Emerging Markets Daily - January 30
SE Asia Stocks a Haven from Market Turmoil, China Eyes 'Armed Reunification' with Taiwan?, Oil Continues Rally, Argentina New IMF Deal, Kenya Coffee and Tea Exports
The Top 5 Stories Shaping Emerging Markets from Global Media - January 30
Southeast Asia Stocks A Haven From Market Turmoil
“Global risk assets may be tumbling after the Federal Reserve’s hawkish pivot, but the modest reaction in Southeast Asian markets points to a pocket of resilience that offers opportunities to investors.”
“High exposure to cyclical sectors, key trading partner China in stimulus mode and the potential from easing lockdowns are bolstering views that the region’s stocks and bonds can withstand Fed rate hikes that have historically weighed.”
“An MSCI gauge of Southeast Asian, or Asean, equities fell less than 2% this week and rose to an 18-month high relative to the Asia benchmark, which slumped almost 5%. ‘Asean is now less vulnerable than in the past as current account balances have improved and valuations on equities, bonds and currencies are less demanding,’ UBS Group AG strategists including Niall MacLeod wrote in a note Thursday. ‘Markets are in a much better position relative to 2013.’”
“The potential for a faster pace of Fed hikes has sent global bond yields soaring, triggering a broad equity rotation into value stocks and out of high-priced growth names.”
“That’s favoring markets such as the Philippines, Thailand and Singapore -- which have high exposure to sectors like financials and industrials. Their benchmarks were among the top performers this week in Asia while markets laden with expensive tech shares like South Korea and Hong Kong underperformed.” Bloomberg reports.
China Eyes ‘Armed Reunification’ With Taiwan by 2027, Key Chinese Academic Says
Nikkei Asia
“Chinese President Xi Jinping will employ force to reunify Taiwan with China by 2027, an influential Chinese academic who advises Beijing on foreign policy told Nikkei.”
“Jin Canrong, a professor in Renmin's University's School of International Studies, notes that the People's Liberation Army already has more forces deployed to deal with a contingency involving Taiwan. He is known as one of China's most vocal hawks, and his online comments are followed by many.”
“Xi has set Taiwan reunification as a goal but has not indicated a timeline. Jin said: ‘Once the National Congress of the Communist Party of China is over in the fall of 2022, the scenario of armed unification will move toward becoming a reality. It is very likely that the PLA will move toward armed unification by 2027, the 100th anniversary of its founding.’”
“This view was echoed in March 2021 by Adm. Phil Davidson, then commander of the U.S. Indo-Pacific Command, who told the Senate Armed Services Committee in regard to Taiwan: ‘I think the threat is manifest during this decade -- in fact, in the next six years.’”
“On whether the the U.S. would have a military response to a Chinese move to take the island Jin said that ‘China already has the capability to unify Taiwan by force within one week’ and that ‘the PLA can defeat any U.S. force within 1,000 nautical miles of the coastline.’”
“The PLA is believed to have a strategy of keeping U.S. naval vessels out of the waters around China -- and therefore refining its ability to launch missile attacks against American forces there.” Tsukasa Hadano reports.
Oil Continues to Rally to 7 Year High
The National
“Oil prices continued to rally for the sixth week in a row as prices traded near a seven-year high amid expectations of tighter supply due to geopolitical tensions in Eastern Europe over the Ukraine crisis.”
“Brent, the benchmark for two thirds of the world's oil, settled 0.77 per cent higher at $90.03 per barrel when markets closed on Friday. West Texas Intermediate, the gauge that tracks US crude, was up 0.24 per cent to trade at $86.82 per barrel.”
“‘Crude prices have been on fire, rising for a sixth straight week as the demand outlook improves and over geopolitical fears could lead to severe production disruptions,’ said Edward Moya, senior market analyst at Oanda.”
“The Opec+ group, led by Russia and Saudi Arabia, will meet on February 2 to decide future production cuts that are being carried out as part of a pact formed in 2020 to support the oil market. The 23-member group stuck to its plan to increase production by 400,000 barrels a day for February.”
“Crude has remained buoyant over the past few days as geopolitical tensions intensify, especially in Eastern Europe. The Pentagon has placed 8,500 US troops on high alert over the Ukraine crisis following Russia's move to station thousands of troops along the Ukraine border.” Fareed Rahman reports.
Argentina Agrees on New Financing Deal with IMF
Buenos Aires Times
“After months of negotiations, President Alberto Fernández announced that Argentina has reached a credit agreement with the International Monetary Fund that will allow the country access to new financing and buy it time to help it repay its US$44.5-billion debt.”
"‘I want to announce that the government of Argentina has reached an agreement with the International Monetary Fund,’ said the Peronist leader in a video filmed from the garden of the Olivos presidential residence.”
“Argentina was due this year to pay back US$19 billion of its US$44-billion debt to the IMF. Fernández said that the country had been living with ‘a rope around its neck, a sword of Damocles, and now it has a path it can follow.’”
“Declaring that the deal with the multilateral lender would ‘put the present in order and build a future,’ the president described the deal as ‘reasonable.’ Argentina has pledged to slowly reduce its fiscal deficit and cut the Central Bank’s financing of the Treasury as part of an economic programme agreed with the IMF, Economy Minister Martín Guzmán later revealed.”
“The deal would give Argentina at least a four-and-a-half year grace period before starting to pay back its debt, he added. ‘This decision opens a path we can walk, and will allow us to take other steps toward a country with more work,’ Guzmán told reporters in Buenos Aires. ‘We reached the best agreement we could achieve.’”
“The deal, which still needs to be approved by the country’s Congress and the IMF’s board of directors, would help refinance over US$40 billion of outstanding debt Argentina has with the lender stemming from a record bailout given in 2018. It also provides the first framework of an economic plan under President Fernández, who has opted to govern through a patchwork of short-term policies.” BA Times reports.
Kenya Tea and Coffee Exports Hit $1.32 Billion
The East African
“Kenya benefitted from a weaker shilling and global weather shocks to earn more than $1.32 billion from tea and coffee exports last year despite a decline in the quantities exported.”
“Exports of the two commodities gained from a depreciation of the Kenya shilling, which had lost ground to hit lows of $1.13 as at the end of last year.”
“Freezing due to bad weather at the world’s leading coffee grower, Brazil, led to a seven-year price high last year to trade at $1.70 per pound from $1.50 in 2020, according to the New York Exchange, which is used as a benchmark for all world prices.”
“Kenya earned $213 million from coffee between January and November 2021, with the value surpassing the entire 2020 earnings that stood at $196 million according to the Kenya National Bureau of Statistics data.” Anthony Kitimo reports.
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