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Emerging markets are affected .. Investors are running for safety



Emerging markets are affected .. Investors are running for safety

Emerging market securities are facing the worst losses in nearly three decades, weighed down by rising global interest rates, sluggish growth and the crisis in Ukraine.
The benchmark emerging country dollar-denominated sovereign securities index, JPMorgan Global Diversified, has yielded about 15 percent of total returns so far in 2022, its worst start since 1994. This decline was mitigated slightly by the widespread recovery of global markets. Days recently, the seven-week losing streak on Wall Street stocks came to an end.
According to EPFR data, about $ 36 billion in emerging market mutual funds and bond trading funds have flown out of the market since the beginning of this year, and stock market inflows have declined since the beginning of May.
“This is the worst start I can remember across Asset Class and I have been working in emerging markets for over 25 years,” said Brett Diamond, Head of Global Emerging Market Credit, Aberdeen Investments.
Emerging economies have been hit hard by the corona virus epidemic and their public funds are struggling. High inflation, slowing global growth and the political and financial turmoil resulting from the crisis between Russia and Ukraine have added to the economic pressures facing emerging economies. And investment outflows threaten to exacerbate its problems by reducing cash flow.
According to David Honor, head of emerging market strategy and economics at Bank of America Global Research, the situation is expected to worsen. “The important thing is that the world has the highest inflation rate, and monetary policymakers are still amazed at how high it is,” he said. “This means more monetary tightness and the central banks will continue to do so until something collapses, the economy or the market.”
Higher yields in emerging markets such as the US – as central banks raise interest rates – have not made emerging market securities attractive, said Yarlon Chestikov, global head of emerging markets in Amundi. “At best, you’ll get zero returns, and at worst, you’ll face financial losses this year.”
According to Honor, high interest rates in large advanced market economies are not bad for emerging market assets if they are accompanied by economic growth. “But not now – we have a huge stagnation problem, and in some places like the US the central banks are raising interest rates to control widespread inflation. This is a very unhealthy background for emerging markets.”
China, the world’s largest emerging market, faced the biggest sales.
Jonathan Forden, an economist at the Institute of International Finance, who monitors cross-border portfolio flows in emerging markets, said concerns about geopolitical risks have been heightened by the government-imposed recession in the wake of the crisis between Russia and Ukraine. Locks to continue the zero-govt policy.
He pointed out that after adding the country to the world indexes, Chinese assets have received so-called negative receipts over the past two years.
But this year, such receipts have fallen, with more than $ 13 billion out of the Chinese bond market in March and April, and more than $ 5 billion in Chinese stock markets, according to data from the Institute of International Finance.
“Throughout this year we have been working on a provisional forecast for a negative outflow from China. This is very important,” Forton said.
Fund managers did not allocate some of the money withdrawn from China to other emerging market assets, which led to a widespread collapse, saying “everyone is moving from emerging markets to one asset class and moving to safer assets.”
The shock of commodity prices caused by the crisis in Ukraine has increased the pressure on many developing countries that depend on imports to meet their food and energy needs.
But this has led to the emergence of some winners among freight exporters. Local currencies in the JPMorgan GBI-EM Emerging Markets Index have yielded less than 10 percent in dollar terms so far this year, but Aberdeen’s Diment notes that there are widespread variations across the country.
Bonds issued by Hungary, which is close to the Russia-Ukraine dispute and dependent on Russian energy imports, have lost 18 percent so far this year. In Brazil, a major exporter of industrial and food products, commodity prices rose 16 percent against the dollar.
Diment said emerging market bond ratings “now look very attractive” and that Aberdeen has seen net inflows into emerging market bond funds so far this year.
The Honor of the Bank of America, however, argued that the bottom line was that central banks could only shift their focus from fighting inflation to encouraging growth. “It may happen occasionally in the fall, but we still don’t seem to be there,” he said.
The rise in inflation will depend on whether the global economy recovers to a balance between lower inflation and lower interest rates, Costikov said. He warned that the alternative would be for the US to enter recession next year, which would further slow global growth and boost growing market yields.

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European shares fall for fifth straight day, real estate shares fall, Reuters



European shares fall for fifth straight day, real estate shares fall, Reuters
© Reuters. Electronic screens show stock trading activity on the German DAX index at the Frankfurt Stock Exchange on Wednesday. Photo: Reuters.

(Reuters) – European stocks fell for a fifth straight day on Wednesday as negative reports from brokerages on property owners in Britain hurt real estate stocks, while recent moves weighed on shares of Dutch insurers and Swiss bank UBS. .

The European index fell 0.2 percent, closing at its lowest level in six months.

The European real estate sector index fell 2 percent.

Land Securities, British Land and Derwent London shares fell between 3.4 percent and 4.3 percent.

Overall, market sentiment remained pessimistic with investors on the likelihood of major central banks keeping interest rates high for longer, and a slump in China’s real estate sector added to negative sentiment.

The STOXX 600 index appeared to be on track for its first quarterly loss in four years, while the German index turned out to be the worst performer at the regional level.

Meanwhile, shares of Dutch insurers took a hit after court rulings raised the prospect of huge damage claims in a long-running battle over investment-linked products.

NN shares fell 18.8 percent, while ASR shares fell 14.2 percent.

Shares of UBS Bank fell about three percent after the U.S. Justice Department stepped up scrutiny of cases of suspected noncompliance with rules that helped clients from Russia avoid sanctions.

H&M shares, on the other hand, rose 3.4 percent after the world’s second-largest clothing retailer reported a slightly larger-than-expected increase in its quarterly profit, supported by cost cuts.

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(Prepared by Rehab Ala for Arabic Bulletin)

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Saudi Aramco to enter into new acquisition deal in China



Saudi Aramco to enter into new acquisition deal in China

Saudi Aramco continues its strategy of expanding petrochemical investments as part of a plan to convert 4 million barrels of oil per day into chemical products.

The Saudi oil giant has made China one of the most important markets it aims to expand into by entering into partnership or acquisition deals in the oil refining and petrochemical sector.

In this context, Saudi Aramco, one of the world’s leading integrated companies in the field of energy and petrochemicals, and Jiangsu Eastern Xinghong Company Limited (Eastern Xinghong), on Wednesday, September 27 (2023), signed a framework cooperation agreement to enter. In advising on potential acquisitions.

Acquisition Agreement Targets – Step Report Seen by Special Energy Platform – Acquisition of 10% strategic stake in Jiangsu Xinghong Petrochemical Industry Group Co., Ltd. (Jinghong Petrochemical), a wholly-owned subsidiary of East Jinggang, the deal is subject to necessary assessments and approvals.

Big investments

Xinghong Petrochemical Company owns and operates an integrated refining and petrochemical complex with a production capacity of 320 million barrels per day, as well as a methanol-to-olefins and derivatives complex.

Through its wholly-owned subsidiaries, it also has a facility for the production of refined terephthalic acid, and its facilities are located in the Petrochemical Industrial Park in Jiangsu Province.

An Aramco employee walks near an oil tank at the Ras Dhanura oil refinery – photo from Reuters

Under the framework cooperation agreement, Saudi Aramco intends to supply crude oil and other raw materials to Shenghong Petrochemical Company. Saudi Oil Company and Shenghong Petrochemical Company intend to cooperate on a major expansion project, subject to the results of consultations between the two countries. Conclusion of parties and binding final agreements.

The new deal comes two months after Saudi Aramco closed a deal to buy a 10% stake in Rongsheng Petrochemical Co. for 24.6 billion Chinese yuan (3.4 billion US dollars).

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The deal includes the export of 480,000 barrels per day of Arabian crude oil to the largest integrated refining and petrochemical complex in China owned by Zhejiang Petroleum and Petrochemical Co., Ltd., a subsidiary of Rongsheng.

Energy security in China

Mohammed Yahya Al-Qahdani, Saudi Arabia’s head of refining, chemicals and marketing, said, “Through our partnership with East China Sea, we look forward to providing Aramco with the reliable energy needed for growth, development and the long-term sustainability of China’s energy security.

He added: “The signing of the structural cooperation agreement with Saudi Aramco is an important step in our strategy in the field of refining, chemicals and marketing, which aims to increase the company’s ability to convert Arab crude oil into chemicals. Our vision to expand into the Chinese market, one of the world’s leading markets in the energy sector, is to “make China We consider ourselves an important partner today and for decades to come.”

Eastern Singhong, listed on the Shenzhen Stock Exchange, is one of the leading integrated companies in the energy and chemical industry and is keen to adopt advanced technologies in its new businesses in the energy and materials sectors.

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Dollar hits 10-month high as interest rates linger, via Reuters



Dollar hits 10-month high as interest rates linger, via Reuters
© Reuters. One hundred US dollar bills in Seoul, a photo from the Reuters archive.

SINGAPORE (Reuters) – The dollar hit a 10-month high as the U.S. continues to dominate at long-term highs.

In recent trading, the euro fell 0.14 percent to $1.05575, its lowest level in six months at $1.05555. The euro is heading for a quarterly loss of more than three percent, its worst quarterly performance in a year.

It fell 0.09 percent to $1.2146 after touching a six-month low of $1.2141 on Wednesday. Sterling is heading for a quarterly loss of more than four percent.

It hit a ten-month low of 106.30.

The rise in earnings led to a fall in the yen, which rose slightly to 149.03 yen against the dollar after falling to an 11-month low of 149.185 on Tuesday.

Some experts believe a breach of the 150 yen threshold could force Japanese authorities to intervene to support the currency, as they did last year.

The Australian dollar was down 0.20 percent at $0.6385.

The New Zealand dollar was down 0.23 percent at $0.5931.

(Prepared by Marwa Salam for Arabic Bulletin – Editing by Marwa Gharib)

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