President Obama in his last White House correspondents dinner said: “If this material works well, I’m going to use it at Goldman Sachs next year. Earn me some serious Tubmans”.
Of course earning ”serious Tubmans” is not going to be an issue for the president when he leaves office. Earning Tubmans in the markets is always a 24-hour job and one where we cannot leave the screen for even a moment.
The currency markets have been seeing some serious action of late with the Japanese yen surging more than 4.5 per cent last week for its second biggest gain since LTCM in October 1998. The markets feel that ‘Abenomics’ is a busted flush and the bank of Japan might be brandishing a bazooka but that it has not got any bullets.
You will recall I said on January 11 that one of my conviction trades for 2016 is to buy the yen against just about everything.
The pound has been on the mend. The dollar has come under pressure and has now fallen for three months and this now the longest stretch since before it embarked on a two-year, 20 per cent rally in July 2014. The dollar has fallen 5.9 per cent this year. The US economy expanded at 0.5 per cent in first quarter and that’s on an annualised basis signalling the economy has hit a brick wall. The Kenya shilling is at an eight-month high and interestingly has exhibited a great deal of Alpha when compared to its peers.
Brent crude has now ramped nearly 80 per cent higher since slumping to a multi-year low in January. This rebound actually mimics what happened this time last year, its close to a mirror image. A lot of folks (I included) think this is a ‘head-fake’ and that the rally has been a vicious short-covering one. Shorts are folks who sell an asset in the expectation that they can buy the same asset back later at a lower price and for a profit. Shorts have been burned and the market is now net long.
Gold and silver have surged to 15-month highs and both look set to push on further. Closer to home, the dollar sell-off and a perception that South Africa’s President Zuma is set to be terminated has seen the rand rally. Egypt entered a bull market in March and is leading the Africa equity indices and is plus 10.95 per cent this year.
Here at the Nairobi Securities Exchange, investors will be keenly awaiting the full year earnings release from the exchange’s bellwether stock Safaricom on May 11. I expect muscular earnings from Safaricom and my year end price target is 22.50 which will underpin a positive 2016 for the indices. EABL has surged to a 2016 closing high since spicing things up with the announcement of a Sh4.50 special dividend and is now plus 8.79 per cent and headed higher.
In the accompanying announcement re the special dividend, EABL said: ”The board is also encouraged by the strong financial outlook for the second half of the year, ending June 30, buoyed buy robust performance in our premium beers and spirits.”
I spoke of a bifurcation at the stock market previously and this bifurcation is set to accelerate with big caps outperforming small caps. The banking industry remains fluid and I continue to see this situation playing to the advantage of tier 1 banks. KCB is set to pick up the pieces and to its advantage.
So if it’s Tubmans you are after, stay long on the yen, buy some precious metals and and consider selling crude oil.