德银-全球-投资策略-新兴市场宏观与策略聚焦-20180209-28页_1mb

Deutsche Bank Markets Research Summary - February 9, 2018

Core Content

This report outlines the key economic, foreign exchange (FX), interest rates (Rates), and credit market outlooks for Emerging Markets (EM) and the United States (US), with a focus on macroeconomic trends and strategic trading recommendations.

Main Economic Outlook

Asia

• Indonesia, Thailand, and Sri Lanka are expected to maintain their policy rates steady, with no immediate signs of policy bias shifts.
• Malaysia is likely to report slightly higher GDP growth in Q4 2017, reaching 6.3% YoY.
• India is expected to see CPI inflation pull back to 5.0% YoY in January, with export growth rising to 17.1% YoY and import growth to 23.8% YoY, leading to a narrower trade deficit.
• Indonesia's export growth is expected to accelerate to 17.0% YoY in January, while import growth moderates to 16.0% YoY, resulting in a trade surplus.
• Singapore's NODX growth is expected to moderate slightly to 1.0% YoY, but retail sales growth is expected to remain strong at 4.9% YoY.

EMEA

• CEE3 (Czech Republic, Hungary, Poland) and Israel will release Q4 GDP and January inflation data, which will be key for market analysis.
• Czech Republic: Expected to report strong GDP growth of 5.1% YoY in Q4, driven by domestic demand and fixed capital formation. Inflation is projected at 2.4% YoY for 2018 and 2.2% YoY for 2019.
• Hungary: Expected to see headline inflation slightly retreat to 2% YoY in January due to supportive base effects and stronger HUF, while core inflation is likely to rise due to domestic demand and wage costs.
• Poland: Headline CPI inflation is expected to decelerate to 1.9% YoY in January, influenced by lagged effects of PLN appreciation and weaker food price pressure. Core inflation is expected to remain stable.
• Israel: Annual CPI inflation is expected to edge down to 0.2% YoY in January, with a gradual tightening cycle of 40bps until end-2019, and the policy rate differential vis-à-vis the US expected to reach -200bps by Q3 2018.

FX Outlook

• EM currencies are expected to perform well if growth remains synchronized and the USD weakens.
• Take profit in spot ZAR longs and move to long-dated (9m) USDZAR digital puts.
• Hold 2m digital puts in USDTRY and USDMXN.
• Shekel (ILS) is recommended on the short side, especially due to recent intervention data showing increased pace.
• Long BRL and short USDCOP are advised due to potential oil price declines.
• Close recommendation to sell USDPEN due to increasing domestic turmoil and declining copper prices.
• Buy 9m USDZAR digital put in South Africa.
• Buy 3m USDTRY digital put in Turkey.
• Buy USD/CLP in Chile.
• Buy BRL/CLP in Brazil/Chile.

Rates Outlook

• EM rates are driven by risk-neutral rates, not by term premium.
• Position for normalization via fwd-starting IRS steepeners in TRY and CZK.
• Tactical short-end receivers in PLN ahead of another low inflation print.
• 5Y5Y ILS receivers vs USD and long OFZs (Mar-33) due to low sensitivity to external deterioration.
• Receive FRAs in Brazil (Jan21Jan23) and Colombia (6M1Y and 1Y1Y).
• Buy Soberanos 28s in Peru and favor linkers over nominals in Chile (10y sector).
• Favor receivers in the belly in Mexico where nominal rates are excessively high.

Credit Outlook

• Volatility and market correction may continue in the near term, but the market is expected to stabilize and inflows to return.
• Argentina: Oversold, look to add long USD Pars vs. 5Y CDS as volatility subsides.
• PEMEX: Switch to 27s from 4.5% 26s due to domestic turmoil risks and copper price declines.
• Qatar: Long 22s as a new trade recommendation.
• South Africa: 27s vs. 47s trade is maintained, with a focus on the likely exit of Zuma.
• Venezuela/PDVSA: Downside risk to bond prices due to stalled negotiations and rising sanction risks, but take profit in Republic vs. PDVSA as relative pricing seems fair.

Key Economic Releases

Strategic Notes

• EM macro and strategy suggest that the realignment in UST premium and equity prices has limited consequences for the global economy.
• EM inflows have little bearing on US equity positions.
• Reduced pass-through of wage inflation to prices indicates no change in the FOMC stance.

Fund Flows

• Hard currency has experienced outflows.
• Local currency remains stable.

Top Trade Recommendations

Summary of Key Points

• Asia: Policy rates are expected to remain stable, with some potential for early rate hikes in Indonesia.
• EMEA: Focus on Q4 GDP and January inflation data, with Czech Republic and Hungary expected to report strong growth.
• FX: EM currencies are expected to benefit from USD weakness, with specific trades recommended for ZAR, ILS, and USDTRY.
• Rates: Normalization is expected in various EM countries, with a focus on forward-starting IRS steepeners and receivers.
• Credit: Volatility may persist, but long-term fundamentals support a constructive outlook, with specific trades recommended for Argentina and South Africa.

Risk Factors

• Venezuela: Rising sanction risks and political instability.
• Mexico: FX volatility and potential rate hikes.
• Peru: Domestic turmoil and copper price declines.
• Poland: Potential for inflationary pressures and wage growth.

Conclusion

The report provides a detailed outlook on EM macroeconomic indicators, FX and Rates strategies, and credit market opportunities, with a focus on key economic releases and trade recommendations. The overall sentiment is cautiously optimistic, with a preference for normalization and strategic positioning in response to macroeconomic trends and FX movements.