20180130-法国巴黎银行-CEEMEA__Making_savings__not_so__great_again_13页_416kb

Summary of EM Strategy Desknote: "CEEMEA: Making savings (not so) great again"

Core Content

This document provides an analysis of the external financing needs (EFC) and net international investment position (NIIP) of emerging markets (EM), with a particular focus on the CEEMEA region (Central and Eastern Europe, Middle East, and Eastern Asia). It extends the previous analysis to include Asian and European savers and the US, examining how USD strength and global savings dynamics have shaped the financial landscape of these regions over the past 40 years.

Main Findings

1. Global Savings Dynamics:

   • Over the past 40 years, EM countries, along with Asian and European savers, have improved their C/A surpluses and NIIP positions.
   • The US has experienced a deterioration in its NIIP, driven by a persistent current account deficit.

2. Impact of Tapering:

   • The US tapering in 2013 led to a sharp rise in USD interest rates, which increased the cost of funding for EM countries and pressured their FX.
   • The US NIIP deteriorated significantly from USD 5.4trn in Q2 2014 to USD 8.3trn in Q4 2016, with USD appreciation being a key driver.

3. USD Appreciation and IIP:

   • The US IIP deterioration is linked to USD strength, which reduced the value of foreign-currency denominated assets held by Americans and increased USD-denominated liabilities for foreign investors.
   • The US current account deficit is now counterbalanced by the global savings glut in EM, Asia, and Europe.

4. Historical Lessons:

   • Past episodes of USD strength (e.g., 1980s, mid-1990s) led to financial shocks and rebalancing in EM countries, which resulted in higher savings and lower investment.
   • The 1997 Asian debt crisis was a direct consequence of USD appreciation and sudden stop in capital flows.

5. CEEMEA Performance:

   • The recent USD weakness and EM FX outperformance suggest that CEEMEA assets are still attractive to global investors.
   • Long-term USD depreciation is expected to continue, supporting inflows to CEEMEA.

6. Inflation Expectations and USD:

   • The US inflation expectations are approaching 2%, which could lead to tightening of liquidity and rebalancing of flows.
   • The G10 strategy team estimates the long-term EURUSD fair value at 1.34, indicating potential USD weakness and EUR strength.

Key Information

• Table 1 compares the NIIP of key countries and regions, highlighting the US as a net debtor and Asia and Europe as net savers.
• Chart 1 shows the sharp deterioration in the US NIIP since the 1990s.
• Chart 2 illustrates the global savings glut and the shift in NIIP from EM, Asia, and Europe to the US.
• Chart 4 highlights three major USD strength periods over the last 40 years, each associated with sudden stops in capital flows to EM.
• Chart 5 shows the annual EFC of Asian savers, peaking at USD 500bn in 2007.
• Chart 6 indicates that Eurozone debt outflows during QE were predominantly directed to the US, contributing to USD strength.
• Chart 7 and Chart 8 show the impact of USD interest rates and inflation expectations on EM flows and USD performance.

Implications for CEEMEA Assets

• CEEMEA assets are expected to benefit from USD depreciation and increased inflows.
• The adjustment mechanism for global savings flows is driven by long-term US rates.
• Inflation expectations are a key barometer for future flow adjustments and USD performance.
• The current level of inflation expectations (approaching 2%) may trigger a correction in the USD's fair value and shift flows towards EM assets.

Conclusion

The CEEMEA region is likely to continue benefiting from USD weakness due to the global savings glut and improved EFC. The US's deteriorating IIP and rising inflation expectations suggest a potential shift in global capital flows. The G10 strategy team estimates the EURUSD fair value at 1.34, indicating a long-term USD depreciation and EUR strength.

Contacts and Legal Notice

• The document is produced by BNP Paribas Global Markets Research teams.
• It is a marketing communication and not investment research.
• Legal disclaimer applies, stating that the information is not guaranteed for accuracy, completeness, or fitness for a particular purpose.
• The document is not intended to provide investment advice or fiduciary duty.
• It is subject to conflicts of interest and non-independent research.

Additional Resources

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

This summary encapsulates the key findings, historical context, and implications of the document for CEEMEA assets and global capital flows, within the 1000-word limit and in Markdown format.