LatAm Macro Strategy: Mid-Year Outlook - Top 4 FAQ

Research evidence excerpt

LatAm Macro Strategy: Mid-Year Outlook - Top 4 FAQ

IdeaM

Valuation Methodology and Risks

Exhibit 9: Valuation Methodology and Risks

Trade Date Entry Level Target Stop Rationale Risks

We think that the sol's recent rebound does not accurately reflect potential election-related risk premium

around the second round of the presidential election. Additionally, both currencies remain exposed to oil and

Short PENCLP 18-May-26 263.00 254 269 additionalcopper pricesmarketfromfriendlya termspoliciesof tradeand standpoint,fiscal consolidation.but CLP'sWedomesticacknowledgenarrativethatshouldgiven reflectBCRP'sthemorepotentialproactivefor Sustained increase in oil pricces

FX approach, another spike in global oil prices would pose some risks to our trades, as CLP would remain

more exposed

As market pricing now incorporates ~75bp of easing only but election-related noise has intensified, we think

Jan 28 versus Jan 31 DI steepener 18-May-26 9.00 50 -10 that the path of least resistance is to see curve steepening (either bull or bear, depending on the direction of Continued upside surprises in CPI

upcoming headlines).

We think that Banxico's reaction function implies a propensity for delaying any potential hikes as much as

possible, though we note that it is the only regional economy whose CPI expectations have yet to de-anchor. If

Buy 2028 MBonos 18-May-26 7.65 7.35 7.90 anything, we actually think that there is a non-negligible possibility that the door towards another small A large sell-off in US rates.

adjustment (towards 6.00%) could be open in a few months (perhaps after the World Cup) to the extent that

the Middle East conflict is resolved without inflicting meaningful inflationary pressures on Mexico.

Source: Morgan Stanley Research

Morgan Stanley Research 7