Entrepreneur
Flash Briefing: Traders in emerging markets, currencies ride ebb, flow of US elections; SA stocks; elephant crisis
Emerging-market stocks rallied and an index of currencies erased its biggest drop since March as traders rode the ebb and flow of a US election.
By Jackie Cameron
- Emerging-market stocks rallied and an index of currencies erased its biggest drop since March as traders rode the ebb and flow of a US presidential election that's has been too close to call. The US could be facing perhaps even weeks of uncertainty dominated by political bickering over who won. Piotr Matys, a London-based strategist at Rabobank, said in a note. "When the dust settles, what will be crucial for the markets is how efficiently the US administration will be able to support the economy using fiscal measures." Stocks have rallied this week amid speculation a Biden victory would allow lawmakers to pass a US stimulus plan and reduce geopolitical uncertainty, says Bloomberg. But as odds shifted toward a Trump victory or at least a contested result, investors headed for the safety of the dollar and bonds, it reports. Yerlan Syzdykov, London-based head of global emerging markets at Amundi Asset Management, said a divided-power scenario or a contested outcome would fuel volatility and push appetite for the dollar higher in the short term. "The worst-case scenario is one of persistent dollar strengthening, putting EM central banks with a dilemma of responding to economic impact of the Covid-19 and stabilizing FX and capital markets, leading to higher volatility in EM currencies," he said. Some EM currencies, however, like the Russian ruble, will show resilience and are likely to outperform in this environment, he said.
- South Africa's weak economy and poor growth prospects have hidden the "phenomenal" potential for the shares in some locally focused companies to deliver returns for investors, according to Old Mutual Investment Group. So-called South Africa Inc. stocks have largely missed out on the 40% rebound in Johannesburg's benchmark index, says Bloomberg. Meryl Pick, who helps oversee OMIG's R10bn ($533m) Investors Fund, said during a webinar Wednesday. "There are resilient and adaptive companies that can still outperform in a weak macro," Pick said, citing stock-specific areas of the local market that the money manager sees as attractive. Pick pointed to South African bank valuations as an example, with lenders trading at the same price-to-book multiples they had in the 1980s, even though their businesses are much stronger with more robust balance sheets.
- Botswana may have found a solution to its elephant overpopulation: It's going to encourage some of them to leave the country. Botswana's tourism industry, which accounts for a fifth of the economy, is heavily reliant on the world's biggest elephant population, but the animals have become a political issue as there are too many of them and they destroy crops and occasionally trample villagers. Now, elephants are beginning to migrate into neighbouring Angola and the governments of both countries are helping them do so by removing land mines left over from Angola's civil war and tearing down fences. "It's the idea that we have, particularly looking at the overpopulation we have," said Philda Kereng, Botswana's environment minister, in an interview. "We have to help Angola understand the value of elephants." Botswana's 135,000 elephants mostly live in a 520,000 square kilometer (201,000 square-mile) area known as the Kavango-Zambezi Transfrontier Conservation Area, which spans five countries and is home to almost half of the world's African elephants. Angola's elephants were pushed across the border by a decades-long civil war that ended in 2002. Illegal hunting elsewhere, especially Zimbabwe, has also boosted Botswana's elephant population.