20171110-法国巴黎银行-EM_TODAY_7页_250kb

EM STRATEGY DAILY SUMMARY - 10 November 2017

Core Content

This document is a daily summary of Emerging Markets (EM) strategy insights from BNP Paribas, highlighting key market developments, sentiment analysis, and relevant data in several EM regions, including Turkey, South Africa, China, and Latin America (Latam). It also includes legal and regulatory disclosures regarding the use and distribution of the document.

Main Views and Key Information

Turkey

• Bearish sentiment in the Turkish Lira (TRY) appears more persistent than in previous stress tests, due to the largest year-to-date drawdown.
• The USDTRY pair closed largely unchanged on the previous day, despite some cautious optimism from the meeting between PM Yildirim and US Vice-President Pence.
• Investor sentiment remains cautious, as the recent sell-off has wiped out up to 6 million USD in realised returns.
• Portfolio flow data from the Central Bank of the Republic of Turkey (CBRT) shows offshore investors reduced their carry trade position by USD 1.7bn, with total outflow since mid-September reaching USD 13bn.
• Local investors have also eased pressure on the TRY by reducing FX deposits by USD 9bn, with USD 2bn in the last week.

South Africa

• President Zuma is expected to announce funding plans for subsidised higher education, which has led to selling pressure on the South African rand (ZAR).
• Concerns are that the program may require ZAR 40bn in budget cutbacks, which could impact the currency negatively.

China

• The People's Bank of China (PBoC) has injected significant liquidity into the markets in October, but sovereign bonds only edged up, as investors viewed this as a temporary measure.
• Chinese non-financial companies have reduced FX holdings, while offshore entities have increased RMB asset purchases.
• Chinese banks are stepping in to absorb the FX liquidity sold by non-financials and offshore entities.
• The Asia Strategy team notes that if the current situation persists, it may hurt economic growth.

Latin America (Latam)

• In Brazil, the release of the October CPI is expected to show low inflation, allowing the Central Bank to continue easing the Selic rate.
• Latam Strategy team highlights the potential for continued monetary easing in Brazil.

Other Recent Publications

• Chile: Pension funds are monitoring and switching to riskier funds, indicating a shift in investment strategy.

EM Strategy Contacts

Legal Notice

• The document is non-independent research and may be subject to conflicts of interest.
• It is a marketing communication and not investment research.
• No liability is accepted for any reliance on the information contained.
• Indicative prices are provided for informational purposes and are not actual transaction terms.
• Confidentiality is maintained, and the document may not be copied or distributed without prior consent.
• The document does not constitute a prospectus or public offering.
• Investment risks are highlighted, including market, credit, and liquidity risks.
• Options and ETFs are complex instruments, and disclosure requirements are in place for compliance with US and UK regulations.

US Disclosures

• Options are complex and not suitable for all investors.
• ETFs may involve tracking error, currency, and geopolitical risks.
• BNP Paribas may have multiple interests in the companies discussed, including advisory, transactional, and financial roles.
• Nonpublic information may be used for market-making activities, and confidentiality is maintained.

Regulatory Information by Country

• UK: BNP Paribas London Branch is lead supervised by the ECB and ACPR.
• France: The report is produced by BNP Paribas SA and BNP Paribas Arbitrage.
• Germany: Distributed by BNP Paribas S.A. Niederlassung Deutschland.
• Belgium: Supervised by ECB, ACPR, and FSMA.
• Ireland: Distributed by BNP Paribas S.A., Dublin Branch.
• Italy: Distributed by BNP Paribas Italian Branch, subject to limited regulation by the Bank of Italy and CONSOB.
• Netherlands: Distributed by BNP Paribas Fortis SA/NV, Netherlands Branch.
• Portugal: Distributed by BNP Paribas - Sucursal em Portugal, subject to limited regulation by Banco de Portugal and Comissão do Mercado de Valores Mobiliários.
• Spain: Distributed by BNP Paribas S.A., S.E., subject to limited regulation by the Bank of Spain.
• Switzerland: Intended for Qualified Investors as defined by Swiss regulations.

Summary of Key Themes

• Persistent bearish sentiment in TRY, driven by a large drawdown and lack of positive catalysts.
• USD weakness due to revised US tax reform plans, but not necessarily long-term negative for the dollar.
• South Africa faces pressure from potential education funding cutbacks.
• China is dealing with liquidity injections and corporate reliance on shadow banking.
• Latam is expected to see continued monetary easing in Brazil.
• Legal and regulatory disclosures emphasize the non-investment advisory nature of the document and the potential for conflicts of interest.