汇丰银行-新兴市场-宏观策略-新兴市场利率：担忧之墙可能变成担忧的悬崖-2019.6.6-43页.pdf

Disclosures&Disclaimer This report must be read with the disclosures and the analyst certifications in the Disclosure appendix,and with the Disclaimer,which forms part of it.Issuer of report:The Hongkong and Shanghai Banking Corporation Limited View HSBC Global Research at:https:/ THIS CONTENT MAY NOT BE DISTRIBUTED TO THE PEOPLES REPUBLIC OF CHINA(THE PRC)(EXCLUDING SPECIAL ADMINISTRATIVE REGIONS OF HONG KONG AND MACAO)Investors need to factor in a cluster of external factors We remain cautious and prefer low-beta countries like China,Thailand,Israel,the Czech Republic and Hungary We turn more constructive on India and are still bullish on Russia Policy support doesnt provide much relief in the face of a wall of worry Although EM bonds have so far been more resilient than EM FX,external risk factors have continued to increase,putting some key EM countries at the epicentre of trade tensions.They include US-China trade tensions,the imposition of US tariffs on Mexicos imports,geo-political risks in the Middle-East and the increased chance of a no-deal Brexit.Although the policy backdrop has turned supportive for local bond markets,with several EM central banks on a path of monetary easing,we dont think this provides much relief in the face of these external risks.Prefer low-beta countries In our view,this wall of worry could well become a cliff of concerns.We therefore remain cautious on EM local rates,preferring low-beta countries China(receive 5yr ND IRS),Thailand(Long 10-year ThaiGBs),Israel(long 10-year ILGOVs),Czech Republic(ASW CZGB 10/23)and Hungary(long 3yr HGBs).For the EM high yielders,we turn more constructive on India(receive INR1yr1yr),where we think recent elections should lead to policy continuity and remain bullish on Brazil(Long NTNF 2027s),Russia(Long 5yr OFZ)and Philippines(long 2yr RPGBs).The link between EM local rates and FX We think the link between FX and rates should be weaker in low yielding markets.As such,low yielding Asian markets with high trade exposure to China(Korea,Singapore and Thailand)can still afford lower rates with weaker exchange rates.However,any exchange rate volatility in EM high yielders due to high export exposure to China is likely to ripple through the local rates markets in the form of higher risk premia.Among high yielders,Chile and Brazil look most exposed to China trade,while Mexico,the Philippines and India may be the least exposed.Capital flows One factor that has supported EM rates recently has been that the capital flows into local bonds have remained broadly stable.Foreign investors have scaled up bond holdings in Brazil,Indonesia,South Africa and Russia.That said,there has been a divergence in demand between high and low yielders since mid-April.Foreign flows in low yielders have been led by China,Korea,the Czech Republic and Hungary.We think this trend is likely to persist as investors continue to prefer low-beta markets amid the external volatility.Andre de Silva,CFA Head of Global EM Rates Research The Hongkong and Shanghai Banking Corporation Limited .hk+852 2822 2217 Pin Ru Tan Asia-Pacific Rates Strategist The Hongkong and Shanghai Banking Corporation Limited,Singapore Branch .sg+65 6658 8782 Radoslaw Bodys Head of CEEMEA Rates Strategy HSBC Bank plc +44 20 7991 5882 Dayeon Hong Asia Pacific Rates Strategist The Hongkong and Shanghai Banking Corporation Limited .hk+852 2996 6569 Himanshu Malik,CFA Asia-Pacific Rates Strategist The Hongkong and Shanghai Banking Corporation Limited .hk+852 3941 7006 Monty Gandhi LatAm Fixed Income Strategist HSBC Securities(USA)I+1 212 525 6483 Tom Nash,CFA Strategist HSBC Bank Australia Limited .au+61 2 9084 2433 Piran Phippen CEEMEA Rates Strategist HSBC Bank plc +44 20 7991 5693 Zoe Fang Associate,Asia-Pacific Rates Strategy The Hongkong and Shanghai Banking Corporation Limited .hk+852 2822 4665 6 June 2019 EM Rates Fixed Income Rates Global Emerging Markets Wall of worry could become a cliff of concerns Fixed Income Rates 6 June 2019 2 Local bonds barometer 3 Top Trades 4 Clients questions on EM 5 EM Rates 6 Summer blues 6 Link between EM local rates and FX 8 Capital flows 9 EM hard debt 10 Cracks emerging 10 Sensitivity to global risk sentiment rising 10 at a time where there are signs of EM complacency 11 EM FX:Quality over quantity 12 EM Economics 13 Debt constrains EM growth potential 13 EM high yielders 14 Brazil 14 Russia 15 Mexico 16 The Philippines 17 India 18 Malaysia 19 South Africa 20 Turkey 21 EM low yielders 22 Onshore China 22 Israel 23 Hungary 24 Korea 25 Czech Republic 26 Romania 27 Poland 28 Andean markets 29 Colombia 29 Chile 30 Frontier markets 31 Argentina 31 Sri Lanka 32 Recent EM publications 33 Disclosure appendix 39 Disclaimer 42 Contents 3 Fixed Income Rates 6 June 2019 Table 2.Emerging Markets Local Bonds Value Matrix Brazil Mexico Indonesia India*China Malaysia South Africa*Turkey Russia External factors FX adequacy ratio*1.6 1.2 1.1 1.3 0.8 1.2 0.6 0.7 3.3 FX reserves(USDbn)374.1 173.0 118.6 392.2 3,095.0 99.6 41.4 70.7 390.6 Short-term external debt(%of reserves)8.6 3.0 50.3 23.3 42.5 90.2 64.6 183.0 15.5 Import coverage ratio(months)24.4 4.3 8.1 9.3 15.7 6.9 6.2 3.8 20.4 Macro variables Current account balance(FY19e,%of GDP,HSBC forecasts)-1.3-1.7-2.6-2.2 0.3 2.2-2.9-2.1 4.9 Fiscal balance(FY19e,%of GDP,HSBC forecasts)-4.6-2.9-1.7-3.4-2.8-3.4-5.1-3.9 2.3 Household debt(%of GDP)27.1 16.1 17.0 11.3 51.5 67.0 33.0 15.6 16.9 Headline CPI(last,%y-o-y)4.9 4.4 2.8 2.9 2.5 0.2 4.4 19.5 5.2 HSBC CPI forecasts(end-2019e,%y-o-y)4.2 3.9 3.9 4.0 2.2 2.2 5.3 18.3 4.5 Positioning&sensitivity Sensitivity-0.54 0.11-0.13 0.29 0.34 0.02-0.05-1.39-0.24 Latest foreign ownership of local government debt 12.5%30.4%38.1%3.4%8.1%23.2%39.2%13.3%26.7%Foreign ownership(a year ago)12.3%31.6%38.1%4.1%6.3%28.4%42.7%21.1%34.5%*FX adequacy ratio-IMF Ratio of reserve/ARA metric(November 2018).*FY19/20 refers to 1 April 2019-31 March 2020 for India and South Africa.Beta computed using a regression between the yields of 10-year government bonds and US Treasuries over the past three months.Source:HSBC forecasts Local bonds barometer Table 1.Emerging Markets Local Currency Bonds Outlook Brazil Mexico India China*Malaysia Russia South Africa Turkey View on local bonds Bullish Mildly Bullish Neutral Bullish Neutral Bullish Mildly Bullish Bearish 10-year nominal yield(%)8.46 8.00 6.96 3.26 3.76 7.91 9.10 18.09 Correlation to UST*-0.18 0.13 0.32 0.49 0.04-0.21-0.04-0.14 Trend in foreign flows Monetary policy bias FX outlook *Correlation computed using daily yield data over the past three months.Trend in foreign flows is based on the latest monthly flows for the country.Based on HSBC FX Research(Emerging Markets FX Roadmap)and HSBC Economics forecasts for end-2019.Data include government+corporate flows.Source:HSBC.*Monetary policy outlook in China based on the Reserve Requirement Ratio.Fixed Income Rates 6 June 2019 4 Top Trades 1.Long China 30yr CGBs Entry:3.88%Target:3.55%Stop:4.30%Entry date:5-Jun-19 Current:3.88%Slower economic growth and a slower pace of financial deleveraging Risks:Currency depreciation or higher USD rates 2.Long Russia OFZ6.5 Feb24 Entry:8.18%Target:7.25%Stop:8.67%Entry date:28-Feb-18 Current:7.62%Strong fundamentals and a benign inflation outlook Risks:Increase in geopolitical tensions 3.Rec India 1yr1yr INR NDOIS Entry:5.61%Target:5.30%Stop:5.80%Entry date:3-Jun-19 Current:5.57%ND OIS curve likely to reflect aggressive pricing of policy easing Risks:Higher crude oil prices and/or increase in food prices 4.Long Israel ILGOV2.25 Sep28 5.Long Hungary HGB1.75 Oct22(22B)Entry:1.83%Target:1.50%Stop:2.10%Entry:1.39%Target:0.90%Stop:1.80%Entry date:24-Apr-19 Current:1.60%Entry date:8-Feb-19 Current:1.04%6.Long Philippines RPGB4.875 Jun21 7.Long Brazil NTNF 2027s Entry:5.92%Target:5.20%Stop:5.75%Entry:8.06%Target:7.50%Stop:8.34%Entry date:13-Mar-19 Current:5.43%Entry date:3-Jun-19 Current:8.05%Source:Bloomberg,HSBC.*For full details of open trades including risks and rationale,please refer to Table 3 on page 35.Revised target and stop 3.53.63.73.83.94.04.1Feb-19Mar-19Apr-19May-19Jun-19%China 30yr CGBEntryTarget7.07.58.08.5Jan-19Feb-19 Mar-19Apr-19May-19Jun-19%Russia OFZ 6.5 Feb24EntryTarget5.15.35.55.75.96.16.3Mar-19Apr-19May-19Jun-19%India 1yr1yr INR NDOISEntryTarget 5 Fixed Income Rates 6 June 2019 1.Is the Peoples Bank of Chinas takeover of Baoshang Bank a one-off case or the start of a wider banking system clean-up?How will this affect the funding markets?On 24 May,the PBoC announced that it will take over Baoshang Bank for a year,due to serious credit risks at the bank.There were concerns that this may be a re-run of 2013,when the central bank started to clean up the trust industry,eventually culminating in the major interbank liquidity squeeze of June 2013.We disagree,given that the macroeconomic conditions today are not conducive for a shake-up of the financial industry.Back in 2013,the central bank was not in a monetary easing cycle and economic growth was stable,allowing the authorities to move forward in tightening financial supervision.Fast forward to today,the central bank has been easing since early 2018 due to significant growth uncertainties.We therefore believe that the takeover of Baoshang Bank is a standalone case.Note though that this incident is likely to lead to increased prudence among interbank players in China when they enter into repo agreements,it remains unclear to date if Baoshang Bank will be able to meet all outstanding repo obligations.Prior to this incident,interbank players never seriously considered the possibility of a repo default in our view,regardless of counterparty.Going forward,there is likely to be a stronger price distinction between strong credit and weaker credit names in the repo market.However,we expect overall funding conditions to remain stable as the central banks liquidity stance will remain the single most important determinant of the market direction.2.What are the implications of the latest announcement by the US to impose tariffs of up to 25%on all Mexican imports?The US administration has announced that it will impose tariffs on imports from Mexico unless Mexico takes steps to reduce unlawful immigration into the US.The imposition of tariffs is due to start at 5%on 10 June,but will increase to 10%on 1 July,15%on 1 August,20%on 1 September,and 25%on 1 October,subject to action on migrants.Mexicos exports to the US represent 80%of its total exports(as of 2018)and HSBC Economists estimate that for every 1%change in Mexican manufacturing production,the impact on real GDP growth would be around 0.15-0.17%(US tariffs on Mexico,31 May 2019).In a scenario that no agreement is reached between US and Mexico before 10 June and tariffs are placed,Mexico rates are likely to be largely driven by the central banks policy stance and a potential peso selloff.The heightened risk is likely to support Banxicos already well-established hawkish stance and may even make it more resolute.Rate cut expectations priced in at the front-end of the curve are likely to dissipate.The long-end of the curve could also come under pressure,subsequently widening spreads versus US Treasuries.We prefer to take a short duration stance considering attractive real rates.We retain a long position at the front-end of the Mbono curve even as we stay vigilant of the tariff risk.In external debt,spreads are likely to widen with the increased uncertainty reflecting higher risk premium.The heightened risk supports our stance to stay cautious.While this is specifically related to Mexico,markets will also naturally draw an implicit link with other trade tensions and the prospect of additional tariffs,such as on China.Heightened risk aversion and increased volatility in EM currencies on the back of such measures in particular should lead to a higher risk premium in local rates in high yielding EMs.3.Both President Joko Widodo and Prime Minister Narendra Modi have been re-elected to office.What can we expect from their respective second terms?In Indonesia,investors are awaiting President Joko Widodos cabinet reshuffle and watching closely to see if Sri Mulyani Indrawati gets reappointed as the finance minister.In his second term,the President has stated that he will go all out to boost economic reforms as he would have no re-election considerations due to the two-term limit.Specifically,he would like to slim the government to expedite policymaking,reduce red tape that is hampering investment,continue to add infrastructure as well as improve human resources.For India,Prime Minister Narendra Modis government is likely to prioritise steps to improve fiscal revenues.This can be done through introducing a new Direct Tax Code and carrying out disinvestment reforms.This could help lower government borrowing.Land reform is also critical given that current ownership rights are poorly defined and land acquisition is difficult.The government could also help improve living standards by encouraging a shift from short-term to multi-year labour contracts.4.President Cyril Ramaphosa of South Africa has reshuffled his cabinet following the partys election win in May.What are the next steps to watch?In a good start,President Cyril Ramaphosa announced a leaner cabinet with 28 ministerial positions,down from 36 previously,by streamlining ministries.However,the true litmus test for the presidents ability to reform is the way he deals with state-owned energy company Eskom.The company,which employs around 50,0000 staff,ran an estimated loss of USD1.5bn for the financial year 2018-19.It also required an emergency bailout worth USD355m from the government in April,as it did not have sufficient funds to repay its debt.In his State of the Nation Address on 7 February,the president stated the need for cost cuts,higher energy tariffs and the splitting of Eskom into three entities.Investors will be closely watching for a timeline for these steps.Moodys rating agency skipped its review of South Africa in March for the second time in a row,and the next review is due on 1 November.If the rating agency downgrades South Africa,the country would lose its final investment grade recognition and will be removed from the FTSE-Russell World Government Bond Index,potentially triggering USD1.5bn of outflows from the local bond market.Clients questions on EM Fixed Income Rates 6 June 2019 6 Summer blues Whilst EM bonds have been resilient vs EM FX,exogenous risk factors have intensified even further in the form of either pledged or,in some cases,very prescriptive US tariffs.Not only does this jeopardise global growth,which is already progressively slowing but it has put some key EM countries at the epicentre of trade tensions.US-China trade tensions,including increasing odds of US tariffs on all remaining China imports(Renewed China-US tariff war,10 May),specific tech supply-side disruptions,the imposition of US tariffs on Mexicos imports,a ratcheti