20161209-法国巴黎银行-EM_Strategy_Plus_37页_4mb

EM Strategy Weekly Summary - 09 December 2016

Core Content

This document is a weekly report from BNP Paribas on Emerging Markets (EM) strategy and trade opportunities. It outlines the current market conditions, key themes, and specific recommendations for various regions, including Asia, CEEMEA, and Latin America (Latam). The report is authored by several strategists from different branches of BNP Paribas.

Main Themes and Views

1. Emerging Markets Performance

• Emerging markets had a somewhat better tone this week after a sharp sell-off in November.
• November is typically a weak month for EM assets, but the recent performance suggests a reversal of the trend.
• Higher oil prices and stabilized US rates have supported EM commodity exporters.

2. Asia

• USDCNH Forwards: The CNH implied rates have risen sharply due to increased capital outflow concerns and tighter CNH funding. The report recommends taking profit on the 1x12 paid recommendation.
• China Rates: The recent sell-off in CNY rates is seen as overdone. The PBoC is likely to maintain a 'balanced-tight' liquidity stance, and the report recommends a receiver trade in 5y NDIRS with a target of 3.2% and a stop at 3.7%.
• FX Reserves: Despite a slight decline in China's FX reserves, most other Asian countries reported better figures, suggesting that foreign investors are not rushing to repatriate funds.
• Korean Rates: The central bank is expected to keep rates unchanged, but the report highlights the risks of prolonged political instability.
• Brazilian DI Strategy: The report recommends a receiver trade in DI Jan25, anticipating further rate cuts by the central bank in 2017.

3. CEEMEA

• Turkey: The xccy curve is expected to steepen, but the report suggests that Korean swaps are not the best way to position for the global steepening trend.
• Poland and Romania: Poland's CPI data is expected to show a small negative inflation rate, while Romania will hold general elections, potentially affecting market sentiment.
• South Africa: The focus is on November inflation data, with expectations of a rise due to fuel prices. Retail sales growth is also expected to slow.

4. Latin America

• Monetary Policy Outlook: The report highlights upcoming monetary policy decisions in Chile, Mexico, and Colombia.
• Chile: The central bank is expected to keep policy on hold, with a risk of easing bias.
• Mexico: Banxico is expected to raise rates, but the report suggests that the front end of the IRS curve still has too much premium.
• Colombia: The central bank may leave rates unchanged, but the report notes the risk of new dovish signals in the IBR curve.

Key Recommendations

• Sell Latam CDS basket (ARS, BRL, COP, MXN): USD 10mn notional, entry level 271, target 231, stop 305.
• Receive 5y CNY NDIRS: 5K DVO1, entry level 3.50%, target 3.20%, stop 3.70%.
• Long USDBRL 4.00 Call: USD 50mn notional, entry level 0.67%, current 0.33%, P/L -0.34%.
• Buy steepener TRY XCCY 1v5 in 3m forwards: 5k USD, entry level -35bp, current -33bp, target 30bp.
• Buy 1m USDTWD NDF: USD 10mn notional, entry level 31.66, current 31.8, P/L 0.44%.
• Buy 12m SGDIDR NDF: SGD 20mn notional, entry level 10320, current 10000, P/L 3.10%.
• Buy 6m USDILS call butterfly 3.76/3.845/3.93: USD 10mn notional, entry level 0.50%, P/L 0.60%.

New Recommendations Table

Key Data and Insights

• FX Reserves: China's FX reserves declined more than expected, but other Asian countries showed resilience.
• CNH Funding: Implied rates in the CNH market have surged due to capital outflow concerns and tighter liquidity.
• China Bond Market: The bond market is facing multiple headwinds, but the recent sell-off is seen as overdone.
• Emerging Market Seasonality: EM FX and credit markets show seasonal trends, with November typically being weak for FX and credit.

What's Up Next Week

• Asia: India will release trade and current account figures, and China will report total social financing for November.
• CEEMEA: Russia and Turkey will release GDP and central bank policy meeting results, while Romania holds general elections.
• Latin America: Chile, Mexico, and Colombia will have monetary policy meetings, with implications for the region's interest rate curves.

Conclusion

The report suggests that while EM markets have seen a better tone this week, the recent sell-off may have been overdone in certain areas. Strategic trades are recommended across various EM markets, including FX, rates, and credit instruments, with a focus on taking profit on certain positions and anticipating further rate cuts in Brazil and potential curve steepening in Turkey. The overall outlook is cautiously optimistic, with a focus on balancing liquidity and managing risks.