Last month, foreign purchase of Asian stocks at $17.5 billion was the highest in over several years. That said, the inflow of cash into regional bond markets reached $15.2 billion.

Net equities inflow amounts to $34.1 billion in year to date, while net bonds inflow outside China are only $1 billion. Nader Naeimi, head of dynamic markets at AMP Capital, told the media, “It won’t happen in a clear smooth line and there will be volatility. But some fast money seems to be getting interested again.” 

It is reported that India and South Korea have been preferred markets for investors and their benchmark indexes have scaled to highest levels. The large shifts in Asian currency markets can be attributed to equity and bond flows, resulting in multi-year highs. 

Last month, South Korea bond sales inched up from the previous month amid increasing interest rates. The value of bonds reached $63.1 billion, up from 1.8 trillion won from a month earlier, according to Korea Financial Investment Association data.

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It is observed that any reading above 50 shows expansion in the sector. That said, the output and new orders have marginally declined in November, and firms also reduced their purchases in the same month. 

David Owen, an economist at IHS Markit, told the media, “Looking ahead, news about effective vaccines underpinned a nine-month high for business sentiment, as firms were given hope of a restoration of global demand sometime in 2021.”

In addition, the outlook for business activity increased to the highest levels in the first nine months to November this year, media reports said. Also, the levels of job shedding in the same month had decreased and employment dropped to the lowest levels in the first eight months of the year. 

More recently,  it was reported that the US State Department’s Coordinator for Counterterrorism will be meeting with South African officials in Pretoria today. The officials in South Africa have frequently emphasised on the insurgency’s destabilising effect on regional partners. 

That said, the country has provided  financial support to Mozambique’s counterinsurgency. It is believed that the Biden administration is likely to support ‘multilateral stabilisation pathways’.

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Algorithms, also known as algos, are used at an estimated 10 percent to 20 percent of daily global spot trading.  The Bank of International Settlements in its annual report said “The impact on market functioning will depend on many factors, including the direction in which EAs (execution algorithms) evolve, their market share, how well their risks are understood and managed, and how they interact with other developments in financial markets.” 

In fact, foreign exchange execution algorithms are basically automated trading programmes. They are specifically designed to purchase or sell a predetermined amount on the basis of a set of instructions, media reports said. 

The Bank of International Settlements has also warned that too many internalised trades could lower turnover on primary venues. This is in extreme situations. That said, market participants will be able to benefit from banks matching trades internally. 

A statement released by the Bank of International Settlements wrote that “Central banks and market participants must have access to the necessary data, skills and tools to allow them to assess the opportunities and risks of evolving markets.”

It is reported that execution algorithms change the way market participants access the foreign exchange market and the manner in which trades are executed. But they are also prone to give way to additional challenges.

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The data is released by the Central Bank of Kenya. The data also shows that remittance inflows in the country stood at $260.7 million in September compared to  Sh29.7 billion and  Sh29.9 billion in the previous two months. 

“Low gasoline prices should help boost forex reserves. There’s also less demand for imports,” money markets expert and financial adviser Benson Ndehi tweeted. “Unless the fiscal indiscipline ceases, the slide is inevitable. I don’t have a timeframe though.” 

Kenya has been struggling to keep the shilling afloat in the recent years. More recently, the Kenya regulator has granted a licence for Pepperstone, forex and contracts for differences (CFDs) broker, which has been seeking to expand its presence into the Kenya forex market. 

Pepperstone has been granted a non-dealing Foreign Exchange Broker Licence by the Capital Markets Authority of Kenya. The licence is for the company’s locally established subsidiary Pepperstone Markets Kenya. 

Pepperstone Kenya CEO Sahil Patel said in a statement “We’re extremely excited by the opportunity to bring world-class trading platforms, execution, and pricing to the vibrant retail and institutional forex market in Kenya.” Recently, the company had secured a Dubai Financial Services Authority licence and two other European licences to continue its European operations following Brexit.

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The bank in a note to its clients said “In Latam FX, we cut the regional OW, which would benefit most from a strong cyclical picture coming from large U.S. fiscal stimulus and clear Biden victory. However, the bank kept an overall neutral stance on emerging market currencies, saying investors needed to ‘wait for the outcome of the Presidential election, which is close and changing hourly.’”

Chile’s peso gained momentum across Latin American currencies earlier this week. The gains were attributed to positive Chinese manufacturing data which supported copper prices, media reports said. However, the sentiment remained quiet owing to the US elections. 

It is reported that China’s manufacturing sector demonstrated strong performance in nearly a decade in October. The mainland is the largest consumer of metal. Now JP Morgan will hold 71 percent of its Chinese securities joint venture following the completion of a transaction to acquire a 20 percent stake from its local partner, media reports said. 

The increase in its stake holding will in fact position the bank for having the  highest ownership stake in Chinese securities joint ventures. It is reported that China’s factory sector reached a decade-high record on the back of heavy domestic demand.

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Now Applied Derivatives has become the first broker to distribute Trading Technologies platform in South Africa, media reports said. With that, the latter’s clients will be able to access the Johannesburg Stock Exchange for trading  equity and currency derivatives. This will even include futures and options, media reports said. 

Steve Stewart, Managing Director, Sales EMEA at Trading Technologies, told the media, “We are very happy to be bringing the TT platform into South Africa for the first time through this partnership with Applied Derivatives. They are leaders in the region, with a focus on providing their services to large financial institutions, hedge funds and other professional trading organizations. We look forward to expanding our reach in this important part of the world through this collaboration with the Applied Derivatives team.” 

In July, BCG Partners had extended their partnership with Trading Technologies to implement Order Management System for order management and post-trade allocation. Now Applied Derivatives will be able to access Trading Technologies preconfigured execution algorithms, Autospreader and ADL, mobile trading, FIX services and API development.

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Piotr Matys, a London-based strategist at Rabobank, told the media, “Apart from the ongoing clashes between Armenia and Azerbaijan, the risk that the U.S. may impose sanctions on Turkey for purchasing the S-400s from Russia has increased. Testing the S-400s ahead of crucial US presidential elections without knowing whether President Trump, who has an affinity for President Erdogan, will be re-elected is a major source of concerns for already nervous investors.”

It is reported that Turkey had paid a premium on the back of its $2.5 billion debt sale to international investors. With that, the country made its first entrance into the global markets since February, media reports said. The country had priced its bonds at 6.4 percent compared to 4.25 percent for similar maturity notes issued in that month.

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The amount was injected through the BDC operators. Since  the middle of March, naira was being devalued on the back of the protracted coronavirus pandemic. In an attempt to ease the currency devaluation, the Central Bank of Nigeria adopted a single exchange rate over a multi exchange rate policy to stabilise the value of naira.

The apex bank seeks to boost the value of naira and subsequently strengthen the Nigerian economy. A few weeks ago, the World Bank reported that Nigeria’s economy necessitates stronger forex action. 

Hit by a severe shortage of dollars, the country had stalled its weekly interbank foreign exchange sales in March. The coronavirus pandemic and stringent lockdown measures across world economies have resulted in weaker oil prices, further hurting the economy. 

World Bank country director, Shubham Chaudhuri, told the media, “The Azura case is just one example of the difficulties that a number of established foreign and domestic private firms in Nigeria have had in accessing the forex to meet their business and contractual obligations.”

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The Central Bank of Kenya said in a statement, “This meets the CBK’s statutory requirement to endeavour to maintain at least 4 months of import cover, and the EAC region’s convergence criteria of 4.5 months of import cover.”  It appears that interest demonstrated by international investors has strengthened the shilling value.

Yields from Kenya’s eurobonds reduced by an average of 21.4 basis points last week, media reports said. In fact, strengthening of the shilling is expected to ease inflation on import bills.

In May, World Bank approved a $1 billion loan to help Kenya bridge its budget deficit and tackle economic complexities as a result of the pandemic. The World Bank said in a statement, “Its approval is timely, since it will help fill the financing gap generated by the severe, ongoing shock to Kenya’s economy.”

It appears that budget deficit has increased to 8.2 percent of GDP in the financial year, media reports said. The increase in percentage is higher compared to the initial forecast of under 7 percent attributed to reduced tax collection and lost revenue from VAT and income tax cuts, media reports said.

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According to the Central Bank of Kenya data, the country’s usable foreign exchange reserves increased to $8,532 million as of May 14 compared to $7,809 from the previous week. The increase was equivalent to 5.14 months of import cover.

The Central Bank of Kenya said, “This meets the CBK’s statutory requirement to endeavour to maintain at least four months of import cover, and the EAC region’s convergence criteria of 4.5 months of import cover.”

IMF had approved the disbursement of $739 million to Kenya last week. The amount will be drawn under the Rapid Credit Facility (RCF), media reports said. IMF said in a statement, “This will help to meet Kenya’s urgent balance of payments need stemming from the outbreak of the Covid-19 pandemic.”

The loan from IMF would enable Kenya to maintain a healthy forex reserve and provide budget support in the face of the pandemic, media reports said. Also, stabilising the forex reserve will allow preserve the local currency against global fluctuations.

Last month, Kenya was in talks with the World Bank and the IMF for budget support as well as emergency assistance. It had requested $750 million from World Bank for budget support and $350 million from the IMF as a means of emergency assistance.

It is reported that Kenya’s funds were anticipated to slowly start coming in by April or May. In March, the Kenyan shilling had weekend 5 percent against the dollar.

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