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South Africa

VIEWS: 3 PAGES: 31

									Investment Research — General Market Conditions
                                                                                                                                                              17 September 2012




Emerging Markets Briefer
Emerging Markets to benefit from Fed decision
Since the last Emerging Markets (EM) Briefer things have changed quite dramatically.
Last week the Federal Reserve (Fed) made a significant monetary policy regime change                                                                             Contents
by announcing an open-ended purchase programme conditional on developments in the
labour market. We expect the announcement to have a significant effect as it will ease                                                                           Poland ............................................................................. 2
tensions on financial markets and increase monetary policy predictability, thereby                                                                               Czech Republic ..................................................... 3
reducing market volatility. The Fed’s decision is clearly good news for the financial                                                                            Hungary ........................................................................ 4
markets. The implications for the Emerging Markets are clear: commodities should rise                                                                            Estonia ........................................................................... 5
and currencies should strengthen (particularly for commodity exporters such as Russia)                                                                           Latvia ............................................................................... 6
                                                                                                                                                                 Lithuania ...................................................................... 7
On the back of the effective monetary easing by the Fed, which is very good news for the                                                                         Russia ............................................................................. 8
global economy, we have revised our EM FX forecasts quite substantially compared to                                                                              Ukraine .......................................................................... 9
the last EM Briefer. We are more positive on most of the EM FX, especially on a short-                                                                           Kazakhstan ........................................................... 10
term horizon (three to six months). On a 12-month horizon we see some weakness down                                                                              Turkey ......................................................................... 11
the road, especially for the CEE currencies, as we expect the CEE central banks to deliver                                                                       South Africa ......................................................... 12
quite aggressive monetary easing to fight the economic slump.                                                                                                    Brazil ............................................................................ 13
                                                                                                                                                                 Mexico ........................................................................ 14
                                                                                                                                                                 China ............................................................................ 15
                                                                                                            Risk adjusted FX change against EUR                  Hong Kong .............................................................. 16
 FX change against EUR and USD
                                                                                                            and USD                                              Taiwan ........................................................................ 17
   6                                                                                                          1.5                                                South Korea ......................................................... 18
                                                                                                              1.0
   4
                                                                                                              0.5                                                Thailand .................................................................... 19
   2                                                                                                          0.0
 %0                                                                                                          -0.5                                                Malaysia ................................................................... 20
                                                                                                            %-1.0
   -2                                                                                                        -1.5                                                Philippines ............................................................. 21
   -4                                                                                                        -2.0
                                                                                                             -2.5                                                Indonesia ................................................................. 22
   -6                                                                                                        -3.0
                                                                                                                                                                 India ............................................................................... 23
        HUF




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        INR

        PHP
        KRW

        ZAR
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        KZT
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        MXN




        EGP
        CZK




                                                                                                                     HUF




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                                                                                                                     IDR
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                                                                                                                     MYR

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                                                                                                                     ZAR

                                                                                                                     PHP
                                                                                                                     KRW
                                                                                                                     CNY

                                                                                                                     SGD

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                                                                                                                     TRY
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                                                                                                                     KZT
                                                                                                                     EGP
                                                                                                                     PLN




                                                                                                                     MXN
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                   (Simple average relative to EUR and USD)                                                           (Annualised return divided by 1-year)      FX forecast ............................................................ 24
 Source: Reuters EcoWin                                                                                     Source: Reuters EcoWin
                                                                                                                                                                 Forecasts vs forwards .............................. 27
                                                                                                                                                                 Monetary policy calendar...................... 28

 Change in 2-year swap yield                                                                                Stock market performance
    60                                                                                                       10
    40
                                                                                                                8
    20
                                                                                                                6
        0
 bp -20                                                                                                         4
                                                                                                            %
                                                                                                                2
    -40
                                                                                                                0
    -60
                                                                                                                -2
    -80
                                                                                                                -4
   -100
                                                                                                                     SGD
                                                                                                                     PLN
                                                                                                                     HUF




                                                                                                                     MXN

                                                                                                                     UAH
                                                                                                                     ILS




                                                                                                                     SKK
                                                                                                                     CZK
                                                                                                                     TWD

                                                                                                                     IDR
                                                                                                                     ZAR

                                                                                                                     KRW

                                                                                                                     PHP

                                                                                                                     MYR
                                                                                                                     BRL
                                                                                                                     RUB


                                                                                                                     INR
                                                                                                                     TRY




                                                                                                                     CNY
                                                                                                                     RON
                                                                                                HUF
                                    ILS




                                                            TWD



                                                                              IDR
                                                KRW




                                                                        ZAR



                                                                                          PHP
                        BRL




                                                      SGD
            CNY




                                                                                                      TRY
                                          HKD




                                                                                    PLN
                              MXN
                  THB




                                                                  CZK




                                                                                                                                 (Local currency)


 Source: Reuters EcoWin                                                                                     Source: Reuters EcoWin




Important disclosures and certifications are contained from page 30 of this report.

                                                                                                                                                              www.danskeresearch.com
Emerging Markets Briefer
222




            Poland
Macro outlook
      The escalation of the European crisis is becoming visible in Polish growth. As a
       result, we are now less optimistic about Polish growth and have revised down our                              PLN
       GDP forecast to 2.4% y/y for 2012 and 1.9% y/y for 2013. In particular, the relatively
                                                                                                                     Credit rating:
       sharp slowdown in domestic demand is worrying. The construction sector has been hit
       hard and activity in the sector has slowed dramatically. This is weighing on                                  S&P: A- (stable)
       investment and we basically expect no growth in investments for the remainder of                              Currency regime:
       2012 and only a moderate recovery in 2013 and 2014.
                                                                                                                     Free float (freely convertible)
      That said, we believe that the Polish economy is relatively well protected from the
       euro crisis and that the considerable monetary policy flexibility in Poland provides                          Inflation target:
       protection from the negative impact of the euro crisis.                                                       2.5% +/-1pp
      Structurally, the Polish economy looks well balanced and even though both the                                 Macro monitor (10 September)
       current account deficit and the budget deficit are slightly too high compared with
       what is considered to be sustainable in the longer term, we do not see any reason to be
       overly concerned.                                                                                             FX forecast
Monetary policy outlook                                                                                                                      EUR/PLN
      A couple of months ago, the Polish central bank (NBP) hiked its key policy rate by                                                        Danske      Forward
       25bp to 4.75% on the back of relatively robust growth and slightly elevated inflation.                           14-Sep                    4.06
                                                                                                                        +3M                       3.90         4.10
       However, with growth now slowing and inflation beginning to inch down, we believe
                                                                                                                        +6M                       3.95         4.14
       that the NBP will reverse its course in the near future and start cutting interest rates,                        +12M                      4.00         4.22
       especially due to the somewhat bleaker growth outlook. Hence, we expect the NBP to                                                    USD/PLN
       cut its key policy rate by 100bp in total in the coming 12 months.                                                                        Danske      Forward
FX outlook                                                                                                              14-Sep                    3.09
                                                                                                                        +3M                       2.89         3.13
      The zloty has rebound strongly recently on the back of an easing of tensions over the                            +6M                       2.93         3.15
       euro crisis. Furthermore, with interest rates still relatively high in Poland, carry on the                      +12M                      3.08         3.20
                                                                                                                     Source: Reuters EcoWin, Danske Markets
       zloty is attractive. We believe relatively high interest rates will continue to support the
       zloty in the coming one to three months. However, in the medium term (6-12 months),
       the expected further slowdown in the Polish economy and more aggressive monetary
       easing is likely to curb strengthening of the zloty and we could see renewed zloty                            Interest rate forecast
       weakness on a 6-12 month horizon.                                                                                       National Bank of Poland (NBP)
                                                                                                                     Policy rate                    4.75
                                                                                                                     Next meeting                   03 October 2012
                                                                                                                     Next change                    - 25 bp October 2012
Inflation elevated but looking to ease                        Growth is moderating                                   End-2012                       4.00

     30 % y/y                                           30    8                                                  8   Source: Reuters EcoWin, Danske Markets
                                                 % y/y            % y/y                                  % y/y
     25                                                 25    7                                                  7
                                                                               GDP Growth, Poland
     20                                                 20    6                                                  6
              Demand Inflation
     15                                                 15    5                                                  5
     10                        GDP-Deflator             10    4                                                  4   Macro forecast
       5                                                  5   3                                                  3
       0                                                  0   2                                                  2                                  2011     2012     2013
      -5                        Supply Inflation         -5   1                                                  1   GDP (% y/y)                     4.3     2.4       1.9
    -10                                                -10    0                                                  0
                                                                                                                     GDP deflator (% y/y)            3.1     2.3       1.9
         96 98 00 02 04 06 08 10 12                                 07    08      09       10       11    12
                                                                                                                     Private consumption (% y/y)     3.1     1.4       1.7
                                                                                                                     Fixed investments (% y/y)       7.9     3.1       1.6
Source: Reuters EcoWin                                        Source: Reuters EcoWin                                 Unemployment (%)                12.5    12.9     13.8
                                                                                                                     Current account (% of GDP)      -4.3    -3.9      -4.0

                                                                                                                     Source: Reuters EcoWin, Danske Markets




2|      17 September 2012
                                                                                                                     www.danskeresearch.com
Emerging Markets Briefer




                Czech Republic
 Macro outlook
                                                                                                                         CZK
       Czech economic activity remains weak. Even though final Q2 GDP was revised up
        slightly, with the economy falling by 1.0% y/y, up from a preliminary contraction of                             Credit rating:
        1.2% y/y, the Czech economy nonetheless remains in recession. As households and
                                                                                                                         S&P: AA- (stable)
        the government reduced spending, exports, which continued contributing positively to
        growth, could not outweigh the sharp fall in domestic demand. Looking ahead, the                                 Currency regime:
        second half of this year looks even gloomier. We expect larger contractions in GDP in
                                                                                                                         Free float (freely convertible)
        both Q3 and Q4. For 2012, we estimate the Czech economy will contract around 1.3%
        y/y; however, the downside risks to our forecasts are quite high and the Czech                                   Inflation target:
        economy could contract as much as close to 2% this year. We still expect a modest
                                                                                                                         2% +/-1pp
        recovery in 2013.
       Recent macro data remained weak. Retail sales were weaker than expected at 0.3%
        y/y in July and we expect them to remain weak. Although industrial production
        surprised positively in July (growth of 4.2% y/y), there is not much optimism in place
        and we expect industrial production to show weak readings ahead.

 Monetary policy outlook                                                                                                 FX forecasts
       The Czech central bank (CNB) cut the key policy rate by 25bp to 0.50% in June.                                                  EUR/CZK
        However, the Czech economy has proved to be in worse shape than the Czech central                                                Danske          Forward
        bank expected. Both inflation and GDP growth surprised on the downside compared                                  14-Sep           24.34
        with the CNB’s forecast. Hence, given the deteriorating growth outlook,                                          +3M              24.20           24.36
        disinflationary trend strong and, at the same time, strong Czech koruna, which is                                +6M              24.30           24.36
        currently tightening monetary conditions, we believe the Czech central bank has to act                           +12M             24.80           24.37
        more aggressively to loosen monetary conditions further. Hence, besides a further rate                                          USD/CZK
        cut, which we expect from this month’s monetary policy setting meeting, the Czech                                                Danske          Forward
        central bank should, in our view, use other non-standard policy tools to ease monetary                           14-Sep           18.54
        conditions effectively. However, we acknowledge that some of the CNB board                                       +3M              17.93           18.55
        members will remain reluctant to support the use of other non-standard monetary                                  +6M              18.00           18.53
        policy measures.                                                                                                 +12M             19.08           18.51
                                                                                                                         Source: Reuters EcoWin, Danske Markets
 FX outlook
       The Czech koruna (CZK) is performing well in the current euro positive environment.
        As long as sentiment remains positive and monetary conditions are too tight, the CZK
        will continue to perform well. Hence, we expect the CZK to gain moderately on a
        3M-6M horizon but weaken on a 12M horizon, as the collapsing economy forces the
        central bank to take more aggressive action.

  No inflationary pressure on the horizon                     Czech recession is deepening

      10.0 %y/y Demand Inflation                      10.0    10.0 % y/y                                          10.0
                                              %y/y                                                     % y/y
        7.5                                             7.5    7.5                                                 7.5   Interest rate forecast
                                                                                GDP Growth, Czech Republic
        5.0                                             5.0    5.0                                                 5.0
        2.5                                             2.5                                                                      Czech National Bank (CNB)
                                                               2.5                                                 2.5
        0.0                                             0.0                                                              Policy rate         0.50
                                                               0.0                                                 0.0
       -2.5            GDP-Deflator                    -2.5                                                              Next meeting        27 Sep 2012
                                                              -2.5                                                -2.5
       -5.0             Supply Inflation               -5.0                                                              Next change         - 25 bp September 2012
                                                              -5.0                                                -5.0
       -7.5                                            -7.5                                                              End-2012            0.25
     -10.0                                           -10.0    -7.5                                                -7.5
                                                                     06    07   08     09     10     11      12          Source: Danske Markets
          00  02  04     06      08      10   12


  Source: Reuters EcoWin                                      Source: Reuters EcoWin




 3|     17 September 2012
                                                                                                                         www.danskeresearch.com
Emerging Markets Briefer
444




             Hungary
Macro outlook
     Since 2006 there has basically been no growth in the Hungarian economy and there                           HUF
      are really no clear signs of a recovery. Furthermore, the impact of the re-escalation of
      the euro crisis is still feeding through to the Hungarian economy, which is dampening                      Credit rating:
      growth further. Furthermore, we are increasingly reaching the conclusion that the key
                                                                                                                 S&P: BB+ (negative)
      reason for Hungary’s lacklustre growth performance is a continued deterioration of
      ‘supply-side conditions’ in the Hungarian economy. Continued political ‘noise’ is                          Currency regime:
      certainly not helping.
                                                                                                                 Free float (freely convertible)
     An additional worry is that Hungarian Prime Minister Viktor Orban recently stated                          Inflation target:
      that his government cannot accept the IMF’s terms for a new loan deal for Hungary.
      We believe there will be a deal eventually but the renewed uncertainty is likely to                        3% (medium term)
      contribute to volatility in the Hungarian markets and add to ‘regime uncertainty’ in
      Hungary which will probably continue to weigh on growth.

     We expect Hungarian GDP to contract by 2% in 2012 and a further 1% in 2013. This
      is hardly supportive for the long-term outlook for the Hungarian forint.                                   FX forecast

Monetary policy outlook                                                                                                          EUR/HUF
                                                                                                                                  Danske        Forward
     At the latest meeting of the Hungarian central bank’s (MNB) Monetary Council, the
                                                                                                                  14-Sep           281.0
      MNB cut its key policy rate by 25bp on the back of a continued deepening of the
                                                                                                                  +3M              275.0          284.8
      recession in the Hungarian economy and easing inflationary pressures. Looking                               +6M              280.0          287.9
      ahead, there should be more room for monetary easing in Hungary but we expect the                           +12M             280.0          293.4
      MNB to move cautiously going forward. In particular, renewed uncertainty about a                                          USD/HUF
      possible IMF deal is likely to dampen the MNB’s eagerness to pursue further                                                 Danske        Forward
      monetary easing.                                                                                            14-Sep          214.04
                                                                                                                  +3M             203.70         216.87
FX outlook
                                                                                                                  +6M             207.41         219.07
     In the near term, attractive carry on the forint and a benign global financial                              +12M            215.38         222.89
      environment is likely to support it. However, on a 6-12 month horizon, we see                              Source: Reuters EcoWin, Danske Markets
      increasing risk of forint weakness, but do not expect a major correction – rather we
      expect the EUR/HUF to remain fairly range-bound and attractive carry counteracts
      macroeconomic and political weaknesses.
                                                                                                                 Interest rate forecast
Inflation still above MNB’s target rate                     Growth remains lacklustre                                   Hungarian Central Bank (MNB)
     30 % y/y                                         30
                                                                                                                 Policy rate          6.75
                                             % y/y           4 % y/y                                  % y/y 4
                                                                                                                 Next meeting         25 Sep 2012
     25                                               25
     20                                               20     2                                              2    Next change          - 25 bp H2 2012
     15                GDP-Deflator                   15     0                                              0    End-2012             6.50
                                    Supply Inflation
     10                                               10         GDP Growth, Hungary
                                                            -2                                              -2
       5                                                5                                                        Source: Reuters EcoWin, Danske Markets
                                                            -4                                              -4
       0                                                0
      -5                                               -5   -6                                              -6
                             Demand Inflation
    -10                                              -10    -8                                              -8
         96 98   00   02 04 06 08 10 12                          06     07     08      09   10   11    12


Source: Reuters EcoWin                                      Source: Reuters EcoWin




4|     17 September 2012
                                                                                                                 www.danskeresearch.com
Emerging Markets Briefer




                Estonia
    Macro outlook
        Final GDP data for Q2 12 was marginally better than the flash estimate. Estonian                                EEK
         growth decelerated to 2.2% y/y, down from 3.6% y/y in Q1 12. For the whole year we
         leave our forecast unchanged at 2.2% but downside risks to this have decreased, as the                          Credit rating:
         economic situation in key Estonian export markets – Finland and Sweden – have
                                                                                                                         S&P: AA- (negative)
         improved. Also, fixed investment continues to grow robustly mainly due to public
         sector investments in buildings and structures. Due to healthy public finances                                  Currency:
         (very low public deficit) Estonia could adopt a looser fiscal policy stance in 2012.
                                                                                                                         EUR since 1 January 2011
        Contrary to our expectations, CPI inflation in Estonia accelerated again in August to                           Macro monitor (12 April)
         3.8% up from 3.6% y/y in July, mainly due to the continuation of the rise in energy
         prices. In general, we see some upside risk to our inflation forecast and revise our
         forecast for the whole year up from 3.1% to 3.5% on average. We expect inflation to
         slow more intensively over the coming year.                                                                     Macro forecasts
        The Estonian unemployment rate fell the most compared with the other Baltic                                                                  2011 2012 2013
         countries. In Q2 12, unemployment contracted to 10.2% from 11.5% in Q1 12.                                      GDP (% y/y)                   7.5    2.2   3.7
         However, given the current economic outlook we believe it is reasonable to expect the                           Inflation (% y/y)             5.0    3.5   2.1

         labour market situation to improve. We expect the unemployment rate to end 2012 at                              Unemployment (%)             11.4   10.0   9.4

         around 10%.                                                                                                     Current Account (% of GDP)    3.2   -2.0   -3.1

                                                                                                                         Source: Reuters EcoWin, Danske Markets
    FX and monetary policy outlook
        S&P has upgraded its long-term foreign and local currency bond ratings for Estonia
         by two notches to AA-, the fourth-highest investment grade. S&P stated that the
         Estonian economy has been able to maintain high growth and stable public finances.
    Risk factors
        A slowdown in external demand is one of the most important risk factors.

    GDP growth has slowed further                                 Domestic demand will follow exports
     60 % y/y                                     % y/y      60    25 %y/y                                         50
     50                                                      50                                             %y/y
                     Industrial production                                            << Private consumption
     40                                                      40    15                                              30
     30                     Export                           30
     20                                                      20     5                                              10
     10                                                      10
      0                                                       0    -5                                              -10
    -10         GDP                                         -10                Fixed investments >>
    -20                                                     -20   -15                                              -30
    -30                                                     -30
        03 04   05    06   07    08    09    10     11 12         -25                                              -50
                                                                        03 04 05 06 07 08 09 10 11 12


    Source: Reuters EcoWin                                        Source: Reuters EcoWin




    5|   17 September 2012
                                                                                                                         www.danskeresearch.com
Emerging Markets Briefer
666




                      Latvia
Macro outlook
        A preliminary estimate of Q2 12 GDP growth shows that the Latvian economy is                                       LVL
         continuing to expand at a robust pace. GDP growth decelerated marginally to 5.0%
         y/y, down from 6.9% y/y in Q1 12. GDP expansion decelerated but remained robust                                    Credit rating:
         and the highest in the EU area. We see the exceptionally good first-quarter results as a
                                                                                                                            S&P: BBB- (stable)
         temporary factor and we expect to see a gradual pass-through of the negative trend in
         external markets to domestic demand. Due to the solid performance in H1 12, we                                     Currency regime:
         have revised up our GDP forecast and now expect the Latvian economy to expand by                                   Quasi-currency board, ERM2
         3.5% on average in 2012.                                                                                           member (freely convertible)
        Latvian CPI inflation remained flat in August at 1.7% y/y. The greatest downward                                   Inflation target:
         pressure on prices in August was presented by the price drops for food, clothing and
         footwear, alcoholic beverages and tobacco. So far, it appears that inflation in Latvia                             None, due to fixed exchange rate
         will slow down faster than we expected and we revise down our inflation forecast for                               Macro monitor (8 May)
         this year from 2.8% to 2.4%, on average.

        Strong economic growth does not seem to have supported an improvement in labour
         market conditions. The unemployment level improved only marginally in Q2 12 to
         16.1% from 16.3 % in Q1 12. Taking into account the expected deceleration in
         growth, we do not expect any visible improvement in the labour market over the
         course of this year.
                                                                                                                            FX forecasts
FX and monetary policy outlook
                                                                                                                                                EUR/LVL
        The Latvian lat (LVL) is pegged to the euro through ERM II and today the situation in
                                                                                                                                                Danske      Forward
         the financial market appears to be stable.                                                                            14-Sep            0.70
Risk factors                                                                                                                   +3M               0.70            -
                                                                                                                               +6M               0.70            -
        The main risk is associated with a possible deterioration in the external outlook.                                    +12M              0.70            -
                                                                                                                                                USD/LVL
Recovery remains robust                                                      Still good domestic demand outlook                                 Danske      Forward
    25                                                                 25     60 %y/y                                  40
                                                                                                                               14-Sep            0.53
         % y/y                                            % y/y                       << Private consumption   %y/y
    20                                                                 20                                              30      +3M               0.52            -
    15                                                                 15     40                                       20      +6M               0.52            -
    10                                                                 10
                                                                                                                       10
    5                                                                   5     20                                               +12M              0.54            -
                                                                                                                        0
    0                                                                   0
                                                                                                                      -10   Source: Reuters EcoWin, Danske Markets
    -5                                                                  -5     0
                       GDP                                                              Fixed investments >>          -20
-10                                                                    -10
                                                                             -20                                      -30
-15                             Industrial production                  -15
                                                                                                                      -40
-20                                    Export                          -20
                                                                             -40                                      -50
-25                                                                    -25
         01 02   03   04   05     06    07      08   09    10     11               03 04 05 06 07 08 09 10 11               Macro forecasts

                                                                                                                                                         2011 2012 2013

Source: Reuters EcoWin                                                       Source: Reuters EcoWin                         GDP (% y/y)                   5.5     3.5    3.7
                                                                                                                            Inflation (% y/y)             4.4     2.4    1.9
                                                                                                                            Unemployment (%)             14.3    14.9   13.7
                                                                                                                            Current Account (% of GDP)    -1.2   -2.7   -3.5

                                                                                                                            Source: Reuters EcoWin, Danske Markets




6|        17 September 2012
                                                                                                                            www.danskeresearch.com
Emerging Markets Briefer




                     Lithuania
 Macro outlook
         Lithuanian GDP for Q2 12 confirmed that economic activity continued to slow; GDP                                   LTL
          growth decelerated to 2.2% y/y, down from 3.9% y/y in Q1 12. The relatively weak
          Q2 results were affected by one-offs such as the suspension of operations at the                                   Credit rating:
          ORLEN Lietuva oil refinery. However, we believe that Lithuania's growth will
                                                                                                                             S&P: BBB (stable)
          remain positive this year. Exceptionally good agricultural results should support the
          Lithuanian economy and we expect GDP growth to accelerate again in Q3. Thus, we                                    Currency regime:
          leave our forecast unchanged and expect the Lithuanian economy to expand by 2.7%
                                                                                                                             Currency board, ERM2 member
          in 2012.
                                                                                                                             (freely convertible)
         CPI inflation accelerated further in August to 3.3% y/y, up from 2.8% y/y in July. In                              Inflation target:
          general, we reiterate our expectation that external factors in H2 12 such as
          commodities prices will remain a major factor for the increasing Lithuanian CPI. We                                None, due to fixed exchange rate
          maintain our inflation forecast for the year at 3% on average. However, we see                                     Macro monitor (19 April)
          increased risks to our projections based mostly on the higher-than-expected
          pass-through of gas price shocks to heating prices.

         In Q2 12 the unemployment rate improved to 13.3% down from 14.5% in Q1 12.                                         FX forecasts
          However, the economic slowdown is set to affect the labour market recovery
                                                                                                                                                 EUR/LTL
          negatively this year and we expect the unemployment level to improve only
          marginally in 2012.                                                                                                                    Danske      Forward
                                                                                                                                14-Sep            3.45
 FX and monetary policy outlook                                                                                                 +3M               3.45            -
                                                                                                                                +6M               3.45            -
         Moody’s left Lithuania’s credit rating unchanged. The agency notes that despite rapid
                                                                                                                                +12M              3.45            -
          economic growth the challenges of a high fiscal deficit and high unemployment
                                                                                                                                                 USD/LTL
          persist.
                                                                                                                                                 Danske      Forward
 Risk factors                                                                                                                   14-Sep            2.63
                                                                                                                                +3M               2.56            -
         There is a risk that external demand growth will fall in coming quarters and this                                     +6M               2.56            -
          would affect Lithuanian growth trends.                                                                                +12M              2.65            -
                                                                                                                             Source: Reuters EcoWin, Danske Markets
         Lithuanian is due to hold a general election on 14 October this year. The left wing
          parties – the Labour Party, the Social Democratic Party and the Order & Justice party
          – have already signed an agreement to co-operate in the parliamentary elections. If
          this possible coalition wins the election, there is a high risk that it could deviate from                         Macro forecasts
          the current consolidating fiscal policy objectives.
                                                                                                                                                          2011 2012 2013
                                                                                                                             GDP (% y/y)                   5.9     2.7    3.5
  Growth slowing on the back of weaker                                     ...and domestic outcome
                                                                                                                             Inflation (% y/y)             4.1     3.2    2.9
  exports...
                                                                                                                             Unemployment (%)             13.9    13.1   12.4
     30                                                              30    25 %y/y                                     50
     25 % y/y
                                        Export         % y/y
                                                                     25                                         %y/y         Current Account (% of GDP)    -1.6   -1.9   -3.3
     20                                                              20    15                                          30    Source: Reuters EcoWin, Danske Markets
     15                                                              15
     10                                                              10     5                                          10
      5                                                               5
                                                                                 << Private consumption
      0                                                               0     -5                                         -10
     -5                                                               -5
                                                                                         Fixed investments >>
  -10          Industrial production                                 -10   -15                                         -30
  -15                                                                -15
  -20                       GDP                                      -20   -25                                         -50
  -25                                                                -25
                                                                                 03 04 05 06 07 08 09 10 11 12
          03    04     05    06    07    08      09   10   11   12




  Source: Reuters EcoWin                                                   Source: Reuters EcoWin




 7|       17 September 2012
                                                                                                                             www.danskeresearch.com
Emerging Markets Briefer
888




           Russia
Macro outlook
    Russian economic growth slowed to 4% y/y in Q2 12 versus 4.9% in Q1 12. The               RUB
     economy grew 2.6% y/y in July versus 3.8% y/y in June. As consumer demand
     growth moderated in July to its one and a half year low on accelerating inflation, we     Credit rating:
     expect Q3 12 expansion to stay under 4% y/y, which is still good comparing with
                                                                                               S&P: BBB (stable)
     Russia’s western peers and BRICS.
                                                                                               Currency regime:
    Fixed investments grew 3.8% y/y in July versus 4.7% y/y a month earlier. Foreign
     direct investments expanded 8% YTD in Q2 12 after a 0.7% decrease earlier. A              Managed peg versus dual currency
     positive factor for Russian economic growth was an unexpected expansion in                basket – 45% EUR and 55% USD
     industrial production up to 3.4% y/y in July versus 1.9% y/y in June. Manufacturing       (freely convertible)
     rose 5.7% y/y helped by domestic demand according to our expectations.
                                                                                               Inflation target:
    Russia joined the World Trade Organisation on 22 August 2012 after more than 18           5-6% in 2012 (December-on-
     years of negotiations. The World Bank estimates that WTO membership will add
                                                                                               December basis)
     3.3% p.a. to GDP, up to 11% of GDP in the long run. Wages and return on capital
     may rise 13-19%.
                                                                                               FX forecast
    The unemployment rate remained at 5.4% in July, the third month in a row. Low
     unemployment in combination with high growth in real wages keeps consumption up.                              EUR/RUB
     Thus, we expect unemployment to stay low and the accelerating inflation to put a                              Danske      Forward
     brake on fast expansion of real wages and to limit growth in retail sales.                 14-Sep              40.03
FX and monetary policy outlook                                                                  +3M                 39.91          40.61
                                                                                                +6M                 39.72          41.24
    As we expected, RUB weakened at the end of August and in early September on                +12M                42.22          42.55
     growing demand for imports, increased corporate debt paybacks and high dividends                              USD/RUB
     by Russian large corporations. However, the new strong risk-on sentiment produced
                                                                                                                   Danske      Forward
     by ECB’s September meeting, Fed’s new QE and Bank Rossii’s hike are helping                14-Sep              30.49
     RUB up a bit.                                                                              +3M                 29.56          30.92
                                                                                                +6M                 29.42          31.38
    Russia’s central bank, Bank Rossii, unexpectedly increased its main policy rates 13
                                                                                                +12M                32.48          32.32
     September by 25bp as since July inflation has begun to accelerate on raised tariffs and
                                                                                               Source: Reuters EcoWin, Danske Markets
     weaker crops. The new refi rate is 8.25%, back at the November 2011 level. The
     overnight repo rate rose to 5.50% and the depo rate to 4.25%.
                                                                                               Interest rate forecast
    We believe that tightening monetary policy does not help much to restrain price
     growth in Russia, as it does not have much of a monetary nature. To a large extent,                     Bank of Russia (CBR)
                                                                                               Policy rate           8.25
     inflation has been accelerating due to aggressive price hikes by state monopolies and     Next meeting          01-10 Oct
     a poor competitive environment.                                                           Next change           -       Unchanged 2012
                                                                                               End-2012              8.25
    Russian consumer prices grew 5.9% y/y in August after rocketing 5.6% a month              Source: Reuters EcoWin, Danske Markets
     earlier when postponed tariff increases came through. A weaker-than-expected
     harvest did not bring food deflation. Another hike in tariffs occurred in September,
     thus inflation is climbing clearly above 6%. Our estimate for 2012 inflation remains      Macro forecast
     6.5%
                                                                                                                            2011 2012 2013
Risk factors                                                                                   GDP (% y/y)                   4.3     4.1   3.5
    The Russian economy is experiencing very volatile global demand and volatile global       Inflation (% y/y)             6.1     6.5   6.9
     capital flows. Yet, a more freely floating rouble is helping the economy in the           Unemployment (%)              6.6     6.6   5.9
     uncertain environment.                                                                    Current Account (% of GDP)    4.7     3.9   3.1

                                                                                               Source: Reuters EcoWin, Danske Markets




8|   17 September 2012
                                                                                               www.danskeresearch.com
Emerging Markets Briefer




                        Ukraine
 Macro outlook
          Ukrainian economic growth is decelerating as prices for the country’s major export,                                    UAH
           metals, are falling on continuing global uncertainty and slowing emerging economies.
           The grain crop is turning out to be weaker than expected on dry weather and a high                                     Credit rating:
           performance base last year. The economy grew 3% y/y in Q2 12, versus 2% y/y
                                                                                                                                  S&P: B+ (negative)
           growth a quarter earlier, but from January to July it expanded only 2% y/y.
                                                                                                                                  Currency regime:
          Retail sales growth rose to a four-year high of 17.4% y/y in July, after soaring 16%
           y/y in June and 15.5% expansion in May. Elevated budget social expenditure and                                         Managed peg versus USD
           slight deflation increased disposable income. Also, Euro 2012 provided an additional
           kick. Yet, we expect a slowdown in private consumption, as the post-election period
           brings accelerating inflation through hikes in tariffs and a possible weakening of
           UAH. Parliamentary elections are due to be held in October 2012.

          The current account deficit is continually under pressure as the price of imported
           Russian gas is increasing and prices for exported goods are declining. This weighs on                                  FX forecasts
           the UAH and could lead to a devaluation. To avoid a significant fall in FX rates, the
                                                                                                                                                 EUR/UAH
           government may agree on Russian conditions to get a discount on the gas price.
                                                                                                                                                  Danske          Forward
          Consumer prices were flat in August after a 0.1% fall y/y in July. Food deflation was                                  14-Sep          10.61
           the biggest contributor. However, we expect CPI to rise especially in Q4 12 as tariffs                                 +3M             10.95              N/A
           increase.                                                                                                              +6M             12.02              N/A
                                                                                                                                  +12M            13.00              N/A
 FX and monetary policy outlook                                                                                                                  USD/UAH
          The National Bank of Ukraine (NBU) is continuing its tight monetary policy                                                             Danske          Forward
           intervening to maintain the stability of UAH as parliamentary elections are drawing                                    14-Sep           8.12
           closer. As we had expected, the USD/UAH has been extremely volatile over the past                                      +3M              8.11              N/A
           30 days, pushing the UAH to its three-year weakest in early September.                                                 +6M              8.90              N/A
                                                                                                                                  +12M            10.00              N/A
          We still do not rule out new levels for USD/UAH after the elections at 8.5-8.9 in                                      Source: Reuters EcoWin, Danske Markets
           Q4 12 if the government does not agree on lower gas prices.

 Risk factors
          Eurozone woes and the economic slowdown in China are weighing on Ukrainian
           exporters through shrinking demand and falling metal prices.

          Pre-election moves by the government are putting pressure on the Ukrainian budget
           and the UAH in Q3 12. Currency risk is growing as the UAH becomes more volatile
           under moves from both sides: markets and the NBU.

  Real wage growth is robust                                             Industrial production growth
     40                                                            150   25                                                 25
            % y/y                                          % y/y         20 % y/y                Manufacturing >>   % y/y   20
     30                                                            125                                    GDP>>
                                                                         15                                                 15
     20                                                            100   10                                                 10
                                                                          5                                                  5
     10                                                            75     0                                                  0
                          << Retail sales
      0                                                            50     -5                                                 -5
                          << Real wages
                                                                         -10                                                -10
     -10             Household credit>>                            25                       << Mining
                                                                         -15                                                -15
                                                                         -20                << Utilities                    -20
     -20                                                            0
                                                                         -25                                                -25
     -30                                                           -25   -30                                                -30
           05   06        07      08        09   10   11    12                 09      10                  11       12



  Source: Reuters EcoWin, Danske Markets                                 Source: Reuters EcoWin, Danske Markets




 9|         17 September 2012
                                                                                                                                  www.danskeresearch.com
Emerging Markets Briefer
101010




                         Kazakhstan
Macro outlook
          Kazakh economic growth was unchanged at 5.6% y/y according to preliminary Q2 12                                   KZT
           figures. The growth is far below 2011 numbers as global demand for main Kazakh
           exports – commodities – is under pressure amid global uncertainty despite the high oil                            Credit rating:
           price.
                                                                                                                             S&P: BBB+ (stable)
          Industrial production decreased more than expected for the third month in a row,
                                                                                                                             Currency regime:
           dropping 3.7% y/y in August compared to a 0.5% y/y decline a month earlier.
           Manufacturing fell for the third month posting a 3.6% y/y decrease. As we expected,                               Corridor versus USD
           the mining and quarrying growth in July turned out to be unsustainable contracting
                                                                                                                             Inflation target:
           5.1% y/y in August on eurozone recession and slowing down emerging economies.
                                                                                                                             6-8% in 2012 (December-on-
          Real wage growth moderated to 9.5% y/y in July after a 13.3% y/y expansion in June.                               December basis)
           We believe the path is still good enough to support private consumption and help
           2012 economic growth to reach close to 5.5%.

          Consumer price growth was unchanged in August reaching 4.7% y/y but a higher H2
           12 inflation is expected as food prices are rising on weaker harvests. Prices of services
           (electricity, transport, communication) increased 7.1% y/y in August. Food price
           growth accelerated to 3.8% y/y.

FX and monetary policy outlook
          The National Bank of Kazakhstan (NBK) cut its refi rate in early August by 50bp to
           5.5%, hitting a new record low. Yet, it is worried now about accelerating inflation
           during H2 12 on weaker crops. It means no monetary easing is on the agenda for the
           rest of 2012. The NBK is also concerned about the weakening KZT.

          The uncertain global environment is keeping USD/KZT volatile, weakening the tenge
           0.4% from August to early September. NBK’s large interventions helped the KZT to
           weaken just moderately: less than 1% YTD. Gross international reserves expanded by
           USD0.6bn in August as the economy is supported by the high oil price. We believe
           the NBK will intervene aggressively when USD/KZT tries to break 151. The current
           oil price and large reserves offer enough room for manoeuvre.

Risk factors
          Kazakhstan remains dependent on its resource sector and oil exports, both of which
           are suffering among the global uncertainties. The escalation of the euro-crisis and a
           slowdown of the Chinese economy would cut global demand for Kazakh exports.

GDP and inflation                                                  Credit growth is slowly picking up
20.0                                                        20.0   120                                                120
           % y/y                                   % y/y           110 % y/y                                    % y/y 110
17.5                                                        17.5
                                                                   100                                                100
15.0            << CPI                                      15.0     90                                                 90
                                                                                                    Kazakhstan >>
12.5                                    GDP >>              12.5     80                                                 80
                                                                     70                                                 70
10.0                                                        10.0     60                                                 60
    7.5                                                      7.5     50                                                 50
                                                                     40                                                 40
    5.0                                                      5.0     30                                                 30
                                                                           << Russia
    2.5                                                      2.5     20                                                 20
                                                                           << Ukraine
                                                                     10                                                 10
    0.0                                                      0.0
                                                                      0                                                  0
    -2.5                                                    -2.5    -10                                                -10
           04   05       06   07   08   09   10   11   12               06     07       08   09   10      11      12



Source: Reuters EcoWin, Danske Markets                             Source: Reuters EcoWin, Danske Markets




10 |        17 September 2012
                                                                                                                             www.danskeresearch.com
Emerging Markets Briefer




                 Turkey
 Macro outlook
          Turkish economic growth continued to slow more than expected, posting 2.9% y/y in                                     TRY
           Q2 12 versus revised 3.3% y/y a quarter earlier. Energy prices remained high,
           domestic demand and fixed investment shrank. Yet, H1 12 growth was 3.1% y/y.                                          Credit rating:

          Industrial production improved unexpectedly to 3.4% y/y in July from a revised 3.1%                                   S&P: BB (stable)
           expansion in June on rising exports. However, in August industrial confidence
                                                                                                                                 Currency regime:
           continued to fall posting 104.5 versus 107.3 a month earlier. The flexible USD/TRY
           rate is definitely helping the Turkish economy through an increase in exports.                                        Free-float (freely convertible)

          The unemployment rate decreased to 8.2% in May from 9% a month earlier, much                                          Inflation target:
           lower than the market’s average expectation of 9.9% for 2012. It may improve further
                                                                                                                                 5.0% year-end 2012
           as industrial production growth continues in H2 12.
                                                                                                                                 5.0% year-end 2013
          The current account deficit decreased to USD3.9bn in July from USD4.2bn in June as
           exports continued to grow thanks to the flexible TRY. Hopes for a better situation in
           the eurozone may boost Turkish exports but may put upside pressure on TRY as the
           risk-on sentiment returns to the market.
                                                                                                                                 FX forecasts
 Monetary policy outlook
          Consumer prices declined in July to 8.9% versus 9.1% a month earlier as slowing                                                       EUR/TRY
                                                                                                                                                  Danske        Forward
           economic growth keeps inflationary expectations moderated. Yet, the expansion was
                                                                                                                                  14-Sep           2.36
           bigger than expected as food prices are rising on weaker crops. High energy prices
                                                                                                                                  +3M              2.46            2.38
           will push inflation up in the near future.                                                                             +6M              2.42            2.42
          Turkey’s central bank (TCMB) may finally cut its policy rate as exporters are                                          +12M             2.31            2.48
           complaining about the strong lira. The core inflation is heading south, thus we expect                                               USD/TRY
           the TCMB to deliver at least a 50bp rate cut on 18 September as economic growth is                                                     Danske        Forward
           slowing down.                                                                                                          14-Sep           1.79
                                                                                                                                  +3M              1.82            1.82
 FX outlook                                                                                                                       +6M              1.79            1.84
          USD/TRY turned more volatile in August-September as risk sentiment changed                                             +12M             1.78            1.89
           continuously on the altering global mood. A rate cut by the TCMB would weaken                                         Source: Reuters EcoWin, Danske Markets

           TRY but brighter eurozone prospects would support the lira.


                                                                                                                                 Interest rate forecasts
  Growth is moderating                                         External imbalances continue to moderate
                                                                                                                                     C.B. of the Republic of Turkey (TCMB)
     15 % y/y                                            15
                                                 % y/y         175   Turkish C/A Balance, USD billions >>
                                                                                                                            0    Policy rate          5.75
     10                    GDP, Turkey >>                10
                                                               125                                                          -2   Next meeting         18 Sep 2012
      5                                                   5
                                                                                                                                 Next change          - 50 bp September 2012
                                                                75                                                          -4
      0                                                   0
                                                                                                                                 End-2012             5.25
      -5                                                  -5    25                                                          -6
                                            << 4q MA                                                                             Source: Danske Markets
     -10                                                 -10   -25    << 3M Moving Avg % (FDI / C.A.)                       -8

     -15                                                 -15   -75                                                         -10
            05   06   07   08    09    10      11   12                 07          08          09           10   11   12


  Source: Reuters EcoWin                                       Source: Reuters EcoWin




 11 |       17 September 2012
                                                                                                                                 www.danskeresearch.com
Emerging Markets Briefer
121212




                 South Africa
      While the headline number for Q2 GDP showed sound economic expansion in the                                                         ZAR
       quarter (3.2% q/q seasonally adjusted and annualized rate (saar)), up from 2.7% q/q in
       Q1), the breakdown of number provided less upbeat picture. It showed that the strong                                                Credit rating:
       Q2 GDP growth was driven to a large extend by strong performance of mining
                                                                                                                                           S&P: BBB+ (negative)
       industry due to resumed production following series of strikes during Q1. If we strip-
       off the contribution of the mining output to GDP (contributed by 1.5% q/q to GDP),                                                  Currency regime:
       the non-mining GDP was only 1.7% q/q representing strong deceleration from Q1
                                                                                                                                           Free float (Freely convertible)
       3.6% q/q (saar) growth.
                                                                                                                                           Inflation target:
      Looking ahead, we expect South African economic activity to fall in coming quarters.
       Besides a further broad-based slowdown, we expect the mining sector to contribute                                                   3%-6%
       less again in Q3, as production was again disrupted by strikes. We expect the South
       African economy to grow around 2.2% y/y in 2012 and around 2.7% y/y in 2013.
       Both our forecasts are below the South African central bank’s (SARB) official
       forecast.

      Inflation has eased more than expected in recent months. In July, inflation fell below
       5%, to 4.9% y/y. Even though inflation may have increased in August, the rise is only
       temporary and we should see inflation heading down again. However, we must stress
       that higher oil and, in particular, food prices represent upside risks, which could push
       inflation unexpectedly higher.                                                                                                      FX forecasts
Monetary policy outlook                                                                                                                                   EUR/ZAR
      At the MPC meeting in July, the SARB took the market by surprise when it decided                                                                    Danske          Forward
       to cut interest rates by 50bp to 5%. The rate cut came on the back of a deteriorating                                               14-Sep           10.77
       global economy, with the negative spillover effect on the South African economy set                                                 +3M              11.27           10.88
       to intensify. Following the rate cut in July, we expect the SARB to remain on hold                                                  +6M              11.41           11.02
       going forward. That said, if economic activity shows signs of a deeper slowdown, we                                                 +12M             11.38           11.30
       cannot rule out the SARB easing monetary conditions further.                                                                                       USD/ZAR
                                                                                                                                                           Danske          Forward
FX outlook
                                                                                                                                           14-Sep           8.19
      The rand weakened considerably following the release of a Q2 current account                                                        +3M              8.35             8.29
       showing the biggest deficit in almost four years and after labour unrest spread further                                             +6M              8.45             8.38
       in the mining sector. Both the deteriorating external imbalances and the intensifying                                               +12M             8.75             8.58
       labour unrest represent clear risks for a weaker rand. In combination with the                                                      Source: Reuters EcoWin, Danske Markets
       fundamental overvaluation of the rand, we view the scope for any strengthening as
       very limited at this time. We expect the rand to weaken on all forecast horizons from
       three to 12 months.
                                                                                                                                           Interest rate forecast
Inflation is moderating                                        Growth remains weak
                                                                                                                                               South African Reserve Bank (SARB)
    15.0 % y/y                                         15.0    8                                                                      8
                                                                                 G D P n s a , S o u th A fr ic a             % y/y
                                Demand Inflation
                                                 % y/y         7
                                                                    % y/y
                                                                                                                                      7    Policy rate          5.00
    12.5    GDP-Deflator                               12.5
                                                               6                                                                      6
    10.0                                               10.0    5                                                                      5
                                                                                                                                           Next meeting         20 Sep 2012
      7.5                                                7.5   4                                                                      4    Next change          -       Unchanged 2012
      5.0                                                5.0   3                                                                      3
                                                                                                                                           End-2012             5.00
                                                               2                                                                      2
      2.5                                                2.5
      0.0                                                0.0
                                                               1                                                                      1
                                                                                                                                           Source: Danske Markets
                                                               0                                                                      0
     -2.5      Supply Inflation                         -2.5   -1                                                                     -1
     -5.0                                               -5.0   -2                                                                     -2
                                                               -3                                                                     -3
          96 98 00 02 04 06 08 10 12
                                                                    05      06       07          08          09     10   11     12




Source: Reuters EcoWin                                         Source: Reuters EcoWin




12 |     17 September 2012
                                                                                                                                           www.danskeresearch.com
Emerging Markets Briefer




              Brazil
 Macro outlook
       The Brazilian economy has continued its slowdown in 2012. Although it has been                BRL
        gradual, growth is approaching zero as the economy expanded by just 0.7% in Q1 12,
        slowing further in Q2 – newly released data shows growth of just 0.5% y/y, even               Credit rating:
        worse than expected.
                                                                                                      S&P: BBB (stable)
       The situation is not helped by the macroeconomic conditions for Brazil’s major export
                                                                                                      Currency regime:
        partners. The slowdown in Chinese growth is particularly worrisome as well as the
        questions surrounding the US recovery, not to mention the European situation. As we           Free float (non-convertible)
        continue to be concerned about these markets, our outlook for Brazil is not too bright
                                                                                                      Inflation target:
        either. Despite the measures taken in the form of lower interest rates and tax cuts
        (potentially with more to come), we therefore do not feel confident in taking our 2012        4.5% +/- 2% points
        GDP forecast above 1.4% y/y. For 2013, growth should we hope pick up again and                Macro Monitor (3 September)
        we expect the economy to expand by 3.4% y/y.

       On a slightly more positive note, the Brazilian labour market still seems to be
        weathering the current situation well, as unemployment figures continue their
        downward trend.                                                                               FX forecasts

       External balances continue to be rather weak, with current account deficits running                                  EUR/BRL
        relatively high, at around 2% of GDP recently – a level that we expect may even                                       Danske         Forward
                                                                                                      14-Sep                   2.64
        weaken in 2012-13. Exports should, however, to some extent be helped by the weak
                                                                                                      +3M                      2.63                 2.68
        Brazilian real as well as the increase in commodity prices.
                                                                                                      +6M                      2.63                 2.71
 Monetary policy outlook                                                                              +12M                     2.54                 2.79
       Prices rose 5.2% y/y in August, the same increase y/y as in July, as food prices                                     USD/BRL
        continued to be elevated due to bad weather. Inflation is still under control though, as                              Danske         Forward
        the recent increase in consumer prices is still comfortably within the target band            14-Sep                   2.01
        (4.5%, +/-2 percentage points). Our GDP deflator model signals that inflation should          +3M                      1.95                 2.04
        remain at current levels for 2012, as we do not forecast a significant pickup in growth.      +6M                      1.95                 2.06
                                                                                                      +12M                     1.95                 2.12
       The Central Bank of Brazil (BCB) continued its rate-cutting cycle on 29 August by             Source: Reuters EcoWin, Danske Markets
        delivering an additional 50bp cut in the Selic rate, the sixth this year, and the ninth
        since the cutting cycle began a year ago, bringing it to a record-low 7.50%.

       BCB’s cutting cycle may be coming to an end but we believe there is still room for a          Interest rate forecasts
        bit more easing, given the disappointing growth recently. We thus expect one                                Central Bank of Brazil (BCB)
        additional cut this year but this time just 25bp. This means our year-end call is now a       Policy rate                   7.50
                                                                                                      Next meeting                  10 Oct 2012
        7.25% Selic rate.
                                                                                                      Next change                   - 25 bp Q4 2012
 FX outlook and risk factors                                                                          End-2012                      7.25
                                                                                                      Source: Danske Markets
       Following strong depreciation in the Brazilian real earlier this year, it has been
        relatively flat over the last few months, trading in the range of 2.00 – 2.05, a level that
        the government seems to find appropriate.
                                                                                                      Macro forecast
       As some risk appetite has appeared in the global markets recently, in particular after
                                                                                                                                    2011    2012           2013
        the announcement of monetary easing from the Fed, we have a slightly positive                 GDP (% y/y)                    2.7     1.4           3.4

        outlook for the real in the short term, also helped by higher commodity prices.               GDP deflator (% y/y)           7.0     6.0           6.3
                                                                                                      Private consumption (% y/y)    4.1     2.2           3.7
        However, we do not believe the government will allow the real to strengthen                   Fixed investments (% y/y)      4.7     -2.0          5.2

        significantly. Medium to longer term we are relatively neutral, given the weak outlook        Unemployment (%)               5.2     5.8           5.8


        for Brazilian and global growth.                                                              Source: Danske Markets, Reuters EcoWin




 13 |     17 September 2012
                                                                                                      www.danskeresearch.com
Emerging Markets Briefer
141414




                          Mexico
Macro outlook
          The Mexican economy has managed to weather domestic problems as well as the                                                        MXN
           global impact of the euro crisis, growing by an impressive 4.6% y/y in Q1 and 4.1%
           in Q2, which was stronger than expected. The growth in H1 12 was helped by a                                                       Credit rating:
           healthy US recovery, as the Mexican economy is heavily dependent on exports to the
                                                                                                                                              S&P: BBB (stable)
           US. Although the US recovery seems to have hit some hurdles, we still expect
           Mexican growth to remain fairly robust in 2012 and 2013: we expect it to expand by                                                 Currency regime:
           3.7% y/y and 3.3% y/y, respectively, slowing a bit from 3.9% y/y in 2011.
                                                                                                                                              Free float (freely convertible)
          The Mexican current account balance numbers surprised on the upside in H1 12 with                                                  Inflation target:
           a surplus in both quarters but, as growth in Mexico’s export partners is slowing down,
           we still expect a deficit for the year as a whole.                                                                                 3.0% +/- 1% point

          Enrique Peña Nieto from the Institutional Revolutionary Party was elected as                                                       Macro Monitor (31 August)
           Mexico’s president on 1 July.
Monetary policy outlook
                                                                                                                                              FX forecasts
          Inflation has started to pick up in Mexico recently, driven partly by healthy growth in
           the economy and partly by rising food prices resulting from drought and bird flu.                                                                         EUR/MXN
           Consumer prices rose for the fourth month in a row in August, reaching 4.6% y/y, and                                                                       Danske          Forward
                                                                                                                                              14-Sep                   16.68
           are thus moving further away from the central bank’s target range of 3.0% +/-1pp.
                                                                                                                                              +3M                      16.61            16.82
           Although these effects should be temporary, our GDP deflator model suggests that
                                                                                                                                              +6M                      16.74            16.98
           inflation could stay above target in 2012 and 2013.
                                                                                                                                              +12M                     16.25            17.28
          On 7 September, the Mexican central bank (Banxico) once again left its key policy                                                                         USD/MXN
           rate unchanged at 4.50%. As we expect the elevated inflation rate to be temporary,                                                                         Danske          Forward
           while the recent action by the Fed should be positive for the peso and thus help ease                                              14-Sep                   12.71
           inflationary pressures, we believe that Banxico will maintain its wait-and-see                                                     +3M                      12.30            12.81
           approach and keep rates unchanged throughout 2012.                                                                                 +6M                      12.40            12.92
                                                                                                                                              +12M                     12.50            13.13
FX outlook
                                                                                                                                              Source: Reuters EcoWin, Danske Markets
          The Mexican peso has rebounded quite a bit over the summer, as positive sentiment
           appeared in the markets, following the strong sell-off earlier this year. We expect the
           positive momentum to continue in the short term, supported by the announcement of                                                  Interest rate forecast
           monetary easing by the Fed. In the medium to long term, we expect the peso
                                                                                                                                                            Bank of Mexico (Banxico)
           gradually to start weakening again, moving towards a level determined more by                                                      Policy rate                   4.50
           fundamentals.                                                                                                                      Next meeting                  26 Oct 2012
                                                                                                                                              Next change                   -        Unchanged 2012
We remain optimistic on Mexican                                                Inflation has picked up recently                               End-2012                      4.50

growth                                                                                                                                        Source: Danske Markets
 10.0                                                                   10.0
                                                                Y/Y %          6.0                                                      6.0
                                                                                   %                                              % y/y 5.5
    7.5    Mexico, GDP Growth, Production Approach                       7.5   5.5
                                                                                                               << O/N rate. Mexico
                                                                               5.0                                                      5.0
    5.0                                                                  5.0
                                                                               4.5                                                      4.5
    2.5                                                                  2.5   4.0                                                      4.0   Macro forecast
    0.0                                                                  0.0   3.5                                                      3.5
                                                                               3.0                                                      3.0                                  2011    2012     2013
    -2.5                                                                -2.5            Inflation, Mexico >>
                                                                               2.5                                                      2.5   GDP (% y/y)                     3.9     3.7       3.3
    -5.0                                                                -5.0   2.0                                                      2.0   GDP deflator (% y/y)            5.4     4.5       4.7
    -7.5                                                                -7.5   1.5                              Inflation target band   1.5
                                                                                                                                              Private consumption (% y/y)     4.5     4.3       3.9
                                                                               1.0                                                      1.0
-10.0                                                                 -10.0                                                                   Fixed investments (% y/y)       8.9     10.5      7.2
            04     05     06      07      08     09   10   11    12                    09         10               11            12
                                                                                                                                              Unemployment (%)                5.0     4.9       5.0


Source: Reuters EcoWin                                                         Source: Reuters EcoWin                                         Source: Danske Markets, Reuters EcoWin




14 |        17 September 2012
                                                                                                                                              www.danskeresearch.com
Emerging Markets Briefer




                  China
 Macro outlook
          GDP growth in Q2 12 decreased from 8.1% y/y to 7.6% y/y and we expect GDP
                                                                                                                        CNY
           growth to weaken further to 7.4% as data continue to disappoint. The weakness is
           increasingly driven by slower export growth, inventory cuts and to some degree                               Credit rating:
           manufacturing investments. On the other hand, the property market has stabilized
                                                                                                                        S&P: AA- (stable)
           with house sales and house prices in August improving for the third month in a row.
           With both monetary and fiscal policy being eased, we still believe growth will pick up                       Currency regime:
           gradually from Q4 but we have revised our growth forecast for 2012 down to 7.7%
                                                                                                                        Crawling USD peg
           from previously 8% on the back of our expectations of a weaker Q3.
                                                                                                                        Inflation target:
          Inflationary pressure has eased. Inflation increased slightly to 2.0% y/y from 1.8% y/y
           in July but we expect inflation to stay around 2% y/y in the coming months. This is                          Less than 4% for 2012
           substantially below the 4% target the Chinese government has set for inflation in
           2012, so it is unlikely to be a major constraint on monetary policy.
 Monetary policy outlook
                                                                                                                        FX forecast
          There is increasing uncertainty about the People’s Bank of China’s willingness to ease
           monetary policy. China cut its leading interest by 25bp in early June and early July but                                    EUR/CNY
                                                                                                                                         Danske         Forward
           since then no further monetary easing has been announced. Part of the explanation
                                                                                                                        14-Sep            8.29
           could be concern about the rebound in the property market in recent months. We still
                                                                                                                        +3M               8.51             8.35
           expect the leading interest rate to be cut by another 25bp and the reserve requirement
                                                                                                                        +6M               8.51             8.40
           for commercial banks to be cut by 150bp but there is increasing risk that it will be less.                   +12M              8.14             8.48
          On the other hand, fiscal easing is being stepped up and we now expect fiscal easing to                                     USD/CNY
           add more than 1.5% to GDP over the next year. The Chinese government has                                                      Danske         Forward
           announced a number of new infrastructure projects and subsidies for purchases of eco-                        14-Sep            6.32
           friendly consumer durables have been reintroduced.                                                           +3M               6.30             6.36
                                                                                                                        +6M               6.30             6.39
 FX outlook
                                                                                                                        +12M              6.26             6.44
          We believe that the gradual appreciation of CNY against USD has been (as in 2009) and                        Source: Reuters EcoWin, Danske Markets
           that USD/CNY will be broadly unchanged over the next year. The likelihood of a larger
           depreciation of CNY in the coming months is small as China does not want to challenge
           the status quo ahead of the presidential election in the US. However, we should get used
           to more two-way volatility in the USD/CNY exchange rate. In April China widened the
           daily trading band against USD from +/-0.5% to +/-1.0%. The country is gradually                             Interest rate forecast
           moving towards a fully convertible currency and a floating exchange rate and appears to                             People's Bank of China (PBOC)
           be targeting a convertible and free floating currency by 2015. With a current account                        Policy rate          6.00
                                                                                                                        Next meeting         Not announced
           surplus below 3% of GDP and FX reserve accumulation easing, the case for a
                                                                                                                        Next change          -25 bp Q4 2012
           substantially undervalued CNY has become weaker.                                                             End-2012             5.75
                                                                                                                        Source: Reuters EcoWin, Danske Markets
  Intervention in FX market has eased                             More two-way volatility in USD/CNY
     3.5 1,000 bn USD                      1,000 bn USD     3.5   6.6                                             6.6
                                                                               USD/CNY exchange rate
     3.0                FX reserves                         3.0
                                                                  6.5                                             6.5
     2.5                                                    2.5                  Daily trading band
     2.0                                                    2.0
                                                                  6.4                                             6.4
     1.5                                                    1.5                                Spot

     1.0                                                    1.0   6.3                                             6.3
     0.5                                                    0.5
                                                                        PBoC reference rate
     0.0                                                    0.0   6.2                                             6.2
            04   05   06   07   08    09    10    11   12           Apr Jun   Aug Oct Dec Feb     Apr Jun   Aug
                                                                               11                     12

  Source: Reuters EcoWin, Danske Markets                          Source: Reuters EcoWin, Danske Markets




 15 |       17 September 2012
                                                                                                                        www.danskeresearch.com
Emerging Markets Briefer
161616




                Hong Kong
Macro outlook
      GDP growth has slowed on the back of both weaker exports and weaker domestic                             HKD
       demand, albeit GDP growth in Q2 accelerated slightly to 1.2% y/y from just 0.6% y/y
       in the previous quarter. Nonetheless domestic demand remains relatively resilient                        Credit rating:
       supported by negative real interest. Domestic demand in Q2 increased 4.2% y/y, but
                                                                                                                S&P: AAA (stable)
       nonetheless slowed from a solid 8.0% y/y in Q1. WE do expect GDP growth to
       improve in the coming months as growth gradually starts to pick up in China                              Currency regime:

      With real interest rates negative and major capital inflows from mainland China, there                   Currency board/USD peg
       is an increasing risk of a bubble in Hong Kong’s property market. However, the
                                                                                                                Inflation target:
       government is taking proactive steps to prevent a bubble from developing. The
       required down payment for property purchases has been raised, a 15% duty for                             No target
       apartments sold within six months of purchase has been introduced and most recently
       the loan-to-value ratio for new mortgages has been raised.

      Inflation has finally started to ease after peaking above 6% y/y last year. Nonetheless,
       inflation remains relatively high underscoring that the peg to the USD is an increasing
       challenge for Hong Kong.                                                                                 FX forecast

Monetary policy outlook                                                                                                        EUR/HKD
      Due to Hong Kong’s USD currency board, interest rates are linked to their US                                             Danske          Forward
       counterparts. Fed’s latest round of QE and its commitment to keeping leading interest                    14-Sep           10.18
                                                                                                                +3M             10.48            10.18
       rates close to zero until mid 2015 is a considerable challenge for Hong Kong’s
                                                                                                                +6M             10.48            10.19
       economy as the implications is that real interest rate will stay negative. Pegging
                                                                                                                +12M             10.10           10.20
       monetary policy to the US could be destabilising and particularly there is increasing
                                                                                                                               USD/HKD
       risk it will fuel a bubble on the property market.
                                                                                                                                Danske          Forward
                                                                                                                14-Sep           7.75
FX outlook
                                                                                                                +3M              7.76             7.75
      Hong Kong’s currency is pegged to the USD within a very tight trading band (see                          +6M              7.76             7.75
       chart below) and Hong Kong’s Monetary Authority (MA) intervenes in the FX market                         +12M             7.77             7.75
       to keep the HKD within its trading band. Because of the currency board, all HKD                          Source: Reuters EcoWin, Danske Markets
       issues have to be backed by USD assets.

      While we expect Hong Kong to maintain its USD peg for the near future, a change in
       the Hong Kong exchange rate system in the coming years can no longer be ruled out.
       Full CNY convertibility is probably a necessary condition for the HKD to abandon its
       USD peg for a CNY peg and this is unlikely to happen before 2015. However, we                            Interest rate forecast
       expect the importance of CNY to increase gradually and it is already starting to                            Hong Kong's Monetary Authority (MA)
       function as a parallel currency in Hong Kong. This development is being supported by                     Policy rate          0.50
                                                                                                                Next meeting         Not announced
       the offshore CNY market, which has taken off in Hong Kong in the past year.                              Next change          + 25 bp Q2 2015
                                                                                                                End-2012             0.50
USD/HKD is currently trading close to                Negative real interest rates a major
                                                                                                                Source: Reuters EcoWin, Danske Markets
the floor of its trading band                        challenge for monetary policy
    7.90                                      7.90   8                                                     8
                                                          %         3M interbank interest rate>> %
                                                     6     /                                               6
    7.85                                      7.85
           USD/HKD                                   4                                                     4

    7.80                                      7.80   2                                                     2

                                                     0                                                     0
    7.75                                      7.75
                                                                << Consumer prices
                                                     -2                                                    -2

    7.70                                      7.70   -4                                                    -4
           06   07   08   09   10   11   12               03   04    05   06   07   08   09   10   11 12


Source: Reuters EcoWin                               Source: Reuters EcoWin




16 |       17 September 2012
                                                                                                                www.danskeresearch.com
Emerging Markets Briefer




                  Taiwan
 Macro outlook
         The export-dependent Taiwanese economy has slowed on the back of weaker global                                TWD
          growth albeit resilient domestic demand has cushioned the downturn so far. GDP
          growth in Q2 contracted 0.2% y/y in Q2 but GDP did expand quarter-on-quarter and                              Credit rating:
          H1 12 as a whole is still substantially stronger than H2 12. GDP growth is now
                                                                                                                        S&P: AA- (stable)
          expected to expand only 1.5% in 2012 (from 2.4% in 2011), which is nonetheless a
          relatively mild slowdown. Next we expect GDP to expand by about 3% but a                                      Currency regime:
          recovery will be dependent on stronger global growth.
                                                                                                                        Free float
         Liberalisation of economic ties with China is currently a major positive for Taiwan.                          Inflation target:
          Tourism, transport and regulation of foreign direct investments for financial
          institutions have recently been liberalised. In 2010 China and Taiwan signed an                               2% medium term
          Economic Co-operation Framework Agreement (ECFA) that cut tariffs for Taiwan’s
          exports to China substantially from 2011. The re-election of incumbent president Ma
          Ying-jeou in January has secured that this policy will be continued.                                          FX forecast

         Inflation in August rose markedly to 3.1% y/y from 1.6% y/y in July – well above the                                         EUR/TWD
          central bank’s 2% inflation target. However, the surge in inflation in August was                                              Danske         Forward
          mainly due to higher food prices in the wake of typhoon-related bad weather and                               14-Sep            38.52
          inflation should ease again in the coming months.                                                             +3M               38.48           38.52
 Monetary policy outlook                                                                                                +6M               38.48           38.48
                                                                                                                        +12M              37.70           38.38
         Taiwan’s central bank’s leading interest rate is currently just 1.875% and remains low
                                                                                                                                       USD/TWD
          in a historical perspective and with real interest rates negative monetary policy
                                                                                                                                         Danske         Forward
          remains accommodative. For that reason the central bank has not yet eased monetary
                                                                                                                        14-Sep            29.35
          policy. Concern about the property market and in the short run possible inflation will
                                                                                                                        +3M               28.50           29.33
          make the central bank reluctant to cut. Hence, our call remains that the leading
                                                                                                                        +6M               28.50           29.28
          interest rates will stay unchanged. That said, the probability of a rate cut is increasing                    +12M              29.00           29.16
          and it is now a close call..                                                                                  Source: Reuters EcoWin, Danske Markets

 FX outlook
         Fundamentally, TWD remains substantially undervalued. It is well supported by a
          strong current account position (current account surplus 10% of GDP). Fed’s recent
          QE3 is expected to strengthen TWD in the short run albeit the central bank might try
          to stem the appreciation by FX intervention.

         Incumbent president Ma Jing-jeou won the presidential election on 14 January and his
          Kuomintang party also regained a majority in the parliament. The implication is that
          the policy of closer economic ties with China will be continued in coming years. It                           Interest rate forecast
          also suggests that the easing of political tensions between Taiwan and China in recent                               Central Bank of Taiwan (CBT)
          years will continue.                                                                                          Policy rate          1.88
                                                                                                                        Next meeting         27 Sep 2012
                                                                                                                        Next change          -       Unchanged 2012
  Growth has slowed, but it has so far                         Inflation comfortably within central
                                                                                                                        End-2012             1.88
  been a relatively mild slowdown                              bank’s target
                                                                                                                        Source: Reuters EcoWin, Danske Markets
     6 % 3m/3m                             % 3m/3m             12    %                                      %      12
                                                         20                 CPI, % 3M AR
     4         Industrial production >>
                                                                8                               Medium term        8
                                                         10
     2                                                                                          inflation target
                                                                4                                                  4
                                                          0
     0
                                                         -10    0                                                  0
     -2
                       <<GDP                                             CPI, % y/y
     -4                                                  -20    -4                                                 -4

     -6                                                  -30    -8                                                 -8
          05     06    07     08    09    10   11   12               07        08     09   10        11       12


  Source: Reuters EcoWin                                       Source: Reuters EcoWin, Danske Markets




 17 |      17 September 2012
                                                                                                                        www.danskeresearch.com
Emerging Markets Briefer
181818




                  South Korea
Macro outlook
        GDP growth is slowing on the back of weaker exports and to some degree weaker                                    KRW
         domestic demand. In Q2 GDP expanded only 0.3% q/q and in Q3 growth will be
         close to zero. In June and September the government has announced fiscal stimulus                                Credit rating:
         that will amount to about 1% of GDP, which should support growth in the coming
                                                                                                                          S&P: A+ (stable)
         quarters. It still looks like a relatively mild slowdown from a historical perspective.
         We expect GDP growth to ease from 3.6% in 2011 to 2.2% in 2012 before improving                                  Currency regime:
         to 2.8% in 2013. South Korea benefits from a very favourable competitive position
                                                                                                                          Free float
         not least against Japan and the current account surplus is expected to stay above 2.5%
         of GDP.                                                                                                          Inflation target:

        Inflation has eased markedly in recent months and is now below Bank of Korea’s                                   3.0% +/- 1pp
         (BoK) 3.0% +/-1pp target range. The recent decline in inflation is partly driven by
         lower food prices due to favourable weather conditions and should prove temporary.
Monetary policy outlook
        Bank of Korea surprisingly left its leading interest rate unchanged at 3.0% in
         September. However, with inflation now below BOK’s targeted range, house prices
         declining and domestic demand also weakening we expect at least one more rate cut                                FX forecast
         before year-end.
                                                                                                                                           EUR/KRW
FX outlook                                                                                                                                  Danske        Forward
        KRW is one of the Asian currencies most sensitive to risk aversion in the market                                 14-Sep             1466
         because of a large foreign investor share in the South Korean stock market and South                             +3M                1458              1474
         Korean banks’ larger dependence on external foreign currency funding, albeit this                                +6M                1458              1482
         dependence has been reduced markedly. In our view KRW is one of the most                                         +12M               1404              1492
         undervalued currencies in Asia: In the short term Fed’s recent QE3 and less risk                                                  USD/KRW
         aversion in the market should strengthen KRE albeit BoK could stem appreciation of                                                 Danske        Forward
         KRW by intervening in the FX market.                                                                             14-Sep             1117
                                                                                                                          +3M                1080         1122.20
        The transfer of power to Kim Jong Un after the death of the North Korean leader Kim                              +6M                1080         1127.80
         Jong-Il is a major uncertainty, where neither improved relations with North Korea nor                            +12M               1080         1133.50
         increased instability can be ruled out. In South Korea, presidential elections are                               Source: Reuters EcoWin, Danske Markets
         scheduled for December 2012. Park Geun-Hye from the ruling Saenuri party is
         expected to win and as Saenuri already has a majority in the parliament the domestic
         political situation is stable

Inflation has dropped below BoK’s                                GDP growth probably close to zero in                     Interest rate forecast
targeted range                                                   Q3
                                                                                                                                         Bank of Korea (BOK)
    10                                                      10   15                                                  6
         %            Consumer price                   %               % 3m/3m                        % 3m/3m             Policy rate           3.00
                                                                 10                                                  4    Next meeting          11 Oct 2012
    8                                                       8
                       3m/3m AR                                   5                                                  2    Next change           -25 bp Q4 2012
    6     Target for inflation                              6     0                                                  0    End-2012              2.75
                                       y/y
    4                                                       4
                                                                  -5                                                 -2   Source: Reuters EcoWin, Danske Markets
                                                                 -10 << Industrial production                        -4
    2                                                       2                                     GDP>>
                                                                 -15                                                 -6

    0                                                       0    -20                                                 -8
          04    05     06    07   08    09   10   11   12              04   05   06    07   08   09   10   11   12


Source: Reuters EcoWin, Danske Markets                           Source: Reuters EcoWin




18 |       17 September 2012
                                                                                                                          www.danskeresearch.com
Emerging Markets Briefer




                     Thailand
 Macro outlook
         Growth was very strong in H1 12 supported by reconstruction after the flooding that                                   THB
          hit the Bangkok area late last year and the expansionary fiscal policy from the Puea
          Thai Party (PTP) government elected last year. Despite the slowdown in global                                         Credit rating:
          growth GDP growth has so far beaten expectations, increasing 3.3% q/q AR in Q2.
                                                                                                                                S&P: BBB+ (stable)
          Slower growth should start to take its toll in H2 when we expect GDP growth to ease.
          We currently expect GDP growth to expand 5.5% in 2012 and ease moderately to                                          Currency regime:
          around 4.5% next year.
                                                                                                                                Free float
         Inflation has in recent months declined below 3% y/y after a temporary spike after the                                Inflation target:
          flooding late last year. While core inflation remains subdued, headline inflation
          remains close to the ceiling in the 0.5%-3% range that the Thai central bank targets                                  0.5%-3.0%
          for inflation. In addition, easy fiscal policy and strong domestic demand have started
          to weaken Thailand’s external balances and the trade balance has turned into deficit in
          recent months.

         The Puea Thai Party (PTP) won a landslide victory and Yingluck Shinawatra (the
          sister of former Prime Minister Thaksin Shinawatra) has become prime minister with
          a solid majority in the lower house. While the political situation has become more
          stable it remains a major risk. Political tensions could particularly be fuelled again if
                                                                                                                                FX forecast
          Thaksin is granted amnesty and is allowed to return to Thailand.
                                                                                                                                               EUR/THB
 Monetary policy outlook
                                                                                                                                                 Danske         Forward
         In the wake of the flooding late last year Bank of Thailand (BoT) cut its leading
                                                                                                                                14-Sep           40.36
          interest rate by 25bp twice to 3.0% but has not cut it leading interest rates since
                                                                                                                                +3M               40.23          40.55
          January. We know that two of the seven members of the board have been arguing for                                     +6M               40.23          40.74
          an interest rate cut recently and with two new appointments the balance could shift                                   +12M              39.52          41.13
          decisively in a more dovish direction. With growth slowing and the recent strength of                                                USD/THB
          THB we think that the odds have now moved in favour of an additional interest rate                                                     Danske         Forward
          cut before year-end.                                                                                                  14-Sep           30.75
 FX outlook                                                                                                                     +3M               29.80          30.88
                                                                                                                                +6M               29.80          31.00
         THB has performed relatively strongly in recent months. With a populist fiscal policy,
                                                                                                                                +12M              30.40          31.25
          a possibly more dovish central bank and the external balances deteriorating we think
                                                                                                                                Source: Reuters EcoWin, Danske Markets
          that the fundamentals for THB are starting to look weaker and we expect it to
          underperform over the next year.

  Headline inflation has declined back
                                                                  Growth poised to slow in H2                                   Interest rate forecast
  within BoT’s target range
     10 % y/y                                        % y/y   10                                                           20              Bank of Thailand (BOT)
                                                                  40 % y/y                         GDP>>         % y/y
      8                                                      8                                                            15    Policy rate         3.00
                                                                  30
                CPI, headline                                                                                                   Next meeting        17 Oct 2012
      6                                                      6    20                                                      10
                                                                  10                                                            Next change         -25 bp Q4 2012
      4                                                      4                                                             5
                                                                   0                                                            End-2012            2.75
      2                                                      2                                                             0
                                                                  -10                                                           Source: Reuters EcoWin, Danske Markets
      0                                                      0                                                             -5
                                                                  -20
                CPI excl. food & energy
     -2                                                      -2   -30    <<Industrial production                          -10
     -4                                                      -4   -40                                                     -15
          03    04   05   06    07   08   09   10   11 12               04   05    06   07    08     09    10   11   12


  Source: Reuters EcoWin                                          Source: Reuters EcoWin




 19 |      17 September 2012
                                                                                                                                www.danskeresearch.com
Emerging Markets Briefer
202020




                      Malaysia
Macro outlook
        GDP growth in export-dependent Malaysia has been surprisingly resilient despite the                             MYR
         slowdown in global growth supported by strong domestic demand. GDP growth in Q2
         accelerated slightly to 5.5% y/y from 4.8% y/y in Q1. Fiscal policy has strengthened                            Credit rating:
         domestic demand as the UMNO-led government is preparing for a general election
                                                                                                                         S&P: A- (stable)
         that has to be held before March 2013. We expect GDP growth to ease slightly in H2
         but it will only be a moderate slowdown as fiscal policy continues to support growth,                           Currency regime:

        Public finances are deteriorating due to fiscal stimulus and the budget deficit could be                        Free float
         close to 6% of GDP in 2012. However, external balances remain very healthy with the
                                                                                                                         Inflation target:
         current account surplus expected to exceed 7% of GDP in 2012. On a positive note,
         the UMNO-led government has accelerated both economic and political reforms in                                  No official target
         Malaysia and foreign direct investments appear to be improving.

        Inflation has continued to decline and is now close to 1% y/y. This gives the
         Malaysian central bank room to ease if growth slows more than expected in H2 12.
Monetary policy outlook
        The Malaysian central bank is regarded one of the most hawkish central banks in Asia, as                        FX forecast
         it was one of the first central banks to start tightening in connection with the most recent
         monetary tightening cycle in Asia. With the economy so far holding up relatively well                                          EUR/MYR
         supported by fiscal easing, we think the Malaysian central bank will be reluctant to cut its                                    Danske          Forward
         leading interest rate. That said, the central bank sounded more dovish at its most recent                       14-Sep           3.98
         monetary meeting and, in our view, risks are now clearly skewed towards a rate cut                              +3M              3.97             4.01
         before year-end.                                                                                                +6M              3.97             4.03
                                                                                                                         +12M             3.90             4.07
FX outlook                                                                                                                              USD/MYR
        Short term MYR should continue to be supported by improving risk sentiment and a                                                Danske          Forward
         relatively hawkish central bank. Longer term MYR remains supported by strong                                    14-Sep           3.04
         external balances and by recent economic liberalisation measures not least easing                               +3M              2.94             3.05
         access for foreign direct investments into Malaysia. The general election expected in                           +6M              2.94             3.07
         early 2013 remains the main uncertainty.                                                                        +12M             3.00             3.09
                                                                                                                         Source: Reuters EcoWin, Danske Markets
        The political environment appears to be stable, although the governing Barisan
         Nasional (BN) coalition is increasingly challenged by the opposition and the general
         election expected to be held in early 2013 is expected to be the most closely contested
         ever with the opposition possibly winning the election. Prime Minister Najib has
         stepped up both economic and political liberalisation and if anything, these policies                           Interest rate policy
         are expected to be accelerated if the opposition wins a majority.                                                     Central Bank of Malaysia (BNM)
                                                                                                                         Policy rate          3.00
Growth resilient on strong domestic                       Decline in inflation could open for rate                       Next meeting         08 Nov 2012
demand                                                    cut                                                            Next change          -       Unchanged 2012
     6                                                6    9    % y/y                                               9    End-2012             3.00
         % q/q                               % q/q                                                             %
     5                                                5                                                                  Source: Reuters EcoWin, Danske Markets
     4                                                4    7                                                        7
                                                                 Overnight policy rate
     3                                                3    5                                                        5
     2                                                2
     1                                                1    3                                                        3
     0                                                0
    -1                                               -1    1                                                        1
          GDP                                                                 <<CPI inflation
    -2    Domestic demand                            -2    -1                                                       -1
    -3                                               -3
    -4                                               -4    -3                                                       -3
          06     07    08   09    10    11     12               04      05   06   07     08     09   10   11   12


Source: Reuters EcoWin                                    Source: Reuters EcoWin




20 |       17 September 2012
                                                                                                                         www.danskeresearch.com
Emerging Markets Briefer




 .                    Philippines
 Macro outlook
         Growth has been relatively resilient in H1 2012 , but some slowdown is likely on the                            PHP
          back of weaker exports albeit exports have also been surprisingly resilient. GDP
          growth in Q2 only eased slightly to 5.7% y/y from 6.0% y/y in Q1. Hence, the                                    Credit rating:
          Philippines appears to be experiencing a very soft slowdown compared to 2008.
                                                                                                                          S&P: BB+ (stable)
         Inflation has started to pick up in recent months and in August increased to 3.8% y/y
                                                                                                                          Currency regime:
          from 3.2% y/y in July. This is still well within the central bank’s 3-5% target range
          for inflation As Philippines is a net importer of food staples, the Philippines is                              Free float
          particularly sensitive to the recent increase in global food prices and this could add
                                                                                                                          Inflation target:
          upward pressure on inflation in the coming months.
                                                                                                                          3%-5% for 2012
         Structurally the Philippines is a positive story. Recent governments have been able
          reduce the public deficit and the public debt to GDP ratio has been declining
          substantially. In addition the current Aquino government is focusing on fighting                                FX forecast
          corruption and improving public infrastructure. The Philippines have recently been
                                                                                                                                          EUR/PHP
          upgraded by Standard & Poor’a and could soon be investment grade                                                                 Danske         Forward
 Monetary policy outlook                                                                                                  14-Sep           54.30
                                                                                                                          +3M               54.00           54.28
         BSP in July cut its leading interest rate by 25 bp for the third time this year to 3.75%.
                                                                                                                          +6M               54.00           54.37
          With growth slowing another interest rate cut is possible, but higher inflation now
                                                                                                                          +12M              52.65           54.65
          limits the room for further rate cuts, so it is a close call.
                                                                                                                                         USD/PHP
 FX outlook                                                                                                                                Danske         Forward
         The Philippines has a very strong external position. The current account surplus                                14-Sep           41.37
          exceeds 5% of GDP, not least because remittances from Filipinos working abroad                                  +3M               40.00           41.33
          have continued at a high level. We expect The PHP to continue to strengthen in the                              +6M               40.00           41.37
          coming months supported by fed’s recent aggressive easing move.                                                 +12M              40.50           41.52
                                                                                                                          Source: Reuters EcoWin, Danske Markets
     Inflation limits room for further rate
                                                                Growth has been surprisingly resilient
     cuts
                                                                120                         Jan. 2008=100           120
     12 % y/y                                     %        12         Jan. 2008=100
                                                                110 Industrial production                           110
     10                                                    10
                                                                100                                                 100
                                                                                                                          Interest rate forecast
                                  Overnight borrowing
      8                           rate>>                   8     90                                                 90
                                                                                                                               Central Bank of Philippines (BSP)
      6                                                    6     80                                                 80
                                                                                                 Export
                                                                                                                          Policy rate          3.75
      4                                                    4     70                                                 70    Next meeting         25 Oct 2012
      2                                                    2     60                                                 60    Next change          - 25 bp Q4 2012
           <<CPI inflation
                                                                 50                                                 50    End-2012             3.50
      0                                                    0
           05    06     07   08   09   10    11       12                08       09         10            11   12         Source: Reuters EcoWin, Danske Markets

     Source: Reuters EcoWin                                     Source: Reuters EcoWin




 21 |      17 September 2012
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Emerging Markets Briefer
222222




                 Indonesia
Macro outlook
        Indonesia is a comparatively closed economy and continues to perform well on the                               IDR
         back of resilient domestic demand. We expect GDP growth in 2012 to ease only
         slightly to 6.4%, from around 6.6% in 2011. In 2013, we expect GDP growth to                                   Credit rating:
         accelerate to around 7%. Despite resilient growth, inflation appears to be contained,
                                                                                                                        S&P: BB+ (positive)
         with both headline and core inflation declining to the lower end of the Bank of
         Indonesia’s (BI) 4-6% target range for inflation. BI has announced that the target                             Currency regime:
         range for inflation will be lowered to 3.5-5.5% for 2012 and 2013.
                                                                                                                        Free float
        Indonesia has very strong fundamentals, not least compared with another major Asian                            Inflation target:
         country, India. However, there are tentative signs of overheating albeit inflation
         remains contained. Credit growth has been very strong and in recent months the trade                           3.5%-5.5% for 2012
         balance has turned into a deficit. Public finances are healthy with the public sector
         deficit poised to decline below 2% of GDP. Fitch and Moody’s have recently
         upgraded Indonesia’s debt to investment grade.
                                                                                                                        FX forecast
Monetary policy outlook                                                                                                                   EUR/IDR
        BI has recently been among the most dovish central banks as it has eased monetary                                                Danske         Forward
         policy relatively aggressively compared with other Asian central banks. While this                             14-Sep            12470
         can be justified to some degree by real interest rates remaining positive, it also                             +3M               12555          12620
         underscores BI’s pro-growth bias. BI justified its rate cut by the recent decline in                           +6M               12690          12781
                                                                                                                        +12M              12610          13137
         inflation and increasing downside risk to the global economy. However, with tentative
         signs of overheating we see limited room for further monetary easing and we expect                                              USD/IDR
         the next move to be an interest rate hike at some stage next year.                                                               Danske         Forward
                                                                                                                        14-Sep             9500
        BI’s relatively aggressive rate cut and the recent trade balance deficit have been                             +3M                9300              9610
         negative for IDR in the short term and it appears that BI does not mind a slightly                             +6M                9400              9725
         weaker IDR in the current environment. While IDR still has relatively strong                                   +12M               9700              9980
         fundamentals, we also believe the fundamentals have started to deteriorate and hence                           Source: Reuters EcoWin, Danske Markets
         we do believe IDR will underperform other Asian currencies over the next year.

        Political stability is a positive for Indonesia. President Susilo Bambang Yudhoyono
         was re-elected in June 2009 and his Democratic Party improved its position                                     Interest rate forecast
         considerably in the general election. Yudhoyono is reform-minded and has signalled
                                                                                                                                       Bank Indonesia (BI)
         his intention to continue fiscal consolidation. That said, the economic and political                          Policy rate           5.75
         reform has lost some momentum over the past two years.                                                         Next meeting          11 Oct 2012
                                                                                                                        Next change           -        Unchanged 2012
                                                                                                                        End-2012              5.75
                                                          Recent increase in inflation has
Aggressive monetary easing from BI                                                                                      Source: Reuters EcoWin, Danske Markets
                                                          reduced the chances of another rate
                                                          cut
    13                                               13   10                                          % y/y        10
         %                                      %              % y/y            Inflation
    12                                               12    9                                                       9
    11                     3M money market           11            Inflation target
                            t                              8       for 2012                                        8
    10                                               10                               Headline
                                                                                      Headli
                                                           7                                                       7
     9                                                9
                                                           6                                                       6
     8                                                8
                                                           5                                                       5
     7                                                7
     6                                                6    4                                                       4
                Leading policy rate
     5                                                5    3                     Core                              3
     4                                                4    2                                                       2
           07      08       09        10   11   12                 09                 10         11           12


Source: Reuters EcoWin                                    Source: Reuters EcoWin




22 |      17 September 2012
                                                                                                                        www.danskeresearch.com
Emerging Markets Briefer




                 India
 Macro outlook
         Growth in India has slowed relatively sharply as the Indian economy has faced                      INR
          increasingly stronger headwinds from weaker exports and particularly domestic
          investment demand in the wake of the Reserve Bank of India’s (RBI) aggressive                      Credit rating:
          monetary tightening. There remains considerable downside risk as India – unlike
                                                                                                             S&P: BBB- (negative)
          China – has limited scope to ease fiscal and monetary policy due to a high budget
          deficit and relatively resilient inflation. We expect GDP growth to decline to just                Currency regime:
          6.0% in 2012 and recover only slightly to 6.8% in 2012.
                                                                                                             Free float
         Inflation has remained elevated in recent months above 6.5% y/y although it has                    Inflation target:
          declined from the peak reached last year. Lower food price inflation is the main reason
          for the decline in inflation but a poor monsoon so far this year suggests that food price          7% for fiscal 11/12
          inflation will remain elevated in the coming months Hence, inflation is only slowly                3% medium term
          getting closer to the RBI’s comfort zone of inflation below 5%.
 Monetary policy outlook
         The Reserve Bank of India (RBI) cut its leading repo rate by 50bp to 8.0% in April                FX forecast
          but has since left its leading interest rates unchanged. RBI stay on hold at its                                  EUR/INR
          September meeting but with growth slowing relatively sharply, we expect RBI to cut                                 Danske          Forward
          its leading interest rates by 50bp before year-end. There is a risk that interest rates           14-Sep            71.27
          could be cut more aggressively next year on the back of a relatively hard landing of              +3M               70.20           72.50
          the Indian economy.                                                                               +6M               71.55           73.65
                                                                                                            +12M              71.50           75.70
 FX outlook
                                                                                                                            USD/INR
         INR has depreciated close to 30% against USD since July 2011. It remains vulnerable
                                                                                                                             Danske          Forward
          near term due to India’s current account deficit of around 3% of GDP, weaker FDI
                                                                                                            14-Sep            54.30
          and portfolio inflows into the Indian stock market. Frustration with the lack of
                                                                                                            +3M               52.00           55.21
          progress on economic reforms has added to this development recently. However, the
                                                                                                            +6M               53.00           56.04
          Indian government has just announced an acceleration in economic reforms including                +12M              55.00           57.51
          increased access for foreign direct investment into India and , sales of equity states in         Source: Reuters EcoWin, Danske Markets
          state owned companies

         Although USD/INR remain vulnerable it has probably overshot, and we expect it to                  Interest rate forecast
          strengthen in the short run supported by improved risk sentiment in the market and the
                                                                                                                     Reserve Bank of India (RBI)
          government’s recent liberalization measure. However, in the long run it remains a                 Policy rate          8.00
          depreciating currency.                                                                            Next meeting         17 Sep 2012
                                                                                                            Next change          - 50 bp Q4 2012
                                                                                                            End-2012             7.50
  Growth easing substantially                                 INR has become a vulnerable currency
                                                                                                            Source: Reuters EcoWin, Danske Markets
     16 % y/y                                  % y/y     16
                                        GDP                   6 % of GDP       Basic balance           6
     12                                                  12   4                                        4
      8                                                  8    2                                        2

      4                                                  4    0                                        0
                                                              -2                                       -2
      0                                                  0
                                                              -4 Portfolio investment                  -4
                Investment                                       Foreign direct investment
     -4         Consumption                              -4   -6 Foreign direct investment abroad      -6
                Net export                                       Current account
     -8                                                  -8   -8                                       -8
           05   06    07      08   09     10   11   12           00 01 02 03 04 05 06 07 08 09 10 11


  Source: Reuters EcoWin                                      Source: Reuters EcoWin, Danske Markets




 23 |      17 September 2012
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Emerging Markets Briefer
242424




FX forecasts
Core - major

                                EUR                      USD                   DKK                   SEK                   NOK
                       Danske      Forward      Danske      Forward   Danske      Forward   Danske      Forward   Danske      Forward
           14-Sep                                1.31                  745.4                860.0                 746.2
            +3M                                  1.35        1.31     746.0        744.8    850.0        863.0     735.0       749.3
  EUR
            +6M                                  1.35        1.31     745.0        744.2    850.0        865.7     730.0       752.4
           +12M                                  1.30        1.32      745.0       743.3     840.0       870.9     725.0       758.8
           14-Sep       1.31                                           567.7                 655.2                568.3
            +3M         1.35             1.31                         552.6        567.1    629.6        657.2     544.4       570.6
  USD
            +6M         1.35             1.31                         551.9        566.2    629.6        658.7     540.7       572.5
           +12M         1.30             1.32                          573.1       564.7     646.2       661.6     557.7       576.5
           14-Sep       102.9                    78.4                  7.24                  8.36                  7.25
            +3M         110.0        102.9       81.0        78.3      6.78        7.24      7.73        8.39      6.68        7.28
   JPY
            +6M         111.0        102.9       82.0        78.2      6.71        7.23      7.66        8.42      6.58        7.31
           +12M         108.0        102.8       83.0        78.0      6.90        7.23      7.78        8.47      6.71        7.38

Source: Reuters EcoWin, Danske Markets



Wider CEE
                                EUR                      USD                   DKK                   SEK                   NOK
                       Danske      Forward      Danske      Forward   Danske      Forward   Danske      Forward   Danske      Forward
           14-Sep       4.06                     3.09                  183.6                211.9                 183.8
            +3M         3.90             4.10    2.89        3.13     191.3        181.4    217.9        210.2    188.5        182.5
  PLN
            +6M         3.95             4.14    2.93        3.15     188.6        179.6    215.2        208.9    184.8        181.6
           +12M         4.00             4.22    3.08        3.20      186.3       176.3     210.0       206.6     181.3       180.0
           14-Sep       281.0                    214.0                 2.65                  3.06                  2.66
            +3M        275.0         284.8      203.7        216.9     2.71        2.62      3.09        3.03      2.67        2.63
  HUF
            +6M        280.0         287.9      207.4        219.1     2.66        2.58      3.04        3.01      2.61        2.61
           +12M        280.0         293.4       215.4       222.9     2.66        2.53      3.00        2.97      2.59        2.59
           14-Sep       24.34                   18.54                 30.62                 35.33                 30.65
            +3M        24.20         24.36      17.93        18.55     30.83       30.57    35.12        35.43     30.37       30.76
  CZK
            +6M        24.30         24.36      18.00        18.53     30.66       30.55    34.98        35.54     30.04       30.89
           +12M        24.80         24.37      19.08        18.51    30.04        30.50     33.87       35.74    29.23        31.14
           14-Sep       4.50                     3.43                 165.8                 191.3                 166.0
            +3M         4.50             4.55    3.33        3.47     165.8        163.5    188.9        189.5    163.3        164.5
  RON
            +6M         4.50             4.59    3.33        3.49     165.6        162.1    188.9        188.6    162.2        163.9
           +12M         4.60             4.69    3.54        3.56      162.0       158.6     182.6       185.8     157.6       161.9
Source: Reuters EcoWin, Danske Markets




CIS
                                EUR                      USD                   DKK                   SEK                   NOK
                       Danske      Forward      Danske      Forward   Danske      Forward   Danske      Forward   Danske      Forward
           14-Sep       40.03                    30.49                18.62                 21.48                 18.64
            +3M        39.91         40.61       29.56       30.92     18.69       18.34     21.30       21.25     18.42       18.45
  RUB
            +6M        39.72         41.24       29.42       31.38     18.76       18.05     21.40       20.99     18.38       18.25
           +12M         42.22        42.55       32.48       32.32     17.64       17.47     19.89       20.47    17.17        17.83
           14-Sep       10.61                    8.12                  70.2                  81.0                  70.3
            +3M        10.95             N/A     8.11        N/A       68.1        N/A       77.6        N/A       67.1        N/A
  UAH
            +6M        12.02             N/A     8.90        N/A       62.0        N/A       70.7        N/A       60.8        N/A
           +12M        13.00             N/A    10.00        N/A       57.3        N/A       64.6        N/A       55.8        N/A
Source: Reuters EcoWin, Danske Markets




24 |   17 September 2012
                                                                                              www.danskeresearch.com
Emerging Markets Briefer




  Baltics
                                    EUR                    USD                   DKK                   SEK                   NOK
                           Danske      Forward    Danske      Forward   Danske      Forward   Danske      Forward   Danske      Forward
            14-Sep          3.45                   2.63                  215.9                 249.1                 216.1
             +3M            3.45            -      2.56          -       216.2         -       246.4         -       213.0         -
    LTL
             +6M            3.45            -      2.56          -       215.9         -       246.4         -       211.6         -
            +12M            3.45            -      2.65          -       215.9         -       243.5         -       210.1         -
            14-Sep          0.70                   0.53                 1071.3                1235.9                1072.4
             +3M            0.70            -      0.52          -      1065.7         -      1214.3         -      1050.0         -
    LVL
             +6M            0.70            -      0.52          -      1064.3         -      1214.3         -      1042.9         -
            +12M            0.70            -      0.54          -      1064.3         -      1200.0         -      1035.7         -
  Source: Reuters EcoWin, Danske Markets



  MEA
                                    EUR                    USD                   DKK                   SEK                   NOK
                           Danske      Forward    Danske      Forward   Danske      Forward   Danske      Forward   Danske      Forward
            14-Sep          2.36                   1.79                  316.4                365.1                 316.8
             +3M            2.46           2.38    1.82        1.82     303.3        312.5    345.5        362.1    298.8        314.4
    TRY
             +6M            2.42           2.42    1.79        1.84     307.9        308.1    351.2        358.5    301.7        311.6
            +12M            2.31           2.48    1.78        1.89      322.5       299.5     363.6       351.0     313.9       305.8
            14-Sep          10.77                  8.19                  69.2                  79.9                  69.3
             +3M           11.27        10.88      8.35        8.29      66.2        68.4      75.4        79.3      65.2        68.9
    ZAR
             +6M           11.41        11.02      8.45        8.38      65.3        67.5      74.5        78.6      64.0        68.3
            +12M            11.38       11.30      8.75        8.58      65.5        65.8      73.8        77.1      63.7        67.2
            14-Sep          5.12                   3.89                 145.7                 168.1                 145.9
             +3M            5.27           5.12    3.90        3.90     141.7        145.5    161.4        168.6    139.6        146.3
    ILS
             +6M            5.27           5.13    3.90        3.91     141.5        144.9    161.4        168.6    138.7        146.5
            +12M            5.01           5.17    3.85        3.92      148.9       143.9     167.8       168.6     144.9       146.9
  Source: Reuters EcoWin, Danske Markets




 25 |   17 September 2012
                                                                                                www.danskeresearch.com
Emerging Markets Briefer
262626




Latam
                                EUR                      USD                   DKK                   SEK                   NOK
                       Danske      Forward      Danske      Forward   Danske      Forward   Danske      Forward   Danske      Forward
           14-Sep       2.64                     2.01                  282.3                325.7                 282.6
            +3M         2.63             2.68    1.95        2.04     283.4        278.3    322.9        322.5    279.2        280.0
  BRL
            +6M         2.63             2.71    1.95        2.06     283.0        274.6    322.9        319.5    277.3        277.7
           +12M         2.54             2.79    1.95        2.12      293.9       266.7     331.4       312.5     286.0       272.3
           14-Sep       16.68                    12.71                44.69                 51.56                 44.74
            +3M        16.61         16.82       12.30       12.81     44.93       44.28     51.19       51.31     44.26       44.55
  MXN
            +6M        16.74         16.98       12.40       12.92     44.50       43.84     50.78       51.00     43.61       44.33
           +12M         16.25        17.28       12.50       13.13     45.85       43.00     51.69       50.39    44.62        43.91
Source: Reuters EcoWin, Danske Markets


EM Asia
                                EUR                      USD                   DKK                   SEK                   NOK
                       Danske      Forward      Danske      Forward   Danske      Forward   Danske      Forward   Danske      Forward
           14-Sep       8.29                     6.32                  89.9                  103.8                 90.0
            +3M         8.51             8.35    6.30        6.36      87.7        89.2      99.9        103.4     86.4        89.8
  CNY
            +6M         8.51             8.40    6.30        6.39      87.6        88.6      99.9        103.1     85.8        89.6
           +12M         8.14             8.48    6.26        6.44      91.5        87.7      103.2       102.7     89.1        89.5
           14-Sep       1466                     1117                  0.51                  0.59                  0.51
            +3M         1458         1474        1080        1122      0.51        0.51      0.58        0.59      0.50        0.51
  KRW
            +6M         1458         1482        1080        1128      0.51        0.50      0.58        0.58      0.50        0.51
           +12M         1404         1492        1080        1134      0.53        0.50      0.60        0.58      0.52        0.51
           14-Sep       40.4                     30.8                  18.5                  21.3                  18.5
            +3M         40.2             40.5    29.8        30.9      18.5        18.4      21.1        21.3      18.3        18.5
  THB
            +6M         40.2             40.7    29.8        31.0      18.5        18.3      21.1        21.2      18.1        18.5
           +12M         39.5             41.1    30.4        31.2      18.9        18.1      21.3        21.2      18.3        18.5
           14-Sep       1.60                     1.22                   466                   537                   466
            +3M         1.60             1.60    1.19        1.22       466        465        531        539        459        468
  SGD
            +6M         1.60             1.60    1.19        1.22       466        465        531        541        456        470
           +12M         1.57             1.60    1.21        1.22       474        464        534        544        461        474
           14-Sep      10.18                     7.75                  73.3                  84.5                  73.3
            +3M        10.48         10.18       7.76        7.75      71.2        73.2      81.1        84.8      70.2        73.6
  HKD
            +6M        10.48         10.19       7.76        7.75      71.1        73.1      81.1        85.0      69.7        73.9
           +12M        10.10         10.20       7.77        7.75      73.8        72.9      83.2        85.4      71.8        74.4
           14-Sep       3.98                     3.04                 187.1                 215.9                 187.3
            +3M         3.97             4.01    2.94        3.05     188.0        185.7    214.2        215.2    185.2        186.8
  MYR
            +6M         3.97             4.03    2.94        3.07     187.7        184.6    214.2        214.7    183.9        186.6
           +12M         3.90             4.07    3.00        3.09      191.0       182.6     215.4       214.0     185.9       186.4
           14-Sep       54.3                     41.4                 13.73                 15.84                 13.74
            +3M        54.00         54.28      40.00        41.33    13.81        13.72    15.74        15.90    13.61        13.81
  PHP
            +6M        54.00         54.37      40.00        41.37    13.80        13.69    15.74        15.92    13.52        13.84
           +12M        52.65         54.65      40.50        41.52    14.15        13.60    15.95        15.93    13.77        13.88
           14-Sep      12470                     9500                 0.060                 0.069                 0.060
            +3M        12555        12620        9300        9610      0.059       0.059    0.068        0.068     0.059       0.059
   IDR
            +6M        12690        12781        9400        9725      0.059       0.058    0.067        0.068     0.058       0.059
           +12M        12610        13137        9700        9980     0.059        0.057    0.067        0.066    0.057        0.058
           14-Sep      71.27                    54.30                 10.46                 12.07                 10.47
            +3M        70.20         72.50      52.00        55.21    10.63        10.27    12.11        11.90    10.47        10.34
   INR
            +6M        71.55         73.65      53.00        56.04    10.41        10.10    11.88        11.75    10.20        10.22
           +12M        71.50         75.70      55.00        57.51    10.42        9.82     11.75        11.50    10.14        10.02
           14-Sep      38.52                    29.35                 19.35                 22.32                 19.37
            +3M        38.48         38.52      28.50        29.33    19.39        19.34    22.09        22.41    19.10        19.45
  TWD
            +6M        38.48         38.48      28.50        29.28    19.36        19.34    22.09        22.50    18.97        19.55
           +12M        37.70         38.38      29.00        29.16    19.76        19.37    22.28        22.69    19.23        19.77
Source: Reuters EcoWin, Danske Markets




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 Forecasts vs forwards
  3M – base currency EUR                   3M – base currency USD

     6.0                                      8.0
     5.0                                      7.0
     4.0                                      6.0
     3.0                                      5.0
     2.0                                      4.0
     1.0
   %0.0                                     % 3.0
    -1.0                                      2.0
    -2.0                                      1.0
    -3.0                                      0.0
    -4.0                                     -1.0
    -5.0                                     -2.0




                                                     SGD
                                                     EGP
               SGD




                                                     PLN




                                                     MXN
                                                     HUF




                                                     ILS
               EGP




                                                     CZK
                                                     IDR

                                                     TWD
               MXN




                                                     PHP
               PLN
               HUF




                                                     INR




                                                     KRW
                                                     MYR




                                                     ZAR
               ILS




                                                     RUB
                                                     BRL
               CZK
               IDR




                                                     CNY
               TWD




                                                     TRY
               PHP
               INR
               RUB




               KRW
               MYR




               ZAR




                                                     RON
               BRL




               CNY

               TRY
               RON




  Source: Reuters EcoWin, Danske Markets   Source: Reuters EcoWin, Danske Markets




  6M – base currency EUR                   6M – base currency USD

     6.0                                      8.0
     5.0                                      7.0
     4.0                                      6.0
     3.0                                      5.0
     2.0                                      4.0
   % 1.0                                    % 3.0
     0.0                                      2.0
    -1.0                                      1.0
    -2.0                                      0.0
    -3.0                                     -1.0
    -4.0                                     -2.0




                                                     SGD
               HUF




               ILS




                                                     EGP
               IDR




                                                     PLN
               TWD




                                                     MXN
               PHP




               ZAR




                                                     HUF
               RUB

               INR



               KRW
               MYR




                                                     ILS
               BRL




               SGD




                                                     IDR

                                                     CZK

                                                     TWD
               TRY
               CNY




                                                     KRW
                                                     MYR



                                                     PHP




                                                     ZAR
               RON




                                                     RUB
                                                     BRL
                                                     INR
               EGP




                                                     CNY
               PLN




               MXN




                                                     TRY
                                                     RON
               CZK




  Source: Reuters EcoWin, Danske Markets   Source: Reuters EcoWin, Danske Markets




  12M – base currency EUR                  12M – base currency USD

     10.0                                    10.0
        8.0                                    8.0
        6.0                                    6.0
        4.0                                   4.0
   % 2.0                                    % 2.0

        0.0                                    0.0
        -2.0                                  -2.0
        -4.0                                  -4.0
               HUF




                                                     HUF
               ILS




                                                     ILS
               IDR




                                                     IDR
               TWD




                                                     TWD
               PHP




                                                     PHP
               KRW
               INR



               MYR




               RUB
               ZAR




                                                     KRW
                                                     INR



                                                     MYR




                                                     RUB
                                                     ZAR
               BRL




               SGD




                                                     BRL




                                                     SGD
               TRY




               CNY




                                                     TRY




                                                     CNY
               RON




                                                     RON
               EGP




                                                     EGP
               PLN




                                                     PLN
               MXN




                                                     MXN
               CZK




                                                     CZK




  Source: Reuters EcoWin, Danske Markets   Source: Reuters EcoWin, Danske Markets




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Monetary policy calendar
Calendar

                      Policy Rate (%)               Latest Change                  Next Change            Next Meeting    Year-end (%)

                   17 September 2012
   Wider CEE
     PLN                   4.75          + 25 bp            May, 2012    - 25 bp        October 2012      03 Oct 2012        4.00
     HUF                   6.75          - 25 bp            Aug, 2012    - 25 bp          H2 2012         25 Sep 2012        6.50
     CZK                   0.50          - 25 bp            June, 2012   - 25 bp       September 2012     27 Sep 2012        0.25
     RON                   5.25          - 25 bp            Mar, 2012    - 25 bp          H2 2012         27 Sep 2012        5.00
      TRY                  5.75          - 50 bp            Aug, 2011    - 50 bp       September 2012     18 Sep 2012        5.25
      CIS
     RUB                   8.25          + 25 bp            Sep, 2012       -         Unchanged 2012       01-10 Oct         8.25
     MEA
      ILS                  2.25           - 25 bp           Jun, 2012       -         Unchanged 2012      24 Sep 2012        2.25
     ZAR                   5.00           - 50 bp           Jul, 2012       -         Unchanged 2012      20 Sep 2012        5.00
    LATAM
     BRL                   7.50           - 50 bp           Aug, 2012    - 25 bp         Q4 2012          10 Oct 2012        7.25
     MXN                   4.50           - 25 bp           Jul, 2009       -         Unchanged 2012      26 Oct 2012        4.50
   EM Asia
     CNY                   6.00           - 31 bp           Jul, 2012    -25 bp          Q4 2012         Not announced        5.75
     KRW                   3.00           - 25 bp           Jul, 2012    -25 bp          Q4 2012          11 Oct 2012         2.75
     THB                   3.00           - 25 bp           Jan, 2012    -25 bp          Q4 2012          17 Oct 2012         2.75
     HKD                   0.50          - 100 bp           Dec, 2008    + 25 bp         Q2 2015         Not announced        0.50
     MYR                   3.00           + 25 bp           May, 2011       -         Unchanged 2012      08 Nov 2012         3.00
     PHP                   3.75           - 25 bp           Aug, 2012    - 25 bp         Q4 2012          25 Oct 2012         3.50
      IDR                  5.75           - 25 bp           Feb, 2012       -         Unchanged 2012      11 Oct 2012         5.75
      INR                  8.00           - 50 bp           Apr, 2012    - 50 bp         Q4 2012          17 Sep 2012         7.50
     TWD                   1.875         +12.5 bp           Jun, 2011       -         Unchanged 2012      27 Sep 2012        1.875

Source: Reuters EcoWin, Danske Markets




28 |   17 September 2012
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Emerging Markets Briefer




  Emerging Markets Contacts

  Emerging Markets Research
  Lars Christensen            +45 45 12 85 30    larch@danskebank.dk
  Flemming Jegbjærg Nielsen   +45 45 12 85 35    flemm@danskebank.dk
  Violeta Klyviene            +370 5 2156992     vkly@danskebank.com
  Stanislava Pravdova         +45 45 12 80 71    spra@danskebank.dk
  Alexander Reventlow         +45 45 12 85 48    alre@danskebank.dk
  Vladimir Miklashevsky       +358 10 546 7522   vladimir.miklashevsky@danskebank.com


  Global Retail SME, FX
  Stig Hansen                 +45 45 14 60 86    sh@danskebank.dk
  Flemming Winther            +45 45 14 68 24    flw@danskebank.dk


  Trading FX, Fixed Income, Danske Markets
  Frank Sandbæk Vig           +45 45 14 67 96    fsv@danskebank.dk
  Thomas Manthorpe            +45 45 14 69 68    tman@danskebank.dk
  Markku Anttila              +358 10 513 8705   markku.anttila@sampopankki.fi
  Perttu Tuomi                +358 10 513 8738   perttu.tuomi@sampopankki.fi


  Danske Bank Poland, Warsaw
  Maciej Semeniuk             +48 22 33 77 114   msem@pl.danskebank.com
  Bartłomiej Dzieniecki       +48 22 33 77 112   bdz@pl.danskebank.com


  Danske Markets Baltics
  Howard Wilkinson            +358 50 374 559    howard.wilkinson@danskebank.com
  Martins Strazds             +371 6707 2245     martins.strazds@danskebanka.lv
  Giedre Geciauskiene         +370 5215 6180     giedre.geciauskiene@danskebankas.lt
  Lauri Palmaru               +372 675 2464      lauri.palmaru@sampopank.ee


  ZAO Danske Bank Russia, Saint-Petersburg Treasury Department
  Lenina Rautonen             +7 921 797 57 80   lenina.rautonen@danskebank.ru
  Vladimir Biserov            +7 812 332 73 04   vladimir.biserov@danskebank.ru
  Darja Kounina               +7 812 332 73 04   darja.kounina@danskebank.ru




 All EM research is available on Bloomberg DMEM




 29 |   17 September 2012
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Disclosure
This research report has been prepared by Danske Research, a division of Danske Bank A/S ("Danske Bank").
The author of the research report is Lars Christensen, Chief Analyst.

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Research analysts are remunerated in part based on the over-all profitability of Danske Bank, which includes
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 written consent.



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