Emerging Markets Daily - July 21
EM Central Banks Raising Rates, China's Challenge to Singapore Oil Market, India's Smartphone Users, Water Protests in Iran, EM Remittances Rising
The Top 5 Emerging Markets Stories from Global Media - July 21
For Most EM Central Banks, The Only Way Is Up
Reuters
“While top central banks such as the Federal Reserve, the ECB and the Bank of Japan may be sitting on their hands as inflation rises, many of their peers in the big developing economies aren't taking any chances.”
“Brazil and Russia have already raised interest rates three times this year. China had been in tightening mode until a wobble this month, while Mexico, the Czech Republic and Hungary have all just made their first moves in years. And it looks like just the start.”
“Despite this week's global market squalls, a daily JPMorgan reading of financial pricing shows the 18 top emerging markets are expected to deliver the equivalent of 73 standard-sized, 25-basis-point interest rate hikes over the next 12 months, and just over 100 in the next two years.”
“So where are the biggest moves likely to be? How long could these hiking cycles last? And who are the outliers?” Reuters reports.
Singapore's Grip on $30 Billion Oil Market Challenged by China
Straits Times / Bloomberg
“Singapore is facing the greatest competition yet to its status as the dominant marine fuel supplier in Asia, with China luring more ships to its shores following a rapid expansion of its port and refining facilities.”
“China's marine fuel sales - known in the industry as bunkering - have almost doubled over the past five years and the nation is banking on attracting ships that travel to nearby ports in major economies such as South Korea and Japan. Singapore still has a commanding position as the top supplier to a sector valued at over US$30 billion (S$41 billion) in Asia, but Chinese growth is accelerating.”
“The epicentre of China's bunkering is Zhoushan, an archipelago to the south of Shanghai on the east coast. Some of the nation's newest and biggest crude oil refineries are being built in the area, while the government has introduced tax incentives that make Chinese fuels more competitive.” Bloomberg News reports
Google and Jio Seek to Convert 450m Indians into Smartphone Users
Korea Times
“Google and Mukesh Ambani’s Jio are hoping to crack one of the world’s largest untapped smartphone markets, launching a device they hope will be cheap enough to convert 450m Indians on “dumb” handsets into smartphone users.”
“The JioPhone Next, a successor to Ambani’s earlier-generation JioPhone, has been designed by the companies to run a custom version of Android. It will offer a blend of Google and Jio apps, with voice assistance in multiple Indian languages for users with limited literacy. Analysts believe it will be marketed at under $50.”
“…While she questioned how much money either company would make on the handset, the wider goal seems clear: to upgrade as many of the 450m Indians who use 2G and even older dumb phones as possible.” Benjamin Parkin reports
Amid Water Scarcity Protests in Southwest Iran, Policeman Shot Dead
Bloomberg
“A police officer was shot dead and another was wounded during protests in Iran’s restive, oil-producing province of Khuzestan, state-run Islamic Republic News Agency reported, in a sharp escalation of clashes between security forces and protesters over a water shortage.”
“The two policemen were part of a team dispatched to the southwestern town of Mahshahr on Tuesday evening in order to ‘clear it of rioters,’ the agency reported.”
“Video footage shared on the mobile application Telegram, purportedly from late Tuesday night, showed large crowds of demonstrators chanting anti-government slogans in the town of Izeh. The region is home to Iran’s Arabic-speaking population, dozens of oil wells and some of the country’s most important wetlands and tributaries.”
“The videos cannot be independently verified by Bloomberg. On Wednesday, Tasnim news agency posted footage of a convoy of water tankers headed for Khuzestan.”
“The water shortages have battered farmlands and livestock in Khuzestan, sparking six consecutive days of protests that at times have deteriorated into clashes with security forces, according to state news agencies. At least one protester has been killed by gunfire, which authorities blamed on ‘rioters.’ They dismissed as ‘fake’ reports on social media that security forces had opened fire on crowds, causing more deaths.” Arsalan Shahla and Golnar Motevalli report.
Emerging Market Remittances Growing
Oxford Business Group
“As emerging markets around the world continue their recovery from Covid-19, remittances are playing a key role in supporting the economic rebound. In mid-May the World Bank upgraded its forecast for remittances to low- and middle-income countries for 2021, predicting flows of $553bn over the course of the year, reflecting a growth rate of 2.6%.”
“This is to be led by Latin America and the Caribbean, with a predicted increase of 4.9%, followed by South Asia (3.5%), Middle East and North Africa (2.6%), sub-Saharan Africa (2.6%) and East Asia and the Pacific (2.1%). Remittances to Europe and Central Asia are predicted to fall by 3.2%.”
“While many of these figures may seem moderate, some individual countries have experienced dramatic spikes in the amount of money transferred home by expats abroad. For example, remittances grew by 50.2% year-on-year in Morocco between January and May, 21.8% in Mexico (January-May), 20.8% in Sri Lanka (January-April) and 19.7% in Kenya (Jan-June).”
“Conversely, half-yearly remittance flows to Indonesia and Nigeria have experienced double-digit contractions, at 13% and 24%, respectively.”
“These regional and national discrepancies are attributable to various factors. For example, while a majority of Moroccan and Mexican expats live in the EU and US, respectively, which are moving ahead with their economic recoveries, Indonesia sources a large proportion of its remittances from countries such as Saudi Arabia and Malaysia, both of which suffered significantly as a result of pandemic-related shutdowns.” Oxford Business Group reports.
What We’re Also Reading…
Busan's Financial Hub Vision Faces Triple Whammy
Korea Times
“Busan's ambitious plan to become one of Asia's financial centers has been facing multiple unfavorable factors lately, despite its declaration last year that it would try to replace Hong Kong by attracting multinational financial firms leaving Asia's premiere financial hub due to turmoil following the mainland Chinese government's implementation of a national security law there.”
“Korea's second-largest city has been more aggressive than Seoul in terms of attempts to take advantage of the political turmoil in Hong Kong, as it has being using online investor roadshows, web conferences and ads in foreign business news outlets, such as the Economist and Bloomberg, to raise global financial companies' awareness of Busan.”
“However, its efforts have been undermined by recent controversies involving the alternative trading system (ATS), Yozma Group and Jeonju's own financial hub vision.” Park Jae-hyuk reports
Gabon becomes First African Country to get Paid for Protecting its Forests
Mongabay
“In 2019, Norway committed to pay $150 million to Gabon to protect its forests under the Central African Forest Initiative (CAFI). After independent verification of the country’s deforestation rates in 2016 and 2017, Gabon recently received its first $17 million payment, making it the first African country to receive a results-based payment for reducing emissions from deforestation and forest degradation (REDD+).”
“…Gabon’s situation is unusual. Discovery of oil in the 1970s radically changed the country’s fortunes and the dynamics of its society. In 1970, urbanization in Gabon was 30%; by 2020, more than 90% of Gabon’s population lived in urban areas, compared to a sub-Saharan Africa average of 41%. Gabon also has a very low population density, with just eight people per square kilometer (about 21 per square mile) compared to the average of 45 per km2 (117 per mi2) for sub-Saharan Africa.”
“This rare combination — low population and high urbanization, supported by oil revenue — has limited the human impact on Gabon’s forests. Oil has been the foundation of Gabon’s economy, accounting for 80% of exports and 45% of GDP between 2010 and 2015. However, oil reserves are now running low, and with oil prices unstable, Gabon’s government is looking for new ways to power its economy.” Jim Tan reports
The 2021 Olympics Are Turning Into a $20 Billion Bust for Japan
The Wall Street Journal
“When Toyota Motor Corp. said this week it wouldn’t run any ads in Japan tied to the Olympics, it sent a message louder than any TV commercial about the host nation’s grim mood.”
“…The Olympics open on Friday a year late and during a Covid-19 state of emergency in Tokyo. Anticipation and expectations for an economic windfall have largely evaporated. Stadiums and arenas that cost over $7 billion to build or renovate for the Games will be mostly empty after spectators were banned.”
“Japan wanted the Tokyo Olympics to show the country is still a global force despite its declining population and a maturing economy eclipsed by China. The Games would also show how Japan rebounded from a devastating tsunami in 2011. Instead, the Olympics has compounded a malaise over the pandemic that has put its leader under pressure to keep his job.” Alastair Gale, Miho Inada and Rachel Bachman report