This supersedes the version dated 12 February 2015. Page 1, corrects
• Rising risks of mandatory electricity rationing could have severe implications on the economy
• Even without rationing, we now expect zero economic growth in 2015
• If rationi...
Latam headwinds include lower commodity prices, slowing global demand, and a stronger USD
• For Mexico, some of these risks are priced in; we now expect a 25bps Banxico hike in June
• Lower global yields are a near-term positive development for t...
Direction signal now neutral from negative as foreign flows to EM debt, especially oil importers, improve
• Spread signal turns positive on flows to high-yielding oil importers (INR, ZAR, TRY, IDR) plus Brazil
• October fund allocations reflect ...
The COPOM minutes shows the BCB mainly responded to a weaker BRL
• We expect the COPOM to tighten at least another 100bps in consecutive 25bps hikes
• More disappointing signals on the fiscal front could generate a longer and/or steeper hiking cy...
Direction signal stays negative on weak demand for EM debt; EM FX weakness puts pressure on EM bonds
• Structural investors continue to favour Asia bonds; hard data supports Korea and Indonesia
• Flow rotation continues from Russia, Turkey and So...
Dilma returned to office by the narrowest margin in the post-war era
• Local market sentiment remains weak but FX positioning suggests that investors were prepared
• Dilma’s next finance minister appointment will be critical in stabilising market ...
First-round voting on 5 October may not produce a winner; a second-round vote is likely on 26 October
• President Dilma has retaken the lead in recent polls and the BRL remains the regional underperformer
• Marina’s inability to consolidate early ...
Direction signal stays negative on weak demand for EM debt
• Allocations moved towards Brazil in August on Marina Silva, a catalyst for change; now Dilma fights back
• Brazil’s subsequent underperformance makes it cheap and positioning is not skew...
Eduardo Campos’ (PSB) death has turned Brazil’s presidential elections upside down
• Marina Silva’s confirmation as the PSB’s candidate has dramatically increased its chances of victory
• We expect a positive market response to a Marina Silva wi...
• We recently revised our 2014 GDP growth forecast down to 1.8%, and our IPCA projection up to 6.3%
• But our growth forecast remains above-consensus, as we expect a boost from global growth
• The BCB is done, for now; we expect more hikes after t...
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