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Emerging Markets Daily - August 19
New Malaysia Gov't Taking Shape, India's Red-Hot IPO Market, Crypto and Emerging Markets, Bearish Analyst Sees China Tech Rout Continuing, UAE-Turkey Mend Ties
The Top 5 Stories Shaping Emerging Markets - August 19
New Malaysian Leader Set to Form Government After PM’s Fall
“Former Malaysian Deputy Prime Minister Ismail Sabri Yaakob looked set to form the next government after gaining a parliamentary majority from the same coalition that collapsed earlier this week, media and lawmakers said on Thursday.”
“Muhyiddin Yassin resigned as prime minister on Monday after conceding he had lost support from his alliance, bringing to an end a fraught 17 months in office and throwing the country into further political chaos amidst a COVID-19 surge and economic slump.”
“If confirmed, Ismail Sabri's appointment would mark the return of the United Malays National Organisation (UMNO) party to leadership, three years after its defeat in a general election because of widespread corruption allegations, especially around the multi-billion dollar scandal at investment fund 1Malaysia Development Berhad (1MDB).”
“UMNO, which governed the country for over 60 years before that, was part of Muhyiddin's coalition but balked at playing second fiddle. Two governments that came after the polls proved to be fragile and short lived.” Reuters reports.
India IPO Market Sizzles, Shattering Records
“The market for initial public offerings in India is turning into a feeding frenzy.”
“The amount of money raised in IPOs this year has reached $8.8 billion, already surpassing the totals of the past three years though it’s only August. At the current pace, 2021 would exceed the all-time record of $11.8 billion. Founders, bankers, lawyers and advisers are racing to cash in on fervent demand for fresh public offerings.”
“The catalyst, in a word, is Zomato Ltd. The food-delivery startup went public in July and, despite deep losses and mediocre prospects for profitability, shares have soared more than 70%. That has fueled the idea that similarly profit-challenged startups could find a strong reception from investors.”
“Oyo Hotels & Homes Pvt, a long-troubled lodging giant, started work last week on its draft prospectus and aims to file in October, according to people familiar with the matter. The ride-hailing leader Ola and fintech startup Pine Labs Pvt have also begun talks with investment bankers, according to other people aware of the situation.”
“‘India is definitely the star of the show – that is the new phenomenon,’ said Udhay Furtado, co-head of Asia equity capital markets at Citigroup Inc., the lead foreign bank in Asia IPO league tables so far this year. ‘Zomato really opened people’s eyes to India and now we have all these privately funded unicorns coming to the public market.’” Saritha Rai reports.
Emerging Markets Lead in “Ordinary People” Crypto Currency Adoption
“Global adoption of cryptocurrency has taken off in the last year, up 881%, with Vietnam, India and Pakistan firmly in the lead, according to new data from Chainalysis.”
“It is the second year the blockchain data firm has released its Global Crypto Adoption Index, which ranks 154 countries according to metrics such as peer-to-peer exchange trading volume, rather than gross transaction volume, which typically favors developed nations with high levels of professional and institutional crypto buy-in.”
“Chainalysis said the purpose of the index is to capture crypto adoption by ‘ordinary people’ and to ‘focus on use cases related to transactions and individual saving, rather than trading and speculation.’ The metrics are weighted to incorporate the wealth of the average person and the value of money generally within particular countries.”
“Most of the top 20 countries are emerging economies, including Togo, Colombia and Afghanistan.” MacKenzie Sigalos reports.
Bearish Analyst Sees More Gloom for China Tech Stocks
South China Morning Post
“The trillion-dollar rout afflicting Chinese tech stocks may not end until China’s government restores investors’ trust in the securities, as shareholders had been left defenceless by the aftermath of unexpected regulatory crackdowns.”
“That is the view of Manuel Muhl of DZ Bank, a Frankfurt-based lender, who downgraded China’s internet-platform sector last month, making him the only analyst globally with a ‘sell’ rating on the industry torch-bearers Alibaba Group Holding and Tencent Holdings.”
“A loss of trust due to corporate governance lapses in the case of Didi Global and tightening regulations in China’s internet-economy from e-commerce to for-profit off-campus tutoring have thrown a wrench into fundamental stock valuation models.” Cheryl Heng reports.
Senior UAE Official Meets Erdogan as Ankara, Abu Dhabi Mend Ties
“A senior UAE security official visited Turkey’s President Recep Tayyip Erdogan in Ankara on Wednesday, in one of the clearest signs of warmer ties between the two countries after clashes over regional policy. In a televised interview later, Erdogan hinted he may talk with Crown Prince Sheikh Mohammed Bin Zayed Al Nahyan.”
“Sheikh Tahnoun bin Zayed Al Nahyan, the UAE’s national security adviser, discussed improving bilateral ties including boosting investment opportunities in transport, health and energy, the UAE’s state-run WAM news agency reported.”
“Sheikh Tahnoun, the brother of the UAE’s defacto ruler and one of his most senior representatives, also discussed regional issues of mutual concern with Erdogan, WAM said. The visit comes as regional states are assessing how to deal with Afghanistan where the Taliban swept to power.”
“The rare high-level meeting comes after growing signs of outreach in the past year, with officials holding out the possibility of improved ties that could benefit trade and security in a volatile region. Those moves have been largely tentative due to longstanding tensions.” Zaid Sabah and Zainab Fattah report.