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报告摘要

EM Strategy Summary – 5 May 2017

Core Content

This document outlines the Emerging Markets (EM) Strategy and related EM Strategy Plus recommendations for the week of 5 May 2017. It is produced by the BNP Paribas EM Strategy Team and Turk Ekonomi Bank A.S., with insights from various regional strategists. The report includes an analysis of EM performance, commodity price movements, FX liquidity conditions, and credit risk assessments, alongside specific trade recommendations.

Main Themes and Views

1. EM Strategy Outlook

Overall Sentiment: The team remains positive but more cautious than before due to recent commodity price declines, particularly in oil and industrial commodities.
Reason for Caution: The fall in commodity prices is attributed to tightening liquidity in China, which may not extend further.
Strategy Shift: The team suggests increasing over-weights in resource-poor EM countries with high yields, such as Turkey or India, while reducing exposure to resource-rich countries like South Africa or Colombia.

2. Commodity Price Impact

Commodity Price Declines: Industrial commodities like oil, iron ore, and coal fell sharply, while soft commodities (e.g., grains, cocoa) remained flat or slightly higher.
Export Dependency: Table 2 highlights the importance of commodities in EM countries' exports, with Russia and Saudi Arabia heavily reliant on fuels, and Brazil and Chile on industrial and precious metals.
Price Correlation: A sharp correlation between oil prices and the S&P 500 is observed when oil prices fall below $40/bbl. The S&P 500 has seen strong returns, suggesting a buffer against sustained drawdowns, but recent weak performance raises concerns about flow slowdown.

3. CEEMEA Market Analysis

Flow Test: The team suggests adding defensive trades due to possible slowing flows into risky assets.
- Pay RUB 6x9 XCCY (carry trade) and short PLNHUF.
Turkey's Swap Problem: The discrepancy between onshore and offshore rates is due to heavy long positioning in TRY and limited FX liquidity. The team recommends paying the 2m1m TRY forward rate at 10.95%, targeting 12.0% and stopping at 10.5%.
Credit Strategy: The team is switching from Oman $ '27s to Turkey $ '27s for a 31bp yield pickup, due to increased market risks and Oman's vulnerability to oil prices.

4. Latin America (Latam) Strategy

Commodity-Adjusted Approach: The team evaluates international reserve adequacy and recommends a long BRL trade against a basket of currencies (CLP, EUR, AUD).
Brazil: The team increases the receive DI Jan-20 position due to positive inflation outlook and favourable reform environment. The Brazilian pension reform was approved by the Lower House, suggesting support for the trade.
Mexico: The team recommends paying the 5Y CLPxCAM trade, as Mexican reserves are adequate and the carry trade has performed well.
Argentina: Reserves are below adequate levels, and the team expects moderate inflation in April, but still high.
Peru: The team takes profits on long Peru Soberanos 2026 (50% FX hedged), as FX risks have been mitigated.

Key Recommendations

Trade	PV01/Notional	Entry Level	Target	Stop	Notes
Pay the 2m1m TRY forward rate	5k USD	10.95%	12.0%	10.5%	Relative value trade
Switch from Oman $ '27s to Turkey $ '27s	USD 5mn	31 bp	0 bp	55 bp	31bp yield pickup
Pay RUB 6x9 XCCY (carry trade)	5k USD	7.95%	-	7.50%	Positive carry of +20bp
Sell PLNHUF	USD 10mn	73.90	72.50	74.70	Defensive trade
Receive Brazil DI Jan-20	30k USD	9.69%	9.25%	10.10%	Increased position
Long BRL against a basket (CLP, EUR, AUD)	USD 10mn	192.74/4.018/2.6285	209.20/3.396/2.3674	-	Long BRL relative value trade
Buy 2m USDZAR put fly at strikes 12.50/13.00/13.50	USD 20mn	0.66%	0.73%	-	Options trade
Buy 1y USDHKD call spread (7.70 vs. 7.80, 1X1)	USD100m	0.54%	0.54%	-	Options trade
Long USDBRL CS k=3.30-3.60 / exp: 01-Jun-17	USD 55mn	0.54%	0.54%	-	Options trade
Long USDMXN Seagull (PS k=19/18 Call k=22.50 / exp: 27 Dec 2017)	USD 50mn	0.45%	0.32%	-	Options trade
Sell Brazil 5Y CDS	USD 22.5m	229	216	200	+13 bp

Trade Review

Positive Performance: Several trades have shown positive returns, including Receive 2Y1Y THB NDIRS, Pay 1Y1Y RUB XCCY, and Long USDARS 2y NDF against short USDARS 1y NDF.
New Trades: The team has introduced new trades such as Pay 2m1m TRY forward rate, Pay RUB 6x9 XCCY, and Sell PLNHUF.
Profit Taking: The Long Peru Soberanos 2026 trade is closed, with positive P/L of +45 bp.
Total P/L: The total P/L for the week is +3,106 kUSD, with FX contributing the most at +2,529 kUSD.

Upcoming Events

Global

French Election: Second round on 7 May, which may influence global risk sentiment.

CEEMEA

Czech Republic & Hungary: Inflation data release on Wednesday.
South Africa: Reserves and manufacturing production data on Monday and Thursday.
Turkey: Current account data on Thursday, expected to show a USD 3.2bn deficit in March.

Latam

Brazil: Monthly inflation (IPCA) release on Wednesday, expected to slow to 0.17% m/m and 4.13% y/y.
Colombia: CPI expected to rise to 0.39% m/m and 4.58% y/y.
Chile: CPI expected to moderate to 0.3% m/m and 2.8% y/y.
Argentina: CPI expected to moderate to 2% m/m.
Mexico: CPI expected to be flat in April, following a 0.15% decline in the first two weeks of the month.

Conclusion

The EM Strategy team remains positive but cautious, emphasizing defensive trades and relative value strategies due to increased market risks and commodity price declines. The focus is on Turkey, Brazil, and Mexico for credit and FX opportunities, with Turkey highlighted as a key beneficiary of positive yield spreads and FX liquidity support. The team also anticipates normalization in FX liquidity and potential rate cuts in Brazil and Russia due to economic and political factors.