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Emerging Markets Daily - November 4
China Markets to Triple by Next Decade, OPEC+ Conflict Looms with Joe Biden, Asia Global Energy Demand, Fed Tapering Soon, Ethiopian Airlines and African Skies
The Top 5 Stories Shaping Emerging Markets from Global Media - November 4
Mainland China Capital Markets to Triple in Size By Next Decade
South China Morning Post
“Mainland China’s capital market, including both equities and bonds, will more than triple in size in the next decade to US$100 trillion, with Hong Kong playing a vital gateway role, according to the head of the city’s bourse operator.”
“‘The role of Hong Kong is to connect China with the world, as the city is a centre for raising capital, wealth management and risk management. Hong Kong is a gateway to bring international investors to the growth story of China,’ said Nicolas Aguzin, chief executive of Hong Kong Exchanges and Clearing in a speech on Thursday at the 2021 Hong Kong FinTech Week conference.”
“If his estimate is accurate, the Chinese stock market in 10 years’ time will almost match the size of the entire US capital market today, including both stocks and bonds. That figure currently stands at US$96 trillion, according to data from the Securities Industry and Financial Markets Association.” Enoch Yiu reports.
OPEC+ Heads for Geopolitical Showdown with the US Over Supply
“OPEC+ is heading for a politically consequential showdown with President Joe Biden, as Saudi Arabia and its allies must choose whether to heed American demands for more oil.”
“The cartel looked set to rebuff the request, triggering a bare-knuckle fight with the White House, which is worried that inflation caused by high energy prices could derail its economic agenda. ‘You take a look at oil prices,’ Biden told reporters at a news conference at the United Nations climate summit in Glasgow on Tuesday. Fuel costs are high because of ‘the refusal of Russia or the OPEC nations to pump more oil.’”
“It’s a fight that transcends the oil market and goes deep into America’s alliance with [Saudi Arabia] which has been tense since a U.S. report released in February concluded that Crown Prince Mohammed bin Salman approved the killing of Washington Post columnist Jamal Khashoggi. Biden has so far refused to speak with the crown prince, infuriating the royal palace in Riyadh, which had nearly unfettered access to the White House during the Trump administration.”
“The U.S. is asking OPEC+ to increase the size of its monthly supply hike to between 600,000 and 800,000 barrels a day, said delegates and diplomats. The White House has also indicated that it would accept, at a minimum, that the cartel sticks to its current plan for a 400,000 barrel-a-day increase, if it comes with a pledge that other members will pump extra to compensate for those nations that are currently struggling to hit their targets, they said, asking not to be named because the information is private.” Bloomberg reports.
Asia to Drive Global Demand for Energy by 2023
“Consumption of power across the world is set to rise well into 2023 following ongoing volatility in the energy market, with growth set to be led by Asian countries and new technology, according to Fitch Solutions.”
“Power consumption will plateau, growing at a rate of just 2.2 per cent beyond 2023, according to the report. The growth follows a period of significant lull in energy consumption in 2020, when the spread of Covid-19 forced factories to close, transportation to halt and ushered in months of low demand.”
“Growth in the power sector will be led by Asia, which will see its share of demand rise to 56.7 per cent from 52.5 per cent. ‘We highlight that China, India, and Indonesia will all see a dramatic rise in electricity demand from a combination of strong demographic and macroeconomic fundamentals as well as rapidly developing industrial activity,’ Fitch Solutions said.” Jennifer Gnana reports.
Fed to Start Winding Down $120 Bn-a-Month Stimulus Program
“The Federal Reserve said it would begin scaling back its massive $120bn monthly bond-buying programme this month, a critical milestone for a US economy that is recovering from the pandemic and contending with surging inflation.”
“The decision is the culmination of months of debate among Fed officials about the level of support the world’s largest economy needs as price pressures begin to extend beyond the sectors most sensitive to the post-pandemic reopening.”
“The move corresponded with abrupt actions by a number of central banks around the world to tighten monetary policy, including the Reserve Bank of Australia and the Bank of Canada.”
“Markets expect the Bank of England, which meets on Thursday, to raise interest rates for the first time since 2018. Investors are betting that the European Central Bank could follow suit next year despite recent pushback from its president Christine Lagarde.”
“Roaring consumer demand in the US has collided with acute supply chain disruptions, causing prices to jump in some sectors for longer than central bankers had anticipated. Rising rents coupled with wage pressures and a severe shortage of workers have given rise to concerns that inflation will prove more persistent than the Fed had initially expected.” Colby Smith reports.
Inside Ethiopian Airlines Plan to Dominate African Skies
The East African
“Ethiopian Airlines is establishing its presence in more than six African countries through a management role or strategic partnership with the local carriers, making it a dominant player in the continent.”
“The move is set to give East African carriers such as Kenya Airways (KQ) a run for their money. KQ will particularly feel the pinch as increased competition will likely make it harder for the carrier, which is in a deep financial mess, to fly back to profit territory, not to mention its goal of reclaiming its lost glory as the ‘Pride of Africa’.”
“Next month, the Ethiopian carrier is expected to launch Air Congo, the latest in the string of airlines where it is acquiring stakes as African countries move to revive their ailing national carriers. Ethiopian Airlines will operate both the medium and long haul fleet in DRC, which will comprise De Havilland Canada Dash 8-400s, Boeing 737s and two 787s.”
“The Addis-based carrier is also involved in starting a new airline in Zambia, which is expected to be up and running next month. Ethiopia will hold a 49 percent stake while Zambia will have a controlling stake of 51 percent.” Gerald Andae reports.
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