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EM Strategy Daily Summary - 04 December 2017

Core Content

This document is a daily summary of Emerging Markets (EM) strategy insights, focusing on key economic indicators, central bank actions, and market outlooks for various regions. It is produced by BNP Paribas and provides analysis for investors and traders in the FX and IR markets.

Key Regions and Insights

Asia

• India: The RBI is expected to keep rates on hold. However, if the current trend of GDP growth acceleration and inflation increase continues, a rate-hike cycle may begin in the second half of 2018.
• FX Market: Asia FX is weaker due to the stronger USD, influenced by progress on the US tax reform bill.
• Philippines: Stronger CPI data may force the BSP to raise rates in 2018.
• Indonesia: CPI slowed to 3.3% y/y in November, in line with expectations. The central bank is likely to keep rates on hold due to the already narrow US-IDR interest rate spread.

CEEMEA

• Turkey: Inflation rose to 13% y/y in November, exceeding expectations. The CBRT is likely to raise rates by 50-75bp at its next meeting on 14 December, which could lead to further currency weakness.
• Poland: The NBP is expected to keep policy unchanged at its MPC meeting. EURPLN remains range-bound, and rate hikes are unlikely before H2 2018.
• Hungary: November CPI data will be released on 7 December, following GDP revisions. Inflation is expected to rise to 2.7% y/y from 2.2% in October. Industrial production data for October will also be released on 6 December.

Latin America (Latam)

• Brazil: The BCB is expected to cut rates by 50bp on 13 December, as reflected in the DI curve. The Selic rate may be cut to 6.5% in 2018, with policy likely to remain on hold thereafter. The government is expected to push for a vote on the social security reform this week.
• Mexico: Markets are closely watching the release of November CPI on 7 December. There is an increased probability of further rate tightening at the 14 December meeting, although no rate changes are expected in 2017. The short end of the curve offers a receiving opportunity.

Recommendations

• USDZAR: In South Africa, a long USDZAR position is recommended, with a target of 14.10. A USDZAR put fly is also advised due to the uncertainty around the ANC conference.
• Asia FX: The document recommends monitoring the impact of the stronger USD on Asian currencies.
• Latam: In Brazil, the DI curve is expected to push lower, especially in the short end, with the extended target on the Jan19 receiver recommendation.

Additional Information

• China: The latest EM Strategy Plus edition focuses on financial policy changes in China. November trade data is expected to show stronger-than-anticipated export and import growth.
• Bahrain: S&P Global Ratings downgraded Bahrain's credit rating to B+ with a stable outlook due to external liquidity concerns. However, financial support from GCC peers may limit currency de-peg risks.

Contacts

Legal Disclaimer

• This document is non-independent research and is a marketing communication.
• It does not constitute investment research or advice.
• BNP Paribas may have conflicts of interest and may engage in transactions inconsistent with the views expressed.
• All information is for informational purposes only and may not be relied upon as authoritative.
• BNP Paribas disclaims any liability for any use of the information or recommendations contained herein.
• The document may contain back-tested performance data and is not a prospectus or public offering.

Final Notes

• The document is subject to change and may be discontinued.
• It is intended for professional clients and eligible counterparties.
• Information is confidential and must not be distributed without prior consent.