Emerging Markets Daily - May 10
Dubai Business Rebounds, Turkey 'Crazy' Canal a Geopolitical Game Changer, BioNTech To Produce in Singapore, Iron Ore Surges, Cathay Pacific in $500M Bond, Plus Pakistan's Ramadan Water Carriers...
The Top 5 Emerging Markets Stories from Global Media - May 10
Dubai Business Rebounds As Vaccines Pay Off
Bloomberg
“Business activity in Dubai rose to the highest level since late 2019 after a rebound in tourism and a fast distribution of coronavirus vaccines.”
“The private sector, excluding oil, grew for a fifth-straight month in April, according to IHS Markit. Its Purchasing Managers’ Index for the Middle East’s main business hub rose to 53.5 from 51 in March, staying above the 50-mark that separates growth from contraction and signaling significant economic expansion.”
“‘The recovery in the Dubai non-oil economy sped up in April, as output and new order growth returned to pre-Covid trends and business confidence strengthened,’ said David Owen, an economist at IHS Markit. ‘Travel and tourism firms recorded the most notable bounce in performance, amid increasing hopes of a rise in tourism activity later in the year, boosted by the rapid vaccine roll-out.’”
“In the overall United Arab Emirates, of which Dubai is a part, business conditions have also been improving. Inoculation efforts in the Arab world’s second-largest economy and a recovery in oil prices have led to a rebound following last year’s downturn.” Abeer Abu Omar reports.
Turkey's "crazy" Canal Would Impact Eurasian Trade, Geopolitics
Eurasianet
“Turkey has signaled that it intends to start work this year on its long-discussed Kanal Istanbul project, an artificial canal connecting the Black Sea to the Sea of Marmara. The project has faced controversy within Turkey for its cost, environmental impact and potential for corruption. But its international implications could be substantial as well, threatening the delicate regional military balance and impacting maritime trade with the Caucasus and Central Asia...”
“Plans for the canal were first unveiled by Erdogan, then prime minister, in 2011 in what he himself described as a ‘crazy project.’ Its stated purpose is to create a safer transit route for oil tankers to transport crude from the Black Sea to global markets, which now traverse the narrow, occasionally treacherous Bosphorus straits through the country’s largest city, Istanbul. Construction of the canal and associated infrastructure is estimated to cost more than $20 billion.”
“…If the planned canal turns out not to be subject to the Montreux Convention, it would allow Turkey to permit larger and more powerful naval vessels, like aircraft carriers, in and out of the Black Sea, and for longer periods.” David O'Byrne reports
BioNTech to Produce mRNA Vaccines in Singapore, New Regional HQ
Channel News Asia
“German biotechnology firm BioNTech, which partnered Pfizer to develop a COVID-19 vaccine using messenger RNA (mRNA) technology, will set up its regional headquarters in Singapore, along with a manufacturing facility.”
“The new facility will provide ‘regional and global supply capacity of BioNTech's mRNA-based product candidates’ and serve as ‘a rapid response production capability for Southeast Asia to address potential pandemic threats’, the company said on Monday (May 10).” Tang See Kit reports
Iron Ore Prices Surge On Global Economic Recovery Signs
Financial Times
“Iron ore prices jumped more than 10 per cent in Asia trading on Monday on growing expectations that the global economic recovery from the Covid-19 pandemic would extend beyond China and buoy commodities markets. Futures prices for iron ore in Singapore rose to more than $226 a tonne, a record in dollar terms.”
“In Dalian, China’s main commodities trading hub, the price of the most active futures contract was also up 10 per cent. The price rise followed a run of recent highs for the steelmaking ingredient, which alongside other raw materials has been supported by strong demand from a rapidly recovering Chinese economy, and is also expected to benefit from government support measures around the world.”
“The physical iron ore price has hit a record above $212 a tonne, according to S&P Global Platts. That in turn has boosted the share prices of large iron ore producers including Rio Tinto, whose shares powered to a record high $67.05 on Monday. Big producers such as Rio only require a $50 a tonne to break even. ‘It’s more than just China now . . . it’s the whole strength of recovery in the steel industry globally,’ said Justin Smirk, senior economist at Westpac…”
“‘These are record price levels and surpass the highs seen in the pre-2010 boom period,’ Clarksons Platou Securities wrote in a note to clients.” Thomas Hale and Neil Hume report.
Cathay Pacific Eyes $500 Million Raise in US Dollar Bond Offering
South China Morning Post
“Cathay Pacific Airways Limited is selling a US-dollar denominated bondfor the first time in about three decades, less than a year after getting a HK$39 billion (US$5 billion) bailout from Hong Kong’s government, as it battles to stabilise its finances amid a slump in international travel.”
“The city’s dominant carrier is looking to raise over US$500 million on Monday and has already attracted roughly US$1 billion of tentative orders from fixed-income investors, pending the final guidance, according to a person familiar with the matter. The affiliate of the conglomerate Swire Pacific plans to use the bond proceeds as working capital and for general corporate purposes, according to its terms sheet.”
“Cathay Pacific was one of the first and hardest hit airlines by the coronavirus pandemic which quickly stymied global air travel after the first Covid-19 cases were reported in mainland China. Without a domestic flight network, the carrier relies on cross-border travel to more than 190 global destinations in more than 60 countries, which remains largely non-existent due to travel restrictions.”
“The airline and its bankers will face a challenge selling the bond without offering a generous coupon given the parlous state of the issuer’s finances. Investors cannot rely on guidance from major credit rating agencies, S&P Global Ratings, Moody’s or Fitch, as Cathay Pacific has not sought a rating from them.” Alison Tudor-Ackroyd reports.
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What we’re also reading…
Pakistan's Water Bearers Quench Thirst in Ramadan, but Fear for Their Trade
Reuters
“For more than four decades Ramzan has been a "mashki", or water bearer, an age-old profession now in decline as water companies and tankers increasingly supply residents.”
“But his services are at least in high demand during the Islamic holy month of Ramadan, during which fasting can be a challenge when the weather is hot.”
“…Karachi needs about 1,200 million gallons per day of water to meet the demand of its estimated population of 20 million people. But officials say its two main water sources only provide the city with about 580 million gallons per day.” Reuters reports
Biden’s Global Tax Plan Could Leave Developing Nations ‘Next to Nothing’
Financial Times
“US president Joe Biden’s plan to reform global corporate taxation will do little to help the countries most in need of more tax revenues, say developing economies which are lobbying for greater power over multinationals.”
“Washington’s ambitious proposal would tax 100 of the world’s largest companies on profits made in countries where they have little or no physical presence but derive substantial revenues and would introduce a global minimum tax rate, in a bid to end what it dubbed a “race to the bottom” where businesses channel profits through low-tax jurisdictions.”
“But companies would pay most of their taxes in the country where they are headquartered, even if their profits — and in many cases the labour and raw materials used — are sourced from developing countries, senior diplomats and lobby groups told the Financial Times.”
“They are also concerned that many developing countries are not participating in the negotiations over the proposal at the OECD and fear the eventual agreement is unlikely to reflect their interests.” Jonathan Wheatley and Emma Agyemang report
Africa Only Region With “Unified” Covid Strategy, WHO Says
Anadolu Agency
“Africa is the only region to have developed a unified continental strategy for the coronavirus pandemic that has delivered results, the head of the World Health Organization (WHO) said Saturday.”
“Tedros Adhanom Ghebreyesus made the remarks at a high-level emergency virtual meeting of African health ministers on the situation in Africa.”
“…Africa has administered 19.6 million doses of the COVID-19 vaccine, or 2% of the global total, 80% of all doses administered globally have been in high and upper middle-income countries, according to Tedros.” Felix Nkambeh Tih reports
Africa’s $31 Billion Farm Funding Gap in Focus for CDC Debt Deal
Bloomberg"
“CDC Group, the U.K. government’s development investment arm, is taking a step to help bridge what it estimates is a funding gap of as much as $31 billion that Africa’s agriculture and food industry faces each year.”
“The 73-year-old institution is channeling $100 million to small-holder African farmers through export and trading company ETG, and is seeking other partners to help it deploy more capital to the sector.”
“As banks withdraw funding from agriculture because of regulatory challenges, and with some larger players defaulting, institutions such as CDC have a significant role to play in plugging the shortfall, according to its spokesman and investment director, Brad Smith. “This is the biggest deal we have done in the corporate debt space,” he said in a video call.” Roxanne Henderson reports