Top research

Strategy Note /

Global

Inflationbusters! The EM stocks with positive real dividend yields

Rahul Shah @ Tellimer Research

23 September 2022

/article/south-africa-downgrade-zar-to-hold-with-rate

Sovereign Analysis / South Africa

Sovereign Analysis /

South Africa

This afternoon's briefing

The UAE Salik IPO 49x oversubscribed. Dubai toll road operator Salik’s shares have been snapped up by investors. The government sold 1.87bn shares in Salik PJSC at 2 dirhams each, raising a reported US$1bn. The IPO attracted significant investor attention because of the firm’s high local profile, its enviable profitability metrics and its commitment to distributing 100% of profits to shareholders. Rahul Shah has taken a deep dive into the firm’s business model, growth potential and risks to the investment case. Get the full story →

Nigeria’s oil production hits new lows, as gas project inches forward. Nigeria’s oil production is getting worse. The latest OPEC data show Nigeria produced less than 1mbpd in August, at 972kbpd. This is according to the bloc’s direct communications source. Based on secondary sources, OPEC puts Nigeria’s oil production at 1.1mbpd. We stated back in June that the government’s plan to speedily ramp up production by August to meet its OPEC quota was unrealistic. However, we did not expect production would take a turn for the worse. The OPEC data means Nigeria produced less oil than Angola and Algeria (and even Libya, based on the secondary sources). Get the full story →

Repricing of Fed hikes continues after the latest hawkish comments from Powell. Market expectations of the Fed’s interest rate path have adjusted sharply over the past six weeks, bolstered by the relatively hawkish speech by Fed Chair Jay Powell at the Fed’s Jackson Hole symposium on 26 August and the surprisingly high inflation print earlier this month. Powell's downbeat commentary yesterday after the Fed's third consecutive 75bps hike continued the trend. The latest Fed dot plot shows the benchmark rate rising to 4.4% by year-end and peaking at 4.6% next year. The market had been projecting a Fed funds rate at the end of the year of 3.3% back in June, 2.4% at the end of March and 0.8% at the beginning of the year. This massive repricing is both necessary and extremely belated, in our view. We wrote at the beginning of April that markets might be underpricing the extent to which the Fed would need to tighten to tame inflation and prevent a de-anchoring of expectations. Get the full story →

Historic flooding in Pakistan has spawned one of the world’s worst humanitarian crises, covering c1/3 of the country’s landmass and affecting c33 million people. The floods have damaged c1.7mn homes and forced c600,000 people to camps. Crop production has been wiped out in many areas, resulting in the loss of between 1/3 and 1/2 of Pakistan’s cotton crop. It will take months for the full extent of the damage to be known, but UN Secretary-General Antonio Guterres puts the losses at US$30bn (c8% of GDP). This comes at a time of elevated political and economic uncertainty, with former PM Khan doubling down on calls for early elections despite his pending legal challenges and Pakistan narrowly avoiding default by resuming its IMF programme last month. While the humanitarian toll will undoubtedly be devastating, in our latest report we attempt to parse the macroeconomic implications of the floods. Get the full story →

Brazil's main election risk is about how the loser concedes. Brazil's next general election starts on 2 October, with a likely second-round run-off on 30 October. Since his legal readmission into politics in April 2021, leftist presidential challenger Luiz Inacio Lula da Silva has consistently enjoyed a large opinion poll lead over rightist incumbent Jair Bolsonaro. Lula's lead is 9-16 percentage points, according to polling from Datafolha and PoderData, but this is smaller than the 23-25pp gap seen a year ago. For Bolsonaro, the scars inflicted by his Covid mismanagement, corruption scandal and abrasive rhetoric run deep. His increasingly populist fiscal policy – eg the October 2021 Auxilio Brazil welfare plan – has helped narrow the gap, but it has not, it appears, decisively closed it. Our view is that both candidates are likely to pursue similar fiscal policies that lean towards populism rather than difficult structural reform, preserve central bank autonomy and struggle to push any radical legislation through a Congress that they do not control. The main uncertainty around the election is whether Bolsonaro, should he lose, will exit office in an orderly manner. Get the full story →

Latest

Global

Macro Analysis /

Global

Macro: Tell Us Something We Don't Already Know

Marc to Market @ Marc to Market

24 September 2022

Weekend Reading /

United Kingdom

As Truss becomes UK Prime Minister, we ask 'when is a leader's age a risk?'

Truss joins Arden, Macron and Marin in the under-50 club of developed market political leaders. Emerging market under-50s include Chile, El Salvador, Georgia, Iceland, North Korea, Qatar, Saudi Arabia and Ukraine. Risk related to a leader's age: 1) s...

Tellimer Research @ Tellimer Research

24 September 2022

Macro Analysis /

Global

Mexico: Ahead of the Curve

We expect another +75bps by Banxico taking the rate to 9.25%, likely with a unanimous vote. The tone will remain hawkish. July’s GDP-proxy to rebound 0.7% m/m (+1.7% y/y), boosted by a broad recovery across all three sectors. Other relevant indicator...

Banorte @ Banorte

23 September 2022

Macro Analysis /

Global

Powell’s Epiphany: There is No Free Lunch p1 Intro

Alhambra Investments @ Alhambra Investments

23 September 2022

Macro Analysis /

Global

Looking for Opportunities in Supply Chain Chaos

Wells Fargo @ Wells Fargo

23 September 2022

Equity Analysis /

Pakistan

Pakistan Fertilizers: Normalised production led to Urea recovery in August

According to NFDC, Urea sales in August witnessed a recovery of 20% compared to last month to c.552,000 tons. DAP offtake continued to slump, declining to c.26,000 tons, the lowest since Feb’13, down a sharp 86% YoY. Urea offtake is likely to decline...

Intermarket Securities @ Intermarket Securities

23 September 2022

Earnings Report /

Pakistan

Oil & Gas Development: 4Q sees heavy opex and exploration cost; more to come on PIOL and other ventures

OGDC’s earnings rose substantially to PKR31/sh in FY22, gaining from higher oil prices. A higher than expected payout was seen despite heavy investment required by Reko Diq. High 4Q opex but mild rise for full-year keeps future profitability intact.

Intermarket Securities @ Intermarket Securities

23 September 2022

Sovereign Analysis /

South Africa

South Africa: Downgrade ZAR to Hold with rate hike balanced by rising risks

SARB hiked rates by 75bps yesterday in line with expectations, preserving a positive real rate differential with the US. Growth and inflation forecasts broadly unchanged but current account forecast is notably worse; further hikes likely. Worsening e...

Tellimer Research @ Tellimer Research

23 September 2022

Macro Analysis /

Global

The Key to Unlocking Africa’s Economic Potential

Project Syndicate @ Project Syndicate

23 September 2022

Strategy Note /

Global

Inflationbusters! The EM stocks with positive real dividend yields

As interest rates and inflation rise, investors are flocking to high-quality dividend income stories such as UAE's Salik. We look at the best-yielding EM shares: China and commodities plays feature heavily; tech/health care noticeably absent. Stocks....