EM DAILY

Emerging Markets • 2 August 2010

Disappointing data from the US and China

Peru (BUY): We have started covering Peru with a BUY recommendation for PERUGB 6.95%
2031.
Poland (BUY): On Friday the government presented its plan for the economic policy for the
coming years.
Indonesia (HOLD): Inflation rose slightly more than expected in July.
Hungary (HOLD): Forint assets are supported by a more positive sentiment for the euro zone.

EM Daily - Overview
US GDP for the second quarter came out slightly lower than expected, but it did not lead to rising risk
aversion in the financial markets (probably due to the simultaneous upward revision of GDP for the
first quarter). There were small movements on Friday in the emerging-market currencies, but they
tended to appreciate slightly against the euro. GBI generated a return of 0.4%, while the EMBI credit
spread widened by 8 bp to 310 bp. Over the weekend, PMI data from China were announced. A
decline to 49.4 was reported. In spite of disappointing data from the US and China, Asian equities
are up approx. 1% this morning.
This week, several economic indicators and events from the emerging markets are on the agenda:
some of the most important ones are interest-rate announcements from Indonesia, Romania, the
Czech Republic and Peru and consumer prices from Turkey, Peru and Brazil. The interest-rate
announcement from the Czech Republic in particular should attract some attention as to whether
the central bank will react to the latest appreciation of the Czech koruna. For this week’s EM
Publisher:
Jyske Markets Calendar, see here.
Vestergade 8 -16
DK - 8600 Silkeborg Today’s economic indicators and events
Time Country Event Exp. Prior
Analyst: 06:00 Indonesia Consumer prices July 5.78% y/y 5.05% y/y
Linda Vestergård N/A Czech Republic Public budget July -75.7bn
+45 89 89 76 62
16:00 Brazil Trade balance (USD) July 2.3bn
Linda.Vestergaard@jyske
bank.dk
EMBI Global Diversified 310 8 Chart of the day
Translation: Return year-to-date 9,85% Indonesia, CPI % y/y
Translation Services
375 Credit spread
Read more research 13,0
reports on emerging- 11,0
325
market bonds at 9,0
www.jyskemarkets.com 7,0
275 5,0
3,0
225 1,0
feb-2010 apr-2010 jun-2010 aug-2010 jul-2008 mar-2009 nov-2009 jul-2010

Shares Daily change Government b onds (10 year) Daily change

S & P 500 1.102 0,01% Germany 2,67 -0,05
Brazil Bovespa 67.515 0,84% Mexico 6,53 -0,04
Poland WSW WIG index 42.465 -0,36% Hungary 7,25 0,05

Emerging Markets FX Targets (updated 27th July)

Disclaimer: Currency Spot 3m 6 m 12 m Currency Spot 3m 6m 12 m
Please see the last page EURCZK 24,80 25,60 25,50 25,50 EURZAR 9,51 9,53 9,53 9,64
EURHUF 283,64 280,00 270,00 270,00 EURMXN 16,49 15,68 15,88 15,63
EURPLN 4,00 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 2,29 2,25 2,29 2,26
EM DAILY
Emerging Markets • 2 August 2010 • Jyske Markets
Central and Eastern Europe
Poland
Our recommendation for bonds denominated in
the Polish zloty (PLN) is BUY. On Friday the Polish
government presented its plan for the economic
policy for the coming years. The sore spot is the
budget deficit which is expected to be approx. 7%
of GDP for both 2009 and 2010. Therefore, the
announcement of the plan could have affected
the zloty. The government’s plan disappointed a
bit in that the Maastricht criteria would not be
met until 2015, but the effect on the zloty was
limited after all. In spite of the zloty appreciation
in July, only little positive news had been
discounted in the market. The latest appreciation
of the zloty should in fact be attributed to the
more positive sentiment for the euro zone rather
than to Poland specific factors.
Hungary
Our recommendation for bonds denominated in
the Hungarian forint is HOLD. The interrupted
negotiations with the IMF/EU in mid-July led to
rising market rates and pressure on the forint.
Since mid-July, there has been no news about the
future cooperation between the Hungarian
government and the IMF/EU but nevertheless
Hungarian yields have fallen again and the forint
has recovered nicely. The positive trend is thus
not brought on by factors specific to Hungary but
rather by the fact that the general sentiment
related to the euro zone has been favourable.
This is good news for forint-denominated assets
but it also means that the forint and the market
yields will be vulnerable to a growing negative
sentiment related to the euro zone.
Hungary, yields
15
13
11
9
7 Our recommendation for bonds denominated in
5
feb-2008 sep-2008 mar-2009 okt-2009 maj-2010
HGB 6,75% 2013 HGB 5,5% 2016 HGB 6,5% 2019
Without an agreement with the IMF/EU, there is
widespread uncertainty about the future fiscal
policy in Hungary, making Hungarian assets
vulnerable. We still regard it as the most likely
outcome that the Hungarian government
eventually agrees to meeting the requirements
set by the IMF/EU, but it will probably not be
until after the local elections in October. We
therefore maintain our HOLD recommendation
for forint-denominated assets but investors
should be prepared for some months with
increased volatility in forint-denominated assets.
Russia
Our recommendation for rouble-denominated
bonds is HOLD. On Friday, the Russian central
bank announced that it leaves the interest rate
unchanged at 7.75%. This is the third month on
end that the Russian central bank leaves the
interest rate unchanged at this level.
Latin America
Peru
Last week we started covering Peru with a BUY
recommendation for the GDN based on PERUGB
6.95% 2031. Peruvian market rates have fallen
quite a lot over the past month, but as we see it,
they may fall further. The recommendation will
be available in English soon.
PERUGB 6.95% 2031, y-t-m
10,5
9,5
8,5
7,5
6,5
5,5
Asia
Indonesia
rupiahs (IDR) is HOLD. The rupiah is a dollar-
related currency and has thus been supported for
most of 2010 by the falling EUR/USD rate.
Moreover, the rupiah is supported by higher-
than-expected economic growth, low public debt
2
EM DAILY
Emerging Markets • 2 August 2010 • Jyske Markets
and the recent upgrades of the credit rating
agencies’ ratings on Indonesia (Moody’s
changed its outlook to positive in early July, and
both S&P and Fitch upgraded their ratings by one
notch earlier this year). For the time being,
however, we maintain our HOLD
recommendation.

Inflation for July came out at 6.22% y/y;

expectations were for 5.73% and the rate for June
was 5.05%.

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EM DAILY
Emerging Markets • 2 August 2010 • Jyske Markets

EMBI Global Diversified Index

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

EMBI Global Diversified 0,12 4,06 9,85 310 100,00

Region
Africa 0,27 3,15 7,70 336 5,31
Latin 0,19 4,51 10,97 357 40,54
Europe 0,06 3,96 8,58 281 28,58
Asia 0,06 4,29 10,42 204 20,70
Middle East 0,05 1,00 7,60 386 4,87
Country
Chile 0,70 1,30 5,59 133 2,02
Venezuela 0,45 10,19 10,14 1104 4,12
China 0,40 0,83 5,95 84 2,11
El Salvador 0,38 -0,38 8,08 365 1,40
Egypt 0,38 4,54 4,87 264 0,65
Mexico 0,33 2,29 10,88 192 7,14
Malaysia 0,32 1,95 7,17 154 3,53
Colombia 0,27 4,18 11,71 183 4,76
Croatia 0,25 4,32 3,65 296 1,24
South Africa 0,22 3,21 8,15 172 3,06
Peru 0,21 4,85 12,72 171 3,63
Poland 0,19 3,15 5,98 184 2,96
Iraq 0,17 2,96 13,20 443 0,95
Gabon 0,14 3,30 8,49 427 0,40
Ghana 0,13 3,78 10,39 470 0,35
Tunisia 0,13 0,41 4,48 109 0,30
Russia 0,11 3,61 6,34 256 7,32
Kazakhstan 0,09 5,37 - 338 3,14
Indonesia 0,07 5,49 12,30 210 6,41
Brazil 0,06 3,54 - 212 7,82
Turkey 0,03 4,02 7,63 240 7,13
Ecuador 0,03 0,82 0,46 1037 0,24
Jamaica 0,02 2,90 40,17 521 0,19
Ukraine 0,02 5,51 30,35 505 2,46
Bulgaria 0,02 3,19 3,51 282 0,61
Sri Lanka 0,02 3,79 7,36 361 0,46
Pakistan 0,02 4,59 20,59 566 0,50
Belize 0,02 7,17 49,59 797 0,19
Georgia 0,02 0,32 5,98 526 0,22
Lebanon 0,02 0,53 - 358 3,92
Serbia 0,02 0,01 3,08 458 0,43
Hungary 0,02 2,39 0,59 350 1,44
Panama 0,01 4,35 - 178 3,44
Uruguay 0,00 4,34 14,64 220 2,66
Vietnam -0,08 5,75 14,19 265 0,80
Dominican Republic -0,08 2,66 10,41 405 0,63
Philippines -0,16 5,35 11,30 207 6,89
Lithuania -0,24 4,44 - 325 1,63
Argentina -0,42 13,39 - 721 2,29

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 • 2 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 0,40 -0,80 17,87 6,36 4,48 100,00
Region
Mideast & Africa 1,01 2,03 20,96 8,18 5,66 10,94
Europe -0,01 1,23 11,87 6,49 2,95 40,00
Latam 0,70 -1,78 22,07 7,30 5,73 29,06
Asia 0,48 -4,98 21,92 3,50 5,08 20,00
Country
Poland -0,25 4,21 7,67 5,40 3,89 10,00
South Africa 1,05 2,72 21,89 8,17 6,03 10,00
Hungary -0,46 2,08 1,31 7,07 3,78 10,00
Turkey 0,75 0,85 19,15 8,43 2,03 10,00
Colombia 0,33 0,42 39,95 6,13 6,34 3,48
Brazil Broad 0,97 -1,79 18,61 11,66 2,46 4,00
Mexico 0,64 -2,10 26,97 6,40 4,79 10,00
Peru 0,57 -2,16 14,35 6,16 8,67 6,24
Russia -0,05 -2,16 19,73 5,91 2,11 10,00
Brazil 1,02 -2,18 17,04 9,99 6,12 5,34
Malaysia 0,77 -3,85 22,58 3,72 4,36 10,00
Egypt -0,02 -5,40 11,48 8,74 1,76 0,94
Thailand 0,18 -6,11 21,18 3,33 5,80 10,00

Instrument Daily Return USD (%) MTD Ret. USD (%) YTD Ret. USD (%) Yield (%) Duration(y) Market Cap (%)
GBI EM Diversified -0,04 5,47 6,88 6,36 4,48 100,00
Region
Mideast & Africa 0,56 8,48 9,68 8,18 5,66 10,94
Europe -0,44 7,64 1,44 6,49 2,95 40,00
Latam 0,26 4,44 10,69 7,30 5,73 29,06
Asia 0,04 1,03 10,55 3,50 5,08 20,00
Country
Poland -0,69 10,81 -2,37 5,40 3,89 10,00
South Africa 0,61 9,22 10,53 8,17 6,03 10,00
Hungary -0,90 8,54 -8,14 7,07 3,78 10,00
Turkey 0,31 7,23 8,04 8,43 2,03 10,00
Colombia -0,11 6,77 26,90 6,13 6,34 3,48
Brazil Broad 0,52 4,43 7,55 11,66 2,46 4,00
Mexico 0,20 4,10 15,14 6,40 4,79 10,00
Peru 0,13 4,03 3,69 6,16 8,67 6,24
Russia -0,48 4,03 8,57 5,91 2,11 10,00
Brazil 0,58 4,01 6,13 9,99 6,12 5,34
Malaysia 0,33 2,23 11,15 3,72 4,36 10,00
Egypt 0,08 0,58 1,09 8,74 1,76 0,94
Thailand -0,26 -0,17 9,88 3,33 5,80 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 • 2 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.