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EM STRATEGY DAILY Summary - 23 January 2018

Core Content

This document provides an overview of emerging market (EM) strategy and market analysis for the day, focusing on key events and market movements in CEEMEA, Latin America (Latam), and Asia. It also includes legal disclosures and contact information for the strategy team.

Main Points

CEEMEA Focus

• Turkey's Bond Auctions: The Turkish Treasury is set to issue 2.8bn of 10-year fixed coupon and 10-year CPI-linked bonds today.
  • The previous 5-year fixed coupon bond auction saw a bid-cover ratio of 2.2, consistent with the average over the last two years.
  • The average yield at the auction was 12.61%, below the previous 5-year bond yield of 12.74%.
  • The global economic environment remains supportive, so the Treasury is expected to have no difficulty in rolling over its debt.

Latin America (Latam)

• Argentina: The central bank will announce a 7-day repo rate decision.
  • Following the recent inflation target increase and policy rate cut, further easing is expected throughout the year.
  • The central bank has lowered Lebac rates and confirmed an inverted Lebac curve in the December auction.
  • The impact of lower rates on the attractiveness of the ARS and FX performance will be closely monitored.
• Mexico: Ongoing NAFTA negotiations will continue to generate market headlines and be closely watched by investors.

Asia

• Market Reaction: Asia stocks and bonds rallied due to positive US news about government funding and the end of the government shutdown.
  • TWD was the biggest gainer, rising 0.75%.
  • KRW and CNY remained broadly unchanged despite Trump's approval for import tariffs on solar cells and related products.
  • A dovish BoJ policy statement affected JPY negatively.
• Strategy Note: The Asia Strategy team published a note on how investors can derive tradable insights from DTCC data on OTC market transactions.
  • Large activity spikes are seen as important signals, often at the start of trends or during overshooting phases.
  • Investors should consider both fundamental and technical factors when interpreting such spikes.

Key Data Highlights

• IMF Growth Forecasts:

  • EM Europe: 4% (+0.5pp)
  • Saudi Arabia: 1.6% (+0.5pp)
  • Brazil: 1.9% (+0.4pp)
  • Mexico: 2.3% (+0.4pp)
  • Overall EM growth forecast remains at 4.9%.
  • Developed Markets (DM): 2.3% (+0.3pp)

• Regional Data:

  • Singapore: December inflation fell to 0.4% (from 0.6% in November), while core inflation dropped to 1.3% (from 1.5% previously).
  • Philippines: Q4 GDP growth was 6.6% y/y (from 6.9% in Q3), slightly below expectations.

Strategy Team Contacts

Legal and Regulatory Information

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Legal Notice Summary

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