African Capital Markets News

Travels in Ethiopia

Apologies for the lack of postings, currently travelling in Ethiopia, normal service should resume next week..

IMF sees faster recovery coming, 4.3% growth for Africa

The International Monetary Fund (www.imf.org) is upgrading its African growth prospects for this year, compared to forecasts made in its October 2009 World Economic Outlook. It foresees 4.3% growth for 2010, and 5.3% for 2011 in Africa and adds that the world will bounce back from negative growth in 2009 to 3.9% growth in 2010. The African growth is 0.3% (2010) and 0.1% (2011) better than previously forecast and the world economy is also growing faster than previously forecast, still driven by policy measures.
According to an update to its World Economic Outlook, released on 26 January: “The recovery is proceeding at different speeds around the world, with emerging markets, led by Asia relatively vigorous, but advanced economies remaining sluggish and still dependent on government stimulus measures.”
Economies could even head back into recession, if anti-crisis measures are withdrawn too soon, says IMF Managing Director Dominique Strauss-Kahn. IMF Chief Economist Olivier Blanchard says: “For the moment, the recovery is very much based on policy decisions and policy actions. The question is when does private demand come and take over. Right now it’s ok, but a year down the line, it will be a big question.”
The Fund called for a careful unwinding of positions, differentiated for different economies: “There remains a pressing need to continue repairing the financial sector in advanced and hardest-hit emerging economies. In these cases, policies are still needed to tackle banks’ impaired assets and restructuring.” Unwinding the financial sector support gradually can be facilitated by incentives that make measures less attractive as conditions improve.
“Policymakers will also need to move boldly to reform the financial sector with the objectives of reducing the risks of future instability… At the same time, some emerging market countries will have to design policies to manage a surge of capital inflows.”.
The growth and forecast growth for Africa is far behind that for China (8.7% in 2009, 10.0% in 2010 and 9.7% in 2011) and India (5.6%, 7.7% and 7.8%).
“Stronger economic frameworks and swift policy responses have helped many emerging economies to cushion the impact of the unprecedented external shock and quickly re-attract capital flows. The rebound of commodity prices is helping support growth in commodity producers in all regions. The IMF’s baseline petroleum price projection is unchanged for 2010 and revised up by a small amount in 2011 (to $82 a barrel, from $79 a barrel in the October 2009 WEO). Other non-fuel commodity prices have also been marked up modestly.
Significant risks remain if policymakers get it wrong.

Forecast
2008 2009 2010 2011
World 3.0 -0.8 3.9 4.3
Africa 5.2 1.9 4.3 5.3
sub-Saharan Africa 5.6 1.6 4.3 5.5

IFC lists $100 mln Islamic financing instrument in Dubai and Bahrain

This is not strictly an African story, but Islamic finance is a very important for much of Africa..

The International Finance Corporation (IFC – www.ifc.org), a member of the World Bank Group, on 4 November listed its first Islamic long-term financing instrument, a Sukuk. The IFC became the first non-Islamic financial organization to issue a Sukuk in the Gulf Cooperation Council for term funding.

The $100 million Hilal Sukuk was listed on NASDAQ Dubai (www.nasdaqdubai.com), an international exchange serving the Middle East, and on the Bahrain Stock Exchange (BSE – www.bahrainstock.com). The money will be used to fund health and education investments in the region. The Sukuk has a Moody’s Aaa rating. Duration is five years, starting from 3 November 2009. It pays a fixed return of 3.037% every six months (on 3 May and 3 November).

NASDAQ Dubai is the world’s largest exchange for Sukuk by listed value, with 21 listed Sukuk valued at $16.7 billion. The BSE lists 14 issues of Islamic Sukuk and conventional bonds with an approximate total value of $3.3 bln.

Sukuk, from the plural of the Arabic for a legal certificate or cheque, is a financial instrument which is equivalent to a bond but managed according to Shari’ah by not paying interest and meeting other moral and ethical criteria. Often it is linked to partial ownership of a project or asset and can reflect returns or rents on this. The issuer of a sukuk sells an investor group the certificate, who then rents it back to the issuer for a predetermined rental fee. The issuer also makes a contractual promise to buy back the bonds at a future date at par value (http://www.investopedia.com). According to Wikipedia (http://en.wikipedia.org/wiki/Sukuk), more than $700 billion of assets are managed according to Islamic investment principles.

Jeff Singer, Chief Executive of NASDAQ Dubai, says: “The launch of the IFC’s and the World Bank’s first Sukuk and its listing on NASDAQ Dubai are a significant step in the continuing integration of Islamic finance into the global financial system. We are delighted to support the Sukuk as its primary listing venue, providing a regulatory structure that promotes transparency for investors and visibility for the issuer.”

HE Dr. Omar Bin Sulaiman, Governor of the Dubai International Financial Centre (DIFC) and Vice Chairman of the UAE Central Bank, said: “As the first non-Islamic financial institution to issue a sukuk for term funding in the GCC, this truly is a ground-breaking transaction and clearly demonstrates the growing importance of the region within the global financial system.

“NASDAQ Dubai and DIFC remain instrumental in building the regulatory and legal infrastructure to develop a Islamic finance securities market and facilitate the creation of new financing opportunities for global issuers. This listing further enhances DIFC’s stature as a leading global hub for Islamic finance transactions.”

The securities of IFC’s Sukuk are the first to be held on NASDAQ Dubai’s central securities depositary, which reportedly provides securities holders with an efficient and streamlined service.

NASDAQ Dubai serves the region between Western Europe and East Asia, welcoming regional as well as global issuers that seek regional and international investment. It lists shares, derivatives, exchange-traded commodities, structured products, Sukuk (Islamic bonds) and conventional bonds. Majority shareholder is Borse Dubai (two-thirds) and NASDAQ OMX Group owns one third. Dubai Financial Services Authority (DFSA) is the regulator and the exchange is located in the Dubai International Financial Centre (DIFC). For more information, visit www.nasdaqdubai.com. Sukuk are also listed on the London Stock Exchange (www.londonstockexchange.com), Luxembourg (www.bourse.lu) and other stock exchanges. See also www.sukuksummit.com.

Introducing the blog

This blog aims to provide news of developments in Africa’s capital markets, including the stock and securities exchanges and venture capital markets.  I’ve been involved in managing a stock exchange and am a former journalist and hope that the result will give interesting and useful information.