Emerging Markets Daily -December 31
Investors Bullish on Bangladesh, India Stocks Soar in '21, Investors Eye Asia IPOs Beyond China, South Africa Stocks Sizzle in Record Year, China Tech Rebounds
The Top 5 Stories Shaping Emerging Markets from Global Media - December 31
Asian Frontier Markets Investor Bullish on Bangladesh
“As the government continues to offer incentives to attract foreign manufacturers and invest in improving the country's infrastructure, it would not be surprising to see Bangladesh emerge as the ‘Vietnam of South Asia’ over the next decade.”
Business Standard
“Asian Frontier Capital (AFC), the investment management company behind AFC Asia Frontier Fund, expressed a bullish outlook on the Bangladesh economy and the country's blue-chip stocks the firm prefers to invest in.”
“The frontier investment firm has also named Bangladesh as one of its top country picks. ‘Our top country picks with a 3-5 year view are Bangladesh, Kazakhstan, Uzbekistan, and Vietnam, as they all have a combination of a strong macro-economic platform, structural reforms, attractive demographics, and a growing manufacturing sector,’ AFC Frontier Fund said in its 25 December report to clients.”
“In 2021, the Bangladesh stock market stood fifth in terms of returns till mid-December, among the Asian frontier markets the AFC fund invests in. The Dhaka bourse with its 26% year-to-date return was only behind Mongolia, Sri Lanka, Vietnam, and Kazakhstan, ahead of Iraq, Indonesia, and of course, negative return markets such as the Philippines, China, Pakistan, and Malaysia.”
“DSEX, the benchmark index of the Dhaka Stock Exchange (DSE), beat the world averages of frontier markets and also emerging markets, which have developing economies and flourishing financial markets.”
“..AFC analysts say Bangladesh has by far the soundest macroeconomic fundamentals in South Asia. ‘Bangladesh has seen a swift and strong post-pandemic economic recovery and the country's debt levels are very low which has given it room to stimulate the economy through infrastructure investments,’ said AFC Frontier Fund.”
"‘Bangladesh has also seen a powerful rebound in exports as the country is one of the key beneficiaries of the supply chain shift, especially in the global garment industry.’ AFC also mentioned diversification efforts in Bangladesh's manufacturing sector and the fruit it is bearing. ‘It is safe to say that Bangladesh has by far the soundest macroeconomic fundamentals in South Asia,’ AFC said.”
“As the government continues to offer incentives to attract foreign manufacturers and invest in improving the country's infrastructure, it would not be surprising to see Bangladesh emerge as the ‘Vietnam of South Asia’ over the next decade.” Business Standard reports.
India Stocks End the Year With Biggest Gains Since 2017
Bloomberg
“Indian stocks gained for a sixth consecutive year to extend the biggest rally among major equity markets that started from the darkest days of the pandemic in early 2020 with investors setting aside a resurgence of the virus to focus on an economic recovery underway.”
“The benchmark S&P BSE Sensex rose 0.8% to 58,253.82 in Mumbai on Friday, to stretch its yearly advance to 22%, the biggest since 2017. The NSE Nifty 50 Index advanced 0.9%. The key equity gauges, which surged to their record in October, have gained about 2% each for the month but slipped 1.5% for the quarter, partly driven by selling from foreign funds.”
“That selling could see some caution creep into the New Year. ‘2022 is starting with an expectation of tightening liquidity, increasing interest rates and uncertainty around Covid still remaining,’ said Santosh Kumar Singh, head of research at Motilal Oswal Asset Management Co. Ltd. Singh sees returns from local equities to somewhat moderate for the next year even though the economy is showing signs of strength and the corporate earning cycle is on an uptrend.”
“Since a March 2020 low, when stocks plunged worldwide on signs that the coronavirus was spreading globally, India’s Sensex has risen about 124%, the highest among countries with stock markets worth $1 trillion or more.”
As Chinese IPOs Stumble, Investors See Bright Prospects in Other Parts of Asia
Wall Street Journal
“For investors looking to bet on new share offerings in Asia, the center of gravity is shifting away from China.”
“In a year during which Beijing’s regulatory assaults on its companies riled the market and upended a years-long record of great returns from Chinese new-economy stocks, India, South Korea and Southeast Asia have become alternative sources of alluring, big-ticket initial public offerings.”
“‘One significant trend this year was investors getting more interested in markets beyond China. These markets are busier than they have been historically,’ said William Smiley, co-head of equity capital markets in Asia ex-Japan at Goldman Sachs Group Inc.”
“Chinese, South Korean and Indian companies generated the most number of large listings in the Asia-Pacific region this year, according to Dealogic data. The figures exclude listings in Japan, often viewed by investors as a distinct market, and mainland China’s onshore A-share market, where new share sales aren’t easily accessible by foreign investors.”
“While China still led the pack with 15 IPOs of $500 million or more, the performance of these stocks has been underwhelming, dropping more than 35% on average as of Dec. 28, according to Dealogic data. Short-video streaming platform Kuaishou Technology, which raised $6.2 billion in February in the Hong Kong stock exchange in the region’s biggest IPO this year, was recently down about 40% from its IPO price.”
“In contrast, South Korean and Indian IPOs have seen handsome returns on average, at 42% and 23%, respectively, according to Dealogic data. Those figures are despite a few high-profile misfires, such as the listing of One97 Communications Ltd. , the parent company of Indian fintech giant Paytm.”
“Among the region’s top 10 best-performing big IPOs, five are from South Korea and three are from India. Vaccine developer SK Bioscience Co. and fintech player Kakaopay Corp. , which are both from South Korea, and Indian delivery platform Zomato Ltd. are among the top gainers.” The WSJ reports.
South Africa Closes Out Year With Best Stock Rally Since 2009
“The benchmark closed at all-time highs on Wednesday and Thursday.”
Bloomberg
“South African stocks are closing out their best year since 2009, although the gains have little to do with local factors. The FTSE/JSE Africa All Share Index slipped 0.1% in 2021’s final session on Friday, trimming its annual advance to 24%. The benchmark closed at all-time highs on Wednesday and Thursday.”
“While South Africa’s economy has been battered by Covid-19, the success of its stock market reflects optimism about a global rebound from the pandemic and increased demand for commodities. Mining giants Anglo American Plc and BHP Group Plc were major contributors to the gains, along with Sasol Ltd., whose fortune is linked to oil prices, which are also rising the most since 2009.”
“Richemont was the biggest single driver for the South African gauge this year in terms of index points. The Johannesburg shares of the luxury retailer climbed by a record 84% as the sector was buoyed by resilient pandemic sales and bullish prospects for 2022.”
“The dominance of European-listed stocks like Richemont, BHP and Anglo American means the Johannesburg benchmark’s performance this year more closely resembled major developed markets than its emerging country peers, with the MSCI EM Index down 4.5%.” Bloomberg reports.
China Tech Stocks Rebound to Close Out a Tumultuous Year
Financial Times
“Shares in China’s tech companies surged on the year’s final day of trading following big gains on Wall Street for US-listed Chinese businesses, though the rally was not enough to shake off the gloom after a woeful 2021 for the sector marked by a regulatory crackdown.”
“Hong Kong’s Hang Seng index rose 1.2 per cent on Friday, while the exchange’s tech index climbed 3.6 per cent. China’s CSI 300 of Shanghai- and Shenzhen-listed stocks was up 0.4 per cent.”
“The rally followed a boost for the Nasdaq Golden Dragon index of large- and mid-cap Chinese companies, which jumped 9.4 per cent on Thursday, its best one-day performance in more than a decade.”
“The rise was driven by double-digit gains for companies including search engine Baidu, video-sharing platform Bilibili and New Oriental Education. The Golden Dragon index has fallen 42 per cent in 2021, as the campaign by Chinese president Xi Jinping to rein in the country’s tech leaders and the threat of forced delistings from US capital markets took their toll.”
“Friday’s gains in Asia were also driven by some of China’s biggest tech companies, with ecommerce group Alibaba adding 8 per cent in Hong Kong trading and its rival JD.com advancing about 5 per cent. NetEase, the gaming company, rose just under 4 per cent while food delivery group Meituan added 3.2 per cent.”
“Dickie Wong, head of research at Kingston Securities, said the trials of the past year had already been priced in and that market ‘sentiment was coming back’ to the Chinese tech sector. ‘Internet- and technology-related stocks are now trading at extremely low valuations,’ he said. ‘It’s time for a rebound.’” The FT reports.
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