德银-新兴市场-利率与信贷-新兴市场月报：依然强劲-20171016-Deutsche_Bank-EMEA_Monthly：Still_robust_59页_1mb

Emerging Markets CEEMEA Summary (October 2017)

Core Content

This report from Deutsche Bank provides an analysis of the economic and financial outlook for Emerging Markets in Central, Eastern Europe, the Middle East, and Africa (CEEMEA) as of October 2017. It discusses economic growth, inflation, monetary policy, FX trends, and fixed income performance across the region.

Main Points

Economic Outlook

• Growth Trends: EM business cycles are on track and unlikely to be disrupted by Fed rate repricing. Growth remains robust across the region, with CEE countries leading, followed by Turkey and Russia.
• Inflation: Inflation is not yet a threat in most countries, except Turkey. Russia's inflation is expected to fall below 3% by the end of 2017.
• Risk Factors: Political risks in Turkey have materialized, including a diplomatic row with the US. This could negatively impact Turkish assets if further escalation occurs.
• South Africa: While growth is positive, there is a risk of further disappointments. The country is also facing potential credit rating downgrades due to fiscal slippages and political issues.

Fixed Income

• Corporate Credit: CEEMEA corporate spreads tightened by ~22 bps in September 2017, the best monthly performance in 2017. This compared favorably to the overall EM performance.
• Sovereign Credit: Valuation has improved for Turkey and South Africa, but the team remains marketweight due to lack of positive fundamentals. Ukraine and Egypt are more constructive.
• Bond Recommendations: Investors should focus on relative value (RV) opportunities. The report highlights specific RV trade ideas, such as buying MAFUAE '25s vs. EMAAR '26s.

FX Trends

• Emerging Market FX: The summer Goldilocks period for EM FX has paused. External environment uncertainty, including Fed hikes and tax reform, has increased.
• Preferred FX Positions: Long RUB is recommended due to its high scores on defensive metrics. Long PLN and HUF vs. EUR are also favored as they have zero beta to US rates and sound macro conditions.
• TRY Depreciation: A retracement trade via options, such as 1-2m USDTRY put spreads, could be considered due to recent TRY underperformance.

Policy Rates

• Monetary Policy: The report forecasts policy rate changes for various countries in the region. For example, the Czech Republic is expected to hike rates, while Russia is projected to reduce them.
• Interest Rate Outlook: The terminal rate forecast for South Africa has been revised to 6.75% from 7.00% due to the dovish Inflation Report. No rate hikes are expected for 2018 in some countries.

FX Forecasts

• Forecasts vs. Forward Rates: The report compares spot and forward rates for various currencies against USD and EUR. It notes that the EMEA FX appreciation cycle remains intact despite increased uncertainty.

Bond Yield Forecasts

• 10Y Government Bond Yields: Forecasts show varying trends for different countries. For example, Turkey's bond yields are expected to decrease significantly, while the Czech Republic and Hungary are projected to see increases.

Key Economic Forecasts

FX Forecasts

Policy Rate Forecasts

Central Bank Meetings in 2017

Summary

• Growth: Robust across EMEA, with CEE leading, followed by Turkey and Russia.
• Inflation: Not a threat in most countries, except Turkey, where it is expected to rise.
• Policy Rates: Some countries, like the Czech Republic, are expected to increase rates, while Russia and South Africa may see decreases.
• FX: The appreciation cycle remains intact, with long RUB and PLN/HUF vs. EUR being preferred.
• Corporate Credit: Tightened significantly in September, indicating a positive trend.
• Sovereign Credit: Valuation has improved for some countries, but the team remains cautious about others.

This report highlights the current and projected economic conditions, FX trends, and fixed income opportunities in the CEEMEA region, emphasizing the importance of monitoring political and fiscal developments.