Turkey: hold your horses
While the general consensus is that the 2012 rally in emerging market equities still has further to go, it is far from unanimous.
Here’s a note of caution about Turkey from Morgan Stanley in a report headlined Turkey: Tread Carefully, Downgrade to UW [underweight]. After a 26.2 per cent gain this year, in dollar terms, the risks far outweigh the rewards, says the bank which much prefers other EMs in the region – for example, Russia.
Forint wilts as Brussels gets tough
The Hungarian forint took a tumble on Wednesday after the European Commission raised the ante in its high-profile row with Budapest – and froze €495m in European Union cohesion funds for 2013.
The Commission said archly that the planned move was an “incentive” not a “punishment” in its push to persuade Hungary to abide by EU rules on budget deficits. And it’s given Budapest time to comply, since it won’t apply to 2012 money. But the message to prime minister Viktor Orbán’s government is clear – get on with it.
Romania: OMV and Exxon in gas find
Good news for Romania – a “potentially significant” offshore gas disovery in the Black Sea.
It’s far too early to say whether it is a commercial proposition, but investors were excited enough by Wednesday’s announcement by project partners ExxonMobil and Austria’s OMV to move the markets. OMV shares rose by nearly 6 per cent before falling back to trade 4 per cent higher. ExxonMobil stock barely moved – perhaps even a big Black Sea find may not look that big in Texas.
UBS: don’t bet on a big boost from EMs
Looking for another big monetary stimulus from China and other emerging markets? Forget it, says Jonathan Anderson of UBS. Even though we’ve seen interest rates cuts – and can expect more – there’s no scope for radical easing, and no need either.
But, says Anderson, that’s not bad news. It shows that growth is chugging along nicely in most emerging markets, so there should be plenty of opportunities for investors.
Shell: £1bn entry into Mozambique
It may often seem as if Chinese natural resources companies are all over Africa. But here’s a deal which shows that western giants are still very much in the game.
Royal Dutch Shell on Wednesday announced £992m agreed bid for Cove Energy – a UK-listed exploration company with a stake in a Mozambique offshore project that the operators have dubbed “one of the most important natural gasfields discovered in the last 10 years”. The bid price is pretty full – 195p a share, compared with Tuesday’s closing price of 154.4p, and a low last year of 55p.
Egyptian equities: wishful thinking?
Egypt’s stock market is a paradox. Political tensions are getting worse, the economy is deteriorating and foreign exchange reserves are falling dangerously low. And yet equities are up nearly 40 per cent, the biggest gain in the world for 2012.
Clearly investors are betting that the closer the country edges to economic collapse, the greater the chances of the politicians seeing sense and the IMF leading an early bail-out. But what if they’re wrong?
Russian eurobonds: tax reprieve
Panic over in Russian eurobonds. The finance ministry late on Monday scrapped plans to start collecting tax on corporate eurobonds placed by the end of December 2012 – and said it might introduce only a limited levy after that date.
Borrowers and bankers breathed a collective sigh of relief, as the proposals could have added around 20 per cent to bond issue costs. That would have meant a large bill for big issuers, not least state-controlled companies headed by Gazprom, VTB bank and Transneft, the oil pipeline monopoly.
Greece: doubts linger after deal is done
There has been barely of flicker of reaction in emerging markets on the momentuous news of the Greek bail-out. While the euro rose modestly on Tuesday after EU leaders made their announcements, there was little reaction further afield.
In a sense, this is as it should be – the rescue had been widely anticipated by investors. It is also overshadowed by doubts over Greece’s political, social and economic capacity to shoulder its huge burdens – a point highlighted by the gloomy confidential report prepared for eurozone leaders last week and published on Tuesday in the FT. There are no easy ways forward. Not for Athens, not for bankers and not for investors.
Abraaj buys Aureos: but for how much?
You can know a lot about a deal and still not know what really matters.
Abraaj Capital, the biggest private equity investor in the Middle East, proudly announced on Monday that it was planning to buy Aureos Capital, the London-based emerging markets specialist PE investor.
But both sides declined to give financial details for the acquisition. This is a pity since the transaction could raise eyebrows in British political circles. UK taxpayers, who used to own Aureos, have every reason to be interested in the sale price.
China: easing lifts markets – a little
Asian markets took China’s weekend monetary easing in their stride. Investors had largely anticipated the decision to cut bank reserve ratios – indeed some had expected it a month ago.
But it was still a welcome fillip in markets where below the good humour generated by this year’s strong rally a lot of concern still lurks about possible future shocks, notably from the eurozone, China and the Middle East. After jumping by more than 1 per cent in early trading, the MSCI Asia ex-Japan index fell back later to trade 0.5 per cent higher. Clearly for many investors it was a good moment to take profits.
Minmetals: into Africa
China’s Minmetals Resources (MMR) has finally achieved its ambition of getting into Africa, with the completion on Friday of its C$1.3 bn ($1.3 bn) bid for Anvil Mining and its interest in the Kinsevere copper project in the the Democratic Republic of Congo (DRC).
But the Chinese state-run group and its western boss (CEO Andrew Michelmore, pictured) remain on the lookout for more overseas acquisitions and have plenty of funds for the right deals. Anvil is a modest buy compared to the $6.6bn Minmetals put on the table last year in a failed attempt to take over Canada’s Equinox Resources.
Kazakh oligarch faces British jail
Perhaps the UK isn’t such a cosy place for exiled oligarchs after all, as Mukhtar Ablyazov discovered on Thursday to his cost.
As the FT reported, the Kazakh tycoon accused of siphoning off billions of dollars from the big Kazakh bank where he served as chairman has been sentenced to 22 months in prison after a British High Court judge ruled that he had breached court orders.
Louis Delhaize: investing in Romanian retail [corrected]
A vote of confidence on Wednesday for the fragile Romanian economy from Louis Delhaize, the Belgian retail group.
The group is expanding Cora, its Romanian hypermarket chain, from eight stores to around 25 in a big push to expand modern retail out of Bucharest and into the provinces.
It won’t be easy with GDP forecast to stagnate in 2012 or even to contract. But with scores of Romanian towns and cities still without modern hypermarkets or supermarkets, Delhaize sees a lot of potential in developing the Romanian consumer.
CEE: Czechs in recession
The Czech Republic has become the first economy in central and eastern Europe to slide back into recession, with a 0.3 per cent quarter-on-quarter GDP decline in the last three months of 2011, after a 0.1 per cent drop in the previous quarter.
The news, announced on Wednesday, is depressing but scarcely unexpected given the country’s dependence on the eurozone, which also saw GDP contract in the fourth quarter.
Romania: new team into the fray
President Traian Basescu is trying to put Romania’s new government rapidly into place. If all goes well, parliament should on Thursday approve the new team headed by the premier-designate Mihai-Razvan Ungureanu.
But, even if all goes to plan, that won’t be the end of political trouble for the Basescu and his allies in the ruling centre-right coalition. With local and parliamentary elections due this year, they will remain under intense pressure as they desperately try to rebuild their popularity whilst simultaneously ploughing on with an IMF-backed austerity programme.
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