20171208-法国巴黎银行-EM_STRATEGY_PLUS_28页_2mb

EM Strategy Weekly Summary - 8 December 2017

Core Content Overview

This document outlines the emerging markets (EM) and Latin America (Latam) strategy insights from BNP Paribas and its regional teams. The main focus is on US real interest rates and their implications for EM and Latam markets, along with specific trade recommendations and economic outlooks for key countries.

Key Themes

• US Real Rates: US real interest rates are a significant factor for EM and Latam markets. The analysis suggests that these rates are unlikely to rise sharply in 2018, and their impact on local assets will be minimal.
• India: The RBI is expected to maintain a neutral stance and tighten policy in 2018, with a slightly more hawkish outlook on inflation and growth.
• South Africa: Political dynamics are closely watched, with Cyril Ramaphosa having a small lead over Nkosazana Dlamini-Zuma in the ANC presidential race. The ZAR is expected to remain rangebound between 13.50 and 14.50.
• Turkey: The CBRT is anticipated to hike rates by 75bp to 13.00% and the average repo rate by 50bp to 12.75% at the upcoming policy meeting. However, further hikes are unlikely unless the TRY depreciates sharply.
• Mexico: Real rates are attractive, and a long position in Jun-2019 UDIBonos is recommended. The premium in UDIBonos yields is above the model's fitted value, and the position benefits from positive carry.
• Chile: Private pension funds' assets remain flat, and a reallocation from fixed income to equities is beneficial for the 5y CLPxCAM payer.

Trade Recommendations

Rates

• Receive 3x6 TRY CCY FRA (add 5k to position): USD 10k DV01, entry level 13.52%, target 13.00%, stop 14.50%, P/L +22bp, P/L kUSD 110
• Flattening IBR 9M-18M: USD 20k, entry 9, target 5, stop -15, P/L +4bp, P/L kUSD 135
• Receive Brazil DI Jan-19: USD 30k, entry 7.26%, target 6.95%, stop 7.46%, P/L +20bp, P/L kUSD 527
• Receive Mexico TIIE 5Y / Pay Colombia IBR 5Y: USD 20k, entry 187, target 100, stop 300, P/L -50bp, P/L kUSD -908
• Pay Chile CLPxCAM 5Y: USD 8k, entry 3.37%, target 3.51%, stop 3.77%, P/L +14bp, P/L kUSD 12
• Long Jun19 UDIBonus (new): USD 10k, entry 3.36%, target 3.06%, stop 3.60%, P/L +2bp, P/L kUSD 22

FX

• Buy USDZAR: USD 10mn, entry 13.70, target 13.66, stop 14.10, P/L -0.29%, P/L kUSD -29
• Buy USDTRY: USD 10mn, entry 3.85, target 3.85, stop 4.05, P/L -0.88%, P/L kUSD -88
• Buy USDSGD: USD 10mn, entry 1.357, target 1.352, stop 1.385, P/L -0.34%, P/L kUSD -34
• Sell 3m USDCNY NDF (rolled into fresh 3m twice): USD 20mn, entry 7.0051, target 6.654, stop 6.2, P/L 5.27%, P/L kUSD 1055
• Short USDARS via 3m NDF: USD 20mn, entry 18.63, target 18.005, stop 7.0%, P/L 3.39%, P/L kUSD 678
• Short USDCOP via 3m NDF: USD 8mn, entry 2,971, target 3,016, stop 2,820, P/L -1.49%, P/L kUSD -119
• Long BRL against a basket (CLP, EUR & AUD) via 1m NDF: USD 10mn, entry 192.74/4.018/2.6285, target 198.77/3.890/2.4762, P/L 4.11%, P/L kUSD 206

Options

• Buy 1m USDZAR put fly (strikes 1x 13.50/2x 14.00/1x 14.50): USD 10mn, P/L -0.04%, P/L kUSD -4
• Buy 1y USDHKD call spread (7.70 vs. 7.80, 1X1): USD 100mn, P/L 0.51%, P/L kUSD 507
• Long USDBRL OT 3.10 / Mat: 26-Jan-18: USD 1.5mn, P/L -15.56%, P/L kUSD -233
• Long USDMXN OT 20.0 / Mat: 10-Apr-18: USD 1.5mn, P/L 8.66%, P/L kUSD 130
• Long USDBRL OT 2.90 / Mat: 15-Dec-17: USD 1mn, P/L -20.00%, P/L kUSD -200

Credit

• Buy Argentina 5Y CDS vs Sell 5Y Brazil/Mexico/Colombia CDS: USD 30.0mn, P/L -17 bp, P/L kUSD -288
• Long Bocan (Badlar linked) March 2018: USD 5mn, P/L 4.11%, P/L kUSD 206

Total Performance Summary

Outlook for Next Week

Asia

• Philippines (BSP) and Indonesia (BI): Policy meetings on 14 December. Both are expected to keep rates unchanged.
• China: November inflation and industrial production data on 9 and 14 December. Short-end rates may rise due to OMO rate hike rumors, but a hike is unlikely.
• India: November CPI and October industrial production data on 12 December. CPI is expected to rise to 3.8% y/y, and the RBI may consider rate hikes in H2 2018.
• South Korea: President Moon Jae-in will meet President Xi Jinping on 17 December to improve bilateral ties.

CEEMEA

• Turkey: MPC meeting on 14 December. Q3 GDP and October current account data on 11 December. Expected GDP growth of 11.0% y/y and current account deficit of USD 4.4bn.
• South Africa: November inflation on 13 December. Expected headline CPI inflation to moderate to 4.6% y/y. ZAR is expected to remain rangebound. NERSA will announce electricity tariff increase for 2018/19 on 13 December.
• Poland: November headline inflation and core CPI data on 11 and 12 December. Expected headline inflation to remain at 2.5% y/y.
• Russia: Central bank rate decision on 15 December. Expected rate cut of 25bp to 8.0%. CPI inflation is expected to fall further.
• Egypt: November inflation data over the weekend. Expected headline inflation to fall to 26% y/y.

Latam

• Mexico: 'Super Thursday' on 14 December for monetary policy. Banxico is expected to remain on hold, but the probability of rate hikes has increased.
• Colombia: BanRep is expected to leave rates unchanged, with a potential rate cut in 2018. IBR flattener position is maintained.
• Chile: BCCh is expected to remain on hold, with a rate hike anticipated for 2018.

Key Insights

• US real interest rates are the most relevant for EM and Latam markets, with minimal impact expected in 2018.
• Domestic factors continue to play a crucial role in explaining credit risk premiums, especially in Brazil and Mexico.
• Political and fiscal dynamics are significant in South Africa and India, influencing inflation and policy decisions.
• FX strategies focus on USDZAR, USDTRY, and USDSGD, with mixed outcomes.
• Credit risk strategies include CDS positions and long-term bond trades.