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Emerging Markets Daily - September 17
Asia Covid Lockdowns Roil Supply Chains, Indonesia Telecoms, Biden Signs Sanctions on Ethiopia, HSBC in Asia Wealth Push, China Seeks to Join Former TPP
The Top 5 Stories Shaping Emerging Markets from Global Media - September 17
Covid Lockdowns in Asia Deepen Supply Chain Woes - Roiling Markets From Coffee to Palm Oil to Tin
Wall Street Journal
“The recent surge in Covid-19 cases in Southeast Asia has throttled ports and locked down plantations and processors, sparking extended disruptions of raw materials such as palm oil, coffee and tin.”
“Restrictions in Malaysia, the world’s second-largest producer of palm oil, have prevented migrant laborers from traveling to plantations, raising prices of the ubiquitous edible oil used to make candy bars, shampoo and biofuel.”
“Lockdowns in Vietnam, the world’s No. 2 coffee exporter by volume, have delayed the processing and export of coffee beans, adding to production concerns caused by poor weather in Brazil. The global tin supply has been hit by Covid-19-related interruptions at a smelter in Malaysia, contributing to higher prices for the industrial metal, which is used to connect computer chips to circuit boards in electronics.”
“Prices for each of these commodities have risen to multiyear highs in recent months, adding costs that are being passed on to consumers. ‘These supply shocks reverberate globally because Vietnam and Malaysia hold large market share of key commodities,’ said Trinh Nguyen, a senior economist at Natixis.”
“Businesses including Unilever PLC, the consumer-goods company, and J.M Smucker Co. , which includes Folgers coffee, have said increasing prices of raw materials are contributing to cost pressures.” Jon Emont reports.
Ck Hutchinson, Ooredoo Merge Indonesia Telecoms Unit in $6B Deal
“Hong Kong-based conglomerate CK Hutchison will merge its Indonesian telecoms division with the local unit of Qatar’s Ooredoo Group in a $6bn deal that is expected to be the country’s largest inbound foreign merger.”
“The companies said on Thursday the merged group would generate about $3bn in annual sales with market share of 25 per cent, making it Indonesia’s second-largest telecoms company by revenue and a challenger to state-backed Telkomsel, which has about 50 per cent market share.”
“The companies expect annual pre-tax synergies of $300m to $500m a year from the merger and a total of more than 100m subscribers, said executives at CK Hutchison and Ooredoo. Aside from being the largest cross-border merger, the transaction is also the second-largest M&A deal ever in Indonesia, south-east Asia’s biggest economy, according to figures from Dealogic.”
“The companies said they hoped to capitalise on the growth of Indonesia’s telecoms sector through the development of 5G and fibre optic broadband. ‘This transaction is going to redefine the Indonesian telecom marketplace,’ Aziz Aluthman Fakhroo, managing director of Ooredoo, told the Financial Times” William Langley reports.
Biden Signs Exec Order Authorizing Ethiopia Sanctions
“U.S. President Joe Biden signed an executive order authorizing sanctions against those prolonging conflict in northern Ethiopia, adding pressure on parties to end the civil war.”
“The Department of Treasury can now go after several targets, including those in the Ethiopian and Eritrean governments as well as in the Tigray People’s Liberation Front, who continue to fuel the conflict instead of negotiating a cease-fire, according to a statement from the White House.”
“The fighting started in November 2020 when Prime Minister Abiy Ahmed ordered a military incursion into the Tigray province after accusing forces loyal to the TPLF of attacking a federal military base in the region to try and steal weapons.”
“Forces from neighboring Eritrea were reported to have crossed the border to back Abiy’s troops. The fighting has caused one of the world’s worst humanitarian crises, with more than 5 million people needing assistance and nearly one million facing famine.” Bloomberg reports.
HSBC Ramps Up China Hiring In Asia Wealth Management Push
South China Morning Post
"HSBC has accelerated hiring plans for its wealth management business in China this year, as part of the lender’s big bet on rising incomes and wealth in Asia, according to Nuno Matos, the global head of the bank’s wealth and personal banking business.”
“In his first interview since relocating to Hong Kong, Matos said the bank had hired for about 400 client-facing roles for its mainland digital wealth planning venture, known as HSBC Pinnacle, and will have about 700 personal wealth planners on the ground by the end of the year.”
“The hiring spree, part of a $3.5 billion investment in its Asian wealth business over the next five years, comes as Beijing moves to further open its financial sector to foreign banks, including through the newly unveiled Wealth Management Connects scheme in the Greater Bay Area.”
“‘That investment is going exactly at pace. The investment is being delivered to improve our platforms for private banking, for affluent wealth, to put everything we do in mobile,’ Matos said. ‘Our ambition to be the leading Asian wealth manager is coming to fruition. We are already the leader in Hong Kong. We want to be the leader in Asia by 2025.’” Chad Bray reports.
China Applies To Join Pacific Trade Pact that US Abandoned
Business Times (Singapore)
“China has applied to join the Asia-Pacific trade pact once pushed by the US as a way to isolate China and solidify American dominance in the region.”
“China submitted the formal application letter to join the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) to New Zealand, according to a statement late on Thursday in Beijing. Commerce Minister Wang Wentao had a follow-up call with his counterpart Damien O'Connor, as New Zealand is the depositary nation for the agreement.”
“The application is certain to spark a reaction from Washington, where a number of lawmakers had already expressed concern about China's efforts to join. However, there's no sign the administration of President Joe Biden is interested in rejoining the deal.”
“The original deal was envisioned by the US as an economic bloc to counterbalance China's growing power, with then-president Barack Obama saying in 2016 that the US, not China, should write the regional rules of trade. His successor Donald Trump pulled out of the deal in 2017, with Japan leading the revised and renamed pact to a successful conclusion the following year.”
“The application is the result of months of behind-the-scenes discussions after President Xi Jinping said in 2020 the nation was interested in joining. China is the second country to apply to join the 11-nation deal, after the UK asked to become a member earlier this year. ‘It's a perfectly rational calculation by the Chinese leadership’" according to Hosuk Lee-Makiyama, director of the European Centre for International Political Economy in Brussels.” Business Times reports.
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