Emerging Markets Daily - May 11
Airtel Soars Amid Nigeria Stocks Rally, Rising Inflation Favors EM: Mobius, China in Latin America, Israel and Hamas Hostilities Escalate, SE Asia and Covid, Djibouti Thriving, and China Census
The Top 5 Emerging Markets Stories from Global Media - May 11
Airtel Flies to the Top in Record Year for Nigerian Stock Exchange
African Business
“Despite the economic gloom, the Nigerian Stock Exchange had a record-breaking year in 2020, while telco Airtel has soared in our Top Companies ranking...”
“For over 15 years African Business has been running an annual ranking of Africa’s 250 Top Companies, taking the top listed companies from the 17 different stock exchanges across Africa. In this article we focus on the top 20 companies from West African countries that appeared in the ranking in 2021…”
“Airtel Africa, a telco based in London but operating across Africa and dual-listed on the NGX, continued to soar up the main table of the Top Companies rankings from #37 in 2020 to #16 in 2021, as market capitalisation tripled to $9.3bn. Its valuation does diverge with its London listing which has a valuation of $4bn at the time of writing.”
“Giant Dangote Cement was at #20 (up from #21) with strong gains in market capitalisation to $8.9bn with telco MTN Nigeria not far behind (#23). BUA Cement, which listed in January 2020 and was a dynamic new entry to last year’s top 250 at #34, climbed well to #27 this year, with market capitalisation almost doubled to $6.1bn.” Tom Minney reports
Rising Inflation Will Favor Emerging Market Stocks: Mark Mobius
Bloomberg
“The world’s largest money managers may be underestimating the durability of inflation after a record wave of money printing to combat the Covid-19 pandemic, according to veteran investor Mark Mobius.”
“This will pose a particular problem in the U.S., where a rising inflation rate will weigh on the global reserve currency, said Mobius, who set up Mobius Capital Partners after three decades at Franklin Templeton Investments. At the same time, the quickening price growth is likely to support a rally in raw materials, even as the Bloomberg Commodity Index already hovers near its highest since July 2015, he said.”
“Such a backdrop favors emerging markets, which will grow faster than their developed-nation peers in the years ahead, Mobius said. Chinese and Indian equities, recently beaten down by a rout in technology shares as well as the latest Covid-19 crisis, look particularly attractive, he said on Bloomberg TV. Yet he voiced caution about fully rotating into value stocks.”
“‘With continuing low interest rates, normal parameters like P/E ratios aren’t a good guide for where you should be,’ Mobius said from Cairo. ‘The numbers to look at are return on capital and dividend yield. But I think you have to have a combination of value and growth.’” Ben Bartenstein and Annmarie Hordern report.
China Exchanges Loans for Investments in Latin America During the Pandemic
El Pais
“Beijing takes a turn in its relationship with the region and strengthens its presence with greater economic and health cooperation.”
“In the midst of the health crisis derived from the coronavirus pandemic, China has turned its relationship with Latin America around. For the first time in 16 years, its two main development banks, the China Development Bank (CDB) and the Export-Import Bank of China (Chexim), did not provide any financing to the governments of the region in 2020; zero dollars, according to data compiled by the Boston University Center for Global Development Policy and the Inter-American Dialogue analysis center. Chinese companies, on the other hand, strengthened their investments in infrastructure, especially in the path of electricity distribution, and the demand for raw materials continued to increase, despite the fact that Beijing made a commitment in early 2020 with the United States to increase purchases of products.” Alicia Gonzalaz reports
Israel, Hamas Hostilities Escalate After Police Violence at Al-Aqsa
Financial Times
“Israeli warplanes are pounding the Gaza Strip as Hamas fires rockets deep into the Jewish state in a significant escalation of hostilities after Israeli police injured hundreds of Muslim protesters at Jerusalem’s al-Aqsa mosque.”
“Israel launched dozens of targeted air strikes after Hamas, the Palestinian militant group, unleashed rockets towards Jerusalem on Monday — the furthest into Israel since 2014 — and fired scores more overnight into the area surrounding the Gaza Strip.”
“The US condemned Hamas’s rocket barrage, while the Arab League described Israel’s response in Gaza as ‘indiscriminate and irresponsible’ and ‘a miserable show of force at the expense of children’s blood’. Gazan authorities say 24 people had been killed.”
“Egyptian, Qatari and UN officials who mediate between Israel and Hamas were trying to restore calm, an Israeli official said on Tuesday. The anger has built for days as Israeli police injured almost 600 Palestinian Muslims in and near the mosque, a holy site for both Muslims and Jews, since Friday.” Mehul Srivastava reports.
Thailand, Vietnam and Cambodia hit COVID variants with iron fist
Nikkei Asia
“Thailand, Vietnam and Cambodia -- all early COVID success stories -- are now using an iron fist on their residents in bids to halt the spread of more virulent variants.”
“Thailand on May 1 issued a nationwide mask mandate and banned dining in restaurants in Bangkok and elsewhere. The first local transmissions of the U.K. variant were confirmed in early April.”
“By late that month, the country had counted about 65,000 total COVID-19 cases, more than twice the number reported a month earlier.” Yohei Muramatsu Tomoya Onishi report
What We’re Also Reading….
Spying and Stability: Djibouti Thrives in ‘Return to Cold War’
Financial Times
“…Djibouti, a former French colony home to just 1m people, is a rare point of stability in a highly strategic location, the southern end of the Red Sea, en route to the Suez Canal, a linchpin of global commerce.”
“About a third of all daily shipping in the world passes the north-east edge of Africa, where the water narrows to a chokepoint opposite Yemen.”
“With economic growth of up to 7 per cent forecast this year, double Africa’s average, according to the finance ministry, helped by hefty Chinese investment in ports, free trade zones and a railway line to landlocked Ethiopia, Djibouti is set to be one of the fastest-growing economies on the continent.” Andres Schipani reports
China’s Census Highlights Its Looming Population Problem
The Wall Street Journal
“China said its population hit 1.41 billion in 2020, eking out a tiny rise from the previous year, underlining how the world’s most populous nation is going to have to face its demographic challenges sooner than expected.”
“The number—up from the 1.40 billion official data showed for 2019—indicated that China’s population has only gone up by 72 million since the last census, in 2010.”
“In a news conference after the release, Ning Jizhe, head of the National Bureau of Statistics, said there were 12 million births last year, which would represent an 18% drop from the 14.65 million the year before, a trend that is likely to increase pressure on Beijing to ease remaining birth restrictions. It was the fourth straight year of declining births after a rise in 2016, the first year after China ended the three-decade-old one-child policy.” Liyan Qi reports
On US Markets: “This is Nuts, This is the Trash Crash”
The Alphaville Column, Financial Times, Jamie Powell
“To say we’ve been banging this drum for years is an understatement, but what’s going on in equity markets at the moment is truly nuts. Following a start to year when stupid was at the steering wheel of stocks — whether it be the GameStop faux-revolution, Spac Jesus Chamath Palihapitiya framing himself as the next Warren Buffett, or any number of unproven electric vehicle companies coming to market and then exploding higher on no news — the trash trade seemed to have spun out of control.”
“After a pause in April, following February and March’s aggressive sell-off, the trash crash is back with a vengeance. On Monday, the tape looked like the elevator scene in The Shining. The Nasdaq was down 2.55 per cent, with the FANG+ index — which includes Tesla, Alibaba and Baidu alongside Facebook etc — fell 3.61 per cent.”
“However, below the surface of the mega-cap technology stocks there was even more carnage. Chamath Spac names like Open door (-10.32 per cent), Virgin Galactic (-8.47 per cent) and Clover Health (-4.32 per cent) all dipped under severe selling pressure. While once popular retail names such as futuristic insurer Lemonade (-10.18 per cent), software-as-a-service prom king Snowflake (-5.93 per cent) and Chinese electric car market Nio (-7.07%) also got caught in the crossfire…”
“Despite some stocks having already lost more than two-thirds of their value, one can’t help but feel there’s still a severe stink of overvaluation in the air. By the looks of it, however, the garbage truck is backing up to the market, and the binmen are finally beginning to collect the trash.” Jamie Powell writes.