Emerging Markets News Monitor - Oct. 8
Emerging Markets News Monitor - Oct. 8
China Stock Euphoria Cools, India State Elections, Brazil Municipal Elections, Samsung in "Crisis" As Earnings Disappoint, New Major Airport in Saudi Arabia
The Top Stories Shaping Emerging Markets - October 8
China’s Stock Euphoria Cools
Bloomberg
“Chinese stocks began Tuesday’s session with a bang — an onshore benchmark surged 11% as soon as trading resumed after a weeklong break. But the enthusiasm faded as the day progressed, with the lack of more major stimulus from a key policy meeting disappointing investors.”
“In the end, the CSI 300 Index finished just 5.9% higher. In Hong Kong, a gauge of Chinese shares was down more than 10%, on course to erase almost all of the gains made while onshore markets were shut for the Golden Week.”
“The CSI 300 Index had risen for nine straight sessions through Sept. 30 before the Golden Week break, boosted by a stimulus blitz that included interest-rate cuts, freeing-up of cash for banks and support for stocks. That saw Wall Street heavyweights including Goldman Sachs Group Inc., HSBC Holdings Plc and BlackRock Inc. upgrading the once-beaten down stock market amid bets of further stimulus.”
“Tuesday’s rally helped the onshore gauge close at the highest level since July 2022, and some market watchers are already cautioning against stocks reaching overvalued levels.”
“An overheating of the A-share market and the Chinese government’s delivery on its recently-announced policy stimulus are among the risks investors should watch amid the Chinese stock market rally, Morgan Stanley strategists including Laura Wang in Hong Kong wrote in a research note. That adds to the skepticism shown earlier by some other strategists and fund managers who said they are waiting for Beijing to back up its stimulus pledges with real money.”
“…China’s leaders aim to achieve around 5% growth this year, but economic data in recent months show that would be hard to reach as consumer spending remained sluggish and a property downturn persisted.”
“…The world’s second-largest equity market has had multiple boom-and-bust cycles. Confronted by slowing growth and disinflation, China swung into stimulus mode in late 2014, setting off an eye-watering stock market rally that spectacularly crashed back to earth in mid 2015. The Shanghai Stock Exchange Composite Index more than doubled its level from October 2014 to June 2015, but then plunged more than 40% in two months.” Charlotte Yang reports.
India State Elections: BJP Surprise Win in Haryana, Trails in Jammu and Kashmir
Reuters
“India's ruling Bharatiya Janata Party (BJP) appeared on course for a surprise win on Tuesday in polls in the northern state of Haryana, but was trailing the opposition in the first elections in a decade in troubled Muslim-majority Jammu and Kashmir.”
“Held in phases that ended on Saturday, the elections were Narendra Modi's first test of popularity since his return in June as prime minister for a record third straight term, although he needed the help of regional parties.”
“The Haryana vote counting trend reinforced the popularity of Modi's Hindu nationalist BJP months after it stumbled in general elections…Exit polls had predicted a win for Congress in Haryana and gave an edge to an opposition alliance of the Congress party and the regional National Conference (NC) in Jammu and Kashmir, where the BJP has traditionally been weak.”
“Counting trends on the website of the Election Commission of India showed the alliance of the Congress and the NC set for a comfortable majority in the Himalayan region, whose special autonomy Modi scrapped in 2019.”
“…Victory for Congress in Jammu and Kashmir will give a major boost to its leader, Rahul Gandhi, the scion of a dynasty that gave India three prime ministers but who was blamed for the party's slump since Modi first swept to power in 2014.”
“Gandhi was also the face of the opposition alliance of two dozen parties that denied Modi an outright majority in this year's general election and now leads the opposition in the lower house of parliament.” Reuters reports.
Brazil Elections: Bolsonaro Party Gets Boost in Municipal Elections; Centrist Wins Rio and Sao Paulo Remains Hotly Contested
France24
“Former president Jair Bolsonaro's rightwing party finished first Sunday in Brazil's municipal elections, including a slight margin in Sao Paulo, the economic capital.”
“Outgoing Sao Paulo mayor Ricardo Nunes, a Bolsonaro ally, claimed 29.4 percent of the votes in this first-round voting, while Guilherme Boulos, representing the leftist camp of President Luis Inacio Lula da Silva, garnered 29 percent, election officials said…The final round of voting is October 27.”
“Bolsonaro's party won two mayoral races among 26 state capitals and will proceed to the second round in nine others. However, not all races worked out in Bolsonaro's favor. In Rio de Janeiro, centrist Eduardo Paes won a fourth term with 60.4 percent of the votes, coming out ahead of Bolsonaro's former intelligence chief Alexandre Ramagem at 30.8 percent, despite the former president's support of the latter.”
“The overall results will be viewed as a measure of the forces of left and right -- embodied, respectively, by Lula and his predecessor Bolsonaro -- as both sides hope to place as many supporters in town halls as possible.”
“More than 150 million Brazilians were eligible to vote Sunday, at a time when the country is experiencing record wildfires and a historic drought -- though the environment was largely absent from the debates.” France24 reports.
Samsung Issues Public Apology After Falling Behind on AI
Financial Times
”Samsung Electronics has issued a public apology and acknowledged the company is considered to be in ‘crisis’, following the release of worse than expected profit guidance on Tuesday.”
“The South Korean chip giant reported a preliminary operating profit of Won9.1tn ($6.8bn) for the third quarter, undershooting market expectations of a Won10.3tn profit, according to LSEG SmartEstimates. While its expected operating profit has almost tripled compared with the same period a year ago, following a surge in memory chip prices, it is down almost 13 per cent on the second quarter of this year.”
“The company’s share price has fallen almost 30 per cent over the past six months amid growing concern over its competitiveness in cutting-edge chips used in artificial intelligence systems. ‘The leadership team at Samsung Electronics wishes to apologise for not meeting your expectations with our performance,’ Young Hyun Jun, the head of Samsung’s chip division, wrote in a letter to customers, investors and employees on Tuesday. ‘We have caused concerns about our technical competitiveness, with some talking about the crisis facing Samsung. As leaders of the business, we take full responsibility for this,’ said Jun, who took over the division in a management shake-up in May.
“…Samsung shares fell last week to their lowest level in the past 18 months as the company has struggled to catch up with SK Hynix and Micron in supplying the most advanced HBM chips, a crucial component of AI systems…Samsung’s HBM3E chips are reportedly yet to pass industry leader Nvidia’s qualification tests.”
“…Samsung is also struggling to narrow the gap with Taiwan Semiconductor Manufacturing Co in contract chipmaking, where it is expected to suffer billions of dollars in losses this year.” The FT reports
King Salman International Airport Plans Progress
Aviation Week
“Plans are progressing to develop Riyadh’s King Salman International Airport (KSIA), which will be among the biggest in the world when it opens in 2030. The airport will cover approximately 57 sq km and accommodate up to 100 million passengers. This ambitious project aligns with Saudi Arabia’s Vision 2030, which aims to diversify the economy and establish the country as a global travel and logistics hub.”
“Future development phases will increase capacity to up to 100 million passengers in 2030, as well as having the capacity to process 2 million tons of cargo.”
“This ambitious development is projected to contribute approximately 27 billion Saudi riyals ($7.19 billion) annually to non-oil GDP and create 103,000 direct and indirect jobs, further supporting Saudi Arabia’s economic diversification efforts.” David Casey reports.
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