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JP 摩根-新兴市场-宏观策略-IMF与世界银行春季会议亮点-64-34页.pdf
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Global Emerging Markets
Research
04 June 2019
Highlights from the 2019
IMF/World Bank Spring Meetings
Reluctantly bullish: Clear EM risk appetite despite lack
of compelling opportunities
Chair of Global Research
Joyce Chang
(1-212) 834-4203
joyce.chang@jpmorgan.com
J.P. Morgan Securities LLC
Global Emerging Markets
Research
Luis Oganes
AC
(1-212) 834-4326
luis.oganes@jpmorgan.com
J.P. Morgan Securities LLC
Jahangir Aziz
AC
(1-212) 834-4328
jahangir.x.aziz@jpmorgan.com
J.P. Morgan Securities LLC
Jonny Goulden
AC
(44-20) 7134-4470
jonathan.m.goulden@jpmorgan.com
J.P. Morgan Securities plc
See page 32 for analyst certification and important disclosures.
www.jpmorganmarkets.com
More than 750 investors attended our investor seminar during the International
Monetary Fund and World Bank Spring Meetings in Washington DC on April
11-12, which featured meetings with DM and EM policy makers, official creditors
and independent analysts. Key highlights from the meetings follow:
Fed pivot has helped long EM positions and inflows, with investors
positioned OW but seeing limited opportunities. Speakers had no clear ideas
on how to raise DM inflation in an orderly way. EM central banks have room to
keep easy monetary stances and we project policy rates 44bp lower on average.
China is showing early signs of growth stabilization and a positive
announcement on US-China trade appears forthcoming soon. However,
there were serious questions about the comprehensiveness and durability of a
deal, considering the US insistence on a unilateral enforcement mechanism.
Investors are willing to hold onto Argentina risk despite the political
uncertainty. While the election calendar will likely keep volatility high
through the year, depressed valuations keep investors willing to hold positions,
as few see an eventual Cristina Kirchner win.
While the devil is in the details, Brazil remains the preferred EM macro
story for investors this year despite concerns about outlook for the pension
reform. Investors believe that pension reform will gain approval and Brazilian
authorities outlined their plan to tackle fiscal and growth challenges in other
areas: privatizations, containment of public payroll growth and trade opening.
Significant concerns remain over how politics in Mexico will impact
policies and institutions. Investors expect USMCA to be approved by the US
Congress in 2H19 despite few signs of momentum at present, but concerns
remain that AMLO’s policies could lead to institutional deterioration, ratings
downgrades, and risk capital outflows.
Further sanctions against Russia likely to be announced soon. The next
round of chemical weapons related sanctions could be imminent and Congress
appears more likely to pass sanctions post Mueller, with sovereign debt and
secondary market trading more frequently mentioned in the discussions.
Turkey remains an ongoing source of concern to investors as seen in our
audience survey and recent market volatility. In our client survey, 44% of
investors feared that forthcoming policy actions will fall short of what is
needed to address intensifying debt rollover pressures, and 39% asserted that
macroeconomic policies can only provide temporary support if not
accompanied by the rebuilding of state capacity and institutions.
Venezuela’s interim authorities remain confident on regime change. They
indicated that a future debt restructuring would seek to minimize holdouts and
expedite a return to capital markets, but would require an “important” haircut.
Paradigm shifts are underway with key policy risks facing a redefinition
away from the traditional macro cyclical forces. They include populism,
climate change and cybersecurity risks.
Among frontier markets, Ecuador was seen as making the most progress
compared to a year ago. Concerns are increasing about the outlook for Sub-
Saharan Africa, particularly given the strong YTD performance (+12%).
This version
supersede
s the
document published on April 17,
2019. Please see page 32 for
details.
2
Global
Emerging Markets Research
Highlights from the 2019 IMF/World Bank Spring Meetings
04 June 2019
Luis Oganes
(1-212) 834-4326
luis.oganes@jpmorgan.com
This report summarizes the main messages from the presentations in the J.P. Morgan
investor seminar at the time of the 2019 International Monetary Fund and World Bank
Spring Meetings in Washington DC on April 11-12, which included multilateral and
government officials, monetary authorities, rating agencies, market participants, and
economic and political consultants. As such, they represent the perspectives of the
speakers and not necessarily the opinions of J.P. Morgan research analysts. All
sessions from the conference were conducted under Chatham House rules, without
direct attribution to the speakers and closed to the press.
Contributors
Click here to enter text.
Lara Bes
AC
(1-212) 834-3947
Lara.bes@jpmorgan.com
J.P. Morgan Securities LLC
Gabriel Lozano
AC
(52-55) 5540-9558
gabriel.lozano@jpmorgan.com
Banco J.P. Morgan, S.A., Institución de Banca
Múltiple, J.P. Morgan Grupo Financiero
Carlos Carranza
AC
(1-212) 834-7139
carlos.j.carranza@jpmorgan.com
J.P. Morgan Securities LLC
Katherine Marney
AC
(1-212) 834-2285
katherine.v.marney@jpmorgan.com
J.P. Morgan Securities LLC
Cassiana Fernandez
AC
(55-11) 4950-3369
cassiana.fernandez@jpmorgan.com
Banco J.P. Morgan S.A.
Trang Nguyen
AC
(1-212) 834-2475
trang.m.nguyen@jpmorgan.com
J.P. Morgan Securities LLC
Robert Habib
AC
(1-212) 834-4876
robert.habib@jpmorgan.com
J.P. Morgan Securities LLC
Steven Palacio
AC
(52-55) 5382-9651
steven.palacio@jpmorgan.com
Banco J.P. Morgan, S.A., Institución de Banca
Múltiple, J.P. Morgan Grupo Financiero
Michael Harrison
AC
(1-212) 834-7190
michael.p.harrison@jpmorgan.com
J.P. Morgan Securities LLC
Diego W. Pereira
AC
(1-212) 834-4321
diego.w.pereira@jpmorgan.com
J.P. Morgan Securities LLC
Amy Ho
AC
(1-212) 622 9364
amy.ho@jpmorgan.com
J.P. Morgan Securities LLC
Ben Ramsey
AC
(1-212) 834-4308
benjamin.h.ramsey@jpmorgan.com
J.P. Morgan Securities LLC
3
Global
Emerging Markets Research
Highlights from the 2019 IMF/World Bank Spring Meetings
04 June 2019
Luis Oganes
(1-212) 834-4326
luis.oganes@jpmorgan.com
Table of Contents
Top 10 Takeaways ....................................................................4
Results of the On-site Audience Survey ................................8
Speaker Perspectives on Global Issues...............................14
International Monetary Fund: World Economic Outlook ........................................14
Global Financial Stability: Dovish Fed provides near-term boost, but vulnerabilities
underlie medium-term concerns.............................................................................14
Assessing the state of US-Russia relations .............................................................15
Speaker Perspectives on Developed Markets......................16
US domestic political dynamics and US foreign policy priorities ahead of 2020
elections................................................................................................................16
US Treasury macro views and policy priorities ......................................................17
Big Data insights: Institutional investor reactions to major market events and small
business sector highlights ......................................................................................17
Euro Area: Outlook and available policy tools .......................................................18
European outlook: Challenges abound ...................................................................19
Speaker Perspectives on Emerging Markets ........................19
The sovereign restructuring outlook has Venezuela as a tough nut to crack.............19
EM credit ratings outlook: Ratings overall are broadly stable but keep watch on SSA
.............................................................................................................................20
Speaker Perspectives on EM Asia ........................................22
China’s economy is stabilizing, but medium-term outlook points to further
deceleration...........................................................................................................22
India: Pivotal politics ahead...................................................................................23
Speaker Perspectives on EMEA EM .....................................24
Central and Eastern Europe: Monetary policy outlook............................................24
Turkey: Dealing with economic rebalancing amid slower growth ...........................24
Speaker Perspectives on Latin America ..............................25
Economic and political outlook for Latin America .................................................25
Argentina: It’s about policy continuity...................................................................26
Brazil: Economic outlook ......................................................................................27
Chile: BCCh on hold for (at least) a ‘few quarters’.................................................27
Colombia: A strong story with a twin deficit pitfall................................................28
Ecuador: Addressing entrenched structural challenges ...........................................28
Mexico: Building bridges with the private sector amid fiscal challenges.................29
Peru: A data-dependent BCRP...............................................................................30
Uruguay: The fiscal challenge to be addressed by the coming administration..........30
Venezuela: Planning for a still pending regime change...........................................31
4
Global
Emerging Markets Research
Highlights from the 2019 IMF/World Bank Spring Meetings
04 June 2019
Luis Oganes
(1-212) 834-4326
luis.oganes@jpmorgan.com
To p 10 Takeaways
We hosted 25 meetings for around 750 macro, EM dedicated and crossover investors
with DM and EM policymakers, official creditors and independent analysts at the
Spring IMF/World Bank Annual Meetings in Washington, DC on April 11-12. The
top 10 takeaways from the meetings follow:
1. Fed pivot has helped long EM positions and inflows, with investors positioned
OW but seeing limited opportunities. The Fed pause appears to have become the
baseline view, with 41% expecting the Fed to stay on hold in 2019 but forced to cut
in 2020, and 24% seeing an on-hold stance through 2020; only 9% envisioned a
flare-up in inflation causing the Fed to resume hiking. The end-2019 10-year UST
yield was seen at 2.5-2.75% by 39% of investors, and 37% saw 2.25-2.50%,
compared to the J.P. Morgan forecast of 2.75%. None of the speakers had clear
ideas on how to get DM inflation up in an orderly way. We believe that EM
policymakers have room to maintain easy monetary policy stances and are now
projecting policy rates 44bp lower on average. The biggest beneficiaries have been
the high-yielders such as Brazil, which is now expected to remain on hold in
2019—a 225bp shift from the projected rate hike in December 2018—and India,
where we expect another 25bp rate cut in addition to the 50bp cuts already
delivered this year—which tantamount to a 125bp reversal from the 50bp of rate
hikes projected in 2019 at the end of last year. Overall, the risk of rate changes is
tilted to more reductions as growth and inflation remain subdued.
2. China is showing early signs of growth stabilization and a positive
announcement on US-China trade appears to be forthcoming soon. The
stabilization in the data flow and the significant policy support, including a VAT
cut effective on April 1 and a social security contribution rate cut effective on May
1 (in addition to the already substantial reductions in personal income tax that were
implemented on January 1), suggest that China should be able to deliver growth in
the 6-6.5% range. In recent weeks both official and private projections for growth in
2019 have been marked up. However, the policy support comes at a cost with credit
ratios likely to rise over the course of the year by as much as 4-5%-pts of GDP,
raising concerns as high debt remains China’s key vulnerability. Over the medium
term, China’s growth is likely to slow to a 4% handle. However, in the absence of
restructuring of the SOE sector, even the lower growth rate would require a
continued increase in leverage and a move towards ZIRP to keep debt service under
control. This runs the inevitable risk of inducing capital outflows and increasing
external vulnerabilities.
While there was wide agreement that a US-China trade deal is forthcoming,
there were serious questions about both the comprehensiveness and the
durability of such a deal. Given that the outstanding areas of disagreement are
very problematic, it is unlikely that these will get satisfactorily resolved in this trade
deal. Moreover, with US insistence on a unilateral enforcement mechanism, an
agreement may not last long with equal probability that either side could renege.
While it is in China’s immediate benefit to keep the bilateral exchange rate
stable, doing so over any length of time would necessarily erode the monetary
policy independence that the basket peg has provided. Moreover, PBOC’s recent
successes in improving the monetary mechanism by shifting to using money market
rates as policy instruments would also be lost.
5
Global
Emerging Markets Research
Highlights from the 2019 IMF/World Bank Spring Meetings
04 June 2019
Luis Oganes
(1-212) 834-4326
luis.oganes@jpmorgan.com
3. Investors are willing to hold onto Argentina risk despite the political
uncertainty. Brazil and Argentina topped the rankings for best performer in 2019,
though not by a large margin (22% and 21%, respectively). Other large EM
countries (China, Mexico, Russia, Turkey, South Africa, India) garnered between 6-
15% apiece, while audience expectations of the worst performing country was
overwhelming led by Turkey (48%), followed by South Africa (11%) and
Argentina (10%). Around 40% foresee a Macri win in Argentina’s upcoming
elections in October, while around one-quarter (26%) expect a moderate Peronist
(Massa or Lavagna) to win, and 9% expect a Cristina Kirchner or another
Kirchnerista victory.
While the election calendar will likely keep volatility high through the year,
depressed valuations keep investors willing to hold positions, as few see an
eventual Cristina Kirchner win. For the November run off a close race between
the incumbent (Macri) and populism (Kirchner) still is the most likely scenario,
with Macri winning by a couple of points. The authorities reinforced the
commitment to comply with the IMF program, but acknowledged the primary fiscal
deficit may end the year at -0.5% of GDP and not 0% as outlined in the fiscal space
embedded in the program. But the fiscal authorities transmitted a commitment to
continue fiscal consolidation at about 2.2%-pt of GDP despite the election year, and
the monetary authorities expressed that potential dollarization amid political
uncertainty should be contained and its effect on the exchange rate limited amid the
Treasury USD sales of US$9.6bn. Authorities also denied the possibility of price
controls as a strategy to tame inflation.
Our researchers believe that the likelihood of policy continuity is linked in the
near term to a well-behaved FX, and relatedly inflation easing in May. J.P.
Morgan believes that the peso could stabilize in the near term, on improved
valuations, USD supply from the Treasury, agricultural export inflows, and
improving current account balance dynamics, but the technical position in credit
will likely remain an issue.
4. While the devil is in the details, Brazil remains the preferred macro story for
investors in the EM space this year despite concerns about the outlook for the
pension reform. Investors are assuming that the pension reform will gain approval
with 73% indicating that it will pass in 2H19 and only 4% hold a more optimistic
1H19 expectation, while the remaining 24% do not envisage a 2019 passage citing a
new version to be presented in 2020. Brazilian authorities outlined their plan to
tackle fiscal and growth challenges in four different areas: social security reform (a
broad and bold bill has been submitted to Congress, targeting BRL1.1trn of fiscal
savings over 10 years); privatizations (target was to raise US$20bn this year, with
US$12bn completed and around US$200bn projected over four years); contain
public payroll growth (freeze new hiring); cut the red tape (deregulation, tax
simplification etc.); and trade opening (gradual decrease of import tariffs).
Additionally, the independence of the Central Bank was emphasized with a new bill
submitted to Congress, and commitment to a true floating FX regime aligned with
BCB governors recent messages. While the agenda and the presentation of
Brazilian authorities were well-received, doubts remain about the execution of the
plan and the government’s ability to move the agenda forward in Congress,
especially without a more explicit engagement of President Bolsonaro.
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