EM STRATEGY | DAILY Summary
Core Content
This document provides an overview of emerging market (EM) strategy and market outlook for the week of 29 January 2018, focusing on key events and data releases in various regions. It highlights the impact of global macroeconomic developments on EM currencies and assets, with particular emphasis on central bank decisions, economic data, and political events.
Key Events and Market Outlook
United States
- State of the Union Address (29 January): A major focus for the week, expected to influence market sentiment and policy direction.
- Fed Meeting (30 January): Anticipated to be closely watched for potential rate decisions and policy signals.
- US Payroll Figures (31 January): Expected to provide insight into labor market strength and inflationary pressures.
Asia
- India's Union Budget (1 February): A key event with potential implications for bond markets and currency trends.
- Economic Data Releases (31 January):
- South Korea: Industrial production and leading indicators
- Thailand: Trade data
- Taiwan: GDP data
- FX Insights: The Asia Strategy team published a note on deriving tradable insights from DTCC data on OTC market transactions, specifically addressing how option expiries influence spot FX.
CEEMEA
- US Treasury Sanctions: Expected to announce a list of Russian oligarchs for future sanctions, based on a law passed in 2017.
- Hungary:
- Central Bank (MNB) meeting on 30 January: No rate hike expected.
- IRS tender on 1 February: Lower-than-expected 5-year and 1-year IRS led to higher bond and swap rates. The MNB is likely to issue IRS at a fixed rate, with a recommendation to receive 5y HUF swaps and be long EURHUF.
- Czech Republic:
- Central Bank (CNB) meeting on 1 February: Expected to hike rates by 25bps to 75bps, with a consensus of 5 MPC members.
- The CNB may adjust its tightening pace based on the strong currency and high wage growth.
- Presidential election results were released over the weekend, with incumbent Milos Zeman likely to continue in office.
Latin America (Latam)
- Colombia:
- First monetary policy meeting of the year on 29 January: Expected to remain on hold, with a terminal rate target of 4%.
- The central bank may wait to assess economic outlook before resuming rate cuts.
- Investment Strategy: Positioning in an IBR 9m versus 18m flattener.
South Africa
- Moody's Rating Cut: Eskom's rating was cut to B1 from Ba3 due to liquidity concerns and corporate governance issues.
- Rating Review: Eskom is under review for downgrade, with FY17 results to be released on 11 February.
Key Economic Indicators
- Inflation Reports:
- Turkey's CBRT is expected to raise its end-year inflation forecast to 8.5% y/y from 7.0%.
- The upward revision is attributed to a weakening TRY and higher Brent oil prices.
- Monetary Policy Outlook: The CBRT is likely to keep the late liquidity window rate unchanged at 12.75% until underlying inflation trends improve.
Ratings Outlook
- S&P Review: Albania, Kuwait, and Mozambique.
- Fitch Review: Azerbaijan, Macedonia, and Slovakia.
- Outlook:
- Negative: Mozambique, Azerbaijan, Macedonia
- Positive: Slovakia
Strategy Recommendations
- Hungary: Recommend receiving 5y HUF swaps and being long EURHUF.
- Czech Republic: Expect a rate hike of 25bps to 75bps, with potential for further tightening if needed.
- Colombia: Remain positioned in an IBR 9m versus 18m flattener.
Contacts
| Strategist |
Job Title |
Legal Entity |
Phone |
| Wike Groenenberg |
Head of Emerging Markets Research |
BNP Paribas London Branch |
+44 20 7595 8746 |
| Marcelo Carvalho |
Head of Emerging Markets Research |
Banco BNP Paribas Brasil S.A. (Sao Paulo) |
+55 11 3841 3418 |
| Strategist |
Job Title |
Legal Entity |
Phone |
| Piotr Chwieczak |
FX & IR CEEMEA Strategist |
BNP Paribas London Branch |
+44 20 7595 8715 |
| Sai Ulluri |
FX & IR CEEMEA Strategist |
BNP Paribas London Branch |
+44 20 7595 1872 |
| Erkin Isik, CFA |
FX & IR CEEMEA Strategist |
Turk Ekonomi Bank A.S. (Istanbul) |
+90 216 635 2987 |
| Strategist |
Job Title |
Legal Entity |
Phone |
| Mirza Baig |
Head of FX & IR Asia Strategy |
BNP Paribas Singapore Branch |
+65 6210 3262 |
| Dawn Kwa |
FX & IR Asia Strategy |
BNP Paribas Singapore Branch |
+65 6210 3263 |
| Altaz Daga |
Graduate AU/NZ IR Strategist |
BNP Paribas Singapore Branch |
+65 6210 4994 |
| Kun Shan Tianhe Ji |
China Strategist |
BNP Paribas China Limited (Shanghai) |
+86 21 2896 2773 |
| Kun Shan Tianhe Ji |
China Strategist |
BNP Paribas China Limited (Beijing) |
+86 10 6535 0836 |
| Strategist |
Job Title |
Legal Entity |
Phone |
| Gabriel Gersztein |
Head FX & IR Latam Strategy |
Banco BNP Paribas Brasil S.A. (Sao Paulo) |
+55 11 3841 3421 |
| Samuel Castro |
FX & IR Latam Strategist |
Banco BNP Paribas Brasil S.A. (Sao Paulo) |
+55 11 3841 3492 |
| Gustavo Mendonca |
FX & IR Latam Strategist |
Banco BNP Paribas Brasil S.A. (Sao Paulo) |
+55 11 3841 3445 |
Legal and Regulatory Information
- This document is non-independent research and is a marketing communication under MiFID II.
- It is intended for Professional Clients and Eligible Counterparties.
- It is not investment research and should not be relied upon as such.
- BNPP may have conflicts of interest due to its involvement in trading and investment banking activities.
- The document may contain hypothetical or back-tested performance data, which is for illustrative purposes only.
- Options and ETFs are complex instruments with significant risks, and the document may include disclosures about such products.
- Certain securities may be unregistered under US securities laws and are restricted to Qualified Institutional Buyers (QIBs) or non-US persons.
Disclaimer
- This document is for information purposes only.
- It does not constitute an offer to sell or issue securities, nor a solicitation of an offer to buy.
- No guarantees are made regarding the accuracy or completeness of the information.
- The information may be subject to change without notice.
- BNPP disclaims any liability for losses arising from reliance on the document.
Online Resources
Production Team
| Name |
Location |
Legal Entity |
Phone |
| Barbara Consuelo |
London |
BNP Paribas London branch |
+44 20 7595 8486 |
| 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 |
+1 212 841 3698 |
United States Disclosures
- Options: Complex instruments with high risk; only suitable for sophisticated investors.
- ETFs: May involve tracking error, currency, and geopolitical risks. BNPP may have conflicts of interest.
- Unregistered Securities: Certain securities may be restricted and only available to QIBs or non-US persons.
- Distribution: This report may be distributed to U.S. persons by BNPPSC or non-U.S. affiliates under specific conditions.
UK and France Disclosures
- UK: This document is communicated by BNP Paribas London Branch, authorized by the ECB, ACPR, and FCA.
- France: Produced and/or distributed by BNPP SA and/or BNPP Arbitrage, authorized by ECB and ACPR.
Summary of Key Takeaways
- US Focus: State of the Union address, Fed meeting, and payroll data are key drivers.
- Asia Focus: India's budget, economic data releases, and FX positioning from OTC transactions.
- CEEMEA Focus: US sanctions on Russian oligarchs and Hungary's inflation report.
- Latam Focus: Colombia's rate policy and Czech Republic's rate hike expectations.
- South Africa Focus: Eskom's rating downgrade and economic data.
- Ratings Outlook: Mixed outlook for several countries.
- Strategy Recommendations: Positioning in HUF swaps and EURHUF, and IBR flattener in Colombia.
This summary encapsulates the core content, main events, and strategic insights from the document, while adhering to legal and regulatory disclaimers.
