Issue #005 of The Weekly Digest. Still going strong!

1. Yoh! How was your week? Crazy? Calm? Erratic? Exciting? No matter. We’re back (as always) with
interesting and intriguing stories from all around the world. I know you’ve been waiting for this.
What’s new this week? 3 big things actually:
A new(ish) logo! : We thought of sprucing up our logo. Hope you like it!
New Interns: We are continually expanding our team. See if you could spot the new names.
A new ‘Chief’ in town: Lastly, we will be having a new Editor for the Digest stepping in from Issue
#006 as I embrace other new and exciting projects to bring to you loyal (and awesome) readers. I
won’t say who yet - surprises are more fun. So, look out for that in the credits section on next week’s
issue!
Well, since this is my last ‘Word’ (at least in this particular forum), I have really enjoyed working on
this publication for the past few months. I’m also continually encouraged by all the positive feedback
we have been getting. The Weekly Digest is only getting bigger and better – so keep it locked.
That’s all folks! Dig in
AWORDFROMTHEEDITOR
Strathmore Centre for Value Investing (SCVI) is a research centre under the Strathmore Institute of
Mathematical Sciences (SIMS) - formerly SFAE - based in Strathmore University.
Started in 2014 under the leadership of our Director, Ishmael Maina (CFA), the centre is growing
by leaps and bounds with the goal of being the foremost undergraduate research institute in
Quantitative Finance and Economics with a bias towards Value Investing.
SCVI Insight is the publications and corporate communications arm of the Centre. It currently
produces The Weekly Digest, one of 3 planned publications by SCVI Insight. The other two will be
called The Monthly Report and the The Quarterly Review.
Our vision is to become the foremost platform for young undergraduate researchers and writers in
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We believe in the value of ‘learning by doing’ -emphasized and highlighted in our publications and
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Thank you for being a part of our story - which is just beginning!
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THE WEEKLY DIGEST
ISSUE 005
[29th Aug - 4th Sep 2016]
EST. 2016
ANY LAST WORDS?

2. The interest rate capping fiasco is spooking Kenyan Banks, who are now shifting to safer (read ‘large
investment grade’) with SMEs having it quite rough in this particular playing field. They are working around
with the label ‘risky’ on their backs as banks think twice about loaning these enterprises money. Sucks to be
an SME right now.
Economic implications: If SMEs are starved of cash, that means a lot of jobs and livelihoods are at stake
given the critical job-creating role SMEs play.
Big is better for Kenyan banks – SMEs get sidelined
Kenya and Rwanda have signed the Economic Partnership Agreement (EPA) with the European Union,
putting pressure on other EAC countries to do the same. How come? If the deal isn’t signed, Kenya stands
to lose its EU market. Yikes! With the deadline on 30th September, the clocking is ticking fast(!).
Economic implications: Uncertainty surrounding the signing of the EPA by other EAC countries is bad for
Kenya, who stand to lose their export market if the deal fails to go through.
EPA in the EAC – Kenya and Rwanda pile on the pressure
Testing waters – Tanzania has its eyes on Kenya
The Bank of Tanzania (BOT) is closely watching the implementation of Kenya’s ‘interest rate capping’ move.
Why you ask? Well, they tried it before and it didn’t go so well (i.e. a lot of people got hurt - moneywise).
The BOT wants to see how Kenya does it first before trying it out again. No pressure!
Economic implications: Kenya is under pressure to make the policy work and not go the Tanzania way – a
massive gamble with (as mentioned before) incalculable consequences
Limitless – Burundi is bracing for a big decision
Limits. Who needs them? Not Burundians I assure you. They are getting ready to debate on whether to scrap
the whole thing after a commission that was formed last year prepares to present its finding to Parliament.
Burundians are all for lasting political stability and an all-inclusive government - but is the prospect of a
strongman at the helm the way there? Beats me..
Economic implications: It’s unclear what a limitless Presidential term would mean for the economy, but if it
does transform to more stability then that would be a definite plus.
Return of the Villain? – Machar Marches back
He’s back! Dr. Riek Machar has returned to Sudan (through Khartoum) with a few fishy tricks up his sleeve.
Sources say he’s thinking of reviewing the Opposition’s role in the Peace Agreement signed in 2015. This
is sending serious jitters down the spines of the Sudanese populace. However, Khartoum is saying that Dr.
Machar is only getting treatment for his swollen legs – it seems he walked a great deal under aerial bombard-
ment. Let’s hope that’s the only thing he is up (or down ) to!
Economic implications: Machar is an important player in Sudan’s political and economic future. His coopera-
tion (or lack of it) will have economic consequences for the budding state of South Sudan.
A stitch in time…- Minnow banks rescued
MPs in Kenya are the new superheroes in towns, having just handed small banks and mortgage firms a
lifeline. Let me tell you how they did it – by rejecting a bill set to raise core capital requirements to 5B, a
monstrous sum for minnow banks. They also put some brakes on CBK and KDIC, who now have to ‘consult’
the Treasury before placing any bank under receivership. Both these measures will shield other lenders that
might face difficulty in future from the sure and sharp axe that is CBK under Governor Patrick Njoroge. Good
or bad? You decide!
Economic implications: The Kenyan Banking sector is set for some interesting times indeed, the big question
being whether we will witness consolidation of smaller banks – capital requirements notwithstanding. Jury’s
out on this one though.
THE REGIONAL BEAT
Tim Avedi & Elizabeth Kalu
Uganda’s U-Turn
Uganda’s government is set to sign the EPA with the EU (see story above). It had been pushing for a
renegotiation of the pact after Brexit but now does not want to risk its coffee and flower exports each worth
$252m and $45m respectively – money talks yes? Sucks that Tanzania is still dodgy on signing the pact
with the deadline (Sep. 30th) approaching fast. Speed it up TZ!
Economic implications: With Kenya’s economic future on the line, this is definitely good news. Waiting on
Tanzania and Burundi to make their move
Too many Bank Stocks stocked up in the NSE
As if capping the interest rates was not enough, commercial banks in Kenya now have to deal with the
massive decline in their share prices. Banks are facing losses of as high as 10 percent with Equity Bank, KCB
Group, Coop Bank and I&M forming the face of the biggest losers. This is because tens of millions of shares
are floating around in the market without any buyers at all. Economics 101: high supply + low demand = low
prices.
Economic implications: No one wants to touch bank stocks now, meaning lower prices may be seen for a
while until some confidence is restored in the future of the sector.
Hawker menace: Eastleigh traders cry foul
Eastleigh traders cry foul as they closed down their shops for three days between Wednesday 31st August
and Friday 2nd September in protest over the hawkers menace. See, the hawkers are displaying their wares
outside the traders’ shops and are taking over the loading zones which these traders have rightfully paid for
but no longer have access to. The traders are now losing out on their customers who prefer to purchase from
the hawkers who are more accessible. A win for the hustler!
Economic implications: Strikes are bad for business. Period.

3. NORTH AMERICASOUTH AMERICA
Brazil has had it rough these past few years. It
has been beset by a combination of high inflation
and borrowing costs, political paralysis and
growing government debt and deficits, pushing
it into its worst economic downturn since at
least the Great Depression. Pretty depressing
right? However, ever since Dilma Rousseff was
suspended, business confidence is making a
comeback with the current chief, Michael Temer,
installing an economic ‘dream team’ to lead
Brazil out of the black hole they have been in
Economic implications: With the current
President instituting serious reforms, we see a
rosier future for Brazil despite its many previous
setbacks.
Brazil is bouncing back!
In what has been named “The Taking of Cara-
cas”, a flood of Venezuelans — supporters of
the opposition, unhappy with President Nicolas
Maduro — marched in the country’s capital on
Thursday, demanding a recall election. They are
fed up with the free fall in the state of the econ-
omy, with food shortages, lack of medicine and
rampant inflation sparking looting and riots in the
capital. Venezuelans everywhere are at the end
of their tether and are loudly showing it.
Economic implications: Political instability has
never been good for the economy. Venezuela is
practically between a rock and very hard place.
Viva la Venezuela - The Taking of Caracas
Meanwhile in Peru, growth expectations by the
government are looking good and mining is to
blame. Production of copper has soared with
the opening of two new mines, Las Bambas and
Constancia and this has had knock-on effects on
business confidence and investment. More than
that, restrictions to projects have been eased
causing the government to project growth rates
at 4% and nearly 5% this year and next year.
Economic implications: Peru is riding the wave of
increased copper production, which is driving in-
vestment and confidence in the economy. Slowly
but surely, we should see growth in GDP.
Peppy Peru: New copper mines create
confidence
The EU has ruled that Apple should pay
Ireland a whopping 14 billion Dollars (yes,
over 1 trillion shillings), that’s enough cash
to buy 5 IPhones for everyone in Ireland!
This record-breaking penalty came as a
result of dodging taxes in Europe. However,
the move could come back to bite Ireland in
the behind. Investors may decide to invest in
other non-European countries with less strict
tax-laws.
Economic implications: The move may spook
investors within the EU, lowering foreign par-
ticipation in the Capital markets.
Rotten Apple?: EU traps Tech giant
Top investment banks, JPMorgan and Morgan
Stanley, aren’t buying the rate hike hype. De-
spite all signals and comments made by FED
officials including the boss lady herself, the
Wall Street hotshots maintain that the Feder-
al Reserve Bank will forgo raising rates this
month, and will more likely raise it in Decem-
ber. Don’t you just love the suspense?
Economic implications: A delay in raising the
interest rates may increase the rate of inflation
and possibly cause the economy to overheat.
Big banks call the FED’s ‘bluff’
Top economists, including the vice-chair of the
FED, predict that the US is about to reach full
employment. Strong employment in August
will complete a wave of excellent job reports,
for the third executive month. Looks like things
are looking up for the land of the free.
Economic implications:High employment rates
will cause improved living standards, but the
Fed will also have to keep an eye on inflation.
The US Job Machine
Julie Songok Ronald Wakhu
NEWS FROM AROUND THE WORLD

4. AFRICA AT LARGE
Mark Zuckerberg’s visit to the West African
nation was unknown to many as he strolled
down the streets of Lagos like a Naija, ran with
the locals on the bridge and indulged in a little
Afrosinema. On to business, Zuckerberg visited
one of the local innovation and incubation
centres where he promised to enable
Facebook’s tools and apps more affordable to
SMEs in Nigeria.
Economic implications: Incentives for
innovation and entrepreneurship which will
reduce youth unemployment and foster
economic development.
Step aside Chinedu, Zuckerberg is in town.
So you think this is about bombs exploding in
traffic and extremists massacring people on
the roads? You’re mistaken. Tunisia has ex-
perienced a 9% increase in road traffic deaths
since 2015 and 528 deaths in May alone.
Hence, the term “road terrorism”. With reports
of a corrupt traffic authority and fake driving
licenses, one begins to understand the root of
the problem.
Economic implications: The death toll seems to
mostly comprise the youth. This coupled with
terrorism could reduce the country’s labour
force, which is vital for an economy trying to re-
pair itself after constant bouts of terrorism and
social unrest.
They call it “road terrorism” in Tunisia
Public debt scandals, 40% depreciation of
domestic currency and foreign debt at 100%
of G.D.P. Mozambique is facing a financial
crisis that is rocking its economy as taxpayer’s
money seems to be disappearing into thin
air. With the appointment of an IMF official,
Rogerio Lucas Zandamela, as the new central
bank governor, there is hope that he will give
Mozambique’s economy the Midas touch it so
badly needs.
Economic implications: Investors may regain
confidence in Mozambique’s financial system
and increase FDI in Mozambique.
Aluta continua for the Mozambique economy
EUROPE
Initial surveys and several data points have
suggested that UK is actually managing pretty well
in the wake of the historic vote. In the last month,
UK’s GDP for the second quarter of 2016 beat
expectations, retail sales grew unexpectedly, and
unemployment remained at record lows. This has
led proposers of Brexit to argue that the economic
doom predicted will not materialize whereas
optimists say that the statistics demonstrate that
the recovery is in good shape.
Economic implications: This may encourage more
exits from the EU as UK is the guinea pig thus by
recovering it justifies that leaving was more of a
blessing than curse.
Brexit Blues no more?- The road to recovery
The first half of 2016 has been a rollercoaster
for financial markets. European banks like
Deutsche Bank and Credit Suisse have had a
rough six months as Brexit sent banking stocks
south. Most saw their shares in free fall after the
referendum’s results were announced. In the
UK, RS was the worst drop by more than 30%
since June 24th.Consequently, financial service
firms have put in place a strategy that takes
into account the worst case scenario that could
happen by the end of this year, and thus are
prepared for anything.
Economic implications: Reduction of investment
in the UK until there is certainty that the financial
markets are stable.
Going down: Gravity in UK banking stocks
The EU’s executive on 30th October was
expected to rule that the technology giant’s
tax arrangements with Ireland amounted to
preferential treatment with tax rates in the low
single digits, which breaches the bloc’s stated
rules. The commission is required to suggest a
figure that Apple owes Dublin (which is likely to
exceed $1 billion). However, the government,
fearing other investors would be put off, doesn’t
want to collect the money. It will appeal, as will
Apple, ensuring the case drags on for years.
Economic implications: This will encourage more
of preferential treatment concerning tax among
major companies. The incident may still put off
investors as some may lack resources to drag a
case for years.
Appealing Apple: Ireland faces off with the
Tech giant
Koki Gachui Valentine Chweya

5. INDIA, RUSSIA & CHINASOUTH EAST ASIA
Upon arrival at a province in eastern Thailand,
customs officials seized 511 elephant tusks
worth $6 million which are believed to have
originated from Kenya. The ivory had been hid-
den in sacks of tea leaves. This comes a week
after Thai authorities impounded four tonnes of
tusks that were smuggled from Congo
Economic implications: An increase in elephant
hunting reduces the credibility of a region in its
tourism money therefore losing a lot of money
on foreign investment.
The Tusk at Hand
Indonesia’s emergency response service de-
clared that the wave of forest fires is unlikely to
reach proportions seen in 2015. The govern-
ment has stepped up fire prevention measures
coming after Six Indonesian provinces have
declared a state of emergency, allowing the
agency to respond more quickly than last year.
Economic implications: In the case of a fire,
there is massive loss of resources thus slowing
down economic growth. In the case of a mas-
sive forest fire, the damage could be too much
such that the economy takes a dip all together.
South Asia gets lit – literally.
Malaysia confirmed its first case of Zika virus
infection. The disease is caused by a virus and
spread by the Aedes mosquito. The country has
joined the list of others plagued by the phenom-
enon, reaching as far as the Americas. Global
health organizations have reported that the
virus causes birth defects when contracted by
pregnant women, and a neurological syndrome
that causes temporary paralysis.
Economic implications: A healthier economy
is more productive and resources are used on
more important things as opposed to treatment
when the nation is generally healthier.
Zika Madness – Malaysia’s malaise
The (group of 20) Global Summit is here again!
And this time, this September, in China. Apart
from hosting, China is tasked with illustrating to
other economies how to deal with protectionist
measures while providing a blueprint for innova-
tion-driven growth models and intensifying the
spread of existing technologies. Go China! Go
China!
Economic implications: Through the summit,
economic growth rates may skyrocket around
the globe and perhaps low developed econo-
mies can be completed eliminated.
Summit in September - China goes Global
Nowadays, capping is like the “it” thing in case
you didn’t get the memo. From Kenya’s interest
rates and now to tourist numbers to the Taj Ma-
hal. This is a punch in the face of tourists who
universally admired the monument. The director
of Archaeological Survey of India (ASI), Rakesh
Tewari, explained that crowd masses pose a
negative environment threat and also, the carry-
ing capacity of the monument.
Economic Implications: This will eventually limit
diversification of the tourism sector in India as
well as invisible exports. India’s tourism will
narrow as a result, negatively affecting foreign
inflows hence unfavourable trade in India.
Congratulations India you just played yourself.
hence curtail economic growth.
No more tourists – Taj Mahal caps the
crowds
Former employees of Russian car manufac-
turer, AVtoVAZagregat decided to demand for
their wages by striking on the streets. Such
similar demonstrations were last seen in 2008-
2009 still on low wages. The car company was
declared bankrupt and hence unable to pay.
However, Governor Nikolai M. gave out 156.6
million rubles ($2.4 m) towards worker’s un-
paid wages which have not yet reached to the
former employees who continue to strike. This
sounds familiar though. Teachers in Kenya are
not alone after all.
Economic Implications: This implies that the
labour unions are ineffective in Russia which
results to decrease in labour productivity due to
decreasing levels of remuneration`.
We want our money! – Strikes in Russia
Gloria Kendi Ivy Mwende

6. Editor: Tim Avedi
Sub-Editor: Julie Songok
The Regional Beat:
Elizabeth Kalu – Lead Correspondent
Milka Alubokho
Maurine Jebichii
South East Asia:
Gloria Kendi – Lead Correspondent
Micere Murimi
Joel Ndege
India, Russia & China
Ivy Mwende – Lead Correspondent
Patsy Mugabi
Millicent Menya
South America
Julie Songok – Lead Correspondent
Faith Muthoni
Beatrice Muiruri
North America
Ronald Wakhu – Lead Correspondent
Mwende Muna
Africa at large
Koki Gachui - Lead Correspondent
Pauline Odhiambo
Europe
Val Chweya – Lead Correspondent
Cathy Nabatanzi
Team Manager: Rose Kagumba
Design: Adrian Myall
THE TEAM
TOP GAINERS
TOP GAINERS PRICE(KES) CHANGE(%)
UMME (Umeme Ltd) 16.50 +9.63
FTGH (Flame Tree Group Holdings Ltd) 4.15 +9.21
TCL (Trans-Century Ltd ) 6.55 +9.17
HFCK (Housing Finance Group Ltd) 16.65 +8.12
CIC (CIC Insurance Group Ltd) 4.05 +8.00
LOSERS
LOSERS PRICE(KES) CHANGE(%)
XPRS (Express Kenya Ltd) 3.15 -10.00
PAFR (Pan Africa Insurance Holdings Ltd) 31.50 -9.35
ADSS (Atlas African Industries Ltd) 1.10 -8.33
I&M (I&M Holdings Ltd 82.50 -8.33
CABL (E.A.Cables Ltd) 6.95 -7.33
MONTHLY SNAP
WEEKLY SNAP
@scvi_insight
VISIT US AT:
scviinsightblog
MACRO SNAPSHOT