Discover more from Emerging World
Emerging Markets Daily - May 28
Turkish Lira Hits Record Low, Indian Markets Rebound As Covid Rates Fall, High Commodity Prices Hit Chinese Business, Korean Bank ESG Bond, Indonesia To Phase Out Coal
The Top 5 Emerging Markets Stories from Global Media - May 28
Turkish Lira Hits Record Low Amid Inflation Concerns
“Turkey's lira tumbled to a new record low of 8.6 versus the dollar on Friday as it took a hit from global inflation concerns, expectations that the central bank will soon cut rates and worries over possible early elections.”
“The currency - by far the worst performer in emerging markets (EMs) this year - weakened beyond the intraday low of 8.58 that it touched in November. It recouped some losses and was at 8.562 against the US currency at 0834 GMT.”
“It also logged a new nadir of 10.4696 against the euro. The lira has tumbled 16 per cent since mid-March when President Tayyip Erdogan abruptly fired a hawkish and market-friendly central bank chief and replaced him with Sahap Kavcioglu, who had criticised recent rate hikes.”
“Despite Turkish inflation having risen above 17 per cent in April, the bank is expected to lower its policy rate from 19 per cent in coming months. But as the world emerges from the pandemic, global inflation has risen and pushed up US bond yields. That in turn pulls funds from emerging markets such as Turkey, hitting the lira and putting more upward pressure on domestic prices due to its heavy imports.”
"‘Earlier than expected (monetary) tightening in advanced economies is the most serious risk for Turkey because the inflationary pressures are mounting across the globe,’ said Hakan Kara, former chief economist at the central bank who is now at Bilkent University…”
“The lira has slipped for four days straight in part, bankers said, because of calls for early elections from opposition parties in the face of uncorroborated allegations against government officials from a mafia boss.”
“The series of accusations this month by Sedat Peker, whose YouTube videos have been watched by millions, have forced Mr Erdogan to defend his interior minister and insist that elections will not happen until 2023 as scheduled.”
“The lira has shed more than half its value in the last three years as Mr Erdogan has ousted three central bank governors and his government has used unorthodox policies which analysts say have left the economy more vulnerable to crises.” The National/Reuters report.
Indian Equities Rebound Strongly, NSE Hits Record, as Covid Infections Fall
The Times of India
“Equity indices finished higher on Friday with the benchmark BSE sensex rising over 300 points as falling Covid-19 infection rates boosted investor sentiment.
After scaling an intra-day high of 51,529, the 30-share BSE index rose 308 points or 0.6 per cent to finish at 51,423.”
“The broader NSE Nifty settled 98 points or 0.64 per cent higher at fresh record closing of 15,436.”
“Top gainers in the sensex pack included Reliance, M&M, HDFC twin, IndusInd Bank and Kotak Bank with their shares rising as much as 5.85 per cent.”
“While Sun Pharma, Bajaj Finserv, Ultra Cemco, Dr Reddy, ICICI Bank and Bajaj Finance were the major losers falling up to 3.82 per cent.”
“According to experts, falling Covid-19 infection rates in the country boosted sentiment…India posted its lowest daily rise in Covid-19 cases in over a month with 1.86 lakh fresh cases. The daily positivity rate also dipped to 9 per cent.”
“‘The best news for the economy and markets is coming from the Covid-19 data. This will certainly pave the way for the progressive removal of restrictions on economic activity,’ VK Vijayakumar, chief investment strategist at Geojit Financial Services told news agency Reuters.” Times of India reports.
Soaring Commodity Prices Put Pressure on Chinese Businesses
“Soaring commodity prices are putting pressure on businesses in China, even as the country’s wider industrial sector rebounds from the early effects of the coronavirus pandemic, according to the official data agency.”
“The National Bureau of Statistics released figures on Thursday that showed a 57 per cent rise in profits at large industrial companies in April compared with a year earlier, with the sector benefiting from the comparison with a low base in 2020 owing to the pandemic.”
“Profits grew 92 per cent in March. The data highlighted an ‘uneven’ improvement in corporate performance in China, the NBS said, despite the economy’s broad recovery over the past year. Higher prices for raw materials have boosted the profits of miners and other producers but they also stand to increase costs for downstream businesses further along the supply chain.”
“‘The profitability of some consumer goods industries has not yet recovered to their level before the pandemic,’ said Zhu Hong, an official at the NBS. ‘Coupled with the high prices of bulk commodities, this has increased the pressure on the production and operation of midstream and downstream industries.’ The Chinese government has expressed mounting concerns over a rally in commodity prices that has been partly driven by the country’s rapid industrial recovery as well as hopes of stronger global growth this year.” Thomas Hale reports.
Korea Investment and Securities Plans $600 Million ESG-Themed Bond
“Korea Investment & Securities is set to issue around $600 million worth of foreign currency bonds around July this year. It will be the first time that the brokerage is issuing dollar-denominated debt since it opened in 1974.”
”According to investment banking industry sources, Friday, Korea Investment is currently in talks with Citigroup Global Markets, Credit Suisse and HSBC, which have been chosen as underwriters for the bond issuance.”
"The bonds being issued will mature in three to five years. Targeting institutional investors from Asia, Europe and the Middle East, the firm is said to be considering the issuance of bonds themed on environmental, corporate and social governance (ESG) principles.”
"The brokerage has long maintained a leading position in the industry in terms of profits and performance. In particular, it took the top position during the first quarter of this year in terms of quarterly net profit among local brokerages, earning more than 350.6 billion won ($314 million) during the first three months of this year.”
"Market watchers say more and more companies are planning to raise direct foreign currency capital by issuing dollar-denominated bonds because they do not need to take additional procedural hedging strategies like swaps regarding foreign capital.”
“This will provide a great deal of convenience in managing foreign-currency capital for a major securities firm like Korea Investment, which handles a wide spectrum of overseas investments. Market watchers expect more Korean brokerage firms will now target overseas bond markets to attract dollars.” Anna J. Park reports.
Indonesia to Phase Out Coal-Fired Power to Meet 2060 Emissions Goals
Nikkei Asia Review
“Indonesian state utility Perusahaan Listrik Negara is aiming to phase out coal-fired power as the country brings forward its carbon neutrality ambitions to 2060.”
“The expedited schedule comes on the heels of a decision earlier in the month to stop the construction of new coal-burning plants as well as government plans to introduce a carbon tax.”
“It also follows criticism President Joko Widodo received from local media for failing to make a stronger commitment to curb greenhouse gas emissions at the Leaders Summit on Climate, hosted by U.S. President Joe Biden in April.”
“Darmawan Prasojo, PLN's deputy CEO, revealed the plan at a parliamentary hearing on Thursday. The company will look to replace 1.1 gigawatt worth of coal and gasified coal-powered power plants with renewable energy by 2025. It will also retire a total of 49 GW of coal-fueled power plants in stages by 2056.”
“Indonesia's energy demand is expected to reach 1,800 terawatt-hours in 2060, of which PLN expects 53% to come from solar and wind sources. Currently, 60% of the archipelago's energy comes from coal, while less than 1% comes from solar and wind, according to the International Energy Agency.” Shotaro Tani reports.