巴黎银行-美元流动性收紧背景下的重新定价-新兴市场投资策略-20171027-BNP_Paribas-EM_STRATEGY_PLUS_34页_3mb

EM Strategy Summary - Global Weekly (27 October 2017)

Core Content

This document outlines the EM Strategy team's analysis and recommendations for emerging markets (EM) currencies and fixed income instruments for the week of 27 October 2017. It covers key developments in Asia, CEEMEA, and Latin America (Latam), and includes insights on FX positioning, interest rates, and market dynamics.

Main Themes and Views

Asia

• FX Positioning: DTCC data provides a representative sample of Asian NDF trading, offering a new dimension of notional volume for market positioning analysis. The data is used to construct technical indicators such as the VWAP gap and Volume-Price trend (VPT), which help identify market trends and potential reversals.
• China: Rates continue to drift higher, in line with expectations. The team remains paid on 5Y CNY NDIRS with a target of 4.15%. Overseas investors increased their ownership of bonds, particularly NCDs, in Q3 2017. The PBoC is expected to maintain liquidity, and another rate hike in the OMO corridor is likely.
• India: The long USDINR put recommendation expired worthless, indicating a shift in market sentiment.
• Next Week Outlook: Trump's Asia trip and PMI data releases will be key. The BoK may hike rates in November, and the team will monitor CPI and trade data for signals.

CEEMEA

• Liquidity Squeeze: EM countries have improved their external funding positions since 2014, except Turkey, which remains the most exposed to USD liquidity changes.
• Czech Republic: The CNB is expected to hike rates by 25bp in November, with a possible end-of-year hike. The team stopped out of a 2y2y CZK vs EUR position and will wait for the inflation report before reconsidering.
• Poland: October inflation is forecast at 2.0% y/y, driven by global commodity prices and above-trend growth. PMI data is expected to remain above 50.
• Turkey: CBRT maintains a tight policy stance until inflation aligns with targets. Despite base effects causing a drop in headline inflation, the team expects the CBRT to keep rates unchanged. The inflation forecast for end-2017 and 2018 is likely to be revised upwards, but the team believes the forecast may appear too low given recent TRY depreciation.

Latam

• Brazil: The long BRL trade has reduced, while equity investment has increased. The team expects the terminal Selic rate to reach 6.5% by next year and that the BCB will remain on hold longer than the DI curve suggests. The DI market outlook is tilted to the downside.
• Mexico: Banxico increased FX hedge auctions by USD 4bn, signaling its first line of defense. The team recommends buying a USDBRL one-touch option at 3.10 for January 2018. The short USDBRL NDF position was stopped out, and the team is cautious about further corrections.
• Risk Model: The risk index is back to neutrality, but further correction is still plausible.

Key Recommendations

Trade Review

What's Up Next Week?

• Asia: Trump's Asia trip, PMI data, and CPI releases in South Korea and Thailand/Indonesia will be key.
• CEEMEA: CNB inflation report, Polish CPI data, and manufacturing PMIs will be closely watched.
• Latam: Brazil's BCB meeting minutes and Mexico's GDP data will be the focus.

Methodology

• VWAP Gap: Measures the percentage difference between the volume-weighted average price (VWAP) and the live spot value, expressed as a z-score. A +/-2.0 threshold indicates extreme positioning.
• Volume-Price Trend (VPT): Measures price momentum by summing volume-weighted rate of change in market price over a one-month rolling window. Extreme readings suggest over-optimism or over-pessimism.
• DTCC Positioning Index: Combines the VWAP gap and VPT indicators to create a single index of market positioning, helping to identify potential trend reversals.

Summary of Key Data

• China: 7-day repo fixing at 3.44% on 26 October, 10-year CGB at 3.80%, and 10-year CDB bond at 4.37%.
• India: Long USDINR put expired worthless.
• Czech Republic: 2y2y CZK vs EUR position stopped out.
• Turkey: CBRT maintains tight policy, and the team took profit on TRY vs ZAR trade with a 0.65% return.
• Brazil: Long BRL trade reduced, but equity investment increased.
• Mexico: FX hedge auctions increased by USD 4bn, and the team recommends buying a USDBRL one-touch option at 3.10 for January 2018.

Conclusion

The EM Strategy team remains cautious but sees opportunities in the current overreaction to market trends. They emphasize the importance of not relying solely on technical indicators and recommend a comprehensive approach to decision-making. The team continues to monitor liquidity, inflation expectations, and geopolitical developments to adjust their strategies accordingly.