20171214-法国巴黎银行-EM_TODAY_8页_935kb

EM STRATEGY DAILY - 14 December 2017 Summary

Core Content Overview

This document provides a summary of emerging markets (EM) strategy insights from BNP Paribas across different regions, including CEEMEA, Latin America, and Asia, with a focus on monetary policy decisions, FX dynamics, and market outlooks. It also includes legal notices and disclosures relevant to the document's use and the potential conflicts of interest associated with BNP Paribas' strategy teams.

Key Market Insights

United States and EM FX

• Federal Reserve Rate Hike: The Fed raised rates by 25bp as expected, signaling a continued flattening of the US yield curve.
• Support for Risky Assets: The FOMC communication suggested that the US curve will stay flat until inflation accelerates, which is supportive for EM assets.
• USD/EM FX Correction: A Q3 correction in USD/EM FX was driven by fears of rising EM borrowing costs.
• Inflation Expectations: US 2y breakevens were at 2.4% at the start of the year, but have now fallen to 1.3%, indicating subdued inflation expectations.
• Inflation Surprise Outlook: There is a potential for a positive inflation surprise in 2018, which may support EM FX.

Latin America

• Focus on 'Super Thursday' (14 December): Key monetary policy decisions are expected from Mexico (Banxico), Colombia (BanRep), and Chile (BCCh).
• Mexico: Banxico is expected to remain on hold, but the probability of a rate hike has increased due to hawkish remarks and stronger-than-expected inflation.
• Colombia: BanRep is likely to keep rates unchanged, with a possible rate cut in January. The IBR 9m versus 18m flattener is maintained.
• Chile: BCCh is expected to remain on hold, but a rate hike is anticipated for next year.

CEEMEA

• Turkey (CBRT): Economists expect the late liquidity window (LLW) rate to be raised by 75bp to 13.00%, and the ON repo rate by 50bp to 9.75%.
• USD/TRY Dynamics: The 1-week return for USD/TRY is positive, similar to the pattern observed in January 2017, which is essential to break the negative trend.
• 3m Performance: The 3-month return for TRY is deeply negative, reinforcing the need for rate hikes.
• FX Volatility: The market is pricing in 1% break-even volatility for USDTRY, suggesting a potential test of the 3.80 level if a larger than 75bp hike is delivered.
• Currency Curve Flattening: A rate hike is expected to lead to a flattening of the USDTRY currency curve, which could slow appreciation.

Asia

• China: The PBOC raised interest rates by 5bp, which is seen as symbolic. The strategy team recommends receiving 5-year NDIRS at 4.12%, targeting 3.85%.
• RMB Depreciation: The PBOC may allow the RMB to depreciate due to the impact of financial market deleveraging policies and the lagged effect of earlier tightening.

Other Regional Notes

South Africa

• Legal Developments: The South African high court ruled against President Zuma, which may affect Nkosazana Dlamini Zuma's campaign for the ANC conference.
• ZAR Performance: The ZAR has been the top performer this month, indicating strong dollar liquidity availability.
• FX Volatility: High FX volatility is expected ahead of the ANC conference, with asymmetric impacts depending on the outcome.
• Rate Hikes: The market may start pricing in rate hikes as the positive FX performance continues.

Strategy Positions

• USDTRY: Maintain a long USDTRY position with a 3x6 receiver, anticipating further appreciation and curve flattening.
• IBR 9m vs 18m: Continue with the flattener position due to current levels and high positive carry.
• China NDIRS: Recommend receiving 5-year NDIRS at 4.12% with a target of 3.85%.

Legal and Disclosure Information

• Non-Independent Research: This document is non-independent research and may be subject to conflicts of interest with sales and trading.
• Marketing Communication: It is a marketing communication and not investment research for MiFID purposes.
• Confidentiality: The document is for the use of intended recipients and must not be distributed without prior written consent.
• No Investment Advice: BNP Paribas does not provide investment, financial, legal, or tax advice in this document.
• Conflicts of Interest: BNP Paribas may engage in transactions that conflict with the views expressed in the document.
• Simulated Performance: Any performance data included is based on back-testing and is not indicative of future results.

Contact Information

Additional Notes

• The document includes a note about the "www.baogaoba.xyz" website, which is mentioned as a source of exclusive and daily updated information.
• The use of the document is subject to strict confidentiality and legal compliance.
• The legal notices apply across various jurisdictions including the UK, France, Germany, Belgium, Ireland, Italy, and the Netherlands, with specific regulatory authorities mentioned for each.