Emerging Markets Daily - January 28
Brazil 'Super Cheap' Stocks Rising, Google Invests $1B in India's Airtel, Six EM IPOs to Watch, Why the $100 Oil Forecast?, Gold Demand Hits Two Year High
The Top 5 Stories Shaping Emerging Markets from Global Media - January 28
Franklin Templeton Bullish on ‘Super Cheap’ Brazilian Stocks
Bloomberg
“The recent rally in Brazil’s beaten-down stock market that has transformed it into one of the world’s top performers in the first weeks of 2022 isn’t over yet, according to Franklin Templeton. “
“‘The potential for rebound is gigantic,’ said Frederico Sampaio, who manages about 3.5 billion reais ($650 million) from the firm’s Sao Paulo office. ‘Prices are still distorted’ after investors rotated away from local equity-focused funds, forcing domestic money managers to trim positions in the domestic market, he said in an interview. ‘Brazil remains super cheap.’”
“Investors have withdrawn 6.5 billion reais from local funds this month through Jan. 21, following a 3.4 billion-real net outflow in December, according to capital-markets association Anbima. Selling pressure from domestic institutions added to prospects of weaker growth, higher rates and election uncertainty, sending valuations to the lowest levels in a decade.”
“But while locals have been sidelined, offshore investors are mapping opportunities in Brazil as they rotate to value stocks and away from high growth. In the past few weeks alone, they’ve added about 23 billion reais into the domestic equity market, according to exchange data compiled by Bloomberg.”
“Sampaio has been favoring commodity-linked stocks such as pulp maker Suzano SA, oil giant Petroleo Brasileiro SA, miner Vale SA, health-care firms like Hapvida, and tech-oriented stocks including e-commerce retailer Magazine Luiza SA and web services provider Locaweb Servicos de Internet SA.” Vinicius Andrade reports.
Google Invests $1 Billion in Indian Telco Airtel
Nikkei Asia
“Internet search group Google has invested $1 billion for a 1.28% stake in Indian telecom operator Bharti Airtel by dipping into its $10-billion India Digitization Fund, a move that underscores the company's urgency to make smartphone and internet usage ubiquitous in the country amid increasing regulatory scrutiny.”
“With the investment in Airtel, Google has now bought into India's two biggest telecom operators -- after buying 7.7% of Reliance Industries' Jio Platforms for 337.3 billion rupees in 2020 -- which together control 67% of India's cellular market.”
“Google's investment in Reliance Jio also birthed an $87-dollar smartphone that is expected to help the companies capture the imagination of millions of Indians who are likely to shun their feature phones over the next few years, and use mobile internet for the first time, drawn by cheap data costs. Entry-level smartphones represent a competitive sector in India, dominated by Chinese smartphone makers such as Xiaomi, Oppo and Vivo.”
“Data in India is among the cheapest in the world, where the likes of Reliance Industries, Airtel and Vodafone are locked in an intense battle to gain new users. While the price war has somewhat eased of late after steep tariff cuts bled the telecom operators, India's telecom regulator noted in a report in August 2021 that the average user consumes 12.3 gigabytes of data per month at 10.7 rupees per gigabyte.” Sayan Chakraborty reports.
Six Emerging Markets IPOs to Watch in 2022
Rest of World
“Initial public offerings aren’t just startup success stories. The six IPOs we have our eye on this year tell us what’s so unique about the tech scene they grew out of: like payments unicorn Flutterwave from Nigeria, where fintech startups are taking over traditional and legacy industries, and Chinese social video and photo sharing platform Xiaohongshu, the latest in a long line of Chinese companies to seamlessly combine existing services, integrating e-commerce with an Instagram-like social video and photo app.”
“One thing we’re watching for in 2022? More IPOs outside of the U.S. After Chinese ride-hailing giant Didi delisted from the NYSE in December, the next crop of successful Chinese companies are expected to list in Hong Kong or Shanghai rather than New York. And last year, exchanges from Mumbai to Jakarta revamped their rules in the hopes of attracting more high-profile floats.”
The six to watch, according to Rest of World
GoTo - Indonesia
Rappi - Colombia
Gympass - Brazil
Flutterwave - Nigeria
Swiggy - India
Xiaohongshu - China
Meaghan Tobin reports.
What’s Behind Wall Street’s $100 Oil Forecast?
Wall Street Journal
“Wall Street’s summer forecast calls for $100 oil.”
“A barrel hasn’t cost that much since the summer of 2014, before OPEC launched a price war with U.S. shale producers and sent oil prices into a yearslong slump. Early in the pandemic, prices fell to uncharted depths. But the bust ended last year, when crude prices gained more than 50% and oil stocks led the broader market higher.”
“Analysts expect oil demand to return to pre-pandemic levels this year and say that prices need to rise higher yet to entice U.S. producers to drill more wells and to discourage consumption that has been unbowed by the highest gasoline prices in years.”
“‘…The oil market is heading for simultaneously low inventories, low spare capacity and still low investment,’ Morgan Stanley analysts wrote in a research note, lifting their price forecast for the summer quarter by $10 a barrel, to $100 for Brent and $97.50 for West Texas Intermediate.”
“…The case for $100 oil rests on consumption that is increasingly unconstrained by Covid-19, diminishing stockpiles among industrialized nations and doubt that the Organization of the Petroleum Exporting Countries can increase production as it has promised the market.” Ryan Dezember reports.
Gold Demand Hits Two Year High
Arab News
“Rising inflation and the post-pandemic economic uncertainty has sent demand for gold to a two year high, according to the World Gold Council.”
“The organisation’s latest report shows the appetite for the metal reached 1,147 tonnes in the last three months of 2021, its highest level since the second quarter of 2019 and an increase of almost 50 percent year-on-year.”
“Gold bar and coin demand rose 31 percent to an eight-year high of 1,180 tonnes, while the jewellery sector rebounded to match 2019’s pre-pandemic total of 2,124 tonnes. For the twelfth consecutive year, central banks were net purchasers of gold, adding 463 tonnes to their holdings — 82 percent higher than 2020.”
“Central banks from both emerging and developed markets added to their gold reserves, lifting the global total to a near 30-year high…Declines in ETFs were offset by demand growth in other sectors. Jewellery reached its highest level in nearly a decade as key markets like China and India regained economic vibrancy.” Arab News reports.
Tweet of the Day from Emerging World fellow traveler Jo-Ann Alexandra - The Top 5 Stories from Crypto in EM
New Youtube Channel Alert! Our friend and fellow traveler Zain Verjee has launched a new channel to explore the world of NFTs and media and emerging markets.
Over on LinkedIN, she writes: “I’m most interested in how this new space could be applied to media, to the comms space and to emerging markets in particular and their narratives and perceptions. Um. It’s also the most fun of had in a while!”
“It’s not how far you fall, but how high you bounce that counts.” - Zig Ziglar