Hong Kong stocks gained 10.62% in July, leading global major indices, with the Hang Seng Index closing at 25,310 points, up 103 points and above its 100-day moving average. The rally occurred as MSCI Emerging Markets Index entered consolidation after June record highs, with Taiwan and South Korean stock markets showing significant corrections. The US-Iran conflict disrupted approximately 30% of global fertilizer trade and over 30% of nitrogen fertilizer supply by end of June, causing fertilizer prices to rise over 20% year-on-year and nitrogen fertilizer to surge 46%. The United Nations Food and Agriculture Organization (FAO) warned that fertilizer shortage impacts on staple crop production will emerge within 6 to 9 months, predicting severe food price inflation in late 2026 to 2027. Food accounts for 30-50% of the Consumer Price Index basket in major emerging economies including India, Indonesia, Brazil, and Colombia, making food price inflation a systemic threat to emerging market monetary policy and capital flows.
Hong Kong Stocks Lead Global Indices in July
The Hang Seng Index closed at 25,310 points, up 103 points, positioning above its 100-day moving average after recovering its 10-day, 20-day, and 50-day moving averages. The index requires an additional 408 points to surpass its 250-day moving average. Hong Kong stocks' July gain of 10.62% placed them first among global major stock indices. The outperformance resulted from both previous significant underperformance and profit-taking in other markets.
US-Iran Conflict Disrupts Fertilizer Supply
The US-Iran conflict paralyzed shipping through the Strait of Hormuz for months, blocking approximately 30% of global fertilizer trade. The disruption cut approximately 17% of natural gas supply and over 30% of nitrogen fertilizer supply. By end of June, fertilizer prices increased over 20% year-on-year, while nitrogen fertilizer prices surged 46%.
FAO Warns of Food Price Inflation Timeline
The FAO warned that fertilizer shortage impacts on staple crop production will emerge within 6 to 9 months. The organization predicted food price inflation will intensify in late 2026 to 2027. Climate experts estimate the current El Niño phenomenon is the most severe since 1950.
JPMorgan Forecasts 5% Food Inflation Rate in 2027
JPMorgan stated that a "Super El Niño" combined with high oil prices will trigger dual inflationary pressures. The institution forecasts food inflation rates reaching approximately 5% in the first half of 2027, representing an increase of approximately 0.6 percentage points in overall global inflation. In India, Indonesia, Brazil, and Colombia, food comprises 30-50% of the Consumer Price Index basket. Uncontrolled food prices would disrupt central bank monetary policy, forcing delayed interest rate cuts or renewed rate increases, slowing domestic economic growth and triggering foreign capital outflows.
Historical Food Price Peaks Preceded Emerging Market Declines
When the FAO Food Price Index reached historical peaks in 2008, 2011, and 2022, the MSCI Emerging Markets Index subsequently declined 66.06%, 42.58%, and 41.55% respectively from highs. The pattern repeated across all three episodes: rising food prices pushed up inflation, central banks raised interest rates, domestic economies slowed, and foreign capital accelerated withdrawals. The MSCI Emerging Markets Index hit record highs in June alongside global markets but entered consolidation in July due to expensive valuations and profit-taking. Taiwan and South Korean stock market corrections were particularly significant.
FAQ
What caused fertilizer prices to surge by end of June?
The US-Iran conflict paralyzed shipping through the Strait of Hormuz, blocking approximately 30% of global fertilizer trade, approximately 17% of natural gas supply, and over 30% of nitrogen fertilizer supply. By end of June, fertilizer prices rose over 20% year-on-year and nitrogen fertilizer prices surged 46%.
When does the FAO predict food price inflation will intensify?
The FAO warned that fertilizer shortage impacts on staple crop production will emerge within 6 to 9 months, and predicted food price inflation will intensify in late 2026 to 2027. JPMorgan forecasts food inflation rates reaching approximately 5% in the first half of 2027.
