20181227-法国巴黎银行-Latam_FX_Positioning__Option_market_points_to_an_appreciation_of_the_MXN_and_the_BRL_12页_1mb

Latam FX Positioning Summary: December 27, 2018

Core Content

This report provides an analysis of FX positioning in Latin America, focusing on the Brazilian real (BRL), Mexican peso (MXN), Chilean peso (CLP), Colombian peso (COP), and Peruvian sol (PEN). It uses data from the Depository Trust & Clearing Corp. (DTCC) and NDF (Non-Deliverable Forward) positioning to assess market sentiment and potential movements in currency values.

Key Market Insights

Brazil (BRL)

• Positioning Score: Reached overbought levels by the end of November but has since stabilized at a neutral level, currently around the 43rd percentile.
• Futures Market (BMF): The data source for BRL positioning was updated to reflect BMF futures, which are more active.
• Agent Breakdown (Figures 4 and 5):
  • Central Bank: Net short position of USD46.7bn (record high).
  • Local Institutional Investors: Hold USD8.7bn in SCS (FX swap with periodic adjustment).
  • Non-resident Investors: Long USD position of USD36.63bn.
• Options Market: The volume-weighted strike gap for put options has widened again, indicating a potential appreciation of the BRL. This suggests a higher likelihood of USDBRL weakening in the coming weeks.

Mexico (MXN)

• Positioning Score: Similar to BRL, the put strike gap has spiked, indicating a preference for MXN appreciation.
• Options Market: The strike gap has reached a record high, pointing to a significant shift in market sentiment. This aligns with the expectation of a stronger MXN.

Chile (CLP)

• Positioning Score: Shifted from short USDCLP to a slightly long USDCLP position, at the 19.6th percentile.
• Formal Exchange Market: The net USDCLP forward position versus foreign entities has reached a record negative value (-USD22.6bn), indicating a strong international short position.

Colombia (COP)

• Positioning Score: Moved from overbought USD to oversold USD by the end of November, now at the 20th percentile.
• Recent Shift: There has been a sharp shift in positioning over the past week, suggesting a potential change in market direction.

Peru (PEN)

• Positioning Score: Moved from the 90th overbought percentile to the oversold camp, currently at the 18.4th percentile.
• Strategy Trigger: The BEER model triggered a long PEN position based on this shift.

Argentina (ARS)

• NDF Positioning: Fell to a record low after the introduction of a new FX regime in October. It has since recovered slightly but remains in the oversold camp at the 8th percentile.
• FX Regime Bands: On 4 December, USDARS was only 0.9% away from the lower band defined by BCRA, prompting a long USDARS position.

Main Points

• BRL and MXN: Both currencies have shown increased put strike gaps, indicating a strong appreciation bias. BRL's positioning is now neutral, while MXN's strike gap is at record highs.
• ARS: NDF positioning is at a record low, but remains oversold. The proximity to the lower FX band suggests potential for rebound.
• CLP and COP: Both currencies have moved from overbought to oversold, but are now returning to normal levels. CLP's net forward position is at a record negative, while COP's positioning has shifted sharply in recent weeks.
• Options as Indicator: The volume-weighted strike gap for put options is a leading indicator of FX movements. It has historically preceded appreciation in BRL and MXN.
• Market Participants: The positioning data highlights the role of various agents including central banks, institutional investors, and non-resident investors in shaping FX market dynamics.

Key Information

• The report is based on data from Bloomberg LLP and BNP Paribas, with updates to the positioning monitor following recent FX market movements.
• The analysis includes both aggregate positioning and breakdowns by market participants.
• The report serves as a marketing communication and not investment research, with disclaimers regarding conflicts of interest and legal liabilities.
• It includes performance data based on back-testing, which is for illustrative purposes only and not indicative of future results.
• The report contains important disclosures regarding options, ETFs, and securities not registered under U.S. law, emphasizing the risks involved.

Conclusion

The report outlines the current FX positioning in Latin America, with a focus on the BRL and MXN showing signs of appreciation, while ARS and CLP remain in oversold conditions. The use of options strike gaps and NDF positioning is highlighted as a key tool for assessing market sentiment and potential movements. The analysis is intended to inform market participants but comes with important legal and risk disclosures.