Daily Update: May 6, 2021

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As the coronavirus crisis in India continues to devastate its population of 1.4 billion, the outlook for the emerging economy is deteriorating. The implications of India’s second wave of COVID-19 cases include mounting loss of life, declining economic output, hard hits to energy industries, and a curtailing of global trade.

With almost 2.7 million new cases and 25,000 deaths this past week alone, the crisis in India is spreading with no end in sight, as hospitals fight shortages of oxygen, and nonexistent facilities and supplies. There have been more than 20.6 million infections and 226,200 deaths since the first coronavirus cases in January 2020, according to Johns Hopkins University data. Many global health experts believe the true tally is considerably higher. The principal scientific adviser to the Indian government, K. VijayRaghavan, said at a May 5 news conference that a third wave in the country is “inevitable” after this surge. Forecasters at the University of Washington’s Institute for Health Metrics and Evaluation project that India’s death toll could more than quadruple by the end of July, to more than 1 million deaths.

Against this backdrop, many of the hardest hit areas, including Mumbai, New Delhi, and Bangalore have implemented local and regional coronavirus-containment measures. Prime Minister Narendra Modi has yet to instill a national lockdown despite pressure to do so.

A nationwide lockdown could have more adverse economic consequences for India, according to S&P Global Ratings. The second wave could shave as much as 2.8% from the country’s GDP growth in fiscal 2022 and stall the robust recovery in corporate profits, liquidity, funding access, government revenues, and banking-system profitability. If new infections peak in late June, India could lose an average of $210 million in daily output.

“The Indian economy should resume its recovery once the second wave recedes, and to continue to grow at a faster pace than its peers at a similar level of per capita income around the world,” S&P Global Ratings said in a report yesterday. “Should the outbreak worsen over the coming months, or if case numbers plateau at a very high level, this would elevate risks to India's economic and fiscal recovery. This assumes that the health system faces prolonged capacity constraints.”

India’s COVID-19 crisis has impacted the country's energy, metals, and agriculture markets alongside the international price outlook of some commodities, according to S&P Global Platts. S&P Global Platts Analytics lowered its projection for the country’s oil demand growth this year, to 400,000 barrels per day, from 440,000, in light of the climbing cases. Outlooks for the nation’s gasoline demand are nosediving. Analysts project that India's city gas demand could drop 25%-30% in the coming months, and Asia’s demand for liquefied natural gas has already been hurt by the situation. Petrochemical prices in India are under pressure.

Demand for ships into India is also expected to decline, hampering imports of crude and exports of other refined products. Elsewhere, the increase of COVID-19 cases in India has dealt a blow to Australia, which had been targeting the South Asian nation in its efforts to diversify its commodity export dependence on China.

India’s capital markets and business activity may emerge without long-term damage. Despite the volatility that’s expected to arise from this second wave, India could experience a boom of companies going public this year.

“Many companies have given the intention to raise money this year. We are seeing documents filed with the regulator and they have gone up quite a bit. We also see many companies preparing and taking the plunge to initial public offerings,” Ajay Saraf, head of investment banking and institutional equities at ICICI Securities Ltd., told S&P Global Market Intelligence. “I am very sure that the number of companies going public will be larger than what we saw in 2020, with more broad-based activities in the capital market. In terms of the total value, we have to see how much money each company decides to raise. It may be at a similar level to last year and I don't see it being a significant increase in terms of total value but in the number of companies, there would be a significant difference.”

Last year, approximately $26 billion in funds were raised in India’s primary market, and capital market volume was 65% greater year-over-year, according to Mr. Saraf.

Today is Thursday, May 6, 2021 and here is today’s essential intelligence.

Uncertainty in the Global Economy

Healthcare M&A Activity Bounces Back In Q1'21 From Early-2020 Doldrums

The size and volume of pharmaceutical and biotechnology M&A transactions began to rebound in the first quarter of 2021 from a deep valley a year earlier, but the sector has stayed fairly quiet on the megadeal front, according to data compiled by S&P Global Market Intelligence.

—Read the full article from S&P Global Market Intelligence

Market Dynamics

PJM Power Demand, Power And Natural Gas Prices Rise On Year In April

PJM Interconnection power and natural gas prices climbed across the board year over year in April, with power prices up almost 70% at some hubs, reflecting a nearly 7% peak load increase from April 2020 when power demand was lower due to coronavirus pandemic lockdown impacts. Long-term weather forecasts indicate potentially warmer year-over-year Northeast US summer temperatures, which could support power and gas prices.

—Read the full article from S&P Global Platts

Palladium Moves Back Above $3,000/Oz, Near Record High

Both palladium base and spot prices nudged above $3,000/oz on May 5 on the back of continuing tight supply and expected improving auto demand, to move near a recent record high. South African research firm Afriforesight said palladium spot prices have maintained their upward momentum on constrained Russian supply and expectations of strong vehicles sales later in 2021.

—Read the full article from S&P Global Platts

Banking Sector Under Pressure

Africa's Market To Recycle Bad Debt Will Boost Banks — And Entice Investors

Investors' search for better yields could bolster Africa's nascent secondary market in nonperforming loans, with surging defaults across the continent due to the pandemic creating more opportunities to buy distressed debt. For an NPL market to develop, three key aspects are required: An adequate regulatory and legal framework; sufficient capital from investors; and specialist companies to rehabilitate the loans acquired. A lack of supportive laws and regulations, and difficulties in agreeing on prices for NPL portfolios, have so far stymied growth in Africa — and support from the likes of the World Bank's International Finance Corp., or IFC, will be critical to creating a functioning secondary market.

—Read the full article from S&P Global Market Intelligence

Nonbank Finance Companies Capitalize On Lower Rates And Pent Up Investor Demand

Favorable financing conditions persist for the finance companies and asset managers we rate after a year of strong issuances. For this article, finance companies and asset managers will be collectively referred to as nonbank financial institutions (NBFI). The accommodating environment is built on the view that pandemic-related worries and volatility are behind us and near-record low interest rates are too hard to pass up.

—Read the full report from S&P Global Ratings

Technology & Media

How Congested Were The World's Mobile Markets In 2020?

Delayed spectrum auctions and tower rollouts plus increased network demand amid the pandemic improved spectrum congestion but worsened tower congestion in mobile markets covered by Kagan in 2020.

—Read the full article from S&P Global Market Intelligence

2021 U.S. Broadband Forecast Lifted By Rising Digital Home Profiles

U.S. broadband providers are carrying considerable momentum out of the pandemic despite increased competition and impending service maturity with penetrations nearing 90% of occupied households, according to the updated forecast from Kagan, a research unit of S&P Global Market Intelligence.

—Read the full article from S&P Global Market Intelligence

ESG in the Time of COVID-19

The Leaders Climate Change Summit: A Decisive Decade To Cut Emissions

During the April 22 Leaders Summit on Climate hosted by the U.S., several major economies, including Canada, Brazil, Japan, and the EU, increased the extent of their Nationally Determined Contributions (NDCs) in pursuit of the six-year-old Paris Agreement. S&P Global Ratings believes these heightened public policy commitments are major milestones, confirming widespread momentum across regions to decarbonize, on top of the significant milestones achieved to date.

—Read the full report from S&P Global Ratings

The Future of Energy & Commodities

Global Infrastructure And Energy: First-Quarter 2021 Sector Update

As more people across the globe are immunized against COVID-19, economic prospects are looking brighter, offering a clear exit path from pandemic restrictions. S&P Global Ratings still foresees a K-shaped recovery that would ultimately expose widening gaps between certain sectors and countries.

—Read the full report from S&P Global Ratings

Former Iran Oil Minister Runs For President, With Refining, Petchem Ambitions

Iran needs to focus on developing its refining and petrochemical sectors, so that it eventually does not have to export crude and expose itself to international sanctions, according to the country's former oil minister Rostam Ghasemi, who is now running for president.

—Read the full article from S&P Global Platts

Major Gas Pipelines Face 1.1 Million Dth/D Of Expiring Contracts In Q2

Major U.S. natural gas pipelines have 1.1 million Dth/d of firm transportation contracts scheduled to roll off during the second quarter, according to an analysis of S&P Global Market Intelligence data.

—Read the full article from S&P Global Market Intelligence

Written and compiled by Molly Mintz.