Still a rocky path...

A despeito da aparente tranquilidade das bolsas na Europa e nos EUA essa manhã, e um mercado de commodities mais estável, estamos observando mais uma rodada de pressão nos ativos emergentes, em especial nas moedas, novamente liderados pela Turquia. Na China, a noite foi de CNY estável, mas de no queda (entre 1% e 2%) dos índices de bolsa. De maneira geral, ainda não vi os problemas em ambos os países serem endereçados de maneira estrutural.

Na Turquia, em conference call com investidores na manhã de ontem, o Ministro das Finanças fez um discurso relativamente ortodoxo, afirmando que não irão implementar controle de capitais e adotarão as medidas necessárias para estabilizar a economia. Contudo, colocou grande parte do peso do que está acontecendo no país no ambiente internacional, não deu indicações de que pretende elevar as taxas de juros ou pedir ajuda financeira ao FMI, o que ainda dá alguma sensação de que estão em “negação” em relação a real situação da economia. Indicou que pretendem manter uma política fiscal apertada, o que pode ser visto como positivo. Todavia, o país apresenta menos de 30% de dívida\PIB. O problema do país não é fiscal, mas sim seu balanço de pagamentos e sua inflação de curto-prazo. O fiscal ajuda a inflação estruturalmente, mas o monetário é necessário para ajudar a inflação e a moeda no curto-prazo. Enfim, ainda parece que a situação poderá piorar antes de que medidas concretas na direção correta sejam tomadas.

No Brasil a notícia (rumor) de que Alckmin poderia ser denunciado pelo MP ainda antes do primeiro turno levou a uma forte deterioração dos ativos locais no início da tarde. A dinâmica do mercado me leva a crer que os investidores ainda colocam um peso razoável no crescimento de Alckmin uma vez iniciada a corrida eleitoral. Assim, uma decepção nesta frente, poderia levar a uma forte deterioração dos preços dos ativos locais. Continuo vendo a corrida eleitoral como extremamente competitiva, com cerca de 4 candidatos podendo chegar ao segundo turno. Combinações extremamente negativas poderiam ocorrer, a luz da opinião do mercado em relação aos candidatos, ou combinações menos prejudiciais aos preços. A volatilidade deverá permanecer.

Em relação a China, de acordo com o estrategista do Morgan Stanley que copio abaixo, o país adotou estratégia diferente, drenando liquidez offshore para conter a depreciação da moeda. Se, por um lado, isso ajuda a estabilizar o CNY, por outro lado acaba colocando mais um importante banco central do mundo na direção do aperto de liquidez, o que tem sido o principal problema para os ativos de risco ao longo deste ano:

China tightens offshore liquidity… According to Reuters, the Shanghai branch of the PBOC has banned banks in the Shanghai Free Trade Zone from depositing or lending yuan offshore through interbank accounts. China draining offshore liquidity, pushing 1y CNH forward points above 600bp has helped stabilise RMB markets by reducing speculative flows. The difference between onshore CNY and offshore CNH 3m fixings jumped 80bp overnight to 106bp, but remains low when compared to levels reached during the height of RMB depreciation pressure in late 2015 (over 700bp). Remember, the PBOC’s policy on the RMB, concretely its USDCNY fixing relative to model expectations alongside interbank liquidity conditions, is part of our four-factor USD scorecard, which suggests the DXY will correct lower by 2% on a 3m change basis. However, China pushing the CNY-CNH forward spreads wider (see first Exhibit) does not only stabilise the RMB on FX markets, it also suggests that China has changed its strategy. Draining offshore liquidity comes at a price, namely increasing RMB hedging costs for potential offshore investors into RMB-denominated assets via the Connect programmes.

...not boding well for offshore investors… Earlier this year, it appeared China was targeting capital inflows to ease domestic financial conditions which came under strain due to its balance sheet de-risking strategies. Inflows via the Hong Kong- Shanghai Stock and Bond Connect programmes picked up over the course of the past year and were still positive in July despite the intense RMB sell-off in that month. However, with offshore liquidity tightness pushing RMB interest rates higher, potential offshore investors into China’s equity and bond markets may be discouraged as they find it difficult to predict future hedging costs.

...indicating a changing strategy. Instead of attracting inflows, China’s adjusted strategy may focus on preventing outflows. This finding is also supported by our work on China’s balance of payments, finding that the large share of the ‘errors & omissions’ and ‘other investments’ components relative to the reduced size of the total balance may be an indication that the capital account has been less effectively sealed to prevent outflows than previously thought. In respect of its capital account, China seems to have moved from encouraging inflows towards discouraging outflows. As such, China has become more defensive, which may explain its weak equity performance and the commodity bear market. Yesterday, the State Council said China will substantially support private capital investments to stabilise investment and boost the vitality of China's economy. The continued weak performance of the CSI 300 and CRB Rind indices suggests that the market has doubts on the success of its policy approach.

Debt vs cash flow. Debt is a problem when it does not find adequate cash flows to back it up. Creating debt to fund productivity-enhancing and hence cash flow-generating investments is not only unproblematic; it is desirable. However, the last decade has seen QE-inspired debt creation not inspiring investment and hence keeping productivity gains near historic lows. Corporates have repaid equity, handing capital back to investors thus pushing asset prices and consumer-led demand up. Keeping debt sustainable when rates rise is the challenge, and can only work with the help of productivity which boosts cash flows. Starting in February, markets concluded that EM would be in a difficult position as its cash position was regarded as too weak. EM assets started weakening in a domino-like manner, starting with Argentina. Since debt is a global issue, we wonder if the problem of the debt/cash flow mismatch goes beyond EM. If the answer is yes, what FX conclusion is there to be drawn?

US volatility is too low. The second Exhibit shows how the S&P 500 has diverged from the MSCI EM index. Indeed, the spread has reached a multi-year extreme. Obviously, the consensus concludes that the US could generate the cash flow required to service debt in the long term. Hence, the market seems to assume US productivity will pick up beyond a cyclical rebound, coming along with an output gap-closed economy. Even investors who are optimistic on the long-term US growth and productivity prospects may have to agree that the relative US stock market outperformance looks stretched. The same could be said for FX. The DXY looks stretched and is likely to correct lower from here.