Emerging Markets Monitor - January 6
Samsung Reports 69% 4Q Profit Fall, Tech Investors and China's Charm Offensive, Olam Agri's $1B Singapore IPO, MENA Currencies Struggle, Whither Africa in 2023?
The Top 5 Stories Shaping Emerging Markets from Global Media - January 6
Samsung Electronics Expects 69% Profit Drop on Slumping Tech Demand
Wall Street Journal
“Samsung Electronics Co. said it expects its fourth-quarter profit to plunge as the firm’s mainstay memory-chip and smartphone businesses face a sharp pullback in demand, showing the extent of the global tech downturn after pandemic highs.”
“The South Korean tech giant on Friday forecast its operating profit in the quarter ending Dec. 31 to drop by 69% from the prior year to 4.3 trillion won, the rough equivalent of $3.4 billion.”
“Samsung’s estimated results were far below market forecasts. Analysts polled by FactSet were, on average, expecting Samsung to report roughly 7.1 trillion won in operating profit and 73.1 trillion won in revenue. The company is scheduled to report its full earnings later this month.”
“Samsung is considered a bellwether for the tech world. It is a major component supplier to companies such as Apple Inc. and is the world’s top seller of smartphones, TVs and a major player in many other areas of consumer electronics.”
“Samsung said in an explanatory note that its fourth-quarter profit had fallen due to larger-than-expected order pullbacks and price drops in the memory business, combined with falling sales of smartphones and home appliances. The possibility of a global recession and macroeconomic uncertainties are weighing on its key businesses, it said.” Jiyoung Sohn reports.
Tech Investors Wary of China’s Charm Offensive to Attract Funding
Financial Times
“Investors are sceptical about Beijing’s recent pledge to support China’s biggest technology companies in the coming year, following a bruising regulatory campaign that has tamed internet titans such as Alibaba and Tencent.”
“During an annual policy meeting that sets out the agenda for 2023, China’s top leaders pledged last month to support digital companies to ‘fully display their capabilities’ in promoting economic growth, according to a readout of the closed-door summit on Chinese state media.”
“But venture capitalists and foreign investors remain wary about the apparent reversal of a brutal, two-year regulatory campaign. Beijing has levied huge fines on internet players, launched probes over data abuses, limited children’s gaming hours and nearly wiped out the edtech sector when it banned for-profit tutoring for core curriculum subjects.”
“Alibaba’s market capitalisation has fallen by about 70 per cent and Tencent’s by about 50 per cent since both companies’ share prices peaked, in October 2020 and February 2021 respectively.”
“The lingering concerns were validated last week when China’s securities regulator took aim at two Nasdaq-listed online brokerages, Futu Holdings and Up Fintech, which allowed Chinese investors to buy overseas stocks and operated in a regulatory grey area.”
“….Fundraising for high-growth tech start-ups has also fallen off a cliff. These groups raised a total of Rmb143bn ($20.5bn) in the three months to September, according to data provider ITjuzi, a decline of nearly 60 per cent from the same period in 2021, despite government efforts to bolster investor confidence in recent months.” The FT reports.
Olam Agri Picks Banks for $1B Singapore Listing
Bloomberg
“Olam Group Ltd. has picked banks to lead a planned Singapore listing of its agribusiness unit that could raise as much as $1 billion, people familiar with the matter said.”
“The company selected Citigroup Inc., DBS Group Holdings Ltd., HSBC Holdings Plc and Morgan Stanley to arrange the planned initial public offering of Olam Agri Holdings Pte, according to the people.”
“The group said in December it completed the sale of a 35% stake in Olam Agri to state-owned Saudi Agricultural & Livestock Investment Co., a subsidiary of the oil-rich country’s Public Investment Fund. The deal valued the business at about $3.5 billion.”
“Olam Agri sells grains and seeds and makes everything from edible oils to pasta, according to its website. It has over 9,000 employees and operations in more than 30 countries. The business is one of Olam Group’s main operating units, formed in a reorganization announced in early 2020. The group delayed a planned London IPO last year for another unit, Olam Food Ingredients, citing the war in Ukraine.” Bloomberg reports.
Why Some Middle East Currencies Are Struggling
The National
“A combination of macroeconomic and geopolitical factors is hurting several currencies in the Middle East, which have inevitably had ill effects on their countries' economies.”
“…The Egyptian pound has continued its slide against the US dollar, with analysts predicting further devaluation, as Cairo seeks to meet a key International Monetary Fund requirement for a flexible foreign exchange mechanism as part of an agreement for a $3 billion loan.”
“Cairo-based Naeem Brokerage expects the pound to weaken further by another 5 per cent, to about 28 pounds to the US dollar, it said in a research note on January 5.”
“Naeem Brokerage estimates the pound weakened by a combined 15 per cent in this latest round of devaluation.”
“…Crisis-hit Lebanon is grappling with its currency's depreciation to record lows on the parallel market, prompting the country to slash the value of its currency to 38,000 pounds to the dollar on its Sayrafa exchange platform.”
“The Banque du Liban has blamed currency speculation and the smuggling of US dollars outside Lebanon. The economic crisis has pushed many in Lebanon into poverty, with severe shortages of essentials including clean water, electricity and medicine.”
“Inflation in Lebanon increased an average of 189.4 per cent year-on-year in the first 11 months of 2022, government data has shown. Lebanon is expected to post the second-highest inflation rate in the world this year, behind Sudan, according to Fitch Solutions.”
“….The value of the Iraqi dinar has further plummeted against the US dollar following new measures by the US Federal Reserve aimed at blacklisting several Iraqi banks that deal mainly with Iran.”
“….The Israeli shekel declined about 12 per cent against the dollar in 2022, and there are no indications that it will improve soon given that inflation in the country rose sharply to 5.3 per cent in November — almost double the top end of the government’s targets of between 1 per cent to 3 per cent.” Deena Kamel and Alvin R Cabral report.
Africa: Can the Continent Outrun Global Headwinds?
African Business
“As the new year kicks off, Africa is likely to experience a contraction of its annual GDP growth as rising inflation and interest rates hikes continue to bite, restricting borrowing and government spending, says Charlie Robertson, chief economist at Renaissance Capital.”
“‘It’s going to be a year of austerity for many lower-income countries, not just Africa. They can’t borrow easily from abroad. It’s too expensive. We’ve got a global slowdown, which won’t help exports. And that’s a tough combination. Governments will have to take measures like removing the fuel subsidy or at least reducing it in the second half of 2023, which is likely to hurt the middle classes.’”
“But whether African economies wilt further under the barrage of external shocks or make tentative steps towards recovery is likely to differ widely among individual countries. In particular, the continent’s oil exporters could be buoyed by robust energy prices which currently sit at $75 a barrel – at least for the time being, says Miguel Azevedo, head of investment banking, Middle East and Africa (exc. SA) at Citigroup.”
“The economic performance of the continent in 2023 could to a large extent depend on the performance of three major economies – Nigeria, South Africa and Egypt – and the omens in the first two are not good.”
“In the first months of the year, all eyes will be on Nigeria, Africa’s largest economy. Its presidential election on 24 February is likely to temper economic expectations as investors hold fire pending a stable process.”
“And whoever wins the contest – which pitches Bola Tinubu of the ruling All Progressives Congress (APC) against Atiku Abubakar of the main opposition People’s Democratic Party (PDP), with Peter Obi of the Labour Pary potentially playing the role of kingmaker – Nigeria’s next president faces a daunting task in reviving a moribund economy.” Leo Komminoth reports.
“It is not death that one should fear, but one should fear never beginning to live.”
― Marcus Aurelius.