巴黎银行-新兴市场-宏观策略-BNPP全球风险溢价：派对结束之时-20190702-8页_474kb

BNPP-Global Risk Premium Summary: When the Party's Over

Core Content

This document provides an analysis from the BNP Paribas global risk premium model, focusing on the current state of risk appetite and its implications for emerging market (EM) assets. The report is authored by Gabriel Gerszstein, Global Head of Emerging Markets Strategy at Banco BNP Paribas Brasil S.A.

Key Messages

• Risk Appetite and Over-Bought Levels: The model indicates that risk assets are approaching over-bought levels, suggesting a potential pullback in the current rally (β) and/or increased differentiation (α) across risk assets.
• Signal Triggered on 27 May 2019: A signal was triggered indicating critically low investor risk appetite, which suggested a potential appreciation in EM risk assets.
• Position Adjustments: In response, the firm maintained its trade ideas to capture local currency rates in Brazil and Mexico, and was long selected EM currencies.
• Strategy Shift: The firm closed most directional positions and switched to relative value or flattening trades in Brazil, South Africa, Hungary, and Mexico. They are paying rates in Colombia (5y IBR) and Chile (1y CLPxCAM).
• FX Positions: 65% of long positions in FX (CLP, BRL, HUF) are against the EUR, while PLN and CZK are against the USD.

Performance of Selected Assets (As of 1 July 2019)

Risk Premium Model Insights

• The model suggests that risk appetite is a key driver of asset prices and that changes in risk appetite (θ) can significantly affect the expected return of an asset.
• The expected return on an asset is approximated by the formula:
  Expected Return (Y) = α + θ(σ²)
  Where:
  • α represents systemic or global risk.
  • θ is the level of risk appetite.
  • σ² is the variance of the asset.
• An increase in θ indicates an increase in risk aversion.
• The model uses Spearman rank correlation to assess changes in risk appetite, rather than Pearson correlation, which only measures linear relationships and is sensitive to extreme values.

Limitations and Considerations

• The model is a short-term contrarian indicator and is not used for structural calls.
• It has been profitable in over 75% of cases, but has not always been accurate, especially during strong trends or idiosyncratic events.
• Risk vs. Risk Appetite: The model distinguishes between shifts in risk and changes in risk appetite, emphasizing that both can independently affect asset prices.
• The model is not independent research and is subject to conflicts of interest due to its interaction with sales and trading teams.

Legal and Regulatory Notes

• This document is a marketing communication and is not investment research.
• It may contain Research under MiFID II unbundling rules, which is only for firms that have signed up to BNPP’s research packages or are out of scope.
• The document does not constitute an offer to sell or issue securities and is for professional clients and eligible counterparties.
• It includes hypothetical and back-tested performance data, which may not reflect actual market conditions or future results.
• The document is confidential and may not be distributed without prior written consent.
• Important Disclosures are included for ETFs, options, and convertible securities, highlighting risks and regulatory considerations.

Conclusion

The BNPP Global Risk Premium model serves as a tool to gauge short-term market sentiment and risk appetite, particularly in EM assets. While it has shown strong performance in most cases, it is not a foolproof indicator and must be used in conjunction with other analyses. The firm has adjusted its strategy based on the model’s signals, focusing on relative value and flattening trades in key EM markets.