Emerging Markets Briefer · Investment Research — General Market Conditions . Surprisingly sunny dawn of 2012 – let’s see if it continues . We had ended 2011 inrather gloomy

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Investment Research — General Market Conditions

Surprisingly sunny dawn of 2012 – let’s see if it continues We had ended 2011 in rather gloomy terms, with the euro-area debt crisis overshadowing virtually all global market action and trends and with slim indications of a lasting, “final solution”.

While the European woes continue to very much direct and influence the day-to-day global risk sentiment, the latest liquidity measures by the ECB, as well as well as decent economic readings from the US and China, have collectively allowed for a cautiously optimistic and positive start to 2012.

The relief rally experienced in the euro this week has clearly had a positive spill over to the CEE region, where the Hungarian forint has also seen some of the late-2011 losses being pared as PM Orban’s administration has come under increasing international pressure to reverse a number of key interventionist political decisions. While we welcome these developments in CEE, we remain cautious in our risk outlook and expect the road to remain bumpy in the near term, not least in Hungary.

Outside of the European developments, elevated oil and higher metals prices look so far to be supportive of such commodity rich currencies as the Brazilian real and Mexican peso and South African rand and Russian ruble, though a good degree of caution is called for in this respect, as high oil prices currently seem to reflect more geopolitical concerns rather than a strong demand outlook.

20 January 2012

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

Emerging Markets Briefer

Contents

Poland ............................................................................. 2

Czech Republic ..................................................... 3

Hungary ........................................................................ 4

Estonia ........................................................................... 5

Latvia ............................................................................... 6

Lithuania ...................................................................... 7

Russia ............................................................................. 8

Ukraine .......................................................................... 9

Kazakhstan ........................................................... 10

Turkey ......................................................................... 11

South Africa ......................................................... 12

Brazil ............................................................................ 13

Mexico ........................................................................ 14

China ............................................................................ 15

Hong Kong .............................................................. 16

Taiwan ........................................................................ 17

South Korea ......................................................... 18

Thailand .................................................................... 19

Malaysia ................................................................... 20

Philippines ............................................................. 21

Indonesia ................................................................. 22

India ............................................................................... 23

FX forecast ............................................................ 24

Forecasts vs forwards .............................. 27

FX change against EUR and USD Risk adjusted FX change against EUR and USD

Source: Reuters EcoWin Source: Reuters EcoWin

Change in 2-year swap yield Stock market performance


-2-101234567

BR

LZ

AR

INR

MX

NTR

YK

RW

SG

DP

LNR

UB

MY

RTW

DP

HP

IDR

CN

YK

ZT

ILSU

AH

EGP

CZ

KH

UF

RO

N

%

(Simple average relative to EUR and USD)

-0.5

0.0

0.5

1.0

1.5

2.0

INR

SG

DB

RL

TRY

KR

WM

XN

TWD

ZA

RM

YR

PH

PR

UB

CN

YK

ZT

PLN

IDR

ILSU

AH

EGP

CZ

KR

ON

HU

F

%

(Annualised return divided by 1-year)

-20

-10

0

10

20

30

40

50

60

HU

F

CN

Y

BR

L

KR

W

THB

HK

D

ILS

PH

P

TWD

CZ

K

PLN

ZA

R

TRY

MX

N

SG

D

IDR

bp

-15

-10

-5

0

5

10

15

BR

LTW

DP

HP

KR

WTR

YIN

RH

UF

ILSID

RS

GD

MX

NC

ZK

ZA

RP

LNM

YR

CN

YR

ON

SK

KR

UB

UA

H

%

(Local currency)

2 | 20 January 2012 www.danskeresearch.com

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Poland Macro outlook • Compared with the previous growth forecast for Poland the future is now looking

somewhat less bright, as the global environment continues to deteriorate. Our current 2011 forecast is 3.9% y/y. For 2012, we expect Polish growth of about 2.8% y/y, while we have cut our 2013 forecast to 2.2% y/y.

• While investment expansion looks set to lose steam, it is in domestic demand that we expect to see the largest slowdown next year – as, in our view, austerity measures will inevitably take something off consumption activity. Furthermore, we expect external balances to deteriorate somewhat from the current year, with the current account deficit running at about 4.5% in 2012-13E and the trade balance remaining negative, with deficits running at about 2.5% by 2013E.

• Inflation is still well above the central bank’s (NBP) target of 2.5%, averaging 4.3% in 2011, but, given the current economic climate, we expect inflation growth to continue to moderate for the next two years. Finally, we expect unemployment to remain at elevated levels, on the plus side of 12%, with a risk of increasing unemployment from mid-2012.

• The governing coalition under the leadership of Prime Minister Donald Tusk won the recent elections and has a comfortable majority in the Polish parliament. The government is likely to go ahead with a moderate tightening of fiscal policy, which is likely to have a slightly negative impact on domestic demand in 2012. However, the announced plans for e.g. pension reforms are likely to have a long-term positive impact on growth and public finances and are as such highly welcomed.

Monetary policy outlook • Although domestic demand is easing, thereby reducing inflationary pressures,

inflation remains somewhat above the NBP’s target. The recent fairly sharp sell-off is having an impact and the Polish central bank has turned notably more hawkish recently as a direct consequence of the weakening of the zloty. While we expect the NBP to keep interest rates unchanged throughout 2012, the risk of a rate hike now seems bigger than the risk of a rate cut. In that regard it should be noted that we expect inflation to remain elevated above 4% throughout most of 2012 – well above the NBP’s 2.5% target.

FX outlook

• The zloty has been hit surprisingly hard by the ongoing European crisis and the uncertainty in Hungary and is now trading at a level that we consider as fundamentally undervalued. In our opinion, this, combined with a slightly less dovish stance from the NBP going forward, is likely to lead to some stabilisation and even strengthening of the zloty in the medium term – euro crisis or not. That said, in the short term the “noise” from the euro crisis could continue to weigh on the zloty.

PLN

Credit rating:

S&P: A- (stable)

Currency regime:

Free float (freely convertible)

Inflation target:

2.5% +/- 1% point

Macro Monitor (14 December)

FX forecast

Source: Reuters EcoWin, Danske Markets

Interest rate forecast


Macro forecast


Inflation elevated but looking to ease Still keeping growth momentum

96 98 00 02 04 06 08 10

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GDP-Deflator

% y/y % y/y

Supply Inflation

Demand Inflation

07 08 09 10 110

1

2

3

4

5

6

7

8

0

1

2

3

4

5

6

7

8 % y/y % y/y

GDP Growth, Poland


Danske Forward18-Jan 4.34+3M 4.40 4.38+6M 4.35 4.42+12M 4.30 4.48


EUR/PLN

USD/PLN

Policy rate

Next meetingNext change - Unchanged 2012End-2012

National Bank of Poland (NBP)4.50

08 Feb 2012

4.50

2010 2011 2012

GDP (% y/y) 3.8 3.9 2.8

Inflation (% y/y) 2.6 4.3 3.9

Unemployment (%) 12.4 12.5 12.4

Current Account (% of GDP) -4.6 -4.5 -4.5

http://danskeresearch.danskebank.com/link/MacroMonitorPoland141211/$file/MacroMonitor_Poland_141211.pdf�



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Czech Republic Macro outlook • Czech economic activity has been rather lacklustre in 2011 and we expect the Czech

economy to expand at a modest rate of 1.2% y/y in 2011. Poor growth numbers are due mainly to low levels of domestic demand and far-from-impressive levels of investment growth. Looking ahead, we see limited upside to the economic expansion for the next two years and we have further revised down our growth estimates for the Czech economy to an average of 1.8% y/y in 2012E and 2.2% y/y in 2013.

• In our view, the lacklustre performance of the Czech economy is due primarily to overly tight monetary policy and, as our chart below illustrates, there is basically no “demand inflation” in the Czech economy. This is a clear indicator that monetary policy is very tight in the Czech Republic and, as a consequence, we have a hard time seeing the Czech economy recovering in the near term – and the ongoing euro crisis is certainly not helping either.

Monetary policy outlook • As mentioned above, monetary conditions in our view remain very tight in the Czech

economy, because of a sharp fall in money velocity and basically no growth in the Czech money supply. In our view, this is continuing to have a deflationary impact – as confirmed by our measure of “demand inflation” (see chart below) and, in our view, monetary easing is clearly warranted.

• However, for now the Czech central bank seems to see inflationary risks. Therefore, we think the CNB will remain reluctant to move towards monetary easing – primarily because the CNB board (wrongly in our view) seems to associate low interest rates with easy monetary policy. Monetary supply growth and money velocity tell a very different story from interest rates. Furthermore, the CNB seems to be (overly) concerned about the potential inflationary impact of the weakening of the Czech koruna, something we fundamentally do not see as a major threat.

FX outlook • With monetary policy remaining deflationary, the CNB could ease monetary policy to

engineer a further weakening of the Czech koruna and it seems as though the market has to some extent been betting on this. However, it is also notable that some CNB board members have argued that further weakening of the Czech koruna could warrant rate hikes. This – overly in our view – hawkish stance of Czech monetary policy is likely to curb the sell-off in the Czech koruna. However, with the economy continuing to be in a “no growth” mode it is, in our opinion, only a matter of time before the CNB will be forced to allow for a further weakening of the CZK.

No inflationary pressures on the horizon Growth continues to taper off

00 02 04 06 08 10

-10.0

-7.5

-5.0

-2.5

0.0

2.5

5.0

7.5

10.0

-10.0

-7.5

-5.0

-2.5

0.0

2.5

5.0

7.5

10.0 % y/y % y/y

Supply Inflation

GDP-Deflator

Demand Inflation

06 07 08 09 10 11

-7.5

-5.0

-2.5

0.0

2.5

5.0

7.5

10.0

-7.5

-5.0

-2.5

0.0

2.5

5.0

7.5

10.0 % y/y % y/y

GDP Growth, Czech Republic


CZK

Credit rating:

S&P: AA- (stable)

Currency regime:


Inflation target:

2% +/- 1% point

Macro forecasts:

Macro monitor (27 October)

FX forecast




Macro forecast




EUR/CZK

USD/CZK

Policy rate

Next meetingNext change - Unchanged 2012End-2012 0.75

Czech National Bank (CNB)0.75

02 Feb 2012

2010 2011 2012

GDP (% y/y) 2.6 1.2 1.8

Inflation (% y/y) 1.5 1.9 2.8

Unemployment (%) 9.6 8.2 9.0

Current Account (% of GDP) -3.1 -2.3 1.8

http://danskeresearch.danskebank.com/link/MacroMonitorCzechRepublic/$file/MacroMonitor_CzechRepublic.pdf�


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Hungary Macro outlook • Since 2006 there has basically been no growth in the Hungarian economy and the

small signs of recovery have now been “overruled” by the escalation of the euro debt crisis. As a consequence, we expect the Hungarian economy to continue to “flat line” in 2012. Worse we are increasingly coming to the conclusion that the key reason for Hungary’s lacklustre growth performance is a continued deterioration of “supply side conditions” in the Hungarian economy. Continued extreme political “noise” is certainly not helping growth either.

• The only real positive thing to note about the development in the Hungarian economy is the continued improvement in external balances. This is, however, of little comfort given the clear financial fragilities in the Hungarian economy.

• The Hungarian government has reversed its previous stance that it would not seek a new loan agreement with the IMF, but its decision to pass a new highly controversial central bank law, which according to the EU limits the independence of the central bank, has been a major stumbling block in terms of starting negotiations. It now seems that the IMF and the EU have accepted to initiate negotiations after the Hungarian government indicated that it could make concessions on the controversial central bank law. However, there is still a lot of uncertainty about the policy actions of the Hungarian government and we are far from confident that the Hungarian government will do “the right thing”.

Monetary policy outlook • The Hungarian central bank (MNB) has hiked its key policy by a total of 100bp over

the last two Monetary Council meetings, despite the complete lack of growth momentum in the Hungarian economy. However, inflation also remains above the MNB’s 3%-inflation target and there is no doubt that the recent sharp sell-off in the forint is a key driver for the MNB’s hawkishness. With political uncertainty remaining extremely elevated and the MNB’s independence under pressure, more rate hikes certainly cannot be ruled out, in our view.

FX outlook • The forint has taken a significant beating and judging by external balances and cost

competitiveness there is no doubt that the forint is undervalued. However, the very elevated level of political risk and the obvious financial fragility warrant a very significant risk premium on Hungarian asset prices – including on the forint. Therefore, we do not see any potential for a strong rebound in the forint in the short to medium term.

Inflation still above MNB’s target rate Growth remains lacklustre

96 98 00 02 04 06 08 10

-10

-5

0

5

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15

20

25

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-10

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20

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30 % y/y % y/y

Supply InflationGDP-Deflator

Demand Inflation

06 07 08 09 10 11-8

-6

-4

-2

0

2

4

-8

-6

-4

-2

0

2

4 % y/y % y/y

GDP Growth, Hungary


HUF

Credit rating:

S&P: BB+ (negative)

Currency regime:


Inflation target:

3% (medium term)

Macro monitor (4 August)

FX forecast




Macro forecast




EUR/HUF

USD/HUF

Policy rate

Next meetingNext change + 50 bp Jan 2012End-2012 6.50

7.00

24 Jan 2012

Hungarian Central Bank (MNB)

2010 2011 2012

GDP (% y/y) 1.3 1.5 0.7

Inflation (% y/y) 4.9 3.9 4.5

Unemployment (%) 11.2 10.9 11.4

Current Account (% of GDP) 1.1 1.8 0.1

http://danskeanalyse.danskebank.dk/link/MacroMonitorHungary040811/$file/MacroMonitor_Hungary_040811.pdf�



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Estonia Macro outlook • The revised GDP data indicated a continuation of strong recovery path in Q3 11,

according to second estimate GDP growth accelerated to 8.5% y/y, up from 8.4% y/y in Q2 11. The revised GDP growth was 0.6 percentage points higher than the estimate published in November. While we expect growth to decelerate in Q4 11 we believe it will remain strong.

• However, there is a clear risk of a more significant deceleration in 2012. Two-thirds of Estonia's export routes are to Europe, where a significant slowdown is expected already in Q4 11. In one of the main Estonian export partners – Finland – a significant slowdown is already evident. Based on this, forecasts for the forthcoming year have been revised down again to 2.2% y/y.

• The consumer price index increased by 5.0% on average in 2011. The inflation trend was largely in line with our forecast last year. In terms of the outlook for this year, we expect the downward trend to continue as economic growth is expected to decelerate significantly. Further increases in electricity prices (due to changes in the regulatory framework implemented last year) can be expected this year, but the biggest shock will come in 2013 with the opening of the electricity market. Thus, we expect inflation to decelerate to 2.8% this year on average but there is some upside risk mostly arising from global oil market developments.

• The labour market improved further: in Q3 11 the unemployment rate fell to 10.9%, down from 13.3% in Q2 and employment growth accelerated to 8.6% y/y. The labour market is recovering faster than we predicted, but the expected slowdown in growth could put a damper on the recovery prospects.

FX and monetary policy outlook • S&P has upgraded 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.

Strong performance but risks lie ahead Domestic recovery still on track

03 04 05 06 07 08 09 10 11

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60

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GDP

% y/y % y/y

Industrial production

Export

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Fixed investments >>


EEK

Credit rating:

S&P: AA- (negative)

Currency:

EUR since 1 January 2011


Macro forecast


2011 2012 2013

GDP (% y/y) 7.7 2.2 3.7

Inflation (% y/y) 5.0 2.8 1.8



http://danskeresearch.danskebank.com/link/MacroMonitorEstonia131011/$file/MacroMonitor_Estonia_131011.pdf�


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Latvia Macro outlook

• According to revised data in Q3 GDP growth accelerated to 6.6% y/y, up from 5.6% y/y in Q2 11. Based on this information it is clear that Latvia's domestic demand is recovering faster than we predicted. The exceptionally good Q3 11 results are likely to positively affect the whole year results and it is very likely that the Latvian economy will expand by 5% on average. However, the impact on Latvia of the deterioration in the global outlook in 2012 could be fairly strong; we expect growth to decelerate to 2.1% y/y – slightly more than we predicted previously. Still, the risk is on the downside due to the high concentration of Latvian exports in low value-added activities (such as the wood sector, for example).

• Average annual inflation for the whole of 2011 was 4.4% in Latvia, in line with our forecast. Weak consumer demand would result in a continuation of the downward trend in Latvian consumer prices this year. We estimate average annual inflation in Latvia this year will be about 2.6%, driven at least in part by higher gas prices.

• Labour market conditions improved further with the unemployment level falling to 14.4% in Q3, down from 16.2% in Q2. The Latvian labour market continues to suffer from structural problems (the share of long- term unemployed remains at high levels and accounts for 55% of all unemployed), which are preventing the unemployment rate from declining at a rapid rate.

FX and monetary policy outlook • The Latvian lat (LVL) is pegged to the euro through ERM II and today the

situation in the financial market appears to be stable.

Risk factors • Main risk is associated with possible deterioration of the external outlook.

Recovery accelerated Even domestic demand has recovered

01 02 03 04 05 06 07 08 09 10 11

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Export

GDP

03 04 05 06 07 08 09 10 11

-40

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40 % y/y % y/y<< Private consumption



LVL

Credit rating:

S&P: BB+ (positive)

Currency regime:

Quasi-currency board, ERM2

member (freely convertible)

Inflation target:

None, due to fixed exchange rate

Macro monitor (3 November)

FX forecast


Macro forecast


Danske Forward18-Jan 0.70+3M 0.70 -+6M 0.70 -

+12M 0.70 -

Danske Forward18-Jan 0.54+3M 0.56 -+6M 0.54 -+12M 0.52 -

USD/LVL

EUR/LVL

2011 2012 2013

GDP (% y/y) 5.0 2.1 3.3

Inflation (% y/y) 4.4 2.6 2.8

Unemployment (%) 13.7 12.8 11.8


http://danskeresearch.danskebank.com/link/MacroMonitorLatvia031111/$file/MacroMonitor_Latvia_031111.pdf�



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Lithuania Macro outlook • Lithuanian GDP increased 6.7% y/y in Q3 11 compared with 6.5% y/y in Q2 11. The

Lithuanian economy was supported in the quarter by the strong recovery in domestic demand, particularly household consumption. Although we expect GDP growth to slow down in Q4 11, we expect average growth to remain strong in 2012. We think it is possible that the economy will grow slightly faster than we assume in our base forecast scenario to up to 6% in average.

• Due to a less favourable assessment of global trends and the increased risk in financial markets, Lithuanian economic development could slow to 2.7 % y/y on average in 2012. It is likely that its relatively well-diversified export structure will allow Lithuania to avoid a more significant slowdown in growth.

• Average annual inflation for the whole of 2011 was 4.1%. Lithuania in 2011 experienced an energy price shock and its adverse impact on consumer price development is likely to be visible this year as well. This shock will occur in two channels – resulting in higher heating costs and more expensive electricity. The whole effect of higher electricity prices on CPI is likely to be about 0.2-0.3 percentage points. There will be approximately the same impact on inflation from higher excise duties. Meanwhile, how much to contribute from heating prices? It is difficult to assess. Overall inflation this year should average about 2.8% with significant upside risk.

• Rapid economic growth positively contributed to labour market recovery in Q311: unemployment fell to 14.8%. Increasing number of jobs indicates an upward trend in labour demand. However, there is the risk that the shortages, gaps and mismatches of skills will result in relatively high unemployment in the medium term.

FX and monetary policy outlook • Moody's left Lithuania's credit rating unchanged. The agency notes that despite rapid

economic growth, such as the challenges of high fiscal deficit and high unemployment persists.

Risk factors • There is a risk that external demand growth will fall in coming quarters and this

would affect Lithuanian growth trends.

Growth is still strong... ... but risks lie ahead

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<< Private consumption



LTL

Credit rating:

S&P: BBB (stable)

Currency regime:

Currency board, ERM2 member

(freely convertible)

Inflation target:

None, due to fixed exchange rate


FX forecast


Macro forecast


Danske Forward18-Jan 3.45+3M 3.45 -+6M 3.45 -

+12M 3.45 -

Danske Forward18-Jan 2.68+3M 2.74 -+6M 2.65 -+12M 2.57 -

USD/LTL

EUR/LTL

2011 2012 2013

GDP (% y/y) 6.0 2.7 3.4

Inflation (% y/y) 4.1 2.8 2.2

Unemployment (%) 14.2 13.6 13.9

Current Account (% of GDP) -1.2 0.2 -2.3

http://danskeresearch.danskebank.com/link/MacroMonitorLithuania201011/$file/MacroMonitor_Lithuania_201011.pdf�


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Russia Macro outlook • Russian GDP growth accelerated to 4.8% y/y in Q3 versus 3.7% in H1 11. We expect

growth to have remained strong in Q4 as well, due to robust domestic demand.

• We expect credit growth to continue in 2012, albeit at a somewhat more moderate pace. As in 2011, bank lending growth topped 25% y/y in nominal terms, we expect growth to ease to around 20% y/y in 2012. Nevertheless, deepening of the domestic financial sector continues to be one of the key growth drivers, in our view.

• Entry to the WTO is likely to be finalised after the presidential election in spring 2012. Although WTO membership is unlikely to bring imminent improvements, we see the membership as a key step towards modernisation of the Russian economy.

• We expect Brent oil to remain around USD110/bbl in 2012. Thus, commodity prices remain very supportive for the Russian economy and the rouble, in our view.

• Unemployment has been declining rapidly and real wage growth is picking up again. Inflation is easing, which we believe is likely to support income growth further during the coming months.

• Industrial production growth has remained robust, even though the benign base effect is fading. We expect the weaker rouble to support domestic production due to import substitution.

FX and monetary policy outlook • We expect prolonged rouble weakness, as political uncertainty in Russia is now

weighing on the currency as well. Thus far, rouble weakness has been mostly due to global risk aversion. However, we expect political tensions to ease after the March presidential election, and a high oil price to support the rouble in H2 12. The central bank has widened the corridor of fluctuations of the currency and allows the rouble to float quite freely within that range, which is approximately 32.2-38.2 versus the bi-currency basket.

• We expect a further 50bp of cuts to the refinancing rate during Q1, as the rate currently acts mostly as a longer-term inflation tracker. More importantly, we expect a 25bp cut to the repo rate, which is currently the most important policy rate due to tight liquidity.

• Inflation has been easing in recent months due to lower food prices and we expect easing to continue in Q1 12 due to base effect. However, upward pressures to inflation are likely to return in H2 12 due to planned tariff increases and a turnaround in the above-mentioned base effect.

Risk factors • Political uncertainty has risen clearly, although we are still expecting Prime Minister

Putin to win the presidential election in March 2012.

• Russia’s dependence on the global oil price poses the greatest risk to the economy.

• A renewed credit crunch is a major threat as well, as currently bank lending growth is supporting domestic demand.

RUB

Credit rating:

S&P: BBB (stable)

Currency regime:

Managed peg versus dual currency

basket – 45% EUR and 55% USD

(freely convertible)

Inflation target:

7% in 2011 (December-on-

December basis)

FX forecast




Macro forecast


Danske Forward18-Jan 40.40+3M 41.20 40.95+6M 40.04 41.51

+12M 38.99 42.71


USD/RUB

EUR/RUB

Policy rateNext meetingNext change -25 bp Feb 2012End-2012 7.25

Bank of Russia (CBR)

01-10 Feb 20128.00

2010 2011 2012

GDP (% y/y) 4.0 4.3 4.5

Inflation (% y/y) 6.9 8.5 6.5





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Ukraine Macro outlook • Ukrainian GDP growth in Q3 surprised on the upside reaching 6.6% y/y versus 3.8%

in Q2. During Q4 11, economic activity is likely to have remained strong due to growth in agricultural output. We expect growth to slow, but to remain above 3% in 2012 as well.

• Wage growth is supportive for consumption and the retail sector is brisk. Unfortunately, the recovery in consumption mostly supports imports, as Ukraine imports a big part of consumer goods, whereas export products are mostly base metals and chemical and mineral products.

• External demand for industrial production seems to have deteriorated lately. In particular, growth in manufacturing production is clearly slowing down, whereas growth in mining and quarrying remains solid.

• The banking sector is slowly starting to support domestic demand, as inflation is easing while credit growth is gradually picking up. However, tight liquidity might have deterred lending growth recently.

FX and monetary policy outlook • Ukraine’s CPI continued to ease in December, down to 4.6% y/y from its peak of

11.9% y/y in June on the back of lower food prices. Due to an expected rise in utility tariffs in 2012, inflation pressures are likely to increase.

• Liquidity has been tight in the money market, as the Ukrainian central bank has been supporting the hryvna with tight monetary policy. However, liquidity has been improving recently, as the central bank lowered its reserve requirements for banks.

Risk factors • In an uncertain global environment, a stable exchange rate seems like an expensive

and unnecessary handicap for the economy.

• Despite IMF participation, the Ukrainian government has not pushed forward some of the necessary reforms such as higher gas prices for households.

• Political instability continues to be perhaps the biggest risk related to the Ukrainian economy.

Real wage growth is robust Industrial production growth

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100

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150

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Household credit>>

<< Retail sales

09 10 11

-50

-40

-30

-20

-10

0

10

20

30

-50

-40

-30

-20

-10

0

10

20

30% y/y % y/y

GDP>>

<< Mining

Manufacturing >>

<< Utilities

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

UAH

Credit rating:

S&P: B+ (stable)

Currency regime:

Managed peg versus USD

FX forecast


Danske Forward18-Jan 10.32+3M 10.14 N/A+6M 10.43 N/A

+12M 10.72 N/A

Danske Forward18-Jan 8.05+3M 8.05 N/A+6M 8.02 N/A+12M 8.00 N/A

USD/UAH

EUR/UAH


Em

erging Markets B

riefer


Kazakhstan Macro outlook • During the first three quarters of 2011, GDP growth remained at about 7% y/y in

Kazakhstan. A solid economic performance was followed by a ratings upgrade by Standard & Poor’s in November.

• GDP continues to be supported by the consumption side of the economy. Unemployment is low and retail sales are increasing rapidly. Bank loans are also gradually becoming more accessible again.

• Manufacturing production has continued to achieve strong growth, while growth in minerals production is slowing. Mining and quarrying account for around 60% of industrial production in Kazakhstan. Thus, Kazakhstan remains extremely dependent on the external environment, or more precisely, on the oil price.

• The construction sector has started a gradual recovery but investment activity has remained modest.

• The banking sector has gone through a serious restructuring process, which is likely to cause bank lending to start to recover only in late 2012.

FX and monetary policy outlook • Kazakhstan has returned to a managed float regime. The Kazakhstan central bank is

trying to curb excessive moves of the currency.

• Full-year inflation reached 7.4% in 2011, within the official target range of 6-8%. Inflation is expected to remain in the same range for the coming years. Accordingly, Kazakhstan’s central bank expects to keep its refinancing rate in the range of 6-8%. Over the past few months, inflation has been easing.

Risk factors • Kazakhstan is extremely dependent on its resource sector.

• President Nursultan Nazarbayev has been having some health problems and there are no announced plans about his successor.

• The Kazakh economy is also very vulnerable to economic shocks in Russia, which is reflected in exchange rate movements.

GDP and inflation Credit growth is slowly picking up

04 05 06 07 08 09 10 11 12

-2.5

0.0

2.5

5.0

7.5

10.0

12.5

15.0

17.5

20.0

-2.5

0.0

2.5

5.0

7.5

10.0

12.5

15.0

17.5

20.0% y/y % y/y

<< CPI

GDP >>

06 07 08 09 10 11

-10

0

10

20

30

40

50

60

70

80

90

100

110

120

-10

0

10

20

30

40

50

60

70

80

90

100

110

120% y/y % y/y

<< Russia

Kazakhstan >>

<< Ukraine


KZT

Credit rating:

S&P: BBB+ (stable)

Currency regime:

Corridor versus USD

Inflation target:

6-8% in 2011 (December-on-

December basis)

https://www.cia.gov/library/publications/the-world-factbook/flags/flagtemplate_kz.html�



Em

erging Markets B

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Turkey Macro outlook • Following remarkable growth of 9.2% in 2010, the Turkish economy expanded at an

impressive rate of 11.6% y/y in Q1, up from 9.2% y/y in Q4 10, a rate that represented the top of the emerging markets’ universe in Q1. This growth was followed by still very robust activity levels in Q2, which saw the economy growing at 8.8% from the same time a year ago, only to moderate slightly to 8.2% y/y in Q3. Our updated estimates see growth averaging 7.8% y/y in 2011E before slowing notably to average growth of 2.9% y/y in 2012E.

• The rolling 12M current account deficit stood at around USD77.8bn at the end of November and our estimates suggest the deficit will average nearly 10% of GDP for 2011. However, the monthly deficit numbers have notably moderated in the past few months and this is likely to continue as the economy rebalances, with import and credit growth gradually moderating with a general slowdown. Taking into account the latest data, we estimate that the deficit will moderate towards 8% of GDP in 2012.

Monetary policy outlook • Turkish inflationary readings remain volatile and elevated, with the December

headline reading hitting a 2011 high of 10.45% y/y, up from 9.48% y/y a month previously and averaging around 6.5% for 2011. Our latest forecasts see CPI averaging 8.4% in 2012E but the risks are skewed for higher readings despite the central bank’s determined, inflation hawkish stance.

• Since cutting policy rates at the interim rate setting meeting in August by 50bp to 5.75% to shore up against slowing growth and as a pre-emptive measure against the deteriorating external conditions, the TCMB has taken an almost 180 degree turn and adopted a rather hawkish stance in the face of accelerating inflation and the depreciation of the lira, which it regards as excessive. Following the last inflation report, the TCMB launched a lira supportive new policy approach that utilises a rate corridor of 5.75% to 12.5% on the o/n lending rates and effectively re-sets lending rates on a daily basis. However, in terms of the actual policy rates, we see no changes in either direction in the near term, as attention remains on the o/n lending rates and a host of other unorthodox measures.

FX outlook • The TCMB’s hawkish stance and periodic interventions have worked to slow the pace

of TRY’s depreciation, while elevated yields are providing higher carry support and external imbalances continue to correct. Although the euro-area debt crisis continues to have a negative impact and the lira is likely to remain under pressure in the near term, we continue to see it better supported in the longer term with scope for appreciation. Our latest forecasts see USD/TRY at 1.80, 1.76 and 1.75 on three, six and 12M horizons.

TRY

Credit rating:

S&P: BB (positive)

Currency regime:

Free-float (freely convertible)

Inflation target:

5.0% year-end 2012

5.0% year-end 2013

Macro monitor (16 December)

FX forecasts


Growth has been remained buoyant External imbalances continue to moderate

05 06 07 08 09 10 11

-15

-10

-5

0

5

10

15

-15

-10

-5

0

5

10

15 % y/y

<< 4q MA

% y/y% y/y % y/yGDP, Turkey >>

07 08 09 10 11

-10

-8

-6

-4

-2

0

-75

-25

25

75

125

175 Turkish C/A Balance, USD billions >>

<< 3M Moving Avg % (FDI / C.A.)


Macro forecasts


Interest rate forecasts




USD/TRY

EUR/TRY

2010 2011 2012

GDP (% y/y) 9.2 7.8 2.9

Inflation (% y/y) 8.6 6.5 8.4


Policy rate


24 Jan 2012

C.B. of the Republic of Turkey (TCMB)5.75

http://danskeanalyse.danskebank.dk/abo/MacroMonitorTurkey161211/$file/MacroMonitor_Turkey_161211.pdf�


Em

erging Markets B

riefer


South Africa • South African growth remains relatively weak with both the export-oriented

manufacturing sector and domestic demand being relatively soft. High strike activity during the summer has dented growth and it is also clear that the European debt crisis is having some negative impact on South African growth.

• Even though high gold demand should be positive for South African growth and exports to China should help growth, there is really not much to cheer about in terms of growth and unemployment remains stubbornly high.

• Looking forward, however, we are looking for a relatively broad-based slowdown in the South African economy and growth could slow to below 3% in 2012. This clearly would not be welcome news and is likely to put further upward pressure on the already high South African unemployment rate.

Monetary policy outlook • South African inflation remains stubbornly high and inflation in November was above

the South African Reserve Bank’s inflation target range of 3-6% at 6.1%. We expect inflation to remain elevated and to only gradually fall below 6% in the beginning of 2013. So judging from its inflation target alone the Reserve Bank should really move to tighten monetary conditions, but historically SARB has had a fairly relaxed attitude towards the inflation target and in reality it is targeting the upper end of the official target range (5-6%) rather than the mid-point of the range (4.5%). With this in mind we do not think that SARB is overly worried about the present inflation level, but it is clear that there is not much room for mistakes and in that regard it should be noted that risks are increasingly on the upside for South African rates – at least in 2012.

FX outlook and risks • The deterioration of the financial environment continues to impact the rand negatively

and the increased political uncertainty has likely also had a negative impact. Looking ahead we are looking for further weakness. That said we expect the rand weakness to be curbed by overall relatively positive South African fundamentals and by relatively high South African interest rates.

• Recently political risk has increased in South Africa after significant infighting has broken out within the ANC party. At the centre of the conflict is the leader of ANC’s young wing, Julius Malema, who has been expelled from the ANC for disloyalty. The increased political risk potentially could increase market worries about the South African government’s reform agenda and hence negatively impact South African growth potential.

Inflation at upper end of target range Growth remains weak

96 98 00 02 04 06 08 10-5.0

-2.5

0.0

2.5

5.0

7.5

10.0

12.5

15.0

-5.0

-2.5

0.0

2.5

5.0

7.5

10.0

12.5

15.0% y/y % y/y

Supply Inflation

Demand InflationGDP-Deflator

06 07 08 09 10 11-7.5

-5.0

-2.5

0.0

2.5

5.0

7.5

10.0

12.5

-7.5

-5.0

-2.5

0.0

2.5

5.0

7.5

10.0

12.5% y/y % y/y

GDP Growth, South Africa


ZAR

Credit rating:

S&P: BBB+ (stable)

Currency regime:


Inflation target:

3-6%

FX forecast



Source: Danske Markets

Macro forecasts




USD/ZAR

EUR/ZAR

Policy rate


South African Reserve Bank (SARB)5.50

29 Mar 2012

2010 2011 2012

GDP (% y/y) 2.9 3.2 2.7

Inflation (% y/y) 4.3 5.0 6.2




Em

erging Markets B

riefer

Brazil Macro outlook • In 2010, the Brazilian economy achieved its fastest growth in the last two and half

decades, expanding by 7.5%. This represented a remarkable rebound from the contraction of about 0.6% in 2009. Growth moderated in Q1 11, with GDP expanding 4.2% y/y and this moderation continued in Q2, with growth slowing further to 3.1% and Q3 decelerating to 2.1% y/y. This moderation has worked to limit and alleviate the signs of overheating in the Brazilian economy that were visible earlier last year, as was observed in consumer credit and bank lending numbers. A ‘soft landing’ despite a noticeable slowing is still our main scenario and we expect the growth rate to average 2.7%, 2.3% and 3.1% in 2011E, 2012E and 2013E, respectively.

• With the economy slowing, the current outlook in external balances continues to look rather benign, as import growth has slowed in line with external demand despite earlier signs of credit-driven consumption entering overheating territory. Our latest forecasts point to the current account deficit running around 2% of GDP in 2012 - 2013E.

Monetary policy outlook • Inflation, as measured by Brazil’s benchmark IPCA rolling 12-month inflation rate,

moderated further to 6.50% y/y in December, down from 6.64% y/y in November. This final moderation has brought inflation back to the very upper limit of the Brazilian central bank’s (BCB) inflation target range (4.5% +/-2%) and average 2011 inflation to 6.6%. In 2012, we see inflation moderating back towards 6% and falling below 6% in 2013.

• In a surprise move, the BCB lowered its benchmark policy rate by 50bp to 12% on 1

September, changing its stance after five consecutive rate hikes to guard against deteriorating external conditions. The BCB has followed this rate with three consecutive 50bp cuts in October, November and January 2012, taking the policy rate to the current 10.50%.

• Indications point to this new rate cut cycle not being entirely over with and with growth concerns now seemingly overshadowing concerns on still elevated but gradually easing inflationary pressures, an additional cut of 50bp at the next meeting in March looks set to be on the menu.

FX outlook and risk factors • The rate cuts by the BCB, in addition to global growth jitters and debt worries,

combined to deal a fairly significant blow to the BRL, which lost over 20% of its values against the US dollar in the month of September last year. The Brazilian real has remained volatile since then, but has managed to shed about half of those losses.

• Supported by steady commodity prices, our current estimates see BRL steadying around current levels in the six-12-month horizon, before converging with its fundamental value beyond the one-year horizon. Our forecasts for three, six and 12 months now see USD/BRL at 1.78, 1.77 and 1.76, from 1.85, 1.83 and 1.83, respectively, a month ago.

BRL

Credit rating:

S&P: BBB (stable)

Currency regime:

Free float (non-convertible)

Inflation target:

4.5% +/- 2% points

Macro monitor (19 December)

FX forecasts




Macro forecasts




USD/BRL

EUR/BRL

Policy rateNext meetingNext change -50 bp Mar, 2012End-2012

10.5007 Mar 2012

9.50

Central Bank of Brazil (BCB)

2010 2011 2012

GDP (% y/y) 7.5 2.7 2.3

Inflation (% y/y) 5.0 6.6 6.1


http://danskeanalyse.danskebank.dk/abo/MacroMonitorBrazilDecember2011/$file/MacroMonitorBrazil_December_2011.pdf�


Em

erging Markets B

riefer


Mexico Macro outlook • After the major contraction of 6.5% in 2009, Mexico’s economy rebounded

remarkably in 2010, reaching its best growth rates in the last decade and reaching 5.4% for the whole year.

• Helped by the US recovery and driven significantly by exports to the US and improving domestic demand, the Mexican economy entered 2011 with robust growth prospects and recorded Q1 growth of 4.5% y/y. While the global soft patch saw growth decelerating to 3.2% y/y in Q2, Q3 growth was again a brisk 4.5% y/y.

Monetary policy outlook • Inflation has remained firmly in the Mexican central bank’s (Banxico) inflation target

of 3.0% (with a range of +/-1%). Pushed by higher food and prices and impacted by weaker peso, the headline inflation in December accelerated to 3.82% y/y, from 3.48% in November. This was the highest reading in the past one-year period, but is still well within the target tolerance band.

• Banxico has kept overnight policy rates unchanged at 4.5% since mid-2009 and upheld this stance at the 23rd consecutive meeting in December in a unanimous decision. With inflation remaining well within Banxico’s target range and with the Fed committed to near zero-bound rates until 2013, the Mexican central bank is likely to keep rates on hold in the coming months.

• While Banxico’s bias has clearly turned to a more accommodative approach since last August, with the door now open for a potential rate cut in case of a sharper deterioration in external conditions, a weaker peso and somewhat higher inflationary pressures have more recently worked to pare any easing expectations. Therefore, our expectation for the time being continues to favour unchanged policy rates.

FX outlook • As with its Latin peer currency BRL, the Mexican peso has suffered from global risk

aversion and US and euro-area debt worries, losing nearly 10% of its value against the USD since the start of September.

• Looking ahead at the one-year horizon and beyond, we still see the peso converging with its fair value as the recent sell-off has made it cheap on a fair value basis. Our updated FX forecasts thus points to further scope for peso appreciation and we see USD/MXN at 13.11, 13.07 and 13.00 on a three-, six- and 12-month horizon, respectively.

Growth has moderated from 2010 levels,

but is still very resilient

Interest rates firmly on hold with inflation

well within Banxico’s target band

04 05 06 07 08 09 10 11 12

-10.0

-7.5

-5.0

-2.5

0.0

2.5

5.0

7.5

10.0

-10.0

-7.5

-5.0

-2.5

0.0

2.5

5.0

7.5

10.0

Mexico, GDP Growth, Production Approach

Y/Y %

09 10 111.0

1.5

2.0

2.5

3.0

3.5

4.0

4.5

5.0

5.5

6.0

1.0

1.5

2.0

2.5

3.0

3.5

4.0

4.5

5.0

5.5

6.0%

<< O/N rate. Mexico

Inflation, Mexico >>

Inflation target band

% y/y


MXN

Credit rating:

S&P: BBB (stable)

Currency regime:


Inflation target:

3.0% +/- 1% point

FX forecasts


Interest rate forecasts




USD/MXN

EUR/MXN

Policy rateNext meetingNext change - Unchanged 2012End-2012 4.50

4.50Bank of Mexico (Banxico)

20 Jan 2012



Em

erging Markets B

riefer

China Macro outlook • GDP growth in Q4 11 only eased slightly from 9.1% to 8.9% and so far it appears that

the economy is able to escape a hard landing In the short run, the economy will face headwinds from the domestic property market and possibly from exports. In our view, there is no massive bubble in property for China as a whole and hence we do not expect a full blown collapse in the property market. In our view, the current weakness in the property market is largely due to tight monetary policy and regulatory tightening targeting the property introduced over the past two years. With both monetary and fiscal policy being eased, growth should gradually improve in 2012. *

• Inflation in December eased slightly from 4.2% y/y to 4.1% y/y and the pace of the decline in inflation appears to have eased mainly due to seasonal distortions from the Chinese New Year holiday. However, from February the decline in inflation should again pick up speed. We expect inflation to fall below 3% y/y by mid-2012 and do not believe inflation will be a major constraint on monetary policy in 2012.

Monetary policy outlook • The Chinese government has signalled that it will cautiously move economic policy in

a more pro-growth direction in 2012. However, the government has also signalled that it prefers easing fiscal policy to easing monetary policy and that the regulatory tightening targeting the property sector will remain in place. Because the People’s Bank of China (PBoC) has undershot its target for money supply growth and credit growth will be allowed to pick up. We expect the reserve requirement to be cut by at least 150bp in H1 12 but we do not expect the PBoC to cut its leading interest rate at this stage.

FX outlook • With the current account surplus expected to decline to below 3% of GDP in 2011

and no substantial increase in China’s FX reserves through 2011 it could now be argued that CNY is no longer substantially undervalued. With inflation also declining and substantial downside risk to growth, we expect the pace of appreciation of the CNY against the USD to decline to around 3% annually in 2012 from +5% in 2011. We expect to see gradually increasing two-way volatility in the USD/CNY as has already been evident in recent months. We expect the +/- 0.5% daily trading band to be widened at some stage next year. In our view, China is targeting a convertible and free floating currency by 2015.

Growth only eased slightly in Q4 11 FX reserves stopped increasing in late 2011


07 08 09 10 11 12

2

4

6

8

10

12

14

16

2

4

6

8

10

12

14

16Forecast

% y/y

Chinese GDP growth

% q/q AR

04 05 06 07 08 09 10 110.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

FX reserves1,000 bn USD 1,000 bn USD

FX forecast


CNY

Credit rating:

S&P: AA- (stable)

Currency regime:

Crawling USD peg

Inflation target:

4% for 2011





USD/CNY

EUR/CNY

Policy rateNext meetingNext change - Unchanged 2012End-2012 6.56

6.56People's Bank of China (PBOC)

Not announced


Em

erging Markets B

riefer


Hong Kong Macro outlook • GDP growth has slowed sharply (up just 0.1% q/q in Q3 after contracting 0.3% q/q in

Q2) solely on the back of weaker exports, not least to China. However, domestic demand remained resilient supported by negative real interest rates. With resilient domestic demand and growth in China expected to improve in the coming quarters, we also expect growth in Hong Kong to improve.

• With real interest rates negative and major capital inflows from mainland China, there is an increasing risk of a bubble on Hong Kong’s property market. The 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 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 accelerated sharply and reached 5.7% y/y in November, underlining that the peg to USD is an increasing challenge for Hong Kong.

Monetary policy outlook • Due to Hong Kong’s USD currency board, interest rates are linked to their US

counterparts. As a result of the Fed’s commitment to keep leading interest rates close to zero until at least mid-2013, we expect money market rates to remain unchanged until at least mid-2013. With Hong Kong’s economy increasingly decoupling from the US, pegging monetary policy to the US could be destabilising

FX outlook • Hong Kong’s currency is pegged to USD within a very tight trading band (see chart

below) and Hong Kong’s Monetary Authority (MA) intervenes in the FX market to keep HKD within its trading band. Because of the currency board, all HKD issues have to be backed by USD assets.

While Hong Kong is expected to maintain its USD peg for the foreseeable 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 HKD to abandon its USD peg for a CNY peg, and this is unlikely to happen before 2015. However, the importance of CNY will gradually increase, and CNY is already starting to function as a parallel currency in Hong Kong. This development is being supported by the offshore CNY market that has taken off in Hong Kong in the past year.

HKD is currently trading close to the centre within its trading band

Negative real interest rates a major challenge for monetary policy


06 07 08 09 10 11

7.70

7.75

7.80

7.85

7.90

7.70

7.75

7.80

7.85

7.90

USD/HKD

03 04 05 06 07 08 09 10 11

-4

-2

0

2

4

6

8

-4

-2

0

2

4

6

8%

<< Consumer prices

% y/y 3M interbank interest rate>>

HKD

Credit rating:

S&P: AAA (stable)

Currency regime:

Currency board/USD peg

Inflation target:

No target

FX forecast






EUR/HKD

USD/HKD

Policy rateNext meetingNext change + 25 bp Q1 2014End-2012

0.50Hong Kong's Monetary Authority (MA)

Not announced

0.50



Em

erging Markets B

riefer

Taiwan Macro outlook • As a relatively small and open economy, Taiwan is very dependent on external

development. Growth has slowed sharply in recent quarters, with GDP contracting 0.6% q/q AR in Q3 on the back of a substantial slowdown in exports while domestic private consumption has remained resilient. Industrial production has recovered slightly in recent months suggesting GDP growth has improved slightly in Q4. GDP growth should improve further early next year on the back of some recovery in exports to China.

• Liberalisation of economic ties with China is currently a major positive for Taiwan. Tourism, transport and regulation of foreign direct investments for financial institutions have recently been liberalised. In 2010 China and Taiwan signed an Economic Cooperation Framework Agreement (ECFA) that has cut tariffs for Taiwan’s exports to China substantially in 2011. The re-election of incumbent president Ma Ying-jeou has secured that this policy will be continued.

• Inflation has started to ease and headline inflation has declined from a peak at 1.7% y/y in May to just 1.1% y/y in December, comfortably below the central bank’s medium-term inflation target of 2%.

Monetary policy outlook • Taiwan’s central bank raised its leading interest rate by 12.5bp to 0.1875% in June for

the fifth time since June last year. However, with growth possibly slowing more than expected and inflation and money supply both within the target range, we expect Taiwan’s central bank to be on hold until at least mid-2012.

FX outlook • Fundamentally, the TWD remains substantially undervalued. It is well supported by a

strong current account position (current account surplus 10% of GDP) and, for this reason, we expect it to be among the best-performing Asian currencies in a risk-averse environment. However, USD/TWD has increased more than 2% in the wake of the recent turmoil in financial markets and it appears that the central bank has nothing against a slightly weaker TWD as long as risks on growth are mainly on the downside.

• 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 the coming years. It also suggests that the recent years easing political tensions between Taiwan and China will continue.

GDP growth has slowed substantially Inflationary pressure easing

Source: Reuters EcoWin Source: Reuters EcoWin and Danske Markets

05 06 07 08 09 10 11

-30

-20

-10

0

10

20

-6

-4

-2

0

2

4

6

Industrial production >>% 3m/3m % 3m/3m

<<GDP

07 08 09 10 11

-8

-4

0

4

8

12

-8

-4

0

4

8

12

Medium term inflation target

%CPI, % 3M AR

%

CPI, % y/y

TWD

Credit rating:

S&P: AA- (stable)

Currency regime:

Free float

Inflation target:

2% medium-term

FX forecast






EUR/TWD

USD/TWD

Policy rateNext meetingNext change - Unchanged 2012End-2012

29 Mar 2012

Central Bank of Taiwan (CBT)1.88

1.88


Em

erging Markets B

riefer


South Korea Macro outlook • Despite a significant slowdown in South Korea’s exports, GDP growth has remained

relatively resilient because of solid domestic demand. GDP growth in Q3 only eased to 3.2% q/q AR, down slightly from 3.6% q/q AR in Q2 and 5.3% q/q AR in Q1. However, recent industrial production data suggests that GDP growth is slowing substantially on the back of both weaker exports and private consumption. We expect GDP growth to start recovering from Q1 next year. We expect the current account surplus to exceed 2% of GDP in 2011 and 2012.

• Albeit inflation remains slightly above the Bank of Korea’s (BoK) 3.0% +/-1pp target range for inflation, we expect inflation to decline substantially and return to be comfortably within the BoK’s comfort zone later in H1 12.

Monetary policy outlook • The BoK last raised the leading interest rate by 25bp to 3.25% in June but has since

kept its leading interest rate unchanged. With growth poised to be substantially below trend growth and inflation likely to decline below 4% in the coming months, the likelihood of a rate cut in H1 12 is admittedly increasing. However, with the leading interest rates relatively low and real interest negative, we maintain our forecast that the BoK will keep its leading interest rate unchanged in 2012.

FX outlook • The KRW is one of the Asian currencies most sensitive to risk aversion in the market,

because of a large foreign investor share in the South Korean stock market and because South Korean banks, unlike most other Asian banks, have a loan-to-deposit ratio above 1. The KRW has weakened markedly in the past three months and will underperform in a risk-averse market. We still expect it to be one of the best-performing Asian currencies on a 12-month horizon.

• The death of the North Korean leader Kim Jong-Il and the transfer of power to his youngest son have not affected our view on South Korea substantially. As previously, North Korea will remain a constant source of uncertainty. In our view, it is likely it will be status quo after Kim Jong-Il but neither better relations with Western countries nor increased instability can be ruled out in the wake of the leadership transition in North Korea. In South Korea parliamentary and presidential elections are scheduled for April and December 2012, respectively.

Inflation will soon be be comfortable within BoK’s target range

GDP growth poised to weaken in Q4

Source: Reuters EcoWin and Danske Markets Source: Reuters EcoWin

04 05 06 07 08 09 10 110

2

4

6

8

10

0

2

4

6

8

10

Target for inflation

%

y/y

Consumer prices

3m/3m AR

%

04 06 08 10 12

-8

-6

-4

-2

0

2

4

6

-20

-15

-10

-5

0

5

10

15% 3m/3m

GDP>>

<< Industrial production

% 3m/3m

KRW

Credit rating:

S&P: A (stable)

Currency regime:

Free float

Inflation target:

3.0% +/- 1%-point

FX forecast




Danske Forward18-Jan 1463+3M 1424 1474+6M 1430 1481+12M 1374 1491

Danske Forward18-Jan 1138+3M 1130 1146.10+6M 1100 1150.80+12M 1025 1156.00

EUR/KRW

USD/KRW


09 Feb 2012

Bank of Korea (BOK)3.25

3.25



Em

erging Markets B

riefer

Thailand Macro outlook • Thailand has recently been mainly a political risk. The outcome of the July general

elections was positive in the sense that it was much clearer than expected. The opposition Puea Thai Party (PTP) won a landslide victory and Yingluck Shinawatra (the sister of former Prime Minister Thaksin Shinawatra) will become the next prime minister. Hence the new government will be in a much stronger position to push through its policies than the former government. This bodes well for political stability, although Thailand elite’s (including the military) reaction to the government and the possible return of exiled Thaksin (de facto PTP leader) could fuel political tensions.

• We expect the flooding in the Bangkok area to have a substantial negative impact on growth in Q4 11 but growth should recover sharply in H1 12 on the back of the government’s reconstruction efforts. Even before the flooding, the new government planned to ease fiscal policy as the PTP was elected on a populist programme that includes further public spending and an increase in minimum wages. In 2011, we now expect GDP to expand by only 1.8% but GDP growth should rebound substantially to around 6% in 2012.

• Headline inflation has increased above 4.0% y/y in recent months driven mainly by higher food and energy prices. However, core inflation has remained modest and is currently close to 0% y/y. The flooding in Bangkok could temporarily push consumer prices higher.

Monetary policy outlook • The Bank of Thailand (BoT) in late November cut its leading interest rate by 25bp to

3.25% to support the recovery in the wake of the flooding. At the monetary meeting, two of seven members voted for a 50bp cut, so we would not rule out another 25bp cut. However, with headline inflation above target and a very accommodative fiscal policy, we expect the BoT to be reluctant to cut interest rates further.

FX outlook • THB strengthened significantly in the wake of the surprisingly clear election result

and hope that some political stability will now finally return to Thailand, but has in line with other Asian currencies weakened in the past month in the wake of the increasing risk aversion in the market. As Thailand has very strong external balances and foreign investors have avoided Thailand in recent years, we also believe that THB will continue to perform relatively well in a risk-averse market.

THB

Credit rating:

S&P: BBB+ (stable)

Currency regime:

Free float

Inflation target:

0.5%-3.0%

FX forecast




Headline inflation above BoT’s target, but core inflation remains muted

Activity has contracted sharply in Q4 11 due to flooding




EUR/THB

USD/THB

Policy rateNext meetingNext change - 25 bp Q1 2012End-2012 2.75

Bank of Thailand (BOT)

25 Jan 20123.25

03 04 05 06 07 08 09 10 11

-5.0

-2.5

0.0

2.5

5.0

7.5

10.0

-5.0

-2.5

0.0

2.5

5.0

7.5

10.0 % y/y% y/y Headline CPI

Target for core CPI

Core CPI

04 05 06 07 08 09 10 11

-7

-5

-3

-1

1

3

5

-30

-25

-20

-15

-10

-5

0

5

10

15

<<Industrial production

GDP>>

% 3m/3m % 3m/3m


Em

erging Markets B

riefer


Malaysia Macro outlook • As in most of the rest of Asia, growth has slowed markedly in 2011 on the back of

weaker exports, while domestic demand has been relatively resilient. Recent data have been relatively resilient with GDP growth accelerating to 0.9% q/q in Q3 from just 0.5% q/q in Q2. However, considerable downside risk exists due to the international development. Inflation has been stable just above 3% y/y and, unlike most of the rest of Asia, we have so far not seen declining inflation on the back of lower commodity prices. That said, inflation should start to decline in H1 12.

• Malaysia has very healthy external balances with the current account surplus expected to exceed 9% of GDP. However, public finances have started to deteriorate as the easy fiscal policy has remained in place, possibly because the UMNO-led government is preparing for a general election. The budget deficit could be close to 6% of GDP.

Monetary policy outlook • The Malaysian central bank is regarded as one of the most hawkish central banks in Asia

as 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 supported by fiscal easing, we think that the Malaysian central bank will be reluctant to cut its leading interest rate. That said the central bank sounded more dovish at its most recent monetary meeting and risks are now skewed towards a rate cut in Q1 12.

FX outlook • The MYR remains supported by strong external balances and in the medium term

possibly by liberalisation of the economy, including easing access for foreign investments. The MYR, in line with most other Asian currencies, has weakened slightly in the wake of the recent turmoil in the global financial markets. While we believe the MYR will remain vulnerable in the short run, we expect it to strengthen on a 12M horizon on the back a gradual recovery in the global economy and some improvement in risk sentiment.

• The political environment appears to be stable, although the governing Barisan Nasional (BN) coalition is increasingly challenged by the opposition and failed to win a two-thirds majority in the last general election in March 2008. Although the next election is not scheduled until 2013, an election in 2012 looks increasingly likely, because of the government’s current favourable approval ratings. While Malaysia has a stable regulatory environment, it has been lagging other Asian countries on governance reforms and economic liberalisation. That said, Prime Minister Najib recently announced some liberalisation of foreign direct investment rules, easing requirements for co-Malay ownership.

Growth slowing on the back of weaker exports

Inflation appears to have peaked


08 09 10 11

70

80

90

100

110

70

80

90

100

110

Industrial produc

Jan. 2008=100

Export

Jan. 2008=100

04 05 06 07 08 09 10 11

-3

-1

1

3

5

7

9

-3

-1

1

3

5

7

9

<<CPI inflation

% y/y

Overnight policy rat

%

MYR

Credit rating:

S&P: A- (stable)

Currency regime:

Free float

Inflation target:

No official target

FX forecast


Interest rate policy




EUR/MYR

USD/MYR


3.0031 Jan 2012

Central Bank of Malaysia (BNM)

3.00



Em

erging Markets B

riefer

. Philippines

Macro outlook • In line with the rest of Asia, growth has lost considerable momentum on the back of a

substantial slowdown in exports. We expect growth to stay weak until Q1 12, when we expect to improve again.

• Inflation has eased in the past two months and is now again within the central bank’s 3-5% target range. Inflation is expected to decline further in the coming months.

• The fiscal deficit has deteriorated sharply due to fiscal easing. The central government deficit is likely to increase to around 4% of GDP in 2011, from just 0.9% in 2008.

Monetary policy outlook • We growth slowing markedly BSP in January cut its leading interest rate by 25bp to

4.25%. We expect BSP to cut by another 25 bp in early Q2 12.

FX outlook • The Philippines has a very strong external position. The current account surplus

exceeds 5% of GDP, not least because remittances from Filipinos working abroad have continued at a high level. Despite PHP weakening in the past month, we expect the appreciation of PHP to continue.

• Senator Benigno Aquino III from the Liberal party defeated the populist Joseph Estrada in the presidential election in May 2010. While this is positive, President Aquino’s position in the parliament remains weak just as it was for his predecessors and so far Aquino has failed to put forward a clear strategy for his economic policy.

BSP has started easing Growth has lost momentum


05 06 07 08 09 10 110

2

4

6

8

10

12

0

2

4

6

8

10

12

<<CPI inflation

%

Overnight b i t >>

% y/y

08 09 10 11

50

60

70

80

90

100

110

120

50

60

70

80

90

100

110

120 Jan. 2008=100

Export


Jan. 2008=100

PHP

Credit rating:

S&P: BB (positive)

Currency regime:

Free float

Inflation target:

3%-5% for 2011

FX forecast






USD/PHP

EUR/PHP

Policy rateNext meetingNext change - 25 bp Q2 2012End-2012

Central Bank of Philippines (BSP)4.2501 Mar 2012

4.00


Em

erging Markets B

riefer


Indonesia Macro outlook • Indonesia is a comparatively closed economy and continues to perform relatively well

on the back of resilient domestic demand. We expect GDP growth in 2012 to ease only slightly to 6.3%, from around 6.5% in 2011E. In 2013, we expect GDP growth to accelerate to around 7%. Despite resilient growth, inflation appears to be contained, 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 range for inflation will be lowered to 3.5-5.5% for 2012 and 2013.

• Indonesia has very strong fundamentals, not least compared with another major Asian country, India. It has a current account surplus, albeit it has declined slightly below 1% of GDP and very healthy public finances, with the public sector deficit poised to decline below 2% of GDP. In addition, inflation is under control and Indonesia has ample room to ease both fiscal and monetary policy if growth disappoints. Fitch and Moody’s have recently upgraded Indonesia’s debt to investment grade.

Monetary policy outlook • Compared with other Asian central banks, interest rates have remained relatively high

during the global financial crisis and real interest rates have stayed positive. Nonetheless, it was a surprise that the BI cut its leading interest by 25bp in October and by another 50bp to 6.0% in November. The BI has justified its rate cut by the recent decline in inflation and increasing downside risk to the global economy. Should inflation continue to decline in the coming months, BI could cut its leading interest rates by another 25-50bp in H1 12.

• The BI’s relatively aggressive rate cut is negative for IDR in the short run. In addition, it appears that BI does not mind a slightly weaker IDR in the current environment. In the past two months IDR has weakened, albeit only moderately, compared with late 2008 and spring last year. In the short run, we expect IDR to underperform in a risk-averse market and on continued uncertainty about monetary policy but on a 12M horizon it is among our favourite picks on the back of strong economic fundamentals.

• Political stability is a positive for Indonesia. President Susilo Bambang Yudhoyono was re-elected in June 2009 and his Democratic party improved its position considerably in the general election. Yudhoyono is reform minded and has signalled his intention to continue fiscal consolidation. That said, the economic and political reform has lost some momentum over the past two years.

Surprisingly aggressive rate cuts from Indonesian central bank

Inflation is declining to the lower range of BI’s target range


07 08 09 10 11

4

5

6

7

8

9

10

11

12

13

4

5

6

7

8

9

10

11

12

13

Leading policy rate

%

3M money market rate

%

09 10 11

2

3

4

5

6

7

8

9

10

2

3

4

5

6

7

8

9

10Inflation

Inflation target for 2011

% y/y

HeadlineHeadlin

Core

% y/y

IDR

Credit rating:

S&P: BB+ (positive)

Currency regime:

Free float

Inflation target: 3.5%-5.5% for

2012

FX forecast






USD/IDR

EUR/IDR


Bank Indonesia (BI)6.0009 Feb 2012



Em

erging Markets B

riefer

India Macro outlook • Growth in India now appears to be slowing relatively sharply. While India is facing

some headwinds from weaker exports, the main explanation for the recent deterioration in growth is weaker investment demand in the wake of the Reserve Bank of India’s (RBI) aggressive monetary tightening. Although the economy is expected to recover gradually next year, there remains considerable downside risk in the short run as India – unlike China – has limited possibility of easing fiscal and monetary policy due to a high budget deficit and relatively resilient inflation. We expect GDP growth to decline to just 6.9% in 2011, from 10.1% in 2010, and recover only slightly to 7.3% in 2012.

• Wholesale inflation in December declined from 9.1% to 7.5% and while we expect inflation to continue to decline, inflation is unlikely to decline below RBI’s comfort zone around 5% soon. The recent sharp depreciation of INR also adds upside risk to inflation due in particular to India’s dependence on imported fuel.

Monetary policy outlook • Since the start of 2010, RBI has raised its leading repo rate by 350bp to 8.5%.

However, at the past two monetary meetings, RBI has clearly signalled that it does not intend to hike its leading interest rate further but, with inflation elevated, RBI will not be able to cut interest rates soon. That said, the next move from RBI will be down and we expect RBI to start cutting its leading repo rate in late Q2 12.

FX outlook • INR has plunged by close to 20% against the USD since August and it remains

vulnerable in the short run due to India’s current account deficit around 3% of GDP, weaker FDI inflows into India and portfolio inflows out of the India stock market. Frustration with the lack of progress of economic reforms have added to this development recently. RBI has intervened in the FX market recently to stem the depreciation of INR. In addition, it has put limits on net short INR positions for domestic FX traders and the amount of foreign currency expenditure corporations will be allowed to hedge.

• Although USD/INR has probably overshot, it will remain vulnerable in a volatile market. However, with the Indian current account deficit expected to improve next year and market sentiment also expected to improve, we should see some recovery in INR later next year.

Growth has again started to improve India’s external balance looks increasingly vulnerable

Source: Reuters EcoWin Source: Reuters EcoWin and Danske Markets

06 07 08 09 10 11

-30

-20

-10

0

10

20

30

40

35404550556065707580 % 3m/3m AR

<<New orders, manf.

Industrial production, >>

Diffusion

00 01 02 03 04 05 06 07 08 09 10 11

-8

-6

-4

-2

0

2

4

6

-8

-6

-4

-2

0

2

4

6 % of GDP Basic balance

Foreign direct investmenPortfolio investme

Foreign direct investment abroaCurrent account

INR

Credit rating:

S&P: BBB- (stable)

Currency regime:

Free float

Inflation target:

7% for fiscal 11/12

3% medium term

FX forecast






USD/INR

EUR/INR


Researve Bank of India (RBI)

24 Jan 20128.50


Em

erging Markets B

riefer


FX forecasts

Core - major


Wider CEE


CIS


Danske Forward Danske Forward Danske Forward Danske Forward Danske Forward18-Jan 1.29 743.6 879.9 767.5

+3M 1.26 1.29 743.0 743.1 900.0 883.7 760.0 770.3+6M 1.30 1.29 743.0 742.6 870.0 887.3 755.0 773.1

+12M 1.34 1.29 744.0 741.8 850.0 893.7 750.0 778.918-Jan 1.29 578.1 683.9 596.7

+3M 1.26 1.29 589.7 577.9 714.3 687.2 603.2 599.0+6M 1.30 1.29 571.5 577.1 669.2 689.6 580.8 600.8

+12M 1.34 1.29 555.2 575.2 634.3 692.9 559.7 603.918-Jan 98.7 76.8 7.53 8.91 7.78

+3M 96.0 98.6 76.0 76.7 7.74 7.53 9.38 8.96 7.92 7.81+6M 97.0 98.6 75.0 76.6 7.66 7.53 8.97 9.00 7.78 7.84

+12M 104.0 98.4 78.0 76.3 7.15 7.54 8.17 9.09 7.21 7.92

NOK

EUR

USD

JPY

EUR USD DKK SEK

Danske Forward Danske Forward Danske Forward Danske Forward Danske Forward18-Jan 4.34 3.37 171.5 202.9 177.0

+3M 4.40 4.38 3.49 3.41 168.9 169.6 204.5 201.7 172.7 175.8+6M 4.35 4.42 3.35 3.44 170.8 168.0 200.0 200.7 173.6 174.9

+12M 4.30 4.48 3.21 3.48 173.0 165.5 197.7 199.3 174.4 173.718-Jan 304.6 236.9 2.44 2.89 2.52

+3M 320.0 307.6 254.0 239.2 2.32 2.42 2.81 2.87 2.38 2.50+6M 315.0 310.9 242.3 241.6 2.36 2.39 2.76 2.85 2.40 2.49

+12M 315.0 317.1 235.1 245.9 2.36 2.34 2.70 2.82 2.38 2.4618-Jan 25.48 19.81 29.18 34.53 30.12

+3M 26.00 25.48 20.63 19.82 28.58 29.16 34.62 34.68 29.23 30.23+6M 25.70 25.48 19.77 19.80 28.91 29.15 33.85 34.83 29.38 30.34

+12M 25.10 25.47 18.73 19.75 29.64 29.13 33.86 35.09 29.88 30.5818-Jan 4.35 3.38 171.0 202.4 176.5

+3M 4.35 4.39 3.45 3.41 170.8 169.3 206.9 201.4 174.7 175.5+6M 4.40 4.41 3.38 3.43 168.9 168.3 197.7 201.1 171.6 175.2

+12M 4.45 4.50 3.32 3.49 167.2 165.0 191.0 198.8 168.5 173.2

EUR USD DKK SEK NOK

PLN

HUF

CZK

RON


+3M 41.20 40.95 32.70 31.84 18.03 18.15 21.84 21.58 18.45 18.81+6M 40.04 41.51 30.80 32.26 18.56 17.89 21.73 21.37 18.86 18.62

+12M 38.99 42.71 29.10 33.12 19.08 17.37 21.80 20.92 19.23 18.2418-Jan 10.32 8.05 72.1 85.3 74.4

+3M 10.14 N/A 8.05 N/A 73.3 N/A 88.7 N/A 74.9 N/A+6M 10.43 N/A 8.02 N/A 71.3 N/A 83.4 N/A 72.4 N/A

+12M 10.72 N/A 8.00 N/A 69.4 N/A 79.3 N/A 70.0 N/A

RUB

NOK

UAH

EUR USD DKK SEK



Em

erging Markets B

riefer

Baltics


MEA



+3M 3.45 - 2.74 - 215.4 - 260.9 - 220.3 -+6M 3.45 - 2.65 - 215.4 - 252.2 - 218.8 -

+12M 3.45 - 2.57 - 215.7 - 246.4 - 217.4 -18-Jan 0.70 0.54 1063.0 1257.8 1097.2

+3M 0.70 - 0.56 - 1061.4 - 1285.7 - 1085.7 -+6M 0.70 - 0.54 - 1061.4 - 1242.9 - 1078.6 -

+12M 0.70 - 0.52 - 1062.9 - 1214.3 - 1071.4 -

EUR USD DKK

LTL

LVL

SEK NOK


+3M 2.27 2.40 1.80 1.87 327.3 309.2 396.5 367.7 334.8 320.5+6M 2.29 2.45 1.76 1.91 324.5 302.5 379.9 361.4 329.7 314.9

+12M 2.35 2.56 1.75 1.98 316.6 289.8 361.7 349.2 319.1 304.318-Jan 10.23 7.95 72.7 86.0 75.0

+3M 10.40 10.35 8.25 8.05 71.5 71.8 86.6 85.4 73.1 74.5+6M 10.79 10.49 8.30 8.15 68.9 70.8 80.6 84.6 70.0 73.7

+12M 11.26 10.80 8.40 8.38 66.1 68.7 75.5 82.7 66.6 72.118-Jan 4.89 3.80 152.2 180.0 157.1

+3M 4.79 4.90 3.80 3.81 155.2 151.7 188.0 180.4 158.7 157.2+6M 4.91 4.91 3.78 3.81 151.2 151.4 177.0 180.9 153.6 157.6

+12M 4.98 4.93 3.72 3.82 149.3 150.6 170.5 181.4 150.5 158.118-Jan 7.77 6.04 95.7 113.3 98.8

+3M 7.59 7.93 6.03 6.16 97.9 93.7 118.6 111.5 100.1 97.2+6M 7.87 8.09 6.05 6.29 94.5 91.8 110.6 109.7 96.0 95.6

+12M 8.17 8.40 6.10 6.52 91.0 88.3 104.0 106.3 91.8 92.7

TRY

USDEUR SEK

ZAR

EGP

DKK NOK

ILS


Em

erging Markets B

riefer


Latam


EM Asia



+3M 2.24 2.32 1.78 1.80 331.3 320.9 401.3 381.6 338.9 332.6+6M 2.30 2.36 1.77 1.83 322.9 314.9 378.1 376.3 328.1 327.8

+12M 2.36 2.44 1.76 1.89 315.5 303.7 360.4 365.8 318.0 318.918-Jan 17.10 13.30 43.49 51.46 44.89

+3M 16.52 17.25 13.11 13.41 44.98 43.08 54.48 51.24 46.01 44.66+6M 16.99 17.40 13.07 13.52 43.73 42.68 51.20 51.00 44.44 44.44

+12M 17.42 17.74 13.00 13.75 42.71 41.82 48.79 50.38 43.05 43.91

NOKEUR USD DKK SEK

MXN

BRL


+3M 7.91 8.13 6.28 6.33 93.9 91.4 113.7 108.6 96.0 94.7+6M 8.13 8.14 6.25 6.33 91.4 91.2 107.1 109.0 92.9 94.9

+12M 8.23 8.17 6.14 6.34 90.4 90.8 103.3 109.4 91.2 95.318-Jan 1463 1138 0.51 0.60 0.52

+3M 1424 1474 1130 1146 0.52 0.50 0.63 0.60 0.53 0.52+6M 1430 1481 1100 1151 0.52 0.50 0.61 0.60 0.53 0.52

+12M 1374 1491 1025 1156 0.54 0.50 0.62 0.60 0.55 0.5218-Jan 40.8 31.7 18.2 21.6 18.8

+3M 39.3 41.0 31.2 31.9 18.9 18.1 22.9 21.5 19.3 18.8+6M 39.3 41.2 30.2 32.0 18.9 18.0 22.2 21.5 19.2 18.8

+12M 38.6 41.7 28.8 32.3 19.3 17.8 22.0 21.4 19.4 18.718-Jan 1.64 1.28 453 536 467

+3M 1.60 1.64 1.27 1.28 464 453 562 538 475 469+6M 1.61 1.64 1.24 1.27 461 453 540 541 468 471

+12M 1.59 1.64 1.19 1.27 467 452 533 545 470 47518-Jan 9.98 7.76 74.5 88.2 76.9

+3M 9.78 9.98 7.76 7.76 76.0 74.5 92.0 88.6 77.7 77.2+6M 10.09 9.98 7.76 7.76 73.7 74.4 86.2 88.9 74.8 77.4

+12M 10.41 10.00 7.77 7.75 71.5 74.2 81.6 89.4 72.0 77.918-Jan 4.01 3.12 185.6 219.6 191.6

+3M 3.93 4.03 3.12 3.13 189.0 184.5 228.9 219.4 193.3 191.2+6M 3.98 4.05 3.06 3.14 186.8 183.6 218.7 219.3 189.8 191.1

+12M 4.01 4.07 2.99 3.16 185.7 182.1 212.1 219.3 187.2 191.218-Jan 55.8 43.4 13.32 15.76 13.75

+3M 54.43 55.92 43.20 43.49 13.65 13.29 16.53 15.80 13.96 13.77+6M 55.90 56.06 43.00 43.57 13.29 13.25 15.56 15.83 13.51 13.79

+12M 55.34 56.32 41.30 43.67 13.44 13.17 15.36 15.87 13.55 13.8318-Jan 11585 9010 0.064 0.076 0.066

+3M 11340 11679 9000 9082 0.066 0.064 0.079 0.076 0.067 0.066+6M 11440 11780 8800 9155 0.065 0.063 0.076 0.075 0.066 0.066

+12M 11390 11994 8500 9300 0.065 0.062 0.075 0.075 0.066 0.06518-Jan 64.68 50.30 11.50 13.60 11.87

+3M 65.52 66.03 52.00 51.35 11.34 11.25 13.74 13.38 11.60 11.66+6M 67.60 67.07 52.00 52.12 10.99 11.07 12.87 13.23 11.17 11.53

+12M 68.34 68.58 51.00 53.17 10.89 10.82 12.44 13.03 10.97 11.3618-Jan 38.51 29.95 19.31 22.85 19.93

+3M 37.67 38.43 29.90 29.89 19.72 19.34 23.89 23.00 20.17 20.04+6M 37.05 38.37 28.50 29.82 20.05 19.36 23.48 23.13 20.38 20.15

+12M 36.90 38.20 27.54 29.62 20.16 19.42 23.03 23.39 20.32 20.39

TWD

INR

SEK NOK

CNY

KRW

EUR

IDR

THB

SGD

HKD

MYR

PHP

USD DKK



Em

erging Markets B

riefer

Forecasts vs forwards

3M – base currency EUR 3M – base currency USD






-6.0

-4.0

-2.0

0.0

2.0

4.0

6.0

8.0

TRY

EGP

MX

NK

RW

BR

LID

RC

NY

PH

PS

GD

MY

RILSTW

DR

ON

INR

PLN

ZA

RR

UB

CZ

KH

UF

%

-8.0

-6.0

-4.0

-2.0

0.0

2.0

4.0

6.0

TRY

EGP

MX

NK

RW

BR

LID

RC

NY

PH

PS

GD

MY

RILSTW

DR

ON

INR

PLN

ZA

RR

UB

CZ

KH

UF

%

-4.0

-2.0

0.0

2.0

4.0

6.0

8.0

TRY

RU

BK

RW

TWD

IDR

EGP

BR

LM

XN

SG

DM

YR

PLN

RO

NP

HP

CN

YILSIN

RC

ZK

HU

FZ

AR

%

-4.0

-2.0

0.0

2.0

4.0

6.0

8.0

10.0

TRY

RU

BK

RW

TWD

IDR

EGP

BR

LM

XN

SG

DM

YR

PLN

RO

NP

HP

CN

YILSIN

RC

ZK

HU

FZ

AR

%

-6.0

-4.0

-2.0

0.0

2.0

4.0

6.0

8.0

10.0

RU

BTR

YK

RW

IDR

PLN

BR

LTW

DS

GD

EGP

MX

NP

HP

MY

RC

ZK

RO

NH

UF

INR

CN

YILSZ

AR

%

-2.0

0.0

2.0

4.0

6.0

8.0

10.0

12.0

14.0

RU

BTR

YK

RW

IDR

PLN

BR

LTW

DS

GD

EGP

MX

NP

HP

MY

RC

ZK

RO

NH

UF

INR

CN

YILSZ

AR

%


Em

erging Markets B

riefer


Monetary policy calendar

Calendar


19 January 2012Wider CEE

PLN 4.50 + 25 bp June, 2011 - Unchanged 2012 08 Feb 2012 4.50HUF 7.00 + 50 bp Nov, 2011 + 50 bp Jan 2012 24 Jan 2012 6.50CZK 0.75 - 25 bp May, 2010 - Unchanged 2012 02 Feb 2012 0.75RON 5.75 - 25 bp Jan, 2012 - Unchanged 2012 02 Feb 2012 5.75TRY 5.75 - 50 bp Aug, 2011 - Unchanged 2012 24 Jan 2012 5.75CIS

RUB 8.00 - 25 bp Dec, 2011 -25 bp Feb 2012 01-10 Feb 2012 7.25MEA

ILS 2.75 - 25 bp Nov, 2011 - Unchanged 2012 23 Jan 2012 2.75ZAR 5.50 - 50 bp Nov, 2010 - Unchanged 2012 29 Mar 2012 5.50

LATAM

BRL 10.50 - 50 bp Jan, 2012 -50 bp Mar, 2012 07 Mar 2012 9.50MXN 4.50 - 25 bp Jul, 2009 - Unchanged 2012 20 Jan 2012 4.50

EM Asia

CNY 6.56 + 25 bp Jul, 2011 - Unchanged 2012 Not announced 6.56KRW 3.25 +25 bp Jun, 2011 - Unchanged 2012 09 Feb 2012 3.25THB 3.25 - 25 bp Nov, 2011 - 25 bp Q1 2012 25 Jan 2012 2.75HKD 0.50 - 100 bp Dec, 2008 + 25 bp Q1 2014 Not announced 0.50MYR 3.00 + 25 bp May, 2011 - Unchanged 2012 31 Jan 2012 3.00PHP 4.25 - 25 bp Jan, 2012 - 25 bp Q2 2012 01 Mar 2012 4.00IDR 6.00 - 50 bp Nov, 2011 - 25 bp Q1 2012 09 Feb 2012 5.75INR 8.50 + 25 bp Oct, 2011 - 50 bp Q2 2012 24 Jan 2012 7.50

TWD 1.875 +12.5 bp Jun, 2011 - Unchanged 2012 29 Mar 2012 1.875

Year-end (%)Next MeetingPolicy Rate (%) Latest Change Next Change



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Documents

Emerging Markets Briefer · Investment Research — General Market Conditions . Surprisingly sunny dawn of 2012 – let’s see if it continues . We had ended 2011 inrather gloomy