摩根士丹利-全球-外汇策略-全球外汇脉搏：赶上新兴市场的牛市-2019.4.11-38页.pdf

Hans.RJames.LSheena.SGek.Teng.KFilip.DAndres.JDavid.S.AIoana.ZAndrew.WMin.DChun.Him.CBelle.CMORGAN STANLEY&CO.INTERNATIONAL PLCHans W RedekerSTRATEGIST+44 20 7425-2430James K LordSTRATEGIST+44 20 7677-3254Sheena ShahSTRATEGIST+44 20 7677-6457Gek Teng KhooSTRATEGIST+44 20 7425-3842Filip DenchevSTRATEGIST+44 20 7677-3166MORGAN STANLEY&CO.LLCAndres JaimeSTRATEGIST+1 212 296-5570David S.Adams,CFASTRATEGIST+1 212 761-1481Ioana ZamfirSTRATEGIST+1 212 761-4012Andrew M WatrousSTRATEGIST+1-212-761-5287MORGAN STANLEY ASIA LIMITEDMin DaiSTRATEGIST+852 2239-7983Chun Him CheungSTRATEGIST+852 2239-1261Belle ChangSTRATEGIST+852 3963-0668Institutional Investor Global Fixed-IncomeResearch Polls are now open.We hope youhave enjoyed our research over the past yearand appreciate your support.Request yourballot.FX OverviewA Balance of Payments PrimerThe Shifting Drivers of AUDUSDAre Taiwanese Lifers Still Buying Bond ETFs?Strategic FX Portfolio;G10&EM Currency SummaryCentral Bank Watch;Global Event Risk CalendarFX ForecastsFX PulseFX Pulse|Global GlobalRiding the EM FX BullIf you have enjoyed our research in the past year,we would appreciate yoursupport in the Institutional Investor Fixed Income Research Poll.Request yourballot here.FX priced for inaction.FX markets are in stasis complacent,even.Our FXvolatility index(FXVIX)has reached its lowest level in five years,for example.Policy information received this week affirmed this view.While the Brexitdeadline has been postponed until the autumn,both the Fed and ECB havesignaled that limited policy changes are coming in the short term.US-China tradenegotiations also seem to be progressing as expected.but risk-bullish signals.Market conviction seems low and investors seem tobe searching for a new trend.To us,though,clear and positive signals havealready been emerging and continue to do so.China data remain on an uptrendand EM Asia trade volumes are rebounding.The US data mix is one of graduallyimproving growth,such as a likely rebound in retail sales,and tepid inflation.Even Europes picture is moving from broadly negative to more mixed,particularly in Scandinavia.Financial conditions globally are improving.Indeed,our Global Risk Demand Index*has rebounded,driven by tightening EM spreadsand low implied vol.continue to grow:Markets,like economies,rarely stay in one place for long.The outperformance of high-yielding EM FX this week is a signal that this isstarting to shift.Investor reticence suggests future trend following and investorsmay already be missing the boat on EM FX.We view the signals for risk asincreasingly clear and trade accordingly.We take off our AUDJPY short andmaintain our EM FX-heavy and risk-heavy trading strategy.For important disclosures,refer to the Disclosure Section,located at the end of this report.Exhibit 1:Current trade portfolioClosed TradesLong MYR/TWD 6m NDFClose at NY-Close on 11-Apr-19Short AUD/JPYClose at NY-Close on 11-Apr-19Active OrdersEntryStopTargetShort SGD/CNH5.00005.07004.8500Short USD/IDR 3m NDF143851479013850Short USD/PLN3.79663.85003.6500Short USD/NOK8.55008.83007.7500Long PLN/HUF73.6874.4075.80Long AUD/NZD1.04381.04501.0900New OrdersSell USD/RUB66.3567.4064.00Sell USD/CAD1.35001.36501.2900Source:Strategic FX Portfolio Trade Recommendations for more details.Changes in stops/targets in bold italics.*US Pat.No 7,617,1431April 11,2019 07:51 PM GMT FX OverviewDavid AdamsBottom line:Cyclical arguments are important for short-term investors,but for long-term investors,structural arguments matter more.In this weeks FX Overview we takea longer-term view and focus on an often-forgotten component of the current account,the income balance.The relative sensitivity of different FX participants to the exchangerate is what enables the FX rate to equilibrate the balance of payments(BoP)in afloating exchange rate regime.Financial flows are relatively insensitive as are theincome flows on the current account and so for some economies the exchange rate willhave to move more substantially to equilibrate the BoP.In an environment oftightening liquidity conditions,currencies in economies with current account deficitslargely explained by negative income balances will likely weaken the most,whileeconomies with surpluses explained mostly by income will likely strengthen the most.These suggest that AUD and NZD are particularly vulnerable against JPY.Cyclical factors.The cyclical argument for USD weakness continues to build.USgrowth continues to slow indeed,the probability of our cycle indicator falling fromexpansion into downturn over the next 12 months has risen to nearly 70%.Of particularimportance for the US is the benign inflation outlook(Exhibit 2).Core CPI and averagehourly earnings both surprised to the downside,giving the Fed little incentive to strike ahawkish tone.Indeed,some FOMC participants expressed concern about low inflationand inflation expectations in the FOMC minutes.continue to point to USD weakness.Meanwhile,positive signs abroad continue toemerge.China data such as PMIs show a rebound while emerging Asian trade reboundedat the fastest pace on record(Exhibit 3).European data,long the global laggard,haveincreasingly painted a mixed picture,rather than a broadly negative one.A relativeimprovement abroad,coupled with a dovish Fed and benign financial conditions,aresupportive of risk taking and carry-seeking behavior leading to a weaker USDcompared to EMFX.Exhibit 2:Muted inflation pressures may keep US nominal yieldspinnedSource:Macrobond,Morgan Stanley ResearchExhibit 3:Global trade volumes rebounding,led by EM AsiaSource:Macrobond,Morgan Stanley Research2.but structural forces are critical too:For short-term investors,the cyclical argument iscritical as that can drive price action for days,weeks and even months.For a longer-terminvestor,though,the structural argument matters more.This is where current accountsand global imbalances play a huge role for us.Predicting outcomes In analyzing FX,we spend a good deal of time looking at thecurrent and capital accounts.For readers less familiar with these concepts and why theymatter,we provide a primer below.In this weeks FX Overview,we take a longer-termapproach and focus on an oft-forgotten part of the current account the incomebalance and see that it can exacerbate currency corrections in an environment oftightening liquidity conditions.based on incomes:Normally when investors think of the current account,they thinkof it as synonymous with the balance of trade.There is good reason for this.Historically,a countrys balance of payments was dominated by trade because financial flows weremore limited.This is particularly the case during the Bretton Woods era,where limitedcapital mobility and limitations on base money creation meant that global capital flowsacross borders were limited largely to trade.Indeed,the income balance was effectively0%of GDP during the Bretton Woods period for the US and only started risingafterwards as capital flows picked up(Exhibit 4).Trade is sensitive to the FX level.How does the balance of payments drive FX?Withinthe balance of payments,there is a good deal of differentiation in how sensitivedifferent FX market participants are to the level of the exchange rate,and this relativesensitivity or insensitivity is what drives currency appreciation or depreciation.Thecurrent account and capital account drive FX because of the relative sensitivity of thesedifferent FX market participants to the level of the exchange rate.FX participants fortrade are most sensitive to the FX level because even a small change in the FX level canimpact the relative attractiveness of goods and services abroad versus at home.This isparticularly true as transaction costs for international trade have fallen considerablywith new technology and low trade barriers(Exhibit 5).Exhibit 4:US income balance was near 0%of GDP until Bretton WoodscollapsedSource:Macrobond,Morgan Stanley ResearchExhibit 5:Global trade costs have fallen considerably02040608010012019301940195019601970198019902000%of Cost in 1930International PhonePassenger Air TransportSea FreightGlobal trade costs have fallenconsiderably since WWIISource:OECD,Morgan Stanley Research3.while financial flows are insensitive to the FX level:Financial flows,though,are lesssensitive to the FX level.If Europe is deploying excess savings abroad,it will choose thebest investment destination based on other criteria such as return and risk.Whether USTreasuries are a good investment is not determined by whether EURUSD is at 1.20 or1.10.Of course,the potential change in the exchange rate is important but not reallythe level.Equilibrating the balance of payments that is,finding the clearing price for the FX rateto ensure the number of buyers equals the number of sellers is largely determinedthen by the trade balance because those participants are most sensitive.An increase innet savings pushing more capital abroad means more rate-insensitive buyers of,say,USD,so in order to find an additional seller on the current account side,USD has toappreciate sufficiently to render another unit of European goods and services moreattractive than domestic ones.Why is this important?The build-up in global savings,increase in cross-border capitalflows and increased globalization have meant that the current account is driven as muchby the income side as the trade side.And,importantly,the income balance is far lesssensitive to the FX level than the trade balance.Primary income(which is part of the current account),as defined by the IMF,is afunction of income generation on portfolio and FDI assets,as well as related flows likerents.Secondary income is focused on transfers such as remittances and tax payments.Much like financial flows,a transfer of an interest payment,dividend or other income isrelatively insensitive to the exchange rate level.So too are remittances,tax paymentsand most other transfers.Current account deficit economies.All this is critical for a longer-term FX investor,though.If our structural framework is correct,namely,that the stock of global savings islikely to grow more slowly if not shrink and that the net-saving economies which havebeen deploying capital abroad are likely to consume more of that capital at home,theneconomies reliant on foreign capital will have to increasingly generate that capital athome.Exhibit 6:Breakdown of global current accountSource:Macrobond,Morgan Stanley ResearchExhibit 7:Japans current account surplus increasingly incomedrivenSource:Macrobond,Morgan Stanley Research4.driven by the income balance.The FX rate will have to fall for an economy with acurrent account deficit to reach a flat balance of payments because it will need toreduce imports and/or generate more exports.But an economy with a current accountdeficit mostly driven by the income balance will have to see its currency fall even morebecause income flows are rate-insensitive.may see a larger FX depreciation.This is because the trade balance will have toadjust not only to make up for the capital inflow shortfall but to also cover the incomedeficit.Conversely,an economy whose current account deficit is entirely explained by atrade deficit may not need to weaken the exchange rate as much.if global liquidity conditions tighten:This cuts both ways,too.A net-saving economy(current account surplus)bringing money home or sending less money abroad with alarge income surplus will have to see its currency appreciate even more to get a wideenough trade deficit to bring that current account down(or even into deficit).Which currencies are most exposed?Which currencies are most likely to gain or lose alot here,then?Based on this framework,an economy with a current account deficit anda large negative income balance is likely to see the largest FX weakness,while aneconomy with a current account surplus and a large positive income balance is mostlikely to see currency strength(Exhibit 6).JPY and NOK most likely to gain.Within the G10,JPY and NOK fit this bill.Japanscurrent account surplus is almost entirely driven by income,not trade.This may surprisesome investors who often think of Japan as an export-oriented economy,but in fact itstrade balance is nearly 0%of GDP(Exhibit 7).Japans net foreign asset position isincreasingly driven by pension funds and lifers as Japans demographics erode overtime and more of that capital is deployed at home by retirees,Japans current income islikely to fall,but the flip side is that Japan will be able to import considerably more requiring a stronger currency to generate the substitution.Exhibit 8:Breakdown of G10 primary incomeSource:Macrobond,Morgan Stanley ResearchExhibit 9:Growth in global liquidity continues to slowSource:Macrobond,Morgan Stanley Research5NOK shows a similar albeit more modest pattern where a large portion of its currentaccount surplus is explained by income.Like Japan,Norway has developed aconsiderable foreign asset position and an increased income stock means that NOK willhave a more considerable tailwind.Still,because most of the foreign assets are held bythe government investment fund,we see less risk of this balance shifting as we do inJapan where demographics and the proportionate ownership are different.while AUD and NZD look most vulnerable:On the other hand,AUD and NZD lookclearly vulnerable in this analysis.The antipodeans face considerable headwinds asoverinvestment in the housing sector,in turn a function of the build-up in global savings,require deleveraging.This deleveraging will require a reduction in investment and a pick-up in savings.Generating those net savings that is,moving from current account deficitto surplus will require overcoming the large income deficit,suggesting that thecurrency will have to weaken considerably more.Important as well is that most of the income deficit is in fixed income payments likebond coupon payments and interest(Exhibit 8).Dividends are more volatile and can becut in an economic downturn but coupon payments and interest payments in theshort run are less flexible.What about EM?Perhaps unsurprisingly,many EMs running a current account deficitare explained by negative primary income balances.This is likely driven by the higherrates of return offered in these economies a net investment in EMs tends to be higher-yielding and have higher coupon payments compared to investments in the DM.An important factor helping to mitigate the negative primary income balance,though,isthe secondary income balance.These are often explained by remittances.Remittancesare likely insensitive to the FX rate but are likely more sensitive to the economicoutlook.If economic growth slows meaningfully,then remittances may slow as bothincomes and employments for workers abroad may come under pressure.And,importantly,in an environment when global growth slows meaningfully,liquidityconditions may also tighten and funds flow out of EM.Thus,an EM with a negative trade balance and/or negative primary income balancewhich is partial