Fisher Capital Management Seoul Korea: Market Overview 1st Quarter 2010

Fisher Capital Management Seoul Korea: Market Overview 1st Quarter 2010 - India is in a
sweet spot. The central government budget which set the tone for reducing fiscal deficit and an
unexpected increase in the policy rate to rein in inflation has convinced the markets and
economists that India is on its way to having a robust economic growth. Industrial output also
continued to grow at a fast pace in January as companies produced more cars and cement. In
the fiscal year 2011 that ends in March 2011, GDP growth of 8.5% is achievable. Long-term
predictions for the southwest monsoons are expected to be normal, giving a boost to
agricultural production and domestic demand.

Fisher Capital Management Seoul Korea- Inflation in India has been surging, driven by a low
base and high food prices as the weakest monsoon rains in 37 years last year hurt farm output.
Inflation running at 8.5% may have peaked and it is expected to ease by April as the winter-
sown crop comes to market. The year-on-year inflation rate for food articles was 16.22% in the
week ending March 13, far above the comfortable zone for the central bank and the
government. In order to manage the inflationary expectations, the central bank increased
overnight lending and borrowing rates by 0.25 percentages point each, making it one of the
first major central banks to raise rates. The central bank further announced that it would
continue to roll back its loose monetary policy to manage prices, as the country can’t have
sustained strong growth with high inflation. We expect a 0.25-percentage-point rate hike in
mid-April and another increase of one percentage point through March 2011.

Fisher Capital Management Seoul Korea: Market Overview 1st Quarter 2010 - The rebound in
industrial activity also saw a surge in India’s exports for the third month running in January.
Exports in January rose 11.5% from a year earlier to $14.34 billion, after having increased 9.3%
to $14.61 billion in December. Imports increased 35.5% in January to $24.70 billion while oil
imports rose by 56% to $7.05 billion. Non-oil imports, a barometer of investment activity, grew
28.8% to $17.65 billion.

On the back of robust economic numbers and policy pronouncements, the rating agency
Standard & Poor’s raised its rating outlook to stable, expecting the fiscal situation to recover
and growth to remain strong in the coming years. The government’s commitment to follow the
recommendations of the 13th Finance
Commission, as well as its move to reduce fertilizer subsidies and raise domestic fuel prices
were taken as positive indicators. The country’s external position continues to be in a
comfortable zone.

Fisher Capital Management Seoul Korea: Market Overview 1st Quarter 2010 - It is unlikely that
India will benefit from the Google-China spat as the Indian government will not provide the kind
of benefits China extends to the manufacturing sector in China. But some relocation is likely to
emerge. For example, American companies GoDaddy and Dell have threatened to pull out of
China and relocate themselves in India.