Emerging Markets Daily - March 22
Asia-Pacific Tops Institutional Investor Sentiment, Turkish Lira, Stocks Fall, UAE Brokers India-Pakistan Peace, Latin America Economies To Remain Sluggish, Saudi Aramco Eyes More China Investments
The Top 5 Emerging Markets Stories and “By The Numbers” (Scroll Down, New Emerging World Feature) - March 22
Institutional Investors Pick Asia-Pacific As Top Investment Destination
“Hedge funds focused on Asia are predicting a surge of new money from North America and Europe as investors move away from overvalued U.S. assets to tap the early pandemic recovery in China and other parts of the region.”
“The Game Stop Inc investing craze that pitted retail traders against hedge funds may add to the Asian flows, with investors seeking to avoid similar losses from short-selling squeezes, according to hedge fund companies including APS Asset Management.”
“A Credit Suisse Group AG survey of more than 200 institutional investors with $812 billion in hedge fund assets showed Asia-Pacific was the most-sought after region with 55% net demand, the highest level of interest in over a decade. By comparison, net demand for North America stood at just 20%. The figures measure the share of investors planning to raise allocations minus those planning to trim.”
“‘This year we are going to see strong net inflows based on our conversations,” said Richard Johnston, Asia head at Albourne Partners in Hong Kong. ‘The areas we are seeing most demand for are China equities, low-net hedge funds and private credit…’”
“Johnston, who advises investors on alternative investments, said some North American institutions are pushing China allocations to 15% to 20% of their overall investments in a range of asset classes.” Bloomberg reports.
Turkish Lira Tumbles, Stocks Face Pressure After CB Chief Fired
“Turkey’s currency tumbled as much as 14 per cent after President Recep Tayyip Erdogan sacked the country’s central bank chief, who had been regarded as a crucial force in pulling the lira from historic lows. The lira traded at around 8.4 against the US dollar early on Monday before cutting its losses to about 8 per cent at TL7.84 in London trading.”
“The country’s stock market was also under intense pressure, with the benchmark Borsa Istanbul 100 index sinking more than 9 per cent, triggering curbs meant to sooth jittery trading. Turkey’s local and foreign currency bonds dropped sharply, sending borrowing costs jumping.”
“The removal of Naci Agbal, announced in the early hours of Saturday, shocked many local and foreign investors who had applauded the official’s decisions to move Turkey towards a more orthodox monetary policy. ‘Unwinding what was briefly appropriate macro policy is going to be painful,’ said Edward Al-Hussainy, senior rates and currencies analyst at Columbia Threadneedle, adding that it would damage the appeal of Turkish assets…”
“Robin Brooks, chief economist at the Institute of International Finance think-tank, said Turkey was at risk of ‘large’ investor outflows, which would place pressure on the lira. Goldman Sachs warned on Sunday of ‘significant risks of a near-term discontinuous move weaker in the lira.’” The Financial Times reports.
Geopolitics: Secret India, Pakistan Peace Roadmap Brokered by UAE
“About 24 hours after military chiefs from India and Pakistan surprised the world last month with a rare joint commitment to respect a 2003 cease-fire agreement, the top diplomat of the United Arab Emirates popped over to New Delhi for a quick one-day visit.”
“The official UAE readout of the Feb. 26 meeting gave few clues of what Foreign Minister Sheikh Abdullah bin Zayed spoke about with Indian counterpart Subrahmanyam Jaishankar, noting they ‘discussed all regional and international issues of common interest and exchanged views on them.’”
“Yet behind closed doors, the India-Pakistan cease-fire marked a milestone in secret talks brokered by the UAE that began months earlier, according to officials aware of the situation who asked not to be identified. The cease-fire, one said, is only the beginning of a larger roadmap to forge a lasting peace between the neighbors, both of which have nuclear weapons and spar regularly over a decades-old territory dispute.”
“The next step in the process, the official said, involves both sides reinstating envoys in New Delhi and Islamabad, who were pulled in 2019 after Pakistan protested India’s move to revoke seven decades of autonomy for the disputed Muslim-majority state of Jammu and Kashmir. Then comes the hard part: Talks on resuming trade and a lasting resolution on Kashmir, the subject of three wars since India and Pakistan became independent from Britain in 1947…”
“The UAE, which has historic trade and diplomatic links with India and Pakistan, has taken a more assertive international role under de facto ruler Sheikh Mohammed bin Zayed Al Nahyan. The biggest shift has been in the Middle East where the Gulf Arab state has intervened in conflicts and backed groups and regional leaders. But it has also looked to Asia as it strengthens political alliances beyond its role as a global trade and logistics hub.” Bloomberg reports.
Latin America, Caribbean Economies Sluggish After Pandemic, IDB Says
“Economies in Latin America and the Caribbean will remain weak in the years after the coronavirus pandemic and must implement urgent fiscal reforms to confront social challenges, the Inter-American Development Bank (IDB) said on Saturday.”
“The organization expects the region to see average economic expansion of 4.1% this year, following a contraction of 7.4% in 2020, representing the worst registered economic crash since 1821. However, economic growth could slow to 2.5% in 2022 and 2023, the IDB said in a statement during its annual assembly, held in the Colombian city Barranquilla.”
“Worse still, the region runs the risk of seeing timid growth of 0.8% this year, before contracting 1.1% in 2022 and growing 1.8% in 2023, the IDB added, urging countries to lay the foundations for a more solid recovery.”
“If the region is to achieve stronger rates of growth, it must implement reforms to improve productivity, help connect companies to global value chain and promote digital economies and job creation in an inclusive, sustainable fashion, the IDB said.” Reuters reports.
Saudi Aramco Sees “Opportunities for Further Investments” in China
“Saudi Aramco plans to ‘expand and intensify’ cooperation with China on research in areas including hydrogen and ammonia production from natural gas, according to Chief Executive Officer Amin Nasser.”
“Aramco is looking to work with China on blue hydrogen and ammonia, synthetic fuels and carbon capture utilization and storage, Nasser said at the China Development Forum in Beijing…”
“The oil major is also sizing up possible investments in Chinese projects despite spending constraints arising from a period of low oil prices as a result of the coronavirus pandemic. ‘We see opportunities for further investments in integrated downstream projects to help meet China’s needs for heavy transport and chemicals, as well as lubricants and non-metallic materials,’ Nasser said.
“Oil companies globally reported losses or falling profit for 2020 as plunging demand due to the coronavirus pandemic led to lower prices and forced producers to shut in output. Aramco, the world’s biggest producer, was no different, reporting Sunday a 44% drop in profit and further investment reductions. Still, some advanced or strategic projects are going ahead.” Bloomberg reports.
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By the Numbers - Monday March 22
$16 Trillion - The Size of China’s Asset Management Industry
$410 Million - The Amount J.P Morgan Will Pay to Buy 10% of China Merchant Bank’s Wealth Management Business
$1.77 Trillion - Total Cryptocurrency Market Capitalization
$320 Billion - The Net Debt of Major Airlines Worldwide
788 Million - The Number of Active Buyers on China E-Commerce Platform Pinduodo in 2020 (Slightly Higher than Perennial Giant Alibaba)
~1 Million Barrels Per Day - The Amount of Oil China Reported to Buy from Iran in March
1 Million - The Number of Amazon Employees Worldwide
60 Million - The Number of Electric Vehicles That Will Be on the Road in 2026
2035 - The Year GM Will Stop Selling Gas-Powered Cars
(Sources: WEF, Oliver Wyman, WSJ, FT, International Energy Agency, Washington Post, CoinBase)
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