Good morning

It’s Friday.

The headlines:

  1. After the Agribank Branch story yesterday, China’s Agribank announced that its quarterly profits unexpectedly fell for the first time in 2 years. Net income declined 14% – and those 20 analysts from the Bloomberg survey were expecting a 17% increase! Awkward (again). The reason for the increase is given as the government’s attempts to curb property spending. They have done this by tightening credit (ie. restricting the number of mortgage loans that can be given out) and by imposing higher mortgage rates (ie. forcing lower demand by raising the cost). The corollary of this is fewer customers and higher bad debts/defaults for the lenders. My question: if China has artificially restricted lending – what difference will changing the reserve ratios of the branches make? In theory, the branches could lend more. Legally, it looks like they can’t. And then? Link: Agribank’s profits drop.
  2. The president of the Fed of St Louis has said that US monetary policy is at a turning point. One day, I’m going to have to work out how the Fed actually works because there seem to be a great number of presidents. Anyway, Mr Bullard says that we can expect an interest rate hike as early as late 2013. So not really at a turning point so much as squinting your eyes and making out a grey haze on the horizon. Other Fed presidents disagree. Or didn’t comment. Either way, the turning point will only become clear once some of the economic effects of the current policies become more evident. Link: The US Fed Turning Point.
  3. South Africa’s Foreign Ministry has announced that it will be reducing its imports of oil from Iran. According to Ebrahim Ebrahim (the Deputy Minister of the Department of International Relations and Cooperation – so good they named him twice), SA has suspended almost all oil imports from Iran (the source of about 29% of SA’s fuel). The South African Petroleum Industry Association finds that “hard to believe” as they haven’t yet been informed of the plan; and are only expected to hear from a government task team on the issue at the end of May. Other government spokespeople are saying that the cabinet has not made a decision on Iran. What a mess. Link: South Africa and the Iranian Oil Imports.
  4. The commodities bear market is set to continue as analysts predict falling prices of copper. According to this article, industry stockpiles in China have more than doubled since last quarter. And according to the Shanghai Futures Exchange, stockpiles are at their highest level in nine years. It brings me back to the happy reports from a month or so ago, when everyone was excited by the good Chinese manufacturing figures/purchasing manager index figures. I called stock-piling. Smugness: distasteful but fun. Link: The Copper Bear Market
  5. Randgold Resources’ share price has plunged after a coup in Mali. The company has three gold-mines there. Randgold has since announced that those operations remain unaffected. Randgold and the Mali Coup.
  6. As a sidebar fun piece, researchers suggest that people may be investing money in online Ponzi schemes even though they know that it’s fraudulent. It makes sense in some ways – if you’re an initial investors, and you draw out your returns in cash as they’re generated instead of reinvesting, you get to be one of the people that genuinely makes money out of Ponzi. That is: as you become aware of the existence of the scheme, you start to act as a scheme operator rather than a scheme participant. Human nature. And greed. Link: The Allure of Online Ponzi Schemes.
  7. While we’re on the topic of Ponzi schemes, FBI files are revealing how Bernie Madoff deceived his employees. It’s so Mafioso with all the Italian names. Link: Madoff FBI Files.
  8. And the African News in Brief. Link: ABN Briefs. The highlights:
    • Shoprite Holdings is due to issue more shares (around 27.2 million of them – around 5% of current shares in issue), as well as issuing R4.5 billion worth of convertible bonds. They’re raising capital to strengthen the balance sheet and for acquisitions. 
    • Zimbabwe plans to issue a $100 million infrastructure bond. I wonder if they can find an agency to rate it?
That’s all for now.
Have a great Friday!