Emerging Markets Daily - May 5
Turkey Inflation Hits 70%, OPEC+ Sticks to Production Plan, Dollar Slide Buoys EM Currencies, Dangote's Fertilizer Plant Pays Off, Thai Beverage Preps $1B Beer IPO
The Top 5 Stories Shaping Emerging Markets from Global Media - May 4-5
Turkey Inflation Soars Nearly 70%
BBC
“Consumer prices in Turkey soared nearly 70% in April from a year ago, hitting a two-decade high, official figures show. Transport, food prices and household furnishings recorded the sharpest rise in annual inflation, with transport costs more than doubling over the year.”
“Countries around the world are dealing with a growing cost of living crisis. But Turkey's problems have been made worse by its president's reluctance to raise interest rates - a commonly used tool to help cool inflation.”
“The cost of food and non-alcoholic drinks saw an annual increase of 89.1%, while furnishings and household equipment were up 77.64%. On a monthly basis, prices jumped 7.25% in April, according to data from the Turkish Statistical Institute.”
“'Turkey has seen a collapse in the value of the lira, as President Recep Tayyip Erdogan prioritises exports over currency stability. Mr Erdogan has described interest rates as ‘the mother and father of all evil,’ and has used more unorthodox policy to try to dampen prices including intervening in foreign exchange markets.”
“The Turkish president overhauled the country's central bank's leadership last year and the bank has slashed rates to 14% from 19% since September.” BBC reports.
OPEC+ Sticks to Production Plan As High Oil Prices Boost Economies
Wall Street Journal
“OPEC and its allies stuck to a small, planned increase in oil production on Thursday, as windfall revenue from high crude prices boosts the economies of Saudi Arabia and other producers while providing a buffer to Russia against Western sanctions.”
“In its third meeting since Russia invaded Ukraine, sending oil prices above $100 a barrel for the first time in eight years, the Organization of the Petroleum Exporting Countries and a coalition of Moscow-led oil producers agreed to continue raising their collective production by 432,000 barrels a day, delegates said.”
“The incremental boost for June is in line with what the cartel, called OPEC+, agreed to last year as part of a plan to raise output to prepandemic levels. It comes despite repeated calls in recent months from the U.S. and other major oil-consuming nations for Saudi Arabia and other OPEC+ members to tap into the group’s millions of barrels of remaining capacity to pump more oil to help tame prices.”
“In afternoon trading in London, Brent crude, the international benchmark, was up 1% at $111 a barrel, while U.S. crude was 0.8% higher at $108.70. WSJ reports.
Dollar Slide Spells Brief Rally for EM Currencies
Bloomberg
“Developing Asian currencies rallied Thursday as investors piled into riskier assets after the Federal Reserve damped bets for a super-sized rate hike.”
“Thailand’s baht surged as much as 1% to lead the gains, as the dollar tumbled after Fed Chair Jerome Powell dismissed the idea of a 75-basis point increase to cool price pressures. Malaysia’s ringgit rose 0.5%, while the Indian rupee and Philippine peso each climbed at least 0.3%.”
“The moves mark a reprieve for regional currencies after expectations of aggressive U.S. rate increases fueled a bout of strength in the greenback. But, some analysts say the rally may soon fade as China’s Covid curbs weigh on the global economy and the Fed presses ahead with more policy tightening.”
“‘This is an opportunistic time to reverse the recent weakness in Asian currencies,’ said Kiyong Seong, an Asia rates strategist at Societe Generale SA in Hong Kong. ‘We expect a temporary reversal, lasting a couple of weeks. However, souring risk sentiment as the Fed continues to raise rates will continue to weigh on EM currencies in the longer term.’” Bloomberg reports.
Dangote’s Timely Fertiliser Plant Pays Off as Prices Soar
African Business
“What better time to launch a fertiliser plant than when global prices are at their record highs? That’s exactly what Aliko Dangote, Africa’s richest man, did.”
“On March 22, Dangote’s $2.5bn fertiliser plant in Nigeria’s economic capital, Lagos, started production. The 3-million tons a year capacity will meet local demand of 1.5-million tons a year and have a large surplus for export. Producing both urea and ammonia fertilisers, it’s the world’s third-biggest fertiliser plant and second-biggest producer of urea-based fertiliser.”
“Global fertiliser prices have been on the rise since 2020, surging as much as 70% in the past year. A big boost to the rising prices has been provided by Russia’s invasion of Ukraine, which has led to a spike in natural gas prices, the key feedstock for ammonia and urea-based fertilisers.”
“With both warring countries being major grain producers and exporters, global food markets have been hit hard by the extensive disruption which shows no signs of ceasing. As a result, food commodities are seeing their biggest price increases since 2008, according to the World Bank’s Commodities Outlook Report released on April 26. Fertiliser demand has jumped in other producer countries seeking to boost grains output to fill the gap in global supply.”
“…While Dangote’s initial export targets were primarily Africa – the plant has the touted objective of making the continent self-sufficient in food production – current market realities mean there’s increasing demand from outside the continent. Orders have come from far flung places in the US, Brazil, Mexico, India and the EU.” Dulue Mbachu reports.
Thai Beverage Seeks Up to $1 Billion in Singapore IPO of Beer Unit
Channel News Asia
“Singapore-listed Thai Beverage is looking to raise as much as US$1 billion through the revived Singapore initial public offering (IPO) of its regional beer business this year, two sources familiar with the matter said on Thursday (May 5).”
“The size of the potential fundraising has been halved from a year ago because of the impact of the COVID-19 pandemic and decreased market valuations, said the sources who declined to be identified as they were not authorised to talk to the media.”
“ThaiBev, the maker of Chang lager, declined comment on the funding amount. Controlled by tycoon Charoen Sirivadhanabhakdi, ThaiBev is one of Southeast Asia's largest makers of drinks.”
“Earlier on Thursday, the company said in a regulatory filing that it had re-started work to list its regional beer unit, BeerCo, and would look to sell up to a 20 per cent stake through the Singapore IPO.” Channel News Asia reports.
“To burn with desire and keep quiet about it is the greatest punishment we can bring on ourselves.” - Federico Garcia Lorca