The emerging market banks benefitting most from rising interest rates

Rohit Kumar @ Tellimer Research

26 October 2021

Strategy Note /

Global

This morning's briefing

Klarna and Stripe is just the latest tie-up between payment and BNPL companies. The strategic partnership will allow retailers that use Stripe to easily offer a Klarna option to customers at checkout. This comes only a couple of months after Square’s US$29bn acquisition of Australian-headquartered Afterpay. We think such partnerships are even more beneficial in emerging markets as payments companies have access to consumer spending patterns, which are important for BNPL credit risk management in the absence of credit bureau coverage and other traditional consumer financial data. Get the full story →

Inflation pressures see central banks walking a tightrope. With the worst of the Covid-19 pandemic now behind us and the world economy now focused on the recovery, the question that has permeated through the markets over the last few months is just how temporary the recent surge in inflation will be? ETM Analytics look at what central banks can do to prevent price growth spirals without dismantling the fragile economic recovery. Get the full story →

China’s app ecosystem and usage patterns are unlike anywhere else. China’s app ecosystem is unique, due to the exclusion of leading global players –LinkedIn’s recent exit only exacerbates this trend. Super apps like Alipay and WeChat predominate, providing an aspirational template for firms elsewhere such as Grab (ASEAN) and Paytm (India). Censorship of hot-button issues drives lower social media usage in China, and is increasingly a threat elsewhere. Get the full story →

Military coup in Sudan puts debt relief in jeopardy. A military coup has been reported in Sudan after the army put Prime Minister Abdalla Hamdok under house arrest and detained a number of other government officials. Details are still sketchy, but any attempt to derail the path towards democratic elections risks putting back the progress made by Sudan over the last three years in terms of normalising international relations, reforming institutions and repairing the economy. It also jeopardises its path towards obtaining full debt relief under the Heavily Indebted Poor Countries (HIPC) debt relief initiative. Stuart Culverhouse has looked at what this coup means for the prospects of debt relief. Get the full story →

Green bonds and debt swaps are a bad way to fund biodiversity, decarbonisation. Green financing is growing, and EMs don’t appear to be getting their fair share of the concessionary pot. If investors are going to subsidise funding attached to climate projects, then EMs, which need and arguably deserve the subsidy more, should be first at the buffet. And green bonds (and indeed blue bonds for ocean conservation) are only one aspect of innovation in EM climate financing: it appears that so-called "Green Debt Swaps" really are going to become “a thing” in emerging markets. Tellimer’s Paul Domjan expects big announcements about all of this at COP26, but he’s not sure that it will be good for investors, developing countries, or the climate. Paul explains why in the full report. Get the full story →

Emerging market banks: The winners and losers from tighter monetary policy. Higher demand, as Covid-19 lockdowns have eased, allied to supply-chain issues, are driving up global inflation. Central banks are taking corrective action – 15 out of 47 emerging markets in our sample have already raised rates in 2021, and many more are expected to follow suit. Banks can be key beneficiaries of rising rates, particularly in the early part of the tightening cycle, as their margins are positively geared to interest rates. In our full report, our financial team considers the sensitivity to higher interest rates of 113 banks across 47 emerging markets. looking at the implications for both margins and profits. Factoring in rate forecasts, the biggest bank profit boost is in Poland, Bangladesh and Pakistan. Turkey is the clear loser. Get the full story →

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