Emerging Markets Briefer - Danske Bank...from January 2013 (both the reduced and standard VAT rates...

www.danskebank.com/research

Investment Research — General Market Conditions

The ’currency war’ is a misnomer but good news for emerging

markets all the same

Since August-September last year, risk appetite has returned to the global financial

markets on the back of a stepping up of monetary easing from particularly the Federal

Reserve and the Bank of Japan. Despite the return of risk appetite, some commentators

and policy makers have voiced concerns about what has been called a ‘currency war’.

The concern is that particularly the weakening of the yen is going to trigger a rally in EM

currencies and that this will undermine the competitiveness of emerging market

economies such as Brazil.

We are, however, much less concerned about the ‘currency war’. We find it difficult to

view global monetary easing negatively in a situation where the output gap is still

negative in several of the largest economies in the world and where unemployment is

historically high.

It is true that currencies such as the Mexican peso are strengthening mostly due to

monetary easing in the US. That obviously is likely to have a short-term negative impact

on Mexican competitiveness, but more important for Mexican exporters is that US

monetary easing should spur US growth, which would undoubtedly boost Mexican

exports.

We believe the ‘Mexican story’ to be a global story, i.e. emerging market growth is being

helped by US and Japanese monetary easing rather than the opposite, but we think

emerging market currencies would benefit in general from easier global monetary

conditions.

Overall, we think that worries regarding a currency war are overblown and actually

regard such a ‘war’ as a positive stimulus to global growth.

15 February 2013

Important disclosures and certifications are contained from page 27 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

Taiwan ........................................................................ 16

South Korea ......................................................... 17

Thailand .................................................................... 18

Indonesia ................................................................. 19

India ............................................................................... 20

FX forecast ............................................................ 21

Forecasts vs forwards .............................. 24

Monetary policy calendar ...................... 25

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

and USD

Source: Reuters EcoWin Source: Reuters EcoWin

-4

-3

-2

-1

0

1

2

3

4

BR

LH

UF

CZ

KIN

RIL

SR

ON

RU

BK

ZT

TR

YP

HP

IDR

UA

HC

NY

PL

NM

XN

SG

DZ

AR

MY

RE

GP

TW

DK

RW

%

(Simple average relative to EUR and USD)

-2.5

-2.0

-1.5

-1.0

-0.5

0.0

0.5

1.0

BR

LH

UF

ILS

INR

CZ

KR

ON

RU

BK

ZT

TR

YP

HP

PL

NID

RU

AH

MX

NZ

AR

CN

YS

GD

MY

RK

RW

EG

PT

WD

%

(Annualised return divided by 1-year)

2 | 15 February 2013 www.danskebank.com/research

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Poland

Macro outlook

Growth in the Polish economy slowed gradually in 2012 – the most recent data from

Q3 showed 1.9% y/y growth, down from 2.3% y/y in Q2. The slowdown in growth

was particularly harsh in terms of domestic demand, as both investments and imports

contracted in Q3 on a y/y basis, while private consumption increased by a meagre

0.2% y/y. As the euro crisis seems to finally be under control, the external

environment is starting to look better and we expect this to have a positive effect on

the Polish economy. Growth in the Polish economy slowed gradually in 2012. The

slowdown in growth was particularly harsh in terms of domestic demand. We expect

economic activity to remain subdued this year but we expect GDP growth to pick up

speed in 2014 to average 2.9%.

That said, we believe that the Polish economy is relatively well protected from the

euro crisis and that the considerable monetary policy flexibility in Poland provides

medium-term protection from the negative impact of the euro crisis.

Monetary policy outlook

The Polish central bank (NBP) has finally initiated an easing cycle and has started to

cut interest rates and despite fairly cautious communication from key NBP policy

makers on the outlook for more monetary easing, we strongly believe that the relative

sharp slowdown in Polish growth warrants additional rate cuts in Poland – also taking

into account that we expect Polish inflation to ease further going forward. If anything,

the Polish central bank needs to do more and not less monetary easing, in our view.

The realities of the Polish economy therefore sooner or later will force the NBP to

continue the rate cutting cycle all through 2013 and we expect the key policy rate to

be cut to 3.00% by the end of the year.

FX outlook

Recently the Polish zloty has lost some ground against the euro. That mostly reflects a

stronger euro rather than a weaker zloty but nonetheless, there is no doubt that

increased worries about the outlook for Polish growth are weighing in the zloty –

despite NBP’s stance of not signalling too aggressive further rate cuts. The technical

picture has turned decisively more negative on the zloty recently, which is likely to

continue to weigh on the zloty in the near term. We therefore expect the zloty to

remain ‘soft’ in the coming three to six months but it should regain a little ground in

the medium term, six to 12 months.

PLN

Credit rating:

S&P: A- (stable)

Currency regime:

Free float (freely convertible)

Inflation target:

2.5% +/-1pp

Macro monitor (10 January)

FX forecast

Source: Reuters EcoWin, Danske Bank Markets

Inflation seems set to ease Growth is moderating

9 6 9 8 0 0 0 2 0 4 0 6 0 8 1 0 1 2

-1 0

-5

0

5

1 0

1 5

2 0

2 5

3 0

-1 0

-5

0

5

1 0

1 5

2 0

2 5

3 0% y / y % y / y

G D P - D e f la t o r

% y / y % y / y

S u p p ly In f la t io n

D e m a n d In f la t io n

0 7 0 8 0 9 1 0 1 1 1 2

1

2

3

4

5

6

7

8

1

2

3

4

5

6

7

8% y / y % y / y

G D P G r o w t h , P o la n d


Interest rate forecast


Macro forecast


Danske Forward

14-Feb 4.18

+3M 4.25 4.21

+6M 4.25 4.24

+12M 4.20 4.30

Danske Forward

14-Feb 3.12

+3M 3.13 3.15

+6M 3.08 3.17

+12M 3.13 3.21

EUR/PLN

USD/PLN

Policy rate

Next meeting

Next change - 25 bp Q2 2013

End-2013

National Bank of Poland (NBP)3.75

06 March 2013

3.00

2011 2012 2013 2014 2015

GDP (% y/y) 4.3 2.0 2.4 2.9 3.5

GDP deflator (% y/y) 3.0 2.7 2.1 2.2 2.3

Private consumption (% y/y) 2.6 0.6 1.4 2.7 3.3

Fixed investments (% y/y) 8.7 0.1 0.5 2.6 3.3

Unemployment (%) 12.5 12.9 13.6 14.1 14.2

Current account (% of GDP) -4.3 -3.9 -3.8 -4.1 -4.3

http://danskeresearch.danskebank.com/link/MacroMonitorPoland100113/$file/MacroMonitor_Poland_100113.pdf



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Czech Republic

Macro outlook

The outlook for the Czech economy is gloomy. It remained in recession throughout

2012, with average GDP growth contracting by 1.1%. Looking to the next three years,

we believe the economy will struggle to reach sustained economic growth. In the best-

case scenario economic growth in 2013 is flat (GDP growth around 0.0%) and in the

worst-case scenario the economy remains in recession. According to our estimates,

2014 GDP growth will remain below 2%, or more precisely around 1.5%. We expect

2015 GDP also to be below 2%, at around 1.7%.

The Czech labour market continues to deteriorate as the economy is in limbo.

Unemployment in January increased to 8.0%, up from 7.4% in December.

Although average inflation in 2012 was 3.3% y/y, so above the official inflation target

of 2.0%, it was driven primarily by the increase in the VAT rate (the reduced VAT

rate was increased from 10% to 14%). Even though a second VAT hike is effective

from January 2013 (both the reduced and standard VAT rates have increased by 1%,

to 15% and 21% respectively), in our view this will raise inflation somewhat less. We

expect average inflation of around 2% in 2013. Looking into 2014 and 2015, inflation

should average somewhat below 2%. Given that we expect domestic demand to

remain subdued, demand-pulled inflationary pressures are likely to be absent over the

next three years.


With the key policy rate at a technical zero of 0.05%, the Czech central bank (CNB)

has exhausted standard monetary policy tools (CNB cannot use interest rate cuts), so

some non-standard monetary policy tools will have to be used if further monetary

easing is needed. The CNB has said on many occasions that such a non-standard

monetary tool would be the FX channel. The CZK has lost over 5.5% against the euro

since mid-September last year on speculation that the CNB is ready to weaken the

CZK in order to ease monetary policy further. However, the situation has changed

since the latest monetary policy board meeting at the start of February when CNB

governor Miroslav Singer said that further monetary easing is less urgent given the

recent CZK weakening. Such strong wording was a clear signal to the markets that the

CNB is not as close to FX intervention as speculated and the has CZK rallied strongly

by around 1.8% since.

FX outlook

The Czech koruna rallied around 1.8% against the euro on the hawkish comment from

the CNB governor. On the back of the hawkish CNB, we scale back our expectations

of possible imminent FX intervention at this moment. This said, we expect the CNB

to step up its rhetoric again quite soon and start intervening verbally to prevent the

CZK from further strengthening. We maintain our bearish view on the CZK over our

forecast horizon but at the same time we do not think the CNB would be that

aggressive if it were to weaken the CZK though FX intervention.

CZK

Credit rating:

S&P: AA- (stable)

Currency regime:


Inflation target:

2% +/-1pp

FX forecasts




Danske Forward

14-Feb 25.35

+3M 26.00 25.35

+6M 26.20 25.34

+12M 26.00 25.31

Danske Forward

14-Feb 18.95

+3M 19.12 18.97

+6M 18.99 18.96

+12M 19.40 18.91

EUR/CZK

USD/CZK

Policy rate

Next meeting

Next change - Unchanged 2013

End-2013 0.05

Czech National Bank (CNB)0.05

28 Mar 2013


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Hungary

Macro outlook

There is not much to cheer about the performance of (and the outlook for) the

Hungarian economy. Since 2006 there has been basically no growth and there are no

clear signs of a recovery. Very weak domestic demand and lacklustre export growth

weigh on the economy. Furthermore, we are increasingly reaching the conclusion that

the key reason for Hungary’s lacklustre growth performance is a continued

deterioration in ‘supply-side conditions’. Continued political ‘noise’ is certainly not

helping. In addition, the demand side of the economy is worsening at the moment.

Hungarian GDP contracted by 1.6% in 2012. Looking into 2013 and 2014 we expect

GDP to be more or less flat this year and to grow by 1.1% in 2014.

Even though worries about a possible IMF deal for Hungary have subsided a bit (we

do not think Hungary needs an IMF deal right now), we remain concerned about the

overall level of ‘regime uncertainty’ in Hungary. The Hungarian government has over

the past couple of years showed an increasing lack of respect for the rule of law and

the conduct of economic policy has been highly erratic. This is certainly not

something that makes Hungary an attractive destination for foreign investment and

this is visible in the continued very weak investment performance.


The outlook for monetary policy has become even more uncertain recently. It is clear

that the doves on the Hungarian central bank’s (MNB) Monetary Council – who are

mostly government appointed – have taken over control of monetary policy.

Furthermore, comments from Hungarian government officials recently indicate that

the government would not mind seeing a weaker forint. Additionally, soon a new

MNB governor will be appointed and he is likely to be more dovish than outgoing

governor, Andras Simor. Therefore, all indications are that we will get additional rate

cuts despite the fact that inflation continues to run well above the MNB’s target.

FX outlook

The Hungarian forint has performed surprisingly poorly recently. That reflects

investor worries over who will be appointed new MNB governor, still lacklustre

economic performance in Hungary and furthermore, the general euro strengthening

trend has led to forint underperformance. That said, Hungary’s political and structural

problems are well known by market participants and should hence be more or less

fully priced in by the markets. Furthermore, Hungarian interest rates are still relatively

high – despite continued rate cuts. That makes carry trades in the forint attractive.

Finally, Hungarian external balances are fairly strong. That will all help stabilise the

forint in the medium term and we therefore expect that the forint will not weaken

much more against the euro on a 6-12 month horizon.

Inflation remains elevated This is a structural problem

9 6 9 8 0 0 0 2 0 4 0 6 0 8 1 0 1 2

-1 0

-5

0

5

1 0

1 5

2 0

2 5

3 0

-1 0

-5

0

5

1 0

1 5

2 0

2 5

3 0% y / y % y / y

S u p p ly In f la t io n

G D P - D e f la t o r

D e m a n d In f la t io n


0 2 0 3 0 4 0 5 0 6 0 7 0 8 0 9 1 0 1 1 1 2

-2 0

-1 5

-1 0

-5

0

5

1 0

1 5

2 0

2 5

-8

-6

-4

-2

0

2

4

6% y / y% y / y

< < G D P

HUF

Credit rating:

S&P: BB (stable)

Currency regime:


Inflation target:

3% (medium term)


FX forecast




Macro forecast


Danske Forward

14-Feb 291.4

+3M 295.0 294.8

+6M 295.0 297.5

+12M 290.0 301.5

Danske Forward

14-Feb 217.93

+3M 216.91 220.61

+6M 213.77 222.50

+12M 216.42 225.27

EUR/HUF

USD/HUF

Policy rate

Next meeting

Next change - 25 bp February 2013

End-2013 4.75

5.50

26 Feb 2013

Hungarian Central Bank (MNB)

2011 2012 2013 2014 2015

GDP (% y/y) 1.6 -1.6 0.2 1.1 2.2

GDP deflator (% y/y) 3.1 2.7 3.8 4.0 4.2

Private consumption (% y/y) 0.5 -2.0 -2.2 0.5 1.8

Fixed investments (% y/y) -3.6 -4.7 -1.8 0.6 1.8

Unemployment (%) 10.8 10.5 11.9 12.7 12.9

http://danskeresearch.danskebank.com/link/MacroMonitorHungary280113/$file/MacroMonitor_Hungary_280113.pdf



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Estonia

Macro outlook

The economy continued to grow in Q4 12 and GDP rose to 3.7% y/y, up from 3.5%

y/y in Q3 12. GDP growth in 2012 was 3.2% y/y on average. In Q4 the biggest driver

of economic growth was export-oriented manufacturing. Last year's trends were set

by good export performance. First of all, Estonia managed to increase the trade flows

to Russia, which, thanks to the high oil price, continued to grow at high rates.

Secondly, despite a significant deceleration in growth, Sweden and partly Finland

performed much better than the eurozone on average. In 2013 growth is expected to

accelerate, albeit marginally, to 3.3%-3.5% based on the more supportive outlook

from the euro area and Northern economies.

Inflation in January 2013 decelerated only marginally to 3.4% y/y from 3.5% y/y in

December 2012. As expected, inflation was mainly influenced by electricity price,

which was 23.6% more expensive.

The unemployment rate declined to 9.7% in Q3 12 down from 10.2% in the second

quarter. However, more than half the unemployed had been unemployed for one year

or more. Thus, the structural labour market problems have not been resolved and the

gap between actual qualifications and the skills required by the labour market persists.

FX and monetary policy outlook

S&P has upgraded its long-term foreign and local currency bond ratings for Estonia

by two notches to AA-, the fourth-highest investment grade. S&P stated that the

Estonian economy has been able to maintain high growth and stable public finances.

Risk factors

Growth depends on external demand and negative external shocks might adversely

affect the domestic economy trend.

GDP growth has accelerated Domestic demand continues to expand

0 3 0 4 0 5 0 6 0 7 0 8 0 9 1 0 1 1 1 2

-3 0

-2 0

-1 0

0

1 0

2 0

3 0

4 0

5 0

6 0

-3 0

-2 0

-1 0

0

1 0

2 0

3 0

4 0

5 0

6 0

G D P

% y / y% y / y

In d u s t r ia l p r o d u c t io n

E x p o r t

0 3 0 4 0 5 0 6 0 7 0 8 0 9 1 0 1 1 1 2

-5 0

-3 0

-1 0

1 0

3 0

5 0

-2 5

-1 5

-5

5

1 5

2 5% y / y % y / y

< < P r iv a t e c o n s u m p t io n

F ix e d in v e s t m e n t s > >


EEK

Credit rating:

S&P: AA- (stable)

Currency:

EUR since 1 January 2011

Macro monitor (27 September)

Macro forecasts


2011 2012 2013

GDP (% y/y) 8.3 3.0 3.3

Inflation (% y/y) 5.0 3.9 3.5

Unemployment (%) 11.4 9.9 9.3

Current Account (% of GDP) 2.1 -1.2 -1.5

http://danskeresearch.danskenet.net/link/MacroMonitorEstonia270912/$file/MacroMonitor_Estonia_270912.pdf


Em

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Latvia

Macro outlook

The Latvian economy continues to expand at a robust pace, with GDP in Q4 12

increasing by 5.1% y/y versus 5.2% y/y in Q2 12. Thus in 2012 overall, GDP grew by

about 5.5%. Growth was determined by both export and domestic demand factors.

In January 2013 consumer prices dropped to 0.6% y/y from 1.6% y/y in December

2012. The monthly inflation was substantially reduced, mainly by the drop in

regulated prices for natural gas and thermal energy tariffs. This action might be

explained by a strong willingness to keep consumer prices stable in order to fulfil the

Maastricht criteria.

Rapid growth effects are finally being reflected in labour market data. The

unemployment level improved significantly to 13.5% in Q3 12, down from 16.1% in

Q2 12. Taking into account the expected deceleration in growth, the speed of

improvement might decelerate as well. In addition, as in the other Baltic countries,

almost half the unemployed are long term and further progress depends on how

successfully unemployed people are able to integrate into the labour market.


On 9 November, Standard & Poor's raised the foreign and local currency long-term

sovereign credit ratings on Latvia by one notch to 'BBB'. The upgrade reflects the

expectation that Latvia's public debt will decline on the back of its strong economic

recovery and rapidly improving fiscal balances.

Latvia is seeking to adopt the euro from 1 January 2014 and become the 18th member

of the eurozone. Latvia is very close to meeting all the criteria needed to adopt the

euro. However, it will still need a positive decision from the European Commission.

Read more in our flash comment Latvia: getting ready to join the euro, 17 December

2012.

Risk factors

The main risk is associated with a possible deterioration in the external outlook.

Recovery remains robust Still good domestic demand outlook

0 1 0 3 0 4 0 5 0 6 0 7 0 8 0 9 1 0 1 1 1 2

-3 0

-2 5

-2 0

-1 5

-1 0

-5

0

5

1 0

1 5

2 0

2 5

-3 0

-2 5

-2 0

-1 5

-1 0

-5

0

5

1 0

1 5

2 0

2 5

% y / y % y / y


E x p o r t

G D P

0 3 0 4 0 5 0 6 0 7 0 8 0 9 1 0 1 1 1 2

-5 0

-4 0

-3 0

-2 0

-1 0

0

1 0

2 0

3 0

4 0

-4 0

-2 0

0

2 0

4 0

6 0% y / y % y / y




LVL

Credit rating:

S&P: BBB (positive)

Currency regime:

Quasi-currency board, ERM2

member (freely convertible)

Inflation target:

None, due to fixed exchange rate

Macro monitor (4 October)

FX forecasts


Macro forecasts


Danske Forward

14-Feb 0.70

+3M 0.70 -

+6M 0.70 -

+12M 0.70 -

Danske Forward

14-Feb 0.52

+3M 0.51 -

+6M 0.51 -

+12M 0.52 -

EUR/LVL

USD/LVL

2011 2012 2013

GDP (% y/y) 5.5 5.0 3.0

Inflation (% y/y) 4.4 2.2 1.2

Unemployment (%) 14.3 13.1 13.4

Current Account (% of GDP) -1.2 -2.4 -1.5

http://danskeresearch.danskebank.com/link/FlashCommentLatvia171212/$file/FlashComment_Latvia_171212.pdf

http://danskeresearch.danskenet.net/link/MacroMonitorLatvia041012/$file/MacroMonitor_Latvia_041012.pdf



Em

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Lithuania

Macro outlook

In Q4 12 Lithuanian GDP growth decelerated marginally to 4.0% y/y, down from

4.4% y/y in Q3 12; the full-year result was 3.6% on average. Although detailed

statistics are not published, we expect the biggest positive impact on growth came

from net exports and consumption. We expect to see almost the same growth level

this year, around 3.5%, and an acceleration to 4.3-4.5 % in 2014.

As we expected, Lithuanian inflation at the end of the year decelerated to 2.8%. The

annual average CPI inflation for 2012 was 3.1% and it was only 0.1pp lower than we

expected at the beginning of 2012. However, we expect prices to continue to increase

in 2013 due mainly to the increase in electricity tariffs and higher excise tariffs for

fuel and tobacco products. Based on our calculations, the latter factors would elevate

CPI inflation from 0.4pp to 0.5pp.

Based on the monthly data in Q4 12, the unemployment rate improved to 12.0%,

down from 12.3% in Q3 12. Further improvements in the labour market are likely to

depend on the development of export-oriented sectors.


Moody’s left Lithuania’s credit rating unchanged. The agency notes that despite rapid

economic growth the challenges of a high fiscal deficit and high unemployment

persist.

Risk factors

It is planned to introduce a progressive income taxation system. The good thing is that

in parallel we expect the social security tax ceiling to be revised. Thus, the effective

tax rate on labour would not rise significantly.

The Lithuanian central bank has limited Ukio Bankas’ activity. Deposits covered by

the deposits’ insurance scheme amounted to LTL2.5bn (EUR740m) or 2.3% of GDP.

It is our assessment that this will not have a significant adverse impact on the

economy.

Growth returns on good exports... ...and domestic outcome

0 3 0 4 0 5 0 6 0 7 0 8 0 9 1 0 1 1 1 2

-2 5

-2 0

-1 5

-1 0

-5

0

5

1 0

1 5

2 0

2 5

3 0

-2 5

-2 0

-1 5

-1 0

-5

0

5

1 0

1 5

2 0

2 5

3 0

% y

G D P

% y / y% y / y


E x p o r t

0 3 0 4 0 5 0 6 0 7 0 8 0 9 1 0 1 1 1 2

-5 0

-3 0

-1 0

1 0

3 0

5 0

-2 5

-1 5

-5

5

1 5

2 5% y / y % y / y




LTL

Credit rating:

S&P: BBB (stable)

Currency regime:

Currency board, ERM2 member

(freely convertible)

Inflation target:

None, due to fixed exchange rate

Macro monitor (20 September)

FX forecasts


Macro forecasts


Danske Forward

14-Feb 3.45

+3M 3.45 -

+6M 3.45 -

+12M 3.45 -

Danske Forward

14-Feb 2.58

+3M 2.54 -

+6M 2.50 -

+12M 2.57 -

EUR/LTL

USD/LTL

2011 2012 2013

GDP (% y/y) 5.9 3.3 3.5

Inflation (% y/y) 4.1 3.1 3.1

Unemployment (%) 13.9 12.2 11.6

Current Account (% of GDP) -1.7 -2.3 -3.2

http://danskeresearch.danskenet.net/link/MacroMonitorLithuania200912/$file/MacroMonitor_Lithuania_200912.pdf


Em

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Russia

Macro outlook

Russian economic growth continued to slow in Q4 12, bringing full-year 2012

growth to 3.4% year-on-year. Expansion slowed during the second half of the year

on rising inflation, poor agricultural output and slowing private consumption

growth. We expect 2013 GDP growth to remain close to the 2012 figure at 3.5%

y/y.

Consumer confidence fell in Q4 12 to its lowest level in 18 months, as consumers

expect wage growth to lose momentum and inflation to stay above Bank Rossii’s

target. For 2013, we expect the lower consumer confidence and slower consumer

loan growth to curb private consumption.

Industrial production growth eased to 1.4% in December. Manufacturing production

failed to present stronger figures, confirming the slowdown in economic growth. As

household demand in Russia is set to be clearly lower in 2013 than it was in 2012,

we believe domestic investments are the key driver for manufacturing production in

2013.


The RUB performed well in 2012, appreciating by more than 5% against the USD

and more than 2% against the EUR. The RUB was also the best-performing BRIC

currency. The Russian economy’s strong fundamentals and demand for higher

yields in the global QE environment have helped the Russian currency. We expect

the rouble to continue to be supported by improving risk sentiment and

strengthening capital inflows in early 2013. However, our view on the RUB for full-

year 2013 is quite neutral.

Russian consumer price growth was 6.6% in 2012 but accelerated to 7.1% y/y in

January, due to tariff increases. As January tariff increases were postponed until

July in 2012, the base effect is likely to keep inflation elevated until the summer this

year. However, as growth is slowing, we expect year-end inflation to be well below

6%.

Bank Rossii left its key rates unchanged on 12 February (refi rate at 8.25% as

expected). Based on the comments from the Central Bank, a rate cut in March-April

is now less likely. Even though the current inflation drivers cannot be effectively

tamed by high rates, the Russian central bank is trying to continue credible

monetary policy to keep inflation expectations under control. That is, a rate cut

would not look good in the eyes of investors, as inflation is clearly rising, in our

view.

Risk factors

Despite the Russian economy having good macro fundamentals and budget

expenditure being guaranteed by the high oil price, global slowdown and eurozone

problems could raise strong risk-off sentiment. Increasing oil output in the US may

threaten global oil prices already in 2013.

Accelerating inflation and low credit expansion in 2013 on tight monetary and

banking policy could constrain further private consumption and economic growth.

RUB

Credit rating:

S&P: BBB (stable)

Currency regime:

Managed peg versus dual currency

basket – 45% EUR and 55% USD

(freely convertible)

Inflation target:

5-6% in 2012 (December-on-

December basis)

FX forecasts



Source: Danske Bank Markets

Macro forecasts


Danske Forward

14-Feb 40.18

+3M 39.96 40.78

+6M 41.00 41.38

+12M 38.90 42.57

Danske Forward

14-Feb 30.12

+3M 29.38 30.52

+6M 29.71 30.96

+12M 29.03 31.81

EUR/RUB

USD/RUB

Policy rate

Next meeting

Next change -25 bp April/May 2013

End-2013 7.25

Bank of Russia (CBR)

01-11 Mar

8.25

2011 2012 2013 2014

GDP (% y/y) 4.3 3.4 3.4 3.1

Inflation (% y/y) 8.5 5.1 6.3 5.2

Unemployment (%) 6.1 5.3 5.1 5.4

Current Account (% of GDP) 4.6 4.7 3.7 2.8



Em

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g Marke

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Ukraine

Macro outlook

The Ukrainian economy grew only 0.2% y/y in 2012 and we expect it to continue to

struggle in 2013, as new growth drivers are difficult to find.

Ukrainian industrial production has been relying on domestic demand, which clearly

slowed in H2 12. However, Chinese growth is picking up, which might give a boost to

steel prices. Also, as the Ukrainian currency is likely to continue to devaluate, the

export sector could be a positive surprise for Ukraine this year.

Retail sales growth stayed high throughout 2012, easing only slightly to 13.7% y/y in

December. However, consumption growth tends to translate into higher imports,

especially when the currency is held artificially strong. Low consumer price inflation

continues to support private consumption. A possible UAH devaluation would push

prices up as imports become more expensive.

The IMF visit in early February did not bring any major news. Negotiations are likely

to continue for at least a few months, in our view.


Igor Sorkin (45) was approved as the new governor of the National Bank of Ukraine

(NBU) on 11 January 2013. We do not expect any significant changes in the NBU’s

policies.

The NBU continues to use intervention to support the UAH rate, rapidly spending

international reserves. The trade balance deficit is expanding as import growth is

accelerating. The UAH rate is also under pressure, as households’ demand for hard

currencies remains high.

The UAH has devalued slightly since the beginning of the year. There is fear of more

devaluation as fundamentals have not changed, neither has the gas deal with Russia

been achieved. We still expect a soft devaluation of the UAH in H1 13.

Risk factors

Ukrainian exports are dependent on global metals and grain prices. Currency risk is

high as UAH becomes more volatile through moves from both sides: markets and the

NBU.

Although the elections are over, political turbulence is still present together with

uncertainty about the IMF deal.

Real wage growth is robust Industrial production growth

0 5 0 6 0 7 0 8 0 9 1 0 1 1 1 2

-2 5

0

2 5

5 0

7 5

1 0 0

1 2 5

1 5 0

-3 0

-2 0

-1 0

0

1 0

2 0

3 0

4 0

% y / y % y / y

< < R e a l w a g e s

H o u s e h o ld c r e d it > >

< < R e t a il s a le s

1 0 1 1 1 2

-1 5

-1 0

-5

0

5

1 0

1 5

2 0

-1 5

-1 0

-5

0

5

1 0

1 5

2 0

% y / y % y / y

G D P > >

< < M in in g

M a n u f a c t u r in g > >

< < U t il it ie s

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

UAH

Credit rating:

S&P: B (negative)

Currency regime:

Managed peg versus USD

FX forecasts


Danske Forward

14-Feb 10.84

+3M 12.10 N/A

+6M 13.52 N/A

+12M 13.43 N/A

Danske Forward

14-Feb 8.13

+3M 8.90 N/A

+6M 9.80 N/A

+12M 10.02 N/A

USD/UAH

EUR/UAH


Em

ergin

g Marke

ts B

riefer


Kazakhstan

Macro outlook

Kazakh economic growth is cooling down as expected. Preliminary Q3 12 figures

show that the economy expanded by 5.2% y/y in the quarter versus 5.6% in Q2 12.

From January to November, the economy grew 5.0% y/y. We expect 2012 and 2013

GDP to expand 5.0%.

In January, industrial production grew 0.7% y/y, posting positive growth for the third

month in a row.

The main growth driver in Kazakhstan has been household demand, as retail sales

growth in 2012 reached 14.6% supported by low inflation. In addition to this, the

banking sector recovery allowed robust credit growth in 2012, which is likely to

continue to support private consumption in 2013.

The Kazakh economy enjoyed a low unemployment level in 2012. The country’s

fundamentals do not suggest a significant risk of an increase in 2013 unemployment.

This will again be supportive for private consumption.


The National Bank of Kazakhstan (NBK) cut its refi rate in early August by 50bp to

5.5%, hitting a new record low and inflation seems to be staying within the target

band. However, as credit growth is picking up, we see no need for the central bank to

ease its monetary policy further, for now.

In January 2013, USD/KZT touched the 151 level for the first time since mid-2009.

The real effective exchange rate has now appreciated 16% since the fall in 2009. The

current oil price offers enough room for manoeuvre as the oil fund may provide extra

financing for the economy through fiscal spending.

Risk factors

Kazakhstan remains dependent on its resource sector and oil exports, both of which

may suffer among the global uncertainties and increasing US oil output. Accelerating

inflation and weak global demand on commodities could cool down Kazakh

economic growth further.

GDP and inflation Credit growth is slowing down

0 4 0 5 0 6 0 7 0 8 0 9 1 0 1 1 1 2

-2 .5

0 .0

2 .5

5 .0

7 .5

1 0 .0

1 2 .5

1 5 .0

1 7 .5

2 0 .0

-2 .5

0 .0

2 .5

5 .0

7 .5

1 0 .0

1 2 .5

1 5 .0

1 7 .5

2 0 .0

% y / y % y / y

< < C P I

G D P > >

0 6 0 7 0 8 0 9 1 0 1 1 1 2

-1 0

0

1 0

2 0

3 0

4 0

5 0

6 0

7 0

8 0

9 0

1 0 0

1 1 0

1 2 0

-1 0

0

1 0

2 0

3 0

4 0

5 0

6 0

7 0

8 0

9 0

1 0 0

1 1 0

1 2 0

% y / y % y / y

< < R u s s ia

K a z a k h s t a n > >

< < U k r a in e


KZT

Credit rating:

S&P: BBB+ (stable)

Currency regime:

Corridor versus USD

Inflation target:

6-8% in 2012 (December-on-

December basis)

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



Em

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Turkey

Macro outlook

Turkish economic growth rebounded a bit in Q4 12. Consumer confidence and

industrial production did better in November but only consumer did well in

December, while inflation continued to slow to 6.2%.

Surprisingly, industrial production dropped 3.8% y/y in December 2012 versus 11.3%

growth a month earlier. Mining and manufacturing both declined on weaker domestic

demand. We expect that 2012 economic growth is posting over 3.0% y/y.

Yet, the start of 2013 has been soft: despite a sharp fall in consumer confidence,

industrial confidence has scored some points. Rising inflation is the main

disappointment, which may easily lead to tighter monetary stance before the summer.

The 2012 current account deficit shrank to USD49bn from USD77bn a year earlier as

exports expanded and imports declined on weak domestic demand. However, the

deficit will continue to remain a large problem for the economy.

Unemployment has been steady throughout September and October 2012 at 9.1%. It

has been moving upwards since summer 2012 but better economic conditions may

break the trend in 2013.


As we expected, the strong slowdown in economic growth and moderating inflation in

Q3 12 pushed Turkey’s central bank to ease its monetary grip in December 2012,

cutting its benchmark repo by 25bp to 5.50%. However, although supportive for GDP

growth, easing monetary policy is pushing prices up, which contradicts Turkey’s

central bank’s target. We expect the monetary authorities to stay on hold at the next

meeting.

FX outlook

In late January/early February 2013, the USD/TRY has been moving around its one-

month average, gaining on better-than-expected macro releases. It seems that the

same story persisted throughout 2012. We still expect the current account deficit to

remain wide and external risks to keep USD/TRY under pressure in 2013.

TRY

Credit rating:

S&P: BB (stable)

Currency regime:

Free-float (freely convertible)

Inflation target:

5.0% year-end 2012

5.0% year-end 2013

FX forecasts


Interest rate forecasts


Growth is slowing down further Current account deficit has started to

widen again

0 5 0 6 0 7 0 8 0 9 1 0 1 1 1 2

-1 5

-1 0

-5

0

5

1 0

1 5

-1 5

-1 0

-5

0

5

1 0

1 5% y / y

< < 4 q M A

% y / y% y / y % y / y

G D P , T u r k e y > >

0 7 0 8 0 9 1 0 1 1 1 2

-1 0

-8

-6

-4

-2

0

-7 5

-2 5

2 5

7 5

1 2 5

1 7 5T u r k is h C / A B a la n c e , U S D b illio n s > >

< < 3 M M o v in g A v g % ( F D I / C .A .)


Danske Forward

14-Feb 2.36

+3M 2.38 2.39

+6M 2.51 2.41

+12M 2.55 2.47

Danske Forward

14-Feb 1.77

+3M 1.75 1.79

+6M 1.82 1.81

+12M 1.90 1.85

EUR/TRY

USD/TRY

Policy rate

Next meeting


End-2013

C.B. of the Republic of Turkey (TCMB)5.50

19 Feb 2013

5.50


Em

ergin

g Marke

ts B

riefer


South Africa

The South African economy grew only seasonally adjusted and an annualised 1.2% in

Q3, down from a revised 3.4% q/q in Q2. The main drag on growth came from the

mining sector due to work stoppages on the back of strikes. After revising our

forecasts, we now estimate average GDP growth of 2.4% y/y in 2012, 2.3% y/y in

2013, 3.1% y/y in 2014 and 3.3% y/y in 2015.

Unemployment in Q4 12 moderated to 24.9%, despite expectations that

unemployment will increase further. We expect unemployment this year to fall

slightly to around 24.6%.

Inflation in December increased somewhat to 5.7% y/y, up from November’s 5.6% y/y.

We believe inflation in 2013 should be somewhat higher compared with 2012, with

inflation set to average just below the upper end of the inflation target range of 3-6%, at

around 5.8-5.9% y/y. Inflation this year will be influenced by new CPI weights and

rebasing, which should push it somewhat higher. Furthermore, we believe it is likely

that inflation will temporarily break the top end of the target, around spring/summer,

before falling back within the target later in the year.

The current account situation continues to deteriorate and we expect the current account

deficit to widen to -7.7% of GDP in 2013 and to narrow to -6.9% of GDP in 2014.


The Monetary Policy Committee (MPC) seems to find the current interest rate setting

appropriate. At its latest MPC meeting, the South African central bank (SARB) left

the key policy rate unchanged at 5.0% and the statement was overall fairly balanced.

While the MPC still views the downside risks to the domestic economy from the

global economy, persistent inflation risks remain on the upside, due mainly to wage

cost pressures and the exchange rate. Considering the continued risks to the ZAR

from domestic labour unrest, other upside risks to inflation and last but not least the

widening of the current account deficit, we believe the door for further monetary

easing has been closed. We therefore expect the SARB to stay on hold throughout

2013.

FX outlook

Even though the ZAR has experienced a relief following the strong sell-off seen at the

end of January, it still remains very vulnerable to any shift in risk appetite and to

domestic newsflow. Given the large external imbalances, unresolved structural

problems in the economy and the ZAR’s continued fundamental overvaluation, we

remain bearish on the rand over our forecast horizon.

Economic growth remains below its

potential ZAR remains volatile

0 5 0 6 0 7 0 8 0 9 1 0 1 1 1 2

-3

-2

-1

0

1

2

3

4

5

6

7

8

-3

-2

-1

0

1

2

3

4

5

6

7

8

% y / y% y / yG D P n s a , S o u t h A f r ic a

J a n

1 2

M a r M a y J u l S e p N o v J a n

1 3

7 .2 5

7 .5 0

7 .7 5

8 .0 0

8 .2 5

8 .5 0

8 .7 5

9 .0 0

9 .2 5

7 .2 5

7 .5 0

7 .7 5

8 .0 0

8 .2 5

8 .5 0

8 .7 5

9 .0 0

9 .2 5

U S D / Z A R

U S D / Z A R


ZAR

Credit rating:

S&P: BBB (negative)

Currency regime:

Free float (Freely convertible)

Inflation target:

3%-6%


FX forecasts




Macro forecast


Danske Forward

14-Feb 11.74

+3M 12.38 11.80

+6M 12.67 11.96

+12M 12.57 12.25

Danske Forward

14-Feb 8.74

+3M 9.10 8.83

+6M 9.18 8.94

+12M 9.38 9.16

EUR/ZAR

USD/ZAR

Policy rate

Next meeting


End-2013 5.00

South African Reserve Bank (SARB)5.00

20 Mar 2013

2012 2013 2014 2015

GDP (% y/y) 2.4 2.3 3.1 3.3

Private consumption (% y/y) 2.9 2.2 3.1 3.3

Inflation (% y/y) 5.7 5.8 4.8 4.2

Current account (% of GDP) -6.2 -6.6 -6.0 -5.2

http://danskeresearch.danskebank.com/link/MacroMonitorSouthAfrica100113/$file/MacroMonitor_SouthAfrica_100113.pdf



Em

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Brazil

Macro outlook

The expected recovery in the Brazilian economy has not really materialised yet and

Q4 GDP data are not expected to change this dramatically. Some optimism is seen in

the PMI, which came out strong in January, at 53.2, adding to the upward trend of the

past six months.

This has not quite fed through to industrial production growth (y/y) that once again

posted negative growth in December.

The Brazilian labour market still seems to be doing well, as unemployment continues

its decline and is at a historically low level.

While the aggressive rate cutting, as well as other measures taken, may not yet have

taken full effect, we have difficulties seeing a significant pickup in Q4 growth. Hence,

our expectation for 2012 is 0.9% y/y growth. In 2013 growth should pick up again

and we expect the economy to expand by 2.8% y/y – also a bit less than our previous

forecast.

External balances continue to be relatively weak and 2012 ended with a current

account deficit of 2.4% of GDP – a level that we believe could even weaken slightly

in 2013. Exports should, however, to some extent be helped by the still relatively

weak Brazilian real.


Prices rose 6.2% y/y in January, continuing the gradual upwards trend, and inflation is

now starting to look elevated, as it is approaching the upper band of the target range

(4.5% +/- 2 percentage points).

The Brazilian central bank (BCB) unanimously kept the key policy rate unchanged at

its January meeting and signalled that rates will be kept on hold for a while.

We expect this to be the case throughout 2013, as we believe the BCB will consider

the current rate to balance the desire for recovery with the need to keep inflation

under control. Despite the recent pickup in inflation, we still believe that it is below

levels where the BCB starts looking into rate hikes. Thus, 7.25% is our year-end

forecast for 2013 for the Selic rate.

FX outlook and risk factors

The Brazilian real has continued its appreciating trend and it looks like the

government is allowing the real to be stronger, as USD/BRL broke below 2.00 in the

end of January following the central bank’s rollover of all the traditional currency

swaps expiring on 1 February. This was also seen as a sign that BCB is using the

currency to curb the rising inflation.

Given the recent developments, we are starting to believe the rising inflation will

allow the real to trade at even (slightly) stronger levels, at least in the short to medium

term. Hence, we have a rather bullish USD/BRL forecast of 1.90 on the three to six

months’ horizon and 1.95 in 12 months.

BRL

Credit rating:

S&P: BBB (stable)

Currency regime:

Free float (non-convertible)

Inflation target:

4.5% +/- 2% points

FX forecasts


Interest rate forecasts


Macro forecast

Source: Danske Bank Markets, Reuters EcoWin

Danske Forward

14-Feb 2.61

+3M 2.58 2.64

+6M 2.62 2.68

+12M 2.61 2.76

Danske Forward

14-Feb 1.96

+3M 1.90 1.98

+6M 1.90 2.00

+12M 1.95 2.06

EUR/BRL

USD/BRL

Policy rate

Next meeting


End-2013

7.25

06 Mar 2013

7.25

Central Bank of Brazil (BCB)

2011 2012 2013 2014

GDP (% y/y) 2.7 0.9 2.8 3.3

GDP deflator (% y/y) 7.0 5.4 6.2 6.2


Fixed investments (% y/y) 4.7 -2.2 6.0 4.6

Unemployment (%) 5.2 5.4 5.4 5.4


Em

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Mexico

Macro outlook

The Mexican economy has started to show some signs of weakness and it will be

interesting to see where Q4 GDP (released on 18 February) has moved from the 3.3%

y/y growth in Q3. Although growth has slowed, it still looks like a relatively soft

landing and we expect the Mexican economy to have expanded by 3.7% y/y in 2012,

and forecast a growth of 3.3% y/y in 2013. Much of this will depend on the recovery

of the US economy, as the Mexican economy is heavily dependent on exports to the

US.

Recent industrial production numbers are of some concern though, as December

numbers plummeted as production decreased by 1.1% y/y, the weakest and first

negative number since 2009.

The PMI took a dip in January but is still solid at 55.0, down from 57.1. Consumer

confidence also lost a bit in January but still seems to be trending gradually upwards.

Despite these hiccups we are still overall quite positive on Mexico.


Mexican inflation continued to ease significantly in January, slowing to 3.25% y/y,

and is thus approaching the target of 3.0%, despite having been above the upper band

of 4.0% just two months earlier.

On 18 January, the Mexican central bank (Banxico) once again left its key policy rate

unchanged at 4.50%. This time though, Banxico removed its slightly hawkish bias

and replaced it with a slightly dovish one, opening up for the possibility of a rate cut if

inflation continues the current downward trend.

Although Banxico has changed its rhetoric, we maintain our main scenario that

Banxico will continue its wait-and-see approach and keep the key policy rate

unchanged at 4.50% for a while, probably all the way throughout 2013.

FX outlook

The Mexican peso has so far performed well in 2013 and we expect this to continue

on the three-month horizon towards a level of around 12.40 against the dollar,

although the recent easing bias from Banxico should perhaps mitigate the appreciative

pressure a bit.z

In the longer term we still believe the fundamental level of the peso is slightly weaker

than the current level but do not expect this to have much impact within our forecast

horizon.

Mexican growth has started to slow Inflation continues to ease

0 4 0 5 0 6 0 7 0 8 0 9 1 0 1 1 1 2

-1 0 .0

-7 .5

-5 .0

-2 .5

0 .0

2 .5

5 .0

7 .5

-1 0 .0

-7 .5

-5 .0

-2 .5

0 .0

2 .5

5 .0

7 .5

M e x ic o , G D P G r o w t h , P r o d u c t io n A p p r o a c h

Y / Y %

0 9 1 0 1 1 1 2

1 .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 r a t e . M e x ic o

In f la t io n , M e x ic o > >

In f la t io n t a r g e t b a n d

% y / y


MXN

Credit rating:

S&P: BBB (stable)

Currency regime:


Inflation target:

3.0% +/- 1% point

FX forecasts


Macro forecast

Source: Danske Bank Markets, Reuters EcoWin



Danske Forward

14-Feb 16.95

+3M 16.86 17.11

+6M 17.18 17.25

+12M 16.68 17.54

Danske Forward

14-Feb 12.69

+3M 12.40 12.80

+6M 12.45 12.91

+12M 12.45 13.11

EUR/MXN

USD/MXN

2011 2012 2013 2014

GDP (% y/y) 3.9 3.7 3.3 3.8

GDP deflator (% y/y) 6.0 4.6 4.7 4.8


Fixed investments (% y/y) 8.4 6.6 4.6 5.3

Unemployment (%) 4.9 4.8 4.9 4.9

Policy rate

Next meeting


End-2013 4.50

4.50

Bank of Mexico (Banxico)

08 Mar 2013



Em

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China

Macro outlook

Data continue to support our view that growth is now accelerating moderately,

supported primarily by stronger domestic demand but also a gradual recovery in

exports. January data so far suggest a strong start to 2013 but note that data in early

2013 are usually distorted by the seasonal impact from the Chinese Lunar New Year

public holiday. Growth could ease slightly in H2 13 as the positive impact from last

year’s fiscal easing starts to wane. For 2013 we maintain our above consensus

forecast of 8.6% GDP growth .

Inflation in January eased to 2.0% y/y and hence remains comfortably below the 3.5%

target the government has set for 2013. However, inflation will gradually increase

throughout 2013 and possibly exceed 3% y/y in late 2013. In the short term a bigger

concern for People’s Bank of China (PBoC) is signs of very strong credit growth and

accelerating house prices in early 2013.


With inflation substantially below the 3.5% inflation target for 2013 we still expect

PBoC to remain on hold in H1 13, before moving towards a tightening bias at some

stage in H2 13 as inflation nears 3% y/y. However, strong credit growth and

accelerating house prices could force PBoC to move towards a tightening bias sooner.

Any imminent tightening will most likely be in the form of regulatory tightening

targeting.

FX outlook

Since China widened the daily trading band against USD from +/-0.5% to +/-1.0% in

April last year, PBoC’s intervention in the FX market has been modest and changes in

the USD/CNY exchange rate movements appear to be increasingly driven by

commercial flows in the market. For that reason we should get used to more two-way

volatility in the USD/CNY exchange rate. As CNY is only slightly undervalued,

USD/CNY will be less of a one-sided bet in the future, although we expect it to

appreciate moderately. As China usually has a relatively small trade surplus in Q1, we

could see a slight depreciation of CNY in the short run.

Leading indicators suggest growth will

continue to accelerate More two-way volatility in USD/CNY


0 0 0 2 0 4 0 6 0 8 1 0 1 2

0

5

1 0

1 5

2 0

2 5

3 0

-1 0 .0

-7 .5

-5 .0

-2 .5

0 .0

2 .5

5 .0

7 .5

R e a l M 2 m o n e y s u p p ly > >

% y / y

< < In d u s t r ia l p r o d u c t io n

(D e v ia t io n fr o m tr e n d )

% y / y

J a n

1 1

J u l O c t J a n

1 2

A p r J u l O c t J a n

1 3

6 .2

6 .3

6 .4

6 .5

6 .6

6 .2

6 .3

6 .4

6 .5

6 .6U S D / C N Y e x c h a n g e r a t e

P B o C r e f e r e n c e

D a ily t r a d in g b a n d

S p o t

T r a d in g b a n d

w id e n e d

FX forecast


CNY

Credit rating:

S&P: AA- (stable)

Currency regime:

Crawling USD peg

Inflation target:

Less than 4% for 2012



Danske Forward

14-Feb 8.32

+3M 8.49 8.35

+6M 8.56 8.53

+12M 8.24 8.59

Danske Forward

14-Feb 6.23

+3M 6.24 6.25

+6M 6.20 6.38

+12M 6.15 6.42

EUR/CNY

USD/CNY

Policy rate

Next meeting


End-2013 6.00

6.00

People's Bank of China (PBOC)

Not announced


Em

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riefer


Taiwan

Macro outlook

The export-dependent Taiwanese economy has slowed on the back of weaker global

growth, although resilient domestic demand has cushioned the downturn. The

Taiwanese economy has started recovering moderately and GDP growth in Q3

accelerated to 1.0% y/y after contracting 0.2% y/y. GDP growth is now expected to

expand 0.8% in 2012 – down from 2.4% in 2011. Next year, we expect GDP to

expand by about 2.6% but a recovery will be dependent on stronger global growth.

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 Co-operation Framework Agreement (ECFA) that cut tariffs for Taiwan’s

exports to China substantially from 2011. The re-election of incumbent president Ma

Ying-jeou in January has secured that this policy will be continued.

Inflation has edged higher in recent months to 2.1% y/y in October from 1.1% y/y in

June, partly due to higher food prices in the wake of the impact from a typhoon in

July and August.


Taiwan’s central bank’s leading interest rate is currently just 1.875% and remains low

from a historical perspective and with real interest rates negative monetary policy

remains accommodative. For that reason the central bank has not yet eased monetary

policy and we expect the next move to be up at some stage in H2 2013. Concern about

the property market and in the short run possible inflation will make the central bank

reluctant to cut. Hence, our call remains that the leading interest rates will stay

unchanged.

FX outlook

Fundamentally, TWD remains substantially undervalued. It is well supported by a

strong current account position (current account surplus 10% of GDP). Fed’s recent

QE3 is expected to strengthen TWD in the short run albeit the central bank might try

to stem the appreciation by FX intervention.

Incumbent president Ma Ying-jeou won the presidential election in January 2012 and

his Kuomintang party also regained a majority in parliament. The implication is that

the policy of closer economic ties with China will be continued in coming years. It

also suggests that the easing of political tensions between Taiwan and China in recent

years will continue after the leadership transition in China.

Growth has recovered moderately Inflation at the upper end of the

targeted range

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

0 5 0 6 0 7 0 8 0 9 1 0 1 1 1 2

-3 0

-2 0

-1 0

0

1 0

2 0

-6

-4

-2

0

2

4

6

In d u s t r ia l p r o d u c t io n > >

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

< < G D P

0 7 0 8 0 9 1 0 1 1 1 2

-8

-4

0

4

8

1 2

-8

-4

0

4

8

1 2

M e d iu m te r m

in f la t io n ta r g e t

%

C P I, % 3 M A R

%

C P I, %

y / y

TWD

Credit rating:

S&P: AA- (stable)

Currency regime:

Free float

Inflation target:

2% medium term

FX forecast




Danske Forward

14-Feb 39.54

+3M 40.39 39.53

+6M 40.30 39.53

+12M 38.86 39.48

Danske Forward

14-Feb 29.61

+3M 29.70 29.59

+6M 29.20 29.57

+12M 29.00 29.50

EUR/TWD

USD/TWD

Policy rate

Next meeting

Next change + 12.5 bpQ3 2013

End-2013 2.25

1.88

Central Bank of Taiwan (CBT)

21 Mar 2013



Em

ergin

g Marke

ts B

riefer

South Korea

Macro outlook

GDP growth is slowing on the back of weaker exports and to some degree weaker

domestic demand. In Q3 GDP expanded only 0.2% q/q after expanding just 0.3% q/q

in Q2. In June and September the government announced fiscal stimulus that will

amount to about 1% of GDP, which should support growth in the coming quarters.

The recent tension between China and Japan will be slightly positive for demand for

South Korean products in the short run. It still looks like a relatively mild slowdown

from a historical perspective. We expect GDP growth to ease from 3.6% in 2011 to

2.1% in 2012 before improving to 2.7% in 2013. South Korea benefits from a very

favourable competitive position not least against Japan and the current account

surplus is expected to stay above 2.5% of GDP.

Inflation has eased markedly in recent months and is now below Bank of Korea’s

(BoK) 3.0% +/-1pp target range. The recent decline in inflation is partly driven by

lower food prices due to favourable weather conditions and should prove temporary.


BoK has left its leading interest rate unchanged since it cut by 25bp to 2.75% in

October. With inflation below BoK’s target and house prices declining we cannot rule

out another interest rate cut early in 2013. However, as GDP growth is poised to

improve in H1 13, we expect BoK to be on hold.

FX outlook

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 South

Korean banks’ larger dependence on external foreign currency funding, albeit this

dependence has been reduced markedly. We have regarded KRW as one of the most

undervalued currencies in Asia but after recent appreciation not least against JPY we

have become more cautious. In the short term Fed’s recent QE3 and less risk aversion

in the market should strengthen KRW further albeit BoK could stem appreciation of

KRW by intervening in the FX market.

The transfer of power to Kim Jong Un after the death of the North Korean leader Kim

Jong-Il is a major uncertainty, where neither improved relations with North Korea nor

increased instability can be ruled out. Park Geun-Hye from the ruling Saenuri party

won the presidential election in December 2012. Saenuri already has a majority in the

parliament and the domestic political situation should continue to be stable.

Inflation is not a constraint on

monetary policy

GDP growth subdued but poised to

improve

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

0 4 0 5 0 6 0 7 0 8 0 9 1 0 1 1 1 2

0

2

4

6

8

1 0

0

2

4

6

8

1 0

T a r g e t fo r in f la t io n

%

y / y

C o n s u m e r p r ic e s

3 m / 3 m A R

%

0 4 0 5 0 6 0 7 0 8 0 9 1 0 1 1 1 2

-8

-6

-4

-2

0

2

4

6

-2 0

-1 5

-1 0

-5

0

5

1 0

1 5% 3 m / 3 m

G D P > >


% 3 m / 3 m

KRW

Credit rating:

S&P: A+ (stable)

Currency regime:

Free float

Inflation target:

3.0% +/- 1pp

FX forecast




Danske Forward

14-Feb 1449

+3M 1482 1454

+6M 1477 1461

+12M 1420 1473

Danske Forward

14-Feb 1085

+3M 1090 1088.30

+6M 1070 1093.00

+12M 1060 1100.80

EUR/KRW

USD/KRW

Policy rate

Next meeting

Next change +25 bp Q4 2013

End-2013

14 Mar 2013

Bank of Korea (BOK)2.75

3.25


Em

ergin

g Marke

ts B

riefer


Thailand

Macro outlook

Despite the slowdown in global growth, GDP growth has so far beaten expectations,

easing only slightly to 3.0% y/y in Q3 from 3.3% q/q AR in Q2. Growth should start

to improve moderately in H1 13 on the back of stronger global growth. We currently

estimate GDP growth to have expanded 5.5% in 2012 and expect GDP growth to ease

moderately to around 4.3% in 2013.

After a spike in inflation in the wake of the flooding last year, inflation remains

marginally above the ceiling in the 0.5%-3% range that the Thai central bank targets

for inflation. However, core inflation remains subdued. In addition, easy fiscal policy

and strong domestic demand have started to weaken Thailand’s external balances.

The Puea Thai Party booked a landslide victory in the election in 2012 and Yingluck

Shinawatra (the sister of former PM, Thaksin Shinawatra) has become prime minister

with a solid majority in the lower house. While the political situation has become

more stable, it remains a major risk. Political tensions could particularly be fuelled

again if Thaksin is granted amnesty and is allowed to return to Thailand.


The Bank of Thailand (BoT) finally cut its leading interest rate again in October by

25bp after it had been on hold since it cut its leading interest rate twice by 25bp late in

2011 in the wake of the flooding that hit the Bangkok area. With growth stabilising

and expected to improve in 2013 we now expect BoT to start tightening in H2 21013

FX outlook

With a populist fiscal policy, a possibly more dovish central bank and the external

balances deteriorating we think that the fundamentals for THB are starting to look

weaker and we expect it to underperform over the next year.

Headline inflation remains at the

upper end of BoT’s target range Tentative signs of stabilisation


0 3 0 4 0 5 0 6 0 7 0 8 0 9 1 0 1 1 1 2

-5 .0

-2 .5

0 .0

2 .5

5 .0

7 .5

1 0 .0

-5 .0

-2 .5

0 .0

2 .5

5 .0

7 .5

1 0 .0% y / y% y / y

H e a d lin e C P I

T a r g e t f o r c o r e C P I

C o r e C P I

0 4 0 5 0 6 0 7 0 8 0 9 1 0 1 1 1 2

-1 5

-1 0

-5

0

5

1 0

1 5

2 0

-4 0

-3 0

-2 0

-1 0

0

1 0

2 0

3 0

4 0%%


G D P > >% y / y % y / y

THB

Credit rating:

S&P: BBB+ (stable)

Currency regime:

Free float

Inflation target:

0.5%-3.0%

FX forecast




Danske Forward

14-Feb 39.78

+3M 40.80 39.98

+6M 40.71 40.16

+12M 40.74 40.49

Danske Forward

14-Feb 29.79

+3M 30.00 29.92

+6M 29.50 30.04

+12M 30.40 30.25

EUR/THB

USD/THB

Policy rate

Next meeting

Next change +25 bp Q3 2013

End-2013 3.25

Bank of Thailand (BOT)

20 Feb 2013

2.75



Em

ergin

g Marke

ts B

riefer

Indonesia

Macro outlook

Indonesia has strong longer fundamentals, not least compared with another major

Asian country, India. Public finances are healthy with the public sector deficit poised

to decline below 2% of GDP. inflation has declined markedly in recent years and

external balances also remain relatively healthy. Indonesia has also weathered the

global financial crisis on the back of resilient domestic demand. Fitch and Moody’s

have in the past year upgraded Indonesia’s debt to investment grade.

That said, there are tentative signs of overheating although inflation remains

contained with both headline and core inflation comfortable within the Bank of

Indonesia’s (BI) 3.5-5.5% target range. Credit growth has been very strong and the

current account has turned into a deficit. In addition, minimum wages have increased

by up to 40%, indicating possible inflationary pressure. With both presidential and

parliamentary elections in 2014, the fiscal policy is expected to stay accommodative

over the next year. In 2013 we expect GDP growth to accelerate to 6.8% from 6.3% in

2012.


BI has been among the most dovish central banks as it has eased monetary policy

relatively aggressively compared with other Asian central banks, although the leading

interest rate has been unchanged since March last year. While this can be justified to

some degree by real interest rates remaining positive, it also underscores BI’s pro-

growth bias. However, with tentative signs of overheating, there is no room for further

monetary easing, in our view, and we expect the next move to be an interest rate hike

at some stage in Q2 13.

BI’s relatively aggressive rate cut and the recent trade balance deficit have been

negative for IDR in the short term and it appears that BI does not mind a slightly

weaker IDR in the current environment. While IDR still has relatively strong

fundamentals, we believe they have started to deteriorate and hence we do believe

IDR will underperform other Asian currencies over the next year.

There has been political stability in Indonesia under the leadership of President Susilo

Bambang Yudhoyono, who was re-elected in 2009. That said, the economic and

political reform has lost some momentum over the past two years and political

uncertainty will increase ahead of the presidential and parliamentary elections in

2014.

Resilient on strong domestic demand Inflation remains within target range


0 7 0 8 0 9 1 0 1 1 1 2

2

3

4

5

6

7

8

2

3

4

5

6

7

8 % y / y % y / y

G D P

D o m e s t ic d e m a n d

F ix e d

in v e s t m e

n t s

0 9 1 0 1 1 1 2

2

3

4

5

6

7

8

9

1 0

2

3

4

5

6

7

8

9

1 0In f la t io n

In f la t io n ta r g e t fo r 2 0 1 2

% y / y

H e a d lin eH e a d l

C o r e

% y / y

IDR

Credit rating:

S&P: BB+ (positive)

Currency regime:

Free float

Inflation target:

3.5%-5.5% for 2013

FX forecast




Danske Forward

14-Feb 12895

+3M 12920 13028

+6M 13248 13178

+12M 13400 13467

Danske Forward

14-Feb 9657

+3M 9500 9750

+6M 9600 9857

+12M 10000 10062

USD/IDR

EUR/IDR

Policy rate

Next meeting

Next change + 25 bp Q2 2013

End-2013 6.50

Bank Indonesia (BI)5.75

07 Mar 2013


Em

ergin

g Marke

ts B

riefer


India

Macro outlook

Growth in India has slowed relatively sharply as the Indian economy has faced

increasingly stronger headwinds from weaker exports and particularly domestic

investment demand in the wake of the Reserve Bank of India’s (RBI) aggressive

monetary tightening. There remains considerable downside risk as India – unlike

China – has limited scope to ease fiscal and monetary policy due to a high budget

deficit and relatively resilient inflation. We expect GDP growth to decline to just

5.5% in 2012 and recover moderately to 6.4% in 2013.

Despite the relative sharp slowdown in growth, inflation is only declining slowly and

remains elevated above 6.5% y/y. Hence, inflation is only slowly getting closer to the

RBI’s comfort zone of inflation below 5%.


Reserve Bank of India (RBI) in January cut its leading repo-rate with 25bp to 7.75%

on the back of the recent decline in inflation. However, with inflation remaining

elevated we only expect RBI to cut interest rates only cautiously in the coming

months.

FX outlook

INR has depreciated close to 30% against USD since July 2011. It remains vulnerable

near term due to India’s current account deficit of around 4% of GDP, weaker FDI

and portfolio inflows into the Indian stock market. Frustration with the lack of

progress in economic reforms has added to this development, albeit the Indian

government has just announced an acceleration in economic reforms including

increased access for foreign direct investment to India and sales of equity stakes in

state-owned companies.

Although USD/INR remains vulnerable, it has probably overshot and we expect it to

strengthen in the short run supported by improved risk sentiment in the market and the

government’s recent liberalisation measures. However, in the long run it remains a

depreciating currency.

Hard landing in India INR has become a vulnerable currency

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

0 5 0 6 0 7 0 8 0 9 1 0 1 1 1 2

-8

-4

0

4

8

1 2

1 6

-8

-4

0

4

8

1 2

1 6

G D P

In v e s t m e n t

N e t e x p o r t

% y / y% y / y

C o n s u m p t io n

0 0 0 2 0 4 0 6 0 8 1 0 1 2

-8

-6

-4

-2

0

2

4

6

-8

-6

-4

-2

0

2

4

6

C u r r e n t a c c o u n t

% o f G D P B a s ic b a la n c e

F o r e ig n d ir e c t in v e s t m e n t

P o r t f o lio in v e s t m e n t

F o r e ig n d ir e c t in v e s t m e n t a b r o a d

INR

Credit rating:

S&P: BBB- (negative)

Currency regime:

Free float

Inflation target:

7% for fiscal 11/12

3% medium term

FX forecast




Danske Forward

14-Feb 72.08

+3M 73.44 73.49

+6M 74.52 74.74

+12M 75.04 76.99

Danske Forward

14-Feb 53.98

+3M 54.00 55.00

+6M 54.00 55.90

+12M 56.00 57.52

USD/INR

EUR/INR

Policy rate

Next meeting

Next change - 25 bp Q1 2013

End-2013 7.50

Reserve Bank of India (RBI)

19 Mar 2013

7.75



Em

ergin

g Marke

ts B

riefer

FX forecasts

Core - major


Wider CEE


CIS


Danske Forward Danske Forward Danske Forward Danske Forward Danske Forward

14-Feb 1.34 745.9 843.0 739.7

+3M 1.36 1.34 746.0 745.5 830.0 845.4 725.0 742.6

+6M 1.38 1.34 746.0 745.3 830.0 847.3 720.0 745.6

+12M 1.34 1.34 746.0 744.9 820.0 851.4 715.0 751.7

14-Feb 1.34 558.2 630.5 553.4

+3M 1.36 1.34 548.5 558.0 610.3 632.7 533.1 555.8

+6M 1.38 1.34 540.6 557.5 601.4 633.8 521.7 557.7

+12M 1.34 1.34 556.7 556.5 611.9 636.1 533.6 561.7

14-Feb 124.1 92.9 6.01 6.79 5.96

+3M 129.0 124.0 95.0 92.8 5.78 6.01 6.43 6.82 5.62 5.99

+6M 132.0 123.9 96.0 92.7 5.65 6.01 6.29 6.84 5.45 6.02

+12M 134.0 123.7 100.0 92.4 5.57 6.02 6.12 6.88 5.34 6.08

NOK

EUR

USD

JPY

EUR USD DKK SEK


14-Feb 4.18 3.12 178.6 201.8 177.1

+3M 4.25 4.21 3.13 3.15 175.5 177.0 195.3 200.7 170.6 176.3

+6M 4.25 4.24 3.08 3.17 175.5 175.6 195.3 199.6 169.4 175.7

+12M 4.20 4.30 3.13 3.21 177.6 173.1 195.2 197.9 170.2 174.7

14-Feb 291.4 217.9 2.56 2.89 2.54

+3M 295.0 294.8 216.9 220.6 2.53 2.53 2.81 2.87 2.46 2.52

+6M 295.0 297.5 213.8 222.5 2.53 2.51 2.81 2.85 2.44 2.51

+12M 290.0 301.5 216.4 225.3 2.57 2.47 2.83 2.82 2.47 2.49

14-Feb 25.35 18.95 29.43 33.26 29.18

+3M 26.00 25.35 19.12 18.97 28.69 29.41 31.92 33.34 27.88 29.29

+6M 26.20 25.34 18.99 18.96 28.47 29.40 31.68 33.43 27.48 29.42

+12M 26.00 25.31 19.40 18.91 28.69 29.43 31.54 33.64 27.50 29.70

14-Feb 4.38 3.28 170.3 192.5 168.9

+3M 4.36 4.44 3.21 3.32 171.1 168.0 190.4 190.5 166.3 167.3

+6M 4.37 4.49 3.17 3.36 170.7 166.1 189.9 188.8 164.8 166.2

+12M 4.39 4.58 3.28 3.42 169.9 162.6 186.8 185.8 162.9 164.1

HUF

CZK

RON

EUR USD DKK SEK NOK

PLN


14-Feb 40.18 30.12 18.56 20.98 18.41

+3M 39.96 40.78 29.38 30.52 18.67 18.28 20.77 20.73 18.14 18.21

+6M 41.00 41.38 29.71 30.96 18.20 18.01 20.24 20.47 17.56 18.02

+12M 38.90 42.57 29.03 31.81 19.18 17.50 21.08 20.00 18.38 17.66

14-Feb 10.84 8.13 68.8 77.8 68.3

+3M 12.10 N/A 8.90 N/A 61.6 N/A 68.6 N/A 59.9 N/A

+6M 13.52 N/A 9.80 N/A 55.2 N/A 61.4 N/A 53.2 N/A

+12M 13.43 N/A 10.02 N/A 55.6 N/A 61.1 N/A 53.3 N/A

DKK SEK

RUB

NOK

UAH

EUR USD


Em

ergin

g Marke

ts B

riefer


Baltics


MEA



14-Feb 3.45 2.58 216.1 244.2 214.3

+3M 3.45 - 2.54 - 216.2 - 240.6 - 210.1 -

+6M 3.45 - 2.50 - 216.2 - 240.6 - 208.7 -

+12M 3.45 - 2.57 - 216.2 - 237.7 - 207.2 -

14-Feb 0.70 0.52 1066.8 1205.6 1057.9

+3M 0.70 - 0.51 - 1065.7 - 1185.7 - 1035.7 -

+6M 0.70 - 0.51 - 1065.7 - 1185.7 - 1028.6 -

+12M 0.70 - 0.52 - 1065.7 - 1171.4 - 1021.4 -

SEK NOK

LTL

LVL

EUR USD DKK


14-Feb 2.36 1.77 316.2 357.3 313.6

+3M 2.38 2.39 1.75 1.79 313.4 312.6 348.7 354.4 304.6 311.3

+6M 2.51 2.41 1.82 1.81 297.2 308.8 330.7 351.0 286.9 308.9

+12M 2.55 2.47 1.90 1.85 292.5 301.1 321.6 344.2 280.4 303.9

14-Feb 11.74 8.74 63.6 71.8 63.0

+3M 12.38 11.80 9.10 8.83 60.3 63.2 67.1 71.6 58.6 62.9

+6M 12.67 11.96 9.18 8.94 58.9 62.3 65.5 70.9 56.8 62.4

+12M 12.57 12.25 9.38 9.16 59.4 60.8 65.2 69.5 56.9 61.3

14-Feb 4.92 3.68 151.6 171.3 150.3

+3M 4.91 4.93 3.61 3.69 151.9 151.3 169.1 171.5 147.7 150.7

+6M 5.01 4.95 3.63 3.70 148.9 150.7 165.7 171.3 143.7 150.8

+12M 4.92 4.98 3.67 3.72 151.7 149.7 166.7 171.1 145.4 151.1

ZAR

DKK NOK

ILS

USDEUR SEK

TRY



Em

ergin

g Marke

ts B

riefer

Latam


EM Asia



14-Feb 2.61 1.96 285.6 322.8 283.3

+3M 2.58 2.64 1.90 1.98 288.7 282.0 321.2 319.8 280.6 280.9

+6M 2.62 2.68 1.90 2.00 284.5 278.1 316.6 316.2 274.6 278.2

+12M 2.61 2.76 1.95 2.06 285.5 269.7 313.8 308.3 273.6 272.2

14-Feb 16.95 12.69 44.01 49.74 43.64

+3M 16.86 17.11 12.40 12.80 44.24 43.58 49.22 49.42 42.99 43.41

+6M 17.18 17.25 12.45 12.91 43.42 43.19 48.31 49.11 41.91 43.21

+12M 16.68 17.54 12.45 13.11 44.72 42.46 49.15 48.53 42.86 42.85

MXN

BRL

NOKEUR USD DKK SEK


14-Feb 8.32 6.23 89.6 101.3 88.9

+3M 8.49 8.35 6.24 6.25 87.9 89.2 97.8 101.2 85.4 88.9

+6M 8.56 8.53 6.20 6.38 87.2 87.4 97.0 99.3 84.2 87.4

+12M 8.24 8.59 6.15 6.42 90.5 86.7 99.5 99.1 86.8 87.5

14-Feb 1449 1085 0.51 0.58 0.51

+3M 1482 1454 1090 1088 0.50 0.51 0.56 0.58 0.49 0.51

+6M 1477 1461 1070 1093 0.51 0.51 0.56 0.58 0.49 0.51

+12M 1420 1473 1060 1101 0.53 0.51 0.58 0.58 0.50 0.51

14-Feb 39.8 29.8 18.8 21.2 18.6

+3M 40.8 40.0 30.0 29.9 18.3 18.6 20.3 21.1 17.8 18.6

+6M 40.7 40.2 29.5 30.0 18.3 18.6 20.4 21.1 17.7 18.6

+12M 40.7 40.5 30.4 30.3 18.3 18.4 20.1 21.0 17.6 18.6

14-Feb 1.65 1.23 452 511 448

+3M 1.69 1.65 1.24 1.23 442 452 492 512 430 450

+6M 1.67 1.65 1.21 1.23 447 451 497 513 431 452

+12M 1.61 1.65 1.20 1.23 464 451 510 515 445 455

14-Feb 10.36 7.75 72.0 81.4 71.4

+3M 10.55 10.36 7.76 7.75 70.7 72.0 78.6 81.6 68.7 71.7

+6M 10.71 10.36 7.76 7.75 69.7 72.0 77.5 81.8 67.2 72.0

+12M 10.41 10.36 7.77 7.74 71.6 71.9 78.8 82.2 68.7 72.5

14-Feb 4.12 3.09 180.8 204.4 179.3

+3M 4.22 4.15 3.10 3.11 176.9 179.6 196.9 203.6 172.0 178.8

+6M 4.21 4.18 3.05 3.12 177.2 178.4 197.2 202.8 171.1 178.5

+12M 4.02 4.22 3.00 3.15 185.6 176.4 204.0 201.7 177.9 178.1

14-Feb 54.2 40.6 13.76 15.55 13.64

+3M 55.08 54.22 40.50 40.58 13.54 13.75 15.07 15.59 13.16 13.70

+6M 55.20 54.16 40.00 40.51 13.51 13.76 15.04 15.65 13.04 13.77

+12M 54.61 54.19 40.75 40.49 13.66 13.75 15.02 15.71 13.09 13.87

14-Feb 12895 9657 0.058 0.065 0.057

+3M 12920 13028 9500 9750 0.058 0.057 0.064 0.065 0.056 0.057

+6M 13248 13178 9600 9857 0.056 0.057 0.063 0.064 0.054 0.057

+12M 13400 13467 10000 10062 0.056 0.055 0.061 0.063 0.053 0.056

14-Feb 72.08 53.98 10.35 11.70 10.26

+3M 73.44 73.49 54.00 55.00 10.16 10.15 11.30 11.50 9.87 10.11

+6M 74.52 74.74 54.00 55.90 10.01 9.97 11.14 11.34 9.66 9.98

+12M 75.04 76.99 56.00 57.52 9.94 9.68 10.93 11.06 9.53 9.76

14-Feb 39.54 29.61 18.87 21.32 18.71

+3M 40.39 39.53 29.70 29.59 18.47 18.86 20.55 21.38 17.95 18.78

+6M 40.30 39.53 29.20 29.57 18.51 18.85 20.60 21.44 17.87 18.86

+12M 38.86 39.48 29.00 29.50 19.20 18.87 21.10 21.57 18.40 19.04

MYR

PHP

USD DKK

TWD

INR

SEK NOK

CNY

KRW

EUR

IDR

THB

SGD

HKD


Em

ergin

g Marke

ts B

riefer


Forecasts vs forwards

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






-6.0-5.0-4.0-3.0-2.0-1.00.01.02.03.0

BR

L

RU

B

RO

N

MX

N

IDR

ILS

TR

Y

INR

HU

F

PL

N

MY

R

PH

P

CN

Y

KR

W

TW

D

SG

D

CZ

K

ZA

R

%

-4.0-3.0-2.0-1.00.01.02.03.04.05.0

BR

L

RU

B

RO

N

MX

N

IDR

ILS

TR

Y

INR

HU

F

PL

N

MY

R

PH

P

CN

Y

KR

W

TW

D

SG

D

CZ

K

ZA

R

%

-7.0-6.0-5.0-4.0-3.0-2.0-1.00.01.02.03.04.0

RO

N

BR

L

RU

B

HU

F

MX

N

INR

PL

N

IDR

MY

R

KR

W

SG

D

ILS

PH

P

TW

D

CN

Y

CZ

K

TR

Y

ZA

R

%

-4.0-3.0-2.0-1.00.01.02.03.04.05.06.07.0

RO

N

BR

L

RU

B

HU

F

MX

N

INR

PL

N

IDR

MY

R

KR

W

SG

D

ILS

PH

P

TW

D

CN

Y

CZ

K

TR

Y

ZA

R

%

-4.0

-2.0

0.0

2.0

4.0

6.0

8.0

10.0

RU

B

BR

L

MX

N

MY

R

RO

N

HU

F

KR

W

SG

D

INR

CN

Y

PL

N

TW

D

ILS

IDR

PH

P

ZA

R

CZ

K

TR

Y

%

-4.0

-2.0

0.0

2.0

4.0

6.0

8.0

10.0

RU

B

BR

L

MX

N

MY

R

RO

N

HU

F

KR

W

SG

D

INR

CN

Y

PL

N

TW

D

ILS

IDR

PH

P

ZA

R

CZ

K

TR

Y

%



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Monetary policy calendar

Calendar


15 February 2013

Wider CEE

PLN 3.75 - 25 bp Feb, 2013 - 25 bp Q2 2013 06 Mar 2013 3.00

HUF 5.50 - 25 bp Jan, 2013 - 25 bp February 2013 26 Feb 2013 4.75

CZK 0.05 - 20 bp Nov, 2012 - Unchanged 2013 28 Mar 2013 0.05

RON 5.25 - 25 bp Mar, 2012 - 25 bp H1 2013 26-29 Mar 4.75

TRY 5.50 - 50 bp Dec, 2012 - Unchanged 2013 19 Feb 2013 5.50

CIS

RUB 8.25 + 25 bp Sep, 2012 -25 bp April/May 2013 01-11 Mar 7.25

MEA

ILS 1.75 - 25 bp Dec, 2012 - Unchanged 2013 25 Feb 2013 1.75

ZAR 5.00 - 50 bp Jul, 2012 - Unchanged 2013 20 Mar 2013 5.00

LATAM

BRL 7.25 - 25 bp Oct, 2012 - Unchanged 2013 06 Mar 2013 7.25

MXN 4.50 - 25 bp Jul, 2009 - Unchanged 2013 08 Mar 2013 4.50

EM Asia

CNY 6.00 - 31 bp Jul, 2012 - Unchanged 2013 Not announced 6.00

KRW 2.75 - 25 bp Oct, 2012 +25 bp Q4 2013 14 Mar 2013 3.25

THB 2.75 - 25 bp Oct, 2012 +25 bp Q3 2013 20 Feb 2013 3.25

HKD 0.50 - 100 bp Dec, 2008 + 25 bp Q2 2015 Not announced 0.50

MYR 3.00 + 25 bp May, 2011 + 25 bp Q3 2013 07 Mar 2013 3.50

PHP 3.50 - 25 bp Oct, 2012 + 25 bp Q3 2013 14 Mar 2013 4.00

IDR 5.75 - 25 bp Feb, 2012 + 25 bp Q2 2013 07 Mar 2013 6.50

INR 7.75 - 25 bp Jan, 2013 - 25 bp Q1 2013 19 Mar 2013 7.50

TWD 1.875 +12.5 bp Jun, 2011 + 12.5 bp Q3 2013 21 Mar 2013 2.250

Year-end 2013 (%)

Next MeetingPolicy Rate (%) Latest Change Next Change


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Emerging Markets Contacts

Emerging Markets Research

Lars Christensen +45 45 12 85 30 [email protected]

Flemming Jegbjærg Nielsen +45 45 12 85 35 [email protected]

Violeta Klyviene +370 5 2156992 [email protected]

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Alexander Reventlow +45 45 12 85 48 [email protected]

Vladimir Miklashevsky +358 10 546 7522 [email protected]

Global Retail SME, FX

Stig Hansen +45 45 14 60 86 [email protected]

Flemming Winther +45 45 14 68 24 [email protected]

Trading FX, Fixed Income, Danske Markets

Frank Sandbæk Vig +45 45 14 67 96 [email protected]

Thomas Manthorpe +45 45 14 69 68 [email protected]

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Perttu Tuomi +358 10 513 8738 [email protected]

Danske Bank Poland, Warsaw

Maciej Semeniuk +48 22 33 77 114 [email protected]

Bartłomiej Dzieniecki +48 22 33 77 112 [email protected]

Danske Markets Baltics

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Giedre Geciauskiene +370 5215 6180 [email protected]

Lauri Palmaru +372 675 2464 [email protected]

ZAO Danske Bank Russia, Saint-Petersburg Treasury Department

Lenina Rautonen +7 921 797 57 80 [email protected]

Vladimir Biserov +7 812 332 73 04 [email protected]

Irina Voronova +7 812 332 73 04 [email protected]

All EM research is available on Bloomberg DMEM

mailto:[email protected]



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Disclosure This research report has been prepared by Danske Research, a division of Danske Bank A/S ("Danske Bank").

The author of the research report is Lars Christensen, Chief Analyst.

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