Emerging Markets Monitor - June 6
Black Sea Blockade and the Food Crisis, Goldman Sees EM Outperformance, Africa Economic Outlook, Shanghai and Omicron, World Tourism Gradually Recovers
The Top 5 Stories Shaping Emerging Markets from Global Media - June 4-6
Ukraine Warns that Only Lifting Black Sea Blockade Can Avert Food Crisis
Financial Times
”Ukraine has warned that the world faces a critical food shortage unless Russia lifts its Black Sea port blockade, as improvements to other transport options would only enable it to deliver a fraction of its total grain stockpile.”
“Oleksandr Kubrakov, Ukraine’s infrastructure minister, told the Financial Times that ‘all of our activity won’t cover even 20 per cent of what we could do through the Black Sea ports’. Ukraine and its western allies are searching for ways to get up to 20mn tonnes of grain out of the country and clear storage space for this year’s harvest.”
“The crisis threatens tens of millions of people in countries across the Middle East and Africa that rely on Ukraine’s cereals. Trucks face lengthy delays at the border with Poland and Romania, while moving grain by rail is difficult because trains in the EU and Ukraine run on different gauges of track.”
“Russia has repeatedly bombed the alternative routes, including those leading to Romania by road or rail, where grain is then loaded on barges that sail down the Danube and into the Black Sea.”
“….Russia has captured much of Ukraine’s breadbasket in the south and is making progress in the eastern Donbas industrial region, the scene of the fiercest fighting three months into Putin’s invasion of Ukraine.” FT reports.
Goldman Says EM to Outperform on Dollar Peak
Bloomberg
“Stocks, bonds and currencies from emerging economies stand to reap the rewards of a potential peak in the US dollar, according to Goldman Sachs Group Inc.”
“An almost 3% slump in a key gauge of the greenback since a high point in mid-May suggests a rebound in developing markets, which tend to outperform the rest of the world in the months following a cyclical dollar peak, according to Caesar Maasry and Jolene Zhong.”
“‘Weak US dollar cycles tend to bode positively for emerging-market assets,’ they wrote in a Thursday note to clients, pointing to attractiveness in the MSCI China Index and early-cycle emerging markets in Southeast Asia.”
“Some money managers, including at Fidelity and T. Rowe Price Group, are also highlighting potential buying opportunities, given better valuations.”
“There are other signs of investors returning to emerging markets. A three-times leveraged China stock ETF saw a record volume surge Tuesday and Wednesday, almost six times the daily average. The Indonesian rupiah has advanced around 0.6% this week, touching a one-month high, while the South Korean won and offshore yuan have both gained 1.3%.” Bloomberg reports.
Africa Economic Outlook: ‘Growth, Down. Inflation, Up. Debt, Stable.”
African Business
“The 2022 African Economic Outlook (AEO), the African Development Bank’s flagship publication released at the midpoint of last week’s Annual Meetings in Accra, can be summarised in six words: Growth, down. Inflation, up. Debt, stable.”
“Certainly, the headline messages make for grim reading. Africa has suffered terribly from the twin crises of Covid-19 and Russia’s invasion of Ukraine, while the escalating impacts of climate change – felt sooner and harder in Africa than anywhere else – chip constantly away at the continent’s productive capacity.”
“The year 2020 saw Africa slip into its first continental recession in over half a decade, and governments, needing to rapidly expand support to their ailing economies, were forced to incur massive amounts of debt that have stabilised, on average, at above 70% of GDP.”
“Then along came Putin, swinging a sledgehammer through global supplies of food, fuel and fertiliser, driving prices for these commodities into the stratosphere and forcing the millions of Africans that rely on them into severe cost-of-living stress.”
“These three factors – contraction, inflation and debt – have together jeopardised the rebuild that Africa commenced in 2021, and the AEO is frank in warning: ‘Africa’s growth outlook is highly uncertain, with risks tilting to the downside.’” Angus Chapman reports.
Shanghai Re-Opening at Risk as New Omicron Cases Emerge
South China Morning Post
“Shanghai detected another three community infections as local health authorities issued a warning to the city’s 25 million residents that a resurgence of the Covid-19 Omicron variant could upend livelihoods and disrupt business again after a two-month lockdown was lifted on June 1.”
“The city’s health commissioner Wu Jinglei told a press briefing on Sunday night that scattered cases in the mainland’s commercial capital could spread quickly if immediate actions were not taken to cut the transmission chains.”
“…Total community infections since Shanghai formally relaxed a citywide lockdown on June 1 rose to 13, six of which were identified during the Dragon Boat Festival from Friday to Sunday.”
“…The citywide lockdown that started April 1 wreaked havoc on the mainland Chinese economy, straining supply chains from Europe to Japan, and driving thousands of the city’s businesses to the brink of collapse.”
“Shanghai, the gateway for foreign businesses and capital to enter the mainland, is of vital importance to the world’s second-largest economy. The two-month shutdown slowed down cross-border flows of passengers, cargo and funds.” Daniel Ren reports.
World Tourism Gradually Recovers Amid Global Uncertainty
Arab News
“Global tourism has been facing the brunt of natural and man-made events, one after the other. However, it has the potential to grow to $8.6 trillion in 2022, according to an industry survey.”
“Travel and tourism contributed 21.7 percent to the global gross domestic product in 2021 after falling sharply in 2020 due to COVID-19, according to a joint survey by the World Travel & Tourism Council and Oxford Economics. According to the travel body, tourism growth this year holds tremendous potential.”
“Even as global tourism showed strong signs of recovery in January 2022 after reeling under COVID-related restrictions, the Russian invasion of Ukraine added to the uncertainty, the United Nations World Tourism Organization stated in a report.”
“The UN report stated that global international tourist arrivals more than doubled in January 2022, rising by 130 percent compared to January 2021. Around 18 million more tourists were recorded worldwide in March this year.”
“Despite these figures reflecting a positive trend, recovery halted indefinitely in the wake of Omicron and travel restrictions in several destinations. In January 2022, international arrivals remained 67 percent below pre-pandemic levels after declining 71 percent in 2021, according to the UN report.”
“In the same month, all regions performed significantly better than the corresponding month in 2021. Even as international arrivals were at around half the pre-pandemic levels, both Europe and the Americas continued to have the strongest turnout.” Dana Alomar reports.
“You have power over your mind - not outside events. Realize this, and you will find strength.” ― Marcus Aurelius, Meditations