巴黎银行-拉美-外汇市场-阿根廷外汇：近期发展事态权衡-20180323-10页_411kb

Latin America Strategy Summary: Argentina FX Analysis - February 2018

Core Content Overview

This document provides an analysis of Argentina's foreign exchange (FX) market and investment strategy for February 2018, focusing on portfolio flows, central bank interventions, and the implications for the Argentine peso (ARS). It also outlines the broader strategy views of BNP Paribas in the Latin America region, particularly with respect to currency risk management and the economic outlook.

Key FX Market Developments

Portfolio Flows

• Portfolio flows into Argentina remained positive at USD 0.25bn in February.
• This is a reduction from January and aligns with the deceleration trend since November 2017.
• Of the total USD 0.25bn inflow, only USD 9mn was allocated to foreign-currency investments.
• The majority of the inflow went through the FX market, indicating a shift in the dynamics of USDARS appreciation.

Non-Financial Private Sector Purchases

• Purchases from the non-financial private sector reached USD 1.34bn in February.
• This is below the 12-month average of USD 1.9bn and the lowest since June 2017.
• The purchase of hard currency (bills) was at USD 0.97bn, while foreign asset transfers amounted to USD 0.37bn.
• There has been a moderation in bill purchases compared to the previous year.

USD-Denominated Deposits

• USD deposits in the banking system remained broadly constant at around USD 25.6bn.
• This suggests that external asset formation for savings purposes is not a major driver of the ARS's performance in February.

FX Intervention by BCRA

• The BCRA continues to intervene in the FX market to curb peso depreciation.
• So far, the central bank has sold USD 1.5bn in the FX market.
• This intervention aligns with long-held hypotheses that:
  • Pass-through (the effect of inflation on currency) is not significantly reduced.
  • Inflation and domestic dollar demand are inelastic to interest rates.

Market Dynamics and Strategy Views

CDS Premium and Credit Risk

• The 5y CDS for Argentina jumped +41bp since January (roll adjusted), underperforming all peers.
• The cost of credit is +110bp above January levels, indicating rising risk premiums.

Strategy Recommendations

• No structural bullish position is recommended in Argentina due to:
  • High twin deficits (fiscal and current account).
  • Less independent central bank.
  • High credit risk and inflation.
• Long protection via 5y CDS against a basket of Latin American countries is advised, with a current P&L of +35bp.

Economic Concerns

• Retail USD demand moderated slightly in February.
• However, the overall market environment is still dominated by domestic factors.
• The twin deficits are critical for the future evolution of the ARS.
• Fiscal consolidation is expected to accelerate due to increasing premium demands from agents.
• Portfolio inflows have been the main offset to domestic dollar demand, and their reduction could have a meaningful impact on the currency.

Global Financial Conditions and USD Funding Costs

• The cost of USD funding (Libor/OIS spread) has increased, raising concerns about the potential short-term revival of the USD.
• The agricultural export-driven USD inflows in Q2 2018 are not seen as sufficient to stabilize the ARS.
• These inflows are highly dependent on stable or improving global financial conditions.

Important Legal and Compliance Notes

• This document is non-independent research and not investment research for MiFID II purposes.
• It is a marketing communication and intended for Professional Clients and Eligible Counterparties.
• It may contain hypothetical or back-tested performance data, which does not guarantee future results.
• No investment, financial, legal, or tax advice is provided.
• Options and ETFs discussed are complex instruments and may involve high risk.
• The document is subject to conflicts of interest, as BNPP may engage in transactions that are inconsistent with the views expressed.
• Restricted securities may be discussed, which are only available to Qualified Institutional Buyers (QIBs) or non-U.S. persons.

Disclaimer and Risk Warnings

• No liability is accepted for any direct or consequential loss arising from reliance on this document.
• The information provided is not guaranteed in accuracy or completeness.
• Simulated performance may not reflect real-world factors such as liquidity constraints or transaction costs.
• Transactions involving the products discussed are highly volatile and may involve unlimited loss in certain cases.

Important Disclosures

• The document is produced by a BNPP group company and is intended for specific recipients.
• It is not a prospectus, advertisement, or public offering.
• Confidentiality is emphasized; the document must not be copied or distributed without prior consent.
• Legal, tax, and accounting considerations must be evaluated independently before transacting.

Contact Information

• Gabriel Gersztein: Head of GM Latin America Strategy & Commodity Quant Strategy
  +551138413421
• Gustavo Mendonca: FX & IR Latin America Strategy & Commodity Quant Strategy
  +551138413445
• Samuel Castro: FX & IR Latin America Strategy & Commodity Quant Strategy
  +551138413492

Conclusion

The analysis highlights a mixed picture of Argentina's FX market, with moderate inflows and increased pressure on the peso due to domestic factors and rising credit risk. The BCRA's intervention remains a key factor in currency stabilization, but long-term risks persist due to twin deficits and limited central bank independence. The strategy remains cautious, with a focus on protection via CDS and no structural bullish bets recommended.