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EM STRATEGY DAILY SUMMARY - 30 November 2017

Core Content Overview

This document is a daily strategy report from BNP Paribas, focusing on Emerging Markets (EM) and providing insights into key economic events and market outlooks. It includes information on oil production cuts, inflation data in CEEMEA, central bank decisions in Asia, and legal disclosures relevant to the jurisdictions where the report is distributed.

Key Market Events and Views

OPEC Production Cuts

• Event: OPEC and its partners are expected to announce an extension of production cuts.
• Consensus View: A 9-month extension to end-2018 is anticipated.
• Market Context: Speculative positioning in oil is at record levels, as shown in Figures 1 and 2.
• Risk Assessment: While the risk of a sharp correction is lower than in March 2017, the report notes that the market has been positive and investors are less likely to unwind positions due to this trend.

CEEMEA Data Highlights

• Poland: November CPI is forecast to rise slightly to 2.2% y/y from 2.1% in October.
• Turkey: The CBRT will release weekly portfolio flow data for the week ending 24 November.
  • Offshore investors increased their bond portfolio by USD 0.3bn.
  • Locals added USD 0.9bn to FX deposits.
  • The Turkish trade deficit increased by USD 3bn y/y to USD 7.3bn, aligning with expectations.

Asia Market Updates

• South Korea: The Bank of Korea (BoK) held its MPC meeting, resulting in a dovish rate hike.
  • The BoK emphasized inflation and growth as key considerations for future meetings.
  • The KRW weakened following the decision.
  • Short-term outlook suggests further weakening, but medium-term view remains that USDKRW will fall to 1050 over the next 6m-12m.
  • BNP Paribas took profit on a buy KRW position, achieving a carry-adjusted return of about 2.6%.
• India: Q3 GDP data is expected to be released today.
  • Q2 data was weaker than expected, leading to some rupee weakness.
  • Most analysts predict a recovery in real growth from 5.7% in Q2 to 6.4% in Q3.

Strategy Contacts

Legal and Regulatory Disclosures

• This document is a marketing communication and not independent research.
• It is not investment research for MiFID purposes.
• Conflicts of Interest: The strategy teams may have conflicts of interest with sales and trading activities.
• Confidentiality: The document is provided on a strictly confidential basis and must not be copied or distributed without prior written consent.
• Disclaimer: The document does not constitute an offer to sell or issue any financial instruments, nor should it be relied upon as a basis for investment decisions.
• Performance Data: Any performance data is based on simulations and is not indicative of future results.
• Indicative Prices: The prices and terms mentioned are indicative and not binding.
• Jurisdictional Restrictions: The document may not be eligible for sale in all jurisdictions or to certain investors.

US Disclosures

• Options: Complex instruments not suitable for all investors; risks involved are high.
• ETFs: May include tracking error, currency, geopolitical, and credit risks.
• Restricted Securities: Certain securities may not be registered under US Securities Laws and are available only to Qualified Institutional Buyers (QIBs) or non-US persons under Regulation S.

Distribution and Jurisdictional Information

• UK: Distributed by BNP Paribas London Branch, authorized by ECB, ACPR, and PRA.
• France: Distributed by BNP Paribas SA and BNP Paribas Arbitrage, authorized and supervised by ECB and ACPR.
• Germany: Distributed by BNP Paribas S.A. Niederlassung Deutschland, authorized by ECB and ACPR.
• Belgium: Distributed by BNP Paribas Fortis SA/NV, authorized and supervised by ECB, ACPR, and FSMA.
• Ireland: Distributed by BNP Paribas S.A., Dublin Branch, authorized and supervised by ECB and ACPR.
• Italy: Distributed by BNP Paribas Italian Branch, authorized and supervised by ECB, ACPR, and AMF.
• Netherlands: Distributed by BNP Paribas Fortis SA/NV, Netherlands Branch, supervised by ECB, ACPR, AFM, and DNB.
• Portugal: Distributed by BNP Paribas - Sucursal em Portugal, authorized and supervised by ECB, ACPR, and Banco de Portugal.
• Spain: Distributed by BNP Paribas S.A., S.E., supervised by ECB, ACPR, and Bank of Spain.
• Switzerland: Intended for Qualified Investors only, as defined under CISA and CISO.

Conclusion

The report provides a snapshot of the EM markets, emphasizing the expected OPEC production cut extension, CEEMEA inflation and trade data, and central bank decisions in Asia. It also highlights the importance of understanding market risks and legal restrictions in the jurisdictions where the report is distributed. BNP Paribas offers strategic insights and is clear about the nature and limitations of the information provided.