20180925-法国巴黎银行-EM_STRATEGY_DESKNOTE_CEEMEA_FX_Strategy__Tactically_long_TRY_9页_405kb

EM Strategy Desknote Summary

Core Content

This document is a desknote from Banco BNP Paribas Brasil S.A. outlining the current FX strategy for Emerging Markets (EM), with a specific focus on the Turkish Lira (TRY). The strategy is tactically long TRY, suggesting a bullish outlook on the currency despite recent EM sell-offs.

Key Findings

• TRY Valuation: The document states that the Turkish Lira is currently trading ~9% above its short-term fair value against the US Dollar (USDTRY). This is based on the BEER (Bilateral Exchange Rate Regime) model, which incorporates conventional macroeconomic and financial variables.
• Fair Value Estimate: The short-term fair value for USDTRY is estimated at around 5.60 (spot).
• Market Trend: The analysis suggests that the recent EM sell-off may have reached its peak, indicating a potential reversal in the trend.
• Trade Idea: The recommended trade is to short USDTRY via a 3-month forward contract. The entry price is 6.569 (11:28 AM NYT). The initial target is a 7.5% appreciation including carry, with a stop loss at 6.85 (forward).
• Carry Component: The carry from the TRY is 2% per month, which is a key factor in the trade idea.

Main Views

• EM Sell-off Peak: The strategists believe that the recent sell-off in Emerging Markets has likely peaked, suggesting that the market may be entering a recovery phase.
• TRY Undervaluation: Despite the recent sell-off, the Turkish Lira is considered undervalued relative to its theoretical fair value, which is supported by the BEER model.
• Positive Outlook for TRY: The conditional projections indicate an appreciation trend in the coming quarters, reinforcing the case for a long position in TRY.
• Risk Consideration: The document acknowledges the potential risks associated with the trade, including market volatility, counterparty risk, and liquidity issues.

Key Information

• Strategy Authors: The strategy is authored by Gabriel Gersztein (Global Head of Emerging Markets Strategy), Samuel Castro, and Luca Maia (FX & IR Latam Strategy).
• Contact Information:
  • Gabriel Gersztein: +551138413421
  • Samuel Castro: +55 11 3841 3492
  • Luca Maia: +551138413447
• Legal Disclaimer:
  • The document is non-independent research and is intended as a marketing communication.
  • It is not investment research and is not subject to the independence requirements of MiFID II.
  • The information is based on public sources and may not be independently verified.
  • BNPP may have conflicts of interest due to its role in sales and trading.
  • The document does not constitute a prospectus or an offer to sell.
  • It is not a solicitation of an offer to buy any financial instruments.
  • No guarantees are made regarding the accuracy or completeness of the information.
  • Indicative prices are provided for informational purposes and should not be relied upon as actual transaction terms.
  • Options and ETFs mentioned in the document are subject to specific disclosures and may not be suitable for all investors.

Additional Notes

• Performance Data: The document may include back-tested performance data, which is for illustrative purposes only.
• Confidentiality: The information is provided confidentially and may not be copied, reproduced, or distributed without prior written consent.
• Jurisdictional Restrictions:
  • The document is not suitable for all jurisdictions or investors.
  • It is intended for Professional Clients and Eligible Counterparties as defined by MiFID II.
  • It is also not suitable for retail investors in certain regions, including the United States, UK, Canada, and Spain.
• Regulatory Information:
  • The document is authorized and supervised by various regulatory bodies across different jurisdictions.
  • In the US, it is distributed only by BNPP Securities Corp. to institutional investors.
  • In the UK, it is communicated by BNPP London Branch.
  • In France, it is produced and/or distributed by BNPP SA and BNPP Arbitrage.
  • In Germany, it is distributed by BNPP S.A. Niederlassung Deutschland.
  • In Belgium, it is distributed by BNPP Fortis SA/NV.
  • In Ireland, it is distributed by BNPP S.A., Dublin Branch.
  • In Italy, it is distributed by BNPP Succursale Italia.
  • In the Netherlands, it is distributed by BNPP Fortis SA/NV, Netherlands Branch.
  • In Portugal, it is distributed by BNPP - Sucursal em Portugal.
  • In Spain, it is distributed by BNPP S.A., S.E.
  • In Switzerland, it is intended for Qualified Investors as defined by Swiss law.

Conclusion

The desknote provides a tactically bullish outlook on the Turkish Lira, suggesting that it is currently undervalued and may appreciate in the short term. The strategy involves shorting USDTRY via a 3-month forward with a specific entry price, target, and stop loss. The analysis is supported by the BEER model and charts, but the document includes significant legal and risk disclosures, emphasizing that the information is not investment advice and is subject to regulatory restrictions.