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Emerging Markets Daily - April 9
India Second Covid Wave, Naspers' Big Profits on Tencent Sale, Economists See China Eclipsing US As Largest Economy, Fears Rise of New Ukraine Conflict, Investors Sour on EM as US Brightens
Photo Credit: Sumit Saraswat
The Top 5 Emerging Markets Stories from Global Media - April 9
India’s Second Covid Wave Overwhelms Hospitals, Vaccines Run Low
“India is facing an escalating health crisis, with its second wave of virus infections hitting record highs, overwhelming hospitals around the country as supplies of intensive care beds and vital drugs come under pressure.”
“Across the South Asian nation, from the wealthiest and also the worst-hit state of Maharashtra to its most populous, Uttar Pradesh, reports are emerging of hospital beds running short and immunization centers turning away people as they run out of vaccines. India reported more than 131,000 new infections Friday, and with over 13 million virus cases lags behind only the U.S. and Brazil.”
“On Wednesday Maharashtra’s Health Minister Rajesh Tope said the state had about three days worth of shots in stocks and vaccination centers across the state were being forced to shut down. The state capital Mumbai has also currently used up all but 3% of its intensive care hospital beds.”
“India’s capital New Delhi on Thursday reported more than 7,400 new infections, the highest so far in this year, with health care workers some of the worst affected. At Sir Ganga Ram Hospital, one of the city’s top institutions, 37 doctors had been infected with Covid-19 with mostly mild symptoms, two people at the hospital said, asking not to be identified because the information wasn’t public.” Muneeza Naqvi, Bibhudatta Pradhan and Dewani Panda report.
South African Firm Nets $14.7 Billion on Small Sale of Tencent Shares
(A $32 million investment by South Africa’s Naspers in 2001 is now worth $221 billion - one of the highest ever gains on an EM stock investment)
“Tencent's biggest shareholder has sold $14.7 billion worth of shares in the Chinese social media and gaming giant, and will use the money to invest in other growth ventures.”
“Prosus (PROSY), a spin-off by South African media and internet investment firm Naspers(NAPRF), sold a 2% stake in Tencent (TCEHY) for 114.2 billion Hong Kong dollars ($14.7 billion), the Chinese tech giant said in a Hong Kong Stock Exchange filing on Thursday. Tencent, which reported a strong financial year during the pandemic, is by far Nasper's most successful investment.”
“The deal is the biggest block trade ever, according to data provider Refinitiv. Block trades are typically arranged directly between big institutional investors rather than on public stock exchanges.”
“Tencent's stock dropped 1.5% on Thursday in Hong Kong after the news. It has gained about 80% since Prosus was listed on the Amsterdam stock exchange in 2019. After completion of the deal, Prosus will remain Tencent's single largest shareholder, with 28.9%. But it will lose its controlling shareholder status, which under Hong Kong listing rules is granted to investors who hold at least 30% of voting rights.”
“Prosus parent Naspers paid $32 million back in 2001 for a 46.5% stake in Tencent. Its remaining stake is now worth $221 billion. It's a return that is rivaled only by SoftBank's (SFTBF) $20 million punt on Alibaba (BABA) in 2000.” Laura He reports.
Economists See China Eclipsing U.S As Largest Economy Next Decade
“China's economy looks to expand 17.9% for the January-March quarter, a growth figure inflated by the coronavirus-related crash in the year-ago period, a survey of 32 economists by Nikkei and Nikkei Quick News finds.”
“The economists predict 1.0% growth on a seasonally adjusted, quarter-on-quarter basis for the first three months of 2021, as momentum slows from a 2.6% gain in the fourth quarter of 2020. Two-thirds of the economists also think China will overtake the U.S. to become the world's largest economy sometime between 2030 and 2034, benefiting from its containment of the COVID-19 pandemic.”
“Growth estimates for the first quarter of 2021 range from 12% to 20.8%. Of the 24 valid responses, 19 economists expect a rate of 18% or more including Aidan Yao, senior emerging Asia economist at AXA Investment Managers, who forecast 18.8% growth.”
“The high growth rate largely reflects the low base set in the first quarter of 2020, Yao said, when gross domestic product shrank 6.8% during the peak of the COVID-19 outbreak in China.” Stella Wong and Takeshi Kihara report.
Geopolitics: Russian Ruble Down Amid Fear of New Conflict in Ukraine
The Moscow Times
“The Russian ruble has slid to its lowest level against the dollar in five months as fears of a possible escalation of conflict in eastern Ukraine grow. The ruble has lost 2% against the U.S. dollar since the start of the week and is now trading at 77.7 against the currency — its lowest level since the U.S. election last November.”
“Concerns over Russia’s apparent military buildup near the conflict zone in eastern Ukraine and on the Crimean peninsula have led to a sharp increase in the possibility of the simmering conflict escalating, analysts say.”
“Western governments have warned Russia against intimidating Ukraine and pledged their full backing for Kiev. Ukrainian President Volodymyr Zelenskiy has urged the NATO military alliance to advance talks about possible membership — a move which triggered anger and rebukes from Moscow, which is vehemently opposed to NATO enlargement.”
“‘The ruble is losing control,’ Dmitry Babin, analyst at BCS Investment said, pointing to the currency’s slide despite stability in both oil prices and other emerging market currencies.” The Moscow Times reports.
As US Prospects Brighten, Investors Sour on Emerging Markets
The Wall Street Journal
“Pressure is building in some emerging markets as brightening U.S. growth prospects prompt investors to pull capital out of economies that look less robust.”
“The yield on Brazil’s 10-year local currency bond jumped to 9.65% on Wednesday, from 6.96% at the end of 2020. That is the highest since the peak of the market tumult in March 2020, according to FactSet. Russian and Mexican bond yields also recently hit their highest levels in a year. When bond prices fall, yields rise.”
“February and March saw the biggest net outflows from emerging-market bonds since the pandemic emerged last spring, with investors withdrawing about $3 billion in each month, according to data from the Institute of International Finance. The selloff was heaviest for debt issued by South Africa, Indonesia and India. Fund managers also pulled out a combined $670 million from stocks in developing countries over those two months.”
“Investors say emerging markets have been upended by the improved U.S. growth outlook, which is strengthening the dollar and sending Treasury yields higher as money managers bet the Federal Reserve will raise interest rates in coming years to keep inflation tame.” Anna Hirtenstein reports.
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