GLOBAL OUTLOOK ECONOMY & FINANCIAL MARKETS
Andbank’s Monthly Corporate Review April 2016
How much more? For how long?
ECONOMY & FINANCIAL MARKETS CORPORATE REVIEW APRIL-16
Contents Executive Summary
3
This month’s news in charts
4
Country Pages USA
5
Europe
6
China
7
India
8
Japan
9
Brazil
10
Mexico
11
Argentina
12
Equity Markets Fundamental Assessment
13
Short-term Assessment. Risk-off shift probability
13
Technical Analysis. Main indices
13
Fixed Income Markets Fixed Income, Core Countries
14
Fixed Income, European Peripherals
14
Fixed Income, Corporate Bonds Fixed Income, Emerging Markets
15 15
Commodities
16
Forex
18
Summary Table of Expected Financial Market Performance
19
Monthly Tactical Asset Allocation Proposal
20
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ECONOMY & FINANCIAL MARKETS CORPORATE REVIEW APRIL-16
Executive Summary USA - The Fed’s dovish shift was in line with our view that there will be two hikes this year. GDP2016: 2%, CPI: 1.5%. We feel that the worst of the downside risk has passed, even though in our view the upside potential does not yet look compelling. Nevertheless, one of the most prominent risks persists in the form of a subdued primary HY market: New issuance remained poor in March (US$10.3bn vs US$10.6bn in February), and YTD issuance of US$30bn continues to be a fraction of the volume seen in the same period of 2015 (US$ 59.8). S&P target: 1949. 10YT target (entry point): 2.5%. We cut targets for the IG credit (from 85 to 63 bps) and HY spreads (from 450 to 425bps). Europe - On 10th March the ECB delivered more than expected with good news for credit – not only for investment grade, but also for high yield, peripheral and financial debt. The ECB purchases starting in June should lay the foundations for a less volatile environment (although this may only occur in the short term). Fundamental target for the Stoxx 600 is 360 (+6.5% potential appreciation). We cut the 2016 target for German bund (from 0.6% to 0.4%). We are also revising down targets for the IG credit spreads (from 85 to 65 bps) and HY spreads (from 360 to 290bps). In the Peripheral bonds space, and after our targets have been reached, we move the new targets along our previous range, but now we place them in the lower bound of the range. Spain - For the Spanish Ibex, we have begun to anticipate events in Brazil and Argentina, and the potential positive impact that these can eventually have on Spanish multinationals. We have collected these favorable aspects cautiously in the form of an up-tick in sales growth (from 0.2% to 0.66% on the back of a normalization scenario for Latam currencies) and a slight increase in the PE ratio (from 14 to 14.5). The new fundamental target for the Spanish Ibex is 9310 (+6,5% potential appreciation from current levels) China – The decline in FX reserves seems to have slowed. China's opening of its bond market may help alleviate capital outflow pressures and pave the way for its entry into major bond indices. Target for the SSE Index is 3247 (+11.2% potential appreciation). Target for the 10-year government bond is 2.36% (from current 2.86%) India – Analysts and local agents are now cautiously optimistic that better days for India are just around the corner. Reforms to the tax system, land regulations and labor laws still need to be passed, but some important changes have been made in the areas of bureaucracy, digitalization, federalism, the external sector and infrastructures. Fundamental target for the Sensex is 27965 (+12.3% potential appreciation). Target for the 10-year government bond is 7.00% (from current 7.50%) Japan – Business surveys still show a muted environment. Large firm business survey index -3.2 vs +4.6 in Q4. Large manufacturers -7.9 vs +3.8 in Q4. BoJ Governor Kuroda says theoretically room to cut rates to -0.5%. Wage negotiations point to limited pay rises. Fundamental target for the Nikkei of 16445 (-3.9% potential depreciation). Brazil - Debt situation is deteriorating but does not pose an immediate threat. Nevertheless, any hope of sensible rebalancing faded with the resignation of finance minister Joaquim Levy. Dilma’s ousting seems closer (75% according to Eurasia) but the question remains whether there is a coherent and organized political alternative in Brazil. Fundamental target for the Bovespa of 50000 (-1.6% potential depreciation). New target for the 10-year government bond (USD) is 6.00% (from 7%). For the 10Y bond in local currency, the target is now 14% (from 16%) Mexico - The most negative external impact on Mexico’s output comes from U.S. manufacturing and the Fed’s expectations of a lower growth rate for the US in 2016. Mexican peso strengthened against USD. We keep our 2016 estimate at 17.50. Fundamental target for the IPC Index is 47,800 (+4.8% potential appreciation). We cut our target for the 10-year government bond (local) from 6.5% to 6.3%. In the USD bond, we keep our previous target of 4.4% Argentina - President Mauricio Macri’s first 100 days in office have seen an impressive range of measures to put Argentina’s fragile balance of payments on a more sustainable footing. Nevertheless, fiscal and monetary policy will both need to be tightened further in the months ahead if Mr Macri is to fully address the country’s macro imbalances.
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ECONOMY & FINANCIAL MARKETS CORPORATE REVIEW APRIL-16
The month in charts… and other curiosities
Libor-OIS spread (Overnight Index Swap)
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ECONOMY & FINANCIAL MARKETS CORPORATE REVIEW APRIL-16
USA:
If the Fed falls behind the curve, there is more risk of sharper Fed rate hikes in the future
Do you feel dizzy?
The Fed’s dovish shift was in line with our view that there will be two hikes this year, the first one coming in September. Still, we found the timing of the shift in Yellen’s tone to be puzzling, inconsistent and, to some extent, revealing. The “data-centric” Fed has abruptly shifted its 2016 outlook without much corroboration from the data as (1) inflation has risen more than expected, (2) the labor market and real consumer spending remain strong, (3) private sector credit growth is solid, (4) short term headwinds from oil and the dollar are waning; (5) wage growth is consolidating We suspect that the Fed could be in danger of falling behind the curve on inflation. US core inflation measures suggest something quite different from Yellen’s narrative, and we find little evidence to support Yellen’s view that “temporary factors” are now boosting core inflation. 1. Core CPI is at its highest since 2008 at 2.3% y/y and there are good reasons to believe that the CPI may rise. 2. The principal force pushing prices higher is strong consumer demand, since Services CPI is steady at 3.1% y/y. 3. Ongoing tight labor market conditions should continue to drive wage increases as payroll growth slows, keeping aggregate income strong. 4. CPI usually rises when households begin to borrow more, and the data (Flow of funds) confirms that consumers have plenty of capacity to increase borrowing as they have finished deleveraging, with household debt-to-assets ratios back down to 1990s levels. 5. The Fed’s senior loan officer survey confirms that credit conditions remain loose. 6. The drag on CPI is easing (the base effect of last year’s collapse in oil prices is diminishing). If the WTI stays at US$ 40/bbl for the remainder of 2016, the oil price will be contributing to US inflation rather than subtracting from it. That is because the greatest drag from the oil collapse was felt last August (after the WTI fell to US$ 38 from US$ 93 a year earlier). 7. The US$ appears to have topped out against most currencies and is likely to weaken, to a certain extent, which will support inflation. With both demand and supply dynamics favoring increased consumption, the CPI has a solid base, suggesting that if the Fed’s Dovish stance continues, it will be increasingly in danger of falling behind the curve. If true, there is more risk of sharper rate hikes in the future, which could have negative consequences on financial markets and strongly influence the FX market. Markets & Forecasts: We feel that the worst of the downside risk has passed, even though, in our view, the upside potential does not yet look compelling. S&P target: 1949 10YT target: 2.5% GDP2016: 2%, CPI: 1.5% (lower band of the range) 5
ECONOMY & FINANCIAL MARKETS CORPORATE REVIEW APRIL-16
Europe:
The ECB delivered more than expected. Good news for credit, peripheral, financials, primary market and France.
mar-16 dic-15 sep-15 jun-15 mar-15 mar-16 dic-15 sep-15 jun-15 mar-15
PIB real
2016E 0,1% 1,0% 1,1% 1,5% 1,5% 1,4% 1,7% 1,7% 1,9% 1,9%
2017E 1,3% 1,6% 1,7% 1,8% 1,8% 1,7% 1,9% 1,8% 2,0% 2,1%
Fuente: BCE
SORPRESAS MACRO EUROPA 200 150 100 50 0 -50 -100 -150
jul-14
ene-15
jul-13
ene-14
jul-12
ene-13
jul-11
ene-12
jul-10
ene-11
jul-09
ene-10
jul-08
ene-09
jul-07
ene-08
jul-06
ene-07
jul-05
ene-06
jul-04
ene-05
ene-04
-200
jul-15
IPC
ECB On 10th March the ECB delivered more than expected, announcing an increase in purchases (+20bn to €80bn 2018E monthly), and an asset purchase program that would 1,6% include purchases in the corporate bond market. Why? An updated macro scenario, more dovish than expected (especially regarding inflation estimates), lies behind such a decision. The ECB will be buying investment grade, non financial, euro-denominated bonds issued by Eurozone companies. The market for potential purchases comprises over 500 1,8% bill. euros issued. Details are yet to be unveiled: amount, geographic distribution. Impact: (1) Overall, it is good news for credit. Not only for investment grade, but also for high yield (search for yield). (2) Financial debt also to benefit, with spreads driven by two factors: Government debt yield (directly linked to financial ones), and corporate debt yield. (3) ECB “forced” to buy within the BBB space. (4) Sectors for purchases will include utilities and automotive. (5) ECB will be entitled to buy in primary markets, where new issues eligible for ECB purchases estimated to exceed €85 bn. Positive implications for banks: “Banks’ returns matter to the ECB”. Depo rate cut (-10 bp) below expectations (-13 bp), but more liquidity auctions coming soon (TLTRO II): from next June, quarterly, four auctions of 4-year maturities, not conditional on credit concession/allowance, and under more benign rate conditions in which banks can switch from TLRO I (€420 bn). Positive for peripheral banks that borrow more heavily from the ECB and hold less deposits at the central banks than their core European peers. Further rate cuts? The likelihood of further rate reductions has declined, though the door remains open for lower rates (year end?). The ECB may not have reached the bottom regarding repo rates according to Praet. Markets Bund target cut to 0.4% (from 0.6%). Low growth, low inflation, ECB purchases fully absorbing the gross issuance of core countries, etc. Peripheral bonds. Once our mid-point targets have been reached, we move to the lower bound: Spain to 1.4%, Italy to 1.3%, Portugal at 2.5% and Ireland to 0.8%. Credit: Target reached for IG. New target at 65bp (from 85bp). Target reached in the HY space. New target at 290bp (from 360bp). Equity: Europe Stoxx600 stable at 360. Ibex: we raise sales slightly (to 0.66% from 0.20%). New target 8,989 Macro & Politics Macro surprises in Europe have collapsed since midDecember but could be close to marking a turning point. Markets seem to be giving more time to inconclusive governments. Spain’s situation remains uncertain. Possible new elections in June. Ireland elections were inconclusive (a minority government seems to be in the making). S&P has restated Portugal as BB+/Stable. Rating review from DBRS (the only agency that makes Portuguese bonds eligible for QE purchases). ene-16
Escenario macro BCE
Fuente: Bloomberg, ANDBANK España
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ECONOMY & FINANCIAL MARKETS CORPORATE REVIEW APRIL-16
China:
Declines in FX reserves seem to have slowed.
UK banks creating close ties with Chinese markets
FX Reserves Declines in FX reserves seem to have slowed. February foreign reserves $3.20T vs $3.23T in January. The Economic Information Daily suggests that a balance of ~$2T would be appropriate based on imports, foreign debt levels and M2. FX reserves should be able to pay for foreign debt and three months worth of imports. Lower FX reserves and capital outflows should not necessarily lead to stock market and economic declines. Reforms China's opening of its bond market may help alleviate capital outflow pressures and pave the way for its entry into major bond indices, such as Citigroup’s World Government Bond Index (FT) Shenzhen Stock Exchange President Song Liping's proposal to include share sales as a payment method for overseas M&A will add an incentive for outbound investments. Song said that this would help lower funding costs and improve profitability and investor returns. The government will lower the threshold for foreign investment this year and reduce foreign capital restrictions. China aims to layoff 5-6 million workers from "zombie enterprises" over the next two to three years as part of efforts to curb industrial overcapacity and pollution. Real estate Major surge in home prices in Tier-1 city home prices was not driven by monetary policy but by a series of other factors. Alternative financing is exacerbating property surge. The Economic Information Daily reported that speculative financing methods, such as crowd funding and P2P lending are being used to buy real estate in Tier-1 cities amid the surge in property prices. The article calls for more efforts to curb speculative investment, though notes that these types of financing are not commonplace and do not pose systematic risks. Energy China has pushed back the completion of its emergency oil stockpiles to beyond the original 2020 deadline, citing the 2016-2020 Five Year Plan. The government had previously planned for three phases to be completed by the end of the decade, with the first phase inventory buildup finished in 2009 and the second phase to be completed by last year. FX Reuters conducted its own poll of 38 economists who expect the yuan to slightly weaken (~3.5%) against the greenback over the coming year but do not think the PBoC will sharply devalue the currency in the coming months. It highlighted that FX analysts expect the yuan to trade at ~6.60/USD by end-March, easing steadily to ~6.70 by end-August and ~6.78 by end-Feb 2017. Growth State Information Center researchers wrote in a China Securities Journal that GDP growth is expected to slow to around 6.5% in Q1 from 6.9% in 2015. They cited capital outflows, overcapacity in real estate and global uncertainties as the main factors behind the slowdown.
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ECONOMY & FINANCIAL MARKETS CORPORATE REVIEW APRIL-16
India:
Modi’s anticorruption campaign is paying dividends. A major shift in banking use is on the horizon. What we already know (the bad)
The SSE has already reflected the fall in intermediation
The SSE has already reflected the fall in intermediation
According to our collaborators for the region, who have spent a week in India talking to economists, bankers, investors, industrialists and journalists, they are now cautiously optimistic that better days are around the corner for India. Of course some inherited negative aspects persist (ineffectual ministers and ardent opposition in parliament) that have prevented Modi from passing long-promised reforms to the country’s fragmented tax system, stultifying land regulations, and labor laws. And there is little evidence so far that there is substance beneath Modi’s rhetoric. Modi’s manufacturing push is unlikely to employ even a fraction of the million new workers joining the labor force every year. Additionally, corporate India is not investing (private businesses are leveraged) and India’s state banks are not lending (stymied by US$130bn of bad loans), with the government having made little headway on the longrunning debate over how to fix this problem (Finance minister allocated just US$3.7bn to recapitalize public lenders in last month’s budget. Repossession and debt-toequity swaps are still mere intentions). What still cannot be seen (the encouraging aspects) A cleaner bureaucracy: Our local sources mention that Modi’s anticorruption campaign has paid dividends. Everyone they speak to agreed that big-ticket corruption has fallen dramatically (no backhanders in return for contracts, Delhi’s caddies complaining about empty golf courses, officials turn up for work on time and 12 hours a day, industrialists saying that the new government is much cleaner, etc.) The Aadhaar Bill, which provides a unique digital identity to every citizen, will transform the leaky social services administration. Secured with biometric information, the Aadhaar will pay subsidies directly into citizens’ bank accounts. This (1) will bring hundreds of millions of households into the banking system and (2) will ensure that cash reaches citizens without being stolen. This is considered a big deal by our local sources. Improved Infrastructure: The money saved in lost subsidies will be redirected into better infrastructures. The budget allocated a hefty US$32bn for infrastructure projects. The government is trying to kick-start stalled investment by taking over responsibility from private firms. Road-building has accelerated from 2km to 18km per day. Our sources expect investment to continue to pick up. Everyone praises the road, rail and power ministers. Cooperative federalism is fostering competition between India’s states. States like Rajasthan are leading the way with more flexible rules on land and labor. Younger voters are supporting state ministers that deliver jobs. Even West Bengal (once famed for turning away investment) has started to offer tax breaks and cheap land. Macro environment is far stronger than it was two years ago. (1) Current Account has fallen from 5% to 1% and is funded with rising inward real investment. (2) Modi’s decision to press ahead with fiscal consolidation has further reassured global investors that India is in control of its finances. (3) Inflation has fallen from 8% to 5.2%. (4) The 8 RBI can now ease monetary conditions.
ECONOMY & FINANCIAL MARKETS CORPORATE REVIEW APRIL-16
Japan: Room to cut rates to -0.5% (from today’s -0.1%) The State of the nation - Business surveys Q1 2016: Large firm business survey index -3.2 vs +4.6 in Q4 Large manufacturers -7.9 vs +3.8 in Q4 Large non-manufacturers -0.7 vs +5.0 in Q4 Small manufacturers -19.3 vs -6.6 in Q4 Small non-manufacturers -16.1 vs -7.9 in Q4 Profits: All industries FY15 profit +4.8% y/y vs prior +4.8%, FY16 projection -2.4%!!! Capex: All industries FY15 capex +8.8% y/y vs prior +7.5%, FY16 projection -6.6%!! BoJ BoJ Governor Kuroda says theoretically room to cut rates to -0.5%, emphasizing the capacity for further easing. 90% of analysts see the BoJ expanding easing through the end of July. BoJ left policy unchanged. Board members voted (8-1 majority) to continue expanding the monetary base at an annual pace of about ¥80T. The bank decided (7-2 vote) to continue applying an interest rate of -0.1% to current account balances held by financial institutions. Special Cabinet adviser Koichi Hamada said that the BoJ is unlikely to expand easing for the moment as it gauges the impact of the negative rate policy at the current level, adding that there were also external factors in flux. The BoJ is at a point of no return. Any sustained strength in the JPY is likely to cause a downturn in earnings and soft wage negotiations leading to fading inflation expectations. As a result, the BoJ will have to abandon or instead double its efforts to encourage banks to put their reserves to work in the real economy or into higher yielding financial assets. How? By further decreasing rates and crowding out private players from the government bond markets, forcing banks, insurers, pension funds and individuals into higher yielding but also riskier financial or real assets. From the private agents’ perspective, trading stable income for capital gains in “uncertain” markets is an unattractive proposition. Government & Fiscal Some Japanese officials talk of ¥10T economic stimulus. Finance minister Taro Aso says sales tax remains on track (expected to be raised in April 2017) Economy February trade balance: Imports -14.2% y/y, Exports -4% y/y Wage negotiations reach climax and confirm limited pay rises. Japanese companies are conceding smaller pay increases in a setback to Prime Minister Shinzo Abe. Major steelmakers are offering a cumulative base wage increase of ¥2,500 per month over the next two years (barely 50% of what unions demanded). Markets Regional banks see portfolio rebalancing necessary under NIRP. A Bloomberg survey showed 10 out of 11 regional banks see a need for portfolio rebalancing as negative rates have eroded the appeal of JGBs. Eight of these banks said they've already begun or are considering asset reallocation. Eight banks favor asset classes such as foreign bonds, real estate and infrastructure, while two banks prefer Japanese and foreign stocks.
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ECONOMY & FINANCIAL MARKETS CORPORATE REVIEW APRIL-16
Brazil:
The good & the not so good in Brazil Debt situation Debt situation is deteriorating but does not pose an immediate threat (Government debt remains at 67%). Debt is on track to surge 10 pp every year and this is not a matter of countercyclical fiscal spending (stabilizer), but years of spending incontinence (with lavish perks for civil servants, bureaucrats, etc.) Any hope of sensible rebalancing faded with the resignation of finance minister Joaquim Levy, who was replaced by Nelson Barbosa (who promises to be more compliant with Rousseff’s needs). Thus, the fiscal can will probably be kicked down the road, with government debt likely to hit 90% of GDP by the time of the next presidential elections (2018) Even at 90% of GDP in 2018, the government will find a way to pay its bills. There has been some talk with the IMF, although the Fund will not release a penny until after Dilma leaves office (given the Rousseff government’s complete loss of credibility). FX reserves remain high (at US$350bn) while external liabilities have been kept stable (and modest). Banking system: The financial system is secure (banks enjoy the widest interest margins in the world), and banks face no funding stress (loan to deposit ratio still below 100%). In short, although asset quality is deteriorating, it is occurring at a slow pace. There is little chance of a financial disaster. Foreign investors have not dramatically cut their exposure to Brazil and are unlikely to do so (institutional investors that are not subject to MTM accounting -Japanese ones-, that have little choice but to keep the bonds after losing so much. The two scenarios for Dilma’s exit: Dilma’s ousting seems closer (75% according to Eurasia) but the question remains whether there is a coherent and organized political alternative in Brazil? Could the next government prove to be as incompetent? 1. Scenario A: Congress is moving ahead with impeachment (although the credibility of this process is undermined by the fact that the Congress speaker is widely considered to be one of the most corrupt politicians). 2. Scenario B: The Electoral Court nullifies Rousseff’s 2014 re-election following recent investigations pointing to irregular funding by the government. If the court makes this ruling before the end of 2016, fresh elections would automatically occur. If it waits until 2017, an interim president would be appointed by Congress (political paralysis being unresolved). The Central Bank The Central Bank of Brazil kept the Selic rate unchanged at a record high of 14.25%. This could be a responsible decision since 55% of the federal budget is spent on pensions and social benefits, which in turn are linked to inflation. Data Inflation eased in February (IGP-Inflation to 0.79% m/m from 1.53% in January). Trade balance accumulated a surplus of US$5.2bn YTD in the first week of March, with exports growing +11.2% m/m (manufactured products at +17.7%, and basic at +11.1% m/m) and imports continuing to fall (-13.1% m/m).
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ECONOMY & FINANCIAL MARKETS CORPORATE REVIEW APRIL-16
Mexico:
Mexico responds to market turmoil Economics The most negative external impact on Mexico’s output stems from U.S. manufacturing and the Fed’s expectations of a lower US growth rate in 2016, which could impact local growth estimates. Mexico’s exports to the U.S. have slowed and even contracted. The key drivers of an ongoing upturn in the economy continue to be services and private consumption. Inflation still supportive of growth After an unprecedented decline to an all-time low, inflation has risen slightly, approaching the target. Mexican inflation rose in the first month of the year, beating analysts’ forecasts and reaching 2.61% on an annual basis. The main cause has been the affect of the peso depreciation on inflation. Medium and long-term inflation expectations are still anchored around 3.5%. Monetary Policy Monetary policy has been adjusted to reflect adverse international conditions. Banxico decided to hike its reference rate 50 basis points in February to 3.75% given the weakness of the Mexican peso and the introduction of a policy of discretional direct intervention in the FX market (ending the rules-based approach of selling $200mn in FX for every 1% fall in the peso). The rise in rates does not appear to be the start of a cycle of rate rises. Fiscal discipline & Reforms Finance ministry announced a 132 billion pesos cut in 2016 spending focused on Pemex. President Peña announced that Phase 4 of Round 1 of the energy reform bidding auctions will take place in December this year. Financial Markets FX. Mexican peso gained against USD. The correlation between the exchange rate and oil prices has strengthened, coinciding with the deterioration of Pemex’s credit risk premium and more recently offset by improved oil prices. We keep our 2016 estimate at 17.50. Fixed Income. Yields have remained relatively stable. Nonresident holdings of peso-denominated government securities have stayed roughly constant in peso terms since 2015. Given the money market’s reaction to Banxico’s hike (flattening curve) we keep a M10T10 spread between 400425 basis points for 2016. We see a Sell level for the M10 at 6.30%. For USD Sovereign debt we maintain our view of 4.40% for UMS10. Equity. All eyes are focused on China and the US. Concerns about global growth deceleration and corporate indebtedness in China have been key drivers in commodity price adjustments. Latin American economies remain subject to deceleration as crude oil prices have fallen by more than 65% over the past 18 months. But Mexico is not among the most exposed economies to China’s deceleration. Mexico will remain closely linked to the US (as the US receives 80% of Mexico’s exports). Consumption will continue its recovery, at least during 1H16. We also like selected airport and banking sector stocks. We prefer companies with high exposure to USD-denominated revenues. We estimate 4Q15 sales growth between 6% to 8%; net income should be positive on the back of FX depreciation. IPC target circa 48,000.
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ECONOMY & FINANCIAL MARKETS CORPORATE REVIEW APRIL-16
Argentina
Currency and trade reforms have been undertaken. Fiscal reforms still needed.
Fathom Consulting expects GDP to rise to around 2% in 2017
NPL at just 1.9% of total
Current situation President Mauricio Macri’s first 100 days in office have seen an impressive range of measures to put Argentina’s fragile balance of payments on a more sustainable footing. The early days of his presidency must therefore be judged a resounding success. However, fiscal and monetary policy will both need to be tightened further in the months ahead if Mr Macri is to fully address the country’s macro imbalances and raise its sustainable growth rate. Revisiting the “to do” list Mr Macri has taken significant steps to ease the country’s balance of payments problems. (1) The official peso exchange rate has been devalued by 35% from around 9.5/$ to 14.5/$ currently, (2) Support for the currency has been scaled back, which helps to build FX reserves, and (3) Foreign exchange and import controls have been lifted. This has been one of the major factors that has helped to shore up the central bank’s reserves in recent months. (4) Mr Macri has also cut tariffs on a range of agricultural exports such as wheat, corn and soybeans. The initial impact of these reforms, in conjunction with the peso devaluation, has been striking – grain exports surged from just $450mn in November to a whopping $2.4bn in January. If grain export revenues remain at this level, this year they will be equivalent to about 2% of GDP higher than the previous year. Finally, Mr Macri has struck a provisional deal with holdout creditors that should pave the way for Argentina to return to global capital markets. Broad economic policy reform still needed On the fiscal side, some utility subsidies have been cut, but more needs to be done. The recent increase in utility tariffs will narrow the headline budget deficit, equivalent to 5.8% of GDP last year, by less than one percentage point. The issue of price controls have not yet tackled. In early 2014 the government introduced a formal price control programme (Precios Cuidados), imposing caps on 300 consumer products. This list has now expanded to over 500 goods. Not only has this been wholly ineffective in taming inflation, but it has also hit business profit margins and investment. Paring back social welfare spending will be key to reining in the budget deficit. One student support programme, PROG.R.ES.AR, was launched in January 2014 and has expanded significantly in scope since then, while a subsidized housing programme, PRO.CRE.AR, has also continued to grow. Introducing some restraint to social welfare spending would demonstrate that Mr Macri is serious about tightening fiscal policy. Financial Markets In the next few months we expect Argentina to issue large amounts of debt, so there will be a lot of supply pressure in the debt market. We advise a wait-and-see approach to evaluate the conditions and attractiveness. We still like Bonars (17, 18 and 20) with yields within the 5.1%-6.44% range. Province of BA 9/14/18 at 7.41% yield and the YPFAR 7/28/25 at 8.9% yield.
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ECONOMY & FINANCIAL MARKETS CORPORATE REVIEW APRIL-16
Equity Markets GLOBAL EQUITY INDICES - FUNDAMENTAL ASSESSMENT:
Index
Sales per Share 2015
S&P 500 INDEX/d 1.130
EPS 2015
Andbank's Sales Andbank's Net Margin Sales Growth per Share Net Margin 2015 2016 2016 2016
EPS 2016
EPS Growth PE ltm PE ltm 2016 2015 2016
117,6
10,4%
4,6%
1.182
9,7%
115
-2,5%
17,56 17,00
301
21,7
7,2%
3,5%
311
7,7%
24
10,5%
15,56 15,00
IBEX 35 INDEX/d 7.875
641,4
8,1%
0,7%
7.927
8,1%
642
0,1%
13,62 14,50
MXSE IPC GRAL /d28.542
1.888,1
6,6%
7,7%
30.739
7,3%
2.244
18,8%
24,46 21,30
BVSP BOVESPA I/d 55.578
3.377,2
6,1%
5,5%
58.635
6,5%
3.811
12,9%
15,18 13,12
NIKKEI 225 INDEX20.408
1.018,6
5,0%
2,0%
20.816
5,0%
1.041
2,2%
16,45 15,80
STXE 600 PR/d
SSE COMPOSITE/d2.652
233,9
8,8%
7,0%
2.838
8,8%
250
6,8%
12,84 13,00
HANG SENG INDE/d 13.064
2.015,3
15,4%
2,0%
13.325
15,4%
2.052
1,8%
10,30 10,00
S&P SENSEX/d
12.559
1.432,9
11,4%
11,0%
13.941
11,8%
1.645
14,8%
17,73 17,00
MSCI EM ASIA
411
34,1
8,3%
7,0%
37
7,0%
19,41 18,21
440
8,3%
INDEX CURRENT PRICE 2.064 338 8.737 46.192 51.249 16.759 3.004 20.757 25.406 662
2016 TARGET PRICE 1.949 360 9.310 47.797 50.000 16.445 3.247 20.521 27.965 665
2016 E[Perform.] % Ch Y/Y -5,6% 6,5% 6,6% 3,5% -2,4% -1,9% 8,1% -1,1% 10,1% 0,4%
ANDBANK ESTIMATES
RISK-OFF SHIFT PROBABILITY:
Andbank's Global Equity Market Composite Indicator (Breakdown)
Buy signals Positive Bias Neutral Negative Bias Sell signals FINAL VALUATION
Previous
Current
Month
Month
12 2 6 0 2 5,0
7 3 11 1 0 3,6
Andbank’s Global Equity Market Composite Indicator Preliminary assessment of the level of stress in markets
0
-5
-10 Market is Overbought
+5
Area of Neutrality Sell bias
Buy bias
+10 Market is Oversold
o Score. Our Andbank GEM Composite Indicator has dropped from 5 to 3.6 in a -10/+10 range, suggesting that the market is no longer oversold and is now in a neutral zone (no stress). We do not consider that the market is cheap, although we can not say it is expensive. At current levels, a risk-off shift in the equity markets would mean that the market would quickly become oversold (cheap). o Positioning (speculators, HF, managers): The put call ratio is below 1, showing that investors are partially bullish. Average cash balances keep hitting very high levels (5.1%, the highest since 2001) which is an unambiguous Buy signal. o Flows (Funds & ETFs): According to the Fund Flows report from some of our sources, US$6Bn has flowed into US equity, although European equity suffered remarkable outflows totaling €1.2Bn. Merrill Lynch’s Global Fund Manager Survey states that global investors have decided that it is time to take on a few more risky assets. The largest flows were into emerging-market debt (largest in 12 months) and we also saw an all-time record monthly move into commodities. o Sentiment: The BNP Love/Panic US Index is in Buy territory with the lowest ever level (-72%) even lower than in 2008/2012. The percentage of NYSE stocks that closed above their 200 day moving average price line shows an uptick from 22% to 49%. The Ned Davis indicator shows an extreme rebound from pessimistic to optimistic thus our stance (according to this reading) is bearish.
TECHNICAL ANALISYS (2016 view): o S&P: SIDEWAYS. Support: ST at 2000 / MT at 1800. Resistance: ST at 2080 / MT at 2134. o STOXX50: BEARISH. Support: ST at 2900 / MT at 2684. Resistance: ST at 3125 / MT at 3300. o IBEX: BEARISH. Support: MT at 7740. Resistance: MT at 9250.
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ECONOMY & FINANCIAL MARKETS CORPORATE REVIEW APRIL-16
Fixed Income – Core Country Bonds:
NEGATIVE STANCE
UST 10Yr BOND: Entry point above 2.5% yield // Floor at 1.92%. Ceiling 3.00% 1. Swap spread: Swap rates rose to 1.75% (from 1.61%) and the 10Y UST also rose to 1.95% (from 1.82%). The swap spread therefore remained stable (-20bp from -20bp). For this spread to normalize towards the +20bp area, with 10Y CPI expectations (swap rate) anchored in the 2%-2.25% range, the 10Y UST yield would have to move towards 1.92% (this must be considered as a floor). 2. Slope: The UST yield curve has steepened 2bp (to 107bp from 105bp). With the short end normalizing towards 1.25%, to reach the 10yr average slope (175bp), the 10Y UST yield could go to 3.00%. 3. Given the “new normal” (ZIRPs), a good entry point in the 10Y UST could be when real yield hits 1%. Given that our 2016 CPI forecast is now 1.5%, UST yield would have to rise to 2.5% to become a “BUY”. EURO BENCHMARK 10Yr BOND: Target at 0.6% yield // Ceiling at 0.85% 1. Swap Spread: Swap rates remained stable at 0.56% (from 0.57%) and the Bund yield rose to 0.18% (from 0.12%). The swap spread therefore declined to 38bp (from 45bp). For the swap spread to normalize towards the 30-40bp area, with 10Y inflation expectations (swap rate) anchored in the 1%1.25% range, the Bund yield would have to move towards 0.8%. 2. Slope: The slope of the EUR curve rose to 65bp (from 64bp). When the short end “normalizes” in the 0.25% area, to reach the 10yr average slope (113bp), the Bund yield would have to go to 0.88%.
Fixed Income – Peripheral Bonds: •
• •
•
NEUTRAL STANCE
Some of our targets have been reached since the last meeting. The European scenario is relatively benign for government bonds (low growth, low inflation, increased ECB purchases). ECB purchases will fully absorb the gross issuance of core countries, but also a big chunk of debt issuance from peripheral economies. More tightening could come on the back of the announced additional ECB purchases. We suggest moving our targets to the lower band of our projected range (Italy, Spain), although there seems to be limited scope for significant declines in yields from current levels… Targets (10Yr govt yields): Spain 1.4%, Italy 1.3%, Portugal 2.5%, Ireland 0.8%.
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ECONOMY & FINANCIAL MARKETS CORPORATE REVIEW APRIL-16
Fixed Income – Corporate Bonds & EM Govies FIXED INCOME – CORPORATE CREDIT US$ IG & HY CDX HY: Bond yields and spreads decreased 146bp last month to 6.71%, which are 216bp below the peak of 8.87% seen on February 11th. High-yield ETF prices are now +8.25% above February’s market low, and the move represents the sharpest gain for this asset class since the start of the global financial crisis. In an extreme swing, last month’s inflows into HY ETFs recouped more than half of the outflows in February. Year-to-date outflows from high-yield now stand at just -$1.6bn. Primary market in the HY universe remains subdued: New issuance activity remained poor in March (US$10.3bn vs US$10.6bn in February), and YTD issuance at US$30bn remains a fraction of the volumes seen in the same period of 2015 (US$59.8). Outlook: Current spread level 450 bp. Target 425 bp. High Yield is offering better-thancoupon returns with an attractive carry supporting part of the downside. We do not expect a global recession, although volatility is expected to continue to correlate with energy prices and the risk of contagion into another sectors persists. Overweight: Financials – Media – Retail. Underweight: Metals and Mining – Energy – Utilities. CDX IG: Current Spread 83 bp. 2016 target 63 bp. Sector view: Overweight Financials – Materials – Consumer cyclical. Underweight: Utilities – Healthcare – Industrial
EUR IG & HY Very strong reversal in spreads for the main indexes (both in IG and HY), with the latter overtaking our revised target. Taking into account the ECB’s latest movements, targets should revert back to the ones initially outlined for 2016. Though the room for improvement now seems limited in the credit market, the ECB purchases starting in June should lay the foundation for a less volatile environment (in the short term) and reduced spreads until ECB purchases begin. New issuance has recovered particularly in investment grade. In terms of sector performance, raw materials have outperformed following the oil recovery and the adjustments made by sector firms (dividend cuts, reduced investments and personnel savings). We are staying with our bond picking approach, favoring financials and sectors backed by ECB purchases. Stay NEUTRAL in both asset classes. Risks: Lower growth and a very complicated environment of negative rates (making fixed income instruments less attractive). Target Itraxx IG Europe at 65bp (vs 75bp currently, and down from our previous target of 85bp). Target Itraxx HY at 290 (vs current 314 bp and down from our previous target of 360bp).
FIXED INCOME - EMERGING MARKETS (GOVIES): “The two conditions are not met” 10 Year
Last
Yield
reading
Real
3,35%
4,30%
5,61%
1,85%
1,50%
2,04%
1,60%
1,24%
Taiwan
7,65% 7,46% 3,53% 2,84% 3,80% 1,65% 1,82% 1,79% 0,84%
Turkey
9,75%
Philippines EM ASIA
10 Year
Yield
India China Malaysia Thailand Singapore South Korea
EME
CPI (y/y)
Govies Indonesia
2,68%
1,12%
-0,85%
2,50%
0,00%
1,82%
1,28%
0,52%
0,14%
0,71%
8,81%
0,94%
Russian Federation 9,11%
12,92%
-3,81%
13,65% 5,93% 8,02% 7,18%
10,67%
2,98%
2,13%
3,80%
Brazil LATAM
To date, our rule of thumb for EM bonds has been “buy” when two conditions are met: (1) US Treasuries are cheap or at fair value; and (2) Real yields in EM bonds are 175bp above the real yield in UST. Is the UST cheap or at fair value? Historically, a good entry point in the 10Y UST has been when real yields are at or above 1.75%. However, given the “new normal” (ZIRPs globally), a good entry point in the 10Y UST bond could be when the real yield is 1%. Given our 2016 target for US CPI of 1.5%, UST bonds should be at 2.5% to be considered cheap. So the first condition is not met. Do real yields in EM bonds provide sufficient spread? If the first condition is met, under the “new normal” (ZIRPs), a good entry point in EM bonds could be when EM real yields are 100bp above the real yield of the UST. Since the projected annualized real yield of USTs this year is 0.45% (1.95%-1.50%), the real yield of the EM bonds should be at least 1.45% (see table).
Mexico Colombia Peru
6,77%
1,25%
4,40%
2,78%
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ECONOMY & FINANCIAL MARKETS CORPORATE REVIEW APRIL-16
Commodities ENERGY (OIL): Fundamental target at $40. Range (Buy at $30. Sell at $50). Price & volatility Oil has remained relatively well supported this month (although volatile) on news of an agreement for a midApril meeting among global producers, combined with the Fed's dovish policy statement. Oil producers, including Gulf OPEC members, support the holding of talks next month on a deal to freeze output, even if Iran declines to participate, increasing the likelihood of the first global supply deal in 15 years. OPEC and non-OPEC producers will meet in Qatar on 17 April. Outlook The oil shock seems to have stabilized and there are (in our view) good reasons to believe that prices could remain around current levels, ruling out large and sustainable falls in price as well as any strong increases. Why do we say this? 1. US shale producers cut back on hedging in 4Q15, fooled by a false bottom in prices. Twenty eight companies ended the quarter with some 28M fewer hedged barrels, and now just 15-20% of US oil production is hedged, and as little as 2% for 2017 production, signaling that they do not expect sharp decreases. 2. Hedge funds holding slumping high-yield energy debt have been shorting crude oil as a way of hedging against further declines in the bonds. Blackstone's GSP Capital Partners and Apollo Global Management are among many firms that have shorted oil to hedge their position in high-yield debt. They are doing this because the previous mechanism for hedging oil-company debt through CDS is much less active, and the bonds have been illiquid. Once a more “direct� mechanism for hedging emerges, or fears over a disorderly oil-related bankruptcy process are allayed, these hedge funds could close their short oil positions, which could help support for oil prices. 3. A dozen energy companies have opted to cut dividends this year, reducing shareholder income by $7.4B and signaling that they do not expect a rise in price. 4. The oil price rally could be self-defeating as shale output ramps up in response. IHS Energy said if prices keep going up, US production will be extremely responsive, preventing significant additional gains in oil prices. Contrary to this theory, some US producers are warning that they may not be able to ramp up production as fast as many think as prices move higher. They say that many independent companies are too financially strapped and have let go too many employees or have idled too much equipment to immediately ramp up again. Analysts estimate close to 60% of the fracking equipment in the US has been idled during the downturn, although they admit that it will take just two months for some of that equipment to return. 5. US shale producers are pushing fracking technology to new extremes to get more oil out of their wells. While the impact of these techniques may not be noticeable on current US output, with so few wells in operation, it could mean drillers are able to accelerate production more rapidly than ever once prices recover, putting an effective ceiling in oil prices.
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ECONOMY & FINANCIAL MARKETS CORPORATE REVIEW APRIL-16
Commodities GOLD: Buy at US$ 900/oz. Sell above US$1,000 Negative drivers: 1. Gold in real terms. Gold is now at $1,105 at constant prices (vs $1,110 the previous month and still above its 20-year average of $754). Given our global deflator (we use the US Implicit Price Deflator-Domestic Final Sales base year 2009 as a proxy) of 1.1033, for the gold price to stay near its historical average in real terms, the nominal price must remain near US$831. 2. Gold in terms of Oil (Gold / Oil): This ratio has decreased to 32.12x (from 38.48x last month) and remains above its LT average of 14.16. If the average oil price stays at $40, the nominal price of gold must approach US$566 for this ratio to remain near its LT average level. 3. Gold in terms of the DJI (Dow Jones / Gold): This ratio has moved to 14.37 (from 13.41x last month), still below its LT average of 20.4x. Given our new target price for the DJI of $16,700, the price of gold must approach US$818 for this ratio to remain near its LT average. 4. Positioning in gold points to further falls: CEI 100oz Active Future non comm. contracts: longs 258k from prior 209k. Shorts 79k from prior 91k => Net of +178k from prior +117k (Speculators are once again longer than a month ago). 5. Financial liberalization in China. Higher “quotas� each month in the QFII are widening the investment alternatives for Chinese investors (historically focused on gold). 6. Central bank activity: Central banks have gradually reduced their stocks of gold after heavy reserves accumulation during the years prior to 2012 (see chart below). Despite this, gold stocks at central banks are still considerably higher than 2008 levels. 7. Monetary stimulus by ECB and BOJ continues, but not by the Fed (remember the price of gold is in USD). This points to the following dynamics: gold stable or downward in terms of USD; gold price following an upward trend versus the EUR and JPY, which means that the USD must rise relative to the EUR and the JPY. Positive drivers: 1. Amount of gold in the world: The total value of gold in the world is circa US$6.9tn, a fairly small percentage (3.2%) of the total size of the financial cash markets (212tn). The daily volume traded on the LBMA and other gold marketplaces is around US$173bn (2.5% of the world's gold and just 0.08% of the total in the financial markets).
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ECONOMY & FINANCIAL MARKETS CORPORATE REVIEW APRIL-16
Currencies • EUR/USD: MT Target (1.05) Positioning in the EUR/USD cross is now almost neutral (just US$-10bn. compared to–US$8bn seen one month ago). There is still plenty of room for speculators to reach the lower end of the range (30.4bn) seen in the last year and build shorter positions in EUR. If true, the EUR/USD could fall further towards 1.05.
• JPY/USD: MT Target (120). JPY/EUR: MT Target (126) The JPY net long position (US$5bn) has been declining gradually, but remains near its 12-month high of US$7.1bn. Using Z score, speculators remain in the upper band (long JPY) of their positioning range during the last three years.
• • • • • • • •
GBP/USD: MT Target (0.65). GBP/EUR: MT Target (0.68) CHF/USD: MT Target (1.00). CHF/EUR: MT Target (1.05) MXN/USD: MT Target (17.5). MXN/EUR: MT Target (18.4) BRL/USD: MT Target (4.00). MXN/EUR: MT Target (4.20) RUB/USD: UW RUB AUD/USD: UW AUD CAD/USD: UW CAD CNY/USD: MT Target (6.20). Outlook: After a poorly handled attempt to move to a more market-determined exchange rate, and with the US dollar strong across the board and the likelihood that the foreign exchange market has now largely priced in the prospect of Federal Reserve tightening, the US dollar is likely to weaken over the six to 12 months following the Fed’s first rate hike (based on experience).
Values of Change vs Current Net positions last week 1-yr Max 1-yr Min 1-yr Avg Z-score Currency (Bn $) (Bn $) (Bn $) (Bn $) (Bn $) 3-yr
Max Min 4,0
Current
SPECULATIVE POSITION IN THE FX MARKETS (3Yr - Z SCORES. Max, Min & Current in 1Yr)
3,0
USD vs All USD vs G10 EM EUR JPY GBP CHF BRL MXN RUB AUD CAD
7,48 6,50 -0,98 -10,77 5,02 -1,21 0,67 0,13 -1,26 0,15 0,95 -1,26
-0,91 -0,51 0,40 -0,87 -2,12 3,15 0,68 -0,02 0,35 0,07 -1,22 0,66
45,3 44,0 0,1 -6,5 7,1 0,7 1,4 0,2 0,3 0,2 2,2 0,6
0,0 6,2 -2,8 -30,4 -11,7 -4,4 -3,2 -0,3 -2,7 -0,1 -5,9 -5,1
27,7 27,8 -1,3 -17,7 -2,7 -2,1 -0,2 0,0 -1,4 0,0 -2,2 -2,7
-1,13 -1,38 -0,50 0,05 2,57 0,00 0,87 0,25 -0,70 1,15 0,85 0,65
ANDBANK
2,0 1,0 0,0 -1,0 -2,0 -3,0 -4,0
ANDBANK -5,0 USD vs All
USD vs G10
EM vs USD
EUR vs USD
JPY vs USD
GBP vs USD
CHF vs USD
BRL vs MXN vs RUB vs AUD vs CAD vs USD USD USD USD USD
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ECONOMY & FINANCIAL MARKETS CORPORATE REVIEW APRIL-16
Market Outlook – Fundamental Expected Performance Performance Performance Performance Asset Class
Indices
2015
Last month
YTD
Equity
USA - S&P 500
-0,73%
3,9%
1,0%
EUROPE - STOXX 600
6,79%
-1,1%
-7,8%
SPAIN - IBEX 35
-7,15%
-0,4%
-8,5%
Current
2016
Expected
31/03/2016
Target
Performance*
2.064
1949
-5,6%
337
360
6,6%
8.733
9310
6,6%
30/03/2016
MEXICO - MXSE IPC
-0,39%
3,5%
7,5%
46.192
47797
3,5%
BRAZIL - BOVESPA
-13,31%
14,2%
18,2%
51.249
50000
-2,4%
JAPAN - NIKKEI 225
9,07%
0,1%
-12,0%
16.759
16445
-1,9%
CHINA - SHANGHAI COMPOSITE
9,41%
5,4%
-15,1%
3.004
3247
8,1%
KONG KONG - HANG SENG
-7,16%
3,9%
-5,2%
20.777
20521
-1,2%
INDIA - SENSEX
-5,03%
4,7%
-2,8%
25.390
27965
10,1%
MSCI EM ASIA
-7,90%
4,1%
0,0%
662
665
0,4%
Fixed Income
US Treasury 10 year govie
0,2%
4,1%
1,83
2,50
-3,56%
Core countries
UK 10 year Guilt
0,3%
4,6%
1,44
2,00
-3,06%
German 10 year BUND
0,4%
3,9%
0,16
0,40
-1,76%
Fixed Income
Spain - 10yr Gov bond
1,3%
3,2%
1,41
1,40
1,53%
Peripheral
Italy - 10yr Gov bond
1,9%
3,4%
1,22
1,30
0,54%
Portugal - 10yr Gov bond
1,1%
-1,5%
2,75
2,50
4,73%
Ireland - 10yr Gov bond
1,0%
3,6%
0,72
0,80
0,08%
Fixed Income
Credit EUR IG-Itraxx Europe
0,7%
0,3%
74,57
65
0,59%
Credit
Credit EUR HY-Itraxx Xover
2,5%
0,9%
316,78
290
2,93%
IG & HY
Credit USD IG - CDX IG
0,7%
0,9%
78,75
63
2,00%
Credit USD HY - CDX HY
1,7%
1,8%
450,47
425
5,09%
Turkey - 10yr Gov bond
5,4%
8,1%
9,76
9,76
9,76%
Fixed Income
EM Europe (Loc) Russia - 10yr Gov bond
3,1%
7,4%
9,09
10,09
1,09%
Indonesia - 10yr Gov bond
3,5%
11,1%
7,70
7,20
11,66%
Asia
India - 10yr Gov bond
1,7%
4,1%
7,49
7,03
11,18%
(Local curncy)
Philippines - 10yr Gov bond
1,8%
5,1%
3,53
3,35
5,00%
China - 10yr Gov bond
0,2%
0,3%
2,86
2,36
6,82%
Malaysia - 10yr Gov bond
1,0%
3,9%
3,81
3,35
7,45%
Thailand - 10yr Gov bond
1,9%
6,7%
1,70
1,27
5,10%
Singapore - 10yr Gov bond
3,5%
6,6%
1,82
1,47
4,66%
South Korea - 10yr Gov bond
0,6%
3,1%
1,78
2,00
0,02%
Taiwan - 10yr Gov bond
0,1%
1,7%
0,83
0,97
-0,29%
Fixed Income
Fixed Income
Mexico - 10yr Govie (Loc)
2,2%
4,1%
5,93
6,30
2,97%
Latam
Mexico - 10yr Govie (usd)
1,3%
3,7%
3,74
4,40
-1,55%
Commodities
Brazil - 10yr Govie (Loc)
15,8%
26,6%
13,65
14,00
10,85%
Brazil - 10yr Govie (usd)
8,0%
15,3%
5,99
6,00
5,87%
CRY
-2,9%
3,9%
171,0
190,0
11,13%
Oil (WTI)
1,6%
8,6%
37,7
40,00
6,24%
16,0%
-0,8%
1.230,3
900,0
-26,84% -7,42%
GOLD Fx
EUR/USD (price of 1€)
4,4%
4,4%
1,134
1,05
GBP/USD (price of 1$)
2,6%
-2,0%
0,70
0,65
-6,64%
GBP/EUR (price of 1€)
7,2%
2,3%
0,79
0,68
-13,55%
CHF/USD (price of 1$)
-3,8%
-3,3%
0,96
1,00
3,77%
CHF/EUR (pric e of 1€)
0,4%
0,9%
1,09
1,05
-3,95%
JPY/USD (price of 1$)
-6,5%
-0,9%
112,43
120
6,73%
JPY/EUR (pric e of 1€)
-2,2%
3,5%
127,54
126,00
-1,21%
MXN/USD (price of 1$)
0,5%
-3,1%
17,25
17,50
1,43%
MXN/EUR (price of 1€)
4,9%
1,0%
19,56
18,38
-6,06%
BRL/USD (price of 1$)
-9,2%
-7,6%
3,60
4,00
11,27%
BRL/EUR (pric e of 1€) CNY (price of 1$)
-5,2% -0,4%
-3,6% -1,3%
4,08 6,47
4,20 6,20
3,01% -4,13%
* For Fixed Income instruments, the expected performance refers to a 12 month period
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ECONOMY & FINANCIAL MARKETS CORPORATE REVIEW APRIL-16
Monthly Tactical Global Asset Allocation Proposal
This recommended asset allocation table has been prepared by the Asset Allocation Committee (AAC), made up of the managers of the portfolio management departments and the product managers in each of the jurisdictions in which we operate. Likewise, the distribution of assets within each customer profile reflects the risk control requirements established by regulations.
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ECONOMY & FINANCIAL MARKETS CORPORATE REVIEW APRIL-16
Principal Contributors
Alex Fusté. – Chief Global Economist – Global & Asia: Macro, Rates & FX. +376 881 248 Giuseppe Mazzeo. – CIO Andbank US – U.S. Rates & Equity. +1 786 471 2426 Eduardo Anton. – Portf. Manager US – Credit & Quasi governments. +1 305 702 0601 J.A Cerdan. – Equity Strategist Europe – European Equity. +376 874 363 Renzo Nuzzachi, CFA. – Product Manager LatAm – Rates & FX. +5982-626-2333 Jonathan Zuloaga. – Analyst, Mexico – Macro, bonds & FX. +52 55 53772810 Albert Garrido. – Portfolio Manager Andorra – European Equity. +376 874 363 Ricardo Braga. – Product Analyst Brazil – Products. +55 11 3095 7075 Gabriel Lopes. – Product Analyst Brazil – Products. +55 11 3095 7075 Andrés Davila. – Head of Asset Management Panama – Venezuela. +507 2975800 Mª Angeles Fernández. – Product Manager, Europe – Macro & Rates. +34 639 30 43 61 David Tomas. – Wealth Management, Spain – Spanish Equity. +34 647 44 10 07 Andrés Pomar. – Portfolio Manager Luxembourg – Volatility. +352 26 19 39 25 Carlos Hernández. – Product Manager – Technical Analysis. +376 873 381
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ECONOMY & FINANCIAL MARKETS CORPORATE REVIEW APRIL-16
Legal Disclaimer All notes and sections in this document have been prepared by the team of financial analysts at ANDBANK. The opinions stated herein are based on a combined assessment of studies and reports drawn up by third parties. These reports contain technical and subjective assessments of data and relevant economic and sociopolitical factors, from which ANDBANK analysts extract, evaluate and summarize the most objective information, agree on a consensual basis and produce reasonable opinions on the questions analyzed herein. The opinions and estimates contained herein are based on market events and conditions occurring up until the date of the document's publication and cannot therefore be decisive in evaluating events after the document's publication date. ANDBANK may hold views and opinions on financial assets that may differ partially or totally from the market consensus. The market indices have been selected according to those unique and exclusive criteria that ANDBANK considers to be most suitable. ANDBANK does not guarantee in any way that the forecasts and facts contained herein will be confirmed and expressly warns that past performance is no guide to future performance, that analyzed investments could be unsuitable for all investors, that investments can vary over time regarding their value and price, and that changes in the interest rate or forex rate are factors which could alter the accuracy of the opinions expressed herein. This document cannot be considered in any way as a selling proposition or offer of the products or financial assets mentioned herein, and all the information included is provided for illustrative purposes only and cannot be considered as the only factor in the decision to make a certain investment. Additional major factors influencing this decision are also not analyzed in this document, including the investor's risk profile, financial expertise and experience, financial situation, investment time horizon and the liquidity of the investment. As a consequence, the investor is responsible for seeking and obtaining the appropriate financial advice to help him assess the risks, costs and other characteristics of the investment that he is willing to undertake. ANDBANK expressly disclaims any liability for the accuracy and completeness of the evaluations mentioned herein or for any mistakes or omissions which might occur during the publishing process of this document. Neither ANDBANK nor the author of this document shall be responsible for any losses that investors may incur, either directly or indirectly, arising from any investment made based on information contained herein. The information and opinions contained herein are subject to change without notice.
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