20171221-法国巴黎银行-EM_TODAY_8页_241kb

EM STRATEGY DAILY SUMMARY - 21 December 2017

Core Content

This document is a daily emerging markets (EM) strategy report by BNP Paribas, covering key market insights and recommendations across several regions including CEEMEA, Latam, and Asia. It outlines investment positions, market expectations, and event-driven analysis.

Key Market Insights

South Africa (CEEMEA)

• FX Recommendation: The report recommends buying a 1-month USDZAR call spread with strikes evenly weighted at 13.00/13.50, at a cost of around 0.6% of notional value.
• Reasoning: The ZAR has experienced a sharp rally due to the election of Cyril Ramaphosa as the new president of the ANC, but the authors believe this rally is excessive.
• Mean Reversion: FX returns show that 1-week and 1-month forward realised returns are at levels historically followed by strong mean reversion. The likelihood of mean reversion has increased as the market has priced out rate hikes.
• Risk Reversals: Current risk reversals suggest it is cheap to buy options positioning for USDZAR topside.

Czech Republic (CEEMEA)

• Policy Meeting: The Czech National Bank (CNB) will hold its policy meeting.
• Market Consensus: Rates are expected to remain on hold.
• EURCZK Outlook: EURCZK is likely to stay above 25.50 until the year-end.

Latam (Brazil & Mexico)

• Brazil:

  • Inflation Focus: Mid-month inflation data will be closely watched.
  • Monetary Policy: The BCB highlighted that inflation dynamics and social security reform approval will determine the extension of the easing cycle into 2018.
  • Social Security Reform: Delayed until next year, so CPI surprises are more important.
  • DI Curve: The shorter tenor of the DI curve is pricing in 18bp of cuts for the next meeting (February).
  • Curve Steepness: The authors still believe the curve is too steep, with yields in the belly of the curve having room to fall in 2018.

• Mexico:

  • Inflation Release: Bi-weekly inflation data will be in focus.
  • Rate Hike Reason: A rise in inflation was a key reason for the recent 25bp rate hike by Banxico.
  • Market Expectations: The central bank has a cautious stance, but the short end of the curve is pricing in more rate hikes than expected.
  • TIE Receivers: The report still sees value in holding TIE receivers in the 18-month area.

Asia

• Indonesia Upgrade: Fitch Ratings upgraded Indonesia's sovereign credit rating from BBB- to BBB, leading to a strong rally in bonds and equities, and a 0.14% gain in the rupiah.
• Trade Data: Preliminary trade numbers from Thailand, Taiwan, and South Korea show a robust growth picture.
• 2018 Outlook: The authors believe 2018 will be a strong year for small and open Asian economies such as South Korea, Taiwan, Thailand, Singapore, and Malaysia.

Contacts

Legal Notice

• Non-Independent Research: This document is non-independent research and may be subject to conflicts of interest.
• Marketing Communication: It is a marketing communication and not investment research.
• Confidentiality: The document is provided on a strictly confidential basis and may not be reproduced or distributed without prior written consent.
• Disclaimer: The information and opinions are based on public sources and may be subject to change. BNP Paribas does not accept liability for inaccuracies or omissions.
• Indicative Pricing: Any indicative prices are based on internal models and may vary from other sources.
• Risk Disclosure: The document highlights the risks associated with options, ETFs, and convertible securities, and advises caution due to potential conflicts of interest.
• Jurisdictional Restrictions: The document is not intended for distribution to certain jurisdictions or to non-qualified investors.

US Disclosures

• Options Risk: Options are complex and high-risk instruments, suitable only for sophisticated investors.
• ETF Risk: ETFs involve tracking error, currency, and geopolitical risks, as well as credit and interest rate risk for fixed income ETFs.
• Restricted Securities: Certain securities may not be registered under US law and are considered restricted.

EU & Other Jurisdictions

• The document is distributed by BNP Paribas branches in various European countries, including the UK, France, Germany, Belgium, Ireland, Italy, Netherlands, and Portugal.
• It is subject to different regulatory frameworks in each jurisdiction and is intended for professional clients and eligible counterparties.

Summary of Recommendations

• South Africa: Buy USDZAR call spread (13.00/13.50) for a potential correction.
• Czech Republic: EURCZK is expected to remain above 25.50 until year-end.
• Latam: Hold TIE receivers in the 18-month area for Mexico and monitor Brazil's inflation data.
• Asia: Positive outlook on small and open economies, with Indonesia's upgrade driving market sentiment.