Emerging Markets Daily - August 11
Container Shipping Crisis, Digital Yuan vs. Dollar, AI System Gets Patent in S. Africa, Saudi Arabia's Social Revolution, EM Investing and US-China Tensions
The Top 5 Emerging Markets Stories from Global Media - August 11
Ports Face Biggest Crisis Since Start of Container Shipping
Financial Times
“Ports have always faced delays caused by waves, fog and storms, but the pandemic has brought the biggest disruption since the start of container shipping 65 years ago.”
“‘The Covid-19 pandemic has highlighted that ports are in desperate need of investment,’ said John Manners-Bell, chief executive at consultancy Transport Intelligence. ‘The entire port infrastructure system has been overwhelmed for the past year.’”
“Even before the pandemic, ports were under pressure to upgrade their infrastructure by automating operations, decarbonising logistics and building facilities that can handle the new generation of ever-larger ships.” Gill Plimmer and Harry Dempsey report
Will the Digital Yuan Vanquish the Dollar?
Nikkei Asia
“For years, China's efforts to develop a digital currency seemed intended for domestic use only. The introduction of an ‘e-yuan,’ which is still being tested, would help China go cashless while giving the central bank tight centralized control over digital money.”
“However, a new development appeared on July 16: A government white paper shook up financial markets by saying China was exploring cross-border payments for the e-yuan.”
“The digital yuan now appears to be the latest in a decadelong series of steps to internationalize China's currency and ultimately curb the global dominance of the dollar settlement system.”
“The White House, according to several news reports, regards the new Chinese e-currency as a possible effort to undermine the dollar. Meanwhile, the future of the greenback as the undisputed hegemon in global finance is being questioned as the U.S. prints money to pay for economic stimulus programs. Other countries, fearful that their reserves of dollars will be debased, may seek alternatives. This applies most of all to China, the largest foreign holder of U.S. dollar reserves.” Narayanan Somasundaram reports
In a World First, South Africa Grants Patent to an Artificial Intelligence System
The Africa Report
“At first glance, a recently granted South African patent relating to a ‘food container based on fractal geometry’ seems fairly mundane. The innovation in question involves interlocking food containers that are easy for robots to grasp and stack.”
“On closer inspection, the patent is anything but mundane. That’s because the inventor is not a human being – it is an artificial intelligence (AI) system called DABUS.”
“The patent application listing DABUS as the inventor was filed in patent offices around the world, including the US, Europe, Australia, and South Africa. But only South Africa granted the patent (Australia followed suit a few days later after a court judgment gave the go-ahead).”
Saudi Arabia’s Social Revolution Arrives at Riyadh Dining Tables
Bloomberg
“If this were Dubai, London or Singapore, it might barely raise an eyebrow. But this is Riyadh, traditionally the most conservative of Saudi Arabia’s big cities and gastronomically what arguably used to be its dullest. A few years ago, it would have been inconceivable that the American celebrity chef would open a restaurant here, let alone his second one in less than a year.”
“Saudi Arabia’s transformation under Crown Prince Mohammed bin Salman is well documented, as is his increasingly authoritarian leadership that’s at times drawn international condemnation. But a social revolution that promotes going out to concerts and movies and allows gender mixing is now playing out at the dining table in Riyadh, albeit without alcohol.”
“The city was used to Lebanese and the occasional Italian fare complemented by ‘Saudi champagne’—fizzy water and apple juice. It’s now an array of colorful mocktails and imported meats, pomegranate studded cakes and specialty coffees. There’s even briskets and babkas. As one café manager put it: Most people don’t know they’re part of traditional Jewish cuisine, and even if they did, many won’t care in the new Saudi Arabia.” Donna Abu-Nasr reports
U.S.-China Tension Means Emerging Market Investors Need to get Selective
CNBC
“Emerging market assets are highly sensitive to the increased prospects of tapering from the U.S. Federal Reserve and geopolitical tensions between the U.S. and China, according to Ozan Ozkural, managing partner at Tanto Capital Management.”
“Treasury yields rose sharply on Monday as Fed officials hinted that a slowing of the central bank’s asset purchases could be necessary this year, while opening the door to discussion over potential hikes to interest rates.”
“In 2013, the Fed said it would taper off its Great Recession economic stimulus by slowing down the pace of its Treasury bond purchases. The ensuing investor panic triggered a sell-off for bonds and surging Treasury yields, which hit emerging market assets, typically considered more risky than their developed counterparts. Emerging markets suffered significant capital outflows and currency depreciation.”
“Speaking to CNBC’s ‘Street Signs Europe’ on Tuesday, Ozkural said emerging market assets are ‘very, very sensitive’ to any imminent taper tantrum.” Elliot Smith reports
What We’re Also Reading…
Germany’s Greens Get Tougher on China, Russia
Wall Street Journal
“Germany’s Green Party wants to overhaul the economic, foreign and climate policies of the continent’s largest economy in a political realignment that could have a profound impact on the European Union and potentially harden Germany’s stance toward China and Russia.”
“According to opinion polls, the Greens are likely to be part of the next ruling coalition after this autumn’s general election—for the first time since 2005—and could even lead it.”
“With their roots in an unruly 1970s alliance of environmentalists, leftists and pacifists, the Greens have developed into an established party with strong support among high-income city dwellers and poll ratings of around 20%. This makes them the second-biggest party after Chancellor Angela Merkel’s conservatives…”
“Another area where the Greens promise to shake the established consensus is foreign policy. Several party leaders say the country has become too cozy with the likes of Russia, China, Iran and Turkey in an effort to preserve lucrative trade links or geopolitical agreements. Leading Greens have said foreign policy has been driven too much by the country’s trade interests and want to focus more on human rights and the trans-Atlantic alliance.”
“The Greens say Germany must withdraw its support for the Nord Stream 2 pipeline, which is set to double imports of Russian gas and, they say, leaves Germany dangerously reliant on Moscow for its energy supplies. Red lines must be drawn for cooperation with the Kremlin and other authoritarian regimes, said Sergey Lagodinsky, a Green member of the European Parliament who specializes in foreign policy…”
“In China, Germany’s largest trade partner and a key market for many of its industrial firms, the Greens are also challenging Ms. Merkel’s policy of engagement. German industrial giants as well as smaller firms have boosted exports to China, with Volkswagen AG now reliant on the country for almost half of its sales. For nearly a decade, Ms. Merkel has cultivated good relations with Beijing. Last year, she brokered an EU-China investment deal despite opposition from the U.S.” Bojan Pancevski reports.
Local Brands Benefit as EV Sales Surge in China, Tesla Tumbles
Financial Times
”Electric vehicle sales in China surged in July as drivers flocked to local auto brands in the world’s largest car market, while those of Tesla plunged after the US group was swept up in a string of scandals in the country.”“Wholesale deliveries of new energy vehicles — including battery-powered, plug-in hybrid and hydrogen fuel-cell cars — jumped 164 per cent year on year last month to 271,000 units, the China Association of Automobile Manufacturers (CAAM) said on Wednesday.”
“The latest rise meant that electric cars took up 10 per cent of total auto sales in China from January to July. Total wholesale auto deliveries in July fell 12 per cent year on year to 1.9m units, CAAM reported. But EV market leader Tesla sold only 8,621 cars in China last month, according to data from the China Passenger Car Association (CPCA) released on Tuesday.”
“That was a 69 per cent drop month on month and a 26 per cent fall year on year, marking the first annual decline since Tesla opened its Gigafactory in Shanghai in January 2020. The slowdown for the company, whose Model 3 sedan was China’s best-selling electric car last year, suggested ‘pretty anaemic’ demand, said Tu Le, founder of Sino Auto Insights, a Beijing-based consultancy.” Christian Sheperd reports.
