Emerging Markets Daily - April 13
Oil Will Avoid Deficit in 2022: IEA, Be Ready to Buy the China Dip: Analyst, Dubai's Big $6.1B IPO, Yellen Talks Tough on China, World Bank Cuts India Growth Forecast
The Top 5 Stories Shaping Emerging Markets from Global Media - April 13
IEA Says Oil Will Avoid ‘Sharp’ Deficit in 2022
Financial Times
“The International Energy Agency has forecast that the global oil market will avoid a ‘sharp’ deficit this year as emergency stock releases and slowing demand from China offset the impact of lower production from Russia following the invasion of Ukraine.”
“In its monthly report, the Paris-based organisation, which advises major oil-consuming nations on energy policy, lowered its forecast for world fuel consumption to 99.4mn barrels per day, from 99.7mn b/d previously, citing the spate of lockdowns in Shanghai and other Chinese cities.”
“…The IEA expects Russian output to drop 1.5mn b/d in April and for the losses to double in May due to official sanctions and the impact of a widening customer-driven embargo. Vitol, the world’s biggest independent oil trader, on Sunday said it intended to completely stop trading Russia-origin crude and products by the end of this year.”
“…’Benchmark crude prices are now back to near pre-invasion levels but remain troublingly high and are a serious threat for the global economic outlook,’ the IEA said.” Neil Hume reports.
China’s ‘Man-Made Recession’ Batters Stocks. Prepare to Buy the Dip, Analyst Says
South China Morning Post
“Chinese stocks can still fall from current levels as Covid-19 lockdowns in Shanghai and several other provinces raise the spectre of ‘man-made recession’ in the world’s second-largest economy. Be prepared to buy the dip, some analysts said.”
“‘Earnings expectations for Chinese stocks have been fairly stable since last year, which are subject to negative surprises as Covid lockdowns drag on,’ said Yan Wang, chief emerging markets and China strategist at Alpine Macro, a Montreal-based firm, in a report to clients on Wednesday.”
“The valuation levels, while already depressed compared with past averages as well as global peers, are not at historical extremes, he added. Investors should, however, keep a ‘comfortable level of cash’ to prepare for a possible rebound as policymakers in Beijing are likely to dig into their stimulus toolbox. Existing holders should resist cutting their positions, he added, recommending a contrarian stance.” Cheryl Heng reports.
Dubai’s DEWA Shares Surge on Second Biggest Global IPO This Year
Al-Arabiya and Bloomberg
“Dubai Electricity & Water Authority (DEWA) jumped in its trading debut after raising $6.1 billion in the world’s second-biggest initial public offering this year.”
“Shares of Dubai’s main utility rose 20 percent…The IPO valued DEWA at $33.8 billion…DEWA almost tripled the size of its offer to 18 percent in the face of huge demand, drawing orders worth $86 billion, excluding cornerstone and strategic investors.”
“Russia’s invasion of Ukraine has shuttered global IPO markets, already buckling under the weight of surging inflation and monetary policy tightening. The Middle East sidestepped the worst of the volatility, while soaring energy prices boosted cash reserves for local investors, who have been keen to put the money to work.”
“…Dubai last year missed out on a flurry of share sales in the Middle East, led by neighboring Abu Dhabi and Saudi Arabia, and DEWA is only the emirate’s second IPO since 2017. Now, the government is planning to list nine more state companies, including Tecom Group, in an effort to boost trading activity.”
“Trading volume had picked up in Dubai over the last three months of 2021, hitting a four-year high in November after a string of initiatives to bolster activity, but momentum has since faltered. DEWA’s IPO is an important test for the market’s liquidity.” Al-Arabiya reports.
Yellen Talks Tough on China, Warning of Fallout Over Russia Ties
Bloomberg
“Treasury Secretary Janet Yellen on Wednesday delivered a pointed warning to China on its alignment with Russia, suggesting potential economic consequences from the international community depending on how it approaches President Vladimir Putin’s invasion of Ukraine.”
“…While she said she hopes to avoid a ‘bipolar’ split between U.S.- and China-led systems, her remarks may deepen bilateral tensions. In some of her sharpest comments on China since taking office, the Treasury chief warned that ‘going forward, it will be increasingly difficult to separate economic issues from broader considerations of national interest, including national security.’”
“‘The world’s attitude towards China and its willingness to embrace further economic integration may well be affected by China’s reaction to our call for resolute action on Russia,’ Yellen backed the strategy of ‘friend-shoring,’ where supply chains depend on allies rather than “countries where we have geopolitical tensions.”
“…The Treasury chief called for larger support for developing countries from development banks, bilateral official donors and creditors and the private sector, including for needed infrastructure and climate objectives. ‘The response to date is not to the scale needed,” she said. ‘Experts put the funding needs in the trillions, and we have so far been working in billions.’”Bloomberg reports.
World Bank Cuts India Growth Forecast. South Asia Also Revised Downward.
Indian Express
“The World Bank cut its economic growth forecast for India and the whole South Asian region on Wednesday, citing worsening supply bottlenecks and rising inflation risks caused by the Ukraine crisis.”
“The international lender lowered its growth estimate for India, the region’s largest economy, to 8% from 8.7% for the current fiscal year to March, 2023 and cut by a full percentage point the growth outlook for South Asia, excluding Afghanistan, to 6.6%.”
“In India, household consumption will be constrained by the incomplete recovery of the labour market from the pandemic and inflationary pressures, the bank said. ‘High oil and food prices caused by the war in Ukraine will have a strong negative impact on peoples’ real incomes,’ Hartwig Schafer, World Bank Vice President for South Asia, said in a statement.”
“The World Bank raised its growth forecast for Pakistan, the region’s second-largest economy, for the current year ending in June, to 4.3% from 3.4% and kept next year’s growth outlook unchanged at 4%.”
“…It raised crisis-hit Sri Lanka’s 2022 growth forecast to 2.4% from 2.1% but warned the island’s outlook was highly uncertain due to fiscal and external imbalances. Sri Lanka’s central bank said on Tuesday it had become ‘challenging and impossible’ to repay external debt, as it tries to use its dwindling foreign exchange reserves to import essentials like fuel. Indian Express reports.
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