20131101-巴黎银行证券-EM_Strategy_Plus_13页_1mb

EM Strategy Plus Summary - 01 November 2013

Core Content

This document outlines the key views and asset allocation strategies for emerging markets (EM) from BNP Paribas, focusing on interest rates, foreign exchange (FX), and credit instruments. The report emphasizes the current market conditions, including a slowdown in the US economy, increased demand from Europe, and the ongoing risk-reduction mode in EM. It also highlights specific opportunities in the rates and FX space across various EM countries.

Main Views and Asset Allocation

1. PICKS vs USD

• The slowdown in the US economy has not significantly impacted EM, especially with increased European demand.
• Activity is picking up in PICKS countries, offering a good opportunity in the rates space.
• The market is expected to price in rate hikes faster in PICKS than in the US, but the average difference between 1y1y rates and the 1y rate is similar to the US.
• Trade Recommendation: Pay 1y1y rates in PICKS against USD at 125bp, targeting 250bp with a stop at 90bp. DV01: 30k USD.

2. Asia FX and Rates: Let the squeeze linger

• Asian currencies are in a pullback as the market shifts to risk reduction.
• The squeeze is expected to continue, but it will soon create opportunities to buy KRW and PHP.
• Recommendations:
  • Close short USDINR.
  • Remain short USDPHP, aiming to double up around 1m NDF at ref 43.80.
  • Wait for a squeeze to 1075 to re-enter USD shorts in USDKRW.

3. Brazil: Long NTN-B 2018

• The short end of Brazil's inflation-linked bond curve offers good value.
• Inflation is rising and is expected to remain elevated through year-end.
• The CCB may not hike rates as much due to the upcoming presidential election, which could affect economic growth.
• Trade Recommendation: Buy NTN-B 2018 at 5.40%, targeting 4.60% with a stop at 5.65%. DV01: 10k USD.

4. Hungary: Buy PLNHUF and get paid

• HUF rates have been depressed due to broad-based deleveraging and monetary easing.
• Credit growth is likely to end this support, and domestic investors will not tolerate HUF rates below EUR rates for long.
• Trade Recommendation: Buy PLNHUF at 70.70, targeting 73.40 with a stop at 69.35. DV01: 10m USD.

5. Turkey: Hawkish bias to support long end

• CBRT introduced a liquidity policy change, limiting one-week repo funding to TRY 10bn, which will keep the average repo rate above 6.4%.
• This hawkish stance supports the long end of the yield curve.
• Trade Recommendation: Buy 10y TURKGB at 9.00%, targeting 8.20% with a stop at 9.40%. DV01: 5k USD.

6. South Africa

• Trade the 9.60-10.30 range.
• Recommend overweighting the 5-15y segment of the local debt curve, with R207 as the best value.

7. Russia

• USDRUB is vulnerable to fund outflows.
• Recommend short-maturity OFZs due to potential rate cuts.
• Trade Recommendation: Sell RUSSIA '20 into TURKEY '11/19.

8. Mexico

• Buy MXN against BRL due to better fundamentals and external environment.
• Increase duration in MBONO '22.

9. Malaysia

• USDMYR to consolidate, with limited room for further appreciation to 3.10.
• Recommend short duration on local debt due to unfavorable supply outlook.

10. Indonesia

• IDR onshore spot and offshore fixing to converge around 11,000.
• Recommend slightly underweight local debt due to supply pressures and lack of foreign demand.

11. Thailand

• THB to appreciate gradually to 30.50.
• Reduce overweight on local debt.

12. Poland

• Positive on the zloty, with a target range of 4.00-4.10.
• Overweight the back end of the local debt curve.
• Recommend buying REPHUN '41 and selling REPHUN '20.

Key Risk Events

• ECB Monetary Policy Meeting and US Non-Farm Payrolls Report are key events next week.
• China's October PMI and trade data will be important for EM investor sentiment.
• Indonesia's bond auctions on 6 November will provide insight into EM demand.
• Central banks in CEEMEA (Romania, Poland, Czech Republic) will have rate decisions.
• FX mortgage restructuring in Hungary is expected to impact HUF exposure.

Strategic Trade Recommendations

Total P/L: 895 kUSD

Conclusion

The report highlights the ongoing short squeeze in EM, driven by risk reduction and positioning adjustments. It recommends a mix of defensive and strategic trades, with a focus on buying the long end of the yield curve in some EMs and selling in others. The key areas of opportunity include the short end of the inflation-linked bond curve in Brazil, the HUF in Hungary, and the long end of the yield curve in Turkey. The document also underscores the importance of monitoring key central bank meetings and global economic indicators for further market direction.