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EM STRATEGY DAILY - 28 February 2018 Summary

Core Content

This document is a daily market update from BNP Paribas Emerging Markets Strategy team, covering economic and financial developments in key emerging markets. It includes insights from multiple branches and strategists, with a focus on macroeconomic indicators, currency movements, and policy implications.

Key Market Insights

China

• PMI: China's February PMI figure was 50.3, the lowest since August 2016.
• Economic Momentum: The figure suggests a small net slowdown in the industrial sector, net of the holiday effect.
• Deleveraging Impact: The ongoing financial deleveraging campaign has started to weigh on infrastructure investment.

Hong Kong

• USDHKD Movement: The USDHKD broke toward 7.83, prompting renewed discussions about liquidity drain operations.
• HKMA Actions: The Hong Kong Monetary Authority (HKMA) previously used EFN bill issuances to maintain the currency peg.
• HIBOR-LIBOR Differentials: The 3m HIBOR-LIBOR widening suggests the need for HKMA intervention.

South Korea

• Policy Outlook: The dovish stance of the Bank of Korea indicates a potential growth inflection point.
• Currency Outlook: USDKRW is expected to rise to 1120 within the next 3-6 months.
• Interest Rates: KRW rates are expected to remain anchored in the coming weeks.

Thailand

• Current Account: Thailand's current account balance improved, with the overall balance of payments moving into positive territory.

Malaysia

• CPI Figures: Malaysia's CPI fell to 2.8% from 3.5%, in line with consensus.

Turkey

• Foreign Trade Balance: Turkey's January foreign trade balance was USD -9.07bn, in line with expectations.
• Core Deficit: The core deficit is estimated to have surged by USD 2.3bn y/y to USD 4.0bn.
• Tourism Outlook: A pickup in international passengers suggests a 35% y/y increase in tourist arrivals.

South Africa

• Cabinet Reshuffle: The cabinet reshuffle reflects Ramaphosa's commitment to governance reform and state capture reversal.
• Political Balance: The reshuffle is also aimed at keeping ANC constituencies satisfied.
• Data Release: January PPI and trade balance data are expected today.

Strategy Contacts

Strategist	Job Title	Legal Entity	Phone Number
Wike Groenenberg	Head of Emerging Markets Research, CEEMEA & APAC	BNP Paribas London Branch	+44 20 7595 8746
Mirza Baig	Head of FX & IR Asia Strategy	BNP Paribas Singapore Branch	+65 6210 3262
Dawn Kwa	FX & IR Asia Strategy	BNP Paribas Singapore Branch	+65 6210 3263
Kun Shan	China Strategist	BNP Paribas China Limited (Shanghai)	+86 21 2896 2773
Tianhe Ji	China Strategist	BNP Paribas China Limited (Beijing)	+86 10 6535 0836
Marcelo Carvalho	Head of Emerging Markets Research, Latam	Banco BNP Paribas Brasil S.A. (Sao Paulo)	+55 11 3841 3418
Piotr Chwiejczak	FX & IR CEEMEA Strategist	BNP Paribas London Branch	+44 20 7595 8715
Sai Ulluri	FX & IR CEEMEA Strategist	BNP Paribas London Branch	+44 20 7595 1872
Erkin Isik, CFA	FX & IR CEEMEA Strategist	Turk Ekonomi Bank A.S. (Istanbul)	+90 216 635 2987
Gabriel Gersztein	Head FX & IR Latam Strategy	Banco BNP Paribas Brasil S.A. (Sao Paulo)	+55 11 3841 3421
Samuel Castro	FX & IR Latam Strategist	Banco BNP Paribas Brasil S.A. (Sao Paulo)	+55 11 3841 3492
Gustavo Mendonca	FX & IR Latam Strategist	Banco BNP Paribas Brasil S.A. (Sao Paulo)	+55 11 3841 3445

Legal Disclaimer

• This document is non-independent research and is not investment research for the purposes of MiFID II.
• It may contain "Research" as defined under MiFID II unbundling rules and is intended for professional clients and eligible counterparties.
• No liability is accepted for any reliance on the information provided.
• The document is not a prospectus, advertisement, or public offering in the US, Canada, or EU.
• Indicative prices and terms are provided for informational purposes only and not for trading.
• Conflicts of interest may exist due to BNPP's involvement in investment banking, underwriting, or advisory services.

Additional Disclosures

• Options and ETFs: Options are complex instruments with high risk; ETFs carry tracking error, currency, geopolitical, and credit risks.
• Unregistered Securities: Certain securities may be unregistered under US law and are restricted to qualified institutional buyers or non-US persons.
• Confidentiality: The document is confidential and not to be distributed without prior consent.

Legal Notice

• The document is non-independent research and may be subject to conflicts of interest.
• Performance data may be based on back-testing and is illustrative only.
• No guarantee is given regarding the accuracy or completeness of the information.
• No advice is given on investment, tax, or legal matters.

Contact

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