EM DAILY

Emerging Markets • 9 August 2010

Disappointing US job report

Brazil (BUY): Inflation for July declined as expected to 4.6% y/y.
Turkey (BUY): Industrial production data for June will be announced today.
Mexico (BUY): Focus will be on the release of inflation data for July today.
Peru (BUY): The y-t-m on PERUGB 6.95% 2031 rose by 4 bp during Friday’s trading session.

EM Daily - Overview
A disappointing US job report caused EUR/USD to increase further on Friday, and the emerging-
market currencies generally had difficulties keeping up with the stronger euro. The emerging-market
local-currency bonds lost 0.7%. The EMBI credit spread widened by 4 bp yesterday to 298, and the
index generated a return of 0.28%. Disappointing US job data are bad news for the emerging-market
bonds, because it will lead to more speculation on a W-shaped turn in the US. Still, Jyske Bank’s
Macroeconomic Research Team does not expect a W-shaped turn in the US. The most important
indicators in the emerging markets this week are GDP data for Q2 from several Central and Eastern
European countries. The data will be announced on Friday (the data from Russia will be announced
earlier in the week). Today consumer prices from Mexico and the Czech Republic will be announced
and industrial production from Turkey. For this week’s EM Calendar, see here. Outside the emerging
markets, focus will be on the Fed’s monetary-policy meeting, US retail sales and Q2 GDP from the
euro zone. If the trend of disappointing US indicators and better-than-expected European indicators
continues, it will support the euro-related emerging-market currencies, while the dollar-related
emerging-market currencies are likely to lose ground against the euro.
Publisher:
Jyske Markets Today’s economic indicators and events
Vestergade 8 -16 Time Country Event Exp. Prior
DK - 8600 Silkeborg 09:00 Romania Industrial production June 4.1% y/y
09:00 Romania Trade balance (EUR) June -957m
Analyst: 09:00 Czech Republic Consumer prices July 1.9% y/y 1.2% y/y
Linda Vestergård
09:00 Turkey Industrial production June 10.5% y/y 15.6% y/y
+45 89 89 76 62
Linda.Vestergaard@jyske
16:00 Mexico Consumer prices July 3.67% y/y 3.69% y/y
bank.dk N/A China Trade balance July

Translation: EMBI Global Diversified 298 4 Chart of the day

Translation Services Return year-to-date 11,35% Mexico, CPI y/y %

Read more research 375 Credit spread 7

reports on emerging-
market bonds at 325 6
www.jyskemarkets.com
5
275
4

225 3
mar-2010 maj-2010 jul-2010 jan-2007 jan-2008 jan-2009 jan-2010

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

S & P 500 1.122 -0,37% Germany 2,52 -0,04
Brazil Bovespa 68.095 -0,46% Mexico 6,54 0,01
Poland WSW WIG index 43.421 -0,04% Hungary 7,09 -0,05

Disclaimer: Emerging Markets FX Targets (updated 27th July)

Please see the last page Currency Spot 3m 6 m 12 m Currency Spot 3m 6m 12 m
EURCZK 24,86 25,60 25,50 25,50 EURZAR 9,62 9,53 9,53 9,64
EURHUF 280 280,00 270,00 270,00 EURMXN 16,86 15,68 15,88 15,63
EURPLN 3,99 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 2,34 2,25 2,29 2,26
EM DAILY
Emerging Markets • 9 August 2010 • Jyske Markets
Central and Eastern Europe
Turkey
Our recommendation for bonds denominated in
the Turkish lira is BUY. As we wrote in EM Daily
on Friday, the lira underperformed on Thursday
due to uncertainty about the timing of the
approval of a ‘fiscal-policy rule’ in parliament.
We argued in favour of a limited reaction in the
market, and on Friday the lira recovered much of
the ground lost. Against the euro, the lira was,
however, squeezed by an increase in EUR/USD
later in the day.
The industrial production is still growing
strongly, although the annual rate of increase
declined from 17.4% y/y in April to 15.4% in May.
However, it was an increase of 1.9% m/m. The
manufacturing industry is not back to the pre-
crisis level, which is reflected in capacity
utilisation. This is also one of the reasons why
the central bank is not in a hurry to raise interest
rates. We still expect the industrial production to
increase in June compared with May, and we also
expect the y/y rate to increase.
Czech Republic
Inflation data for July will be released today.
Consensus in the market is that inflation for July
will have increased to 1.9% y/y from 1.2% in June.
Generally, inflation has increased since early
2010, but it is still at the low end of the central
bank’s target range of 1-3%.
If inflation comes out lower than expected, it will
increase the likelihood of verbal intervention
from the central bank. So far, we maintain our
targets for the koruna (see the front page).
Latin America
Mexico
Our recommendation for bonds denominated in
Mexican pesos (MXN) is BUY. We still recommend
that investors switch from MBONO 10% 2024
into 7.25% 2016 at a yield to maturity of about
6%.
Inflation fell in June to 3.69% y/y. Inflation is
thus for the second month on end within the
central bank’s target of 2% to 4%. Part of the
reason behind the low rate of inflation is
seasonal factors such as large declines in food
prices. The fall in inflation is therefore tentative.
But core inflation also fell from 4.10% to 3.94.
Given the prospect of continued slow domestic
demand and unemployment which is still
somewhat below the pre-crisis level, we do not
expect significantly increasing inflationary
pressure but we expect inflation to approach the
low for the annual rate of increase during the
next few months. We do not expect the central
bank to raise interest rates until early 2011.
Brazil
Our recommendation for bonds denominated in
Brazilian reals (BRL) is BUY. At twelve months’
term we take the real to hold only limited
potential for appreciating against the euro.
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 appreciation of the real.
The recommendation to buy real-denominated
bonds is mainly based on relatively attractive
yields. For instance, the yield to maturity of EBRD
9.25% 2012 is approx. 8.5%.
July inflation came out exactly as expected, at
4.6% y/y, down from 4.84 % for June.
Peru
Our recommendation for bonds denominated in
the Peruvian nuevo sol (PEN) is BUY. After the
slightly surprising quarter-point hike to 2.50% on
Thursday (consensus expectations were +25 bp),
the yield to maturity of PERUGB 6.95% 2031 rose
by 4 bp during the trading session on Friday
while there was hardly any effect on the nuevo
sol against the US dollar.
PERUGB 6.95% 2031, y-t-m
10,5
9,5
8,5
7,5
6,5
5,5
2
EM DAILY
Emerging Markets • 9 August 2010 • Jyske Markets

EMBI Global Diversified Index

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

EMBI Global Diversified 0,28 1,37 11,35 298 100,00

Region
Europe 0,49 1,68 10,41 261 28,63
Africa 0,37 1,41 9,22 322 5,31
Asia 0,21 0,87 11,38 200 20,61
Latin 0,20 1,52 12,65 344 40,63
Middle East -0,08 0,30 7,91 388 4,82
Country
Kazakhstan 1,21 3,03 - 286 3,19
Argentina 1,21 3,77 - 685 2,35
Russia 0,66 1,66 8,10 237 7,34
Indonesia 0,62 1,28 13,74 201 6,40
Peru 0,60 1,93 14,89 158 3,65
Serbia 0,52 0,01 4,12 455 0,43
Turkey 0,46 1,43 9,17 229 7,12
Croatia 0,41 2,49 6,23 270 1,25
Egypt 0,40 2,53 7,53 241 0,66
Poland 0,35 1,33 7,39 161 2,96
Brazil 0,35 1,01 - 206 7,80
South Africa 0,33 1,09 9,32 161 3,06
Dominican Republic 0,33 2,19 12,83 378 0,63
Iraq 0,31 1,02 14,35 441 0,95
Mexico 0,31 1,61 12,66 177 7,15
Philippines 0,30 0,94 12,35 203 6,87
Colombia 0,29 0,99 12,81 174 4,74
Gabon 0,25 1,39 10,01 415 0,40
Ghana 0,24 1,61 12,17 453 0,35
Bulgaria 0,23 1,00 4,54 267 0,61
Hungary 0,21 3,56 4,17 302 1,47
Tunisia 0,13 0,36 4,85 107 0,30
Chile 0,12 -0,04 5,55 141 2,00
Ecuador 0,03 0,20 0,67 1047 0,24
Jamaica 0,02 0,17 40,40 525 0,19
Ukraine 0,02 0,20 30,61 506 2,43
Belize 0,02 0,75 50,72 797 0,18
Georgia 0,02 0,14 6,13 532 0,22
Pakistan 0,02 -0,07 20,51 580 0,50
El Salvador 0,02 2,53 10,81 345 1,41
Uruguay 0,02 1,00 15,79 217 2,65
Panama 0,02 1,16 - 173 3,44
Sri Lanka -0,04 0,60 8,00 355 0,45
Lithuania -0,09 1,54 - 306 1,60
China -0,10 0,30 6,27 87 2,09
Lebanon -0,17 0,12 - 362 3,87
Vietnam -0,21 0,83 15,13 265 0,80
Malaysia -0,35 0,51 7,72 154 3,50
Venezuela -0,90 2,46 12,84 1071 4,17

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.

3
EM DAILY
Emerging Markets • 9 August 2010 • Jyske Markets

GBI EM Diversified
Instrument Daily Return DKK (%) MTD Ret. DKK (%) YTD Ret. DKK (%) Yield (%) Duration(y) Market Cap (%)
GBI EM Diversified -0,70 -0,37 17,43 6,28 4,55 100,00
Region
Europe -0,16 0,43 12,34 6,45 2,98 40,00
Mideast & Africa -0,48 -1,16 19,56 8,22 5,65 10,89
Asia -0,88 -0,94 20,77 3,46 5,04 20,00
Latam -1,37 -0,81 21,08 7,08 5,97 29,11
Country
Hungary 0,32 2,45 3,79 6,88 3,79 10,00
Poland -0,07 0,36 8,05 5,40 3,87 10,00
Turkey -0,18 -0,97 18,00 8,46 2,04 10,00
Colombia -0,40 1,64 42,24 5,83 6,50 4,19
South Africa -0,43 -1,14 20,50 8,21 6,00 10,00
Russia -0,72 -0,13 19,57 6,00 2,21 10,00
Malaysia -0,76 -0,70 21,72 3,64 4,23 10,00
Egypt -0,95 -1,37 9,95 8,74 1,74 0,89
Brazil -0,99 0,03 17,08 9,69 6,17 5,46
Thailand -1,00 -1,19 19,74 3,33 5,86 10,00
Brazil Broad -1,15 -1,80 16,47 11,71 2,44 3,00
Peru -1,37 -0,12 14,21 6,05 8,68 6,46
Mexico -2,07 -2,37 23,96 6,49 4,95 10,00

Instrument Daily Return USD (%) MTD Ret. USD (%) YTD Ret. USD (%) Yield (%) Duration(y) Market Cap (%)
GBI EM Diversified 0,33 1,65 8,64 6,28 4,55 100,00
Region
Europe 0,87 2,47 3,94 6,45 2,98 40,00
Mideast & Africa 0,55 0,85 10,61 8,22 5,65 10,89
Asia 0,15 1,06 11,73 3,46 5,04 20,00
Latam -0,35 1,20 12,02 7,08 5,97 29,11
Country
Hungary 1,35 4,53 -3,98 6,88 3,79 10,00
Poland 0,96 2,39 -0,04 5,40 3,87 10,00
Turkey 0,85 1,04 9,17 8,46 2,04 10,00
Colombia 0,63 3,70 31,59 5,83 6,50 4,19
South Africa 0,60 0,87 11,48 8,21 6,00 10,00
Russia 0,31 1,90 10,62 6,00 2,21 10,00
Malaysia 0,27 1,31 12,61 3,64 4,23 10,00
Egypt 0,16 0,63 1,72 8,74 1,74 0,89
Brazil 0,04 2,06 8,32 9,69 6,17 5,46
Thailand 0,03 0,81 10,78 3,33 5,86 10,00
Brazil Broad -0,12 0,19 7,75 11,71 2,44 3,00
Peru -0,35 1,90 5,66 6,05 8,68 6,46
Mexico -1,06 -0,39 14,69 6,49 4,95 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 • 9 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.