Emerging Markets Monitor - January 10
EM Stocks Enter Bull Market, Brazil Detains 1000+ as Turmoil Continues, Whither the Xi Rally?, Asia Stocks Roaring, Ambani Sets Sights on Green Energy Revolution
The Top 5 Stories Shaping Emerging Markets from Global Media - January 10
Emerging Market Stocks Jump 20% From October Low
Financial Times
“Emerging market equities have rallied more than a fifth from their October trough as easing global inflation and hopes the US central bank will soon slow its interest rate rises prompt investors to shift in to the asset class.”
“The MSCI Emerging Markets index has risen more than 21 per cent from its intraday low on October 25, according to Refinitiv data. Typically a rise of 20 per cent from a recent low is considered a bull market.”
“The more upbeat recent run comes after a painful stretch between February 2021 and late October last year, when the MSCI EM index tumbled more than 40 per cent. Last year’s big Federal Reserve rate rises and a strengthening US dollar sucked money out of risky assets including EM equities and local-currency bonds.”
“Emerging market assets such as stocks, currencies and local-currency bonds tend to perform well when US rates are low and the dollar is weak, as less attractive returns available in the US and other advanced economies encourage investors to buy riskier, higher-yielding assets.”
“…Chinese stocks, which are the biggest weight in the MSCI EM index, have risen sharply since the autumn: the MSCI index tracking the country’s share market has rallied more than 45 per cent since October 31 in US dollar terms, according to FactSet data.” Jonathan Wheatley reports.
Brazil Detains Hundreds More People, Ousts Capital’s Governor After Attacks
Wall Street Journal
“Brazilian authorities on Monday detained more than 1,000 supporters of former President Jair Bolsonaro and removed Brasília’s federal district governor, an ally, from his post after protesters stormed the presidential palace a day earlier in what officials said was an attempt to overthrow the country’s newly elected president.”
“Protesters supporting the army-captain-turned-politician forced their way into the presidential palace, Congress and Supreme Court in the capital on Sunday, many calling for military intervention to oust Luiz Inácio Lula da Silva, a standard-bearer of the Latin American left who took office a week ago.”
“Some 1,200 people were detained at a camp of Bolsonaro supporters outside the capital’s army headquarters on Monday, in addition to 300 people on Sunday, police said.”
“As security forces worked to restore order in the capital, Mr. Bolsonaro was admitted to hospital on Monday in Florida, where he has been staying since the end of December. He was under observation after complaining of stomach pains related to injuries he suffered during a near-fatal stabbing while on the campaign trail in 2018, his wife, Michelle Bolsonaro, posted on Instagram.”
“Sunday’s attack was one of the biggest on government buildings since the fall of the country’s military dictatorship in 1985 under which Mr. Bolsonaro served. It comes after the closest presidential election in Brazil’s history, which was marred by politically-motivated acts of violence on the left and the right.” WSJ reports.
Xi Spurs $100 Billion China Stock Rally With Abrupt Shifts That May Not Last
Bloomberg
“After years of watching China’s economy take a beating from Covid Zero and moves to rein in the property and tech sectors, investors are suddenly optimistic that the worst is over.”
“The abrupt U-turn on strict Covid restrictions in early December has been swiftly followed up by other market-friendly changes. China is ending a two-year ban on Australian coal imports, easing up on tech giants like Alibaba Group Holding Ltd. and dialing back the stringent ‘three red lines’ that exacerbated a property meltdown.”
“The question now is whether the policy overhaul represents a swing toward the flexibility that helped fuel China’s economic rise over the past four decades, or simply a knee-jerk response to a deteriorating economy and spontaneous anti-lockdown protests. Fresh off securing a third term in October, President Xi Jinping is now surrounded by his closest allies for the foreeseable future.”
“For now, market players are enjoying the ride up. Alibaba and Tencent Holdings Ltd. have gained some $100 billion of market value in 2023, after a year that saw both shed more than a quarter of their capitalization, while the MSCI China Index is up roughly 50% since it hit an 11-year low in October.”
“China’s economy is now forecast to expand by 4.8% this year, compared with little growth in the US and a potential contraction in the Eurozone, according to data compiled by Bloomberg.”
“One big question mark is the tech sector, which only a few years ago was worth trillions of dollars and hailed as the vanguard of a modern China that would drive economic growth for decades. All that changed in 2020, when regulators killed the initial public offering of Jack Ma-backed Ant Group Co. and then opened the floodgates on probes into tech giants like Alibaba, Meituan and Didi Global Inc.” Bloomberg reports.
Asia Stocks on Track to Enter Bull Market as China Rally Extends
Singapore Straits Times
“Asian stocks are close to entering a bull market as China’s reopening and a weakening US dollar lure investors back to the region.”
“The MSCI Asia Pacific Index rose 0.74 per cent on Monday as stocks from Sydney to Hong Kong rallied, making for an 18.2 per cent recovery from the index’s October 2022 trough. The Asia-wide gauge is close to entering a bull market, typically defined as when prices have risen 20 per cent or more off a recent low.”
“Gains were driven by Chinese stocks after the nation pivoted from its Covid-19 strategy and offered more policy support for the economy and developers.”
“The US dollar extended last Friday’s drop as traders bet that the United States Federal Reserve will slow rate increases with the US Institute for Supply Management’s index of services in contraction territory and wage growth slowing.”
“The South Korean won, a benchmark emerging-market risk currency, strengthened past 1,250 per dollar for the first time in six months.”
“Goldman Sachs predicts a further 15 per cent upside for the MSCI China Index. The Hang Seng China Enterprises Index, which tracks Chinese companies, rose as much as 2.5 per cent on Monday. The offshore renminbi strengthened past 6.8 per dollar for the first time since August.”
“‘Asian markets have been through a much more severe bear market than they typically tend to see and the China reopening will be more positive even for Asia ex-China markets,’ Ms Rupal Agarwal, a quantitative strategist at Sanford C. Bernstein in Singapore, said on Bloomberg TV.”
“The 2022 laggards will come back sharply in 2023, ‘so we are favouring more China, South Korea and Taiwan’, she said.” Straits Times reports.
Indian Billionaire Ambani Sets His Sights on Green Energy Revolution
The National (UAE)
“Mukesh Ambani, the billionaire chairman of Reliance Industries, will be focusing his attention on the Indian conglomerate’s pivot to green energy, according to sources, after putting his children in charge of other businesses.”
“The 65-year-old will oversee strategy, including the building of gigafactories and blue hydrogen facilities, will assess acquisition targets and is talking to potential investors, the people said, asking not to be named as the information isn’t public.”
“Last year, Mr Ambani unveiled plans to spend $75 billion on clean energy projects over the next 15 years.”
“Asia’s second-richest man is known for his single-minded focus on key pursuits: in the 1990s he lived for months in shipping containers to build what is today the world’s largest petrochemical refinery and about two decades later, another of his upstart companies became India’s biggest telecom operator.”
“Mr Ambani has since handed the operational reins to his three children and turned his attention to green energy, which will see him go head-to-head with the region’s wealthiest person, Gautam Adani.”
“Reliance is seeking billions of dollars of investments in India’s energy sector and has approached potential investors, including Middle Eastern funds, sources said.”
“His ambition is to disrupt the sector just like he did with his mobile phone company Reliance Jio Infocomm, one of the people said, adding that the billionaire and his team were telling marquee investors they would own every link of the renewables supply chain that can enhance margins.”
“Mr Ambani’s deal-making acumen will be crucial. Reliance spent almost $50 billion to build Reliance Jio, which became India’s number one wireless carrier within some three years of its 2016 debut by offering free calls and cheap data.”
“Then, over a few months of the pandemic lockdown in 2020, Mr Ambani raised more than $20 billion for his digital ventures from a slew of investors, including Silicon Valley giants, Meta Platforms and Google.”
“…India’s transition from fossil fuels to renewables will provide an opportunity for Reliance’s continuous ‘hyper-growth’ over many decades, Mr Ambani told shareholders last August.” The National reports.
From the Rubaiyat of Omar Khayyam - Fitzgerald Translation
I sometimes think that never blows so red
The Rose as where some buried Cæsar bled;
That every Hyacinth the Garden wears
Dropt in its Lap from some once lovely Head.
XIX.
And this delightful Herb whose tender Green
Fledges the River's Lip on which we lean—
Ah, lean upon it lightly! for who knows
From what once lovely Lip it springs unseen!
17
XX.
Ah, my Belovéd, fill the Cup that clears
To-day of past Regrets and future Fears—
To-morrow?—Why, To-morrow I may be
Myself with Yesterday's Sev'n Thousand Years.
XXI.
Lo! some we loved, the loveliest and best
That Time and Fate of all their Vintage prest,
Have drunk their Cup a Round or two before,
And one by one crept silently to Rest.
XXVI.
Oh, come with old Khayyam, and leave the Wise
To talk; one thing is certain, that Life flies;
One thing is certain, and the Rest is Lies;
The Flower that once has blown for ever dies.