Emerging Markets Daily - April 1
World Trade Flourishing, Hong Kong Stocks Halted, World Bank Sees Weak Brazil Growth in 2021, Asian Factories Gain Momentum, Egypt Seeks Compensation for Suez Crisis
The Top 5 Emerging Markets Stories from Global Media - April 1
World Trade Flourishing Despite Suez Crisis, Supply Chain Woes
Wall Street Journal
“A resurgent global economy, led by the U.S., will likely drive world trade higher this year, despite a series of acute disruptions to already strained supply chains, including last week’s blockage of the Suez Canal.”
“Surveys of manufacturers around the world that were released Thursday vividly depicted the current pressures on the globe-spanning supply chains that deliver to consumers everything from computers to lawn chairs.”
“In those surveys, factories recorded a near-universal complaint: Securing enough raw materials and other inputs to meet rising demand from customers is becoming increasingly difficult and expensive. Some manufacturers are reporting record high export orders.”
“But there were few signs the pickup in factory output that began in mid-2020 and has been driven by trade is coming to an end. Pent-up demand around the world after a year of Covid-19 restrictions has been so high that shippers are running low on containers in which to ship goods by sea. But despite those shortages, the World Trade Organization expects flows of goods across borders to increase by 8% this year, more than reversing the 5.3% drop seen in 2020 as the pandemic hit factory output and shipping.” Paul Hannon reports in The Wall Street Journal.
More than 150 Hong Kong Stocks Halted From Trading
South China Morning Post
“Trading in more than 150 stocks has been halted in Hong Kong on Thursday for missing a deadline on earnings reports, a bugbear at a time when more Chinese companies are gaining entry into global stock benchmarks.”
“While there is probably no sinister reason involved, it may be interpreted as a way to pre-empt any negative investor reaction. Investors are wary of sudden stock suspension. It rekindles memories of the misuse of trading rules during China’s last stock market crash in 2015.”
“Then, more than 1,000 companies, or about half of the publicly traded companies on the Shanghai and Shenzhen exchanges, requested trading halts in a bid to avert a sell-off.”
“That eventually prompted complaints from overseas investors. Global index compiler MSCI warned in early 2016 about the misuse of suspension rules as one of the conditions for adding China’s yuan-denominated shares into its emerging market indices.” Zhang Shidong reports for SCMP
World Bank Predicts Weak 3% Growth for Brazil in 2021
Folha de São Paulo
“The World Bank projects growth of 3% for the Brazilian economy in 2021, a figure close to government and private sector estimates and which places the country in the top ten with the weakest results expected for 29 Latin American and Caribbean economies, according to a report released this Monday.”
“In 2020, the Brazilian economy shrank 4.1%, the sixth smallest drop and a result above the average of -6.7% in the region, which should expand by 4.4% in 2021, according to the World Bank. Due to emergency aid, Brazil spent the most to combat the pandemic.” Eduardo Cucolo reports in Folha de São Paulo
Asia's Factory Recovery Picks up but Cost Pressures Emerge
Reuters
“Asia's factories stepped up production in March as a solid recovery in global demand helped manufacturers move past the setbacks of the pandemic, although rising costs are creating new challenges for businesses in the region.”
“A series of upbeat factory surveys released on Thursday reinforce market optimism that vaccine rollouts, as well as strong growth in global powerhouses like the United States and China, will help economies emerge from their sharp downturns of 2020.”
“Japan and South Korea saw factory activity expand in March thanks to solid demand at home and abroad, purchasing manager indexes' (PMI) showed, offering relief to policymakers facing pressure to speed up a patchy recovery.”
“China's factory activity in March expanded at the slowest pace in almost a year, though underlying economic conditions remained positive.” Leika Kihara reports for Reuters
Egypt May Seek $1 Billion in Compensation for Suez Canal Crisis
Bloomberg
“Egypt said it may seek around $1 billion in compensation after a giant container vessel blocked the Suez Canal for almost a week and roiled shipping markets.”
“The figure is a rough estimate of losses linked to transit fees, damages incurred during the dredging and salvage efforts, the cost of the equipment, and labor, Suez Canal Authority chief executive Osama Rabie said late Wednesday to local television channel Sada Elbalad.”
“He did not specify who the Canal Authority would seek compensation from.” Tarek El-Tablawy and Mirette Magdy report for Bloomberg
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What We’re Also Reading…
New Rail Plans in Azerbaijan will Link Iran to Russia, Europe
Eurasianet
“A new rail line connecting Azerbaijan with its exclave of Nakhchivan promises to revolutionize transportation in the Caucasus and could have broad ramifications further afield.”
“The line is not new. It was originally constructed in 1941, when the Caucasus formed the southwestern flank of the Soviet Union, linking Moscow with not only Azerbaijan, Armenia and Nakhchivan, but with the Iranian rail network as well via Julfa in Nakhchivan. It thus provided for freight transit between the Soviet Union and Iranian ports on the Persian Gulf.”
“Inoperable since 1989, as the Soviet Union was collapsing and relations between Armenia and Azerbaijan turned hostile, along large parts of the route there is believed to be little left of the track and other infrastructure.”
“‘The development of the International North South Transport Corridor linking Iran's southern ports with the Caucasus and Europe could significantly reduce freight costs,’ said Andrew Grantham, news editor at Railway Gazette International. Grantham said that access to Iranian ports would further open up maritime connections to and from India.” David O’Byrne reports for Eurasianet
Emerging Europe: Hungary, Poland Seek Alliance With Italy’s League
The Financial Times
“The conservative-nationalist leaders of Hungary and Poland will hold talks with Italy’s rightwing League on Thursday to discuss an alliance they hope could shake up the balance of power in the European parliament. Viktor Orban, Hungary’s prime minister, is hosting the meeting two weeks after his rightwing Fidesz party finalised its divorce from the powerful European People’s party, the centre-right political family that includes Germany’s Christian Democratic Union.”
“The three politicians face big hurdles, not least in finding common ground on Russia, which has divided their parties in the past. But if they can attract enough support from other rightwing parties they could become the second-biggest bloc in the European parliament.”
“Matteo Salvini, leader of Italy’s anti-immigration League, said the meeting was ‘not to discuss political groups but a new idea of Europe . . . based on work, welfare, family, and the values that unite us’. He added: ‘We will also talk about migration policies, international alliances, attitudes towards Russia, China and the role that Turkey is playing, which is indeed a problem at the gates of Europe.’”
“Europe’s populist and nativist parties have attempted to form a single bloc in the European parliament before. A campaign to unite ‘sovereigntists’ parties ahead of the 2019 elections led by former Donald Trump adviser Steve Bannon came to nothing after Italy’s Lega, Poland’s Law and Justice (PiS), and Hungary’s Fidesz stayed in their separate alliances.”
“But Orban’s resignation from the centre-right EPP — which came after a long-running dispute with the group in which he attacked its leadership, Brussels and vowed to build an ‘illiberal democracy’ in Hungary — has reopened the debate.” The Financial Times reports.