Emerging Markets Daily - November 30

Indonesia Crypto Boom, Alibaba Market Cap Sinks by Half, Moderna Fears Omicrom, S. Korea Eyes Saudi Green Hydrogen Boom, Softbank Bets on Asia Metaverse,

The Top 5 Stories Shaping Emerging Markets from Global Media - November 30

Indonesia Crypto Trade Booming

Rest of World

“…Indonesia’s local crypto following has swelled over the past year…In 2020, nearly $4.5 billion in crypto assets were traded in the country. By October this year, that shot up more than ten times to around $50 billion.” 

“The barriers to crypto trading in Indonesia have never been lower. In Indonesia today, all you need to get started buying and trading cryptocurrency assets is a smartphone, an internet connection, and roughly 75 cents.”

“Localized exchange apps like Pintu, Indodax, Luno, and Binance-backed Tokocrypto are suddenly thriving  — tools that connect directly to local banking and digital payments platforms, so new users can sign up and start trading immediately.”

“The prospect of quick gains is alluring: Religious figures and influencers have taken to the internet to tout the ease of trading, and as Indonesia’s economy has stuttered, the appeal of speculating in crypto has grown, outstripping similar behavior in stocks.”

“At the same time, the country’s regulators are racing to keep up, and even crypto proponents know that financial literacy needs to match the mounting opportunities. The government has announced plans to set up its own crypto market in 2022. As affirming as the crypto pile-on has been, a crash would be just as damaging.” Meaghan Tobin and Adi Renaldi report.

Alibaba Market Cap Sinks by Half Over the Past Year

Nikkei Asia

“Alibaba Group Holding has lost more than half its market value in the year since finance arm Ant Group's listing was postponed under pressure from Chinese regulators, sapping the momentum of China's top e-commerce company.”

“Alibaba's market capitalization topped out at 6.6 trillion Hong Kong dollars ($846 billion at current rates) at the end of October 2020, but has since slumped to about HK$2.8 trillion, or $358 billion. The company is also listed on the New York Stock Exchange.”

“Ant Group's valuation has sunk below $200 billion from over $300 billion a year ago, according to one estimate.”

“An earnings call this month illustrates the bearish turn. CEO Daniel Zhang and other executives were peppered with tough questions from analysts about last quarter's lackluster results. Asked when new operations are likely to turn a profit and whether weak group profit owed to macroeconomic factors, management gave few clear-cut answers.”

“Chief Financial Officer Maggie Wu provided perhaps the biggest surprise, saying revenue growth is projected to slow to 11%-16% in the second half of this fiscal year, down from 41% for all of the previous fiscal year. The loss of steam would put overall revenue growth for the current year at a record low 20%-23%.” Nikkei Asia reports.

Moderna Chief Says Existing Vaccines will Struggle Against Omicrom

Financial Times

“The chief executive of Moderna has predicted that existing vaccines will be much less effective at tackling Omicron than earlier strains of coronavirus and warned it would take months before pharmaceutical companies could manufacture new variant-specific jabs at scale.”

“Stéphane Bancel said the high number of Omicron mutations on the spike protein, which the virus uses to infect human cells, and the rapid spread of the variant in South Africa suggested that the current crop of vaccines may need to be modified next year. ‘There is no world, I think, where [the effectiveness] is the same level . . . we had with [the] Delta [variant],’ Bancel told the Financial Times.”

“He added: ‘I think it’s going to be a material drop. I just don’t know how much because we need to wait for the data. But all the scientists I’ve talked to . . . are like, ‘This is not going to be good’. The Moderna chief executive’s comments come as public health experts and politicians have tried to strike a more upbeat tone about existing vaccines’ capacity to confer protection against Omicron…”

“Joe Biden, US president, subsequently said Omicron was ‘a cause for concern, not a cause for panic,’ adding that the government’s medical experts ‘believe that the vaccines will continue to provide a degree of protection against severe disease’. However, Bancel said scientists were worried because 32 of the 50 mutations in the Omicron variant are on the spike protein, which current vaccines focus on to boost the human body’s immune system to combat Covid." Most experts thought such a highly mutated variant would not emerge for another year or two, Bancel added.”

“The Moderna chief’s predictions rattled investors in Europe and Asia on Tuesday, with equities and crude prices dropping.” The FT reports.

South Korea’s S-Oil Eyes Saudi Arabia Potential Green Hydrogen Bonanza

Korea Herald

“With just one-fifth of its barren land, Saudi Arabia can generate sufficient renewable energy to produce 530 million tons of green hydrogen. That is equivalent to the entire world’s green hydrogen demand in 2050.”

”Ironically, the world’s biggest exporter of fossil fuels is gifted with the cheapest solar and wind power on Earth, as the sun shines reliably every day and the wind blows constantly every night in the desert.”

”Thanks to its almost unlimited sunshine and wind, Saudi Arabia is expected to produce the cheapest green hydrogen in the world. State-controlled oil giant Saudi Aramco, which aims to achieve net-zero emissions by 2050, announced in October that it would launch a green hydrogen production project in the country.”

”At this very moment, numerous South Korean companies are salivating over opportunities to import this cheap green hydrogen. Asia’s No. 4 economy is projected to consume 27.9 million tons of clean hydrogen in 2050, but only 3 million tons of green hydrogen will be produced domestically due to unfavorable natural conditions. Simply importing green hydrogen from Aramco and selling it here would generate massive profits.”

”During an interview with The Korea Herald, Lee Jeung-ik, vice president of the new business division at S-Oil, one of the top four refineries in Korea, says S-Oil has the best chance to import the clean hydrogen from the Middle Eastern country due to its special relationship with Aramco.”

“‘Aramco is the largest shareholder and the parent company of S-Oil, and we’re maintaining close ties with each other. This will allow S-Oil to take the lead in importing green hydrogen from Aramco,’ the 53-year-old executive said.” Korea Herald reports.

Softbank Bets on Asian Metaverse

Wall Street Journal

“Softbank Group Corp. is investing $150 million in a South Korean metaverse platform that has amassed a large following of young female users by selling high-fashion items for 3-D avatars, according to the companies involved in the deal.”

“Naver Corp.’s Zepeto, which users access via a mobile app, is Asia’s busiest metaverse platform with about 2 million active users a day. People scan a photo and can build digital likenesses of themselves, then hang out in virtual worlds. Users can voice chat with each other and roam through virtual spaces such as a haunted house, a school classroom or a garden wedding.”

“Zepeto, even by the nascent standards of the metaverse, is niche. Roblox Corp. , which runs one of the most popular metaverse platforms, said it had more than 47 million daily active users as of the third quarter.”

“But about 70% of Zepeto’s users are female and between the ages of 13 and 24, Naver said—a rarity in the metaverse landscape that is largely dominated by older, male gamers.”

“The SoftBank Vision Fund 2 investment values Zepeto, launched in 2018, at more than $1 billion. A group of South Korean investors including HYBE Co. , which manages K-pop boy band BTS, is separately pouring in about $41 million at the same valuation. The Series B fundraising round led by SoftBank is expected to be announced later Tuesday, according to the companies involved.”

“Zepeto’s appeal to young females, mostly across Asia, shows the metaverse’s potential to reach a diverse audience and create a new online marketplace. Some 1.5 billion virtual fashion items are sold on Zepeto, most of which are made by independent creators and typically cost a few dollars or less each.” WSJ reports.

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