Emerging Markets Monitor - April 25
Korea Q1 Growth Robust, WisdomTree Likes India, UBS Positive on China Property, Quantum Hedge Funds Sizzle on Cocoa/Coffee Bets, Turkiye Finance Minister Touts Reforms, UAE-Oman Energy Deals
The Top Stories Shaping Emerging Markets - April 25
Korea’s Q1 Economic Growth at 2 Year High on Exports Recovery
Korea Times
“Korea's economy grew at the fastest pace in over two years in the first quarter of the year on the back of a continued recovery in exports and a rise in construction investment, central bank data showed Thursday.”
“The country's real gross domestic product — a key measure of economic growth — increased at a higher-than-expected rate of 1.3 percent on-quarter in the January-March period, according to preliminary data from the Bank of Korea (BOK).”
‘The first-quarter expansion beat the market estimate of 0.6 percent and the 0.6 percent on-quarter expansion in the September-December period. The reading marks the highest since the fourth quarter in 2021, when the economy expanded 1.4 percent.
“On a yearly basis, Korea's economy advanced 3.4 percent in the first quarter, higher than the 2.2 percent growth for the last quarter of 2023. Private spending logged a 0.8 percent rise in the January-March period, compared with a 0.2 percent advance the previous quarter.”
“The country's exports climbed 0.9 percent in the first quarter, slowing from the previous quarter's 3.5 percent gain, while imports declined 0.7 percent from a 1.4 percent increase the previous quarter.” Korea Times and Yonhap report.
India to Lead Emerging Markets, WisdomTree CIO Says
Benzinga
“Among the developed and emerging markets, WisdomTree’s strategic vision spotlights India as one of its top picks alongside Japan. According to CIO Jeremy Schwartz, India ‘is positioned as the leader of emerging markets (EM).’ What sets India apart is its undeniable dominance among the EMs which is propelled by robust population growth—a demographic dividend that fuels unparalleled GDP expansion, he notes.”
“Moreover, India’s economic prowess finds validation in its equity market performance, emerging as a frontrunner among its emerging market counterparts. Schwartz also noted that ‘interest in China has become more contentious with geopolitical headwinds and sluggish economic growth’ causing investor attention to pivot towards India, as investors seek stability and growth in an increasingly uncertain global landscape.” Benzinga reports.
UBS Analyst Who Took on Evergrande is Now Bullish on China Property
Bloomberg
“When it comes to Chinese real estate, John Lam is a lone wolf.”
“The UBS analyst shocked markets three years ago with a rare sell rating on China Evergrande Group, 11 months before it defaulted and became the poster child for the property collapse. Now Lam is going against the grain again, forecasting a gradual recovery in a moribund market that most analysts say hasn’t hit bottom.”
“‘After three years of being bearish, we’re turning more positive on the China property sector for the first time due to government aid,’ Lam, the head of China and Hong Kong property research at UBS Group AG, said in an interview in Hong Kong.”
“Lam predicts home demand and supply will return to historical averages sometime next year, and developers with sizable portfolios in 21 major cities will likely see their stocks rebound. He upgraded several companies, including Longfor Group Holdings Ltd., to buy in January.”
“And just as he did on Evergrande in 2021, Lam is combining a deep data dive with his own gut feeling to make the unconventional bet on China’s housing sector. ‘It was from instinct that something was just not right,’ said Lam, 38, recalling his brief, 10-line report on Evergrande that raised alarm bells about the meltdown that would follow.”
“Much like his Evergrande call, the rebound bet is a gutsy one. Home sales tanked and prices plunged in March at an even faster annual pace than the previous month, extending a three-year decline. Bloomberg Economics expects the sector to account for just 16% of China’s economy by 2026, from a peak of 24% before the slump. Some five million jobs will be lost or curtailed along the way, BI says.” Bloomberg reports.
Quantum Hedge Funds Enjoy Bumper Start to 2024
Bets on cocoa, coffee, and oil have helped fuel returns
Financial Times
“Computer-driven hedge funds that bet on trends in financial markets are enjoying strong returns as bets on soaring cocoa prices and a sinking Japanese yen have borne fruit.”
“Quantitative funds have gained 12 per cent for the year to the end of March, according to an index compiled by Société Générale, with names such as Man Group, Aspect Capital and Winton among those profiting.”
“…British billionaire David Harding’s Winton had gained 13 per cent in its diversified macro fund, according to a person who saw the numbers. It benefited from bets on higher cocoa prices and against US natural gas and the yen.”
“Bets on skyrocketing cocoa prices have been one of the biggest contributors to funds’ returns, as bad weather in west Africa, the region that produces the most cocoa beans, has hit yields. Cocoa bean futures in London have almost tripled in price since the start of the year.”
“Unusually high temperatures have also hit production of coffee beans, providing another avenue for quant funds to profit…Hedge funds have also made winning bets on oil prices, which have increased as tensions in the Middle East have risen.” The FT reports.
Turkiye Finance Minister Touts International Confidence in Reforms
Daily Sabah
“Treasury and Finance Minister Mehmet Şimşek on Tuesday said foreign investors' worries about Türkiye's economic program have been resolved, as well as concerns regarding political support for the road map.”
"‘This year, we've seen that all doubts are completely gone. Because our program is working, it's producing results and being implemented successfully. Therefore, the interest of investors is very intense,’ Şimşek told reporters in New York.”
“Şimşek has been in the U.S. to attend the spring meetings of the International Monetary Fund (IMF) and the World Bank. He held multiple high-level talks and discussions with investors during the trip.”
“He highlighted ‘highly productive’ meetings with various international organizations such as the World Bank, the Asian Infrastructure Investment Bank, the European Bank for Reconstruction and Development and the European Investment Bank.”
“Accompanied by Central Bank of the Republic of Türkiye (CBRT) Governor Fatih Karahan, Şimşek and his delegation held more than 20 meetings with large groups and met with hundreds of investors.”
"‘We are strengthening the macroeconomic foundations with disinflation, structural reforms and fiscal discipline, which is attracting considerable attention,’ he told Anadolu Agency (AA). ‘Therefore, investor interest was excellent, to put it simply.’”
“The interest during the Türkiye Investment Conference on Monday was to the extent that the meeting room had to be enlarged, according to Murat Özyeğin, the head of the Türkiye-U.S. Business Council (TAIK).”
“Şimşek recalled expectations that a permanent decrease in inflation would begin in the coming months. ‘We will rapidly observe its decline starting from June. This is a process parallel to our program. Therefore, while reducing inflation, we are establishing fiscal discipline, decreasing the current account deficit, and strengthening Türkiye's structure with structural reforms,’ he noted.” The Daily Sabah reports.
UAE and Oman Firms Sign $32 Billion Energy Deal
MEED (Middle East Business Intelligence)
“An industrial and energy project valued at an estimated AED117bn ($31.8bn) topped the recent investment agreements reached between the UAE and Oman following Sultan Haitham Bin Tariq’s visit to the UAE capital earlier this week.”
“The package encompasses renewable energy initiatives, including wind and solar projects, alongside green metals production facilities. The agreement’s signatories included Abu Dhabi National Energy Company (Taqa), Abu Dhabi Future Energy Company (Masdar), Emirates Global Aluminium, Emirates Steel Arkan, OQ Alternative Energy and Oman Electricity Transmission Company.”
“The companies signed the agreements on 22 April in the presence of Sheikh Theyab Bin Mohamed Bin Zayed Al Nahyan, chairman of the Office of Development and Martyrs’ Families Affairs at the Presidential Court, and Sheikh Hamed Bin Zayed Al Nahyan, managing director of Abu Dhabi Investment Authority.”
“Along with other technology and infrastructure-related partnerships and projects, an agreement for the UAE-Oman rail connectivity project, valued at AED11bn, was also signed.” MEED reports.
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