Key questions driving EMEA FX fundamentals€¦ · Macro Commodities Forex Rates Equity Credit...

Macro Commodities Forex Rates Equity Credit Derivatives

27 August 201027 August 201027 August 201027 August 2010

Fixed Income & Forex Important Notice: The circumstances in which this publication has been produced are such that it is not appropriate to characterise it as independent investment research as referred to in European MIF directive and that it should be treated as a marketing material even if it contains a research recommendation

Emerging Markets Weekly

www.sgresearch.com

Key questions driving EMEA FX fundamentals

n Editorial

A look at macro-fundamentals driving EMEA FX suggests that our

preference lies with countries exhibiting a stronger growth

performance, mounting inflation risks, and possibly a credible central

bank. This is particularly the case for PLN. In Russia, where we also

hold a bullish view on the FX, growth is viewed as a key driver, along

with the strong external sector, the low level of debt, and the more

hawkish central bank. In contrast, the widening of the current account

deficits in Turkey and South Africa mirrors our more cautious view on

the FX. In addition, so far we have not been impressed by South

Africa�s economic activity performance.

n FX trade summary

Our trade recommendations have recorded mixed performances since

our last publication, as EM FX has lacked a clear trend. In the near

term, G10 developments will be key to get a sense of the global risk

backdrop. We reiterated our recommendation to go long RUB versus

the basket at 34.65 earlier this week. We think that the RUB may return

to the 34 area when the risk environment normalises. We exited our

short BRL-MXN recommendation, as we hit our stop of 7.30 earlier this

week. This mainly reflected the poor performance of the MXN.

However, we think that the recent MXN sell-off above 13.00 vs USD is

overdone, and we would expect a bounce back, as long as the

newsflow from the US does not deteriorate further.

n FX technical analysis

EUR/CZK - We expect the 25.02 pullback level � or, at most, the

Fibonacci retracement at 25.17 � to cap the upside until EUR/CZK

resumes its LT downtrend towards 23.70 and the July 2008 low of

22.89. CHF/HUF � Any down-move from the 217.95/218.20 resistance

zone would be an ST corrective move before CHF/HUF rises towards

230.00.

Most PMIs remain above 50Most PMIs remain above 50Most PMIs remain above 50Most PMIs remain above 50

30

35

40

45

50

55

60

Jun-07 Dec-07 Jun-08 Dec-08 Jun-09 Dec-09 Jun-10

Poland

Hungary

Czech Rep

Russia

South Africa

Source: SG Cross Asset Research, Reuters

Government debtGovernment debtGovernment debtGovernment debt ratiosratiosratiosratios

10

20

30

40

50

60

70

80

90

Israel Hungary Poland Turkey Czech Rep

EMEA average

South Africa

Russia

% of GDP

Notes: average is GDP weighted; IMF forecasts for 2010 Source: SG Cross Asset Research, IMF

ContentsContentsContentsContents View and Trade SummaryView and Trade SummaryView and Trade SummaryView and Trade Summary EM Research TeamEM Research TeamEM Research TeamEM Research Team

View and Trade Summary 2 19191919/0/0/0/08888/10/10/10/10 26262626/0/0/0/08888/10/10/10/10 Coming weekComing weekComing weekComing week CoCoCoComing monthming monthming monthming month Benoit AnneBenoit AnneBenoit AnneBenoit Anne (44) 20 7676 7622

Weekly Calendar 3 EUR/PLNEUR/PLNEUR/PLNEUR/PLN 3.9650 3.9830 � � Gaëlle BlanchardGaëlle BlanchardGaëlle BlanchardGaëlle Blanchard (44) 20 7676 7439

Central Bank Watch 6 EUR/HUFEUR/HUFEUR/HUFEUR/HUF 278.17 283.74 � � Murat ToprakMurat ToprakMurat ToprakMurat Toprak (44) 20 7676 7491

Editorial 7 EUR/CZKEUR/CZKEUR/CZKEUR/CZK 24.857 24.829 � � Esther LawEsther LawEsther LawEsther Law (44) 20 7676 7396

FX Strategy 11 USD/TRYUSD/TRYUSD/TRYUSD/TRY 1.5109 1.5230 � � Jan VejmelekJan VejmelekJan VejmelekJan Vejmelek (420) 2 2200 8568

Technical Analysis 13 USD/RUBUSD/RUBUSD/RUBUSD/RUB 30.508 30.766 � � AnneAnneAnneAnne----Francoise BlüherFrancoise BlüherFrancoise BlüherFrancoise Blüher (420) 2 2200 8524

Issuance Calendar 14 USD/BRLUSD/BRLUSD/BRLUSD/BRL 1.7555 1.7619 � � Jiri SkopJiri SkopJiri SkopJiri Skop (420) 2 2200 8569

Rates Quantsight 15 USD/MXNUSD/MXNUSD/MXNUSD/MXN 12.728 12.987 � � Alejandro CuadradoAlejandro CuadradoAlejandro CuadradoAlejandro Cuadrado (1) 212 278 7313

Economic Data Preview 17 PLN 5YPLN 5YPLN 5YPLN 5Y 4.83 4.87 � � Jaroslaw JaneckiJaroslaw JaneckiJaroslaw JaneckiJaroslaw Janecki (48) 2 2528 4162

HUF 5YHUF 5YHUF 5YHUF 5Y 6.15 6.49 � �

CZK 5YCZK 5YCZK 5YCZK 5Y 2.12 1.96 � �


22227777 AAAAuuuugggguuuusssstttt 2222000011110000 2222

FX Views and RecommendationsFX Views and RecommendationsFX Views and RecommendationsFX Views and Recommendations

n Our trade recommendations have recorded mixed performances since our last publication, as EM FX has lacked a clear trend. In the near term, G10 developments will be key to get a sense of the global risk backdrop. We reiterated our recommendation to go long RUB versus the basket at 34.65 earlier this week. We think that the RUB may return to the 34 area when the risk environment normalises. The main risk to our bullish call on the RUB scenario is lower oil prices triggered by a reassessment of global economic growth prospects. Should the depreciation risks build up, we think the central bank will likely stand ready to smooth the volatility.

n We exited our short BRL-MXN recommendation, as we hit our stop of 7.30 earlier this week. This mainly reflected the poor performance of the MXN, as the BRL has been relatively resilient in the face of a challenging market environment. However, we think that the recent MXN sell-off above 13.00 vs USD is overdone, and we would expect a bounce back,

as long as the newsflow from the US does not deteriorate further.

FX spot strategies

CrossCrossCrossCross Posi t ionPosi t ionPosi t ionPosi t ion DateDateDateDate En t ryEn t ryEn t ryEn t ry Targe tTarge tTarge tTarge t S topS topS topS top Cu rre n tCu rre n tCu rre n tCu rre n t P /L we e k *P /L we e k *P /L we e k *P /L we e k * P /L to talP /L to talP /L to talP /L to tal

New posi t ions th is we e kNew posi t ions th is we e kNew posi t ions th is we e kNew posi t ions th is we e k

O ld posi t ionsO ld posi t ionsO ld posi t ionsO ld posi t ions

USD/KRWUSD/KRWUSD/KRWUSD/KRW short 28-Jul 1184 1145 1210 1194 -0.62% -0.87%

Baske t/RUBBaske t/RUBBaske t/RUBBaske t/RUB short 07-Jul 34.71 33.50 35.31 34.48 0.03% 0.66%

Posi t ions closed Posi t ions closed Posi t ions closed Posi t ions closed

BRL/MXNBRL/MXNBRL/MXNBRL/MXN short 30-Jul 7.24 6.90 7.30 7.30 -1.39% -0.88%

* since last Thursday close



Events and dataEvents and dataEvents and dataEvents and data EMEAEMEAEMEAEMEA

DuriDuriDuriDuring the weekng the weekng the weekng the week PeriodPeriodPeriodPeriod PreviousPreviousPreviousPrevious SG ForecastSG ForecastSG ForecastSG Forecast ConsensusConsensusConsensusConsensus

Russia Consumer Prices (MoM) AUG 0.40% na na

Consumer Prices (YoY) AUG 5.50% na na Consumer Price Index Core MoM AUG 0.40% na na

South Africa SACCI Business Confidence AUG 84.3 na na

Monday 30Monday 30Monday 30Monday 30----AugAugAugAug----2010 (GMT)2010 (GMT)2010 (GMT)2010 (GMT) PeriodPeriodPeriodPeriod PreviousPreviousPreviousPrevious SG ForecastSG ForecastSG ForecastSG Forecast ConsensusConsensusConsensusConsensus

Turkey National Holiday 8:00 Poland GDP (YoY) 2Q 3.00% 3.20% 3.20%

12:30 South Africa South Africa Budget JUL 8.93B na na

Tuesday 31Tuesday 31Tuesday 31Tuesday 31----AugAugAugAug----2010 (GMT)2010 (GMT)2010 (GMT)2010 (GMT) PeriodPeriodPeriodPeriod PreviousPreviousPreviousPrevious SG ForecastSG ForecastSG ForecastSG Forecast ConsensusConsensusConsensusConsensus

Egypt Unemployment Rate 2Q 9.10% na na Israel Unemployment Rate 2Q 7.20% na na

6:00 South Africa Private Sector Credit (YoY) JUL 0.92% na na 6:00

M3 Money Supply (YoY) JUL 2.41% na na

7:00 Hungary Producer Prices (YoY) JUL 6.90% na na 7:00

Producer Prices (MoM) JUL 1.40% na na

7:00 Turkey Trade Balance JUL -5.6B na na 8:00 Czech Republic Money Supply (YoY) JUL 5.20% na na 12:00 South Africa Trade Balance (Rand) JUL 5.6B na na

Wednesday 01Wednesday 01Wednesday 01Wednesday 01----SepSepSepSep----2010 (GMT)2010 (GMT)2010 (GMT)2010 (GMT) PPPPerioderioderioderiod PreviousPreviousPreviousPrevious SG ForecastSG ForecastSG ForecastSG Forecast ConsensusConsensusConsensusConsensus

Czech Republic Budget Balance (Koruna) AUG -69.0B na na

Hungary PMI (SA) AUG 53.5 na na

4:00 Russia Manufacturing PMI AUG 7:00 Hungary Trade Balance (Mln Euros) JUN F 566.9M na na

7:00 Poland August Manufacturing PMI AUG na na na 7:00 Romania GDP (Total) 2Q F -0.50% na na 7:00 Turkey Manufacturing PMI AUG na na na 7:30 Czech Republic Manufacturing PMI AUG na na na 9:00 South Africa Kagiso PMI AUG 49.5 na na

Thursday 02Thursday 02Thursday 02Thursday 02----SepSepSepSep----2010 (GMT)2010 (GMT)2010 (GMT)2010 (GMT) PeriodPeriodPeriodPeriod PreviousPreviousPreviousPrevious SG ForecastSG ForecastSG ForecastSG Forecast ConsensusConsensusConsensusConsensus

7:00 Romania Producer Prices (YoY) JUL 6.20% na na 7:00

Producer Prices (MoM) JUL 0.40% na na

Friday 03Friday 03Friday 03Friday 03----SepSepSepSep----2010 (GMT)2010 (GMT)2010 (GMT)2010 (GMT) PeriodPeriodPeriodPeriod PreviousPreviousPreviousPrevious SG ForecastSG ForecastSG ForecastSG Forecast ConsensusConsensusConsensusConsensus

4:00 Russia Services PMI AUG 7:00 Czech Republic Avg Real Wage (YoY) 2Q 1.50% na na 7:00 Romania Retail Sales (MoM) JUL 3.10% na na 7:00 Retail Sales (YoY) JUL 3.20% na na 7:00 Turkey Producer Prices (MoM) AUG -0.16% na na 7:00

Producer Prices (YoY) AUG 8.24% na na

7:00 Consumer Prices (YoY) AUG 7.58% na na 7:00 Consumer Prices (MoM) AUG -0.48% na na



Latin AmericaLatin AmericaLatin AmericaLatin America


11:00 Brazil FGV Inflation IGP-M (YoY) AUG 5.79% na na 11:00

FGV Inflation IGP-M (MoM) AUG 0.15% na 0.71%

13:00 Chile Copper Production Total JUL 465003 na na 13:00 Industrial Sales YoY JUL 1.40% na 3.30% 13:00

Industrial Production (YoY) JUL 2.90% na 3.50%

19:30 Mexico Budget Balance (Year to date) JUL na na na


12:00 Brazil Industrial Production sa (MoM) JUL -1.00% na 0.50% 12:00

Industrial Production YoY JUL 11.10% 9.60% 9.50%

13:00 Chile Unemployment Rate JUL 8.50% 8.30% 8.60% 16:00 Colombia Unemployment Rate JUL 12.80% na 12.50% 19:00 Argentina Construction Activity (YoY) JUL 10.10% na na

Wednesday 01Wednesday 01Wednesday 01Wednesday 01----SepSepSepSep----2010 (GMT)2010 (GMT)2010 (GMT)2010 (GMT) PeriodPeriodPeriodPeriod PreviousPreviousPreviousPrevious SG ForecastSG ForecastSG ForecastSG Forecast ConsensusConsensusConsensusConsensus

Brazil SELIC Target - Central Bank Sep.01 10.75% 10.75% 10.75% 11:00 FGV CPI IPC-S Aug.31 -0.17% na na 13:00

PMI Manufacturing AUG 51.8 na na

14:00

IMPORTS - US$ million AUG $16316M na na 14:00 EXPORTS - US$ million AUG $17674M na na 14:00

Trade Balance (FOB) - Monthly AUG $1358M $2500M na

14:00 Mexico Remittances (USD) JUL 1885.2M na na 14:00 Central Bank Economist Survey Sep.01


8:00 Brazil FIPE CPI - Monthly AUG 0.17% na 0.24%

Friday 03Friday 03Friday 03Friday 03----SepSepSepSep----2010 (GMT)2010 (GMT)2010 (GMT)2010 (GMT) PeriodPeriodPeriodPeriod PreviousPreviousPreviousPrevious SG ForSG ForSG ForSG Forecastecastecastecast ConsensusConsensusConsensusConsensus

12:00 Brazil GDP (IBGE) 4Qtrs Accumulated 2Q 2.40% na na 12:00 GDP (IBGE) QoQ 2Q 2.70% 0.80% 0.70% 12:00

GDP (IBGE) YoY 2Q 9.00% 8.1% 8.00%

14:00 Mexico Consumer Confidence AUG 87.4 na na 17:00

IMEF Non Manufacturing Index AUG 53.7 na na

17:00 IMEF Manufacturing Index AUG 53.5 na na 21:00 Colombia Producer Price Index (YoY) AUG 1.81% na na 21:00 Producer Price Index (MoM) AUG -0.61% na na



AsiaAsiaAsiaAsia

During the weekDuring the weekDuring the weekDuring the week PeriodPeriodPeriodPeriod PreviousPreviousPreviousPrevious SG ForecastSG ForecastSG ForecastSG Forecast ConsensusConsensusConsensusConsensus

Indonesia Danareksa Consumer Confidence AUG 85.6 na na

South Korea Ext Trade - Balance in US$ Mln AUG 5674 2613 2613


21:00 South Korea Business Survey- Non-Manufacturing SEP 89 90 na 21:00 Business Survey- Manufacturing SEP 102 102 na 23:00

Leading Index (YoY) JUL 7.00% na na

23:00

Industrial Production (YoY) JUL 16.90% 15.0% 15.80% 23:00 Industrial Production (MoM) JUL 1.40% 0.6% 0.50% 23:00

Industrial Production Mfg(YoY) JUL 17.40% 15.5% na

23:00 Service Industry Output YoY JUL 4.40% na na


Malaysia National Holiday 2:00 Singapore M2 Money Supply (YoY) JUL 7.40% na na 2:00

Bank Loans & Advances (YoY) JUL 9.00% na na

2:00 M1 Money Supply (YoY) JUL 20.50% na na 7:30 Thailand Manufacturing Production (YoY) JUL 21.30% na 12.50% 7:30

Total Trade Balance JUL $2536M na na

7:30 Manufacturing Prod Index (SA) JUL 216.7 na na 7:30

Total Capacity Utilization JUL 68.6 na na

7:30

Current Account Balance (USD) JUL $681M na -$1020M 7:30

Overall Balance in US$ Million JUL $2166M na na

7:30 Business Sentiment Index JUL 52.1 na na 23:00 South Korea Core Consumer Price Index(YoY) AUG 1.70% 1.80% na 23:00

Consumer Price Index (MoM) AUG 0.30% 0.20% 0.40%

23:00 Consumer Price Index (YoY) AUG 2.60% 2.40% 2.60%

Wednesday 01Wednesday 01Wednesday 01Wednesday 01----SepSepSepSep----2010 (GMT)2010 (GMT)2010 (GMT)2010 (GMT) PeriodPeriodPeriodPeriod PreviousPreviousPreviousPrevious SG ForecastSG ForecastSG ForecastSG Forecast ConsensusConsensusConsensusConsensus

0:00 South Korea HSBC Manufacturing PMI AUG 53.2 na na 1:00 China PMI Manufacturing AUG 51.2 52.0 51.6 2:00 Taiwan HSBC Taiwan Manufacturing PMI AUG 50.5 na na 2:30 China HSBC Manufacturing PMI AUG 49.4 50.5 na 4:00 Indonesia Total Trade Balance JUL $580M na $1180M 4:00 Core Inflation (YoY) AUG 4.15% na 4.10% 4:00

Inflation NSA (MoM) AUG 1.57% na 1.00%

4:00

Inflation (YoY) AUG 6.22% na 6.70% 7:00 Thailand Core CPI (YoY) AUG 1.20% na 1.20% 7:00

Consumer Price Index NSA (MoM) AUG 0.20% na na

7:00 Consumer Price Index (YoY) AUG 3.40% na 3.20%


Malaysia Current Account Balance 2Q 30.4B na na 10:00

Overnight Rate Sep.02 2.75% na na

10:01

Trade Balance JUL 6.04B na na 13:30 Singapore Electronics Sector Index AUG 55.7 na 52.5 13:30 Purchasing Managers Index AUG 52.2 na 51 23:00 South Korea GDP at Constant Price (YoY) 2Q F 7.80% na na 23:00 GDP at Constant Price (QoQ) 2Q F 1.80% na na

Friday 03Friday 03Friday 03Friday 03----SepSepSepSep----2010 (GMT)2010 (GMT)2010 (GMT)2010 (GMT) PeriodPeriodPeriodPeriod PreviousPreviousPreviousPrevious SG ForecastSG ForecastSG ForecastSG Forecast ConsensusConsensusConsensusConsensus

1:00 China Non-manufacturing PMI AUG 60.1 na na 2:30

HSBC Services PMI AUG 56.3 na na

6:00 Indonesia Bank Indonesia Reference Rate Sep.03 6.50% na 6.50%

Source: SG Cross Asset Research, KB, Bloomberg



Central bank watchCentral bank watchCentral bank watchCentral bank watch

Rat ing^Rat ing^Rat ing^Rat ing^ Out lookOut lookOut lookOut look Coun t ryCoun t ryCoun t ryCoun t ryNext Next Next Next

Me e t ingMee t ingMee t ingMee t ingLast move (bp)Last move (bp)Last move (bp)Last move (bp)

Cu rre n t Rate Cu rre n t Rate Cu rre n t Rate Cu rre n t Rate

(%)(%)(%)(%)SG V iewSG ViewSG ViewSG View

What is pr iced in What i s pr iced in What i s pr iced in What i s pr iced in

(bp ove r 3m)(bp ove r 3m)(bp ove r 3m)(bp ove r 3m)

A- Stable Po landPo landPo landPo land 29 Sep 10 unchanged 3.50 We expect 50bp rate hike in Q4. 15

BBB- Negative HungaryHungaryHungaryHungary 27 Sep 10 unchanged 5.25 No change this year. 38

A Positive Cze ch Rep.Cze ch Rep.Cze ch Rep.Cze ch Rep. 23 Sep 10 unchanged 0.75 First rate hike in Q1/Q211 0

BB+ Stable Roman iaRoman iaRoman iaRoman ia 29 Sep 10 unchanged 6.25 No change until Q4 then 50bp cut still possible NA

BBB Stable RussiaRussiaRussiaRussia unchanged 7.75 No change this year. NA

BB Positive Tu rkeyTu rkeyTu rkeyTu rkey 16 Sep 10 unchanged 7.00 First rate hike at the end of Q1 2011 54

BBB+ Negative Sou th Afr icaSou th Afr icaSou th Afr icaSou th Afr ica 09 Sep 10 unchanged 6.50Key rates likely to bottom at 6.50% but

downside risk remains if Rand strength

persists

-39

A Stable Israe lIsrae lIsrae lIsrae l 27 Sep 10 unchanged 1.75 We expect 2% by year-end. 19

BB+ Stable EgyptEgyptEgyptEgypt 16 Sep 10 unchanged 8.25 We expect 25bp hike in Q4. NA

BBB- Stable Brazi lBrazi lBrazi lBrazi l 01 Sep 10 +50 10.75 Dovish stance risks no move. The latter

may be tested in Q4 as inflation trends

reverse.

15

A+ Stable Ch i leCh i leCh i leCh i le 16 Sep 10 +50 2.00 We expect 3.75% by year-end. 150

BBB- Positive Co lombiaCo lombiaCo lombiaCo lombia 24 Sep 10 unchanged 3.00Lower inflation in Q3 favours Banrep dovish

stance and risks no hike in 2010.0

BBB Stable MexicoMexicoMexicoMexico 24 Sep 10 unchanged 4.50 Lower inflation and Fed hike delay may

push Banxico to act only in 2011.0

Source: SG Cross Asset Research, KB, Bloomberg, Reut ers (as at 26 Aug 10 close.). ̂ S&P rat ings are used



EditorialEditorialEditorialEditorial –––– KeKeKeKey questions driving y questions driving y questions driving y questions driving EMEA FX fundamentals EMEA FX fundamentals EMEA FX fundamentals EMEA FX fundamentals

� Favouring strong growth, mounting inflation risksFavouring strong growth, mounting inflation risksFavouring strong growth, mounting inflation risksFavouring strong growth, mounting inflation risks and and and and credible central bankscredible central bankscredible central bankscredible central banks

A look at macro-fundamentals driving EMEA FX suggests that our preference lies with countries exhibiting a stronger growth performance, mounting inflation risks, and possibly a credible central bank. This is particularly the case for PLN. In Russia, where we also hold a bullish view on the FX, growth is viewed as a key driver, along with the strong external sector, the low level of debt, and the more hawkish central bank. In contrast, the widening of the current account deficits in Turkey and South Africa mirrors our more cautious view on the FX. In addition, so far we have not been impressed by South Africa’s economic activity performance.

� Is EMEA on the way to growth recovery?Is EMEA on the way to growth recovery?Is EMEA on the way to growth recovery?Is EMEA on the way to growth recovery?

EMEA faces multiEMEA faces multiEMEA faces multiEMEA faces multi----speed economic recoveries. speed economic recoveries. speed economic recoveries. speed economic recoveries. Most EMEA countries are enjoying a strong industrial recovery after the sharp drop in activity in 2008-2009. Russia and Turkey have recorded V-shape recoveries and the pace of manufacturing output growth is now slowing to more sustainable levels in both countries. Russia’s performance will also be undermined by the impact of the drought (we expect it to withdraw 0.5 point of GDP growth this year). South Africa is lagging the move with manufacturing output growth below 10% yoy despite a very large output contraction in 2009. The inventory cycle and then the recovery in world trade led the rebound.

Graph1.Graph1.Graph1.Graph1.Manufacturing recovery continuesManufacturing recovery continuesManufacturing recovery continuesManufacturing recovery continues

-30%

-20%

-10%

0%

10%

20%

30%

Jun-07 Mar-08 Dec-08 Sep-09 Jun-10

Poland Hungary

Czech Turkey

SA Russia

Israel

y/y, 3ma

Source: SG Cross Asset Research, Ecowin

The key question is whether this export-led recovery is – or will be shortly - relayed by domestic demand, as concerns are growing about the outlook for economic growth in the US and EU. The very open economies (the Czech Republic, Israel and Hungary to a lesser extent) would be the most affected by a slowdown in external demand. Poland, which does not rely as much on exports, would be less affected. Most EMEA countries have very close trade links with the eurozone, with the Czech Republic the most exposed (67%

of its exports go to the euro area) and South Africa and Israel the least exposed. Concerning PMIs, the outlook for industrial activity remains positive despite the fading momentum. Furthermore, order books are still strengthening in all countries, while recent German data and leading indicators have been very strong. Only South Africa’s PMI stands below 50, raising concerns about the sustainability of the recovery, especially as the industrial sector has to cope with a strong currency.

Graph2.Graph2.Graph2.Graph2. MoMoMoMost PMIs remain above 50st PMIs remain above 50st PMIs remain above 50st PMIs remain above 50

30

35

40

45

50

55

60


Poland

Hungary

Czech Rep

Russia

South Africa

Source: SG Cross Asset Research, Reuters

The recovery is clearly more broad-based in Turkey, Israel and Russia, where domestic demands have been strengthening significantly. In Poland, private consumption has been resilient during the crisis but there is no strong momentum, while investment has yet to recover. Domestic demand remains fragile or even weak in other countries. Tight fiscal policies and credit conditions as well as a weaker HUF (meaning increased burden for households who borrowed in FX) will continue to weigh on consumption in Hungary. Fiscal policy will also weigh on domestic demand in the Czech Republic next year, while it will remain more supportive in Poland and Russia (and possibly Turkey).

Graph3.Graph3.Graph3.Graph3. Retail salesRetail salesRetail salesRetail sales (yoy change)(yoy change)(yoy change)(yoy change)

-15

-10

-5

0

5

10

15

20


Czech Rep Hungary

Israel Poland

South Africa Russia




Overall, from a macroeconomic standpoint, we expect Israel, Poland, Turkey and Russia to stand out. Hungary and South Africa should continue to lag.

� Is there an inflation risk emerging in EMEA? Is there an inflation risk emerging in EMEA? Is there an inflation risk emerging in EMEA? Is there an inflation risk emerging in EMEA?

ThThThThe answer is mixed.e answer is mixed.e answer is mixed.e answer is mixed. In a number of countries, there are indeed signs that inflationary pressures are building up. This is the case in Poland, Russia and Israel. When this mounting risk coincides with the presence of a credible central bank, we believe this is supportive for the currency. In other parts of EMEA, inflation risks remain muted, including in South Africa, Turkey, the Czech Republic and Hungary.

In Poland, we expect inflation to rise further in the second half of the year due to higher food prices (flooding and droughts), and the ever-longer time for delivery in industry - a characteristic phenomenon of an economy which is speeding up. Also, the second administrated price hikes (probably in December) constitute some additional risk that inflation will be well above the central bank target (2.5%) at the end of this year. We expect inflation to reach around 2.8-3.0% by the end of 2010, which will likely prompt the central bank to be pro-active on the policy front. We indeed call for a NBP hike as soon as October, which will provide support to the PLN. In Russia, we also think that the disinflation process will end soon, as macroeconomic conditions are changing: acceleration in money supply growth, easing credit conditions, growing loan books, rising wages and a closing output gap all point to higher CPI growth. This will be exacerbated by a one-off factor, the drought-related increase in food prices. Our seasonally-adjusted ex-food and gasoline inflation index shows acceleration since March on a mom basis. We expect the increase in yoy headline CPI to start showing in October/November when favourable seasonality fades away.

Graph 4.Graph 4.Graph 4.Graph 4. Inflation risks mounting in PLN, RUB and ILSInflation risks mounting in PLN, RUB and ILSInflation risks mounting in PLN, RUB and ILSInflation risks mounting in PLN, RUB and ILS

4

6

8

10

12

14

16

1.5

2.0

2.5

3.0

3.5

4.0

4.5

Jan-09 Apr-09 Jul-09 Oct-09 Jan-10 Apr-10 Jul-10

Poland ( LHS)

Israel (LHS)

Russia (RHS)

Source: SG Cross Asset Research, Bloomberg

Finally in Israel, inflationary risks are also rising. GDP growth in Q2 was stronger than expected at 4.7% qoq annualised after 3.4% in Q1, but Q3 may be less buoyant as export growth is fading. The outlook for domestic demand is still positive, though, as the labour market continues to improve (employment and wages are growing). The central bank sees the fast rise in house

prices as the main inflationary risk, although it does not consider that they are diverging from fundamentals yet. Another risk factor is the government's plan to increase some indirect taxes. CPI growth fell to 1.8% yoy in July from 2.4%, but the central bank's August survey of inflation expectations showed that the 12-month inflation forecast rose to 3.2% from 3% in July, above the upper limit of the inflation target range.

Elsewhere, inflation does not constitute a major macro issue at this stage. In South Africa, the economic recovery has so far not been strong enough to fuel inflationary pressures, and the ZAR's strengthening trend has helped contain prices. The main upside risk for inflation comes from wage negotiations, but this is not the prevailing factor at this time. In Turkey, the central bank recently published a relatively dovish inflation report, which suggests that inflation risks are likely to remain measured going forward. We broadly agree with this assessment but also recognize that a further pickup of domestic demand may alter the inflation outlook.

We also think that the inflation risks are going to stay moderate in the Czech Republic, even though the inflation trajectory is on an upward trend. Overall, during the second half of the year, inflation should gradually grow towards the CNB target of 2% and might even go above it in Q4. Overall, we expect inflation to reach 1.5% this year and 2.4% in 2011, which will trigger a relatively slow policy shift on the part of the central bank. In Hungary, while the central bank recently revised its inflation forecast upwards, the profile still points to a declining trend. In addition, the risk factors for the headline CPI mainly relate to possible indirect tax hikes or an increase in administered prices. The broad domestic demand picture does not indicate any major inflation risk at this stage, although the persistent weakness of the HUF may somewhat alter that view.

Graph5Graph5Graph5Graph5.... Moderate inflation risks in TRY, ZAR, and CZKModerate inflation risks in TRY, ZAR, and CZKModerate inflation risks in TRY, ZAR, and CZKModerate inflation risks in TRY, ZAR, and CZK

-0.5

0.0

0.5

1.0

1.5

2.0

2.5

3

4

5

6

7

8

9

10

11

Jan-09 Apr-09 Jul-09 Oct-09 Jan-10 Apr-10 Jul-10

South Africa (LHS)Turkey (LHS)Czech Rep (RHS)

Source: SG Cross Asset Research, Bloomberg

� Are EMEA’s external vulnerabilities declining?Are EMEA’s external vulnerabilities declining?Are EMEA’s external vulnerabilities declining?Are EMEA’s external vulnerabilities declining?

External vulnerabilities have decreased but imbalances External vulnerabilities have decreased but imbalances External vulnerabilities have decreased but imbalances External vulnerabilities have decreased but imbalances could quickly recould quickly recould quickly recould quickly re----emerge emerge emerge emerge The crisis has triggered a massive adjustment of the current account balances in most countries, as the contraction in imports generally surpassed the drop in exports. Current account deficits



shrunk the most in Hungary and in Turkey (see chart below), reducing these countries’ external vulnerability. The trend is turning around again though, especially in Turkey where the economic recovery is led by domestic demand. Policymakers will have to act to avoid the re-emergence of large and unsustainable imbalances, especially in a volatile global market environment. The financing of the deficit could be more difficult for some countries as direct investment is not recovering from the crisis yet and portfolio investment is likely to remain cautious and driven by the differentiation theme. In this context, the most vulnerable countries are Hungary (high public and external debts), Turkey (fast widening current account deficit and uncertainty regarding fiscal policy) and South Africa (financing of the current account deficit highly dependent on the volatile portfolio flows).

Graph6Graph6Graph6Graph6.... The adjustment of current account deficits is overThe adjustment of current account deficits is overThe adjustment of current account deficits is overThe adjustment of current account deficits is over

-8

-6

-4

-2

0

2

4

6

8

SA Hungary Turkey Poland Czech R. Israel Russia

2007

2009

2010

Source: SG Cross Asset Research, IMF

Graph7Graph7Graph7Graph7.... FDI and portfolio flows FDI and portfolio flows FDI and portfolio flows FDI and portfolio flows

-5

0

5

10

15

20

25

30

Hungary Czech Rep SA Turkey Poland

FDI

Portfolio

bn USD, 12-mth accumulation


� Is EMEA at risk of a sovereign debtIs EMEA at risk of a sovereign debtIs EMEA at risk of a sovereign debtIs EMEA at risk of a sovereign debt crisis? crisis? crisis? crisis?

We do not think that the size of the government debt is a We do not think that the size of the government debt is a We do not think that the size of the government debt is a We do not think that the size of the government debt is a serious issue for EMEA, with the exception of Hungary.serious issue for EMEA, with the exception of Hungary.serious issue for EMEA, with the exception of Hungary.serious issue for EMEA, with the exception of Hungary. Looking at a GDP-weighted average for the region (based on our seven-country sample), we find that the EMEA government debt ratio stands at only 35% of GDP, which to us points to moderate debt sustainability risks. There are two countries for which the government debt to GDP

ratio hovers around 80%, namely Hungary and Israel. In the case of Israel, the level of debt may be higher than desirable, but we do not have any major concerns about access to financing, given the depth of the local market, and Israel’s status as a safe haven in EM. In contrast, Hungary’s debt level remains a well-documented issue, which deserves to be addressed through a rigorous fiscal adjustment program. The problem for the country is that there are now significant doubts about the fiscal adjustment efforts going forward, following the breakdown of relations with the IMF. Elsewhere, the debt ratio is fairly high in Poland, at about 55% of GDP, but is not considered as alarming. While investors’ focus is clearly on sovereign risks, reflecting the EU periphery issues, overall we believe that the debt picture in EMEA is broadly manageable. Graph8Graph8Graph8Graph8.... Government debt raGovernment debt raGovernment debt raGovernment debt ratiostiostiostios

10

20

30

40

50

60

70

80

90

Israel Hungary Poland Turkey Czech Rep

EMEA average

South Africa

Russia

% of GDP

Notes: average is GDP weighted; IMF forecasts for 2010

Source: SG Cross Asset Research, IMF

� Are EMEA central banks credible? Are EMEA central banks credible? Are EMEA central banks credible? Are EMEA central banks credible?

The picture in terms of central bank credibility is relatively The picture in terms of central bank credibility is relatively The picture in terms of central bank credibility is relatively The picture in terms of central bank credibility is relatively mixed in EMEA.mixed in EMEA.mixed in EMEA.mixed in EMEA. In particular, we have some concerns about the risk of policy errors in South Africa, and, to a lesser extent, in Turkey. In South Africa, the SARB is subject to significant political pressures to modify its mandate towards a more pro-growth agenda. This may hurt the credibility of the inflation-targeting regime in our view. For the time being, there is little concern about inflation risks, but the policy challenge may surface later on when a more solid macro recovery takes hold. In Turkey, the central bank paints a relatively dovish outlook but an overly lax monetary policy, combined with an accommodating fiscal stance, may eventually lead to some macro imbalances.

We are more impressed by the credentials of the National Bank of Poland with regards to its inflation targeting. On this basis, we believe that the NBP will be fairly quick to respond to mounting inflation risks and expect a hike as early as October. In Hungary, the central bank faces severe challenges but has so far done a good job at defending the currency, including the threat of defensive interest-rate hikes. If the CHF-HUF cross spins out of control going forward, an aggressive policy rate move is quite likely, in our view. At this stage, the main factor hurting the authorities' credibility is the lack of policy dialogue between the central bank and the government. We would



also rate the Czech and Israeli central banks as highly credible. In the case of Israel, however, the frequent occurrence of monetary policy surprises is a factor that may weigh somewhat on investor confidence.

[email protected]@[email protected]@sgcib.com [email protected]@[email protected]@sgcib.com



FX StrategyFX StrategyFX StrategyFX Strategy

EUR/PLNEUR/PLNEUR/PLNEUR/PLN 1 week view1 week view1 week view1 week view �� 1 month view1 month view1 month view1 month view ��

We expect strong We expect strong We expect strong We expect strong fundamentals and fundamentals and fundamentals and fundamentals and

prospects of a Q4 rate prospects of a Q4 rate prospects of a Q4 rate prospects of a Q4 rate hike to support the PLNhike to support the PLNhike to support the PLNhike to support the PLN

We wait for better levWe wait for better levWe wait for better levWe wait for better levels els els els to reto reto reto re----enter a long PLN enter a long PLN enter a long PLN enter a long PLN

positionpositionpositionposition

Another volatile week for EUR/PLN, mainly driven by external developments. Softer than expected retail sales had no major impact, and the central bank’s decision to leave its key rate unchanged had been widely expected. The MPC statement did not include key changes from the previous month. It again discussed factors that may fuel inflationary pressures in the medium term as well as the situation of public finances, urging the government to introduce decisive measures to reduce the budget deficit. The MPC expects a rise in inflation in the next few months due to food and energy prices. The 2011 VAT increase should also push CPI growth higher, but the MPC expects the impact to be minor. Overall, the central bank has not turned more hawkish this month, but we still expect a rate hike in Q4 as macro fundamentals are strong. This should continue to support the PLN in the medium term.

The main economic data next week will be Q2 GDP, to be released on Monday. We expect 3.2% yoy growth after 3.0% in Q1, in line with consensus. The manufacturing PMI (on Tuesday) will provide further clues about the outlook for manufacturing activity following a deceleration in industrial output growth in July. Strong data could help push EUR/PLN back down towards 3.95, but global market sentiment remains a key driver. We prefer to wait for better levels to re-enter a long PLN position, as the risk of central bank intervention will increase ahead of 3.85.

EUR/CZKEUR/CZKEUR/CZKEUR/CZK 1 week view1 week view1 week view1 week view �� 1 month view1 month view1 month view1 month view ��

TheTheTheThe CZK outperforms its CZK outperforms its CZK outperforms its CZK outperforms its CE peersCE peersCE peersCE peers....

Although tAlthough tAlthough tAlthough the shorthe shorthe shorthe short----term term term term outlook is rather dark for outlook is rather dark for outlook is rather dark for outlook is rather dark for the the the the CZKCZKCZKCZK,,,, the longthe longthe longthe long----term term term term outlook remains rosyoutlook remains rosyoutlook remains rosyoutlook remains rosy....

After hitting its lowest level since November, slightly below EUR/CZK 24.60 at the end of July, the exchange rate corrected modestly during August. It climbed close to the 25.00 level this week, but the CZK still performed significantly better than the HUF or the PLN. The Czech currency is still capped by rather sound fundamentals; very low exchange rate volatility stems from unattractive interest rates.

Based on our NATREX calculations, the CZK is still around 2.5% overvalued, and unfavourable sentiment on global markets should push for an elimination of the gap. However, a more marked move beyond EUR/CZK 25.00 would not be easy from a technical standpoint and is only likely to occur in the event of a sharp increase in risk aversion on global markets. Only global aversion will remain a key short-term determinant as the economic calendar is almost empty for next week.

The absence of macroeconomic imbalances and government efforts to stabilise public finances leads us to the conclusion that the long-term outlook for the Czech crown remains favourable.

EUR/HUFEUR/HUFEUR/HUFEUR/HUF 1 week view1 week view1 week view1 week view �� 1 month view1 month view1 month view1 month view ��

HUF weaker despite more HUF weaker despite more HUF weaker despite more HUF weaker despite more hawkish centrahawkish centrahawkish centrahawkish central bankl bankl bankl bank

More currency volatility More currency volatility More currency volatility More currency volatility ahead ahead ahead ahead on the back of on the back of on the back of on the back of

fiscal issues fiscal issues fiscal issues fiscal issues

A rate hike is A rate hike is A rate hike is A rate hike is likelylikelylikelylikely if if if if EUR/HUF approaches EUR/HUF approaches EUR/HUF approaches EUR/HUF approaches

300300300300

The HUF weakened this week on the back of renewed concerns about the country’s economic and fiscal situations. The central bank left its key rate unchanged at 5.25% on Monday, but the tone of the statement and press conference were clearly more hawkish. The central bank has now more reasons for concern. The NBH’s new forecasts show that the inflation outlook has significantly deteriorated (2010 was revised down to 4.7% from 4.9% but 2011 was revised up to 3.5% from 3.0% and 2012 up to 3.4% from 2.9%). The central bank also expects the budget deficit to be above the 3.8% target this year and to remain well above 3% in 2012. Despite the NBH’s hawkish tone, the HUF is likely to remain under pressure as the prospects for the country are far from bright.

Furthermore, the economy ministry said this week that the government would not seek a new loan agreement with the IMF when talks restart in autumn. The talks would be just a "regular" country review. “Serious” discussions with the IMF are unlikely before October, as the government will not be willing to talk about fiscal tightening ahead of the local elections.

More currency volatility is likely on the back of fiscal issues and disappointment regarding a new IMF deal. CHF/HUF reached a new historic high just below 220 on Wednesday, and technical analysis suggests it is on an upward trend. Further HUF weakness vs EUR and/or CHF would likely trigger verbal intervention from the central bank. A rate hike is likely if EUR/HUF approaches 300. The outlook remains clouded for the Hungarian currency and we expect EUR/HUF to move back towards 290 in the coming month.



Basket/RUBBasket/RUBBasket/RUBBasket/RUB 1 week view1 week view1 week view1 week view �� 1 m1 m1 m1 month viewonth viewonth viewonth view ��

We think that the RUB We think that the RUB We think that the RUB We think that the RUB may return to the 34 area may return to the 34 area may return to the 34 area may return to the 34 area

when the risk when the risk when the risk when the risk environment normalisesenvironment normalisesenvironment normalisesenvironment normalises

The RUB was hit in the first part of the week by risk aversion, lower oil prices and equity markets. We see such upward moves of the basket as an opportunity to re-enter long RUB positions. We think that the RUB may return to the 34 area when the risk environment normalises. Overall, we expect the RUB to strengthen to 33.50 vs the basket by the end of the year, and then to continue appreciating towards 32.00 on a one-year horizon.

The main risk to our bullish call on the RUB scenario is lower oil prices triggered by a reassessment of global economic growth prospects. As investors are taking off risk, the RUB has come under some pressure, but we think that the sell-off will be limited in terms of the basket. Should depreciation risks build up, the central bank will likely stand ready to smooth volatility in our view.

[email protected]@[email protected]@sgcib.com

[email protected][email protected][email protected][email protected]



Technical analysis

EUR/CZK: EUR/CZK: EUR/CZK: EUR/CZK: ST pause in LT downtrendST pause in LT downtrendST pause in LT downtrendST pause in LT downtrend

�� EUR/CZKEUR/CZKEUR/CZKEUR/CZK ---- We expect the We expect the We expect the We expect the 25.02 pullback 25.02 pullback 25.02 pullback 25.02 pullback levellevellevellevel –––– orororor,,,, at mostat mostat mostat most,,,, the Fibonacci retracement at the Fibonacci retracement at the Fibonacci retracement at the Fibonacci retracement at 25.17 25.17 25.17 25.17 –––– to cap the upside until to cap the upside until to cap the upside until to cap the upside until EUR/CZK EUR/CZK EUR/CZK EUR/CZK resumes its LT resumes its LT resumes its LT resumes its LT downtrend towards downtrend towards downtrend towards downtrend towards 23.7023.7023.7023.70 and and and and the July 2008 low of 22.89.the July 2008 low of 22.89.the July 2008 low of 22.89.the July 2008 low of 22.89.

EUR/CZK has been stable above 24.61 since the beginning of August, consolidating the down-leg which started at 26.06 in early June.

We expect the 25.02 pullback level - or, at most, the 25.17 Fibonacci retracement - to contain any upward attempt until EUR/CZK breaks below 24.61 and resumes its LT downtrend.

24.41 and 23.92 should then be the next major steps on the way to the October 2008 low of 23.70 and the July 2008 low of 22.89.

Written at 8:00am GMT on August 27

3333rdrdrdrd supportsupportsupportsupport 2222ndndndnd supportsupportsupportsupport 1111st st st st supportsupportsupportsupport LastLastLastLast 1111stststst resistanceresistanceresistanceresistance 2222ndndndnd resistanceresistanceresistanceresistance 3333rdrdrdrd resistanceresistanceresistanceresistance

23.92 24.41 24.61 24.76 25.02 25.17 25.27

CHFCHFCHFCHF////HUF: test of intermediate upside targetHUF: test of intermediate upside targetHUF: test of intermediate upside targetHUF: test of intermediate upside target

�� CHF/HUFCHF/HUFCHF/HUFCHF/HUF –––– Any downAny downAny downAny down----move move move move from the 217.95/218.20 from the 217.95/218.20 from the 217.95/218.20 from the 217.95/218.20 resistance zone would be an ST resistance zone would be an ST resistance zone would be an ST resistance zone would be an ST corrective move before CHF/HUF corrective move before CHF/HUF corrective move before CHF/HUF corrective move before CHF/HUF rises towards 230.00.rises towards 230.00.rises towards 230.00.rises towards 230.00.

From an Elliott-wave viewpoint, the rise initiated at 200.35 two weeks ago is probably an impulse, i.e. a move that should unfold into five waves. As this rise can only be broken down into three waves, any stabilisation or down-move from the 217.95/218.20 resistance area (*) should merely aim to consolidate wave 3333. CHF/HUF could thus decline to 213.80 – or even to 212.50/70 – to draw down-wave 4444 before heading north again.

Once 217.95/218.20 is broken, CHF/HUF should target the 230.00 Fibonacci projection. The MT pullback line - which comes at 220.05 on Friday (+0.40/day) - and 225.00 should be the main steps on the way.

(*) Late June high and tentative resistance line.

3333rdrdrdrd supportsupportsupportsupport 2222ndndndnd supportsupportsupportsupport 1111st st st st supportsupportsupportsupport LastLastLastLast 1111stststst resistanceresistanceresistanceresistance 2222ndndndnd resistanceresistanceresistanceresistance 3333rdrdrdrd resistanceresistanceresistanceresistance

206.95 209.80 212.50/213.80 217.40 217.95/218.20 225.00 230.00 [email protected]@[email protected]@sgcib.com & fabien.manach@sgc& fabien.manach@sgc& fabien.manach@sgc& [email protected]

DAILY CHART

MT pullback line

217.95

213.80

230.00

206.95

200.35

225.00

212.50/70

Tentative resistance line

1111

2222

3333

4444

5555

WEEKLY CHART

25.02

22.89

23.70

24.61

26.06

25.17



Issuance CalendarIssuance CalendarIssuance CalendarIssuance Calendar

Date Issuer Bond Planned Amount (Bn local ccy) Bid-Cover

20-Aug-10 South Africa T-bill 3M 3.83 1.69



20-Aug-10 South Africa T-bill 1Y 0.48 3.11

20-Aug-10 South Africa R210 Inflation-linked 0.21 4.07



23-Aug-10 Poland 52-week bill 0.80 3.35

23-Aug-10 Romania 182-day bill 0.80 1.99

24-Aug-10 Hungary 3-month bill 50.00 2.6

24-Aug-10 South Africa R207 1.50 4.02

24-Aug-10 South Africa R213 0.60 2.85

25-Aug-10 Hungary HU0000402425 (Buyback) 23.54 1.07

25-Aug-10 Hungary HU0000401922 (Buyback) 6.48 2.15

25-Aug-10 Russia OFZ Bonds, series 26203 15.00 3.86

25-Aug-10 Russia OFZ Bonds, series 25074 33.50 1.92

26-Aug-10 Hungary 2014, 5.5% 20.00 1.44

26-Aug-10 Hungary 2016,5.5% 15.00 2.09

26-Aug-10 Hungary 2020, 7.5% 28.40 1.89

26-Aug-10 Czech 1 Y Bill 8.00 1.69

26-Aug-10 Russia OBR Notes, series 14 5.00

27-Aug-10 South Africa Inflation-linked bonds 0.60

30-Aug-10 Hungary 6-week Bills na

30-Aug-10 Poland 52-week bill 0.80

31-Aug-10 Hungary 3-month bill na

1-Sep-10 Czech 2015, 3.4% 7.00

1-Sep-10 Poland OK1012 na

1-Sep-10 Russia OFZ Bonds, series 25075 35.00


2-Sep-10 Hungary 1 Y bill na

2-Sep-10 Czech 91-day bill 7.00

2-Sep-10 Romania Bonds na

6-Sep-10 Turkey 182-day bill na

6-Sep-10 Poland Bill na

6-Sep-10 Romania Bill na

7-Sep-10 Hungary 3 month bill na

7-Sep-10 Turkey 2012 zero coupon bond na

8-Sep-10 Hungary Hungary to buy back bonds na

8-Sep-10 Czech 2013, 2.8% 7.00

8-Sep-10 Poland PS na



9-Sep-10 Hungary Bonds na

9-Sep-10 Czech 273-day bill 8.00

Source: Bloomberg, Ministry of Finance



Rates QuantsightRates QuantsightRates QuantsightRates Quantsight

EM IRS curve monitorEM IRS curve monitorEM IRS curve monitorEM IRS curve monitor

EM currencies summary

10y (1w

mo ve)

2y10y (1w

mo ve)

R efi

rate

N ext

meeting

C o ns.

F o recast

Level

indicato r*

Slo pe

indicato r*

C vxty

indicato r*

D irect io nality

indicato r **

P LN 4.8% (-16.0bp) 33bp (-8bp) 3.50% 24-Sep-10 3.50% --v---|------ ------|v----- v-----|------ -v----|------

H UF 6.2% (-6.0bp) 17bp (-15bp) 5.25% 23-Aug-10 5.25% -v----|------ ---v--|------ ----v-|------ ---v--|------

C Z K 2.4% (-19.0bp) 81bp (-13bp) 0.75% 23-Sep-10 0.75% v-----|------ ---v--|------ v-----|------ ---v--|------

Z A R 7.4% (-10.8bp) 97bp (-3bp) 6.50% 9-Sep-10 6.50% v-----|------ --v---|------ --v---|------ --v---|------

M XN 6.5% (-11.0bp) 124bp (-7bp) 4.50% 20-Aug-10 4.50% v-----|------ v-----|------ ---v--|------ v-----|------

ILS 4.2% (-11.0bp) 161bp (-13bp) 1.75% 22-Aug-10 1.75% -v----|------ v-----|------ v-----|------ ---v--|------

A ED 4.0% (-10.0bp) 173bp (-7bp) 1.00% ------|-----v ------|-----v -----v|------ ---v--|------

SA R 3.5% (4.1bp) 240bp (4bp) 0.25% ------|-----v ------|--v--- ------|v----- ----v-|------

Source: SG Cross Asset Research, * Curve, slope and convexity indicators: a low mark indicates a curve for which rates are low, which is flat, which has low convexity and vice-versa. ** Directionality

indicator: a low value indicates that the curve is in bull flattening/bear steepening mode and vice-versa.

PLN IRS driversPLN IRS driversPLN IRS driversPLN IRS drivers HUF IRS driversHUF IRS driversHUF IRS driversHUF IRS drivers CZK IRS driversCZK IRS driversCZK IRS driversCZK IRS drivers

-3

-2

-1

0

1

2

3

Aug-08 Feb-09 Aug-09 Feb-10 Aug-10

Level Slope Curvature

x nb

-3

-2

-1

0

1

2

3



x nb stdev

-3

-2

-1

0

1

2

3



x nb stdev

ZAR IRS driversZAR IRS driversZAR IRS driversZAR IRS drivers AED IRS driversAED IRS driversAED IRS driversAED IRS drivers SAR IRS driversSAR IRS driversSAR IRS driversSAR IRS drivers

-3

-2

-1

0

1

2

3



x nb stdev

-3

-2

-1

0

1

2

3

Feb-09 Aug-09 Feb-10 Aug-10

Lev el Slope Curv ature

x nb stdev

-3

-2

-1

0

1

2

3

Jan-09 Jul-09 Jan-10 Jul-10

Lev el Slope Curv ature

x nb stdev

IRS curve monitor

Curve drivers: The curve drivers are calculated using a 2-year rolling probabilistic PCA. Their time series are shown as a multiple of the historical standard deviation. The first driver, the level factor, can be seen as an average of the IRS within the data sample. The second driver, the slope factor, represents one chosen IRS spread. The third driver, the convexity factor, can be synthetised by some statistically weighted flys. For MXN, the convexity driver is not significant.

Curve, slope and convexity indicators: These indicators give a synthetic view of the current level of the previously presented curve drivers. A low mark indicates a curve for which rates are low, which is flat, which convexity is low and vice-versa,

Directionality indicator: a low value indicates that the curve is in bull flattening/bear steepening mode and vice-versa. For more

about this type of indicator, see our 2010 FI Outlook.



EM IRS trade monitorEM IRS trade monitorEM IRS trade monitorEM IRS trade monitor

EM IRS trade summary

Mkt (ind.,

bp)

3M carry

& RD * Fair value Potential

Correl

to

level

Correl

to

slope

z-

score Fair value Potential

Correl

to

level

Correl

to

slope

z-

score

2Y7Y 38.0 47.0 30.5 7.5 -85% 51% 1.7 31.6 6.4 -36% 95% 2.0

7Y10Y -5.0 6.6 5.7 -10.7 -97% 3% -1.8 3.0 -8.0 -85% 19% -2.9

5Y7Y10Y 8.0 0.5 -2.5 10.5 47% 58% 1.7 -2.0 10.0 16% 67% 3.0

3Y5Y7Y 11.0 5.8 8.3 2.7 -49% 76% 0.4 11.7 -0.7 -1% 95% -0.2

5Y7Y 6.0 9.1 2.8 3.2 -85% 42% 1.0 3.6 2.4 -91% 24% 1.0

2Y10Y 17.0 67.2 18.9 -1.9 -86% 49% -0.7 18.1 -1.1 -91% 33% -0.3

5Y7Y10Y 13.0 0.2 7.9 5.1 -3% 54% 0.8 7.8 5.2 45% 13% 1.0

3Y5Y7Y 1.5 6.6 8.3 -6.8 -52% 64% -1.0 6.4 -4.9 -46% 65% -1.1

5Y7Y 19.0 1.8 14.9 4.1 -6% 86% 1.7 20.1 -1.1 -79% 66% -0.5

2Y10Y 81.0 22.3 88.1 -7.1 -20% 95% -2.3 82.2 -1.2 -51% 97% -0.6

5Y7Y10Y -4.0 -0.8 -11.8 7.8 47% 47% 1.5 -7.3 3.3 -38% 48% 0.8

3Y5Y7Y 2.0 2.5 9.3 -7.3 -10% 70% -1.5 0.3 1.7 -15% 87% 0.4

5Y10Y 35.0 20.1 32.8 2.2 -37% 86% 0.4 32.5 2.5 -87% 92% 0.8

2Y10Y 97.0 63.9 100.1 -3.1 -38% 91% -1.0 99.5 -2.5 -82% 97% -1.2

5Y7Y10Y 11.0 0.9 10.4 0.6 -16% 61% 0.1 11.3 -0.3 -57% 47% -0.1

2Y5Y10Y 27.0 11.9 34.4 -7.4 -35% 86% -0.6 34.5 -7.5 -76% 62% -1.0

5Y10Y 66.0 12.0 42.6 23.4 -10% 91% 2.3 54.8 11.2 -64% 86% 1.1

2Y5Y 58.0 37.3 64.9 -6.9 -31% 94% -1.1 63.4 -5.4 -62% 97% -0.8

5Y7Y10Y 0.0 -0.5 8.3 -8.3 -27% 11% -0.6 -1.5 1.5 -13% 9% 0.1

2Y5Y10Y -8.0 12.6 22.4 -30.4 -44% 68% -2.2 8.6 -16.6 -45% 67% -1.3

7Y10Y 35.5 -1.9 27.4 8.1 -83% 46% 1.7 30.4 5.1 -36% 53% 1.6

5Y7Y 42.5 3.9 41.3 1.2 -88% 37% 0.2 42.7 -0.2 -62% 31% 0.0

2Y5Y10Y 4.5 7.7 9.3 -4.8 -42% 45% -0.4 -0.6 5.1 -24% 69% 0.5

3Y5Y10Y -34.0 4.9 -20.4 -13.6 64% -16% -1.4 -29.6 -4.4 16% 18% -0.5

5Y7Y 56.5 2.0 51.4 5.1 -90% 27% 1.1 49.5 7.0 3% 50% 1.6

2Y10Y 173.0 13.0 175.3 -2.3 -89% 43% -0.8 173.5 -0.5 36% 89% -0.2

5Y7Y10Y 8.0 -1.0 0.1 7.9 -5% -4% 0.8 -8.4 16.4 -12% -28% 1.7

3Y5Y7Y -6.5 0.8 2.6 -9.1 -47% 60% -1.2 1.9 -8.4 -67% -19% -1.2

5Y7Y 69.5 1.5 62.2 7.3 -84% 40% 0.9 66.2 3.3 -9% 26% 0.7

2Y10Y 240.0 3.6 247.8 -7.8 -87% 46% -1.2 244.5 -4.5 42% 81% -1.5

5Y7Y10Y 11.5 -0.6 -0.4 11.9 -15% -4% 0.6 5.7 5.8 -8% 15% 0.6

3Y5Y7Y 10.0 -1.4 18.9 -8.9 -56% 25% -0.8 14.8 -4.8 -43% -8% -0.6

AE

DS

AR

MX

NIL

S

LT MODEL (10Y) ST MODEL (2Y)

PL

NH

UF

CZ

KZ

AR

Source: SG Cross Asset Research

IRS trade dashboard

For each currency, we give the best flattener/steepener, the best receiving fly and the best paying fly. The carry and roll-down calculations are given for steepening positions and paying flys positions.

Long term model is based on a probabilistic PCA, calibrated on historical data going back to January 1999. Z-score is

calculated as the difference between market and model value, divided by the standard deviation of the residuals. Correlation to level/slope is the correlation between the trade and the first two factors of the PCA, calculated since January 1999.

Short-term model is based on the same probabilistic PCA, calibrated on a two-year rolling data set.

Correlation to level/slope: this is the correlation between the trade and the relevant driving factor, calculated on the same

horizon than the one chosen for calibrating the model.

z-score: a high positive z-score indicates either attractive flatteners or attractive receiving flys. Vice-versa, a low negative z-score indicates either attractive steepeners or paying flys.



Economic Data PreviewEconomic Data PreviewEconomic Data PreviewEconomic Data Preview

Brazil July IP to test slowdown magnituBrazil July IP to test slowdown magnituBrazil July IP to test slowdown magnituBrazil July IP to test slowdown magnitudededede Brazil industrial production vs trend remains positiveBrazil industrial production vs trend remains positiveBrazil industrial production vs trend remains positiveBrazil industrial production vs trend remains positive

The Brazilian economy decelerated in Q2 but still grew above potential. Industrial output continued to grow above trend even with the impact of tax break expiries and the World Cup (Chart). Further, declines in industrial production in relation to its potential level generally lead to rises in inventory levels. But according to the FGV, stocks are falling, not rising. Industrial output is poised to pick up again in the coming months in response to demand expansion (though moderate), keeping the output gap in positive territory. July IP data will be the first test, and positive growth in vehicle production for that month already points in that direction.


-20%

-15%

-10%

-5%

0%

5%

10%

Jun-06 Jun-07 Jun-08 Jun-09 Jun-10

Source: IBGE, SG Cross Asset Research

Brazil COPOM set to put the tightening cycle on holdBrazil COPOM set to put the tightening cycle on holdBrazil COPOM set to put the tightening cycle on holdBrazil COPOM set to put the tightening cycle on hold Brazil inflation expectations show diverging trends (%)Brazil inflation expectations show diverging trends (%)Brazil inflation expectations show diverging trends (%)Brazil inflation expectations show diverging trends (%)

We expect Brazil’s Copom to remain on hold next week, keeping the Selic rate at 10.75%. Lower activity and inflation readings favour the central bank’s dovish stance. Copom’s balance of risks, expressed in July’s meeting, pointed to an increasingly dovish stance, and high frequency data (the Copom driver as of late) released since the last meeting supports the pause. However, we believe this pause may be temporary, as Copom could be pushed to resume the tightening cycle into 2011. Fundamentals remain strong, and we expect growth to pick up in H2 2010 driven by an economy working near full employment, favourable credit conditions and still loose fiscal policy. Notably, despite benign inflation readings, longer-term inflation expectations remain at the strongest levels since end-2008. This implies a loss of confidence in the effectiveness of BCB’s action this far.


3.75

4.00

4.25

4.50

4.75

5.00

5.25

5.50

5.75

Aug-09 Nov-09 Feb-10 May-10 Aug-10

2011 2010 12-month

Source: BCB, SG Cross Asset Research

Brazilian GDP slowed in Q2 but domestic demand Brazilian GDP slowed in Q2 but domestic demand Brazilian GDP slowed in Q2 but domestic demand Brazilian GDP slowed in Q2 but domestic demand continues to boost growthcontinues to boost growthcontinues to boost growthcontinues to boost growth

Brazilian domestic demand to keep output gap positiveBrazilian domestic demand to keep output gap positiveBrazilian domestic demand to keep output gap positiveBrazilian domestic demand to keep output gap positive

Brazil's GDP slowed down considerably in Q2 2010. Temporary factors, such as the end of the tax break for durable goods purchases and the drop in hours worked during the World Cup, contributed to a more sluggish growth. Retail sales were flat on the quarter while industrial output expanded only 1.4% qoq. We believe the economy slowed to 0.8%qoq sa from the frenzied 2.7% expansion posted in Q1. On an annual basis the economy likely expanded 8.1%. However, there are signs of a pick-up in activity in Q3. Vehicle output and sales resumed growth in July. And electricity use also advanced. Overall, the strength in fundamentals – record low unemployment, high business and consumer confidence and rising credit market – should continue to drive growth in H2 2010.


-6.0%

-4.0%

-2.0%

0.0%

2.0%

4.0%

6.0%

Q404 Q405 Q406 Q407 Q408 Q409 Q410

Source: IBGE, SG Cross Asset Research



EM cross asset performance and SG sentiment indicatorEM cross asset performance and SG sentiment indicatorEM cross asset performance and SG sentiment indicatorEM cross asset performance and SG sentiment indicator

SG Sentiment indicator*SG Sentiment indicator*SG Sentiment indicator*SG Sentiment indicator* EM FX performance (long EM FX 180d return %)EM FX performance (long EM FX 180d return %)EM FX performance (long EM FX 180d return %)EM FX performance (long EM FX 180d return %)

0

0.2

0.4

0.6

0.8

1

Jul-09 Aug-09 Oct-09 Dec-09 Jan-10 Mar-10 May-10 Jun-10 Aug-10

SG

Sentim

ent

Indic

ato

r

Risk seeking

Risk averse

-3.00

-2.00

-1.00

0.00

1.00

2.00

3.00

4.00

5.00

6.00

PLN

KR

W

ILS

HU

F

TR

Y

MX

N

BR

L

RU

B

ZA

R

CN

Y

RO

N

CZ

K

Source: SG Cross Asset Research, Bloomberg. *see FX QuantSight Source: SG Cross Asset Research, Bloomberg

EM rates performance (2Y IRS bp change YTD)EM rates performance (2Y IRS bp change YTD)EM rates performance (2Y IRS bp change YTD)EM rates performance (2Y IRS bp change YTD) EM Equities performance (% change YTD)EM Equities performance (% change YTD)EM Equities performance (% change YTD)EM Equities performance (% change YTD)

-500 -400 -300 -200 -100 0 100

RON*

RUB*

HUF

KRW

ZAR

PLN

CZK

TRY*

MXN

ILS

CNY

BRL^

-30

-20

-10

0

10

20

30

40 H

UF

CN

Y

KZ

T

BR

L

ILS

RU

B

US

D

MX

N

ZA

R

PLN

KR

W

CZ

K

RO

N

TR

Y

UA

H

EM equities Chg (%) since 04 Jan 10

MSCI EM

Source: SG Cross Asset Research, Bloomberg, ^Jan 11 DI * XCCY Source: SG Cross Asset Research, Bloomberg

EM 3M FX impEM 3M FX impEM 3M FX impEM 3M FX implied volatility (% change YTD)lied volatility (% change YTD)lied volatility (% change YTD)lied volatility (% change YTD) EM CDS performance (% change YTD)EM CDS performance (% change YTD)EM CDS performance (% change YTD)EM CDS performance (% change YTD)

0

2

4

6

8

10

12

14

16

-40

-30

-20

-10

0

10

RU

B

CZ

K

RO

N

ZA

R

ILS

BR

L

MX

N

PLN

TR

Y

HU

F

EU

R

EMFX 3m implied v ol Chg (%) since 04 Jan 10 (LHS) Last price (RHS)

0

100

200

300

400

500

600

-60

-40

-20

0

20

40

60

UA

H

ILS

CZ

K

TR

Y

MX

N

RU

B

KZ

T

BR

L

ZA

R

PLN

CN

Y

RO

N

KR

W

HU

F

CDS Chg (%) since 04 Jan 10 (LHS) Last price (RHS)

Source: SG Cross Asset Research, Bloomberg Source: SG Cross Asset Research, Bloomberg



EM FX forecastsEM FX forecastsEM FX forecastsEM FX forecasts

Sep 10Sep 10Sep 10Sep 10 Dec 10Dec 10Dec 10Dec 10 Mar 11Mar 11Mar 11Mar 11 Jun 11Jun 11Jun 11Jun 11

EUR/PLNEUR/PLNEUR/PLNEUR/PLN 3.90 3.80 3.80 3.70

EUR/HUFEUR/HUFEUR/HUFEUR/HUF 290 280 270 260

EUR/CZKEUR/CZKEUR/CZKEUR/CZK 25.00 24.80 24.80 24.50

EUR/RONEUR/RONEUR/RONEUR/RON 4.20 4.15 4.00 4.00

EUR/RUBEUR/RUBEUR/RUBEUR/RUB 37.40 36.80 35.60 33.80

EUR/TRYEUR/TRYEUR/TRYEUR/TRY 1.90 1.85 1.80 1.80

USD/RUBUSD/RUBUSD/RUBUSD/RUB 31.20 30.80 30.80 30.60

USD/TRYUSD/TRYUSD/TRYUSD/TRY 1.50 1.50 1.45 1.40

USD/ZARUSD/ZARUSD/ZARUSD/ZAR 7.80 7.80 8.00 8.20

USD/ILSUSD/ILSUSD/ILSUSD/ILS 3.75 3.70 3.60 3.50

USD/EGPUSD/EGPUSD/EGPUSD/EGP 5.60 5.50 5.40 5.40

USD/BRLUSD/BRLUSD/BRLUSD/BRL 1.85 1.80 1.75 1.80

USD/MXNUSD/MXNUSD/MXNUSD/MXN 12.20 12.00 11.75 11.50

USD/CLPUSD/CLPUSD/CLPUSD/CLP 515 500 500 510

USD/ARSUSD/ARSUSD/ARSUSD/ARS 4.00 4.00 4.05 4.05

USD/COPUSD/COPUSD/COPUSD/COP 1950 1900 1950 1900

USD/CN YUSD/CN YUSD/CN YUSD/CN Y 6.75 6.55 6.35 6.15

USD/HKDUSD/HKDUSD/HKDUSD/HKD 7.78 7.78 7.78 7.78

USD/IN RUSD/IN RUSD/IN RUSD/IN R 46.00 45.50 45.00 44.50

USD/IDRUSD/IDRUSD/IDRUSD/IDR 9100 9000 9000 9000

USD/MYRUSD/MYRUSD/MYRUSD/MYR 3.28 3.25 3.23 3.21

USD/PHPUSD/PHPUSD/PHPUSD/PHP 44.00 43.00 42.00 41.00

USD/SGDUSD/SGDUSD/SGDUSD/SGD 1.39 1.38 1.37 1.39

USD/KRWUSD/KRWUSD/KRWUSD/KRW 1200 1150 1100 1050

USD/TWDUSD/TWDUSD/TWDUSD/TWD 31.50 31.00 31.00 30.50

USD/THBUSD/THBUSD/THBUSD/THB 34.00 33.00 32.00 32.00

EMU MonitorEMU MonitorEMU MonitorEMU Monitor

HICPHICPHICPHICP

Inflation*Inflation*Inflation*Inflation*

Long-term Long-term Long-term Long-term

GB yield*GB yield*GB yield*GB yield*

General General General General

Government Government Government Government

Balance,Balance,Balance,Balance,

last Q4 avg in % of last Q4 avg in % of last Q4 avg in % of last Q4 avg in % of

GDPGDPGDPGDP

General General General General

Government Government Government Government

Debt in % of Debt in % of Debt in % of Debt in % of

GDPGDPGDPGDP

ERM II ERM II ERM II ERM II

entryentryentryentry

LowerLowerLowerLower

RateRateRateRate

UpperUpperUpperUpper

RateRateRateRate

Maximum Maximum Maximum Maximum

upward upward upward upward

deviation**deviation**deviation**deviation**

Maximum Maximum Maximum Maximum

downward downward downward downward

deviation**deviation**deviation**deviation**

periodperiodperiodperiod 06.201006.201006.201006.2010 06.201006.201006.201006.2010 12.200912.200912.200912.2009 12.200912.200912.200912.2009

Reference ValueReference ValueReference ValueReference Value 1.81.81.81.8 6.06.06.06.0 -3.0-3.0-3.0-3.0 60606060

Czech Republic 0.3 4.4 -5.9 35 No

Hungary 5.2 7.6 -4.0 78 No

Poland 3.5 6.0 -6.9 51 No

Romania 3.5 8.8 -8.3 24 No

Bulgaria 1.6 6.7 -3.6 15 No

Estonia 0.0 NA -1.8 7 Jun.04 13.300 15.647 17.994 0.0% 0.0%

Latvia -1.6 12.3 -8.9 36 May.05 0.597 0.703 0.808 1.0% -0.7%

Lithuania 0.9 9.8 -8.9 30 Jun.04 2.935 3.453 3.971 0.0% 0.0%

* 12-month average rate

CentralCentralCentralCentral

RateRateRateRate

Note: Red cell means not fulfilling the criteria

** Maximum percentage deviations from ERM II central rate over last two years, based on a ten-day moving average of daily data at business frequency. An upward/downward deviation

implies that the currency is on the weak/strong side of the band.



Interest rates forecastsInterest rates forecastsInterest rates forecastsInterest rates forecasts

Key centra l bank ratesKey centra l bank ratesKey centra l bank ratesKey centra l bank rates

Sep 10S ep 10S ep 10S ep 10 Dec 10Dec 10Dec 10Dec 10 Mar 11Mar 11Mar 11Mar 11 Jun 11Jun 11Jun 11Jun 11

PolandPolandPolandPoland 3.50 4.00 4.25 4.25

HungaryHungaryHungaryHungary 5.25 5.25 5.25 5.50

Czech Rep.Czech Rep.Czech Rep.Czech Rep. 0.75 0.75 1.00 1.00

RomaniaRomaniaRomaniaRomania 6.25 5.75 5.75 5.75

Russ iaRuss iaRuss iaRuss ia 7.75 7.75 8.00 8.50

TurkeyTurkeyTurkeyTurkey 7.00 7.00 7.50 8.00

South AfricaSouth AfricaSouth AfricaSouth Africa 6.50 6.50 6.50 7.00

Is raelI s raelI s raelI s rael 1.50 2.00 2.75 3.25

EgyptEgyptEgyptEgypt 8.25 8.50 9.00 9.50

BrazilBrazilBrazilBrazil 11.50 11.50 12.00 12.25

M ex icoMex icoMex icoMex ico 4.50 4.50 4.50 6.00

Chi leChi leChi leChi le 1.50 3.75 4.50 5.75

ColombiaColombiaColombiaColombia 3.00 4.25 5.75 5.75

ChinaChinaChinaChina 5.31 5.31 5.31 5.58

Indones iaIndones iaIndones iaIndones ia 6.50 6.75 7.00 7.25

M alays iaM alays iaM alays iaM alays ia 2.25 2.50 2.75 3.00

Phil ippinesPhil ippinesPhil ippinesPhil ippines 4.00 4.50 4.50 5.00

South KoreaSouth KoreaSouth KoreaSouth Korea 2.25 2.50 3.00 3.50

TaiwanTaiwanTaiwanTaiwan 1.50 1.75 2.00 2.25

IndiaIndiaIndiaIndia 5.50 6.00 6.50 6.75

Thai landThai landThai landThai land 1.75 2.00 2.25 2.50

Macro forecastsMacro forecastsMacro forecastsMacro forecasts

2008200820082008 2009200920092009 2010201020102010 2011201120112011 2008200820082008 2009200920092009 2010201020102010 2011201120112011

PolandPolandPolandPoland 5.0 1.8 2.5 3.5 4.2 3.5 2.8 3.0

Czech RepublicCzech RepublicCzech RepublicCzech Republic 2.3 -4.0 1.9 1.3 6.3 1.0 1.5 2.4

HungaryHungaryHungaryHungary 0.6 -6.7 0.0 3.4 6.1 4.2 3.9 1.9

RomaniaRomaniaRomaniaRomania 7.3 -7.1 1.0 3.0 7.9 5.6 4.3 2.6

RussiaRussiaRussiaRussia 5.6 -7.9 5.5 2.5 14.1 11.7 6.5 8.5

BrazilBrazilBrazilBrazil 5.1 -0.2 6.6 4.6 5.9 4.3 5.3 5.1

MexicoMexicoMexicoMexico 1.5 -6.5 4.2 3.2 5.7 4.5 4.8 4.5

ChileChileChileChile 3.2 -1.7 3.1 6.3 8.7 1.6 1.7 3.4

GDPGDPGDPGDP Infla tion (yea r ave rage )Infla tion (yea r ave rage )Infla tion (yea r ave rage )Infla tion (yea r ave rage )

2008200820082008 2009200920092009 2010201020102010 2011201120112011 2008200820082008 2009200920092009 2010201020102010 2011201120112011

PolandPolandPolandPoland -5.0 -1.6 -2.5 -2.5 -3.6 7.2 -7.0 -5.5

Czech RepublicCzech RepublicCzech RepublicCzech Republic -0.6 -1.00 -1.00 -1.60 -2.7 -5.9 -5.5 -4.8

HungaryHungaryHungaryHungary -7.2 0.4 -0.5 -1.4 -3.8 -3.7 -4.3 -4.3

RomaniaRomaniaRomaniaRomania -11.2 -4.4 -5.7 -5.6 -4.8 -7.4 -5.9 -4.3

RussiaRussiaRussiaRussia 6.1 3.7 2.9 1.0 4.1 -6.5 -3.5 -2.8

BrazilBrazilBrazilBrazil -1.7 -1.5 -2.7 -3.8 -1.6 -3.3 -2.5 -2.3

MexicoMexicoMexicoMexico -1.4 -0.6 -0.6 0.0 -0.1 -2.3 -2.7 -2.4

ChileChileChileChile -2.0 2.2 1.0 -1.5 5.3 -4.5 -3.8 -1.6

Fisca l ba lance (% of GDP)Fisca l ba lance (% of GDP)Fisca l ba lance (% of GDP)Fisca l ba lance (% of GDP)Curren t account ba lance (% of GDP)Curren t account ba lance (% of GDP)Curren t account ba lance (% of GDP)Curren t account ba lance (% of GDP)


CROSS ASSET RESEARCHCROSS ASSET RESEARCHCROSS ASSET RESEARCHCROSS ASSET RESEARCH –––– FIXED INCOME & FOREXFIXED INCOME & FOREXFIXED INCOME & FOREXFIXED INCOME & FOREX GROUPSGROUPSGROUPSGROUPS Global Head of ResearchGlobal Head of ResearchGlobal Head of ResearchGlobal Head of Research Head of Macro StrategyHead of Macro StrategyHead of Macro StrategyHead of Macro Strategy

Patrick LeglandPatrick LeglandPatrick LeglandPatrick Legland

Benoît HubaudBenoît HubaudBenoît HubaudBenoît Hubaud (33) 1 42 13 97 79 (44) 20 7676 7168 [email protected] [email protected]

Head of Fixed IncomeHead of Fixed IncomeHead of Fixed IncomeHead of Fixed Income StrategyStrategyStrategyStrategy

Vincent ChaigneauVincent ChaigneauVincent ChaigneauVincent Chaigneau (44) 20 7676 7707 [email protected]

Ciaran O'HaganCiaran O'HaganCiaran O'HaganCiaran O'Hagan

Adam KurpielAdam KurpielAdam KurpielAdam Kurpiel

Aro RazafindrakolaAro RazafindrakolaAro RazafindrakolaAro Razafindrakola

Jose SarafaJose SarafaJose SarafaJose Sarafanananana (33) 1 42 13 58 60 (33) 1 42 13 63 42 (33) 1 42 13 64 93 (33) 1 42 13 56 59 [email protected] [email protected] [email protected] [email protected]

Mark CapletonMark CapletonMark CapletonMark Capleton

Patrick GouraudPatrick GouraudPatrick GouraudPatrick Gouraud

David MendDavid MendDavid MendDavid Mendezezezez----VivesVivesVivesVives

Christian Carrillo (AsiaChristian Carrillo (AsiaChristian Carrillo (AsiaChristian Carrillo (Asia----Pacific)Pacific)Pacific)Pacific) (44) 20 7676 7956 (44) 20 7676 7850 (33) 1 42 13 31 03 (81) 3 5549 5626 [email protected] [email protected] [email protected] [email protected]

Fidelio Tata (New York)Fidelio Tata (New York)Fidelio Tata (New York)Fidelio Tata (New York)

WeeWeeWeeWee----Khoon Chong (Hong Kong)Khoon Chong (Hong Kong)Khoon Chong (Hong Kong)Khoon Chong (Hong Kong) (1) 212 278 6213 (852) 2166 5462 [email protected] [email protected]

Head of Foreign ExcHead of Foreign ExcHead of Foreign ExcHead of Foreign Exchangehangehangehange

Kit JuckesKit JuckesKit JuckesKit Juckes (44) 20 7676 7972 [email protected]

David DeddoucheDavid DeddoucheDavid DeddoucheDavid Deddouche

Phyllis PapadavidPhyllis PapadavidPhyllis PapadavidPhyllis Papadavid

Peter FrankPeter FrankPeter FrankPeter Frank

Olivier KorberOlivier KorberOlivier KorberOlivier Korber (Derivatives)(Derivatives)(Derivatives)(Derivatives) (33) 1 42 13 56 22 (44) 20 7676 7999 (44) 20 7676 7458 (33) 1 42 13 32 88 [email protected] [email protected] [email protected] [email protected]

Head of Emerging Markets StrategyHead of Emerging Markets StrategyHead of Emerging Markets StrategyHead of Emerging Markets Strategy

Benoît AnneBenoît AnneBenoît AnneBenoît Anne (44) 20 7676 7622 [email protected]

Murat ToprakMurat ToprakMurat ToprakMurat Toprak

Gaëlle BlanchardGaëlle BlanchardGaëlle BlanchardGaëlle Blanchard

Esther LawEsther LawEsther LawEsther Law (44) 20 7676 7491 (44) 20 7676 7439 (44) 20 7676 7396 [email protected] [email protected] [email protected]

Technical analysisTechnical analysisTechnical analysisTechnical analysis

Hugues NakaHugues NakaHugues NakaHugues Naka

Fabien Manac’hFabien Manac’hFabien Manac’hFabien Manac’h (33) 1 42 13 51 10 (33) 1 42 13 88 35 [email protected] [email protected]

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