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Emerging Markets Daily - March 15
Short Sellers Targeting Turkey, East Euro Leaders to Visit Kyiv, Dubai Launches Privatization Drive, Indonesia's GoTo IPO, El Salvador's Crumbling Bitcoin Gamble
The Top 5 Stories Shaping Emerging Markets from Global Media - March 15
Short Sellers are Ramping Up Bets Against Turkey
“Short sellers are starting to build up positions in Turkish stocks as the war in Ukraine adds inflationary pressures and drives investors out of riskier markets.”
“About 20% of the shares in the iShares MSCI Turkey exchange-traded fund (ticker TUR) have been borrowed and sold short, according to data from IHS Markit. It’s the highest level since November, just before Turkey’s currency crisis took hold.”
“Investors have been bailing out of Turkish stocks in the wake of President Recep Tayyip Erdogan’s determination to lower interest rates, no matter the cost to the economy. Turkey’s inflation is already running at a 20-year high and soaring energy prices are expected to push the country deeper into a wage-price spiral.”
“The $250 million iShares ETF has lost about quarter of its value since the start of 2021. Foreign investors have pulled out $835 million from Turkish equities this year. Their ownership on Turkish equities is hovering near a record low of 37.8%, according to Takasbank data.” Tugce Ozsoy reports.
Eastern European Leaders to Visit Kyiv As Russia Ramps Up Shelling
Wall Street Journal
“A delegation of European heads of state headed to Kyiv to meet with President Volodymyr Zelensky as Russia lobbed more missiles at the embattled Ukrainian capital amid heightened fighting in the city’s outskirts.”
“One missile destroyed a building associated with an arms maker in central Kyiv in a predawn strike, blowing the windows out of buildings in a one-block radius. Separately, two apartment buildings were hit, setting fire to one of them.”
“…Heavy artillery barrages again shook the city early Tuesday and a firefight overnight lit up the western horizon with tracer bullets. There was shelling and sporadic attacks on other cities and towns.”
“The group of Central European leaders visiting Kyiv—all from NATO member states—plan to offer a broad package of support for Ukraine, the Polish government said. Poland’s Prime Minister Mateusz Morawiecki and Deputy Prime Minister Jarosław Kaczyński, Czech Prime Minister Petr Fiala and Prime Minister of Slovenia Janez Janša were set to meet with Mr. Zelensky and Prime Minister Denys Shmyhal as representatives of the European Council. The delegation headed to Kyiv jointly by train.” WSJ reports.
Dubai Launches Privatization Drive With Power and Water IPO
“Dubai has kicked off plans to boost its capital markets by selling stakes in 10 state-owned businesses with the IPO of its monopoly electricity and water provider. In its intention to float statement on Tuesday, the Dubai Electricity and Water Authority said it would offer 3.25bn shares, or 6.5 per cent of its share capital, in what could be one of the largest listings ever in the emirate.”
“Officials and bankers have previously said the listing could value Dewa at around 100bn dirhams ($27.2bn).”
“…The Dewa IPO is part of a plan to revive Dubai’s moribund capital markets with a series of part-privatisations, as well as the expansion of market making and support for technology firms seeking to list on the Dubai Financial Market.”
“The government aims to boost its domestic markets after falling behind regional competitors Abu Dhabi and Riyadh, where volume and valuations have soared in recent years. Dubai has also revealed plans to float other government and state-related entities, including Salik, the road toll unit of the transportation authority; Empower, another utility; and business park operator Tecom.”
“It has yet to announce the other six businesses being readied for privatisation, with bankers anticipating they include a part of Dubai’s corporate crown jewel, Emirates Group, which owns the airline and a range of other airport and travel services, or even the sale of shares in the international airline itself, as travel demand has recovered.”
“Dubai, which was initially hit hard by the pandemic, has rebounded quickly as wealthy people flocked there to escape lockdowns elsewhere. The regional business hub kept its economy open alongside public health restrictions.” Simeon Kerr reports.
Indonesia’s GoTo Heads to Market With IPO Valued at Nearly $29 Billion
“GoTo, Indonesia's largest private tech company, is looking to raise up to 17.9 trillion rupiah ($1.25 billion) in an initial public offering that will likely prove a test amid a battering Southeast Asian tech stocks have taken in recent weeks.”
“GoTo, formed as a result of a merger between Indonesian superapp provider Gojek and local e-commerce company Tokopedia, on Tuesday said in a prospectus it is offering shares at 316 rupiah to 346 rupiah. The scheduled listing on the Indonesia Stock Exchange is April 4.”
“The shares offered will represent 4.35% of the company, which would lead to a valuation of $28.8 billion at the top end of the IPO price, vaulting GoTo to become the fourth largest IDX-listed company, according to Quick-FactSet.”
“…GoTo's IPO offering is based on numbers from January through July 2021. It posted revenues of 2.5 trillion rupiah during that period, 50% more than in the year-earlier period, boosted by the merger with Tokopedia last May.” Shotaro Tani reports.
El Salvador’s Bitcoin Gamble is Crumbling
Rest of World
“…Six months since El Salvador’s Bitcoin Law came into effect, adoption of the cryptocurrency remains patchy. Even on ‘Bitcoin Beach,’ a rugged strip of Salvadoran coastline that has become a mecca for crypto disciples, the transition has been challenging.”
“…When President Nayib Bukele first announced the Bitcoin law in June 2021, he made a grand promise to his citizens. Adopting Bitcoin, he said, would digitize the economy, decrease dependence on the U.S. dollar, lower remittance fees — which account for about 20% of the country’s gross domestic product — and drive investment. El Salvador could become the first country to prove the transformative power of cryptocurrency on a national scale.”
“It is difficult to get a full picture of the scope of Bitcoin adoption in the country. In January, the government endorsed a report that at least 4 million users — nearly the country’s entire population — had been verified as authentic users of the government’s wallet over the past several weeks. But in March, a survey released by the Chamber of Commerce and Industry of El Salvador reported that 86% of the businesses contacted said they had never conducted a transaction using Bitcoin.”
“Interviews with dozens of Salvadoran citizens, economists, and technology developers reveal cracks in the project. Since launching, the initiative has been plagued with technical glitches, while tensions have arisen from the mismatch between Bitcoin’s decentralized ethos and El Salvador’s authoritarian government.” Anna-Cat Brigida and Leo Schwartz report.
“Had I a harbor, had I a vessel
In the land of dreams and mirrors,
Had I the remains
Of a city, had I a city
In the land of children and weeping,
I would forge them all for the wound
Into a spear-like song
That pierces trees and stones and sky,
A song as supple as water,
Unruly and dazed, like conquest.” - Adonis, Syrian Poet.