Emerging Markets Daily - May 12
China Millennials Balk at Having Children, Taiwan Stock Crash, Sovereign Funds' Investments, Algeria Nixes Business With Morocco, Xiaomi Removed from Pentagon Blacklist, and more...
The Top 5 Emerging Markets Stories from Global Media - May 12
China Millennials and Gen-Z Balk at Having Children, Citing Cost, Lifestyle
South China Morning Post
“China’s young people are not surprised that their homeland has one of the world’s lowest fertility rates. In fact, most seem to empathise with the growing reluctance to have kids in China.”
“Many believe that there is a general consensus among China’s millennials and Generation Z that having children will impose a strong financial burden under the country’s current public welfare conditions, and that having fewer or no children is necessary to maintain one’s quality of life.”
“‘Honestly, I don’t want to have a relationship, I don’t want to get married, and I don’t want to have children,’ said Zhang Jie, a 31-year-old salesman with a small private trading company in Guangzhou who recently broke up with his girlfriend after four years. ‘For the working class, it is simply becoming more and more unaffordable to raise a child in urban cities.’”
“Once-a-decade census data released on Tuesday shows that Chinese mothers gave birth to 12 million babies last year, down from 14.65 million in 2019, marking an 18 per cent decline year on year and continuing the descent to a near six-decade low.”
“China’s fertility rate also fell to 1.3 children per woman, which is well below the replacement level of 2.1 – the rate needed for a stable population. By comparison, Japan’s fertility rate was 1.369 in 2020.”
“Zhang’s family tree is among those that look like an inverted pyramid, and it reflects the attitude of many young Chinese people toward marriage and childbirth.”
Taiwan Stock Crash Exposes Danger of Too Much Leverage
Bloomberg via Yahoo Finance
“Few things evoke fear in equity markets like a margin call. On Wednesday that fear turned into panic in Taiwan, offering another warning for the world on what can happen when leverage unwinds.”
“The trading day started out quiet in Taipei’s $2 trillion stock bourse. But before the morning was over, the local benchmark index had plummeted almost 9% in the worst one-day performance in its 54-year history.”
“There were reasons to sell. New data showed a worsening Covid-19 outbreak in an island where almost no one is vaccinated. A deepening slump in global tech shares also undermined the appeal of a market dominated by the industry. But the swiftness of the plunge that followed suggests bigger forces were at play.”
“For months, bull market skeptics around the world have warned that surging leverage is making equity markets riskier -- and the blowup of Archegos Capital Management in March served as a reminder of that. Yet stocks have continued to rise, with the MSCI All-Country World Index closing at a record as recently as Friday. In the U.S., margin debt topped $822 billion by the end of March -- the latest available data. That’s up 72% year on year.”
“On a smaller scale, the same happened in Taiwan. Armed with conviction, and with history on their side, investors took on increasing amounts of leverage. The result was a 46% expansion in margin debt this year to about NT$274 billion ($9.8 billion) two weeks ago, the highest since 2011. By comparison, the Taiwan benchmark was up just 19% in that period, an indication that people were taking out loans faster than stocks were appreciating.” Sofia Horta e Costa writes.
Sovereign Funds' Direct Investments Double to $65.9bn in 2020
Reuters
“Sovereign wealth funds' direct investments almost doubled in 2020 to $65.9 billion, with a significant portion of that amount invested at home as funds sought to soften the hit to their economies from the Covid-19 crisis, according to a report published Tuesday.”
“For the first time, savings funds invested less than sovereign development funds and hybrid funds, according to the report from the International Forum of Sovereign Wealth Funds (IFSWF), based on publicly-disclosed direct investments.” Tom Arnold reports
Algeria Nixes Business With Morocco, Chilling a Commerce-Led Detente
Arab Weekly
“The Algerian Army, through President Abdelmadjid Tebboune, has acted to halt commercial diplomacy sponsored by Algerian and Moroccan companies in an effort to end the impasse in the relationship between the two countries.”
“Tebboune ordered on Sunday the country’s state and private economic companies to terminate their contracts with foreign entities ‘hostile’ to Algeria, claiming that they harm its ‘vital and security interests’.”
“Analysts said Tebboune’s decision was unlikely to have been taken without consulting the military establishment that controls decision-making in the state. Tebboune put out a statement vehemently attacking the Algerian Insurance and Reinsurance Company (CAAR) and the Algerian Insurance Company (SAA). He gave the companies ten days to end all collaboration with Moroccan firms.”
“Tebboune’s justification for the decision is that cooperation with Moroccan businesses risks putting sensitive information at the disposal of ‘foreign entities’ opposed to Algeria’s interests and undermining its security…”
“Moroccan-Algerian relations have been strained for decades due to the conflict over the Western Sahara, where Algeria supports the Polisario Front separatists. Tensions have increased between the two over the past few months after the United States announced the recognition of Morocco’s sovereignty over the Sahara.” Arab Weekly reports.
Pentagon Removes Xiaomi From Blacklist, Shares Pop in Hong Kong
Wall Street Journal
“The Defense Department has agreed to remove Xiaomi Corp. from a blacklist that prohibits U.S. investment in the Chinese tech giant, reversing course after a federal court had granted a temporary halt to the ban following a lawsuit by the company.”
“In a one-page filing in Washington, D.C., federal court Tuesday, lawyers for both sides said removing Xiaomi from the U.S. blacklist was appropriate following the company’s court victory in March, thereby avoiding additional litigation over the matter.”
“Xiaomi filed a lawsuit in January challenging the Pentagon’s decision to place it on its blacklist of companies with alleged links to China’s military. Xiaomi denied any such ties. Shares of Xiaomi rose almost 6% in afternoon trading in Hong Kong following the disclosure.” Dan Strumpf reports.
What We’re Also Reading…
How China is Shaping the Future of Shopping
Financial Times
“…Inspired by the rapid expansion of mobile commerce in China, new ventures including Popshop, Verishop, OOOOO and NTWRK are vying with the likes of Instagram and TikTok to redefine online retail for a new generation of consumers.”
“Imran Khan, a former banker and Snapchat executive, wants his US-based online retail start-up Verishop to become a ‘digital mall’.”
“Amazon is great for finding ‘convenience’ items, he said, but for the fastest-growing categories in ecommerce, such as fashion, beauty and homeware, ‘people want to hear others’ opinion and understand the story of the product’.” Tim Bradshaw and Hannah Murphy report
Africa’s First Crypto Art Collections have Investors and Creators Feeling Optimistic
Quartz Africa
“African art sales, though they are on the rise, still currently account for less than 1% of the $50 billion global art market. What if there was a way for African artists to profit from their work in perpetuity while also growing their piece of the pie?”
“This was one of the major motivations for Kenyan-based award-winning photographer and filmmaker, Rich Allela, to auction one of the continent’s first crypto art collections using non-fungible token (NFTs). His work is facilitated by Picha Images, a digital media company which launched one of the first crypto art NFTs on the continent. The auction is running from April 26 to mid-May, and is hosted on OpenSea, one of the world’s largest NFT digital marketplaces.” Ciku Kimeria reports
Nikkei Logs Sharpest Fall in over 2 Months on Tech Plunge, Asia Falls
Jakarta Post
“Tokyo stocks tumbled Tuesday, with the Nikkei index posting the sharpest drop in more than two months, as major technology issues slipped following a plunge in their US peers overnight and falls in other Asian markets.”
“Decliners were led by machinery, precision instrument and information and communication issues…”
“The market slide was boosted as ‘investor sentiment was (also) worsened by declines in other markets such as Taiwan and South Korea where semiconductor and electronics issues have a big impact,’ said Maki Sawada, a strategist at Nomura Securities's Investment Content Department.” Jakarta Post reports