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Emerging Markets Daily - September 3
Bumpy Ride Ahead for EM Currencies, Arab World Streaming App and Future of Music, Iran Nuke Talks, Africa's EV Opportunities, S. Korea Exports Hit New Highs
The Top 5 Stories Shaping Emerging Markets from Global Media - September 3
Bumpy Ride Ahead for Emerging Markets Currencies
“Volatility in high-risk, high-return emerging market currencies is set to persist amid fears of a "taper tantrum" once the U.S. Federal Reserve starts cutting its bond buying, according to analysts who say a sell-off is likely in the next three months.”
“A majority of FX strategists in the Aug. 30-Sept. 2 Reuters poll said recent dollar weakness would be temporary as the day the Fed eventually decides to taper its $120 billion of monthly purchases approaches, likely pushing U.S. yields higher.”
“High-beta currencies - those with the most risk but also offering the greatest potential for returns such as the Brazilian real and South African rand - are set to drive overall currency volatility over the next 12 months.”
“While the Fed is not expected to shift gears for another few months, any move by markets to price in a more hawkish stance could weigh on high-beta, CEE and commodity FX, but less so on EM Asia FX, Barclays strategists wrote in a note.”
“Most emerging market currencies were forecast to weaken or at best cling to a range over the next three to six months as U.S. stimulus withdrawal could push investors to shun the currencies coined the "fragile five" as they did in 2013.” Reuters reports.
Why an Abu Dhabi-Based Streaming App is the Future of Music
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“When Lebanese founders Elie Habib and Eddy Maroun began developing a digital music service back in 2012, they had relatively modest ambitions. At the time, the global digital market was dominated by Apple’s iTunes Store, which had sold 20 billion songs by September that year; Spotify had launched in the U.S. just 12 months earlier. The founders wanted to build a product that re-created the record store or lounge experience, where users could share the music they loved with friends.”
“But in just a few years, their app, Anghami, now based in Abu Dhabi, has become a vital part of shaping the music business in the Middle East and North Africa (MENA) region. It has 70 million registered users and nearly 60 million songs in its library. It’s also set to be the first Arab tech startup to go public on New York’s Nasdaq stock exchange, thanks to a $220 million SPAC merger with Vistas Media Acquisition Company.”
“Anghami’s trajectory has also been something of a case study in how the global music industry is being slowly transformed from outside its core centers of New York, Los Angeles, and London.” Yinka Adegoke writes.
Geopolitics: Iran Digs in On Nuclear Talks, Boosted by China and Russia
“U.S. and European efforts to coax Iran back into nuclear negotiations as soon as this month are being blunted by support the Islamic Republic’s already emboldened leaders are receiving from China and Russia.”
“The result is that three years after former President Donald Trump imposed his ‘maximum pressure’ policy, Iran has enriched uranium close to weapons grade while its economy is showing some signs of stabilizing with the help of Beijing and Moscow, even as crucial oil exports remain heavily sanctioned.”
“Diplomats and analysts suggest the developments are creating space for Iran’s new government to expand the list of concessions it wants from Washington to return to compliance with the 2015 agreement struck with world powers. Doing so could push the talks into next year, topple the process entirely, or lead to fresh turmoil in the Middle East.”
“Iran’s negotiators see U.S. sanctions yielding ‘diminishing returns’ and they’re likely to demand relief that goes beyond the nuclear penalties imposed by Trump, said Ali Vaez at the International Crisis Group, the Brussels-based research institute formerly led by top U.S. Iran envoy Rob Malley.” Jonathan Tirone reports.
Africa’s Electric Vehicle Opportunities
“From the Cape to Cairo, green tech startups are leading Africa’s charge towards electric mobility, a critical intervention in the fight against climate change driven by a global tide in the use of electric vehicles (EVs). However, the continent’s shift to electric mobility lags behind Europe, the US and China, the global frontrunners in electric mobility.”
“South Africa sold only 92 battery electric vehicles (BEVs) in 2020, down from 154 in 2019, representing 0.02% of domestic vehicle sales. Hybrid sales declined from 253 units in 2019 to 232 units in 2020.”
“Nonetheless, several countries are developing comprehensive policy frameworks to catalyse the transition and adoption of electric mobility. Momentum is anticipated to escalate especially after the European Union (EU) in mid-July proposed to phase out diesel and petrol car sales in a major market shift by 2035.”
“This decision will positively impact African countries like South Africa, which exports nearly 64% of its manufactured vehicles to global markets.” Tonderayi Mukeredzi reports.
South Korean Exports Have Reached New Highs
“South Korean exports have reached new highs even amid the fourth wave of the COVID-19 pandemic, while domestic demand has sunk into another slump.”
“This trend, with the strong export performance failing to translate into domestic demand, has led to an intensifying ‘K-shaped’ pattern in the business recovery.”
“The Ministry of Trade, Industry and Energy (MOTIE) announced that August exports had been recorded at US$53.23 billion on Wednesday. The number was 34.9% higher than during the same month in 2020, and the highest ever recorded for the month of August.”
“Cumulatively, exports from January to August stood at US$411.9 billion, up 27.6% from the same period in 2020.”
“The MOTIE said that it was the shortest length of time ever taken for South Korea to pass the US$400 billion mark within a single year. In 2018 — the only year to date in which annual exports exceeded US$600 billion — the cumulative total for January to August was US$399.7 billion.”
“Average daily exports for August were US$2.31 billion when the number of working days was factored in. That total was also an all-time high for the month of August.” Hankyoreh reports.