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Emerging Markets Daily - November 5
Food Prices Surging, Uniqlo Pushes Deeper into China, Saudi Wealth Fund Eyes Direct China Investments, Airlines and Oil Price Woes, Crisis Grips Horn of Africa
The Top 5 Stories Shaping Emerging Markets from Global Media - November 5
Food Prices Surging Worldwide
“… global food prices have surged because of bad weather, such as droughts in North and South America and heavy rain in Europe, and the supply chain problems that came with the easing of coronavirus restrictions.”
“The FAO food price index rose at an astonishing annual rate of 31 per cent in October. The IMF’s food and beverages commodity index rose at a similar rate. In real terms, after taking into account inflation, global food commodity prices are now higher than their 2008 and 2011 peaks, just before the Arab spring protests that were partly caused by soaring food costs.”
“Poland’s agriculture minister was one of those to warn recently of a ‘food prices crisis’. In the worst-case scenario, rising food costs combined with surging energy prices have the potential to imperil the livelihoods of millions of people around the globe — just as the world emerges from the worst of the pandemic.” The FT reports.
Japan’s Uniqlo in Aggressive China Retail Push
“Uniqlo will launch a global flagship store in one of Beijing's leading fashion districts Saturday, a key step in its aggressive expansion strategy in China that aims to open 100 stores year.”
“The Sanlitun location is Uniqlo's first global flagship in the Chinese capital and the third in mainland China. It includes an exhibit featuring traditional embroidery from the Miao ethnic minority, which participates in one of Uniqlo's community service initiatives, and is also the first Chinese store to sell flowers.”
“‘We are focused on the Chinese market,’ Jalin Wu, executive officer of brand operator Fast Retailing and chief marketing officer of Uniqlo Greater China, told reporters Friday. ‘We aim to open 100 stores in the country a year, and to expand in regional cities as well,’ Wu said.”
“Social media heavily influences consumer trends in China. Wu said Uniqlo would work to further integrate brick-and-mortar sales with online tools like networking platforms to provide customers with a more convenient experience.”
“Including production partnerships, Uniqlo has been operating in China for about 30 years. It now has over 850 stores across about 180 Chinese cities, surpassing its presence at home in Japan.” Shunsuke Tabeta reports.
Saudi Wealth Fund Poised for Direct China Stock Deals
“Saudi Arabia’s sovereign wealth fund may be poised to start making major investments in Chinese companies, after so far mostly limiting its overseas holdings to the U.S. and Europe.”
“The $450 billion Public Investment Fund has applied for a Qualified Foreign Institutional Investor license in China, according to information published on the website of the country’s top securities regulator. That will give it the ability to directly trade renminbi-denominated stocks, rather than having to go through third parties.”
“A tilt toward China would make sense for the kingdom as it looks to develop economic ties through investment by its sovereign fund. China is the kingdom’s biggest trading partner and a top customer for Saudi Aramco, which is chaired by PIF Governor Yasir Al Rumayyan.”
“Many global investors are warming up to China’s battered stocks amid bets that Beijing’s regulatory overhaul has potentially peaked. The world’s second-biggest economy has also been an appealing destination for sovereign investors, with Russia’s wealth fund converting billions of its dollar holdings into yuan as part of an effort to make the country less vulnerable to sanctions.” Matthew Martin reports.
Higher Oil Prices to Hit Airlines
“Rising oil prices will add pressure on airlines' costs, forcing them to pass on some of that burden to passengers by raising air fares, but will not stall the recovery of carriers, according to the head of the International Air Transport Association.”
“Global airlines, already battered over the past 20 months by the Covid-19 pandemic that has hit their revenue, are facing stronger oil prices of about $80 per barrel and increasing fees from air navigation service providers (ANSPs) seeking to recoup their own losses, Willie Walsh, the director general of Iata, said in an online media briefing on Wednesday.”
“Oil prices have hit multi-year highs with global supplies constrained while demand is rising as developed economies rebound faster than expected from the coronavirus-induced slowdown. Brent, the global benchmark under which two thirds oil trades, has gained more than 60 per cent since the start of the year and was trading at $82.87 a barrel at 6.30pm UAE time on Wednesday.” Deena Kamel reports.
Geopolitics: Crisis Engulfs the Horn of Africa
“Ethiopia is on the verge of full-scale civil war. The confrontation between the authoritarian armed forces and the democratically minded public in Sudan is escalating. Somalia’s extremist al-Shabaab movement is gaining momentum on the ground, once again threatening the government in Mogadishu.”
“Just months ago, the long-troubled Horn of Africa had settled into a fragile but hopeful period of relative calm, with signs of economic and social progress and hopes for durable political stability. Now, though, much of that has come undone, and a region that has long been associated with violence, displacement and extremism appears on the verge of cataclysm and further economic ruin.”
“The reasons for the unfolding disaster are many; the consequences are potentially dire. Though the conflicts are not directly related, they are all driven by common factors, including the ongoing damage of the coronavirus pandemic, which has exacerbated political polarisation and worsened economic desperation in the Horn.”
“Africa experts also describe a reordering of the geopolitical space, following disengagement from the continent by the United States and Europe just as the Horn became a battleground for emerging regional rivalries.” Borzou Daragahi reports.
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