EM DAILY

Emerging Markets • 6 August 2010

Waiting for the US job report

Brazil (BUY): Today inflation data for July will be released.
Czech Republic: As expected, the central bank held interest rates at 0.75%.
Turkey (BUY): The lira was under pressure yesterday due to a delay of a ‘fiscal-policy rule'.
Peru (BUY): Yesterday, the central bank (NBR) surprisingly raised interest rates by 0.50
percentage point to 2.50%.
EM Daily - Overview
Relatively small movements were seen in the financial markets yesterday, and the markets are
undoubtedly waiting for the release of the US job report today. The EMBI credit spread widened by 4
bp to 294, and the index generated a return of 0.08%, while the GBI EM ended the day up 0.19%. The
lira was among the worst-performing emerging-market currencies, and Turkish yields rose by about
5 bp due a later-than-expected approval of a ‘fiscal-policy rule’ in parliament. As expected, the Czech
central bank held interest rates at 0.75%, but the latest appreciation of the koruna was not cause for
much concern. The Peruvian central bank surprisingly raised interest rates by half a point to 2.50%,
and this is likely to affect both interest rates and the nuevo sol in today’s trading session. The most
important EM event today is consumer prices from Brazil. The general sentiment in the market will
be determined by the outcome of the US job report (JB: down 40,000). If the job report disappoints, it
will adversely affect the general appetite for risk and thus also the emerging-market bonds.

Today’s economic indicators and events

Publisher: Time Country Event Exp. Prior
Jyske Markets 09:00 Czech Republic Trade balance June 12.3bn
Vestergade 8 -16 09:00 Czech Republic Industrial production June 10.3% y/y 16.9% y/y
DK - 8600 Silkeborg 09:00 Czech Republic Retail sales June 3.1% y/y
09:00 Hungary Trade balance (EUR) 424m
Analyst: 14:00 Brazil IPCA July 4.61% y/y 4.84% y/y
Linda Vestergård N/A Colombia Minutes of MP meeting
+45 89 89 76 62
Linda.Vestergaard@jyske
E M B I G lo b al D iver s ified 294 4 C h ar t o f th e d ay
bank.dk
R etur n year -to -d ate 1 1 ,0 3 % P er u, K ey R ate %
Translation:
375
Translation Services Cr e dit sp r e a d 7
6
Read more research 325 5
reports on emerging- 4
market bonds at 3
275
2
www.jyskemarkets.com
1
225 0

m ar -2 0 1 0 m aj-2 0 1 0 jul-2 0 1 0 jan-2 0 0 8 ok t -2 0 0 8 jul-2 0 0 9 apr -2 0 1 0

S h a re s D a il y ch a ng e G o ve rnm e nt b o nd s ( 1 0 ye a r) D a il y ch a ng e
S & P 500 1.126 -0 ,13% G e r m any 2,56 -0 ,0 4
B r azil B o v e spa 6 8.412 0 ,20 % M e xico 6 ,53 0 ,0 3
P o land W S W W IG inde x 43.437 -0 ,23% Hung ar y 7,15 -0 ,0 7

E m e rg ing M a rke t s FX Ta rg e t s ( u p d a t e d 2 7 t h Ju l y)
C u rre ncy Sp ot 3m 6m 12 m C u rre ncy Sp ot 3m 6m 12 m
E U R CZK 2 4 ,7 3 2 5 ,6 0 2 5 ,5 0 2 5 ,5 0 E U R ZA R 9 ,5 6 9 ,5 3 9 ,5 3 9 ,6 4
Disclaimer:
Please see the last page EU R H U F 2 7 9 ,7 2 2 8 0 ,0 0 2 7 0 ,0 0 2 7 0 ,0 0 EU R MXN 1 6 ,5 6 1 5 ,6 8 1 5 ,8 8 1 5 ,6 3
side E U R P LN 3,9 9 3,9 5 3,9 0 3,8 0 U S D CN Y 6 ,7 7 6 ,7 0 6 ,6 0 6 ,4 5
EU R TR Y 1 ,9 8 1 ,9 1 1 ,9 1 1 ,9 3 EU R B R L 2 ,31 2 ,2 5 2 ,2 9 2 ,2 6
EM DAILY
Emerging Markets • 6 August 2010 • Jyske Markets
Central and Eastern Europe
Hungary
Our recommendation for bonds denominated in
the Hungarian forint is HOLD. In the short term,
a period of pressure on the forint and increasing
market rates is likely. For the short term, it is
worth considering selling forint-denominated
bonds and to buy them again at some time over
the next two months. Our latest update on
Hungary will be available in English later today.
Industrial production for June came out at 12.6%
y/y against the expected 13.1%. Furthermore,
the figure for May was revised slightly to 13.8%
from 13.7%. At the moment, the development of
the forint and Hungarian market rates is to a
high degree determined by sentiment for the
euro zone and the development of the
cooperation between the Hungarian government
and the IMF/EU.
Czech Republic
Focus at yesterday’s monetary-policy meeting
was on whether the Czech central bank (CNB)
would comment on the latest appreciation of the
koruna. As expected, the Czech central bank held
interest rates at 0.75%, but the latest
appreciation of the koruna did not seem to be
cause for much concern. So far, we maintain our
price target for the koruna (see page 1), but it
cannot be ruled out that the koruna may
appreciate further for the short term in a
scenario in which sentiment for the euro zone
brightens continuously and the CNB tolerates a
stronger koruna.
Turkey
Our recommendation for bonds denominated in
the Turkish lira is BUY. The lira underperformed
the other emerging-market currencies and
Turkish market rates rose by approx. 5 bp.
The movements are an indication that the
government’s ’fiscal-policy rule’ will not be
approved in parliament as expected in October
but in the course of 2011 instead. The fiscal-
policy rule is aimed to ensure that the budget
deficit will not exceed 1% of GDP, i.e. the rule is
aimed to ensure fiscal-policy discipline in Turkey.
The plans to implement this rule have been
received well by the credit-rating agencies.
According to these agencies, the rule is a very
important step for Turkey towards reaching
investment-grade status. The Turkish Finance
Minister Simsek has warned of such a delay
previously and the reaction in the market should
therefore be limited. Furthermore, the public
debt is not an actual risk to Turkish assets at the
moment. We do not find that a later-than-
expected approval of the rule will stop the
positive development going on in Turkey at the
moment.
Latin America
Brazil
Our recommendation for bonds denominated in
Brazilian reals (BRL) is BUY. At twelve months’
term we take BRL to hold only limited potential
for appreciating against EUR. Particularly
uncertainty up to the presidential election in the
autumn and the aversion of the central bank/the
authorities to a USD/BRL rate below 1.70 will
hamper BRL appreciation. Our recommendation
of buying bonds denominated in reals is
therefore mainly based on relatively attractive
yields. For instance, the y-t-m of EBRD 9.25%
2012 is about 8.61%. The latest update of our
recommendation will be available in English
soon.
Inflation has decreased in 2010, but for June it
was 4.84%, down from 5.22% y/y for May.
Inflation was extensively pushed down by falling
food prices. The preliminary inflation data for the
first fortnight of July showed a fall of 0.09% m/m,
and this indicates a lower y/y inflation rate still
for July. It should be noted that core inflation
rose for the first part of June, but at a lower rate
of increase than for May. Although the y/y
inflation has been falling over recent months, we
find that there is still a considerable underlying
pressure on inflation from the rapidly growing
economy. The very volatile food prices are driving
up inflation.
Peru
Our recommendation for bonds denominated in
the Peruvian nuevo sol (PEN) is BUY. Somewhat
surprisingly the Peruvian central bank last night
raised interest rates by 0.50 percentage point to
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EM DAILY
Emerging Markets • 6 August 2010 • Jyske Markets
2.50%. Consensus was for a quarter-point hike,
whereas we expected interest rates to be left
unchanged. The central bank termed the hike
preventive and said that it is to keep inflation
below the target of 2% +/- 1 percentage point.
The surprise hike will probably make Peruvian
yields rise today (particularly in the light of the
falls seen over recent weeks), but it will also be
favourable for the nuevo sol.
.

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EM DAILY
Emerging Markets • 6 August 2010 • Jyske Markets

EMBI Global Diversified Index

Instr um e nt D aily R e t. (% ) M T D R e t. (% ) YT D R e t. (% ) C r e dit S pr e ad M ar k e t C ap. (% )
(bp)

EM B I G lo b a l D ive rs ifie d 0 ,0 8 1 ,0 8 1 1 ,0 3 29 4 1 0 0 ,0 0
R e g io n
Afric a 0 ,2 1 1 ,0 3 8 ,8 1 320 5 ,3 1
M id d le Ea s t 0 ,1 6 0 ,3 7 8 ,0 0 379 4 ,8 3
Eu ro p e 0 ,1 4 1 ,1 8 9 ,8 7 26 2 2 8 ,6 0
L a tin 0 ,0 8 1 ,3 2 1 2 ,4 2 339 4 0 ,6 5
As ia -0 ,0 7 0 ,6 6 1 1 ,1 4 19 5 2 0 ,6 2
C o untr y
B e liz e 0 ,6 3 0 ,7 3 5 0 ,6 9 789 0 ,1 9
Ka z a kh s ta n 0 ,5 6 1 ,8 0 - 30 5 3 ,1 6
P anam a 0 ,5 2 1 ,1 5 - 16 5 3 ,4 5
Ira q 0 ,3 1 0 ,7 1 1 4 ,0 0 436 0 ,9 5
S e rb ia 0 ,2 7 0 ,0 1 3 ,5 8 452 0 ,4 3
Gabon 0 ,2 5 1 ,1 5 9 ,7 4 411 0 ,4 0
C ro a tia 0 ,2 4 2 ,0 8 5 ,8 0 26 7 1 ,2 5
G hana 0 ,2 4 1 ,3 7 1 1 ,9 0 450 0 ,3 5
B u lg a ria 0 ,2 3 0 ,7 7 4 ,3 0 26 8 0 ,6 1
Tu rke y 0 ,2 2 0 ,9 7 8 ,6 7 227 7 ,1 1
Ve n e z u e la 0 ,2 2 3 ,3 9 1 3 ,8 7 10 49 4 ,2 2
Eg yp t 0 ,2 1 2 ,1 2 7 ,1 0 237 0 ,6 6
S o u th Afric a 0 ,1 7 0 ,7 5 8 ,9 6 158 3 ,0 6
El S a lva d o r 0 ,1 4 2 ,5 1 1 0 ,7 8 337 1 ,4 2
Le b a no n 0 ,1 2 0 ,2 9 - 352 3 ,8 9
H u n g a ry 0 ,1 2 3 ,3 4 3 ,9 5 29 8 1 ,4 7
C o lo m b ia 0 ,1 1 0 ,7 0 1 2 ,4 9 170 4 ,7 4
L ith u a n ia 0 ,1 0 1 ,6 4 - 29 6 1 ,6 4
R u s s ia 0 ,0 8 0 ,9 9 7 ,3 9 241 7 ,3 1
Arg e n tin a 0 ,0 7 2 ,5 3 - 6 88 2 ,3 3
M e xic o 0 ,0 6 1 ,2 9 1 2 ,3 1 173 7 ,1 5
P o la n d 0 ,0 6 0 ,9 7 7 ,0 1 16 1 2 ,9 6
P h ilip p in e s 0 ,0 4 0 ,6 4 1 2 ,0 2 19 7 6 ,8 6
Ec u a d o r 0 ,0 3 0 ,1 8 0 ,6 4 10 42 0 ,2 4
B ra z il 0 ,0 2 0 ,6 6 - 20 3 7 ,7 9
Ja m a ic a 0 ,0 2 0 ,1 4 4 0 ,3 7 517 0 ,1 9
D o m in ic a n R e p u b lic 0 ,0 2 1 ,8 6 1 2 ,4 6 376 0 ,6 3
S ri L a n ka 0 ,0 2 0 ,6 3 8 ,0 4 349 0 ,4 5
Tu n is ia 0 ,0 2 0 ,2 2 4 ,7 1 10 0 0 ,3 0
M a la ys ia 0 ,0 2 0 ,8 6 8 ,0 9 140 3 ,5 2
C h in a 0 ,0 1 0 ,3 9 6 ,3 7 79 2 ,1 0
U ru g u a y -0 ,0 1 0 ,9 8 1 5 ,7 7 20 9 2 ,6 6
C h ile -0 ,1 3 -0 ,1 6 5 ,4 2 136 2 ,0 0
In d o n e s ia -0 ,1 7 0 ,6 6 1 3 ,0 4 20 2 6 ,3 8
P e ru -0 ,1 9 1 ,3 2 1 4 ,2 1 156 3 ,6 4
G e o rg ia -0 ,2 2 0 ,1 2 6 ,1 0 529 0 ,2 2
Vie tn a m -0 ,3 0 1 ,0 4 1 5 ,3 7 255 0 ,8 0
U kra in e -0 ,3 8 0 ,1 8 3 0 ,5 8 50 0 2 ,4 4
P a kis ta n -1 ,0 1 -0 ,0 9 2 0 ,4 8 574 0 ,5 0

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 • 6 August 2010 • Jyske Markets

GBI EM Diversified
In s tru m e n t D a ily R e tu rn D K K (% ) M T D R e t. D K K (% ) YT D R e t. D K K (% ) Yie ld (% ) D u ra tio n (y ) M a rk e t C a p (% )
GB I EM D iv ers ified 0 ,1 9 0 ,3 2 1 8 ,2 6 6 ,2 9 4 ,5 6 1 0 0 ,0 0
R e g io n
Latam 0 ,3 4 0 ,5 7 2 2 ,7 7 7 ,0 7 5 ,9 8 2 9 ,1 1
As ia 0 ,2 8 -0 ,0 7 2 1 ,8 4 3 ,4 6 5 ,0 5 2 0 ,0 0
Eu ro p e 0 ,0 9 0 ,5 9 1 2 ,5 3 6 ,4 6 2 ,9 8 4 0 ,0 0
M ideas t & Africa -0 ,0 1 -0 ,6 8 2 0 ,1 4 8 ,2 7 5 ,6 4 1 0 ,8 9
C o u n try
B razil 0 ,6 7 1 ,0 3 1 8 ,2 5 9 ,7 1 6 ,1 6 5 ,4 6
Hu n gary 0 ,5 8 2 ,1 3 3 ,4 6 6 ,9 3 3 ,7 9 1 0 ,0 0
P eru 0 ,5 2 1 ,2 6 1 5 ,7 9 6 ,0 0 8 ,7 2 6 ,4 6
C o lo m b ia 0 ,4 5 2 ,0 5 4 2 ,8 2 5 ,9 1 6 ,4 8 4 ,1 9
M alay s ia 0 ,4 4 0 ,0 5 2 2 ,6 5 3 ,6 5 4 ,2 3 1 0 ,0 0
B razil B ro ad 0 ,3 6 -0 ,6 6 1 7 ,8 2 1 1 ,7 0 2 ,4 5 3 ,0 0
P o lan d 0 ,3 3 0 ,4 3 8 ,1 3 5 ,3 9 3 ,8 7 1 0 ,0 0
Thailan d 0 ,1 1 -0 ,1 9 2 0 ,9 5 3 ,3 2 5 ,8 6 1 0 ,0 0
Egy p t 0 ,0 5 -0 ,3 7 1 1 ,0 7 8 ,7 4 1 ,7 4 0 ,8 9
S o u th Africa -0 ,0 2 -0 ,7 1 2 1 ,0 3 8 ,2 6 5 ,9 9 1 0 ,0 0
M exico -0 ,0 2 -0 ,3 0 2 6 ,5 9 6 ,4 7 4 ,9 6 1 0 ,0 0
R u s s ia -0 ,2 3 0 ,5 9 2 0 ,4 4 5 ,9 7 2 ,2 1 1 0 ,0 0
Tu rk ey -0 ,3 0 -0 ,7 9 1 8 ,2 1 8 ,4 9 2 ,0 5 1 0 ,0 0

In s tru m e n t D a ily R e tu rn U S D (% ) M T D R e t. U S D (% ) YT D R e t. U S D (% ) Yie ld (% ) D u ra tio n (y ) M a rk e t C a p (% )

GB I EM D iv ers ified 0 ,2 7 1 ,3 1 8 ,2 8 6 ,2 9 4 ,5 6 1 0 0 ,0 0
R e g io n
Latam 0 ,4 2 1 ,5 6 1 2 ,4 2 7 ,0 7 5 ,9 8 2 9 ,1 1
As ia 0 ,3 6 0 ,9 1 1 1 ,5 6 3 ,4 6 5 ,0 5 2 0 ,0 0
Eu ro p e 0 ,1 8 1 ,5 8 3 ,0 4 6 ,4 6 2 ,9 8 4 0 ,0 0
M ideas t & Africa 0 ,0 7 0 ,3 0 1 0 ,0 1 8 ,2 7 5 ,6 4 1 0 ,8 9
C o u n try
B razil 0 ,7 6 2 ,0 2 8 ,2 7 9 ,7 1 6 ,1 6 5 ,4 6
Hu n gary 0 ,6 6 3 ,1 3 -5 ,2 7 6 ,9 3 3 ,7 9 1 0 ,0 0
P eru 0 ,6 1 2 ,2 6 6 ,0 3 6 ,0 0 8 ,7 2 6 ,4 6
C o lo m b ia 0 ,5 3 3 ,0 5 3 0 ,7 7 5 ,9 1 6 ,4 8 4 ,1 9
M alay s ia 0 ,5 3 1 ,0 4 1 2 ,3 0 3 ,6 5 4 ,2 3 1 0 ,0 0
B razil B ro ad 0 ,4 4 0 ,3 1 7 ,8 9 1 1 ,7 0 2 ,4 5 3 ,0 0
P o lan d 0 ,4 1 1 ,4 1 -0 ,9 9 5 ,3 9 3 ,8 7 1 0 ,0 0
Thailan d 0 ,1 9 0 ,7 9 1 0 ,7 5 3 ,3 2 5 ,8 6 1 0 ,0 0
Egy p t 0 ,1 3 0 ,6 0 1 ,7 0 8 ,7 4 1 ,7 4 0 ,8 9
S o u th Africa 0 ,0 6 0 ,2 7 1 0 ,8 2 8 ,2 6 5 ,9 9 1 0 ,0 0
M exico 0 ,0 6 0 ,6 8 1 5 ,9 2 6 ,4 7 4 ,9 6 1 0 ,0 0
R u s s ia -0 ,1 5 1 ,5 8 1 0 ,2 8 5 ,9 7 2 ,2 1 1 0 ,0 0
Tu rk ey -0 ,2 2 0 ,1 9 8 ,2 4 8 ,4 9 2 ,0 5 1 0 ,0 0

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 • 6 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.