20181127-法国巴黎银行-Stopped_out_of_short_USDCOP__adjusting_the_target_for_USDBRL_8页_926kb

Trade Idea Summary: EMERGING MARKETS | LATAM (27 November 2018)

Core Content

This document provides a trade idea and market analysis for emerging markets in Latin America, focusing on the Colombian peso (COP) and Brazilian real (BRL). It outlines strategic positions and adjustments in foreign exchange (FX) and interest rate (IR) markets, based on the current economic and market conditions.

Key Messages

• COP (Colombian Peso): The recent sharp decline in crude oil prices has put additional pressure on the COP. The previous bullish assumption that the COP would follow crude oil prices was incorrect. With low carry and the Bank of Colombia's (BanRep) new intervention strategy, it is challenging to find strong catalysts to support the original recommendation.
• BRL (Brazilian Real): A more bullish view is maintained for the BRL. The EM-BEER model indicates a fair value below 3.70 in the short term.
• Market Volatility: Despite the overall supportive view on emerging markets, the document emphasizes the importance of differentiation and tactical trading due to the expected higher volatility in the region.

Strategy Adjustments

1. USDCOP Position:

   • Action: Close the short 3-month NDF (Non-Deliverable Forward) on USDCOP at 3,230 (spot reference).
   • Position: Remain in receivers of 2-year IBR (Interest Rate Swap) with a target of 4.46% and an allocation of USD 20k DV01.

2. USDBRL Position:

   • Adjustment: Change the target from 3.50 to 3.60 (spot).
   • Stop Loss: Adjust the stop loss from 3.90 to 4.00 (spot).
   • Allocation: Keep the allocation at USD 35mn.

EM-BEER Model Update

• The EM-BEER model for USDBRL indicates a short-term fair value of 3.67.
• The recent depreciation of the BRL is attributed to specific technical factors, such as dividend transfers in a less liquid market.
• The central bank has announced USD2bn in funding lines, which supports the current market dynamics.

Legal and Regulatory Information

• This document is a marketing communication and not independent investment research.
• It is intended for Relevant Persons, including Professional Clients and Eligible Counterparties, as defined under MiFID II.
• The information provided is not investment advice and should not be relied upon as such.
• The indicated prices are for informational purposes only and may not reflect actual transaction terms.
• The document contains performance data based on back-testing, which is for illustrative purposes only and may not reflect real-world market conditions.

Disclaimer

• The document may contain "Research" as defined under MiFID II unbundling rules, which is only available to certain firms.
• BNPP may have conflicts of interest due to its involvement in investment banking, underwriting, or advisory services related to the discussed instruments.
• No liability is accepted for any loss or damage arising from the use of this document.
• The information is subject to change and not guaranteed to be accurate or complete.
• No guarantee is given that the indicated returns or performance will be achieved.

Additional Disclosures

• Options: Complex instruments not suitable for all investors. Only for sophisticated investors who understand the risks.
• ETFs: May involve tracking error, currency, and geopolitical risks. BNPP may act as a market maker or advisor to the underlying assets.
• Convertibles and Unregistered Securities: May be restricted and only available to Qualified Institutional Buyers (QIBs) or non-US persons.
• U.S. Distribution: The report may be distributed only to U.S. persons who qualify as institutional investors under FINRA rules or to major U.S. institutional investors under Rule 15a-6.
• International Distribution: The report is distributed in various countries (UK, France, Germany, Belgium, Ireland, Italy, Netherlands, Portugal, Spain, Switzerland, Canada) by BNPP subsidiaries and branches, each subject to specific regulatory requirements.

Conclusion

The document outlines a strategic adjustment in FX positions for the COP and BRL, with a more supportive view on the BRL and a cautionary stance on the COP due to the impact of oil prices and market interventions. It serves as a market discussion tool and is not intended as a recommendation or investment advice.