Emerging Markets Daily - February 28
Alibaba Stock Losing its Shine?, Petrobras and EM Corporate Debt, NYSE to Delist CNOOC, Saudi Shares Retreat on US Intel Report, Spotify Grows in Africa
The Top 5 Emerging Markets Stories - February 28
Alibaba, Once a Fund Darling, Dumped by Some Wall Street Titans
“Alibaba Group Holding, once the most valuable company in China, is turning from a global hedge fund favourite to something less than desirable.”
“Investors from hedge fund titans such as Point72 Asset Management and Moore Capital Management to Canadian and US pension funds dumped 101 million of Alibaba's American depositary receipts in the fourth quarter, cutting the market value of their holdings by US$89 billion (S$117.4 billion), according to filing data. It was the biggest investment reduction among US traded companies, more than three times the second-most sold stock, Salesforce.com.”
“Once a symbol of China's New Economy, the e-commerce giant founded by Jack Ma now finds itself at the forefront of the government's campaign to rein in the sprawling power of tech giants. Alibaba's shares, which are traded on the New York Stock Exchange, have slumped about 18 per cent since November, when regulators in Beijing halted the US$35 billion initial public offering of Alibaba's affiliate Ant Group at the last minute. Government watchdogs have also ordered Ant to overhaul its business and began an antitrust investigation of Alibaba.” The Singapore Straits Times/Bloomberg reports
Petrobras Shake-Up Prompts Questions About EM Corporate Debt
“Brazil’s shake up of state-run oil firm Petrobras has caused shockwaves at home but may also prompt some bond investors to rethink their $1 trillion-plus exposure to other government-controlled companies across emerging markets.”
“From China’s Exim Bank to Mexican oil giant Pemex or South African utility Eskom, companies wholly or partly government owned make up half of the $2.4 trillion market in emerging market corporate debt.”
“Such state-owned enterprises (SOEs) are generally in high demand from investors, first as their bonds carry a yield premium over sovereign’s debt and second, because of the perception of state backing.”
“But Brazilian President Jair Bolsonaro’s abrupt sacking of Petroleo Brasileiro SA’s chief executive last Friday in favour of an army general ‘reminds investors of the risk inherent of investing in SOEs or quasi-sovereigns,’ said Eric Ollom, head of EM corporate debt strategy at Citi…”
“Emerging SOE debt - concentrated in financials, commodities and energy -- comprises around a fifth of the EMBI emerging debt benchmark compiled by JPMorgan. Governance, like at Petrobras, is just one of the concerns…”
“Investors aren’t yet rushing to sell out of emerging market SOEs more broadly though. And close government ties can be a boon. Mexico just extended a $3.5 billion lifeline to state oil firm Pemex to shore up finances and crude output. Government backing allows Pemex to run a net debt leverage of 8.5 times - well above many other oil firms,” Reuters reports.
NYSE Set to Delist China National Offshore Oil Company
“The New York Stock Exchange said it would delist Cnooc Ltd. , the Chinese oil major, to comply with an executive order signed by former President Donald Trump targeting companies that the previous administration said had links to the Chinese military.”
“Trading in American depositary shares of Cnooc will be suspended at 4 a.m. ET on March 9, the NYSE said in a statement. The Big Board’s regulatory arm determined that Cnooc was ‘no longer suitable for listing’ in light of the executive order, which Mr. Trump signed in November. The order has remained in effect under the Biden administration.”
“Cnooc, one of the main Chinese state-controlled oil-and-gas producers, didn’t immediately respond to a request for comment. The company will continue to have shares listed on the Hong Kong stock exchange even after the NYSE carries out its delisting. But U.S. investors who currently hold Cnooc’s NYSE-listed shares may have difficulty converting them into overseas shares, and many may choose to sell in the coming days. The NYSE-listed shares fell 2.8% Friday to $118.74,” The Wall Street Journal reports.
Saudi Shares Retreat After US Intel Report on Khashoggi Killing
“Saudi stocks fell the most in a month, tracking last week’s declines across emerging markets, as traders weighed the impact of a U.S. intelligence report saying Crown Prince Mohammed bin Salman signed off on the killing of Washington Post columnist Jamal Khashoggi.”
“The Tadawul All Share Index retreated as much 1%, its sharpest decline since Jan. 31. It was 0.6% lower as of 10:43 a.m. in Riyadh (EM World Editors note: the Tadawul All Share Index ended the day with a more modest fall of .54%).”
“While President Joe Biden’s administration imposed only modest new sanctions on the kingdom, it’s expected to announce more action on Monday. Saudi Arabia said it ‘rejects the negative, false and unacceptable assessment in the report.’”
“Trading in Riyadh was also pressured by wider declines in emerging-market shares on Friday, when the MSCI EM Index fell 3.2% as a selloff in Treasuries triggered a slide in risk assets. Oil, Saudi Arabia’s biggest export, finished 1.1% lower last week.” Bloomberg reports.
Spotify Turns Up its Africa Business
“Spotify, the world’s most widely used audio streaming service, is set to launch in 40 African countries this year after being inaccessible across the continent since its creation in 2008.'“
“Most Africans have been unable to download Spotify either on Android or iOS unless they live in or have visited South Africa, Morocco, Egypt, Algeria and Tunisia.”
“The launch coincides with a global expansion into 85 new markets across Asia, Europe, Latin America and the Caribbean, the company said on Tuesday.” African Business reports