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Emerging Markets Daily - March 30
Vietnam Recovery Robust, Hedge Fund Losses Hit EM, Myanmar Junta Unleashes Deadly Crackdown, Xiaomi Enters EV Arena, Iraq, Total Partner on Gas, Solar Projects
The Top 5 Emerging Markets Stories from Global Media - March 30
Vietnam Recovery Robust on the Back of Exports to the U.S
“Vietnam’s economy is growing again, on the back of a strong rise in exports. The Southeast Asian nation looks to be one of the most clear-cut international beneficiaries of the U.S. stimulus package,” The Wall Street Journal reports.
“First-quarter gross domestic product was up 4.5% relative to last year’s figure, according to an initial estimate released Monday. The recovery is being driven by a surge in goods and services sold abroad, which rose almost 20% year-over-year in March. Sales to the U.S. specifically are likely rising even faster, with no sign of a slowdown on the horizon.”
“Using Vietnamese export data and U.S. data for imports from Vietnam, it is clear that the American share of Vietnam’s overseas sales has risen considerably. In the 12 months through January, U.S. imports from Vietnam were equivalent to about 29% of the Asian country’s total exports, far higher than the roughly 20% average before 2019…”
“Vietnam emerged as a big winner from the China-U.S. trade spat. Some supply chains reoriented away from China, and the country also was a logical docking station for multistage ‘transshipments’ to avoid American tariffs.”
Hedge Fund Archegos Losses Rattle Global, Emerging Markets
“A fire sale linked to losses at a fund run by a former Tiger Asia manager rippled through markets, including emerging markets. The selloff heightens concerns about a liquidity squeeze in some emerging markets, like South Africa, while also creating bargains in some Chinese internet stocks,” Barron’s reports
“Archegos Capital Management, a fund run by Billy Hwang that focused on global stocks, has reportedly suffered losses, sparking a liquidation of positions of as much as $30 billion, according to The Wall Street Journal, which cited people familiar with the matter. The selloff has had wide effects, hitting shares of Chinese companies like Baidu (ticker: BIDU) and Tencent Music Entertainment (TME), as well as leading Credit Suisse(CS) to warn of possible substantial losses because a hedge fund had defaulted on margin calls. Japan’s Nomura Holdings said an unidentified client owed it about $2 billion…”
“In a note to clients, Gavekal’s Tom Holland sees a pattern developing in speedy sales of a handful of stocks by prime brokers—after Archegos’ troubles and last week’s volatility triggered by the plummet of the Turkish Lira after President Recep Tayyip Erdogan fired another central banker for not supporting his unorthodox views about cutting rates to lower inflation.”
“Indeed, signs of illiquidity are showing up abroad as U.S. interest rates inch up and emerging markets like Brazil and Russia are forced to raise local interest rates or risk a depreciation in their currencies that could spark the emerging markets boogeymen of capital outflows or higher inflation at home.”
“In the coming weeks, other emerging markets will face the same decision,” Holland says. “To date, South Africa has held off from raising rates. If it continues to do so, the next casualty of this unholy witches’ brew may not be another leveraged player in the US stock market, or even a Japanese brokerage, but very possibly the South African Rand.”
Myanmar Junta Unleashes Full Force in Bid to Crush Protestors
“Residents of 44 towns and cities across Myanmar are collecting the scattered empty bullet casings from the streets as a grim reminder of the carnage in their neighborhoods Saturday. Some share photos via social media, holding the casings in blood-stained fingers.” Nikkei Asia reports.
“The casings reveal the small-arms firepower that Myanmar's junta unleashed on protesters who dared to fill the streets by the thousands to spoil the pomp of the Armed Forces Day parade in Naypyitaw, the capital, an event marked annually March 27 with the display of heavy weapons including missiles.”
“But this year's Armed Forces Day became a grisly milestone. Troops with weapons identified by military experts as Chinese-made light machine guns and locally produced semiautomatic rifles killed 114 civilians, some of them children, in the worst bloodbath since Myanmar's Feb. 1 coup.”
“The trail of bullet casings has not been lost on some Southeast Asian security sources. The weekend's carnage represents an ominous escalation, they told Nikkei Asia, indicating that the Tatmadaw, as Myanmar's defense forces are known, has shed the pretense of pursuing riot control in order to crush the anti-coup protesters and given troops the license to shoot dissenters at will.”
“This shift in strategy was revealed during a Friday night broadcast on Myanmar Radio and Television, the state-run mouthpiece. An announcement before the regular 8 p.m. news warned that protesters ‘can be in danger of getting shot in the head and the back’ -- the first formal admission by the junta of live fire.”
Xiaomi Enters Crowded Electric Car Arena With $10B Investment Plans
“Xiaomi Corp. plans to invest about $10 billion over the next decade to manufacture electric cars, embarking on its biggest-ever overhaul to enter China’s booming EV market.” Bloomberg reports.
“Billionaire co-founder Lei Jun will lead a new standalone division that will invest an initial 10 billion yuan ($1.5 billion) on smart vehicle manufacturing, the company said in an exchange filing. The Chinese smartphone maker joins tech giants from Apple Inc. to Huawei Technologies Co. in targeting the vehicle industry, betting future cars will grow increasingly autonomous and connected...”
“Xiaomi becomes the latest to pile into an already crowded arena, where an array of automakers from Tesla Inc. to local upstarts Nio Inc. and Xpeng Inc.are battling for a slice of the world’s biggest EV market. Search giant Baidu Inc. and Geely Automobile Holdings Ltd. are also said to be teaming up to build electric cars. EV sales in China may climb more than 50% this year alone as consumers embrace cleaner automobiles and costs tumble, research firm Canalys estimates.”
Iraq, Total Join Hands To Develop Four Major Gas, Solar Projects
“Iraq and French oil major Total agreed to jointly work on developing four associated gas and solar power projects, the country's oil ministry said March 29, as OPEC's second largest producer seeks to reduce dependence on Iranian energy imports needed for power generation,” S&P Global Platt’s reports.
“The most important project is construction of complexes and units to treat associated gas, which will be in two phases with a capacity of 600 million cf, the ministry said. The other projects are a solar energy plant with capacity of 1,000 MW for the Ministry of Electricity, a sea water project and development of the Ratawi field to increase natural gas output.”
“Iraq and Total, which signed on Jan. 27 a memorandum of understanding for developing ‘big projects,’ want to cooperate on associated gas projects in Ratawi in the south, Diyala in the east and Anbar in the northeast, Iraq's Oil Minister Ihsan Ismaael said in a ministry statement on March 17.”
“Iraq is trying to lower its dependence on Iranian gas and electricity imports as it comes under increasing US pressure. Since the US imposed sanctions on Tehran's energy sector in 2018, Iraq has been receiving waivers from Washington to continue importing energy from Iran.”
“Iraq needs Iranian energy imports to avert acute power shortages that have led to protests in the past, especially in the hot summer months when temperatures can reach 50 C in the south.”