20180611-法国巴黎银行-CEEMEA_Credit_Update_8页_262kb

CEEMEA Credit Update – 11 June 2018 Summary

Core Content

This document provides an overview of the credit market developments in the Emerging Markets (EM) and CEEMEA (Central and Eastern Europe, the Middle East, and Africa) regions as of 11 June 2018. It highlights key events, economic data, central bank decisions, and investment recommendations, with a focus on sovereign and corporate credit instruments.

Key Central Bank Decisions

• Fed: Expected to raise interest rates by 25 basis points (bps). The BNP Paribas Economics team forecasts higher 2018 GDP and lower unemployment rates, with the median “dots” unchanged from March. The Fed's shift to a more neutral policy stance is a key factor to watch.
• ECB: Market expectations are that the ECB will begin preparing to end its asset purchases later in the year. This is in response to recent indications from the ECB's Chief Economist.
• Russia: The central bank's decision is expected to be split between a 25bp rate cut and no change, reflecting uncertainty in the region.
• Turkey: The central bank has recently tightened policy by 125bps, bringing total rate hikes for the year to 500bps. This is aimed at stabilizing the lira, although macroeconomic policy uncertainty remains.

Economic Data Highlights

• CEEMEA: The weak Q118 GDP print in South Africa and the outcome of the Normandy talks on Ukraine will be closely monitored.
• Turkey: Q1 GDP surprised on the upside at 7.4% year-on-year (yoy), while the April current account deficit continued to widen. PMIs have been below 50 since April, indicating economic contraction.
• Russia: The document notes the potential for a 25mn secured loan from O1 Group, which could negatively impact O1 Properties' bondholders.

Investment Recommendations

• Sovereigns:
  • Sell OPRORU $8.25% 2021 bond at $66 due to concerns about O1 Properties' financial stability and the potential implications of the secured loan.
  • Buy POGLN $8.125% 2022 bond at $86.75, as the company is expected to benefit from the completion of its key POX project in Q418, which will significantly improve its economics by 2019.

Market Performance and Fund Flows

• EM Credit: Mixed performance last week, with hard currency fund outflows reaching -$1.6bn, the second worst weekly outflow of the year.
• Fund Flows: Fund flow uncertainties and a backlog of supply from May are expected to continue affecting the market in the coming weeks.
• FX Strategy: BNP Paribas FX strategists have repositioned for a weaker U.S. dollar in H2, which is seen as supportive for EMFX and Credit.

EM Credit Spread and Z-Spread Changes

• EM Cash and CDS Spread Summary:
  • J.P. Morgan EMBI Global Spread: 368 (up 2bps in 1 week, up 6bps in 1 month).
  • BBG EM $ Aggregate (10Y; BBB/BBB-): 282 (down 1bp in 1 week, up 9bps in 1 month).
  • BBG EM $ Aggregate HY (9Y; BB-/B+): 469 (down 4bps in 1 week, up 20bps in 1 month).
  • BBG EM $ Sovs (12Y; BBB-/BB+): 328 (down 2bps in 1 week, up 5bps in 1 month).
  • BBG EM $ Corps (6.5Y; BBB-/BB+): 304 (down 2bps in 1 week, up 16bps in 1 month).
• Sovereigns Z Spread Change:
  • CEEMEA: -3bps in 1 week, 0bps in 1 month.
  • CIS (ex-Russia): -2bps in 1 week, -30bps in 1 month.
  • GCC: 3bps in 1 week, 8bps in 1 month.
  • Russia: 4bps in 1 week, -12bps in 1 month.
  • South Africa: 11bps in 1 week, 9bps in 1 month.
  • Turkey: -7bps in 1 week, 28bps in 1 month.

Weekly Fund Flows

• 1W outperformers include Lebanon (-19bps), Croatia (-9bps), Morocco (-8bps), Serbia (-8bps), and Turkey (-7bps).
• 1W underperformers include Iraq (29bps), Angola (23bps), Bahrain (17bps), Nigeria (16bps), Cameroon (15bps), Zambia (15bps), Egypt (15bps), and Jordan (11bps).

EM Global Issuance

• Week 16–21 Issuance: Global issuance has fluctuated, with notable amounts in CEEMEA and Asia.
• Total Issuance YTD: 308,996mn USD.
• Net Issuance YTD: 159,468mn USD.

Key Events and Data Releases

• Mon: Normandy talks on Ukraine, Turkey GDP for Q118, and Turkey's current account for April.
• Tue: Trump-Kim Jong Un Summit.
• Wed: FOMC interest rate decision and press conference.
• Thu: ECB rates decision and press conference, South Africa business confidence, and retail sales.
• Fri: Russia rates decision, South Africa mining output, and rating reviews for Senegal, Serbia, and Slovenia.

Legal Notice

• This document is a marketing communication and not a research report.
• It is intended for professional clients and relevant investors.
• BNPP may have proprietary positions or trade in the instruments discussed.
• The document does not constitute investment, financial, legal, or tax advice.
• It is not a prospectus or an offer to buy/sell financial instruments.
• All information is based on data considered reliable as of the date of publication, but not guaranteed.
• The views expressed may differ from those of the BNPP Research Department.
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Regulatory Information

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