20180327-法国巴黎银行-EM_TODAY_10页_345kb

EM STRATEGY | DAILY - 27 March 2018 Summary

Core Content

This document is a daily update from BNP Paribas' Emerging Markets Strategy team, outlining key market developments and investment views across various regions. It includes insights on FX and interest rate markets, with a focus on China, Latin America, and Asia, as well as mentions of recent publications and legal disclosures.

Main Points

Global Market Overview

• Risk assets have rebounded following news of constructive dialogue between the US and China.
• The Chinese delegation to the WTO has formally requested consultations with the US.
• USDCNY and USDKRW have declined, with USDCNY breaking below 6.30 and USDKRW down to 1070 from 1085.
• ADXY remains range-bound, forming a triangle pattern, indicating potential for a significant trend upon a price break.

China

• 5Y Chinese Government Bonds (CGBs) have reached the initial target of 3.6% and the team now extends the target to 3.5%.
• The inclusion of CGBs in a global bond benchmark is expected to attract substantial inflows over time.
• Indian government bonds rallied 25 bps after the announcement of reduced 1H borrowings, with 48% of total issuance planned instead of the usual 60%.
• Investors anticipate foreign portfolio limits expansion, with hopes for an increase from the current 5%.
• The team suggests buying the rupee via short-dated options, considering the positive news flow and the potential drag from higher oil prices.

Latin America

• In Brazil, the central bank (BCB) is expected to cut rates by 25 bps at the next meeting, leading to a further rally in the DI curve.
• The COPOM meeting minutes will be released today and are expected to provide more insight into the monetary policy guidance.
• In Argentina, the central bank (BCRA) is expected to leave the policy rate unchanged at 27.25%, due to lack of inflation improvement and upward pressure on USDARS.
• The BCRA has been intervening in the FX market, selling over USD 1.2bn in the month to date to curb peso depreciation.
• Despite increased international reserves, the team remains cautious, as the sources of USD purchases are structural and related to Argentina's twin deficits.

CEEMEA

• The Hungarian central bank (MNB) is expected to keep policy rates on hold, as the base rate has remained at 0.9% since May 2016.
• The MNB has been using alternative tools to lower long-term yields and support inflation, which remains below its target of 3%.

Key Information

• The document highlights the impact of US-China trade tensions on global markets and the potential for a new trend based on DTCC NDF volumes.
• It includes contact details for strategists and production teams, along with legal notices and disclosures related to the document's use and the potential conflicts of interest.
• The legal disclaimer emphasizes that the document is non-independent research and not investment research, and that it is intended for professional clients only.
• It also includes important disclosures regarding options, ETFs, and convertible securities, cautioning about risks and advising against reliance on the information without professional advice.

Charts Mentioned

• Chart 1: Large NDF trading volumes in CNY, KRW, INR, and TWD markets were recorded on DTCC on Friday.
• Chart 2: ADXY remains range-bound, forming a triangle pattern.

Contacts

Legal & Regulatory Information

• The document is non-independent research and not investment research.
• It is intended for professional clients and Eligible Counterparties.
• Conflicts of interest may exist due to interactions with sales and trading teams.
• Disclosures are provided for options, ETFs, and convertible securities, highlighting the risks involved.
• The document is subject to legal restrictions and confidentiality agreements.

Conclusion

The document provides a comprehensive view of the current state of emerging market FX and interest rate strategies, with a focus on the impact of US-China trade relations, the performance of major currencies, and central bank policy outlooks in key regions. It also includes important legal and compliance information, ensuring that users are aware of the nature and limitations of the content provided.