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Emerging Markets Daily - March 4
Flipkart Eyes $35B US IPO, Asian Markets Spooked by Inflation, African Sovereigns, Brazil Covid Crisis Worsens, S. Korea and Taiwan Dominate Semiconductors
The Top 5 Emerging Markets Stories - March 4
India’s Flipkart Eyes $35 Billion US Listing Via a SPAC
“Walmart Inc.’s Flipkart is exploring going public in the U.S. through a merger with a blank-check company as it seeks to quicken its listing process, according to people familiar with the matter.”
“The Bengaluru-based online retailer has been weighing a U.S. initial public offering and it’s now also looking at other options, the people said. Flipkart’s advisers have approached several SPACs, said one of the people, who asked not to be identified as the information is not public. Flipkart could seek a valuation of at least $35 billion in a blank-check transaction, the people said.”
“Deliberations are at an early stage and Flipkart could still explore other options, the people said. A representative for Flipkart had no immediate comment.”
“The e-commerce firm is joining other Indian firms like online grocer Grofers in exploring a U.S. listing through SPAC deals. ReNew Power last week agreed to merge with a U.S.-listed special purpose acquisition company in a deal that will give India’s biggest renewable power producer an enterprise value of $8 billion.”
“Merging with SPACs, which are shell companies that raise money from public investors intending to acquire a business within two years, will allow Walmart to take its India unit to market at a faster pace than the usual IPO route. As many as 10 Indian companies could go public through SPAC deals before the end of the year, Utpal Oza, head of investment banking for India at Nomura Holdings Inc., said in an interview.” Bloomberg reports.
Asian Markets Retreat on Inflation Fears
“Asian investors retreated as the rollercoaster ride on global markets continued, with fears over inflation winning the tug of war with vaccine optimism on Thursday.”
“After a year-long rally across the planet and with light at the end of the pandemic tunnel, focus is now on the expected surge in activity as lockdowns are eased and life returns to some semblance of normal.”
“And the growing belief is that a gargantuan spending splurge from pent-up consumers -- and an imminent stimulus package -- will light a rocket under prices, forcing central banks to wind back ultra-easy monetary policies -- including record low interest rates -- that have been a key driver of the stocks surge.” Jakarta Post/AFP reports.
African Sovereigns Walk Slippery Debt Path
“While stronger African economies are keen to issue Eurobonds to global markets, lured by low interest rates and optimism about vaccines, risks remain for weaker countries that are seen not to be distancing themselves from some Covid-19 debt relief packages.”
“Investors seem spooked by uncertainty over what debt relief could mean for repayments of private bonds and African sovereigns that urgently need money but have weaker credit ratings may have to think twice.”
“A world flush with cash is hunting higher-yielding investments and demand is good for Eurobonds issued by governments with good economic management and stronger international credit ratings (B and higher). In addition, some African countries are showing good recoveries from the economic effects of the pandemic, with rapid bounces back to levels seen at the start of 2020.” African Business reports.
Brazil’s Covid Crisis Hits New Deadly Wave
“Covid-19 has already left a trail of death and despair in Brazil, one of the worst in the world. Now, a year into the pandemic, the country is setting another wrenching record.”
“No other nation that experienced such a major outbreak is still grappling with record-setting death tolls and a health care system on the brink of collapse. Many other hard-hit nations are, instead, taking tentative steps toward a semblance of normalcy.”
“But Brazil is battling a more contagious variant that has trampled one major city and is spreading to others, even as Brazilians toss away precautionary measures that could keep them safe.”
“On Tuesday, Brazil recorded more than 1,700 Covid-19 deaths, the highest single-day toll of the pandemic.” The NY Times reports.
South Korea and Taiwan Dominance of Chip Market Worries U.S, China
“There’s nothing like a supply shock to illuminate the tectonic shifts in an industry, laying bare the accumulations of market power that have accrued over years of incremental change. That’s what’s happened in the $400 billion semiconductor industry, where a shortage of certain kinds of chips is shining a light on the dominance of South Korean and Taiwanese companies.”
“Demand for microprocessors was already running hot before the pandemic hit, fueled by the advent of a host of new applications, including 5G, self-driving vehicles, artificial intelligence, and the internet of things. Then came the lockdowns and a global scramble for computer displays, laptops, and other work-from-home gear.”
Now a resulting chip shortage is forcing carmakers such as Daimler, General Motors, and Ford Motor to dial back production and threatens to wipe out $61 billion in auto industry revenue in 2021, according to estimates by Alix Partners. In Germany, the chip crunch is becoming a drag on the economic recovery; growth in China and Mexico might get dinged, too. The situation is spurring the U.S. and China to accelerate plans to boost their domestic manufacturing capacity.” Bloomberg reports.