20140221-巴黎银行证券-EM_Strategy_Plus_17页_1mb

EM Strategy Plus Summary

Core Content

This document outlines the current investment strategy and views for Emerging Markets (EM), with a focus on risk appetite, FX forecasts, and specific trade recommendations. It highlights the development of a risk appetite model that uses time-varying risk premium data to inform asset allocation decisions. The model has shown strong performance, outperforming the EMBI Global index by 30.6% since January 2009. The document also provides insights into various EM countries, including Brazil, Korea, Israel, Indonesia, Malaysia, Mexico, Poland, Russia, South Africa, and Thailand, with tailored FX and debt market recommendations.

Key Views and Asset Allocation

• Emerging-market risk appetite is approaching balanced levels, following a strong recovery in recent weeks.
• The risk premium is no longer attractive, suggesting a need to scale back some exposure.
• There is growing concern about economic data weakness and tightening monetary conditions, which may lead to further market instability.
• Political risk is a major factor, with the heavy EM election calendar likely to keep investors cautious.
• The EM markets are now closer to fair value, and the strategy should focus on managing risk rather than overexposure.

Trade Review

• Profits were taken on the remainder of the receiver position on Jan'15 PRExDI in Brazil at 11.21%, with a total profit of USD 235k.
• A KRW 2s10s NDIRS steepener was initiated at 52bp, targeting 70bp, with a stop at 43bp.
• Partial profits were taken on the short 1m USDPHP position, and a long USDILS position was opened, targeting 3.65 with a stop at 3.45.
• Other trades include steepeners in Brazil, flatteners in Poland, switching out of Russia's 17s into Turkey's 17s, and switching out of South Africa's 41s into Romania's 44s.

EM Focus: Introducing the Risk Appetite Model

• The model uses the on-time-varying risk premium concept to measure global investor risk appetite.
• It provides signals for over/under weighting risky assets and assesses the probability of regime changes.
• The model is used to enhance current strategy tools and improve decision timing.

Asia: Has Risk Rallyed Too Far?

• The Asian risk index suggests that local markets have run out of potential in the short term.
• Risk premia have fallen sharply, and a more cautious stance is warranted.
• The FX market is expected to remain range-bound for the next one or two months due to weather and Lunar New Year distortions.
• Indonesia's IDR has rallied 4% this month, and the 10y INDOGB yields have dropped by 70bp, prompting a reduction in overweight to +1.
• KRW NDIRS curve has flattened, suggesting the need for steepeners.

Changes to Our Asian FX Forecasts

• USDIDR forecast has been substantially lowered, while USDKRW has been slightly raised.
• The longer-term USD/Asia trend is still positive, but near-term dollar strength is tempered.
• Indonesia's IDR is expected to weaken in H2 2014, potentially due to political noise or re-weighting of a major global benchmark index.

Country-Specific Views

Key Takeaways

• The risk appetite model is a crucial tool for assessing EM exposure and timing.
• FX markets are influenced by fundamental shifts, monetary policy, and political developments.
• Emerging-market risk has rebalanced, but caution is advised due to economic and political uncertainties.
• Strategic trades are recommended across various EM currencies and debt instruments, with target and stop levels provided for each.