28March20191FLASHPleaserefertoimportantinformation&authorsattheendofthereport&MARDisclosureBNPP-GlobalRiskPremiumModelmoresupportiveforriskassetsnowLink:Focus:TheFebruaryscaleback…RiskpremiummodelupdateWehavebeencloselymonitoringourglobalriskpremiummodel(onBloomberg)toassesstheprobabilityofamarketcorrection.Modelvaluesarebacktoneutral/highriskpremiumlevels.(Fig.1-2):Fig.1-2:Riskpremium(appetite)(onBloomberg)Sources:BNPParibas,BloombergLLP;asof28March2019FrequentlyaskedquestionsModelvaluesarenowatmoresupportivelevels.Doesthismeanthatthemarketwillrally?Notnecessarily.BNPSGRPIndexisaglobal/systemicindicator,meaningthattherearetimeswheretheappreciationtrendwouldn'tbelinearacrosstheboard.Also,valuesneedtobeatextremestoformallytriggerasignaltobuy/overweight(Fig.1-2)FullyinvestedatthebeginningoftheyearScalebackpositionsinFebruary0.35(1.0)(0.8)(0.5)(0.3)0.00.30.50.81.0Apr-16Nov-16Jun-17Jan-18Aug-18Mar-19DefinitionZone;↓appetiteDefinitionZone;appetiteAppetiteislow,but,whenatextremevalues,reversalprobabilityishighPremiumistoolow(appetitehigh);probabilityofreversal()()()()()()()(150)(90)(30)3090-90%-70%-50%-30%-10%10%30%50%70%90%RiskPremiumLowRiskPremiumHighImprovingDeterioratingRiskPremiumLowRiskPremiumHighImproving↑DeterioratingTheoreticallyreducepositionswhenpremiumistoolowTriggertooverweight;premiumisabnormallyhighNOW3mAGOShortTermRiskPremiumCycleLATINAMERICASTRATEGYPleaserefertoimportantinformationattheendofthereportFLASHEMERGINGMARKETS28March2019GabrielGerszteinGlobalHeadofEmergingMarketsStrategy+551138413421BancoBNPParibasBrasilS.A.KEYMESSAGESWehavebeencloselymonitoringourglobalriskpremiummodel(onBloomberg)toassesstheprobabilityofamarketcorrection.Thisapproachisusedforshorttermmovesandnotforstructuralcalls.Thedecisiontoenterintoyear2019fullyinvestedandtoscalebackpositionsattheendofJanuarywasbasedonit.Currentresultssuggesttheworstisover.Modelvaluesarebacktoneutral/highriskpremiumlevels.Duetoclientdemands...
