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EM Strategy Daily Summary - 07 December 2017

Core Content

This document provides a summary of emerging markets (EM) strategy insights and market updates for 07 December 2017, authored by BNP Paribas London Branch. It highlights key developments in various EM regions, including Asia, Latin America (Latam), and Central and Eastern Europe, the Middle East, and Africa (CEEMEA), and includes important legal and regulatory disclosures.

Key Market Updates

Asia

• IMF Report on China: The IMF published a report on China's financial system, recommending a gradual and targeted increase in bank capital to manage financial risk amid structural changes and regulatory arbitrage trends.
• India's RBI: The Reserve Bank of India (RBI) kept policy rates unchanged at 6%, as expected. However, the central bank showed a slightly more hawkish stance, with expectations of rate hikes in 2018. The RBI continues to drain excess funds from the banking system, which supports the effectiveness of future rate hikes.
• FX Market: A stronger USD has led to weaker FX performance in Asia.

Latin America

• Mexico CPI: Markets are closely watching the November CPI data, which followed an upward surprise in the bi-weekly print. The new Banxico governor's cautious tone has increased the probability of rate hikes at the 14 December monetary policy meeting.
• Brazilian Central Bank: The BCB cut policy rates by 50 basis points (bps) as expected. The strategy team expects the Selic rate to be cut to 6.5% in 2018, with the CCB holding rates for the rest of the year. This should lead to lower DIs across the curve, particularly in the short end. The team has extended its target for the Jan19 receiver recommendation to below 7.00%.

CEEMEA

• Industrial Production Data: Czech October industrial production and South African October mining and manufacturing production data are scheduled for release.
• Ghana's Budget: Lawmakers in Ghana approved the 2018 budget, which forecasts a decline in the budget deficit to below 4% of GDP from 6.3% in 2017. The projections assume higher government revenues from oil exports.

Key Views and Recommendations

• The strategy team believes the short end of the yield curve in Latin America offers a receiving opportunity, given the expectation of no further rate hikes in 2017.
• In China, the government has already taken steps to reduce financial risk, while gradually opening up the financial sector.
• The team has extended the target for its Jan19 receiver recommendation to below 7.00% in Brazil.

Legal and Regulatory Disclosures

• This document is non-independent research and is a marketing communication under MiFID.
• BNP Paribas may have conflicts of interest due to its involvement in investment banking, underwriting, or advisory services for the entities mentioned.
• The document does not constitute investment research and is not intended to be relied upon for investment decisions.
• All information and opinions are based on public sources and may be subject to change without notice.
• Indicative prices and performance data are provided for informational purposes only and may not reflect actual transaction terms or future results.
• The document is intended for professional clients and eligible counterparties, and may not be suitable for all investors.
• No liability is accepted for any use of the information or reliance on the content.

Contacts

Additional Notes

• The document includes figures on total bank assets by country (2015, % GDP) and total credit (% GDP), sourced from the IMF.
• It is important to note that the information provided is for informational purposes only and should not be used as a substitute for professional advice.
• The document may contain performance data based on back-testing, which is for illustrative purposes only and does not reflect actual market conditions or future performance.