巴黎银行-新兴市场-宏观策略-BNPP全球风险溢价：派对结束之时-20190702-8页 (2).pdf

1 FLASH 02/07/19 BNPP-Global Risk Premium:When the partys over 1 Risk premium model update The models return to the over-bought camp suggests that,all else equal,a pullback in the current rally()and/or differentiation()across risk assets is expected.Yet,as the model aims to match ex-ante risk with ex-post return,risk asset prices are only likely to remain stable or even continue appreciating,if there is a considerable drop in risk(30-day implied volatility).Fig.1-2:BNP Paribas global risk premium model(risk appetite)Sources:BNP Paribas,Bloomberg LLP;as of 1 July 2019 Contrarian recommendation in the middle of a bearish marketFully invested at the beginning of the yearScale back positions in February-0.57(1.0)(0.8)(0.5)(0.3)0.00.30.50.81.0Dec-15Jul-16Feb-17Sep-17Apr-18Nov-18Jun-19Definition Zone;appetiteDefinition Zone;appetiteAppetite is low,but,at extreme values reversal probability is highPremium is too low(appetite high);probability of reversal()()()()()()()()()()()()(150)(90)(30)3090-90%-70%-50%-30%-10%10%30%50%70%90%Risk Premium LowRisk Premium HighPremium upPremium dfownRisk Premium LowRisk Premium HighPremium upPremium downTheoretically reduce positions when premium is too lowTrigger to overweight;premium is abnormally highNOW3m AGORisk Appetite slowly up premium starts to converge back to equilibrium;Data dependenceShort Term Risk Premium CycleLATIN AMERICA STRATEGYPlease refer to important information at the end of the report FLASH EMERGING MARKETS 02 July 2019 Gabriel Gersztein Global Head of Emerging Markets Strategy Banco BNP Paribas Brasil S.A.Performance of selected assets since triggering long/overweight signal on 27 May 2019:EM CDX -42bp BRL-USD +5.2%TRY-USD +7.0%PLN-USD +2.3%EUR-USD +1.0%EM FX Index +2.3%EM MSCI +4.3%Barclays EM Agg +3.2%Barclays Global HY +2.6%As of 1 July 2019 KEY MESSAGES The BNP Paribas global risk premium model suggests risk assets are nearing over-bought levels and that all else equal a pullback in the current rally()and/or increasing differentiation()across risk assets is therefore expected.In the last week of May,the model signalled that investor risk appetite was critically low,indicating a potential appreciation in EM risk assets,and as a result we held our trade ideas to receive local currency rates in Brazil and Mexico and be long selected EM currencies,even after the US imposed tariffs on Chinese goods.Our approach assesses short-term dynamics and is not used for structural calls.Our decision to enter 2019 fully-invested and to scale back positions at the end of January was based on it.Rates strategy:we closed the majority of our directional positions and switched into relative value or flattening trades in Brazil,South Africa,Hungary,and Mexico.We are paying rates in Colombia(5y IBR)and Chile(1y CLPxCAM).In FX,65%of our long positions(CLP,BRL,and HUF)are against the EUR;only PLN and CZK are against the USD.TM FLASH 02/07/19 Frequently asked questions If model values are at more supportive levels,does this mean that the market will rally?Not necessarily.The BNPSGRP index is a global/systemic indicator,meaning that there are times where the appreciation trend is not linear across the board.Also,values need to be at extremes to formally trigger a signal to buy/overweight(Figures 1-2)Do the signals work better for some asset classes?Back-testing suggests that the model can be a good contrarian/short-term indicator for the S&P 500,EM credit,and EM FX in a majority of cases.Has the model worked well every single time it triggered a signal?No.While it has been profitable in more than 75%of the times,there have been periods where a trend has been so strong(or idiosyncratic events so dominant),that a contrarian signal has been wrong.The performance between different asset classes has also varied.Annex:BNPP model:Inferring risk appetite Risk is not the same as shifts in risk appetite.For instance,there are periods when risk is at a low level but risk appetite is not particularly high,and periods when risk is high(deteriorating medium-term fundamentals)but investor appetite remains at a high level.To assess the odds of a market sell off,which is more important:Risk or risk appetite?First,we assume that the yield or premium that any risk asset pays over the risk-free rate is a function of:1)risk or structural components/fundamentals;2)appetite for risk;and 3)systemic or global risk(which cannot be diversified away).The expected return on any asset Y is then approximated by the following function:Expected Return(Y)=+(2)Where is the level of risk appetite,represents the systemic or global risk,and 2 is the variance of the asset.An increase of the level of represents an increase in risk aversion.The expected return can also be viewed as the difference between the current price of a risky asset and the hypothetical fair or equilibrium price,so:Expected Return(Y)=Long term price of Y Current price of Y=+(2)or 1 Current price of Y=Long term price of Y-(2)2 From the equations above,it is clear that risky asset prices can swing when:1)systemic risk changes(even when risk appetite or idiosyncratic risk remain constant);or 2)the appetite for risk varies(even when systemic and idiosyncratic risk are unchanged).A change in the appetite for risk would imply:Y/=-2 in which,the riskier the asset(2),the higher the price variation.Equations 1 and 2 are the basis of our approach in the sense that the riskier(more volatile)an asset is,the higher its exposure to changes in risk appetite.It also shows that shifts in general risk are different from time-varying changes in the appetite for risk.Following the above framework,our measure of risk appetite will be a function of abnormally high or low risk premium,and will flow from the correlation between asset risk(2)at time t-n and asset excess return at t.If the appetite for risk varies,the correlation between risk ex ante and excess return ex post should be robust.To compute the correlation,we used Spearman rank as well.One of the problems with the commonly-used Pearson correlation is that it only measures linear relationships between two variables(a and b).For any relationship to exist,any change in a should have a constant proportional change in b.If the relationship is not linear,then the result is inaccurate.Also,the Pearson correlation is also affected by extreme values.On a daily basis,we calculate the rolling 1-month excess return of each of 23 different global assets and compare them with the level of risk ex ante.We rank their return and risk,and use Spearman correlation coefficient()among them to quantify changes in risk appetite.For a more details,see our introductory piece:Introducing the risk appetite model.Links to previous publications:BNPP-Global Risk Premium Model Triggers Overweight/Bullish position Focus:The February scale back BNPP-Global Risk Premium Model more supportive for risk assets now Shifts in general risk are different from time-varying changes in the appetite for risk Our measure of risk appetite is a function of abnormally high or low risk premium LEGAL NOTICE This document has been written by our Strategist and Economist teams within the BNP Paribas group of companies(collectively“BNPP”);it does not purport to be an exhaustive analysis,and may be subject to conflicts of interest resulting from their interaction with sales and trading which could affect the objectivity of this report.This document is non-independent research for the purpose of the UK Financial Conduct Authority rules.For the purposes of the recast Markets in Financial Instruments Directive(2014/65/EU)(MiFID II),non-independent research constitutes a marketing communication.This document is not investment research for the purposes of MiFID II.It has not been prepared in accordance with legal requirements designed to provide the independence of investment research,and is not subject to any prohibition on dealing ahead of the dissemination of investment research.The content in this document/communication may also contain“Research”as defined under the MiFID II unbundling rules.If the document/communication contains Research,it is intended for those firms who are either in scope of the MiFID II unbundling rules and have signed up to one of the BNPP Global Markets Research packages,or firms that are out of scope of the MiFID II unbundling rules and therefore not required to pay for Research under MiFID II.Please note that it is your firms responsibility to ensure that you do not view or use the Research content in this document if your firm has not signed up to one of the BNPP Global Markets Research packages,except where your firm is out of scope of the MiFID II unbundling rules.STEER is a trade mark of BNPP.MARKETS 360 is a trade mark of BNP Paribas This document constitutes a marketing communication and has been prepared by BNPP for,and is directed at,(a)Professional Clients and Eligible Counterparties as defined by the recast Markets in Financial Instruments Directive(2014/65/EU)(MiFID II),and(b)where relevant,persons who have professional experience in matters relating to investments falling within Article 19(5)of the Financial Services and Markets Act 2000(Financial Promotion)Order 2005,and at other persons to whom it may lawfully be communicated(together“Relevant Persons”)under the regulations of any relevant jurisdiction.Any investment or investment activity to which this document relates is available only to and will be engaged in only with Relevant Persons.Any person who is not a Relevant Person should not act or rely on this document or its content.Securities described herein may not be eligible for sale in all jurisdictions or to certain categories of investors.The information and opinions contained in this document have been obtained from,or are based on,public sources believed to be reliable,but there is no guarantee of the accuracy,completeness or fitness for any particular purpose of such information and such information may not have been independently verified by BNPP or by any person.None of BNPP,any of its subsidiary undertakings or affiliates or its members,directors,officers,agents or employees accepts any responsibility or liability whatsoever or makes any representation or warranty,express or implied,as to the accuracy and completeness of the information or any opinions based thereon and contained in this document and it should not be relied upon as such.This document does not constitute or form any part of any offer to sell or issue and is not a solicitation of any offer to purchase any financial instrument,nor shall it or any part of it nor the fact of its distribution form the basis of,or be relied on,in connection with any contract or investment decision.To the extent that any transaction is subsequently entered into between the recipient and BNPP,such transaction will be entered into upon such terms as may be agreed by the parties in the relevant documentation.Information and opinions contained in this document are published for the information of recipients,but are not to be relied upon as authoritative or taken in substitution for the exercise of judgment by any recipient,are subject to change without notice and not intended to provide the sole basis of any evaluation of the instruments discussed herein.In providing this document,BNPP does not offer investment,financial,legal,tax or any other type of advice to,nor has any fiduciary duties towards,recipients.Any reference to past performance is not indicative of future performance,which may be better or worse than prior results.Any hypothetical,past performance simulations are the result of estimates made by BNPP,as of a given moment,on the basis of parameters,market conditions,and historical data selected by BNPP,and should not be used as guidance,in any way,of future performance.To the fullest extent permitted by law,no BNPP group company accepts any liability whatsoever(including in negligence)for any direct or consequential loss arising from any use of or reliance on material contained in this document even where advised of the possibility of such losses.All estimates and opinions included in this document are made as of the date of this document.Unless otherwise indicated in this document there is no intention to update this document.BNPP may make a market in,or may,as principal or agent,buy or sell securities of any issuer or person mentioned in this document or derivatives thereon.Prices,yields and other similar information included in this document are included for information purposes however numerous factors will affect market pricing at any particular time,such information may be subject to rapid change and there is no certainty that transactions could be executed at any specified price.BNPP may have a financial interest in any issuer or person mentioned in this document,including a long or short position in their securities and/or options,futures or other derivative instruments based thereon,or vice versa.BNPP,including its officers and employees may serve or have served as an officer,director or in an advisory capacity for any person mentioned in this document.BNPP may,from time to time,solicit,perform or have performed investment banking,underwriting or other services(including acting as adviser,manager,underwriter or lender)within the last 12 months for any person referred to in this document.BNPP may be a party to an agreement with any person relating to the production of this document.BNPP may to the extent permitted by law,have acted upon or used the information contained herein,or the analysis on which it was based,before the document was published.BNPP may receive or intend to seek compensation for investment banking services in the next three months from or in relation to any person mentioned in this document.Any person mentioned in this document may have been provided with relevant sections of this document prior to its publication in order to verify its factual accuracy.This document is for information purposes only and there is no assurance that a transaction(s)will be entered into on such indicative terms.Any indicative price(s)contained herein have been prepared in good faith in accordance with BNPPs own internal models and calculation methods and/or are based on or use available price sources where considered relevant.Indicative price(s)based on different models or assumptions may yield different results.Numerous factors may affect the price(s),which may or may not be taken into account.Therefore,these indicative price(s)may vary significantly from indicative price(s)obtained from other sources or market participants.BNPP expressly disclaims any responsibility for the accuracy or completeness of its own internal models or calculation methods,the accuracy or reliability of any price sources used,any errors or omissions in computing or disseminating these indicative price(s),and for any use you make of the price(s)provided.The indicative price(s)do not