Emerging Markets Monitor - October 20
Saudi Aramco New IPO, US Readies SPR Oil Release, Fitch Sees Limited India Risk, Tencent Growth, EU Sanctions Iran for Drone Supply to Russia
The Top 5 Stories Shaping Emerging Markets from Global Media - October 20
Saudi Aramco Pushes Ahead With IPO of Oil Trading Unit
Bloomberg
“Saudi Aramco is pushing ahead with plans for an initial public offering of its energy-trading business, which would rank as one of the largest share sales this year, according to people familiar with the matter.”
“The world’s largest oil company is working with its advisers for a listing in Riyadh for the end of the year or early 2023, the people said, asking not to be identified as the matter is private. Aramco is in the process of adding more banks to the IPO, which could value the unit at more than $30 billion, the people said.”
“…While the global IPO market has suffered due to weakening economies and rising inflation, there’s still plenty of appetite for deals in Saudi Arabia, which is the fastest-growing of the G20 group of major economies. Arabian Drilling Co., an oilfield-services firm, attracted $43 billion in orders for its listing this month.”
“Aramco, controlled by the Saudi Arabian government, is mulling the deal at a time when other national oil companies in the Persian Gulf are also seeking to build their trading businesses. Abu Dhabi National Oil Co. is considering buying all or part of commodity trading house Gunvor Group, in what would be one of the industry’s biggest deals in years, Bloomberg reported last month. Qatar Energy wants to expand its trading activity, albeit organically rather than through acquisitions, its chief executive officer said this week.”
“…Established in 2011, Aramco Trading buys and sells everything from crude oil to diesel and liquefied natural gas. In 2020, it traded around 5 million barrels a day of crude and refined products, and wanted to increase that to 6 million by 2023, according to Ibrahim Al-Buainain, then head of the business. That would put the company among the world’s biggest energy traders.”
The parent company sold around 2% of its shares in 2019. It was the world’s biggest initial public offering, though many major international investors didn’t buy the stock because they felt the pricing was too expensive. Bloomberg reports.
Biden Tells Officials to Prepare for More SPR Oil Releases Soon
Financial Times
”President Joe Biden has ordered officials to prepare for more releases from the US Strategic Petroleum Reserve as he approved the sale of 15mn barrels of oil in December and established a plan to replenish the dwindling emergency stockpile.”
“…He insisted it was ‘not politically motivated at all’, brushing aside criticism that the oil releases were only done to boost Democratic chances in the November midterm elections.”
“…Biden also laid some blame on oil companies for the high prices of petrol and called on them not to distribute profits to investors while consumers were struggling with such high prices.”
“A senior administration official said on Tuesday that the president had directed his top economic and energy officials to be in a ‘high state of readiness’ and prepare for the potential sale of additional barrels of oil beyond the 180mn if necessary, a signal to markets and oil-producing nations that the US will try to enforce a ceiling on the price of crude oil.”
“Oil analysts said the supply release was designed to send a signal of action on petrol prices but would have a limited impact on global oil market balances.”
“the administration’s reliance on the SPR has come under fire from Republicans who argue it has fallen to dangerously low levels. According to the latest Energy Information Administration figures, the reserve held 409mn barrels of crude in the first week of October, its lowest level since 1984.” The FT reports.
Fitch Sees Limited Risk to India Ratings Amid External Pressures
LiveMint
“Ratings agency Fitch on Wednesday said India's external buffers appear sufficient to cushion risks associated with rapid monetary policy tightening in the United States and high global commodity prices.”
“In a statement, Fitch said the country's foreign exchange reserves will remain robust and its current account deficit is expected to remain at sustainable levels, limiting any risk to India's sovereign rating from external pressures.”
“Fitch also stated that India's public finances remain the key driver of the country's sovereign rating and its limited reliance on external financing helps.”
“‘Moreover, public finances remain the key driver of the rating and are only modestly affected by these developments, particularly as India is relatively insulated from global volatility due to the sovereign’s limited reliance on external financing,’ Fitch said in a release. LiveMint India reports.
Tencent Set for Fourth Quarter Growth Path, Goldman Says
South China Morning Post
“Tencent Holdings will probably chart stronger revenue and profit growth from this quarter, as the operator of Chinese social-media tool WeChat ramps up efforts to monetise its video accounts and releases a much-awaited online game, Goldman Sachs said.”
“The video move may bolster Tencent’s advertising income, making it the biggest contributor to that business segment by 2025, Goldman said in a report on Tuesday…Tencent’s third-quarter earnings report is due November 16. Tech peers Alibaba Group Holding, Meituan and JD.com are also due to release their quarterly report cards next month.”
“Tencent is set for revenue growth recovery ‘with the pace gradually accelerating into 2023,’ Goldman analysts led by Ronald Keung wrote in the report. ‘We expect management to continue to return value to shareholders while rationalising spending.’”
“…The impending results may offer investors an opportunity to reassess China’s biggest technology companies, which have suffered from years of regulatory crackdown and pandemic flare-ups. Citic Securities, China’s biggest publicly traded brokerage, this week said Tencent’s earnings may have already bottomed, following measures to cut costs and improve efficiency.” SCMP reports.
EU To Impose New Sanctions on Iran Military for Supplying Drones to Russia
Wall Street Journal
“The European Union agreed to impose sanctions on three top Iranian military officials and an Iranian drone-maker, as the bloc’s leaders prepare to hit out at Tehran for supporting Russia’s war efforts and cracking down on protesters at home, diplomats said.”
“EU diplomats said the sanctions, which are in response to Iranian drone deliveries to Russia, were backed by member states Wednesday and would be formalized Thursday morning.”
“The drone sanctions are the second package of measures adopted by the EU against Iran this week, as relations between European governments and Iran have chilled in recent months. Most European governments were strong supporters of the 2015 Iranian nuclear deal, but with talks to revive the accord stalled and Tehran swinging behind Russia in the Ukraine war, tensions have sharpened.”
“EU foreign ministers agreed on Monday to impose the broadest human-rights sanctions package against Iran in almost a decade over the regime’s crackdown on protests.”
“EU leaders will gather in Brussels this week for their regular quarterly meeting, and senior diplomats said Iran’s role in the Ukraine war would be discussed. Written conclusions from the meeting are set to condemn the ‘unjustifiable and unacceptable use of force’ by Iran against protesters at home and slam Iran for supporting Russia’s war.” Laurence Norman reports.
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