Discover more from Emerging World
Emerging Markets Daily - February 1
Silver Prices Rise Amid Latest Wall Street vs Reddit Battle, Rough January for EM, China Stocks Frothy?, SPACs Spread to Asia, Kenya Recession
Silver Prices Rise as Showdown Looms Between Wall Street and Reddit - Reuters
“Silver prices leapt to a five-month high on Monday and small silver miners listed in Australia surged after social media calls to buy the metal and emulate the frenzy that has driven GameStop shares up 1,500% in two weeks.”
“Spot silver rose as much as 7.4% to $28.99 an ounce, the highest since mid-August. Shares in a handful of mining firms such as Argent Minerals, Boab Metals and Investigator Resources leapt more than 15%.”
“Coin-selling websites also reported unprecedented demand and flagged delays in delivering bullion. The moves are the latest example of small-time traders buying en masse, particularly of stocks and other assets that were heavily bet against, resulting in large losses for major investors.”
“‘There is this curious situation now where the Reddit crowd has turned its sights on a bigger whale in terms of trying to catalyse something of a short squeeze in the silver market,’ said Kyle Rodda, an analyst at brokerage IG Markets in Melbourne,” Reuters reports.
Rough January Puts EM Investors on Back Foot, Bulls Stay Course - Bloomberg
“After a one-month trial of 2021, the shoppers of emerging-market assets can point to any number of reasons for wanting their money back. Yet the balance of evidence suggests they’ll stick with the product for a while.”
“For all the factors that triggered last week’s selloff, the prospect of stronger growth ahead as stimulus kicks in, vaccines are distributed and restrictions lifted continues to underpin confidence. Goldman Sachs Group Inc., Society Generale SA and Loomis Sayles & Co were among those talking up emerging markets in the past week, even as the Cboe Volatility Index had its biggest daily jump in about three years on Wednesday.”
“‘I see the current backup as an opportunity to fade weakness, rather than the start of another sustained leg down,’ said Ilya Gofshteyn, a senior emerging-markets strategist at Standard Chartered in New York. ‘Assets can rally once U.S. equity market volatility rolls over. Emerging-market currencies were on the back foot even ahead of the recent spike in VIX, so positioning is much cleaner now.’” Bloomberg reports.
China Stocks May Be Frothy, Analysts Say - South China Morning Post
China has been a happy hunting ground for local and foreign stock investors as the A-share market clawed its way back from the painful 2015 crash. After rallying from a January 2019 low, however, valuations are frothy and stocks may be at risk of near-term capitulation, some analysts said.
Since the CSI 300 Index of the nation’s biggest stocks reclaimed the 2015 peak on January 5, the rally has plateaued and wobbled, with markets flashing several signs of fatigue, strategists at BCA Research led by Jing Sima wrote in a report on January 27.
Tightening monetary conditions, narrowing breadth of stock gains, earnings and valuation hurdles, as well as new stock offerings mania are some of the major telltale signs that also preceded past market tumults, she added. Investors looking to allocate more cash to Chinese stocks should wait until a correction occurs. South China Morning Post reports.
SPACs Craze Spreads to Asia - Bloomberg
“The blank-check company craze that’s taken Wall Street by storm is now spreading to Asia. A raft of funds and financiers in the region is leveraging their deal-sourcing capabilities and understanding of U.S. capital markets to jump on the bandwagon with special-purpose acquisition companies, or SPACs.”
“Among them are former Deutsche Bank AG and Lehman Brothers banker Joaquin Rodriguez Torres, who is now talking with more than a dozen companies in the region for his SPAC Poema Global Holdings LLC that just raised $345 million. Others diving into the action include LVMH-backed L Catterton’s Asia unit, Hong Kong tycoon Richard Li, Singapore-based health-care entrepreneur David Sin and former hedge fund manager George Raymond Zage.”
“‘Asia is the next big treasure trove for SPAC candidates,’ said Torres, co-founder of investment fund Princeville Capital. ‘Funds that have expertise in both companies operating in Asia and how U.S. capital markets work hold significant advantage,’” Bloomberg reports.
Kenya Hits First Recession in Nearly Two Decades - African Business
“Kenya’s economy slumped into a recession for the first time in almost two decades after GDP contracted for a second straight quarter in September 2020.”
“Economic output shrank 1.1% in the third quarter, and 5.5% in the second quarter, according to a report released by the Kenya National Bureau of Statistics (KNBS) on Wednesday.”
“The contraction was driven by a severe decline in the hospitality and education sectors, and a slowdown in manufacturing, retail and services.”
“The recession in Kenya fits with the broader trend of Africa entering its first recession in 25 years, according to the World Bank. The downturn in economic activity is expected to cost the continent at least $115bn in output losses and to push 40m people into poverty, reversing at least five years of progress in that regard,” African Business reports.