1GabrielGersztein,GlobalHeadofEmergingMarketsStrategyLucaMaiaEmergingMarkets/LATAMStrategyBurakBaskurt,EmergingMarkets/CEEMEAStrategistShaunDaly,EmergingMarkets/CEEMEAStrategist|FOCUS05/07/19TRADEIDEASouthAfricaZAR:tacticallylongagainKEYMESSAGESSincewestartedcoveringSouthAfricainQ42018,ourFXstrategyhasbeentosticktoourfactorandglobalriskpremiummodels,aimingtoarbitrageanysubstantialdivergencewithmarketpricesindependentlyofthedirection.OurEM-BEERmodelsuggestsnowthatUSDZARisagain~5%aboveitstheoreticalshort-termfairvalue.OurmodelputsUSDZAR’sshort-termfairvalueatabout13.50.ThisexplainswhywejustenteredintoatacticalshortEURZARmaturity18September2019;entrypriceat16.2224(spotref:15.9924);allocation:EUR8mn;initialtarget:4%(carryincluded);stoploss:3%(carryincluded).Carryis+0.58%permonth.Therelativelylowallocationisexplainedonthestretchedlevelsofourglobalriskpremiummodel.Thesetacticaltradesarepartofourmoreactive/higherfrequencystrategyfor2019.RecapWehavebeenkeepingtrackofEMFXmarketsusingbothourshort-term(BEER)andourlong-term(FEER)models.Whileourriskpremiummodelislesssupportiveforaggressivepositions,weintendtoarbitrageanymarkeddivergencebetweenourfair-valuemodelsandmarketpricesindependentlyofthedirection.AftertheZAR’srecentunderperformance,ourEM-BEERmodelshowsthatUSDZARis>5%aboveitstheoreticalshort-termfairvalue.WeseeUSDZAR’sshort-termfairvalueataround13.50.Formoredetailssee:SouthAfrica:TakeprofitsonlongZARpositionSouthAfrica-TakeprofitsonlongZARpositionCEEMEAFX;TakeprofitsonlongUSDZARstrategyEMFX;TAKEPROFITSONLONGZARSTRATEGYFig.1-3:USDZAR;marketvsBNPPEM-FXBEERmodelSources:BloombergLLP,BNPParibas;asof05July2019EntrydateCloseDatePnLUSD'000ShortUSDZARviaIMMFwd13-Jun-1919-Jun-194.0%317ShortUSDZARvia3mFwd8-Mar-1910-Apr-194.6%457LongUSDZARvia3mFwd4-Dec-186-Dec-184.0%401ShortUSDZARvia3mFwd5-Oct-1816-Oct-184.4%438Total1,6136.08.511.013.516.06.08.511.013.516.0201120122014201520172018ModelBandMarketModelcentralUSDZARpriceagainstfactormodelbands5.7%-10%-5%0%5%10%20112013201520172019U...
