Emerging Markets Daily - August 6
China Telecom Seeks Biggest Listing of 2021, Indonesia's Bukalapak Surges, S. Africa Finance Min Out, Lebanon's Deteriorating Biz Climate, Rwanda's $620M Eurobond
The Top 5 Emerging Markets Stories from Global Media - August 6
China Telecom Seeks $7.3 Billion in World’s Top 2021 Listing
Bloomberg
“China Telecom Corp., one of the three mainland telecom carriers booted off the New York stock exchange, is planning to raise 47.1 billion yuan ($7.3 billion) from a listing in Shanghai that is set to be the world’s biggest so far this year.”
“The A-shares were priced at 4.53 yuan apiece, above the company’s book value of 4.49 yuan per share. The fundraising by China’s largest fixed-line operator is the biggest listing this year globally, exceeding the $6.3 billion initial public offering in Hong Kong by TikTok-rival Kuaishou Technology in February.”
“China Telecom was one of three of China’s big state-owned carriers whose American depositary receipts were delisted by the New York Stock Exchange in May this year, following an executive order issued by former president Donald Trump barring U.S. investments in companies with ties to the Chinese military.”
“The pivot back home for funds comes as Beijing extends a crackdown on its companies that are are listing overseas and as tensions between the U.S. and China continue to ratchet up.”
“China Telecom, which went public in Hong Kong and New York in 2002, has had to scale back its offering in Shanghai, however. The sale of 10.4 billion A shares in the offering, excluding the greenshoe option, is down from the 12.1 billion shares it had said it would initially sell in April.” Filipe Pacheco and Shirley Zhao report.
Indonesia’s Bukalapak Surges on 1st Day of Trading After Blockbuster IPO
Straits Times/Bloomberg
“Online marketplace Bukalapak surged on its first day of trading after raising US$1.5 billion (S$2.03 billion) in Indonesia's biggest-ever initial public offering (IPO).”
“The shares jumped 25 per cent from its initial offer price of 850 rupiah in Jakarta trading. The increase hit the upper limit that triggered the bourse's automatic rejection, with the price staying at 1,060 rupiah as at 9.02am local time.”
“A successful debut by Bukalapak sets the tone for other regional tech giant IPOs. Indonesia's GoTo, created through a merger of ride-hailing giant Aplikasi Karya Anak Bangsa, known as Gojek, and e-commerce company Tokopedia, is seeking to be valued at up to US$30 billion by offering shares before the end of the year. Traveloka Indonesia and Singapore's Grab Holdings aim to go public via blank-cheque companies as soon as this year.” Singapore Straits Times and Bloomberg report.
South Africa Finance Minister Steps Down in Cabinet Reshuffle
Financial Times
“Tito Mboweni has stepped down as South Africa’s finance minister in a cabinet reshuffle carried out by President Cyril Ramaphosa in the fallout from the worst unrest in the country’s democratic history last month.”
“Enoch Godongwana, an economic policymaker in the ruling African National Congress, will take over the treasury after Ramaphosa said he had accepted a ‘longstanding request’ by Mboweni to exit as part of the reshuffle, which was announced on Thursday.”
“Ramaphosa wielded the axe over the state’s response to what he has called an ‘attempted insurrection’ last month that left more than 330 dead and wrecked businesses and infrastructure across Gauteng and KwaZulu-Natal, two big provinces.”
“The president said the security services had been ‘found wanting in several respects’ during the unrest, which was sparked by the jailing of Jacob Zuma, the former president, for contempt of court. The police and intelligence services are widely seen to have failed to act on warnings that a factional battle for control of the ANC was about to break out into open conflict.”
“South Africa’s state security ministry will be abolished and oversight of intelligence placed with the presidency, Ramaphosa said. He also replaced his defence minister and announced an expert panel that will investigate the security shortcomings. The head of a previous probe that examined the decay and politicisation of South Africa’s spies under Zuma will also become national security adviser.” Joseph Cotterill reports.
Lebanon Business Conditions Continue Spiraling Downward
The National
“Lebanon's private sector continued to shrink in July, with business conditions deteriorating to a four-month low as a fall in output and new orders quickened during deepening political turmoil.”
“The Blom Lebanon PMI, which measures operating conditions in the country's private sector, slipped to 47 in July, down from 47.5 in June and its lowest level since March. A reading below the 50 neutral mark indicates a contraction.”
“The latest data signals a sharper deterioration in the health of the country’s private sector, as the headline PMI reading moves farther away from May's 19-month high.”
“Trends in output and new orders were negative again as domestic demand was hit by eroding purchasing power and unfavourable economic conditions. Liquidity issues on the back of continued weakening of the Lebanese currency resulted in further cost pressures, causing businesses to increase their output charges.”
“Lebanon is facing its worst economic crisis since independence in 1943 after defaulting on about $31 billion of eurobonds last year. Talks with the International Monetary Fund for a $10bn aid package stalled as a result of political disputes among the country's governing class.”
“The country's economic collapse ranks it among the world’s top 10 crises – possibly even the top three – since the mid-19th century, according to the World Bank. An explosion at the Port of Beirut in August last year, which killed more than 200 people and destroyed large parts of the capital, further compounded the country's economic woes.”
“Overall, the July PMI results signalled a stronger and accelerated decline in the country’s economic conditions, although it was weaker than that seen on average over the survey’s history.” Sarmad Khan reports.
Rwanda Raises $620 Million Through 10 Year Eurobond
The East African
“Rwanda will use part of its $620 million raised from its second Eurobond issued on Tuesday to pay back part of its $400 million Eurobond that was expected to retire in 2023.”
“This is meant to reduce pressure on government coffers that have come under intense pressure due to pandemic related expenditures over the last 12 months. The latest issuing makes Rwanda the second country in the region after Kenya to issue another Eurobond to retire a maturing one.”
“The country has taken advantage of the low interest environment in international financial markets making access to capital relatively cheap.”
“For instance, the latest 10-year Eurobond close to three times against investor interest of ($.6 billion) attracted a coupon rate of 5.5 percent, lower than the 2013 rate of 6.625 percent, and Kenya’s 6.3 percent.”
“‘We are pleased with the positive response from investors in this 2021 Eurobond issuance. The lower yield of this issue will result in a reduction in our annual interest payments over the next 10 years, strongly contributing to our debt sustainability strategy. The funds raised will accelerate strategic projects in productive sectors that will further boost the country’s economic transformation efforts,’ said John Rwangombwa, Governor of the National Bank of Rwanda, in a Press Statement.” Berna Namata reports.
What We’re Also Reading…
2020 Was Worst Year for Airlines in Recorded History
Aviation International News (AIN Online)
“Thanks to the Covid-19 pandemic, last year marked the largest recorded decline in airline passengers transported since the International Air Transport Association (IATA) began tracking global revenue passenger kilometers (RPKs) in the 1950s, according to the IATA World Air Transport Statistics (WATS) report released late on August 3. Overall, airlines flew 1.8 billion passengers last year, down 60.2 percent from 2019, while RPKs fell 69.5 percent year-over-year (YOY).”
“In the face of global travel restrictions, international RPKs plummeted 75.6 percent last year as countries closed their borders, while domestic RPKs dived 48.8 percent over the same comparable period. Meanwhile, industry passenger revenues declined last year by 69 percent, to $189 billion, and net airline losses totaled $126.4 billion.”
“Measured in available seat kilometers (ASKs), global airline capacity decreased by 56.7 percent, with international capacity being hit the hardest, declining by 68.3 percent. Systemwide passenger load factor dropped to 65.1 percent last year, compared with 82.5 percent in 2019.”
“By world region, the Middle East region suffered the largest loss in passengers carried, falling 67.6 percent YOY, to 76.8 million passengers. This was followed by Europe (389.9 million passengers, -67.4 percent), Africa (34.3 million passengers, -65.7 percent), North America (401.7 million passengers, -60.8 percent), and Latin America (123.6 million passengers, -60.6 percent). Notably, China became the largest domestic market for the first time ever—at 780.7 million passengers, a YOY decrease of 53.4 percent—as air travel rebounded faster last year following its efforts to control Covid-19.”
“Just this week, Chinese authorities imposed new travel restrictions, including extensive flight cancellations, in an effort to contain a surge in infections from the latest Delta variant of the Covid virus. All domestic flights were canceled out of the cities of Nanjing and Yangzhou. Authorities said that the flare-up in infections was in part traced to contact between airport workers and passengers at Nanjing Lukhou International Airport.” AIN Online reports.
