Back to the complete issue
Monday, 12 July 2021

The global economy’s post-covid boom could insulate emerging markets from trouble in the oil market

OPEC+ agreement or no OPEC+ agreement, commodity prices will continue rising regardless, benefiting commodity-exporting emerging markets, strategists from JPMorgan Chase and Goldman Sachs have said, according to Bloomberg. The failure to reach an agreement to raise oil supply last week won’t impact the recent boom in commodity prices, which will continue to rise on strong demand in economies recovering from the pandemic, they said.

Investors don’t seem to be too worried about the possibility of a new oil price war on emerging markets, saying that the surge in global demand for raw materials and consumer products will backstop their economies. And one currency strategist claimed that currencies most exposed to movements in the price of crude should be relatively insulated against a major drop in the price of crude thanks to cheaper valuations and tightening cycles in some EM central banks such as Russia and Mexico.

Some net importers are also in line for a shot in the arm should oil prices drop: Major commodities importers such as Egypt and Turkey are set to gain if oil prices drop as their import bills fall.

High inflation isn’t going anywhere soon, according to economists surveyed by the Wall Street Journal. Average forecasts now expect inflation to increase to 3.2% by 4Q2021 and average 2.58% each year between 2021 and 2023, which would be the highest rate seen since 1993.

Could the Fed move to raise rates sooner than expected? “Inflation is expected to surge longer and longer — longer than the Fed previously thought,” one economist told the journal. “The Fed is now likely to raise rates in the first half of 2023, although some Fed presidents will be nipping at the bit to move sooner.” The Fed last month indicated that it could raise interest rates twice in 2023 in response to rising inflation, one year earlier than expected.

France wants countries to be able to impose a 25% tax on multinationals’ income where they are earned. "I think that the best solution would be a level of allocation of profit of 25% to meet the concerns of some developing countries which are legitimate concerns," French Finance Minister Bruno Le Maire said following the meeting of G20 finance ministers on Saturday, during which they signed off on the G7-OECD plan to introduce a 15% minimum global corporate tax rate. The rules, which are due to be finalized during a G20 summit in Rome in October, would permit countries to levy a 20-30% tax on excess profits earned by large multinationals (defined as companies with more than EUR 20 bn in annual turnover).

Down

EGX30

10,153

-0.3% (YTD: -6.4%)

None

USD (CBE)

Buy 15.64

Sell 15.74

None

USD at CIB

Buy 15.64

Sell 15.74

None

Interest rates CBE

8.25% deposit

9.25% lending

Down

Tadawul

10,688

-1.3% (YTD: +23.0%)

Up

ADX

6,993

+0.4% (YTD: +38.6%)

Down

DFM

2,760

-0.7% (YTD: +10.8%)

Up

S&P 500

4,369

+1.1% (YTD: +16.3%)

Up

FTSE 100

7,121

+1.3% (YTD: +10.2%)

Up

Brent crude

USD 75.55

+1.9%

Down

Natural gas (Nymex)

USD 3.67

-0.4%

Up

Gold

USD 1,810.60

+0.6%

Up

BTC

USD 34,158

+1.2% (as of midnight)

THE CLOSING BELL-

The EGX30 fell 0.3% at yesterday’s close on turnover of EGP 820 mn (33.1% below the 90-day average). Foreign investors were net sellers. The index is down 6.4% YTD.

In the green: MM Group (+1.9%), TMG Holding (+1.5%) and Eastern Company (+0.8%).

In the red: Oriental Weavers (-3.1%), Sidi Kerir Petrochemicals (-2.2%) and Pioneers Holding (-1.9%).

Asian markets are strongly in the green this morning, though futures suggest US shares will fall in early trading while European shares will mostly rise.

Enterprise is a daily publication of Enterprise Ventures LLC, an Egyptian limited liability company (commercial register 83594), and a subsidiary of Inktank Communications. Summaries are intended for guidance only and are provided on an as-is basis; kindly refer to the source article in its original language prior to undertaking any action. Neither Enterprise Ventures nor its staff assume any responsibility or liability for the accuracy of the information contained in this publication, whether in the form of summaries or analysis. © 2021 Enterprise Ventures LLC.

Enterprise is available without charge thanks to the generous support of Commercial International Bank (tax ID: 204-891-949), the largest private-sector bank in Egypt; EFG Hermes (tax ID: 200-178-385), the leading financial services corporation in frontier emerging markets; SODIC (tax ID: 212-168-002), a leading Egyptian real estate developer; SomaBay (tax ID: 204-903-300), our Red Sea holiday partner; Infinity (tax ID: 474-939-359), the ultimate way to power cities, industries, and homes directly from nature right here in Egypt; CIRA (tax ID: 200-069-608), the leading providers of K-12 and higher level education in Egypt; Orascom Construction (tax ID: 229-988-806), the leading construction and engineering company building infrastructure in Egypt and abroad; and Act Financial (tax ID: 493-924-612), the leading activist investor in Egypt; and Abu Auf (tax ID: 584-628-846), the leading health foodmaker in Egypt and the region.