Emerging Markets Daily - May 25
EM Bonds Resilient To Covid Destruction, Asia's Vaccination Struggles, Ethiopia 'Deal of the Century' Falls Flat, Omani Protests, Africa's Energy Transition Dilemma
The Top 5 Emerging Markets Stories from Global Media - May 25
Emerging Markets Bonds Resilient to Covid Destruction
Wall Street Journal
“Covid-19 is spreading rapidly in large developing countries such as Argentina and India, sparking concerns of long-term economic hardship, but prices of their government bonds have barely budged.”
“The disconnect boils down to two factors, analysts and fund managers say. Loose monetary policy and economic reopening in developed countries is fueling global growth. At the same time, some emerging economies can’t afford to shut down. Under those circumstances, investors are willing to hang on to the relatively high-yielding debt, even as cases climb.”
“Bond fund managers remain desperate for government debt that pay attractive returns because yields, which fall when bond prices rise, remain near historic lows in Europe and the U.S. Simultaneously, international demand is booming for the commodities exported by many emerging markets.”
“Indian 10-year bond yields have remained around 6% since infections started to surge compared with the roughly 1.6% paid by the 10-year Treasury note, according to global bond-data provider Cbonds Europe SIA. The Reserve Bank of India bought some bonds to keep the market steady in recent months but international investors also played a part.”
“‘Real rates are high in India,’ said Polina Kurdyavko, an emerging markets portfolio manager at BlueBay Asset Management. ‘All else being equal, it’s attractive.’”
“A greater worry for many emerging-markets bond investors is the likelihood that the U.S. Federal Reserve starts stepping back from pandemic stimulus efforts such as bond-buying later in the year. That would make riskier assets such as emerging-market debt less attractive. Increased expectations in February that the Fed would move to combat rising inflation sooner than anticipated fueled early year declines in bonds from Latin America, Asia and Africa.” Matt Wirz reports.
Asia’s Curious Struggle to Vaccinate its Citizens
Financial Times
“Asian countries that led the way in controlling Covid-19 last year have become laggards in the battle against the virus as their efforts to vaccinate their populations fall behind other parts of the world.”
“The problems with rollout vary from country to country, but across most of Asia one factor is constant: a lack of vaccines to administer. Having failed to develop or produce vaccines at home, many Asian countries must wait for deliveries from Europe or the US, leaving them at the back of the queue.”
“While Asia has become the factory of the world, making up an increasingly dominant share of the global economy, the race for vaccines has shown it still lags behind in pharmaceuticals.” Robin Harding and Stephanie Findlay report
‘Deal of the Century’ Falls Flat as Telecoms Bidders Shun Ethiopia
African Business
“Ethiopia’s telecoms industry, the largest remaining state monopoly of its kind, was seen as the final frontier for a sector that has underpinned communications, education and healthcare during the pandemic.”
“Addis Ababa viewed the sale of its first two private telecoms licences as the ‘deal of the century’, and predicted that international bidders would queue up to penetrate a market of 112m people.”
“Ultimately, the process proved disappointing, with just two bids announced at the launch ceremony on 25 April, one by South Africa’s MTN Group in partnership with China’s Silk Road Fund and the other by the Global Partnership for Ethiopia Consortium, which includes Kenya’s Safaricom and international partners Vodafone, Vodacom, CDC Group and Sumitomo.”
“The relative failure of the process is a bitter pill to swallow for Abiy Ahmed, the prime minister who vowed to liberalise Ethiopia’s economy but has become embroiled in a reputation-damaging conflict in the northern region of Tigray.”
“The underwhelming telecoms auction has been blamed on an opaque bidding process and the exclusion of the lucrative mobile money sector, which has since prompted a government U-turn. But it also demonstrates waning investor confidence amid growing insecurity. With Abiy due to face elections delayed from 5 June, some investors are concerned about the potential for further political disruption.”
“…By contrast, all over the continent, improved mobile telecommunications have been boosting productivity and growth. According to GSMA, mobile technology has driven a fifth of income-per-capita growth over the last 20 years in sub-Saharan Africa, and there will be an estimated 1bn mobile connections in the region by 2024.” Africa Business reports
Omanis Clash with Police in Rare Jobless Protests
Bloomberg
“Omani security forces clashed with dozens of demonstrators who gathered in the industrial city of Sohar for the second day for rare protests against record unemployment and worsening economic conditions.”
“Police fired tear gas at young Omanis outside the Labor Ministry and governor’s office in the northern city, which lies some 150 km (93 miles) from the border of the United Arab Emirates, and detained several people, according to witnesses. The protesters threw stones at police.”
“While the protests remained relatively small, such public dissent has been rare in Oman since 2011, when a wave of anti-government uprisings swept through the Middle East toppling dictators from Tunisia to Yemen. Back then, limited demonstrations in Oman also began in Sohar, which suffers from the highest unemployment rate in the country, before spreading to other parts of the Gulf Arab nation.”
“Since taking power in January 2020, following the death of his long-time predecessor, Sultan Haitham bin Tariq has taken dramatic measures to bolster flagging public finances, cutting subsidies, introducing a value-added tax and even planning an income tax -- unusual in the oil-rich Gulf -- as part of medium-term plan to overhaul the economy.” Turki Al Balushi reports
Africa’s Energy Transition Dilemma
The Africa Report
“Facing pressure from the public and Western regulators, as well as from shareholders and financial partners, oil industry majors, especially those based in Europe – chiefly Shell, BP, Total and Eni – have initiated an unprecedented transformation by voluntarily reducing their crude oil activities in favour of “greener” forms of energy.”
“This may be good news for environmental activists, but not so for Africa’s oil-producing countries that benefit from the tax revenues and jobs the industry brings.” Pierre-Olivier Rouaud reports