EU tariffs on Chinese EVs might possibly ease up

China wants to hash out EV tariffs with the EU: China has agreed to enter into negotiations with the EU over the bloc’s move to impose higher tariffs on imported Chinese EVs, the Financial Times reports, with German Vice-Chancellor Robert Habeck paying a visit to Beijing in a bid to “[soothe] tensions.”

REFRESHER- The EU passed a decision this month to push tariffs on imports of Chinese EVs to up to 48% on some vehicles. The move follows an anti subsidy investigation initiated by the supranational political union last year against Chinese EVs.

Are the tariffs already hitting trade volumes? German exports to China dropped 14% y-o-y last month, the Financial Times reports separately. Although tensions could be rising between Beijing and Berlin over the EV tariffs, analysts and economists suggest the export decline is likely attributable to other factors, including weaker auto sales in China or “a lagged impact of the Red Sea blockage.” It doesn’t look like this reading is the start of a new downtrend,” Oxford Economics economist Oliver Rakau said.

As one door opens, another door closes: The Canadian government is also mulling passing its own set of fresh tariffs on Chinese-made EVs, in a bid to match actions by the US and EU, Bloomberg reports, citing people familiar with the matter. The decision is still pending, with public consultations about the matter expected to kick off soon, the business information service cites officials as saying.

REMEMBER- The Biden administration also revealed plans last month to nearly quadruple tariffs on Chinese EVs to up to a final rate of 102.5%, as part of an election-year bid to ramp up domestic manufacturing in critical industries. The government accused the Chinese market of “cheating” on trade, and dumping underpriced goods into international markets.

Chinese EVs are priced notably more affordably than Western brands, with some selling for 20% cheaper in the EU, on the back of Chinese companies supplying a significant portion of global EV batteries, Al Jazeera reports. Chinese EVs dominated an 8.2% market share in the EU in 2023, with China’s BYD surpassing Tesla as the world's largest electric car company in 2023. Predictions place Chinese EVs as comprising an 11% market share in the EU in 2024 and possibly 20% by 2027.

ALSO FROM PLANET FINANCE-

Currencies in emerging markets have been on a losing streak since the beginning of 2024, falling towards their worst start to the year since 2020, pressured by a stronger-than-expected USD and carry traders fleeing Latin American markets, writes the Financial Times. JPMorgan’s index for currencies in emerging markets has dipped 4.4% in 2024 — a dip more than double the size of their decline over the past three years.

Carry trade investors have been stepping back from some larger EM: Despite investor appetite growing in the beginning of the year for the carry trade in emerging markets, local interest rate uncertainty and elections spooking the markets have destroyed much of the gains made. This is particularly true in Latin America, where the MXN has fallen nearly 10% against the greenback after Mexico’s election of Claudia Sheinbaum spooked the markets and other currencies in the region followed suit. However, some investors are instead focusing on local currency bonds from smaller countries working their way out of economic difficulties with high interest rates like Egypt and Nigeria, the salmon-colored paper writes.

MARKETS THIS MORNING-

Major Asian benchmarks are each down around 0.6% this morning as the trading week gets started, with only the Nikkei bucking the trend — it’s flat. Traders are looking forward to Australian and Japanese inflation data this week. US stock futures are down slightly overnight as traders prepare for the last week of the first half of 2024.

THE CLOSING BELL-

The DFM rose 0.6% on Friday on turnover of AED 382.6 mn. The index is down 1.17% YTD.

In the green: AL Salam Sudan (+14.9%), Drake & Scull International (+3.6%) and Commercial Bank of Dubai (+3%).

In the red: Dubai Islamic Insurance and Reinsurance Co. (-4%), Watania International Holding (-3.6%) and Takaful Emarat (-3.5%).

Over on the ADX, the index closed up 0.7% on turnover of AED 1.49 bn. Meanwhile Nasdaq Dubai closed down 0.6%.

CORPORATE ACTIONS-

#1- The National Bank of Ras Al Khaimah approved issuing up to USD 750 mn in new capital securities, in a bid to ramp up its capital adequacy ratio, it said in an ADX disclosure (pdf). The new capital securities will comprise up to USD 500 mn in additional Tier 1 capital and up to USD 250 mn in Tier 2 Capital.

#2- RAK Properties boosts issued capital to AED 3 bn: RAK Properties obtained approval from the SCA to raise its issued capital to AED 3 bn, divided into three bn shares priced at AED 1 each and fully paid in cash, according to an ADX disclosure (pdf). Previously, RAK Properties' issued capital was AED 2 bn, divided into two bn shares. This follows the company’s move to approve distributing 4% of the company's capital — valued at AED 80 mn — as bonus shares, increasing the company’s total capital by AED 920 mn in March.

#3- The International Holding Company’s (IHC)’s board approved a share buyback program, allowing the company to repurchase of AED 5 bn of its shares, representing 0.6% of the conglomerate’s total share capital, according to an ADX disclosure (pdf).

Background: IHC announced the program in May, aiming to “enhance shareholder value through increased earnings per share.” The program is set to take place over one year, during which IHC will cancel the shares after repurchasing them.

#4- Takaful Emarat’s board approved a AED 60 mn capital increase to AED 185 mn through the issuance of new shares, according to a DFM filing (pdf).