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Emerging Markets Daily - March 21
Erdogan Fires CB Governor, Global Economy to Recover Strongly: IMF, US-India Defense Ties to Counter China, Saudi Aramco Divident Intact, Universal Makes Africa Music Push
The Top 5 Emerging Markets Stories from Global Media - March 21
Turkey’s Erdogan Fires CB Governor, Lira to Face More Pressure
“Turkey’s president has fired the governor of the central bank just three months into his term and replaced him with an academic who has lobbied for lower interest rates in a shock move that is likely to heap more pressure on the lira.”
“Recep Tayyip Erdogan’s dismissal on Saturday of Naci Agbal, came just two days after the respected former finance minister had won plaudits from the market by hiking interest rates by 200 basis points to tame inflation and support the currency. ‘This is a truly idiotic decision by Erdogan and markets will express their opinions on Monday, and it is likely to be an ugly reaction,’ said Timothy Ash, an analyst at BlueBay Asset Management.”
“Since his appointment in November, Agbal had increased the benchmark interest rate by a cumulative 875bp to 19 per cent, helping the lira recover as investors saw signs that Turkey was moving towards more orthodox monetary policy. But that ran counter to Erdogan’s view that higher interest rates cause, rather than cure, inflation. He demanded that credit stay cheap to boost economic growth, fuelling double-digit inflation for much of the past three years and prompting foreign investors to dump Turkish assets.”
“In a tweet, Agbal said: ‘I express my gratitude for my dismissal from duty as of today. May God grant us all good luck.’” Financial Times reports.
“Stronger Recovery” Emerging for Global Economy, IMF Says
“The prospects of a stronger global economic recovery are emerging, driven by Covid-19 vaccines and the new stimulus measures in the US but significant risks remain, according to a senior official from the International Monetary Fund.”
“Countries are currently rolling out coronavirus vaccines to stop the spread of the pandemic while the US, the world's largest economy, also approved a $1.9 trillion stimulus package to support its economy earlier this month.”
“‘In January, we projected 2021 global growth at 5.5 per cent, but prospects of a stronger recovery are emerging, because of additional fiscal stimulus, especially in the US and the prospects of broader vaccination,’ Geoffrey Okamoto, first deputy managing director at IMF, told the China Development Forum on Saturday.”
“However, significant risks remain due to the unequal distribution of vaccines and the spread of resistant mutations that could delay recovery, he added.” The National reports.
Geopolitics: US Vows Deeper Defense Ties With India to Counter China
“The U.S. and India vowed to deepen their defense ties, as the Biden administration works to enhance cooperation between allies in the region in an effort to counter China.”
“‘The Indo-Pacific region faces acute transnational challenges such as climate change and challenges to a free and open regional order. Cooperation among like-minded countries is imperative to securing our shared vision for the future,’ U.S. Defense Secretary Lloyd Austin said Saturday.”
“Mr. Austin, the first top member of the Biden administration to visit India, arrived Friday after traveling to Japan and South Korea earlier in the week. His trip comes just a week after a meeting of the leaders of the U.S, Japan, Australia, and Indian alliance of countries seeking to counter China’s expansionism called the Quadrilateral Security Dialogue, or the Quad.”
“Mr. Austin met with Indian Prime Minister Narendra Modi and Indian National Security Adviser Ajit Doval on Friday and his Indian counterpart, Rajnath Singh, on Saturday.”
“Mr. Austin said boosting military cooperation with India was a priority for the Biden administration. The new U.S. administration has been quick in reaching out to its allies and close partners like India to forge a stronger front against China.” The Wall Street Journal reports.
Saudi Aramco to Pay Large Shareholder Dividend Despite Oil Fall
“Saudi Aramco’s $75 billion dividend survived one of the biggest disruptions to oil markets in decades as the coronavirus pandemic and a price war sent crude prices tumbling.”
“Aramco will make the payout -- the largest of any listed company and almost all which goes to Saudi Arabia’s government -- for 2020 despite a slump in earnings and revenue. The dividend is a key source of cash for the kingdom, whose economy was hit after the virus hammered energy markets and shut down local businesses.”
“The world’s biggest oil company has taken on more debt in the past 12 months to keep up the dividend in the face of dwindling cash flow…Net income for 2020 was 184 billion riyals ($49 billion), slightly better than analysts’ expectations and down 44% from the previous year. Free cash flow fell almost 40% to $49 billion, substantially below the level of the dividend.”
“‘We’re very optimistic about 2021 in terms of growth in demand, especially in the second half,’ Chief Executive Officer Amin Nasser told reporters on Sunday. ‘Prices have so far responded to the recovery we are seeing. We need to be prudent, but you have to compare everything to 2020.’”
“Global oil use will increase to 99 million barrels a day by the end of the year, he said. That compares with today’s consumption of around 95 million barrels daily and would almost be back to pre-virus levels.” Bloomberg reports.
Universal Makes Big Africa Push Into Music
”From a giant neon-pink billboard in Times Square celebrating Nigeria’s ‘Queen of Afrobeats’ Tiwa Savage to the South African artists laying down the soundtrack to Hollywood juggernaut Black Panther, African music is increasingly flexing its commercial muscles on the global stage.”
“Once relegated to the unfashionable world music section of record stores, hot new African sounds are dominating the mainstream, attracting the attention of major international labels and finding their way into movies, TV shows, adverts and listeners’ headphones.”
“One of the key players responsible for keeping the momentum alive and thrusting new stars into the spotlight is Sipho Dlamini, the newly appointed CEO of Universal Music South Africa and Sub-Saharan Africa. Dlamini, who has been with the company since 2016, has been appointed to oversee all of UMG’s operations within English-speaking Africa and will help to bring the label’s most exciting artists to new continental and global audiences.”
“Wooed by Africa’s huge and growing young population, the uptake of internet and smartphones, and the breakthrough popularity of homegrown genres, international record labels are increasingly scouring the continent for talent. Young, tech-savvy Africans are driving the popularity of music streaming services, and in 2018, UMG licensed its catalogue to Boomplay, Africa’s largest local streaming platform, which claims 75m users.”
“In South Africa, streaming should generate around $50.8m in 2022, more than three times what was generated in 2017, according to PwC. On a continent where physical music sales always had a limited footprint, audiences are waking up to a new world of recorded music.” African Business reports.