HSBC-新兴市场外汇策略之新兴市场外汇路线图-2021.5-99正式版

Currencies

EmergingMarkets

May2021

By:HSBCFXStrategy

EmergingMarketsFXRoadmap

Rayoflight

LightisshiningthroughforEM

currencies–especiallyforthose

thataresupportedbyexpectations

oftightermonetarypolicy,vaccine

efforts,andcurrentaccountflows

Theroadtorecoveryremainslongand

risksarestillpresent;FXsequencing

pointstodivergentfortunesahead

Inthisedition,wetakeacloserlook

attheINR,MYR,IDR,PLN,HUF,CZK,

ZAR,TRY,BRL,andCOP

Playvideowith

PaulMackel,MuratToprakand

DavidDuong

Disclosures&Disclaimer:ThisreportmustbereadwiththedisclosuresandtheanalystcertificationsintheDisclosureappendix,andwiththeDisclaimer,whichformspartofit.

Currencies●EmergingMarkets

May2021

Regionalviews

Asia

ThebroadUSDcontinuedweakeninginMay,whichhelpedsomeAsiancurrenciestofurtherrecover.Theinabilityoflonger-endUSyieldstorisefurther,alongwithflushUSDliquidityconditions,emboldenedmanyinvestorstoreturntoFXcarrytrades.TheINRreboundedsharplyandtheIDRalsodidwell.

Wedonotdisagreewiththesecarrytradesinthenearterm.WethinkspotUSD-INRcanremainroughlystable,asthetradedeficitcouldnarrowanew(becauseofweakerdomesticdemandfollowingtheCOVID-19outbreak),whileequityoutflowsmaybecappedbyexpectationsofpolicysupportfortheeconomy.AsfortheIDR,its“core”balanceofpaymentsdynamicslookquitesupportive–givenatermsoftradegain,manufacturingcapacityadditionsandFDIreforms–andthereisnoimminentriskofbalancesheettaperingbytheFed.

TheCOVID-19developmentsintheregionremainunpredictable.DailycasecountsinMalaysiaandThailandhavecontinuedtobreakrecords,andtheMYRandTHBhavesharplyunderperformed.SingaporeandTaiwan–placeswithlowcasecountsforalongtime–recentlysawlocaloutbreaks.Thatsaid,theSGDandTWDseemtoberelativelylessaffected.Inourview,thereasonbehindthiscouldbethatSingaporeisstillontracktoachieve“herdimmunity”in3Q21,whileTaiwan’scurrentaccountsurplusissimplytoolargeforequityoutflowstocompletelyoverwhelm.Wethinksomeinvestorscanconsiderfundingoutoftheseloweryieldingcurrenciesinthenearterm.

WearenotthatbearishontheKRW.VolatilityinglobaltechstocksinducedforeigninvestorstosellnearlyUSD9bnofKoreanstocksinMay,themostsinceMarch2020.Despitethatsheeramountofoutflows,theKRWdidnotweakenmaterially.OffsettingfactorscouldhavecomefromdimmingenthusiasmforforeignassetsamonglocalretailinvestorsandanunloadingofsomeFXdepositsbyexporters.TheKRWisalsotoovolatileandhigh-betaforafundingcurrency.

USD-RMBbrokebelowthecloselywatched6.40levelinlateMayonstrongequityinflows.PBoC’shands-freeapproachdoesraiseprobabilityoffurtherdownsideinUSD-RMBinthenearterm.However,webelieveinflowpressureswillmoderateinthecomingmonths.DividendpayoutstendtobeconcentratedinJune-August.VariousportfolioinvestmentchannelsmayalsobelaunchedsoonsuchastheSouthboundBondConnectandGBMWealthConnect.TheRMBisovervalued,byourestimates,andexportersarenotunder-hedged.

CEEMEA

TheZARhasbeentheshiningstarinCEEMEAsincethestartoftheyear.Thecurrencyhasbeensupportedbystrongtermsoftradegains,whichledtoastrongcurrentaccountrebalancing,aprudentmonetarypolicyamidcontainedinflation,andtheglobalmarkets’appetiteforrisks.ThesefactorsarelikelytoremaininthecomingmonthsandcontinuetoprovidesupporttotheZAR.TheRUBhasalsorecoupedsomeofitslossesintherecentperiodasthegeopoliticalriskshavesomewhatdiminished.However,thedownwardmoveinUSD-RUBseemstobemoreafunctionofUSDweaknessratherthanRUBstrength.Yet,risingoilpricesandmonetarypolicytighteningbytheCentralBankofRussiaareRUB-supportive,inourview.Meanwhile,theTRYremainsvulnerabletoanylooseningofmonetarypolicyfromtheTurkishcentralbank.TheupcomingMPCmeetingon17Junewillbepivotal.

1

Currencies●EmergingMarkets

May2021

InCEE,mostcentralbankshaveturnedhawkish,signallingthataratehikeisinthepipeline.On6May,theCzechcentralbanksaidthatitwoulddebatethetimingofthefirstratehikeatitsmeetinginJune.Aratehikeof25bpinAugustfollowedbyasecondhikebeforeyear-end2021appearslikely.Similarly,theHungariancentralbankstandsreadytorespondtorisinginflation.On17May,theNBHsaidthatitmayhikeitspolicyrateinJune.BoththeCZKandHUFhavestrengthenedonsuchhawkishshifts.Thetwocurrenciesmayappreciatefurtherintheneartermastheyhistoricallytendtoreactinaconventionalmannertochangesinpolicyrates.TheNBPappearstobetheexceptioninCEE-3.ThePolishcentralbankdoesnotenvisagearatehikebefore2022,evenifinflationisaboveitstarget.Therefore,wecontinuetoseethePLNunderperformingintheregion.

LatAm

DespiteasignificantincreaseincommoditypricessinceearlyApril,thecorrespondingLatAmcommoditycurrencieshaveonlyralliedbyaround3%overthesameperiod.Thishasbeenduetoprimarilyidiosyncraticfactors.Onthedomesticside,weareseeingpressuresintheformofeitherfiscalrisksinBrazilandColombiaorpoliticalrisksinChile,PeruandMexico.Overall,weremainpositiveontheregioninH22021,butweseesomeimportantchallengesinthenearterm.WearechangingourhigherconvictionviewsfrombullishMXNandCLPtobeingbullishtheBRL.

ThatisnottosaythatwedisliketheMXN,butwedobelievethatMexico’shighergrowthexpectations(inrelationtoUSstimulusandinfrastructurespending)maybeclosetobeingfullypricedinnow.Indeed,wehavegottenclosetoouryear-endtargetof19.75versustheUSDinrecentweeks.Thatsaid,whilethemidtermelectionson6Juneareasourceofpotentialpoliticalrisk,thiscouldbeatailwindforthecurrencyifwegetamarket-friendlyoutcomeandforeigninvestorsreturntothecountry’sbondmarket,creatingpositivemomentumfortheMXN.

TheCLPontheotherhandfacestheriskofnear-termunderperformancefollowingtheelectionsfortheconstitutionalassemblyon15-16May.Thecentre-rightcoalitionreceivedonly24%ofthe155seatsintheassembly–lessthantheone-thirdneededtohavevetopoweragainstradicaleconomicproposals.Nevertheless,weretainourbullishCLPbiasforH22021asChile’sgrowthprospectslookhealthy,thecountry’svaccinationprogrammeisontracktocover75%ofitspopulationwithintwomonths(accordingtoBloombergestimatesasof17May),whiletheoutlookforcopperpricesremainsstrong.Giventhepoliticalriskpremia,however,wethinktheUSD-CLPsupportleveliscloserto700-710.

InBrazil,wethinkinvestorsaremovingpastconcernsthatfiscalrisksmayresurface,eventhoughCOVID-19infectionsremainhigh(whichimpactsgovernmentreliefspending).ThisopensuptheopportunitytotakeadvantageoftheBRL’sundervaluationrelativetothestronggainsseeninBrazil’stermsoftrade.Moreover,amorehawkishcentralbankcouldaccelerateinvestorinterestincarrytrades,particularlyinalowvolatilityenvironment.Withasteepforwardcurve,theBRLcanbeanattractiveoptioninthisscenario.

Colombiafacedtwosuccessivesetbacksinrecentweeks.First,thegovernmentretracteditstaxreformproposalinthefaceofpopularopposition.Second,ratingagencyS&PdowngradedColombia’screditratingtoBB+(belowinvestmentgrade)withastableoutlook.Withthecountry’stwindeficits,thesestumblingblockswillputtheCOPinaweakpositionoverthenext

1-2months.However,weremainoptimisticthatataxreformmaystillbepassedthisyearandthatfurtherratingreviewswillbedependentonthecontentofanewproposal.

Finally,thePEN’sperformancehasbeentiedtopoliticaluncertaintysurroundingPeru’spresidentialelectionswiththesecondroundduetotakeplaceon6June.Pollshaveshownanarrowingofsupportbetweenthetwopresidentialcandidates,whiletherearemanyundecidedvoters.Thismakestheoutcometooclosetocallforthetimebeing.Nevertheless,thePENmaystabilisefromcurrentlevelsoncethiseventriskpasses.

2

Currencies●EmergingMarkets

May2021

Contents

Regionalviews

1

EMFX:Rayoflight

4

EMFX:Realmoneyholdings

9

Asiaataglance

10

INR:Relapse

11

MYR:Darknessbeforedawn

19

Unperturbed(FXpolicydashboard,1Q21)

27

IDR:Muddlingthrough

41

CEEMEAataglance

49

CEEFX:Hawksareout,FXisup

50

ZAR:Inasweetspot

54

TRY:Furtherundervaluation

60

LatAmataglance

62

BRL:Fivereasonstobemoreoptimistic

63

Colombia:Taxreform:Alternativesinfocusaftersetback

71

EMforeignportfolioflowstracker

74

HSBCLittleMacvaluationranges

80

KeyglobaleconomicandFXassumptions

90

Disclosureappendix

93

Disclaimer

96

3

Currencies●EmergingMarkets

May2021

EMFX:Rayoflight

LighthasbeguntoshinethroughforEMcurrencies…

…withsomebettersupportedbyexpectationsoftightermonetarypolicy,vaccineeffortsandcurrentaccountflows

Theroadtorecoveryremainslongandrisksarestillpresent;FXsequencingpointstodivergentfortunesahead

PaulMackel

HeadofEmergingMarketsFXResearch

TheHongkongandShanghaiBankingCorporationLimitedpaulmackel@.hk+85229966565

JuWang

SeniorFXStrategist

TheHongkongandShanghaiBankingCorporationLimitedjuwang@.hk+85228224340

JoeyChew

SeniorAsiaFXStrategistTheHongkongandShanghaiBankingCorporationLimitedjoey.s.chew@.hk+85229966568

MadanReddy

AsiaFXStrategist

TheHongkongandShanghaiBankingCorporationLimitedmadan.reddy@.hk+85228221672

MohdTariqAzim

Associate

Bangalore

Darknessbeforethedawn

InthepreviouseditionoftheRoadmap,wediscussedhowtherewillbeagreaterattentiononthetaperdebatefrommajorcentralbanksinthemonthsaheadandwhatthiscouldmeanforEMFX(seeEmergingMarketsFXRoadmap:Tryingnottocrack,28April2021).Theirdefencesaremoreresilientthaninthepastbutnegativespill-overscouldstilloccur,eveniftemporarilyso.Nonetheless,EMFXhavetakentheseconcernsintheirstridelatelywiththembeingonastrongerfooting,inparticularthelow-yieldingCEEcurrencies(HUF,CZK,andPLN).ThisispartlyafunctionoftheEUR’sresilience,whichhasbenefittedonthebackofrisingvaccineeffortsandoptimismabouteconomicreopening,andahawkishleanbyCEEcentralbanks(Chart1).ItisreminiscenttoayearagowhenthefocusontheEU’sNextGenerationFundledtoaEURrecovery,helpingtheCEEcurrenciestobeamongthebestperformerslastyear.Backthen,therewasalsoaperiodofcatch-upandoutperformancebyCEEcurrenciescomparedtotheNorthAsiannames–CNY,KRW,andTWD.

Anotherfeaturerelatestothefairlystableshowingbysomehigh-yieldingEMFXlately,

whichstandsincontrasttohowthesecurrenciestendtoweakenduringthemonthofMay(Chart2).WehavebeencircumspectofseasonalityinFXbutrecognisethattherecanbeseasonalpatternsincurrentandcapitalaccountflows.Thesecanclearlyimpactexchangerates.However,weapproachthistopicwithsomedegreeofcaution,especiallywhensuchexpectedflowscouldbealessreliableindicator,giventhecontinuedfalloutfromCOVID-19.

EMFX(ex-CEE)hasbeenonsteadiergroundoverthelastmonth

112

109

Pre-COVID-19baseline

106

(17Jan=100)

103

100

97

94

91

88

85

82

Jan-20

May-20

Sep-20

Jan-21

May-21

EMHYvsUSD

G10vsUSD

CEEvsUSD

NorthAsiavsUSD

ASEAN+INRvsUSD

EMFXshowedgreaterresiliencesofarinthemonthofMay,defyingthosethathadnegativeexpectations

2.0%

Averagemonthlyperformance(%)

1.5%

1.0%

0.5%

0.0%

-0.5%

-1.0%

-1.5%

2021(monthlyperformance,YTD)

-2.0%

JanFebMarAprMayJunJulAugSeptOctNovDec

TotalreturnsonEM5HY*basketvsUSD

AverageEMFXspotperformancevsUSD

Source:Bloomberg,HSBC*NotethereddottedcirclereferencesthepointofCEE

Source:Bloomberg,HSBC.5HYincludesIDR,INR,TRY,ZARandBRL.Weuse

FXoutperformingNorthAsiancurrenciesinQ22020

historicaldatafrom2001

4

OurEMFXframeworkandthe

‘HierarchyofNeeds’

FX

strength

Capital

inflowsrise

Favourable

macro-policymix

GradualUSDweakness

LooseUSfinancialconditions

Source:HSBCFXResearch

Currencies●EmergingMarketsMay2021

EMportfolioflowshavebeenlacklustreastheywerein2018

USDbnTotalEM*portfolioflows(debtandequity)

75

50

25

0

-25

-50

-75

-100

-125

1 41 81 121 161 201 241 281 321 361

2020

2019

2018

2017

2016

2021

Source:Bloomberg,HSBC.*EMincludesonlythosecountriesthatprovidedailydata.Forinstance,excludemainlandChinabondflowsgivenitsmonthlyfrequency

Lookingforahome

Thereareinterestingfeaturesastohowflowshavechangedoverthepastyear,whichhasalsomuddiedthepictureforEMFX.Aswehighlightedrecently,EMcurrenciesshouldderivesomebenefitfromaweakerUSDonthesurface.Thisisconsistentwithourlong-termframeworktounderstandwhetherthetop-downoutlookforEMFXisimprovingornot(Chart3).TherearebasicneedssuchaslooserUSfinancialconditionsandasomewhatweakerUSD.Beyondthat,therearemorecomplexneedssuchasfavourableEMgrowthconditionsandsoundmacropoliciesadoptedbytheauthorities.Ifthesearerealised,thenthisshouldleadtoameaningfulresumptionofportfolioinflowsandsupporttherespectivecurrencies.

TherealityisthatEMportfolioinflowshavebeensubduedthisyear,eventhoughmajorcentralbankshaveexpandedtheirbalancesheetsquicklyandtheUSDisinabenignstate(Chart5).ThisisadifferentoutcometotheaftermathoftheGlobalFinancialCrisiswhenthesedevelopmentsleadtopronouncedEMportfolioinflows.Ifwenarrowthescopeofsuchflowsoverthepastyear,thereareonlyahandfulofmarketsthathavewitnessedinflows,includingChina,Korea(debt),India(equity)andBrazil.

ThischallengesourframeworkforEMFXthatthe‘basicneeds’beingmetshouldhelp‘pullin’capital,butitshouldbeobviousthatotherconditionsmatter.Wedonotruleoutthatthisshouldchangeforthebetter,iftheEMgrowthoutlookimproves(Chart6).SimilartohowweviewedtheRMBbeingfirstintothiscrisisandthenfirsttorecover,therehavebeencatchupstoriesbyothercurrencies.Indeed,thereisacasetobemadethatasequencingofsortshasplayedoutintheFXmarketwiththeRMBleadingtheway,followedbyGBPandtheUSD,EURandCEEFX.Othersshouldfollowasthevaccinedeploymentacceleratesandtheirrespective

economiesgainmomentum.

PortfolioflowsarenotsoforthcomingintoEMexmainlandChina

EMvaccinedeploymenthaslaggedbutthisshouldchangeforthebetter

210 40

180 30

150 20

120

10

90

60 0

-10

-20

-30 -30

RMB

EMportfolioflows(USDbn)

INR

KRW

BRL

IDR

TRY

THB

ZAR

TWD

MXN

Equities

Debt

%shareoftotalpopulationthatreceived

atleastonevaccinedose

50

end-March2021

Latest

40

30

20

10

0

ILSGBPHUFCLPUSDEURSGDPLNCZKRONARSTRYBRLMXNINRRUBKRWIDRMYRPHPTHBZARTWD

Source:Bloomberg,CEIC,HSBC.Formarketsthatprovidedmonthlydata,weuseddatafromApril2020-to-date,andforothersits20March2020-to-date.

Source:OurWorldinData,HSBC

5

Forthemostparttradebalancesimprovedtopre-pandemictimes

10

USDbn,MonthlytradebalanceforselectEM

5

0

-5

-10

-15

-20

INRTRY

PHPIDRMXN

ZARBRL

Range(2016-2020)

2019monthlyavg

YTDmonthlyavg

Source:Bloomberg,HSBC.

Currencies●EmergingMarketsMay2021

Termsoftradeisrisingforcommodityproducers,butsuchEMFXislagging

140

80

130

100

120

120

140

110

160

100

180

90

200

EMcommoditytermsoftrade

EMcommodityFX(2010=100,inverted,RHS)

Source:Bloomberg,HSBC*NotewelookattheTermsofTradeforBRL,COP,CLP,PEN,andMYRattheperiodendsApril2021

Shelterfromthestorm

Atfirstglance,anabsenceofEMportfolioinflowssofarthisyearshouldbeanegativefeatureforEMFXbutthereismoretoit.Thecurrentaccountpositionsformanyofthesecountrieshaveimproved,especiallythosethatarepronetohavingdeficitsratherthansurpluses.ForanumberofhighyieldingEMFXthatareusuallymorereliantonforeignfunding,themonthlytradebalanceshaveremainedinhealthiershape(Chart7).Moreover,theongoingdivergencebetweencommodityproducersFXandtermsoftradecontinuestostandout,implyingthesecurrenciesareundervalued(Chart8).ThecurrentaccountpositionshavealsoshownamaterialimprovementformostEMcurrencies,whichisunlikelytodeterioratesoon(Chart9).Puttingthistogether,thereisagoodcasetobemadethatcurrentaccountratherthanportfolioflowsareplayingabiggerroleforEMFX.

Wehavepreviouslysuggestedthatthismaynotwhollybeforidealreasons.ImportcompressionwaspronouncedforEMeconomiesoverthepastyear.AlthoughthereislikelytobeeventualdeteriorationofEMcurrentaccountpositions,asEMeconomiesgraduallyrecoveralongsidefirmercommodityprices(i.e.oil),thisshouldstillberatherlimitedinmagnitude.ThereislittlereasontobelievethatEMcurrencieswillsuddenlyexperiencearapidchangeoftheircurrentaccountpositionswhendomesticdemandistepid,asreflectedbysubduedcreditgrowth(Chart10).ThisisnotthecaseforeveryEMeconomy,whichhasgivensomejustcauseforthecentralbanksfromthelikesofBrazilandRussiatostartincreasingtheirpolicyrates.Wehavearguedthatthiscanhelpsupporttheirrespectivecurrenciesbuttherecouldalsobelimitsforthosewithlong-termfiscalrisksanddebtservicingcosts.InthecaseoftheBRL,thereneedstobecontinuedsignsoffiscalprudencetohelpcompressvolatilityandmakeiteasiertocorrectthecurrency’sundervaluation(Chart11).

EMcurrentaccountpositionsaremostlyimprovingwhencomparedtohistoricalaverages…

8

C/A(%ofGDP,average(2016-2020)

THB

6

KRW

Worsened

4

ILS

RUB

2

HUF

CZKCNY

MYR

PLN

0

MXN

INR

PHP

PEN

-2

RON

TRY

IDR

BRL

CLP

ARS

ZAR

Improved

-4

COP

-6

C/A(%ofGDP,HSBC2021f)

-5-4-3

-2-1

0

1

2

3

4

5

Source:Bloomberg,HSBC

…theimprovementshouldcontinueaslongascreditgrowthremainssubdued

50%

EMcreditgrowth(%y/y)

40%

30%

20%

10%

0%

-10%

Latest

Max-Min(Since2013)

-20%

PRRLPWL

MXNPHIDPLNZARCOPMYRCZKTHBINCTWDPENKRRUBRMBBRHUFTRY

Source:Bloomberg,HSBC

6

LowervolatilitywouldmakeiteasiertocaptureCOP,RUBandBRL’scheapness

range

15%

PHPILS

CZK

10%

CLP

5%

CNYCHFUSD

KRWNZD

aluation

TWD

ZAR

-5%

EUR

HUF

MXN

0%

SGDTHB

PEN

IDR

AUD

ofv

-10%

INR

CAD

SEKNOK

MYR

GBP

avg

-15%

JPY

PLN

COPundervalued

REER,

-20%

buthighvol

-25%

BRL

RUB

Adj

-30%

TRY

-35%

3%

6%

9%

12%

15%

18%

21%

3mimpliedFXvolatility,%

Source:Bloomberg,HSBC

Currencies●EmergingMarketsMay2021

SomecurrenciesaremoresensitivetotheDXYthanothers

100%

52wcorrelationsbetweenweeklychanges

90%

80%

in

USD-EMpairsandtheDXYindex

70%

60%

50%

40%

30%

20%

10%

0%

CZKPLNSGDHUFILSZARMXNBRLCLPCNYCOPKRWMYRRUBTWDIDRTHBPHPPENINRTRY

Source:OurWorldinData,HSBC

Conclusion

TherehavebeensignsofoptimismforEMcurrenciesoverthepastmonth.TheUSDhasremainedinasofterstateeventhoughtheFed’s“tapertalk”ismoreevident.Someofthiscouldalreadybediscounted,whichisreflectedbyUSTreasuryyieldsbeingfairlysteady(i.e.basicneedsforEMFXbeingmet).WemustadmitthatUSDweaknesscouldendupbeingmorepronouncedthanweexpect.SothecurrenciesthataremoresensitivetoDXYshouldcontinuetoholdupwell(Chart12).OurpreferredoneswouldincludetheCZK,HUF,ILS,andSGD.

Yet,thesedevelopmentsthatshouldleadtostrongerEMportfolioinflowsarenotexactlyhappening,broadlyspeaking.So,wearequestioningwhetherour“HierarchyofNeeds”frameworkneedstoadapt?Fornow,theemphasisonportfolioflowsisprobablyoverstatedversustheimprovementinEMcurrentaccountpositions.Thelatterisprovidingamoresupportiveforcetherespectivecurrencies,despitetheunderlyingreasonbeingafunctionofslowgrowth.Thisinfluencecouldlastforsometime,forexample,whenconsideringhowlongitcouldtakeformanyEMeconomiestoreach“herdimmunity”fromCOVID-19.Henceconsumptionpatterns,supplydisruptions,dividendincomeandtourismflowscouldbedistortedforalongerperiod(Chart13).Thisisveryrelevanttothosecurrenciesthataretypically“deficit”currenciesandhigheryieldinginnature(Chart14).Ideally,wewanttofavourthosecurrencieswiththepotentialforabettercurrentaccountpositionandrelativelyhighrealratessuchasBRL,andevenmoresoiftheunderlyingvolatilitysubsides(Chart11again).OtherssuchastheINRandPHPshouldbestable,givenothersourcesofFXinflows(FDI,remittances),despitethelesscompellingrealyields.Somedownsideriskstothesecurrenciesexistbuttimeisbought.

FollowingtheherdwithAsialaggingthetimelinetoreachimmunity

HUF

GBP

Timeline

forherdimmunity

USD

CLP

SGD

EUR

PLN

RMB

TRY

ILS

MXN

BRL

RUB

KRW

INR

MYR

IDR

THB

2021 2022 2023 2024 2025 2026 2027 2028

Source:OurWorldinData,HSBC

EMFX–lookingforbettercurrentaccountsandstrongerrealrateprofiles

5%

Realrates*

4%

IDR

BRL

3%

COP

CNY

2%

ZAR

MYR

1%

TRY

PHP

MXN

THB

RUB

0%

KRW

-1%

INR

HUF

CZK

ILS

-2%

CLP

-3%

PEN

PLN

-4%

Currentaccountbalance(2021f)

-5%

-4%-3%

-2%-1%

0%1%

2%3%

4%5%

Source:Bloomberg,HSBC.*Realratesiscalculatedusing2-yearnominalyieldandlatestcoreCPIlevel.Blackmarketsindicatecurrentaccountisindeficitposition

7

8

Table1:Gordianknotindicators–ThreetypesofFXfundamentals

________________________Asia_________________________

________________CEEMEA_________________

______________LatAm______________

_______Frontier________

RMB

INR

IDR

KRW

MYR

PHP

SGD

TWD

THB

CZK

HUF

ILS

PLN

RUB

TRY

ZAR

ARS

BRL

CLP

COP

MXN

PEN

LKR

VND

EGP

GHS

SUMMARYINDICATOROF

FXFUNDAMENTALS

Externalbalances

2021FCurrentaccount,%GDP

2.3%

-1.1%

-1.2%

4.1%

4.5%

-0.2%

17%

13%

1.0%

1.5%

0.3%

3.4%

2.3%

4.3%

-3.8%

0.1%

2.3%

-0.9%

0.2%

-1.3%

1.5%

1.0%

-1.9%

4.3%

-4.2%

-1.7%

ChangeinC/Afrom2020,%GDP

0.2%

-1.9%

-0.8%

-0.5%

0.1%

-1.7%

-1.1%

-1.3%

-2.3%

-1.7%

-0.4%

-1.5%

-1.2%

2.1%

1.3%

-2.1%

0.0%

-1.1%

2.1%

-0.7%

0.5%

1.4%

-0.5%

-0.9%

-0.9%

0.3%

IIP:Netassetsex-reserves,%GDP

-7.7%

-33%

-39%

2.0%

-26%

-36%

201%

128%

-40%

-82%

-76%

5.5%

-72%

-6.2%

-59%

16%

20%

-51%

-24%

-86%

-66%

-77%

-63%

-

-65%

-54%

NetFXreserves,%IMFARA

129%

248%

95%

125%

103%

240%

229%

246%

287%

278%

89%

318%

143%

417%

2.9%

85%

-41%

240%

92%

154%

124%

323%

-34%

100%

38%

161%

Valuationmetrics

TFP-adjREER,%versusaverage

5.4%

-6.4%

0.8%

-2.4%

-9.6%

9.8%

-0.2%

1.8%

1.1%

9.2%

-7.4%

10%

-9.6%

-19%

-34%

3.4%

-41%

-21%

7.0%

-17%

7.6%

-7.0%

-0.4%

9.3%

10%

-20%

1-monthimpliedyields,%

2.4%

6.4%

5.3%

0.0%

1.7%

2.3%

0.3%

-3.3%

2.3%

0.2%

0.7%

-0.1%

0.0%

4.9%

18%

5.2%

27%

3.4%

0.7%

1.9%

4.3%

0.9%

-12%

1.2%

11%

10%

1-monthimpliedvolatility,%

4.0%

5.1%

7.5%

7.1%

6.1%

3.8%

4.2%

5.2%

5.1%

8.0%

9.2%

6.7%

8.7%

12%

16%

14%

9.8%

17%

14%

15%

12%

6.8%

7.2%

0.5%

5.1%

1.9%

Macrovariables

Outputlevelbyend-2021Fvs2019

11%

0.5%

1.8%

2.4%

-0.2%

-3.8%

0.7%

8.3%

-3.3%

-2.2%

-1.1%

2.8%

1.0%

-0.1%

6.1%

-3.3%

-1.0%

0.8%

-1.9%

-5.0%

-3.4%

-3.7%

0.3%

-0.2%

-2.9%

1.6%

Outputgap(vspotential)by2022F

-1.0%

-11%

-7.4%

-1.2%

-7.5%

-15%

-0.7%

4.2%

-7.6%

-4.1%

-5.9%

-2.5%

-4.5%

-2.8%

4.0%

-4.1%

-5.2%

-0.9%

-6.4%

7.5%

-5.2%

0.5%

-4.2%

-4.3%

-7.1%

-1.1%

Realpolicyrate(coreCPI),%

1.5%

-1.2%

2.3%

-0.9%

1.1%

-1.3%

-0.6%

-1.3%

0.2%

-2.4%

-2.4%

-0.9%

-3.8%

-0.5%

1.2%

0.5%

-12%

-0.2%

-2.3%

0.2%

-0.1%

-1.5%

1.6%

3.1%

4.9%

6.0%

Fiscalhealth

2021FBudgetbalance,%GDP

-3.2%

-6.