Wazua
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Kenya: Dejavu Asian Financial Crisis of 1997
Rank: Elder Joined: 9/25/2009 Posts: 4,534 Location: Windhoek/Nairobbery
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Read here how the Weak Shilling is a threat to the NSE http://contrarianinvesti...ancial-crisis-of.html
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Rank: Member Joined: 4/15/2008 Posts: 205
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Rank: Member Joined: 4/15/2008 Posts: 205
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Makes sense to me, especially because every co. in the NSE relies on one imported product or another. Mumias needs Diesel, even the tea factories import fertilizer. The financials have already started talking about raising interests. With election yr around the corner. the Govt needs to restore investor confidence back, and fast. Do it today! Tomorrow is promise to no-one.
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Rank: Elder Joined: 9/25/2009 Posts: 4,534 Location: Windhoek/Nairobbery
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Rank: Chief Joined: 1/13/2011 Posts: 5,964
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Interesting. Now that u've highlighted the problems & consequences..what are the solutions.how did they come out the mess? Thanks in advance.
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Rank: Elder Joined: 9/25/2009 Posts: 4,534 Location: Windhoek/Nairobbery
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Cde Monomotapa wrote:Interesting. Now that u've highlighted the problems & consequences..what are the solutions.how did they come out the mess? Thanks in advance. Short term interest hikes might work...but that might slow the economy down and put Banks under pressure with NPL....anyway its better than doing nothing...uhmm in 2008/09 during the last recession SA's economy contracted by 1.7%...Namibia 0.7%...Botswana 5.7% and they survived so hiking interest rates now and chopping them down latter can work...anyways those are my 2 Zim cents...Lol.
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Rank: Chief Joined: 1/13/2011 Posts: 5,964
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Give us the other side of the story Mr. Media man "from our sources" lol!!
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Rank: Elder Joined: 9/25/2009 Posts: 4,534 Location: Windhoek/Nairobbery
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Rank: Chief Joined: 8/4/2010 Posts: 8,977
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I can see Ndungu has learnt well his shock & awe classes...
Next card on table, pretend, pretend & pretend to fail. Then reset the system.
Boring, so predictable...
@deal - now you've burst
my reference point, S. Korea inc with Thai.$15/barrel oil... The commodities lehman moment arrives as well as Sovereign debt volcano!
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Rank: Chief Joined: 8/4/2010 Posts: 8,977
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Cde Monomotapa wrote:Interesting. Now that u've highlighted the problems & consequences..what are the solutions.how did they come out the mess? Thanks in advance. We get a solution when we force the central planners to stop pretending... Comprehende?
The pretext -->
http://www.businessdaily.../-/12g1p2j/-/index.html
$15/barrel oil... The commodities lehman moment arrives as well as Sovereign debt volcano!
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Rank: Member Joined: 9/29/2010 Posts: 679 Location: nairobi
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Cde Monomotapa wrote:Interesting. Now that u've highlighted the problems & consequences..what are the solutions.how did they come out the mess? Thanks in advance. the rain started beating on us when we took IMFs SSF, we need to return the chumes and chart our own course, as long as these guys are in town CBK will be at their beck and call..at that point 1. the governor must stop commenting on the exchange rate 2. the cbk should sell a small amount of reserves, the market has massive shorts and some selling is needed to re-ignite it 3.cbk should stop all FX purchases until the rate and the market can absorb the same, in any case the open tender system should be stopped 4.cbk should stop funding short sellers, 26bn borrowed from CBK could only mean guys are arbitraging CBK on cbr and tbill and/or are funding shorts through borrowing from the window
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Rank: Elder Joined: 10/13/2009 Posts: 1,950 Location: in kenya
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kizee1 wrote:Cde Monomotapa wrote:Interesting. Now that u've highlighted the problems & consequences..what are the solutions.how did they come out the mess? Thanks in advance. the rain started beating on us when we took IMFs SSF, we need to return the chumes and chart our own course, as long as these guys are in town CBK will be at their beck and call..at that point 1. the governor must stop commenting on the exchange rate 2. the cbk should sell a small amount of reserves, the market has massive shorts and some selling is needed to re-ignite it 3.cbk should stop all FX purchases until the rate and the market can absorb the same, in any case the open tender system should be stopped 4.cbk should stop funding short sellers, 26bn borrowed from CBK could only mean guys are arbitraging CBK on cbr and tbill and/or are funding shorts through borrowing from the window @Kizee I agree with you Totally, the government should introduce a tax(tobin tax) to reign in the speculators and then introduce effective exchange control like offer incentives for companies who get foreign denominated capital to reserve it for a certain period at CBK interest free this will cushion the country from shocks that we witness when a company invest heavily in the country. Lastly I think breaks should be introduced in the forex market like the ones in NSE that halts all trading if the shilling experience some unexplained losses due to speculation. '......to the acknowledgment of the mystery of God, and of the Father, and of Christ; 3 In whom are hid all the treasures of wisdom and knowledge.' Colossians 2:2-3
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Rank: Elder Joined: 9/25/2009 Posts: 4,534 Location: Windhoek/Nairobbery
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“The central bank entirely misread the inflation cycle,” Leon Myburgh, a sub-Saharan Africa strategist for Citigroup Inc. in Johannesburg, said in a June 17 phone interview. “The shilling remains vulnerable.” “The bank wishes to assure the market that the panic is not warranted,” Ndung’u said in comments published by the Nairobi-based Standard on Sunday newspaper. The shilling is likely to stabilize when Greece’s sovereign debt crisis settles and Kenya completes the current cycle of importing capital goods, he said. inflation may reach 18 percent in the fourth quarter unless the central bank accelerates rate increases, said Matthew Pearson, the head of Africa equity products in London at Standard Bank. t’s not enough to express concern about the currency, but not do anything to ensure that the turnaround takes place,” Khan said in a phone interview from London. Any signal of “much higher” interest rates will “make it very painful to be short the Kenyan shilling,” she said. “Unless the central bank addresses those real rates of inflation and real interest rates, there’s going to continue to be pressure on the shilling,” said Standard Bank’s Pearson. “Political risk in Africa has come to the fore again,” Pearson said. There’s the prospect of a “near-term potential shock” from Kenya’s election, he said. http://www.bloomberg.com...parks-state-concern.html
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Rank: Member Joined: 6/21/2010 Posts: 514 Location: Nairobi
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At times we look for solutions from complicated conservative macro economic laws that were/are derived from industrialized nations when the solutions might be simple. 1. Kenya as an economy has many people who live below the poverty line & thus live on wages. Conservatively with the current inflation & weak shilling, everyone expects CBK to increase rate which basically in turn has an effect on prime rate affecting borrowing costs, most companies go for short term financing like OD to finance their working capital. If rates go up the first costs mainly affected are variable costs & wages fall here, meaning though costs go up it will be coz of financing costs when people are out of work making the consumer market not only be one with a lower purchasing power but one with more people without money to spend. No one wants this when we are nearing an election year. 2. Our economy is expected to be driven by SMEs which in the past few years have created more jobs than the larger institutions & all this thanks to lower interest rates (thanks to Equity & Family). With higher interest rates don't expect them to grow & create more jobs pay more taxes on growing income. This in turn will reduce our economy's growth expectations which isn't good in bringing in FDIs. 3. Each & every flourished economy played around with their own economic matrices till they got it right. With the above i think i concur with Ndung'u that if we fight inflation & encourage consumption(which encourages borrowing) without necessarily increasing interest rates, then the rest of the chips will fall in place. 'They say money cannot buy me happiness but when i compare when i had none and now, i'm happier' Kevin O'leary
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Rank: Member Joined: 9/29/2010 Posts: 679 Location: nairobi
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erifloss wrote:At times we look for solutions from complicated conservative macro economic laws that were/are derived from industrialized nations when the solutions might be simple.
1. Kenya as an economy has many people who live below the poverty line & thus live on wages. Conservatively with the current inflation & weak shilling, everyone expects CBK to increase rate which basically in turn has an effect on prime rate affecting borrowing costs, most companies go for short term financing like OD to finance their working capital. If rates go up the first costs mainly affected are variable costs & wages fall here, meaning though costs go up it will be coz of financing costs when people are out of work making the consumer market not only be one with a lower purchasing power but one with more people without money to spend. No one wants this when we are nearing an election year.
2. Our economy is expected to be driven by SMEs which in the past few years have created more jobs than the larger institutions & all this thanks to lower interest rates (thanks to Equity & Family). With higher interest rates don't expect them to grow & create more jobs pay more taxes on growing income. This in turn will reduce our economy's growth expectations which isn't good in bringing in FDIs.
3. Each & every flourished economy played around with their own economic matrices till they got it right.
With the above i think i concur with Ndung'u that if we fight inflation & encourage consumption(which encourages borrowing) without necessarily increasing interest rates, then the rest of the chips will fall in place. we do not advocate for a blanket rate hike(selah and I), we argue that the CB should make it hard for spec accounts to fund short KES positions..KES rates r still lower than many, the fact that KES is the 2nd most liquid ccy in africa(sic) means its a great funding ccy for the SSA carry trade! no rocket science here mate..how do u xplain CBR borrowin at 26yds? ive never in my life seen such madness
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Rank: Member Joined: 9/29/2010 Posts: 679 Location: nairobi
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kizee1 wrote:[quote=erifloss]At times we look for solutions from complicated conservative macro economic laws that were/are derived from industrialized nations when the solutions might be simple.
1. Kenya as an economy has many people who live below the poverty line & thus live on wages. Conservatively with the current inflation & weak shilling, everyone expects CBK to increase rate which basically in turn has an effect on prime rate affecting borrowing costs, most companies go for short term financing like OD to finance their working capital. If rates go up the first costs mainly affected are variable costs & wages fall here, meaning though costs go up it will be coz of financing costs when people are out of work making the consumer market not only be one with a lower purchasing power but one with more people without money to spend. No one wants this when we are nearing an election year.
2. Our economy is expected to be driven by SMEs which in the past few years have created more jobs than the larger institutions & all this thanks to lower interest rates (thanks to Equity & Family). With higher interest rates don't expect them to grow & create more jobs pay more taxes on growing income. This in turn will reduce our economy's growth expectations which isn't good in bringing in FDIs.
3. Each & every flourished economy played around with their own economic matrices till they got it right.
With the above i think i concur with Ndung'u that if we fight inflation & encourage consumption(which encourages borrowing) without necessarily increasing interest rates, then the rest of the chips will fall in place. we do not advocate for a blanket rate hike(selah and I), we argue that the CB should make it hard for spec accounts to fund short KES positions..KES rates r still lower than many, the fact that KES is the 2nd most liquid ccy in africa(sic) means its a great funding ccy for the SSA carry trade! no rocket science here mate..how do u xplain CBR borrowin at 26yds? ive never in my life seen such madness... i must agree that ours is a micro level economy, in which case your argument of low rates makes sense but remember, these r guys whose main inputs are import driven eg car vendors, the lady who buys clad from turkey and sells etc etc...the rate at this level is hurting everyone! micro macro xporter etc...
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Rank: Elder Joined: 9/25/2009 Posts: 4,534 Location: Windhoek/Nairobbery
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Quiet a discussion on my blog on this one atleat CBK says they will intervene http://mobile.reuters.co...5L0JB20110622?edition=af
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Rank: Elder Joined: 10/13/2009 Posts: 1,950 Location: in kenya
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CBK will not intervene its just checking the speculators.If CBK intervene it will lose its reserves and there is no guarantee it would solve the problem. I still think this is the only option at the moment,if CBK intervenes by pumping more dollar into the sinking sand it might get itself chocked. The demand for the dollar will continue rising as long as Europe is unstable. The govt should look for other ways of cushioning the local manufacturers from these losses. The shilling will continue getting a beating once Millers start importing Grain .... I hear Rationing of flour has started in R.V,western and Nyanza with the cost of 2kg maize flour going for 160/=. '......to the acknowledgment of the mystery of God, and of the Father, and of Christ; 3 In whom are hid all the treasures of wisdom and knowledge.' Colossians 2:2-3
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Rank: Member Joined: 9/29/2010 Posts: 679 Location: nairobi
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selah wrote:CBK will not intervene its just checking the speculators.If CBK intervene it will lose its reserves and there is no guarantee it would solve the problem. I still think this is the only option at the moment,if CBK intervenes by pumping more dollar into the sinking sand it might get itself chocked. The demand for the dollar will continue rising as long as Europe is unstable. The govt should look for other ways of cushioning the local manufacturers from these losses. The shilling will continue getting a beating once Millers start importing Grain .... I hear Rationing of flour has started in R.V,western and Nyanza with the cost of 2kg maize flour going for 160/=. think they will do it thru monetary policy, the guys who paid market are mainly offshores, these guys need to be forced out of their possys, CB needs to make funding very xpensive for these guys
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Rank: Member Joined: 3/10/2008 Posts: 301 Location: Abu Dhabi
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@kizee,
Can't the CB tighten the CBR window, not necessarily by hiking the rate, but by other softer means like limiting the number of times of using CBR window in a week/month.
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Wazua
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Kenya: Dejavu Asian Financial Crisis of 1997
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