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EM STRATEGY DAILY - 01 June 2018 Summary

Core Content

This document is a daily strategy report from BNP Paribas Global Markets, focusing on emerging market (EM) trends, particularly in India and the CEEMEA (Central and Eastern Europe, Middle East, and Eastern Europe) region. It also includes legal disclaimers and disclosures regarding the nature of the research, potential conflicts of interest, and regulatory compliance.

Key Market Insights

India

• Positive GDP and Fiscal Data: India's Q1 2018 GDP reached 7.7% y/y, surpassing expectations and BNP Paribas' forecast of 7.5%. The fiscal deficit for FY18 was 3.5% of GDP, aligning with government targets.
• Surplus in March: March 2018 brought a surprising surplus, which supports the possibility of an on-target fiscal performance for FY19.
• Inflation Outlook: Strong data gives the RBI confidence to address rising inflation, with two 25bp rate hikes expected in H2 18, raising the repo rate to 6.50%.
• Currency Impact: The INR is on a strong footing due to the improved economic data.

CEEMEA

• Mixed PMI Results: Manufacturing PMIs for May showed mixed results across the region.
  • Hungary, Poland, and Czech Republic maintained strong PMIs above 50.
  • Turkey's PMI dropped from 48.9 to 46.4, indicating economic weakness.
• GDP Readings: Final Q1 2018 GDP readings for the Czech Republic are expected today.
• Lira Weakness: The Turkish lira weakened, with local banks offering low forward rates in the NDF auction. The CBRT sold USD 161mn against a total auction of USD 300mn.
• FX Trade Performance: The 1v5 XCCY steepener trade performed 20bp since initiation.

China

• Updated Negative Lists: China is expected to release and implement two updated foreign investment negative lists by June 30, further liberalizing market access for foreign investors.
• Target Sectors: In addition to finance and automobiles, the lists will cover energy, resources, infrastructure, transportation, and commercial and professional services.

Additional Information

• Contact Details: The report includes contact information for various strategists and graduates across different regions and roles.
• Legal Disclaimer:
  • The document is non-independent research and marketing communication.
  • It is not investment research and not subject to independence requirements under MiFID II.
  • Conflicts of interest may exist due to the interaction between research and sales/trading teams.
  • No liability is accepted for any reliance on the document's content.
• Regulatory Compliance:
  • The document is subject to legal and regulatory requirements in various jurisdictions.
  • It is not a prospectus or public offering in the UK, France, Germany, Belgium, Ireland, Italy, or the Netherlands.
  • The information is for professional clients and eligible counterparties only.
• Investment Risks:
  • The report mentions the high risk associated with securities and ETFs.
  • Options and convertible securities are highlighted as complex instruments with significant risks.
  • Simulated performance data is included but not guaranteed to reflect actual results.

Summary of Key Points

• India: Strong Q1 GDP and fiscal surplus support a positive outlook for FY19 fiscal performance and potential rate hikes.
• CEEMEA: Mixed PMI results with Hungary, Poland, and Czech Republic performing well, while Turkey shows signs of economic weakness.
• China: Expected to liberalize foreign investment access with new negative lists by June 30.
• Currency Movements: INR is strong, while TRY weakens due to low forward rates and weak PMI.
• Legal & Compliance: The document is a marketing communication, not investment advice, and includes disclaimers regarding conflicts of interest, liability, and regulatory compliance.

Strategy Contacts

Legal & Regulatory Notes

• The document is non-independent and may be subject to conflicts of interest.
• It is not intended for retail investors and is subject to legal restrictions in various jurisdictions.
• Simulated performance and back-testing data is provided for illustrative purposes only.
• ETFs, options, and convertible securities are highlighted as complex instruments with high risk.
• BNP Paribas may engage in transactions inconsistent with the views expressed in the report.

Disclaimer

• No guarantee of accuracy or completeness of the information provided.
• No liability is accepted for any reliance on the document's content.
• Performance data is not indicative of future results.
• Confidentiality is required; the document may not be copied or distributed without prior consent.