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Sovereign Analysis /

Sri Lanka

Sri Lanka's restructuring is off to a rocky start

Patrick Curran @ Tellimer Research

1 July 2022

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Strategy Note / Global

Strategy Note /

Global

The profitability of emerging markets fintechs

Emerging-Frontier Equity Monthly – June: US recession fear, China reopening hope

Near term outlook for African bonds is gloomy as inflation pressures build

Poland: The stagflation scenario is already there

ING Think

1 July 2022

This evening's briefing

Tellimer's top picks for July. The start of a new month means it's time for us to present five of our best current calls across economies, sectors, stocks and bonds. This month's picks: Thailand tourism, Buy Nigeria bonds, Sell Colombia's dollar bonds, Sell Indonesian tech firm GoTo. We also caution that banks in India, Colombia and Hungary are most vulnerable to rising inflation. Get the full story →

What investors are thinking. Tellimer analysts held a series of client meetings in London over the past fortnight, consisting of a mix of fixed income and equity investors in emerging and frontier markets, Africa specialists, and special situations and distress funds. The meetings took place against a challenging global backdrop, with the Fed’s surprise 75bps policy rate hike on 15 June triggering a severe market rout and setting a dour tone for EM. However, that didn’t stop investors, or us, looking for chinks of light. The key question from many clients was whether we’d reached the bottom or if there was more weakness to come. For a closer look at the key top-down and country-specific takeaways, click here. Get the full story →

Higher costs for bakers raise the temperature in Nigeria and Ghana. Bread makers in Nigeria plan to strike because of the skyrocketing cost of baking ingredients and, in Ghana, bread prices have increased significantly over the past few months. This is by no means isolated to West Africa – our colleague in Mauritius told us that prices of the famous dholl puri (Mauritian flatbread) and rotis, which are typical lunchtime meals, have risen significantly. A few months ago, protests erupted on the island, partly fuelled by inflation, and we think that higher food costs across the continent increase the likelihood of protests and disquiet. The factors driving higher wheat prices this year are beyond the control of governments, and subsidies are not a sustainable solution. For more on-the-ground insights, click here to read our latest West Africa in Focus report. Get the full story →

US inflation – a tale of two measures. The challenge for US monetary policy from higher inflation was spelt out clearly in a speech by Fed Board Governor Bowman last week. Inflation was “much too high” and showed little sign of moderating she said. CPI inflation, which tends to grab most of the headlines, rose to 8.6% yoy in May. The Fed’s preferred inflation measure – personal consumption expenditure (PCE) – was 6.3% yoy in April. The central bank is trying to slow inflation without causing a recession, but the IMF still expects the US to narrowly avoid one, with growth falling to 1.7% in 2023 and 0.8% in 2024. Get the full story →

China equities are having a moment. China equities (Shanghai Composite index) were the worst performer in large EM in the first four months of this year. After the sell-off, we said in mid-May that the low valuation for China relative to history suggested that positive news on the long list of fundamental concerns may spark a bigger response in asset prices than further negative news. And so it has proved this month. The CSI 300 index is up more than 8% so far in June. China this week announced it is reducing quarantine requirements to one week, while today's China's headline PMIs show evidence of recovery too. And while most central banks are raising rates to battle inflation, China has capacity for policy stimulus should it need to stimulate growth, which is very rare in EM. China is the highest-ranked out of c50 emerging equity markets in our Tellimer EM Country Index. Get the full story →

Egypt makes largest wheat purchase in a decade. Egypt yesterday booked the most wheat in a tender for at least a decade, note ETM Analytics, bolstering stockpiles as the war in Ukraine disrupts global supplies. The purchase of 815k tonnes comes on the back of a recent slump across grain futures as commodities were dragged down by the recessionary worries hanging over financial markets. Egypt is the world's largest wheat importer, and the commodity is a cornerstone of its bread subsidy programme, used by c70% of its population. For more on the headlines making news across Africa this morning, see ETM Analytics' daily dispatch. Get the full story →

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