Emerging Markets Monitor - January 27
Adani Hits Back at Short-Seller Allegations, Turkey Plans to Prop Up Lira, Lat-Am Mining Woes, China Car Exports Sizzle, IMF To Visit Pakistan for Bailout Talks
The Top 5 Stories Shaping Emerging Markets from Global Media - January 27
Adani Group: Asia’s Richest Man Hits Back at ‘Con’ Allegations
BBC
“A company owned by Asia's richest man has hit back at a report which accused the firm of ‘brazen’ stock manipulation and accounting fraud. The Adani Group, founded by Gautam Adani, called the report by a US investment firm ‘malicious’ and ‘selective misinformation.’”
“The group lost almost $11bn (£8.7bn) of its market value after the research was made public on Wednesday. It is now considering legal action against New York's Hindenburg Research.”
“Adani Group is one of India's biggest companies, and has operations in a wide range of industries including commodities trading, airports, utilities and renewable energy. It is led by Indian billionaire Mr Adani who is the world's fourth richest man, according to Forbes magazine.”
“Hindenburg, meanwhile, specialises in ‘short-selling’, or betting against a company's share price in the expectation that it will fall. In its report, Hindenburg accused Mr Adani of ‘pulling the largest con in corporate history’. This came days ahead of a planned sale of Adani Group shares to the public.”
“The report questioned the Adani Group's ownership of companies in offshore tax havens such as Mauritius and the Caribbean. It also claimed Adani companies had ‘substantial debt’ which put the entire group on a ‘precarious financial footing’.
“…While it appears that the decks are clear for Adani Group to proceed with its $2.4bn public share sale on Friday, the allegations in the report could put some investors off, said Ambareesh Baliga, a financial markets analyst.”
“But the report could have broader consequences that go beyond the Adani Group. Andy Mukherjee, a columnist at the news service Bloomberg, said that beyond Adani, there were ‘many questions about the integrity of the broader Indian market, which is caught between the pressures of financial globalisation and political nationalism’.” BBC reports.
Turkey Unveils New Scheme to Prop Up Lira
Financial Times
“Turkey has unveiled a new scheme to push exporters to hold less foreign currency as the government of Recep Tayyip Erdoğan steps up its battle to defend the lira ahead of this year’s elections.”
“The country said on Thursday it would offer companies new incentives to swap money they earn abroad into lira in return for a vow not to purchase foreign currencies. The new programme is the latest sign of how Turkey is deploying a broad range of tools to prop up the lira and boost its $800bn economy ahead of presidential and parliamentary elections set for May 14.”
“It comes as polling shows that disquiet over the government’s handling of the economy has eroded support for Erdoğan and his ruling Justice and Development party (AKP).”
“A coalition of opposition political parties, known as the ‘table of six’, is expected to name a candidate in the coming weeks to challenge Erdoğan, who has been in power for two decades.” Adam Samson reports.
Latin American Miners Caught Between a Rock and Hard Places
Bloomberg Opinion
“Latin America has long been a favored destination for mining majors as a reliable source of metals, particularly copper. But increasingly, it’s becoming a trouble spot. From Chile’s tax hike to Peru’s social unrest and Panama’s intervention in a massive mine, all is not well”
“The problem is clear enough. State infrastructure, pensions, education and health care were threadbare in much of the region even before a pandemic that exposed deep inequities. Inflation, still high, is making a bad situation worse, and governments have made expensive promises they’re now under pressure to fund. Understandably enough, social and environmental concerns are also front of mind for local communities.”
“Copper isn’t the only mineral in the crosshairs. Chile, whose president was elected with a green agenda, last week rejected a $2.5 billion iron-ore project near a nature reserve in the north and is creating a state miner to unlock its lithium potential.”
“But concern focuses on production of the red metal in a region where three countries alone — Chile, Peru and Mexico — account for roughly two-fifths of global reserves. Major copper mines are already tangled in Peru’s upheaval. Add in optimism around demand as China reopens, plus low inventories, and no wonder the commodity is trading near its strongest levels in more than seven months.”
“Chile’s state-owned giant Codelco, shortchanged for years by successive governments, is an extreme example. Last year, it produced 10% less copper than planned due to operational setbacks, and its chairman has said keeping output steady is a ‘tremendous challenge.’ Other miners in the country have also reported shortfalls, blaming low grades and drought.” Clara Fereirra Marques writes.
China Car Exports Take on the World
Bloomberg
“…As China’s auto brands woo more and more foreign customers…the nation is poised to become the world’s No. 2 exporter of passenger vehicles, a milestone that could reshape the global auto industry and spark new tensions with trading partners and rivals.”
“Overseas shipments of cars made in China have tripled since 2020 to reach more than 2.5 million last year, according to data from the China Passenger Car Association. That’s only a whisker (about 60,000 units) behind Germany, whose exports have fallen in recent years. China’s numbers, behind Japan but ahead of the US and South Korea, herald the emergence of a formidable rival to the established auto giants.”
“Chinese brands are now market leaders in the Middle East and Latin America. In Europe, the China-made vehicles sold are mostly electric models from Tesla Inc. and Chinese-owned former European brands such as Volvo and MG, and European brands like Dacia Spring or the BMW iX3, which is produced exclusively in China. A raft of homegrown marques like BYD Co. and Nio Inc. are ascending as well, with ambitions to dominate the world of new-energy vehicles. Backed by Warren Buffett’s Berkshire Hathaway Inc., BYD is already charming EV buyers in developed countries such as Australia.”
“…The trend underscores that China has moved beyond being the ‘world’s factory’ for low-cost consumer electronic devices, appliances and Christmas toys. By shifting to more complex and sophisticated products for competitive, highly regulated markets, Chinese companies are moving up the value chain in manufacturing—a key driver of growth that transformed the once-struggling communist economy into today’s quasi-capitalist $18 trillion juggernaut.” Bloomberg reports.
IMF to Visit Pakistan to Discuss Stalled Bailout Program
Channel News Asia
“An International Monetary Fund mission will visit Pakistan later this month to discuss the stalled ninth review of the country's current funding programme, the lender's resident representative said on Thursday, with the cash-strapped nation's economy in turmoil.”
“Pakistan secured a $6 billion IMF bailout in 2019, which was topped up with another $1 billion last year, but the lender then stalled disbursements in November due to Pakistan's failure to make more progress on fiscal consolidation and economic reforms.”
“A successful visit is critical for Pakistan, which is facing an increasingly acute balance of payments crisis and is desperate to secure external financing, with less than three weeks' worth of import cover in its foreign exchange reserves.”
“….the mission will focus on policies aimed at restoring domestic and external sustainability, including to strengthen the fiscal position while supporting those affected by the floods, as well as power sector reforms.”
“It will also look to discuss re-establishing a market-based mechanism to determine the value of the Pakistani rupee…Such a mechanism is a key prior action for the country to receive IMF support, but which it had fallen short of until this week.” Channel News Asia reports.
“The most difficult thing is the decision to act, the rest is merely tenacity.” – Amelia Earhart
“May you live every day of your life.” - Jonathan Swift
Also of note….
Gold Prices Buoyed by Rally As Investors Get on Board
Wall Street Journal
“Gold is starting the year with gains. Gold purchases by everyone from central banks to institutions and ordinary investors have lifted the precious metal in 12 of the past 16 sessions, according to Dow Jones Market Data.”
“The most-actively traded gold futures contract has climbed about 20% from its September low to above $1,940 an ounce—its highest level since April 2022. Prices are poised to gain for the sixth consecutive week, which would mark the longest weekly winning streak since the nine-week run that carried gold to a record of $2,069.40 in August 2020.”
“The advance comes after rising interest rates dragged gold to a lukewarm 2022. Gold avoided the steeper, double-digit losses suffered by stocks and bonds, but still disappointed those who had expected it to thrive during a time of elevated inflation. Now, signs of cooling price increases and weakening growth are lifting investors’ hopes of a respite from the Federal Reserve’s aggressive rate increases.”
“…SPDR Gold Shares, the world’s largest physically backed gold exchange-traded fund, has climbed 6.8% so far this month, outpacing the S&P 500 index’s 4.6% advance. Shares of gold producers have rallied, with Barrick Gold Corp. adding 15%, Newmont Corp. gaining 17% and Royal Gold Inc. jumping 17%.” WSJ reports.