After Sri Lanka, more emerging markets are getting ready to fall like dominos with (nuclear armed) Pakistan possibly up next. While this is not the first time emerging markets have faced sovereign debt defaults, this time is different. The problem now (according to investor Jay Newman) is that the size, scope and terms of China’s BRI deals are state secrets. This makes it nearly impossible to do a proper debt restructurings.
Meanwhile, the war in the Ukraine and sanctions against Russia means many emerging markets dependent on wheat from those two countries are facing starvation. However, Russia appears to be winning the wheat war and has time to shift energy exports away from Europe to Asia…
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- Jay Newman: “We are on the brink of an epidemic of emerging market defaults, the scale and scope of which will rival the debt crisis of the 1980s,” he wrote in an op-ed in the Financial Times. [Click here for a non paywalled article)
- “When Sri Lanka, predictably, found itself unable to satisfy the debt, China sprang the trap, insisting on repayment, offering to exchange debt for further concessions and vast tracts of land, and offering additional cash to help tide the political class over.”
Just say no – China has sprung a debt trap on many developing countries(Financial Times) $ [Click here for a non paywalled article)
- According to JPMorgan, Sri Lanka, the Maldives, the Bahamas, Belize, Senegal, Rwanda, Grenada, and Ethiopia are all “at risk of reserve depletion” — aka the cash drawer is empty. Let’s not leave out Lebanon, Egypt, Pakistan, Russia, the inevitable renegotiation of Ukrainian debt, or, for that matter, the 27 countries with bonds that yield more than 10 per cent — always a sign of trouble…
- Unless a debtor demonstrates a willingness and capacity for reinvention, and unless all creditors — including China and the IFIs — agree to disclose the entirety of their claims and agree to negotiate a resolution on commercial terms, any restructuring will fail.
- Pakistan is also a nuclear power — political elites may stoke a conflict with neighboring India to distract public anger from domestic financial pain.
Is Pakistan About to Pop? (Petition Substack)
- China made extraordinary efforts to shore up funds for Sri Lanka by way of “covert imperialism” in order to take power away from India and put it into its own hands.
- We are now seeing the same happening in Pakistan, except that here, China will almost certainly have more influence than India if it wants, because India and Pakistan aren’t exactly homies.
- Turkey’s inflation for the month of May rose by an eye-watering 73.5% year on year, its highest in 23 years, as the country grapples with soaring food (food prices in the country of 84 million rose 91.6% year on year) and energy costs.
- The two countries share many of the same export partners, located for the most part in north Africa and the Middle East. Faced with the possibility of food shortages, many are turning to Russia to make up the shortfall.
- More than 44% of wheat consumed in countries on the continent comes from Russia and Ukraine, according to UN figures. Wheat prices have soared around 45% as a result of the supply disruption, according to the African Development Bank.
Note: Investing.com has a full calendar for most global exchanges BUT you may need an Investing.com account, then hit “Filter,” and select the countries you wish to see company earnings from. Otherwise, purple (below) are upcoming earnings for US listed international stocks (Finviz.com):
Click here for a full weekly calendar from Investing.com (my filter excludes USA, Canada, EU, Australia & NZ). Some frontier and emerging market highlights:
Frontier and emerging market highlights (from IFES’s Election Guide calendar):
- Colombia President Jun 19, 2022 (d) Second Round if needed Jun 17, 2018
- Grenada Grenadian House of Representatives Jun 23, 2022 (t) Snap Mar 13, 2018
- Grenada Grenadian Senate Jun 23, 2022 (t) Snap Jul 8, 2008
- Papua New Guinea National Parliament of Papua New Guinea Jul 9, 2022 (d) Date not confirmed Jun 24, 2017
- Tunisia Referendum Jul 25, 2022 (t) Confirmed Oct 24, 1999
- Senegal Senegalese National Assembly Jul 31, 2022 (d) Confirmed Jul 2, 2017
- Congo (Brazzaville) Congolese National Assembly Jul 10, 2022 (d) Confirmed Jul 16, 2017
- Angola Angolan National Assembly Aug 3, 2022 (t) Tentative Aug 23, 2017
- Kenya President Aug 9, 2022 (d) Confirmed Dec 27, 2007
- Kenya Kenyan National Assembly Aug 9, 2022 (t) Confirmed Aug 8, 2017
- Kenya Kenyan Senate Aug 9, 2022 (t) Confirmed Aug 8, 2017
- Brazil President Oct 2, 2022 (d) Confirmed Oct 30, 2022
- Brazil Brazilian Federal Senate Oct 2, 2022 (t) Confirmed Oct 7, 2018
- Brazil Brazilian Chamber of Deputies Oct 2, 2022 (d) Confirmed Oct 7, 2018
Climate change and ESG are clearly the latest flavors of the month for most new ETFs. Nevertheless, here are some new frontier and emerging market focused ETFs:
- 4/21/2022 – FlexShares ESG & Climate Emerging Markets Core Index Fund FEEM – Passive, equity, ESG
- 4/6/2022 – India Internet & Ecommerce ETF INQQ – Passive, equity, thematic
- 2/17/2022 – VanEck Digital India ETF DGIN – Passive, India market, thematic
- 2/17/2022 – Goldman Sachs Access Emerging Markets USD Bond ETF GEMD – Passive, fixed income, emerging markets
- 1/27/2022 – iShares MSCI China Multisector Tech ETF TCHI – Passive, China, technology
- 1/11/2022 – Simplify Emerging Markets PLUS Downside Convexity ETF EMGD – Active, equity, options strategy
- 1/11/2022 – SPDR Bloomberg SASB Emerging Markets ESG Select ETF REMG – Passive, equity, ESG
Frontier and emerging market highlights:
- 6/10/2022 – Infusive Compounding Global Equities ETF JOYY
- 5/3/2022 – ProShares Short Term USD Emerging Markets Bond ETF EMSH
- 4/7/2022 – DeltaShares S&P EM 100 & Managed Risk ETF DMRE
- 3/11/2022 – Direxion Daily Russia Bull 2X Shares RUSL
- 1/27/2022 – Legg Mason Global Infrastructure ETF INFR
- 1/14/2022 – Direxion Daily Latin America Bull 2X Shares LBJ
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Emerging Market Links + The Week Ahead (June 6, 2022) was also published on our Substack.
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