Economic headwinds are coming from the East as well as the West: Fissures in China’s economic recovery could drag down riskier emerging markets, Bloomberg reports. Production slowdowns as a result of the spread of the delta variant, the government’s regulatory crackdown on parts of the private sector, and the potential default of Chinese property giant Evergrande are all putting strain on the Chinese economy, analysts say.

China’s slowdown could cause knock-on effects in developing countries, including the upping of risk premiums on EM assets, due to its heavy weighting in EM indexes. “It’s going to be the rest of the world’s problem and it has already started to show up in a lot of the emerging-market countries,” said one EM and Asia Pacific analyst. “I expect China’s slowdown to accelerate from here.”

That said, the impact has so far been confined to countries in China’s direct orbit, like Thailand and Korea, as investors continue to benefit from a strong carry trade and what are seen as undervalued equities in EMs elsewhere.

ALSO WORTH NOTING-

The UAE will spend USD 6.5 bn to entice citizens into the private sector, offering a package of incentives to try and persuade 75k Emiratis to join private companies in the next five years, Bloomberg reports. As in many Gulf countries, UAE graduates often hold out for the better pay, benefits and working hours of public-sector positions, while most private-sector jobs are held by expats. But with unemployment rising sharply from 2.2% in 2019 to 5% in 2020 due to the pandemic, the state is now set to offer monthly stipends for private-sector workers with children as well as supplemental income and bonuses to try and reverse the trend.

Residency rules relaxed: The policy switch comes a week after the country announced it would relax residency rules in a bid to attract more high-skilled foreigners to the country.

THE CLOSING BELL-

The EGX30 fell 0.2% at yesterday’s close on turnover of EGP 867 mn (43.4% below the 90-day average). Local investors were net sellers. The index is up 1.8% YTD.

In the green: Raya (+3.9%), Mopco (+2.4%) and Palm Hills (+1.6%).

In the red: MM Group (-2.9%), Eastern Company (-2.5%) and Cleopatra Hospitals (-2.2%).

Asian markets are mostly in the red in early trading this morning and futures suggest that European shares will follow them later this morning. US stock futures are currently in the green.