德银-新兴市场-投资策略-新兴市场宏观与策略聚焦-20180223-23页_905kb

Deutsche Bank Markets Research Summary - February 23, 2018

Core Content

This report from Deutsche Bank Markets Research provides an analysis of Emerging Markets (EM) macroeconomic and strategy outlook, focusing on FX, Rates, and Credit. It outlines key economic releases, trade recommendations, and market outlook for various regions including Asia, EMEA, and LatAm.

Main Points

Economics Focus

• Asia: The Bank of Korea (BoK) is expected to keep its policy rate unchanged at 1.5% during its February 27 meeting. The BoK's press conference is likely to focus on growth-related issues, including the KORUS FTA and housing prices. Hong Kong and India are expected to show stronger GDP growth in Q4 2017, with India's growth likely to accelerate from 6.3% to 7.0%. High frequency data in EM Asia are affected by the Lunar New Year holiday.
• EMEA: The National Bank of Hungary (NBH) and the Bank of Lithuania (Bol) are expected to keep their monetary policies unchanged in their respective MPC meetings. The final Q4 GDP prints for the Czech Republic and Poland are unlikely to show revisions from preliminary estimates. The Bank of Israel (ILS) has weakened by 6% since mid-January due to discretionary intervention.
• LatAm: Attention will be on Chile's manufacturing activity data and the BCCh's survey of expectations. Mexico's retail sales data will be released next week, and it is expected to show a deceleration in growth, consistent with weaker private consumption.

Strategy Focus

• EM markets remain relatively resilient despite rising US yields and equity volatility.
• FX: ZAR is recommended as a long-term buy due to macro disinflation, high real rates, and current account adjustment. USDTRY is also seen as a potential catch-up appreciation. BRL is recommended due to a favorable macro environment and lack of negative aftermath from failed social security reforms. The report suggests buying BRL/COP.
• Rates: Disinflation is expected to continue in Brazil, Colombia, and Peru, with a focus on the front end. Mexico is seen as an unanchored market, and the belly is favored for hedges. A steepener bias is maintained in the Czech Republic, Hungary, and Turkey, while a short-end bias is recommended in Israel, Poland, and Russia. South African rates are viewed as bullish.
• Credit: Credit spreads are sensitive to US Treasury yields, but the retreat in VIX and term premium is supportive. A neutral stance is maintained, with long positions on South African 27s and a sell position on Russian 10Y CDS in anticipation of a potential S&P upgrade. Argentina is expected to recover, with long duration exposure at the long end of the curve (Pars and 48s).

Key Economic Releases

Top Trade Recommendations

FX Trades

• Hungary: Sell EUR/HUF (Maintain, FXOutright, 15Feb18, Target: 313.09, Stop: 315.50)
• Poland: Sell EUR/PLN (Maintain, FXOutright, 15Feb18, Target: 4.10, Stop: 4.20)
• South Africa: Buy 9m 11.15 USDZAR digital put (Maintain, Premium, 08Nov18, Target: 25.00, Stop: 180.00)
• Turkey: Buy 3m 3.65 USDTRY digital put (Maintain, Premium, 10Apr18, Target: 15.00, Stop: 190.00)
• Brazil/Colombia: Buy BRL/COP (Maintain, FXOutright, Target: 905.00, Stop: 857.00)
• Brazil/Mexico: Buy 5m USD/MXN call @19.2 with WDKO @17.5/19.2 FOR 1.2% (Maintain, Premium, Target: -90.00, Stop: -60.00)

Rates Trades

• Czech Republic: 2Y2Y-5Y5Y IRS steeperer (Maintain, DV01 Neutral, 22Feb18, Target: 60.00, Stop: 10.00)
• Hungary: 2Y2Y - 10Y IRS steeperer (Maintain, DV01 Neutral, 22Feb18, Target: 125.00, Stop: 50.00)
• Israel: 5Y5Y IRS vs USD (Maintain, Outright, 22Feb18, Target: 75.00, Stop: -15.00)
• Poland: 2Y2Y IRS receiver (Maintain, Outright, 15Feb18, Target: 2.75, Stop: 3.20)
• Russia: Receive 1Y IRS (vs Mosprime) (Maintain, Outright, 22Feb18, Target: 6.50, Stop: 7.25)
• Brazil: Jan21 | Jan23 (Maintain, FRA, Target: 8.50, Stop: 11.50)

Credit Trades

• Qatar: Long 22s (Maintain, Outright, Target: 70.00, Stop: 95.00)
• Russia: Sell 10Y CDS (Maintain, DV01-neutral, Target: 150.00, Stop: 190.00)
• South Africa: Long 27s (New, Outright, Target: 180.00, Stop: 215.00)
• Argentina: 23s vs. 5Y CDS (Maintain, DV01-neutral, Target: 25.00, Stop: -20.00)
• Mexico: Mexico 27s vs. 47s (Maintain, DV01-neutral, Target: -90.00, Stop: -60.00)

Summary of Strategy Views

• EM continues to be relatively resilient despite risks from rising US yields and equity volatility.
• The report suggests a constructive view on EM, with specific recommendations on FX, Rates, and Credit.
• The EM FX Scorecard ranks BRL, TRY, and MXN as top longs, while ILS, THB, and KRW are among the best shorts.
• The forward curves in Brazil are seen as too flat, with a bias towards the front end due to the expectation of tightening and the impact of fiscal backdrop and US term premium.