(585496004) CEE Weekly_3Jul15

CEE Weekly

Issue 26/2015 3 July 2015

2Please note the risk notifications and explanations at the end of this documentJune PMI data (points)

58565452504846

Highlights

Uncertainties regarding the outcome of the Greek referendum next Sunday the latest polls suggest a neck-and-neck race weighed on most CE/SEE local financial markets during the week. Thereby, the allegedly most exposed markets to Greek event risks in light of trade and banking sector exposures suffered the most. That being said, Romanian LCY bonds lost more than CE peers and should continue to do so in case of a No vote in Greece. In such a case, the possibil-CZ PL HU RU TR PMI June 2015 PMI May 2015PMI April 2015

Source: Bloomberg, RBI/Raiffeisen RESEARCH

Market snapshot

curr.* Sep-15 Dec-15 Mar-16

ity of the Grexit scenario would increase substantially and should trigger a sell-off on other local financial markets in the CEE region as well (Russia likely bet- ter shielded). In case of Greek voters would accept the reform proposals with a Yes vote, local debt and FX markets could see a temporary recovery, whilst Eu- robonds are likely to rather enter a relative stagnation phase with spreads on many CEE sovereigns remaining fairly tight as thinner liquidity in summer would impact trading activity. In the longer term, though, the approaching Fed lift-off which we continue to expect in September should exert upward pressure on bond yields and EUR/LCY rates.

PolandEUR/PLN4.194.154.104.10In Ukraine the bond prices jumped on the news that Ukraines finance ministerwould join debt negotiations next week. Actually the news should be positivelyKey rate1.501.501.501.50counteracting the danger of debt moratorium since it would be unthinkable for10y bond3.23.43.63.8Ukraine to begin negotiations by defaulting on Eurobond debt. As a result we seeHungaryEUR/HUF314.1310315315the latest development as highly welcome step which could lead to orderly resolu-Key rate1.501.301.301.30tion of the debt situation impasse in Ukraine. Meanwhile we foresee difficult talks10y bondCzech Rep.3.94.44.54.6ahead as the exclusion of USD 3 bn owed to Russia from commercial EurobondEUR/CZK27.227.527.427.4Key rate0.050.050.050.0515% principal debt reduction to help it meet, partially or in full, its IMF targets.10y bond1.31.01.21.1Financial analysts: Gintaras Shlizhyus, RBI ViennaRomaniaExpected changes from today until September 2015EUR/RON4.484.454.454.40restructuring means that Ukraine would have more merits to insist on moderate 10-

Key rate 1.75 1.75 1.75 1.7510y bond 4.3 4.2 4.4 4.6CroatiaEUR/HRK 7.60 7.65 7.70 7.68

Gains5y bond 3.6 3.5 3.5 3.5RussiaUSD/RUB 55.6 55.0 60.0 57.0Key rate 11.50 10.50 10.00 9.00

Losses8y bond n.a. 10.3 9.8 9.5TurkeyUSD/TRY 2.69 2.75 2.70 2.70Key rate 7.50 7.50 7.50 7.7510y bond 9.2 10.0 11.0 11.5EUR/USD 1.11 1.10 1.05 1.05

-75

-50

-25

0

25

50

75

100

PL HU CZ RO RU* TR

DE, EUR/USD

3%

2%

1%

0%

-1%

-2%

-3%

-4%Currencies per 1 EUR* prices as of 3 July 2015, 10:58 a.m. CETSource: Thomson Reuters, RBI/Raiffeisen RESEARCH

Content

10y yield chg (actual to Sep-15, bp, inverted) LCY changes vs. EUR (actual to Sep-15, %; r.h.s.)

* 8y bondsSource: Bloomberg, RBI/Raiffeisen RESEARCH

Data highlights upcoming week

Ratings, main macro forecasts p. 11

Focus onp. 2 3DateIndicatorPeriodest.HighMeanLowPrev.Data releases, country coveragep. 4 607.JulCZ: Industrial output, % yoyMay4.34.93.31.44.3Monetary policy, money marketsp. 707.JulHU: Industrial output, % yoyMay7.4n.a.n.a.n.a.6.3FX marketsp. 807.JulRU: CPI, % yoyJunn.a.15.615.415.315.8Local currency bond marketsp. 9-1008.JulPL: Key rate, %Jul1.501.501.501.501.50Eurobond market overviewp. 1210.JulRO: Industrial output, % yoyMayn.a.n.a.n.a.n.a.4.1Source: Bloomberg, RBI/Raiffeisen RESEARCH

Focus on: Summing up costs of pre-election promises in Poland

CEE Weekly

Public debt (% of GDP)*

60

55

50

45

4002 04 06 08 10 12 14 16f

* forecasts based on current revenue and expenditure structures, i.e. not factoring in any substantial potential fiscal looseningSource: national sources, RBI/Raiffeisen RESEARCH

Budget deficit (% of GDP)*

0

-2

-4

-6

-8

Recently the European Commission (EC) recommended taking Poland off the ex- cessive Deficit Procedure (EDP). On the one hand this move may be seen as a proof of a credible fiscal policy pushing risk premiums down, on the other it opens up room to loosen fiscal policy which may be not welcomed by investors, in particular in a period when the upcoming parliamentary election campaign will put pressure on politicians to make more and more costly promises to attract additional voters. In this analysis we would like to shed some light on the costs of the proposed reforms which may help evaluate the likelihood of their implementation.

Before we start any deliberations on reform costs it should be reminded that despite the EDP removal budget spending is still limited by the stabilizing expenditure rule. It sets the maximum increase in budget expenditures in 2016 at PLN 16 bn (2.3% yoy). Of course some reforms may influence only budget revenues but the rule considers their impact adjusting accordingly spending limits. Anyway in case Polands budget deficit widens a fiscal policy tightening will be enforced by both, the national fiscal rule or an EDP re-imposition. Thus it seems that any reform programme that can be considered as reliable can redistribute some PLN -16 bn.

Higher tax-free income threshold

One of the most popular reform proposals which have already appeared during the presidential election campaign is a higher tax-free income threshold. Currently it is set at PLN 3,091 per annum but many claim that it is much below the minimum existence floor. The Law and Justice party (PiS) opts for raising the threshold to PLN 8,000 which would reduce PIT income by about PLN 16.5 bn. The Civic Platform (PO) so far does not officially plan to hike the threshold but some PO politicians suggested such a move might be considered albeit in a lower scale. Such changes would have a significant impact on budget revenues although they could be slightly offset by higher VAT income assuming that house- holds will spend this additional income on consumption. In result the net annual02 04 06 08 10 12 14 16f

* forecasts based on current revenue and expenditure structures, i.e. not factoring in any substantial potential fiscal looseningSource: national sources, RBI/Raiffeisen RESEARCH

Impact of change tax-free income

Budget revenues (PLN bn)10

0

-10

-20

-303,000 5,000 7,000 9,000Tax-free income threshold

PIT VATNet budget impactSource: RBI/Raiffeisen RESEARCH

impact of a hike in the tax-free income threshold to PLN 8,000 may be estimatedat about PLN -14 bn.

Lower VAT rate

The EDP removal raised speculations that the VAT rate could be lowered already in 2016 rather than in 2017 as it was said by the current government. The PiS calls also for lowering the VAT tax rate from 23% to 22%. Such a move would influence budget revenues significantly. VAT income constitutes about 45% of the whole budget income. We assess the annual impact of a lower VAT rate at about PLN 5 bn. The higher the GDP and inflation dynamics the less severe would be the reform to the budget, largely driven by those factors.

Grants for multiple children families

One of the most expensive proposals was presented by PiS, which aims to set monthly grants of PLN 500 for the second and subsequent child living in a multiple children family or even for the first in case of a difficult financial situation. Al- though the exact cost of the reform is difficult to evaluate we assume it would increase budget spending by about PLN 30 bn which is consistent with the plan of the PiS party to increase pro-family spending to 4% of the GDP (which is PLN 72 bn while the current government spends for this purpose about PLN 30-40 bn). Assuming a positive impact on demand which would boost VAT income we estimate the net impact of such a reform at around PLN 25 bn.

Wage hikes in budgetary sphere/pubic sector

Budget revenues (PLN bn)The current government is so far much less generous in its promises. The most expensive proposal which has appeared was already included in the 2016 budget assumptions. The government wants to hike the wage fund by PLN 2 bn for, in which wages has been frozen since 2010. The net cost of this reform could be however much lower. Higher wages would boost PIT income by about PLN 0.4 bn and VAT income by PLN 0.3 bn. Thus the net impact of this reform on the budget may be estimated at PLN -1.3 bn.

Cancelation of pension reform

One of the main promises of the PiS opposition is to cancel the pension reform and to lower back the pension age to 60 and 65 accordingly for women and men. That would increase budget spending on average by about PLN 5 bn per year in 2016-2020. However the cost would be lower at the beginning of this period and would be increasing as time passes.

Taxing banks and hypermarkets

Looking for a source of financing for its costly reforms the PiS party wants to im- pose a tax on banking assets as well as a tax on the hypermarkets turnover. The banking tax could be set at a rate of 0.5% of the tax base, the hypermarket taxation at 1.0%. While banking assets in Poland account for about PLN 1,550 bn, the tax would give a rise to revenues of about PLN 7.7. Assuming that turnover of hypermarkets stands at about PLN 100 bn the latter tax would boost revenues by about PLN 1 bn. Thus both taxes could increase budget revenues by about PLN 8.8 bn. The proposed tax rates could be also fine-tuned to somewhat ad- just the revenues.

Taxing the richest

0.00%Another proposal presented by PiS already in 2014 assumes setting the third PIT tax threshold at 39% (currently 18% and 32%) for people with an income above PLN 300,000 (25,000 per month). Although such a reform could be popular among most voters since merely 0.4% of employees may achieve the mentioned threshold, it probably will be not a lucrative change from a budgetary perspec- tive. We estimate it may bring additional PLN 0.2 bn in tax revenue which seems to be a drop in the ocean considering the costly expenditure proposals.

Summary

Potential revenues from bank tax

10

8

6

4

2

00.30%0

0.10%0.20%0.40%0.50%0.60%Banking asset tax rate

Source: RBI/Raiffeisen RESEARCH

1.25%Potential revenues hypermarket tax

Budget revenues (PLN bn)1.41.210.80.60.40.20

0.25%0.75%1.00%Hypermarket turnover tax rate

0.50%Source: RBI/Raiffeisen RESEARCH

Summing up the costs of current pre- election gifts (PLN bn)Summing up we can see that full implementation of all the currently discussed pre- election gifts, mainly presented by the PiS party, is simply impossible as it would

Proposed reform

Budget income

Budget spending

Net im- pactresult in a doubling of the budget deficit (in 2015 the deficit is planned at PLN46.08 bn). Nevertheless limitations imposed by the national stabilizing expendi-

Higher tax-free in-come threshold(PLN 8 ths)

-14.0 0.0 -14.0ture rule may be easily overridden by the new government which could suspend

Lower VAT rate -5.0 0.0 -5.0

the rule for some time. Nevertheless it would lead to a swift re-imposition of EUsEDP, including a threat of freezing EU funds inflow in case no tightening meas-

Grants for children(PLN 500)Wage hikes in budgetary sphere

4.7 30.0 -25.4

0.7 2.0 -1.3

ures were undertaken. That would also push government bonds risk premiums Lower pension age0.05.0-5.0

higher and would increase state financing costs. Of course partial implementa- Taxing banks8.80.08.8

tion of some of the proposed changes to public spending or revenues, in partic- (0.5%) and hypermarkets (1%)

ular those which are less costly or which may bring additional income triggeringTaxing the richest0.20.00.2

no social discontent, such as a taxation of banking assets, are still likely.Sum-4.737.0-41.7

Financial analyst: Michal Burek, Raiffeisen Polbank, Warsaw

Source: RBI/Raiffeisen RESEARCH

Data releases and country coverage

IndicatorPeriodActualForecastPrev.IndicatorPeriodThis week, previous week: key data releases

est. HighMeanLowPrev.

Monday, 29 JuneFriday, 3 July

HR: Industrial output, % yoyMay4.41.71.2HR: Retail sales, % yoyMay1.6n.a.n.a.n.a.2.5

Tuesday, 30 JuneMonday, 6 July

CZ: GDP, % yoy finalQ14.0n.a.1.4UA: CPI, % yoyJunn.a.58.457.55758.4

PL: C/A balance, EUR bnQ11.62.22.0UA: FX reserves, USD bnJunn.a.9.79.49.09.9

RS: Industrial output, % yoyMay17.7n.a.-0.1Tuesday, 7 July

RS: Retail sales, % yoyMay1.5n.a.0.2CZ: Industrial output, % yoyMay4.34.93.31.44.3

SI: Retail sales, % yoyMay3.0n.a.-0.9CZ: Retail sales, % yoyMay6.79.154.06.4

SI: CPI, % yoyJun-0.7n.a.-0.5HU: Industrial output, % yoyMay7.4n.a.n.a.n.a.6.3

Wednesday, 1 JulyRO: GDP, % yoy finalQ1n.a.n.a.n.a.n.a.2.7

CZ: PMI, pointsJun56.9n.a.55.5RU: CPI, % yoyJunn.a.15.615.415.315.8

HU: PMI, pointsJun55.1n.a.55.1RU: FX reserves, USD bnJunn.a.369.6366.3360.0356.8

PL: PMI, pointsJun54.352.252.4Wednesday, 8 July

RO: Key rate, %Jul1.751.751.75HU: CPI, % yoyJun0.8n.a.n.a.n.a.0.5

RU: PMI, pointsJun48.7n.a.47.6PL: Key rate, %Jul1.501.501.501.501.50

RU: GDP, % yoy finalQ1-2.2n.a.0.4TR: Industrial output, % yoyMayn.a.3.31.80.53.8

TR: PMI, pointsJun49.0n.a.50.2BG: Industrial output, % yoyMayn.a.n.a.n.a.n.a.1.5

Friday, 3 JulyBG: Retail sales, % yoyMayn.a.n.a.n.a.n.a.0.5

CZ: Trade balance, CZK bnMay17.315.019.2Thursday, 9 July

HU: Retail sales, % yoyMay5.25.25.0CZ: CPI, % yoyJun1.01.00.90.70.7

HU: Trade balance, EUR mn finalApr497.0n.a.929.0HU: Trade balance, EUR mnMay365.0n.a.n.a.n.a.497.0

RO: Retail sales, % yoyMay4.2n.a.7.5RS: Key rate, %Juln.a.n.a.n.a.n.a.6.00

SK: Retail sales, % yoyMay1.4n.a.-0.4RU: C/A balance, USD bnQ2n.a.19.213.510.128.9

TR: CPI, % yoyJun7.2n.a.8.1Friday, 10 July

HR: Retail sales, % yoy finalMayn.a.n.a.n.a.n.a.2.5

RO: Trade balance, EUR mnMayn.a.n.a.n.a.n.a.-644.2

RO: CPI, % yoyJunn.a.n.a.n.a.n.a.1.2

RO: Industrial output, % yoyMayn.a.n.a.n.a.n.a.4.1

RU: Trade balance, USD bnMayn.a.18.715.310.415.0

SK: Industrial output, % yoyMayn.a.n.a.n.a.n.a.4.7

SI: Industrial output, % yoyMayn.a.n.a.n.a.n.a.4.2


Bosnia and Herzegovina (BA) This week was coloured by several high-profile macroeconomic figures which are only published on a quarterly basis. Firstly, the Central Bank of B&H (CBBH) published the Balance of Payments data for Q1 2015 which delivered mixed signals. Specifically, the current account (C/A) deficit narrowed significantly in first quarter of 2015 (-19.4% yoy), on the back of trade deficit tightening which was in line with our expectations. On the other hand, the financial account data were a big disappointment, as the net inflow of FDI in Q1 2015 amounted to a tiny EUR 43.4 million. Nevertheless, we expect that the C/A deficit will widen in course of the year (up to 8.0% of GDP in 2015), while the net inflow of FDI should amount to 4.2% of estimated GDP for 2015. The State Agency for Statistics also published the GDP figures for Q1 2015 which surprised on the upside. Real GDP growth accelerated to 2.1% yoy in Q1 2014, marking the best result in a one-year period. The composition of growth surprised on the upside along with the growth rate itself. Spe- cifically, out of the 19 GDP categories (by production methodology) followed by the State Agency only five posted negative readings, versus fourteen categories which experienced expansion in Q1 2015 (in % yoy). Wholesale and retail trade, public administration, and construction were at the forefront of economic growth in Q1 2015, contributing to around half of the registered real GDP growth rate. Therefore, we remain positive on our stand that the B&H economy will be able toreach 2.5% real growth in 2015.

Financial analyst: Srebrenko Fatusic (+387(33) 287 916), Raiffeisen BANK d.d., Sarajevo

CEE WeeklyCroatia (HR) This week brought a few favourable macroeconomic outcomes. First of all, the latest data for May confirmed the positive trends in industrial production, which grew for the fourth month in a row (+4.4% yoy). However, still-weak domestic demand remains the main limiting factor for more tangible growth, and thus in 2015 we expect mildly positive industrial growth of 1.5% yoy.

The Q1 C/A showed a deficit of EUR 1.3 bn (-13.9% yoy), but on a rolling basis in the last four quarters the C/A balance showed a surplus of 1.1% of GDP. Solid tourism indicators from the beginning of the year positively contributed to the C/A improvement, and thus the whole year could record a C/A surplus for the third year in a row.Next week, the CBS will publish the tourism data for May which are expected to continue showing solid performance. Also on the schedule for the next week are foreign trade data for the first four months and the producer price index for June. Sluggish domestic demand and the lack of inflationary pressure from foreign markets will continue to support a PPI decline. Therefore, although June PPI might reflect a slight positive monthly growth rate (0.2%), on an annual basis it will continue with negative rates (-2.7% yoy), in a trend lasting since August 2013.Turning to the financial markets, after three weeks MoF held a T-bill auction issuing 1y HRK 323 mn. As expected, with the bid-to-cover ratio at 1.0, yields remained unchanged at 1.5%. The subdued demand partially stems from the upcoming 10- year HRK bond issuance. Considering that up to April the Government covered more than 60% of this years refinancing needs, in the case of generous issues the total financial needs for the whole year could be met.Financial analyst: Tomislava Ujevic (+385 1 4695 099), Raiffeisenbank Austria d.d., Zagreb

Czech Republic (CZ) A wave of headline macroeconomic data will attract the attention of the domestic market next week. The overall picture remains unchanged the Czech economy is accelerating in all sectors, with some areas reaching top levels, and the newest data should only confirm this picture. Since wages are growing and consumer confidence is still around its historical peak, we see space for further growth in retail sales in May by 6.7% yoy (with cars) and 5.6% yoy (without cars). The acceleration in soft indicators suggests that industrial production should also grow. We forecast growth in industrial production of 4.3% yoy in May. The labour market is expected to show signs of further improvement too. We expect unemployment to decline to 6.2% from the previous 6.4%. We do not expect a strong reaction of the Czech crown to data releases since the improving macro figures are already priced in. Nevertheless, unexpected surprises may affect the Czech crown.Due to the still relatively high yields we stick to our latest recommendation BUY maturities 5 years and higher.

Financial analyst: Daniela Miluk (+420 234 40 5685), Raiffeisenbank a.s., Prague

Hungary (HU) Producer prices for May increased 1% on a year-on-year basis, following a 1.7% drop in April. Our estimate was a 0.8% decrease. Overall, the data confirms our view that inflation is back on the rise on the producers' side too. Meanwhile, June's manufacturing PMI remained at 55.1 while May's figure was revised up to 55.2. This is bad news for us, because most of the region's indices may show some improvement. With regard to Friday's retail sales release for May, we expect a slight improvement of 5.2% after April's downward-revised annual reading of 5.0%, partly because of the Sun- day closures. As for next week's preliminary trade balance figures for May, we expect a small contraction in the surplus, meaning that it may come down to EUR 365 million from the EUR 534 million in April due this Friday. But with the shrink- age, we believe that the gradual depreciation of the currency may support further the positive trend in the trade surplus of the mainly export-oriented Hungarian economy.

Financial analyst: Gergely Plffy (+36 1 484 4313), Raiffeisen Bank Zrt., Budapest

Poland (PL) Developments on domestic financial markets were still dominated by reports on Greece, and thus the PMI index was a release of rather less relevance to investors. Accordingly, both the zloty and government bonds remained de- pressed despite the PMI surprise on the upside, as the indicator rebounded from 52.4 to 54.3 pts. Such a reversion in its trend would underpin our scenario that after GDP growth stabilisation in Q2, the second half of the year should feature a peak in economic activity. It seems also that the industrial output reading for June should easily meet our optimistic expectations at 6.8% yoy. The main event scheduled for the upcoming week is the MPC meeting which ends on Wednesday. Again, the interest rate decision may be hardly surprising as no change is the most likely outcome. This time however the Council will present the updated NBP forecasts for GDP and inflation, which may help to assess when we can expect the first changes in monetary policy (our main case is for Q3/Q4 2016).Financial analyst: Micha Burek (+48 609 921 092), Raiffeisen Polbank, Warsaw

Romania (RO) At the monetary meeting on 1 July, the National Bank of Romania (NBR) remained on hold, preserving the key interest rate at 1.75%, in line with our expectations and analysts consensus. This time, the comments of the NBR Governor were more hawkish, stating that the NBR is taking into account a prudent reconsideration of the monetary policy cycle amid the current international context and framework and due to the uncertainty related to the further status of the agreements between Romania and international institutions (IMF, EC). The most interesting macroeconomic release next week may be the inflation print for June, which will mainly reflect the impact of the VAT rate cut for food products and ca-

tering services/restaurants to 9% from 24% (enforced starting 1 June). We expect the monthly dynamics of inflation to be deep in negative territory in June (-2.4% mom), resulting in an annual rate of around -1% yoy. Most likely, the annual reading for inflation will remain negative in the following year (June 2015 - May 2016).Financial analyst: Anca Jelea (+402 1306 1265), Raiffeisen BANK S.A., Bucharest

Russia (RU) Minfin published a draft budget policy for 2016-2018. According to the document, to finance the budget deficit which is estimated at RUB 1.9 trillion and RUB 1.7 trillion in 2016 and 2017, respectively, the Ministry plans to use the Reserve fund (RUB 1.07 trillion and RUB 1.01 trillion, respectively) and net borrowings (RUB 809 bn and RUB 692 bn, respectively). Given such assumptions, a major part of the Reserve fund is likely to be utilised by YE 2017: it should decrease to RUB 500 bn (from RUB 4.03 trillion as of June, 2015). By way of comparison, this year the budget deficit (RUB 2.7 trillion) is planned to be covered mostly by the Reserve fund (RUB 3 trillion), while net borrowing will be negative according to Minfins expectations (+RUB 180 bn on the local debt market and -RUB 203 bn on the Eurobond market). In 2016, Min- fin expects to 1) attract funds on the Eurobond market (RUB 323 bn net); and 2) increase local borrowings (RUB 609 bn vs. RUB 180 bn in 2015). On the local market, the ministry will focus on floaters (RUONIA+ and CPI+) and mid-term classic OFZs. Given relatively limited amount of the Reserve fund in the medium term and certain limitations on borrowings on ex- ternal market we think that Minfin will have to offer certain premiums to meet its borrowing plan.Financial analyst: Denis Poryvay (+7 495 221-9843), AO Raiffeisenbank, Moscow

CEE Weekly6

PLHUCZRORUTRMonetary policy and money markets overview

CEE Weekly

10Please note the risk notifications and explanations at the end of this documentCEE key interest and money markets outlook

Inflation snapshot

PolandKey interest rate (%, eop)curr.*Sep-15Dec-15Mar-165y high5y low20

1.501.501.501.504.751.5016

1m money market rate (%, eop)1.561.701.701.704.821.5312

3m money market rate (%, eop) 1.62 1.80 1.80 1.80 5.04 1.55

8


Hungary4

Key interest rate (%, eop)1.501.301.301.307.001.500

1m money market rate (%, eop)1.501.401.401.407.301.50-4


6m money market rate (%, eop)1.421.301.301.307.931.42CPI, % yoy (52w high)

Czech RepublicCPI, % yoy (52w low)

Key interest rate (%, eop)0.050.050.050.050.750.05CPI, % yoy (current)

1m money market rate (%, eop)0.220.230.230.231.020.22Source: Bloomberg, RBI/Raiffeisen RESEARCH



Romania

Key interest rate (%, eop)1m money market rate (%, eop)1.751.041.751.251.751.351.751.556.256.571.750.43Key rate trends (%)



Russia12

Key interest rate (%, eop)11.5010.5010.009.0017.005.5010


ECB key interest rate (% eop) 0.05 0.05 0.05 0.051.50 0.05Fed key interest rate (% eop) 0.13 0.50 0.75 1.000.31 0.01Benchmark key rates (% eop) curr.* Sep-15 Dec-15 Mar-16 5y high 5y low


3m money market rate (%, eop) 12.50 11.90 11.40 10.40 29.93 3.738646m money market rate (%, eop)12.5012.0011.5010.5030.314.122Turkey0Key interest rate (%, eop)7.507.507.507.7510.004.50Apr-15Jul-15Dec-151m money market rate (%, eop)11.2810.7011.0011.5011.994.61PolandHungary3m money market rate (%, eop)11.3410.8011.1011.6012.154.74Czech Rep.Romania6m money market rate (%, eop)11.3510.8011.1011.6012.485.12RussiaTurkey* Bid rates (for Hungary ask rates) as of 3 July 2015, 09:32 a.m. CET Source: Bloomberg, RBI/Raiffeisen RESEARCH

Key rate forecast (chg., bp)

Central bank watch

Poland (NBP) The MPC will present the updated NBP forecasts next Wednesday which may shed some light on the timing of the first interest rate hikes (in our base case we expect the start of MP tightening in Q3 2016).Hungary (MNB) We expect deeper cuts than initially assumed, targeting a terminal rate of1.30% by end-August. Switch to new key rate, the 3m deposit rate, nextSeptember could bring additional easing.Czech Republic (CNB) According to our baseline, FX intervention regime not to end before 2016 and rate hikes only to start after this. FX intervention regime seems to work sufficiently, whilst exit will remain a challenge.

0

Poland Hungary Czech Rep. Romania Russia Turkey

-50

-100

-150

-200Romania (BNR) NBR on hold at the monetary policy meeting on 1 July, but the tone of the NBR Governor was more hawkish, suggesting a prudent reconsideration of the monetary policy cycle. Also it seems that the NBR is no more eager on cutting minimum reserve requirements ratios in the following period.Serbia (NBS) Following the latest cut to 6%, we would not expect additional cuts. How- ever, risks of overambitious rate cuts have increased. Contagion risks from Greece as well as the overall elevated volatility on global financial markets weigh, however, not as strong as the favourable assessment of Serbia'sIMF program.Russia (CBR) CBR may act a bit more cautious in the next few months given the still elevated inflationary risks. Nevertheless, we expect the continuation ofthe rate cutting cycle in smaller steps as previously. Our year-end target is10.00% for the Russian base rate, followed by additional 200bp cuts in

3m horizon (bp) 6m horizon (bp)Source: Bloomberg, RBI/Raiffeisen RESEARCH

Rate setting meetings

Jul Aug Poland (NBP) 8 - Hungary (MNB) 21 25Czech Rep. (CNB) - 6Romania (NBR) 1 4

Turkey (TCMB)

H1 2016 on easing inflation.Serbia (NBS)913The Monetary Council tried to resume rate cuts by a cautious, 25bp cut tothe 1w repo rate at the gebinning of 2015, but then was forced to remainRussia (CBR)31-on hold since then. As the Fed liftoff likely in September comes closer andTurkey (TCMB)2318political uncertainty prevails, we do not foresee the continuation of rate cuts. Source: NationalCentral Banks,RBI/RaiffeisenRBI/Raiffeisen RESEARCH RESEARCHSource: Bloomberg, Reuters,

Foreign exchange market overview

314.1 310.0 315.0 315.0 322.6 262.3EUR/PLNs rise is for now hampered by 4.20 but may breach it depending on developments in GreeceEUR/HUF should fluctuate around levels of 310-315 in the coming weeks, but depending on Greek development short-term overshooting towards 320 possibleEUR/CZK fairly close to the intervention level of 27.0, but the central bankFX forecasts

PLN4.194.154.104.104.573.84EUR vs current1 Sep-15 Dec-15 Mar-16 5y high 5y low Comment

HUF

refrained from a more active verbal intervention; with the FX regime likely to remain well into 2016 we see little room for further appreciation of the crown

EUR/RON volatile as Greece issue is pending; political turbulences can flare up again

Despite tourist season intensifies, upcoming EUR-linked sovereign bond maturity (EUR 350 mn) might generate slight HRK depreciation pressures

Favourable environment to support EUR/RSD; stabilisation to continue in the summer months

CZK

27.22

27.50

27.40

27.40

28.37

23.99

RON4.484.454.454.404.644.07

HRK7.607.657.707.687.727.18

RSD120.2124.0126.0125.0123.796.7

RUB61.7960.5063.0059.8584.9638.43see rouble basket below

UAH23.3425.3026.2528.3537.989.74see USD/UAH below

BYR17,05817710176931848017,9973,779see USD/BYR below

TRY2.993.032.842.843.191.92see USD/TRY below

USD1.111.101.051.051.491.05Euro will continue to remain under pressure as QE in euro area and rate hike expectations in US weigh on the currencies

USD vscurrent1Sep-15Dec-15Mar-165y high5y low

RUB55.6255.0060.0057.0069.4727.28see rouble basket below

UAH21.0123.0025.0027.0033.757.82IMF agreement and central bank measures stabilised UAH, but UAH depreciation likely as soon as the central bank eases the administrative measures

BYR15,37516100168501760015,7052,969Steady USD/BYR depreciation to continue throughout 2015

TRY2.692.752.702.702.761.40(Coalition) government has to be formed, political uncertainty persists; short- term overshooting above 2.80 possible in case of continued unsupportive

political news

USD/RUB hovering around 55 and seems to have found stability at this

RUB basket58.3957.4861.3558.2878.5932.94level; CBR FX operations with limited effect on RUB; most risk stemming fromgeopolitical conflict in Ukraine and threat of new sanctions in case of further

1 as of 3 July 2015, 09:31 a.m. CETSource: Bloomberg, RBI/Raiffeisen RESEARCH

escalation

Change of LCY value to EUR (%)

LCYappreciationRussia US Dollar Poland Czech Rep. Serbia Croatia Hungary Romania Turkey-6% 0% 6% 12% 18% Chg 1m Chg 3m Chg YTDSource: Bloomberg, RBI/Raiffeisen RESEARCH

Change of LCY value to USD (%)

LCYdepreciationRussia Poland Czech Rep. Hungary Turkey Belarus Ukraine-30% -15% 0% 15% Chg 1m Chg 3m Chg YTDSource: Bloomberg, RBI/Raiffeisen RESEARCH

Exchange rate comparison

1251201151101051009590858075Dec-14 Feb-15 Apr-15 Jun-15EUR/RUB EUR/PLN EUR/HUF EUR/CZKIndexed December 2014 = 100Source: Bloomberg, RBI/Raiffeisen RESEARCH

Local currency bond market overview

Change of LCY 10y bond yields (bp)

Turkey (9.32%) Poland (3.22%) Czech Rep. (1.25%) Germany (0.84%) Romania (3.45%) Hungary (3.93%) Russia (11.15%)-400 -200 0 200Chg YTD Chg 1m Chg 3m


Change of LCY 2y bond yields (bp)

Turkey (9.57%)

Germany (-0.25%)

Russia (10.81%)

-600 -400 -200 0 200Chg YTD Chg 1m Chg 3mSource: Bloomberg, RBI/Raiffeisen RESEARCH

PLN yield curve

3.5

3.0

2.5

2.0

1.51 2 3 4 5 6 7 8 9 10

Yield curve 02 Jul-15Forecast Sep-15Current swap curveSource: Bloomberg, Thomson Reuters, RBI/RaiffeisenRESEARCH

CZK yield curve

1.41.2

0.80.60.4

0.0-0.21 2 3 4 5 6 7 8 9 10


HUF yield curve

5.0

4.0

3.0

2.0

1.01 2 3 4 5 6 7 8 9 10


RON yield curve

4.5

4.0

3.5

3.0

2.5

2.0

1.51 2 3 4 5 6 7 8 9 10


5y USD CDS spreads

HRK yield curve

RUB yield curve

700

6.0 13

600

500

400

300

200

100Jan-14 Jun-14 Nov-14 Apr-15

5.0

4.0

3.0

2.0

1.0

1 2 3 4 5 6 7 8 9 10

Yield curve 02 Jul-15

11

101 2 3 4 5 6 7 8 9 10

Yield curve 02 Jul-15RU TRForecast Sep-15Current swap curveForecast Sep-15Current swap curve

Turkey 5y high 343.7, 5y low 111.7; Hungary 5y high735, 5y low 114.9; Russia 5y high 628.7, 5y low 118.7Source: Bloomberg, RBI/Raiffeisen RESEARCHSource: Bloomberg, Thomson Reuters, RBI/RaiffeisenRESEARCHSource: Bloomberg, Thomson Reuters, RBI/RaiffeisenRESEARCH

Yield forecasts2y T-bond yields (%) 10y T-bond yields (%)current* Sep-15 Dec-15 Mar-16 5y high 5y low current* Sep-15 Dec-15 Mar-16 5y high 5y low

Poland1.972.12.42.65.11.5Poland3.223.43.63.86.42.0

Hungary**2.142.12.22.310.22.0Hungary3.934.44.54.610.72.7

Czech Rep.0.030.00.00.02.0-0.2Czech Rep.1.251.01.21.14.30.3

Romania2.052.12.22.37.31.5Romania4.294.24.44.67.62.6

Croatia2.592.52.52.66.31.6Croatia**3.503.53.53.57.33.0

Russia10.8110.410.39.417.55.5Russia**11.1510.39.89.517.06.3

Turkey9.6110.010.010.311.34.9Turkey9.2310.011.011.511.06.0

Euro area-0.25-0.3-0.3-0.31.9-0.3Euro area0.840.80.90.93.50.1

USA0.631.01.11.30.90.2USA2.382.52.62.83.71.4

* Ask yields as of 3 July 2015, 09:53 a.m. CET; ** HU: 3y, HR: 5y; RU: 8ySource: Bloomberg, RBI/Raiffeisen RESEARCH

Local currency bond market overview

CEE local currency bond market snapshot

Maturity Coupon,%

Ask Price YTM, % Spread toBunds, bpPoland

MDur. CommentPLN 2y Gov. Bond 25/07/2017 0.00 96.11 1.94 219 2.1 Greece crisis may still hamper POLGBs but its impactPLN 5y Gov. Bond 25/04/2020 1.50 94.65 2.70 255 4.7PLN 10y Gov. Bond 25/07/2025 3.25 100.49 3.19 236 8.5Hungary

should not be long-lasting. Nevertheless an upward trend in yields remains intact with core market pressure ante portas.HUF 3y Gov. Bond 22/06/2018 2.50 101.34 2.03 220 2.9 Latest recovery rally following Greece-induced sell-offHUF 5y Gov. Bond 24/06/2020 3.50 102.66 2.92 277 4.7HUF 10y Gov. Bond 24/06/2025 5.50 113.79 3.81 298 8.1

Czech Republic

should come to an end soon. Whilst short-end of the HGB curve should remain relatively well anchored due to ongoing rate cuts, long-end should suffer from potential Greek events and, later on, approaching Fed liftoff likely in Sep- tember.CZK 2y Gov. Bond 11/04/2017 4.00 107.10 -0.03 22 n.a. Current, relatively high yield levels are attractive in ourCZK 5y Gov. Bond 29/10/2019 1.50 104.95 0.34 19 4.2CZK 10y Gov. Bond 17/09/2025 2.40 111.45 1.20 37 9.1

Croatia

view in the short term since we expect a partial reversal of the latest losses in save haven CZGBs, especially at the back-end of the curve.HRK 2y Gov. Bond 25/11/2017 6.25 109.50 2.14 199 2.2 The Government is supposed to tap the market with 10-yearHRK 5y Gov. Bond 05/03/2020 6.75 115.50 3.15 232 4.1

Romania

HRK bond issuance. Relatively low trading volumes might be supportive for the EUR-linked sovereign bonds.RON 3y Gov. Bond 17/01/2018 3.25 102.92 2.05 222 2.5 Fed tightening later this year remains a risk factor goingRON 5y Gov. Bond 29/04/2020 5.75 112.38 2.95 280 4.3

Russia

forward, while the forseen increase of the public budget deficit in 2016 should start to be gradually scrutinized by investors.RUB 2y Gov. Bond 14/06/2017 7.40 94.90 10.63 1088 1.9 As expected, OFZ market suffered from pricing-out of over-RUB 5y Gov. Bond 03/08/2016 6.90 96.50 10.67 1052 1.0RUB 8y Gov. Bond 24/11/2021 6.50 82.00 10.80 997 5.1

Turkey

aggressive rate cut expectations following the latest more cautious central bank tonality. In the longer-term, however, OFZ market should regain attractiveness and continue to rally in line with ongoing rate cutting cycle.TRY 2y Gov. Bond 16/11/2016 8.20 98.30 9.53 978 1.3 The expected short-term rally is a long time coming fol-TRY 5y Gov. Bond 05/02/2020 7.40 92.65 9.40 925 3.9TRY 10y Gov. Bond 12/03/2025 8.00 92.22 9.23 840 6.8

Data as of 3 July 2015, 09:53 a.m. CET Source: Bloomberg, RBI/Raiffeisen RESEARCH

lowing the political stalemate in terms of government for- mation. As fed liftoff is coming closer, we would not bet anymore on recovery rally in TURKGBs.

Bond auctions

ISINCouponMaturityVolume

6 July 2015

RO6y T-bondsn.a.5.95%11 Jun-21n.a.

8 July 2015

RUT-bondsn.a.n.a.n.a.n.a.

9 July 2015

PLT-bondsn.a.n.a.n.a.n.a.

RO1y T-bondsn.a.0.00%11 Jul-16n.a.

Eurobond market overview

TR (BBB-)*CEE USD EMBIG spread valuation*

CEE EMBIG USD vs. UST YTM*

4,000

3.0

10.0 4

3,000

2.3

2,000

1,000

1.5

0.8

7.5 3

0

-1,000

0.0

UA (CC)-0.8

BY (B-)5.0 2

PL (A-)RO (BBB-)-2,000

-1.5

RU (BB+)2.5 1

HU (BB+)Jul-10 Jul-11 Jul-12 Jul-13 Jul-14 Jul-15

LT (A-)z-score (r.h.scale)* spread (bp)** z-score - EMBIG USD country spread deviation from mean normalised by 1 standard deviation, score at or below minus 1 = expensive, at or above 1 = cheap

RS (BB-)Source: Thomson Reuters, RBI/Raiffeisen RESEARCH

EMBIG USD Europe * UST * (r.h.scale)

HR (BB)* YTM - yield to maturity EMBI Global USD, UST - 10-year US Treasury noteSource: Thomson Reuters, RBI/Raiffeisen RESEARCH

Market PriceYTM mid.Spread vs.Mdur.ISIN

Issuer/rate/dueBidAskw/w %5y max5y min% p. a.Bmk, bpyears---

EUR

BGARIA 4 1/4 07/09/17106.7107.2-0.34110.5100.30.74981.9XS0802005289

CROATI 5 7/8 07/09/18109.4110.1-0.24112.287.72.482662.6XS0645940288

REPHUN 3 1/2 07/18/16103.0103.4-0.24104.677.10.35531.0XS0240732114

REPHUN 5 3/4 06/11/18112.8113.3-0.53115.076.01.191372.7XS0369470397

REPHUN 6 01/11/19115.5116.0-0.58118.277.91.371503.2XS0625388136

LITHUN 4.85 02/07/18111.8112.3-0.33114.394.00.18392.5XS0327304001

POLAND 3 5/8 02/01/16102.0102.1-0.08109.095.10.00190.6XS0242491230

POLAND 1 5/8 01/15/19103.9104.3-0.08105.498.00.45573.4XS0874841066

POLAND 3 3/4 01/19/23116.4117.4-0.10124.799.51.37856.6XS0794399674

POLAND 3 3/8 07/09/24113.6114.6-0.08124.899.31.68937.6XS0841073793

ROMANI 5 1/4 06/17/16104.5104.8-0.24109.295.50.37550.9XS0638742485

ROMANI 4 7/8 11/07/19114.7115.3-0.49117.999.01.291303.9XS0852474336

TURKEY 5 7/8 04/02/19112.9113.7-0.62119.4101.22.122223.4XS0285127329

TURKEY 5 1/8 05/18/20111.3112.1-0.55115.995.42.532454.3XS0503454166

USD

BELRUS 8 3/4 08/03/1599.1100.0-0.08106.170.714.9714960.1XS0529394701

BELRUS 8.95 01/26/1896.397.7-0.55111.270.010.339412.1XS0583616239

CROATI 6 3/8 03/24/21108.2108.8-0.58117.886.74.662794.7XS0607904264

CROATI 5 1/2 04/04/23103.0103.6-0.82108.694.44.982766.2XS0908769887

REPHUN 5 3/8 02/21/23108.6109.20.04113.993.14.011866.2US445545AH91

REPHUN 7 5/8 03/29/41133.2134.3-0.57150.379.55.2322012.9US445545AF36

LITHUN 7 3/8 02/11/20119.1119.7-0.02130.7104.82.841253.9XS0485991417

LITHUN 6 5/8 02/01/22119.2119.8-0.13128.6101.03.301245.3XS0739988086

LATVIA 2 3/4 01/12/20100.0100.6-0.17102.791.42.681124.2XS0863522149

LATVIA 5 1/4 06/16/21111.9112.6-0.26117.290.92.991075.1XS0638326263

POLAND 3 7/8 07/16/15100.1100.2-0.07107.8100.1-1.89-1890.0US731011AS13

POLAND 6 3/8 07/15/19115.7116.10.03125.9107.42.23903.5US731011AR30

POLAND 3 03/17/2398.398.80.22103.687.63.211056.7US731011AT95

ROMANI 6 3/4 02/07/22117.3118.0-0.33124.499.23.711715.3US77586TAA43

ROMANI 4 3/8 08/22/23103.0103.7-0.36109.590.83.891696.7US77586TAC09

RUSSIA 4 1/2 04/04/2298.299.0-0.22114.782.04.742645.7XS0767472458

RUSSIA 7 1/2 03/31/30117.7118.00.40128.799.63.54924.3XS0114288789

RUSSIA 5 5/8 04/04/4294.895.7-0.74124.976.05.9829013.2XS0767473852

SERBIA 5 1/4 11/21/17103.6104.3-0.18107.196.83.492652.2XS0856951263

SERBIA 4 7/8 02/25/20101.4102.3-0.03104.689.64.432844.0XS0893103852

TURKEY 6 1/4 09/26/22111.2111.9-0.41127.0101.04.362255.8US900123BZ27

TURKEY 6 7/8 03/17/36115.7116.3-0.66139.699.25.5627411.5US900123AY60

TURKEY 6 3/4 05/30/40114.8115.5-1.20139.497.35.6126212.8US900123BG46

UKRAIN 7 3/4 09/23/2051.352.50.86108.037.924.6122853.4XS0543783194

UKRAIN 7.8 11/28/2254.355.31.62106.637.819.6517474.6XS0858358236

UKRAIN 7 1/2 04/17/2353.054.50.08101.740.319.1616944.7XS0917605841

* w/w - week on week, 5-y - 5-year low and high, YTM mid - yield to maturity based on mid market price, Bmk - benchmark, Mdur - modified duration, ISIN - international securityidentification number; prices as of 3 July 2015, 10:10 a.m. CET Source: Bloomberg, RBI/Raiffeisen RESEARCH

Summary: Ratings & macro data

Country ratings: CE, SEE, CIS

LCYS&P FCYOutlookLCYMoody'sFCYOutlookLCYFitchFCYOutlook

CEE

PolandAA-positiveA2A2stableAA-stable

HungaryBB+BB+stableBa1Ba1stableBBB-BB+stable

Czech RepublicAAAA-stableA1A1stableAA-A+stable

Slovakia *AApositiveA2A2stableA+A+stable

Slovenia *A-A-stableBaa3Baa3stableBBB+BBB+stable

SEE

RomaniaBBB-BBB-stableBaa3Baa3stableBBBBBB-stable

BulgariaBB+BB+stableBaa2Baa2stableBBBBBB-stable

CroatiaBBBBstableBa1Ba1negativeBB+BBstable

SerbiaBB-BB-negativeB1B1stableB+B+stable

CIS

RussiaBBB-BB+negativeBa1Ba1negativeBBB-BBB-negative

UkraineCCC+CCnegativeCaCanegativeCCCCCn.a.

BelarusB-B-stableCaa1Caa1negativeNRNRn.a.

KazakhstanBBBBBBnegativeNABaa2positiveA-BBB+stable

TurkeyBBBBB+negativeBaa3Baa3negativeBBBBBB-stable

* Euro area (Euro currency) members; positive rating/outlook changes (in previous week) in green, negative changes in redSource: rating agencies websites

Main macro data & forecasts*

Country Year GDP, CPI, Unem- Nominal Fiscal Public Export**, C/A, % Ext. debt, FXR*** % Import% avg. % avg. ployment, wages, balance, debt, % % GDP GDP % GDP ext. debt cover, yoy yoy % EUR % GDP GDP months

Croatia 2014e -0.4 -0.2 17.3 1042 -5.7 85.1 22.7 0.7 108.5 n.a. 9.52015f 0.5 0.0 16.9 1040 -5.4 90.5 23.9 0.9 111.3 n.a. 9.22016f 1.0 1.4 16.7 1039 -5.0 93.7 24.5 0.7 111.1 n.a. 9.0

Czech Rep. 2014e 2.0 0.4 7.7 933 -2.0 42.6 73.9 0.6 67.0 43.3 5.02015f 3.2 0.5 6.6 961 -2.5 41.1 76.1 0.6 65.4 45.1 4.92016f 2.4 1.7 6.3 1008 -1.8 40.4 79.5 0.6 63.3 47.5 4.8

Hungary 2014e 3.6 -0.2 7.7 726 -2.6 76.9 81.9 3.9 108.7 30.7 5.32015f 3.0 0.5 7.4 745 -2.6 75.0 81.1 3.8 92.5 32.2 4.82016f 2.5 2.9 6.9 754 -2.5 73.8 82.5 3.7 84.8 35.8 4.7

Poland 2014e 3.4 0.0 12.3 904 -3.2 50.1 38.1 -0.5 70.9 28.2 6.22015f 3.9 -0.4 10.7 946 -2.7 50.1 38.6 -1.2 69.5 28.3 6.02016f 3.6 1.5 9.7 1020 -2.3 49.9 38.3 -1.7 67.8 24.7 5.1

Romania 2014e 2.8 1.1 6.8 513 -1.5 39.8 31.1 -0.5 62.8 34.2 7.42015f 4.0 0.0 6.7 546 -2.3 39.8 31.3 -1.5 59.6 34.2 6.92016f 3.5 1.4 6.5 582 -2.3 39.8 32.1 -2.0 57.9 33.8 6.4

Russia 2014e 0.6 7.8 5.3 640 -1.0 11.5 26.6 3.5 35.4 56.3 14.42015f -4.0 15.2 6.5 542 -4.2 12.5 25.3 3.7 37.7 70.9 21.92016f 0.5 7.5 6.5 579 -3.0 13.5 24.4 2.7 31.6 82.0 20.6

Ukraine 2014e -6.8 12.1 9.3 240 -11.0 53.6 42.2 -4.0 96.4 5.9 1.52015f -10.0 53.7 11.5 168 -7.0 81.4 48.6 -1.9 131.8 10.0 3.12016f 1.5 14.0 11.0 n.a. -5.5 72.0 56.0 -0.7 143.4 12.0 3.6

Turkey 2014e 2.9 8.9 9.8 n.a. -1.5 35.0 21.2 -5.7 55.9 23.9 5.62015f 3.0 7.7 10.5 n.a. -1.5 34.0 23.3 -5.1 59.8 22.8 5.42016f 3.5 7.5 10.0 n.a. -1.5 32.0 21.3 -6.0 52.4 26.4 5.8

* only for countries regularly included in CEE Weekly, under revison** Export of Goods only; *** FXR - Foreign exchange reservesSource: Thomson Reuters, National Statistics, RBI/Raiffeisen RESEARCH

Risk notifications and explanations

Warnings

Figures on performance refer to the past. Past performance is not a reliable indicator of the future results and development of a financial instrument, a financial index or a securities service. This is particularly true in cases when the financial instrument, financial index or securities service has been offered for less than 12 months. In particular, this very short comparison period is not a reliable indicator for future results. Performance of a financial instrument, a financial index or a securities service is reduced by commissions, fees and other charges, which depend on the individual circumstances of the investor. The return on an investment can rise or fall due to exchange rate fluctuations. Forecasts of future performance are based purely on estimates and assumptions. Actual future performance may devi- ate from the forecast. Consequently, forecasts are not a reliable indicator for the future results and development of a financial instrument, a financial index or a securities service.

Raiffeisen Bank International AG is responsible for the information and recommendations in this publication which are prepared by analysts from subsidiary banks who are listed in this publication or from Raiffeisen Centrobank.

A description of the concepts and methods which are used in the preparation of financial analyses can be found at:www.raiffeisenresearch.at/conceptsandmethods

Detailed information on sensitivity analyses (procedure for checking the stability of potential assumptions made in the context of financial analysis) can be found at: www.raiffeisenresearch.at/sensitivityanalysis

The distribution of all recommendations relating to the calendar quarter prior to the publications date, and distribution of recommendations, in the context of which investmentbanking services within the meaning of 48f (6) Z 6 Stock Exchange Act (BrseG) have been provided in the last 12 months, is available under:www.raiffeisenresearch.at/distributionofrecommendations

Disclosure of circumstances and interests which may jeopardise the objectivity of RBI (as per Sec 48f [5] and [6] of the Stock

DisclosureExchange Act): www.raiffeisenresearch.at/disclosuresobjectivity

18

Bonds

Financial instruments/Company Date of the first publicationEurobonds 01/01/2001LCY bonds 01/01/1997

Recommendations history: Local currency government bonds (B: buy; H: hold; S: sell; I: no change)*

Date of change20/06/2014CZ2y 5y 10y CZKHold Hold Hold HoldHU2y 5y 10y HUFHold Hold Hold SellPL2y 5y 10y PLNHold Hold Hold HoldRO2y 5y 10y RONHold Hold Hold HoldRU**2y 5y 10y RUBSell Sell Sell SellTR**2y 5y 10y TRYHold Hold Hold Buy

06/08/2014I I I II I I HoldI I I II I I IHold Hold Hold HoldI I I I

16/09/2014I I I II I I IBuy Buy Buy IBuy Buy Buy IBuy I I IBuy I I Hold

07/11/2014I I I II I I II I I II Hold Hold IHold I I IHold I I I

09/12/2014I I Buy II I I SellI I I II I I ISell Sell Sell SellBuy Buy Buy Buy

09/02/2015I I Hold IBuy Buy Buy IHold Hold Hold IBuy Buy Buy II I I II I I I

24/03/2015I I I II Hold Hold II I I SellI I I IHold I I II Hold Hold Sell

28/04/2015I I I II I I II I I HoldHold Hold Hold HoldBuy Hold Hold II I I Hold

15/05/2015I Buy Buy II I I II I I HoldHold Hold Hold HoldBuy Hold Hold II I I Hold

02/06/2015I Hold Hold IHold I I HoldI I I II I I II I I HoldI Buy Buy Buy

24/06/2015I I Buy II I Sell II I Sell II I Sell II Buy Buy ISell Sell Sell Sell

* recommendations based on absolute expected performance in LCY** TRY and RUB vs USD; other FX vs EUR Source: RBI/Raiffeisen RESEARCH

Recommendations history: Sovereign Eurobonds (B: buy; H: hold; S: sell; I: no change)*

Date of changeEURBGUSDEURHRUSDEURCZUSDEURHUUSDEURPLUSDEURROUSDEURRUUSD

20/06/2014Hold--SellSellHoldHoldBuyBuyBuyIHoldHoldHoldHold

06/08/2014I--IIIIIIHoldIBuyIII

16/09/2014I--IIIIIIBuyBuyIIII

09/12/2014I--IIIIIHoldIIHoldHoldSellSell

09/02/2015I--IIIIIIHoldHoldBuyIII

05/03/2015I--HoldHoldIIIIIIIIHoldHold

24/03/2015I--IIIIHoldIBuyHoldIBuyBuyBuy

17/04/2015I--IIIIIIIIIIHoldHold

28/04/2015I--IIIIIIIIIIII

02/06/2015Sell--IIIIIIIBuyHoldHoldII

24/06/2015Hold--IIIIIIIHoldIIII

* recommendations based on absolute expected performance, i.e. expected spread change; Source: RBI/Raiffeisen RESEARCH

Recommendations history: Sovereign Eurobonds (B: buy; H: hold; S: sell; I: no change)*

Date of changeEURRSUSDEURSKUSDEURSIUSDEURTRUSDEURUAUSDEURBYUSD

20/06/2014--Buy--------BuyHoldHoldSell--Hold

06/08/2014--Hold--------HoldIII--I

16/09/2014--I--------BuyBuySellI--I

09/12/2014--I--------HoldHoldII--I

09/02/2015--Sell--------IIII--Sell

05/03/2015Hold--------IIII--I

24/03/2015I--------IIII--Hold

17/04/2015I--------IIII--I

28/04/2015IHold--Buy--BuyBuyHoldHold--Buy

02/06/2015Sell----I--IIII-I

24/06/2015II--I--IHoldII-I

* recommendations based on absolute expected performance, i.e. expected spread change; Source: RBI/Raiffeisen RESEARCH

Disclaimer Financial Analysis

Publisher: Raiffeisen Bank International AG (hereinafter RBI)RBI is a credit institution according to 1 Banking Act (Bankwesengesetz) with the registered office Am Stadtpark 9, 1030 Vienna, Austria. Raiffeisen RESEARCH is an organisational unit of RBI.Supervisory authority: Austrian Financial Market Authority FMA, Otto-Wagner-Platz 5, A-1090 Vienna and National Bank of Austria, Josefsplatz 1, 1015Vienna. Additionally, Raiffeisen Bank International AG is subject to supervision by the European Central Bank (ECB), which ECB undertakes within the SingleSupervisory Mechanism (SSM), which consists of the ECB on national responsible authorities (Council Regulation (EU) No 1024/2013). Unless set out herein explicitly otherwise, references to legal norms refer to norms enacted by the Republic of Austria.

This document is for information purposes and may not be reproduced or distributed to other persons without RBIs permission. This document constitutes neither a solicitation of an offer nor a prospectus in the sense of the Austrian Capital Market Act (in German: Kapitalmarktgesetz)or the Austrian Stock Exchange Act (in German: Brsegesetz) or any other comparable foreign law. An investment decision in respect of a security, financial product or investment must be made on the basis of an approved, published prospectus or the complete documentation for the security, financial product or investment in question, and not on the basis of this document.This document does not constitute a personal recommendation to buy or sell financial instruments in the sense of the Austrian Securities Supervision Act (in German: Wertpapieraufsichtsgesetz). Neither this document nor any of its components shall form the basis for any kind of contract or commitment whatsoever. This document is not a substitute for the necessary advice on the purchase or sale of a security, investment or other financial product. In respect of the sale or purchase of securities, investments or financial products, your banking advisor can provide individualised advice which is suitable for investments and financial products.This analysis is fundamentally based on generally available information and not on confidential information which the party preparing the analysis has obtained exclusively on the basis of his/her client relationship with a person.Unless otherwise expressly stated in this publication, RBI deems all of the information to be reliable, but does not make any assurances regarding its accuracy and completeness.In emerging markets, there may be higher settlement and custody risk as compared to markets with established infrastructure. The liquidity of stocks/financial instruments can be influenced by the number of market makers. Both of these circumstances can result in elevated risk in relation to the safety of investments made on the basis of the information contained in this document.

The information in this publication is current, up to the creation date of the document. It may be outdated by future developments, without the publication being changed.Unless otherwise expressly stated (www.raiffeisenresearch.at/specialcompensation), the analysts employed by Raiffeisen Bank International AG are not compensated for specific investment banking transactions. Compensation of the author or authors of this report is based (amongst other things) on the overall profitability of RBI, which includes, inter alia, earnings from investment banking and other transactions of RBI. In general, RBI forbids its analysts and persons reporting to the analysts from acquiring securities or other financial instruments of any enterprise which is covered by the analysts, unless such acquisition is authorised in advance by RBIs Compliance Department.RBI has put in place the following organisational and administrative agreements, including information barriers, to impede or prevent conflicts of interest in relation to recommendations: RBI has designated fundamentally binding confidentiality zones. Confidentiality zones are typically units within credit institutions, which are isolated from other units by organisational measures governing the exchange of information, because compliance-relevant information is continuously or temporarily handled in these zones. Compliance-relevant information may fundamentally not leave a confidentiality zone and is to be treated as strictly confidential in internal business operations, including interaction with other units. This does not apply to the transfer of information necessaryfor usual business operations. Such transfer of information is limited, however, to what is absolutely necessary (need-to-know principle). The exchange of compliance-relevant information between two confidentiality zones may only occur with the involvement of the Compliance Officer.SPECIAL REGULATIONS FOR THE UNITED KINGDOM OF GREAT BRITAIN AND NORTHERN IRELAND (UK):This document does not constitute either a public offer in the meaning of the Austrian Capital Market Act (in German: Kapitalmarktgesetz; hereinafterKMG) nor a prospectus in the meaning of the KMG or of the Austrian Stock Exchange Act (in German: Brsegesetz). Furthermore this document does not intend to recommend the purchase or the sale of securities or investments in the meaning of the Austrian Supervision of Securities Act (in German: Wertpa- pieraufsichtsgesetz). This document shall not replace the necessary advice concerning the purchase or the sale of securities or investments. For any advice concerning the purchase or the sale of securities of investments kindly contact your RAIFFEISENBANK. Special regulations for the United Kingdom of Great Britain and Northern Ireland (UK): this publication has been either approved or issued by Raiffeisen Bank International AG (RBI) in order to promote its investment business. Raiffeisen Bank International AG, London Branch is authorised by the Austrian Financial Market Authority and subject to limited regulation by the Financial Conduct Authority (FCA). Details about the extent of our regulation by the Financial Conduct Authority are available from us on request. This publication is not intended for investors who are Retail Customers within the meaning of the FCA rules and should therefore not be distributed to them. Neither the information nor the opinions expressed herein constitute or are to be construed as an offer or solicitation of an offer to buy (or sell) investments. RBI may have affected an Own Account Transaction within the meaning of FCA rules in any investment mentioned herein or related investments and or may have a position or holding in such investments as a result. RBI may have been, or might be, acting as a manager or co-manager of a public offering of any securities mentioned in this report or in any related security.SPECIFIC RESTRICTIONS FOR THE UNITED STATES OF AMERICA AND CANADA: This document may not be transmitted to, or distributed within, the United States of America or Canada or their respective territories or possessions, nor may it be distributed to any U.S. person or any person resident in Canada, unless it is provided directly through RB International Markets (USA) LLC, a U.S. registered broker-dealer (RBIM), and subject to the terms set forth below.SPECIFIC INFORMATION FOR THE UNITED STATES OF AMERICA AND CANADA: This research document is intended only for institutional investors and is not subject to all of the independence and disclosure standards that may be applicable to research documents prepared for retail investors. This report was provided to you by RB International Markets (USA) LLC, a U.S. registered broker-dealer (RBIM), but was prepared by our non-U.S. affiliate, Raiffeisen Bank International AG (RBI). Any order for the purchase or sale of securities covered by this report must be placed with RBIM. You can reach RBIM at 1133Avenue of the Americas, 16th Floor, New York, NY 10036, 212-600-2588. This document was prepared outside the United States by one or more analysts who may not have been subject to rules regarding the preparation of reports and the independence of research analysts comparable to those in effect in the United States. The analyst or analysts who prepared this research (i) are not registered or qualified as research analysts with the Financial Industry Regula- tory Authority (FINRA) in the United States, and (ii) are not allowed to be associated persons of RBIM and are therefore not subject to FINRA regulations, including regulations related to the conduct or independence of research analysts.The opinions, estimates and projections contained in this report are those of RBI only as of the date of this report and are subject to change without notice. The information contained in this report has been compiled from sources believed to be reliable by RBI, but no representation or warranty, express or implied, is made by RBI or its affiliated companies or any other person as to the reports accuracy, completeness or correctness. Securities which are not registered in the United States may not be offered or sold, directly or indirectly, within the United States or to U.S. persons (within the meaning of Regulation S under the Securities Act of 1933 [the Securities Act]), except pursuant to an exemption under the Securities Act. This report does not constitute an offer with respect to the purchase or sale of any security within the meaning of Section 5 of the Securities Act and neither shall this report nor anything contained herein form the basis of, or be relied upon in connection with, any contract or commitment whatsoever. This report provides general information only. In Canada it may only be distributed to persons who are resident in Canada and who, by virtue of their exemption from the prospectus requirements of the applicable provincial or territorial securities laws, are entitled to conduct trades in the securities described herein.INFORMATION REGARDING THE PRINCIPALITY OF LIECHTENSTEIN: COMMISSION DIRECTIVE 2003/125/EC of 22 December 2003 implementing Directive 2003/6/EC of the European Parliament and of the Council as regards the fair presentation of investment recommendations and the disclosure of conflicts of interest has been incorporated into national law in the Principality of Liechtenstein by the Finanzanalyse-Marktmissbrauchs-Verordnung.

ImprintIf any term of this Disclaimer is found to be illegal, invalid or unenforceable under any applicable law, such term shall, insofar as it is severable from the remaining terms, be deemed omitted from this Disclaimer; it shall in no way affect the legality, validity or enforceability of the remaining terms.

Imprint

Information requirements pursuant to the Austrian E-Commerce ActRaiffeisen Bank International AGRegistered Office: Am Stadtpark 9, 1030 ViennaPostal address: 1010 Vienna, POB 50Phone: +43-1-71707-0; Fax: + 43-1-71707-1848Company Register Number: FN 122119m at the Commercial Court of ViennaVAT Identification Number: UID ATU 57531200Austrian Data Processing Register: Data processing register number (DVR): 4002771S.W.I.F.T.-Code: RZBA AT WWSupervisory Authorities: As a credit institution pursuant to 1 of the Austrian Banking Act, Raiffeisen Bank International AG is subject to supervision by the Financial Market Authority and the Austrian Central Bank. Further, Raiffeisen Bank Interna- tional AG is subject to legal regulations (as amended from time to time), in particular the Austrian Banking Act (Bankwesen- gesetz) and the Securities Supervision Act (Wertpapieraufsichtsgesetz). Additionally, Raiffeisen Bank International AG is subject to supervision by the European Central Bank (ECB), which ECB undertakes within the Single Supervisory Mechanism (SSM), which consists of the ECB on national responsible authorities (Council Regulation (EU) No 1024/2013). Membership: Austrian Federal Economic Chamber, Federal Bank and Insurance Sector, Raiffeisen Association

Statement pursuant to the Austrian Media ActPublisher and editorial office of this publication: Raiffeisen Bank International AG, Am Stadtpark 9, A-1030 ViennaMedia Owner of this publication: Raiffeisen RESEARCH Verein zur Verbreitung von volkswirtschaftlichen Analysen und Fi- nanzmarktanalysen, Am Stadtpark 9, A-1030 ViennaExecutive Committee of Raiffeisen RESEARCH Verein zur Verbreitung von volkswirtschaftlichen Analysen und Finanz- marktanalysen: Mag. Peter Brezinschek (Chairman), Mag. Helge Rechberger (Vice-Chairman)Raiffeisen RESEARCH Verein zur Verbreitung von volkswirtschaftlichen Analysen und Finanzmarktanalysen is constituted as state-registered society. Purpose and activity are (inter alia), the distribution of analysis, data, forecasts and reports and similar publications related to the Austrian and international economy as well as financial markets.Basic tendency of the content of this publication Presentation of activities of Raiffeisen Bank International AG and its subsidiaries in the area of conducting analysis related to the Austrian and international economy as well as the financial markets. Publishing of analysis according to various methods of analyses covering economics, interest rates and currencies, government and corporate bonds, equities as well as commodities with a regional focus on the euro area and Central and Eastern Europe under consideration of the global markets.Producer of this publication: Raiffeisen Bank International AG, Am Stadtpark 9, A-1030 Vienna

Editor: Stephan Imre, RBI Vienna

Contacts

Contacts

Global Head of Research:Peter Brezinschek (ext. 1517)

Top-Down CEE Banking Sector:Gunter Deuber (ext. 5707), Elena Romanova (ext. 1378)

Research Sales:Werner Weingraber (ext. 5975)

Economics, Fixed Income, FX:Valentin Hofsttter (Head, ext. 1685), Jrg Angel (ext. 1687), Gunter Deuber (ext. 5707), Wolfgang Ernst (ext. 1500), Stephan Imre (ext. 6757), Lydia Kranner (ext. 1609), Patrick Krizan (ext. 5644), Matthias Reith (ext.6741), Andreas Schwabe (ext. 1389), Gintaras Shlizhyus (ext. 1343), Gottfried Steindl (ext. 1523), Martin Stelzeneder (ext. 1614)

Credit/Corporate Bonds:Christoph Klaper (Head, ext. 1652), Michael Ballauf (ext. 2904), Jrg Bayer (ext. 1909), Martin Kutny (ext. 2013), Peter Onofrej (ext. 2049), Manuel Schreiber (ext. 3533), Lubica Sikova (ext. 2139), Jrgen Walter (ext. 5932)

Stocks:Helge Rechberger (Head, ext. 1533), Aaron Alber (ext. 1513), ConnieGaisbauer (ext. 2178), Christian Hinterwallner (ext. 1633), Jrn Lange (ext.5934), Hannes Loacker (ext. 1885), Johannes Mattner (ext. 1463), ChristineNowak (ext. 1625), Magdalena Quell (ext. 2169), Leopold Salcher (ext.2176), Andreas Schiller (ext. 1358), Christoph Vahs (ext. 5889)

Quant Research/Emerging Markets:Veronika Lammer (Head, ext. 3741), Florian Acker (ext. 2108), Bjrn Chyba (ext. 8161), Judith Galter (ext. 1320), Thomas Keil (ext. 8886), Andreas Mannsparth (ext. 8133), Stefan Theul (ext. 1593)

Technical Analysis:Robert Schittler (ext. 1537), Stefan Memmer (ext. 1421)

Layout:Birgit Bachhofner (ext. 3518), Kathrin Korinek (ext. 1518)

Albania: Raiffeisen Bank Sh.A.Croatia: Raiffeisenbank Austria d.d.Kosovo: Raiffeisen Bank Kosovo J.S.C.

Joan CanajZrinka Zivkovic MatijevicArta Kastrati

Valbona GjekaNada Harambasic-NereauAntigona Limani

Jadran Simic

Belarus: Priorbank Open Joint-Stock CompanyTomislava UjevicPoland: Raiffeisen Bank Polska S.A.

Oleg LeontevMarta Petka-Zagajewska

Vasily PirogovskyCzech Republic:Dorota Strauch

Olga LaschevskayaRaiffeisenbank a.s.Tomasz Regulski

Mariya KedaHelena HorskaPiotr Jelonek

Michal BrozkaMicha Burek

Bosnia & Herzegovina: Raiffeisen Bank dd BosnaLenka Kalivodova

i HercegovinaDaniela MiluckaRomania: RAIFFEISEN BANK S.A.

Ivona ZameticaIonut Dumitru

Srebrenko FatusicHungary: Raiffeisen Bank Zrt.Nicolae Covrig

Zoltn TrkAnca Jelea

Bulgaria: Raiffeisenbank (Bulgaria) Sole-ownedGergely PlffyAlexandru Combei

Joint Stock CompanyLevente BlahIuliana Mocanu

Emil KalchevCatalin Diaconu

Russia: AO RaiffeisenbankAnastasia Baykova Denis Poryvay Anton Pletenev Maria Pomelnikova Rita TsovianIrina Alizarovskaya Konstantin Yuminov Sergey LibinAndrey Polischuk Fedor Kornachev Natalia Kolupaeva

Serbia: Raiffeisen banka a.d. BeogradLjiljana GrubicSlovenia: Raiffeisen Bank d.d.Primoz Kovacic

Ukraine: Raiffeisen Bank Aval Public Joint StockCompany Sergii Drobot Ludmila Zagoruyko Olga NikolaievaCompany Research: Raiffeisen Centrobank AGStefan Maxian (Head)

Daniel Damaska Natalia Frey Oleg Galbur Jakub Krawczyk Bernd MaurerJuliusz Mozdzierz Dominik Niszcz Markus Remis Teresa Schinwald Jovan Sikimic Arno Supper

Slovakia: Tatra banka, a.s.Robert Prega Juraj Valachy Boris Fojtik

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Investmentbanking Products:

Matthias RennerP: +431 71707-2123PL: Raiffeisen Bank Polska S.A.

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RB International Markets (USA) LCC

Stefan GabrieleP:+1 212 835 2328RO: Raiffeisen Bank S.A.

Aurelian MihailescuP: +40 21 3061221

AL: Raiffeisen Bank Sh.a.

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Reuf SulejmanovicP: +387 33 287-449

SI: Raiffeisen Banka d.d.

BG: Raiffeisenbank (Bulgaria) EADMarko StolicaP: +386 22293183

Boyan PetkovP: +359 2 91985-635

SK: Tatra banka, a.s.

BY: Priorbank JSCPeter AugustinP: +421 2 5919-1313

Treasury: Svetlana N GulkovichP: +375 17 2899080

Investmentbanking: Oleg LeontevP. +375 17 2899251SR: Raiffeisen banka a.d.

Branko NovakovicP: +381 11 2207131

CZ: Raiffeisenbank a.s.

Milan FischerP: + 420 234 40-1145UA: Raiffeisen Bank Aval

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Ivan ZizicP: +385 1 4695-076

Raiffeisen CENTROBANK AGInstitutional Equity Sales, ViennaHead: Wilhelm Celeda P: +43 1 515 20 402Sales: Klaus della Torre P: +43 1 515 20 472

Merger & AquisitionsGerhard Grund P: +43 1 51520-302Henning von Stechow P: +43 1 51520-760

Commercial banksRaiffeisen Bank International AG, ViennaCorporate Customers: Joseph Eberle Tel: +43 1 71707 1487Financial Institutions: Axel Summer Tel: +43 1 71707 1476

RBI London BranchRBI Beijing BranchTerence LeeTel: +86 10 8531-9007

RBI Singapore Branch

Klaus KrombassTel: +65 6305 6024

Matthias RennerTel: +44 20 7933 8001

Graham PageTel: +44 20 7933 8108

International Desk

AL: Raiffeisen Bank Sh.a.KO: Raiffeisen Bank Kosovo J.S.C.

Jorida ZaimiP: +355 4 2381 445 2865Anita SopiP: +381 38 22 22 22 184

AT: Raiffeisen Bank International AGPL: Raiffeisen Bank Polska S.A.

Rudolf LercherP: +43 1 71707 3537Krzysztof LubkiewiczP: +48 22 585 2534

BH: Raiffeisen Bank d.d. Bosna i Hercegovina RO: Raiffeisen Bank S.A.

Vildana SijamhodzicP: +387 33 287 283Reinhard ZeitlbergerP: +40 21 306 1564

BG: Raiffeisenbank (Bulgaria) EADRU: AO Raiffeisenbank

Irena KrentchevaP: +359 2 9198 5118Maria MaevskayaP: +7 495 775 5230

BY: Priorbank JSCSI: Raiffeisen Banka d.d.

Oksana AlekseychenkoP: +375 17 289 9908Simona VizintinP: +386 2 22 93 159

SK: Tatra banka, a.s.

CZ: Raiffeisenbank a.s.Mirco RibisP: +421 2 5919 1846

Roman LaglerP: +420 234 40 1728

SR: Raiffeisen banka a.d.

HR: Raiffeisenbank Austria d.d.Sofija DavidovicP: +381 11 220 7807

Wolfgang WoehryP: +385 1 4566 462

UA: Raiffeisen Bank Aval

HU: Raiffeisen Bank Zrt.Andreas KettlgruberP: +38 044 495 41 10

Lszlo VolosinovskyP: +36 1 484 4639

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(585496004) CEE Weekly_3Jul15