20180124-法国巴黎银行-EM_TODAY_10页_360kb

EM STRATEGY DAILY SUMMARY - 24 January 2018

Core Content Overview

This document is a daily strategy report from BNP Paribas on Emerging Markets (EM) currencies and related financial instruments, focusing on key economic data releases, market sentiment, and investment implications.

Key Economic Indicators and Market Analysis

South Africa

• CPI Release: Today, South Africa will release the December CPI data.
  • Core Inflation: Expected to fall modestly to 4.3% y/y.
  • Headline Inflation: Likely to rise to 4.8% y/y.
• Policy Outlook: At the 18 January policy meeting, the South African Reserve Bank (SARB) revised down 2018 inflation forecasts by 0.5% for core and 0.2% for headline.
• Factors Influencing Policy: ZAR appreciation since the ANC's leadership election and a lower electricity tariff for Eskom were key considerations.
• FX Positioning: The strong positive momentum in ZAR, reflected in 1-month, 3-month, and 6-month realized returns, suggests a limited risk of a sustained drawdown.
• Conclusion: Despite the risk of temporary weakness, ZAR is expected to return to an appreciation path and limit future inflation.

Turkey

• Treasury Auctions: Strong demand in Tuesday's 10y fixed coupon bond auctions with a bid-cover ratio of 2.7, higher than the average of 2.1 over the past two years.
• Yield: The average yield in the auction was 12.19%, matching the secondary market yield.
• Market Sentiment: Robust global risk sentiment is evident despite rising TRY cross-currency swaps premiums (1y3m rates increased from 12.15% to 12.70%).
• Positioning: Accumulated profits in long TRY positions are only slightly positive on a 1-month horizon, and negative on a 3-month and 6-month basis.
• Conclusion: More premium will be needed to prevent a sustained sell-off in the TRY if the USD strengthens.

Bank Negara Malaysia (BNM)

• Policy Decision: BNM will announce its policy decision tomorrow morning.
• Inflation: Remains in the upper band of the target range, with risks skewed to the upside due to rising oil prices.
• Previous Statement: The central bank indicated it "may consider reviewing the current degree of monetary accommodation".
• Conclusion: A rate hike is expected.

Latin America (Latam)

• Brazil: Attention is on the Appeals court decision regarding Lula's corruption conviction. A 3:0 unanimous guilty verdict would reduce the likelihood of Lula running in the 2018 presidential election, while a split vote would maintain uncertainty.
• Local Positioning: The technical position monitor indicates locals have increased long BRL positions and remain positioned in DI receivers.
• Mexico: Bi-weekly inflation will be in focus. Base effects should push the year-on-year rate downward, but the bi-weekly number is expected to be on the high side, benefiting real rate bonds (UDIBonos).
• Market Reaction: Both MXN and Mexican rates reacted to positive NAFTA headlines, but no concrete progress has been made, leading to continued volatility.
• Argentina: The central bank (BCRA) cut the 7-day repo rate by 75bp to 27.25%. The move was justified by the contractionary nature of real rates.
• FX Impact: Dovish remarks from the central bank governor have already impacted the performance of the Argentine Peso.
• Conclusion: Recommendation is to avoid structural long ARS positions.

Additional Insights

Asia FX

• Market Sentiment: Asia FX is stronger across the board, reflecting positive risk sentiment.
• USD-EUR Differentials: A move lower in the 5y5y USD-EUR rates differential has contributed to weaker USD vs. EUR.

Call/Put Ratio for Asian Currencies

• Indicator: A simple call/put ratio based on USD call vs. put premia is used to gauge market sentiment.
• Observation: USD puts are becoming increasingly popular, consistent with risk-reversal skews.
• Conclusion: The ratio does not lead the spot market but may indicate price overshoot if it diverges from the underlying trend.

Colombia

• Risk Drivers: Recent updates to the Principal Components Analysis show USD systemic risk, US rates, and terms of trade are the most important drivers of the Colombian peso and 5y CDS.
• FX Correlation: FX moves are now more correlated with terms of trade, a welcome shift towards fundamentals.
• Positioning: BNPP remains short USDCOP, as the rally in oil has not yet exhausted its potential.

Contacts

Legal Disclaimer

• This document is non-independent research and is a marketing communication.
• It does not constitute investment research under MiFID II.
• It is intended for Relevant Persons as defined by financial regulations.
• No guarantee of accuracy, completeness, or fitness for a particular purpose is made.
• No liability is accepted for any direct or consequential loss from reliance on the document.
• No advice is given on investment, legal, tax, or other matters.
• Performance data is based on simulations and not indicative of future results.
• Confidentiality: The document is provided on a strictly confidential basis and may not be distributed without prior written consent.

Disclaimer for U.S. Clients

• Options: Complex instruments not suitable for every investor, with high risk.
• ETFs: Carry risks including tracking error, currency, and geopolitical risks.
• Securities: Some may not be registered under U.S. securities laws and are considered "restricted securities".
• Distribution: Report is distributed only to qualified institutional buyers or non-U.S. persons.

Online Resources

• BNP Paribas Global Markets Website: www.globalmarkets.bnpparibas.com
• Bloomberg:
  • Fixed Income Research: BPFR
  • Emerging Markets Research: BPFR
  • G10 Interest Rate Research: BPBS
  • Market Economics: BPEC

Additional Publications

• Argentina: Fiscal outlook
• Chile: An experienced cabinet

Final Notes

• The information is for informational purposes only and should not be relied upon as authoritative.
• The document may be subject to change or discontinuation.
• Transactions are subject to market conditions and should be evaluated independently.