Emerging Markets Daily - February 20
China Property Latest Woes, Sri Lanka Energy Crisis, West Warns of Russia 'Deception', Al Rajhi Bank Shares Pop, Africa's Flutterwave Triples Valuation
The Top 5 Stories Shaping Emerging Markets from Global Media - February 20
China’s Latest Default Warning Takes Shock Factor to New Extreme
Bloomberg
“Only seven weeks ago, Zhenro Properties Group Ltd. looked like a rare beacon of strength in a Chinese real estate industry reeling from an unprecedented stretch of defaults.”
“The company had just announced plans to redeem a perpetual bond and boasted that one of its units had secured a 9.14 billion yuan ($1.44 billion) credit line from state-owned Bank of China Ltd…Now Zhenro has become the latest developer to warn it may not meet its obligations, an about-face that’s extreme even by the standards of an industry where negative surprises have multiplied over the past year.”
“The company’s sudden and mysterious slide into distress is raising investor anxiety toward many of its peers, undermining efforts by the Chinese government to stem financial contagion in a real estate sector that accounts for about a quarter of economic output. Speculation about a liquidity crunch at Zhenro helped spark a broad slump in Chinese developer bonds last week, driving up financing costs for companies that need to repay almost $100 billion of debt this year.”
“Zhenro confirmed investors’ fears late Friday, saying in an exchange filing that it may not have enough cash to meet its debt payments next month. The company is asking bondholders to waive any default claims that may arise from a failed redemption of its $200 million perpetual note on March 5.”
“The development is the latest sign that China’s property-sector cash crunch is far from over…While the company is tiny relative to Evergrande -- ranking 30th among Chinese developers by contracted sales last year -- Zhenro’s travails have had an outsized impact on the broader market because it had indicated so recently that its finances were sound.” Bloomberg reports.
Sri Lanka Energy Crisis Worsens; Nation Runs Out of Currency to Buy Oil
Bangkok Post
“Sri Lanka’s state-run petroleum company has run out of cash to buy oil, and fuel shortages across the country could get worse, the energy minister said on Friday.”
“Udaya Gammanpila said the loss-making Ceylon Petroleum Corporation (CPC) continued to haemorrhage cash and could no longer afford to procure supplies from abroad. ‘Earlier, we were short of dollars to import oil. Now we don’t have the rupees to buy the dollars,’ Gammanpila told reporters in Colombo.”
“Diesel is the most commonly used fuel for public transport, and motorists outside the capital have reported long queues at understocked pumps. Several thermal power stations, meanwhile, closed Friday afternoon after running out of fuel, leading the country’s main energy utility to announce the resumption of rotating power cuts across the country.”
“…Sri Lanka’s worsening foreign-exchange shortage has seriously affected the energy sector, which depends entirely on imports for its oil needs…Sri Lanka’s economy is also seeing a scarcity of food, with supermarkets forced to ration staple foods including rice. Automotive parts and cement are also in short supply.”
“The shortages pushed food inflation to a record 25% last month…The island was handed temporary relief with a $500 million credit line from India last month to finance oil purchases sufficient for about six weeks.”
“Three international rating agencies have downgraded the island since late last year on fears it may not be able to service its $35 billion sovereign debt. Sri Lanka has also sought more loans from Beijing to help repay its existing Chinese debt, which accounts for about 10% of the country’s external borrowings.” The Bangkok Post reports.
Russia Using Deception As Pretext for Invasion, Western Leaders Warn
Financial Times
”Western leaders said Russia was following a ‘playbook of deception’ to justify an invasion of Ukraine, amid intensifying clashes in the east of the country between Ukrainian forces and pro-Russian separatists.”
“Speaking at the Munich Security Conference, US vice-president Kamala Harris said Moscow was creating false pretexts for an attack while amassing troops and firepower in plain sight. ‘We are seeing Russia spreading disinformation, lies and propaganda,’ Harris told the annual get-together of politicians, diplomats and military officials, calling it ‘the playbook of Russian aggression’.”
“The White House said President Joe Biden would convene a meeting of his National Security Council on Sunday to discuss the situation in Ukraine. Ukrainian president Volodymyr Zelensky said Ukraine had fallen victim to an ‘information war, a hybrid war’ but was ‘not responding to any provocations’.”
“The massive Russian troop build-up on the Ukrainian border has raised fears of a new war in the heart of Europe. Western leaders speaking at the conference called for a diplomatic solution, urging Russia to ‘pull back from the brink’. But they also warned Moscow of the consequences of an invasion: far-reaching sanctions that they said would inflict huge damage on its economy. Zelensky appealed to the west to stand by Ukraine and said western nations had let Kyiv down by appeasing Russia.” The FT reports.
Saudi Arabia’s Al Rajhi Bank Shares Surge on $4 Billion Capital Plan Rollout
The National
“Shares of Al Rajhi Bank, Saudi Arabia’s second-largest lender by assets, surged after it announced a $4 billion capital increase plan to grow its business.”
“The Riyadh-based lender’s board of directors recommended increasing the bank’s capital through issuance of bonus shares to shareholders. It plans to offer three bonus shares for every five held, Al Rajhi said in a statement on Sunday to the Tadawul Stock Exchange, where its shares are traded.”
“…Al Rajhi's rivals include Saudi National Bank, which took the top spot as the kingdom’s biggest lender by assets after a combination with Samba Financial Group.”
“Al Rajhi has a market capitalisation of about $110bn, higher than that of Saudi National Bank. But it trails the latter with assets of $155bn compared with $243bn of its rival, according to Bloomberg.” Deepthi Nair reports.
Africa Fintech Flutterwave Triples Valuation to $3B After $250 Million Funding
Tech Crunch
“African fintech Flutterwave has raised $250 million in a Series D round that tripled the company’s valuation to over $3 billion in just twelve months.”
“In March 2021, the San Francisco-headquartered and Lagos-based startup raised $170 million in a Series C round from Tiger Global and Avenir at a valuation of $1 billion. The latest financing, which confirms a Bloomberg scoop from October, brings Flutterwave’s total raise since its inception six years ago to $475 million (it raised a $35 million Series B in 2020 and a $20 million Series A in 2018).”
“At $3 billion, Flutterwave is currently the highest valued African startup, surpassing the $2 billion valuation set by SoftBank-backed fintech OPay and FTX-backed cross-border payments platform Chipper Cash last year.”
“Led by founder and CEO Olugbenga “GB” Agboola, Flutterwave facilitates cross-border payments transactions of small to large businesses in Africa via one API. The company also helps businesses outside Africa expand their operations on the continent. Some of its international clients include Booking.com, Flywire and Uber.”
“Flutterwave has seen astronomical growth since TechCrunch covered its unicorn round last year. At the time, the payments company said it processed 140 million transactions worth over $9 billion. A year later, the African payments giant, with an infrastructure reach across 34 countries on the continent, now processes 200 million transactions worth more than $16 billion.” Tage Kene-Okafor reports.
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