Emerging Markets Daily - February 18
Indonesia Cuts Rates as Outlook Dims, Nomura Bullish on India, Bharti Airtel Buys Back Digital Biz, Saudi PIF Bets on Video Games, S. Korean Firms Bullish on Vietnam
The Top 5 Emerging Markets Stories - February 18
Indonesia Central Bank Cuts Rates as Outlook Dims
“Indonesia’s central bank cut its benchmark interest rate to a record low and downgraded its growth outlook amid fears that a resurgence in Covid-19 cases is slowing the economy’s recovery.”
“Bank Indonesia slashed the seven-day reverse repurchase rate Thursday by 25 basis points to 3.5%, the lowest level since the rate was introduced in 2016. The move was expected by 22 out of 29 economists surveyed by Bloomberg, while seven forecast no change.”
“‘This decision is consistent with the forecast for inflation to remain low and the rupiah’s maintained stability, as well as continued steps to boost the national economic recovery momentum,’ Governor Perry Warjiyo said in Jakarta. With room for further cuts limited, he said the bank could rely on alternative measures like quantitative easing and macroprudential policy to boost growth.”
“Policy makers have signaled growing concern over the economy, as Indonesia’s first recession in more than two decades threatens to spill over to this quarter after movement curbs were reimposed to control a surge in cases. Recent economic indicators have shown marked declines in imports, retail sales and consumer confidence,” Bloomberg reports.
Nomura Bullish on India, Changes Stance to ‘Overweight’
“The fear of missing out (FOMO) on the growth opportunity, it seems, is driving foreign investors to Indian shores. A day after Credit Suisse upgraded its stance on India to ‘overweight’ in its Asia Pacific (APAC) model portfolio, Nomura, too, has raised its rating on Indian equities to ‘overweight’ in its Asia ex-Japan portfolio.”
“‘A number of recent positive developments in India lead us to change our stance to an Overweight (from Neutral) in our regional Asia-ex-Japan (AeJ) allocation. We view India as a counterweight to North Asia as a large liquid market that – despite its strong run recently – does provide a hedge in portfolios. We are modestly reallocating to India from Korea – although we remain Overweight on Korea (alongside China and Indonesia),’ wrote Chetan Seth and Nirransh Jain of Nomura in a February 17 co-authored report.
“Nomura is now much less concerned about two of the central issues that plagued India – India’s limited fiscal space and vulnerability from Covid-19. The recent developments, it said, have surprised them. However, Nomura does caution that execution of Budget and other policy proposals remains one of the key risks,”Business Standard reports
India's Bharti Airtel to Regain Control of Digital Biz, May Reorganize
“Bharti Airtel, India’s second-largest wireless operator, will buy back a 20 per cent stake in its digital unit from Warburg Pincus for 31.3 billion rupees ($430 million) to regain control of the company and study options to unlock value.”
“The carrier, controlled by billionaire Sunil Mittal, will pay Warburg Pincus in cash and shares of the flagship firm in return for the Bharti Telemedia stake, it said in exchange filings on Wednesday. It will also set up a panel to look at reorganising its non-telecom operations.”
“Bharti’s restructuring plan follows a familiar strategy adopted by its larger rival, Mukesh Ambani’s Reliance Industries, which also reorganised its digital assets in 2019 - a move that helped it lure $20bn last year through stake sales to global giants including Facebook and Google.” The National reports
Saudi Wealth Fund Makes $3.3 Billion Bet on Video Game Makers
“Saudi Arabia's sovereign wealth fund is pursuing investments in an industry long favoured by Crown Prince Mohammed bin Salman: video games.”
“The Riyadh-based Public Investment Fund acquired more than US$3 billion worth of stock in three US video-game makers during the fourth quarter, according to a regulatory filing. They include Activision Blizzard, Electronic Arts and Take-Two Interactive Software.”
“The sovereign wealth fund, also known as PIF, is controlled by Prince Mohammed, who told Bloomberg Businessweek in 2016 that he was part of the first Saudi generation to grow up playing video games.” The Business Times reports
South Korean Companies Bullish on Vietnam
“Vietnam will continue to be a promising investment destination for South Korean companies, given its manufacturing potential, says a Korean Chamber of Commerce official.”
“Many South Korean companies are considering expanding their investments in Vietnam because they are optimistic about the country’s prospects after its success in handling the Covid-19 pandemic, said Sun Hong, secretary general of the Korea Chamber of Commerce in Vietnam (Korcham).”
“Although Vietnam has experienced a new outbreak in several localities, the number of infectees is still small compared to other countries; and the government’s determination to contain the spread of the novel coronavirus gives foreign investors confidence that the business environment remains stable.”
“Since Samsung entered Vietnam in 2008, the number of South Korean suppliers has been rising and now stands at over 1,000, according to Korcham data,” VN Express Business reports.