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Monday, 5 July 2021

Fears of the Delta strain are hitting emerging-market currencies

Fears of the Delta strain are hitting emerging-market currencies: Developing countries with low vaccination rates could face currency pressure as the Delta variant prompts new restrictions, Bloomberg reports. In June, the South African rand and the Russian ruble — formerly this year’s best performers — stalled, weighing down an index of emerging-market currencies in June for the first time in three months. Both South Africa and Russia are being hit hard by what appears to be the Delta variant, with Durban last week announcing a strict lockdown to curb a rapid increase in cases and Moscow reporting record daily cases on Saturday.

Vaccination rates to determine the victors and losers in EM? “Achievements in terms of vaccination will increasingly be a differentiation factor among emerging markets in the second half [of 2021],” said one EM strategist.

The most vulnerable: South Africa and Colombia are likely to see the most pressure on their currencies as the combination of rising cases, low interest rates and higher state spending puts portfolio flows to the test, according to an interest-rate and currency analyst. South Africa has only vaccinated 5% of its population, and at the current rate, would have to wait until 2023 to inoculate 50% of its population, the percentage that experts say is needed to combat Delta. Colombia has also only 11% of its people vaccinated.

The fortunate: Chile, China, Israel, the UAE and the Central Eastern European countries, which have vaccinated almost half of their citizens, the percentage that experts say is needed to combat Delta, Bank of America said last week. Other EMs — such as Brazil, India, Indonesia, Mexico, Russia and Turkey — are expected to reach the same level by the end of 2021.

But the UK is showing right now that even the fortunate may not be on easy street: Covid cases are back above 20k per day in the UK, which has given more than 45 mn of its citizens at least one shot of a covid vaccine.


MENA wealth funds get an ‘F’ for governance and resilience: Sovereign wealth funds in the Middle East are the world’s worst performers when it comes to governance and resilience, according to Global SWF’s latest GSR Scoreboard. The scoreboard, which ranks wealth funds based on 10 governance elements, 10 sustainability benchmarks and five resilience metrics, ranked only four MENA funds higher than 50%, with the region’s three biggest funds sitting at the bottom of the pile due to poor transparency and “significant withdrawals” caused by covid-19 and the last year’s oil crash. “The big three Middle Eastern funds seem to be getting worse at inspiring trust,” Bloomberg quoted the report as saying, referring to ADQ, the Kuwait Investment Authority, and the Qatar Investment Authority.




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The EGX30 rose 0.9% at yesterday’s close on turnover of EGP 897 mn (27.7% below the 90-day average). Foreign investors were net buyers. The index is down 4.6% YTD.

In the green: TMG Holding (+4.8%), Abou Kir Fertilizers (+3.8%) and EFG Hermes (+2.1%).

In the red: MM Group (-1.0%), Cleopatra Hospital (-0.4%) and Orascom Development Egypt (-0.4%).

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