Discover more from Emerging World
Emerging Markets Daily - February 19
Tencent Raises $8.3 Bln Loan, Huawei Slows Smartphone Production, Thai Airways Cuts More Execs, Africa Free Trade Area Challenges, and Bitcoin Nears $1 Trillion Market Cap
The Top 5 Emerging Markets Stories - February 19
Tencent Raises $8.3 Billion in its Largest Ever Loan
“Tencent Holdings Ltd, the creator of the messaging platform WeChat, has raised $8.3 billion in the biggest offshore syndicated loan in Asia for a Chinese firm since 2016.”
“Twelve banks joined the Tencent financing deal, which initially had a $6 billion size, according to people familiar with the matter. The loan will be used for general corporate purposes, the people said, asking not to be identified as they aren’t authorized to speak publicly.”
“Tencent is fast evolving beyond a social media and gaming behemoth over the past decade and has poured billions of dollars snapping up stakes in promising startups, widening its reach in areas from social media to grocery delivery. It received a 1.3 billion euro ($1.6 billion) loan last month to back its purchase of more shares in Universal Music Group International Ltd.”
“The deal comes amid a flurry of debt financings by tech giants, with Alibaba Group Holding Ltd issuing $5 billion of bonds in early February and Chinese Internet search engine giant Baidu Inc. seeking what would be potentially its largest syndicated loan.” Bloomberg reports.
Huawei Slows Smartphone Productions as US Sanctions Bite
“Huawei Technologies Co has told suppliers that its orders for smartphone components will drop by more than 60 per cent this year as it continues to struggle under harsh US sanctions, the Nikkei newspaper reported on Thursday, citing unnamed sources at multiple suppliers.”
“The Chinese telecoms equipment and handset giant said it intends to procure parts for between 70 million to 80 million smartphones in 2021, the Nikkei reported. This marks a dramatic decline from the 189 million smartphones that Huawei shipped last year, according to figures from market research firm IDC. Huawei’s orders have consisted solely of components for 4G smartphones since US restrictions have prevented the company from buying components for 5G devices. Some suppliers reportedly anticipated the final orders to fall further to around 50 million units.” The South China Morning Post reports.
Thai Airways Cuts More Exec Posts Amid Bankruptcy Restructuring
“Thai Airways International announced on Friday it had cut around 240 executive positions at the airline as part of its bankruptcy restructuring process. The announcement comes as the company nears a deadline to submit its restructuring plan to a bankruptcy court for creditor approval and as the fallout of the coronavirus pandemic adds to the woes for an airline that has been struggling since 2012.”
“‘The number of executive positions has been reduced from 740 to about 500,’ the airline said in a statement, adding that the move would increase efficiency by going from eight supervisory levels to five,” The Bangkok Post reports.
Promising Africa Free Trade Agreement Faces Many Challenges
“Few intergovernmental projects are as ambitious as unifying 54 countries with a combined population of 1.2bn to create the world’s largest free trade area. Yet the African Continental Free Trade Agreement (AfCFTA) has proved successful in rallying all of the African Union member states, except Eritrea, to sign the landmark accord. As of January 2021, 35 of the 54 signatories have ratified the agreement. Trading under its terms has begun, but much remains to be done before it reaches its full potential.”
“Hailed by AfCFTA secretary general Wamkele Mene as ‘a strong signal to the international investor community that Africa is open for business, based on a single rule-book for trade and investment,’ the benefits of a free trade area are clear. Eliminating burdensome trade tariffs, harmonising regulatory systems and establishing a single market for goods and services will pave the way for a reshaping of markets across the continent and enhance intra-Africa investment.”
“But the continuing impact of Covid-19 is complicating the already substantial challenges facing the AfCFTA. Due to the impact of the pandemic, the start of free trading under the agreement was postponed from 1 July 2020 to 1 January 2021. Virtually all African countries have faced major economic upheavals and threats to conventional ways of working due to Covid-19,” African Business reports.
Bitcoin Heads Toward $1 Trillion Market Cap on New Record High
“Bitcoin hit yet another record high on Friday, and moved within sight of a market capitalisation of $1 trillion, blithely shrugging off analyst warnings that it is an ‘economic side show’ and a poor hedge against a fall in stock prices.”
“The world’s most popular cryptocurrency jumped 2.6% to an all-time high of $52,932, setting it on course for a weekly jump of over 8%. It has surged around 60% so far this month.”
“Bitcoin’s gains have been fuelled by signs it is winning acceptance among mainstream investors and companies, from Tesla and Mastercard to BNY Mellon. Its latest gains took its market capitalisation - all the bitcoin in circulation - to about $982 billion, according to cryptocurrency data website CoinMarketCap, with all digital coins combined worth around $1.6 trillion.”
“Still, many analysts and investors remain sceptical of the patchily-regulated and highly volatile digital asset, which is still little used for commerce. Analysts at JP Morgan said bitcoin’s current prices were well above estimates of fair value. Mainstream adoption increases bitcoin’s correlation with cyclical assets, which rise and fall with economic changes, in turn reducing benefits of diversifying into crypto, the investment bank said in a memo,” Reuters reports.