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EM STRATEGY DAILY - 07 March 2018 Summary

Core Content Overview

This document provides a summary of the current state of emerging markets (EM) currencies and strategies for the day, focusing on key developments in the CEEMEA, Latam, and Asia regions. It is produced by BNP Paribas and includes insights from various strategists and analysts across different branches and locations.

Key Market Developments

USD Weakness

• The USD is trading weaker due to the resignation of Trump's economic advisor, Gary Cohen, attributed to disagreements on trade protectionism.
• Despite weaker equities and credit, Asian currencies are holding up well.

Central Bank Meetings

• Turkey (CBRT): Expected to maintain the key late liquidity window rate at 12.75% at today's MPC meeting. The strategy is to keep interest rates at current levels until a more significant improvement in inflation outlook is observed.
• Poland (NBP): Will hold a policy meeting and announce new economic projections. Inflation path is expected to remain broadly unchanged in the near term. Policy bias is likely to become more hawkish during the year, with rates possibly rising by 100bp by end-2019.

Currency Performance

• Brazilian Real (BRL): Outperformed other EM currencies after the outcome of another of former President Lula's appeals.
• Malaysian Ringgit (MYR): Central bank kept policy rates on hold following January tightening and weaker inflation prints. Rhetoric was more dovish, with inflation forecasts lower for 2018.

Key Views and Recommendations

Turkey

• Spot TRY has failed to outperform forwards vs. a basket of funding currencies (50% EUR / 50% USD).
• Current policy stance has not been effective in driving FX outperformance or reducing inflation significantly.
• Recommendation: Continue to recommend paying 1y1y TRY cross-currency rates.

Poland

• By 2020, both headline and core inflation are expected to be above target at 3%.
• Policy is expected to remain unchanged until at least Q4 2018.
• Recommendation: Policy rates may rise by 100bp to 2.50% by end-2019.

Argentina

• Peso had poor performance and decoupled from regional currencies.
• Structural issues include a worsening current account, high fiscal deficits, and strong retail demand for USD.
• Recommendation: Avoid structural positions in domestic risk assets and remain long protection in Argentina 5y CDS against a basket of Latam countries.

Latam

• Short-end of the DI curve shows increased probability of another 25bp cut in the March meeting by the BCB.
• Despite recent rally, a substantial premium is embedded in the belly of the DI curve.

Contacts

Strategists

Name	Job Title	Legal Entity	Phone Number
Piotr Chwieczak	FX & IR CEEMEA Strategist	BNP Paribas London Branch	+44 20 7595 8715
Sai Ulluri	FX & IR CEEMEA Strategist	BNP Paribas London Branch	+44 20 7595 1872
Gustavo Mendonca	FX & IR Latam Strategist	Banco BNP Paribas Brasil S.A. (Sao Paulo)	+55 11 3841 3445

Asia

Name	Job Title	Legal Entity	Phone Number
Dawn Kwa	FX & IR Asia Strategy	BNP Paribas Singapore Branch	+65 6210 3263
Mirza Baig	Head of FX & IR Asia Strategy	BNP Paribas Singapore Branch	+65 6210 3262
Erkin Isik, CFA	FX & IR CEEMEA Strategist	Turk Ekonomi Bank A.S. (Istanbul)	+90 216 635 2987

Additional Contacts

Name	Job Title	Legal Entity	Phone Number
Wike Groenenberg	Head of Emerging Markets Research, CEEMEA & APAC	BNP Paribas London Branch	+44 20 7595 8746
Marcelo Carvalho	Head of Emerging Markets Research, Latam	Banco BNP Paribas Brasil S.A. (Sao Paulo)	+55 11 3841 3418

Legal and Disclaimer Information

• This document is non-independent research for the purpose of UK FCA rules and is a marketing communication under MiFID II.
• It is not investment research and does not constitute an offer to sell or issue securities.
• The information may be subject to conflicts of interest due to interactions with sales and trading teams.
• BNPP may have financial interests in the issuers mentioned and may engage in transactions inconsistent with the views expressed.
• The document does not constitute a prospectus or public offering and may not be used as a basis for investment decisions.
• It is for informational purposes only and may be subject to change or discontinuation.
• The information is believed to be reliable but not guaranteed for accuracy or completeness.
• Indicative prices and terms are based on internal models and may vary from other sources.

United States Disclosures

• Options and ETFs discussed may involve high risk and are not suitable for all investors.
• Certain securities may not be registered under US Securities Laws and are considered restricted.
• This document may be distributed only to qualified institutional buyers or non-US persons.
• BNPPSC is a registered broker-dealer and futures commission merchant in the US.
• The document is a general solicitation of derivatives business and may not be used for investment decisions without proper authorization.

Online Resources

• BNP Paribas Global Markets Website: www.globalmarkets.bnpparibas.com
• BNP Paribas Strategy Website

Bloomberg

• Fixed Income Research: BPFR
• G10 Interest Rate Research: BPBS
• Emerging Markets Research: BPFR
• Market Economics: BPEC

Regulatory Information

• The document is produced by BNP Paribas and is for the use of intended recipients only.
• It is subject to limited regulation by the Financial Conduct Authority and Prudential Regulation Authority in the UK.
• BNPP is incorporated in France with Limited Liability and registered in Paris.
• BNPP London Branch is registered in England and Wales under no. FC13447.