Macro: a wall of uncertainty

We expect a better growth-inflation mix in EM, driven by the recovery in commodity exporters. Downside risks remain high and are not priced in with the exception of Mexico and Turkey. We expect policy uncertainty to persist. Positioning in EM is light. We remain biased to short Asia FX vs USD. We mostly prefer steepeners in local rates. We like receivers in Brazil and Indonesia. We also favor Argentina and Turkey credit.

Local Markets: our top trades

We are biased to short CNH, KRW, HKD and SGD in Asia. We like PEN and prefer to short CLP in LatAm. We like to buy RUB on dips. We remain long Zloty. In local rates, we prefer steepeners in Korea, Singapore, Mexico and S. Africa. We like receiving rates in Brazil, Peru, Indonesia, Malaysia, and India while paying forward swaps in 1 to 4y range on CEE3 curve.

EXD Strategy: technicals remain supportive

We are neutral on emerging market external debt, following the US transition. We expect global rates to rise this year and uncertainty to increase under the Trump administration. But technicals remain supportive of EXD as US and European rates remain at historical lows, driving global structural demand for duration as investors seek higher yields.

Corp Strategy: how tight can we go?

After a strong 2016 and a large supply of new issues in January, average spreads are -13 bps tighter MTD, reaching the richest level since 2008. Quasi sovereigns have also tightened but many still offer a decent spread pick-up vs. the sovereign.

Equity Strategy: fight the consensus at extremes

The global Equity Risk-Love indicator is in euphoria. Meanwhile, in EMs, animal spirits remain subdued. Fundamentals are still strong, currencies are undervalued, earnings are being revised upwards and external accounts are in surplus.
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See report (attached) for further information.