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Emerging Markets Daily - February 4
EM Stocks May Have Peaked Already, Dollar Rises as EM Currencies Stay Flat, Kuaishou Hong Kong IPO Set to Sizzle, Tencent in Anti-Corruption Probe, and Ethiopia Telecoms Liberalization Looms
The Top 5 Emerging Markets Stories - February 4
EM Stocks May Have Peaked: Morgan Stanley - Bloomberg
“After a surge to record highs in January, emerging-market stocks may have already peaked for the year, according to Morgan Stanley.”
“There are eight reasons why the MSCI Emerging Markets Index won’t climb any further, analysts led by Jonathan Garner, the chief Asia emerging-market strategist based in Hong Kong, wrote in an 18-page report. The measure has overshot then fallen below the bank’s previously-set year-end target of 1,330.”
“The arguments include falling copper prices, moderating balance sheets of Group-of-Four nations, peaking sentiment on reflation, tightening liquidity in China, a steadying U.S. dollar, stalling earnings revisions, ‘euphoric’ fund inflows and the relative performance of Korean stocks.”
“‘If we are correct, the key to performance going forward is market, sector and stock selection,’ the strategists said. ‘On the market side, we are most bullish India currently, with a favorable budget further boosting the outlook,’” Bloomberg reports.
Dollar Rising, EM Currencies Flat - Reuters
“South Africa's rand fell on Thursday, while most other emerging market currencies in Europe, the Middle East and Africa were little changed as recent signs of strength in the U.S. economy drove buying into the dollar.”
“Increasing optimism over the U.S. economy and a bumper COVID-19 stimulus package attracted investors to the U.S. dollar, pressuring most currencies in emerging markets.”
“Employment data due this week is also expected to set the tone for dollar flows in the coming weeks.”
“South Africa's rand fell 0.4% to the dollar, while Turkey's lira and the Russian rouble gained slightly.”
"‘This (dollar) recovery rally has caught many traders by surprise and some are questioning whether the rules have changed. Whether the dollar's strength is to be short-lived or a longer-lasting theme remains to be seen. But fundamentals now appear to be on its side,’ Hussein Sayed, Chief Market Strategist at FXTM, wrote in a note,” Reuters reports.
Kuaishou IPO Set for Possible 170% Rally in Hong Kong IPO - South China Morning Post
“Hong Kong retail investors who have poured in HK$1.28 trillion (US$164.8 billion) to bid for a stake in Kuaishou Technology stand to reap a windfall in the city’s most overbought initial public offering on record, judging by pre-trading prices.”
“The Chinese short-video app operator is expected to fetch more than HK$300 per share, according to pre-trading gray market prices. The stock was indicated at HK$310.60 at 5.13pm local time on Thursday, according to data published by Phillip Securities, and HK$322 at 5.42pm by Bright Smart Securities. They represent at least 170 per cent upside over its HK$115 offer price.”
“‘This [Kuaishou IPO] is the talk of the town,’ said Louis Tse Ming-kwong, managing director of Wealthy Securities. ‘Everyone wants to make a killing on this one, especially before the Lunar New Year,’” South China Morning Post reports.
Tencent Fires Staff, Bans Companies in Anti-Corruption Probe - Reuters
“Tencent Holdings Ltd on Wednesday named 37 companies it had blacklisted from future contracts and said it has fired more than 100 staff over embezzlement and bribery incidents.”
“Tencent, China’s biggest social media and video games company, said in a social media post that it had reported 40 employees to authorities since it started an anti-graft campaign in the fourth quarter of 2019.”
“In one case, an employee in its game publishing division sought benefits for outside parties and obtained kickbacks from them, Tencent said in the name and shame post.”
“Chinese tech companies have doubled down on corruption investigations in recent years, as their valuations and profiles have soared following a tech boom in the country,” Reuters reports.
Ethiopia Telecom Liberalization Looms - African Business
“One of Africa’s most enduring telecoms monopolies is set for dramatic change in March, when the Ethiopian government grants two new spectrum licences in a bid to liberalise the long-restricted sector.”
“A 40% stake in state-owned Ethio Tele com – the sole mobile services provider in a country of 112m people – will also be sold as mobile network operators hunt for exposure to one of Africa’s final frontiers of potential growth.”
“Among the telecoms operators expected to table bids for the two licences by 5 March are MTN, Orange, and a Vodafone-led Global Partnership for Ethiopia, which secured a conditional loan of up to $500m in January from the US International Development Finance Corporation (DFC), subject to the consortium winning one of the 15-year licenses,” African Business reports.