20180105-法国巴黎银行-EM_TODAY_8页_239kb

EM STRATEGY DAILY SUMMARY - 05 January 2018

Core Content

This document is a daily strategy update from BNP Paribas, focusing on Emerging Markets (EM) currencies, rates, and market dynamics. It provides insights from the FX & IR strategy teams in CEEMEA, Latam, and Asia, with an emphasis on risk management, market positioning, and economic outlook.

Main Views

US Employment Data and USD/EM Dynamics

• US employment data is in focus, with expectations of 175k jobs added in December.
• The USD has shown low sensitivity to positive economic data surprises, which may limit upside for USD/EM pairs.
• Flattening US curve suggests a subdued reaction to data, and the report does not expect a strong positive impact on risky assets.

CEEMEA Market Outlook

• Turkey and South Africa are highlighted for their recent FX rallies.
• Turkey's vulnerabilities include heavy reliance on external financing and expansionary fiscal policy.
• The central bank is expected to be cautious about rate cuts, despite declining inflation.
• South Africa may face a reversal soon due to unclear policy outlook and insufficient premium for sustained inflows.
• The team remains positioned for a correction in USDZAR via call spreads.

Latin America Strategy

• Mexico is still viewed constructively, but the team switches allocation to real rates due to uncertainties.
• TIIEs and UDIBonos are noted for similar dislocations, prompting a shift in strategy.
• Recommendation: Switch USD 15k DV01 out of the 18-month TIE receiver at 7.97% and increase the Jun19 UDIBonus at 3.31%.

Asia FX Positioning

• Asia CDS spreads tightened by up to 2bp in the morning session.
• FX and equities in Asia have gained ground.
• Traders have large exposure to Asian currencies, with IDR and THB being particularly stretched.
• CNH, INR, and PHP may have room for appreciation, though offshore long positioning is also increasing.
• The team cautions against immediate negative catalysts but notes exuberance in market positioning.

Key Information

• The report is produced by BNP Paribas London Branch and other regional teams.
• Legal notice highlights that this is non-independent research and a marketing communication.
• Conflicts of interest may exist due to the strategy team's interaction with sales and trading.
• No investment advice is given, and the document is for informational purposes only.
• Indicative prices are provided based on internal models and are not actual transaction terms.
• Simulated performance data is included, which is not guaranteed and not indicative of future results.
• Confidentiality is emphasized, and the document must not be distributed without prior consent.

Contacts

Disclaimer

• The document is not investment research and is not intended for use as a basis for investment decisions.
• No warranties are given regarding the accuracy or completeness of the information.
• Past performance is not indicative of future results.
• Indicative prices may differ based on models and assumptions.
• Confidentiality is required, and the information is not to be shared with unauthorized parties.
• Legal disclosures apply across various jurisdictions, including the UK, France, Germany, Belgium, Ireland, Italy, Netherlands, and Portugal.

Summary of Strategy Adjustments

• Switch to real rates in Mexico due to uncertainties and dislocations in TIIEs and UDIBonos.
• Maintain constructive view on Mexican rates but reallocate to real rates for better returns.
• Position for correction in USDZAR due to political and economic uncertainties.
• Monitor Asia FX positioning, noting exuberance but no immediate catalysts for a downturn.
• Expect inflation decline in Turkey and cautious central bank stance.
• Uncertainty in South Africa regarding structural reforms and policy clarity.

Conclusion

The strategy team remains cautious about EM FX and rates, with a focus on risk management and position adjustments. While positive sentiment is present in certain markets, underlying vulnerabilities are noted, especially in Turkey and South Africa. The report emphasizes the importance of market positioning, carry opportunities, and regulatory considerations in EM strategy.