Emerging Markets Monitor - May 17
China Tech Darlings' Party Over, Saudi to Hit 13M Barrels by 2027, China's COSCO Expands to Peru Port, McDonalds Exits Russia, Morocco OCP's New Plant in Brazil
The Top 5 Stories Shaping Emerging Markets from Global Media - May 17
Tencent and Alibaba Party Is Over in a ‘New Paradigm’ For China Tech
Bloomberg
“For years they were two of the fastest-growing companies worldwide -- stock-market darlings worth a combined $1.7 trillion at their peak. Now Tencent Holdings Ltd. and Alibaba Group Holding Ltd. are struggling to keep up with even the most staid utilities as China’s crackdown on internet giants takes its toll.”
“Tencent results on Wednesday are expected to show revenue rose by a mere 4.3% in the March quarter, while growth at Alibaba is projected at 7.1%. Both would be record lows and lagging the 8.6% average growth reported by the 10 largest utilities including Duke Energy Corp. and The Southern Co. last year.”
“It’s a remarkable turn of events for two corporate stars that once embodied China’s modern economic miracle, before Xi Jinping’s sweeping tech-sector crackdown forced the internet industry to cut staff, freeze investments into new arenas -- even give away billions to social causes. The creator of WeChat, which has shed about $520 billion of value since its 2021 peak -- could be hardest-hit after embracing what second-in-command Martin Lau calls a ‘new industry paradigm.’”
“China’s tech giants have made peace with a new era of caution and stricter government oversight. Venture capitalists are hitting the brakes on some of the country’s hottest internet trends like community buying, sounding the death knell for high-profile startups and squeezing valuations of others. TikTok-owner ByteDance Ltd. and online exporter Shein could postpone their stock-market debuts. All that has disillusioned investors who can no longer count on China Tech Inc. to drive their portfolios.” Zheping Huang reports.
Saudi On Track to Hit 13 Million Barrels Per Day By 2027, Oil Minister Says
The National
“Saudi Arabia, Opec’s largest producer, is on track to increase oil production to more than 13 million barrels per day by the end of 2026 or the start of 2027, its energy minister has said.”
“The current production capacity of Saudi Arabia, the Arab world's largest economy, is 12 million bpd. ‘We are going to go to 13.2 to 13.3 [million bpd] subject to what we will do in the divided zone but most likely it will be 13.3 and 13.4 and that will be attended to the end of 2026 or beginning of 2027,’ Prince Abdulaziz bin Salman told an energy conference in Bahrain on Monday.”
“Prince Abdulaziz also reiterated earlier calls for increased investments in the oil and gas sector globally and said the world was ‘running out of capacities at all levels’. Supply chain issues are further exacerbating the effects, he said, and ‘the energy sector is a global issue for the world to attend to’.”
“The total investment in the upstream part of the oil and gas sector fell 23 per cent below pre-coronavirus levels to $341 billion in 2021, the International Energy Forum and IHS Markit said.” The National reports.
China’s COSCO Plants its Flag in South America with $3B Peruvian Port
Nikkei Asia
“Major ports along the west coast of the Americas have been snarled for much of the last two years due to COVID and global shipping challenges such as the Ukraine war.”
“Outside a sleepy South American fishing town, Chinese state-owned conglomerate COSCO Shipping Holdings is moving forward with its own solution to untangling this knot: building -- virtually from scratch -- a $3 billion deep-water port linked with a sprawling industrial and logistics park, in collaboration with a unit of Swiss trading house Glencore.”
“Here in Chancay, 55 km north along Peru's Pacific coast from the capital Lima, the whir of Chinese heavy machinery and the thud of underground explosions now frequently drown out the sound of breaking waves at the site of the only new port development underway in the Americas.”
“China Railway Group is building a 1.8 km tunnel from the port area so trucks going to a linked 800-hectare industrial and logistics park can bypass Chancay's town center. (Photo by Lucien Chauvin)”
“COSCO runs operations at around 35 ports globally, but Chancay will be the conglomerate's first outpost in South America. ‘COSCO Shipping will jointly cooperate with Peru to develop Port of Chancay into an important hub port in Latin America,’ Chairman Xu Lirong said in 2019 when the company closed the deal to buy 60% of the project from Glencore's Volcan unit for $225 million.” Nikkei Asia reports.
McDonald’s Calls it Quits on Russia After Three Decades
Wall Street Journal
“McDonald’s Corp. said it would quit Russia and sell its business there, ending more than three decades in the country over its invasion of Ukraine. In deciding to sell after having initially paused its operations in the country, the fast-food giant joins a raft of Western companies, from auto makers to brewers, in exiting Russia.”
“McDonald’s said in March it would temporarily close its 847 restaurants in Russia while continuing to pay the 62,000 people it employs there. Since then, pressure has mounted on Western companies—particularly from the Ukrainian government—to pull the plug on their Russian operations. Moscow has also pressured companies, threatening legislation to nationalize assets and compel executives to resist Western sanctions.”
“The departure of McDonald’s from Russia is particularly notable given its arrival was emblematic of a rush among Western companies in the 1990s to enter the country, seeking to profit from its move from communism to capitalism. McDonald’s opened its first Russian location in Moscow’s Pushkin Square in 1990, when thousands of locals lined up to get their first taste of the American chain’s burgers and fries.”
“On Monday, McDonald’s said that continued ownership of its business in Russia was no longer tenable nor consistent with its values, as well as posing practical and commercial challenges.” WSJ reports.
Morocco’s OCP to Set Up New Phosphate Fertilizer Plant in Brazil
North Africa Post
“Morocco’s OCP Group is set to open a new phosphate fertilizer manufacturing plant in Brazil, announced Brazil’s Agriculture Minister on Twitter earlier this week. The move contributes to the stabilization of the market amid a global shortage in fertilizers and their inputs because of the COVID-19 pandemic, a shortage that was worsened by the conflict in Eastern Europe.”
“The announcement was made following a meeting in OCP’s headquarters between OCP executives, including OCP CEO Mostafa Terrab, and a Brazilian delegation, led by Minister of Agriculture, Livestock and Food Supply (MAPA), Marcos Montes.”
“During the meeting, Terrab discussed the company’s aspirations to invest abroad, prioritizing in particular the Brazilian market. Brazil wants to compensate the recorded decline in its imports of fertilizers after the outbreak of the conflict in Eastern Europe.”
“With Russia suspending its fertilizer exports, Brazil increases its fertilizer imports from Morocco, in an early sign of the North African country’s growing centrality to global food security.” North Africa Post reports.
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