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Sunday, 7 November 2021

Emerging-market stocks haven’t kept pace with developed economies this year

This year’s US-led equities boom has left emerging-market stocks behind, the Financial Times reports, with the expected monetary tightening in developed markets causing investors to anticipate a mass exit from EM assets. The gap between EM and developed-market equities hasn’t been wider since 2013’s taper tantrum, with MSCI’s EM index registering negligible gains so far this year, while its DM index has shot up more than 20%.

Egypt, India and Turkey are particularly vulnerable to a more hawkish turn from central banks, one analyst told the FT. Anticipated interest rate hikes to curb inflation in developed markets could see growth stall even as energy prices continue to rise. That scenario could squeeze our finances, as more risky EM stocks and bonds lose their appeal for investors, according to Danske Bank’s head of global macro research. Nevertheless, strong foreign reserves and a switch to longer-term debt — two points the Central Bank of Egypt (CBE) has been working on of late — should provide some protection from the brewing EM market storm.

It’s not just an emerging markets problem: US and UK hedge funds can’t keep up with changing central bank policies either. An intense sell-off in short-term government debt in anticipation of rate hikes has cost big players like London-based Rokos Capital and New York-based Alphadyne Asset Management bns of USD in recent months, the Financial Times reports. High volatility in government bonds has managers pointing fingers at the Fed and the Bank of England, as they argue that monetary tightening could throttle the economic recovery. “I think the markets are telling you that global central banks are careening into a pretty sizeable policy mistake,” one bond fund manager told the FT.

Dubai’s bourse gets a revamp as the city looks to catch up to neighbors: Sheikh Maktoum bin Mohammed bin Rashid replaced five of seven board members on the Dubai Stock Exchange on Wednesday, according to Bloomberg. The Dubai Financial Market jumped by 56% over the course of the week, bringing its weekly gains to a seven-year high of 9%. Earlier in the week, Bin Rashid announced plans to list the Dubai Electrical and Water Authority (DEWA) at a USD 25 bn valuation, in what is expected to be the first of many IPOs designed to breathe new life into the emirate’s bourse. Dubai’s bourse, previously the leading exchange by traded volume in the UAE, has taken a backseat to Abu Dhabi’s recently, which saw three IPOs this year alone. Last month, Nassef Sawiris’ OCI-backed Fertiglobe IPOed on the Abu Dhabi stock exchange in one of the city’s biggest IPOs to-date.

Boeing directors will pay USD 237.5 mn to settle a years-long lawsuit with shareholders over safety faults in the company’s 737 Max aircraft, which was involved in two fatal crashes in 2018 and 2019 which killed 346 people. The settlement, which is still pending court approval, will also see the company reshuffle its board and adopt a range of additional safety measures. (Reuters | Wall Street Journal | New York Times).

Down

EGX30

11612.84

-0.6% (YTD: +7%)

None

USD (CBE)

Buy 15.66

Sell 15.76

None

USD at CIB

Buy 15.66

Sell 15.76

None

Interest rates CBE

8.25% deposit

9.25% lending

Up

Tadawul

11,752

+0.6% (YTD: +35.3%)

Up

ADX

8,015

+6% (YTD: +58.9%)

Down

DFM

3,108

-0.05% (YTD: +24.7%)

Up

S&P 500

4,698

+0.4% (YTD: +25%)

Up

FTSE 100

7,304

+0.3% (YTD: +13%)

Up

Brent crude

USD 82.74

+2.7%

Down

Natural gas (Nymex)

USD 5.52

-3.5%

Up

Gold

USD 1,817

+1.3%

Up

BTC

USD 61,457

+0.6% (as of midnight)

THE CLOSING BELL-

The EGX30 fell 0.6% at Thursday’s close on turnover of EGP 1.05 bn (31.4% below the 90-day average). Local investors were net buyers. The index is up 7.1% YTD.

In the green: Orascom Development Egypt (+3.5%), Fawry (+2.1%) and Eastern Company (+1.6%).

In the red: Mopco (-5.1%), GB Auto (-4.2%) and Sidi Kerir Petrochem (-2.2%).

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