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JPMorgan Close Their Underweight CLP

CHILE
  • BCCh’s hawkish turn on Thursday dealt a triple whammy to CLP shorts and materially changes prospects for the currency, according to JPMorgan. This has prompted JPM to close their UW CLP and stay neutral in the GBI-EM Model Portfolio.
  • Several of the factors that warranted a weaker currency have now played out, and JPM believe we should see a more stable peso going forward. The important role played by both the bold easing cycle and the FX intervention programs in propelling CLP’s poor performance, suggests we should see some reversal as these drivers are either moderated or just completely removed.
  • JPM’s neutral stance is justified by the fact that they don’t see extreme cheapness in the currency, especially after today’s rally, while copper prices remain low and the carry profile of CLP is less than thrilling when tiered against other LatAm countries. This is all consistent with MW CLP positioning in the Model Portfolio.
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