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Emerging Markets Daily - February 22
Reliance Deal Halted to Amazon's Relief, Goldman Forecasts Oil to $75, China Further Limits Online Lenders, East Africa Economies, Pakistan and the IMF
The Top 5 Emerging Markets Stories - February 22
India Court Halts Reliance E-Commerce Deal, Amazon Relieved
“India's Supreme Court on Monday halted regulatory approval for Future Group's $3.4 billion sale of retail assets to Reliance Industries, effectively blocking the deal for now.”
“The ruling is seen as a win for Amazon, the world's largest online retailer, which challenged the deal amid fierce competition for domination of the retail sector in Asia's third largest economy.”
“The US e-commerce giant had filed a petition to India's top court, contesting that Reliance Industries' transaction violates Amazon's contract with Future Group. Following Amazon’s petition, India’s top court on Monday overturned a lower court’s ruling and blocked the country’s companies tribunal from approving the deal until further notice…”
“The decision ‘is definitely a relief’ for Amazon, said Divakar Vijayasarathy, the founder and managing partner at DVS Advisors, an international professional services company. At stake is competition for access to India's $1 trillion consumer retail market in a country of more than 1.3 billion people, with an economy that is expected to expand rapidly in the coming years,” The National reports.
Goldman Sees Oil Rally, Brent Moving Toward $75
“Oil prices will rally sooner and higher than previously thought as the global energy demand recovery outpaces the supply response from the OPEC+ alliance, shale and Iran, according to Goldman Sachs Group Inc.”
“Consumption will get back to pre-virus levels by late July, while output from major producers is likely to remain ‘highly inelastic’ to the rising prices, the bank said in a note. Goldman raised its Brent forecasts by $10 a barrel, to $70 next quarter and $75 in the following three months.”
“‘This faster re-balancing during what was expected to be the dark days of winter will be followed by a widening deficit this spring as the ramp-up in OPEC+ production lags our above-consensus demand recovery forecast,’ bank analysts including Damien Courvalin said in the note.”
“Oil’s rebound to levels last seen before Covid-19 wreaked havoc on the global economy has been driven by Saudi Arabia’s unilateral output cuts together with the improving demand outlook. The rally has also been supported by investors using crude to position for a reflationary environment, Goldman said. Brent oil traded above $63 a barrel on Monday and is up around 22% this year,” Bloomberg reports.
China Imposes Further Caps on Online Lending
“China’s banking regulator imposed new restrictions on banks and financial institutions working with online microlenders including those led by Jack Ma’s Ant Group Co., dealing further blows to one of the fastest-growing business segments for financial-technology behemoths.”
“Banks must cap overall joint lending with internet platforms or other partners at no more than 50% of their outstanding loans, the China Banking and Insurance Regulatory Commission said in a statement on Saturday. Co-lending with one platform should not exceed 25% of the bank’s tier-1 net capital, the CBRIC said.”
“The new restrictions add to draft rules issued on the booming sector late last year, which heralded a sudden shift in the regulatory stance on fintech, scuttling Ant’s $35 billion share sale just days before it was due to go public in Shanghai and Hong Kong. The move upended one of China’s biggest business success stories and was followed by crackdowns on technology juggernauts in everything from e-commerce to credit-scoring and payments.” Bloomberg reports
The East Africa Economic Story: Losing Its Shine?
“At the beginning of 2020, few developing world regions excited as much attention as East Africa. Driven by a resurgent Kenyan economy, the promise of economic liberalisation in Ethiopia and the possibility of vast oil production in Uganda, investors were flocking to the region in the hope of taking advantage of bold new opportunities.”
“A year later, that picture looks very different. Ravaged by a war in Ethiopia, dubious elections in Uganda and Tanzania, and a second wave of the coronavirus, the region has become emblematic of Africa’s struggles. Despite the destabilising forces, the World Bank has projected that it will remain the continent’s fastest growing region in 2021, alongside Southern Africa, with growth of 2.7%, but for some the shine has already worn off,” African Business reports.
Pakistan, IMF Discussing Next Disbursements on $6 B Loan
“Pakistan and the IMF have agreed for exploring options either to jack up the size of remaining three reviews of tranches or extend the time frame beyond September 2022 under the existing $6 billion Extended Fund Facility (EFF).”
“‘The size of the IMF programme under EFF for Pakistan will remain at the same level of 4,268 million Special Drawing Rights (SDRs), equivalent to over $6 billion, with a quota share of 210 percent. Both the IMF and Pakistan agreed for exploring options either to jack up the size of remaining three tranches or extending the timeframe of EFF beyond September 2022,’ top official sources confirmed to The News here on Saturday.”
“Ruling out possibility for any reduction in size of IMF programme from existing over $6 billion, a top official of PTI-led government told The News in background discussions that both sides decided to place fresh macroeconomic framework after agreeing to combine second to fifth reviews and releasing only $500 million tranche subject to the approval of IMF’s Executive Board probably by end- March 2021. Instead of releasing $2 billion through a combination of second to fifth reviews, the IMF staff is recommending its Executive Board for approving only $500 million,” The News International reports.