Emerging Markets Monitor - July 15
EM Debt Troubles Mount, China EV Leader Sizzles, Biden in Saudi Arabia, Eurozone Buffeted by Inflation and Sluggish Growth, Singapore Economy Reviving
The Top 5 Stories Shaping Emerging Markets from Global Media - July 15
Emerging Market Debt Woes + Inflation and Rising $ Ignite Fears of More Defaults
Financial Times
“Sri Lanka’s debt default and political implosion have reignited fears that other emerging market countries could be heading into similar trouble as blistering inflation and rising US interest rates send investors fleeing.”
“Sovereign bond yields have ballooned to levels that point to intensifying strains across more than a dozen developing economies…The tumult has prompted investors to pull $52bn from emerging market bonds this year, according to JPMorgan data. ‘It’s pretty shocking to see this scale of a collapse in bond prices,’ said Charlie Robertson, global chief economist at Renaissance Capital, adding that the sell-off is ‘one of the biggest I’ve seen in 25 years.’”
“…Under the greatest duress is Ukraine, which since Russia’s invasion in February has been begging foreign governments for cash to meet its soaring budget deficit, at present running at $9bn a month, up from $5bn in the early stages of the war.”
"The bond yields of Pakistan, Egypt and Ghana are also spiralling higher. On Thursday, Pakistan reached an agreement with the IMF which paves the way for the country to access crucial funds and avoid a potential default.” The FT reports.
Buffet-backed Chinese EV Maker Sizzles
South China Morning Post
“BYD Co, China’s biggest electric-car maker backed by Warren Buffett’s Berkshire Hathaway, logged the biggest winning streak in four months in Hong Kong after telling investors earnings could triple as sales defied a slowdown in the economy.”
“The stock jumped as much as 6.7 per cent to HK$302 before closing at HK$294.20. An almost 10 per cent rebound over two days is the best since mid-March. The stock has risen 10 per cent this year in Hong Kong and 26 per cent in Shenzhen.”
“Net profit could jump to between 2.8 billion yuan (US$414 million) and 3.6 billion yuan for the six months to June 30, versus 1.17 billion yuan in the same period a year earlier, the Shenzhen-based carmaker said in an exchange filing. Sales showed strong momentum, among other reasons, it added.” SCMP reports.
Tweet of the Day - Fist Bump Diplomacy - President Biden Meets Saudi Crown Prince Mohammad Bin Salman
Biden to Leave Middle East With No Announcements on Oil, But Officials Say Private Agreements Have Been Reached
Bloomberg
“President Joe Biden will leave the Middle East this week with no announcements on increasing oil supply before a scheduled meeting of producers next month, people familiar with the matter said.”
“Biden, who came to office vowing to turn the world’s biggest oil exporter into a ‘pariah’ over the 2018 killing of Washington Post columnist Jamal Khashoggi, said he decided to make the trip to advance US interests and try and curb soaring gasoline prices, which have hurt him politically ahead of mid-term elections.”
“…Officials from the US and Saudi governments have been in close contact on the issue of energy markets, and discussions will continue regarding output from members of the OPEC+ cartel, one of the people said, asking not to be named because the deliberations aren’t public.”
“Biden officials privately say agreements have been reached but no details will be announced until the next scheduled meetings of OPEC+ next month.”
“‘I don’t think you should expect a particular announcement here bilaterally because we believe any further action taken to ensure that there is sufficient energy to protect the health of the global economy will be done in the context of OPEC+,’ Jake Sullivan, Biden’s national security advisor, told reporters on the flight to Jeddah.” Bloomberg reports.
Inflation Up, Growth Down in Eurozone for 2022-3
Politico Europe
“The euro area economy will grow by 2.6 percent this year and 1.4 percent in 2023, a significant markdown from May estimates of 2.7 percent and 2.3 percent, respectively, the European Commission said Thursday.”
“The bloc as a whole will grow by 2.7 percent this year and 1.5 percent the next, according to the EU executive. The picture across the bloc is fragmented. Germany’s growth has been revised downward by more than one percentage point for next year, to 1.3 percent, as has Spain’s. Italy’s GDP was revised upward for this year, to 2.9 percent, but significantly downward for 2023, to 0.9 percent — the worst expected output in the eurozone.”
“The Commission also revised inflation upward for both years, hitting 7.6 percent in the euro area this year before easing to 4 percent in 2023, up from 6.1 percent and 2.7 percent, previously.”
The EU executive now estimates the peak will happen this quarter at 8.4 percent and ‘decline steadily’ thereafter. In the EU, inflation will reach 8.3 percent this year and 4.6 percent in 2023.” Politico Europe reports.
Singapore Economy on Road to Recovery
IHS Markit
“Singapore's economy has continued to recover from the COVID-19 pandemic in the first half of 2022. The advance estimate of GDP for the second quarter of 2022 was up 4.8% year-on-year (y/y), after growth of 4.0% y/y in the first quarter. This follows GDP growth of 7.6% in 2021 as the economy rebounded from the impact of the COVID-19 pandemic. Singapore's manufacturing output grew by 13.8% y/y in May 2022.”
“Despite the economic disruptions caused by the COVID-19 pandemic, Singapore has continued to attract strong foreign direct investment inflows, notably into electronics and pharmaceuticals manufacturing. A number of new vaccine manufacturing plants are currently under construction in Singapore, including by Sanofi, BioNTech and Hilleman Laboratories.”
“Manufacturing output rose by 8.0% y/y in the second quarter, driven by rapid expansion in electronics and precision engineering output. Construction output grew by 3.8% y/y in the second quarter, with the easing of border restrictions having helped migrant labor inflows for the construction industry. The service sector also recorded expansion of 4.7% y/y in the second quarter of 2022. Growth in the food services sector was boosted by easing of pandemic-related restrictions on restaurants and other food outlets during the second quarter.” IHS Markit reports
One must still have chaos in oneself to be able to give birth to a dancing star.
Friedrich Nietzsche