Good morning

The headlines:
  1. The Greece deal will trigger Credit-Default Swaps, according to the ISDA (International Swaps and Derivatives Association). Contrary to popular (read: “my”) belief (read: “erroneous understanding”), the Greek government was going to use the CACs regardless. I get the impression that Greece needed the 75% participation in order to activate the CACs for the remaining balance – but this seems to be a misunderstanding as well. So in conclusion – the reasons aren’t clear, but there was 85% participation, and then Greece used the CACs to bring participation up to 95%, and the CDSs were therefore triggered. The ISDA will now expedite an auction on 19 March to settle the $3 billion or so worth of contracts (normally, this auction would take place a month later). Now – the auction is very interesting. Basically – the CDS seller must pay the CDS owner out when a bond defaults; and that payment should be the difference between the face value of the bond and the market value of the bond at the date of settlement. How do you get the market value of the bond? You hold an auction for the bonds that are going into default. Link: Greece Deal Triggers Default Swaps.
  2. On Friday, China’s customs bureau reported China’s trade deficit for February was the country’s largest since 1998. The shortfall of $31.5 billion was created by a 39.6% increase in imports against only an 18.4% increase in exports. This creates pressure on the Chinese government to implement policies that promote growth, especially after last week’s reduction in China’s target growth rate. It’s possible that the quantitative easing measures that the China Central Bank has been implementing will become more direct that just adjustments to reserve requirements. On the other hand, the higher imports over lower exports does suggest that China is building its stockpiles of inventories, as I mentioned last week when China’s manufacturing indicators showed increases in production. The real question is whether China can actually stimulate real economic growth internally if the key problem is that its external consumer demand base is going through an economic contraction. To me – it seems that China’s solution is quantitative easing in the US and the Eurozone, not within China itself. But it’s just a thought. Link: China’s trade deficit.
  3. Wal-Mart has won the SA Lawsuit contesting its purchase of Massmart. The Competition Appeal Court in Cape Town stated that there was insufficient evidence to support the view that the Massmart purchase would be detrimental to the public. Link: Wal-mart Win.
  4. And the Africa Business News in brief. Link: ABN Briefs. The highlights:
    • The Ugandan Central Bank intervened to prevent a fall in the shilling after the Central Bank’s interest rate cut announcement.
    • South Africa has won a tender for one of the world’s largest nuclear power deals.
That’s all for now.
Have a great Monday.