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EM STRATEGY | DAILY SUMMARY - 21 March 2018

Core Content Overview

This document provides a summary of emerging markets (EM) strategy insights and market updates for the week of 21 March 2018, focusing on key developments in EM countries, particularly in CEEMEA, Latam, and Asia. It highlights expectations for central bank decisions, bond market performance, and macroeconomic indicators, while also including contact information and legal disclosures.

Key Market Updates

United States

• The Fed is expected to hike interest rates by 25 basis points (bps) at its policy meeting.
• Economic forecasts are anticipated to see upward revisions, especially for GDP growth.
• Rate dots (dot plot) are also expected to be revised upwards for the current and next year.

Brazil

• The central bank (BCB) is expected to keep the Selic rate at 6.75% today, contrary to the consensus of a 25 bp cut.
• The short-end of the DI curve is adjusting to reflect a higher probability of a rate cut.
• The domestic and external environment is expected to allow the BCB to remain on hold for a substantial period.
• There is scope for further reduction in risk premium in the Brazilian market.

Turkey

• Turkish bonds performed strongly, with a very successful auction of TRY 1.7bn of 2y and TRY 1.4bn of 10y fixed coupon bonds.
• Bid-cover ratio reached 5.3, significantly higher than the previous month's 1.6 and the long-term average of 2.2.
• 10y bond yield dropped by 26 bps to 12.66%.
• Negative sentiment for Turkish bonds has persisted due to high inflation, a Moody's downgrade, and a widening current account deficit.
• Bond issuance is expected to remain light in April and May, which may lead to further yield declines.

South Africa

• South African bonds had a strong performance due to:
  • Low inflation at 4.0%, well below the target range of 3–6%.
  • A likely rate cut on March 28.
  • A suspension of the commissioner of the Revenue Agency (SARS), Tom Moyane, a close Zuma ally.
• February CPI release was softer, contributing to positive sentiment.
• Today is a public holiday in South Africa.
• Positive sentiment is expected to continue in FI rates, but FX appears overvalued.

Russia

• The Ministry of Finance does not plan to issue more Eurobonds in March but may issue $3bn more in 2018.
• Plans to issue CPI linkers annually and target Chinese investors and retail holders.

Chile

• The central bank left policy rates unchanged at the meeting on 20 March.
• The quarterly inflation report on 21 March is expected to provide further clarity on the central bank's stance.

Colombia

• The central bank left rates on hold against expectations.
• The current account deficit has narrowed to 3.3% of GDP, better than expected.
• Improvement in external balances is driven by falling exports and rising oil prices.
• The broader picture suggests less vulnerability, supporting the view of further rate cuts to 4.0% by year-end.

Asia

• China's National Party Congress concluded yesterday. Key takeaways include:
  • Revising the constitution and comprehensively reorganizing the government system.
  • Aggressive fiscal policy to secure 6.5% growth.
• February CPI in Malaysia cooled to 1.4% from 2.7% in January.

Key Contacts

Legal Disclosures

• This document is a marketing communication and is not investment research.
• It is not independent research and may be subject to conflicts of interest.
• Steer™ is a trademark of BNP Paribas.
• The information and opinions are based on public sources and may not be independently verified.
• No liability is accepted for any direct or consequential loss arising from reliance on this document.
• Indicative prices are not actual transaction terms and may vary significantly.
• ETFs and options discussed are complex instruments with potential high risk.
• Securities may not be eligible for sale in all jurisdictions or to certain investors.
• Performance data may be based on back-testing and is not indicative of future results.
• No prospectus or offering document is provided in this report.
• The document is confidential and may not be copied or distributed without prior consent.

Additional Information

• The BNP Paribas Global Markets Website is available at www.globalmarkets.bnpparibas.com.
• The Bloomberg platforms referenced include:
  • Fixed Income Research (BPFR)
  • G10 Interest Rate Research (BPBS)
  • Emerging Markets Research (BPFR)
  • Market Economics (BPEC)

This summary encapsulates the main themes and insights from the original document, focusing on the EM strategy and market outlook for the week of 21 March 2018.