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EM STRATEGY | DAILY SUMMARY - 11 June 2018

Core Content Overview

This document provides an analysis of economic and monetary developments in emerging markets (EM) across various regions, including CEEMEA, Latin America, and Asia. It outlines key macroeconomic indicators, central bank actions, and market outlook for the week of 11 June 2018. The report also includes contact details for EM strategy teams and legal disclaimers regarding the nature and use of the document.

Key Economic Indicators and Central Bank Outlook

Turkey

• Q1 2018 GDP Growth: Surpassed expectations at 7.4% y/y (market expected 7.0%).
• CBRT Survey of Expectations: Expected to show deterioration in inflation expectations due to currency depreciation in May.
• Central Bank Policy: Already tightened policy significantly in April, May, and June. Further rate hikes are unlikely, even if inflation expectations rise.
• Treasury Actions: The Treasury will issue 2019 zero-coupon bonds on 12 June.

Czech Republic

• May CPI: Accelerated to 2.2% y/y from 1.9% in April.
• Central Bank (CNB) Guidance: Aligns with hawkish comments from the Governor and Vice Governor. Market prices in tightening at 22bp, with an additional 8bp expected over the next six months.
• Policy Outlook: Expected to hike rates by 25bp before the end of the year, with one more move in 2019.
• EURCZK: Remains above the central bank’s average Q2 2018 forecast of 25.2.

Russia

• CBR MPC Meeting: Scheduled for 15 June.
• Market Expectation: Central bank is expected to remain on hold following the RUB sell-off and comments by Governor Nabiullina.
• Nabiullina's Comments: Suggested the possibility of rate hikes if inflation risks increase due to a weaker RUB and higher gasoline prices.
• Rate Curve: Steepened, pricing out much of the loosening expected for 2018. Market now expects only 15bp of cuts from 40bp earlier.

Argentina

• BCRA Policy: Expected to remain on hold on 12 June.
• FX Market Tension: Cumulative rate hikes of nearly 1,300bp have been observed. The current situation is deemed fragile.
• Inflation Outlook: Monthly consumer price inflation is expected to remain high at 2.5% in May, lifting the annual rate to 26.8%.
• IMF Loan: Argentina has received a USD 50bn loan, which may help reduce USD-denominated debt default risk. However, compliance with conditions will be challenging.

Chile

• Central Bank Policy: Expected to remain on hold on 13 June.
• Economic Activity: Recent data suggests an improving underlying trend. Growth in April was 4.8% y/y.
• Inflation: Consumer price inflation has surprised to the upside recently.
• Policy Outlook: First rate hike expected in Q3 2018, with the policy rate at 3% by year-end. Rate hikes likely to continue in 2019.

Brazil

• BCB FX Swaps: Announced to offer up to USD 20bn of FX swaps until 15 June.
• Market Strategy: Increased receive Brazil DI Fra Jan20sJan21s recommendation and opened a new receive Fra Jan22sJan23s strategy.
• Opportunities: The report suggests that there are still opportunities for positive pay-out despite the worsening domestic and external scenarios.

Asia

• India: Reports May inflation and April industrial production on 12 June. May inflation is expected to slow to 4.1% y/y.
• China: Reports retail sales, industrial production, and fixed asset investment for May on 14 June. Retail sales expected to accelerate to 9.7% y/y, while industrial production and fixed asset investment (ex-rural) likely to slow to just below 7% y/y.
• Market Closures: Indonesia, India, Malaysia, and Singapore will be closed on Friday.

EM Strategy Contacts

Legal and Disclaimers

• 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 comply with the independence requirements for investment research.
• No liability is accepted for any losses arising from the use of this document.
• Performance data may be based on back-testing and is not indicative of future results.
• Confidentiality: The document is provided on a strictly confidential basis and may not be copied or distributed without prior consent.
• Conflicts of Interest: BNPP may have financial interests in the issuers or act as a market maker, advisor, or underwriter in relation to the financial instruments discussed.
• Options and ETFs: Complex instruments with high risk; only suitable for sophisticated investors. BNPP may have conflicts of interest related to these products.
• U.S. Securities: Certain securities may not be registered under U.S. securities laws and are considered restricted securities.

Additional Notes

• Global Events: President Trump will meet Kim Jong Un in Singapore on 12 June. The Federal Reserve and ECB will hold policy meetings on Wednesday and Thursday, respectively.
• Asian Equity Markets: Trading well, with currencies moderately stronger versus the USD.
• Market Outlook: The report emphasizes the importance of monitoring inflation trends, central bank policies, and FX developments in the coming weeks.