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EM DAILY

Emerging Markets • 5 August 2010

Economic indicators on the agenda


Indonesia (HOLD): GDP for Q2 was a pleasant surprise.
Peru (BUY): Interest-rate announcement: Consensus in the market is a quarter-point hike. We
expect status quo on rates.
Czech Republic: It is widely expected that the central bank will leave interest rates unchanged
at 0.75% today.
Colombia (HOLD): We expect an additional marginal increase in consumer prices.

EM Daily - Overview
Positive returns were generated on both hard- and local-currency bonds during yesterday’s trading
session. Our benchmarks EMBI (see page 4) and GBI EM (see page 5) gained 0.16% and 0.56%,
respectively. This is attributable to positive indicators from the US. Several important economic
indicators from the emerging markets are on the agenda today. Already this morning, GDP data for
Q2 from Indonesia will be announced. In the course of the day follow interest-rate-announcements
from the Czech Republic and Peru, industrial production from Hungary and consumer prices from
Colombia.

Today’s economic indicators and events


Publisher: Time Country Event Exp. Prior
Jyske Markets N/A Russia FX reserves (USD) Week 30 469.1bn
Vestergade 8 -16 N/A Peru Rate announcement 2.00% 2.00%
DK - 8600 Silkeborg 09:00 Hungary Industrial production, y/y June 13.10% 13.70%
13:00 Czech Republic Rate announcement 0.75% 0.75%
Assisting analyst: 02:00 Colombia Consumer prices y/y July 2.37% 2.25%
Stig Kammersgaard
+45 89897664
Stig.Kammersgaard@jys EMBI Global Diversified 290 -6 Chart of the day
kebank.dk
Return year-to-date 10,95% Peru, Base Rate (% )
375 Credit spread
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Shares Daily change Government b onds (10 year) Daily change


S & P 500 1.127 0,61% Germany 2,60 0,00
Brazil Bovespa 68.272 0,40% Mexico 6,50 0,01
Poland WSW WIG index 43.535 0,28% Hungary 7,22 0,03

Emerging Markets FX Targets (updated 27th July)


Currency Spot 3m 6 m 12 m Currency Spot 3m 6m 12 m
EURCZK 24,63 25,60 25,50 25,50 EURZAR 9,58 9,53 9,53 9,64
Disclaimer:
EURHUF 281,04 280,00 270,00 270,00 EURMXN 16,47 15,68 15,88 15,63
Please see the last page
EURPLN 3,99 3,95 3,90 3,80 USDCNY 6,77 6,70 6,60 6,45
EURTRY 1,97 1,91 1,91 1,93 EURBRL 2,31 2,25 2,29 2,26
EM DAILY
Emerging Markets • 5 August 2010 • Jyske Markets

Central and Eastern Europe Romania


We maintain our SELL recommendation for leu-
Hungary denominated bonds.
We currently have a HOLD recommendation for
forint-denominated bonds. Yesterday we
The range of available bonds is poor, and the
published a new overview of our
yield level is not attractive in comparison with
recommendation. An English version will be
other emerging-market countries.
available soon.
At its monetary-policy meeting yesterday, the
This morning, data about the Hungarian
Romanian central bank left interest rates
industrial production for June will be announced.
unchanged at 6.25%, as had been expected.
The data for May showed a growth rate of 13.7%
y/y, which indicates that Hungary benefits from
the global recovery, particularly the upturn in the Latin America
German economy. The order intake is still Colombia
pointing solidly to growth in industrial We currently have a HOLD recommendation for
production over the coming months, although Colombia’s peso bonds.
the PMI index has fallen back and was below 50
in May as well as June. The sentiment indicator Tonight consumer prices for July will be
of the manufacturing industry released by announced. Inflation for June rose to 2.25% y/y,
Eurostat did not show the same trend. We and consensus in the market is that the rate for
therefore do not expect growth in the July will be slightly higher at about 2.37%.
manufacturing industry to stall, but find that the Although inflation has increased slightly
year-on-year growth rate is probably close to following the historically low levels earlier in the
peaking. Consensus about today’s indicator is a year, it is still at the low end of the central bank’s
growth rate of 13.10% y/y. target range of 2-4%.

Czech Republic Peru


Today the Czech central bank (CNB) will hold a We currently recommend investors to buy bonds
monetary-policy meeting. Like the rest of the denominated in nuevos soles. Read the full
market we expect interest rates to be kept recommendation of the new country in our
unchanged at 0.75%. At the latest monetary- universe of emerging-market bonds here.
policy meeting, the central bank found that its
growth and inflation forecasts generally still Today a monetary-policy meeting will be held at
applied, and that the risks to the estimates were the Peruvian central bank. We expect unchanged
balanced. The biggest risk to this view is that the rates this time around after the central bank
EUR/CZK rate has been below 25.00 for the past raised rates by a quarter point from 1.25% to
week – on earlier occasions the CNB has shown 2.00% at the last three meetings. In the latest
aversion to letting CZK appreciate below this press release, the rhetoric had, however, been
point. Even if the CNB made a surprise move as changed slightly and the central bank stated that
late as in May by lowering interest rates by 0.25 interest-rate hikes would depend on new
percentage point, we do not expect the Bank to information about the economy and its effect on
act likewise at the meeting today. Instead focus inflation. Uncertainty about the global economy
will be on the CNB’s comments about was also emphasised. Inflation is on the increase
developments and its verbal intervention, if any. and came out at 1.82% y/y for July, which is still
In combination with the weak domestic economy below the central bank’s target range of 2% +/- 1
and the sluggish recovery, the strength of CZK percentage point. Core inflation, on the other
makes us expect the CNB to be reluctant to raise hand, has been stable at about 1.8% for the past
interest rates. We expect the first hike to be three months. Therefore, we do not expect the
made in the course of the first six months of central bank to raise interest rates at today’s
2011. meeting, although continued tightening cannot

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EM DAILY
Emerging Markets • 5 August 2010 • Jyske Markets
be ruled out. We assess that tightening will be
seen for the rest of the year.

Asia
Indonesia
We currently have a HOLD recommendation for
rupiah-denominated bonds.

The Indonesian central bank (BI) ended a busy


week this morning with respect to economic
indicators with the release of the GDP data for
the second quarter of the year. Growth was
2.80% q/q and 6.20% y/y. This was more than
the expected 2.55% and 6.00%. Indonesia has
weathered the crisis without reporting negative
y/y growth rates. Combined with the higher-
than-expected inflation rate, the growth data
increase the likelihood of an early hike.

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EM DAILY
Emerging Markets • 5 August 2010 • Jyske Markets

EMBI Global Diversified Index


Instrument Daily Ret. (%) MTD Ret. (%) YTD Ret. (%) Credit Spread Market Cap. (%)
(bp)

EMBI Global Diversified 0,16 1,00 10,95 290 100,00


Region
Latin 0,46 1,23 12,33 335 40,65
Africa 0,36 0,82 8,59 318 5,30
Europe 0,23 1,04 9,71 259 28,58
Middle East 0,12 0,22 7,83 379 4,83
Asia -0,56 0,73 11,22 188 20,65
Country
Argentina 2,24 2,46 - 684 2,33
Venezuela 1,15 3,16 13,62 1046 4,21
Croatia 0,97 1,83 5,55 264 1,25
Egypt 0,87 1,91 6,87 235 0,66
Uruguay 0,68 0,99 15,78 205 2,66
Dominican Republic 0,53 1,84 12,44 371 0,63
Poland 0,48 0,91 6,95 156 2,96
Gabon 0,40 0,90 9,47 410 0,40
Ghana 0,40 1,12 11,63 448 0,35
Chile 0,40 -0,03 5,56 129 2,00
Peru 0,36 1,51 14,42 149 3,65
Iraq 0,35 0,39 13,64 434 0,94
Lithuania 0,32 1,54 - 296 1,64
Georgia 0,30 0,34 6,34 515 0,22
Bulgaria 0,27 0,53 4,06 269 0,61
Turkey 0,27 0,74 8,43 225 7,10
Mexico 0,27 1,23 12,24 170 7,15
Panama 0,21 0,63 - 168 3,43
Kazakhstan 0,20 1,23 - 311 3,14
El Salvador 0,19 2,37 10,63 333 1,42
Brazil 0,18 0,63 - 198 7,80
South Africa 0,17 0,58 8,78 155 3,05
China 0,15 0,38 6,36 73 2,10
Russia 0,12 0,91 7,30 236 7,31
Malaysia 0,09 0,84 8,08 134 3,53
Ecuador 0,09 0,15 0,61 1036 0,24
Jamaica 0,07 0,12 40,33 513 0,19
Belize 0,06 0,10 49,74 792 0,18
Pakistan 0,06 0,93 21,71 547 0,50
Lebanon 0,06 0,17 - 353 3,88
Serbia 0,06 0,01 3,30 452 0,43
Tunisia 0,06 0,21 4,69 97 0,30
Vietnam 0,05 1,34 15,72 241 0,81
Colombia 0,05 0,59 12,37 167 4,74
Hungary 0,05 3,21 3,83 294 1,47
Ukraine -0,13 0,56 31,08 484 2,45
Sri Lanka -0,17 0,61 8,02 344 0,45
Philippines -0,49 0,60 11,97 191 6,87
Indonesia -1,36 0,83 13,23 194 6,39

The EMBI Global Diversified


The EMBI Global Diversified Index is a JP Morgan Chase index, which covers the aggregate return on USD-denominated bonds
issued by emerging market countries and government bodies. This includes Brady bonds, loans, Eurobonds and local
instruments. 39 countries are covered. The expression ‘diversified’ means that the weightings of the individual countries are
reduced, and the Index is therefore an excellent tool for Danish institutional investors. All returns are in USD. Past performance
is not a reliable indicator of future performance. The gains may increase or decline as a result of exchange-rate fluctuations.

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EM DAILY
Emerging Markets • 5 August 2010 • Jyske Markets

GBI EM Diversified
Instrument Daily Return DKK (%) MTD Ret. DKK (%) YTD Ret. DKK (%) Yield (%) Duration(y) Market Cap (%)
GBI EM Diversified 0,56 0,13 18,03 6,30 4,56 100,00
Region
Latam 0,99 0,24 22,36 7,11 5,98 29,11
Asia 0,62 -0,34 21,50 3,45 5,05 20,00
Mideast & Africa 0,61 -0,66 20,16 8,25 5,65 10,89
Europe 0,20 0,50 12,42 6,49 2,98 40,00
Country
Colombia 1,52 1,60 42,18 5,91 6,49 4,19
Peru 1,26 0,74 15,19 6,06 8,71 6,46
Brazil 0,90 0,35 17,46 9,80 6,14 5,46
Thailand 0,89 -0,30 20,82 3,31 5,87 10,00
Egypt 0,83 -0,43 11,01 8,74 1,75 0,89
Mexico 0,77 -0,28 26,62 6,45 4,98 10,00
South Africa 0,59 -0,69 21,05 8,23 6,00 10,00
Brazil Broad 0,57 -1,02 17,40 11,80 2,45 3,00
Malaysia 0,36 -0,39 22,11 3,65 4,23 10,00
Russia 0,29 0,82 20,72 5,97 2,22 10,00
Hungary 0,24 1,54 2,87 7,00 3,78 10,00
Poland 0,17 0,09 7,77 5,42 3,87 10,00
Turkey 0,11 -0,49 18,57 8,46 2,05 10,00

Instrument Daily Return USD (%) MTD Ret. USD (%) YTD Ret. USD (%) Yield (%) Duration(y) Market Cap (%)
GBI EM Diversified -0,03 1,04 7,99 6,30 4,56 100,00
Region
Latam 0,39 1,14 11,95 7,11 5,98 29,11
Asia 0,03 0,55 11,16 3,45 5,05 20,00
Mideast & Africa 0,02 0,23 9,93 8,25 5,65 10,89
Europe -0,39 1,40 2,86 6,49 2,98 40,00
Country
Colombia 0,92 2,51 30,08 5,91 6,49 4,19
Peru 0,66 1,64 5,39 6,06 8,71 6,46
Brazil 0,31 1,26 7,46 9,80 6,14 5,46
Thailand 0,29 0,59 10,53 3,31 5,87 10,00
Egypt 0,24 0,47 1,56 8,74 1,75 0,89
Mexico 0,18 0,62 15,85 6,45 4,98 10,00
South Africa 0,00 0,20 10,75 8,23 6,00 10,00
Brazil Broad -0,02 -0,13 7,41 11,80 2,45 3,00
Malaysia -0,24 0,51 11,72 3,65 4,23 10,00
Russia -0,30 1,73 10,44 5,97 2,22 10,00
Hungary -0,36 2,45 -5,89 7,00 3,78 10,00
Poland -0,43 1,00 -1,40 5,42 3,87 10,00
Turkey -0,48 0,40 8,48 8,46 2,05 10,00

The Global Bond Index – Emerging Markets Diversified is designed by JP Morgan Chase. It tracks local emerging market
debt and consists of regularly traded, liquid fixed-rate, domestic currency government bonds. 13 countries are included. The
expression ‚diversified‛ means that the weightings of the individual countries are reduced and is therefore an excellent tool
for Danish institutional investors. All returns are in DKK. Past performance is not a reliable indicator of future performance.

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EM DAILY
Emerging Markets • 5 August 2010 • Jyske Markets

Disclaimer & Disclosure


Jyske Bank is supervised by the Danish Financial Supervisory Authority.

The research report is based on information which Jyske Bank finds reliable, but Jyske Bank does not assume any responsibility
for the correctness of the material nor any liability for transactions made on the basis of the information or the estimates of
the report. The estimates and recommendations of the research report may be changed without notice. The report is for the
personal use of Jyske Bank's customers and may not be copied.

This is a recommendation and not an in-depth investment report.

Conflicts of interest
Jyske Bank has prepared procedures to prevent conflicts of interest. These procedures have been incorporated in the business
procedures covering the research activities of Jyske Markets, a business unit of Jyske Bank.

Jyske Bank's emerging-market analysts may not hold positions in the instruments for which they independently prepare
research reports. Jyske Bank may, however, hold positions, have interests in or business relations with the instruments that
are analysed. The analysts receive no payment from persons interested in individual research reports.

Read more about Jyske bank's policy on conflicts of interest at www.jyskebank.dk/terms.

Risk associated with the bond


Investment in an emerging-market bond involves risk. Many factors, including the country’s credit quality, willingness to pay,
liquidity, social conditions and economic development may affect the price of the bond. Indirect factors may also affect the
price of the bond, for instance global economic factors, global risk tolerance and geopolitical risks. See the research report for
our view on the risk. The risk factors stated in the report should not be regarded as exhaustive.

FX risk
If the bond is traded in a currency other than the investor’s base currency (this is often the case), the investor accepts an FX
risk. The FX risk is in many cases affected by the same factors as the bond (see above). We will assess the FX risk where we find
it necessary. The FX risk factors stated in the research report should not be regarded as exhaustive.

Update of regular research reports


We update EM Daily every day. We update EM Outlook every week. We update EM Recommendations at least once a week.
Our view of the individual countries will be updated on a regular basis in these publications. See the front page of the research
report for the date of the latest update.
http://www.jyskebank.dk/finansnyt/obligationer/emergingmarkets/markedskommentarer/dagenskommentar/emerging
marketsdaily/168988.asp?refId=118973
http://www.jyskebank.dk/_jb/asp/apps/markets/meta_docs.asp?metaname=Skabelon&metavalue=JM_Makro_EM&do
cs=10&shadowID=255531
http://finansnyt/_jb/default.asp#http://finansnyt/udlobligationer/emergingmarkets/emrecommendations/2324
90.asp

Update of separate research reports

Separate reports are not updated. A new research report will be published when we find it necessary. This will often be the
case when there are significant changes which are relevant for investors. This includes changes in the recommendation, a
significant change of the risk associated with the bond or a significant change in FX risk. See the front page of the report for
the date when the research report was published. Separate recommendations are only published once.

http://www.jyskebank.dk/_jb/commoninc/apps/markets/forside.asp?fagomr=Obl_EM&visfrasite=3&shadowID=113566

Trading prices
All prices stated are the latest trading prices at the time of the release of the research report, unless otherwise stated.