Emerging Markets Monitor - November 9
Qatar Eyes Egypt Investments, EM Sees October Inflows, Global Investors Shun China Stock Rally, Turkey's $1.5 Bond, India's Bullish Manufacturers
The Top 5 Stories Shaping Emerging Markets from Global Media - November 9
Qatar Fund Transfers $1B to Egypt Central Bank, Eyes Stakes in Egyptian Co’s
Bloomberg
“Qatar’s sovereign wealth fund has deposited $1 billion with Egypt’s central bank as the gas-rich Gulf state moves closer to a deal to acquire government holdings in some of the North African nation’s major firms.”
“The $445 billion Qatar Investment Authority transfered the funds amid discussions over it acquiring state-held stakes in Egyptian companies, according to people with knowledge of the matter. Due diligence on the assets and finalizing a deal may take time so the QIA made the deposit to help Egypt to shore up its finances in the interim, the people said, asking not to be identified because the talks are confidential.”
“Bloomberg last month reported Qatar was in advanced talks over a deal worth about $2.5 billion. The QIA declined to comment on the deposit, while officials at Egypt’s central bank weren’t available to comment.”
“Urgency is building for Egypt’s $400 billion economy as it seeks to plug its external funding gap. Soaring oil and commodity prices have hit one of the world’s largest wheat importers hard, as has the loss of tourists from Russia and Ukraine. The conflict has put pressure on Egypt’s currency and prompted it to seek International Monetary Fund assistance.” Bloomberg reports.
EM Sees October Portfolio Inflows But Investors rethink China
Reuters
“Emerging markets in October posted their second-largest month of portfolio inflows this year, though China suffered another bout of outflows with investors rethinking their exposure to the country, the Institute of International Finance (IIF) said.”
“Overall, foreign investors added $9.2 billion to emerging market portfolios last month, with fixed income attracting $7.6 billion in the strongest monthly inflows so far this year.”
“However, the breakdown showed emerging markets outside China attracted $18 billion last month while China suffered overall outflows, including $1.2 billion from fixed income.”
“Chinese bond portfolios have posted outflows every month since Russia invaded Ukraine in February, totaling $105.1 billion over nine months. Chinese stock portfolios lost $7.6 billion in October, the most since March.”
“Back in the first quarter, the IIF debated whether the shift to outflows from China was a tactical move linked to the Russian invasion or a shift in investor strategy.” Reuters reports.
Foreign Investors Shun China Stock Rally
Financial Times
"Global investors are largely spurning a searing rally for China stocks, with exchange data and market participants pointing to Chinese traders as the main driver of world-beating share price gains amid hopes that the end is nigh for the country’s strict zero-Covid policy.”
“Over the past week, Chinese stock benchmarks have shot higher in response to unconfirmed rumours that Beijing is on the verge of a major pivot that could see China reopening to the rest of the world as early as the first quarter of next year.”
“Hong Kong’s Hang Seng China Enterprises index has risen almost 13 per cent from its recent nadir, leaving the gauge just shy of its level before the sell-off sparked last month by Xi Jinping’s consolidation of power at the Chinese Communist party congress.”
“Xi’s stacking of the elite seven-member Politburo Standing Committee with his own people prompted market fears that the president’s signature policies, including zero-Covid, were unlikely to be relaxed any time soon.”
“Investors and traders in China and Hong Kong said the latest rally was driven primarily by Chinese buyers, with foreign institutions yet to return in force to mainland markets after last month’s round of record selling.”
“That reticence is reflected in flows through Hong Kong’s stock connect programmes with Shanghai and Shenzhen. Despite a recovery rally for the country’s benchmark CSI 300 index of large and liquid mainland stocks over the past week, a Financial Times analysis of stock connect data shows offshore investors have become net sellers of mainland Chinese stocks for the year to date.” The FT reports.
Turkey Raises $1.5B in Bonds as Emerging Market Sell-Off Ease
Financial Times
”Turkey has issued $1.5bn in new dollar bonds in a sign of how this year’s vicious sell-off in emerging market debt has eased in recent weeks. The country sold the five-year debt at a yield of 10 per cent, Turkey’s Ministry of Treasury and Finance said on Tuesday.”
“It brings the total amount Turkey has raised on international markets this year to $9bn. Turkey’s debt sale highlights how some investors are snatching up debt of riskier emerging market issuers after a big fall in prices in 2022 sharply increased the returns they receive for holding the bonds.”
“Emerging market debt traded on international markets has recovered in price since late October, sending the premium in borrowing costs that investors demand to hold these bonds above ultra low-risk assets such as US Treasuries — known as the ‘spread’ — falling.”
“Spreads on emerging market sovereign debt on international markets reached 5.07 percentage points on Monday from 5.77 percentage points on October 21, according to JPMorgan’s global diversified emerging market bond index.”
“…Almost three-quarters of the debt was purchased by investors outside Turkey, including those in the US, UK, Europe and the Middle East. Sentiment surrounding emerging markets has improved in recent weeks as investors bet the US Federal Reserve’s cycle of rate increases, which has weighed heavily on the asset class, will end in the middle of next year.” The FT reports.
Indian Manufacturers Bullish Despite Global Headwinds
Hindustan Times
“A majority of domestic manufacturers are confident about the sustained growth momentum of the Indian economy for the next six to nine months despite global headwinds such as supply chain disruptions due to the Ukraine war and the slowdown of major economies due to rising interest rates, according to an industry survey of 300 manufacturing units with a combined turnover of ₹2.80 lakh crore.”
“The growth momentum picked up by the manufacturing sector in the last few months is likely to be sustained for the next six to nine months,’ the Federation of Indian Chambers of Commerce and Industry (Ficci) said on Monday, citing its quarterly survey of manufacturing units.”
“After experiencing a revival of the Indian economy in 2021-22, the momentum of growth continued in subsequent quarters -- Q1 (April-June 2022-23) and Q2 (July-Sept 2022-23) with over 61% of respondents reporting higher production levels in the second quarter of FY23, it said. The buoyancy is also supported by robust order books reported by more than half (54%) of the respondents in Q2 of FY23, it added.” Hindustan Times reports.
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