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EM Strategy Summary - 26 April 2018

Core Content

This document provides an overview of the Emerging Markets (EM) strategy for 26 April 2018, focusing on key developments in Turkey, South Korea, and Latin America (Latam), along with updates to the EM inflation model and relevant legal disclaimers.

Key Developments

Turkey

• The Central Bank of the Republic of Turkey (CBRT) increased the overnight late liquidity window lending rate by 75 basis points (bps), raising it to 13.50%, which was above consensus expectations and aligned with the upside risk scenario.
• The Monetary Policy Committee (MPC) indicated a willingness to tighten further if necessary.
• Despite the significant rate hike, the currency market did not show strong appreciation, suggesting systematic risks remain.
• The path of inflation remains uncertain, which could impact investor sentiment in the coming months.

South Korea

• GDP growth for Q1 2018 reached 2.8% y/y, in line with expectations.
• The risk of a rate hike has eased following a revised down CPI outlook twice since the beginning of the year.

Latin America (Latam)

• The markets are expected to analyze the Monetary Policy Committee (Banxico) in Mexico, which left policy rates unchanged.
• The focus will be on the factors that may lead to a policy rate cut in H2 2018.
• A recommendation is made to receive 1y1y TIIE due to the high premium in the short-end of the IRS curve.

EM Inflation Model Update

• The global EM inflation model has been updated.
• Chinese PPI is incipiently retreating, which suggests EM inflation may remain stable, assuming all other factors are equal.
• The full analysis is available in the document: EM Strategy: Is there a common global factor for EM inflation?

Contacts

Production and Editorial

• Production: Barbara Consuelo, London, BNP Paribas London branch, +44 20 7595 8486
• Editorial Team:
  • Amanda Grantham-Hill, London, BNP Paribas London branch, +44 20 7595 4107
  • Anna McLaughlin, London, BNP Paribas London branch, +44 20 7595 3754
  • Varghese Joseph, New York, BNP Paribas Securities Corp (New York), +1 212 841 3698

Legal and Regulatory Information

• The document is a marketing communication and non-independent research under UK FCA rules.
• It may contain Research under MiFID II unbundling rules, intended for Professional Clients and Eligible Counterparties.
• No investment advice is provided, and the document does not constitute a prospectus or public offering.
• Performance data may be based on back-testing and is illustrative only.
• Conflicts of interest may exist due to BNPP's involvement in investment banking, underwriting, and advisory services.

Disclaimer

• BNPP does not guarantee the accuracy or completeness of the information.
• Indicative prices are based on internal models and may vary from other sources.
• No liability is accepted for any losses arising from reliance on the document.
• Options, ETFs, and other securities may involve high risk and are not suitable for all investors.
• Restricted securities may be discussed, and are only available to Qualified Institutional Buyers (QIBs) or non-US persons.

Additional Information

• Online Resources:
  • BNP Paribas Global Markets Website: www.globalmarkets.bnpparibas.com
  • BNP Paribas Strategy Website
• Bloomberg References:
  • Fixed Income Research (BPFR)
  • G10 Interest Rate Research (BPBS)
  • Emerging Markets Research (BPFR)
  • Market Economics (BPEC)

Distribution

• The report is distributed to U.S. persons by BNPP Securities Corp or non-U.S. affiliates to major U.S. institutional investors.
• It is subject to limited regulation in various jurisdictions, including the UK, France, Germany, Belgium, Ireland, Italy, Netherlands, and Portugal.

Final Notes

• The document is for information purposes only and may be discontinued or changed.
• Transactions may involve high risk and volatility.
• Confidentiality is required, and the document should not be copied or distributed without prior written consent.