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February 18, 2019

BAT rallies on Reynolds buyout

British Prime Minister Theresa May./FILE
British Prime Minister Theresa May./FILE

International markets are awaiting British Prime Minister Theresa May’s headline Brexit speech today with baited breath. Early whispers are pointing towards a ‘’hard’’ Brexit and this sent sterling to below 1.200 versus the dollar early this week. Sterling was at 1.2240 last rebounding from that low. I am listening to the PM as I file this and she has threaded the needle with elegance and precision.

The dollar was sold aggressively in the FX markets after US President-elect Donald Trump broke the tradition of presidents refraining from commenting on the US dollar’s level and went directly into it in an interview with the Wall Street Journal.

The Journal reported: Mr. Trump said the US dollar was already “too strong” in part because China holds down its currency, the yuan. “Our companies can’t compete with them now because our currency is too strong. And it’s killing us.” The yuan is “dropping like a rock”, Mr Trump said, dismissing recent Chinese actions to support it as done simply “because they don’t want us to get angry”.

The US buyout group Carlyle has agreed to buy Africa’s largest rating agency. The acquisition of Global Credit Ratings, which rates more credits in Africa than global rivals Fitch, Moody’s and Standard & Poor’s, is a savvy bet on the growth of African capital markets.

The Nairobi All Share could not build on yesterdays +0.27 per cent bounce and closed -0.18 points at 124.09. The NSE20 retreated -25.76 points to close at 2929.68 a fresh 2008 low. Safaricom which opened this morning -6.266 per cent in 2017 closed unchanged at 17.95 and traded 5.467 million shares. Yesterday’s price action might be signalling the downdraft is now exhausted. The share is oversold.

Standard Chartered soared 5.8 per cent in Hong Kong which is a big move. Barron’s mused that ‘’a more plausible reason is that StanChart is a good hedge against Brexit shorts’’. Standard Chartered closed unchanged at 179.00 on light trading. KCB Group rebounded +1.85 per cent to close at 27.50 and traded 1.567 million shares. Barclays Bank Kenya eased -1.86 per cent to close at 7.90 and traded 4.001 million shares. Barclays Bank is oversold at -13.186 per cent in 2017.Kenya Re rallied +3.44 per cent to close at 22.50 and traded 1.414 million shares. Kenya Re is unchanged year to date which is in fact a strong showing. BAT has agreed a takeover of Reynolds in $49.4 billion deal. The BAT press office said: ‘’Based on BAT’s share price and the dollar-sterling exchange rate as at market close on January 16, 2017, the purchase price implies a total current value of $49.4 billion for the remaining 57.8 per cent of Reynolds not owned by BAT.

Aly-Khan is a financial analyst.

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