20180604-法国巴黎银行-CEEMEA_Credit_Update__8页_541kb

CEEMEA Credit Update – 4 June 2018 Summary

Core Content Overview

This document provides a credit market update for the CEEMEA (Central and Eastern Europe, the Middle East, and Africa) region and emerging markets (EM) as of 4 June 2018. It includes analysis of currency trends, credit spreads, fund flows, and rating agency actions, with a focus on Turkey, Bahrain, and other key markets.

Key Market Developments

Global Market Trends

• US Dollar Weakness: The US dollar weakened following a strong jobs report and despite rising US yields. The EURUSD pair was supported by Italy's stabilization and higher-than-expected Eurozone inflation, which may influence the ECB's tapering plans.
• US Yield Curve: Flattening pressures on the yield curve could prompt a reaction from the Fed, especially if the curve reaches an "unacceptable" level.
• EM Fund Flows: EM fund flows were negative last week, with -$0.1bn in hard currency and -$0.3bn in local currency. EM issuance remained low, with only $2.6bn priced globally, resulting in a negative net supply of -$6.3bn and -$4bn in CEEMEA.

CEEMEA Region

• Turkey: The Central Bank of Turkey is expected to make a rate decision on Thursday. Recent negative developments include May inflation rising to 12.1% (above expectations), a Moody's rating review, and a weak PMI at 46.4. Fitch has placed Turkish banks on Negative Watch, with foreign-owned banks (Garanti, Yapi Kredi, QNB Finansbank) being the most vulnerable to downgrade.
• Ukraine: The Rada has not passed all amendments to the Anti-Corruption Court (ACC) bill. A last-minute agreement with international lenders is anticipated due to limited financing options. The analyst remains Long UKRAIN $32 into this event.
• CEE (Central Eastern Europe): PMIs remain elevated, indicating strong activity. The region is performing better than Turkey, Russia, and South Africa, with mixed results overall.

Bahrain

• S&P Rating: S&P affirmed Bahrain's B+ rating, which is the lowest among the three rating agencies. A potential downgrade is expected in August by Moody's, but a Stable outlook would be seen as positive.
• Bonds: The analyst tactically favors Bahraini bonds, particularly low cash price bonds in the belly (e.g., BHRAIN $24, 26, 28, 29), while cautioning about headline risks and new supply.

Key Indicators and Data

Credit Spreads

Sovereign Z Spread Changes

EM Global Issuance by Week

1W Outperformers

• Turkey: -7
• Israel: 1
• Kazakhstan: 4
• Saudi Arabia: 5
• Latvia: 6
• Georgia: 7
• Abu Dhabi: 7
• Qatar: 7

1W Underperformers

• Lebanon: 51
• Tunisia: 35
• Gabon: 34
• Bahrain: 34
• Zambia: 28
• Ukraine: 28
• Kenya: 27
• Rwanda: 26

Data Releases

• Mon: Turkey inflation for May, BRICS meeting on foreign affairs
• Tue: Russia inflation, South Africa Q1 GDP, Egypt PMI, World Bank Economic Outlook
• Wed: South Africa business confidence
• Thu: Turkey CB rate decision
• Fri: Rating review for Abu Dhabi (S&P), Kuwait (Moody's), Poland (Fitch)

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