Emerging Markets Monitor - August 9
Egypt Pound Under Pressure, Didi's Hong Kong Listing, Taiwan Strait Tensions, Lula's Poll Lead in Brazil Elections Narrows, Sri Lanka and India and a China Military Ship
The Top 5 Stories Shaping Emerging Markets from Global Media - August 9
Egypt Currency Under Pressure Amid IMF Talks
Bloomberg
“A currency that the world’s biggest banks say is too expensive likely leaves Egypt few options besides allowing it to weaken further.”
“A greater flexibility in the pound has emerged as an issue for Egypt as the government looks to clinch a new loan from the International Monetary Fund. In the view of Deutsche Bank AG and Goldman Sachs Group Inc., the currency is about 10% overvalued, as measured by its real effective exchange rate, while Citigroup Inc. has a lower estimate of 5%.”
“Urgency is building for the $400 billion economy despite a devaluation of more than 15% in March. The dollar’s rally since then has weighed on the currencies of its trading partners and other developing peers, while energy and food shocks from Russia’s invasion of Ukraine strained Egypt’s finances.”
“The pound needs to weaken about 23% to help the economy adjust and reduce Egypt’s funding gap, according to Bloomberg Economics.”
“…It marks a reversal of fortune for the one-time darling of emerging-market investors….Drawn to Egypt’s high interest rates, a stable pound and its track record of market-friendly moves, foreigners had pumped billions of dollars into its debt market….The government said in May that foreign investors had pulled some $20 billion from the local debt market since the start of this year.” Netty Idayu Ismail reports.
Didi May List in Hong Kong Without Raising Cash
Shanghai Daily
“CHINA’S ride-hailing giant Didi Global plans to use a mechanism that will allow it to list shares in Hong Kong without raising capital or issuing new stock as it seeks to delist from New York, two people with knowledge of the matter said.”
“The plans come as Didi is moving towards withdrawing from the New York Stock Exchange. The Hong Kong mechanism, known as ‘listing by introduction,’ would allow owners of Didi US shares to transfer them to the HK bourse gradually, said the people.”
“They declined to be identified as the plan was not yet public. Didi aims to file for the Hong Kong listing by end-April and list by June, one of the people said.”
“The plans are being prepared six months after Didi made its debut in New York after raising US$4.4 billion in a conventional IPO. It said earlier this month that it plans to delist from the US bourse.” Shanghai Daily reports.
Investor Report Alert - Emerging Europe
The Mirae Asset emerging markets team always produces insightful reports. Their latest is on emerging Europe, specifically Poland and Turkey.
Mirae Asset Global Investments: Emerging Europe
“Emerging Europe is undergoing rapid political, economic, and social change. Though we see opportunities in various countries across Emerging Europe, from Greece to Kazakhstan, this paper is focused on two of the region’s deeper markets — Poland and Turkey.”
“The outlook for each country is still uncertain. However, as active stock pickers with a solid understanding of the political, economic, and social landscape in which we invest, we note that now is the time to seek investment opportunities — when markets are under-owned and uncertainty ahead of elections grows.”
Views from the Ground: Emerging Europe
Taipei Warns that China Seeks to Control Entire Taiwan Strait
Financial Times
"Taipei has warned that China could use military drills around the island to establish control over the entire Taiwan Strait, impeding international shipping and air traffic and strengthening Beijing’s efforts to deny the US military access to the area.”
“The warning from foreign minister Joseph Wu came as the People’s Liberation Army said it was extending joint air and naval exercises around Taiwan on Tuesday for a second day.”
“The live-fire drills, which were called in retaliation to a visit by US House of Representatives Speaker Nancy Pelosi to Taipei last week, were originally scheduled to last for four days ending on Sunday.”
“‘China has openly declared its ownership over the Taiwan Strait,’ Wu said. ‘It aims to influence the international community’s freedom of navigation in the waters and airspace of the Taiwan Strait by denying the status quo that it is an international waterway.’”
“China’s military response to Pelosi’s two-day Taiwan visit, which was part of a wider trip to Asia last week, has prompted concerns over the long-term security of global logistics and supply chains in the region, one of the most important trade routes in the world. According to Taiwan’s defence ministry, 45 Chinese military aircraft and 10 warships operated in the Taiwan Strait area on Tuesday, with 16 fighters flying across the median line north and north-east of Taiwan.” The FT reports.
Lula’s Lead Narrows to Single Digits in Upcoming Brazil Election
Channel News Asia
“Former President Luiz Inacio Lula da Silva's lead over incumbent Jair Bolsonaro has narrowed to 7 percentage points ahead of the October election, according to a new poll published on Monday (Aug 8).”
“The leftist leader has the support of 41 per cent of voters against 34 per cent for his far-right adversary, compared to 44 per cent and 31 per cent respectively last month, the BTG/FSB telephone poll said.”
“Lula's lead has dropped steadily to 7 points from 13 last month and 14 in May, the poll said. Other polls show Lula's strong lead slipping but maintaining a double-digit advantage: Datafolha saw his advantage at 18 points and a Genial/Quaest poll last week said his lead had fallen to 12 points from 14 points.”
“Lula would still win a second-round runoff against Bolsonaro by 51 per cent to 39 per cent if the vote were today, a 12 point lead that has narrowed from 18 points last month, the BTG/FSB poll said.” Channel News Asia reports
Sri Lanka Asks China to Postpone Ship Visit After India Protests
Al Jazeera
“Sri Lanka says it has asked China to defer a planned visit of a Chinese ship to the island country after initially approving its arrival this week, yielding to diplomatic pressure from neighbour India to keep the military vessel out.”
“The Yuan Wang 5 was due to arrive on Thursday at the Chinese-built and leased Hambantota port in Sri Lanka’s south for five days for replenishment. It is currently sailing in the east Indian Ocean, according to Refinitiv Eikon.”
“Foreign security analysts describe the Yuan Wang 5 as one of China’s latest generation space-tracking ships, used to monitor satellite, rocket and intercontinental ballistic missile launches.”
“The Pentagon says Yuan Wang ships are operated by the Strategic Support Force of the People’s Liberation Army. New Delhi fears its bigger and more powerful rival China will use Hambantota as a military base in India’s back yard. The $1.5bn port is near the main shipping route from Asia to Europe.”
“Sri Lanka’s foreign ministry said on July 12 it had approved the ship’s arrival for this month.” Al Jazeera reports.
“May you live every day of your life.”
― Jonathan Swift