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Emerging Markets Daily - November 3
EM Currencies Face Bumpy Road, Mobius Calls Crypto a 'Religion,' Trade Lanes Clogged Worldwide, Saudi PIF Mulls Cell Towers Deal, Ethiopia 'State of Emergency'
The Top 5 Stories Shaping Emerging Markets from Global Media - November 3
Emerging Markets Currencies Face Bumpy Road Ahead
“Emerging market currencies are headed for more trouble next year as mounting expectations the Federal Reserve will raise interest rates to quell inflation are set to keep the mighty U.S. dollar in the driving seat, a Reuters poll showed.”
“Most emerging market currencies were forecast to weaken or at best cling to a range over the year as currency strategists in the Oct. 29-Nov. 2 Reuters poll feared high commodity prices would further pressurise economies already struggling with elevated inflation.”
“Higher U.S. Treasury yields are becoming a stronger headwind for EM currencies, as investors bet elevated U.S. inflation could lead the Fed to tighten policy sooner than signaled. ‘For EM currencies, the worst is not yet behind us, as growth and inflation challenges persist into 2022, while U.S. 10-year Treasury yields are anticipated to march relentlessly higher through next year,’ noted Phoenix Kalen, head of emerging markets research at Societe Generale…”
“The most actively traded emerging market currency, the Chinese yuan, was predicted to depreciate over 1% to 6.47 per dollar in a year as the economy is slowing after a strong rebound from the pandemic-driven slump early last year…”
“The Thai baht, which has plunged about 10% so far this year, was expected to fall 1.5% more to 33.77/$ in the next six months. The Indian rupee, down over 2.0%, was forecast to depreciate more modestly, another 1.0% to 75.28/$ in a year.”
“Turkey's battered lira, which has already lost a fifth of its value this year, was expected to shed another 6% to 10.09/$ in a year.”
“The lira has been the worst-performing currency among EM peers this year, thanks to an unconventional monetary policy espoused by President Tayyip Erdogan - cutting interest rates to fight inflation. He has replaced the central bank head three times in the last 2-1/2 years.”
“While several remain under intense pressure, a few emerging market currencies are likely to mark a stronger 2022 -- especially the South African rand, South Korean won and the Russian rouble.” Vivek Mishra reports.
Top EM Investor Dismisses Crypto as “a Religion,” Not an Investment
“Global investor Mark Mobius on Wednesday called cryptocurrencies a religion, joining a chorus of digital coin skeptics at a time when bitcoin and ether are trading near all-time highs. ‘It’s a not an investment, it’s a religion,’ the founder of Mobius Capital Partners said on CNBC’s Squawk Box.”
“‘People should not look at these cryptocurrencies as a means to invest. It’s a means to speculate and have fun. But then you got to go back to stocks at the end of the day,’ he added. Mobius isn’t alone in slamming crypto. JPMorgan Chase CEO Jamie Dimon has also vocally criticized the likes of bitcoin, most recently calling it ‘worthless’ and ‘fool’s gold.’”
“Billionaire investor Paul Tudor Jones, on the other hand, believes crypto has its place, and told CNBC last month that he believes cryptocurrencies are a better bet against inflation than even gold. Mobius, a world markets guru who had a long career at Franklin Templeton before striking out on his own, believes stocks are the best bet because of currency and inflation factors.”
“‘Stocks definitely are the answer because the devaluation of currency is not going to go away, which means inflation is going to continue at a high rate going forward,’ he said. ‘Don’t forget the U.S. money supply has gone up over 30%.’” CNBC reports.
Trade Sea Lanes Congested Worldwide
Sea Trade Maritime News
“While congestion on the key transpacific and Asia – Europe trades has grabbed the headlines analysts Sea-Intelligence say it impacts a far wider range of trades.”
“Of the 34 trade lanes covered in its Global Liner Performance Report SeaIntel most trades showed a major increase in delays in September this year compared to a baseline of 2016 – 2019.”
“‘Most trades show very large increases in delays, indicating that the congestion problems leading to delays are indeed prevalent globally and not isolated to just a few large key trades,’ said Alan Murphy, CEO of SeaIntel.”
“The average delay across the 34 trades covered peaked at 3.93 days in August this year, however, for many trades delays are significantly higher. In terms of the relatively less impacted trade lanes, these are mostly connected to South America, from both Europe and North America.” SeaTrade Maritime News reports.
Saudi Wealth Fund Mulling Major Cell Towers Deal
“The Public Investment Fund is weighing a deal to combine the mobile phone infrastructure of Saudi Telecom Co. and Zain Saudi Arabia in a merger that would form the kingdom’s largest cellular towers company, according to people familiar with the matter.”
“If completed, the deal would create a firm with 23,000 towers, which the Saudi wealth fund could potentially list on the local bourse, the people said. A merger would cut overlap in places where both firms have towers, making it more efficient to invest in upgrading coverage and mobile internet speeds, they said, asking not to be identified as the information is private.”
“Telecom operators globally are seeking to derive more value out of their tower portfolios, taking advantage of rising investor appetite for such assets. MTN Group Ltd. is said to be in talks with American Towers Inc. and IHS Holdings Ltd. about the sale-and-lease back of its South African tower holdings, while Vodafone Group Plc completed an initial public offering of its tower business earlier this year.” Matthew Martin and Dinesh Nair report.
Ethiopia Declares State of Emergency as Conflict Escalates
“Ethiopia’s government has declared a state of emergency as forces from the northern Tigray region said they were gaining ground and authorities in the capital prepared for a possible military assault.”
“The two sides have been at war for almost a year though the conflict has mostly been confined to the north of the country. It has recently spread further south and fighting has sharply escalated in the past few days. ‘The state of emergency is aimed to protect civilians from atrocities being committed by the terrorist TPLF group in several parts of the country,’ state-affiliated media reported on Tuesday, referring to the Tigray People’s Liberation Front that ruled the country for three decades until 2018.”
“The declaration of a state of emergency came after Abiy Ahmed, Ethiopia’s prime minister, called on citizens to take up arms to against what he said was a TPLF advance that threatened to ‘push the country to its demise’. Getachew Reda, a senior member of the TPLF, said that the Ethiopian army had been routed from Tigray.” David Pilling and Andres Schipani report.
“Above all, don't lie to yourself. The man who lies to himself and listens to his own lie comes to a point that he cannot distinguish the truth within him, or around him, and so loses all respect for himself and for others. And having no respect he ceases to love.”
― Fyodor Dostoevsky, The Brothers Karamazov