Emerging Markets Daily - August 30
IMF Warns on EM Taper Tantrum, India's Ola Preps $1 Billion IPO, Mauritius Looks East, Malaysia Covid Surge Threatens Chip Supplies, Sinopec Enters Hydrogen Rush
The Top 5 Stories Shaping Emerging Markets from Global Media - August 30
Emerging Economies Cannot Afford ‘Taper Tantrum’ Redux, says IMF’s Gopinath
Financial Times
“…In an interview with the Financial Times, Gita Gopinath sounded a cautious note as the Fed prepares to dial back its pandemic support, highlighting the economic pressures on low and middle-income countries, which have suffered disproportionately from the coronavirus crisis.”
“She also warned of the potential fallout should inflation become a more pernicious issue in the US and force a sudden move to tighten monetary policy.”
“‘[Emerging markets] are facing much harder headwinds,’ she said. ‘They are getting hit in many different ways, which is why they just cannot afford a situation where you have some sort of a tantrum of financial markets originating from the major central banks.’” Colby Smith and Jonathan Wheatley report
Ride-Hailing Group, Ola, Picks Banks for $1 Billion Mumbai IPO
Bloomberg
“Ride-hailing startup Ola has selected banks including Citigroup Inc. and Kotak Mahindra Bank Ltd. to manage its Mumbai initial public offering that could raise about $1 billion, according to people familiar with the matter.”
“The company, backed by SoftBank Group Corp. and Tiger Global Management, has also picked Morgan Stanley for the listing, said the people, who asked not to be named as the information is private. The Bangalore-based startup could seek a valuation of more than $8 billion in the IPO and could lodge a filing as soon as October, one of the people said.”
“The 11-year-old Ola would be joining a strong pipeline of Indian startups that are ready to tap the IPO market in the coming months. Paytm, the country’s leader in digital payments, Flipkart, the Indian e-commerce giant controlled by Walmart Inc., and digital education startup Byju’s are also preparing for their first-time share sales, Bloomberg News has reported.” Baiju Kalesh and Anto Antony report.
Mauritius Pins its Hopes on the East
African Business
“Covid-19 hit Mauritius hard economically by bringing global tourism to a halt and forcing the country to shut its borders. Its economy shrank by 18%, its first recession in four decades, forcing the government to dig deep to spend 47bn Mauritian rupees ($1bn) in wage assistance schemes and another Rs30bn (out of a total war-chest of Rs80bn set aside) in loans through its central bank to troubled large companies to prevent them from closing down and sparking massive job losses.”
“Now the government believes the worst is behind it, expecting the economy to rebound by 9% over the next 12 months. The IMF puts it at much more modest 6.6%. Much of the government’s optimism comes from its expectations of restarting the country’s tourism sector, which accounts for as much as a quarter of the country’s GDP and 22% of employment.”
“…High hopes are being pinned on China and India to help Mauritius get out of the rut and reinvent itself. Both countries have liberally doled out money for infrastructure in recent years. Beijing has helped fund a dam project, drain works, social housing, a new building for the state television broadcaster, donated new buses and most recently lent money for Mauritius’ Safe City project.” Iqbal Ahmed Khan reports
Covid-19 Surge in Malaysia Threatens to Prolong Global Chip Shortage
The Wall Street Journal
“A surge of Covid-19 cases in Malaysia, a little-known but critical link in the semiconductor supply chain, has opened a new front in the battle to fix manufacturing woes that have rippled across industries during a global shortage of computing chips.”
“The Southeast Asia nation is one of the world’s top destinations for assembly and testing of the devices that control smartphones, car engines and medical equipment. Disruptions in Malaysia threaten to prolong uncertainty over chip supply well into next year, dashing hopes of relief in the second half of 2021.'“
“The supply crunch in Malaysia, caused primarily by staff shortages linked to virus-control measures combined with a sharp surge in global demand, poses a new problem for the auto industry. For the first half of this year, shortages largely stemmed from companies miscalculating the pace of economic recoveries and not ordering enough parts. Now they can’t always get the parts they need because Covid-19 outbreaks are denting factory output.” Feliz Solomon reports
Sinopec to Spend $4.6 billion over Five Years on a Supply Chain to Promote Hydrogen
South China Morning Post
“China Petroleum & Chemical Corporation (Sinopec) has unveiled a multibillion yuan plan to build the nation’s largest supply chain for automotive hydrogen, as it steps in with infrastructure to help the Chinese government meet its goal of becoming a carbon neutral country by 2060.”
“Sinopec aims to plough 30 billion yuan (US$4.6 billion) to set up 1,000 hydrogen refuelling stations with 200,000 tonnes of annual refuelling capacity, and facilities run by renewable energy that can produce over 1 million tonnes of the zero-emission fuel every year, said president Ma Yongsheng. The plan, scheduled for the five years through 2025, was unveiled for the first time.”
“‘As a major energy company, we have accumulated rich experience and technological advantages in hydrogen production and utilisation,’ he said during a Monday conference call with analysts and the media after Sinopec’s interim financial results. ‘Our [more than] 30,000 fuel stations throughout China will also give us an edge on hydrogen distribution. We will seize the historic opportunity to accelerate our hydrogen business.’” Eric Ng reports