Emerging Markets Monitor - June 13
China Stocks Reviving, Global Tech Rout Hits Africa, TotalEnergies Signs New Gas Deal with Qatar, US Economy Headed for Recession, India Riots and Gov't Crackdown
The Top 5 Stories Shaping Emerging Markets from Global Media - June 12-13
Beleaguered China Stocks Making a Comeback
Bloomberg
“From dialing back of a crackdown on tech giants to some easing of Covid curbs, the month of June so far has brought a double dose of good news for China’s stock investors.”
“Key equity gauges in China and Hong Kong are all rallying this month, bucking a global slide, with an MSCI Inc. gauge of Chinese shares just capping its best week since July 2020. Even as a rebound in virus cases poses a fresh risk, calls are growing that this may be the start of a more sustainable rally in one of the world’s worst-faring major markets this year.”
“Just this week, Morgan Stanley, Bank of America and Jefferies Financial Group Inc. ramped up bullish commentary on Chinese stocks, while foreign investors have been net buyers for 10 straight days, the longest run since December.”
“‘The recovery rally is far from over in our view, and the suppressed demand and backlog in orders from the lockdown will bring about a big spike in activity in coming months,’ said Hua Tong, a fund manager at Shenzhen Zhengyuan Investment Co. ‘Looking back at the early second quarter, the pessimism was overdone. It’s likely that a revival of confidence will come just as strong.’”
“Morgan Stanley strategists, well-known China bears, suggested investors gradually add back growth stocks amid the ‘final leg of a bear market,’ while noting there will be ‘hiccups’ along the recovery.” Bloomberg reports.
Global Tech Rout to Set Back Fundraising in Africa - ‘The Party is Over’
African Business
“Since the beginning of the year, blue chip stocks in the S&P 500 have lost more than $7 trillion in value. Tech stocks have been hit the hardest, with investors pulling billions of dollars out of companies that were attractive due to future growth prospects but have now become less so in a bear market fuelled by rising interest rates and fears of a recession.”
“As investors scramble to find less risky assets, the knock-on effect in emerging markets and Africa will be huge. Despite raising a record $4.65bn in 2021, according to data collected by Briter Bridges, African startups are facing a much tougher fundraising environment this year.”
“‘You can’t run a company like it’s 2021 anymore,’ says Daniel Yu, founder and CEO of Wasoko, an e-commerce platform for informal retailers in Africa. ‘It’s very important that people realise this: the party is over. It is a really challenging situation as we all work to survive over this period.’”
“Yu says that the biggest slowdown will be in late stage funding for companies that are looking to raise big ticket sizes. Investors are no longer keen to pump large amounts of late-stage capital into startups when there is no clear exit plan, as listing on public markets is less attractive in the current environment.” Tom Collins reports.
France’s TotalEnergies Signs Deal to Develop Massive Gas Field in Qatar
The National
“French oil company TotalEnergies was awarded a 25 per cent stake to develop the world’s largest natural gasfield in Qatar as the Gulf state aims to increase its production and respond to higher global demand for LNG.”
“State-owned QatarEnergy will hold the remaining 75 per cent stake in the North Field East (NFE) LNG project, which has a production capacity of 32 million tonnes a year, TotalEnergies said on Sunday.”
“Qatar is partnering with international energy companies in the first and largest phase of a nearly $30 billion expansion of the NFE project, according to Reuters.”
“…The NFE, launched by QatarEnergy in 2019, is currently under construction. It is intended to increase Qatar's total LNG export capacity from 77 million tonnes a year to about 110 million tonnes a year by 2027 as a result of the construction of four eight-million-tonnes-a-year trains.” Fareed Rahman reports.
US Economy Headed for Recession Next Year, Economists Predict
Financial Times
”The US economy will tip into a recession next year, according to nearly 70 per cent of leading academic economists polled by the Financial Times.”
“The latest survey, conducted in partnership with the Initiative on Global Markets at the University of Chicago’s Booth School of Business, suggests mounting headwinds for the world’s largest economy after one of the most rapid rebounds in history, as the Federal Reserve ramps up efforts to contain the highest inflation in about 40 years.”
“The US central bank has already embarked on what will be one of the fastest tightening cycles in decades. Since March it has raised its benchmark policy rate by 0.75 percentage points from near-zero levels.”
“The Federal Open Market Committee gathers once again on Tuesday for a two-day policy meeting, at which officials are expected to implement the first back-to-back half-point rate rise since 1994 and signal the continuation of that pace until at least September.”
“Almost 40 per cent of the 49 respondents project the National Bureau of Economic Research — the arbiter of when recessions begin and end — will declare one in the first or second quarter of 2023.”
“A third believe that call will be delayed until the second half of next year. The NBER characterises a recession as a ;significant decline in economic activity that is spread across the economy and lasts more than a few months’. Just one economist pencilled in a recession in 2022…The unemployment rate is set to steady at 3.7 per cent, according to the median estimate for December. The FT reports.
India Officials Step Up Arrests After Riots Sparked by Anti-Islam Comments
Reuters
“Authorities in India's Uttar Pradesh state have demolished the homes of several people accused of involvement in riots last week triggered by derogatory remarks made by ruling party figures about Islam's Prophet Mohammad, officials said on Sunday.”
“In Indian Kashmir, police arrested a youth for posting a video threatening to behead the ruling party's former spokeswoman who had made some of the remarks, officials said. The video, circulated on YouTube, has been withdrawn by authorities.”
“Muslims have taken to the streets across India in recent weeks to protest against the anti-Islamic comments by two members of Prime Minister Narendra Modi's Hindu nationalist Bharatiya Janata Party (BJP).”
“Clashes have broken out between Muslims and Hindus and in some cases between protesters and police in several areas. Police in Uttar Pradesh arrested more than 300 people in connection with the unrest.”
“Some in India's minority Muslim community see the comments as the latest instance of pressure and humiliation under BJP rule on issues ranging from freedom of worship to the wearing of hijab head scarves.”
“The BJP has suspended its spokeswoman Nupur Sharma and expelled another leader, Naveen Kumar Jindal, for the comments, which have also caused a diplomatic row with several Muslim countries.”
“Police have filed cases against the two and the government has said the comments do not reflect its views.” Reuters reports.
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