emerging markets and latin america: new lows ahead? …
TRANSCRIPT
EMERGING MARKETS AND LATIN AMERICA:NEW LOWS AHEAD?
JUNE 2016
A PRESENTATION BY:
Santiago E. Gomez, Editor/Strategist Emerging Markets Strategy & Geopolitical [email protected]
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IMPORTANCE OF EM IN WORLD ECONOMY
8
7
6
5
4
3
2
2000 2002 2004 2006 2008 2010 2012 2014 2016
8
7
6
5
4
3
2
IMPORTS IN US$ AS A % OF GLOBAL GDP*VULNERABLE EMERGING MARKETS
(INCLUDING CHINA)**U.S.EUROPEAN UNION
%ofGDP
%ofGDP
* SOURCE: IMF DIRECTION OF TRADE.** DEVELOPING MARKETS EXCLUDING MEXICO, POLAND, CZECH REPUBLIC, HUNGARY, SLOVANIA, AND ROMANIA.
© BCA Research 2016
45
40
35
30
25
20
15
10
2002 2004 2006 2008 2010 2012 2014 2016
45
40
35
30
25
20
15
10
40
35
30
25
20
15
40
35
30
25
20
15
KOREA
% %AS A % OF TOTAL EXPORTSEXPORT DESTINATION TO:
U.S.EUROPEAN UNIONCOMMODITY PRODUCERS*EMERGING ASIA
CHINA
% %
* INCLUDES LATAM, AFRICA, MIDDLE EAST, RUSSIA, AUSTRALIA & CANADA.
© BCA Research 2016
6
5
4
3
2
1
2000 2002 2004 2006 2008 2010 2012 2014 2016
6
5
4
3
2
1
EXPORTS TO VULNERABLE EMERGING MARKETSAS A % OF THEIR GDP*:
U.S.GERMANYJAPAN
%ofGDP
%ofGDP
* SOURCE: IMF DIRECTION OF TRADE; DEVELOPING MARKETS EXCLUDING MEXICO, POLAND, CZECH REPUBLIC, HUNGARY, SLOVENIA, ROMANIA AND THE MIDDLE EAST.
9
8
7
6
5
4
3
2
1
1990 1995 2000 2005 2010 2015
9
8
7
6
5
4
3
2
1
REAL CAPEX AS % OF GLOBAL REAL GDP*:EM**U.S.JAPANEUROPEAN UNION
% %
* IN 2000 CONSTANT US$; SOURCE: WORLD BANK.** INCLUDES CHINA, KOREA, POLAND, AFRICA, TURKEY, INDIA, PHILIPPINES, THAILAND, INDONESIA, MEXICO, BRAZIL, MALAYSIA, CHILE, RUSSIA AND COLOMBIA.
© BCA Research 2016
© BCA Research 2016
Commodity Producers
Commodity Producers
EU
EU
U.S.
U.S.
Non-Japan Asia
Non-Japan Asia
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GLOBAL MANUFACTURING/TRADE
20
10
0
-10
-20
2006 2008 2010 2012 2014 2016
20
10
0
-10
-20
EMERGING MARKETS IMPORT VOLUME*Ann%
ChgAnn%Chg
* SHOWN AS A 3-MONTH MOVING AVERAGE; SOURCE: NETHERLANDS BUREAU FOR ECONOMIC POLICY ANALYSIS.
0
-5
-10
2013 2014 2015 2016
0
-5
-10
JAPAN: EXPORT VOLUME*Ann%
ChgAnn%Chg
* SHOWN AS A 3-MONTH MOVING AVERAGE.
10
5
0
2011 2012 2013 2014 2015 2016
10
5
0
GLOBAL EXPORTS VOLUME*
Ann%Chg
Ann%Chg
* SOURCE: NETHERLANDS BUREAU FOR ECONOMIC ANALYSIS.
© BCA Research 2016
© BCA Research 2016
© BCA Research 2016
10
0
-10
-20
-30
2004 2006 2008 2010 2012 2014 2016
10
0
-10
-20
-30
20
0
-20
-40
20
0
-20
-40
20
0
-20
-40
20
0
-20
-40
DOMESTICAnn%Chg
Ann%Chg
GERMANY:MANUFACTURING ORDER VOLUME
FROM EURO AREAAnn%
ChgAnn%Chg
FROM NON-EURO AREAAnn%
ChgAnn%Chg
* SHOWN AS A 3-MONTH MOV. AVG.; SOURCE: DEUTSCHE BUNDESBANK.
15
10
5
0
-5
-10
-15
2006 2008 2010 2012 2014 2016
15
10
5
0
-5
-10
-15
IMPORT VOLUME*EURO AREAU.S.**
Ann%Chg
Ann%Chg
* SHOWN AS A 3-MONTH MOVING AVERAGE.** DEFLATED BY IMPORT PRICE INDEX (ALL COMMODITIES; END USE).
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Still contracting
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EM STOCKS POINT TO FURTHER WEAKNESS IN GLOBAL INDUSTRIAL CYCLE
50
40
30
20
10
0
-10
-20
2004 2006 2008 2010 2012 2014 2016
50
40
30
20
10
0
-10
-20
CAPITAL GOODS IMPORTS* (IN U.S. DOLLARS):CHINA
Ann%Chg
Ann%Chg
* AGGREGATE OF 17 EMERGING ECONOMIES; SUM OF IMPORTS OF CAPITAL GOODS IN US$; BOTH SERIES SHOWN AS A 6-MONTH MOVING AVERAGE.
15
10
5
0
-5
-10
1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016
80
60
40
20
0
-20
-40
GLOBAL INDUSTRIAL PRODUCTION* (LS)EMERGING MARKETS STOCK PRICES IN LOCAL CURRENCY TERMS** (ADVANCED BY 6 MONTHS; RS)
Ann%Chg
Ann%Chg
* SHOWN AS A 3-MONTH MOVING AVERAGE; SOURCE: NETHERLANDS BUREAU FOR ECONOMIC POLICY ANALYSIS.** SOURCE: MSCI Inc. (SEE COPYRIGHT DECLARATION).
30
20
10
0
-10
-20
-30
2004 2006 2008 2010 2012 2014 2016
30
20
10
0
-10
-20
-30
CAPITAL GOODS IMPORTS IN US$EMERGING MARKETS EXCLUDING CHINA*
Ann%Chg
Ann%Chg
* AGGREGATE OF 17 EMERGING ECONOMIES; SUM OF IMPORTS OF CAPITAL GOODS IN US$; SHOWN AS A 3-MONTH MOVING AVERAGE.
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© BCA Research 2016© BCA Research 2016
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INVENTORY OVERHANG AND OUTPUT CONTRACTION IN GLOBAL MANUFACTURING
1.3
1.2
1.1
1.0
2004 2006 2008 2010 2012 2014 2016
1.3
1.2
1.1
1.0
1.5
1.4
1.3
1.2
1.1
1.0
.9
1.5
1.4
1.3
1.2
1.1
1.0
.9
1.4
1.3
1.2
1.4
1.3
1.2
1.4
1.3
1.2
1.1
1.0
1.4
1.3
1.2
1.1
1.0
KOREA*
TAIWAN*
MANUFACTURINGINVENTORY-TO-SHIPMENT RATIO
U.S.
JAPAN
* SHOWN AS A 3-MONTH MOVING AVERAGE.
8
4
0
-4
2012 2014 2016
8
4
0
-4
3
2
1
0
3
2
1
0
10
5
0
-5
10
5
0
-5
5
0
-5
-10
5
0
-5
-10
4
2
0
-2
4
2
0
-2
GERMANY**
Ann%Chg
Ann%Chg
U.S.**Ann%Chg
Ann%Chg
JAPAN**
Ann%Chg
Ann%Chg
MANUFACTURING OUTPUT
TAIWAN**
Ann%Chg
Ann%Chg
KOREA*
Ann%Chg
Ann%Chg
* SHOWN AS A 6-MONTH MOVING AVERAGE.** SHOWN AS A 3-MONTH MOVING AVERAGE.
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U.S. MANUFACTURING & CHINESE EXPORTS
25
20
15
10
5
0
-5
-10
-15
-20
1995 2000 2005 2010 2015
25
20
15
10
5
0
-5
-10
-15
-20
U.S.:TOTAL RAILROAD CARLOAD
EXCLUDING PETROLEUM AND COAL* (LS)MANUFACTURING OUTPUT** (RS)
Ann%Chg
Ann%Chg
* SHOWN AS A 10-WEEK MOVING AVERAGE.** SOURCE: FEDERAL RESERVE.
15
10
5
0
-5
-10
-15
1995 2000 2005 2010 2015
15
10
5
0
-5
-10
-15
U.S. INTERMODAL CARLOAD
Ann%Chg
Ann%Chg
SHOWN AS 20-WEEK MOVING AVERAGE.
7.2
7.1
7.0
6.9
6.8
6.7
6.6
2006 2008 2010 2012 2014 2016
30
20
10
0
-10
CHINA CONTAINER FREIGHT INDEX* (LS)CHINA EXPORT VOLUME** (RS)
Ann%Chg
* SHOWN AS A NATURAL LOGARITHM; SOURCE: SHANGHAI SHIPPING EXCHANGE.** SHOWN AS A 6-MONTH MOVING AVERAGE.
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GLOBAL DEFLATIONARY PRESSURES ARE ESCALATING
10
0
-10
2004 2006 2008 2010 2012 2014 2016
10
0
-10
20
0
-20
20
0
-20
10
0
-10
10
0
-10
EXPORT PRICE IN US$:TAIWAN
Ann%Chg
Ann%Chg
EXPORT PRICE IN US$:KOREA
Ann%Chg
Ann%Chg
WORLD MANUFACTURED GOODS PRICES* IN US$
Ann%Chg
Ann%Chg
* SOURCE: NETHERLANDS BUREAU FOR ECONOMIC POLICY ANALYSIS.
-10
0
10
2004 2006 2008 2010 2012 2014 2016
-10
0
10
10
0
-10
10
0
-10
EXPORT PRICE IN US$*:MEXICO (MANUFACTURED GOODS)Ann%
ChgAnn%Chg
EXPORT PRICE IN US$*:CHINA
Ann%Chg
Ann%Chg
* SHOWN AS 3-MONTH MOVNG AVERAGE.
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Deflation Deflation
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STEALTH RMB DEVALUATION
104
102
100
98
96
94
92
2014 2015
104
102
100
98
96
94
92
6.1
6.2
6.3
6.4
6.5
6.6
5.0
4.5
4.0
3.5
3.0
2.5
JAN APR JUL OCT JAN APR JUL OCT JAN APR JUL
RMB vs. NEW BASKET*
CHINA:RMB vs. USD (LS)12-MONTH SWAP RATE (RS)
USD/CNY
%
* BCA ESTIMATE BASED ON CFETS CURRENCY BASKET; REBASED TO 100 AT DECEMBER 31, 2014.
6.6
6.5
6.4
6.3
6.2
6.1
2014 2015
320
310
300
290
280
270
260
250
JAN APR JUL OCT JAN APR JUL OCT JAN APR JUL
RMB vs. USD (LS)GLOBAL STOCK PRICES IN SDR* (RS)
USD/CNY
* SPECIAL DRAWING RIGHT; SOURCE: IMF.
12
8
4
0
-4
-8
-12
1995 2000 2005 2010 2015
12
8
4
0
-4
-8
-12
-16
GLOBAL INDUSTRIAL PRODUCTION* (LS)TRADE WEIGHTED DOLLAR INDEX**
SHOWN AS AN 18-MONTH RATE OF CHANGE (RS,INVERTED)
Ann%Chg
%
* SOURCE: NETHERLANDS BUREAU FOR ECONOMIC POLICY ANALYSIS.** NOTE: NOMINAL BROAD BASED TRADE WEIGHTED DOLLAR; SOURCE: FEDERAL RESERVE.
© BCA Research 2016 © BCA Research 2016
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New lows
?
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GLOBAL DEFLATION, RETURN ON CAPITAL, & EM
20
10
0
-10
-20
2006 2008 2010 2012 2014 2016
20
10
0
-10
-20
15
10
5
0
-5
15
10
5
0
-5
10
5
0
-5
-10
10
5
0
-5
-10
10
5
0
-5
-10
-15
10
5
0
-5
-10
-15
30
20
10
0
-10
-20
30
20
10
0
-10
-20
MEXICO (MANUFACTURED GOODS)Ann%Chg
Ann%Chg
CHINA*Ann%
ChgAnn%Chg
JAPANAnn%
ChgAnn%Chg
TAIWAN
Ann%Chg
Ann%Chg
KOREA
EXPORT PRICES:IN US$IN LOCAL CURRENCY TERMS
Ann%Chg
Ann%Chg
* HONG KONG RE-EXPORT PRICE AS A PROXY; SOURCE: HONG KONG MONTHLY DIGEST OF STATISTICS.
20.0
17.5
15.0
12.5
10.0
1995 2000 2005 2010 2015
11.0
10.8
10.6
10.4
10.2
10.0
9.8
9.6
9.4
9.2
20.0
17.5
15.0
12.5
10.0
103.5
103.0
102.5
102.0
101.5
101.0
100.5
100.0
99.5
99.0
98.5
STOCK PRICES IN LOCAL CURRENCY TERMS*** (RS)
%
REAL EFFECTIVE EXCHANGE RATE* (RS)
RETURN ON EQUITY: NON-FINANCIALS** (LS)
EMERGING MARKETS:
%
* EQUITY MARKET-CAP WEIGHTED OF 19 COUNTRIES; AVERAGE OF PPI AND CPI BASED; REBASED TO 100 AT JANUARY 2001; SOURCE: J.P. MORGAN CHASE & CO.** SOURCE: DATASTREAM; BCA CALCULATION.*** SHOWN AS A NATURAL LOGARITHM; SOURCE: MSCI Inc. (SEE COPYRIGHT DECLARATION).
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EM INDICATORS DO NOT SIGNAL A GROWTH RECOVERY
200
150
100
50
0
-50
-100
2006 2008 2010 2012 2014 2016
200
150
100
50
0
-50
-100
120
100
80
60
40
20
0
-20
120
100
80
60
40
20
0
-20
160
120
80
40
0
-40
-80
-120
160
120
80
40
0
-40
-80
-120
CHINA*BPs BPs
YIELD CURVE: 5-YEAR/6-MONTH SWAP RATES
TAIWAN
BPs BPs
KOREA
BPs BPs
* SHOWN AS A 10-DAY MOVING AVERAGE.
100
75
50
25
0
-25
-50
2006 2008 2010 2012 2014 2016
100
75
50
25
0
-25
-50
100
75
50
25
0
-25
-50
100
75
50
25
0
-25
-50
EM SMALL CAP
EARNINGS PER SHARE* IN LOCALCURRENCY TERMS:Ann%
ChgAnn%Chg
EM LARGE CAP
Ann%Chg
Ann%Chg
* CALCULATED AS STOCK PRICES DIVIDED BY P/E RATIO; SHOWN AS A 3-MONTH MOVING AVERAGE; SOURCE: MSCI Inc. (SEE COPYRIGHT DECLARATION).
40
20
0
-20
-40
-60
2004 2006 2008 2010 2012 2014 2016
40
20
0
-20
-40
-60
EMERGING MARKETS STOCKS NET EARNINGSREVISIONS*
% %
* SOURCE: IBES.
© BCA Research 2016
© BCA Research 2016
© BCA Research 2016
-25%
-25%
10
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NO SIGN OF MAJOR UPTURN
55
54
53
52
51
50
2012 2013 2014 2015 2016
55
54
53
52
51
50
52
51
50
49
48
52
51
50
49
48
CHINA NON-MANUFACTURING PMI***:
NON-SMOOTHED6-MONTH MOVING AVERAGE
MANUFACTURING PMI*EMERGING MARKETS EXCLUDING CHINA**CHINA
* SOURCE: MARKIT.** EQUITY MARKET-CAP WEIGHTED AGGREGATE OF 12 EMERGING ECONOMIES.*** AVERAGE OF NATIONAL BUREAU OF STATISTICS AND CAIXIN PMIs.
1800
1600
1400
1200
1000
800
600
400
1995 2000 2005 2010 2015
1800
1600
1400
1200
1000
800
600
400
PRECIOUS METALS INDEX IN US$*:
3-YEAR MOVING AVERAGE12-YEAR MOVING AVERAGE
* SOURCE: COMMODITY RESEARCH BUREAU Inc.
16001400
1200
1000
800
600
2012 2013 2014 2015 2016
16001400
1200
1000
800
600
24000
20000180001600014000
12000
10000
24000
20000180001600014000
12000
10000
120
100
80
60
40
120
100
80
60
40
5000
4000
3000
2500
2000
5000
4000
3000
2500
2000
COKE SPOT PRICE****RMB/T RMB/T
WHOLESALE PRICE OF RUBBER***RMB/Ton
RMB/Ton
IRON ORE PRICES**
US$/Ton
US$/Ton
CHINA:PRICE OF STEEL*
RMB/T RMB/T
* DOMESTIC HOT ROLLED STEEL SHEET AVERAGE SPOT PRICE; SOURCE: ANTAIKE INFORMATION DEVELOPMENT.** SOURCE: METAL BULLETIN.*** BEIJING DOMESTIC-MADE No.1 RUBBER.**** 2ND GRADE COKE SPOT PRICE TIANJIN; SOURCE: ANTAIKE INFORMATION DEVELOPMENT.
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A major resistance
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MARKET PROFILES
320
300
280
260
240
220
200
180
2010 2012 2014 2016
320
300
280
260
240
220
200
180
520
480
440
400
360
320
280
520
480
440
400
360
320
280
GLOBAL STOCK PRICES* IN SDR**
GLOBAL STOCK PRICES IN LOCALCURRENCY*:
200-DAY MOVING AVERAGE800-DAY MOVING AVERAGE
* SOURCE: MSCI Inc. (SEE COPYRIGHT DECLARATION).** SPECIAL DRAWING RIGHTS; SOURCE: IMF.
130
120
110
100
90
80
70
2012 2014 2016
130
120
110
100
90
80
70
U.S.:
RELATIVE TOTAL RETURN:S&P 500 RELATIVE-TO-U.S. 30-YEAR TREASURYS*
200-DAY MOVING AVERAGE400-DAY MOVING AVERAGE800-DAY MOVING AVERAGE
* REBASED TO 100 AT JANUARY 2011.
220
200
180
160
140
120
100
80
2008 2010 2012 2014 2016
220
200
180
160
140
120
100
80
RELATIVE TOTAL RETURN:EMERGING MARKETS STOCKS*-TO-U.S. 30-YEAR TREASURYS
200-DAY MOVING AVERAGE
* REBASED TO 100 AT JANUARY 2005; SOURCE: MSCI Inc. (SEE COPYRIGHT DECLARATION).
© BCA Research 2016
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New lows ahead
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MARKET PROFILES
95
85
75
65
55
45
35
2006 2008 2010 2012 2014 2016
95
85
75
65
55
45
35
CHINA INVESTIBLE STOCK PRICESIN LOCAL CURRENCY*:
200-DAY MOVING AVERAGE
* SOURCE: MSCI Inc. (SEE COPYRIGHT DECLARATION).
120
115
110
105
100
95
90
85
2004 2006 2008 2010 2012 2014 2016
120
115
110
105
100
95
90
85
160
150
140
130
120
110
100
90
160
150
140
130
120
110
100
90
TELECOMMUNICATION
200-DAY MOVING AVERAGE800-DAY MOVING AVERAGE
UTILITIES GLOBAL STOCK PRICESRELATIVE TO*:
* BOTH SERIES REBASED TO 100 AT JANUARY 2004; SOURCE: MSCI Inc. (SEE COPYRIGHT DECLARATION).
180
160
140
120
100
2010 2012 2014 2016
180
160
140
120
100
240220200180
160
140
120
100
240220200180
160
140
120
100
220200
180
160
140
120
100
220200
180
160
140
120
100
180
160
140
120
100
180
160
140
120
100
S&P 500 TRUCKINGCOMPOSITE**
U.S. HIGH BETA:CONSUMER DISCRETIONARY*
U.S. HIGH BETA:INDUSTRIALS*
200-DAY MOVING AVERAGE800-DAY MOVING AVERAGE
U.S. HIGH BETA:TECHNOLOGY*
NOTE: ALL SERIES RABASED TO 100 AT JANUARY 2010.* SOURCE: MSCI Inc. (SEE COPYRIGHT DECLARATION).** SOURCE: BLOOMBERG.
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GLOBAL GROWTH-SENSITIVE EQUITY SEGMENTS
180
160
140
120
100
80
60
2008 2010 2012 2014 2016
180
160
140
120
100
80
60
200
180
160
140
120
100
80
200
180
160
140
120
100
80
180
160
140
120
100
80
60
180
160
140
120
100
80
60
GLOBAL MACHINERY STOCKS IN US$*
GLOBAL CHEMICALS STOCKS IN US$*
3-YEAR MOVING AVERAGE6-YEAR MOVING AVERAGE12-YEAR MOVING AVERAGE
GLOBAL AUTO STOCKS IN US$*
* REBASED TO 100 AT JANUARY 2006; SOURCE: MSCI Inc. (SEE COPYRIGHT DECLARATION).
300
260
220
180
140
100
80
60
2002 2004 2006 2008 2010 2012 2014 2016
300
260
220
180
140
100
80
60
KOREAN STOCKS IN US$*
6-YEAR MOVING AVERAGE12-YEAR MOVING AVERAGE
* REBASED TO 100 AT JANUARY 2000; SOURCE: MSCI Inc. (SEE COPYRIGHT DECLARATION).
20
15
10
5
0
-5
-10
2012 2013 2014 2015 2016
20
15
10
5
0
-5
-10
GLOBAL INDUSTRIALS:EARNINGS PER SHARE*(IN LOCAL CURRENCY TERMS)
Ann%Chg
Ann%Chg
* CALCULATED AS STOCK PRICE DIVIDED BY P/E RATIO; SOURCE: MSCI Inc. (SEE COPYRIGHT DECLARATION).
© BCA Research 2016
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Contracting
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EM SHARE PRICES IN U.S. DOLLARS: A LONG-TERM PERSPECTIVE
1200
1000
800
600
400
300
200
150
100
1990 1995 2000 2005 2010 2015
1200
1000
800
600
400
300
200
150
100
EMERGING MARKETS STOCK PRICES IN US$*6-YEAR MOVING AVERAGE**12-YEAR MOVING AVERAGE**24-YEAR MOVING AVERAGE**
* SOURCE: MSCI Inc. (SEE COPYRIGHT DECLARATION).** EXPONENTIAL MOVING AVERAGES ARE USED IN THIS CHART.
5.0
2.5
0
-2.5
-5.0
-7.5
-10.0
-12.5
-15.0
2012 2014 2016
5.0
2.5
0
-2.5
-5.0
-7.5
-10.0
-12.5
-15.0
24
23
22
21
20
19
18
17
24
23
22
21
20
19
18
17
COMPOSITE MOMENTUM INDICATOR**% %
EMERGING MARKETS CURRENCIESVERSUS U.S. DOLLAR*:
200-DAY MOVING AVERAGE400-DAY MOVING AVERAGE
* NOTE: WISDOMTREE EMERGING MARKETS CURRENCY FUND.** INCLUDES 100-DAY, 200-DAY, 400-DAY RATES OF CHANGE; ANNUALIZED.
1100
1000
900
800
700
600
500
400
2012 2014 2016
1100
1000
900
800
700
600
500
400
14
13
12
11
10
9
8
7
14
13
12
11
10
9
8
7
CREDIT SPREAD*
BPs BPs
BOND YIELDS
CHINA: ONSHORE CORPORATE BONDS:1-YEAR BBB+5-YEAR BBB+
% %
* RELATIVE TO GOVERNMENT BOND YIELD WITH THE SAME DURATION.
Emerging cracks in the credit system?
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Bear market intact
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QE AND EM
7.4
7.2
7.0
6.8
6.6
6.4
6.2
6.0
5.8
5.6
5.4
1994 1996 1998 2000 2002 2004 2006
8
7
6
5
4
3
EMERGING MARKETS STOCKS IN US$* (LS)U.S. 10-YEAR GOVERNMENT BOND YIELD (RS)
(1993-2008)
%
* SHOWN AS A NATURAL LOGARITHM; SOURCE: MSIC Inc. (SEE COPYRIGHT DECLARATION).
4.3
4.2
4.1
4.0
2000 2002 2004 2006 2008
6.5
5.5
4.5
3.5
2.5
1.5
.5
EMERGING MARKETS EXCLUDING CHINA CURRENCY INDEX* (LS)
U.S. 2-YEAR TREASURY YIELD (RS)
(1999-2008)
%
* EQUITY MARKET-CAP WEIGHTED AGGREGATE OF 18 EMERGING ECONOMIES; SHOWN AS A NATURAL LOGARITHM.
320
280
240
200
160
120
2010 2012 2014 2016
160
140
120
100
3000
2600
2200
1800
220
180
140
100
4000
3000
2500
2000
1500
1000
2006 2008 2010 2012 2014 2016
110
105
100
95
90
85
80
BANK OF JAPAN ASSETS**** (LS)EMERGING MARKETS SOVEREIGN
BONDS EXCESS RETURN***** (RS)
TnYEN
EUROPEAN CENTRAL BANK ASSETS** (LS)EM STOCK PRICES IN USD*** (RS)
BnEURO
FED TOTAL ASSETS (LS)EMERGING MARKETS
CURRENCIES* vs US$ (RS)
BnUS$
* EQUITY MARKET-CAP WEIGHTED AGGREGATE OF 19 EMERGING ECONOMIES.** SOURCE: EUROPEAN CENTRAL BANK.*** SOURCE: MSCI Inc. (SEE COPYRIGHT DECLARATION).**** SOURCE: BANK OF JAPAN.***** REBASED TO 100 AT JANUARY 2009; SOURCE: BARCLAYS.
Nocorrelation
Nocorrelation
Nocorrelation
Positive correlation
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EM CREDIT MARKETS ARE TOO COMPLACENT
120
110
100
90
80
70
60
2006 2008 2010 2012 2014 2016
110
100
90
80
120
100
80
60
2000 2002 2004 2006 2008 2010 2012 2014 2016
700
600
500
400
300
200
CORPORATE BOND EXCESS RETURN* (LS)EMERGING MARKETS EXCLUDING CHINA
CURRENCIES** vs. US$ (RS)
EMERGING MARKETS* SOVEREIGN BOND EXCESS RETURN (LS)
CONTINUOUS COMMODITY PRICE INDEX (RS)
* REBASED TO 100 AT JANUARY 2006; SOURCE: BARCLAYS.** EQUITY MARKET-CAP WEIGHTED AGGREGATE OF 18 EMERGING ECONOMIES.
240
220
200
180
160
140
120
100
80
2010 2012 2014 2016
700
650
600
550
500
450
400
350
300
250
150
140
130
120
110
100
90
80
70
2014 2015 2016
400
380
360
340
320
300
280
260
240
220
400
380
360
340
320
300
280
260
240
220
9.6
9.4
9.2
9.0
CORPORATE SPREADS*:GLOBAL INDUSTRIALS (LS)EMERGING ASIA CORPORATE*** (RS)
BPs BPs
SOVEREIGN CDS (LS)OFF-SHORE CORPORATE AND
QUASI-SOVEREIGN SPREADS* (RS)
BPs BPs
CHINA:OFF-SHORE CORPORATE & QUASI-SOVEREIGN
SPREAD* (INVERTED; LS)H-SHARE PRICE
INDEX** (RS)
BPs
* SOURCE: BARCLAYS.** SHOWN AS A NATURAL LOGARITHM.*** CORPORATE & QUASI-SOVEREIGN SPREAD.
CHINA:
?
?
?
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ASIAN STOCKS, COMMODITIES AND U.S. IMPORTS
600550500
450
400
350
300
250
200
150
1995 2000 2005 2010 2015
800
400
200
100
EMERGING ASIAN STOCK PRICES IN USD* (LS)BRENT OIL PRICE (RS)
* SOURCE: MSCI Inc. (SEE COPYRIGHT DECLARATION).
25
20
15
10
5
0
-5
-10
-15
1990 1995 2000 2005 2010 2015
80
60
40
20
0
-20
-40
U.S. IMPORTS VOLUME* (LS)EMERGING MARKETS
STOCK PRICES** (RS)
Ann%Chg
Ann%Chg
* SHOWN AS A 3-MONTH MOVING AVERAGE.** SOURCE: MSCI Inc. (SEE COPYRIGHT DECLARATION).
Asian Boom and Bust
U.S. Tech capex
boom/tech
bubble
U.S. housing bubble
Credit/Asset markets-driven business cycles
A Historical Perspective On Asset/Credit Cycles
1990 1995 2000
1998
2001
2008/09
2005 2010 2015
China/EM credit excesses?
2017
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EM: STEALTH LIQUIDITY INJECTIONS
40
30
20
10
0
-10
-20
-30
2006 2008 2010 2012 2014 2016
40
30
20
10
0
-10
-20
-30
50
40
30
20
10
0
-10
50
40
30
20
10
0
-10
40
30
20
10
0
-10
40
30
20
10
0
-10
MALAYSIA
Ann%Chg
Ann%Chg
INDONESIA**
Ann%Chg
Ann%Chg
FOREIGN EXCHANGE RESERVES (LS)NARROW MONEY (M1) GROWTH* (RS)
CHINA
Ann%Chg
Ann%Chg
* SHOWN AS A 3-MONTH MOVING AVERAGE.** FOREIGN EXCHANGE RESERVES IS NET OF GOLD HOLDINGS, COMMERCIAL BANKS' FOREIGN EXCHANGE DEPOSITS IN CENTRAL BANK, AND FX SWAPS.
30
25
20
15
10
5
0
-5
-10
2008 2010 2012 2014 2016
30
25
20
15
10
5
0
-5
-10
30
25
20
15
10
5
0
-5
30
25
20
15
10
5
0
-5
40
20
0
-20
-40
-60
40
20
0
-20
-40
-60
MEXICO
Ann%Chg
Ann%Chg
SOUTH AFRICA
Ann%Chg
Ann%Chg
TURKEY
FOREIGN EXCHANGE RESERVES (LS)NARROW MONEY (M1) GROWTH* (RS)
Ann%Chg
Ann%Chg
* SHOWN AS A 3-MONTH MOVING AVERAGE.
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FISCAL BALANCES WILL WORSEN
1
0
-1
-2
-3
2000 2002 2004 2006 2008 2010 2012 2014 2016
1
0
-1
-2
-3
0
-2.5
-5.0
-7.5
0
-2.5
-5.0
-7.5
1
0
-1
-2
-3
-4
-5
1
0
-1
-2
-3
-4
-5
0
-2.5
-5.0
-7.5
-10.0
-12.5
-15.0
0
-2.5
-5.0
-7.5
-10.0
-12.5
-15.0
INDONESIA% ofGDP
% ofGDP
MALAYSIA% ofGDP
% ofGDP
SOUTH AFRICA
% ofGDP
% ofGDP
TURKEY
FISCAL BALANCE:
% ofGDP
% ofGDP
7.5
5.0
2.5
0
-2.5
-5.0
-7.5
2000 2002 2004 2006 2008 2010 2012 2014 2016
7.5
5.0
2.5
0
-2.5
-5.0
-7.5
0
-1
-2
-3
-4
-5
0
-1
-2
-3
-4
-5
0
-1
-2
-3
0
-1
-2
-3
0
-2.5
-5.0
-7.5
-10.0
0
-2.5
-5.0
-7.5
-10.0
RUSSIA% ofGDP
% ofGDP
COLOMBIA
% ofGDP
% ofGDP
MEXICO
% ofGDP
% ofGDP
FISCAL BALANCE:
BRAZIL
% ofGDP
% ofGDP
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TRADE BALANCES ARE WEAK
200
150
100
50
2000 2002 2004 2006 2008 2010 2012 2014 2016
200
150
100
50
0
-6
-12
-18
0
-6
-12
-18
0
-10
-20
-30
0
-10
-20
-30
40
20
0
-20
-40
-60
-80
-100
40
20
0
-20
-40
-60
-80
-100
RUSSIA
BnUS$
BnUS$
COLOMBIA
CURRENT ACCOUNT BALANCETRADE BALANCE
BnUS$
BnUS$
MEXICOBnUS$
BnUS$
BRAZILBn
US$BnUS$
NOTE: ALL SERIES ARE SHOWN AS A 12-MONTH MOVING TOTAL.
30
10
-10
-30
2000 2002 2004 2006 2008 2010 2012 2014 2016
30
10
-10
-30
40
30
20
10
0
40
30
20
10
0
5
0
-5
-10
-15
-20
5
0
-5
-10
-15
-20
0
-25
-50
-75
-100
0
-25
-50
-75
-100
INDONESIA
BnUS$
BnUS$
MALAYSIA
CURRENT ACCOUNT BALANCETRADE BALANCEBn
US$BnUS$
SOUTH AFRICABn
US$BnUS$
TURKEYBn
US$BnUS$
NOTE: ALL SERIES ARE SHOWN AS A 12-MONTH MOVING TOTAL.
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HIGH PRIVATE DEBT LEVELS AND SERVICE COSTS
150
125
100
2000 2005 2010 2015
40
35
30
25
TOTAL CREDIT TO PRIVATE NON-FINANCIALSECTOR AS A % OF GDP
% ofGDP
% ofGDP
* SOURCE: BIS.
80
60
40
20
2000 2005 2010 2015
80
60
40
20
TOTAL CREDIT TO PRIVATENON-FINANCIAL SECTOR AS A % OF GDP:
% ofGDP
% ofGDP
* SOURCE: BIS.
20
15
10
5
2005 2010 2015
20
15
10
5
PRIVATE NON-FINANCIALSECTOR DEBT SERVICE RATIO*:
% %
* SOURCE: BIS.
12.5
10.0
7.5
5.0
2005 2010 2015
12.5
10.0
7.5
5.0
PRIVATE NON-FINANCIALSECTOR DEBT SERVICE RATIO*:
% %
* SOURCE: BIS.
© BCA Research 2016
© BCA Research 2016
© BCA Research 2016
© BCA Research 2016
Indonesia (RS)
Malaysia (LS)
Thailand (LS)
138%
40%
123%
RussiaBrazil
India
South Africa
Turkey
IndiaSouth Africa
Indonesia
Turkey
Russia
Brazil
Malaysia
Thailand
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EM CREDIT IS STILL STRONG
35
30
25
20
15
10
5
2004 2006 2008 2010 2012 2014 2016
35
30
25
20
15
10
5
35
30
25
20
15
10
5
35
30
25
20
15
10
5
CHINA:BANK AND NON-BANK CREDIT**NOMINAL GDP
Ann%Chg
Ann%Chg
EMERGING MARKETS EXCLUDING CHINA,KOREA AND TAIWAN*:
PRIVATE CREDITNOMINAL GDP
Ann%Chg
Ann%Chg
* EQUITY MARKET-CAP WEIGHTED AGGREGATE OF 16 EMERGING ECONOMIES.** NON-BANK LOANS = CUMULATIVE SOCIAL FINANCING EXCLUDING BANK LOANS AND EQUITY FINANCING.
© BCA Research 2016
Corporate Debt Burden
COUNTRY TOTAL CREDIT* TO NON-FINANCIAL CORPORATIONS AS A % OF GDP
CHINA 166%
CANADA 112%
KOREA 106%
JAPAN 102%
HUNGARY 87%
AUSTRALIA 83%
U.S. 71%
MALAYSIA 68%
RUSSIA 60%
TURKEY 59%
CZECH REPUBLIC 57%
GERMANY 54%
THAILAND 52%
BRAZIL 50%
INDIA 50%
POLAND 47%
SOUTH AFRICA 36%
MEXICO 25%
INDONESIA 24%
ARGENTINA 12%
* AS OF Q3 2015; SOURCE: BIS
External (Foreign Currency) Debt Of Companies And Banks
COUNTRY EXTERNAL CREDIT* TO COMPANIES AND BANKS AS A % OF GDP
CHILE 36.8%
MALAYSIA 35.1%
SOUTH AFRICA 28.9%
BRAZIL 28.1%
TURKEY 25.1%
RUSSIA 23.9%
PERU 19.5%
MEXICO 19.3%
KOREA 19.2%
THAILAND 19.0%
COLOMBIA 18.7%
TAIWAN 17.0%
PHILIPPINES 13.8%
INDIA 12.1%
INDONESIA 11.8%
CHINA 9.7%
* AS OF Q4 2015; SOURCE: BIS
12.5%
7.1%
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EM DOMESTIC BOND YIELDS HAVE BROKEN OUT
5.5
5.0
4.5
4.0
3.5
3.0
2008 2010 2012 2014 2016
5.5
5.0
4.5
4.0
3.5
3.0
20
18
16
14
12
10
8
6
20
18
16
14
12
10
8
6
11
10
9
8
7
11
10
9
8
7
22
18
14
10
6
22
18
14
10
6
MALAYSIA: 5-YEAR SWAP RATE
% %
INDONESIA:10-YEAR GOVERNMENT BOND YIELD
% %
SOUTH AFRICA:15-YEAR GOVERNMENT BOND YIELD
6-YEAR MOVING AVERAGE
% %
TURKEY:5-YEAR GOVERNMENT BOND YIELD
% %
7
6
5
4
2011 2012 2013 2014 2015 2016
7
6
5
4
7
6
5
4
7
6
5
4
9
8
7
6
5
9
8
7
6
5
22
20
18
16
14
12
10
8
22
20
18
16
14
12
10
8
MEXICO: 5-YEAR
% %
DOMESTIC GOVERNMENT BOND YIELD:6-YEAR MOVING AVERAGE
PERU: 5-YEAR
% %
COLOMBIA: 5-YEAR
% %
BRAZIL:3-YEAR GOVERNMENT BOND YIELD
% %
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LOAN-TO-DEPOSIT RATIOS HAVE RISEN A LOT
94
92
90
88
86
84
82
80
2004 2006 2008 2010 2012 2014 2016
94
92
90
88
86
84
82
80
100
90
80
70
60
100
90
80
70
60
90
85
80
75
120
100
80
60
40
150
100
50
150
100
50
SOUTH AFRICA% %
INDONESIA:LOCAL CURRENCYFOREIGN CURRENCY
% %
MALAYSIA:LOCAL CURRENCY (LS)FOREIGN CURRENCY (RS)
% %
LOAN-TO-DEPOSIT RATIO:TURKEY:
LOCAL CURRENCYFOREIGN CURRENCY
% %
120
110
100
2004 2006 2008 2010 2012 2014 2016
120
110
100
160
150
140
130
120
160
150
140
130
120
123
122
121
120
119
118
117
123
122
121
120
119
118
117
THAILAND
% %
RUSSIA
% %
LOAN-TO-DEPOSIT RATIO:BRAZIL
% %
© BCA Research 2016© BCA Research 2016
115%
110%
115%
150%
100%
90%
100%
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EM BANKS HAVE NOT PROVISIONED FOR IMPAIRED ASSETS
8
6
4
2
2004 2006 2008 2010 2012 2014 2016
8
6
4
2
12
10
8
6
4
12
10
8
6
4
8
6
4
2
8
6
4
2
12
10
8
6
4
2
12
10
8
6
4
2
INDONESIA
% %
THAILAND% %
INDIA
% %
CHINA
AS A % OF TOTAL BANK LOANS*:NON-PERFORMING LOANSPROVISIONS
% %
* SOURCE: NATIONAL SOURCES.
8
6
4
2
2004 2006 2008 2010 2012 2014 2016
8
6
4
2
6
5
4
3
2
6
5
4
3
2
10.0
7.5
5.0
2.5
10.0
7.5
5.0
2.5
8
7
6
5
4
8
7
6
5
4
MALAYSIA
% %
TURKEY
% %
AS A % OF TOTAL BANK LOANS*:NON-PERFORMING LOANSPROVISIONS
RUSSIA
% %
BRAZIL% %
* SOURCE: NATIONAL SOURCES.
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LOW AND FALLING EM RETURN ON CAPTIAL WILL CONTINUE SUPPRESSING CAPEX
16
14
12
10
8
2000 2002 2004 2006 2008 2010 2012 2014 2016
16
14
12
10
8
EMERGING MARKETS:RETURN ON CAPITAL FOR NON-FINANCIALS*PRIME LENDING RATE**
% %
* EQUITY MARKET-CAP WEIGHTED AGGREGATE OF 9 EM SECTORS; SOURCE: BLOOMBERG.** EQUITY MARKET-CAP WEIGHTED AGGREGATE OF 17 EMERGING ECONOMIES.
80
40
0
-40
2004 2006 2008 2010 2012 2014 2016
80
40
0
-40
1.2
.8
.4
.2
.1
1.2
.8
.4
.2
.1
NET PORTFOLIO INFLOW (QUARTERLY)US$Bn
US$Bn
EMERGING MARKETS EXCLUDING CHINAAND KOREA AND TAIWAN:
CUMULATIVE NET PORTFOLIO INFLOW*
US$Tn
US$Tn
* CUMULATE FROM JANUARY 2004. NOTE: BCA CALCULATION USING BALANCE OF PAYMENT DATA.
200
150
100
50
2004 2006 2008 2010 2012 2014 2016
16
14
12
10
8
EM EX-CHINA NET FDI INFLOWS* (LS)EM RETURN ON CAPITAL** (RS)
BnUS$
%
* INCLUDES 17 EMERGING ECONOMIES; BCA CALCULATION USING NATIONAL SOURCES; SHOWN AS A 4-QUARTER MOVING TOTAL.** EQUITY MARKET-CAP WEIGHTED AGGREGATE OF 9 EM SECTORS EXCLUDING FINANCIALS; SOURCE: BLOOMBERG.
© BCA Research 2016
© BCA Research 2016
© BCA Research 2016
Return on capital has fallen to the level of borrowing costs
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10.0 9.0 8.0 7.0 6.0
5.0
4.0
3.0
2.0
1.5
1.0
1970 1975 1980 1985 1990 1995 2000 2005 2010 2015
10.0 9.0 8.0 7.0 6.0
5.0
4.0
3.0
2.0
1.5
1.0
PRICES IN REAL TERMS:GOLD NIKKEI 225 NASDAQ IRON ORE*
* CHINA (TIANJIN PORT) IMPORT IRON ORE PRICE. NOTE: All SERIES REBASED TO 1 AT BEGINNING OF DECADE.
350
300
250
200
150
100
1990 1995 2000 2005 2010 2015
350
300
250
200
150
100
EMERGING MARKETS STOCKSvs DEVELOPED WORLD*:
6-YEAR MOVING AVERAGE12-YEAR MOVING AVERAGE
IN US$ TERMS
* SERIES REBASED TO JANUARY 1989 AT 100; SOURCE: MSCI Inc. (SEE COPYRIGHT DECLARATION).
8000
7000
6000
5000
4000
3000
2000
1000
1990 1995 2000 2005 2010 2015
8000
7000
6000
5000
4000
3000
2000
1000
EMERGING MARKETS STOCKS vsDEVELOPED WORLD*:
6-YEAR MOVING AVERAGE12-YEAR MOVING AVERAGE
IN LOCAL CURRENCY TERMS
* SERIES REBASED TO JANUARY 1989 AT 100; SOURCE: MSCI Inc. (SEE COPYRIGHT DECLARATION).
© BCA Research 2016© BCA Research 2016
© BCA Research 2016
STRUCTURAL BREAKDOWN IN COMMODITIES AND EM RELATIVE PERFORMANCE
Structural breakdown
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COMMODITY PLAYS STILL AT RISK
140120
100
80
60
40
20
1980 1985 1990 1995 2000 2005 2010 2015
140120
100
80
60
40
20
BRENT OIL PRICES*3-YEAR MOVING AVERAGE6-YEAR MOVING AVERAGE12-YEAR MOVING AVERAGE
US$/Bbl
US$/Bbl
* SOURCE: LONDON BRENT CRUDE OIL INDEX.
500
450
400
350
300
250
200
150
100
2006 2008 2010 2012 2014 2016
500
450
400
350
300
250
200
150
100
COPPER PRICE IN US$12-YEAR MOVING AVERAGE24-YEAR MOVING AVERAGE
CENTS/POUND
CENTS/POUND
2.6
2.4
2.2
2.0
1.8
1.6
1.4
60 65 70 75 80 85 90 95 2000 05 10 15
2.6
2.4
2.2
2.0
1.8
1.6
1.4
3.4
3.2
3.0
2.8
2.6
2.4
2.2
2.0
3.4
3.2
3.0
2.8
2.6
2.4
2.2
2.0
2.2
2.0
1.8
1.6
1.4
1.2
1.0
.8
.6
.4
.2
2.2
2.0
1.8
1.6
1.4
1.2
1.0
.8
.6
.4
.2
S&P MACHINERY / S&P 500TREND+/- TWO STANDARD DEVIATIONS
S&P ENERGY / S&P 500TREND+/- TWO STANDARD DEVIATIONS
S&P MATERIALS / S&P 500TREND+/- TWO STANDARD DEVIATIONS
© BCA Research 2016
© BCA Research 2016
© BCA Research 2016
New lows ahead
29
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BANKS AND COMMODITY PRODUCING COUNTRIES ARE VULNERABLE
400
300
200
150
100
2000 2002 2004 2006 2008 2010 2012 2014 2016
600
500
400
300
200
150
100
16001200
800
400
200
100
300
200
150
100
16001200
800
400
200
100
800
600
400
200
100
SOUTH AFRICAN BANK STOCKS** (LS)PLATINUM PRICES IN USD (RS)
INDONESIAN BANK STOCKS** (LS)LMEX INDEX IN USD*** (RS)
PERUVIAN BANK STOCKS* (LS)PRECIOUS METALS PRICES IN USD (RS)
* CREDITCORP STOCK PRICE AS A PROXY.** IN LOCAL CURRENCY TERMS; SOURCE: MSCI Inc. (SEE COPYRIGHT DECLARATION).*** SOURCE: LONDON METAL EXCHANGE.
600
400
200
100
1990 1995 2000 2005 2010 2015
300
250
200
150
100
EMERGING MARKETS STOCK PRICES* (LS)INDUSTRIAL METALS PRICES** (RS)
* IN USD TERMS; SOURCE: MSCI Inc. (SEE COPYRIGHT DECLARATION).** SOURCE: LONDON LMEX EXCHANGE INDEX. NOTE: BOTH SERIES ARE IN US$; REBASED TO 100 AT JANUARY 1990.
60
40
20
0
-20
-40
1998 2000 2002 2004 2006 2008 2010 2012 2014 2016
15
10
5
0
-5
-10
-15
-20
COMMODITY PRICES* (ADVANCED BY 6-MONTH, LS)
CHANGE IN DOMESTIC CREDIT GROWTH RATE IN COMMODITY COUNTRIES** (RS)
Ann%Chg
%
* SHOWN AS A 6-MONTH MOVING AVERAGE; SOURCE: S&P GOLDMAN SACHS COMMODITY INDEX.** EQUALLY-WEIGHTED AVERAGE OF BRAZIL, CHILE, COLOMBIA, MEXICO, SOUTH AFRICA, AND RUSSIA; SOURCE: IMF.
© BCA Research 2016
© BCA Research 2016 © BCA Research 2016
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U.S. DOLLAR WILL APPRECIATE VERSUS EM CURRENCIES
170
160
150
140
130
120
110
100
2002 2004 2006 2008 2010 2012 2014 2016
170
160
150
140
130
120
110
100
TOTAL RETURN:EMERGING MARKETS EXCLUDING CHINACURRENCIES* vs US$
* EQUITY MARKET-CAP WEIGHTED AGGREGATE OF 20 EM ECONOMIES.
140130120110100
90
80
70
1975 1980 1985 1990 1995 2000 2005 2010 2015
140130120110100
90
80
70
120100
80
60
40
120100
80
60
40
NARROW MEASURE BASED ONMAJOR CURRENCIES**
TRADE WEIGHTED U.S. DOLLAR INDEX6-YEAR MOVING AVERAGE12-YEAR MOVING AVERAGE
BROAD MEASURE*
NOTE: SHADING DENOTES BROAD USD BEAR MARKETS. SOURCE: FEDERAL RESERVE.* INCLUDES 19 EM AND 7 DEVELOPED COUNTRIES.** INCLUDES 7 DEVELOPED COUNTRIES.
120
115
110
105
100
95
2002 2004 2006 2008 2010 2012 2014 2016
120
115
110
105
100
95
EMERGING ASIAN CURRENCIES* vs US$
* TRADE AND LIQUIDITY WEIGHTED ASIAN CURRENCIES; SOURCE: BLOOMBERG J.P. MORGAN ASIAN CURRENCY INDEX (ADXY).
© BCA Research 2016© BCA Research 2016
© BCA Research 2016
Bear market
Break down
31
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U.S. DOLLAR: MORE UPSIDE
4.0
3.5
3.0
2.5
2.0
1995 2000 2005 2010 2015
115
110
105
100
95
EMERGING MARKETS EXCLUDING CHINA:PRODUCTIVITY GROWTH* (LS)REAL EFFECTIVE EXCHANGE RATE** (RS)
Ann%Chg
* EQUITY MARKET-CAP WEIGHTED AGGREGATE OF 18 EMERGING ECONOMIES.** EQUITY MARKET-CAP WEIGHTED OF 19 COUNTRIES; AVERAGE OF PPI AND CPI BASED.
140
120
100
80
1985 1990 1995 2000 2005 2010 2015
140
120
100
80
110
100
90
80
110
100
90
80
160
140
120
100
160
140
120
100
JAPAN
EURO AREA
REAL EFFECTIVE EXCHANGE RATE(BASED ON UNIT LABOR COST)*
U.S.
* SOURCE: IMF INTERNATIONAL FINANCIAL STATISTICS.
6
4
2
0
1996 1998 2000 2002 2004 2006 2008 2010 2012 2014
6
4
2
0
CHINA:TOTAL FACTOR PRODUCTIVITY GROWTH*
% %
* SOURCE: OECD ECONOMIC SURVEYS: CHINA 2015.
© BCA Research 2016
© BCA Research 2016
© BCA Research 2016
Not expensive
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200
175
150
125
2006 2008 2010 2012 2014 2016
200
175
150
125
16
12
8
6
4
2
16
12
8
6
4
2
AS A % OF GDP% OfGDP
% OfGDP
CHINA:CORPORATE ANDHOUSEHOLD DEBT*
TnUS$
TnUS$
* CUMULATIVE TOTAL SOCIAL FINANCING EXCLUDING EQUITY ISSUANCE BY NON-FINANCIAL CORPORATIONS PLUS NON-BANK INTERNATIONAL DEBT SECURITIES AND FOREIGN BANK CLAIMS ON NON-BANK CORPORATE SECTOR.
100
90
80
2008 2010 2012 2014 2016
100
90
80
EMERGING MARKETS EXCLUDING CHINA:CORPORATE AND HOUSEHOLD DEBT*AS A % OF GDP
% ofGDP
% ofGDP
* INCLUDES 15 EMERGING ECONOMIES; SOURCE: BIS AND IMF.
160
140
120
100
80
60
40
1985 1990 1995 2000 2005 2010 2015
160
140
120
100
80
60
40
CORPORATE DEBT*-TO-GDP RATIO
% ofGDP
% ofGDP
* SOURCE: BIS; BCA CALCULATIONS.
20.0
17.5
15.0
12.5
2000 2002 2004 2006 2008 2010 2012 2014 2016
20.0
17.5
15.0
12.5
PRIVATE NON-FINANCIAL SECTORDEBT-SERVICE RATIO*:
% %
* CALCULATED AS INTEREST PAYMENTS PLUS AMORTIZATION TO INCOME RATIO; SOURCE: BIS.
© BCA Research 2016
© BCA Research 2016
© BCA Research 2016
CHINA’S LEVERAGE AND DEBT SERVICE RATIO
© BCA Research 2016
US$17 tn
$23 tn
20%
90 percentage points of GDP
China
Japan
Korea
U.S.
Thailand
China
U.S.
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CHINA
36
32
28
24
20
16
12
8
2004 2006 2008 2010 2012 2014 2016
36
32
28
24
20
16
12
8
CHINADOMESTIC CREDIT (BANK PLUS NON-BANK)*NOMINAL GDP
Ann%Chg
Ann%Chg
* CUMULATIVE AGGREGATE FINANCING EXCLUDING EQUITY FINANCING.
40
30
20
10
2004 2006 2008 2010 2012 2014 2016
40
30
20
10
16
8
4
2
1
16
8
4
2
1
AS % OF NOMINAL GDP
% OfGDP
% OfGDP
ANNUAL DOMESTIC CREDIT ORIGINATION*CENTRAL GOVERNMENT SPENDINGLOCAL GOVERNMENT SPENDING
LEVEL
TnRMB
TnRMB
* TOTAL SOCIAL FINANCING MINUS EQUITY FINANCING.
25
20
15
10
5
0
-5
2008 2010 2012 2014 2016
36
32
28
24
20
16
12
CHINA:IMPORT VOLUME* (LS)BANK LOANS PLUS NON-BANK CREDIT**
(ADVANCED BY 6 MONTHS; RS)
Ann%Chg
Ann%Chg
* ADJUSTED FOR WORKING DAYS; SHOWN AS A 12-MONTH MOVING AVERAGE.** NON-BANK LOANS = CUMULATIVE SOCIAL FINANCING EXCLUDING BANK LOANS AND EQUITY FINANCING.
© BCA Research 2016
12.5%
7.1%
15 Tn
2.5 Tn
© BCA Research 2016
© BCA Research 2016
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CHINA
4.4
4.0
3.6
3.2
2.8
2.4
2.0
1.6
1985 1990 1995 2000 2005 2010 2015
4.4
4.0
3.6
3.2
2.8
2.4
2.0
1.6
.6
.5
.4
.3
.6
.5
.4
.3
INCREMENTAL CAPITAL-OUTPUT RATIO(ICOR)**
CHINA:OUTPUT-TO-CAPITAL RATIO*
*ANNUAL CHANGES IN REAL GDP AVERAGED OVER 3 YEARS DIVIDED BYANNUAL CHANGES IN REAL CAPITAL SPENDING AVERAGED OVER 3 YEARS**ANNUAL CHANGES IN REAL CAPITAL SPENDING AVERAGED OVER 3 YEARSDIVIDED BY ANNUAL CHANGES IN REAL GDP AVERAGED OVER 3 YEARS
6
4
2
0
1986 1990 1994 1998
6
4
2
0
10
5
0
10
5
0
1000
900
800
700
40000
35000
30000
25000
20000
15000
REAL PERSONAL CONSUMPTIONEXPENDITURE
Ann%Chg
Ann%Chg
TOTAL BANK LOANS
Ann%Chg
Ann%Chg
LAND PRICES* (LS)NIKKEI STOCK PRICE INDEX (RS)
JAPAN(1985-1999)
* REBASED TO 100 AT JANUARY 1967.
© BCA Research 2016
Little output growth per unit of capex
China’s investment efficiency has collapsed
© BCA Research 2016
Bubble peak
No contraction till 1997 - 1998
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CHINESE SURVEYS ARE WEAK
55
50
45
40
1998 2000 2002 2004 2006 2008 2010 2012 2014 2016
55
50
45
40
60
55
50
45
40
60
55
50
45
40
OVERSEAS ORDERS
CHINA 5000 INDUSTRIAL ENTERPRISES SURVEY*:
DOMESTIC ORDERS
* SOURCE: PBoC.
60
55
50
45
40
1998 2000 2002 2004 2006 2008 2010 2012 2014 2016
60
55
50
45
40
70
65
60
55
50
45
70
65
60
55
50
45
PROFITABILITY
CHINA 5000 INDUSTRIAL ENTERPRISES SURVEY*:
GENERAL BUSINESS CONDITIONS
* SOURCE: PBoC.
© BCA Research 2016© BCA Research 2016
Collapsed
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60
40
20
0
-20
2006 2008 2010 2012 2014 2016
60
40
20
0
-20
80
40
0
-40
80
40
0
-40
40
0
-40
40
0
-40
40
20
0
-20
-40
40
20
0
-20
-40
100
50
0
100
50
0
50
25
0
-25
50
25
0
-25
CONSUMER STAPLESAnn%
ChgAnn%Chg
CONSUMER DISCRETIONARY
Ann%Chg
Ann%Chg
UTILITIESAnn%Chg
Ann%Chg
ENERGYAnn%
ChgAnn%Chg
FINANCIAL INCLUDING BANKSBANKS
Ann%Chg
Ann%Chg
CHINESE MAINLAND LISTED COMPANIES:
OVERALL**
EARNINGS PER SHARE*
Ann%Chg
Ann%Chg
* CALCULATED AS STOCK PRICES DIVIDED BY P/E RATIO; SHOWN AS A 3-MONTH MOVING AVERAGE; TRUNCATED AT ¯50 AND 100; SOURCE: MSCI Inc. (SEE COPYRIGHT DECLARATION).** AVERAGE OF IBES AND MSCI DATA.
80
40
0
-402006 2008 2010 2012 2014 2016
80
40
0
-40
80
40
0
-40
80
40
0
-40
100
50
0
-50
100
50
0
-50
100
50
0
-50
100
50
0
-50
100
50
0
-50
100
50
0
-50
HEALTH CAREAnn%
ChgAnn%Chg
TELECOMMUNICATIONAnn%
ChgAnn%Chg
TECHNOLOGYAnn%
ChgAnn%Chg
INDUSTRIALSAnn%
ChgAnn%Chg
CHINESE MAINLAND LISTED COMPANIES:
MATERIALS
EARNINGS PER SHARE*
Ann%Chg
Ann%Chg
* CALCULATED AS STOCK PRICES DIVIDED BY P/E RATIO; SHOWN AS A 3-MONTH MOVING AVERAGE; TRUNCATED AT ¯50 AND 100; SOURCE: MSCI Inc. (SEE COPYRIGHT DECLARATION).
© BCA Research 2016© BCA Research 2016
CHINA CORPORATE PROFITS (EPS)
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100
90
80
1995 2000 2005 2010 2015
100
90
80
110
100
90
80
70
110
100
90
80
70
110
100
90
110
100
90
130
110
90
70
130
110
90
70
100 90
80
70
60
50
100 90
80
70
60
50
CHILE
COLOMBIA
PERU
REAL EFFECTIVE EXCHANGE RATE*MEAN+/- ONE STANDARD DEVIATION+/- TWO STANDARD DEVIATION
MEXICO
BRAZIL
* AVERAGE OF CPI BASED AND PPI BASED REAL EFFECTIVE EXCHANGE RATES; SOURCE: J.P. MORGAN CHASE & CO.
© BCA Research 2016
LATIN AMERICAN REAL EFFECTIVE EXCHANGE RATES
MEAN
MEAN
MEAN
MEAN
MEAN
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BRAZIL: PRICED FOR POLITICAL PERFECTION
250
500
1000
2000
3000
4000
1975 1980 1985 1990 1995 2000 2005 2010 2015
250
500
1000
2000
3000
4000BRAZIL:STOCK PRICES* IN US$
200-WEEK MOVING AVERAGE800-WEEK MOVING AVERAGE
* SOURCE: MSCI Inc. (SEE COPYRIGHT DECLARATION).
© BCA Research 2016
1990-1997
2003-2010
Brazil: Possible Political Scenarios And Their Impact On MarketsPO
LITI
CA
L SC
ENA
RIO
S
© BCA Research 2016
POLI
TIC
AL
SCEN
AR
IOS
IMPEACHMENT
STATUS QUOREMAINS
NEW ELECTION
PRESIDENT SURVIVES
IMPEACHMENT
PRESIDENT REPLACED BY VICE PRESIDENT MICHEL
TEMER (PMDB)
PRESIDENT`S RESIGNATION
SPIRAL OF SOCIAL UNREST AND TENSIONS
PRESIDENT REPLACED BY NEW MARKET-FRIENDLY ADMINISTRATION
MARKET NEGATIVE: INVESTORS LOSE
CONFIDENCE
MARKET NEGATIVE: CONGRESSIONAL
GRIDLOCK REMAINS UNTIL 2018
MARKET NEGATIVE: PENDING
RESOLUTION
MARKET POSITIVE: GENUINE
POLITICAL CHANGE
We are here
39
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BRAZIL
-2
0
2
4
6
8
2004 2006 2008 2010 2012 2014 2016 2018
3
4
5
6
7
8
30
25
20
15
10
5
0
-5
-10
-15
30
25
20
15
10
5
0
-5
-10
-15
REAL GDP GROWTH (LS)CONSUMER PRICE INFLATION (RS)Ann%
ChgAnn%Chg
BRAZIL:CAPITAL SPENDINGIN REAL TERMS
Ann%Chg
Ann%Chg
Stagflation
© BCA Research 2016
3000
2500
2000
1500
1000
500
0
1995 2000 2005 2010 2015
3000
2500
2000
1500
1000
500
0
700
650
600
550
500
450
400
700
650
600
550
500
450
400
14
12
10
8
6
4
2
0
-2
-4
1900 1920 1940 1960 1980 2000 2020
14
12
10
8
6
4
2
0
-2
-4
SOVEREIGN SPREADS**BPs BPs
REAL GDP (LEVEL)
BRAZIL:REAL GDP GROWTH*
Ann%Chg
Ann%Chg
* SOURCE: IPEADATA, IBGE AND BCA CALCULATIONS.** OPTION ADJUSTED SPREAD; SOURCE: BARCLAYS.
Already fell by 5.6%
Fell by 1.4%
Fell by 0.5%Fell
by 1%
© BCA Research 2016
One of the worst recessions in 115 years
-17%
40
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20
15
10
5
0
-5
-10
1995 2000 2005 2010 2015
20
15
10
5
0
-5
-10
GROSS NATIONAL SAVINGS RATE(AS A % OF GDP)
PRIVATE SECTORPUBLIC SECTORTOTAL
%ofGDP
%ofGDP
18
16
14
12
10
8
6
4
2005 2010 2015
18
16
14
12
10
8
6
4
3-YEAR GOVERNMENT BOND YIELD (LS)
NOMINAL GDP (RS)
% Ann%Chg
150
100
50
0
-50
2002 2004 2006 2008 2010 2012 2014 2016
150
100
50
0
-50
120
100
80
60
40
20
0
-20
-40
-60
120
100
80
60
40
20
0
-20
-40
-60
100
90
80
70
60
50
40
30
20
10
100
90
80
70
60
50
40
30
20
10
NET OTHER INVESTMENTUS$
BnUS$Bn
NET PORTFOLIO INVESTMENTUS$Bn
US$Bn
12-MONTH MOVING TOTAL3-MONTH ANNUALIZED*
BRAZIL:NET FDI
US$Bn
US$Bn
* CALCULATED AS FOUR TIMES 3-MONTH MOVING TOTAL.
BRAZIL
© BCA Research 2016
Not bad
© BCA Research 2016© BCA Research 2016
Government dissaving is to blame
Toxic debt dynamics
41
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BRAZIL
15
10
5
0
1995 2000 2005 2010 2015
15
10
5
0
10
9
8
7
6
5
4
10
9
8
7
6
5
4
-10
-8
-6
-4
-2
0
2
4
6
-10
-8
-6
-4
-2
0
2
4
6
GOVERNMENT EXPENDITURES*(IN REAL TERMS**)
Ann%Chg
Ann%Chg
INTEREST PAYMENTS ON THE PUBLIC DEBTAS A % OF GDP
% ofGDP
% ofGDP
BRAZIL: BUDGET BALANCE AS A % OF GDPNOMINALPRIMARY
%ofGDP
%ofGDP
* SHOWN AS A 12-MONTH MOVING AVERAGE; EXCLUDES SOCIAL SECURITY TRANSFERS.** DEFLATED BY CORE TRIMMED-MEAN CPI.
40
50
60
70
80
90
100
110
2000 2005 2010 2015 2020
40
50
60
70
80
90
100
110BRAZIL:GROSS GOVERNMENT DEBT*(AS A % OF GDP)
BEST CASE PROJECTIONBASE CASE PROJECTIONWORST CASE PROJECTION
%ofGDP
%ofGDP
*SOURCE: BANCO CENTRAL DO BRASILNOTE: SCENARIOS ARE BCA's CALCULATIONS BASED ON TABLE 1
25
20
15
10
5
0
-5
2005 2010 2015
25
20
15
10
5
0
-5
BRAZIL*:GOVERNMENT REVENUEGOVERNMENT EXPENDITURE**
Ann%Chg
Ann%Chg
* SHOWN AS A 12-MONTH MOVING AVERAGE.** EXCLUDES SOCIAL SECURITY TRANSFERS.
© BCA Research 2016
© BCA Research 2016© BCA Research 2016
-10%
7.8%
109%
97%
86%
42
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BRAZIL
22
24
26
2000 2005 2010 2015
22
24
26
14
16
18
14
16
18
80
60
40
20
0
80
60
40
20
0
2
0
-2
-4
-6
-8
20
0
-20
-40
-60
-80
-100
FEDERAL GOVERNMENT EXPENDITURESAS A % OF GDP
% %
GROSS NATIONAL SAVINGS RATE**%of
GDP%ofGDP
CURRENT ACCOUNT DEFICITNET FOREIGN DIRECT INVESTMENT*
BnUSD
BnUSD
BRAZIL:
CURRENT ACCOUNT BALANCE:AS A % OF GDP (LS)LEVEL (RS)
%ofGDP
BnUS$
* SHOWN AS A 12-MONTH MOVING TOTAL.** SHOWN AS 4-QUARTER MOVING AVERAGE.
8
10
12
14
16
18
2000 2005 2010 2015
8
10
12
14
16
18
40
50
60
70
80
40
50
60
70
80
CORPORATE FOREIGN DEBT
%ofGDP
%ofGDP
BRAZIL*:PRIVATE SECTORTOTAL DEBT
%ofGDP
%ofGDP
* SOURCE: BIS AND IMF; BCA CALCULATIONS.
3
4
5
6
7
8
1995 2000 2005 2010 2015
3
4
5
6
7
8BRAZILIAN BANKS*:TOTAL FOREIGN DEBT*OUTSTANDING AS A % OF GDP
%ofGDP
%ofGDP
* SOURCE: BIS.
© BCA Research 2016
© BCA Research 2016 © BCA Research 2016
Up by 50 percentage
points of GDP in 10 years
?
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BRAZIL
5.0
7.5
10.0
12.5
2006 2008 2010 2012 2014
5.0
7.5
10.0
12.5
16
18
20
22
16
18
20
22
WAGE COMMITMENTS TO:INTEREST PAYMENTSPRINCIPAL PAYMENTS
% %
BRAZILIAN CONSUMERS*:DEBT SERVICE LOAD
% %
* SOURCE: BANCO CENTRAL DO BRASIL.
1.21.0
.8
.6
.4
2006 2008 2010 2012 2014
1.21.0
.8
.6
.4
10
20
30
40
50
10
20
30
40
50
MORTGAGES OUTSTANDING*
Mn Mn
BRAZILIAN HOUSEHOLD DEBTAS A % OF DISPOSABLE INCOME*
TOTALMORTAGES
% %
* SOURCE: BANCO CENTRAL DO BRASIL.
40
30
20
10
0
2008 2010 2012 2014
40
30
20
10
0
2824201612 8 4 0-4
2824201612 8 4 0-4
RIO DE JANEIRO**:APARTMENT PRICESAPARTMENT RENT
Ann%Chg
Ann%Chg
SAO PAULO:APARTMENT PRICESAPARTMENT RENT
Ann%Chg
Ann%Chg
SOURCE: FIPEZAP
-2
0
2
4
2005 2010 2015
-2
0
2
4
12
8
4
0
-4
12
8
4
0
-4
TOTAL EMPLOYMENT***Ann%Chg
Ann%Chg
WAGES*:IN NOMINAL TERMSIN REAL TERMS**
Ann%Chg
Ann%Chg
* SHOWN AS 6 3-MONTH MOVING AVERAGE.** DEFLATED BY CPI.*** SOURCE: BANCO CENTRAL DO BRASIL; SHOWN AS A 3-MONTH MOVING AVERAGE.
© BCA Research 2016© BCA Research 2016
© BCA Research 2016© BCA Research 2016
Up 4-fold
22%
Contracting
Contracting
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32
28
24
20
2004 2006 2008 2010 2012 2014 2016
32
28
24
20
20
16
12
8
20
16
12
8
DEMAND, TIME ANDSAVINGS DEPOSITS*
% %
BRAZILIAN BANKS:AS A SHARE OF TOTAL LIABILITIES:INTERBANK, DEBENTURES,COMMERCIAL PAPER ANDMONEY MARKETS*
% %
* SOURCE: BANCO CENTRAL DO BRASIL.
30
20
10
0
2005 2010 2015
30
20
10
0
30
20
10
30
20
10
40
50
60
40
50
60
TOTAL DEPOSITSAnn%
ChgAnn%Chg
PUBLIC DIRECTED CREDITFREE-MARKET CREDIT*Ann%
ChgAnn%Chg
CREDIT AS A % OF TOTAL:PRIVATE BANKSPUBLIC BANKS
% %
* INCLUDES ALL NON-DIRECTED CREDIT BY BOTH PRIVATE AND PUBLIC BANKS.
10
9
8
7
6
5
4
3
2
2002 2004 2006 2008 2010 2012 2014 2016
10
9
8
7
6
5
4
3
2
BRAZILIAN PUBLIC BANKS*AS A SHARE OF TOTAL LOANS:
PROVISIONSNON-PERFORMING LOANS
% %
* SOURCE: BANCO CENTRAL DO BRASIL.
Only 4.5%
Less than 20%
BRAZIL
5
6
7
8
2005 2010 2015
10
8
6
4
2
0
-2
-4
-6
BRAZIL:PRIVATE BANKS NPL*
PROVISIONS RATIO** (LS)ECONOMIC ACTIVITY INDEX***
(INVERTED, ADVANCED BY 3 MONTHS, RS)
% Ann%Chg
* NON-PERFORMING LOANS.** SOURCE: BANCO CENTRAL DO BRASIL.*** SHOWN AS A 3-MONTH MOVING AVERAGE.
© BCA Research 2016© BCA Research 2016
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BRAZIL
40
20
0
-20
-40
2000 2002 2004 2006 2008 2010 2012 2014 2016
40
20
0
-20
-40
120
115
110
105
100
95
120
115
110
105
100
95
12
8
4
0
-4
-8
12
8
4
0
-4
-8
NEW TRUCK REGISTRATIONSAnn%
ChgAnn%Chg
CONSUMER CONFIDENCE
BRAZIL*:NARROW** RETAIL SALES VOLUME
Ann%Chg
Ann%Chg
* SHOWN AS A 3-MONTH MOVING AVERAGE.** EXCLUDES VEHICLES AND CONSTRUCTION MATERIALS.
40
45
50
55
60
65
70
1998 2002 2006 2010 2014
40
45
50
55
60
65
70
BRAZIL:BUSINESS CONFIDENCE*
* SOURCE: BANCO CENTRAL DO BRASIL.
7
6
5
4
32006 2008 2010 2012 2014 2016
70
66
62
58
54
16
14
12
10
8
6
4
2
16
14
12
10
8
6
4
2
CORE TRIMMED MEAN CONSUMER PRICE INFLATION* (LS)
CONSUMER PRICE INFLATION DIFFUSION INDEX*** (RS)
Ann%Chg
%
BRAZIL*:SUPERVISED PRICE INFLATIONFREE MARKET** PRICE INFLATION
Ann%Chg
Ann%Chg
* SOURCE: BANCO CENTRAL DO BRASIL.** INCLUDES ALL NON-SUPERVISED PRICES.*** SHOWN AS A 6-MONTH MOVING AVERAGE.
Collapsed
Confidence at record low
© BCA Research 2016
© BCA Research 2016
© BCA Research 2016
Sticky
9%
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BRAZIL
1000
800
600
400
300
200
2006 2008 2010 2012 2014 2016
1000
800
600
400
300
200
1600
1200
800
600
400
1600
1200
800
600
400
IN US$
IN LOCAL CURRENCY TERMS
BRAZILIAN BANKS: STOCK PRICES*400-DAY MOVING AVERAGE
* SOURCE: MSCI Inc. (SEE COPYRIGHT DECLARATION).
600
500
400
300
200
2010 2012 2014 2016
600
500
400
300
200
600
500
400
300
200
600
500
400
300
200
CAIXA ECONOMICA FEDERAL 2022 US$ BOND SPREADOVER U.S. TREASURYS**
BPs BPs
BNDES 2020 US$ BOND SPREADOVER U.S. TREASURYS*
BPs BPs
* BRAZILIAN DEVELOPMENT BANK (BNDES) US$ BONDS MATURING JUL. 2020 OVER 7-YEAR U.S. TREASURYS.** CAIXA ECONOMICA FEDERAL (CEF) US$ BONDS MATURING NOV. 2022 OVER 7-YEAR U.S. TREASURYS.
600
400
200
0
2006 2008 2010 2012 2014 2016
600
400
200
0
BRAZIL:ON-SHORE U.S. DOLLARFUNDING SPREAD*
BPs BPs
* 3-MONTH CUPOM CAMBIAL OVER 3-MONTH LIBOR; SHOWN AS A 10-DAY MOVING AVERAGE.
400 300 200 100 0
-100-200-300
2006 2008 2010 2012 2014 2016
400 300 200 100 0
-100-200-300
-100
0
100
200
-100
0
100
200
CORPORATE SPREADS
BPs BPs
SOVEREIGN SPREADS
BRAZIL MINUS EMERGING MARKETS*EXCLUDING VENEZUELA AND ARGENTINA:
BPs BPs
* SOURCE: J.P. MORGAN CHASE & CO.
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Sign ofstress
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BRAZIL
300
250
200
150
100
50
1990 1995 2000 2005 2010 2015
300
250
200
150
100
50
BRAZIL VS EMERGING MARKETS:STOCK PRICES IN US$*
* REBASED TO JAN. 1990=100.
110
100
90
80
70
60
50
1995 2000 2005 2010 2015
110
100
90
80
70
60
50
BRAZIL: REAL EFFECTIVE EXCHANGE RATE*MEAN+/- ONE STANDARD DEVIATION+/- TWO STANDARD DEVIATION
* AVERAGE OF CPI BASED AND PPI BASED REAL EFFECTIVE EXCHANGE RATES; SOURCE: J.P. MORGAN CHASE & CO.
Mean
EMS downgraded
x© BCA Research 2016© BCA Research 2016
20
18
16
14
12
10
8
2006 2008 2010 2012 2014 2016
20
18
16
14
12
10
8
BRAZIL:3-YEAR NOMINALGOVERNMENT BOND YIELD
6-YEAR MOVING AVERAGE12-YEAR MOVING AVERAGE
% %
500
450
400
350
300
250
200
150
100
2010 2012 2014 2016
500
450
400
350
300
250
200
150
100
BRAZIL:5-YEAR SOVEREIGN CDS
400-DAY MOVING AVERAGE
BPs BPsEMS went long Feb./05
EMS booked profits Jan./13
EMS went long Jul/15
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MEXICO: NOT INFALLIBLE
4
2
0
-2
1990 1995 2000 2005 2010 2015
4
2
0
-2
-6
-4
-2
0
2
240
200
160
120
80
PRODUCTIVITY*:MEXICOEMERGING MARKETS (EXCLUDING CHINA**)
Ann%Chg
Ann%Chg
MEXICO VS EMERGING MARKETS:PRODUCTIVITY*
(EXCLUDING CHINA**) (LS)STOCK PRICES*** IN US$ (RS)
Ann%Chg
* SOURCE: THE CONFERENCE BOARD, TOTAL ECONOMY DATABASE.** MARKET CAP-WEIGHTED AGGREGATE OF 20 EM ECONOMIES.*** SOURCE: MSCI Inc. (SEE COPYRIGHT DECLARATION).
100
90
80
70
60
50
40
2008 2010 2012 2014
100
90
80
70
60
50
40
TOTAL NON-PUBLIC NON-FINANCIAL DEBTAS A % OF GDP
MEXICO EMERGING MARKETS
(EXCLUDING CHINA)
% OfGDP
% OfGDP
130
120
110
100
90
80
1990 1995 2000 2005 2010 2015
130
120
110
100
90
80
TOTAL FACTOR PRODUCTIVITY
*SOURCE: THE CONFERENCE BOARD, TOTAL ECONOMY DATABASE.
20
15
10
5
0
-5
-10
-15
2006 2008 2010 2012 2014 2016
8
6
4
2
0
-2
-4
-6
MEXICO:PRODUCER PRICE INDEX:
ELECTRICITY, GAS AND WATER (LS)
ECONOMIC ACTIIVITY INDEX (RS)
Ann%Chg
Ann%Chg
© BCA Research 2016© BCA Research 2016
No imminent debt hangover
Reforms kicking in
India
Brazil
Mexico
South Africa© BCA Research 2016© BCA Research 2016
?
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MEXICO
3
4
5
2006 2008 2010 2012 2014 2016
3
4
5
4.8
4.6
4.4
4.2
4.0
4.8
4.6
4.4
4.2
4.0
CONSUMER PRICE INFLATION:UNDERLYING CORE
Ann%Chg
Ann%Chg
MEXICO:NOMINAL WAGE GROWTH*
MANUFACTURINGSERVICES
Ann%Chg
Ann%Chg
* SOURCE: BANCO DE MEXICO AND INEGI.
-3
-2
-1
0
2006 2008 2010 2012 2014 2016-3
-2
-1
0
MEXICO:FISCAL THRUST*
% %
* CHANGE IN CYCLICALLY-ADJUSTED PRIMARY FISCAL BALANCE AS A % OF POTENTIAL GDP; SOURCE: IMF.
3
2
1
0
-1
-2
-3
-4
-5
2008 2010 2012 2014 2016
2.5
2.0
1.5
1.0
.5
0
-.5
-1.0
-1.5
-2.0
MEXICO:OUTPUT GAP* (LS)ANNUAL CHANGE IN
CORE INFLATION (RS)
% %
* SHOWN AS A % OF POTENTIAL GDP; SOURCE: BANCO DE MEXICO.
-5
-4
-3
-2
-1
0
1
1995 2000 2005 2010 2015
-5
-4
-3
-2
-1
0
1
-4
-3
-2
-1
0
1
-4
-3
-2
-1
0
1
MEXICAN CURRENTACCOUNT BALANCEAS A % OF GDP:
TOTALEXCLUDING OIL TRADE*%of
GDP%ofGDP
MEXICAN FISCAL BALANCE AS A % OF GDP:TOTALEXCLUDING PEMEX
%ofGDP
%ofGDP
*ADJUSTED FOR BOTH EXPORTS AND IMPORTS OF OIL AND OIL DERIVATIVES
Tame wage growth
Record low
© BCA Research 2016
Fiscal policy to stay tight
© BCA Research 2016 © BCA Research 2016
© BCA Research 2016
-3%
-3%
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MEXICO
5.4
5.0
4.6
4.2
3.8
3.4
2010 2012 2014 2016
5.4
5.0
4.6
4.2
3.8
3.4
5.4
5.0
4.6
4.2
3.8
3.4
5.4
5.0
4.6
4.2
3.8
3.4
COMMERCIAL PAPER INTEREST RATE**% %
MEXICO:PRIME LENDING RATE*
% %
*SOURCE: IMF**SOURCE BANXICO
8
6
4
2
0
-2
2005 2007 2009 2011 2013 2015 2017
8
6
4
2
0
-2
-4
60
40
20
0
20
40
25
20
15
10
5
0
-5MARGINAL PROPENSITY TO CONSUME**
PROXY (ADVANCED BY 6 MONTHS, LS)RETAIL SALES VOLUME*** (RS)Ann%
ChgAnn%Chg
MEXICO:PRIME LENDING RATE*
(ADVANCED BY 12 MONTHS, INVERTED, LS)
PRIVATE SECTOR CREDIT (RS)
Ann%Chg
Ann%Chg
*SOURCE: IMF**CALCULATED AS THE ANNUAL RATE OF CHANGE OF THE RATIO OFDEMAND TO SAVINGS DEPOSITS***SHOWN AS A 6-MONTH MOVING AVERAGE
© BCA Research 2016
© BCA Research 2016
© BCA Research 2016
30
20
10
0
-10
-20
2008 2010 2012 2014 2016
30
20
10
0
-10
-20
MEXICANNON-OIL EXPORTS*
Ann%Chg
Ann%Chg
* SHOWN AS A 3-MONTH MOVING AVERAGE.
Headwinds for manufacturing
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600
500
400
300
200
100
2010 2011 2012 2013 2014 2015 2016
600
500
400
300
200
100
MEXICO:NET CENTRAL BANK REPOS WITHCOMMERCIAL BANKS
6-WEEK MOVING AVERAGE
BnMXN
BnMXN
50
40
30
20
10
2015 2016
50
40
30
20
10
4.8
4.6
4.4
4.2
4.0
3.8
3.6
3.4
4.8
4.6
4.4
4.2
4.0
3.8
3.6
3.4
U.S.:6-MONTH FED FUNDSDISCOUNTER
BPs BPs
MEXICO:1-YEAR SWAP RATE
% %
© BCA Research 2016 © BCA Research 2016
© BCA Research 2016© BCA Research 2016
MEXICO
18
16
14
12
10
8
6
4
2005 2007 2009 2011 2013 2015 2017
18
16
14
12
10
8
6
4
20
16
12
8
4
20
16
12
8
4DOMESTIC CURRENCYCOMPONENT OFMONEY (M1)Ann%
ChgAnn%Chg
MEXICO:MONETARY BASE*
Ann%Chg
Ann%Chg
*MONETARY BASE = BANK RESERVES PLUS MONEY (M0) SUPPLY.
350
300
250
200
150
100
50
0
2006 2008 2010 2012 2014 2016
350
300
250
200
150
100
50
0
MEXICAN 10/1-YEAR SWAP CURVEU.S. 10/1-YEAR YIELD CURVE
BPs BPs
EMS recommened paying 1-year rates Dec 2/15
Decoupled
Central bank reducing liquidity injections
Bet on yield curve flattening
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.30
.25
.20
.15
2002 2006 2010 2014
.30
.25
.20
.15
MXN vs BRL800-DAY MOVING AVERAGE
MXN/BRL
MXN/BRL
500
400
300
200
100
1995 2000 2005 2010 2015
500
400
300
200
100
300
250
200
150
100
50
300
250
200
150
100
50
IN LOCAL CURRENCY TERMS
MEXICO VS. EMERGING MARKETS:STOCK PRICES*
6-YEAR MOVING AVERAGE12-YEAR MOVING AVERAGE
IN US$
* SOURCE: MSCI Inc.(SEE COPYRIGHT DECLARATION).
200180160140
120
100
80
60
1970 1975 1980 1985 1990 1995 2000 2005 2010 2015
200180160140
120
100
80
60
110100 90
80
70
60
50
1995 2000 2005 2010 2015
110100 90
80
70
60
50
(BASED ON UNIT LABOR COSTS)**
MEXICO: REAL EFFECTIVE EXCHANGE RATE*MEAN+/- ONE STANDARD DEVIATION+/- TWO STANDARD DEVIATIONS
*AVERAGE OF CPI BASED AND PPI BASED REAL EFFECTIVE EXCHANGERATES; SOURCE: J.P. MORGAN CHASE & CO.**SOURCE: OECD
© BCA Research 2016
© BCA Research 2016
© BCA Research 2016
© BCA Research 2016
?
At fair value
Very expensive
Mean
Mean
Not cheap
Not very cheap yet
Mean
Mean
MEXICO
1.6
1.4
1.2
1.0
.8
.6
.4
1990 1995 2000 2005 2010 2015
1.6
1.4
1.2
1.0
.8
.6
.4
40
35
30
25
20
15
10
5
40
35
30
25
20
15
10
5
MEXICO VS. EMERGING MARKETS:CYCLICALLY-ADJUSTED P/E RATIO*
MEAN+/- ONE STANDARD DEVIATION+/- TWO STANDARD DEVIATIONS
MEXICO: CYCLICALLY-ADJUSTED P/E RATIO*
*CALCULATED USING STOCK PRICES AND EPS IN U.S.DOLLAR TERMS, AND THEN DEFLATING BY U.S. CONSUMER PRICEINFLATION; SOURCE OF DATA: MSCI Inc. (SEE COPYRIGHT DECLARATION)
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COLOMBIA: CYCLICAL DOWNTURN, AMID STRUCTURAL STRENGTH
3.5
3.0
2.5
2.0
1.5
1995 2000 2005 2010 2015
3.5
3.0
2.5
2.0
1.5
2.5
2.0
1.5
1.0
2.5
2.0
1.5
1.0
4
3
2
1
0
-1
4
3
2
1
0
-1
POTENTIAL GDP GROWTH**:COLOMBIAEMERGING MARKETS EXCLUDING
CHINA***% %
WORKING AGE POPULATION:COLOMBIAEMERGING MARKETS
Ann%Chg
Ann%Chg
PRODUCTIVITY GROWTH*:COLOMBIAEMERGING MARKETS EXCLUDING
CHINA***
% %
* SHOWN AS A 5-YEAR MOVING AVERAGE; SOURCE: THE CONFERENCE BOARD, TOTAL ECONOMY DATABASE.** POTENTIAL GDP GROWTH RATE EQUALS LABOR FORCE GROWTH RATE PLUS PRODUCTIVITY GROWTH RATE.*** AGGREGATE OF 18 EMERGING MARKET ECONOMIES.
2
0
-2
-4
-6
1980 1985 1990 1995 2000 2005 2010 2015
2
0
-2
-4
-6
26
24
22
20
18
16
14
12
26
24
22
20
18
16
14
12
COLOMBIA:AS A % OF GDP
CURRENT ACCOUNTBALANCE*
% ofGDP
% ofGDP
NATIONAL SAVINGS RATE*GROSS FIXED CAPITAL FORMATION
% ofGDP
% ofGDP
* SOURCE: IMF, WORLD ECONOMIC OUTLOOK; 2016 FORECAST.
4
3
2
1
0
-1
-2
1950 1960 1970 1980 1990 2000 2010 2020
4
3
2
1
0
-1
-2
COLOMBIA:LABOR PRODUCTIVITY*
Ann%Chg
Ann%Chg
* SOURCE:THE CONFERENCE BOARD, TOTAL ECONOMY DATABASE.
© BCA Research 2016 © BCA Research 2016
© BCA Research 2016 -6%
Low domestic savings rate
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18
16
14
12
10
2002 2004 2006 2008 2010 2012 2014 2016
18
16
14
12
10
25
20
15
10
5
0
25
20
15
10
5
0
UNEMPLOYMENT RATE**% %
COLOMBIA:REAL GROSS FIXED CAPITAL EXPENDITURE*
Ann%Chg
Ann%Chg
* SOURCE: NATIONAL DEPARTMENT OF STATISTICS.** SHOWN AS A 12-MONTH MOVING AVERAGE; SOURCE: BLOOMBERG.
16
12
8
4
0
-4
-8
-12
2004 2006 2008 2010 2012 2014 2016
14
12
10
8
6
4
2
0
-2
MARGINAL PROPENSITY TO CONSUME PROXY* (ADVANCED BY 3-MONTHS, LS)
RETAIL SALES VOLUME** (RS)
Ann%Chg
Ann%Chg
* CALCULATED AS DEMAND DEPOSITS OVER TOTAL DEPOSITS; SHOWN AS A 3-MONTH MOVING AVERAGE.** EXCLUDES FUELS AND VEHICLES.
COLOMBIA
7
6
5
4
3
2
2010 2012 2014 2016
350
300
250
200
150
100
50
0
-50
COLOMBIA:REAL GDP GROTWH* (LS)5/1-YEAR OIS (IBR) CURVE (RS)
Ann%Chg
BPs
* SHOWN AS A 24-WEEK MOVING AVERAGE.
20
16
12
8
4
0
2000 2002 2004 2006 2008 2010 2012 2014 2016
20
16
12
8
4
0
COLOMBIA*:CURRENT ACCOUNT DEFICITNET FDINET PORTFOLIO FLOWS
BnUS$
BnUS$
* ALL SERIES SHOWN AS A 12-MONTH MOVING TOTALS; SOURCE: BANCO DE LA REPUBLICA DE COLOMBIA.
© BCA Research 2016
© BCA Research 2016
© BCA Research 2016
© BCA Research 2016
Inverted
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22
20
18
16
14
12
10
8
6
4
2
1995 2000 2005 2010 2015
22
20
18
16
14
12
10
8
6
4
2
20
18
16
14
12
10
8
6
4
2
20
18
16
14
12
10
8
6
4
2
12
10
8
6
4
2
12
10
8
6
4
2
MORTGAGE LOANS
% %
CONSUMER LOANS
% %COLOMBIA:(AS A % OF TOTAL LOANS):
NPLs*PROVISIONS**
COMMERCIAL LOANS
% %
* SOURCE: SUPERINTENDENCIA FINANCIERA DE COLOMBIA.** SOURCE: SUPERINTENDENCIA FINANCIERA DE COLOMBIA; BCA CALCULATION.
1210 8 6 4 2 0-2-4
2005 2010 2015
1210 8 6 4 2 0-2-4
120
115
110
105
100
95
90
85
120
115
110
105
100
95
90
85
NET REPOSWITH THE CENTRAL BANK
TnCOP
TnCOP
COLOMBIA:LOAN-TO-DEPOSIST RATIO
% %
8
10
12
14
16
18
20
2002 2004 2006 2008 2010 2012 2014 2016 2018
35
30
25
20
15
10
5
0
5
28
24
20
16
12
8
80
40
0
-40
BANK'S LENDING RATE (INVERTED, ADVANCED BY 9-MONTHS, LS)
PRIVATE CREDIT (RS)% Ann%
Chg
COLOMBIA:MONEY (M1) SUPPLY (LS)POLICY RATE*
(INVERTED, ADVANCED BY 9-MONTHS, RS)
Ann%Chg
Ann%Chg
* SOURCE: BANCO DE LA REPUBLICA DE COLOMBIA.
COLOMBIA
© BCA Research 2016
© BCA Research 2016
© BCA Research 2016
115%
Commercial banks borrowing from central bank
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400
350
300
250
200
150
100
50
1995 2000 2005 2010 2015
400
350
300
250
200
150
100
50
COLOMBIA RELATIVE TOEMERGING MARKETS:STOCK PRICES IN US$*
* SOURCE: MSCI Inc. (SEE COPYRIGHT DECLARATION).
180
160
140
120
100
2002 2004 2006 2008 2010 2012 2014 2016
180
160
140
120
100
3000
2600
2200
1800
3000
2600
2200
1800
COLOMBIAN PESO VERSUS EQUALLY-WEIGHTED BASKET OF EUR & JPY
400-DAY MOVING AVERAGE
COLOMBIAN PESO VERSUS U.S. DOLLAR800-DAY MOVING AVERAGE
USD/COP
USD/COP
400
350
300
250
200
150
100
50
2000 2005 2010 2015
400
350
300
250
200
150
100
50
COLOMBIA* RELATIVE TO PERU**:BANK STOCKS PRICES IN US$
* BOTH SERIES REBASED T0 100 AT JANUARY 1996; SOURCE: MSCI Inc. (SEE COPYRIGHT DECLARATION).** SOURCE: DATASTREAM.
300
250
200
150
100
50
0
2011 2012 2013 2014 2015 2016
300
250
200
150
100
50
0
COLOMBIA:10/1-YEAR SWAP CURVE
Bps Bps
COLOMBIA
© BCA Research 2016
© BCA Research 2016
© BCA Research 2016
© BCA Research 2016
EMS downgraded to underweight Oct 9/13
EMS recommended curve flattener Sept 16/15
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PERU: STILL FIGHTING THE “IMPOSSIBLE TRINITY”
8
6
4
2
0
-2
-4
-6
1995 2000 2005 2010 2015
90
100
110
120
130
12
10
8
6
4
2
0
2
12
10
8
6
4
2
0
-2
300
200
100
250
200
150
100
PORTFOLIO FLOWS* (LS)BROAD TRADE-WEIGHTED U.S. DOLLAR**
(INVERTED, RS)
BnUS$
CURRENT ACCOUNT DEFICIT*NET FDI*
BnUS$
BnUS$
PERU:EXPORT PRICE INDEX
IN US$ (LS)EXPORT VOLUMES (RS)
* SHOWN AS 4-QUARTER MOVING TOTAL.** SOURCE: FEDERAL RESERVE.
2
0
-2
-4
-6
-8
1995 2000 2005 2010 2015
2
0
-2
-4
-6
-8
-6
-4
-2
0
-6
-4
-2
0
30
25
20
15
10
30
25
20
15
10
16
14
12
16
14
12
CURRENT ACCOUNT DEFICITAS A % OF GDP
%ofGDP
%ofGDP
PERUVIAN BANKING INSTITUTIONS:NET FOREIGN ASSETSAS A % OF GDP
%ofGDP
%ofGDP
TOTAL EXTERNAL DEBTAS A % OF GDP*
%ofGDP
%ofGDP
PERU:DOMESTICALLY-ORIGINATEDFOREIGN CURRENCYLIABILITIESAS A % OF GDP
%ofGDP
%ofGDP
* SOURCE: BIS; BCA CALCULATIONS.
© BCA Research 2016 © BCA Research 2016
?
14%
Foreign currency liabilities = 14% + 36% = 50% of GDP
36%
Large
-4%
58
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PERU
302520
15
10
5
2008 2010 2012 2014 2016
302520
15
10
5
40353025
20
15
10
40353025
20
15
10
PERU:CENTRAL BANK DOMESTIC ASSETS*
BnPEN
BnPEN
PERU:CENTRAL BANK FOREIGNCURRENCY LIABILITIES
US$Bn
US$Bn
* CALCULATED AS TOTAL CENTRAL BANK ASSETS EXCLUDING FOREIGN RESERVES.
140
130
120
110
100
90
80
70
2006 2008 2010 2012 2014 2016
140
130
120
110
100
90
80
70
60
40
20
0
60
40
20
0
LOCAL CURRENCY:LOAN-TO-DEPOSIT RATIO
% %
LOCAL CURRENCY:CREDITDEPOSITS
Ann%Chg
Ann%Chg
30
20
10
0
-10
1995 2000 2005 2010 2015
60
40
20
0
-20
PERU:PRIVATE SECTOR CREDIT
IN REAL TERMS* (LS)EXPORT PRICES IN US$
(ADVANCED BY 12 MONTHS, RS)
Ann%Chg
Ann%Chg
* DEFLATED BY CONSUMER PRICE INDEX FOR LIMA.
120
110
100
90
80
60
70
2006 2008 2010 2012 2014 2016
120
110
100
90
80
60
70
40
30
20
10
0
-10
-20
40
30
20
10
0
-10
-20
FOREIGN CURRENCY (US$):LOAN-TO-DEPOSIT RATIO
% %
FOREIGN CURRENCY (US$):CREDITDEPOSITS
Ann%Chg
Ann%Chg
© BCA Research 2016
© BCA Research 2016
© BCA Research 2016
© BCA Research 2016
152%!
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PERU
160140120100 80 60 40 20 0
-20-40
2000 2002 2004 2006 2008 2010 2012 2014 2016
40
30
20
10
0
-10
4030
20
10
5
4030
20
10
5
NET INTERNATIONAL RESERVES* (LS)NARROW MONEY (M1) SUPPLY (RS)
Ann%Chg
Ann%Chg
PERU:NET INTERNATIONALRESERVES*
US$Bn
US$Bn
* CENTRAL BANK'S GROSS RESERVES MINUS DOMESTIC FOREIGN CURRENCY LIABILITIES.
12
10
8
6
4
2
0
2004 2006 2008 2010 2012 2014 2016
30
20
10
0
REAL GDP GROWTH (LS)NARROW MONEY (M1)
SUPPLY (ADVANCED 6 MONTHS; RS)
Ann%Chg
Ann%Chg
7
6
5
4
2012 2014 2016
7
6
5
4
5.5
5.0
4.5
4.0
3.5
5.5
5.0
4.5
4.0
3.5
5-YEAR NOMINALGOVERNMENT BOND YIELD**
6-YEAR MOVING AVERAGE% %
PERU:INTERBANK RATE*
% %
*SHOWN AS A 5-DAY MOVING AVERAGE**NOMINAL GOVERNMENT BOND MATURING AUG/2020
700600500400300
200
100
50
2000 2002 2004 2006 2008 2010 2012 2014 2016
700600500400300
200
100
50
1000 800 600
400 300
200
100
50
1000 800 600
400 300
200
100
503-YEAR MOVING AVERAGE6-YEAR MOVING AVERAGE
IN LOCALCURRENCYTERMS
IN US$
PERUVIAN BANKS:STOCK PRICES*
* REBASED TO JAN, 2000= 100; SOURCE: DATASTREAM.
© BCA Research 2016 © BCA Research 2016
© BCA Research 2016 © BCA Research 2016
Fade the rally
60
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PERU
800
600
400
300
200
100
1995 2000 2005 2010 2015
2.4
2.6
2.8
3.0
3.2
3.4
3.6
1000 800 600
400 300
200
100
150
125
100
75
50
BANK STOCK PRICES IN LOCAL CURRENCY* (LS)
PERUVIAN NEW SOL VS. U.S. DOLLAR (RS)
USD/PEN
PERU:BANK STOCK PRICES*
IN US$ (LS)EXPORT PRICES
IN US$ (RS)
* SOURCE: DATASTREAM.
500
450
400
350
300
250
200
150
2004 2006 2008 2010 2012 2014 2016
500
450
400
350
300
250
200
150
18001600140012001000
800
600
400
18001600140012001000
800
600
400
6-YEAR MOVING AVERAGE12-YEAR MOVING AVERAGE
STOCK PRICES*:PERUVS EMERGING MARKETS
PERUVIANSTOCK PRICES* (US$)
* SOURCE: MSCI Inc. (SEE COPYRIGHT DECLARATION).
10
9
8
7
6
5
4
3
2
1
2000 2002 2004 2006 2008 2010 2012 2014 2016
10
9
8
7
6
5
4
3
2
1
PERU:COMMERCIAL BANKSNPL* RATIO
% %
* NON-PERFROMING LOANS; SOURCE: BANKING SUPERVISOR, PERU.
200
100
0
-100
-200
-300
-400
-500
2006 2008 2010 2012 2014 2016
4500
4000
3500
3000
2500
2000
PERU: CORPORATE MINUS SOVEREIGN OAS* (INVERTED, LS)
INDUSTRIAL METALS PRICES**(RS)
BPs
* OPTION ADJUSTED SPREAD; SOURCE: BARCAP.** LMEX INDEX; SOURCE: LONDON METALS EXCHANGE.
© BCA Research 2016© BCA Research 2016
© BCA Research 2016© BCA Research 2016
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CHILE: STILL MOVING LEFTWARDS, TOWARDS STAGFLATION?
20
18
16
14
12
10
8
6
2010 2012 2014 2016
20
18
16
14
12
10
8
6
28
26
24
22
20
28
26
24
22
20CAPITAL EXPENDITURES (IN REAL TERMS)AS % OF GDP*
NON-FINANCIAL CORPORATESPUBLIC SECTOR*
%ofGDP
%ofGDP
CHILE:CAPITAL EXPENDITURES(IN REAL TERMS)AS % OF GDP*
%ofGDP
%ofGDP
* SHOWN AS A 4-QUARTER MOVING AVERAGE; SOURCE: BANCO CENTRAL DE CHILE AND BCA CALCULATIONS.
13
12
11
10
2000 2005 2010 2015
13
12
11
10
42
40
38
36
34
42
40
38
36
34
54
52
50
48
46
44
54
52
50
48
46
44
TAXES LESS SUBSIDIES
% %
WAGES
% %
NET OPERATING SURPLUS
CHILEAN INCOME AS A % GDP*:
% %
* SOURCE: BANCO CENTRAL DE CHILE.
16
15
14
13
12
11
10
9
1960 1970 1980 1990 2000 2010
16
15
14
13
12
11
10
9
CHILE:GOVERNMENT EXPENDITUREAS A % OF GDP*
%ofGDP
%ofGDP
* SOURCE: WORLD BANK, WDI.
140
130
120
110
100
1995 2000 2005 2010 2015
140
130
120
110
100
CHILE:REAL WAGES*
* CALCULATED AS REAL HOURLY WAGE TIMES HOURS WORKED; SOURCE: BANCO CENTRAL DE CHILE.
© BCA Research 2016
© BCA Research 2016
© BCA Research 2016
© BCA Research 2016
Annual growth rate of 2% since 1994 and 2.5% since 2009
The slope steepened
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CHILE
20
10
0
-10
2005 2010 2015
20
10
0
-10
20
15
10
5
0
20
15
10
5
0
80
70
60
50
40
30
20
10
0
-10
RETAIL SALES VOLUME*INDUSTRIAL PRODUCTION
Ann%Chg
Ann%Chg
BROAD MONEY SUPPLY (M2)PRIVATE SECTOR CREDIT
Ann%Chg
Ann%Chg
CHILE:BUSINESS CONFIDENCE INDEX
(ADVANCED BY 3 MONTHS, LS)CAPEX IN REAL TERMS (RS)
Ann%Chg
* SHOWN AS A 3-MONTH MOVING AVERAGE.
12
10
8
6
4
2
0
-2
-4
1995 2000 2005 2010 2015
12
10
8
6
4
2
0
-2
-4
CHILE:REAL PERSONAL CONSUMPTION*
Ann%Chg
Ann%Chg
* SHOWN AS A 2-QUARTER MOVING AVERAGE.
50
40
30
20
10
0
-10
-20
-30
-40
2006 2008 2010 2012 2014 2016
30
20
10
0
-10
-20
-30
CHILE*:EXPORTS (LS)NON-MINING EXPORTS (RS)
Ann%Chg
Ann%Chg
* SHOWN AS A 3-MONTH MOVING AVERAGE.
© BCA Research 2016 © BCA Research 2016
© BCA Research 2016 © BCA Research 2016
8
6
4
2
0
2010 2012 2014 2016
8
6
4
2
0
30.5
30.0
29.5
29.0
71.0
70.5
70.0
69.5
88
87
86
85
84
83
18
17
16
15
14
13
12
TOTAL EMPLOYMENT
Ann%Chg
Ann%Chg
PERMANENT (LS)TEMPORARY (RS)% %
CHILE: EMPLOYMENT* AS A SHARE OF TOTAL:WITH CONTRACT (LS)VERBAL CONTRACT
ONLY (RS)
% %
*SOURCE: NATIONAL STATISTICS INSTITUTE, CHILE.
Weak
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CHILE
-40
0
40
2004 2006 2008 2010 2012 2014 2016
-40
0
40
-40
0
40
80
-40
0
40
80
LOOSER STANDARDS
TIGHTER STANDARDS
CONSUMERS
LOOSER STANDARDS
TIGHTER STANDARDS
CHILEAN CREDIT STANDARDS*:CORPORATES
* SOURCE: BANCO CENTRAL DE CHILE.
5.5
5.0
4.5
4.0
3.5
2000 2005 2010 2015
5.5
5.0
4.5
4.0
3.5
30
25
20
15
10
5
0
30
25
20
15
10
5
0
MONETARY BASEAS % OF GDP
%ofGDP
%ofGDP
CHILE*:MONETARY BASE
Ann%Chg
Ann%Chg
* SHOWN AS A 3-MONTH MOVING AVERAGE.
30
20
10
0
-10
2005 2010 2015
30
20
10
0
-10
3.0
2.8
2.6
2.4
2.2
2.0
1.8
2008 2010 2012 2014 2016
3.0
2.8
2.6
2.4
2.2
2.0
1.8
CONSUMER CREDITCORPORATE CREDIT
Ann%Chg
Ann%Chg
CHILEAN BANKS*:AS SHARE OF TOTAL LOANS
PROVISIONSPAST-DUE LOANS
% %
* SOURCE: SUPERINTENDENCY OF BANKS & FINANCIAL INSTITUTIONS.
8
6
4
2
0
-2
2000 2005 2010 2015
8
6
4
2
0
-2
8
6
4
2
0
8
6
4
2
0
UNIT LABOR COSTS**(BASED ON NOMINAL WAGES)Ann%
ChgAnn%Chg
CHILE:CORE INFLATION*
Ann%Chg
Ann%Chg
* EXCLUDING FOOD AND FUELS.** CALCULATED AS WAGES TIMES HOURS WORKED TIMES EMPLOYMENT DIVIDED BY REAL GDP.
© BCA Research 2016
© BCA Research 2016
© BCA Research 2016
© BCA Research 2016
Strong
Sticky
Sticky
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CHILE
100
200
300
400
500
2005 2010 2015
100
200
300
400
500
30
25
20
15
30
25
20
15CHILE:CORPORATE SPREADS**BPs BPs
CHILE:NON-FINANCIAL CORPORATEFOREIGN DEBT AS A % OF GDP*
%ofGDP
%ofGDP
* SOURCE: BIS; BCA CALCULATION.** SOURCE: J.P. MORGAN CHASE & Co.
8
7
6
5
4
3
2004 2006 2008 2010 2012 2014 2016
8
7
6
5
4
3
700
650
600
550
500
450
700
650
600
550
500
450
3-YEAR GOVERNMENT BOND YIELD% %
CHILEAN PESO VS U.S. DOLLAR CLP/USD
CLP/USD
120
100
80
60
40
1990 1995 2000 2005 2010
120
100
80
60
40
CHILE:MARKET CAP* AS A % OF GDPTIME TRENDTIME TREND +/- 20%
% %
* DATATREAM INDEX.
130
120
110
100
90
80
70
1990 1995 2000 2005 2010 2015
130
120
110
100
90
80
70
2500
2000
1500
1000
500
2500
2000
1500
1000
500
CHILE VS EMERGING MARKETS:STOCK PRICES IN US$*
CHILEAN STOCK PRICES IN US$*1600-DAY MOVING AVERAGE3200-DAY MOVING AVERAGE
* SOURCE: MSCI Inc. (SEE COPYRIGHT DECLARATION).
© BCA Research 2016
© BCA Research 2016
© BCA Research 2016© BCA Research 2016
Breakout
24.4%
EMS went short Nov 2012
?
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36
32
28
24
20
16
12
2012 2014 2016
36
32
28
24
20
16
12
14121110 9 8 7 6
5
14121110 9 8 7 6
5
3-MONTH T-BILL RATE*
30-DAY DEPOSIT RATE**
% %
ARGENTINE PESOVERSUS U.S. DOLLAR
ARS/USD
ARS/USD
* 3-MONTH LEBAC NOTES.** PRIVATE BANKS BALDAR RATE.
150
140
130
120
110
100
90
80
1995 2000 2005 2010 2015
1800
1600
1400
1200
1000
800
600
400
ARGENTINA:TERMS OF TRADE* (LS)SOYBEAN PRICES (RS)
Cent/Bushel
* SOURCE: NATIONAL STATISTICS & CENSUS INSTITUTE.
35
30
25
20
15
10
5
2004 2006 2008 2010 2012 2014 2016
35
30
25
20
15
10
5
20
30
40
50
20
30
40
50
-2
0
2
4
-2
0
2
4
3-MONTH T-BILL RATE
% %
FOREIGN RESERVESBn
US$BnUS$
CURRENT ACCOUNT BALANCEAS A % OF GDP
% ofGDP
% ofGDP
50
40
30
20
10
0
2006 2008 2010 2012 2014 2016
50
40
30
20
10
0
-6
-4
-2
0
2
4
-6
-4
-2
0
2
4
GOVERNMENT EXPENDITURES**(NOMINAL, IN PESOS)
Ann%Chg
Ann%Chg
FISCAL BALANCE AS A % OF GDP*:NOMINALPRIMARY
% ofGDP
% ofGDP
* SHOWN AS A 2-QUARTER MOVING AVERAGE; SOURCE: MECON.** SHOWN AS A 6-MONTH MOVING AVERAGE.
© BCA Research 2016
© BCA Research 2016 © BCA Research 2016
© BCA Research 2016
1000 basis point rate hike
Macri elected President
ARGENTINA: BACK TO ORTHODOXY, BUT CHALLENGES REMAIN
Can Macri follow through with shock therapy?
?
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ARGENTINA
40
30
20
10
0
-10
-20
2006 2008 2010 2012 2014 2016
40
30
20
10
0
-10
-20
ARGENTINA:REAL INTEREST RATES* (LS)BROAD (M2) MONEY SUPPLY (RS)
% Ann%Chg
* CALCULATED AS BADLAR MINUS 12-MONTH INFLATION EXPECTATIONS.
0
5
10
15
20
25
30
2004 2006 2008 2010 2012 2014 2016
60
50
40
30
20
10
0
-10
3-MONTH T-BILL RATE* (INVERTED AND ADVANCED 9 MONTHS, LS)
PRIVATE SECTOR CREDIT (RS)
% Ann%Chg
* CENTRAL BANK NOTES (LEBAC).
80
70
60
50
40
30
20
1995 2000 2005 2010 2015
80
70
60
50
40
30
20
ARGENTINA:DOMESTIC CREDIT AS A % OF TOTAL
PRIVATE SECTORPUBLIC SECTOR
% %
60
55
50
45
40
35
2008 2010 2012 2014 2016
36
32
28
24
16
20
15
10
5
0
-5
-10
-15 -40
-20
0
20
40
CONSUMER CONFIDENCE (LS)12-MONTH INFLATION
EXPECTATIONS* (INVERTED, RS) %
INDUSTRIAL PRODUCTION VOLUME* (LS)
IMPORTS IN US$* (RS)
Ann%Chg
Ann%Chg
*SHOWN AS A 3-MONTH MOVING AVERAGE
© BCA Research 2016 © BCA Research 2016
© BCA Research 2016© BCA Research 2016
?
?
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ARGENTINA
-4
-2
0
2
2000 2005 2010 2015
-4
-2
0
2
.4
.6
.8
1.2
1.62.0
.4
.6
.8
1.2
1.62.0
ARGENTINE TRADE BALANCE WITH BRAZILUS$Bn.
US$Bn.
ARGENTINE PESO v.s. BRAZILIAN REAL
ARS/BRL
ARS/BRL
950
900
850
800
750
700
2010 2012 2014 2016
950
900
850
800
750
700
1100
1000
900
800
700
600
500
1100
1000
900
800
700
600
500
250
200
150
100
75
50
250
200
150
100
75
50
BRAZIL
VENEZUELA
SOVEREIGN CREDIT TOTAL RETURN INDEX*
ARGENTINA
* SOURCE: BARCLAYS.
140
130
120
110
100
90
80
70
2006 2008 2010 2012 2014 2016
28
24
20
16
12
8
4
ARGENTINA:BANK STOCK PRICES* IN US$ (LS)30-DAY DEPOSIT RATE** (RS)
%
* SHOWN AS A NATURAL LOGARITHM; SOURCE: MSCI Inc. (SEE COPYRIGHT DECLARATION).** PRIVATE BANKS BADLAR RATE.
© BCA Research 2016
© BCA Research 2016 © BCA Research 2016
?
Overweight
68
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6
4
2
0
-2
-4
-6
2010 2012 2014 2016
6
4
2
0
-2
-4
-6
140
120
100
80
60
40
140
120
100
80
60
40
REAL GDP GROWTHAnn%
ChgAnn%Chg
VENEZUELA:TAX REVENUE*
Ann%Chg
Ann%Chg
* SOURCE: SENIAT, VENEZUELA.
60
80
100
120
140
1990 1995 2000 2005 2010 2015
60
80
100
120
140
120
80
40
0
120
80
40
0
120
80
40
0
120
80
40
0
LOAN-TO-DEPOSIT RATIO*% %
PRIVATE SECTOR CREDIT
Ann%Chg
Ann%Chg
VENEZUELA:MONEY (M1)GROWTH
Ann%Chg
Ann%Chg
* SHOWN AS A 3-MONTH MOVING AVERAGE.
60
40
20
0
-20
1995 2000 2005 2010 2015
60
40
20
0
-20
CURRRENT ACCOUNT BALANCE*
QUARTERLY, ANNUALIZED
BnUSD
BnUSD
* SHOWN AS A 4-QUARTER MOVING TOTAL; SOURCE:J.P.MORGAN CHASE & CO.
© BCA Research 2016
© BCA Research 2016 © BCA Research 2016
146% growth all due to inflation...
...as the economy is imploding
100%
75%
130%
-7%!
Worse than in 2008
VENEZUELA: TIME IS UP
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VENEZUELA
110100 90 80 70 60
50
40
30
202011 2012 2013 2014 2015 2016
110100 90 80 70 60
50
40
30
20
30282624
22
20
18
16
14
30282624
22
20
18
16
14
VENEZUELAN CRUDE OIL BASKETUS$/Bbl
US$/Bbl
VENEZUELA:FOREIGN RESERVES*
US$Bn
US$Bn
* SOURCE: BANCO CENTRAL DE VENEZUELA.
70
80
90
100
110
2006 2008 2010 2012 2014 2016
70
80
90
100
110
2800
2000
1200
400
2800
2000
1200
400
EMBI** RELATIVE TOTAL RETURN INDEX:VENEZUELA vs. EMERGING MARKETS
VENEZUELA:SOVEREIGN SPREADS*
200-DAY MOVING AVERAGE
BPs BPs
* SOURCE:J.P.MORGAN CHASE & CO.** EMERGING MARKETS BOND INDEX; SOURCE:J.P.MORGAN CHASE & CO.
11000
10000
9000
8000
7000
6000
5000
4000
3000
2000
1000
2008 2010 2012 2014 2016
120
100
80
60
VENEZUELA:5-YEAR SOVEREIGN CDS (LS)BRENT SPOT PRICE
(INVERTED, RS)
BPs US$
320
280
240
200
160
120
80
40
2010 2012 2014 2016
320
280
240
200
160
120
80
40
SOVEREIGN DEBTTOTAL RETURN INDEX*:ARGENTINA VERSUS VENEZUELA
400-DAY MOVING AVERAGE
* REBASED TO JAN. 2010=100; SOURCE: BARCLAYS.
© BCA Research 2016 © BCA Research 2016
© BCA Research 2016© BCA Research 2016
Only US$12.3 billion, mostly in gold
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LATIN AMERICA
100
80
60
40
1990 1995 2000 2005 2010 2015
100
80
60
40
EXPORTS BY TECHNOLOGICAL INTENSITY*:(PRIMARY PRODUCTS AS PERCENTAGE OF TOTAL EXPORTS)
% %
* SOURCE: UNECLAC.
BOLIVIA
VENEZUELA
PARAGUAY
ARGENTINA
ECUADOR
BRAZIL
COLOMBIA
PERUCOSTA RICA
MEXICO
CHILE
URUGUAY
© BCA Research 2016
CHANGE IN GINI (EARLY 2000S TO LATEST DATA)
CH
AN
GE
IN M
EDIA
N W
EALT
H P
ER A
DU
LT (2
001-
2013
)
300
250
200
150
100
50
0
-50
%
.01 .02 .03 .04 .05 .06 .07 .08 .09
SOURCE: WORLD BANK AND CREDIT SUISSE; BCA CALCULATIONS.
Wealthier median adult
Lower Inequality & Lower Median Wealth
Less inequality
The Boom Years In Review: Inequality & Income Gains
© BCA Research 2016
Chile
Colombia
PeruBrazil
Argentina
Mexico
Aside From Mexico, Commodity Dependence Remains Unaltered
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LATIN AMERICA
30
25
20
15
10
2005 2010 2015
30
25
20
15
10
80
40
20
10
80
40
20
10
(AS % OF TOTAL)LATAM* EX-MEXICO EXPORTS TO:
CHINA U.S.
% %
LATAM* EX-MEXICO EXPORTS TO: CHINA U.S.
BnUSD
BnUSD
* INCLUDES ARGENTINA, BRAZIL, CHILE, COLOMBIA, PERU, AND VENEZUELA.
40
30
20
10
1975 1980 1985 1990 1995 2000 2005 2010 2015
40
30
20
10
U.S. OIL IMPORTS FROM: MIDDLE EAST AND WEST AFRICA* LATAM** NORTH AMERICA***
% %
* INCLUDES ALGERIA, IRAQ, KUWAIT, LIBYA, NIGERIA, QATAR, AND SAUDI ARABIA.** INCLUDES BRAZIL, COLOMBIA AND VENEZUELA.*** INCLUDES CANADA, AND MEXICO.
30
25
20
15
10
52000 2005 2010 2015
30
25
20
15
10
5
50
40
30
50
40
30
CURRENT ECONOMIC SITUATION*(% OF RESPONDENTS ANSWERING VERY GOODAND GOOD)
COUNTRY PERSONAL
% %
LATAM FUTURE ECONOMIC SITUATION*(% OF RESPONDENTS ANSWERING MUCH BETTERAND A LITTLE BETTER)
COUNTRY PERSONAL
% %
* SOURCE: LATINOBAROMETRO.
260
220
180
140
100
60
1995 2000 2005 2010 2015
1.2
1.1
1.0
.9
.8
.7
.6
STOCK PRICES: EMERGING ASIA VS LATIN AMERICA* (LS)
GLOBAL MANUFACTURED GOODS VS RAW MATERIALS PRICES** (RS)
* SHOWN IN U.S. DOLLAR TERMS AND REBASED TO JAN. 2002 = 100; SOURCE: MSCI INC. (SEE COPYRIGHT DECLARATION).** SOURCE: NETHERLANDS BUREAU FOR ECONOMIC POLICY ANALYSIS.
© BCA Research 2016© BCA Research 2016
© BCA Research 2016 © BCA Research 2016
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POSITIONS INITIATION DATE RETURN
ON EM EQUITY BENCHMARKSHORT EM / LONG U.S. STOCKS DEC 14/10 105.5%
SHORT EM STOCKS MAY 24/11 26.8%
TAIWAN AUG 9/07 19.5%
KOREA IT SECTOR JAN 27/10 69.9%
CZECH REPUBLIC JUN 21/11 -38.3%
CHINA NOV 26/14 5.4%
HUNGARY MAY 20/15 51.1%
INDIA JUNE 24/15 11.0%
POLAND APR 6/16 -10.6%
KOREA (EXCLUDING IT AND BANKS) APR 27/16 -1.5%
INDONESIA JUN 14/11 -8.6%
TURKEY MAR 13/12 -5.9%
BRAZIL AUG 21/12 71.0%
PERU SEP 2/15 -21.4%
MALAYSIA OCT 21/15 -5.8%
HONG KONG - DOMESTIC STOCKS MAR 30/10
RUSSIA OCT 12/10
CHILE DEC 3/14
SOUTH AFRICA JUL 22/15
SINGAPORE SEP 9/15
THAILAND OCT 21/15
MEXICO FEB 10/16
COLOMBIA MAY 4/16
PHILIPPINES MAY 11/16
OVER
WEI
GHT
UNDE
RWEI
GHT
NOTE: RETURNS RELATIVE TO BENCHMARK. MSCI FOR EQUITY RECOMMENDATIONS UNLESS OTHERWISE SPECIFIED. * RETURN INCLUDES THAT OF OUR PREVIOUS CALL: LONG KOREA / SHORT EM BANKS FROM APR 3/12 TILL FEB 19/13.
OTHER EQUITY RECOMMENDATIONS - ABSOLUTE TRADES
SHORT BRAZILIAN BANKS APR 26/11 56.4%
LONG EM EQUITY VOLATILITY (ETF: VXEEM) MAR 6/12 -28.4%
SHORT SOUTH AFRICAN GENERAL RETAILERS APR 23/13 26.5%
SHORT TURKISH BANK STOCKS JUN 4/13 49.2%
SHORT KOREAN AUTO STOCKS JUL 3/13 29.0%
SHORT PERUVIAN BANK STOCKS FEB 18/15 -0.8%
OTHER EQUITY RECOMMENDATIONS - RELATIVE TRADES
LONG EM TECH / SHORT EM MATERIALS FEB 23/10 106.1%
SHORT CHINESE PROPERTY COMPANIES / LONG U.S. HOMEBUILDERS MAR 06/12 118.9%
SHORT EM BANKS / LONG U.S. BANKS FEB 12/13 59.4%
LONG KOREAN BANKS / SHORT INDONESIAN BANKS* FEB 19/13 -9.3%
LONG CHINESE SMALL CAPS / SHORT EM SMALL CAPS NOV 20/13 1.0%
LONG INDIAN / SHORT INDONESIAN STOCKS JUL 30/14 7.0%
SHORT EM STOCKS / LONG U.S. 30-YEAR TREASURIES APR 08/15 18.1%
LONG RUSSIA / SHORT MALAYSIA STOCKS MAR 2/16 15.8%
LONG CENTRAL EUROPE BANKS / SHORT EURO AREA BANKS STOCKS APR 6/16 -6.8%
LONG KOREAN / SHORT EM STOCKS APR 27/16 -2.5%
LONG COLOMBIAN BANKS / SHORT PERUVIAN BANKS MAY 4/16 -16.5%
NEU
TRAL
EQUITY RECOMMENDATIONS
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POSITIONS INCEPTION LEVEL
INITIATION DATE
RETURN TO DATE STOPS
FIXED-INCOME
RECEIVE KOREAN 10-YEAR SWAP RATES MAY 24/11 269 BPs
SHORT 5-YEAR INDONESIAN BONDS 5.2% MAR 20/12 9.0%
LONG SOUTH AFRICAN 10-YEAR/ SHORT 1-YEAR SWAP RATES MAR 4/15 26 BPs
RECEIVE RUSSIAN 5-YEAR SWAP RATES APR 29/15 239 BPs
LONG 10-YEAR HUNGARIAN BONDS 3.5% MAY 20/15 5.0%
RECEIVE COLOMBIAN 10-YEAR/PAY 1-YEAR SWAP RATES SEP 16/15 216 BPs
PAY MEXICAN 1-YEAR SWAP RATES DEC 2/15 91 BPs
LONG 10-YEAR POLISH BONDS 2.9% APR 6/16 -2.0%
SHORT 2-YEAR TURKISH BONDS 9.3% JUN 1/16 -2.0%
CREDIT MARKETS
SHORT EM CORPORATE AND SOVEREIGN CREDIT / LONG U.S. JUNK CORPORATE CREDIT AUG 30/11 9.0%
LONG 5-YEAR CHINESE CDS JUN 7/11 47 BPs
SHORT SOUTH AFRICAN / LONG EM SOVEREIGN CREDIT APR 10/12 4.6%
SHORT BRAZILIAN / LONG EM SOVEREIGN CREDIT MAY 15/12 16.1%
SHORT INDONESIA / LONG MEXICO SOVEREIGN CREDIT NOV 28/12 -5.1%
LONG PHILIPPINES / SHORT TURKEY SOVEREIGN CREDIT JUN 4/13 9.8%
LONG PERU / SHORT BRAZIL SOVEREIGN CREDIT AUG 21/13 14.3%
LONG EMERGING ASIA INVESTMENT GRADE / SHORT HIGH YIELD CORPORATE BONDS FEB 11/15 -6.1%
BUY SOUTH AFRICAN / SELL RUSSIAN 5-YEAR CDS PROTECTION SEP 23/14 357 BPs
SHORT PERUVIAN CORPORATE BONDS / LONG SOVEREIGN BONDS FEB 18/15 -7.9%
LONG HUNGARY / SHORT EM SOVEREIGN CREDIT MAR 4/15 -3.4%
LONG 5-YEAR BRAZILIAN CDS JUL 8/15 78 BPs
LONG MEXICO / SHORT COLOMBIA SOVEREIGN CREDIT JUL 22/15 -2.0%
LONG 5-YEAR MALAYSIAN CDS AUG 5/15 13 BPs
CURRENCIES
SHORT BRL / LONG USD 1.66 (USD/BRL) SEP 6/11 72.0%
SHORT TRY / LONG USD 1.845 (USD/TRY) JAN 17/11 44.4%
SHORT IDR / LONG USD 9155 (USD/IDR) MAR 20/12 25.4%
SHORT CLP / LONG USD 478.9 (USD/CLP) NOV 6/12 28.3%
SHORT ZAR / LONG USD 10.51 (USD/ZAR) JUL 23/14 32.1%
LONG MXN / SHORT BRL 0.18 (MXN/BRL) JAN 14/15 -7.3%
SHORT TURKISH LIRA / LONG BASKET OF JPY & EURO FEB 11/15 14.5%
SHORT COLOMBIAN PESO / LONG BASKET OF JPY & EURO APR 15/15 34.2%
LONG HUF / SHORT IDR 46.62 (HUF/IDR) APR 15/15 1.5%
LONG RUB / SHORT MYR 0.06 (RUB/MYR) NOV 25/15 -0.1%
SHORT CNY (12-MONTH NDF) / LONG USD 6.71 (USD/CNY) DEC 9/15 -2.2%
SHORT KOREAN WON / LONG BASKET OF JPY, EURO & USD MAY 25/16 1.5%
NOTE: PLEASE NOTE THAT ALL CURRENCY TRADE CALCULATIONS INCLUDE COST OF CARRY.
FIXED-INCOME, CREDIT AND CURRENCY RECOMMENDATIONS
GLOBAL OFFICES
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