EM DAILY

Emerging Markets • 30 July 2010

Focus on US and Chinese data

 Thursday turned out to be a quiet day in the financial markets
 Brazil (BUY): the minutes of last week’s monetary-policy meeting had limited effect on yields
 Peru BUY): we start covering Peru with a BUY recommendation for PERUGB 6.95% 2031
 Indonesia (HOLD): on Monday morning inflation data for July will be announced
EM Daily - Overview
Thursday was another relatively quiet day in the financial markets. The most significant movement
was that the EUR/USD rate rose by about 0.7%. Most emerging-market currencies had difficulty in
keeping up with the strengthening euro. The GBI lost 0.25% yesterday, while the EMBI credit spread
narrowed by 2 bp to 302 bp. Brazilian market rates hardly budged in response to the release of the
minutes of the latest monetary-policy meeting, whereas Turkish market rates gained 10 bp after the
central bank had raised banks’ currency requirements to 10% (earlier 9.5%). This morning the gen-
eral sentiment in the market is on the negative side after disappointing indicators from Japan. Today
few important events are scheduled for the emerging markets. The Turkish lira and the rand may be
affected by the relevant countries’ trade balances for June. Outside the emerging markets, focus will
be on Q2 GDP from the US, which could dampen or support concern over a possible double dip in the
US economy. The general sentiment in the market will also be affected by PMI from China to be an-
nounced in the course of the weekend.

Today’s economic indicators and events

Publisher: Time Country Event Exp. Prior
Jyske Markets 09:00 Turkey Trade balance June -6.0bn -4.8bn
Vestergade 8 -16 14:00 South Africa Trade balance June -1.6bn -0.3bn
DK - 8600 Silkeborg 14:30 South Africa Public budget June -20.68bn
18:00 Colombia Unemployment June 12.7%
Analyst: 21:30 Mexico Public budget June -3.84bn y-t-d
Linda Vestergaard 06:00 Indonesia Consumer prices July 5.78% y/y 5.05% y/y
+45 89897662
lin- EMBI Global Diversified 302 -2 Chart of the day
da.Vestergaard@jyskeba
nk.dk
Return year-to-date 9,71% EUR/CZK
375 Credit spread
Translation: 30,0
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Shares Daily change Government b onds (10 year) Daily change

S & P 500 1.102 -0,42% Germany 2,72 -0,03
Brazil Bovespa 66.954 0,22% Mexico 6,56 -0,05
Poland WSW WIG index 42.617 0,47% Hungary 7,20 -0,12

Emerging Markets FX Targets (updated 27th July)

Currency Spot 3m 6 m 12 m Currency Spot 3m 6m 12 m
EURCZK 24,80 25,60 25,50 25,50 EURZAR 9,62 9,53 9,53 9,64
EURHUF 284,36 280,00 270,00 270,00 EURMXN 16,65 15,68 15,88 15,63
Disclaimer:
EURPLN 4,01 3,95 3,90 3,80 USDCNY 6,77 6,70 6,60 6,45
EURTRY 1,98 1,91 1,91 1,93 EURBRL 2,30 2,25 2,29 2,26
EM DAILY
Emerging Markets • 30 July 2010 • Jyske Markets
Central and Eastern Europe Asia and other countries
Czech Republic Indonesia
After dropping on Wednesday, the EUR/CZK rate Our recommendation for bonds denominated in
edged up again on Thursday. But the cross rate is rupiahs (IDR) is HOLD. The rupiah is a dollar-related
still below 25.00 (currently at 24.80), and in our currency and has thus been supported for most of
view, the cross rate will rise over the coming days. 2010 by the falling EUR/USD rate. Moreover, the
The Czech central bank has still not reacted to the rupiah is supported by higher-than-expected eco-
appreciation of the koruna, but in the light of the nomic growth, low public debt and the recent up-
bank’s earlier aversion against a stronger koruna, grades of the credit rating agencies’ ratings on
there is a risk of verbal intervention. Indonesia (Moody’s changed its outlook to positive
in early July, and both S&P and Fitch upgraded their
Latin America ratings by one notch earlier this year). For the time
being, however, we maintain our HOLD recommen-
Peru dation.
Based on our extensive and interesting update on
Peru (an English version of the paper will be avail- On Monday morning inflation data for July will be
able soon), our recommendation is BUY for bonds announced. Inflation is rising and increased to
denominated in Nuevos Soles (PEN). The conclusion 5.05% for June (4.16% for May). Inflation is mainly
of the update is that Peru is a shining star from the pushed up by food prices. The inflation rate is still
point of view of monetary policy, fiscal policy and within the central bank’s 4-6% target range. In July,
economic growth. In our view, the Nuevo Sol will electricity duties were raised by 10% and this is
strengthen by 3.9% against the euro at one year’s expected to lift the inflation rate by 0.2-0.25 per-
term. Over the same period we expect the yield on centage point, which would take inflation close to
long-term bonds to fall by 34 bp. We specifically the upper limit of the target range. Core inflation,
recommend a GDN (Global Depositary Note) for by contrast, was more modest and only rose from
PERUGB 6.95% 2031, which offers a y-t-m of about 3.82% to 3.97% in June, which allows Bank Indone-
6.54%. A GDN is an instrument which emulates the sia more scope for interest-rate hikes. Given the
underlying asset completely. That is, the coupon, solid increase in economic growth, expectations of
credit rating and currency are identical to those of rising inflation and higher credit growth, we expect
the underlying asset – in this case PERUGB 6.95% the inflation rate to go on rising in the second half
2031. The idea of the product is to give foreign of 2010. Yet we think that Bank Indonesia will not
investors access to the local market without having be keen to raise interest rates just yet. We expect
to establish expensive safe-custody facilities in the first interest-rate hike to be made in Q4.
Peru. Our recommendation (with links to a general
description of GDNs and a fact sheet about the GDN
in question) will be available in English soon.
EUR/IDR and EUR/USD
1,60 17000
1,55
Brazil 16000
Our recommendation for bonds denominated in 1,50
15000
Brazilian reals (BRL) is BUY. The minutes of the 1,45
latest central-bank meeting were eagerly awaited. 1,40 14000
That is because the central bank somewhat surpris-
1,35 13000
ingly raised interest rates by 0.50 instead of the
expected 0.75 percentage point. The most extreme 1,30
12000
speculations supposed that the central bank may 1,25
have made its last hike for the time being. There 11000
1,20
was no indication to that effect in the minutes, but 1,15 10000
the tone was more doveish than earlier. We expect 05 06 07 08 09 10
the central bank to raise interest rates further, but EUR/USD EUR/IDR
Source: Reuters EcoWin

it is more uncertain by how much. That may cause

wider fluctuations in Brazilian market rates for the
coming time.

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EM DAILY
Emerging Markets • 30 July 2010 • Jyske Markets

EMBI Global Diversified Index

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

EMBI Global D iversified 0,20 3,93 9,71 302 100,00

Region
Latin 0,24 4,31 10,76 350 40,74
Africa 0,23 2,87 7,42 331 5,33
Europe 0,21 3,90 8,52 271 28,21
Asia 0,13 4,23 10,35 195 20,82
Middle East 0,08 0,95 7,54 377 4,89
Country
Croatia 1,41 4,07 3,39 294 0,68
Venezuela 0,85 9,70 9,65 1100 4,13
Argentina 0,84 13,87 - 706 2,32
Bulgaria 0,67 3,17 3,49 273 0,62
Egypt 0,66 4,15 4,48 258 0,66
Vietnam 0,50 5,84 14,28 252 0,81
El Salvador 0,43 -0,76 7,66 362 1,40
Russia 0,39 3,50 6,22 243 7,39
Iraq 0,32 2,79 13,01 435 0,95
Peru 0,31 4,63 12,48 164 3,65
Poland 0,28 2,96 5,78 175 2,98
China 0,26 0,43 5,53 93 2,12
Kazakhstan 0,24 5,27 - 330 3,15
Ukraine 0,20 5,49 30,32 496 2,47
Brazil 0,20 3,49 - 202 7,88
Malaysia 0,20 1,62 6,83 150 3,54
Mexico 0,14 1,95 10,51 185 7,16
Gabon 0,14 3,16 8,35 419 0,41
Ghana 0,13 3,64 10,24 463 0,35
Sri Lanka 0,13 3,77 7,34 352 0,46
Indonesia 0,13 5,42 12,23 200 6,44
Pakistan 0,12 4,57 20,56 556 0,50
Lithuania 0,10 4,69 - 313 1,64
Panama 0,08 4,34 - 169 3,46
Uruguay 0,04 4,35 14,65 211 2,68
Ecuador 0,03 0,79 0,43 1027 0,24
Jamaica 0,02 2,87 40,13 511 0,19
Belize 0,02 7,15 49,56 787 0,19
Georgia 0,02 0,30 5,96 519 0,22
Lebanon 0,02 0,52 - 349 3,94
Tunisia 0,02 0,27 4,34 113 0,30
Hungary 0,02 2,37 0,58 341 1,45
South Africa 0,02 2,98 7,91 166 3,08
Philippines 0,01 5,52 11,49 194 6,94
Chile -0,02 0,59 4,86 136 2,02
Colombia -0,04 3,90 11,41 176 4,78
Turkey -0,07 3,99 7,60 231 7,18
Dominican Republic -0,08 2,75 10,50 396 0,63
Serbia -0,11 0,01 3,06 449 0,43

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 instru-
ments. 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.

3
EM DAILY
Emerging Markets • 30 July 2010 • Jyske Markets

GBI EM Diversified
Instrument Daily Return DKK (%) MTD Ret. DKK (%) YTD Ret. DKK (%) Yield (%) Duration(y) Market Cap (%)
GBI EM Diversified -0,25 -1,20 17,40 6,36 4,48 100,00
Region
Europe -0,10 1,24 11,87 6,45 2,96 40,00
Latam -0,30 -2,46 21,22 7,32 5,73 29,06
Mideast & Africa -0,38 1,01 19,76 8,22 5,65 10,94
Asia -0,43 -5,43 21,34 3,48 5,08 20,00
Country
Hungary 0,41 2,55 1,78 7,03 3,79 10,00
Poland 0,12 4,47 7,94 5,37 3,90 10,00
Colombia 0,02 0,09 39,49 6,13 6,34 3,48
Mexico -0,09 -2,72 26,16 6,42 4,79 10,00
Russia -0,30 -2,12 19,78 5,90 2,11 10,00
South Africa -0,37 1,65 20,62 8,21 6,01 10,00
Malaysia -0,40 -4,59 21,65 3,71 4,37 10,00
Thailand -0,46 -6,28 20,97 3,31 5,80 10,00
Brazil -0,46 -3,16 15,86 10,03 6,12 5,34
Egypt -0,48 -5,84 10,97 8,74 1,76 0,94
Brazil Broad -0,50 -2,73 17,48 11,76 2,46 4,00
Peru -0,54 -2,71 13,71 6,17 8,66 6,24
Turkey -0,65 0,10 18,27 8,38 2,04 10,00

Instrument Daily Return USD (%) MTD Ret. USD (%) YTD Ret. USD (%) Yield (%) Duration(y) Market Cap (%)
GBI EM Diversified 0,29 5,51 6,92 6,36 4,48 100,00
Region
Europe 0,44 8,12 1,89 6,45 2,96 40,00
Latam 0,25 4,17 10,40 7,32 5,73 29,06
Mideast & Africa 0,17 7,87 9,07 8,22 5,65 10,94
Asia 0,11 0,99 10,51 3,48 5,08 20,00
Country
Hungary 0,95 9,52 -7,31 7,03 3,79 10,00
Poland 0,66 11,57 -1,70 5,37 3,90 10,00
Colombia 0,56 6,89 27,04 6,13 6,34 3,48
Mexico 0,45 3,89 14,91 6,42 4,79 10,00
Russia 0,24 4,53 9,09 5,90 2,11 10,00
South Africa 0,18 8,56 9,85 8,21 6,01 10,00
Malaysia 0,15 1,89 10,79 3,71 4,37 10,00
Thailand 0,08 0,09 10,17 3,31 5,80 10,00
Brazil 0,08 3,41 5,52 10,03 6,12 5,34
Egypt 0,06 0,56 1,06 8,74 1,76 0,94
Brazil Broad 0,04 3,88 6,99 11,76 2,46 4,00
Peru 0,00 3,90 3,56 6,17 8,66 6,24
Turkey -0,11 6,90 7,71 8,38 2,04 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.

4
EM DAILY
Emerging Markets • 30 July 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 a ny liability for transactions ma de on the basis of the i nformation or the esti mates 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 i n the business
procedures covering the research activi ties of Jyske Markets, a business unit of Jyske Bank.

Jyske Bank's emerging-market analysts may not hold posi tions in the instruments for which they indep endently 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 co nflicts 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 quali ty, willi ngness to pay,
liquidity, soci al 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 facto rs stated i n 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 upda te EM Recommend ations at least once a week.
Our view of the individual countri es will be updated on a regular basis in these publicati ons. See the front page of the research
report for the date of the latest update.
http://www.jyskebank.dk/fi nansnyt/obligationer/emergingmarkets/markedskommentarer/dagenskommentar/emergi ng
marketsdaily/168988.asp?refId=118973
http://www.jyskebank.dk/_jb/asp/apps/markets/meta_docs.asp?metaname=Skabelon& metaval ue=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 fi nd 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/forsi de.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 .