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Emerging Markets Daily - July 30
Venture Capital's New Hot Spot: India, Brent Rises Above $75, China Tech Stocks Tanking, Unrest and Emerging Markets, Nairobi Rises as E. Africa Finance Hub
The Top 5 Stories Shaping Emerging Markets from Global Media - July 30
Amid China Crackdown, Venture Capital Turns to New Hot Spot: India
“Venture capital investors have a new favorite developing market.”
“The value of venture deals in India surged to $7.9 billion in July, while China investments plummeted to $4.8 billion, according to data compiled by research firm Preqin. That’s the first time the South Asian nation has surpassed its larger neighbor on a monthly basis since 2013, the firm said.”
“Caveats apply: One month of data may have limited significance since venture deal-making tends to be lumpy with bursts of activity followed by periods of lull. China had already topped $65 billion in the first half of the year, suggesting its total for 2021 will likely exceed India’s.”
“Still, the countries appear to be moving in opposite directions. Xi Jinping’s administration has unleashed a series of crackdowns on private companies in technology and beyond, spooking investors about prospects for the future. India’s startups are going public to fervent demand -- food-delivery app Zomato Ltd. has soared about 75% since its debut eight days ago -- signaling the opportunity for profit.”
“‘Global investors are increasingly excited about the potential for Indian companies competing in India and in other markets around the world,’ said Anis Uzzaman, chief executive officer and general partner at Pegasus Tech Ventures, based in San Jose, Calif.”
“The July total for India was boosted by a $3.6 billion funding round by Flipkart, the e-commerce giant controlled by Walmart Inc. The investment valued the business at $37.6 billion, as it prepares for a potential IPO in 2022. China saw a flurry of deals in June just ahead of the decline.” Saritha Rai and Zheping Huang report.
Brent Crude Rises Above $75
“Oil gained for a second day on Thursday as traders remained buoyed by yesterday’s data showing a bigger-than-expected drop in US inventories, while the Federal Reserve painted an optimistic picture of the American economy.”
“Brent crude gained 0.7 percent to $75.23 a barrel at 2:44 p.m. in London, set to close above the $75 mark for the first time in two weeks. US Benchmark WTI also added 0.7 percent, to $72.87.”
“Brent, the global benchmark, passed $75 a barrel in June for the first time in more than two years but has fallen below $69 on July 17 on concerns over the spread of the Delta coronavirus variant and an OPEC+ deal to increase production over the coming months.”
“Crude in storage fell to the lowest since January 2020, while distillate supplies posted the biggest decline since April, the US Energy Information Agency said in its weekly report on Wednesday. Fuel inventories fell by more than 2 million barrels.”
“The US economy is continuing to recover even as COVID-19 infections increase, the Federal Reserve said on Wednesday, sparking speculation as to when it will begin to taper its bond purchase program.”
“In a separate report from the US Commerce Department today, the economy was shown to have grown at a 6.5 percent annual pace in the second quarter, below the 8.5 percent predicted in a Reuters poll of economists, but still enough to bring the economy back to its pre-pandemic size.” Matt Brown reports.
China Tech Stocks Set for Worst Month Since 2008 Financial Crisis
“Chinese technology stocks listed in the US are set for their worst month since the global financial crisis after investors dumped shares following a regulatory crackdown by Beijing.”
“The Nasdaq Golden Dragon China index, which tracks Chinese tech stocks listed in New York, has fallen 22 per cent in July, putting it on course for its biggest monthly fall since 2008.”
“Shares in Chinese internet groups Tencent and Alibaba have dropped about 16 per cent and 10 per cent respectively. The sharp declines come as Beijing has launched a regulatory assault on companies that handle large amounts of data and education businesses, as well as an overhaul of how Chinese groups list on stock markets outside the country.”
“On Friday, at a high-level meeting chaired by President Xi Jinping, the Chinese Communist party’s top leaders said they would ‘improve the system of regulatory supervision for companies listing overseas’, according to a report from state news agency Xinhua that did not give further details.”
“Big Chinese tech stocks fell again on Friday, with Hong Kong’s Hang Seng Tech index dropping 3.3 per cent. This month’s stock market losses appear to have unsettled Beijing. Policymakers have tried to reassure global and domestic investors that the avalanche of regulations and punitive measures is not meant to bury China’s biggest internet groups, prompting a brief rally in their shares on Thursday before Friday’s falls.” Hudson Lockett and Tabby Kinder report.
Unrest, Underperformance Haunt Emerging Markets
“At the start of the century, developing economies were a source of unbounded optimism and fierce ambition. Today South Africa is reeling from an insurrection, Colombia has suffered violent protests and Tunisia faces a constitutional crisis. Illiberal government is in fashion. Peru has just sworn in a Marxist as its president and independent institutions are under attack in Brazil, India and Mexico.”
“This wave of unrest and authoritarianism partly reflects covid-19, which has exposed and exploited vulnerabilities, from rotten bureaucracies to frayed social safety-nets. And as we explain this week, the despair and chaos threaten to exacerbate a profound economic problem: many poor and middle-income countries are losing the knack of catching up with the richest ones.” The Economist reports.
Nairobi Positions Itself Further as East Africa Finance Hub
Business Daily Africa
“This week, the Nairobi International Financial Centre (NIFC) signed its first deals with British insurer Prudential Plc and business lobby group TheCityUK ahead of its official launch later in the year.”
“NIFC, first mooted more than a decade ago, is mandated to support the transformation of Nairobi into a financial hub. However, its rollout has taken time due to delays in setting up a board of directors to oversee its operations and publication of rules to operationalise the NIFC Act.”
“The Treasury has, however, moved to kickstart the centre, promising to publish a framework for attracting investments and financial services into the centre by the end of December this year.”
“The Business Daily spoke to the acting chief executive of the NIFC, Oscar Njuguna, for more insights into the operations of the NIFC and its plans to attract investment into Nairobi as a regional financial hub.” Business Daily Africa reports.
Note to fellow travelers/readers: Our apologies for some of the delays this week and last on the EM Daily. We are on travel (currently on the Pacific coast of Oaxaca, Mexico and wi-fi has been spotty, though the views and food have been extraordinary. More to come from this Mexico visit in later editions)