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Emerging Markets Daily - August 2
Investors Head Back Into China Stocks, US and UK Blame Iran for Tanker Attack, Peru Currency and Stocks Dive, Abu Dhabi Stocks Hit Record High, China EV Sales on Roll
The Top 5 Emerging Markets Stories from Global Media - August 2
Investors Creeping Back into China Equities After Turmoil
“A recovery in Chinese stocks following a meltdown at the start of last week underscored how investors in emerging markets have few alternatives that are as big and liquid.”
“After ditching the Asian nation’s assets amid the turmoil, there are already signs that folks are creeping back. Traders piled a net $975 million into Chinese exchange-traded funds last week, more than all other developing nations tracked by Bloomberg combined.”
“‘There’s no way that any global investor can ignore China unless there’s a complete embargo by the U.S. government,’ said Mark Mobius, a veteran investor in emerging markets who spent three decades at Franklin Templeton Investments. ‘But that’s very unlikely.’”
“Despite all the risks associated with investing in the world’s second-largest economy, the sheer breadth of the market and its outsized share in key indexes means money managers often have no choice but to look past bouts of turbulence and maintain exposure.”
“While the latest manufacturing data out of China point to a slowdown in activity, the nascent rebound in the nation’s battered equities may have room to run if funds begin to rebuild their positions and liquidity injections restore calm in financial markets.” Seljuk Gokoluk and Netty Idayu Ismail report.
US and UK Blame Iran for Tanker Attack Off Oman Coast
“The US and UK have blamed Iran for a drone attack last night on an oil tanker in the Gulf that killed a Briton and a Romanian, an assault that has threatened to heighten tensions between Tehran and the west.”
“In separate statements on Sunday, Washington and London said they were working with partners to respond to the attack on MV Mercer Street, which is managed by Israeli-owned Zodiac Maritime, as the incident occurred in international waters near Oman.”
“Antony Blinken, US secretary of state, said Washington was ‘confident that Iran conducted this attack’. He added that such actions ‘threaten freedom of navigation through this crucial waterway, international shipping and commerce and the lives of those on the vessels involved’.”
“Dominic Raab, UK foreign secretary, said Britain believed the attack ‘was deliberate, targeted, and a clear violation of international law by Iran. Iran must end such attacks, and vessels must be allowed to navigate freely in accordance with international law,’ Raab said. ‘The UK is working with our international partners on a concerted response to this unacceptable attack.’”
“Israel had previously blamed Iran for the attack. Tehran on Sunday rejected Israel’s claims, with Iran’s foreign ministry warning Israel that ‘if you sow the wind you reap the whirlwind’. The two regional enemies have been involved in a shadow war in which both states have blamed the other for targeting their vessels.” Andrew England and Najmeh Bozorgmehr report.
Peru Currency Plummets, Stocks Dive on Political Uncertainty
Buenos Aires Times
“Peru's currency fell to a record low against the US dollar on Friday as the Lima stock exchange dropped more than six percent amid uncertainty over the next finance minister.”
“On Thursday, President Pedro Castillo named most of his Cabinet but crucially did not pick anyone for finance or justice portfolios. The exchange rate to the dollar passed four soles for the first time – hitting 4.06 soles – while the Lima stock exchange plunged 6.24 percent.”
“On Thursday, Castillo named Guido Bellido, a 41-year-old electronic engineer and fellow leftist with no experience in public office, as his prime minister. He also picked 85-year-old former guerrilla Hector Bejar to be his foreign minister.”
“Castillo was expected to name economist Pedro Francke, his economic advisor during the election campaign, as finance minister but that did not happen. Daily newspaper La Republica said Francke had turned down the post over the appointment of Bellido, a member of Castillo's Marxist-Leninist Peru Libre ("Free Peru") party who became a lawmaker just six days ago.” Buenos Aires Times reports.
Abu Dhabi Stocks Hit Record High, Saudi Shares Also Advance
“Abu Dhabi's stock market ended higher on Sunday, hitting a record high during the session, while the Saudi index was bolstered by gains in banking shares. The Saudi benchmark index (.TASI) finished 0.5% higher, with Al Rajhi Bank (1120.SE) rising 2% after posting a 48% jump in quarterly profit, helped by an increase in net financing and investment income, and fees from banking services.”
“The bank reported a net profit of 3.6 billion riyals ($959.92 million) for the period ended June 30, up from 2.44 billion in the same period a year earlier. Among other gainers, Alinma Bank (1150.SE) added over 2% after reporting a rise in quarterly net profit.”
“Saudi banks have benefited from growth in mortgages and an economic recovery this year following the easing of lockdowns imposed to combat the outbreak of coronavirus. In Abu Dhabi, the index (.ADI) advanced 1%, buoyed by a 5.5% leap in Emirates Telecommunications Group (Etisalat) (ETISALAT.AD)”
“On Thursday, Etisalat reported quarterly net profit of 2.40 billion dirhams ($653.49 million), up from 2.39 billion dirhams a year earlier. In a separate bourse filing, Etisalat also approved a distribution of interim dividend of 40 fils per share for the first half of 2021.”
“Dubai's main share index (.DFMGI) added 0.6%, led by a 1.2% increase in sharia-compliant lender Dubai Islamic Bank. (DISB.DU) However, the Dubai Financial Market (DFM.DU) retreated 2.8% following a decline in second-quarter net profit.”
“The Qatari benchmark (.QSI) fell 0.2%, pressured by a 1.1% drop in Qatar National Bank (QNBK.QA). Outside the Gulf, Egypt's blue-chip index (.EGX30) closed 0.6% higher, as most of the stocks on the index were in positive territory.”
“The Egyptian Stock Exchange will lift the limit on intraday share price moves to 20% from September, the bourse said on Sunday.” Reuters reports.
Electric Vehicles Sales on a Roll in China
“Chinese electric vehicle maker XPeng reported a new monthly record for deliveries. It’s another sign EV demand in China remains hot.”
“XPeng (ticker: XPEV) delivered 8,040 vehicles in July, up 228% year over year and up from the 6.565 vehicles delivered in June. So far in 2021, XPeng has delivered almost 39,000 vehicles.”
“Earlier Sunday, XPeng peer Li Auto (LI) reported its own new monthly record with 8,589 vehicle deliveries in July. Both results point to strong demand for EVs in China, and demonstrate that the worst of the global semiconductor shortage that constrained automotive production in 2021 is fading.”
“XPeng, for instance, delivered just 2,223 vehicles in February, and just 5,696 in May. June deliveries were a record—until July—and achieving 8,000-plus deliveries in a month is another strong data point for XPeng as well as the Chinese EV industry.”
“It’s a good number, but calling the stock reaction Monday is hard, even with XPEng stock up 1.1% in late Sunday trading. XPeng stock opened higher on July 1 after reporting June numbers, but still closed down 1.6% on the day.”
“XPeng stock is down about 5% year to date, trailing the S&P 500 ‘s 17% rise and the Dow Jones Industrial Average ‘s14% advance.” Al Root reports.