Central bank in Africa’s second largest copper hotspot Zambia on 20 March sold $21million (Kwacha equivalent) of 2,7 and 15yr bonds in a poorly subscribed auction. On offer was a yard in assets with appetite totaling K539.4million ($31million equivalent) which the Bank is Zambia absorbed K369.3million. Market liquidity going into the auction was only K100million. Kwacha assets alongside other emerging assets are generally unattractive to offshores who seek safety in dollar cash in the wake of coronavirus pandemic. Yields across the Kwacha fixed income curve were unchanged save the 15-year point that widened 100 basis points to 31%. The debt…
Author: The Editor
Mobile money booths in Africa’s copper producer Zambia.
The Airbus 330 at ORT in Johannesburg, South Africa.
The Capital Asset Pricing Model (CAPM) has historically taught that government securities are risk free assets, the implications being when investors lock up liquidity for a specified duration, they expect a guaranteed return. This looked at in totality with any country being ‘AAA’ rated for its own paper ideally makes default a far- fetched fallacy. However, with the ballooning of debt in Africa and globally, structural issues have mushroomed posing a very unique set of fiscal challenges which are in turn drying up liquidity in money markets. In some jurisdictions, central banks are being burdened with correcting fiscal imbalances. Balance…
The theme this week has been sharp falling knives from the sky as Emerging Market (EM) asset sell-off pressure steepens. All this is in the wake of a thickening corona pandemic that has caused panic in the financial markets sending stocks to their knees. Wall street and Asian stock futures rocked their lowest this week with US stocks down over 10% as Asia gyrated between 8%-12% in losses. EM currencies exposed to commodities have stretched losses significantly YTD. See Bloomberg currency ranker below for YTD performance for EM currencies. Zambian Kwacha and SA Rand lead the loss streak. African currencies have…
Credit default spreads on dollar bonds for Africa’s second largest copper producer Zambia widened over 2,500-4,000 basis points as global sentiment, exacerbated by COVID-19 pandemic, dims. Asset- sell off pressure in emerging and frontier markets remains high as demand for safer haven bets soars in the wake of uncertainty around how far COVID-19 will ravage justifications outside China. Stock futures are in red on Wall Street and in Asian trading prompting central bank intervention from the US Federal Reserve of New York has just announced a massive liquidity package of over $4trillion in the repo market to help calm virus-related disruptions in…
Absa head office in Sandton South Africa.
The central bank in Africa’s red metal producer today sold K717.3million is treasury bills. With K893million of purchasing power into Thursday 11 March K950million debt sale, the Bank of Zambia absorbed 81% of the market appetite for government securities observed. Bids for one year paper were in excess of K600million of the K475million on offer, while central bank locked in K464million of these in cash terms. Market appetite for shorter dated high yielding assets has persisted with more skew towards bills than longer dated bonds. Yields ebbed 25bps higher for the 1-year to 29.25% while the 6month treasury assets were…
Currency in Africa’s second largest copper hotspot, Zambia, has taken a cue from the Emerging Market (EM) ‘commodity exposed’ rout. As at midday, the red metal currency was priced at 15.55/15.60 in bid/offer having opened the first business day of the week beginning 10 March at 15.25/15.55. The Kwacha was last seen at these levels on Dec 06 which prompted the central bank to raise the cash reserve requirement 400 basis points to 9% to curb the slide. Identical themes across frontier markets have been observed following global jitteriness in the wake of COVID-19 spread causing rising disinvestment risk as…
The Securities and Exchange Commission (SEC) in Africa’s red metal producer Zambia, announced on 02 March 2020 in a memo that it would with immediate impact effect temporarily take over Madison Financial Services Group Asset Management wing and subsidiary Madison Asset Management Company (MAMCo) Ltd due to license breaches. MAMCo has for years grappled with credit and liquidity risks exposing it’s investors to risks of not receiving their investment proceeds at maturity. MAMCo runs unit trusts, management of assets and stock broking.Ignored signs in sky liquidity strains. MAMCo had a few years ago enticed investors by paying interest upfront on investments…