Egypt Independent: Business-Main news en Nikkei pays price for downplaying Brexit risk, sees worst fall since 2011 <img src="" alt="" title="" class="imagecache imagecache-media_thumbnail" /><p><span style="font-size: 1em; line-height: 1.5em;">Japanese stocks suffered their biggest daily fall in more than five years on Friday after Britain voted to leave the European Union, roiling financial markets and raising fears of a shock to the already fragile global economy.</span></p><p>The Nikkei&nbsp;<a href="" target="_blank">.N225</a>&nbsp;ended down 7.9 percent at 14,952.02 points, after falling as low as 14,864.01 at one point, its weakest since October 2014.&nbsp;</p><p>The Nikkei&#39;s drop was its steepest since March 2011, when threats of a nuclear catastrophe following a powerful earthquake and tsunami had sent financial markets reeling.</p><p>Global markets had generally been trending up in recent sessions on hopes that Britons would choose to stay in the EU, though most polls had indicated it was too close to call.</p><p>Pressure on Japanese equities intensified as investors fled to safe-haven assets such as the yen. The dollar fell to as low as 99.00 yen&nbsp;<a href=";destCurr=USD" target="_blank">JPY=</a>, its lowest since November 2013.</p><p>&quot;This is absolutely unexpected,&quot; said Norihiro Fujito, senior investment strategist at Mitsubishi UFJ Morgan Stanley Securities.&nbsp;</p><p>He said the market was closely watching whether Group of Seven nations will take steps to calm markets.&nbsp;</p><p>&quot;If they come up with necessary steps, not just short-term money supply but a drastic move such as pound buying, euro buying or yen selling, the market may stabilize,&quot; Fujito said.&nbsp;</p><p>Exporters tumbled across the board on the yen&#39;s strength, with Bridgestone Corp (<a href="" target="_blank">5108.T</a>) losing 8.5 percent, Toyota Motor Corp (<a href="" target="_blank">7203.T</a>) shedding 8.7 percent and Panasonic Corp (<a href="" target="_blank">6752.T</a>) falling 8.3 percent.</p><p>Companies with production hubs in Britain suffered. Hitachi Ltd (<a href="" target="_blank">6501.T</a>), which manufactures trains in Britain, fell 10.3 percent. Nissan Motor Co Ltd (<a href="" target="_blank">7201.T</a>), which makes cars in the UK, lost 8.1 percent.</p><p>The broader Topix&nbsp;<a href="" target="_blank">.TOPX</a>&nbsp;dropped 7.3 percent to 1,204.48 and the JPX-Nikkei Index 400 .JPXNK400 declined 7.3 percent to 10,869.19.</p><p>Turnover in the broader market surged to 3.338 trillion yen from Thursday&#39;s 1.57 trillion yen.</p><p><br />&nbsp;</p><p>&nbsp;</p> Sat, 25 Jun 2016 10:58:00 +0000 Reuters 2470609 at sites/default/files/photo/2016/06/25/505021/jpx.jpg Brexit baffled punters, pundits and fund managers to the very end <img src="" alt="" title="" class="imagecache imagecache-media_thumbnail" width="152" height="114" /><p><span style="font-size: 1em; line-height: 1.5em;">Nearly everyone, from London gamblers to US money managers got it wrong. Britain&#39;s vote to leave the European Union shocked pundits, investors and politicians alike, underscoring the inherent difficulty of forecasting such rare events.</span></p><p><span style="font-size: 1em; line-height: 1.5em;">On PredictIt, an online political events betting site operated by Victoria University in Wellington, New Zealand and US-based partners, bettors had the probability of a &ldquo;leave&rdquo; camp win at just 16 percent on Thursday as British polls closed. Within four hours of the vote count, that had shot to 90 percent.</span></p><p><span style="font-size: 1em; line-height: 1.5em;">The dramatic reversal caught many investors flat footed and showed how they have trouble hedging against such shocks even with the help of such tools as exchange-traded funds or computer algorithms designed to capture an electorate&#39;s social media vibe, economists, pollsters and fund managers said on Friday.</span></p><p>Predicting the outcome of Thursday&#39;s referendum was harder than that of a national election because there was virtually no historical data to draw on, said David Rothschild, an economist at Microsoft Research. He said pollsters also did not pay enough attention to working class and less educated voters.</p><p>The city of Sunderland, for example, home to Britain&#39;s largest car factory and considered a bellwether of the sentiment among blue-collar voters, surprised with the strength of its support for EU departure and when the result came among the first that night it sent the pound reeling.&nbsp;</p><p>Rothschild, who forecast Britain would vote to remain in the bloc it joined in 1973, had a lot of company.</p><p>A person familiar with the campaign&#39;s monitoring by the US intelligence agencies admitted that they were befuddled by the vote&#39;s outcome.&quot; We&#39;re all scratching our heads.&quot;&nbsp;</p><p>By mid-week, a rise in demand for S&amp;P 500 put options was indicating that more and more investors were either betting on a market drop or hedging themselves against such a scenario, said David Jilek, chief investment strategist at Gateway Investment Advisers.&nbsp;</p><p>Yet while opinion polls went back and forth and kept indicating a close vote, betting odds consistently favored the &quot;remain&quot; camp. And since odds makers fared better than pollsters in predicting the results of the last general election and the 2014 Scottish independence referendum, the 52-48 percent victory for the &quot;leave&quot; campaign to leave was such a shock.</p><p><strong>Through the roof</strong></p><p>Global stock markets and the British pound tumbled on Friday after a wild election night ride.</p><p>&quot;All through Thursday the big bets had come in favor of &quot;remain&quot; but as the clock ticked toward midnight the most extraordinary reversal got underway,&quot; said David Williams, a spokesman for betting firm Ladbrokes. &quot;In the end we&#39;ve managed our book well enough to make a few quid but the real story for the bookies was just how enormous the turnover was,&quot; he said.</p><p>&quot;Never before in our 130-year history have we known a night when betting went through the roof like this.&quot;</p><p>Betfair, a betting exchange, said the implied probability of a remain vote was 94 percent right up until the polls closed, but that changed dramatically in the wee hours of Friday when early results started coming in.&nbsp;</p><p>&ldquo;At one point after the Sunderland result had been announced, there was&nbsp;more than &pound;5-10k being traded per second&nbsp;on the market, which is absolutely huge,&rdquo; said Naomi Totten, a spokeswoman for Betfair.&nbsp;</p><p>One theory is that some of the more affluent punters were staunch supporters of the &quot;remain&quot; campaign and bet on it to win, according to two gambling analysts. Since EU supporters bet more money than those from the &quot;leave&quot; camp, that skewed the odds and public perceptions about the likely outcome, said the analysts, who did not want to be named because they were not authorized to speak about betting trends.</p><p>Money managers, meanwhile, may be kicking themselves for failing to deploy simple hedging strategies. Charles Reinhard, head of portfolio strategy at MainStay Investments, said building up cash or buying more stable, dividend-paying stocks could have dampened Friday&#39;s stock market shock wave.</p><p>But Don Steinbrugge, managing partner at Agecroft Partners, said hedge fund managers are rewarded for beating the market and face heavy redemptions from clients if they are cautious and take large cash positions.</p><p>&quot;They want you to beat the market through stock selection,&quot; he said.</p><p>Rothschild, who also is a fellow at Columbia University&rsquo;s Applied Statistics Center, said he expected forecasting to improve with a transition from polls using small, random representative samples to large Internet-based ones with rich demographic data.&nbsp;</p><p>&quot;If I have one million respondents with a large amount demographic data, I should be able to predict outcomes better, or I&#39;m not a very good statistician,&quot; he said. &nbsp;&nbsp;</p> Sat, 25 Jun 2016 10:21:00 +0000 Reuters 2470607 at sites/default/files/photo/2016/06/25/505021/broker_bgc.jpg Apache Corp extends Western Desert oil drilling for five years <img src="" alt="" title="" class="imagecache imagecache-media_thumbnail" width="152" height="114" /><div>The American wildcat oil and gas exploration firm Apache Corporation has agreed a five-year extention to its Khalda-2 drilling concession in the Western Desert, with an expected investment of US$40 million.</div><div>&nbsp;</div><div>The agreement was signed by Petroleum Minister Tareq al-Molla, the Egyptian General Petroleum Corporation&#39;s Chief Executive Tareq al-Hadidy and David Shi, the vice-president of Apache.</div><div>&nbsp;</div><div>The deal involves the digging of 10 new wells.</div><div>&nbsp;</div><div>The minister stressed that the agreement continues a successful partnership with the Apache, which uses modern drilling methods drilling, contributing to the swift recovery of oil.</div><div>&nbsp;</div><div>Apache operates in Egypt through the Khalda Petroleum Company, a joint venture with the Egyptian General Petroleum Company.</div><div>&nbsp;</div><div>Molla said Apache uses existing infrastructure to reduce production costs, and contributes to increasing oil reserves and oil production rates, which in turn backs the growth of Khalda.<br /><br /><em>Edited translation from Al-Masry Al-Youm</em></div> Fri, 24 Jun 2016 12:49:00 +0000 Al-Masry Al-Youm 2470590 at sites/default/files/photo/2015/12/06/1755/petroleum_minister_tarek_al-molla.jpg Africa’s richest man got a fistful of dollars in Nigerian currency squeeze <img src="" alt="" title="" class="imagecache imagecache-media_thumbnail" width="152" height="114" /><p>As Nigeria grapples with a foreign exchange crisis, one person stands out in the scramble to obtain hard currency: Aliko Dangote, Africa&#39;s richest man.<br /><br />When the government restricted the supply of dollars in June 2015 to prop up the value of the Nigerian naira, firms owned by Dangote landed a healthy share of dollars available at the cheap official rate, a study by Reuters shows.<br /><br />Reuters examined foreign currency transactions made during an 11-week period in March to May this year. Over that time, Dangote businesses were able to buy at least $161 million in hard currency from the central bank. That was around nine percent of all the hard currency the bank sold over the period. In a single week in March, one dollar in every eight went to Dangote companies. There is not enough data to see how that stacks up with the companies&#39; share of foreign trade.<br /><br />Compared with buying dollars on the more expensive unofficial market, though, Dangote companies benefited to the tune of about $100 million.<br /><br />The wrangling for dollars highlights Dangote&#39;s pivotal role as Africa&rsquo;s biggest economy tries to diversify away from oil.<br /><br />Over the past year, Nigeria pegged its currency, the naira, to the U.S. dollar at an official rate of 197-199 naira. The central bank doled out dollars at the official rate to companies it deemed strategic to the Nigerian economy. Until June 20, when the bank abandoned the peg, anyone else had to pay a lot more on the black market.<br /><br />Small businesses complained that the foreign exchange restrictions were forcing them out of business. Frank Jacobs, president of the Manufacturers&#39; Association of Nigeria, said that the majority of manufacturers &ndash; 2,000 of them &ndash; had been unable to source raw materials because they could not obtain dollars to pay for imports. Up to 100 firms either shut completely or cut production, he said. &quot;The large companies have better clout.&quot;<br /><br />Dangote&rsquo;s purchases were entirely legal, and some economists say the 59-year-old deserved such special treatment because he has promised to build a much-needed oil refinery. He also has a track record helping Nigeria become more self-sufficient in cement and food.<br /><br />Dangote Group, the parent firm, declined to comment. Dangote Cement said it had received enough dollars. &quot;We believe that we are being treated fairly and we do not receive preferential treatment,&quot; Chief Financial Officer Brian Egan said by email.<br /><br />The central bank did not respond to written requests for comment.<br /><br />Reuters&#39; calculations are based on foreign exchange purchase data which the Nigerian government required banks to publish. Reuters examined every transaction that Dangote&rsquo;s companies made between March 1 and May 13. One newspaper, This Day, calculated a weekly total of all the published official transactions. Reuters used this total to analyse Dangote&#39;s share.<br /><br />It is difficult to assess whether Dangote companies received more cheap dollars than anyone else because data for all currency transactions is not available.<br /><br />In the period Reuters analysed, the average black market rate was around 320, according to AbokiFX, a Lagos financial company. The difference against the official rate equated to about 20 billion naira ($101 million).<br /><br />Charles Robertson, global chief economist at Renaissance Capital in London, said Dangote got more hard currency than other firms because his plan to build a refinery will help the government end fuel imports, which cost Nigeria some $6 billion annually.<br /><br />&quot;A lot of drain on the foreign exchange is from the need to buy imported fuel,&quot; he said. &quot;Getting the refinery going will require a lot of investment and imported goods.<br /><br />&quot;He&#39;s got a track record here. He did it with flour. He did it with cement and now the idea is he does it with the oil refinery ... He is trusted. You no longer need to rely on foreigners, Nigerians can do it themselves.&quot;<br /><br /><strong>&#39;Frenzied pursuit&#39;</strong><br /><br />The collapse in the oil price has hit Nigeria&#39;s revenues hard, pushing it into its worst economic crisis for decades. Crude oil and gas revenues bring in 90 percent of its foreign currency earnings and fund 70 percent of the state budget. At the same time as collecting lower revenues from crude oil sales, Nigeria has also had to spend billions importing refined products because it lacks refining capacity.<br /><br />Africa&#39;s biggest economy contracted for the first time in at least 12 years in the first quarter of this year, and state governments are struggling to pay public servants. After the central bank abandoned the currency peg, the naira tumbled 30 percent against the dollar in a single day.<br /><br />President Muhammadu Buhari, a former military ruler who was elected to office in March last year, has made it a priority to fund investments which can help make the country more self-sufficient in everything from food to energy. Buhari often uses the slogan, &quot;We must produce what we eat.&quot; Last month, he said the central bank would give firms which helped to diversify the economy &quot;incentives,&quot; without saying what that meant. Buhari&#39;s office declined to comment for this story.<br /><br />Buhari backed central bank plans to adopt a more flexible foreign exchange policy. But he long resisted devaluing the official naira rate. In a speech last month, he said, &quot;we cannot get away from the fact that a strong currency is predicated on a strong economy.&quot;<br /><br />Atedo Peterside, chairman of Lagos-based Stanbic Bank, told a conference in February that the peg had guaranteed &quot;huge windfall incomes&quot; to those lucky enough to get dollars allocated at the official rate. Some speculators would buy dollars at the official rate and sell them for a quick profit on the parallel market.<br /><br />&quot;Most investors here are currently caught in a frenzied pursuit of the cheapest available dollars,&quot; he said. &quot;The difference between losing this game and winning it can be as high as a mind-boggling 50 per cent.&quot;<br /><br />In January, Central Bank Governor Godwin Emefiele said the bank would assist the Dangote Group to access foreign exchange to facilitate its refinery project, which will be the country&rsquo;s first private oil refinery and is due by 2018. Emefiele also said the bank would help companies that boost local food production.<br /><br />Muda Yusuf, a spokesman for the Lagos Chamber of Commerce, said the central bank&#39;s allocation of hard currency gave businesses only 20 percent of what they needed to operate. Even state oil firm NNPC had to ask big international oil firms for loans worth $200 million to fund fuel imports, according its Managing Director, Emmanuel Ibe Kachikwu.<br /><br />In a February interview Dangote&#39;s brother Sani Dangote, Group Vice President, said the firm was not getting 100 percent of its foreign exchange needs. &quot;We&#39;re getting some amount to make sure the industries keep going,&quot; he said, adding that the firm&#39;s sugar refinery was running at 60 percent capacity.<br /><br />But Dangote, whose businesses refine sugar and produce cement and mill flour, continued to expand. He pushed ahead with plans to build the $12 billion oil refinery, a gas pipeline across West Africa, a tomato plant and farms in Nigeria to produce one million tonnes of rice.<br /><br />Reuters&#39; analysis shows that about 80 percent of Dangote&#39;s dollar purchases during the 11-week period were for the import of equipment and raw materials for his agricultural, sugar, cement and food companies.<br /><br /><strong>Political currency</strong><br /><br />Technically, commercial banks decided how to allocate dollars. But executives at import firms say the central bank played a big part.<br /><br />Competition among industrial bosses for the central bank&#39;s attention was on display in April at the funeral of Governor Emefiele&#39;s mother. Dozens of business leaders attended the service, including Dangote and the CEOs of most big banks. Business leaders, dressed in traditional robes, left their bodyguards behind as they crammed into the small town of Agbor deep in the Niger Delta.<br /><br />Since founding his business in the 1970s, Dangote has been close to a series of presidents, both military and elected. He was an economic adviser to Buhari&#39;s predecessor Goodluck Jonathan, who ruled from 2010 to 2015.<br /><br />Although Dangote built his business under Jonathan&#39;s People&#39;s Democratic Party, he also had links with the opposition. On election night in 2015, when Buhari ousted Jonathan, a smiling Dangote was pictured next to Buhari at a house in Abuja as results came in.<br /><br />Moses Ochonu, a Nigerian-born African history professor at Vanderbilt University in the United States, has criticised Dangote for having outsized power in the Nigerian economy. But he says Dangote also creates jobs. &quot;People are willing to give him the benefit,&quot; he said. &quot;He&rsquo;s contributing a lot to the economy.&quot;</p> Thu, 23 Jun 2016 13:41:00 +0000 Reuters 2470577 at sites/default/files/photo/2016/06/23/504802/nigeria.jpg