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Emerging Markets Daily - October 27
India Economy Reviving, More Developer Woes in China, African Airlines to Buy $160B in Planes, Lira Bear Sees More Decline, Iran and Nuclear Talks
The Top 5 Stories Shaping Emerging Markets from Global Media - October 27
India Economy Back on Track, ‘Animal Spirits’ Index Up
Economic Times (India)/Bloomberg
“India showed more signs of a recovery taking hold last month as its consumption-driving festive season kicked off, keeping it on track to regain the title of the world’s fastest-growing major economy."
”An array of indicators compiled by Bloomberg News pointed to a continuing rebound in demand in September, helping keep the needle on a dial measuring so-called animal spirits steady at 5 for a third straight month. Sentiment in the dominant services and manufacturing sectors was strong, thanks to a surge in new orders. Bank loan disbursals also grew as Asia’s third-largest economy slowly emerged from the shadows of the Covid-19 pandemic."
“The recovery coincides with the start of India’s months-long festive season beginning with Ganesh Chaturthi in September, heralding the boom season for consumption. The International Monetary Fund, as well as India’s central bank, this month estimated the nation’s gross domestic product will grow 9.5% in the year ending March -- the quickest pace among major economies -- after contracting 7.3% last year.” Economic Times and Bloomberg report.
It’s Not Just Evergrande: More Developer Woes to Come in China
South China Morning Post
“A third of China’s property developers could see their liquidity ‘acutely strained’ in the worst case scenario as weaker sentiment and new government regulations weigh on their funding sources, with a ‘real’ risk of default as some US$84 billion in debt is set to mature by the end of next year, according to S&P Global Ratings.”
“The credit rating company said that more than half of its rated portfolio of Chinese property developers are ‘most at risk’ under such a scenario as their bonds are rated as junk, from ‘B-’ to ‘B+’, or two levels below investment grade.”
“‘The entities have also made heavy use of funding via joint ventures and trust loans, given they have been largely shut out of more conventional funding,’ S&P analysts Matthew Chow and Aeon Liang said in a research note. ‘New regulations and weak sentiment are squeezing these capital channels.’” South China Morning Post reports.
African Airlines To Buy $160 Billion in Planes as Travel Recovers
The East African
“Plane manufacturer Boeing forecasts that Africa’s airlines will invest $160 billion in acquiring additional 1,030 aircraft by 2040 to meet the growing demand for flying in the continent, raising hopes for the recovery of the sector that has been hard hit by Covid-19.”
“Boeing says Africa’s strong, long-term growth prospects for commercial aviation are closely tied to the continent’s projected three percent annual economic growth over the next 20 years.”
“Initiatives such as the African Continental Free Trade Area and Single African Air Transport Market are expected to stimulate trade, air travel and economic cooperation. The US-based manufacturer also notes that the continent will require aftermarket services such as manufacturing and repair of these aircraft worth $235 billion, enabling growth for air travel and economies across the region.”
“‘Africa has healthy opportunities to expand travel and tourism, coinciding with increasing urbanisation and rising incomes,’ said Randy Heisey, Boeing managing director of commercial marketing for the Middle East and Africa.” Gerald Andae reports.
Prominent Lira Bear Sees Further Decline in Turkish Currency
“The lira’s most bearish forecaster just set an even weaker target as Turkey’s currency looks set to blow through the ‘symbolic’ level it warned of back in March.”
“Commerzbank AG now sees the lira reaching 11 per dollar as it approaches the round 10 it called when President Recep Tayyip Erdogan ousted his central bank governor in March. Just before that, the lira was outperforming all 24 emerging market currencies tracked by Bloomberg and most analysts expected it to snap eight years of losses.”
“The central bank started cutting interest rates in September, setting off an inflationary currency spiral. The lira is now the worst-performing among its peers, and options traders see a 63% probability of it reaching 10 versus the dollar by the end of the year.”
“‘Only a couple of months ago this level seemed to be unrealistic,’ said Ulrich Leuchtmann, head of currency strategy at Commerzbank in Frankfurt. ‘We wanted to remind our clients of the scale of risk.’”
“On Wednesday, Tatha Ghose, a senior emerging-market economist at Commerzbank in London, revised the lender’s projection to 11 versus the dollar by March 2022. Wells Fargo sees it reaching that level by the end of next year.” Tugce Ozsoy reports.
Iran to Return to Nuclear Talks by End November
Wall Street Journal
“Iran will return to nuclear talks before the end of November, its chief negotiator, Ali Bagheri, said on Wednesday, paving the way for the first talks since June on restoring the 2015 nuclear deal.”
“U.S. and European hopes of reviving the nuclear deal have faded sharply in recent months since hard-line Iranian President Ebrahim Raisi took office. Iran had repeatedly said it would continue the negotiations but refused to set a date.”
“The Biden administration has set the revival of the 2015 nuclear deal as a foreign policy goal and said it hopes to use it as a platform for negotiating a longer, stronger deal with Iran.”
“However senior U.S. officials have warned time is running short for reviving the deal given the progress Iran has made on nuclear technology.” Laurence Norman reports.
“We can’t change the direction of the wind, but we can adjust the sails.” - Indian proverb