Emerging Markets Daily - March 4
Food Insecurity Looms in EM on Wheat Price Rise, NATO Says 'No' to Ukraine No-Fly Zone, Alibaba's New Low, Unloved Coal Returns to Europe, Brazil Mulls CBDC
The Top 5 Stories Shaping Emerging Markets from Global Media - March 4
Food Insecurity Looms Across EM As Wheat Prices Hit Fresh Highs
Financial Times
“Wheat prices have hit record highs on intensifying fears over a supply shortage, as the war in Ukraine halted the grain’s exports from the country and Russia. Both countries account for about 30 per cent of the world’s traded wheat and still have crops from last year to ship.”
“‘There is no end in sight to the upswing because 30 per cent of the world’s wheat exports have been cut off from the global market,’ said Carsten Fritsch, analyst at Commerzbank. Wheat traded in Chicago, the international benchmark, has soared more than 50 per cent since Russia invaded Ukraine.”
“Food and agricultural experts are concerned about food security, particularly in poor countries, as well as high food inflation globally. In January, average food inflation around the world hit 7.8 per cent, the highest level in seven years, according to the IMF.”
“Leading agricultural traders including Archer Daniels Midland and Bunge, which buy and sell grains around the world, have closed their operations in Ukraine.” Emiko Tarazano reports.
NATO Rejects No-Fly Zone for Ukraine
Reuters
“NATO allies rejected Ukraine's demand for no-fly zones on Friday, saying they were increasing support but that stepping in directly would lead to a broader, even more brutal European war so far limited to Russia's assault on its neighbour.”
“Ukraine, a former Soviet republic, wants to join the European Union and Western military alliance NATO, whose members are bound in its founding treaty to defend each other from invasion. ‘We are not part of this conflict,’ NATO Secretary-General Jens Stoltenberg told a news conference.”
"‘We have a responsibility as NATO allies to prevent this war from escalating beyond Ukraine because that would be even more dangerous, more devastating and would cause even more human suffering.’”
“Thousands of people are believed to have been killed or wounded and more than 1 million refugees have fled Ukraine since Feb. 24, when Russia's President Vladimir Putin ordered the biggest attack on a European state since World War Two.” Reuters reports.
Alibaba Sinks to New Low Amid Gloomy China Tech Outlook
Nikkei Asia
“The stock price of Alibaba Group Holding fell below 100 Hong Kong dollars ($13) a share for the first time Friday, a day of heavy selling in Chinese tech stocks as investors fretted over the company's growth prospects and risk of further regulatory pressure from Beijing.”
“Alibaba closed down 5.17% to HK$99 on the Hong Kong Stock Exchange, down 68% from its peak. Tencent, the largest Chinese technology company by market capitalization, touched HK$400 during the day, its lowest since mid 2020.”
“The Hang Seng Tech Index, meanwhile, tumbled 4.4% to a record low.”
“The decline in Alibaba, also listed on the New York Stock Exchange and holder of the U.S. record for the largest initial public offering, came after it last week posted its slowest quarterly revenue growth, a 10% increase to 242.6 billion yuan ($38.4 billion) for the December quarter. The quarterly financial report did not show any signs of improvement in most business areas.”
"‘Alibaba is facing headwinds in almost all its business segments, including its cash cows Taobao and Tmall,’ said Oshadhi Kumarasiri, an analyst who publishes on investment platform SmartKarma. ‘Thus, Alibaba is bound to underperform in the medium term until valuations fall towards the cyclical low level.’” Nikkei Asia reports.
Unloved Coal Rises in Europe as Russia-Ukraine War Scrambles Energy Prices
Wall Street Journal
“The war in Ukraine scrambled global energy markets, with one especially unloved commodity—coal—enjoying a renaissance as European countries look again at the dirty fuel to establish energy independence from Russia.”
“A surge in a benchmark thermal coal price to a record high of $446 a metric ton this week reflected this reordering of priorities among governments that have been trying to phase out the fossil fuel because of its contribution to climate change.”
“In the days after Russian troops crossed over Ukraine’s border, Poland asked Australia if it could supply coal that could displace Russian imports. Italy’s prime minister has suggested reviving coal-fired power plants because of fears of a breakdown in natural-gas supplies from Russia. Germany signaled that it might extend the lifespan of coal plants that were due to close by 2030, days after it suspended certification of a pipeline that would have doubled the volume of gas it imports directly from Russia.”
“The European Union imports more natural gas from Russia than from any other country, representing a key vulnerability to its economy if supply is cut off. Coal’s advantage is that power plants can switch from natural gas to the fuel at short notice. The difficulty is that Russia is also a major supplier of thermal coal to Europe.Germany’s extended use of coal is the price Germany will pay for its solidarity with Ukraine, said Annalena Baerbock, Germany’s foreign minister and a member of the pro-environment Green Party.” WSJ reports.
Brazil Paves the Way for Central Bank Digital Currency
The Block
“Brazil’s central bank revealed today that it has picked nine projects to move forward in its quest to develop a central bank digital currency (CBDC).”
“The projects will move forward through an innovation lab co-managed by the bank. The lab, known as LIFT for its name in Portuguese, selected projects from companies including established banks, a DeFi protocol and an important crypto exchange. This exercise aims to research possible use cases for a digital Brazilian real, and the technical feasibility of various methods for getting there.”
“The central bank has previously indicated plans to decide on the finalized version of a CBDC in 2024, following the innovation lab in 2022 and pilot projects in 2023.” The Block reports.
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