Emerging Markets Monitor - April 18
JP Morgan on India: Buy the Dips, Asia Hedge Funds Outperform, Hong Kong Drops Out of Top 10 Ports, Cocoa Prices Soar, Panama Boom Fades As Election Nears
The Top Stories Shaping Emerging Markets from Global Media - April 18
JP Morgan on India: Buy the Dip If Election Volatility Hits Stocks
Bloomberg
“Investors should use any swings in Indian stocks during the weekslong election as an opportunity to buy, according to JPMorgan Chase & Co.’s private banking unit.”
“The South Asian nation, which has been a favorite pick among investors looking away from China, is set to kick off nationwide polls from Friday with votes to be counted on June 4.”
“Prime Minister Narendra Modi-led Bharatiya Janata Party is widely expected to win a third term, which will help his administration continue its focus on modernizing infrastructure and boost manufacturing. Indian equities have risen to records this year following a rally driven by robust economic growth.”
“‘We remain convinced of the structural growth opportunity in Indian equities,’ Alexander Wolf, head of Asia investment strategy at JPMorgan Private Bank wrote in a note. …The stellar rally has made India’s $4.5 trillion stock market among the most expensive in the world. The MSCI India Index trades at about 23 times next year’s expected earnings, exceeding the multiple for even US equities.” Bloomberg reports.
Asia Hedge Funds Benefit in Q1 from Japan Rally, Recovery in China
Reuters
“Asia-focused hedge funds started 2024 with a strong first quarter, cashing in on a prolonged rally in Japanese stocks, a tentative turnaround in Chinese equities, and a boom in artificial intelligence (AI) stocks.”
"Most stock markets across Asia - from Japan and India to mainland China - ended the first quarter higher, as expectations for U.S. interest rate cuts lifted global equities. Hedge funds that use an Asian equities long/short strategy rose 2.9% in the first quarter, according to data from Eurekahedge.”
“…Chinese stocks have stabilised since February, after three consecutive years of steep losses, as the country's securities regulator intervened with steps to stem selling. The benchmark MSCI China index has bounced 10% since Jan. 22. Investing in procyclical sectors ranging from energy to industrial, as well as internet and high-yield stocks, has led to outperformance, according to investors.”
“Betting on Chinese food delivery giant Meituan helped Hong Kong-based First Beijing yield returns of 6.3%, according to a source who was briefed on its performance. Some hedge funds benefited from bullish wagers on the AI supply chain across the U.S., Taiwan, and mainland China. Grand Alliance Asset Management’s Sino Vision Market Neutral Fund notched a 6.1% net gain for the first quarter, with a majority of returns driven by AI-related trades, the fund reported.” Reuters reports.
Hong Kong Drops Out of Top Ten Busiest Ports Ranking, Reflecting Slow Decline
gCaptain
“Hong Kong fell out of the world’s top 10 container ports last year, for the first time in the history of container shipping, according to new data from Alphaliner on the world’s busiest 30 box ports.”
“HK saw traffic last year drop 14.1%, to 14.3m teu, establishing the long-term decline of what was always a leading container port – 20 years ago it regularly vied with Singapore and Shanghai for the title of the world’s busiest – deposed from 2023’s tenth ranking by Dubai.”
“‘Dubai overtook two of its nearest competitors in 2023 to make the top 10, a position it previously occupied in 2018. As earlier predicted by Alphaliner, it moved ahead of Hong Kong, which posted its seventh year of consecutive volume declines and has now lost a third of its container traffic over the past decade,’ Alphaliner wrote today.”
“The only other major port to have suffered a greater fall in volumes than Hong Kong was New York & New Jersey, which saw its throughput decline 17.7%, to 7.8m teu, for the year.
“…Last year saw two new entrants to the top 30 – China’s Qinzhou grew 13.1%, to reach 6.1m teu, in position 26, while Vietnam’s Cai Mep was ranked 30th with a throughput of 5.6m teu, flat in terms of growth, but allowing it to overtake Savannah and Manila, which both posted declining volumes.”
“…Other ports with significant growth included India’s Mundra, which ‘has now firmly reestablished itself as India’s leading port, with 2023 growth of 11.2%, to 7.2m teu, that saw it overtake Colombo to become the subcontinent’s largest box port’.”
“Meanwhile, the Moroccan transhipment hub of Tanger Med climbed three places, after 13.4% growth, to reach 8.6m teu, although Alphaliner noted it was now becoming ‘dangerously close’ to being at its limit. ‘Volumes for the Moroccan port have risen 80% since 2019 – last year’s figure of 8.6m teu is equivalent to 95% of the port’s nominal capacity, and reaches targets set by the port authority four years ahead of schedule,’ it said.”
“At the top of the rankings there was no change: Shanghai retained first position, followed by Singapore and Ningbo. With a throughput of a little over 49.1m teu, Shanghai needs to see around 2% growth this year to see it go past the 50m teu milestone in 2024.” gCaptain reports.
Cocoa Prices Hit Record as West African Yields Decline
African Business
“Cocoa prices broke $10,000 per ton for the first time in March, amid disease outbreaks and destructive weather patterns in West Africa. Cocoa futures were as high as $10,080 in New York at the close of the first quarter, having more than doubled this year – due to expectations of a shortage of cocoa beans, the raw material used to make chocolate.”
“Ghana, Côte d’Ivoire, Nigeria, and Cameroon together produce more than 75% of the world’s cocoa, but have seen drastically reduced crop yields amid droughts, fires and other climate change-induced weather phenomena. Drought index data from the Gro Intelligence platform indicates that the current drought in West Africa is the worst the region has seen since at least 2003.”
“On top of that, the Cocoa Farmers Association of Nigeria reported that fires destroyed over 30 hectares (74 acres) of cocoa farmlands in the first quarter in Abia state, a major cocoa producer in southeast Nigeria. That could see a loss of 11,000 to 12,000 tonnes of cocoa from the mid-crop harvest in Nigeria. This would represent roughly 4% of the commodity’s anticipated production this year, which is between 280,000 and 300,000 tons. African Business reports.
Panama Boom Years Fade as Election Looms
Financial Times
”Panama, once Latin America’s star economy, is close to losing its investment-grade status as another ratings demotion looms, with the next president set to inherit its biggest economic challenge in decades.”
“A post-dictatorship boom in the Central American country famous for its canal, an important global trade artery, is fading, with the IMF forecasting a dramatic slowdown in gross domestic product growth to 2.5 per cent this year, from 7.5 per cent in 2023.”
“A big factor is the abrupt shutdown of a huge copper mine after widespread protests last year, as anger against political corruption fused with growing environmental concerns. The closure will complicate the dollarised country’s battle to reverse a sharp rise in debt levels since the pandemic.”
“Last month, Fitch relegated Panama’s sovereign bonds to junk territory, with the markets pricing in further downgrades from the rating agencies. S&P already holds a negative outlook on the country. In early May, voters are set to choose a new president from a slate of mostly economically liberal candidates who have largely avoided committing to detailed policies to address the country’s problems.”
“‘We’re at an important inflection point for Panama,’ said Nicolas Jaquier, emerging markets fixed-income analyst at investment manager Ninety One. ‘There needs to be some realisation of that among the politicians — to try to steer the growth model towards something more sustainable.’” Christine Murray reports
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