德银-新兴市场-宏观经济-新兴市场月度报告：高期望-20180118_136页_3mb

Emerging Markets Monthly High Expectations Summary

Core Content

This document provides a comprehensive overview of the outlook for emerging markets (EM) in early 2018, covering economic forecasts, FX trends, credit positions, and political risks across various regions. The analysis is based on Deutsche Bank's research and includes data from multiple sources such as Bloomberg Finance LP and Haver Analytics.

Main Points

Economic Forecasts

• Global EM Growth: Expected to remain strong, with a forecast of 4.9% in 2018 and 5.0% in 2019.
• Growth by Region:
  • Asia (ex-Japan): Projected to grow at 6.1% in 2018, with a stable outlook for 2019.
  • China: Expected to grow at 6.3% in 2018, with a focus on fiscal tightening and housing market dynamics.
  • India: Projected to grow at 7.5% in 2018, with a strong medium-term outlook due to demographic and structural factors.
  • LatAm (ex-Venezuela): Growth is expected to rise to 3.0% in 2018, though political challenges remain.
  • EEMEA: Positive growth surprises are noted, particularly in South Africa and Turkey.

Inflation Trends

• EM inflation is picking up, but from a low base.
• Asia: Food prices are a major inflation risk, especially in China and India.
• Turkey: Inflation is expected to remain in double digits, with rate hikes likely to top off.
• Russia, Brazil, and Mexico: Potential for further rate cuts or slower disinflation.
• EM FX Carry: Inflation is not yet a significant disruptor for EM, but the impact of commodity and food prices is notable.

FX Trends

• USD Weakness: Expected to continue supporting EM FX performance.
• FX Strategy:
  • Stay long EM FX vs. USD.
  • Position more defensively in ZAR, TRY, BRL, and cut long RUB.
  • Sell USD/ARS, EUR/HUF, and position for further CNH and KWR downside.
  • Buy EUR/ILS and stay short CLP.
• Regional FX Outlook:
  • Euro: Likely to appreciate against the USD, with EUR/USD expected to rise to 1.30.
  • Emerging Markets: EM FX is expected to outperform, with a focus on growth and policy support.

Credit Outlook

• Overweight: Argentina, Ecuador, Indonesia, Turkey, Ukraine, and Mongolia.
• Underweight: Mexico, Peru, Hungary, Philippines, Kazakhstan, and Sri Lanka.
• Curve Steepeners/Flatteners:
  • Favor 10s30s cash curve steepeners in Peru, Uruguay, Mexico, Egypt, and Kazakhstan.
  • Favor 10s30s flatteners in Brazil and South Africa.
  • Maintain Pemex 27s vs. 4.5% 26s.

Political Risks

• Asia: Trade conflicts, particularly in Korea, pose a risk.
• LatAm: Political uncertainty in Argentina, Brazil, Chile, Colombia, Mexico, and Peru.
• EEMEA: Political risks in Turkey, Russia, and Egypt.
• GCC: Potential for further tensions between Saudi-led block and Qatar.
• EU: Political challenges in Germany, France, and Italy.

Key Information

• Activity Surveys: Holding up at elevated levels or improving, indicating synchronized growth.
• Inflation Expectations: Moderate, with a focus on commodity and food prices.
• FX Strategy: Favor EM FX, especially in the context of USD weakness and reduced local rate premiums.
• Credit Strategy: Overweight in certain EM countries and underweight in others based on economic and political conditions.
• Economic Drivers: Growth in EM is supported by policy, macroeconomic conditions, and FX appreciation.
• Risk Factors: Political instability, trade conflicts, and fiscal policy changes.

Strategic Recommendations

• EM FX: Stay long the basket vs. USD, with a defensive approach in some currencies.
• EM Equities: Still underweighted, but potential for increased allocations due to growth and FX support.
• Credit: Overweight in Argentina, Ecuador, Indonesia, Turkey, Ukraine, and Mongolia.
• Interest Rates: Expect rate cuts in Russia and Brazil, while rate hikes in Turkey may be limited.
• Local Markets: Expect continued outperformance due to FX appreciation and supportive macroeconomic conditions.

Conclusion

The document emphasizes the positive outlook for EM in 2018, driven by synchronized growth, FX appreciation, and supportive macroeconomic conditions. However, it also highlights the importance of monitoring political risks and inflation dynamics, especially in Asia and Turkey. The strategy is tilted toward EM FX and select credit markets, with a cautious approach to certain currencies and countries.