Emerging Markets Monitor - May 11
Ukraine Halts Key Russia-to-Europe Pipeline, India Inflation Rising, Lagarde Signals ECB Rate Rise, Africa Mining, Mubadala Reports Record Earnings
The Top 5 Stories Shaping Emerging Markets from Global Media - May 10/11
Ukraine Stops Flow of Russian Gas to Europe Via Key Pipeline
Wall Street Journal
“Ukraine reduced flows of Russian natural gas through its territory to Europe, introducing a new threat to the energy security of a continent already racing to sever its dependence on Russian fossil fuels.”
“The company that runs Ukraine’s pipeline network halted the flow of gas through a major entry point in the east of the country Wednesday, blaming interference by Russian troops with critical gas infrastructure. The border crossing accounts for a third of Russian gas exports through Ukraine to Europe and feeds 3% of the European Union’s overall gas consumption.”
“Natural-gas prices in Europe jumped before falling back. An increase in flows of Russian gas through a separate section of pipeline in Ukraine-controlled territory near the city of Sumy partially offset the stoppage, limiting the rise in prices.”
“Europe has been shoring up its energy supplies ahead of a planned European Union-wide embargo on Russian oil, being hashed out this week. Some member states, especially Germany, have also scrambled to find alternative supplies of gas amid the threat of a potential severing of exports by Moscow. Despite these moves, Europe is still heavily reliant on Russian gas, a slug of which flows through Ukraine. That gas had kept moving since the Feb. 24 invasion despite the raging conflict.” WSJ reports.
India Central Bank Set to Raise Inflation Forecast in June
This sets the stage for more interest rate rises in August
Bloomberg
“India’s central bank will raise its inflation forecast in the June monetary policy meeting amid elevated commodity prices, possibly setting the stage for more interest rate increases by August, a person familiar with the matter said.”
“There is also a growing chance that inflation will breach the upper end of the Reserve Bank of India’s targeted 2%-6% range for the next two quarters as a shortage of coal and edible oils would feed into the readings, said the person who declined to be identified as the discussions are private.”
“That means the inflation rate would have breached the RBI’s accepted range for three straight quarters, and the central bank will have to write a letter to the government, as laid down by law, explaining why it failed to keep costs under check. It will also have to lay out remedial measures.”
“The RBI raised key rates for the first time in nearly four years and moved to drain billions from the banking system in a surprise move last week to tame inflation. The decision stunned markets and pushed the benchmark 10-year bond yield to its highest in three years.” Bloomberg reports.
Lagarde Signals that ECB Will Raise Rates in July to Ensure ‘Price Stability’
Eurozone inflation hit a record 7.5% in April
Financial Times
“Christine Lagarde signalled that she would support raising the European Central Bank’s main interest rate in July, leading economists to declare that the first increase for more than a decade is almost certain to go ahead.”
“The ECB president said in a speech in Slovenia on Wednesday that she expected the bank to stop expanding its balance sheet through bond purchases ‘early in the third quarter’ and to then raise rates ‘some time’ after that, which ‘could mean a period of only a few weeks’.”
“Lagarde added that ‘actions that demonstrate our commitment to price stability’ would be critical in ensuring businesses’ and households’ expectations of future inflation did not rise further and test the central bank’s credibility.”
“Eurozone inflation hit a record 7.5 per cent in April — almost four times the central bank’s target of 2 per cent. The remarks are a clear sign that Lagarde supports the growing number of governing council members that have called for a 25 basis-point rise in the ECB’s deposit rate at the July 21 policy meeting. The deposit rate is now minus 0.5 per cent and has been in negative territory since 2014, when it was lowered to help fight the region’s debt crisis.” The FT reports.
Zambia President Says Africans Should Do More to Grow Mining Sector
South African Minister says Africans should ‘add value’ beyond the digging for minerals
Africa News
“The 2022 Mining Indaba summit began on Monday in Cape Town South Africa. The summit is scheduled to run until the end of the week and intends to highlight the issue surrounding mining in Africa.”
“Speaking during the opening of the summit, the Zambian president called upon elected leaders in their respective countries to be responsible for their duties. ‘All of us on this continent should not accept the fact that we don't have sufficient power to drive our mining sector and other industries. We do have. We have just not been doing the work that we were elected to do.’”
“Among the issues highlighted include power shortage that has impacted the mineral flow in various African countries. Other leaders also called upon countries in Africa must share the benefits of their respective resources.”
"‘We dig the mineral from the pit to the pot and somebody else adds value. Let's invest in beneficiating our minerals. Beneficiation will mean we are fully taking ownership of the value chain of our minerals across the sphere,’ said Gwede Mantashe, the South African Minister of Mineral Resources and Energy.”
“This year's mining indaba happens with the backdrop of high energy prices, which pose a significant inflationary risk to the poor and emerging markets. The mining industry on the continent has been impacted by other issues like insecurity, workers' strikes and low global mineral prices.” Africa News reports.
Mubadala Reports Strongest Annual Profit in 20 Year History
The National
“Mubadala Investment Company, Abu Dhabi’s strategic investment arm, said comprehensive income surged almost 70 per cent in 2021, making it the ‘strongest financial year’ in its 20-year history, driven by a sharp rise in investment returns and monitisation of assets.”
“Comprehensive income jumped to Dh122 billion ($33.2bn) in 2021 from Dh72bn a year earlier, the company said. ‘Mubadala continues to invest in sectors that are changing the world and impacting global business. As markets rose and the economy began to recover from the pandemic, we looked for opportunities to take some of our strongest companies public and invest with world-class partners in high-growth sectors and geographies,’ Khaldoon Al Mubarak, Mubadala’s group chief executive and managing director, said.”
“Assets under management climbed more than 16 per cent to Dh1.04 trillion at the end of 2021 from Dh894bn a year earlier. Growth was supported through investment returns, monetisation of certain assets and new partnerships it struck last year.”
“The company listed its wholly-owned semiconductor manufacturing unit, GlobalFoundries, in a $2.6bn initial public offering on the Nasdaq that valued the New York-based chipmaker at nearly $26bn. It also listed Yahsat on the Abu Dhabi Securities Exchange in a deal that raised $731 million.” Sarmad Khan reports.
“Courage is the most important of all the virtues because without courage, you can't practice any other virtue consistently.”
― Maya Angelou