Discover more from Emerging World
Emerging Markets Daily - September 4
Russia CB Warns of Global Crisis, Cash Flows to China Despite Crackdowns, Ambani Green Hydrogen Plans, PAL Files Bankruptcy, New Pakistan Low-Cost Carrier
The Top 5 Stories Shaping Emerging Markets from Global Media - September 4
Russia Central Bank Warns of New Global Financial Crisis
“Russia’s central bank says a new financial crisis on the scale of the 2008 collapse could happen in less than 18 months if global inflation is not kept in check. A surge in public and private sector debt levels during the recovery from the pandemic could cause the global economy to ‘deteriorate drastically and rapidly’ if the US Federal Reserve has to jack up interest rates to quell inflation, the Bank of Russia warned in its annual monetary policy forecast.”
“The report, published on Thursday, said global gross domestic product growth could slow to just 1.1 per cent as higher interest rates prompt investors to dump risky assets.”
“Emerging market countries with high levels of foreign debt would be particularly hurt. ‘Risk premiums will increase significantly, the most indebted countries will struggle to service their debt, and a significant financial crisis will begin in the global economy in the first quarter of 2023 — one comparable to the 2008-2009 crisis, with a long period of uncertainty and a protracted recovery,’ the central bank said.”
“The prediction is not the central bank’s central scenario. This instead foresees a broad economic recovery with inflationary pressures dissipating by the end of this year and is ‘significantly more likely’ than its alternative scenarios of financial crisis, a worsening pandemic or rising global inflation.” Max Seddon and Jonathan Wheatley report.
Despite Crackdowns, Cash Continues to Pour into China
“Canceled share sales. Ruined business models. Tech moguls brought to heel. Barely a day goes by without more news on the widening scope of Beijing’s crackdown on private enterprise.”
“Yet money from around the world continues to flow into mainland China -- testament to its gravitational pull on global investors and long-term confidence in its economy.”
“Amidst the turmoil in markets, foreign investors have added to their holdings of stocks in Shanghai and Shenzhen every month since November via trading links, according to Bloomberg calculations based on data from Hong Kong’s stock exchange.”
“That’s when they might have been expected to start retreating, as authorities blocked the initial public offering of Ant Group Co., marking the beginning of the regulatory onslaught.”
“Purchases more than doubled last month versus July, and it’s a similar picture in China’s bond market. Far from shying away, international investors seeking additional yield have increased their portfolios of yuan-denominated government debt to record, according to data from the central bank though July.” Bloomberg News reports.
India’s Richest Man Unveils Ambitious Green Hydrogen Plans
The Times of India
“Reliance Industries Ltd chairman Mukesh Ambani on Friday unveiled his plan to do a 'Jio' in energy transition by producing green hydrogen for under $1 per Kg, or roughly Rs 73 at Friday's dollar exchange rate, for faster adoption of the cleanest mobility solution available to the world at this point.”
“‘Green hydrogen is zero-carbon energy. It is the best and cleanest source of energy, which can play a fundamental role in the world's decarbonisation plans,’ India's richest man told told International Climate Summit 2021, adding Reliance will pursue the target of first reduce the cost to below $2 per kg and ultimately to under $1 in a decade.”
“Ambani's vision for green hydrogen has a familiar ring to it. It has the potential to disrupt the mobility and energy transition markets the way Reliance did when it entered the telecom market with Jio, which reduced tariffs and got consumers hooked to data services- a key ingredient for moving towards 'internet-of-all-things'. Green hydrogen currently costs between $3 and $6.55 per kg.” The Times of India reports.
Philippine Airlines Files for Bankruptcy
Nikkei Asian Review
“Philippine Airlines on Saturday said it filed for bankruptcy protection in the U.S., paving the way for a crucial restructuring to help the flag carrier survive the COVID-19 crisis.”
“The pre-arranged Chapter 11 petition was filed in a New York district court, the company said, following an agreement with creditors, lessors, suppliers and its majority shareholder.”
“The restructuring plan, subject to court approval, provides Philippine Airlines with over $2 billion in payment reductions and allows the airline to cut its fleet size by 25%.”
“The airline also plans to raise $505 million in long-term equity and debt financing from the group of billionaire and company chairman Lucio Tan -- the airline's majority shareholder -- and $150 million of additional debt from new investors.”
“The company has been preparing since late last year for the court-backed restructuring amid turmoil in the travel and tourism industries due to the coronavirus pandemic. The company has laid off a third of its work force and pushed backed deliveries of new aircraft.”
“The airline, partly owned by Japan's ANA Holdings, said business will continue during the Chapter 11 process.” Cliff Venzon reports.
Air Arabia in Joint Venture To Launch Low-Cost Airline in Pakistan
“Sharjah-based low-cost carrier Air Arabia Group and Lakson Group, a business conglomerate in Pakistan, announced their decision to form a joint venture to launch Fly Jinnah, a new airline in Pakistan.”
“The proposed venture will establish a low-cost passenger airline serving domestic and international routes from Pakistan, according to a statement on Friday from Air Arabia…”
“Fly Jinnah will initially be based in Karachi and serve domestic routes in Pakistan and will then expand its route network internationally. The new airline will follow the low-cost business model.” Deepthi Nair reports.