Emerging Markets Daily - August 1
Attack on Israeli-Owned Ship in Arabian Sea, EM Investors Sitting on Cash, Xiaomi Eclipses Apple, China-ASEAN Trade, Russia CB Chief Says Inflation Long-Term, Caribbean Music Pioneer Dies of Covid
The Top 5 Emerging Markets Stories from Global Media - August 1
US Navy Says Attack on Ship Linked to Israeli Billionaire a ‘Drone Strike’
Associated Press
“U.S. Navy explosive experts believe a ‘drone strike’ targeted an oil tanker that came under attack off the coast of Oman in the Arabian Sea, killing two on board, the American military said Saturday.”
“The strike Thursday night on the oil tanker Mercer Street marks the first-known fatal attack after years of assaults on commercial shipping in the region linked to tensions with Iran over its tattered nuclear deal. While no one has claimed responsibility for the attack, Israeli officials alleged Tehran launched the drone strike.”
“While Iran did not directly acknowledge the attack, the strike comes as Tehran now appears poised to take an even tougher approach with the West as the country prepares to inaugurate a hard-line protégé of Supreme Leader Ayatollah Ali Khamenei as president.”
“The American nuclear-powered aircraft carrier USS Ronald Reagan and the guided missile destroyer USS Mitscher were escorting the Mercer Street as it headed to a safe port, the U.S. Navy’s Mideast-based 5th Fleet said in a statement early Saturday.”
“The Mercer Street is managed by London-based Zodiac Maritime, part of Israeli billionaire Eyal Ofer’s Zodiac Group. The firm said the attack killed two crew members, one from the United Kingdom and the other from Romania. It did not name them, nor did it describe what happened in the assault. It said it believed no other crew members on board were harmed.”
“British maritime security firm Ambrey said the attack on Mercer Street had killed one of its team members on board the vessel.”
“The Mercer Street, empty of cargo, had been on its way from Dar es Salaam, Tanzania, to Fujairah, United Arab Emirates, at the time of the attack, Zodiac Maritime said. The attack targeted the tanker just northeast of the Omani island of Masirah, over 300 kilometers (185 miles) southeast of Oman’s capital, Muscat. Oman’s state-run news agency late Friday described the area as ‘beyond Omani regional waters’ and said its forces responded to the tanker’s mayday call.” Jon Gambrell reports.
EM Investors Sitting on Cash, Waiting to Deploy: HSBC
Business Standard/Bloomberg
“Emerging-market investors whipsawed by volatility are sitting on a pile of cash and are waiting for markets to stabilise before getting back into higher-yielding assets, according to an HSBC Holdings survey. About 45 per cent of investors that the London-based bank polled have more than 5 per cent of their portfolios in cash and almost two- thirds of them don’t expect to deploy it over the next three months.”
“Their biggest concern: the prospect that markets will overreact to any sign that the Federal Reserve is reducing its support for the US economy by tightening policy. Investors have also become less optimistic on the growth outlook for developing economies over the next 12 months and have downgraded their inflation expectations, according to the poll.”
“‘Emerging-market investors are waiting for the right time to invest because the markets have been gyrating wildly over the past two months,’ Murat Ulgen, global head of emerging-market research at HSBC in London, said in a statement.”
“HSBC surveyed the investors between June 8 and July 23, just before the latest government crackdown in China dealt a fresh blow to sentiment toward risk assets. Developing-nation equities are headed for their worst month since the March 2020 rout, while currencies and local bonds are set for their second month of losses in July. Investors are holding on to cash as they seek to dodge potential volatility in August, when the usual drop in liquidity tends to exaggerate market moves.”
“‘We have been steadily de-risking and reducing our exposure to emerging-market debt since the beginning of the year, so we are not adjusting our portfolios or changing our behavior drastically here on the back of the China weakness,’ Paul Greer, a money manager at Fidelity International in London, which oversees about $700 billion. ‘We expect the market to remain with a soft tone into August, when seasonals and market liquidity are usually both quite poor across EM.’”
“About half of the respondents were neutral on the prospects for developing economies over the next three months, according to HSBC’s survey of 124 investors from 119 institutions overseeing $506 billion.”
“Still, 40 per cent are now bullish, up from 34 per cent in the first quarter of the year. Risk appetite — measured on a scale of 0 to 10 — rose modestly to 6.17 from 6.04.” Business Standard/Bloomberg report.
China’s Xiaomi Eclipses Apple As 2nd Largest Smartphone Vendor
Nikkei Asian Review
“Chinese smartphone maker Xiaomi leapfrogged Apple in the April-June quarter to become the world's second-largest vendor for the first time, buoyed by strong sales in South America and Africa.”
“Xiaomi's meteoric rise follows the fall of compatriot Huawei Technologies, which only about a year ago was in a neck-and-neck race with industry leader Samsung Electronics until it was hit by a U.S. blacklist.”
“Xiaomi shipped 53.1 million units in the second quarter, up 86.6% on the year, data released Friday by research firm IDC shows. The company grabbed a global market share of 16.9%, up 6.6 percentage points and edging closer to Samsung, whose share shrank to 18.8% from 19.5%. Xiaomi surpassed Apple's slice of 14.1%, which itself increased from 13.6%.”
“The Chinese vendor ranked third domestically after compatriots Vivo and Oppo in the second quarter. But Xiaomi's overseas expansion strategy gave a lift, as its handsets apparently sold well in emerging markets such as South America and Africa as well as in western Europe.”
“The outcome was not entirely a surprise as research firm Canalys this month issued a forecast naming Xiaomi as the world's No. 2. Lei Jun, Xiaomi founder and CEO, took to Chinese microblogging site Weibo in mid-July to proclaim the high ranking a testament to the company's successful strategy.”
“Xiaomi unveiled its first smartphone only 10 years ago, in August 2011. Lei, often called ‘the Steve Jobs of China,’ says he was inspired by the late Apple co-founder to establish his own company.”
“The business initially gained customers with ultra-affordable phones sold for 1,000 yuan ($155 at current rates). Xiaomi shifted its international drive into high gear during 2014, entering markets such as India, and emerged as the world's No. 3 for smartphone shipments in the third quarter of that year.” Takashi Kawakami reports.
China-ASEAN Trade Skyrockets 85 Times Over Past Three Decades
Hellenic Shipping News
“Trade between China and the Association of Southeast Asian Nations (ASEAN) has skyrocketed by 85 times since the two sides established their dialogue relations 30 years ago, official data showed.”
“China has remained ASEAN’s largest trading partner for 12 consecutive years, said Ren Hongbin, assistant minister of commerce. In 2020, ASEAN also became China’s largest trading partner.”
“In the first half of this year, bilateral trade between China and ASEAN continued robust expansion, registering a 38.2 percent year-on-year growth, Ren told a press conference Thursday.”
“On the investment front, ASEAN has become one of China’s major outbound investment destinations and sources of foreign direct investment, with cooperation booming in sectors such as manufacturing, agriculture, infrastructure, high-tech, the digital economy, and the green economy.”
“Mutual investment between China and ASEAN exceeded 310 billion U.S. dollars as of June 2021, while the business revenue of Chinese enterprises from project contracts in ASEAN countries approached 350 billion U.S. dollars.” Hellenic Shipping News reports.
Russia CB Governor Warns Inflation Set To Be Long-Term
Financial Times
“Russia’s central bank governor has warned that inflation is set to be a long- term phenomenon in her country, signalling that the bank is likely to continue with its tough monetary policy stance.”
“Elvira Nabiullina told the Financial Times in an interview that public fears over soaring prices lay behind the central bank’s concerns. Sharp rises in food prices had ‘de-anchored’ ordinary Russians’ inflation expectations, she said, with polling showing consumers predicting an increase of more than double the central bank’s projected annual figure.”
“Inflation expectations carry the risk of encouraging the public to stock up on goods in an effort to beat inflation but thereby actually driving up prices. They also run the risk of stoking wage rise demands and pre-emptive price rises by businesses.”
“The central bank has responded by raising interest rates four times since March, including a full percentage point increase in July. ‘We started targeting inflation later than many others and the population doesn’t have enough trust to understand that the central bank will always take decisions to put inflation back on track,’ Nabiullina said.”
“Russia is among a small group of emerging market peers, including Brazil, that are taking a tougher stance on inflation than the Federal Reserve — which has played down the risk as a ‘transitory surge’ caused by the pandemic recovery — and other countries that are keeping rates low.” Max Seddon reports.
What We’re Also Reading…
Celebrated Caribbean Musician Jacob Desvarieux Dies of Covid
He founded popular fast-beat zouk music style, exported to the world
Jakarta Post
“Jacob Desvarieux, the Guadeloupean co-founder of Caribbean band Kassav' which shot to global fame in the 1980s by creating the fast-beat zouk music style, has died of Covid-19.”
“Local media in the French territory of Guadeloupe announced his death aged 65 late on Friday, prompting an outpouring of grief. ‘The West Indies, Africa and music have just lost one of their greatest ambassadors,’ tweeted Senegalese music star Youssou N'Dour. ‘Jacob, thanks to your art, you brought the West Indies and Africa closer together. Dakar where you once lived mourns you. Farewell friend.’”
“In poor health after undergoing a kidney transplant, the singer and guitarist was taken to hospital in Pointe-a-Pitre, Guadeloupe's largest city, on July 12 after catching Covid-19. ‘A giant of zouk music. An unparalleled guitarist. An emblematic voice of the West Indies. Jacob Desvarieux was all of these things at once,’ French President Emmanuel Macron tweeted.”
“Desvarieux told French daily Liberation in 2016 that his band Kassav' started out in Paris as an experiment. ‘We wanted to find a soundtrack that would combine all the previous (Caribbean) traditions and sounds, but that would be exportable everywhere,’ he said.”
“And so zouk was born, rising to global fame, particularly in France and on the African continent where people partied to its festive rhythm. ‘We questioned our origins through our music,’ Desvarieux told Liberation. ‘What were we doing here, we who were black and spoke French’”
“Kassav' rose to prominence along with the increasing popularity of world music in the 1980s.” Jakarta Post reports.