Emerging Markets Daily - November 27

Investors Turn Bullish on China, New Covid Variant Spawns Global Fears, China and Iran Nuke Talks, Foreign Investment in Saudi Markets, Indian Weddings Rise Again

The Top 5 Stories Shaping Emerging Markets from Global Media - November 26/7

Major Investors Turn Bullish on China, Bearish on India

Bloomberg

“In a change of tone over the world’s two biggest emerging markets, global investors overseeing billions of dollars are slowly starting to favor China versus India -- reversing a year-long trend that’s pushed stocks in opposite directions.” 

“BlackRock Inc. has upgraded Chinese stocks as policy hurdles ease, saying ‘the time to position in China is now,’ while trimming its exposure to Indian equities. Goldman Sachs Group Inc. and Nomura Holdings Inc. both downgraded Indian stocks in recent days, with the former upgrading offshore Chinese equities at the same time.” 

“Valuations are the key rationale as the losses triggered by Beijing’s wide-ranging regulatory crackdown have made Chinese equities relatively cheap, while shares in the South Asian nation appear expensive after a world-beating rally.” 

“The MSCI China Index is trading under 13 times its one-year forward earnings estimates while its Indian peer has a multiple of 22, putting the gap at two standard deviations above the average over the past decade. The Chinese gauge has fared better since the end of September after six straight quarters of underperformance…”

“The pivot toward China comes amid growing optimism that its battered equities have factored in the worst of Beijing’s rein-tightening that at its most extreme wiped off as much as $1.5 trillion in value. That said, an economic slowdown and a property market crunch are among factors that make being bullish on China a brave call.”

“BlackRock moved China to a more neutral position from underweight, and narrowed its underweight call on internet services companies. Meanwhile, it is booking some profits on Indian shares.” Ishika Mookerjee and Ashutosh Joshi report.

New Covid Variant, Omnicron, Triggers Global Fears

Wall Street Journal

“A fast-spreading new strain of the coronavirus first detected in southern Africa is a global “variant of concern” and might pose a higher risk of people falling ill with Covid-19 for a second time, the World Health Organization said Friday, as governments around the globe restricted travel from the region.”

“WHO said there was also preliminary evidence that the variant, which it named Omicron after the Greek letter, was more transmissible than the Delta variant that is currently dominant world-wide, and other virus strains. Health authorities in Belgium, Israel, Hong Kong and Botswana said they had detected first cases of the variant.”

“Although scientists were still figuring out the exact effects of the variant’s many mutations, its discovery highlights the continued threat posed by an evolving virus to the world’s emergence from the pandemic. The travel restrictions imposed by many countries, including the U.S., raised fears that there could be further setbacks to the reopening of economic and social life, including in Western countries with high vaccination rates.” The Wall Street Journal reports.

Geopolitics: China Asserts Influence in Upcoming Iran Nuclear Talks

Bloomberg

“China is drawing a link between nuclear non-proliferation talks and a western submarine pact in the Pacific that it opposes, potentially adding another obstacle to the tortured process of reaching a deal with Iran.”

“Beijing had already emerged as a linchpin to the success or failure of talks resuming Monday in Vienna on how to restore the 2015 nuclear accord between Tehran and world powers.”

“The decision by China’s envoy at the International Atomic Energy Agency this week to elevate Beijing’s concerns over the so-called Aukus atomic submarine deal between the U.S., U.K. and Australia alongside international worries about Iran’s nuclear program suggests Chinese ambitions are growing.”

“‘Why do the U.S. and U.K. say Iran can’t manufacture enriched uranium above 3.7%, while on the other hand openly and directly transferring to Australia tons of 90% highly-enriched nuclear-weapons material?’ China’s envoy to the IAEA, Wang Qun, said on Friday. ‘This is a classic case and point of a double standard.’” Bloomberg reports.

Foreign Investment in Saudi Market Reaches $36 Billion

Arab News

“Foreign inflows in the Saudi capital market since 2019 have reached nearly SR135 billion ($35.98 billion), despite the Kingdom being at an early stage in dealing with external investors, Capital Market Authority Chairman Mohammed ElKuwaiz said.”

“Opening the market for foreign investment supports diversification of funding sources for listed companies, ElKuwaiz said, during his participation in the second session of the Financial Stability Conference in Riyadh.”

“The CMA chairman added that Saudi Arabia is working to issue a market-making system to boost the institutional investor's effectiveness in trading, not equity.  The authority does not aim to maximize the institutional investor’s turnover over the individual investor, but the goal is to improve the market’s depth through diversifying trading, he explained.” 

“Turnover of institutional investors, comprising all non-individual investors, doubled, he added.  ElKuwaiz highlighted that a total of six companies out of 10 largest companies in terms of market capitalization are preparing sustainability reports even though they are not obligated to announce them.” Arab News reports.

Big, Fat Indian Weddings Rev Up Again As Covid Pain Eases

Nikkei Asia

"..The country's unorganized and highly fragmented marriage services industry is estimated to be worth about 3.7 trillion rupees, according to a KPMG report commissioned by matchmaking site Matrimony.com…”

“India's daily new infections have fallen below 20,000 in recent weeks after peaking above 400,000 per day in early May. The downtrend comes thanks to nearly 1.2 billion vaccine doses being administered. As a result, many places now allow 200 to 250 people to attend weddings, and most of the restrictions put in place to contain the virus have been lifted.”

“About 2.5 million weddings are expected to take place across the nation from Nov. 14 to Dec. 13, bringing ‘a massive flow’ of about 3 trillion rupees ($40.3 billion) to the country's trading community, according to the Confederation of All India Traders, which represents 70 million merchants. In Delhi alone, more than 150,000 weddings are likely to take place, which could generate 500 billion rupees worth of business.”

“Indian weddings create demand for gold and diamond jewelry, wedding apparel, footwear, dried fruit, electronics and gifts. They are usually large-scale affairs running up to three days, longer in some cases, and venues such as hotels and farmhouses need to be reserved. One wedding is a windfall that spills into the tills of caterers, flower shops, decorators, taxi drivers, orchestras, lighting specialists, photographers and other professionals.”

Deepak Sharma, who runs a catering and decoration business in the national capital, said he has bookings for almost every wedding muhurat day. ‘Muhurat’ refers to particularly auspicious moments to start a business, hold a ceremony or otherwise embark on a new path. ‘Wedding numbers are back to pre-pandemic levels,’ he said.” Nikkei Asia reports.

“There is neither happiness nor misery in the world; there is only the comparison of one state with another, nothing more. He who has felt the deepest grief is best able to experience supreme happiness. We must have felt what it is to die, Morrel, that we may appreciate the enjoyments of life.” - The Count of Monte Cristo, Alexandre Dumas