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Foreign exchange in emerging markets ^=åçåJÇÉäáîÉê~ÄäÉ=Ñçêï~êÇ=EkacF=áë=~=ëóåíÜÉíáÅ=Ñçêï~êÇ=Éå~ÄäáåÖ= ÜÉÇÖáåÖ= ~åÇ= éçëáíáçåJí~âáåÖ= áå= ÅçìåíêáÉë=ëìÄàÉÅí=íç=ÅìêêÉåÅó=êÉÖìä~íáçåë=çê=ÜáÖÜ=éçäáíáÅ~ä=êáëâK=^ë=~=êÉëìäíI= áí= áë= éçëëáÄäÉ= íç= ÜÉÇÖÉ= ÉñéçëìêÉë= íç=^ëá~åI= i~íáå=^ãÉêáÅ~åI= ^ÑêáÅ~å= ~åÇ= b~ëíÉêå= bìêçéÉ~å= ÅìêêÉåÅáÉë=éêÉîáçìëäó=ÅçåëáÇÉêÉÇ=ÒìåÜÉÇÖÉ~ÄäÉÒK== Currency regulations and convertibility risk j~åó= ÉãÉêÖáåÖ=ã~êâÉíë= áãéçëÉ= êÉëíêáÅíáçåë= çå= ÑçêÉáÖå=ÉñÅÜ~åÖÉK= ^ë= ~= êÉëìäíI= äçÅ~ä= ÅìêêÉåÅó= Å~ååçí= ÄÉ= ÑêÉÉäó=ÄçìÖÜí=çê= ëçäÇ=ïáíÜçìí=çÑÑáÅá~ä=~ééêçî~äK=råÇÉê=åçêã~ä=ÅáêÅìãëí~åÅÉë= cu= íê~åë~Åíáçåë= ~êÉ= ~ääçïÉÇ= çå=éêÉëÉåí~íáçå= çÑ= êÉäÉî~åí= ÇçÅìãÉåí~íáçå= ëìÅÜ= ~ë= ~å=áãéçêí= áåîçáÅÉ= çê= ÄêçâÉê~ÖÉ= åçíÉK= få= ãçêÉ= ÇÉîÉäçéÉÇ=ã~êâÉíë=äçÅ~ä=Ñçêï~êÇë=~äëç=ÉñáëíK=oÉÖìä~íÉÇ=ã~êâÉíë=~êÉ=ìëì~ääó= çåäó= ~ÅÅÉëëáÄäÉ= íç= äçÅ~ä= ÉåíáíáÉë= ~åÇ= äçÅ~ä= Ä~åâë=~äçåÉ=Å~å=çéÉê~íÉ= áå= íÜÉ=ã~êâÉíK=`çåëÉèìÉåíäóI= áå=çêÇÉê=íç= ~ÅÅÉëë= ëìÅÜ= ~=ã~êâÉí= ~= äçÅ~ä= ëìÄëáÇá~êó= áë= åÉÅÉëë~êó=ïáíÜ= íê~åë~Åíáçåë= åçêã~ääó= çåäó= ÉñÉÅìíÉÇ= áå=Åçää~Äçê~íáçå= ïáíÜ= äçÅ~ä= Ä~åâëK= qÜáë= ~äëç= áãéäáÉë= íÜ~í=äçÅ~ä= ÅêÉÇáí= ~åÇ= éçäáíáÅ~ä= êáëâI= ëçãÉíáãÉë= ëìÄëí~åíá~äI= áë=ìå~îçáÇ~ÄäÉK==Avoid restrictions and mitigate risks _ó= ìëáåÖ= ~å= çÑÑëÜçêÉ= kac= áí= ÄÉÅçãÉë= éçëëáÄäÉI= áå= íÜÉ=Ñçêï~êÇ= äÉÖI= íç= ~îçáÇ= äçÅ~ä= êÉëíêáÅíáçåë= ~åÇ= äçÅ~ä= ÅêÉÇáí=êáëâK=^å=kac=áë=ëÉííäÉÇ=çÑÑëÜçêÉ=áå=Ü~êÇ=ÅìêêÉåÅóI=~åÇ=áë=íÜÉêÉÑçêÉ=çìíëáÇÉ=íÜÉ=àìêáëÇáÅíáçå=çÑ=äçÅ~ä=~ìíÜçêáíáÉë=~åÇ=íÜÉ= ~ÅÅçìåíë= çÑ= äçÅ~ä= Ä~åâëK= lå= áíë= ÉñéáêóI= ~å= kac= áë=ëÉííäÉÇ= Äó= Å~äÅìä~íáåÖ= íÜÉ= åÉí= î~äìÉ= ÄÉíïÉÉå= íÜÉ= ~ÖêÉÉÇ=ê~íÉ=~í=íÜÉ=çéÉåáåÖ=çÑ=íÜÉ=Åçåíê~Åí=~åÇ=~=ÑáñáåÖ=ê~íÉ=ëÉí=~í=áíë=ã~íìêáíóK=qÜÉ=ÑáñáåÖ=ê~íÉ=êÉÑäÉÅíë=íÜÉ=ã~êâÉí=î~äìÉ=~åÇ=áë= ëÉí= ÉáíÜÉê= Äó= íÜÉ= ÅÉåíê~ä= Ä~åâ= çê= Äó= íÜÉ= bjq^=EbãÉêÖáåÖ= j~êâÉíë= qê~ÇÉ= ^ëëçÅá~íáçåF= ìëáåÖ= ~= ã~êâÉí=ëìêîÉóK=qÜÉ=åÉí=î~äìÉ=áë=Å~äÅìä~íÉÇ=~åÇ=ÇáëÄìêëÉÇ=áå=Ü~êÇ=ÅìêêÉåÅóK= ^ë= íÜÉêÉ= áë= åç= äçÅ~ä= ÅìêêÉåÅó= áåîçäîÉÇI= íÜÉ=çéÉê~íáçå= Å~å= ÄÉ= ÉñÉÅìíÉÇ= çÑÑëÜçêÉK=^åçíÜÉê= ~Çî~åí~ÖÉ=çÑ=~å=kac= áë= íÜ~í= áí= äáãáíë= ÅçìåíÉêé~êíó=ÉñéçëìêÉ= íç= íÜÉ=åÉí=î~äìÉ=çÑ= íÜÉ=kac=ê~íÜÉê= íÜ~å= íÜÉ= Ñìää=éêáåÅáé~ä= ëìã=~ë= ~å= çêÇáå~êó= cuJÑçêï~êÇK= få= ~ÇÇáíáçå= íÜÉêÉ= áë= ~äëç= ~=åçåJÇÉäáîÉê~ÄäÉ=çéíáçå=ã~êâÉí=EkalF=Ä~ëÉÇ=çå=íÜÉ=ë~ãÉ=éêáåÅáéäÉë=~ë=kacëK===^å=kac=áë=~=åçåJÅ~ëÜ=áåëíêìãÉåíK=^ë=~=êÉëìäíI= áí=Å~ååçí=êÉéä~ÅÉ= çåëÜçêÉ= ëéçí= ÇÉ~äë= Ñçê= íÜçëÉ= êÉèìáêáåÖ= éÜóëáÅ~ä=Å~ëÜK=eçïÉîÉê=~å=kac=Å~å=ÅçãéäÉãÉåí=~åÇ=ÄÉ=ìëÉÇ=~ë=íÜÉ= Ñçêï~êÇ= äÉÖI= ÄÉáåÖ= ëÉííäÉÇ= íÜÉå= Äó= ~å= çåëÜçêÉ= ëéçí=ÇÉ~äK=

When are NDFs used? kacë=Å~å=ÄÉ=ìëÉÇ=Äó=ÄçíÜ=Åçãé~åáÉë=~åÇ=áåîÉëíçêë=Ñçê=~=ïáÇÉ=î~êáÉíó=çÑ=éìêéçëÉëK=cçê=Åçãé~åáÉëI=kacë=ã~ó=ÄÉ=ìëÉÇ= íç= ÜÉÇÖÉ= äçÅ~ä= íê~åë~Åíáçå= ÉñéçëìêÉëK= eÉêÉI= íÜÉ=É~ëáÉëí=ãÉíÜçÇ=áë=íç=ÉáíÜÉê=áåîçáÅÉ=çê=Ñáå~åÅÉ=áå=íÜÉ=kac=ÅìêêÉåÅóI=íÜìë=ãçîáåÖ=íÜÉ=ÉñéçëìêÉ=çÑÑëÜçêÉ=ïÜÉêÉ=áí= áë=ÅçîÉêÉÇ=Äó=kacëK=fí=áë=~äëç=ÉÑÑáÅáÉåí=íç=ÜÉÇÖÉ=íê~åëä~íáçå=ÉñéçëìêÉë=áåÅäìÇáåÖ=äçÅ~ä=ÉèìáíóK=cçê=áåîÉëíçêë=kacë=Å~å=ÄÉ= ìëÉÇ= íç= ÜÉÇÖÉ= Ñáå~åÅá~ä= áåîÉëíãÉåíë= ëìÅÜ= ~ë= Éèìáíó=éçêíÑçäáçë=çê=íç=í~âÉ=~å=cu=éçëáíáçåK= NDF pricing mêáÅáåÖ=çÑ= ~å=kac= áë=Ä~ëÉÇ=çå= íÜÉ= ë~ãÉ=éêáåÅáéäÉë= ~ë= ~=ÅçåîÉåíáçå~ä= cuJÑçêï~êÇI= áåîçäîáåÖ= íÜÉ= áåíÉêÉëí= ê~íÉ=ÇáÑÑÉêÉåíá~ä=ÄÉíïÉÉå=Ä~ëÉ=~åÇ=éêáÅÉ=ÅìêêÉåÅáÉëK=eçïÉîÉêI=~ë= íÜÉ= íê~åë~Åíáçå=í~âÉë=éä~ÅÉ=çÑÑëÜçêÉ=ïáíÜçìí=~ÅÅÉëë=íç=äçÅ~ä=ãçåÉó=ã~êâÉíë=kacë= ~êÉ= ÇêáîÉå=ãçêÉ= Äó= ëìééäó=~åÇ=ÇÉã~åÇ= íÜ~å=åçêã~ä= Ñçêï~êÇë= ~åÇ= íÜÉáê= î~äìÉ= Å~å=ÇáÑÑÉê=ä~êÖÉäó=Ñêçã=íÜÉáê=íÜÉçêÉíáÅ~ä=éêáÅÉK== Example: Hedging Korean equity ^= ÑçêÉáÖå= áåîÉëíçê= ÜçäÇáåÖ= ~= hçêÉ~å= Éèìáíó= éçêíÑçäáç=ïáëÜÉë= íç= ÜÉÇÖÉ= cu= êáëâK= qÜÉ= áåîÉëíçê= ëÉääë= hot= ~åÇ=Äìóë=rpa=ìëáåÖ=kacëK=qÜÉ=éçêíÑçäáç=Ü~ë= ~å= Éèìáî~äÉåí=hot=î~äìÉ=çÑ=rpa=NMãK==NFK=lå=pÉéíÉãÄÉê=NI=íÜÉ=ÑçêÉáÖå=áåîÉëíçê=Äìóë=rpa=NMã=îëK=hot=kac=NJãçåíÜ=~í=NPMM=ïáíÜ= ëéçí= ~í= NPMOK= qÜÉ= kac= Åçåíê~Åí= áë= ÑáñÉÇ= çå=pÉéíÉãÄÉê= OV= ~åÇ= î~äìÉ= Ç~íÉ= çå= lÅíçÄÉê= NK= OFK= lå=pÉéíÉãÄÉê=OVI=íÜÉ=rpaLhot=ê~íÉ=áë=ãçîÉÇI=ÄÉáåÖ=ÑáñÉÇ=~í=NPRMK=^ë=íÜÉ=Åçãé~åó=ÄçìÖÜí=rpa=~í=NPMM=áí=ã~âÉë=~=éêçÑáí= çÑ= hot= RMMIMMMIMMM= ERMGNMIMMMIMMMFK=eçïÉîÉêI= ~ë=íÜáë=áë=~å=çÑÑëÜçêÉ=kacI=íÜÉ=åÉí=~ãçìåí=áë=ëÉííäÉÇ=áå=rpaK=_~ëÉÇ= çå= ~= rpaLhot= ê~íÉ= çÑ= NPRMI= íÜÉ= áåîÉëíçê=ÅçåëÉèìÉåíäó= êÉÅÉáîÉë= rpa= PTMIPTM= ERMMIMMMIMMMLNPRMF=çå= íÜÉ= î~äìÉ= Ç~íÉ= lÅíçÄÉê= NI= ÅçãéÉåë~íáåÖ= Ñçê= íÜÉ= cu=äçëë=çå=íÜÉ=Éèìáíó=éçêíÑçäáçK= NDF-documentation and accounting qÜÉ= ÇçÅìãÉåí~íáçå= åÉÅÉëë~êó= íç= íê~ÇÉ= kacë= áë= ãçêÉ=ÉñíÉåëáîÉ= íÜ~å= Ñçê= åçêã~ä= Ñçêï~êÇëK= kçêã~ääó= ïÉ=êÉèìáêÉ=~å=fpa^=çê=~í= äÉ~ëí=~=ÖÉåÉê~ä=cuJ~ÖêÉÉãÉåíK=cçê=íÜÉ=éìêéçëÉë=çÑ= ~ÅÅçìåíáåÖI= íÜÉ=kac=Åçåíê~Åí= áë= íêÉ~íÉÇ=~ë=~=êÉÖìä~ê=cuJÑçêï~êÇK==

Further information cçê=ÑìêíÜÉê=áåÑçêã~íáçåI=éäÉ~ëÉ=Åçåí~Åí=óçìê=äçÅ~ä=pb_=ë~äÉë=êÉéêÉëÉåí~íáîÉ=çê=íÜÉ=bãÉêÖáåÖ=j~êâÉíë=Öêçìé=íÜêçìÖÜ=éÉííÉêKë~åÇÖêÉå]ëÉÄKëÉ=çê=HQS=U=RMS=OPN=NMK

NDF-Guide

SEB MERCHANT BANKING – EMERGING MARKETS July 2009

SEB MERCHANT BANKING – EMERGING MARKETS July, 2009

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