20161014-法国巴黎银行-EM_Strategy_Plus_35页_4mb

报告摘要

EM Strategy Plus Summary - 14 October 2016

Core Content

This document provides a comprehensive analysis of emerging market (EM) strategies, focusing on the outcomes and implications of the IMF and World Bank Annual Meetings, as well as specific market recommendations and observations for Asian, CEEMEA, and Latin American currencies and bonds.

Main Themes and Views

Global Slow Growth and Low Inflation: The document highlights that global economic growth has remained slow, with low inflation and accommodative monetary policies in advanced economies continuing to drive portfolio flows into EM assets.
Monetary Policy Outlook: It is expected that the US Federal Reserve will hike rates modestly, with a 65% chance of a December hike and a 100% probability of a rate hike by mid-2017. The European Central Bank (ECB) and the Bank of Japan (BoJ) are expected to maintain accommodative policies.
China's Economic Risks: China is identified as a major risk to EM and the global financial system, with concerns over resource misallocation and an opaque, growing financial sector. The country's reliance on credit has increased significantly, with total debt exceeding 250% of GDP.
EM FX and Bond Market Trends: The document outlines several FX and bond market strategies, including buying USDTRY, USDKRW, and UDIBonos in Mexico, as well as specific positioning indicators and volatility analysis.

Key Market Recommendations

Buy 3m USDKRW Call Spread 1,115 vs 1,150: This trade is expected to benefit from a potential rise in the USD/KRW pair, which is forecast to reach 1,150 by year-end. The trade costs around 1.1% off a spot reference of 1,115.
Buy Mexico Jun19 UDIBonos: The document recommends buying real rate instruments in Mexico, anticipating inflation risks and a flattening of the yield curve.
Buy TRYRUB: The TRY/RUB pair is recommended with a target of 21.50, based on the expectation of continued dollar demand and depreciation of the yuan.
Buy Brazil NTN-B May 21: This trade is suggested due to the anticipated stabilization of Brazil's debt dynamics and the flattening of the DI curve.

Key Information

FX Positioning

USD Strength: The dollar has shown strength against all Asian currencies, with long USD positions increasing. The PHP is the least favored, while the THB and KRW have faced downward pressure due to various factors.
USDCNH: The pair has breached the 6.70 level, indicating further upside potential. However, forward premia, volatility, and skew have remained stable, suggesting sentiment is unchanged.
USDKRW: The KRW has been a strong performer in Asia, but it is expected to retrace some of its gains in Q4, rising to around 1,150 by year-end.
USDTRY: The document recommends buying a 1m USDTRY call spread with strikes at 3.10 and 3.20, and closing the put leg due to the TRY's depreciation.

Bond Market Insights

Mexico: Inflation risks are skewed to the upside, with the DI curve pricing in a 50bp cut for the October meeting. Real rate instruments are expected to perform well as nominal rates remain stable.
Chile: The country's local rates are at substantially low levels, influenced by pension fund allocations. The recommendation to pay 5y CLPxCAM is at risk due to the strong cyclicality of these allocations.
Brazil: The DI curve is expected to flatten further, supporting the recommendation to buy a DI Jan19sJan23 flattener. The BCB is expected to cut rates by 50bp, with the market currently pricing in a split between 25bp and 50bp.
Turkey: The CBRT is expected to cut the overnight lending rate by 25bp to 8.0% at the MPC meeting, bringing the total reduction since March to 275bp.

Upcoming Events

Asia: Thailand will be in mourning following the passing of King Bhumibol Adulyadej, which may affect consumption and investment. Indonesia will release its September trade balance and interest rate decision.
CEEMEA: South Africa will release September inflation and August retail sales data. Poland will see industrial production and retail sales data, while the Czech Republic will release producer price inflation.
Latam: Brazil's BCB will meet to decide on interest rate cuts, and Chile's central bank will have its monetary policy meeting.

Risk Factors

US Election Impact: The potential impact of the US election on fiscal and international trade policies is considered a key risk.
China's Economic Adjustment: Any disruptive adjustment in Chinese economic growth could have significant implications for global growth and the financial system.
Negative US Data Surprises: These could undermine the USD and affect the USDKRW and USDTRY trades.
Risk-On Environment: A strong 'risk-on' environment for equities could boost equity inflows to Korea, affecting the USDKRW trade.

Summary of Key Data

Country	Real GDP Growth (2016)	CPI y/y (2016)	Notes
Advanced Economies	1.6%	0.8%	Continued slow growth and low inflation
Euro Area	1.7%	0.3%	Muted wage pressures and accommodative policies
Japan	0.5%	-0.2%	Targeting 10-year yields at zero
US	1.6%	1.2%	Modest rate hikes expected
Emerging Markets	4.2%	4.5%	Stronger growth compared to advanced economies
Brazil	-3.3%	9.0%	Expected rate cuts and flattening of DI curve
China	6.6%	2.1%	Major contributor to global growth, with significant debt levels
India	7.6%	5.5%	Strong growth and inflation expectations
Mexico	2.1%	2.8%	Inflation risks and rate cuts expected

Conclusion

The document underscores the continued influence of accommodative monetary policies in advanced economies on EM asset flows. It also highlights the risks associated with China's economic model and the potential impact of US political developments. Specific FX and bond market strategies are recommended based on current market conditions and expectations for future movements.

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