20181207-法国巴黎银行-WEEK_AHEAD___EMERGING_MARKETS_16页_1mb

Summary of the Week Ahead: Emerging Markets

Core Content Overview

This report provides an analysis of emerging market (EM) economic and financial developments for the week ahead, with a focus on oil prices, monetary policy, fiscal outlooks, and portfolio flows. It also includes trade ideas, economic forecasts, and market strategies.

Main Risk Events and Key Views

Oil Price Impact on EMs

• Oil prices have fallen from above USD80/bbl in early October to around USD60/bbl, affecting EMs differently.
  • Oil-producing countries such as Mexico and Colombia face budgetary challenges due to lower oil prices.
    • Mexico: A newly elected populist government has made spending promises that may worsen the fiscal outlook. The 2019 budget is due by 15 December, and the country is expected to see a shift from surplus to deficit.
    • Colombia: A tax reform bill is set to be unveiled on 11 December. The revised proposal includes changes like removing a tax cut for foreign bondholders.
  • Oil-importing countries such as Turkey, South Africa, and India benefit from improved current account balances and lower inflation.
    • India: The RBI is expected to keep rates unchanged, with inflation likely to fall to 2.3% y/y in November.
    • Turkey: The current account surplus is improving, and the CBRT is expected to keep rates unchanged at 24% on 13 December, despite some inflationary relief.
    • South Africa: Inflation is expected to remain at 5.1% y/y in November, with a potential drop to 4.5% in December. The central bank is unlikely to hike rates further in 2019.

Monetary Policy Highlights

• Brazil: The COPOM will meet on 12 December. The SELIC rate is expected to remain unchanged at 6.50%.
• Argentina: The November CPI is due on 13 December, with a forecast of a 2.8% m/m rise, bringing the annual rate down to 48% y/y.
• Chile: The central bank will publish its market survey on 10 December, with focus on inflation and rate expectations.

Trade and Economic Data

• Mexico: October industrial production is expected to decline by 1.1% y/y due to a sharp drop in oil and mining output, with manufacturing likely to grow by 2.2% y/y.
• South Africa: Q3 GDP growth is forecast at 2.2% q/q (1.1% y/y), with inflation expected to remain moderate.
• Turkey: Q3 GDP is expected to grow at 2.5% y/y, supported by a drop in imports.

Trade Ideas and Market Strategies

Active Trades

Closed Trades (Past Month)

• Long USDZAR via 3m Fwd: USD 10.0m, closed on 06-Dec-18 with a 4.01% gain (P/L: USD 401k).

Portfolio Flow Model

BNP Paribas has updated its empirical model for EM portfolio flows, incorporating both push (external) and pull (domestic) factors:

• Push factors: Include global economic conditions and external supply-side variables.
• Pull factors: Include local macroeconomic fundamentals and official policy.
• The model was updated following IIF data showing USD34bn in EM portfolio inflows for November, with USD22bn in debt and USD12bn in equity.
• The model forecasts a pick-up in EM portfolio flows for November and December, but actual inflows may differ due to market conditions and policy shifts.

Economic Calendar Highlights (10-14 December)

China

• Industrial production y/y (Nov): Forecast at 5.8%.
• Fixed asset investment y/y (Nov): Forecast at 5.7%.
• Retail sales y/y (Nov): Forecast at 8.6%.
• Total social financing (RMB): Forecast at 728.8bn.
• New loans (RMB): Forecast at 697.0bn.
• M2 y/y (Nov): Forecast at 8.0%.

India

• CPI y/y (Nov): Forecast at 2.3%.
• Industrial production y/y (Oct): Forecast at 4.9%.
• Wholesale prices y/y (Nov): Forecast at 5.5%.
• Trade balance (USD): Forecast at -18.2bn.

CEEMEA

• Turkey GDP y/y (Q3): Forecast at 2.5%.
• Turkey current account balance (USD): Forecast at 2.8bn.
• South Africa CPI m/m (Nov): Forecast at 0.1%.
• South Africa CPI y/y (Nov): Forecast at 5.1%.
• South Africa core CPI y/y (Nov): Forecast at 4.3%.
• South Africa retail sales y/y (Oct): Forecast at 1.0%.

LATAM

• Brazil Selic rate: Expected to remain unchanged at 6.50%.
• Mexico manufacturing production y/y (Oct): Forecast at 2.2%.
• Mexico industrial production y/y (Oct): Forecast at -1.0%.
• Argentina CPI m/m (Nov): Forecast at 2.8%.
• Argentina CPI y/y (Nov): Forecast at 48%.
• Brazil retail sales m/m (Oct): Forecast at 0.0%.
• Brazil retail sales y/y (Oct): Forecast at 2.5%.
• Brazil retail sales broad y/y (Oct): Forecast at 6.8%.
• Colombia retail sales y/y (Oct): Forecast at 5.6%.

2019 Asset Allocation and Outlook

• 2019 Global Asset Allocation: The report outlines a strategic view of asset classes, emphasizing key risk factors.
• Equity Outlook for Q1 2019: The focus is on regional performance, earnings, inflation, and geopolitical risks.
• China: The trade truce with the US is expected to ease global tensions and support market-oriented reforms.
• India: The RBI is expected to maintain a cautious stance, with one more 25bp rate hike in February.

Key Takeaways

• Oil price volatility continues to impact EMs, with oil producers facing fiscal challenges and importers benefiting from improved balances and lower inflation.
• Monetary policy remains a critical factor, with central banks in several EMs showing a cautious approach.
• Portfolio flows are influenced by both global and domestic conditions, with the updated model indicating a pick-up in inflows for November and December.
• Political and economic uncertainty in several EMs, especially in Argentina and Mexico, poses risks to market stability and investor sentiment.
• Trade strategies are in place, with a focus on FX and interest rate differentials, reflecting market expectations and risk management.

Conclusion

The week ahead is crucial for EM markets, with key data releases and policy decisions expected to influence inflation, fiscal outlooks, and capital flows. The report highlights the divergent impacts of oil price changes, the importance of monetary policy, and the role of political developments in shaping the investment landscape. Portfolio flows and trade strategies are closely tied to these macroeconomic and policy variables, underscoring the need for vigilance and strategic positioning in the coming weeks.