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Emerging Markets Daily - September 12
Shipping Profits Boom, India Could See 10% Growth, Oil Bullish Despite China Stockpile Release, U.S Stocks Headed for Bumps, EBRD Invests in Egypt Renewables
The Top 5 Stories Shaping Emerging Markets - September 12
World’s Shippers Net Highest Profits Since 2008
“The global shipping industry is getting its biggest payday since 2008 as the combination of booming demand for goods and a global supply chain that’s collapsing under the weight of Covid-19 drives freight prices ever higher.”
“Whether its giant container ships stacked high with of 40-foot steel boxes, bulk carriers whose cavernous holds house thousands of tons of coal, or specialized vessels designed to pack in cars and trucks, earnings are soaring for ships of almost every type.”
“With the merchant fleet hauling about 80% of world trade, the surge reaches into every corner of the economy. The boom back in 2008 brought with it a huge wave of new vessel orders, but the rally was quickly undone by a demand collapse when a financial crisis triggered the deepest global recession in decades.”
“This boom’s causes are twofold -- an economic reopening after Covid that has spurred surging demand for goods and raw materials. Alongside that, the virus continues to cause disruption in global supply chains, choking up ports and delaying vessels, all of which is limiting how many are available to haul goods across oceans. That’s left the majority of the shipping sector with bumper earnings in recent months.” Alex Longley reports.
India Expected to Grow 10% in FY ‘22, Think Tank Head Says
“The Indian economy is expected to grow around 10 per cent during the current financial year on the likelihood of fewer COVID-19-linked supply disruptions and buoyancy in the global economy, said Poonam Gupta, director general of economic think-tank NCAER.”
“‘The real challenge, however, would be to sustain a growth rate of 7-8 per cent in years to come, she said. ‘We could see annual growth in the ballpark range of about 10 per cent. The reasons for this perceived optimism are: fewer supply disruptions; increased pent-up demand in the traditional and contact-intensive services; and a buoyant global economy.’”
"‘Even so, if two pandemic years are taken together, there would be a very small net growth. In other words, the economy at the end of 2021-22 would be only slightly larger than at the end of 2019-20,’ Gupta said.” LiveMint India reports.
Oil Remains Bullish Despite China Stockpile Release
“Oil ended the week on a high note despite a major intervention by China, the world's largest importer of the commodity, that is set to lead to additional supply in the market.”
“Brent, the international benchmark for crude, settled 2.06 per cent higher at $72.92 per barrel on Friday. West Texas Intermediate, which tracks US crude grades, closed the week 2.32 per cent higher at $69.72 per barrel.”
“Oil prices rose in spite of the move by Beijing to lower prices by releasing crude stockpiles from its strategic reserves. The world's second-largest economy is battling surging energy costs for oil, coal and natural gas, which have forced factory output to shut in rural areas of the country.”
“The move was undertaken to ‘ease the pressure of rising raw material prices’, the National Food and Strategic Reserves Administration said on Thursday. China has one of the largest strategic reserves of crude in the world, estimated at 220 million barrels, according to UK-based consultancy Energy Aspects.”
“The US, the world's largest producer of oil and gas, has the largest reserves, estimated at 727 million barrels, equivalent to 60 days of oil imports. Countries stockpile oil to meet emergency requirements as well as to tide over vagaries in the oil market. This is the first time Beijing has used it as a measure to lower prices.” Jennifer Gnana reports.
U.S Stocks Could Be Headed for Bumpy Autumn
Wall Street Journal
“After a record-breaking bull run for the U.S. stock market this year, many Wall Street analysts are starting to warn that investors could be in for a bumpy ride in the coming weeks and months.”
“Analysts at firms including Morgan Stanley, Citigroup Inc., Deutsche Bank AG and Bank of America Corp. each published notes this month cautioning about current risks in the U.S. equity market. With the S&P 500 already hitting 54 records through Thursday this year—the most during that period since 1995—several analysts said that they believe there is a growing possibility of a pullback or, at the least, flatter returns.”
“Behind that cautious outlook, the researchers said, is a combination of things, including euphoric investment sentiment, extended valuations and anticipation that inflation and supply-chain disruptions will weigh on corporate margins. In a Wednesday note, strategists at BofA Securities said they saw little to be excited about, asking, ‘What good news is left?’ They added, ‘A lot of optimism is already priced in.’”
“In the note, the Bank of America team led by Savita Subramanian, head of U.S. equity and quantitative strategy, moved its year-end price target for the S&P 500 price to 4250—a 4.7% reduction from the 4458.58 level at which the benchmark index closed Friday. For 2022, Bank of America set a 4600 price target for the end of the year.” Caitlin McCabe reports.
EBRD Announces $25 Billion Loan to Support Egypt Renewable Energy
“The European Bank for Reconstruction and Development (EBRD) announced Thursday securing a loan of $25 billion to the National Bank of Kuwait Egypt (NBKE). EBRD clarified in a statement that this step comes in its endeavors to boost renewable energy and energy efficiency in Egypt.”
“According to EBRD, 15 percent of the total loan amount is being co-financed by the Green Climate Fund (GCF). ‘The funds will be on lent to Egyptian small and medium size enterprises (SMEs) and households to finance investments to mitigate the impacts of climate change. The application of new technologies is expected to promote the transition to an environmentally sustainable, low-carbon and climate resilient economy in Egypt,’ it clarified.”
“It added that the GCF and EBRD’s partnership for transformation has seen the GCF support six EBRD program to the tune of $ 830 million, catalyzing more than $ 3.6 billion in total project value. The GCF is the world’s largest climate fund, supporting developing-country efforts to respond to the challenges of climate change.”
“This loan is being extended under the EBRD’s Green Economy Financing Facility (GEFF), which provides finance and advice to private-sector businesses to support Egypt’s green economy transition. The facility has a financing pool worth €140 million for energy-efficiency and renewable energy investments.”
“NBKE is an Egyptian joint stock company and a subsidiary of the NBK group. It has been a partner of the EBRD since 2015, when it agreed an SME loan and a trade finance facility, followed in 2016 by an energy-efficiency loan under the Egypt GEFF.” Egypt Today reports.