This Week In Emerging Markets (Vol. IV)
News, data, and curated content from across the globe.
Bloomberg ($): China Is Drinking Barely A Drop of Australian Wine After 200% Tariffs
China last month formalized tariffs of more than 200% on Australian wine for five years, though the higher duties had been in place since November. The tariffs followed a raft of measures barring Australian imports from coal and copper to barley last year.
The slump in China was too steep to compensate for increased shipments from Australia to the U.K., Germany and New Zealand: The value of Australia’s total wine exports fell 4% to A$2.77 billion in the year ended March.
Financial Times($): Indian food delivery group Zomato looks to raise $1.1bn in IPO
The Gurgaon-based company, which counts Jack Ma’s Ant Group and Uber as major shareholders, was last valued at $5.4bn in a fundraising round in February. The start-up has filed an initial prospectus, according to papers submitted to the market regulator on Wednesday.
Zomato’s move comes as India is battling a catastrophic wave of coronavirus infections. The country of 1.4bn has reported record daily cases and deaths in the past month, with health infrastructure in some cities collapsing under the sheer volume of cases.
The pandemic lockdowns have made consumers globally even more reliant on food delivery companies.
The timing of Zomato’s IPO is “perfect”, said Neil Shah, an analyst at Counterpoint.
“If you look at how reliant we are on Zomato and Swiggy, the demand is unparalleled,” he said, referring to Zomato’s main rival in India. The company is serving some 70m customers each month.
Pragmatic Capital: The Scarcity of Money Myth
Money is actually a very unnatural thing. We’re the only species that uses it because it is pretty much something we conjure up in our minds. More specifically, “money” is really just a bunch of contractual agreements. It’s “I’ll give you 25 apples at this time next year and this monetary note will settle that debt”. Loans create deposits. Deposits are money.
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The more important key point is that money is elastic. This means that we can create more of these agreements as needed to meet the demands of the economy. A lot of us have been trained to believe that more money is necessarily bad/inflationary. But this need not be true so long as we produce the corresponding real resources to support the demand for that money. In fact, this is a good thing because it provides us with a monetary system that can flexibly react to the needs of its users. And this is what all credit based monetary systems are – flexible systems that can expand and contract financial assets as needed. Within the piping of the existing system banks are the primary issuers of the loans that supply that needed liquidity.
Points of Return: Markets Are Insulated From India's Agony, for Now
Outflows this month have been massive. Foreign investors had plowed $5.3 billion into Indian equities and bonds from January to March, according to Societe Generale SA, buoyed by expectations of one of the world’s strongest economic recoveries. The IMF’s forecast was for 12.5% growth next year. But $6.1 billion of capital has exited so far this month: This SocGen chart shows portfolio flows in and out of stocks and bonds combined since the beginning of last year:
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Again, this can be looked at two ways. The pandemic hasn’t had much financial impact yet, but there is time for it to wreak considerably more damage. As SocGen shows in this chart, the yields available on Indian deposits (the “carry” for holding assets in rupees) is now more appealing than those of any other main Asian currency, so this should act as some kind of a buffer.
Securities Finance Times: Pass test to invest, South Korean regulator tells retail short sellers
The South Korean financial regulator says the measures, designed to protect and enhance opportunities for retail investors to engage in securities lending and short selling announced in February, will come into effect from 3 May.
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If an investor has shorted a company’s stock within the period of one day after the announcement of the company’s capital increase plan until the determination of the issuing price, the investor is not allowed to participate in the company’s capital increase.
A monetary penalty of up to 1.5 times the undue profit gained from violating this rule can be imposed.
Investors with net holding balance above a certain level due to short sale activities should report to the FSC and the KRX.
A monetary penalty of up to KRW 30 million (USD 26,936) can be imposed for violating this rule on each incident.
Nikkei Asia: Chinese regulators summon Tencent, ByteDance and fintechs
The aim of the interview, as in the case of Ant, was to prevent monopolies and the "disorderly expansion of capital," while also examining poor corporate governance, regulatory arbitrage and unfair competition, the authorities said.
The companies summoned Thursday, with large-scale operations and considerable influence in the sector, epitomize some of these problems, the People's Bank of China -- the country's central bank -- said in a release.
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The regulators did acknowledge that in recent years, online platforms have played an important role in improving the efficiency of financial services, the inclusiveness of the financial system and reducing transaction costs, but they said the development of fintech business must serve the real economy and the reduction of financial risks.
Alibaba was hit recently with a record $2.81 billion antimonopoly fine.
FT Special Report — Investing In Chile ($): Chilean miners fear struggle to meet copper demand
But miners warn that Chilean politics could delay investment in the country’s rich resources of both copper and lithium. A combination of social unrest, Covid-19 and plans to rewrite the country’s Pinochet-era constitution risks deterring financial backers, according to Diego Hernández, the president of Sonami, Chile’s national mining society.
“If you are an investor, you probably will want to wait to see what is the result of this process instead of making investment decisions now,” he says. There is no doubt about the world’s growing hunger for copper. Wind turbines, solar farms and their networks use up to 12 times as much of the metal as non-renewable energy systems.
Net Interest: When Irish Eyes Are Smiling
For a few years at least, the domestic focus paid off. Ireland was hot. Economic growth was running at around 7% a year. Tax incentives, competitive wages and European Union membership drew people in from around the world. Most of all, having signed up to the single currency in 1999, Ireland had access to deeper pools of liquidity and therefore cheaper credit than it had ever had before. All of this fuelled a boom in real estate markets and Irish Life and Permanent was there to cheer it on.
Having been kindled by positive developments in the general economy, real estate markets soon overshadowed most other sectors, becoming a major driver of the economy themselves. The construction industry swelled to contribute close to a quarter of GDP as homebuilders rushed to mine new houses. They built around half as many new homes per year as their peers in the UK were building, despite a population a fifteenth the size. By the mid 2000s, the construction industry employed around one in five of the Irish workforce.
Markets
Data from Trading View
The Week Ahead:
Author’s Note: Seemingly every country is reporting PPI results next week.
Sunday — 🇰🇷 Korean, 🇹🇼 Taiwan,🇵🇭 Philippines, 🇮🇩 Indonesia, 🇦🇺Australian Manufacturing PMI; 🇮🇩 Indonesia, 🇦🇺 Australia, 🇵🇪 Peru Inflation;
Monday — 🇩🇪 Germany Retail Sales; 🇹🇷 Turkish PPI; 🇰🇷 Korean, 🇹🇷 Turkish, 🇧🇷 Brazilian CPI; 🇨🇱 Chilean Economic Activity; 🇿🇦 South African Vehicle Sales; 🇦🇺 Reserve Bank of Australia Interest Rate Decision;
Also...
Reporting Manufacturing PMI: 🇮🇳 India, 🇸🇪 Sweden, 🇹🇷 Turkey, 🇭🇺Hungary, 🇪🇸 Spanish, 🇨🇭 Swiss, 🇮🇹 Italian, 🇳🇴 Norwegian, 🇪🇺 EU, 🇧🇷 Brazil, 🇸🇬 Singapore, 🇨🇦 Canada, 🇺🇸 U.S., 🇮🇪 Ireland, 🇨🇳 China, 🇸🇦Saudi Arabia, 🇦🇪 United Arab Emirates;
Tuesday — 🇷🇺 Russian, 🇭🇰 Hong Kong, 🇵🇱 Polish, 🇬🇷 Greek, 🇬🇧 British Manufacturing PMI; 🇭🇰 Hong Kong Retail Sales; 🇳🇿 New Zealand Unemployment; 🇵🇭 Philippines,🇹🇭Thailand CPI; 🇵🇱 Narodowy Bank Polski interest rate decision;
Wednesday — 🇸🇬 Singapore Retail Sales; 🇳🇴 Norway Unemployment; 🇨🇭 Swiss CPI; 🇹🇭 Bank of Thailand Interest Rate Decision; 🇪🇺 European, 🇺🇸 U.S., 🇯🇵 Japanese, 🇨🇳 Chinese Services PMI; 🇧🇷 Brazilian Industrial Activity, Interest Rate Decision;
Thursday — 🇷🇺 Russian Services PMI; 🇲🇾 Bank Negara Malaysia, 🇳🇴 Norges Bank, 🏴 Bank of England, 🇹🇷 Central Bank of the Republic of Turkey, Interest Rate Decision; 🇦🇷 Argentinian Industrial Activity; 🇨🇳 Chinese Trade Balance
Friday — 🇨🇭 Swiss, 🇨🇦 Canadian, 🇺🇸 U.S., Unemployment; 🇩🇪 German Industrial Production; 🇲🇽 Mexican, 🇷🇺 Russian CPI; 🇧🇷 Brazilian Retail Sales;