Australia Markets closed
  • It’s Mostly About Rates for Growth-Deprived Emerging Markets
    Business
    Bloomberg

    It’s Mostly About Rates for Growth-Deprived Emerging Markets

    (Bloomberg) -- Record low interest rates, rising commodity prices and improved mobility data have been buoying expectations of a recovery across emerging markets even as investors cast a wary eye toward November’s U.S. presidential election.Yet for all those plus points -- and any small boost provided by a gentler geopolitical backdrop -- it’s rate differentials that are sustaining much of the investor demand. Bond funds last week extended their longest streak of inflows since a 12-week run in the fourth quarter of 2017, according to EPFR Global, with China bond funds attracting “above-average” interest.“Even though policy rates in emerging markets have come down a lot, many of them show meaningful relative interest-rate advantages versus the dollar now, despite benign inflation,” said Morgan Harting, a New York-based money manager at AllianceBernstein who oversees about $2.8 billion. “This could support ongoing capital flows to emerging markets, which would generally be good for stocks and bonds.”The MSCI currency index climbed for a fourth week in the five days through Friday, the best run since January. Domestic bonds clocked up their biggest gains since June, while a gauge of stocks rose the most since early June relative to the S&P 500 Index, untroubled by a retreat in U.S. technology shares.For all the optimism, the evidence of recovery has been uneven, suggesting a protracted return to levels of economic activity recorded before the Covid-19 pandemic and the resulting lockdowns. While China has rebounded, other nations such as South Africa, India and Turkey have lagged behind.“The area where the pace of recovery has remained weak is the emerging economies outside China, which account for roughly 25% of global nominal dollar GDP,” Chetan Ahya, chief economist at Morgan Stanley in New York, wrote in a report Sunday. “While the emerging-markets-ex-China recovery has been relatively weak and some of these economies also face structural challenges, we think that the cyclical outlook for the group will improve from the first half of 2021.”Emerging markets looked poised to enjoy a fresh tailwind Monday after President Donald Trump’s weekend approval of Oracle Corp.’s bid for the American operations of TikTok -- a move that might have taken some of the heat out of Washington’s standoff with Beijing. That was before a report on bank allegations and signs that London is heading for a second virus-induced lockdown triggered a fresh bout of risk-aversion.Declines in the South African rand and Mexican peso put the MSCI currency index on course for its biggest retreat in more than four weeks, while almost every major stock market in Asia and the Europe, Middle East and Africa region fell. The premium investor demand to hold emerging-market dollar bonds instead of Treasuries widened 3 basis points, according to a JPMorgan Chase & Co. index.The slowing of the rate-cutting trend among developing-market central banks looks set to continue in the coming week, following the hold decisions from Brazil, South Africa, Russia, Taiwan and Indonesia last week. Policy makers in China, Hungary, Thailand, Egypt, Colombia, Nigeria, Turkey and the Czech Republic are among those due to meet over the next five days.Of these, Turkey’s decision may be the closest watched as the central bank struggles to shore up the lira while avoiding an outright rate increase that would defy President Recep Tayyip Erdogan’s calls to cut borrowing costs.Listen: EM Weekly Podcast: Central Banks, China Bond Index InclusionMexico, Colombia EasingMexican policy makers are expected to lower interest rates by 25 basis points to 4.25% on Thursday, breaking from the pattern of half-point cuts in previous meetings, according to economists surveyed by BloombergTraders will also watch retail sales figures for July, to be posted on Wednesday, for signs of how the pandemic is affecting household demandOn Friday, a reading of the nation’s economic activity index for July will probably show a decline from a year earlierSince the end of June, the Mexican peso has strengthened almost 10% against the dollar, the best performance among about 140 currencies tracked by Bloomberg. The peso has also delivered the No. 1 carry trade returnColombia’s central bank will probably trim its key interest rate by 25 basis points on Friday to 1.75%, which would be the lowest on recordBloomberg Economics expects policy makers to reiterate that the end of the easing cycle is close while keeping the door open for more cutsThe Colombian peso has underperformed most of its Latin American peers this monthTurkey’s Stealth TighteningMost economists surveyed by Bloomberg expect Turkey’s central bank to hold the benchmark repo rate at 8.25% for a fourth month on ThursdayThe lira has lost more than a quarter of its value against the dollar since December, and is on track for an eighth annual depreciation. The currency is trading at all-time lows against both the dollar and the euro. For now though, the central bank has resisted calls for an outright rate hike and is resorting to stealth tightening instead by pushing up the weighted-average cost of fundingYet the monetary authority is coming under pressure from investors to reverse an easing cycle this year that’s pushed annual borrowing costs below inflationThe central bank will raise the upper bound of its interest-rate corridor while keeping benchmark borrowing costs on hold, according to Goldman Sachs Group Inc.Rates on HoldChina’s Loan Prime Rates -- the reference rate for bank loans to companies -- remained unchanged Monday“The go-slow approach to easing suggests the authorities may be satisfied with the pace of economic recovery so far and the strong credit expansion since the second quarter,” Bloomberg Economics said in a reportIndustrial profits due on Sept. 27 are expected to continue their reboundThe yuan is one of the best-performing currencies in emerging Asia this month, helped by better-than-forecast economic data and fading trade-war concernsHungary’s central bank will probably leave its policy rate unchanged at 0.6% on Tuesday, according to the median of economist etsimates in a Bloomberg surveyThe forint’s depreciation against the euro since the beginning of August, has added to concerns about price pressuresAlso on Tuesday, Nigeria’s central bank is seen leaving its benchmark rate unchanged at 12.5% for a second consecutive meetingEgypt’s central bank will likely hold rates on Thursday even with inflation at its lowest in nearly a year, after cutting by 450 basis points in 2019 and another 300 in a mid-March emergency sessionWhile the pandemic cut into some of Egypt’s main sources of hard currency, such as tourism and remittances, and spurred capital outflows from March to May, investors began returning in June after the country secured financing from the International Monetary FundThe Czech central bank will stand pat on Wednesday, after cutting interest rates the most in the European Union this year. It should keep the benchmark at 0.25% for at least a year before considering raising it, Deputy Governor Tomas Nidetzky said in an interview last weekThe Bank of Thailand’s last meeting under the incumbent governor is being held on Wednesday, with the central bank widely expected to keep rates on holdInvestors will eye the minutes of Brazil’s September central bank meeting, to be released on Tuesday, for more details on a plan to hold interest rates at record lows for the foreseeable futureBi-weekly CPI figures on Wednesday will also help give traders a fresh assessment on inflation. On Thursday, policy makers will release their quarterly inflation report. The real is the worst-performing currency in the developing markets this yearChina’s Bond Index InclusionFTSE Russell is due to announce the results of a fixed-income review on Thursday, with investors expecting some Chinese debt to be included in the World Government Bonds Index (WGBI). While the short-term boost to the yuan might be limited, the longer-term implications are positiveInclusion could prompt USD140b worth of index-related inflows over a 20-month period, following a one-year grace period, according to Goldman SachsChinese bonds appear good value at current high real yieldsChina’s 10-year bond yields edged lower last weekListen: Speaking of EM: Looking Ahead Can Boost Bond Returns (Podcast)Other Data and EventsSouth Korea’s consumer confidence data for September are due on FridayThe Korean won was Asia’s best-performing currency last weekTaiwan’s August export orders, due on Monday, may show a continued recovery from a year earlierIndustrial production numbers will be released on WednesdayThe Taiwan dollar broke free of the central bank’s grip last week, and may have further to run, based on past performanceThailand’s trade figures for August are due on WednesdayInvestors may be alert to a rise in political tension, with Thailand’s anti-government protesters calling for a general strike next month as the movement challenges long-held taboos including questioning the monarchy’s powersMalaysia’s August CPI, due on Wednesday, is forecast to show continued deflationMalaysian bonds, the best performers in Asia this quarter, now face challenges, including the dimming prospect of another interest-rate cutThe nation’s 10-year bond yields rose about 5 basis points last weekPoland reports last month’s construction output and retail sales data on Monday, followed on Tuesday by the August money supply M3 print, the previous month’s unemployment and consumer confidence.The central bank publishes minutes from its last meeting on Thursday, followed on Friday by Fitch’s update on Poland’s credit ratingArgentina’s second-quarter GDP data, expected on Tuesday, will probably show a contraction amid social distancing measures, unsustainable policies and debt negotiations, according to Bloomberg Economics.For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.

  • What Type Of Shareholders Own The Most Number of Wm Morrison Supermarkets PLC (LON:MRW) Shares?
    Business
    Simply Wall St.

    What Type Of Shareholders Own The Most Number of Wm Morrison Supermarkets PLC (LON:MRW) Shares?

    The big shareholder groups in Wm Morrison Supermarkets PLC (LON:MRW) have power over the company. Institutions often...

  • Jack Ma’s Ant to Lift IPO Funding Target to $35 Billion
    Business
    Bloomberg

    Jack Ma’s Ant to Lift IPO Funding Target to $35 Billion

    (Bloomberg) -- Jack Ma’s Ant Group is seeking to raise at least $35 billion in its initial public offering after assessing early investor interest, people familiar with the matter said, putting the Chinese fintech giant on track for a record debut sale.Ant lifted its IPO target based on an increased valuation of about $250 billion, up from previous estimates of $225 billion, said the people, who asked not to be identified discussing private matters. It was earlier expecting to raise at least $30 billion, people familiar have said.Ant’s simultaneous listing in Hong Kong and Shanghai may mark the biggest IPO ever, topping Saudi Aramco’s record $29 billion sale. Ant could exceed Bank of America Corp.’s market capitalization, and be more than twice the size of Citigroup Inc. Among U.S. banks, only JPMorgan Chase & Co. is bigger at $300 billion.Ant received a nod from regulators in Shanghai on Friday to proceed with its public share sale. In the wake of its IPO plans, the company’s been hit by a flurry of new regulations aimed at reducing risks in China’s online finance sector. Regulators have curbed small-loan funding sources, capped lending rates, and imposed new capital and license requirements on Ant and other conglomerates.The Hangzhou-based company is seeking a hearing with the Hong Kong stock exchange Thursday to clear the next key hurdle, the people said. Ant declined to comment in an emailed statement.Ant has picked China International Capital Corp., Citigroup, JPMorgan and Morgan Stanley for its Hong Kong sale.Ant generated 72.5 billion yuan in revenue in the first-half, after full-year sales of 120.6 billion yuan in 2019, it said. The firm posted a 21.1 billion yuan profit in the first-half of this year.Ant, which grew out of the Alipay payments app, now gets the bulk of its revenue from providing quick consumer loans, fueling China’s growing consumer spending. It also runs an insurance business and money market funds, on top of providing credit scoring and technological services for the finance industry.Alipay has 711 million active users, mostly in China, who tap it to buy everything from a quick coffee to even property, generating $17 trillion in payments in the 12 months through June.For those who don’t have ready cash to spend via Alipay, Ant operates services that dole out small unsecured loans: Huabei (Just Spend) and Jiebei (Just Lend). The former focuses on quick consumer loans for purchases of iPhones and fridges, while the latter finances anything from travel to education.Ant uses some of its capital for these loans, but the bulk of the money comes from banks, with the firm acting as a gateway. The platforms made loans to about 500 million people in the 12 months through June, charging annualized rates on its smaller loans of about 15%.(Adds Ant’s revenue, profit in 7th paragraph.)For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.