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Emerging Markets Daily - March 17
Baidu To Raise $3B in Hong Kong, Evidence Mounts of Commodity Super Cycle, US-China Tensions Rise, Analysts Like Reliance Industries, Boomplay vs Spotify in Africa
The Top 5 Emerging Markets Stories from Global Media - March 17
Baidu To Raise $3.1 Billion in Hong Kong Stock Listing
“Baidu is set to raise more than $3bn in a Hong Kong stock market listing, marking the latest ‘homecoming’ share sale by a Chinese technology group against a backdrop of tensions between Washington and Beijing.”
“The New York-traded search-engine company told investors on Wednesday that it expected to price shares for its Hong Kong secondary listing at HK$252 ($32.45) each, according to two people familiar with the matter. That represents a discount of about 2.7 per cent against the most recent closing level for its Nasdaq-listed American depositary receipts…”
“The Hong Kong listing would make Baidu the final member of the so-called BAT stocks to list in the city after Chinese internet groups Alibaba and Tencent. Baidu also joins a host of New York-listed Chinese tech companies, such as JD.com and NetEase, that have sought secondary placements closer to home.”
“US authorities have said they will delist Chinese companies from American exchanges if they do not comply with local accounting rules…One person familiar with the matter said strong institutional investor demand — particularly from long-only hedge funds — had helped Baidu’s share offer weather recent volatility in global equity markets. The Hong Kong listing will open up the company’s stock to more Chinese funds and retail investors.”
“Baidu, known as China’s answer to Google, has been expanding into new businesses including electric vehicles and video streaming in a bid to increase its revenues and shift away from its stagnating core business…Baidu’s Nasdaq-listed ADRs have risen more than 20 per cent this year.” The Financial Times reports.
Meanwhile, the South China Morning Post reports that “Baidu’s pricing comes amid more lukewarm investors sentiment compared with when short-video platform Kuaishou’s Hong Kong retail tranche priced at the top-end of the marketed range. Tencent-backed Kuaishou’s bumper IPO raised over US$6 billion, the city’s biggest deal since Alibaba’s US$13 billion IPO in November 2019.”
Commodity Supercycle “Has Got Legs,” Bank Says, As Copper Hits High
“A commodity supercycle in global oil and metals markets will last for a number of years, according to Saxo Bank's head of commodity strategy. The Danish bank expects demand for mining and metals to significantly fuel price appreciation for a number of years.”
"‘The supercycle, or the commodity cycle, has got legs. We are potentially looking at several years of supportive prices,’ Ole Hansen told reporters during a briefing on Tuesday. A supercycle refers to a boom in prices for commodities fuelled by aggressive demand and/or inflation, followed by an eventual bust. The phenomenon was last observed when China's growing economy in the early 2000s led to a surge in the price of commodities.”
“Copper, which is integral to semiconductors and electronic components, reached a nine-year high in February, fuelled by indications of reviving industrial activity across the world.” The National reports.
Geopolitics: US-China Tensions Rise As US Sanctions Chinese Officials
“The Biden administration added new sanctions against two dozen Chinese officials it says have undermined Hong Kong’s partial autonomy from Beijing, signaling a continuing strong U.S. line on an issue that has contributed to fraying bilateral ties.”
“Announced Tuesday evening in Washington, the measures marked the first time the Biden administration imposed sanctions on Chinese officials. The move comes shortly before senior U.S. and Chinese officials are due to arrive in Alaska on Thursday to hold the first high-level in-person talks between the two countries since President Biden took office in January.”
“The measures extend the confrontation between the U.S. and China over the governance of Hong Kong, where Beijing has stepped up suppression of dissent in the face of Western criticism. U.S. objections to Chinese policies in the former British colony have fueled bilateral tensions, along with discord over issues such as trade, technology and global influence…”
“Chinese Foreign Ministry spokesman Zhao Lijian condemned the new U.S. sanctions and called on Washington to stop interfering in China’s internal affairs. Speaking at a routine briefing on Wednesday, Mr. Zhao told reporters that Beijing would respond with forceful measures in accordance with the situation. China has previously imposed tit-for-tat sanctions on American lawmakers and Trump administration officials...”
“Ahead of his meeting with top Chinese diplomats in Alaska, [US Secretary of State] Antony Blinken embarked on visits to Japan and South Korea—both key U.S. allies—along with Defense Secretary Lloyd Austin, in the first foreign trips by members of Mr. Biden’s cabinet.”
“Speaking on Tuesday in Tokyo, Mr. Blinken accused China of using coercive tactics to assert its interests in places such as Hong Kong, Taiwan and Xinjiang, and promised that the U.S. ‘will push back if necessary on China’s coercions or aggressions.’” The Wall Street Journal reports.
Analysts Turning Optimistic on Reliance Industries’ Stock
“Despite a massive underperformance at the bourses since the last six months, analysts are turning optimistic on Reliance Industries (RIL). Those at Jefferies, for instance, say that the company is a proxy play for India’s consumption growth story.”
“The key catalysts for the stock, according to a Jeffries note, include faster-than-expected market share gain in retail, oil-to-chemicals (O2C) stake sale, recovery in gross refining margins (GRM), potential public listing of Jio and even a possible banking licence going ahead. That apart, analysts feel any tariff hike in Reliance Jio (RJio) – its telecom venture – will also aid performance…”
“Among 36 analysts’ recommendations on Bloomberg, 24 recommend buying the stock. The highest target price (best case) among them is Rs 2,900 – up around 38 per cent from the current levels. Meanwhile, 7 analysts recommend a 'hold', while 5 analysts recommend selling the stock.”
“At the bourses, however, the stock has been an underperformer – falling nearly 6 per cent since October 2020 as compared to 28 per cent rise in the S&P BSE Oil & Gas index and 32 per cent rally in the S&P BSE Sensex during this period, data show.” India’s Business Standard reports.
Boomplay vs Spotify: The Battle Heats up in Africa
“Nigerian music service Boomplay has extended its licensing agreement for Universal Music Group’s global music catalogue to cover 47 countries in Africa as it competes with Spotify for the continent’s streaming crown.”
“The deal with UMG represents a renewal and expansion of an existing licensing arrangement first signed in 2018 which covers seven African markets. Lagos-based Boomplay says that it has 50m monthly active users who have access to a library of around 50m tracks.”
“The news comes shortly after major competitor Spotify, the world’s most widely used audio streaming service, announced that it is set to launch in 40 African countries this year after being widely inaccessible across the continent. Spotify plans to offer a range of pricing packages to suit local market conditions across Africa.” African Business reports.