emerging markets briefer - danske bank€¦ · 2 | 17 june 2014 riefer eur/pln emerging markets...

Important disclosures and certifications are contained from page 23 of this report. www.danskeresearch.com

Investment Research — General Market Conditions

The past year has been very challenging for global emerging markets (EM) and even

though we have seen market sentiment turn a bit more positive in the past couple of

months, it is also clear that the markets remain ‘shaky’.

One of the factors featuring prominently in the EM volatility over the past year is the

return of what we could call regime uncertainty: an increase in political uncertainty and

geopolitical uncertainty across the global EM universe. Some of the issues include the

following: corruption scandals in Turkey, significant labour market unrest in South

Africa, ongoing street protests in Brazil ahead of the football World Cup, violent protests

and demonstrations in Venezuela, the continued civil war in Syria, which now seems to

be spreading to Iraq, Ukrainian-Russian tensions, the military coup in Thailand and so on.

All these conflicts to a smaller or larger extent have had a negative impact on EM

sentiment over the past year, either directly or through the impact of these crises on global

commodity prices. One example is the Ukrainian-Russian conflict, which has clearly

contributed to the significant increase we have seen in global food prices and to some

extent global gas prices.

While these conflicts have obviously had a negative impact on overall EM sentiment, one

could argue that they are mainly a consequence of the global EM crisis rather than a cause

of it. Hence, we think there is a significant correlation between the slowdown in

economic growth in many EM since 2011-12 and the increase in regime uncertainty.

While the EM in general weathered the initial global economic and financial storm in

2008-09 well, in recent years most EM economies have seen a slowdown. In our view,

this has mostly been a result of Chinese monetary tightening, stagnation in global

commodity prices and unwelcomed monetary tightening to curb the sell-off in the EM

currencies as well as the increased regime uncertainty in many countries.

Hence, with economic conditions worsening, there has been an increase in public

disconnect in many EM countries. Furthermore, with public coffers coming under

pressure, democratic as well as non-democratic governments have found it harder to

‘buy’ support from voters and special interests.

Looking ahead, we warn against overemphasising the impact of the increased regime

uncertainty on the global EM markets as we mostly see the increased uncertainty as a

consequence of weaker growth rather than a cause of it. However, with no clear signs of a

major acceleration in EM growth, it seems as if the heightened regime uncertainty is

becoming more permanent in many EM. Therefore, we need to remind ourselves why we

call them EM and remember that by definition, these economies are riskier than

developed markets.

17 June 2014

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

Emerging Markets Briefer

Return of ‘regime uncertainty’

Contents

Poland ................................................ 2

Czech Republic ............................. 3

Hungary............................................. 4

Romania ............................................ 5

Baltics ................................................ 6

Russia ................................................ 7

Ukraine .............................................. 8

Kazakhstan ..................................... 9

Turkey ............................................ 10

South Africa ............................... 11

Brazil ............................................... 12

Mexico............................................ 13

China ............................................... 14

Indonesia ...................................... 15

India ................................................. 16

FX forecasts ............................... 17

Forecasts vs forwards ........ 20

Monetary policy calendar .. 21

mailto:[email protected]

2 | 17 June 2014 www.danskeresearch.com

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Poland

Macro outlook

The latest GDP data shows that growth seems to be picking up faster than we

previously expected. We now expect real GDP growth of 3.6% y/y in 2014 and 3.6%

in 2015. On the other hand, the ongoing Ukrainian-Russian conflict could potentially

harm Polish growth going forward even though we think the effect has so far been

very limited.

We still expect private consumption and investments to be the main drag on growth

this year. Given the expected weakness in private demand, external balances should

improve somewhat (and have been doing so recently).

Monetary policy outlook

While Polish growth seems to be picking up, inflation remains very subdued and there

is a risk of outright deflation in the coming months in Poland. The continued very low

inflation could push the Polish central bank (NBP) in a slightly more dovish direction

and rate cuts cannot be ruled out. The ECB’s recent easing measures combined with a

stronger zloty could also add to market speculation about a possible rate cut.

However, for now, the NBP keeps signalling that rates will be on hold throughout

2014.

FX outlook

The zloty has been doing surprisingly well recently. The recent strengthening has,

among other things, been driven by the ECB’s more dovish stance and the drop in

eurozone money market rates has helped make the zloty more attractive from a carry

perspective. Looking forward, we believe that the strengthening could continue on a

three-six month horizon – primarily driven by attractive carry on the zloty.

No real inflation pressure Growth is picking up

Source: Macrobond Source: Macrobond

PLN

Credit rating:

S&P: A- (stable)

Currency regime:

Free float (freely convertible)

Inflation target:

2.5% +/-1pp

Macro forecasts

Source: Macrobond, Danske Bank Markets

Interest rate forecast

Source: Danske Bank Markets

FX forecasts


2013 2014 2015 2016

GDP (% y/y) 1.5 3.6 3.6 4.0

GDP deflator (% y/y) 1.0 1.6 1.8 1.9

CPI (% y/y) 1.0 1.0 1.5 2.0

Private consumption (% y/y) 0.8 3.1 3.5 3.9

Fixed investments (% y/y) -0.1 3.0 3.5 3.9

Unemployment (%) 13.4 12.6 12.4 12.1

Current account (% of GDP) -1.6 -1.6 -1.0 -1.2

Policy rate

Next meeting

Next change - Unchanged 2014

End-2014

National Bank of Poland (NBP)2.50

02 July 2014

2.50

Danske Forward

16-Jun 4.14

+3M 4.05 4.16

+6M 4.10 4.19

+12M 4.15 4.23

Danske Forward

16-Jun 3.05

+3M 3.05 3.07

+6M 3.15 3.08

+12M 3.29 3.11

EUR/PLN

USD/PLN


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Czech Republic

Macro outlook

Czech Q1 GDP was revised up to 2.5% y/y GDP growth. That was slightly higher

than we expected but below the Czech central bank’s (CNB) forecast (0.2% y/y

lower). Growth was driven by investments but also domestic demand contributed

more than expected. We expect the Czech economy to continue its recovery with

average 2014 GDP growth of 2.4% y/y and 3.1% y/y in 2015 and 3.2% y/y in 2016.

The CNB’s current forecast is for 2014 GDP growth of 2.6% and 3.3% in 2015.

Inflation remains very low. Even though it increased in April to 0.4% y/y, up from

May’s 0.1% y/y, it came in below the CNB’s own forecast. We expect it to slow

down again in June before picking up a bit again. However, we expect it to rise up to

target slowly and to return to the CNB’s target of 2% somewhat later than the CNB

assumes.

Latest economic indicators confirm the ongoing economic revival. PMI in May

increased to 57.3 up from 56.5 and is one of the highest in CEE region. Industrial

production in April was 7.7% y/y and also retail sales in April were strong at 6.0%

y/y.


The CNB remains committed to using the exchange rate as a non-standard monetary

policy and to keeping the EUR/CZK floor at 27. Despite the continued economic

recovery, inflation continues to hover close to zero and is increasing less than

expected by the CNB. This means that the probability of a later exit from the

exchange rate commitment is increasing. We expect the CNB to keep the koruna cap

for longer – beyond Q1 15 as assumed by the CNB. Some CNB board members have

already acknowledged the possibility of a later exit.

FX outlook

The Czech koruna remains stable and is hovering around EUR/CZK 27.5. We expect

it to stay basically flat at current levels going forward and expect the CNB to maintain

the CZK cap beyond Q1 15. We forecast EUR/CZK at 27.40, 27.40 and 27.30 on

three-, six- and 12-month horizons.

CZK

Credit rating:

S&P: AA- (stable)

Currency regime:


Inflation target:

2% +/-1pp

Macro forecasts




FX forecasts


2013 2014 2015 2016

GDP (% y/y) -0.9 2.4 3.1 3.2

GDP deflator (% y/y) 1.9 1.9 2.0 2.0

CPI (% y/y) 1.4 1.4 0.9 1.8



Unemployment (%) 8.2 8.4 8.2 8.1


Policy rate

Next meeting


End-2014

Czech National Bank (CNB)0.05

26 Jun 2014

0.05

Danske Forward

16-Jun 27.44

+3M 27.40 27.40

+6M 27.40 27.38

+12M 27.30 27.33

Danske Forward

16-Jun 20.22

+3M 20.60 20.18

+6M 21.08 20.15

+12M 21.67 20.09

EUR/CZK

USD/CZK


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Hungary

Macro outlook

Growth is clearly picking up in Hungary and after years of stagnation, it is becoming

one of the fastest growth economies in central and eastern Europe. However, both

structural problems and weak domestic demand are continuing to weigh on economic

activity.

We now expect a higher pick-up in growth to 3.5% y/y in 2014 – up from 1.2% y/y in

2013. We expect growth to remain at 3.5% y/y in 2015.

Hungary has seen a substantial improvement in external balances. The improvement

in external balances partly reflects the continued improvement in Hungarian public

finances but also still weak domestic demand. That said, as growth is picking up, we

expect the current account surplus to shrink moderately in the coming years.


The Hungarian central bank (MNB) has initiated a policy of baby-step rate cuts.

Further monetary easing is justified as there is actually now deflation in Hungary

(despite higher growth) and there is certainly a risk of further deflation in coming

months. However, rates have now come down to the point where the MNB might start

to worry that the stability of the HUF is jeopardised. Furthermore, higher GDP growth

might also turn the MNB slightly less dovish.

FX outlook

We continue to believe that Hungary’s fairly strong external position is likely to be

supportive for the HUF in the medium term, as will the increasingly stronger recovery

in growth. As a consequence, the HUF could even strengthen moderately against the

EUR on a 12-month horizon, while the short-term outlook is likely to be dependent on

the general EM outlook as well as developments in the Russian-Ukrainian conflict. The biggest risks to the HUF remain the political uncertainty and the Hungarian

government once again taking a ‘misstep’ in economic policy.

Deflation Growth is picking up


HUF

Credit rating:

S&P: BB (stable)

Currency regime:


Inflation target:

3% (medium term)

Macro forecasts


Macro forecasts




FX forecasts


2013 2014 2015 2016

GDP (% y/y) 1.2 2.9 2.9 2.5

GDP deflator (% y/y) 3.0 3.1 3.1 3.0

CPI (% y/y) 1.7 1.2 3.2 3.1


Fixed investments (% y/y) 5.9 3.2 2.7 2.5

Unemployment (%) 8.9 8.0 7.6 7.4

Current account (% of GDP) 2.9 3.2 3.2 3.0

2013 2014 2015 2016

GDP (% y/y) 1.2 3.5 3.5 2.8

GDP deflator (% y/y) 3.0 3.1 3.3 3.1

CPI (% y/y) 1.7 1.7 1.2 3.2



Unemployment (%) 8.9 7.3 6.6 6.3


Policy rate

Next meeting

Next change - 10 bp June, 2014

End-2014

Hungarian Central Bank (MNB)2.40

24 Jun 2014

2.00

Danske Forward

16-Jun 307.8

+3M 305.0 308.4

+6M 305.0 309.2

+12M 305.0 311.3

Danske Forward

16-Jun 226.79

+3M 229.32 227.19

+6M 234.62 227.67

+12M 242.06 228.83

EUR/HUF

USD/HUF


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Romania

Macro outlook

The Romanian economy performed relatively well in 2013 with GDP growth of 3.3%

y/y. Q1 2014 GDP growth was decent, 3.8% y/y. We are fairly positive on the outlook

for the economy. As the country has improved its external imbalances, making it more

resilient to external shocks, it provides some scope for pro-growth policies going

forward. Furthermore, as the eurozone continues to recover, it should further support

export growth. We expect the Romanian economy to expand by 3.8% y/y in 2014, 3.7%

y/y in 2015 and 3.8% in 2016.

Inflation has dropped considerably over the past year and still continues to inch down. In

May, it surprised well on the downside when it dropped below 1%, precisely to 0.9% y/y,

down from April’s 1.2% y/y. Hence, headline inflation continues to be well below the

official inflation target of 2.5%. In 2014, we expect inflation to average around 2.1% y/y

and around 3% in 2015.

Economic indicators continue to point to an economic recovery. Retail sales in April

remained decent, expanding 5.1% y/y. Industrial production in April was also fairly good,

growing by 5.9% y/y.

The current account deficit has narrowed considerably over the past two years, where

especially the current account situation improved strongly in 2013 with the deficit

narrowing to 1.06% of GDP. Looking ahead, we expect the current account deficit to

remain sustainable. We expect a deficit of 1.4% of GDP in 2014 and 1.6% of GDP in

2015.


The Romanian central bank (NBR) initiated monetary policy easing in mid-2013 amid

the economic slowdown and falling inflation. Since mid-July 2013, it has eased monetary

policy by cutting its key policy rate by 175bp to 3.50%. At the May meeting, the NBR

stayed on hold. Given that inflation keeps falling, we cannot rule out that the NBR could

ease monetary policy further and cut interest rates further.

FX outlook

Due to Romania’s improved external imbalances, the leu has become more resilient to

external shocks. Along with improved risk sentiment and a continued domestic economic

recovery, this has been supportive for the RON. The currency has appreciated recently

and is already trading very close to its fair value. In that respect, we do not expect it to

appreciate much further going forward and we expect the EUR/RON to trade around

current levels of 4.40 on three-, six- and 12-month horizons.

Macro forecasts


RON

Credit rating:

S&P: BBB- (stable)

Currency regime:


Inflation target:

2014: 2.5% +/-1pp



FX forecasts


2013 2014 2015 2016

GDP (% y/y) 3.3 3.8 3.7 3.8

GDP deflator (% y/y) 3.5 2.8 2.8 2.8

CPI (% y/y) 4.0 2.1 2.9 2.9


Fixed investments (% y/y) -3.9 -2.6 2.6 3.6

Unemployment (%) 7.4 7.2 7.4 7.5


Policy rate

Next meeting

Next change - H2, 2014

End-2014

01 Jul 2014

3.50

National Bank of Romania (NBR)

3.25

Danske Forward

16-Jun 4.40

+3M 4.40 4.40

+6M 4.40 4.42

+12M 4.40 4.45

Danske Forward

16-Jun 3.24

+3M 3.31 3.24

+6M 3.38 3.25

+12M 3.49 3.27

EUR/RON

USD/RON

http://upload.wikimedia.org/wikipedia/commons/7/73/Flag_of_Romania.svg


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Baltics

Overall comment: the escalation in geopolitical tension with regard to the situation in

Ukraine is likely to have a significant negative impact on Baltic growth. Furthermore,

a further escalation in geopolitical tension could hurt the general investor perception

of the Baltic States.

Estonian macro outlook

The Estonian economy slowed significantly in 2013 and underperformed the other

two Baltic economies in terms of growth performance. In particular, the weak growth

of Estonia’s trading partners, such as Finland, has been weighing on growth. We

expect some pick-up in Estonia but, given the overall lacklustre European growth, we

expect this to be slow. We expect Estonian GDP growth to pick up moderately from

2013, to 1.5% y/y in 2014 and further to 1.8% y/y in 2015.

Latvian macro outlook

The recovery in the Latvian economy continues with GDP growth around 3-4% y/y

but the Ukraine-Russia conflict is clearly a downside risk to Latvian growth.

Latvia joined the euro area on 1 January. We do not expect a major short-term impact

as Latvia has effectively been ‘shadowing’ ECB monetary policy for years as a

consequence of the peg to the euro. However, it is also clear that the performance of

the Latvian economy is now linked completely to that of the euro area.

Inflation came down significantly in 2013 and we are likely to see outright deflation in

Latvia during some of 2014. We expect inflation to pick up only slowly in coming years.

Lithuanian macro outlook

Lithuania has not joined the euro area yet but looks set to fulfil the Maastricht criteria

soon. The economy continues to recover and growth remains among the fastest in

Europe. However, the output gap has not yet been fully closed following the sharp fall

in economic activity in 2008-09. We still expect Lithuanian growth to pick up. The

biggest near-term risk to growth is the expected sharp slowdown in Russia, as it is one

of Lithuania’s main trading partners.

As in Latvia, inflation in Lithuania fell significantly in 2013. Given the continued

decline in global commodity prices and continued slack in the Lithuanian economy,

we expect inflation to remain quite subdued in 2014 and 2015.

Baltics macro forecast


Year GDP (% y/y)

GDP deflator (% y/y) CPI (% y/y)

Private consumption

(% y/y)Fixed investments

(% y/y)Unemployment (%)

Current account (%

of GDP)

2013 0.8 5.0 2.8 4.2 1.1 8.8 -2.1

2014 1.5 1.6 0.7 2.2 6.3 8.9 -2.0

2015 1.8 1.7 1.7 1.5 3.4 9.1 -2.0

2016 2.4 1.8 1.8 2.2 3.3 9.1 -2.0

2013 4.8 1.7 0.0 5.4 -4.3 11.6 -1.0

2014 3.7 2.1 0.4 2.3 5.7 11.4 -1.5

2015 2.6 1.9 1.7 2.8 3.7 11.3 -2.0

2016 2.8 1.9 1.9 2.7 2.8 11.1 -2.0

2013 2.5 1.6 1.1 3.2 4.8 10.8 0.1

2014 2.4 1.8 0.7 2.4 2.3 10.8 -0.5

2015 2.7 1.9 1.9 2.6 2.6 10.6 -0.7

2016 2.9 1.9 1.9 2.8 2.8 10.4 -0.7

Lithuania

Latvia

Estonia

EEK

Credit rating:

S&P: AA- (stable)

Currency:

EUR since 1 January 2011

LVL

Credit rating:

S&P: A- (stable)

Currency:

EUR since 1 January 2014

LTL

Credit rating:

S&P: A- (stable)

Currency regime:

Currency board, ERM2 member

(freely convertible)

Inflation target:

None, due to fixed exchange rate


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Russia

Macro outlook

Economic growth in Russia is slowing further, posting 0.9% y/y growth in Q1 14

compared with 2.0% y/y in Q4 13. Our 2014 GDP forecast stays at -0.3% y/y due to a

surge in geopolitical risks, which have introduced both supply and demand side

shocks: extreme acceleration in capital outflows in Q1 14 and continuing monetary

tightening.

Fixed investment growth continues to be negative: it decreased 2.7% y/y in April,

falling for the fourth consecutive month. Construction fell 2.8% y/y in April, staying

negative for the ninth month in a row despite strong residential construction data:

15.8% y/y growth in April 2014 and a 31% expansion in Q1 14. As supply side

shocks and tightening monetary policy are set to have a further negative impact on

fixed investments in 2014, we see some upside risks in 2015-16 arising from giant

state projects such as the gas line deal with China.

Unemployment fell to 5.3% in April from 5.4% in March. Yet, private consumption

expansion is slowing down on high interest rates and weakened rouble: retail sales

expanded 2.6% y/y in April from a revised 4% y/y in the previous month.

Russia’s credit rating was downgraded by S&P to BBB- with a negative outlook on

25 April 2014 as geopolitical and economic risks continue to weigh.

FX and monetary policy outlook

The Russian central bank, Bank Rossii, surprisingly hiked its main rates by 50bp on

25 April to curb accelerating inflation and support the RUB. But it kept rates

unchanged on 16 June saying that Russia may hike if current inflation risks are

realized. We believe that a total 50bp rate cut is still possible in H2 14 if CPI falls

close to 6% y/y. Our CPI forecast for December 2014 is 6.2% y/y.

Consumer prices accelerated further to 7.6% y/y in May, staying far from Bank

Rossii’s 2014 target of 5%. Yet, if we see more escalation in the situation in Ukraine

and steep RUB devaluation, the consumer price index could stay far above 6% y/y

even in H2 14. The main inflation risk comes from the soaring prices of imported

goods, especially in Russia’s large cities.

Risk factors

The main risks continue to be geopolitical at present, although after the presidential

elections in Ukraine, the situation seemed to de-escalate. However, we have been

constantly reiterating that geopolitical risks are underestimated by the markets

The oil price risk is currently lower than it has been. However, Bank Rossii’s

monetary tightening is another large risk which could easily send the country into

recession already in 2014. A rapid devaluation of RUB could prompt more radical

measures such as capital control, although we see this as less probable under the new

governor of Bank Rossii than under the previous team.

RUB

Credit rating:

S&P: BBB- (negative)

Currency regime:

Managed peg versus dual currency

basket – 45% EUR and 55% USD

(freely convertible)

Inflation target:

5% in 2014, 4.5% in 2015

(December-on-December basis)

Macro forecasts




FX forecasts


2013 2014 2015 2016

GDP (% y/y) 1.3 -0.3 -1.8 0.5

GDP deflator (% y/y) 5.9 3.0 2.7 3.2

CPI (% y/y) 6.8 6.2 4.8 4.0

Private consumption (% y/y) 4.0 1.2 -2.2 2.2

Fixed investments (% y/y) -2.0 -3.7 -3.0 0.3

Unemployment (%) 5.6 5.9 7.1 6.9


Policy rate

Next meeting

Next change - 50 bp Q4 2014

End-2014

25 Jul 2014

7.50

Bank of Russia (CBR)

7.00

Danske Forward

16-Jun 47.00

+3M 48.94 47.93

+6M 49.80 48.92

+12M 51.00 50.88

Danske Forward

16-Jun 34.63

+3M 36.80 35.30

+6M 38.31 36.01

+12M 40.48 37.40

USD/RUB

EUR/RUB


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Ukraine

Macro outlook

The escalation of the political situation in Ukraine is weighing dramatically on the

Ukrainian economy. The economy grew 3.3% y/y in Q4 13, but fell 1.1% y/y in

Q1 14, according to final data. The economy has received its first external support as

a two-year stand-by agreement with the IMF has been made. However, military

operations by the Ukrainian army in the country’s Eastern parts to quash action by

federalisation and independence movements are putting the future of the programme

at risk.

The decline in industrial production continued in April posting a 6% y/y decline from

6.8% y/y fall in March. Mining and manufacturing shrank 7% y/y in April. As the

major unrest and military operations are concentrated on Ukraine’s most

industrialised regions, industrial production will be hit heavily in 2014. As Russian

energy giant Gazprom and Ukraine failed to agree on natural gas price and almost

USD2bn has not been received for previous gas supplies, the company said it is

moving to prepayment for gas. This would hit further industrial production in

Ukraine.

Retail sales growth cooled to 5.6% y/y in January-April 2014 from 7.7% y/y in

January-March 2014. Gas price increases are set to significantly reduce consumers’

purchasing power.


Inflation continues to accelerate on weak UAH reaching 10.9% y/y in May versus

6.9% y/y in April.

Ukraine’s foreign reserves grew by USD3.7bn as country gets the first tranche from

IMF. We expect USD/UAH to hit 15.00 this year as there are insufficient FX reserves

to provide enough support. However, IMF financing may mitigate the path of

devaluation.

Risk factors

Escalation of the geopolitical situation and difficulties with debt servicing are the

major economic risks in the current environment.

Private consumption set to dive in

2014

Industrial and agricultural production

Source: Macrobond, Danske Bank Markets Source: Macrobond, Danske Bank Markets

UAH

Credit rating:

S&P: CCC (negative)

Currency regime:

Managed peg versus USD

FX forecasts


Danske Forward

16-Jun 15.95

+3M 19.95 16.13

+6M 19.50 16.14

+12M 18.90 16.16

Danske Forward

16-Jun 11.75

+3M 15.00 11.88

+6M 15.00 11.88

+12M 15.00 11.88

USD/UAH

EUR/UAH


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Kazakhstan

Macro outlook

Kazakh economic growth slowed unexpectedly to 3.8% y/y in Q1 14 versus 6% y/y in

Q4 13, according to preliminary data. Agriculture, production of services and

construction were still growing, but industrial production shrank 0.3% y/y. Global

uncertainty among EM markets is also weighing on the Kazakh economy.

Kazakhstan’s credit rating outlook was lowered to negative from stable by rating

agency Standard & Poor’s on 13 June as the outlook for economic growth is

worsening together with effectiveness of monetary policy.

Real wage expansion jumped to 4.3% y/y in April versus 1% y/y in March. However,

the growth trend is downwards due to devaluated KZT. We expect CPI to increase to

8% y/y in 2014. Inflation accelerated further in May to 6.9% y/y versus 6.5% y/y in

April.

Low unemployment prevailed throughout 2013 and early 2014, remaining at 5.1% in

April.


On 11 February 2014, the National Bank of Kazakhstan (NBK) announced that it

would no longer support KZT at the previous level of around 155 for one USD. As a

result, KZT lost 19% against USD, hitting 186 in just one day. To improve liquidity in

the banking sector and accelerate credit growth, NBK is opening a USD10bn swap

line starting from 1 July 2014. The US dollars will be swapped into KZT at an annual

3% rate. According to NBK, another measure to boost credit growth will be

implemented from October 2015: 30% of lenders’ capital will be allowed to go into

derivatives. The rest must be invested into the economy. We see these actions as

positive for fixed investments and steady economic growth in the long run.

NBK reserves decline a bit from USD28.4bn, reaching USD27.6bn in May. On the

other hand, the national oil fund grew to new highs of USD75.8bn as oil revenues

remain strong.

Risk factors

Kazakhstan remains dependent on its resource sector and oil exports. Accelerating

inflation and weak global demand for commodities could cool Kazakh economic

growth further.

Kazakhstan and Russia are big trade partners. A slowdown in the Russian economy

would weigh on Kazakh exports, KZT and the economy.

KZT

Credit rating:

S&P: BBB+ (negative)

Currency regime:

Corridor versus USD

FX forecasts


GDP and inflation Industrial production growth


Danske Forward

16-Jun 249.08

+3M 252.70 249.10

+6M 249.60 249.24

+12M 245.70 249.61

Danske Forward

16-Jun 183.52

+3M 190.00 183.49

+6M 192.00 183.49

+12M 195.00 183.49

USD/KZT

EUR/KZT

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


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Turkey

Macro outlook

The Turkish economy has been showing quite clear signs of slowing over the past

couple of years due to increased political risk, significant volatility and sharp

monetary tightening. That said, we are now beginning to see some stabilisation in

Turkish growth. Hence, we expect 2.7% y/y real GDP growth in 2014 and 2.9% y/y in

2015.

The continued high inflation (8.4% y/y in 2014) and the large current account deficit

continue to be a problem from a fundamental perspective.


Turkish inflation expectations have risen sharply on the back of the significant sell-off

in the lira and this was undoubtedly, in our view, one of the main drivers behind the

central bank of Turkey’s (TCMB) emergency rate hike at the end of January. Recently

higher food prices have pushed Turkish inflation up further. That said, inflation has

probably peaked and recently the TCMB has changed course and initiated a rate

cutting cycle – cutting its key policy rate by 50bp at the latest monetary policy

meeting. The TCMB is likely to remain under political pressure to cut rates even more

despite the elevated level of inflation.

FX outlook

Continued fairly high inflation and a large current account deficit are likely to

continue to weigh on the lira over the longer term. However, these imbalances are to a

large extent already reflected in the lira and the lira continues to trade at what we

consider to be fairly ‘cheap’ levels from a fundamental perspective. Furthermore, high

Turkish interest rates are likely to provide some support for the lira. Overall, we see a

gradual depreciation of the lira, but we are slightly less negative than markets in

general.

TRY

Credit rating:

S&P: BB+ (negative)

Currency regime:

Free-float (freely convertible)

Inflation target:

5.0% year-end 2014

Interest rate forecasts


Macro forecasts


FX forecasts


GDP has picked up Current account deficit remains wide


Policy rate

Next meeting

Next change -50bp H1, 2014

End-2014

C.B. of the Republic of Turkey (TCMB)9.50

24 Jun 2014

8.00

2013 2014 2015 2016

GDP (% y/y) 4.1 2.7 2.9 3.4

GDP deflator (% y/y) 5.9 5.5 5.6 5.7

CPI (% y/y) 7.7 8.4 5.7 5.9



Unemployment (%) 9.4 9.4 9.7 9.9


Danske Forward

16-Jun 2.91

+3M 2.82 2.96

+6M 2.80 3.02

+12M 2.77 3.14

Danske Forward

16-Jun 2.14

+3M 2.12 2.18

+6M 2.15 2.23

+12M 2.20 2.31

USD/TRY

EUR/TRY


Em

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South Africa

Macro outlook

The South African economy has been hard hit by the prolonged strikes in the platinum

sector. This was reflected in very weak Q1 GDP, which showed growth of 1.6% y/y

(down from 2.0% y/y in Q4 13) but a contraction of 0.6% q/q from 3.8% growth in

Q4 13. Given such a weak reading and continued strikes, we have revised down our

GDP forecast to 1.9% y/y for this year and to 2.3% y/y in 2015. The South African

central bank (SARB) revised its GDP forecast for this year significantly down to 2.1%

in (versus 2.6% previously). In 2015, the SARB expects GDP growth of 3.1%.

Inflation in April rose further to 6.1%, breaking the upper end of the official central

bank’s inflation target range of 3-6%. Looking ahead, we expect inflation to accelerate

further in coming months and now expect headline it to average 6.5% in 2015 and 6.8%

y/y in 2016. The SARB forecasts average inflation of 6.3% in 2014 and 5.8% in 2015.

The current account deficit surprised positively in Q4 13, narrowing to a deficit of

5.1% of GDP, which was better than expected, while the Q3 13 deficit was revised to

a deficit of 6.4% of GDP from 6.8%. We do not expect the current account situation

to improve in coming years and expect a deficit of around 6.5% of GDP in 2014.

In Q4 13, unemployment unexpectedly moderated more than expected, falling to

24.1% from a revised figure of 24.5% in Q3 13. Looking ahead, we do not expect any

major improvement in the labour market as the economy remains weak.


The rate decision in May was a big shift in a more dovish direction. This was on the

back of significant deterioration in the growth outlook. The central bank is facing

conflicting policy choices: weakening economic activity but accelerating inflation.

Recent comments from SARB governor Gill Marcus still indicate that the next move

will be up. The outlook for monetary policy remains unclear but currently the growth

concerns outweigh inflation concerns. We therefore expect the SARB to stay on hold

at the next MPC meeting in July.

FX outlook

Our outlook for the rand has changed quite markedly. While the rand was boosted by

positive risk sentiment in May and even though the fairly positive sentiment towards

emerging markets still remains more or less intact, the rand recently came under some

pressure. This is on the back of persistent structural problems, which hit the economy

hard and which are no longer being ignored by investors. Structural problems,

consequently deteriorating the economic prospects and large external imbalances

mean that we turned negative on all forecast horizons. A credit rating downgrade is a

clear risk.

ZAR

Credit rating:

S&P: BBB (stable)

Currency regime:

Free float (Freely convertible)

Inflation target:

3-6%



FX forecasts


Macro forecasts


Policy rate

Next meeting

Next change +25bp H2, 2014

End-2014

South African Reserve Bank (SARB)5.50

17 Jul 2014

6.00

Danske Forward

16-Jun 14.58

+3M 14.90 14.76

+6M 14.69 14.99

+12M 14.62 15.52

Danske Forward

16-Jun 10.74

+3M 11.20 10.87

+6M 11.30 11.04

+12M 11.60 11.41

USD/ZAR

EUR/ZAR

2013 2014 2015 2016

GDP (% y/y) 1.9 1.9 2.3 2.6

GDP deflator (% y/y) 5.8 6.4 6.7 6.7

CPI (% y/y) 5.7 5.7 6.5 6.8



Unemployment (%) 24.1 25.4 25.7 25.8



Em

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Brazil Macro outlook

The Brazilian economy remained weak. Q1 14 GDP expanded by 1.9% y/y, down

from the revised 2.2% y/y in Q4 13. We expect the Brazilian economy to remain

weak and to operate well below its potential over the next three years. We expect

GDP growth for 2014 to average 2.0%, 2.6% in 2015 and 2.7% in 2016.

Manufacturing PMI continues to disappoint. In May, it fell further below the critical

50 to 48.8 from 49.3 in April. Industrial production remains well in the red, falling by

5.8% y/y in April, down from -0.7% y/y in March. Retail sales remain volatile and in

April came out at 6.7% y/y, up from -1.1% y/y in March.

The situation in the labour market continues to improve with unemployment in April

falling further down to 4.9% from 5.0% in March. Unemployment remains well

anchored.

Inflation in May inched further up to 6.37% y/y from 6.28% y/y in April. Hence, it is

getting closer to the upper end of the tolerance band of the official inflation target of

4.5% ,+/-2 percentage points. We expect inflation to hover around 6.2% on average in

2014 and around 6.5% y/y in 2015.


The Brazilian central bank (BCB) continued monetary tightening and at its monetary

policy committee (Copom) meeting at the start of April, it raised the Selic rate by

another 25bp to 11.0%. At May’s meeting, the central bank stayed on hold,

maintaining the key policy rate at 11%. We could still see some additional tightening

going forward.

FX outlook and risk factors

Amid the return of positive sentiment on emerging markets, the BRL has rebounded

since the EM turmoil at the beginning of this year. It has gained quite a bit and is now

more or less at its fair value. Despite the high carry, which is supportive for the BRL,

as long as the economy remains as weak as now and the outlook for commodities and

the Chinese economy in that respect is so uncertain, we cannot see more potential for

further BLR strengthening for now. We therefore expect the BRL to remain around

2.25 against the USD in all forecast horizons.

BRL

Credit rating:

S&P: BBB- (stable)

Currency regime:

Free float (non-convertible)

Inflation target:

4.5% +/- 2 percentage points

Macro forecasts


Interest rate forecasts


FX forecasts


2013 2014 2015 2016

GDP (% y/y) 2.3 2.0 2.6 2.7

GDP deflator (% y/y) 7.7 6.4 6.7 6.7

CPI (% y/y) 6.2 6.2 6.5 6.8


Fixed investments (% y/y) 6.2 -3.1 1.8 2.9

Unemployment (%) 5.1 4.8 4.9 4.9


Policy rate

Next meeting

Next change + 25 bp H2, 2014

End-2014

16 Jul 2014

11.25

Central Bank of Brazil (BCB)11.00

Danske Forward

16-Jun 3.03

+3M 2.99 3.11

+6M 2.93 3.19

+12M 2.90 3.34

Danske Forward

16-Jun 2.24

+3M 2.25 2.29

+6M 2.25 2.35

+12M 2.30 2.45

USD/BRL

EUR/BRL


Em

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Mexico Macro outlook

Q1 14 GDP came out slightly lower than expected with GDP expanding by 1.8% y/y,

up from 0.7% y/y in Q4 13. We expect the Mexican economy to recover this year;

however, the recovery is likely to be milder than we previously expected. We expect

the economy to expand 2.9% y/y in 2014, 4.0% y/y in 2015 and 4.0% y/y in 2016.

Manufacturing PMI in May remained above the critical at 51.9, slightly up from 51.8

in April. Retail sales still remain volatile and weak, despite coming out in positive,

growing by 1.7% y/y in March up from -1.7% y/y in February. Unemployment

remains fairly contained, just below 5%.

The Mexican government, led by President Peña Nieto, approved a bill to end the

75-year state monopoly on Mexican oil production. The legislation is credit positive

and positive for the Mexican economic outlook, in our view. In early February,

Moody’s upgraded Mexico’s foreign currency long-term rating from Baa1 to A3.


Consumer prices in May stayed almost unchanged at 3.51% y/y, up from 3.50% y/y in

April. Hence, inflation remains within the inflation target range of 3.0% +/-1pp but

very close to the upper end of the tolerance band. We expect it to remain elevated and

expect average inflation of 3.8% y/y in 2014 and 4.5% y/y in 2015.

The Mexican central bank, Banco de Mexico, surprised the markets when it

unexpectedly slashed its key policy rate by 50bp to 3.00% at its most recent monetary

policy setting meeting in June. Looking ahead, we do not expect the central bank to

deliver further easing as inflation remains close to the upper end of the tolerance

band. We expect Banco de Mexico to stay on hold this year.

FX outlook

The MXN has lost some of its momentum despite supportive risk sentiment. It is

mostly due to the recent rate cut by the Mexican central bank as economic activity has

been disappointing and the recovery weaker than expected. Our EMEA FX Scorecard

signals that we could see more weakness in the MXN. The global score in particular is

currently negative, while the carry supports the MXN somewhat less.

Growth remains weak Inflation remains within target range


MXN

Credit rating:

S&P: BBB (positive)

Currency regime:


Inflation target:

3.0% +/- 1 percentage point

Macro forecasts


FX forecasts




2013 2014 2015 2016

GDP (% y/y) 1.3 2.9 4.0 4.0

GDP deflator (% y/y) 1.8 2.9 2.9 2.9

CPI (% y/y) 3.8 3.8 4.5 3.0



Unemployment (%) 4.3 4.8 4.8 4.8


Danske Forward

16-Jun 17.68

+3M 17.49 17.80

+6M 17.16 17.91

+12M 16.70 18.15

Danske Forward

16-Jun 13.03

+3M 13.15 13.11

+6M 13.20 13.19

+12M 13.25 13.34

USD/MXN

EUR/MXN

Policy rate

Next meeting


End-2014

11 Jul 2014

Bank of Mexico (Banxico)3.00

3.00


Em

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China

Macro outlook

Growth has started to stabilise after slowing since Q3 13 on the back of the People’s

Bank of China’s (PBoC) de facto monetary tightening in 2013. We expect growth to

improve moderately in H2 14 due to moderate easing of both monetary and fiscal policy

and some improvement in exports to developed markets.

There is still a risk that the government’s bid to deleverage the Chinese economy could

turn into a severe credit crunch. However, credit growth has started to stabilise and most

credit risk indicators have improved markedly recently. Hence, the risk of renewed

money market stress has declined and the risk to our 7.4% GDP growth forecast for 2014

has become more balanced.

Inflationary pressure remains subdued but higher food prices are expected to push

inflation higher in H2 but we expect inflation to stay below 3% y/y – below the

government’s 3.5% critical threshold, leaving room to ease if needed.


Money market rates and bond yields have declined markedly since end-2013,

suggesting that monetary policy has been eased although both the leading interest

rates have so far been left unchanged. In June, the PBoC announced a 50bp targeted

cut in the reserve requirement for smaller banks. However, with focus on reigning in

excessive credit growth, the PBoC will only ease reluctantly. An across-the-board cut

in the reserve requirement for all banks is still possible but the PBoC does not at this

stage appear willing to cut the leading interest rates.

FX outlook

The CNY has weakened since the PBoC widened the daily trading band in March for

USD/CNY to +/-2% from +/-1% previously. So far this year, the CNY has weakened

by 2.6% against the USD. In our view, PBoC is not targeting a major depreciation of

CNY but is mainly hoping that that more two-way volatility in the exchange rate will

deter speculative capital inflows into China. The wider trading band should be

regarded as another step towards a floating exchange rate and a convertible currency.

China’s current account surplus above 2% of GDP and continued gains in market share

on global export markets in our view suggest that the Chinese currency is still slightly

undervalued. Hence, we believe the CNY remains on a moderate appreciation path in the

medium term. However, as long as the PBoC has an easing bias we expect USD/CNY to

move sideways at the upper end of the daily trading band, but with the economy expected

to recover moderately in H2 14 we also expect CNY to resume a moderate appreciation.

PBoC is not targeting major depreciation of the CNY

China appears to have bottomed out

Source: Macrobond Source: Macrobond, Danske Bank Markets

CNY

Credit rating:

S&P: AA- (stable)

Currency regime:

Crawling USD peg

Inflation target:

3.5% for 2014



FX forecasts


Policy rate

Next meeting


End-2014

Not announced

People's Bank of China (PBOC)6.00

6.00

Danske Forward

16-Jun 8.45

+3M 8.23 8.49

+6M 7.98 8.52

+12M 7.62 8.57

Danske Forward

16-Jun 6.23

+3M 6.19 6.26

+6M 6.14 6.27

+12M 6.05 6.30

USD/CNY

EUR/CNY


Em

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Indonesia

Macro outlook

The Indonesian economy has been balancing close to overheating in recent years and

Indonesia’s current account has deteriorated markedly since 2011. However, the

current account deficit in Q1 14 declined markedly to around 2% of GDP from around

4% of GDP in Q3 13, meaning it is now more or less covered by foreign direct

investment (FDI) inflows. Growth has been slowing moderately in recent quarters to

below 5.5% y/y in Q1 14, but growth is expected to stabilise in Q2 and improve

slightly in H2 14.

Inflation has started to ease slightly after it surged above 8% y/y last year on the back

of a weaker IDR and a cut in subsidies on gasoline and diesel. Inflation should decline

markedly in H2 14 as the impact of the cut in government subsidies starts to wane.


Bank of Indonesia (BI) hiked interest rates aggressively last year n the wake of the

plunge in the IDR and the jump in inflation after energy subsidies were cut last. We

expect inflation to decline gradually as the impact of the cut in subsidies starts to

wane but we do not expect BI to cut interest rates until political uncertainty has been

reduced in connection with a possible second-round presidential election in

September.

FX outlook

2014 is a year with considerable political uncertainty. The main opposition party

PDI-P performed far from as strongly as expected in connection with the

parliamentary election on 9 April, although its candidate Joko Widodo is still

expected to win the presidential election in July or September (if a second round is

needed). Hence, a new PDI-P-led government would be dependent on the support of

other parties and for that reason it is likely to be a weak government. In policy terms,

we expect Indonesia to continue its slide towards a more nationalistic and populist

policy, with a negative impact on FDI and competitiveness.

Following its plunge last year, the IDR is no longer overvalued and its current account

deficit no longer excessive. However, because of foreign investors’ large share in

Indonesian government bonds, Indonesia is particularly sensitive to Fed tapering. In

addition, Indonesia’s balance of payments could be affected by the lack of policy

adjustments in 2014 and a push in a more protectionist direction. We still see

moderate depreciation of the IDR on a 12-month horizon.

CA deficit no longer excessive and

portfolio investments returning

IDR stabilisation could pave the way

for an interest rate cut in late 2014


IDR

Credit rating:

S&P: BB+ (stable)

Currency regime:

Free float

Inflation target:

3.5-5.5% for 2014



FX forecasts


Policy rate

Next meeting


End-2014

7.50

10 Jul 2014

Bank Indonesia (BI)

7.25

Danske Forward

16-Jun 15999

+3M 15561 16105

+6M 14950 16351

+12M 15120 16933

Danske Forward

16-Jun 11818

+3M 11700 11863

+6M 11500 12038

+12M 12000 12448

USD/IDR

EUR/IDR


Em

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India

Macro outlook

GDP growth has slowed markedly to less than 5% after double-digit growth just

before the global financial crisis started in 2008. The slowdown has been driven by

both monetary tightening and a slowdown in India’s potential growth as the pace of

economic reforms has slowed.

India’s current account has also improved markedly to less than 0.5% of GDP in

Q1 14, from more than 5% of GDP in H2 13.

The general election concluded in May gave main opposition party BJP an outright

majority in the Lower House. Hence, it appears that India will get a relatively strong

government which will again lead to accelerated economic reforms. In 2014, GDP

growth is likely to remain subdued slightly below 5%. With inflation gradually under

control and external balances substantially improved, India now appears well

positioned for a recovery in 2015 and 2016.


The new Reserve Bank of India’s (RBI) governor Raghuram Rajan has attempted to

signal an increasingly independent monetary policy and, among other things, RBI is

planning to move gradually towards a pure inflation target using traditional CPI instead

of currently wholesale prices. A report commissioned by the RBI recommends the

inflation target for CPI should eventually be 4% +/-2%., With CPI inflation currently

more than 8% y/y this is very ambitious. Hence, a possible new inflation target suggests a

more hawkish RBI and it now looks less likely that the RBI will cut its leading interest

rates until late H2 14.

FX outlook

INR has appreciated markedly in recent months and we expect the appreciation to

continue in the short term. The main drivers include 1) a marked improvement in the

current account, 2) possible acceleration in economic reforms under a strong new

BJP-led government, 3) credible/hawkish central bank and 4) dovish central banks in

the developed countries. In 2015, gradual monetary tightening in the US should

gradually start to weigh on INR. However, because the Indian money and bond

market is relatively closed, India should also be less sensitive to higher interest rates

in the US than other EM.

External balances have improved

markedly

Deleveraging in India will soon come to

an end


INR

Credit rating:

S&P: BBB- (negative)

Currency regime:

Free float

Inflation target:

5% medium term



FX forecasts


Policy rate

Next meeting


End-2014

05 Aug 2014

8.00

Reserve Bank of India (RBI)

7.75

Danske Forward

16-Jun 81.61

+3M 79.14 82.61

+6M 75.40 84.05

+12M 74.34 87.16

Danske Forward

16-Jun 60.13

+3M 59.50 60.85

+6M 58.00 61.88

+12M 59.00 64.07

USD/INR

EUR/INR


Em

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FX forecasts

Core – major


Wider CEE


Baltics


Danske Forward Danske Forward Danske Forward Danske Forward Danske Forward

16-Jun 1.36 745.6 899.2 812.6

+3M 1.33 1.36 746.0 745.4 890.0 900.0 800.0 815.6

+6M 1.30 1.36 746.0 745.1 880.0 903.5 795.0 818.7

+12M 1.26 1.36 746.0 744.8 870.0 903.5 785.0 825.1

16-Jun 1.36 549.4 662.5 598.7

+3M 1.33 1.36 560.9 549.1 669.2 662.9 601.5 600.8

+6M 1.30 1.36 573.8 548.6 676.9 665.2 611.5 602.7

+12M 1.26 1.36 592.1 547.5 690.5 664.2 623.0 606.6

16-Jun 138.3 101.9 5.39 6.50 5.88

+3M 140.0 138.1 105.3 101.8 5.33 5.40 6.36 6.52 5.71 5.91

+6M 143.0 138.0 110.0 101.7 5.22 5.40 6.15 6.54 5.56 5.93

+12M 144.0 137.9 114.3 101.5 5.18 5.40 6.04 6.55 5.45 5.98

NOK

EUR

USD

JPY

EUR USD DKK SEK


16-Jun 4.14 3.05 180.0 217.0 196.1

+3M 4.05 4.16 3.05 3.07 184.2 179.0 219.8 216.1 197.5 195.8

+6M 4.10 4.19 3.15 3.08 182.0 178.0 214.6 215.9 193.9 195.6

+12M 4.15 4.23 3.29 3.11 179.8 176.1 209.6 213.7 189.2 195.1

16-Jun 307.8 226.8 2.42 2.92 2.64

+3M 305.0 308.4 229.3 227.2 2.45 2.42 2.92 2.92 2.62 2.64

+6M 305.0 309.2 234.6 227.7 2.45 2.41 2.89 2.92 2.61 2.65

+12M 305.0 311.3 242.1 228.8 2.45 2.39 2.85 2.90 2.57 2.65

16-Jun 27.44 20.22 27.18 32.77 29.62

+3M 27.40 27.40 20.60 20.18 27.23 27.21 32.48 32.85 29.20 29.77

+6M 27.40 27.38 21.08 20.15 27.23 27.22 32.12 33.00 29.01 29.91

+12M 27.30 27.33 21.67 20.09 27.33 27.25 31.87 33.05 28.75 30.19

16-Jun 4.40 3.24 169.6 204.5 184.8

+3M 4.40 4.40 3.31 3.24 169.5 169.4 202.3 204.6 181.8 185.4

+6M 4.40 4.42 3.38 3.25 169.5 168.7 200.0 204.6 180.7 185.4

+12M 4.40 4.45 3.49 3.27 169.5 167.3 197.7 203.0 178.4 185.4

EUR USD DKK SEK NOK

PLN

HUF

CZK

RON


16-Jun 3.45 2.54 215.9 260.4 235.3

+3M 3.45 3.45 2.59 2.54 216.2 - 258.0 - 231.9 -

+6M 3.45 3.45 2.65 2.54 216.2 - 255.1 - 230.4 -

+12M 3.45 3.44 2.74 2.53 216.2 - 252.2 - 227.5 -

EUR USD DKK

LTL

SEK NOK


Em

erging M

arkets B

riefer


CIS


MEA


LATAM



16-Jun 47.00 34.63 15.87 19.13 17.29

+3M 48.94 47.93 36.80 35.30 15.24 15.55 18.18 18.78 16.35 17.02

+6M 49.80 48.92 38.31 36.01 14.98 15.23 17.67 18.47 15.96 16.74

+12M 51.00 50.88 40.48 37.40 14.63 14.64 17.06 17.76 15.39 16.22

16-Jun 15.95 11.75 46.7 56.4 50.9

+3M 19.95 16.13 15.00 11.88 37.4 N/A 44.6 N/A 40.1 N/A

+6M 19.50 16.14 15.00 11.88 38.3 N/A 45.1 N/A 40.8 N/A

+12M 18.90 16.16 15.00 11.88 39.5 N/A 46.0 N/A 41.5 N/A

16-Jun 249.1 183.5 2.99 3.61 3.26

+3M 252.70 249.10 190.00 183.49 3.0 3.0 3.5 3.6 3.2 3.3

+6M 249.60 249.24 192.00 183.49 3.0 3.0 3.5 3.6 3.2 3.3

+12M 245.70 249.61 195.00 183.49 3.0 3.0 3.5 3.6 3.2 3.3

RUB

NOK

UAH

KZT

EUR USD DKK SEK


16-Jun 2.91 2.14 256.4 309.2 279.4

+3M 2.82 2.96 2.12 2.18 264.5 251.6 315.6 303.7 283.7 275.3

+6M 2.80 3.02 2.15 2.23 266.4 246.5 314.3 298.9 283.9 270.8

+12M 2.77 3.14 2.20 2.31 269.3 236.9 314.1 287.4 283.4 262.5

16-Jun 14.58 10.74 51.2 61.7 55.7

+3M 14.90 14.76 11.20 10.87 50.1 50.5 59.7 61.0 53.7 55.2

+6M 14.69 14.99 11.30 11.04 50.8 49.7 59.9 60.3 54.1 54.6

+12M 14.62 15.52 11.60 11.41 51.0 48.0 59.5 58.2 53.7 53.2

16-Jun 4.69 3.46 158.9 191.7 173.2

+3M 4.66 4.69 3.50 3.45 160.3 159.1 191.2 192.0 171.9 174.0

+6M 4.55 4.68 3.50 3.45 164.0 159.1 193.4 192.9 174.7 174.8

+12M 4.47 4.68 3.55 3.44 166.8 159.0 194.5 192.9 175.5 176.1

16-Jun 9.71 7.15 76.8 92.6 83.7

+3M 9.31 9.84 7.00 7.25 80.1 75.8 95.6 91.5 85.9 82.9

+6M 9.75 9.98 7.50 7.35 76.5 74.7 90.3 90.6 81.5 82.1

+12M 10.08 10.27 8.00 7.55 74.0 72.5 86.3 88.0 77.9 80.4

TRY

USDEUR SEK

ZAR

EGP

DKK NOK

ILS


16-Jun 3.03 2.24 245.7 296.3 267.8

+3M 2.99 3.11 2.25 2.29 249.3 239.7 297.4 289.4 267.3 262.3

+6M 2.93 3.19 2.25 2.35 255.0 233.7 300.9 283.4 271.8 256.8

+12M 2.90 3.34 2.30 2.45 257.4 223.0 300.2 270.5 270.9 247.1

16-Jun 17.68 13.03 42.17 50.85 45.95

+3M 17.49 17.80 13.15 13.11 42.65 41.88 50.89 50.56 45.74 45.82

+6M 17.16 17.91 13.20 13.19 43.47 41.60 51.28 50.45 46.33 45.71

+12M 16.70 18.15 13.25 13.34 44.68 41.03 52.11 49.78 47.02 45.46

NOKEUR USD DKK SEK

MXN

BRL


Em

erging M

arkets B

riefer


Emerging markets Asia



16-Jun 8.45 6.23 88.3 106.4 96.2

+3M 8.23 8.49 6.19 6.26 90.6 87.8 108.1 106.0 97.2 96.0

+6M 7.98 8.52 6.14 6.27 93.5 87.5 110.2 106.1 99.6 96.1

+12M 7.62 8.57 6.05 6.30 97.9 86.9 114.1 105.5 103.0 96.3

16-Jun 1385 1020 0.54 0.65 0.59

+3M 1343 1382 1010 1018 0.56 0.54 0.66 0.65 0.60 0.59

+6M 1365 1388 1050 1022 0.55 0.54 0.64 0.65 0.58 0.59

+12M 1348 1400 1070 1029 0.55 0.53 0.65 0.65 0.58 0.59

16-Jun 43.9 32.4 17.0 20.5 18.5

+3M 43.2 44.0 32.5 32.4 17.3 16.9 20.6 20.4 18.5 18.5

+6M 42.8 44.2 32.9 32.5 17.4 16.9 20.6 20.4 18.6 18.5

+12M 41.8 44.7 33.2 32.9 17.8 16.7 20.8 20.2 18.8 18.5

16-Jun 1.70 1.25 439 530 479

+3M 1.65 1.70 1.24 1.25 452 439 540 530 485 481

+6M 1.65 1.70 1.27 1.25 452 439 533 532 482 482

+12M 1.61 1.70 1.28 1.25 463 438 539 532 487 485

16-Jun 10.52 7.75 70.9 85.5 77.2

+3M 10.32 10.52 7.76 7.75 72.3 70.8 86.2 85.5 77.5 77.5

+6M 10.09 10.53 7.76 7.75 73.9 70.8 87.2 85.8 78.8 77.8

+12M 9.79 10.54 7.77 7.75 76.2 70.6 88.9 85.7 80.2 78.3

16-Jun 4.37 3.23 170.8 206.0 186.2

+3M 4.22 4.40 3.17 3.24 176.9 169.5 211.1 204.6 189.7 185.5

+6M 4.24 4.42 3.26 3.26 176.0 168.4 207.6 204.2 187.6 185.1

+12M 4.22 4.48 3.35 3.29 176.7 166.3 206.1 201.8 186.0 184.3

16-Jun 59.4 43.9 12.55 15.13 13.67

+3M 57.86 N/A 43.50 N/A 12.89 N/A 15.38 N/A 13.83 N/A

+6M 57.20 N/A 44.00 N/A 13.04 N/A 15.38 N/A 13.90 N/A

+12M 56.70 N/A 45.00 N/A 13.16 N/A 15.34 N/A 13.84 N/A

16-Jun 15999 11818 0.047 0.056 0.051

+3M 15561 16105 11700 11863 0.048 0.046 0.057 0.056 0.051 0.051

+6M 14950 16351 11500 12038 0.050 0.046 0.059 0.055 0.053 0.050

+12M 15120 16933 12000 12448 0.049 0.044 0.058 0.053 0.052 0.049

16-Jun 81.61 60.13 9.14 11.02 9.96

+3M 79.14 82.61 59.50 60.85 9.43 9.02 11.25 10.89 10.11 9.87

+6M 75.40 84.05 58.00 61.88 9.89 8.87 11.67 10.75 10.54 9.74

+12M 74.34 87.16 59.00 64.07 10.03 8.54 11.70 10.37 10.56 9.47

16-Jun 40.77 30.04 18.29 22.05 19.93

+3M 39.90 40.68 30.00 29.97 18.70 18.32 22.31 22.12 20.05 20.05

+6M 39.00 40.60 30.00 29.89 19.13 18.35 22.56 22.25 20.38 20.16

+12M 39.06 40.47 31.00 29.75 19.10 18.40 22.27 22.33 20.10 20.39

TWD

INR

SEK NOK

CNY

KRW

EUR

IDR

THB

SGD

HKD

MYR

PHP

USD DKK


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Forecasts vs forwards

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






-3.0-2.0-1.00.01.02.03.04.05.06.0

EG

P

TR

Y

INR

MY

R

BR

L

IDR

CN

Y

SG

D

KR

W

PL

N

TW

D

MX

N

HU

F

ILS

RO

N

CZ

K

ZA

R

RU

B

%

-5.0-4.0-3.0-2.0-1.00.01.02.03.04.0

EG

P

TR

Y

INR

MY

R

BR

L

IDR

CN

Y

SG

D

KR

W

PL

N

TW

D

MX

N

HU

F

ILS

RO

N

CZ

K

ZA

R

RU

B

%

-4.0

-2.0

0.0

2.0

4.0

6.0

8.0

10.0

12.0

INR

IDR

BR

L

TR

Y

CN

Y

MY

R

MX

N

TW

D

ILS

SG

D

EG

P

PL

N

ZA

R

KR

W

HU

F

RO

N

CZ

K

RU

B

%

-8.0

-6.0

-4.0

-2.0

0.0

2.0

4.0

6.0

8.0

INR

IDR

BR

L

TR

Y

CN

Y

MY

R

MX

N

TW

D

ILS

SG

D

EG

P

PL

N

ZA

R

KR

W

HU

F

RO

N

CZ

K

RU

B

%

-2.00.02.04.06.08.0

10.012.014.016.0

INR

BR

L

TR

Y

CN

Y

IDR

MX

N

ZA

R

MY

R

SG

D

ILS

KR

W

TW

D

HU

F

PL

N

EG

P

RO

N

CZ

K

RU

B

%

-10.0-8.0-6.0-4.0-2.00.02.04.06.08.0

10.0

INR

BR

L

TR

Y

CN

Y

IDR

MX

N

ZA

R

MY

R

SG

D

ILS

KR

W

TW

D

HU

F

PL

N

EG

P

RO

N

CZ

K

RU

B

%


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Monetary policy calendar

Calendar


17 June 2014

Wider CEE

PLN 2.50 - 25 bp July, 2013 - Unchanged 2014 02 July 2014 2.50

HUF 2.40 - 10 bp May, 2014 - 10 bp June, 2014 24 June 2014 2.00

CZK 0.05 - 20 bp Nov, 2012 - Unchanged 2014 26 June 2014 0.05

RON 3.50 - 25 bp Feb,2014 - H2, 2014 01 July 2014 3.25

TRY 9.50 -50 bp May, 2014 -50bp H1, 2014 24 June 2014 8.00

CIS

RUB 7.50 +50 bp April, 2014 - 50 bp Q4 2014 25 July 2014 7.00

MEA

ILS 0.75 - 25 bp Feb, 2014 - Unchanged 2014 23 June 2014 0.75

ZAR 5.50 +50 bp Jan, 2014 +25bp H2, 2014 17 July 2014 6.00

LATAM

BRL 11.00 + 25 bp May, 2014 + 25 bp H2, 2014 16 July 2014 11.25

MXN 3.00 - 50 bp June, 2014 - Unchanged 2014 11 July 2014 3.00

EM Asia

CNY 6.00 - 31 bp Jul, 2012 - Unchanged 2014 Not announced 6.00

KRW 2.50 - 25 bp May, 2013 + 25 bp Q4 2014 10 July 2014 2.75

THB 2.00 - 25 bp Feb, 2014 - Unchanged 2014 18 June 2014 2.00

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

MYR 3.00 + 25 bp May, 2011 + 25 bp Q4 2014 10 July 2014 3.25

PHP 3.50 - 25 bp Oct, 2012 + 25 bp Q4 2014 19 June 2014 3.75

IDR 7.50 + 25 bp Oct, 2013 - 25 bp Q4 2014 10 July 2014 7.25

INR 8.00 + 25 bp Jan, 2014 - 25 bp Q4 2014 05 August 2014 7.75

TWD 1.875 +12.5 bp Jun, 2011 + 12.5 bp Q4 2014 26 June 2014 2.00

Year-end 2014 (%)

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]

Stanislava Pravdová-Nielsen +45 45 12 80 71 [email protected]

Vladimir Miklashevsky +358 10 546 7522 [email protected]

Narayani Sritharan +45 45 12 85 48 [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]

Markku Anttila +358 10 513 8705 [email protected]

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

Howard Wilkinson +358 50 374 559 [email protected]

Martins Strazds +371 6707 2245 [email protected]

Giedre Geciauskiene +370 5215 6180 [email protected]

Rainer Änilane +372 675 2471 rainer.anilane@ danskebank.ee

ZAO Danske Bank, St. 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]

Marina Rautonen +7 812 332 73 00 [email protected]

All EM research is available on Bloomberg DMEM





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Disclosures This research report has been prepared by Danske Bank Markets, a division of Danske Bank A/S (‘Danske

Bank’). The author of this research report is Lars Christensen, Chief Analyst.

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