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EM STRATEGY DAILY - 15 March 2018 Summary

Core Content

This document provides an overview of Emerging Markets (EM) strategy and market developments as of 15 March 2018, with a focus on key economic data, geopolitical events, and market reactions. It is produced by the BNP Paribas Global Markets Research teams and serves as a marketing communication for professional clients and eligible counterparties.

Main Points

1. Poland CPI Data

• Focus: The February CPI data is expected to show a moderation from 1.9% y/y in January to 1.7% y/y.
• Inflation Outlook: Weaker commodity prices are expected to reduce disinflationary pressures, supporting higher inflation for the rest of the year.
• Market Reaction: Polish rates in the belly of the curve rallied by around 8bp following NBP Governor Glapinski's comments, but the market response is seen as overdone.
• Curve Expectations: The curve is not pricing a full 25bp hike until mid-2019.

2. Geopolitical Developments in CEEMEA

• UK-Russia Tensions: UK Prime Minister May announced retaliatory measures against Russia due to alleged involvement in a nerve-agent attack on British soil.
• Russian Response: Russia may announce countermeasures in response to these actions.
• Economic Impact: The announced measures are unlikely to have a significant economic impact, and Russian assets remain unaffected.

3. South Africa

• Jacob Zuma Prosecution: The National Prosecuting Authority (NPA) may announce its decision on prosecuting Jacob Zuma.
• Impact on Ramaphosa: A prosecution decision could strengthen Ramaphosa's position to implement institutional reforms.

4. Tunisia

• Credit Rating Downgrade: Moody's downgraded Tunisia's sovereign credit rating to B2 with a stable outlook.
• Reasons: Concerns over Tunisia's debt burden and large external funding needs, reflected in a significant current account deficit and falling foreign exchange reserves.

5. Asia Market Overview

• Mixed Markets: Asian markets are mixed with limited moves in FX and equities.
• Credit Market: A short squeeze is observed in the credit space, with broadly tighter spreads.
• Philippines Remittances: January overseas remittances grew by 9.7% y/y, consistent with peso weakness during the same period.
• Israel CPI: Expected to remain steady at 0.1% y/y.

6. EM Strategy Contacts

• Key Contacts:
  • Wike Groenenberg (Head of Emerging Markets Research, CEEMEA & APAC)
  • Sai Ulluri (FX & IR CEEMEA Strategy)
  • Dawn Kwa (FX & IR Asia Strategy)
  • Piotr Chwieczak, Marcelo Carvalho, Erkin Isik, CFA
  • Mirza Baig, Gabriel Gersztein, Samuel Castro, Gustavo Mendonca
• Phone Numbers: Provided for each contact, with different branches in London, Singapore, and Brazil.

Key Information

• The document includes important disclosures related to:
  • Conflicts of Interest: BNP Paribas may have financial interests in the issuers mentioned.
  • Non-Independent Research: The content is non-independent research for regulatory purposes and not investment research.
  • Legal Disclaimer: The document is for informational purposes only and does not constitute an offer to sell or a solicitation to buy.
  • Confidentiality: The information is provided on a strictly confidential basis.
  • US Disclosures: Includes important disclosures for options, ETFs, and securities not registered under US law.
  • Regulatory Compliance: The document is compliant with various financial regulations in the UK, France, Germany, Belgium, Ireland, Italy, and the Netherlands.

Additional Information

• Online Resources:
  • BNP Paribas Global Markets Website: www.globalmarkets.bnpparibas.com
  • BNP Paribas Strategy Website
• Bloomberg Codes:
  • Fixed Income Research: BPFR
  • G10 Interest Rate Research: BPBS
  • Emerging Markets Research: BPFR
  • Market Economics: BPEC

Legal Notice

• The document is non-independent research and is subject to the UK Financial Conduct Authority rules.
• It does not constitute investment research under MiFID II.
• The document may include performance data based on back-testing, which is for illustrative purposes only.
• BNPP may engage in transactions inconsistent with the views expressed, either for its own account or for clients.
• No liability is accepted for any use of the document or its content.
• The information is not a prospectus, advertisement, or public offering in any jurisdiction.

Disclaimer

• No Guarantee of Accuracy: The information is based on public sources and may not be independently verified.
• No Investment Advice: BNPP does not offer investment, financial, legal, or tax advice.
• Risks Involved: Transactions may involve high risk and volatility, including market, credit, and liquidity risks.
• Confidentiality: The document must not be copied, reproduced, or distributed without prior written consent.

Jurisdictional Disclosures

• UK: Document is communicated by BNP Paribas London Branch.
• France: Report is produced and/or distributed by BNPP SA and BNPP Arbitrage.
• Germany: Distributed by BNPP S.A. Niederlassung Deutschland.
• Belgium: Distributed by BNPP Fortis SA/NV.
• Ireland: Distributed by BNPP S.A., Dublin Branch.
• Italy: Distributed by BNPP Italian Branch (Succursale Italia).
• Netherlands: Distributed by BNPP Fortis SA/NV, Netherlands Branch.

Conclusion

This document serves as a strategic update on EM markets, highlighting key data points, geopolitical tensions, and market reactions. It is intended for professional clients and includes important legal and risk disclosures. The content is non-independent research and should not be relied upon as an authoritative source for investment decisions.