Semester 2 Week 11

Hey Legend!

Welcome to week 11 🥳, hope the study grind 💪is going well. Keep at it, three more weeks until D-day 🪖 (start of exam period).

Sick of grinding past papers and tutorial questions? Tired of learning content you’ll probably never use after this semester?

Fear not, for our flagship event ✨ An Introduction to Emerging Markets presented by Dr Gaby Berhe Nadari is on this Friday. Take a well-deserved breather 🫰 from the books and explore the exciting opportunities in emerging markets.

• 📅 Friday 11th October

• ⏱️ 2.00 — 4.00 pm

• 📍 Parkville, The Spot, Level 4, Lectorial Learning Space 4012

Dr Gaby — the subject coordinator for Emerging Markets Finance 💱, advises leading financial institutions 🏦in emerging markets coverage, possessing over 20 years of tertiary experience teaching commerce 👩‍🏫, her insights are not to be missed.

The Numbers

The Roundup

In this week’s roundup — we see the continuation of India’s strong economic performance and military capabilities 💪. China follows with huge market gains 💸but volatile international relations 🥶. Finally, we finish up with the Fed’s cautious 👀outlook on rate cuts and their harmful effects on emerging markets 😭.

India

India is making big moves on the global stage! 🚀 From advancing in education and technology to boosting its defense and economy, it is rapidly solidifying its position as a global powerhouse. With new initiatives to preserve culture, enhance digital finance, and strengthen military capabilities, India is poised for a bright future. In addition to this, with a focus on self-reliance, the economy is set to hit new heights, making it an exciting time for businesses and investors alike. 🌍

• The Indian government has unveiled plans to grant 'classical language' status to five more languages: Marathi, Bengali, Assamese, Pali, and Prakrit. 🎉 This decision aims to preserve India's rich cultural heritage while providing employment opportunities and academic benefits for speakers of these languages. 📚 The recognition will have a lasting impact on the country's linguistic and cultural diversity. 🌏

• The country’s manufacturing and technology sectors are booming, with India solidifying its place as a global leader in electronics and pharmaceuticals. The Union Cabinet recently approved a massive infrastructure development plan, aiming to further accelerate growth and employment. 🚧 India’s export sector is also thriving, with 22% growth in engineering goods and textiles exports in August alone. 📦

• The Reserve Bank of India (RBI) has taken steps to boost the economy by reducing the repo rate by 25 basis points, lowering it to 5.75%. 📉 This move will increase liquidity in the market, potentially spurring economic growth. Additionally, the RBI has introduced a ₹10,000 crore fund for the MSME sector, aiming to support small businesses and promote entrepreneurship. 🏦

• In a significant achievement, India successfully tested a missile with a range of 5,000 km. 🚀 Conducted on October 3, 2024, the test further establishes India as a major player in the global nuclear club. 🛡️ This successful test strengthens India's defense capabilities and showcases its technological advancements. 💥

China

China has made global headlines this week for everything good, bad and controversial, most notably for its stunning stock market performance 📈🥳. On the negative side however, it has endured lots of scrutiny within the international community, whether it be tariffs on EVs 🚙🏷️📈, concerns surrounding business acquisitions 🔎👮‍♀️ or cyber warfare 🧑‍💻🛜⚔️.  

• China has had one of the best days for it’s stock markets 📈📈, with the CSI300 closing up 8.48%, reaching it’s highest levels since over a year ago and its best daily performance in almost 16 years 🤑. This reaction comes as the global market’s rejoice in favour of China’s bold approach to fiscal and monetary policy 🏦💸🤲 after having previously developed a reputation for half-hearted and underwhelming economic stimulus.

• The EU has approved a 45% tariff on Chinese made EVs 🚙🏷️📈, a vote which has divided the EU’s member states and threatened greater tensions and harm to China-EU relations 😬👎. Member states in favour of the tariffs hope that it will enable the EU to be more competitive in the industry 🏭💰, whereas those against the tariffs fear it will start a trade war which will harm both the EU and China ⚔️🚢.

• Canada has announced a security review 🔎👮‍♀️ of Australian company Paladin Energy’s $1.5bn acquisition of Canadian company Fission Uranium due to Chinese influence across both sides of the deal ⚡️🤝👎. Fission Uranium is 11% owned by China General Nuclear Power Corp, a Chinese state owned energy corporation which has unsuccessfully tried to block the takeover 🙅‍♂️💰👨‍💼. On the Australian side, China National Nuclear Corporation, owns 25 per cent of a major Paladin mine, and is a major lender to Paladin ⛏️🏦.

• A potentially catastrophic cybersecurity breach by Chinese hacking group ‘Salt Typhoon’🧂🌪️ was carried out into US broadband provider networks including Verizon, AT&T and Lumen Technologies 🧑‍💻🛜. This breach likely gave the hackers access to systems the US government uses for court-approved wiretapping requests, thus demonstrating the intrusion to be a national security threat 🧑‍⚖️📲🚨. China has firmly denied any association or engagement with cyberattacks.

Hot Topic 🔥

Emerging Markets are feeling the pressure amid the Fed’s signaling of a more cautious approach to rate cuts. With smaller reductions on the horizon, investors are re-evaluating their strategies, creating ripple effects across global markets.

The CME's FedWatch Tool shows reduced expectations for a significant 50-basis-point cut in November, with investors now anticipating quarter-point reductions - if any. Powell’s cautious approach stems from positive economic data and the anticipation of key non-farm payrolls reports, along with the upcoming US Presidential elections.

In response, the US dollar strengthened against major currencies, while Chinese markets paused for National Day holidays, halting the recent rally in emerging market assets. The MSCI Emerging Markets Index dipped 0.1%, easing off after a strong month driven by China’s economic stimulus and the Fed’s September rate cut.

However, Emerging Markets are feeling the strain. Currencies dropped by 0.4%, halting a three-month rally, and manufacturing struggles persist in countries like the Czech Republic, Hungary, and Turkey. In South Africa, the rand weakened against the dollar, while Sri Lanka’s rupee hit a high not seen since June 2023, driven by hopes of an IMF bailout. Adding to the uncertainty, global investors are rethinking their positions in China.

Have a good rest of the week, we look forward to seeing you this Friday at our seminar!

Best regards,

EMN 💚