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EM Strategy Daily Summary - 21 November 2017

Core Content Overview

This document provides a summary of the Emerging Markets (EM) strategy for the day, focusing on currency and interest rate (IR) developments in Turkey, Hungary, and Latin America (Latam), along with legal and regulatory disclosures relevant to the document's distribution.

Key Market Insights

Turkey

• USD/TRY: The long USD/TRY recommendation has reached the 3.95 target, and the target is now extended to 4.05.
• FX Drawdown: Despite measures taken by the authorities, the Turkish lira (TRY) continues to depreciate.
• CBT Performance: The Central Bank of Turkey (CBT) needs to deliver more than expected to generate a weekly 4% positive FX return, which would help break the negative momentum.
• CCY Curve: The currency curve is pricing around 200bp of tightening, but this has not translated into a positive FX return.

Hungary

• Monetary Policy: The Hungarian National Bank (MNB) is likely to implement further easing measures through its Interest Rate Swap (IRS)/FX swap program.
• FX Impact: The flattening of the yield curve is expected not to have an immediate negative impact on the Hungarian forint (HUF).

Latin America

• Mexico: The strategy team has updated the positioning in Mexico. Non-resident holdings of Mexican public debt remained flat at USD 111.1bn in October.
• Mbono Exposure: Non-residents' Mbono exposure had been increasing since November 2016, but recent data shows a drop in DVO1 in USD terms, although not as significant in MXN terms.
• Peso Performance: The Mexican peso fell almost 5% in October, contributing to the drop in DVO1.

Strategy Recommendations

• USD/TRY: Maintain a long USD/TRY position, with the target moved to 4.05.
• 3x6 Ccy FRA: Remain received in the 3x6 ccy Forward Rate Agreement (FRA).

Legal and Regulatory Information

This document is a marketing communication and not independent research. It is intended for Relevant Persons as defined by MiFID and other regulations. It is not investment research and should not be relied upon as an offer to buy or sell securities.

Disclaimer

• No Liability: BNP Paribas and its affiliates disclaim any liability for inaccuracies or omissions in the document.
• Confidentiality: The information is provided on a strictly confidential basis and may not be copied, reproduced, or distributed without prior written consent.
• Conflicts of Interest: BNP Paribas may have financial interests in the issuers or securities discussed and may engage in transactions inconsistent with the views expressed.

US Disclosures

• Options: Complex instruments with high risk; only suitable for sophisticated investors.
• ETFs: May involve tracking error, currency, and geopolitical risks. BNP Paribas may have conflicts of interest due to advisory, transactional, or financial relationships with the underlying companies.
• Unregistered Securities: Certain securities may be "restricted securities" under US law and are only available to Qualified Institutional Buyers (QIBs) or non-US persons under Regulation S.

Contact Information

Disclaimer Summary

• This document is for informational purposes only.
• It is not intended to be a complete or exhaustive analysis.
• It is not investment research and may not be relied upon for investment decisions.
• BNP Paribas may engage in transactions inconsistent with the views expressed.
• No assurance is given that the performance data or returns mentioned will be achieved.
• The document may contain simulated performance data and is not indicative of actual results.
• BNP Paribas may have conflicts of interest due to its involvement with issuers or market participants.