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EM STRATEGY | DAILY - 30 January 2018 Summary

Core Content

This document is a daily report from BNP Paribas' Emerging Markets Strategy team, providing insights and analysis on current market conditions in various regions including CEEMEA, Asia, and Latin America (Latam). It includes updates on central bank policies, economic surveys, and market trends, as well as contact details for strategists and legal disclaimers.

Main Views and Key Information

Global Market Outlook

• US Focus: Markets will closely watch Donald Trump's State of the Union address later tonight for potential policy signals.
• Russia: The Treasury released a list of "most senior foreign political figures and oligarchs in the Russian Federation", but there are no new indications that holdings of OFZ local bonds will be affected.
• Asian Markets: Overnight, equities, credit, and rates sold off, leading to a depreciation of most Asian currencies. CNY remained broadly unchanged.

CEEMEA Region

Turkey

• The Central Bank of the Republic of Turkey (CBRT) raised its end-2018 inflation forecast to 7.9% from 7%.
• The upward revision was due to an increase in the average 2018 Brent oil price assumption from $56/bbl to $66/bbl.
• The CBRT is expected to maintain a tight monetary stance over the next few months, even as inflation declines on base effects.

Hungary

• The National Bank of Hungary (MNB) is holding its first central bank meeting of the year.
• No rate hike is expected, and the focus will be on the IRS tender on 1 February.
• The MNB issued a lower amount of 5y and 1y IRS than expected in its first tender of 2018, leading to a spike in longer-dated bond and swap rates.
• The MNB is expected to issue fixed-rate IRS in the future. The authors recommend receiving 5y HUF swaps and being long EURHUF.
• The MNB may tolerate lower long-term rates to support improvement in Hungary's poor external position.

Asia Region

• India's pre-budget Economic Survey was generally optimistic, with the government expecting GDP growth to accelerate to 7–7.5% in FY19, up from 6.75% in FY18.
• There was an acknowledgment that the FY18 fiscal target may be missed, with a possible pause in fiscal consolidation compared to previous years.
• The report provides a link to India Economic Survey: Key takeaways for further details.

Latam Region

• Colombia's central bank (BanRep) cut policy rates by 25 basis points in its first monetary policy meeting of 2018.
• The decision was made with a 4-3 split, indicating that the rate cut was driven by domestic factors.
• Inflation is converging towards the target's centre, and the rate cuts have not shown a high co-movement with external variables.

Strategy Recommendations

• Hungary: Recommend receiving 5y HUF swaps and being long EURHUF.
• India: The economic survey suggests a positive outlook for FY19 GDP growth, though there are realistic concerns about FY18 fiscal targets.
• Colombia: The central bank is reacting to domestic data rather than external variables, suggesting a more independent monetary policy.

Contacts

Strategist Contacts

Production Team

Legal Notice

• This document is non-independent research and is a marketing communication under MiFID II.
• It does not constitute investment research and is not subject to independence requirements.
• No liability is accepted for any inaccuracies or omissions.
• Indicative prices are not actual transaction terms and may vary significantly.
• The document may include performance data based on back-testing, which is for illustrative purposes only.
• No guarantees are made regarding the accuracy or completeness of the information.
• No investment, financial, legal, or tax advice is provided.

US Disclosures

• Options: Complex instruments not suitable for all investors; only for sophisticated investors.
• ETFs: May involve currency, geopolitical, credit, and interest rate risks.
• Securities: Some may be unregistered and only available to QIBs or non-US persons.
• Distribution: Report may be distributed only to qualified institutional buyers or major institutional investors.

Regulatory Information

• The document is produced by BNP Paribas and is intended for intended recipients.
• It is not a prospectus and not for public offering in the US, Canada, or other jurisdictions.
• It is subject to regulatory supervision in various countries, including the ECB, ACPR, BaFin, and FSMA.
• Confidentiality: The document is provided strictly confidential and not to be distributed without prior consent.

Additional Resources

• Bloomberg: Fixed Income Research (BPFR), G10 Interest Rate Research (BPBS), Emerging Markets Research (BPFR), Market Economics (BPEC).
• Online: BNP Paribas Global Markets Website and Strategy Website.