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EM Strategy Daily Summary - 13 June 2018

Core Content Overview

This document provides a summary of key economic and market developments in Emerging Markets (EM) as of 13 June 2018, with insights from various BNP Paribas branches and strategists. It highlights expectations for central bank policy decisions, economic indicators, and regulatory changes in several countries, particularly in the US, China, India, and South Africa. The report also includes details on the EM Strategy team and legal disclaimers regarding the nature of the content.

Key Market Developments

United States

• The Federal Reserve is widely expected to raise the policy rate by 25 basis points (bps) today.
• Higher GDP projections for 2018 and lower unemployment forecasts are anticipated.
• The median "dots" (central bank projections for future rate hikes) are expected to remain unchanged from March.
• Asian equity and FX markets are in tight ranges ahead of the FOMC meeting and ECB meeting.

China

• The State Administration of Foreign Exchange (SAFE) removed the $20%$ repatriation limit under the Qualified Foreign Institutional Investor (QFII) scheme.
• Lockup periods for investment principal under QFII and RQFII will be eliminated.
• FX hedging in China is now permitted for investors under both schemes.
• This move follows the inclusion of over 200 China-listed shares in the MSCI Emerging Market Index.

India

• May headline inflation was $4.9%$ y/y, in line with expectations but above the RBI's $4%$ medium-term target.
• Core inflation reached a record high of $5.8%$ y/y.
• Industrial production for April rose to $4.9%$ y/y, slightly above March's $4.4%$.
• Inflationary pressures are expected to continue, with a potential 25bp rate hike by the RBI in July–August 2018.
• The repo rate is expected to reach $6.50%$ by the end of the year.
• Economic Affairs Secretary Garg suggested a shift toward longer-term bonds to manage short-end yields.

South Africa

• The IMF reiterated its $1.5%$ 2018 growth projection.
• The projection was revised up by $0.4%$ in the April 2018 WEO.
• The report warns that slow policy implementation could pose downside risks to growth.
• BNP Paribas has revised down its growth forecast for South Africa to $1.7%$ for 2018.
• Growth is expected to peak in Q1 2019, leading to a higher annual 2019 figure of $+2.0%$.

EM Strategy Team Contacts

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