading in debt and equity products is to start trading in Mauritius in March, according to an interview on Reuters.
The Global Board Of Trade Ltd. exchange (www.gbot.mu) was due to open this month, but is still waiting to build critical mass of brokers, aiming for 25-30.
In an interview, Joseph Bosco, the COO of GBOT, told Reuters that the regulators in Mauritius are processing four broker licences and anticipate another 12 in the pipeline. Trading is electronic and members can be anywhere in the globe, according to the website.
The main promoter is Financial Technologies (www.ftindia.com) company from India, listed on the National and Bombay Stock Exchanges.
Bosco says the market will help African firms and companies investing across Africa to hedge their risks in a continent which has experienced volatility. He says it will be a “multi-asset exchange that will be a gateway for Africa to the rest of the world”> According to the GBOT website, it is “strategically located at the crossroads of Africa and Asia” and “offers an ideal platform for global investors to access many of the world’s fastest growing economies… GBOT endeavours to introduce modern market mechanisms into Africa’s financial market ecosystem and to serve as a platform of choice for the global investing community.”
GBOT is licensed by the Financial Services Commission (FSC), the Regulator for non-bank financial services sector in Mauritius, for derivatives trading in commodities and currencies.
Bosco reportedly told Reuters that they intended to start with six dollar-based currency pairs – including Mauritius rupee, euro, yen and sterling – and are now adding the Kenyan and Ugandan shillings. The report says the exchange will trade in 14 commodities, including precious metals, base metals and agricultural commodities.
It expects to trade futures contracts in zinc, copper, aluminium, nickel, gold, silver, platinum, coffee, sugar and maize as well as crude oil and carbon credits. It looks to add options contracts in future.
Kenya was an example of price volatility in its currency and stock prices, including after disputed elections in 2007. Bosco said: “We are giving them risk containment mechanisms; we are helping them to hedge themselves against uncertainty or unforeseen circumstances”.
October 12th, 2009 by Tom Minney
South Africa’s securities exchange, the JSE Ltd (www.jse.co.za), is offering trading in gold, platinum and sweet crude oil futures contracts on its commodities derivatives market, according to an official announcement on 12 October. Previously, only agricultural commodities were traded.
The JSE recently signed an agreement with the world’s largest derivatives marketplace, CME Group (www.cmegroup.com). This builds on the heritage of the Chicago Board of Trade, Chicago Mercantile Exchange and Nymex (www.nymex.com) and offers the world’s biggest platform to hedge risks, with trading floors in New York and Chicago and the CME GLOBEX electronic trading platform.
The locally listed contracts will be cash-settled, using benchmark gold settlement prices referenced from CME’s COMEX division and platinum and crude oil prices from its NYMEX division. The underlying instrument is a contract traded on NYMEX or COMEX, giving extra liquidity.
Ashley Erasmus, Senior Commodities Trader at Nedbank Capital (www.nedbank.co.za), says: “The two metal commodities should interest local investors as South Africa is the world’s largest platinum producer and the third largest gold producer. The price of the commodities is generally linked to the prices of mining stocks. The liquidity that the current market makers and any new ones will bring to the market can only be beneficial to investors.”
Rod Gravelet-Blondin, Head of the Commodities Division at the JSE, adds: “We are confident that trading will gain traction as more and more investors realise that they can trade these highly traded commodities in an easy and more affordable manner.” In February 2009, the JSE listed a Chicago corn contract. It plans to list more cash-settled commodities in 2010.
The JSE makes the contracts accessible to individuals by trading smaller lot sizes than those traded in the US. The minimum contract size for crude oil is 100 US barrels (15,898.73 litres) with contracts expiring in Feb, June, August and December, while in New York the contract minimum is 1,000 barrels. Each gold and platinum contract size equates to 10 troy ounces and the minimum price movement is set at 100 South African cents per ounce. The gold contract expiry months are April, June, August and December and a minimum of two expiries are always available for trading. The contract for platinum expires in January, April, July and October with a minimum of two expiries always available for trade.
Gravelet-Blondin says: “We are particularly excited about the opportunities that a crude oil contract offers. Oil has a knock-on effect on all sectors of the economy. Notably, as diesel is a major cost in farming, this will give our agricultural market a tool to hedge a major input cost. Organisations in the transport and manufacturing sectors that use large quantities of fuel may also want to hedge their energy usage against the benchmark,” adds.
Nedbank, Standard Bank and Rand Merchant Bank will quote live rand prices for investors. Previously investors wishing to trade these derivatives or hedge exposures had to trade on foreign markets and were subject to exchange controls and limits. The futures contracts still count as overseas assets in terms of limits for pension funds and long-term insurance companies (20% foreign allocation limits) and asset managers and registered collective investment schemes (30%), according to the announcement.
The listing comes at a time when metals prices, including gold, are soaring. Many investors seek gold and other refuges in times of global economic crisis, including the weak dollar.
The JSE connects buyers and sellers in four financial markets: equities, equity derivatives, agricultural derivatives and interest rate instruments (Yield-X). It is in the world top 20 exchanges in terms of market capitalization.