巴黎银行-新兴市场-投资策略-全球风险溢价：自上次更新以来没有变化-20190719-7页_658kb

Summary of BNPP-Global Risk Premium Document (17 July 2019)

Core Content

This document from BNP Paribas outlines the current state of the BNPP-Global Risk Premium model and its implications for emerging market (EM) assets and strategies. The model is used to assess risk appetite and market dynamics across various asset classes, including equities, FX, and credit.

The model currently indicates over-bought conditions, suggesting that a pullback in the current rally (β) and/or increasing differentiation (α) across risk assets may occur. However, it also notes that risk asset prices may remain stable or continue to appreciate if there is a significant drop in risk (e.g., 30-day implied volatility).

Key Market Performance (As of 17 July 2019)

(*) denotes outliers.

Main Strategies

• Flatteners: Implemented in Brazil (21s25s), SOAF (2s10s), Hungary (1s5s), and Mexico (5s10s).
• Receiving 2y TIIE: Spread over 2y US swaps.
• Paying rates: In Colombia (5y), Chile (1y), and opportunistically in Brazil (April-20).
• FX positions: Long on TRY (hedged by 5y Xcy payers), short on ARS and KRW; most positions are against EUR, with PLN and CZK against USD.
• Credit positions: Short protection in Russia and Turkey against Colombia (using 5y CDS).

Key Messages

1. Model Signal: The model remains in over-bought territory, indicating a potential for market pullback or increased differentiation.
2. Risk Appetite vs. Risk: The model differentiates between systemic risk (α) and risk appetite (θ), which are not the same.
3. Contrarian Indicator: The model functions as a contrarian indicator for equities, EM credit, and EM FX in most cases.
4. Signal Accuracy: While the model has been profitable in over 75% of cases, it is not infallible. Strong trends or idiosyncratic events can lead to incorrect signals.
5. Model Basis: The model uses the Spearman rank correlation between asset risk (σ²) and excess returns to measure changes in risk appetite. It is based on rolling 1-month excess returns of 23 global assets.

Risk Premium Model Insights

• The expected return on an asset is modeled as:
  $$
  Y = \alpha + \theta (\sigma^2)
  $$
  Where:

  • $Y$ is the expected return
  • $\alpha$ represents systemic or global risk
  • $\theta$ is the level of risk appetite
  • $\sigma^2$ is the variance of the asset

• An increase in $\theta$ implies increased risk aversion, leading to decreased asset prices.

• The model suggests that market appreciation is not guaranteed even if risk appetite indicators are supportive. Appreciation trends may not be linear across all markets.

Legal and Compliance Notes

• The document is non-independent research and is intended for Professional Clients and Eligible Counterparties under MiFID II.
• It may contain "Research" as defined under MiFID II unbundling rules, and is only for firms that have signed up to a BNPP Global Markets Research package or are out of scope of MiFID II.
• The information is for informational purposes only and does not constitute investment advice.
• No liability is accepted for any reliance on the information, and confidentiality is emphasized.
• Performance data is based on back-testing and simulations, which may not reflect actual market conditions.
• Options, ETFs, and Convertible Securities are highlighted with important disclosures, including risks and restrictions on trading.
• The document is intended for selected recipients only and is not available to all investors.

Conclusion

The BNPP-Global Risk Premium model remains in an over-bought state, signaling potential for market correction or increased differentiation. It serves as a contrarian indicator for EM equities, FX, and credit, though not always accurate. The model’s output is based on risk appetite and systemic risk assessments, and is used to inform trading strategies in EM markets. The document includes detailed legal and compliance disclosures, emphasizing that it is not investment advice and should not be relied upon for decision-making.