EMERGING MARKETS RESEARCH 26 January 2012

PLEASE SEE ANALYST CERTIFICATIONS AND IMPORTANT DISCLOSURES STARTING AFTER PAGE 33

THE EMERGING MARKETS WEEKLY What happens at the crossroads

The intensity of the month-old global risk rally raises questions not only about its sustainability but also how EM central banks are likely to react to relative currency gains based on growth inflation balance sheet and historical considerations We expect few central banks to aggressively fade let alone reverse their currenciesrsquo recent outperformance which is still modest versus the Q4 11 underperformance

Macro Outlooks

Emerging Asia Selective and calibrated easing 8 Growth is starting to bottom out in EM Asia as shown in Korearsquos Q4 GDP report We expect momentum to improve in Q1 supported by a resurgence in exports Some EM Asia central banks continue to ease monetary policy using calibrated approaches to support economic growth

EEMEA Rate decisions amid growth concerns 10 After two years of consistent performance EEMEA growth is beginning to decelerate It will likely ease further this year on the back of poor euro area growth In Russia growth concerns and modest inflation justify easing but we expect the CBR to be cautious in the lead-up to presidential elections and to remain on hold In other rate decisions this week we expect the Czech Republic to keep policy rates on hold Romania to continue cutting rates and Egypt to raise rates

Latin America Trading places 12 Mapping trade flows is critical to understanding spillovers from the global economy to Latin America China has become a key trading partner for LatAm countries especially Brazil and Chile The cost of this trend especially for Brazil is that rising commodity exports along with renewed USD weakness could spur protectionism

Strategy Focus

Indonesia More room to run 14 We have a constructive view on Indonesia Inclusion of the countryrsquos sovereign bonds in global bond indexes is likely to generate USD200-400mn of buying by passive investors who need to match their benchmark Furthermore active investors are likely to be buyers because Indonesia trades 151bp wide of the Barclays Capital Global Aggregate index

Turkey Another adjustment in FX policy 17 The Central Bank of Turkey seems to be signaling considerable comfort with the lira having cancelled the daily FX auctions Although the global risk environment is supportive of Turkish assets we argue for being cautious on lira and we reiterate our RV trade to selling lira versus the rand

EM Views on a Page 2

EM Dashboard 19

EM FX Views on a Page 20

EM Credit Portfolio 22

EM Local Bond Portfolio 23

Data Review amp Preview 24

FX Forecasts and Forwards 31

Official Interest Rates 32

What we like

Credit Long Argentina USD Discount

Rates SGD 1y forward 3s10s IRS steepener

FX Long SGD vs a USD-EUR basket

Weekly EM Asset Performance

EM FX03

08

09

14

19

1936

15

02TWDUSD

INRUSD

CLPUSD

BRLUSD

KRWUSD

ZARUSD

MXNUSD

TRYUSD

RUBUSD

EM Rates

-16 bp-14 bp

-5 bp-5 bp

-1 bp3 bp

6 bp5 bp

-3 bp

-19 bpBraz Jan 14Hun 5yr IRSMex TIIE 5yrIndo 5yr Gov

SA 2yr IRSCLP 2yr IRSCZK 5yr IRSKor 2yr IRS

India 2yr IRSPol 5yr IRS

EM Credit

-43 bp-40 bp

-18 bp-12 bp

-7 bp-5 bp-4 bp

0 bp

-53 bp

-1 bp

Veni 5yr CDSArg 5yr CDS

Hun 5yr CDSTurk 5yr

Rus 5yr CDSSA 5yr CDS

Braz 5yr CDSPhils 5yr

Mex 5yr CDSIndo 5yr CDS

EM Equity0410

1417

2022

26

4643

-11BolsaSampP

ShanghaiJSE All

FTSE JSEBovespa

KospiSensex

Turkey ISERussia

Note EM Assets Performance charts as of 26 January 2012 Source Bloomberg Barclays Capital

Barclays Capital | The Emerging Markets Weekly

26 January 2012 2

EM VIEWS ON A PAGE

What happened

Markets Risky assets continued to rally this week buoyed by an implicit loosening in US monetary policy and solid global economic data EM and G10 commodity currencies are having a strong week with the HUF PLN MYR RUB and NOK outperforming In equities EM bourses are outperforming developed market peers

Global data Solid Asian economic activity data suggest the region is lifting out of a mid-cycle slowdown Singaporersquos December output rose a stronger-than-expected 78 mm (consensus 22) In EMEA Russia industrial production growth came in slightly weaker than expected In developed economies European survey data (ie flash PMIs German IFO) surprised to the upside

Monetary policy

In Asia the Reserve Bank of India left its policy rate unchanged but cut the cash reserve ratio by 50bp to 550 in a surprise to markets The Bank of Thailand lowered its policy rate by 25bp to 30 in line with expectations In EMEA the Bank of Israel delivered a counter-consensus 25bp policy rate cut to 250 that was consistent with our forecast Meanwhile the National Bank of Hungary and the Central Bank of Turkey left their policy rates unchanged at 70 and 575 respectively

Euro watch The continuing rally in risky assets suggests that bad news related to the Greek PSI issues continues to be priced out However discussions remain ongoing with no near-term conclusion seemingly in sight Indeed recent comments from the IIF IMF and the EU suggest that a deal may be difficult to reach ahead of next weekrsquos EU summit

What we think

EM assets We think policymakers particularly in Asia will re-focus this year on still-sticky inflation with disinflationary FX appreciation potentially allowing for rate cuts particularly in EMEA and LatAm If risk appetite continues to rebound non-Japan Asian currencies are likely to continue underperforming high-yielding EM currencies with strong fundamentals and less interventionist central banks as well as the AUD and NZD

What we like

Asset class Trade Rationale

FX Long SGD vs a USD-EUR basket

A stronger-than-expected rise in Singapores December industrial output the rise in CPI inflation to 57 yy and a likely rebound in GDP growth in Q1 12 will see the MAS favouring slow SGD NEER appreciation rather than a more dovish exchange rate policy in our view We estimate that the SGD NEER is currently trading 06 below the midpoint of the policy band

Rates SGD 1y forward 3s10s IRS steepener

Improving risk sentiment driven by stabilisation in economic data as well as decreased systemic risk in money markets following the European LTRO operation should maintain the steepening bias in the SGD IRS curve near term With the FOMC expecting ldquoexceptionally low levels for the federal funds rate at least through late 2014rdquo this is likely to result in the belly of the curve being favoured in dollar-linked curves like the SGD and HKD We continue to recommend a SGD 1y forward 3s10s IRS steepener The forward steepener has a positive roll down of 10bpannum

Credit Long Argentina USD Discount

While we acknowledge that medium-term fundamentals are deteriorating FX depreciation pressures have been reduced due to stricter authoritiesrsquo control and an increase in local interest rates External bonds were particularly penalized after the election amid concerns of lsquointernalrsquo peso outflows We have been recommending the short-end of the dollar curve but as the curve has steepened we now highlight long-end bonds particularly the USD discount

Figure 1 Global equity market fund positioning end-November 2011

Figure 2 Net foreign equity and bond inflows based on EPFR fund flow data (1-18 January 2012 USD bn)

-5

-4

-3

-2

-1

0

1

2

3

Cas

hTu

rkey

Indi

aTh

aila

ndH

unga

ryIn

done

sia

Phili

ppin

esM

exic

oC

zech

Rep

M

oroc

coSo

uth

Afric

aC

hile

Pola

nd

Colo

mbi

aRu

ssia

Braz

ilC

hina

Mal

aysi

aKo

rea

Taiw

an

Overweight relative to MSCI EM benchmark index

Underweight relative to MSCI EM benchmark index

-1

0

1

2

3

4

EM EM Asia Latam EMEA

Equity inflows Bond inflows

Source EPFR Barclays Capital Source EPFR Barclays Capital

Barclays Capital | The Emerging Markets Weekly

26 January 2012 3

EMERGING MARKETS OUTLOOK

What happens at the crossroads The intensity of the month-old global risk rally raises questions about its

sustainability but also how EM central banks are likely to react to relative currency gains based on growth inflation balance sheet and historical considerations We expect few central banks to aggressively fade let alone reverse their currenciesrsquo recent outperformance which is still modest versus the Q4 11 underperformance

We expect them this year to refocus on still sticky inflation with Central European and Turkish central banks likely to welcome FX appreciation to the extent it allows greater room for rate cuts But we do not expect a revolution in NJA exchange rate policy merely a modest evolution in policymakersrsquo priorities and central banks in Peru and South Africa are likely to continue their FX purchases We also think the risk is mounting of central banks in NJA Russia Brazil and Chile fading further sustained andor rapid FX appreciation Should risk appetite sour we still see Central European currencies and the INR as the weakest links

We maintain our long SGD and RUB vs EUR-USD basket trade recommendations FX appreciation is also likely to support a further compression of risk premia in local rates markets and we highlight select receivers at the short end of curves in EEMEA and 1y TIIE in Mexico EM sovereign credit has participated in the rally but heavy supply has likely held back performance As supply pressures get digested and core rates remain low for longer we think cash credit has further room to perform

The surge in global risk appetite driven by a growing expectation of a soft landing in global growth the ECBrsquos provision of liquidity via the LTRO and the Fedrsquos commitment to loose monetary policy has seen significant foreign equity flows particularly into Asia and the outperformance of mostly high-yielding G10 commodity and EM currencies

But markets are potentially reaching an important juncture with the brisk pace of this month-old rally pointing to a possible slowing or even pullback in risk appetite Eurozone event risk in Q1 remains elevated While the LTRO has undoubtedly eased bank funding stress its impact on sovereign solvency has been mixed The lack of agreement on Greek PSI leaves the door open to a more extreme credit event contagion to other peripheral countries (eg Portugal) and the need for far-reaching eurozoneIMF financial support (please see A Greek decision tree 26 January 2012) Furthermore while the tail risk of a hard landing in global growth has eased growth this year is likely to be 04pp lower than in 2011 accentuating the challenge of fiscal consolidation

We take some comfort from investors showing a degree of discrimination The rally has been more then just short-covering in favour of high-beta EM currencies with (barring a few exceptions) investors buying currencies (PLN MXN INR) in which they had the greatest degree of conviction back in December (please see Global Macro Daily 26 January 2012) Moreover there is further headroom for foreign inflows into EMEA equities and non-Japan Asia (NJA) in our view This suggests that some of our directional trades offer insulation against temporary swings in risk appetite and room for relative value trades based on fundamentals rather than positioning per se

Olivier Desbarres +65 6308 2073

olivierdesbarresbarcapcom

Nick Verdi +65 6308 3093

nickverdibarcapcom

Surge in risk appetite leading to EM currency outperformance

Tail risks from eurozone and sluggish global growth

More than just about high beta high carry

Barclays Capital | The Emerging Markets Weekly

26 January 2012 2

EM VIEWS ON A PAGE

What happened

Markets Risky assets continued to rally this week buoyed by an implicit loosening in US monetary policy and solid global economic data EM and G10 commodity currencies are having a strong week with the HUF PLN MYR RUB and NOK outperforming In equities EM bourses are outperforming developed market peers

Global data Solid Asian economic activity data suggest the region is lifting out of a mid-cycle slowdown Singaporersquos December output rose a stronger-than-expected 78 mm (consensus 22) In EMEA Russia industrial production growth came in slightly weaker than expected In developed economies European survey data (ie flash PMIs German IFO) surprised to the upside

Monetary policy

In Asia the Reserve Bank of India left its policy rate unchanged but cut the cash reserve ratio by 50bp to 550 in a surprise to markets The Bank of Thailand lowered its policy rate by 25bp to 30 in line with expectations In EMEA the Bank of Israel delivered a counter-consensus 25bp policy rate cut to 250 that was consistent with our forecast Meanwhile the National Bank of Hungary and the Central Bank of Turkey left their policy rates unchanged at 70 and 575 respectively

Euro watch The continuing rally in risky assets suggests that bad news related to the Greek PSI issues continues to be priced out However discussions remain ongoing with no near-term conclusion seemingly in sight Indeed recent comments from the IIF IMF and the EU suggest that a deal may be difficult to reach ahead of next weekrsquos EU summit

What we think

EM assets We think policymakers particularly in Asia will re-focus this year on still-sticky inflation with disinflationary FX appreciation potentially allowing for rate cuts particularly in EMEA and LatAm If risk appetite continues to rebound non-Japan Asian currencies are likely to continue underperforming high-yielding EM currencies with strong fundamentals and less interventionist central banks as well as the AUD and NZD

What we like

Asset class Trade Rationale

FX Long SGD vs a USD-EUR basket

A stronger-than-expected rise in Singapores December industrial output the rise in CPI inflation to 57 yy and a likely rebound in GDP growth in Q1 12 will see the MAS favouring slow SGD NEER appreciation rather than a more dovish exchange rate policy in our view We estimate that the SGD NEER is currently trading 06 below the midpoint of the policy band

Rates SGD 1y forward 3s10s IRS steepener

Improving risk sentiment driven by stabilisation in economic data as well as decreased systemic risk in money markets following the European LTRO operation should maintain the steepening bias in the SGD IRS curve near term With the FOMC expecting ldquoexceptionally low levels for the federal funds rate at least through late 2014rdquo this is likely to result in the belly of the curve being favoured in dollar-linked curves like the SGD and HKD We continue to recommend a SGD 1y forward 3s10s IRS steepener The forward steepener has a positive roll down of 10bpannum

Credit Long Argentina USD Discount

While we acknowledge that medium-term fundamentals are deteriorating FX depreciation pressures have been reduced due to stricter authoritiesrsquo control and an increase in local interest rates External bonds were particularly penalized after the election amid concerns of lsquointernalrsquo peso outflows We have been recommending the short-end of the dollar curve but as the curve has steepened we now highlight long-end bonds particularly the USD discount

Figure 1 Global equity market fund positioning end-November 2011

Figure 2 Net foreign equity and bond inflows based on EPFR fund flow data (1-18 January 2012 USD bn)

-5

-4

-3

-2

-1

0

1

2

3

Cas

hTu

rkey

Indi

aTh

aila

ndH

unga

ryIn

done

sia

Phili

ppin

esM

exic

oC

zech

Rep

M

oroc

coSo

uth

Afric

aC

hile

Pola

nd

Colo

mbi

aRu

ssia

Braz

ilC

hina

Mal

aysi

aKo

rea

Taiw

an

Overweight relative to MSCI EM benchmark index

Underweight relative to MSCI EM benchmark index

-1

0

1

2

3

4

EM EM Asia Latam EMEA

Equity inflows Bond inflows

Source EPFR Barclays Capital Source EPFR Barclays Capital

Barclays Capital | The Emerging Markets Weekly

26 January 2012 3

EMERGING MARKETS OUTLOOK

What happens at the crossroads The intensity of the month-old global risk rally raises questions about its

sustainability but also how EM central banks are likely to react to relative currency gains based on growth inflation balance sheet and historical considerations We expect few central banks to aggressively fade let alone reverse their currenciesrsquo recent outperformance which is still modest versus the Q4 11 underperformance

We expect them this year to refocus on still sticky inflation with Central European and Turkish central banks likely to welcome FX appreciation to the extent it allows greater room for rate cuts But we do not expect a revolution in NJA exchange rate policy merely a modest evolution in policymakersrsquo priorities and central banks in Peru and South Africa are likely to continue their FX purchases We also think the risk is mounting of central banks in NJA Russia Brazil and Chile fading further sustained andor rapid FX appreciation Should risk appetite sour we still see Central European currencies and the INR as the weakest links

We maintain our long SGD and RUB vs EUR-USD basket trade recommendations FX appreciation is also likely to support a further compression of risk premia in local rates markets and we highlight select receivers at the short end of curves in EEMEA and 1y TIIE in Mexico EM sovereign credit has participated in the rally but heavy supply has likely held back performance As supply pressures get digested and core rates remain low for longer we think cash credit has further room to perform

The surge in global risk appetite driven by a growing expectation of a soft landing in global growth the ECBrsquos provision of liquidity via the LTRO and the Fedrsquos commitment to loose monetary policy has seen significant foreign equity flows particularly into Asia and the outperformance of mostly high-yielding G10 commodity and EM currencies

But markets are potentially reaching an important juncture with the brisk pace of this month-old rally pointing to a possible slowing or even pullback in risk appetite Eurozone event risk in Q1 remains elevated While the LTRO has undoubtedly eased bank funding stress its impact on sovereign solvency has been mixed The lack of agreement on Greek PSI leaves the door open to a more extreme credit event contagion to other peripheral countries (eg Portugal) and the need for far-reaching eurozoneIMF financial support (please see A Greek decision tree 26 January 2012) Furthermore while the tail risk of a hard landing in global growth has eased growth this year is likely to be 04pp lower than in 2011 accentuating the challenge of fiscal consolidation

We take some comfort from investors showing a degree of discrimination The rally has been more then just short-covering in favour of high-beta EM currencies with (barring a few exceptions) investors buying currencies (PLN MXN INR) in which they had the greatest degree of conviction back in December (please see Global Macro Daily 26 January 2012) Moreover there is further headroom for foreign inflows into EMEA equities and non-Japan Asia (NJA) in our view This suggests that some of our directional trades offer insulation against temporary swings in risk appetite and room for relative value trades based on fundamentals rather than positioning per se

Olivier Desbarres +65 6308 2073

olivierdesbarresbarcapcom

Nick Verdi +65 6308 3093

nickverdibarcapcom

Surge in risk appetite leading to EM currency outperformance

Tail risks from eurozone and sluggish global growth

More than just about high beta high carry

Barclays Capital | The Emerging Markets Weekly

26 January 2012 3

EMERGING MARKETS OUTLOOK

What happens at the crossroads The intensity of the month-old global risk rally raises questions about its

sustainability but also how EM central banks are likely to react to relative currency gains based on growth inflation balance sheet and historical considerations We expect few central banks to aggressively fade let alone reverse their currenciesrsquo recent outperformance which is still modest versus the Q4 11 underperformance

We expect them this year to refocus on still sticky inflation with Central European and Turkish central banks likely to welcome FX appreciation to the extent it allows greater room for rate cuts But we do not expect a revolution in NJA exchange rate policy merely a modest evolution in policymakersrsquo priorities and central banks in Peru and South Africa are likely to continue their FX purchases We also think the risk is mounting of central banks in NJA Russia Brazil and Chile fading further sustained andor rapid FX appreciation Should risk appetite sour we still see Central European currencies and the INR as the weakest links

We maintain our long SGD and RUB vs EUR-USD basket trade recommendations FX appreciation is also likely to support a further compression of risk premia in local rates markets and we highlight select receivers at the short end of curves in EEMEA and 1y TIIE in Mexico EM sovereign credit has participated in the rally but heavy supply has likely held back performance As supply pressures get digested and core rates remain low for longer we think cash credit has further room to perform

The surge in global risk appetite driven by a growing expectation of a soft landing in global growth the ECBrsquos provision of liquidity via the LTRO and the Fedrsquos commitment to loose monetary policy has seen significant foreign equity flows particularly into Asia and the outperformance of mostly high-yielding G10 commodity and EM currencies

But markets are potentially reaching an important juncture with the brisk pace of this month-old rally pointing to a possible slowing or even pullback in risk appetite Eurozone event risk in Q1 remains elevated While the LTRO has undoubtedly eased bank funding stress its impact on sovereign solvency has been mixed The lack of agreement on Greek PSI leaves the door open to a more extreme credit event contagion to other peripheral countries (eg Portugal) and the need for far-reaching eurozoneIMF financial support (please see A Greek decision tree 26 January 2012) Furthermore while the tail risk of a hard landing in global growth has eased growth this year is likely to be 04pp lower than in 2011 accentuating the challenge of fiscal consolidation

We take some comfort from investors showing a degree of discrimination The rally has been more then just short-covering in favour of high-beta EM currencies with (barring a few exceptions) investors buying currencies (PLN MXN INR) in which they had the greatest degree of conviction back in December (please see Global Macro Daily 26 January 2012) Moreover there is further headroom for foreign inflows into EMEA equities and non-Japan Asia (NJA) in our view This suggests that some of our directional trades offer insulation against temporary swings in risk appetite and room for relative value trades based on fundamentals rather than positioning per se

Olivier Desbarres +65 6308 2073

olivierdesbarresbarcapcom

Nick Verdi +65 6308 3093

nickverdibarcapcom

Surge in risk appetite leading to EM currency outperformance

Tail risks from eurozone and sluggish global growth

More than just about high beta high carry

Barclays Capital | The Emerging Markets Weekly

26 January 2012 4

This in turn raises the question of whether EM currencies will be allowed to outperform which is in turn dependent (among other things) on the relative outlook for growth and inflation the economyrsquos relative openness competitiveness and reliance on external debt and of course the central bankrsquos propensity to guide its currency

We expect few central banks to aggressively fade let alone reverse their currenciesrsquo recent outperformance First in NEER terms the rallies have been modest compared to the underperformance in Q4 11 and NJA currencies in particular remain cheap (Figure 1) More fundamentally we think policy-makers will re-focus this year on still sticky inflation and allow some disinflationary FX appreciation (see FX Focus Evolution not revolution in Asian reaction functions 26 January 2012) We think Central European and Turkish policy-makers welcome currency appreciation as it reduces households and corporatesrsquo sizeable external debt-servicing costs and gives central banks greater room to cut policy rates In LatAm we expect Bank Mexico to remains hands-off

But we do not expect a revolution in NJA exchange rate policy merely a modest evolution in policymakersrsquo priorities We expect central banks in Peru and South Africa to continue their FX purchases We also think the risk is mounting of central banks in NJA Russia Brazil and Chile fading further sustained andor rapid FX appreciation and keeping their currencies broadly aligned with regional peers

Figure 2 below shows the asymmetry of FX intervention proxied by the change in central bank FX reserves for NJA (adjusted for valuation effects) and actual FX intervention data for LatAm and EMEA The first eight months of 2011 (ldquorisk-onrdquo) were characterised by large FX inflows into EM but also large increases in central bank FX reserves particularly in NJA and only modest currency appreciation (Figure 3) In contrast central banksrsquo FX intervention in September-December (ldquorisk-offrdquo) was far more modest and they ultimately allowed their currencies to weaken (Figure 3) Assuming this global risk appetite rebound extends near-term NJA currencies are likely to continue underperforming high-yielding EM currencies with strong fundamentals and less interventionist central banks and the AUD and NZD

Should risk appetite sour we still see Central European currencies as the weakest link given their close ties with the eurozone NJA central banks would likely allow modest currency weakening should renewed concerns about global growth weigh on FX inflows into Asia but

Figure 1 Behavioural Effective Exchange Rate (BEER) deviation from fair value

-25

-20

-15

-10

-5

0

5

10

15

20

25

KRW

NO

K

HKD ZA

R

GBP

MX

N

JPY

SEK

IDR

EUR

INR

PLN

THB

USD

MYR

TWD ILS

CNY

CAD

NZD HU

F

SGD

PHP

CHF

RUB

TRY

CZK

AU

D

BRL

Source Barclays Capital

What now for EM central banks

Central banks unlikely to reverse recent EM currency

outperformance given sticky inflation and opportunity to

cut rates

But wholesale change in FX policy unlikely

Central bank FX intervention was asymmetric last year

In risk-off environment Central European currencies and the INR still the most vulnerable

Barclays Capital | The Emerging Markets Weekly

26 January 2012 5

they have the tools and the willingness to support their currencies The INR remains the most vulnerable in our view given Indiarsquos high twin deficits and still-high inflation and interest rates

We now turn to individual countries and currencies in EEMEA and LatAm For both regions we broadly rank countries in increasing order of FX intervention risk For a more detailed discussion about Asian central bank FX policy reaction functions please refer to FX Focus Evolution not revolution in Asian reaction functions 26 January 2012

Poland and Hungary We think policymakers particularly in Hungary would welcome further currency appreciation to support households with FX-linked liabilities and help attract foreign inflows into local-currency government bonds National Bank of Poland (NBP) officials have also indicated they see room for further EURPLN downside and our model has EURPLN fair value at around 400-410 about 5 below current levels We think the National Bank of Hungary (NBH) views the current EURHUF level as still a little higher than fair value We thus think the NBP and NBH would meet say a further 10 appreciation versus the USD with rate cuts rather than FX intervention

Turkey We think the CBT is unlikely to buy dollars aggressively soon We think the TRY trade weighted exchange rate is now near levels which the central bank (CBT) described a couple months ago as desirable and fair We think the CBT would welcome further modest strength as it would enable it to halt current dollar-selling auctions At a later stage it would help ease back on lira liquidity (via Open Market Operations or Reserve Requirement Ratio cuts) start gradually cutting rates to support growth andor build FX reserves again We think the CBT would probably wait for a safety window of appreciation before intervening with the purpose of weakening the lira

Russia The Central Bank of Russia (CBR) has historically been the most interventionist of the EEMEA central banks in our view We think it would be inclined to fade any further rapid RUB appreciation or volatility to maintain export competitiveness (the RUB is rich on our BEER model) and rebuild FX reserves But the CBRrsquos bias has shifted somewhat towards a more laisser-faire FX management to better absorb the strains associated with global shocks and re-focus on the longer-term goal of managing still

Figure 2 Estimated size of central bank FX intervention (adjusted for valuation effects of GDP)

Figure 3 Change in Nominal Effective Exchange Rates (NEERs)

-4

-2

0

2

4

6

8

10

Mex

ico

Pola

ndTu

rkey

S A

fric

aIn

dia

Col

ombi

Peru

Rus

sia

Kore

aIs

rael

Braz

ilIn

done

siC

hile

Thai

land

Taiw

anPh

ilipp

inC

hina

Sing

apor

Mal

aysi

a

Jan-Aug 2011

Sep-Dec 2011

-15

-10

-5

0

5

10

Mex

ico

Pola

ndTu

rkey

S A

fric

aIn

dia

Col

ombi

Peru

Rus

sia

Kore

aIs

rael

Braz

ilIn

done

siC

hile

Thai

land

Taiw

anPh

ilipp

inC

hina

Sing

apor

Mal

aysi

a

Jan-Aug 2011

Sept-Dec 2011

Note Change in central bank FX reserves for NJA and FX intervention data for LatAm and EMEA positivenegative sign refers to increasedecrease in FX reserves Source Barclays Capital

Source Barclays Capital

Barclays Capital | The Emerging Markets Weekly

26 January 2012 6

quite high inflation

South Africa We think the risk of the SARB stepping up dollar purchases is low We estimate that the ZAR is still undervalued by 2 13 and 15 respectively in real effective exchange rate (REER) terms versus our BEER model and in purchasing power parity (PPP) terms versus USD Accounting for revaluation effects the SARBrsquos dollar purchases have slowed in recent months from a monthly average of $300-500mn last year Over and above the significant opportunity cost of buying dollars as result of the wide interest rate differential the SARB tends to stay out the FX market during periods of risk aversion Also given that domestic inflation is trending higher and portfolio inflows have been modest we think the SARB will refrain from picking up the pace of dollar buying we note that the SARB governor was a tad more hawkish at last weekrsquos MPC conference We think the SARB would slow intervention in the event of strong FDI flows a plausible scenario given the currently very negative ZAR basis spread

Mexico The central bank is probably the most ldquoflexiblerdquo in the region Last Fridayrsquos monetary policy statement signalled some comfort regarding the inflation outlook given the fall in USDMXN We do not see relevant risks of intervention in USDMXN and see value in being short CHFMXN given the still supportive risk-taking environment

Brazil We think the risk of central bank FX intervention is mounting in our view So far verbal intervention has dominated but market participants have become more sensitive to intervention risks given that USDBRL is only 35 away from the level (170) at which the central bank started its intervention programme

Chile Intervention risks are also likely with USDCLP below 490 and only 07 away from the 465 level at which the central bank launched an intervention programme last year in the face of mounting pressure from exporters

Colombia There has not been much guidance from policy-makers the government has historically expressed concern when USDCOP has traded below 1820 and the central bank started buying dollars when USDCOP hit 1780 in September 2010

Peru The central bank has continued to buy USD in recent weeks to cap the pace of currency appreciation even if it has no specific currency target in mind

Some comfort not only for FX but also for rates and credit The indication from the Fed this week that US rates are likely to remain very accommodative for an extended period (and even longer than previously communicated) has undoubtedly been supportive of EM local rates Combined with the general appreciation trend in EM FX and the more stable liquidity environment fuelled by receding bank funding pressures this is likely to encourage carry trades in EM rates While this backdrop should be generally supportive for receivers the implications for curve shapes are more mixed as bond investors have to balance the risk of a liquidity-driven bond curve bull flattening and a re-flation view-led bond curve steepening

The lower-for-much-longer rates environment should also be supportive of EM credit as concerns about a back-up in UST yields eating into total returns have likely been alleviated further EM credit has not been a bystander in the year-to-date rally but the heavy supply pipeline has held back the performance of cash credit in particular As supply is being digested and the supply overhang caused by unfavourable issuance conditions in H2 11 clears we think EM credit has some further room to perform

A supportive environment for carry trades and receivers

EM credit ndash held back by issuance but conditions

favourable for cash credit in particular

Barclays Capital | The Emerging Markets Weekly

26 January 2012 7

What we like

FX We maintain our recommendation of being long the SGD versus a weighted USD-EUR basket initiated on 6 December 2011 and currently up 29 The rise in Singapores core CPI inflation to 26 yy in December --- a two-year high --- and likely rebound in GDP growth in Q1 12 will see the MAS favouring slow SGD NEER appreciation rather than a more dovish exchange rate policy in our view We estimate that the SGD NEER is trading 06 below the midpoint of the MAS policy band (Singapore Core inflation up even as headline moderates slightly 25 January 2012) In EEMEA FX our favoured directional long is in the ruble against both the dollar and the euro This is supported by high carry (especially on local bonds) and what we think are asymmetric risks to the upside on oil prices We have been stopped out of our long EURPLN recommendation and it is unclear what would cause the zloty to underperform again in the near term this feeds into our decision to turn market weight (from underweight) Poland in our local bond model portfolio

Rates We reiterate our recommendation to receive short-end rates in Mexico Our 1y TIIE receiver has performed well but we see further room for rates to decline as the market is not yet pricing in the cuts we envision The Feds commitment for rates to be on hold until 2014 (effectively an additional monetary easing as it was not expected by the market) together with the ongoing deceleration in Mexicos activity should lead Banxico to cut policy rates 25bp in March and 25bp in April in our view In EEMEA short-end rates are also likely to be the largest beneficiaries as they enjoy reduced funding costs and needs for policy hikes as FX recovers We recommend HUF 3m T-bills and 5y TRY bonds FX hedged and like receivers of PLN 1y1y IRS and ZAR 5y IRS For Asia rates the most clear-cut trade at this juncture is in USD-linked curves in our view where we expect the belly to get received most on favourable carry and lower volatility We hold on to our SGD IRS 1y forward 3s10s steepener in line with this view (entry 120bs current 128bp target 140bp) It has a positive roll-down of 10bpannum

Credit The supportive environment for cash credit should cause the basis in EM to widen (ie cash outperforming CDS) and hence support our recommendation to buy the Turkey 5y basis (5y CDS $16s$17s) We think the trade has further room to perform as after the new issue and amid improving liquidity conditions in the local banking sector there should be some technical support for Turkey cash credit in particular Among the outright long credit opportunities we continue to consider Qatar long-end valuations as attractive and highlight Argentinarsquos long end Argentina has continued to outperform While we acknowledge that the medium-term fundamentals are deteriorating the FX depreciation pressures have been reduced significantly due to the authoritiesrsquo stricter control and an increase in the local interest rates (the Badlar rate trades at 1518 versus 11 pre-election) The external bonds were particularly penalized after the election amid concerns over lsquointernalrsquo peso outflows However as valuations and the technical position had become very supportive Argentina credit rallied We have been recommending the short end of the dollar curve (Boden 15s) but as the curve has steepened we now highlight the long-end bonds particularly the USD Discount as our instruments of choice at this stage

Remain long the SGD and RUB vs EURUSD baskets

Receive Mexico 1y TIIE short-end rates in EEMEA (FX-hedged)

Turkey negative basis to compress further Qatar long-

end and Argentina USD Discounts as outright longs

Barclays Capital | The Emerging Markets Weekly

26 January 2012 7

What we like

FX We maintain our recommendation of being long the SGD versus a weighted USD-EUR basket initiated on 6 December 2011 and currently up 29 The rise in Singapores core CPI inflation to 26 yy in December --- a two-year high --- and likely rebound in GDP growth in Q1 12 will see the MAS favouring slow SGD NEER appreciation rather than a more dovish exchange rate policy in our view We estimate that the SGD NEER is trading 06 below the midpoint of the MAS policy band (Singapore Core inflation up even as headline moderates slightly 25 January 2012) In EEMEA FX our favoured directional long is in the ruble against both the dollar and the euro This is supported by high carry (especially on local bonds) and what we think are asymmetric risks to the upside on oil prices We have been stopped out of our long EURPLN recommendation and it is unclear what would cause the zloty to underperform again in the near term this feeds into our decision to turn market weight (from underweight) Poland in our local bond model portfolio

Rates We reiterate our recommendation to receive short-end rates in Mexico Our 1y TIIE receiver has performed well but we see further room for rates to decline as the market is not yet pricing in the cuts we envision The Feds commitment for rates to be on hold until 2014 (effectively an additional monetary easing as it was not expected by the market) together with the ongoing deceleration in Mexicos activity should lead Banxico to cut policy rates 25bp in March and 25bp in April in our view In EEMEA short-end rates are also likely to be the largest beneficiaries as they enjoy reduced funding costs and needs for policy hikes as FX recovers We recommend HUF 3m T-bills and 5y TRY bonds FX hedged and like receivers of PLN 1y1y IRS and ZAR 5y IRS For Asia rates the most clear-cut trade at this juncture is in USD-linked curves in our view where we expect the belly to get received most on favourable carry and lower volatility We hold on to our SGD IRS 1y forward 3s10s steepener in line with this view (entry 120bs current 128bp target 140bp) It has a positive roll-down of 10bpannum

Credit The supportive environment for cash credit should cause the basis in EM to widen (ie cash outperforming CDS) and hence support our recommendation to buy the Turkey 5y basis (5y CDS $16s$17s) We think the trade has further room to perform as after the new issue and amid improving liquidity conditions in the local banking sector there should be some technical support for Turkey cash credit in particular Among the outright long credit opportunities we continue to consider Qatar long-end valuations as attractive and highlight Argentinarsquos long end Argentina has continued to outperform While we acknowledge that the medium-term fundamentals are deteriorating the FX depreciation pressures have been reduced significantly due to the authoritiesrsquo stricter control and an increase in the local interest rates (the Badlar rate trades at 1518 versus 11 pre-election) The external bonds were particularly penalized after the election amid concerns over lsquointernalrsquo peso outflows However as valuations and the technical position had become very supportive Argentina credit rallied We have been recommending the short end of the dollar curve (Boden 15s) but as the curve has steepened we now highlight the long-end bonds particularly the USD Discount as our instruments of choice at this stage

Remain long the SGD and RUB vs EURUSD baskets

Receive Mexico 1y TIIE short-end rates in EEMEA (FX-hedged)

Turkey negative basis to compress further Qatar long-

end and Argentina USD Discounts as outright longs

Barclays Capital | The Emerging Markets Weekly

26 January 2012 8

MACRO OUTLOOK EMERGING ASIA

Selective and calibrated easing Growth is starting to bottom out in EM Asia as shown in Korearsquos Q4 GDP report We

expect momentum to improve in Q1 supported by resurgence in exports

Some EM Asia central banks continue to ease monetary policy using calibrated approaches to support economic growth

Korea GDP growth likely bottomed out in Q4 We see more signs that growth in EM Asia is bottoming out The advance estimate showed that Korearsquos GDP expanded 04 qq sa in Q4 slightly slower than Q3rsquos 05 increase For 2011 as a whole GDP growth averaged 36 slightly less than expected (BarCap 37 MOSFBoK 38) Despite the weaker-than-expected print we are not pessimistic for two reasons First there could be further upward revisions (up to 01 qq) to the advance estimate next month given that December was generally a much stronger month for activity Second Q4 was likely the bottom for GDP in this mid-cycle slowdown Looking ahead we expect GDP to reaccelerate to 1 in Q1 12 driven by resurgent exports The recent stabilisation in US activity indicators supported by resilient Chinese consumer demand will be a key factor of support For 2012 we continue to project growth will slow only moderately to 35

Given that there are no signs of distress in Korearsquos labour market and with growth likely to rebound in Q1 we continue to believe the Bank of Korea will keep the policy rate unchanged through Q1 12 The focus of policy is likely to remain on the cost of living ahead of the National Assembly elections on 11 April In our view the central bank is likely to preserve its limited policy buffer unless 2012 growth is projected to fall below 3 (BoK 37 BarCap 35) job losses mount and inflation expectations subside

India Calibrated move towards supporting growth Central banks are employing calibrated approaches to monetary easing where required The Reserve Bank of India (RBI) left its policy rates unchanged in line with expectations but cut the cash reserve ratio 50bp to 55 surprising us and the market The RBI based its

Rahul Bajoria +65 6308 3511

rahulbajoriabarcapcom

Wai Ho Leong +65 6308 3292

waiholeongbarcapcom

Growth most likely bottomed out in Q4 11 in Korea

No sign of stress on domestic front we expect BoK to keep

rates on hold

Figure 1 Korea We look for a pick-up in Q1 GDP Figure 2 Korea Resilient services demand

-100-80-60-40-20

020406080

100

Dec-07 Dec-08 Dec-09 Dec-10 Dec-1120

30

40

50

60

70

80

KR Exports ( 3m3m saar)US ISM New Orders (LHS)

-6

-4

-2

0

2

4

6

8

10

Q407 Q208 Q408 Q209 Q409 Q210 Q410 Q211 Q411

Mfg Construction Servicecs Others (incl Net Taxes)

pp contribution to GDP ( yy)

Source CEIC Barclays Capital Source CEIC Barclays Capital

RBI surprised with a CRR cut of 50bp

Barclays Capital | The Emerging Markets Weekly

26 January 2012 9

move on three factors First it flagged rising downside risks to growth as reflected in its reduction of its FY 11-12 GDP forecast to 70 from 76 At the same time WPI inflation is moving in line with the central bankrsquos expectations and is likely to hit the RBIrsquos projected 70 yy by March 2012 Finally with liquidity conditions tighter than the central bank prefers the RBI felt that the cut in the CRR would help correct the ongoing structural imbalances in banking sector liquidity

We continue to see risks of a 25bp repo rate cut at the March mid-quarter policy review while maintaining our base case that the rate-cutting cycle will start in April Even with the CRR cut the RBI has said that non-food manufacturing inflation remains elevated and has eased sufficiently to justify policy rate reductions Upside risks to inflation also stem from a weaker currency and elevated global commodity prices On growth RBI is worried about the slowdown in capital spending Pressure from large government borrowing is compounding the problem with the RBI talking openly about the risks of private investment being crowded by the large pipeline of government bond auctions The RBI expects a modest rebound in growth in FY12-13 along with marginally lower inflation which we again sense is something that can broadly be achieved We maintain our view of a slow but calibrated reduction in policy rates in FY12-13 However given the ongoing pressures on liquidity another 50bp cut in the CRR in March cannot be ruled out at this stage

Thailand Policy accommodation appears to be over The Bank of Thailand reduced its policy rate another 25bp to 30 However the central bank clearly indicated the move is temporary and designed to accommodate flood reconstruction efforts and should not be seen as putting rates on a downward trend Indeed in line with improving data the sharp drop in business sentiment and consumer confidence is starting to reverse and is showing nascent signs of improvement This along with government spending on flood reconstruction (USD11bn expected to start from end-February once the budget is approved) should shore up growth from Q1 We do not expect the BoT to reduce its policy rate further For now our base case is that the BoT will keep rates on hold until end-Q3 12 and may start withdrawing monetary stimulus at that time as the economy returns normal (neutral output gap) However given the fragile global growth backdrop and risks that reconstruction efforts will fall behind schedule we think the possibility that rates will remain on hold for longer cannot be discounted

Policy gearing shifting towards supporting growth risks of a

March rate cut cannot be discounted

Figure 3 India Core prices remain sticky Figure 4 Thailand Early signs of improvement

-3

0

3

6

9

Jan-09 Jun-09 Nov-09 Apr-10 Sep-10 Feb-11 Jul-11 Dec-11

IN Core inflation ( yy)Core inflation ( yy 3mma)

70

72

74

76

78

80

82

84

86

Dec-07 Dec-08 Dec-09 Dec-10 Dec-11

TH Consumer confidence (point estimate)

Source CEIC Barclays Capital Source CEIC Barclays Capital

Bank of Thailand reduced policy rate by 25bps signal end of rate

cuts for now

Barclays Capital | The Emerging Markets Weekly

26 January 2012 10

MACRO OUTLOOK EMERGING EUROPE MIDDLE EAST AND AFRICA

Rate decisions amid growth concerns After two years of consistent performance EEMEA growth is beginning to decelerate

It will likely ease further this year on the back of poor euro area growth

In Russia growth concerns and modest inflation justify easing but we expect the CBR to be cautious in the lead-up to presidential elections and to remain on hold

In other rate decisions this week we expect the Czech Republic to remain on hold Romania to continue cutting and Egypt to raise rates

When Q4 11 growth is released we expect to see weaker figures across the EEMEA region (Figure 1) The global slowdown particularly the lacklustre euro area performance has depressed EEMEA exports leading to a lower pace of growth and greater reliance on domestic demand In some regions buoyant retail sales performance will provide a cushion ndash for instance in the CIS region with double-digit growth in Ukraine and Kazakhstan As the consumer sector comes to the forefront improvements in inflation in several countries (again the CIS region but also Israel Bulgaria the Baltics Romania and Serbia) will provide additional support Since fiscal balances are already stretched we expect support to the real economy will more likely come from rate cuts particularly in the above group of countries

Poland Lithuania and Ukraine will be among the first to report Q4 GDP growth In Poland a positive surprise is possible despite softening PMIs as ldquohardrdquo data remained strong in Q4 11 However in Q1 12 we expect growth to slow gradually In Lithuania after the very strong growth in 2011 likely close to 6 yy we expect the economy to slow to 25 in 2012 ndash still a comparatively robust number in the regional context however For Ukraine our forecasts point to a deceleration of growth to 43 yy in Q4 11 from 66 in Q3

For Russia the Q4 11 GDP growth release will have an important impact on the rate decision later this week We predict growth decelerated to 42 yy from 48 in Q3 11 Meanwhile consumer inflation has declined sharply from above 9 yy in H1 11 to 61 in December and we forecast 43 in January (Figure 2) While slower inflation justifies further easing we believe the CBR will wait until after the 4 March presidential elections before resuming rate cuts

Vladimir Pantyushin +7 495 786 8450

vladimirpantyushinbarcapcom

Daniel Hewitt +44 (0)20 3134 3522

danielhewittbarcapcom

EEMEA growth slows with emphasis shifting towards

domestic demand particularly consumption

First Q4 growth figures from Poland Lithuania and Ukraine

Russian growthinflation mix justifies further easing which we expect to resume at end-March

Figure 1 Growth decelerating across EEMEA Figure 2 Inflation trend justifies further easing in Russia

Real GDP ( yy)

0

2

4

6

8

10

12

Turk

ey

Rus

sia

Isra

el

Pola

nd

S A

fric

a

Hun

gary

Cze

ch R

Rom

ania

Q1-11 Q2-11 Q3-11 Q4-11F

4

6

8

10

12

14

16

Jan-08 Jan-09 Jan-10 Jan-11

CPI ( yy) Core CPI ( yy) Refinancing rate

Source National sources Haver Analytics Barclays Capital Source Rosstat CBR Haver Analytics Barclays Capital

Barclays Capital | The Emerging Markets Weekly

26 January 2012 11

In the Czech Republic we expect the CNB to maintain its policy rate at 075 for the 18th consecutive month Inflation at 24 yy remains near the centre of the 1-3 inflation target (excluding administered prices inflation is only 15 yy) Domestic demand is weak and not a factor pushing prices up On the other side Czech entered into recession in Q3 11 and the decline probably accelerated in Q4 However the CNB has pointed out that cutting the rate is not likely to increase bank lending which is constrained by low domestic demand and limits on bank financing Governor Singer recently stated that he expects the CNB policy rate to remain unchanged throughout 2012 previously the CNB had forecast rate hikes beginning Q4 12

The Romanian NBR meets next week amid continuing street demonstrations We expect it to reduce rates by 25bp to 55 This will be the third consecutive cut and we expect two more similar cuts during the next two meetings bringing the rate to 50 Inflation decelerated to 31 yy in December (from 48 at mid-2011) near the middle of the 2-4 target range and is likely to ease further due to favourable base in H1 12 Meanwhile the political situation in Romania is tense as daily demonstrations continue asking for the resignation of the President and the government and new elections With parliamentary elections already scheduled for November this year we do not think the government will resign But clearly the continuing demonstrations are causing nervousness in Romanialsquos financial markets

In Egypt the political transition continues to weigh heavily on economic activity there is significant retrenchment in tourism while the manufacturing and construction sectors have scaled down investment Yet with inflation at elevated levels (at 95 yy in December from 91 yy in November) and risks of additional inflationary pressures remaining high we believe the CBE will raise rates by another 100bp An additional factor supporting a hike is the CBEs attempt to stem increasing currency pressures reflected in the continued rapid decline in FX reserves

In Turkey the CBT kept rates on hold as expected The repo rate is no longer the primary liquidity window for the CBT Instead the lending rate at about 12 is being relied on as well as other means of regulating liquidity While inflation at 105 yy in 2011 is well above the 5 target (for 2012) the CBT expects inflation to decline by the end of 2012 In Israel the central bank cut rates by 25bp to 25 the third such cut in the past five months continuing its intermittent cycle Rate cuts have been more rapid than anticipated as inflation has decelerated to 22 yy in December from above 4 yy in mid-2011 Housing inflation has eased and domestic demand appears to be weakening as the economy suffers from the global slowdown We expect an additional 25bp rate cut in this cycle Further cuts depend on the severity of the slowdown in Europe and spill over into Israel

In Hungary the NBH decided to keep its policy rate on hold at 70 following two consecutive 50bp rate increases One reason was the recent currency appreciation which has lowered financial risk In addition following last months split decision the majority of MPC members apparently view the policy rate as being sufficiently high to keep inflation contained Hungarian markets have rebounded on optimism that the government will be able to start negotiations with the IMFEU on a support programme Meanwhile the EU demands that the government changes several laws associated with the new constitution In addition Hungary has been declared in violation of the Excessive Deficit Procedure Hungary could be subject to extensive financial penalties unless it brings its laws and fiscal policies in line with EU guidelines We think the government will eventually come to terms with the IMFEU but only perhaps after additional market sell-offs put pressure on the government to act

Czech CNB likely stays on hold throughout 2012

Romania NBR likely to hold amid ongoing street demonstrations

We expect Egypt to raise rates further to stem currency

pressures

This week Israel cut while Turkey remained on hold

Hungary NBH on hold as currency appreciates reflecting renewed optimism on IMFEU

programme prospects and improved global risk appetite

Barclays Capital | The Emerging Markets Weekly

26 January 2012 12

MACRO OUTLOOK LATIN AMERICA

Trading places Mapping trade flows is critical to understanding spillovers from the global economy

to Latin America

China has become a key trading partner for LatAm countries especially Brazil and Chile

The cost of this trend especially for Brazil is that rising commodity exports along with renewed USD weakness could spur protectionism

Trade is the main channel via which changes in the outlook for global growth affect activity in Latin America Of the three major sources of uncertainty in H2 11 ndash fear of a US double dip fear of a hard landing in China and the European debt crisis ndash the first two have abated while the third remains at the front of market participantsrsquo minds Yet even in Europe soft activity indicators (PMI releases) are beginning to show that growth is not in free fall and could start showing some signs of dynamism especially in the northern part of the region Mapping the patterns of trade is critical to an understanding of the effect of spillover from the developed world to Latin America

Figure 1 plots the flow of exports from Latin Americarsquos four largest inflation targeters (Brazil Mexico Chile and Colombia) to the EU US and China Mexico remains closely tied to the US which takes 75 of its exports however some diversification has occurred this share has dropped from 81 on the eve of the 2008 crisis (August 2008) with China and other destinations benefiting from this trend Colombia also has strong ties to the US (42) but is heavily dependent on commodities (especially oil) which dampens the importance of geographical ties though not of global growth

Exports from Chile and Brazil are very similar in terms of destination Exports to the US and EU are roughly of the same order of magnitude (shares of 10 and c20 respectively) Chilersquos dependence on China is greater than Brazilrsquos but this gap is closing very fast Compared with the pre-crisis period the share of Brazilian exports to China has nearly doubled to 16 from 9 Growth in the share of Chilersquos exports to China was strong but slightly more modest (up 52) With Chinese growth remaining vibrant in the aftermath of

Marcelo Salomon +1 212 412 5717

marcelosalomonbarcapcom

Figure 1 Latam export destination ( total exports 12-month rolling in August 2011)

21

1016

53

19

10

22

48

16

42

4

38

6

75

2

18

0

10

20

30

40

50

60

70

80

EU US Chi Oth EU US Chi Oth EU US Chi Oth EU US Chi Oth

Brazil Chile Colombia Mexico

Source Haver Barclays Capital

Understanding the patterns of trade helps map the effect of spillovers from the developed

world

Mexico is closely tied to the US though some diversification into

China has been taking place

Chile and Brazil have similar exposures to the US EU

and Chinahellip

Barclays Capital | The Emerging Markets Weekly

26 January 2012 13

the US housing crisis and still showing signs of only a soft landing in 2012 it seems very likely that the importance of this market will continue to rise But the main economic difference between Chile and Brazil lies in their relative openness Chile is a small open economy (trade accounts for 65 of GDP) while Brazil is a large closed economy (trade is 20 of GDP) Hence even though both are affected by global economic cycles the impact on Chilersquos real growth is larger than on that of Brazil

China is playing a critical role both directly and indirectly in demanding more exports and sustaining large hard currency flows into countries such as Brazil and Chile In 2011 Chinarsquos imports of Brazilian goods rose by more than 35 (12-month rolling data) while its imports of Chilean goods rose by a little less than 15 (based on our forecast for the year as we have trade data only through November for Chile) Figure 2 shows the seasonally adjusted monthly level of Chinese imports from our inflation targeters sample in Latin America On an annualized basis China is already buying USD 67bn of Brazilian goods which should amount to nearly 24 of total Brazilian exports by the end of the year (we forecast total Brazilian exports at USD 280bn) and making China one of the Brazilrsquos key trading partners

Relative to changes in the terms of trade (Figure 3) the increase in Chinese demand becomes even more important In the first three quarters of 2011 terms of trade rose by 27 in Brazil and contracted by 35 in Chile Hence prices which have played a very important role for LatAm exporters since 2007 took a backseat in 2011 In our sample Colombia benefited most from terms of trade last year with a 12 increase

But this new trend comes at a cost that some policymakers in the region have been trying hard to fend off a growing share of commodity exports This has been the case in Colombia and Brazil whose dependence on commodity exports rose by 17pp and 12pp respectively to 69 and 48 in August 2008-November 2011 (At the other end of the spectrum are Chile and Mexico whose dependence on commodities fell by 2pp and 3pp respectively to 60 and 16) Combined with the new wave of currency appreciation in the region this rise in the commodity share of exports in our view has the potential to spur non-commodity exporting sectors to become even louder in their claims for protection

hellipbut Chilersquos large exposure to trade makes it more vulnerable

than Brazil

Figure 2 Strong Chinese imports hellip (USD mnmonth SA)

Figure 3 hellipdespite more modest increases in terms of trade (Index)

0

1000

2000

3000

4000

5000

6000

Jan-08 Apr-09 Jul-10 Oct-11

Brazil Chile Colombia Mexico

65

75

85

95

105

115

125

135

145

Q108 Q308 Q109 Q309 Q110 Q310 Q111 Q311

Brazil Chile Colombia Mexico

Source Haver Barclays Capital Note Terms of trade = export pricesimport prices Source Haver Barclays Capital

China is importing more from the region especially from Brazil

and Chile

The cost of the new trend is a larger share of commodity exports which has been a

concern especially for Brazil

Barclays Capital | The Emerging Markets Weekly

26 January 2012 14

STRATEGY FOCUS INDONESIA

More room to run This article is a shortened version of the report published on 20 January 2012

We have a constructive view on Indonesia Inclusion of the countryrsquos sovereign bonds in global bond indexes is likely to generate USD200-400mn of buying by passive investors who need to match their benchmark Furthermore active investors are likely to be buyers because Indonesia trades 151bp wide of the Barclays Capital Global Aggregate index

Summary of recommended positioning Our recommendation is to buy the INDON rsquo21s and the INDOIS rsquo18s sukuk bonds We recommend a neutral stance on INDON rsquo42s and would look to buy INDON rsquo38s as they cheapen against the curve We think the move in the 5y INDON CDS is somewhat overdone

Long-dated bonds we recommend a hold on the INDON rsquo42s For the INDON rsquo38s we expect the bonds to continue to cheapen against the curve given it is relatively less liquid As these bonds cheapen versus the INDON rsquo42s we would look to add on dips (Figure 3)

Following the upgrade the INDON rsquo42s have experienced a sharper rally than the INDON rsquo38s highlighting investorsrsquo preference for liquidity The fair differential for long-end Indonesian bonds versus the Philippines is ~0-10bp in our view Long-dated Indonesian bonds have rallied 10-15bp more than Philippines we view the compression as a fair reflection of the incremental buying that we expect from passive investors

Short-dated bonds and the belly of the curve We like the front-end bonds (INDON rsquo14s rsquo15s rsquo16s and rsquo17s) but they are illiquid and execution can be challenging

In the belly of the Indonesian curve we prefer to add 10y bonds (INDON rsquo21s) The INDON rsquo21s have not rallied as much as longer-dated bonds and the 10s30s curve has inverted to -5bp from about 14bp before the upgrade

Among Indonesian quasi-sovereigns we like Perusahaan Listrik Negararsquos (PLN) 10y bonds at a spread of more than 130-140bp to the Indonesian sovereign The PLNIJ rsquo21s are currently indicated 99bp wide of the INDON rsquo21s

Sukuk bonds Demand for sukuks is driven by the strong liquidity of Islamic banks the relatively scarce sukuk supply and limited availability of alternative Islamic investment products Islamic banks also have a preference for higher-quality sukuk paper therefore Indonesiarsquos upgrade should benefit its sukuk bonds at the margin We see value in the INDOIS rsquo18s these bonds are relatively more liquid than other front-end bonds (quoted 12bp wider than the INDON rsquo18s) and we expect demand from Middle Eastern banks to be supportive

CDS Following the upgrade Indonesia CDS compressed to 12bp from 20bp versus the Philippines The basis between the Indonesia 10y bonds and 5y CDS has turned negative (Figure 1) Therefore we think CDS move may be somewhat overdone

Avanti Save +65 6308 3116

avantisavebarcapcom

Krishna Hegde CFA +65 6308 2979

krishnahegdebarcapcom

Prakriti Sofat +65 6308 3201

prakritisofatbarcapcom

Barclays Capital | The Emerging Markets Weekly

26 January 2012 9

move on three factors First it flagged rising downside risks to growth as reflected in its reduction of its FY 11-12 GDP forecast to 70 from 76 At the same time WPI inflation is moving in line with the central bankrsquos expectations and is likely to hit the RBIrsquos projected 70 yy by March 2012 Finally with liquidity conditions tighter than the central bank prefers the RBI felt that the cut in the CRR would help correct the ongoing structural imbalances in banking sector liquidity

We continue to see risks of a 25bp repo rate cut at the March mid-quarter policy review while maintaining our base case that the rate-cutting cycle will start in April Even with the CRR cut the RBI has said that non-food manufacturing inflation remains elevated and has eased sufficiently to justify policy rate reductions Upside risks to inflation also stem from a weaker currency and elevated global commodity prices On growth RBI is worried about the slowdown in capital spending Pressure from large government borrowing is compounding the problem with the RBI talking openly about the risks of private investment being crowded by the large pipeline of government bond auctions The RBI expects a modest rebound in growth in FY12-13 along with marginally lower inflation which we again sense is something that can broadly be achieved We maintain our view of a slow but calibrated reduction in policy rates in FY12-13 However given the ongoing pressures on liquidity another 50bp cut in the CRR in March cannot be ruled out at this stage

Thailand Policy accommodation appears to be over The Bank of Thailand reduced its policy rate another 25bp to 30 However the central bank clearly indicated the move is temporary and designed to accommodate flood reconstruction efforts and should not be seen as putting rates on a downward trend Indeed in line with improving data the sharp drop in business sentiment and consumer confidence is starting to reverse and is showing nascent signs of improvement This along with government spending on flood reconstruction (USD11bn expected to start from end-February once the budget is approved) should shore up growth from Q1 We do not expect the BoT to reduce its policy rate further For now our base case is that the BoT will keep rates on hold until end-Q3 12 and may start withdrawing monetary stimulus at that time as the economy returns normal (neutral output gap) However given the fragile global growth backdrop and risks that reconstruction efforts will fall behind schedule we think the possibility that rates will remain on hold for longer cannot be discounted

Policy gearing shifting towards supporting growth risks of a

March rate cut cannot be discounted

Figure 3 India Core prices remain sticky Figure 4 Thailand Early signs of improvement

-3

0

3

6

9

Jan-09 Jun-09 Nov-09 Apr-10 Sep-10 Feb-11 Jul-11 Dec-11

IN Core inflation ( yy)Core inflation ( yy 3mma)

70

72

74

76

78

80

82

84

86

Dec-07 Dec-08 Dec-09 Dec-10 Dec-11

TH Consumer confidence (point estimate)

Source CEIC Barclays Capital Source CEIC Barclays Capital

Bank of Thailand reduced policy rate by 25bps signal end of rate

cuts for now

Barclays Capital | The Emerging Markets Weekly

26 January 2012 10

MACRO OUTLOOK EMERGING EUROPE MIDDLE EAST AND AFRICA

Rate decisions amid growth concerns After two years of consistent performance EEMEA growth is beginning to decelerate

It will likely ease further this year on the back of poor euro area growth

In Russia growth concerns and modest inflation justify easing but we expect the CBR to be cautious in the lead-up to presidential elections and to remain on hold

In other rate decisions this week we expect the Czech Republic to remain on hold Romania to continue cutting and Egypt to raise rates

When Q4 11 growth is released we expect to see weaker figures across the EEMEA region (Figure 1) The global slowdown particularly the lacklustre euro area performance has depressed EEMEA exports leading to a lower pace of growth and greater reliance on domestic demand In some regions buoyant retail sales performance will provide a cushion ndash for instance in the CIS region with double-digit growth in Ukraine and Kazakhstan As the consumer sector comes to the forefront improvements in inflation in several countries (again the CIS region but also Israel Bulgaria the Baltics Romania and Serbia) will provide additional support Since fiscal balances are already stretched we expect support to the real economy will more likely come from rate cuts particularly in the above group of countries

Poland Lithuania and Ukraine will be among the first to report Q4 GDP growth In Poland a positive surprise is possible despite softening PMIs as ldquohardrdquo data remained strong in Q4 11 However in Q1 12 we expect growth to slow gradually In Lithuania after the very strong growth in 2011 likely close to 6 yy we expect the economy to slow to 25 in 2012 ndash still a comparatively robust number in the regional context however For Ukraine our forecasts point to a deceleration of growth to 43 yy in Q4 11 from 66 in Q3

For Russia the Q4 11 GDP growth release will have an important impact on the rate decision later this week We predict growth decelerated to 42 yy from 48 in Q3 11 Meanwhile consumer inflation has declined sharply from above 9 yy in H1 11 to 61 in December and we forecast 43 in January (Figure 2) While slower inflation justifies further easing we believe the CBR will wait until after the 4 March presidential elections before resuming rate cuts

Vladimir Pantyushin +7 495 786 8450

vladimirpantyushinbarcapcom

Daniel Hewitt +44 (0)20 3134 3522

danielhewittbarcapcom

EEMEA growth slows with emphasis shifting towards

domestic demand particularly consumption

First Q4 growth figures from Poland Lithuania and Ukraine

Russian growthinflation mix justifies further easing which we expect to resume at end-March

Figure 1 Growth decelerating across EEMEA Figure 2 Inflation trend justifies further easing in Russia

Real GDP ( yy)

0

2

4

6

8

10

12

Turk

ey

Rus

sia

Isra

el

Pola

nd

S A

fric

a

Hun

gary

Cze

ch R

Rom

ania

Q1-11 Q2-11 Q3-11 Q4-11F

4

6

8

10

12

14

16

Jan-08 Jan-09 Jan-10 Jan-11

CPI ( yy) Core CPI ( yy) Refinancing rate

Source National sources Haver Analytics Barclays Capital Source Rosstat CBR Haver Analytics Barclays Capital

Barclays Capital | The Emerging Markets Weekly

26 January 2012 11

In the Czech Republic we expect the CNB to maintain its policy rate at 075 for the 18th consecutive month Inflation at 24 yy remains near the centre of the 1-3 inflation target (excluding administered prices inflation is only 15 yy) Domestic demand is weak and not a factor pushing prices up On the other side Czech entered into recession in Q3 11 and the decline probably accelerated in Q4 However the CNB has pointed out that cutting the rate is not likely to increase bank lending which is constrained by low domestic demand and limits on bank financing Governor Singer recently stated that he expects the CNB policy rate to remain unchanged throughout 2012 previously the CNB had forecast rate hikes beginning Q4 12

The Romanian NBR meets next week amid continuing street demonstrations We expect it to reduce rates by 25bp to 55 This will be the third consecutive cut and we expect two more similar cuts during the next two meetings bringing the rate to 50 Inflation decelerated to 31 yy in December (from 48 at mid-2011) near the middle of the 2-4 target range and is likely to ease further due to favourable base in H1 12 Meanwhile the political situation in Romania is tense as daily demonstrations continue asking for the resignation of the President and the government and new elections With parliamentary elections already scheduled for November this year we do not think the government will resign But clearly the continuing demonstrations are causing nervousness in Romanialsquos financial markets

In Egypt the political transition continues to weigh heavily on economic activity there is significant retrenchment in tourism while the manufacturing and construction sectors have scaled down investment Yet with inflation at elevated levels (at 95 yy in December from 91 yy in November) and risks of additional inflationary pressures remaining high we believe the CBE will raise rates by another 100bp An additional factor supporting a hike is the CBEs attempt to stem increasing currency pressures reflected in the continued rapid decline in FX reserves

In Turkey the CBT kept rates on hold as expected The repo rate is no longer the primary liquidity window for the CBT Instead the lending rate at about 12 is being relied on as well as other means of regulating liquidity While inflation at 105 yy in 2011 is well above the 5 target (for 2012) the CBT expects inflation to decline by the end of 2012 In Israel the central bank cut rates by 25bp to 25 the third such cut in the past five months continuing its intermittent cycle Rate cuts have been more rapid than anticipated as inflation has decelerated to 22 yy in December from above 4 yy in mid-2011 Housing inflation has eased and domestic demand appears to be weakening as the economy suffers from the global slowdown We expect an additional 25bp rate cut in this cycle Further cuts depend on the severity of the slowdown in Europe and spill over into Israel

In Hungary the NBH decided to keep its policy rate on hold at 70 following two consecutive 50bp rate increases One reason was the recent currency appreciation which has lowered financial risk In addition following last months split decision the majority of MPC members apparently view the policy rate as being sufficiently high to keep inflation contained Hungarian markets have rebounded on optimism that the government will be able to start negotiations with the IMFEU on a support programme Meanwhile the EU demands that the government changes several laws associated with the new constitution In addition Hungary has been declared in violation of the Excessive Deficit Procedure Hungary could be subject to extensive financial penalties unless it brings its laws and fiscal policies in line with EU guidelines We think the government will eventually come to terms with the IMFEU but only perhaps after additional market sell-offs put pressure on the government to act

Czech CNB likely stays on hold throughout 2012

Romania NBR likely to hold amid ongoing street demonstrations

We expect Egypt to raise rates further to stem currency

pressures

This week Israel cut while Turkey remained on hold

Hungary NBH on hold as currency appreciates reflecting renewed optimism on IMFEU

programme prospects and improved global risk appetite

Barclays Capital | The Emerging Markets Weekly

26 January 2012 12

MACRO OUTLOOK LATIN AMERICA

Trading places Mapping trade flows is critical to understanding spillovers from the global economy

to Latin America

China has become a key trading partner for LatAm countries especially Brazil and Chile

The cost of this trend especially for Brazil is that rising commodity exports along with renewed USD weakness could spur protectionism

Trade is the main channel via which changes in the outlook for global growth affect activity in Latin America Of the three major sources of uncertainty in H2 11 ndash fear of a US double dip fear of a hard landing in China and the European debt crisis ndash the first two have abated while the third remains at the front of market participantsrsquo minds Yet even in Europe soft activity indicators (PMI releases) are beginning to show that growth is not in free fall and could start showing some signs of dynamism especially in the northern part of the region Mapping the patterns of trade is critical to an understanding of the effect of spillover from the developed world to Latin America

Figure 1 plots the flow of exports from Latin Americarsquos four largest inflation targeters (Brazil Mexico Chile and Colombia) to the EU US and China Mexico remains closely tied to the US which takes 75 of its exports however some diversification has occurred this share has dropped from 81 on the eve of the 2008 crisis (August 2008) with China and other destinations benefiting from this trend Colombia also has strong ties to the US (42) but is heavily dependent on commodities (especially oil) which dampens the importance of geographical ties though not of global growth

Exports from Chile and Brazil are very similar in terms of destination Exports to the US and EU are roughly of the same order of magnitude (shares of 10 and c20 respectively) Chilersquos dependence on China is greater than Brazilrsquos but this gap is closing very fast Compared with the pre-crisis period the share of Brazilian exports to China has nearly doubled to 16 from 9 Growth in the share of Chilersquos exports to China was strong but slightly more modest (up 52) With Chinese growth remaining vibrant in the aftermath of

Marcelo Salomon +1 212 412 5717

marcelosalomonbarcapcom

Figure 1 Latam export destination ( total exports 12-month rolling in August 2011)

21

1016

53

19

10

22

48

16

42

4

38

6

75

2

18

0

10

20

30

40

50

60

70

80

EU US Chi Oth EU US Chi Oth EU US Chi Oth EU US Chi Oth

Brazil Chile Colombia Mexico

Source Haver Barclays Capital

Understanding the patterns of trade helps map the effect of spillovers from the developed

world

Mexico is closely tied to the US though some diversification into

China has been taking place

Chile and Brazil have similar exposures to the US EU

and Chinahellip

Barclays Capital | The Emerging Markets Weekly

26 January 2012 13

the US housing crisis and still showing signs of only a soft landing in 2012 it seems very likely that the importance of this market will continue to rise But the main economic difference between Chile and Brazil lies in their relative openness Chile is a small open economy (trade accounts for 65 of GDP) while Brazil is a large closed economy (trade is 20 of GDP) Hence even though both are affected by global economic cycles the impact on Chilersquos real growth is larger than on that of Brazil

China is playing a critical role both directly and indirectly in demanding more exports and sustaining large hard currency flows into countries such as Brazil and Chile In 2011 Chinarsquos imports of Brazilian goods rose by more than 35 (12-month rolling data) while its imports of Chilean goods rose by a little less than 15 (based on our forecast for the year as we have trade data only through November for Chile) Figure 2 shows the seasonally adjusted monthly level of Chinese imports from our inflation targeters sample in Latin America On an annualized basis China is already buying USD 67bn of Brazilian goods which should amount to nearly 24 of total Brazilian exports by the end of the year (we forecast total Brazilian exports at USD 280bn) and making China one of the Brazilrsquos key trading partners

Relative to changes in the terms of trade (Figure 3) the increase in Chinese demand becomes even more important In the first three quarters of 2011 terms of trade rose by 27 in Brazil and contracted by 35 in Chile Hence prices which have played a very important role for LatAm exporters since 2007 took a backseat in 2011 In our sample Colombia benefited most from terms of trade last year with a 12 increase

But this new trend comes at a cost that some policymakers in the region have been trying hard to fend off a growing share of commodity exports This has been the case in Colombia and Brazil whose dependence on commodity exports rose by 17pp and 12pp respectively to 69 and 48 in August 2008-November 2011 (At the other end of the spectrum are Chile and Mexico whose dependence on commodities fell by 2pp and 3pp respectively to 60 and 16) Combined with the new wave of currency appreciation in the region this rise in the commodity share of exports in our view has the potential to spur non-commodity exporting sectors to become even louder in their claims for protection

hellipbut Chilersquos large exposure to trade makes it more vulnerable

than Brazil

Figure 2 Strong Chinese imports hellip (USD mnmonth SA)

Figure 3 hellipdespite more modest increases in terms of trade (Index)

0

1000

2000

3000

4000

5000

6000

Jan-08 Apr-09 Jul-10 Oct-11

Brazil Chile Colombia Mexico

65

75

85

95

105

115

125

135

145

Q108 Q308 Q109 Q309 Q110 Q310 Q111 Q311

Brazil Chile Colombia Mexico

Source Haver Barclays Capital Note Terms of trade = export pricesimport prices Source Haver Barclays Capital

China is importing more from the region especially from Brazil

and Chile

The cost of the new trend is a larger share of commodity exports which has been a

concern especially for Brazil

Barclays Capital | The Emerging Markets Weekly

26 January 2012 14

STRATEGY FOCUS INDONESIA

More room to run This article is a shortened version of the report published on 20 January 2012

We have a constructive view on Indonesia Inclusion of the countryrsquos sovereign bonds in global bond indexes is likely to generate USD200-400mn of buying by passive investors who need to match their benchmark Furthermore active investors are likely to be buyers because Indonesia trades 151bp wide of the Barclays Capital Global Aggregate index

Summary of recommended positioning Our recommendation is to buy the INDON rsquo21s and the INDOIS rsquo18s sukuk bonds We recommend a neutral stance on INDON rsquo42s and would look to buy INDON rsquo38s as they cheapen against the curve We think the move in the 5y INDON CDS is somewhat overdone

Long-dated bonds we recommend a hold on the INDON rsquo42s For the INDON rsquo38s we expect the bonds to continue to cheapen against the curve given it is relatively less liquid As these bonds cheapen versus the INDON rsquo42s we would look to add on dips (Figure 3)

Following the upgrade the INDON rsquo42s have experienced a sharper rally than the INDON rsquo38s highlighting investorsrsquo preference for liquidity The fair differential for long-end Indonesian bonds versus the Philippines is ~0-10bp in our view Long-dated Indonesian bonds have rallied 10-15bp more than Philippines we view the compression as a fair reflection of the incremental buying that we expect from passive investors

Short-dated bonds and the belly of the curve We like the front-end bonds (INDON rsquo14s rsquo15s rsquo16s and rsquo17s) but they are illiquid and execution can be challenging

In the belly of the Indonesian curve we prefer to add 10y bonds (INDON rsquo21s) The INDON rsquo21s have not rallied as much as longer-dated bonds and the 10s30s curve has inverted to -5bp from about 14bp before the upgrade

Among Indonesian quasi-sovereigns we like Perusahaan Listrik Negararsquos (PLN) 10y bonds at a spread of more than 130-140bp to the Indonesian sovereign The PLNIJ rsquo21s are currently indicated 99bp wide of the INDON rsquo21s

Sukuk bonds Demand for sukuks is driven by the strong liquidity of Islamic banks the relatively scarce sukuk supply and limited availability of alternative Islamic investment products Islamic banks also have a preference for higher-quality sukuk paper therefore Indonesiarsquos upgrade should benefit its sukuk bonds at the margin We see value in the INDOIS rsquo18s these bonds are relatively more liquid than other front-end bonds (quoted 12bp wider than the INDON rsquo18s) and we expect demand from Middle Eastern banks to be supportive

CDS Following the upgrade Indonesia CDS compressed to 12bp from 20bp versus the Philippines The basis between the Indonesia 10y bonds and 5y CDS has turned negative (Figure 1) Therefore we think CDS move may be somewhat overdone

Avanti Save +65 6308 3116

avantisavebarcapcom

Krishna Hegde CFA +65 6308 2979

krishnahegdebarcapcom

Prakriti Sofat +65 6308 3201

prakritisofatbarcapcom

Barclays Capital | The Emerging Markets Weekly

26 January 2012 10

MACRO OUTLOOK EMERGING EUROPE MIDDLE EAST AND AFRICA

Rate decisions amid growth concerns After two years of consistent performance EEMEA growth is beginning to decelerate

It will likely ease further this year on the back of poor euro area growth

In Russia growth concerns and modest inflation justify easing but we expect the CBR to be cautious in the lead-up to presidential elections and to remain on hold

In other rate decisions this week we expect the Czech Republic to remain on hold Romania to continue cutting and Egypt to raise rates

When Q4 11 growth is released we expect to see weaker figures across the EEMEA region (Figure 1) The global slowdown particularly the lacklustre euro area performance has depressed EEMEA exports leading to a lower pace of growth and greater reliance on domestic demand In some regions buoyant retail sales performance will provide a cushion ndash for instance in the CIS region with double-digit growth in Ukraine and Kazakhstan As the consumer sector comes to the forefront improvements in inflation in several countries (again the CIS region but also Israel Bulgaria the Baltics Romania and Serbia) will provide additional support Since fiscal balances are already stretched we expect support to the real economy will more likely come from rate cuts particularly in the above group of countries

Poland Lithuania and Ukraine will be among the first to report Q4 GDP growth In Poland a positive surprise is possible despite softening PMIs as ldquohardrdquo data remained strong in Q4 11 However in Q1 12 we expect growth to slow gradually In Lithuania after the very strong growth in 2011 likely close to 6 yy we expect the economy to slow to 25 in 2012 ndash still a comparatively robust number in the regional context however For Ukraine our forecasts point to a deceleration of growth to 43 yy in Q4 11 from 66 in Q3

For Russia the Q4 11 GDP growth release will have an important impact on the rate decision later this week We predict growth decelerated to 42 yy from 48 in Q3 11 Meanwhile consumer inflation has declined sharply from above 9 yy in H1 11 to 61 in December and we forecast 43 in January (Figure 2) While slower inflation justifies further easing we believe the CBR will wait until after the 4 March presidential elections before resuming rate cuts

Vladimir Pantyushin +7 495 786 8450

vladimirpantyushinbarcapcom

Daniel Hewitt +44 (0)20 3134 3522

danielhewittbarcapcom

EEMEA growth slows with emphasis shifting towards

domestic demand particularly consumption

First Q4 growth figures from Poland Lithuania and Ukraine

Russian growthinflation mix justifies further easing which we expect to resume at end-March

Figure 1 Growth decelerating across EEMEA Figure 2 Inflation trend justifies further easing in Russia

Real GDP ( yy)

0

2

4

6

8

10

12

Turk

ey

Rus

sia

Isra

el

Pola

nd

S A

fric

a

Hun

gary

Cze

ch R

Rom

ania

Q1-11 Q2-11 Q3-11 Q4-11F

4

6

8

10

12

14

16

Jan-08 Jan-09 Jan-10 Jan-11

CPI ( yy) Core CPI ( yy) Refinancing rate

Source National sources Haver Analytics Barclays Capital Source Rosstat CBR Haver Analytics Barclays Capital

Barclays Capital | The Emerging Markets Weekly

26 January 2012 11

In the Czech Republic we expect the CNB to maintain its policy rate at 075 for the 18th consecutive month Inflation at 24 yy remains near the centre of the 1-3 inflation target (excluding administered prices inflation is only 15 yy) Domestic demand is weak and not a factor pushing prices up On the other side Czech entered into recession in Q3 11 and the decline probably accelerated in Q4 However the CNB has pointed out that cutting the rate is not likely to increase bank lending which is constrained by low domestic demand and limits on bank financing Governor Singer recently stated that he expects the CNB policy rate to remain unchanged throughout 2012 previously the CNB had forecast rate hikes beginning Q4 12

The Romanian NBR meets next week amid continuing street demonstrations We expect it to reduce rates by 25bp to 55 This will be the third consecutive cut and we expect two more similar cuts during the next two meetings bringing the rate to 50 Inflation decelerated to 31 yy in December (from 48 at mid-2011) near the middle of the 2-4 target range and is likely to ease further due to favourable base in H1 12 Meanwhile the political situation in Romania is tense as daily demonstrations continue asking for the resignation of the President and the government and new elections With parliamentary elections already scheduled for November this year we do not think the government will resign But clearly the continuing demonstrations are causing nervousness in Romanialsquos financial markets

In Egypt the political transition continues to weigh heavily on economic activity there is significant retrenchment in tourism while the manufacturing and construction sectors have scaled down investment Yet with inflation at elevated levels (at 95 yy in December from 91 yy in November) and risks of additional inflationary pressures remaining high we believe the CBE will raise rates by another 100bp An additional factor supporting a hike is the CBEs attempt to stem increasing currency pressures reflected in the continued rapid decline in FX reserves

In Turkey the CBT kept rates on hold as expected The repo rate is no longer the primary liquidity window for the CBT Instead the lending rate at about 12 is being relied on as well as other means of regulating liquidity While inflation at 105 yy in 2011 is well above the 5 target (for 2012) the CBT expects inflation to decline by the end of 2012 In Israel the central bank cut rates by 25bp to 25 the third such cut in the past five months continuing its intermittent cycle Rate cuts have been more rapid than anticipated as inflation has decelerated to 22 yy in December from above 4 yy in mid-2011 Housing inflation has eased and domestic demand appears to be weakening as the economy suffers from the global slowdown We expect an additional 25bp rate cut in this cycle Further cuts depend on the severity of the slowdown in Europe and spill over into Israel

In Hungary the NBH decided to keep its policy rate on hold at 70 following two consecutive 50bp rate increases One reason was the recent currency appreciation which has lowered financial risk In addition following last months split decision the majority of MPC members apparently view the policy rate as being sufficiently high to keep inflation contained Hungarian markets have rebounded on optimism that the government will be able to start negotiations with the IMFEU on a support programme Meanwhile the EU demands that the government changes several laws associated with the new constitution In addition Hungary has been declared in violation of the Excessive Deficit Procedure Hungary could be subject to extensive financial penalties unless it brings its laws and fiscal policies in line with EU guidelines We think the government will eventually come to terms with the IMFEU but only perhaps after additional market sell-offs put pressure on the government to act

Czech CNB likely stays on hold throughout 2012

Romania NBR likely to hold amid ongoing street demonstrations

We expect Egypt to raise rates further to stem currency

pressures

This week Israel cut while Turkey remained on hold

Hungary NBH on hold as currency appreciates reflecting renewed optimism on IMFEU

programme prospects and improved global risk appetite

Barclays Capital | The Emerging Markets Weekly

26 January 2012 12

MACRO OUTLOOK LATIN AMERICA

Trading places Mapping trade flows is critical to understanding spillovers from the global economy

to Latin America

China has become a key trading partner for LatAm countries especially Brazil and Chile

The cost of this trend especially for Brazil is that rising commodity exports along with renewed USD weakness could spur protectionism

Trade is the main channel via which changes in the outlook for global growth affect activity in Latin America Of the three major sources of uncertainty in H2 11 ndash fear of a US double dip fear of a hard landing in China and the European debt crisis ndash the first two have abated while the third remains at the front of market participantsrsquo minds Yet even in Europe soft activity indicators (PMI releases) are beginning to show that growth is not in free fall and could start showing some signs of dynamism especially in the northern part of the region Mapping the patterns of trade is critical to an understanding of the effect of spillover from the developed world to Latin America

Figure 1 plots the flow of exports from Latin Americarsquos four largest inflation targeters (Brazil Mexico Chile and Colombia) to the EU US and China Mexico remains closely tied to the US which takes 75 of its exports however some diversification has occurred this share has dropped from 81 on the eve of the 2008 crisis (August 2008) with China and other destinations benefiting from this trend Colombia also has strong ties to the US (42) but is heavily dependent on commodities (especially oil) which dampens the importance of geographical ties though not of global growth

Exports from Chile and Brazil are very similar in terms of destination Exports to the US and EU are roughly of the same order of magnitude (shares of 10 and c20 respectively) Chilersquos dependence on China is greater than Brazilrsquos but this gap is closing very fast Compared with the pre-crisis period the share of Brazilian exports to China has nearly doubled to 16 from 9 Growth in the share of Chilersquos exports to China was strong but slightly more modest (up 52) With Chinese growth remaining vibrant in the aftermath of

Marcelo Salomon +1 212 412 5717

marcelosalomonbarcapcom

Figure 1 Latam export destination ( total exports 12-month rolling in August 2011)

21

1016

53

19

10

22

48

16

42

4

38

6

75

2

18

0

10

20

30

40

50

60

70

80

EU US Chi Oth EU US Chi Oth EU US Chi Oth EU US Chi Oth

Brazil Chile Colombia Mexico

Source Haver Barclays Capital

Understanding the patterns of trade helps map the effect of spillovers from the developed

world

Mexico is closely tied to the US though some diversification into

China has been taking place

Chile and Brazil have similar exposures to the US EU

and Chinahellip

Barclays Capital | The Emerging Markets Weekly

26 January 2012 13

the US housing crisis and still showing signs of only a soft landing in 2012 it seems very likely that the importance of this market will continue to rise But the main economic difference between Chile and Brazil lies in their relative openness Chile is a small open economy (trade accounts for 65 of GDP) while Brazil is a large closed economy (trade is 20 of GDP) Hence even though both are affected by global economic cycles the impact on Chilersquos real growth is larger than on that of Brazil

China is playing a critical role both directly and indirectly in demanding more exports and sustaining large hard currency flows into countries such as Brazil and Chile In 2011 Chinarsquos imports of Brazilian goods rose by more than 35 (12-month rolling data) while its imports of Chilean goods rose by a little less than 15 (based on our forecast for the year as we have trade data only through November for Chile) Figure 2 shows the seasonally adjusted monthly level of Chinese imports from our inflation targeters sample in Latin America On an annualized basis China is already buying USD 67bn of Brazilian goods which should amount to nearly 24 of total Brazilian exports by the end of the year (we forecast total Brazilian exports at USD 280bn) and making China one of the Brazilrsquos key trading partners

Relative to changes in the terms of trade (Figure 3) the increase in Chinese demand becomes even more important In the first three quarters of 2011 terms of trade rose by 27 in Brazil and contracted by 35 in Chile Hence prices which have played a very important role for LatAm exporters since 2007 took a backseat in 2011 In our sample Colombia benefited most from terms of trade last year with a 12 increase

But this new trend comes at a cost that some policymakers in the region have been trying hard to fend off a growing share of commodity exports This has been the case in Colombia and Brazil whose dependence on commodity exports rose by 17pp and 12pp respectively to 69 and 48 in August 2008-November 2011 (At the other end of the spectrum are Chile and Mexico whose dependence on commodities fell by 2pp and 3pp respectively to 60 and 16) Combined with the new wave of currency appreciation in the region this rise in the commodity share of exports in our view has the potential to spur non-commodity exporting sectors to become even louder in their claims for protection

hellipbut Chilersquos large exposure to trade makes it more vulnerable

than Brazil

Figure 2 Strong Chinese imports hellip (USD mnmonth SA)

Figure 3 hellipdespite more modest increases in terms of trade (Index)

0

1000

2000

3000

4000

5000

6000

Jan-08 Apr-09 Jul-10 Oct-11

Brazil Chile Colombia Mexico

65

75

85

95

105

115

125

135

145

Q108 Q308 Q109 Q309 Q110 Q310 Q111 Q311

Brazil Chile Colombia Mexico

Source Haver Barclays Capital Note Terms of trade = export pricesimport prices Source Haver Barclays Capital

China is importing more from the region especially from Brazil

and Chile

The cost of the new trend is a larger share of commodity exports which has been a

concern especially for Brazil

Barclays Capital | The Emerging Markets Weekly

26 January 2012 14

STRATEGY FOCUS INDONESIA

More room to run This article is a shortened version of the report published on 20 January 2012

We have a constructive view on Indonesia Inclusion of the countryrsquos sovereign bonds in global bond indexes is likely to generate USD200-400mn of buying by passive investors who need to match their benchmark Furthermore active investors are likely to be buyers because Indonesia trades 151bp wide of the Barclays Capital Global Aggregate index

Summary of recommended positioning Our recommendation is to buy the INDON rsquo21s and the INDOIS rsquo18s sukuk bonds We recommend a neutral stance on INDON rsquo42s and would look to buy INDON rsquo38s as they cheapen against the curve We think the move in the 5y INDON CDS is somewhat overdone

Long-dated bonds we recommend a hold on the INDON rsquo42s For the INDON rsquo38s we expect the bonds to continue to cheapen against the curve given it is relatively less liquid As these bonds cheapen versus the INDON rsquo42s we would look to add on dips (Figure 3)

Following the upgrade the INDON rsquo42s have experienced a sharper rally than the INDON rsquo38s highlighting investorsrsquo preference for liquidity The fair differential for long-end Indonesian bonds versus the Philippines is ~0-10bp in our view Long-dated Indonesian bonds have rallied 10-15bp more than Philippines we view the compression as a fair reflection of the incremental buying that we expect from passive investors

Short-dated bonds and the belly of the curve We like the front-end bonds (INDON rsquo14s rsquo15s rsquo16s and rsquo17s) but they are illiquid and execution can be challenging

In the belly of the Indonesian curve we prefer to add 10y bonds (INDON rsquo21s) The INDON rsquo21s have not rallied as much as longer-dated bonds and the 10s30s curve has inverted to -5bp from about 14bp before the upgrade

Among Indonesian quasi-sovereigns we like Perusahaan Listrik Negararsquos (PLN) 10y bonds at a spread of more than 130-140bp to the Indonesian sovereign The PLNIJ rsquo21s are currently indicated 99bp wide of the INDON rsquo21s

Sukuk bonds Demand for sukuks is driven by the strong liquidity of Islamic banks the relatively scarce sukuk supply and limited availability of alternative Islamic investment products Islamic banks also have a preference for higher-quality sukuk paper therefore Indonesiarsquos upgrade should benefit its sukuk bonds at the margin We see value in the INDOIS rsquo18s these bonds are relatively more liquid than other front-end bonds (quoted 12bp wider than the INDON rsquo18s) and we expect demand from Middle Eastern banks to be supportive

CDS Following the upgrade Indonesia CDS compressed to 12bp from 20bp versus the Philippines The basis between the Indonesia 10y bonds and 5y CDS has turned negative (Figure 1) Therefore we think CDS move may be somewhat overdone

Avanti Save +65 6308 3116

avantisavebarcapcom

Krishna Hegde CFA +65 6308 2979

krishnahegdebarcapcom

Prakriti Sofat +65 6308 3201

prakritisofatbarcapcom

Barclays Capital | The Emerging Markets Weekly

26 January 2012 11

In the Czech Republic we expect the CNB to maintain its policy rate at 075 for the 18th consecutive month Inflation at 24 yy remains near the centre of the 1-3 inflation target (excluding administered prices inflation is only 15 yy) Domestic demand is weak and not a factor pushing prices up On the other side Czech entered into recession in Q3 11 and the decline probably accelerated in Q4 However the CNB has pointed out that cutting the rate is not likely to increase bank lending which is constrained by low domestic demand and limits on bank financing Governor Singer recently stated that he expects the CNB policy rate to remain unchanged throughout 2012 previously the CNB had forecast rate hikes beginning Q4 12

The Romanian NBR meets next week amid continuing street demonstrations We expect it to reduce rates by 25bp to 55 This will be the third consecutive cut and we expect two more similar cuts during the next two meetings bringing the rate to 50 Inflation decelerated to 31 yy in December (from 48 at mid-2011) near the middle of the 2-4 target range and is likely to ease further due to favourable base in H1 12 Meanwhile the political situation in Romania is tense as daily demonstrations continue asking for the resignation of the President and the government and new elections With parliamentary elections already scheduled for November this year we do not think the government will resign But clearly the continuing demonstrations are causing nervousness in Romanialsquos financial markets

In Egypt the political transition continues to weigh heavily on economic activity there is significant retrenchment in tourism while the manufacturing and construction sectors have scaled down investment Yet with inflation at elevated levels (at 95 yy in December from 91 yy in November) and risks of additional inflationary pressures remaining high we believe the CBE will raise rates by another 100bp An additional factor supporting a hike is the CBEs attempt to stem increasing currency pressures reflected in the continued rapid decline in FX reserves

In Turkey the CBT kept rates on hold as expected The repo rate is no longer the primary liquidity window for the CBT Instead the lending rate at about 12 is being relied on as well as other means of regulating liquidity While inflation at 105 yy in 2011 is well above the 5 target (for 2012) the CBT expects inflation to decline by the end of 2012 In Israel the central bank cut rates by 25bp to 25 the third such cut in the past five months continuing its intermittent cycle Rate cuts have been more rapid than anticipated as inflation has decelerated to 22 yy in December from above 4 yy in mid-2011 Housing inflation has eased and domestic demand appears to be weakening as the economy suffers from the global slowdown We expect an additional 25bp rate cut in this cycle Further cuts depend on the severity of the slowdown in Europe and spill over into Israel

In Hungary the NBH decided to keep its policy rate on hold at 70 following two consecutive 50bp rate increases One reason was the recent currency appreciation which has lowered financial risk In addition following last months split decision the majority of MPC members apparently view the policy rate as being sufficiently high to keep inflation contained Hungarian markets have rebounded on optimism that the government will be able to start negotiations with the IMFEU on a support programme Meanwhile the EU demands that the government changes several laws associated with the new constitution In addition Hungary has been declared in violation of the Excessive Deficit Procedure Hungary could be subject to extensive financial penalties unless it brings its laws and fiscal policies in line with EU guidelines We think the government will eventually come to terms with the IMFEU but only perhaps after additional market sell-offs put pressure on the government to act

Czech CNB likely stays on hold throughout 2012

Romania NBR likely to hold amid ongoing street demonstrations

We expect Egypt to raise rates further to stem currency

pressures

This week Israel cut while Turkey remained on hold

Hungary NBH on hold as currency appreciates reflecting renewed optimism on IMFEU

programme prospects and improved global risk appetite

Barclays Capital | The Emerging Markets Weekly

26 January 2012 12

MACRO OUTLOOK LATIN AMERICA

Trading places Mapping trade flows is critical to understanding spillovers from the global economy

to Latin America

China has become a key trading partner for LatAm countries especially Brazil and Chile

The cost of this trend especially for Brazil is that rising commodity exports along with renewed USD weakness could spur protectionism

Trade is the main channel via which changes in the outlook for global growth affect activity in Latin America Of the three major sources of uncertainty in H2 11 ndash fear of a US double dip fear of a hard landing in China and the European debt crisis ndash the first two have abated while the third remains at the front of market participantsrsquo minds Yet even in Europe soft activity indicators (PMI releases) are beginning to show that growth is not in free fall and could start showing some signs of dynamism especially in the northern part of the region Mapping the patterns of trade is critical to an understanding of the effect of spillover from the developed world to Latin America

Figure 1 plots the flow of exports from Latin Americarsquos four largest inflation targeters (Brazil Mexico Chile and Colombia) to the EU US and China Mexico remains closely tied to the US which takes 75 of its exports however some diversification has occurred this share has dropped from 81 on the eve of the 2008 crisis (August 2008) with China and other destinations benefiting from this trend Colombia also has strong ties to the US (42) but is heavily dependent on commodities (especially oil) which dampens the importance of geographical ties though not of global growth

Exports from Chile and Brazil are very similar in terms of destination Exports to the US and EU are roughly of the same order of magnitude (shares of 10 and c20 respectively) Chilersquos dependence on China is greater than Brazilrsquos but this gap is closing very fast Compared with the pre-crisis period the share of Brazilian exports to China has nearly doubled to 16 from 9 Growth in the share of Chilersquos exports to China was strong but slightly more modest (up 52) With Chinese growth remaining vibrant in the aftermath of

Marcelo Salomon +1 212 412 5717

marcelosalomonbarcapcom

Figure 1 Latam export destination ( total exports 12-month rolling in August 2011)

21

1016

53

19

10

22

48

16

42

4

38

6

75

2

18

0

10

20

30

40

50

60

70

80

EU US Chi Oth EU US Chi Oth EU US Chi Oth EU US Chi Oth

Brazil Chile Colombia Mexico

Source Haver Barclays Capital

Understanding the patterns of trade helps map the effect of spillovers from the developed

world

Mexico is closely tied to the US though some diversification into

China has been taking place

Chile and Brazil have similar exposures to the US EU

and Chinahellip

Barclays Capital | The Emerging Markets Weekly

26 January 2012 13

the US housing crisis and still showing signs of only a soft landing in 2012 it seems very likely that the importance of this market will continue to rise But the main economic difference between Chile and Brazil lies in their relative openness Chile is a small open economy (trade accounts for 65 of GDP) while Brazil is a large closed economy (trade is 20 of GDP) Hence even though both are affected by global economic cycles the impact on Chilersquos real growth is larger than on that of Brazil

China is playing a critical role both directly and indirectly in demanding more exports and sustaining large hard currency flows into countries such as Brazil and Chile In 2011 Chinarsquos imports of Brazilian goods rose by more than 35 (12-month rolling data) while its imports of Chilean goods rose by a little less than 15 (based on our forecast for the year as we have trade data only through November for Chile) Figure 2 shows the seasonally adjusted monthly level of Chinese imports from our inflation targeters sample in Latin America On an annualized basis China is already buying USD 67bn of Brazilian goods which should amount to nearly 24 of total Brazilian exports by the end of the year (we forecast total Brazilian exports at USD 280bn) and making China one of the Brazilrsquos key trading partners

Relative to changes in the terms of trade (Figure 3) the increase in Chinese demand becomes even more important In the first three quarters of 2011 terms of trade rose by 27 in Brazil and contracted by 35 in Chile Hence prices which have played a very important role for LatAm exporters since 2007 took a backseat in 2011 In our sample Colombia benefited most from terms of trade last year with a 12 increase

But this new trend comes at a cost that some policymakers in the region have been trying hard to fend off a growing share of commodity exports This has been the case in Colombia and Brazil whose dependence on commodity exports rose by 17pp and 12pp respectively to 69 and 48 in August 2008-November 2011 (At the other end of the spectrum are Chile and Mexico whose dependence on commodities fell by 2pp and 3pp respectively to 60 and 16) Combined with the new wave of currency appreciation in the region this rise in the commodity share of exports in our view has the potential to spur non-commodity exporting sectors to become even louder in their claims for protection

hellipbut Chilersquos large exposure to trade makes it more vulnerable

than Brazil

Figure 2 Strong Chinese imports hellip (USD mnmonth SA)

Figure 3 hellipdespite more modest increases in terms of trade (Index)

0

1000

2000

3000

4000

5000

6000

Jan-08 Apr-09 Jul-10 Oct-11

Brazil Chile Colombia Mexico

65

75

85

95

105

115

125

135

145

Q108 Q308 Q109 Q309 Q110 Q310 Q111 Q311

Brazil Chile Colombia Mexico

Source Haver Barclays Capital Note Terms of trade = export pricesimport prices Source Haver Barclays Capital

China is importing more from the region especially from Brazil

and Chile

The cost of the new trend is a larger share of commodity exports which has been a

concern especially for Brazil

Barclays Capital | The Emerging Markets Weekly

26 January 2012 14

STRATEGY FOCUS INDONESIA

More room to run This article is a shortened version of the report published on 20 January 2012

We have a constructive view on Indonesia Inclusion of the countryrsquos sovereign bonds in global bond indexes is likely to generate USD200-400mn of buying by passive investors who need to match their benchmark Furthermore active investors are likely to be buyers because Indonesia trades 151bp wide of the Barclays Capital Global Aggregate index

Summary of recommended positioning Our recommendation is to buy the INDON rsquo21s and the INDOIS rsquo18s sukuk bonds We recommend a neutral stance on INDON rsquo42s and would look to buy INDON rsquo38s as they cheapen against the curve We think the move in the 5y INDON CDS is somewhat overdone

Long-dated bonds we recommend a hold on the INDON rsquo42s For the INDON rsquo38s we expect the bonds to continue to cheapen against the curve given it is relatively less liquid As these bonds cheapen versus the INDON rsquo42s we would look to add on dips (Figure 3)

Following the upgrade the INDON rsquo42s have experienced a sharper rally than the INDON rsquo38s highlighting investorsrsquo preference for liquidity The fair differential for long-end Indonesian bonds versus the Philippines is ~0-10bp in our view Long-dated Indonesian bonds have rallied 10-15bp more than Philippines we view the compression as a fair reflection of the incremental buying that we expect from passive investors

Short-dated bonds and the belly of the curve We like the front-end bonds (INDON rsquo14s rsquo15s rsquo16s and rsquo17s) but they are illiquid and execution can be challenging

In the belly of the Indonesian curve we prefer to add 10y bonds (INDON rsquo21s) The INDON rsquo21s have not rallied as much as longer-dated bonds and the 10s30s curve has inverted to -5bp from about 14bp before the upgrade

Among Indonesian quasi-sovereigns we like Perusahaan Listrik Negararsquos (PLN) 10y bonds at a spread of more than 130-140bp to the Indonesian sovereign The PLNIJ rsquo21s are currently indicated 99bp wide of the INDON rsquo21s

Sukuk bonds Demand for sukuks is driven by the strong liquidity of Islamic banks the relatively scarce sukuk supply and limited availability of alternative Islamic investment products Islamic banks also have a preference for higher-quality sukuk paper therefore Indonesiarsquos upgrade should benefit its sukuk bonds at the margin We see value in the INDOIS rsquo18s these bonds are relatively more liquid than other front-end bonds (quoted 12bp wider than the INDON rsquo18s) and we expect demand from Middle Eastern banks to be supportive

CDS Following the upgrade Indonesia CDS compressed to 12bp from 20bp versus the Philippines The basis between the Indonesia 10y bonds and 5y CDS has turned negative (Figure 1) Therefore we think CDS move may be somewhat overdone

Avanti Save +65 6308 3116

avantisavebarcapcom

Krishna Hegde CFA +65 6308 2979

krishnahegdebarcapcom

Prakriti Sofat +65 6308 3201

prakritisofatbarcapcom

Barclays Capital | The Emerging Markets Weekly

26 January 2012 12

MACRO OUTLOOK LATIN AMERICA

Trading places Mapping trade flows is critical to understanding spillovers from the global economy

to Latin America

China has become a key trading partner for LatAm countries especially Brazil and Chile

The cost of this trend especially for Brazil is that rising commodity exports along with renewed USD weakness could spur protectionism

Trade is the main channel via which changes in the outlook for global growth affect activity in Latin America Of the three major sources of uncertainty in H2 11 ndash fear of a US double dip fear of a hard landing in China and the European debt crisis ndash the first two have abated while the third remains at the front of market participantsrsquo minds Yet even in Europe soft activity indicators (PMI releases) are beginning to show that growth is not in free fall and could start showing some signs of dynamism especially in the northern part of the region Mapping the patterns of trade is critical to an understanding of the effect of spillover from the developed world to Latin America

Figure 1 plots the flow of exports from Latin Americarsquos four largest inflation targeters (Brazil Mexico Chile and Colombia) to the EU US and China Mexico remains closely tied to the US which takes 75 of its exports however some diversification has occurred this share has dropped from 81 on the eve of the 2008 crisis (August 2008) with China and other destinations benefiting from this trend Colombia also has strong ties to the US (42) but is heavily dependent on commodities (especially oil) which dampens the importance of geographical ties though not of global growth

Exports from Chile and Brazil are very similar in terms of destination Exports to the US and EU are roughly of the same order of magnitude (shares of 10 and c20 respectively) Chilersquos dependence on China is greater than Brazilrsquos but this gap is closing very fast Compared with the pre-crisis period the share of Brazilian exports to China has nearly doubled to 16 from 9 Growth in the share of Chilersquos exports to China was strong but slightly more modest (up 52) With Chinese growth remaining vibrant in the aftermath of

Marcelo Salomon +1 212 412 5717

marcelosalomonbarcapcom

Figure 1 Latam export destination ( total exports 12-month rolling in August 2011)

21

1016

53

19

10

22

48

16

42

4

38

6

75

2

18

0

10

20

30

40

50

60

70

80

EU US Chi Oth EU US Chi Oth EU US Chi Oth EU US Chi Oth

Brazil Chile Colombia Mexico

Source Haver Barclays Capital

Understanding the patterns of trade helps map the effect of spillovers from the developed

world

Mexico is closely tied to the US though some diversification into

China has been taking place

Chile and Brazil have similar exposures to the US EU

and Chinahellip

Barclays Capital | The Emerging Markets Weekly

26 January 2012 13

the US housing crisis and still showing signs of only a soft landing in 2012 it seems very likely that the importance of this market will continue to rise But the main economic difference between Chile and Brazil lies in their relative openness Chile is a small open economy (trade accounts for 65 of GDP) while Brazil is a large closed economy (trade is 20 of GDP) Hence even though both are affected by global economic cycles the impact on Chilersquos real growth is larger than on that of Brazil

China is playing a critical role both directly and indirectly in demanding more exports and sustaining large hard currency flows into countries such as Brazil and Chile In 2011 Chinarsquos imports of Brazilian goods rose by more than 35 (12-month rolling data) while its imports of Chilean goods rose by a little less than 15 (based on our forecast for the year as we have trade data only through November for Chile) Figure 2 shows the seasonally adjusted monthly level of Chinese imports from our inflation targeters sample in Latin America On an annualized basis China is already buying USD 67bn of Brazilian goods which should amount to nearly 24 of total Brazilian exports by the end of the year (we forecast total Brazilian exports at USD 280bn) and making China one of the Brazilrsquos key trading partners

Relative to changes in the terms of trade (Figure 3) the increase in Chinese demand becomes even more important In the first three quarters of 2011 terms of trade rose by 27 in Brazil and contracted by 35 in Chile Hence prices which have played a very important role for LatAm exporters since 2007 took a backseat in 2011 In our sample Colombia benefited most from terms of trade last year with a 12 increase

But this new trend comes at a cost that some policymakers in the region have been trying hard to fend off a growing share of commodity exports This has been the case in Colombia and Brazil whose dependence on commodity exports rose by 17pp and 12pp respectively to 69 and 48 in August 2008-November 2011 (At the other end of the spectrum are Chile and Mexico whose dependence on commodities fell by 2pp and 3pp respectively to 60 and 16) Combined with the new wave of currency appreciation in the region this rise in the commodity share of exports in our view has the potential to spur non-commodity exporting sectors to become even louder in their claims for protection

hellipbut Chilersquos large exposure to trade makes it more vulnerable

than Brazil

Figure 2 Strong Chinese imports hellip (USD mnmonth SA)

Figure 3 hellipdespite more modest increases in terms of trade (Index)

0

1000

2000

3000

4000

5000

6000

Jan-08 Apr-09 Jul-10 Oct-11

Brazil Chile Colombia Mexico

65

75

85

95

105

115

125

135

145

Q108 Q308 Q109 Q309 Q110 Q310 Q111 Q311

Brazil Chile Colombia Mexico

Source Haver Barclays Capital Note Terms of trade = export pricesimport prices Source Haver Barclays Capital

China is importing more from the region especially from Brazil

and Chile

The cost of the new trend is a larger share of commodity exports which has been a

concern especially for Brazil

Barclays Capital | The Emerging Markets Weekly

26 January 2012 14

STRATEGY FOCUS INDONESIA

More room to run This article is a shortened version of the report published on 20 January 2012

We have a constructive view on Indonesia Inclusion of the countryrsquos sovereign bonds in global bond indexes is likely to generate USD200-400mn of buying by passive investors who need to match their benchmark Furthermore active investors are likely to be buyers because Indonesia trades 151bp wide of the Barclays Capital Global Aggregate index

Summary of recommended positioning Our recommendation is to buy the INDON rsquo21s and the INDOIS rsquo18s sukuk bonds We recommend a neutral stance on INDON rsquo42s and would look to buy INDON rsquo38s as they cheapen against the curve We think the move in the 5y INDON CDS is somewhat overdone

Long-dated bonds we recommend a hold on the INDON rsquo42s For the INDON rsquo38s we expect the bonds to continue to cheapen against the curve given it is relatively less liquid As these bonds cheapen versus the INDON rsquo42s we would look to add on dips (Figure 3)

Following the upgrade the INDON rsquo42s have experienced a sharper rally than the INDON rsquo38s highlighting investorsrsquo preference for liquidity The fair differential for long-end Indonesian bonds versus the Philippines is ~0-10bp in our view Long-dated Indonesian bonds have rallied 10-15bp more than Philippines we view the compression as a fair reflection of the incremental buying that we expect from passive investors

Short-dated bonds and the belly of the curve We like the front-end bonds (INDON rsquo14s rsquo15s rsquo16s and rsquo17s) but they are illiquid and execution can be challenging

In the belly of the Indonesian curve we prefer to add 10y bonds (INDON rsquo21s) The INDON rsquo21s have not rallied as much as longer-dated bonds and the 10s30s curve has inverted to -5bp from about 14bp before the upgrade

Among Indonesian quasi-sovereigns we like Perusahaan Listrik Negararsquos (PLN) 10y bonds at a spread of more than 130-140bp to the Indonesian sovereign The PLNIJ rsquo21s are currently indicated 99bp wide of the INDON rsquo21s

Sukuk bonds Demand for sukuks is driven by the strong liquidity of Islamic banks the relatively scarce sukuk supply and limited availability of alternative Islamic investment products Islamic banks also have a preference for higher-quality sukuk paper therefore Indonesiarsquos upgrade should benefit its sukuk bonds at the margin We see value in the INDOIS rsquo18s these bonds are relatively more liquid than other front-end bonds (quoted 12bp wider than the INDON rsquo18s) and we expect demand from Middle Eastern banks to be supportive

CDS Following the upgrade Indonesia CDS compressed to 12bp from 20bp versus the Philippines The basis between the Indonesia 10y bonds and 5y CDS has turned negative (Figure 1) Therefore we think CDS move may be somewhat overdone

Avanti Save +65 6308 3116

avantisavebarcapcom

Krishna Hegde CFA +65 6308 2979

krishnahegdebarcapcom

Prakriti Sofat +65 6308 3201

prakritisofatbarcapcom

Barclays Capital | The Emerging Markets Weekly

26 January 2012 13

the US housing crisis and still showing signs of only a soft landing in 2012 it seems very likely that the importance of this market will continue to rise But the main economic difference between Chile and Brazil lies in their relative openness Chile is a small open economy (trade accounts for 65 of GDP) while Brazil is a large closed economy (trade is 20 of GDP) Hence even though both are affected by global economic cycles the impact on Chilersquos real growth is larger than on that of Brazil

China is playing a critical role both directly and indirectly in demanding more exports and sustaining large hard currency flows into countries such as Brazil and Chile In 2011 Chinarsquos imports of Brazilian goods rose by more than 35 (12-month rolling data) while its imports of Chilean goods rose by a little less than 15 (based on our forecast for the year as we have trade data only through November for Chile) Figure 2 shows the seasonally adjusted monthly level of Chinese imports from our inflation targeters sample in Latin America On an annualized basis China is already buying USD 67bn of Brazilian goods which should amount to nearly 24 of total Brazilian exports by the end of the year (we forecast total Brazilian exports at USD 280bn) and making China one of the Brazilrsquos key trading partners

Relative to changes in the terms of trade (Figure 3) the increase in Chinese demand becomes even more important In the first three quarters of 2011 terms of trade rose by 27 in Brazil and contracted by 35 in Chile Hence prices which have played a very important role for LatAm exporters since 2007 took a backseat in 2011 In our sample Colombia benefited most from terms of trade last year with a 12 increase

But this new trend comes at a cost that some policymakers in the region have been trying hard to fend off a growing share of commodity exports This has been the case in Colombia and Brazil whose dependence on commodity exports rose by 17pp and 12pp respectively to 69 and 48 in August 2008-November 2011 (At the other end of the spectrum are Chile and Mexico whose dependence on commodities fell by 2pp and 3pp respectively to 60 and 16) Combined with the new wave of currency appreciation in the region this rise in the commodity share of exports in our view has the potential to spur non-commodity exporting sectors to become even louder in their claims for protection

hellipbut Chilersquos large exposure to trade makes it more vulnerable

than Brazil

Figure 2 Strong Chinese imports hellip (USD mnmonth SA)

Figure 3 hellipdespite more modest increases in terms of trade (Index)

0

1000

2000

3000

4000

5000

6000

Jan-08 Apr-09 Jul-10 Oct-11

Brazil Chile Colombia Mexico

65

75

85

95

105

115

125

135

145

Q108 Q308 Q109 Q309 Q110 Q310 Q111 Q311

Brazil Chile Colombia Mexico

Source Haver Barclays Capital Note Terms of trade = export pricesimport prices Source Haver Barclays Capital

China is importing more from the region especially from Brazil

and Chile

The cost of the new trend is a larger share of commodity exports which has been a

concern especially for Brazil

Barclays Capital | The Emerging Markets Weekly

26 January 2012 14

STRATEGY FOCUS INDONESIA

More room to run This article is a shortened version of the report published on 20 January 2012

We have a constructive view on Indonesia Inclusion of the countryrsquos sovereign bonds in global bond indexes is likely to generate USD200-400mn of buying by passive investors who need to match their benchmark Furthermore active investors are likely to be buyers because Indonesia trades 151bp wide of the Barclays Capital Global Aggregate index

Summary of recommended positioning Our recommendation is to buy the INDON rsquo21s and the INDOIS rsquo18s sukuk bonds We recommend a neutral stance on INDON rsquo42s and would look to buy INDON rsquo38s as they cheapen against the curve We think the move in the 5y INDON CDS is somewhat overdone

Long-dated bonds we recommend a hold on the INDON rsquo42s For the INDON rsquo38s we expect the bonds to continue to cheapen against the curve given it is relatively less liquid As these bonds cheapen versus the INDON rsquo42s we would look to add on dips (Figure 3)

Following the upgrade the INDON rsquo42s have experienced a sharper rally than the INDON rsquo38s highlighting investorsrsquo preference for liquidity The fair differential for long-end Indonesian bonds versus the Philippines is ~0-10bp in our view Long-dated Indonesian bonds have rallied 10-15bp more than Philippines we view the compression as a fair reflection of the incremental buying that we expect from passive investors

Short-dated bonds and the belly of the curve We like the front-end bonds (INDON rsquo14s rsquo15s rsquo16s and rsquo17s) but they are illiquid and execution can be challenging

In the belly of the Indonesian curve we prefer to add 10y bonds (INDON rsquo21s) The INDON rsquo21s have not rallied as much as longer-dated bonds and the 10s30s curve has inverted to -5bp from about 14bp before the upgrade

Among Indonesian quasi-sovereigns we like Perusahaan Listrik Negararsquos (PLN) 10y bonds at a spread of more than 130-140bp to the Indonesian sovereign The PLNIJ rsquo21s are currently indicated 99bp wide of the INDON rsquo21s

Sukuk bonds Demand for sukuks is driven by the strong liquidity of Islamic banks the relatively scarce sukuk supply and limited availability of alternative Islamic investment products Islamic banks also have a preference for higher-quality sukuk paper therefore Indonesiarsquos upgrade should benefit its sukuk bonds at the margin We see value in the INDOIS rsquo18s these bonds are relatively more liquid than other front-end bonds (quoted 12bp wider than the INDON rsquo18s) and we expect demand from Middle Eastern banks to be supportive

CDS Following the upgrade Indonesia CDS compressed to 12bp from 20bp versus the Philippines The basis between the Indonesia 10y bonds and 5y CDS has turned negative (Figure 1) Therefore we think CDS move may be somewhat overdone

Avanti Save +65 6308 3116

avantisavebarcapcom

Krishna Hegde CFA +65 6308 2979

krishnahegdebarcapcom

Prakriti Sofat +65 6308 3201

prakritisofatbarcapcom

Barclays Capital | The Emerging Markets Weekly

26 January 2012 14

STRATEGY FOCUS INDONESIA

More room to run This article is a shortened version of the report published on 20 January 2012

We have a constructive view on Indonesia Inclusion of the countryrsquos sovereign bonds in global bond indexes is likely to generate USD200-400mn of buying by passive investors who need to match their benchmark Furthermore active investors are likely to be buyers because Indonesia trades 151bp wide of the Barclays Capital Global Aggregate index

Summary of recommended positioning Our recommendation is to buy the INDON rsquo21s and the INDOIS rsquo18s sukuk bonds We recommend a neutral stance on INDON rsquo42s and would look to buy INDON rsquo38s as they cheapen against the curve We think the move in the 5y INDON CDS is somewhat overdone

Long-dated bonds we recommend a hold on the INDON rsquo42s For the INDON rsquo38s we expect the bonds to continue to cheapen against the curve given it is relatively less liquid As these bonds cheapen versus the INDON rsquo42s we would look to add on dips (Figure 3)

Following the upgrade the INDON rsquo42s have experienced a sharper rally than the INDON rsquo38s highlighting investorsrsquo preference for liquidity The fair differential for long-end Indonesian bonds versus the Philippines is ~0-10bp in our view Long-dated Indonesian bonds have rallied 10-15bp more than Philippines we view the compression as a fair reflection of the incremental buying that we expect from passive investors

Short-dated bonds and the belly of the curve We like the front-end bonds (INDON rsquo14s rsquo15s rsquo16s and rsquo17s) but they are illiquid and execution can be challenging

In the belly of the Indonesian curve we prefer to add 10y bonds (INDON rsquo21s) The INDON rsquo21s have not rallied as much as longer-dated bonds and the 10s30s curve has inverted to -5bp from about 14bp before the upgrade

Among Indonesian quasi-sovereigns we like Perusahaan Listrik Negararsquos (PLN) 10y bonds at a spread of more than 130-140bp to the Indonesian sovereign The PLNIJ rsquo21s are currently indicated 99bp wide of the INDON rsquo21s

Sukuk bonds Demand for sukuks is driven by the strong liquidity of Islamic banks the relatively scarce sukuk supply and limited availability of alternative Islamic investment products Islamic banks also have a preference for higher-quality sukuk paper therefore Indonesiarsquos upgrade should benefit its sukuk bonds at the margin We see value in the INDOIS rsquo18s these bonds are relatively more liquid than other front-end bonds (quoted 12bp wider than the INDON rsquo18s) and we expect demand from Middle Eastern banks to be supportive

CDS Following the upgrade Indonesia CDS compressed to 12bp from 20bp versus the Philippines The basis between the Indonesia 10y bonds and 5y CDS has turned negative (Figure 1) Therefore we think CDS move may be somewhat overdone

Avanti Save +65 6308 3116

avantisavebarcapcom

Krishna Hegde CFA +65 6308 2979

krishnahegdebarcapcom

Prakriti Sofat +65 6308 3201

prakritisofatbarcapcom

Barclays Capital | The Emerging Markets Weekly

26 January 2012 15

Figure 2 Spread comparison of Indonesia and other EM sovereigns and indices

Ratings OAS Amt outstd (USD bn) Avg life

Brazil Baa2BBBBBB 170 351 125

Colombia Baa3BBB-BBB- 200 128 143

Hungary Ba1BB+BB+ 816 210 69

Indonesia Baa3BB+BBB- 249 203 111

Mexico Baa1BBBBBB 190 356 163

Panama Baa3BBB-BBB 198 72 143

Peru Baa3BBBBBB 215 83 187

Philippines Ba2BBBB+ 218 233 135

Russia Baa1BBBBBB 313 292 79

South Africa A3BBB+BBB+ 261 108 83

Turkey Ba2BBBB+ 407 403 110

Global Aggregate Index AA2AA3 99 373035 76

Global EM Sovereign Index Ba1Ba2 425 3945 115

Source Barclays Capital

How much should Indonesia compress following its upgrade We believe long-dated Indonesian sovereign bonds for should trade nearly flat to the Philippines Indonesiarsquos 10y bonds have not tightened much since the upgrade and we think there is still potential for them to compress against Philippines

Index demand to drive spreads for liquid bonds We believe Indonesiarsquos inclusion in the Barclays Global Aggregate Index (Global Agg) will generate USD200-400mn of incremental buying from passive benchmarked investors We also expect demand from active investors given that Indonesia trades (249bp) wide of the Global Agg (985bp) and underweighting Indonesia will create a drag of 151bp versus the benchmark

Figure 1 5y CDS spread vs 10y Indonesia bonds (bp)

100

150

200

250

300

350

Jun-11 Jul-11 Aug-11 Oct-11 Nov-11 Dec-11-50

-40

-30

-20

-10

0

10

20

30

40

50INDON 5y CDS INDON 21s (ASW) Basis

Note ASW for the bond spread Source Barclays Capital

Barclays Capital | The Emerging Markets Weekly

26 January 2012 16

Outlook for Indonesia credit In the medium term we believe supportive labour dynamics and a rising investment-to-GDP ratio suggest that Indonesiarsquos potential GDP growth will rise to 75-80 over the coming decade Indonesia received annual FDI inflows of more than USD10bn in 2010 and 2011 We believe this trend will continue given 1) the countryrsquos rising middle income group 2) its vast commodity resources and 3) its relatively lower labour costs compared with Chinarsquos coastal region The sovereignrsquos fiscal and debt positions are expected to remain much better than higher-rated peers Also economic policy management continues to improve

In terms of structural reforms the creation of the OJK (Financial Services Authority) and recent passage of the Land Acquisition Bill (despite political opposition) underpin the sovereignrsquos positive ratings trajectory Recent charges of official corruption are concerning and appear to have hurt President Yudhoyonorsquos approval ratings which continue to fall These developments could slow the reform agenda in the near term Towards the latter part of 2012 we believe the political focus will shift towards potential candidates for the presidential election in 2014 as President Yudhoyono is not allowed to run for a third term

Risks Despite higher FX reserves (December 2011 USD110bn) and prudential measures to deter ldquohotrdquo money inflows since the global financial crisis Indonesiarsquos financial system remains vulnerable to risk sentiment given heavy offshore positioning in the local bond and equity markets The economy is highly leveraged to commodity prices (65 of exports) Its dependence on China has risen ndash directly through exports and indirectly owing Chinarsquos growing influence on global commodity markets and prices A sharper-than-expected Chinese slowdown would be a risk for Indonesia We forecast Indonesiarsquos economy will expand 62 in 2012 however if there is a global recession we believe Indonesias growth will be 45 (see Indonesia Better buffered but not immune 21 October 2011)

Incremental demand for Indonesia assets

We believe the upgrade to IG is likely to boost investment inflows from Japan At the same time central banks have also been diversifying into IndoGBs We believe positive sentiment towards the IDR and Indonesiarsquos local-currency bond market will provide a more constructive backdrop for credit and support spreads in the medium to long term (see Emerging Asia Sovereign Credit Stirred not shaken 8 December 2011 for more details)

Figure 3 Indonesia curve before and after the upgrade (spread)

200

210

220

230

240

250

260

270

280

0 5 10 15 20 25 30 35

16-Jan-1220-Jan-12

bp

life

Source Barclays Capital

Barclays Capital | The Emerging Markets Weekly

26 January 2012 16

Outlook for Indonesia credit In the medium term we believe supportive labour dynamics and a rising investment-to-GDP ratio suggest that Indonesiarsquos potential GDP growth will rise to 75-80 over the coming decade Indonesia received annual FDI inflows of more than USD10bn in 2010 and 2011 We believe this trend will continue given 1) the countryrsquos rising middle income group 2) its vast commodity resources and 3) its relatively lower labour costs compared with Chinarsquos coastal region The sovereignrsquos fiscal and debt positions are expected to remain much better than higher-rated peers Also economic policy management continues to improve

In terms of structural reforms the creation of the OJK (Financial Services Authority) and recent passage of the Land Acquisition Bill (despite political opposition) underpin the sovereignrsquos positive ratings trajectory Recent charges of official corruption are concerning and appear to have hurt President Yudhoyonorsquos approval ratings which continue to fall These developments could slow the reform agenda in the near term Towards the latter part of 2012 we believe the political focus will shift towards potential candidates for the presidential election in 2014 as President Yudhoyono is not allowed to run for a third term

Risks Despite higher FX reserves (December 2011 USD110bn) and prudential measures to deter ldquohotrdquo money inflows since the global financial crisis Indonesiarsquos financial system remains vulnerable to risk sentiment given heavy offshore positioning in the local bond and equity markets The economy is highly leveraged to commodity prices (65 of exports) Its dependence on China has risen ndash directly through exports and indirectly owing Chinarsquos growing influence on global commodity markets and prices A sharper-than-expected Chinese slowdown would be a risk for Indonesia We forecast Indonesiarsquos economy will expand 62 in 2012 however if there is a global recession we believe Indonesias growth will be 45 (see Indonesia Better buffered but not immune 21 October 2011)

Incremental demand for Indonesia assets

We believe the upgrade to IG is likely to boost investment inflows from Japan At the same time central banks have also been diversifying into IndoGBs We believe positive sentiment towards the IDR and Indonesiarsquos local-currency bond market will provide a more constructive backdrop for credit and support spreads in the medium to long term (see Emerging Asia Sovereign Credit Stirred not shaken 8 December 2011 for more details)

Figure 3 Indonesia curve before and after the upgrade (spread)

200

210

220

230

240

250

260

270

280

0 5 10 15 20 25 30 35

16-Jan-1220-Jan-12

bp

life

Source Barclays Capital

Barclays Capital | The Emerging Markets Weekly

26 January 2012 17

STRATEGY FOCUS TURKEY

Another adjustment in FX policy This article is an expanded version of the 25 January 2012 note Central Bank of Turkey Another Tweak in FX Policy

The Central Bank of Turkey (CBT) seems to be signaling considerable comfort with the lira having cancelled the daily FX auctions Although the global risk environment is supportive of Turkish assets we argue for being cautious on lira and we reiterate our RV trade to selling lira versus the rand

CBT governor Basci indicated on January 26 his general comfort with the policy tools of the Bank that he expected the lira to remain firm He also said that the Turkish monetary stance could be changed following the recent surprise-dovish statement from the Fed This suggests that the CBT may loosen liquidity conditions in Turkey The recent decisions and announcements by the CBT as a possible lira negative may be ignored by the market for now However the lira would face a significant challenge if the Turkish economy slows more sharply At that stage the CBT would likely have to make the tough choice between defending the lira and its inflation targets or taking a growth and CA supportive stance We think the bias could be to the latter as indicated by governor Bascirsquos recent comments

From daily to ad hoc FX auctions Tuesdayrsquos monetary policy decision was largely a non-event (the key policy rates and required reserve ratios of the banks were kept unchanged) However the CBT announced it would no longer hold the daily FX selling auctions (where the rules were $50mn under ldquonormal conditionsrdquo and a $17bn cap on consecutive days) instead opting for ad hoc FX selling auctions with a cap of $500mn The CBT did not rule out ad hoc non-auction interventions and these are probably still in the CBTs FX toolbox The CBT left unchanged the guidance range on ldquoregularrdquo 1wk repo lending (at 575) at 3-7bn lira but said it would lend up to a maximum of 20bn lira at its 1mth window on 27 January up from 12bn lira at the previous auction Admittedly these are not significant changes (a $500mn auction is the equivalent of two weeks worth of the recent daily auctions) However in stepping back from the FX market

Koon Chow +44 (0)20 7773 7572

koonchowbarcapcom

CBT has cancelled its daily FX auctions and seems willing to

offer more lira liquidity

Figure 1 The lira and Central Bank FX interventions

-1500

-1300

-1100

-900

-700

-500

-300

-100

100

300

Apr-08 Oct-08 Apr-09 Oct-09 Apr-10 Oct-10 Apr-11 Oct-111112131415161718192212223

FX intervention (-ve = FX sales) USDTRY RHS USD-EUR basketTRY RHS

26bn

Heavy FX sales (USDTRY 190 Bask 220)

FX buying (below USDTRY 170 Bask 210)

Source Central Bank of Turkey

Given the challenges ahead we remain cautious the lira but

recognise that with the rising levels of investor risk appetite

that lira cautions is best expressed in an RV trade

versus ZAR

Barclays Capital | The Emerging Markets Weekly

26 January 2012 18

and in providing more lira liquidity we believe the CBT is signalling that it is comfortable with where the lira has appreciated to and probably does not want to see further strong gains This is consistent with past official steps on the exchange when the lira depreciated through 174 per USD and 210 per basket of EUR-USD (a proxy for the trade weighted measure of the lira) on 5 August 2011 the CBT started intervening by selling foreign currency and became increasingly aggressive toward 190 and 220 respectively In October this was reinforced by open market operations squeezing lira liquidity At current exchange rate levels especially on the basket measure (at 207) the lira is back near to the early-August levels The CBT was last buying foreign currency (in daily auctions) toward the end of July 2011 when USDTRY was 169 and the basket measure was 206

Not only is the CBT signalling comfort on the lira but also its actions probably reflect some desire to conserve its already moderate levels of FX reserves The FX reserves have fallen to $753bn as of the 20 January and down 54bn yy and down 186bn from the July 2011 highs Moreover in terms of coverage ratios (to short-term debt for example) Turkish FX reserves are at the low end of the Emerging Markets distribution (see our publication EM FX leaning against or blown about by the wind 5 January 2012) A weak exchange rate helps in the adjustment of the current account deficit one of Turkeys main macroeconomic challenges right now We are forecasting a sharp slowdown in the economy in 2012 but we do not given ldquostickyrdquo imports in Turkey especially of energy expect the current account deficit to fall below 75 of GDP from 95 in 2011 The greatest dilemma for the CBT is likely to be when the economy slows more aggressively We have already seen signs of manufacturing and consumer activity flagging and 2012 is likely to see these trends extended At the latter stages of the slowdown the CBT may need to choose between supporting growth and the current account adjustment or supporting the lira and containing inflation which has already been pushed above 10 on the back of last years depreciation The risks of the former keep us cautious on the lira and the real test will be if the unfolding slowdown dovetails with another period of risk aversion

The lira is nearing levels where the Central Bank was last buying

FX (July 2011)

Figure 2 Industrial production and credit growth (particularly) are slowinghellip

Figure 3 But confidence indicators have not fallen sharply The lsquobig testrsquo is still ahead

0

10

20

30

40

50

60

70

Sep-05 Sep-06 Sep-07 Sep-08 Sep-09 Sep-10 Sep-11-30

-20

-10

0

10

20

30

Private sector credit growth ( yy)LHSIndustrial production ( yy) RHS

50

60

70

80

90

100

110

120

Oct-07 Oct-08 Oct-09 Oct-10 Oct-1130

35

40

45

50

55

60

Turkey Consumer Confidence (NSA Index)

Turkey Real Sector Confidence Index (NSA Avg)

PMI RHS

Source Haver Analytics Barclays Capital Source Haver Analytics Barclays Capital

Barclays Capital | The Emerging Markets Weekly

26 January 2012 18

and in providing more lira liquidity we believe the CBT is signalling that it is comfortable with where the lira has appreciated to and probably does not want to see further strong gains This is consistent with past official steps on the exchange when the lira depreciated through 174 per USD and 210 per basket of EUR-USD (a proxy for the trade weighted measure of the lira) on 5 August 2011 the CBT started intervening by selling foreign currency and became increasingly aggressive toward 190 and 220 respectively In October this was reinforced by open market operations squeezing lira liquidity At current exchange rate levels especially on the basket measure (at 207) the lira is back near to the early-August levels The CBT was last buying foreign currency (in daily auctions) toward the end of July 2011 when USDTRY was 169 and the basket measure was 206

Not only is the CBT signalling comfort on the lira but also its actions probably reflect some desire to conserve its already moderate levels of FX reserves The FX reserves have fallen to $753bn as of the 20 January and down 54bn yy and down 186bn from the July 2011 highs Moreover in terms of coverage ratios (to short-term debt for example) Turkish FX reserves are at the low end of the Emerging Markets distribution (see our publication EM FX leaning against or blown about by the wind 5 January 2012) A weak exchange rate helps in the adjustment of the current account deficit one of Turkeys main macroeconomic challenges right now We are forecasting a sharp slowdown in the economy in 2012 but we do not given ldquostickyrdquo imports in Turkey especially of energy expect the current account deficit to fall below 75 of GDP from 95 in 2011 The greatest dilemma for the CBT is likely to be when the economy slows more aggressively We have already seen signs of manufacturing and consumer activity flagging and 2012 is likely to see these trends extended At the latter stages of the slowdown the CBT may need to choose between supporting growth and the current account adjustment or supporting the lira and containing inflation which has already been pushed above 10 on the back of last years depreciation The risks of the former keep us cautious on the lira and the real test will be if the unfolding slowdown dovetails with another period of risk aversion

The lira is nearing levels where the Central Bank was last buying

FX (July 2011)

Figure 2 Industrial production and credit growth (particularly) are slowinghellip

Figure 3 But confidence indicators have not fallen sharply The lsquobig testrsquo is still ahead

0

10

20

30

40

50

60

70

Sep-05 Sep-06 Sep-07 Sep-08 Sep-09 Sep-10 Sep-11-30

-20

-10

0

10

20

30

Private sector credit growth ( yy)LHSIndustrial production ( yy) RHS

50

60

70

80

90

100

110

120

Oct-07 Oct-08 Oct-09 Oct-10 Oct-1130

35

40

45

50

55

60

Turkey Consumer Confidence (NSA Index)

Turkey Real Sector Confidence Index (NSA Avg)

PMI RHS

Source Haver Analytics Barclays Capital Source Haver Analytics Barclays Capital

Barclays Capital | The Emerging Markets Weekly

26 January 2012 19

EM DASHBOARD Alanna Gregory 212 412 5938 alannagregorybarcapcom

Description Entry date Entry Current Target Stop

PampL to target

PampL to stop Analyst

Credit (7)

Buy the Turkey 5y basis (5y CDS $16s$17s) 19-Jan-12 -95bp -70bp -30bp -120bp 080 Kolbe

Buy Egypt 5y CDS 06-Dec-11 520bp 565bp 650bp 560bp 17 Kolbe Moubayed

Long Qatar 42s 06-Dec-11 285bp 270bp 230bp 300bp 133 Kolbe

Sell RussiaKazDubai 5y CDS vs CroRomCzech 06-Dec-11 64bp 40bp 150bp 0bp 275 Kolbe

Sell the Russia basis ($15s 3y CDS) 06-Dec-11 -20bp -35bp -70bp 0bp 175 Kolbe

Long PDVSA 17 New 28-Apr-11 72 80 85 75 100 Arreaza Cruz Grisanti Guarino

Long Argentina EUR Warrant 06-Jun-10 605 12 13 10 050 Guarino

FX (10)

Sell AUDKRW 1m forward 06-Jan-12 1181 1182 1187 1215 346 Desbarres Verdi

Short CHFMXN 06-Jan-12 1438 1411 1350 1460 124 Melzi Felices Wynne

Short AUDBRL 05-Jan-12 189 185 18 192 071 Felices Melzi Desbarres

Long SGD vs USD-EUR basket (60-40) 06-Dec-11 100 10290 10350 9850 014 Desbarres Verdi

Long ILS short CZK 06-Dec-11 502 509 540 500 344 Chow

Sell 3m ATMF USD callBRL put 06-Dec-11 179 175 - - - Melzi

Sell 3m ATMF USD callMXN put 06-Dec-11 1365 1298 - - - Melzi

Short basket long RUB 06-Dec-11 3578 3460 3380 3600 057 Chow

Short TRY long ZAR 06-Dec-11 438 436 420 460 067 Chow

Long EUR short RON 15-Nov-11 436 4340 450 428 400 Chow

Rates (14)

Receive 1y TIIE 20-Jan-12 485 481 450 500 - Melzi

INR 1y fwd OIS 2s5s steepener 12-Dec-11 5bp 19bp 45bp -15bp 111 Rachapudi

HUF 3M T-bill (FX implied rates financed) 06-Dec-11 250bp - - - - Chwiejczak

Long Jun 14 Mbonos 06-Dec-11 472 474 450 485 218 Melzi

MYR Receive1y1y vs 5y 06-Dec-11 33bp 27bp 50bp 20bp 329 Arora

Poland Receive 1Y1Y FWD 06-Dec-11 470 469 400 500 223 Chwiejczak

SGD 1y fwd 3s10s steepeners 06-Dec-11 120 122 140 110 150 Arora

SOAF Long 5Y bond (R157) 06-Dec-11 670 650 640 720 014 Gable Chwiejczak

Turkey Long bond JAN16 FX hedge 06-Dec-11 995 1010 1000 1070 017 Chwiejczak

KRW 2s5s steepener 11-Nov-11 425bp 325bp 20bp -5bp 203 Wang

Israel 5Y-2Y steepner DV01 08-Nov-11 60bp 63bp 100bp 50bp 257 Chwiejczak

China 2s5s NDIRS steepener 12-Oct-11 0bp 17bp 40bp -10bp 085 Wang

Israel ILS 10Y CPI BE 15-Sep-11 200 215 250 - 016 Chwiejczak

South Africa Receive 5y IRS 29-Jul-11 735 668 600 740 094 Chwiejczak Gable

Closed Trades (4) Date Closed

Jan13-Jan15 flattener 06-Dec-11 70 93 20 95 26-Jan-12 Melzi

Long MYR short TWD 3m NDF 06-Dec-11 953 976 98 945 26-Jan-12 Desbarres Verdi

Long EUR short PLN 15-Nov-11 441 433 46 428 24-Jan-12 Chow

Receive 1y1y fwd TIIE 12-Aug-11 493 51 425 545 20-Jan-12 Melzi

Note As of 26 January 2012 (trades are updated regionally) Methodology PampL to targetPampL to stop is a measure of how much can be gained relative to how much can be lost Both are calculated from the current value and reported in dollars This measure does not take probabilities into account Source Barclays Capital

Barclays Capital | The Emerging Markets Weekly

26 January 2012 20

FX VIEWS ON A PAGE

Currency Tactical bias Strategic directional view Current strategy trades we like

Vol adj 6m returns

Score (1-5)

Emerging Asia

THB Bullish The performance of the THB has been remarkably resilient despite political change and the effect of flooding on economic activity Expansionary monetary and fiscal policy should support economic growth and the currency

058 400

KRW Bullish Elevated inflation robust export growth and a tight labour market augur for KRW appreciation

Sell AUDKRW 1m forward 029 390

INR Neutral The INR has outperformed its regional peers year-to-date If risk appetite continues to improve USDINR could fall further However weak fundamentals are likely to limit INR appreciation

035 380

MYR Bullish Resilient growth a healthy fiscal position and the roll-out of the governmentrsquos divestment program should support the currency

032 380

IDR Bullish The recent underperformance of the IDR vis-agrave-vis the wider region is likely to reverse as risk appetite rises

016 325

TWD Neutral While economic activity remains relatively firm core inflationary pressures are benign running at about 1 yy As such the CBC has little incentive to allow the TWD to appreciate

-004 300

PHP Bullish The central bankrsquos preference for the PHP not to be an outlier in terms of regional performance points to modest currency appreciation

010 295

HKD Neutral Rising CNY deposits onshore could result in the ldquoRMB-isationrdquo of the economy

-030 260

CNY Bullish We expect the USDCNY to slowly move lower as the PBoC leans against still-elevated inflation

-002 255

SGD Bullish We expect the MAS to maintain a bias towards currency appreciation near the centre of the NEER policy band which we estimate to be +-275bp with a +2 slope

Long SGD vs USD (60)-EUR (40) basket 004 230

Latin America

MXN Bullish Still inexpensive valuation not crowded positioning limited intervention risks and capped depreciation potential by existing intervention programs (selling USD)

Sell CHFMXN (target 135) 020 330

PEN Neutral Strong FX intervention biases us to a neutral stance 020 320

CLP Neutral Copper prices supportive but monetary policy easing in the pipeline

020 320

COP Bullish Should remain supported by high oil prices (Barclays Capital sees significant upside risks to oil prices)

016 280

BRL Neutralbullish Risk environment is supportive yet intervention remains a threat especially if USDBRL falls below 170

Sell AUDBRL (target 18) 016 250

Barclays Capital | The Emerging Markets Weekly

26 January 2012 21

Currency Tactical bias Strategic directional view Current strategy trades we like

Vol adj 6m returns

Score (1-5)

Emerging EMEA

EGP Bearish The CBE has tried to stabilise the EGP against capital flight but FX reserves have fallen sharply It may take a hard decision in a couple of months to allow a lsquofloatdevaluationrsquo before reserves fall below a prudent level

034 370

RUB Bullish Russiarsquos resilience to euro contagion is supported by sticky oil prices and argues for going long the RUB against a EUR-USD basket Strong local growth and higher yields should help retain capital in the country

Short EUR-USD basketlong RUB 019 310

HUF Neutral The willingness voiced by the Hungarian government to agree to what is needed to bring IMFEU loans plus stronger global risk appetite will likely trigger for hedging of HUF shorts Fundamentals remain fragile however

-031 300

RON NeutralBearish The risk environment is supportive for the RON but low yields and recent signs of political unrest (public protests against the governmentrsquos past austerity measures) keep us in our short RON recommendation for now

Long EURshort RON

000 295

TRY Neutralbearish Turkeyrsquos high external funding needs and uncertain monetary policy will likely weigh against the lira relative to the stronger currencies in EEMEA The CBT has stopped its daily FX auctions which could leave the TRY vulnerable if and when global investor risk appetites were to recede

Short TRYlong ZAR

003 275

ZAR Bullish Strong commodity prices and attractive local asset prices (on bonds) should mean capital inflows if global liquidity conditions stabilise This should benefit the ZAR more than other high-beta EEMEA currencies

Short TRYlong ZAR

011 275

PLN Neutral We remain cautious on the PLN given the external funding needs of Poland but the recent increase in global risk appetite has stopped us out of our shorts and we await a stabilization in the market before setting new ones

-019 265

ILS NeutralBullish Opportunity for an RV trade against the CZK given Israelrsquos stronger balance of payments and lower vulnerability to euro area contagion The ILS should benefit from our house view of lower EURUSD (and the past correlation between ILSCZK and EURUSD)

Long ILSShort CZK

-010 205

CZK Neutralbearish The Czech Republic has the strongest balance sheet among CEE countries however the currency should still suffer as the Czech economy may slip back into a recession

Long ILSShort CZK -018 180

UAH Neutralbearish High carry reflects investor fears of devaluation An agreement with the IMF or Russia on gas imports may alleviate these concerns but there has been little progress in this direction Meanwhile FX reserves are being depleted slowly by some internal capital flight

KZT Neutralbullish Being a commodity producer (oil) and having a positive CA create a cushion for uncertainty in global capital flows However low liquidity in this FX market may limit the appeal of the KZT

Note Versus EUR The variable score is an index that ranks EM currencies according to vol-adjusted returns PPP valuation carry systemic risk basic balanceGDP and reserves accumulated over the past 5yGDP For more details on the trade recommendations please see the EM Dashboard Note that bold text indicates changes in view Source Barclays Capital

Barclays Capital | The Emerging Markets Weekly

26 January 2012 22

CREDIT PORTFOLIO OAS (bp) OAD Weights () Duration Bias Total Returns () Bonds we recommendhellip

30-Dec-

11 25-Jan-

12 3mF Benchmark Model Adj

Duration 1w2012 QTD

2012 YTD 3m F Buying Selling

EM Portfolio 377 358 338 72 100 1000 Long 80 10 08 08 24 Arg Ven Ukr 1031 935 897 56 136 129 under Short 43 41 61 61 59 Other 272 267 249 75 864 871 neutral Long 86 05 00 00 18 EM Asia 244 238 213 80 15 16 over Long 99 07 01 01 29 Philippines 212 199 179 85 74 63 under Long 87 07 03 03 22 Philip 24s 25s 34s 37s Philip 13s 14s 15s 16s 17sIndonesia 237 240 210 78 67 87 over Long 120 07 -02 -02 37 Indo 14s 15s 16s 17s 18s sukuk 21s Sri Lanka 475 455 430 59 06 07 neutral Long 76 11 05 05 29 Sri Lanka 20 21s Vietnam 522 512 492 49 05 03 under Short 26 -01 08 08 23 Vietnam 20s EMEA 383 378 369 62 38 37 under Neutral 66 09 02 02 09 Turkey 369 384 373 72 93 102 neutral Neutral 78 02 -13 -13 11 Turkey 15s 16s 17s 18s Russia 327 304 281 58 91 117 over Long 90 03 14 14 23 Russia 28s Russia 30s Russia 15s Qatar 224 227 203 67 46 50 over Long 88 04 -05 -05 24 Qatar 40s42s Poland 314 289 285 58 29 30 neutral Long 70 13 10 10 01 Poland 21s 22s Lebanon 370 372 387 44 28 14 under Neutral 22 03 05 05 -13 Ukraine 926 923 972 43 20 13 under Short 23 47 10 10 -27 Ukr 12s 13s Ukr 20s 21s Hungary 657 610 635 63 18 07 under Short 19 36 28 28 -29 Hungary 20s 21s 41s South Africa 222 239 227 73 23 08 under Neutral 25 06 -15 -15 09 Lithuania 448 464 431 53 15 22 over Neutral 77 02 -08 -08 37 Lithuania 17s 20s 21s Croatia 601 601 616 65 10 05 under Neutral 32 14 01 01 -17 Egypt 622 534 539 78 03 00 under Short 00 58 61 61 -09 Egypt 20s 40s Latin America 412 378 350 80 45 46 over Long 88 12 16 16 35 Brazil 168 150 128 82 116 158 over Long 134 07 06 06 24 BR41 Mexico 167 169 146 88 97 114 over Long 124 01 -08 -08 25 MX22N MX 40 MX 100yr Venezuela 1175 1071 1011 56 74 80 over Short 49 42 63 63 85 PD 17N PD 15 Argentina 827 703 663 61 42 36 neutral Short 42 38 81 81 55 Boden 15 Colombia 184 184 169 89 41 24 under Short 42 05 -04 -04 13 CO 27 CO 33 CO 41 Peru 207 213 188 107 27 29 neutral Long 137 -11 -22 -22 37 PE33 PE50 PE37 Panama 198 189 171 92 24 04 under Short 12 -02 -02 -02 18 PA 36 Uruguay 191 184 169 103 16 10 under Short 51 -07 -09 -09 15 UY25 El Salvador 447 452 462 85 10 00 under Short 00 04 -06 -06 -21 EL Salv 35 Dominican Republic 583 551 544 53 05 05 neutral Short 39 27 18 18 11 DR21 DR27 Additional Countries 427 432 423 39 19 12 under Neutral 28 04 05 05 11 Abu Dhabi 166 180 177 41 09 00 under Long 00 07 -07 -07 -01 ADGB14s Bulgaria 366 340 349 27 03 00 under Neutral 00 08 11 11 -02 Bulgaria 15s Gabon 419 414 382 47 02 05 over Neutral 112 06 13 13 31 Gabon 17s Pakistan 1377 1422 1422 37 02 03 neutral Short 35 07 -04 -04 28

Ghana 556 529 490 44 02 04 over Neutral 88 08 17 17 39 Ghana 17s

Note Benchmark forecast Benchmark is a variant of the Barclays Capital Global EM Sovereigns index featuring USD only bonds Changes in view denoted in bold Additional Countries was previously known as Off-Index Allocations Source Barclays Capital

Barclays Capital | The Emerging Markets Weekly

26 January 2012 23

EM LOCAL BOND PORTFOLIO

1252012 Weights Total Returns FX Unhedged () Bonds we recommend

Duration Yield to Worst Mkt val

Current Market Model

Past Week QTD YTD

3m Forecast Buying Selling

EM Local 452 593 1448857 10000 10000 163 -245 555 353

Latin America 390 837 388169 2845 3318 over 125 -108 961 424

Brazil 259 1033 195289 1558 2011 over 093 -190 988 430 Jan 17 NTNF Jan21 NTNF Global BRL Jan 22

Chile 414 437 5922 036 009 under 149 355 466 174 May 18 BCP

Colombia 444 642 63049 392 440 over 082 282 1640 561 Local TES Jul 24

Mexico 583 586 112994 784 848 over 218 -282 568 390 Jun 27 Nov 36 Nov 38

Peru 812 609 10915 074 010 under 029 1178 1205 061 May 15

EEMEA 432 653 424001 2908 2320 under 213 -1026 -361 055

Czech Republic 586 274 46202 304 000 under 281 -1026 229 -094 May 25s

Hungary 344 868 28452 222 101 under 672 -2207 -565 -080 13E 14D

Israel 439 348 45510 301 277 under 049 -384 004 -034 Sept 13s Feb 19s

Poland 418 501 96524 660 574 neutral 269 -1382 -425 -346 Apr 16s Oct 20s

Russia 422 756 64926 470 220 under 295 -699 483 568

South Africa 592 765 76846 515 720 over 007 -936 -963 216 R157s

Turkey 212 1006 65541 438 428 neutral 119 -791 -1018 150 Jan 16s Jan 21s

EM Asia 509 392 636687 4247 4361 neutral 154 195 899 509

India 683 835 8869 054 075 over 077 -586 -409 755 IGB GS 18 GS 15

Indonesia 727 596 62383 400 400 neutral 458 1495 2947 455 INDOGB Apr 17 (FR60)

Malaysia 484 328 83145 543 550 neutral 131 161 575 268 MGS Sep 18

Philippines 783 532 37731 257 244 neutral 047 1452 1901 486

South Korea 428 362 374713 2524 2642 over 135 -132 706 553 3-5y bonds

Thailand 615 323 69846 469 450 neutral 091 277 162 580 LB176A

Note Bolding indicates change in bias Source Barclays Capital

Barclays Capital | The Emerging Markets Weekly

26 January 2012 24

DATA REVIEW amp PREVIEW ASIA Rahul Bajoria Jian Chang

Review of last weekrsquos data releases

Main indicators Period Previous BarCap Actual Comments

India Repo rate () Jan 850 850 850 Elevated core inflation prevents cut in repo rate

India Cash reserve ratio () Jan 600 600 550 Policy gearing moving towards supporting growth

Singapore CPI ( yy) Dec 57 56 55 Core inflation expected to remain sticky in Singapore

Thailand BoT policy rate () ndash 325 300 300 We do not expect any further rate cuts from Bank of Thailand

Korea GDP ( yy) Q4 35 39 34 We see potential for upside revisions in the second estimate next month

Preview of week ahead

Monday 30 January Period Prev 2 Prev 1 Latest Forecast Consensus

0700 Korea Current account balance (USD bn) Dec 283 413 505 40

1000 Philippines GDP ( yy) Q4 46 31 32 38 37

1600 Taiwan Unemployment rate (sa) Dec 43 43 43 43 43

Korea We expect the current account surplus to narrow as year-end outbound travelling typically opens up a wide services trade deficit The goods trade balance on a customs basis was USD4bn in December

Philippines Growth is likely to remain soft given weak export performance and continued government under-spending However consumption should remain strong given holiday-related spending

Taiwan Employment in non-agricultural sectors started to decline in November with a slight increase in the number of workers on unpaid leave

Tuesday 31 January Period Prev 2 Prev 1 Latest Forecast Consensus

0700 Korea IP ( yy) Dec 69 63 56 40 61

1000 Singapore Unemployment rate () Q4 19 21 20 21

1600 Taiwan GDP ( yy) Q4 66 45 34 33 28

1800 Malaysia BNM policy rate ndash 300 300 300 300 300

Korea We expect manufacturing output to increase 17 mm sa in December which will more than offset the small declines in the previous two months Exports in December were unusually resilient

Singapore We expect net job creation to slow as suggested by various hiring surveys But restrictions on foreign workers will keep the labour market tight

Taiwan We expect investment to become a smaller drag on GDP in Q4 than in Q3 as suggested by the stabilisation in imports of capital goods Consumption is likely to remain robust supported in part by tourism and will mitigate weakness in the external sector We forecast a 05 qq sa expansion in Q4 GDP following a 01 contraction last quarter We expect 44 GDP growth for 2011

Malaysia With growth moderating only gradually our base case is for the policy rate to be unchanged in H1

Wednesday 1 February Period Prev 2 Prev 1 Latest Forecast Consensus

0700 Korea CPI ( yy) Jan 36 42 42 37 36

0900 Korea Exports ( yy) Jan 76 116 108 65

0900 China PMI Manufacturing Jan 504 490 503 495 496

1200 Indonesia CPI ( yy) Jan 44 42 38 39

1200 Indonesia CPI core ( yy) Jan 44 44 43 44

1200 Indonesia Exports ( yy) Dec 440 178 83 100

1200 Thailand CPI ( yy) Jan 42 42 35 34 33

1200 Thailand Core CPI ( yy) Jan 29 29 27 26 27

2130 Singapore Electronics PMI Jan 521 509 497 ndash 499

Barclays Capital | The Emerging Markets Weekly

26 January 2012 25

Korea Lunar New Year demand and electricity tariff hikes for businesses last December should keep the cost of food energy and services high Nonetheless inflation is expected to moderate on base effects We expect exports to rise 6 mm sa extending Decemberrsquos 84 increase due to last-minute festive shipments in the early part of the month Lunar New Year holidays should exert a dampening effect on trade and manufacturing data in January and we expect a temporary trade deficit in January given high energy imports

China We look for a post-Chinese New Year mm decline and expect the PMI to hover around 50 in Q1

Indonesia Inflation to remain contained at 39 however we should see a mm pick-up driven by food prices and health costs We expect inflation to rise gradually in 2012 and end the year at 53 core inflation is likely to hold steady at about 44 We look for soft export growth given the uncertain external environment

Thailand Higher fuel prices coupled with a seasonal uptick in food prices should translate into only a modest decline in inflation

Friday 3 February Period Prev 2 Prev 1 Latest Forecast Consensus

0900 China Non-manufacturing PMI Jan 577 497 560 ndash

Barclays Capital | The Emerging Markets Weekly

26 January 2012 26

DATA REVIEW amp PREVIEW EMERGING EUROPE MIDDLE EAST AND AFRICA Eldar Vakhitov Daniel Hewitt Christian Keller Vladimir Pantyushin Jeffrey Schultz Alia Moubayed Piotr Chwiejczak

Review of last weekrsquos data releases

Main indicators Period Previous Barclays Actual Comments

Israel Base rate announcement () Jan 275 250 250 Rate cut due to rapid deceleration of inflation

Turkey Benchmark repo rate () Jan 575 575 575 Rate on hold but revisions in FX auction more ad hoc

Hungary Base rate announcement () Jan 700 725 700 Rates on hold because of HUF strength and high real rate

Israel Unemployment rate () Nov 54 - 54 Unemployment rate remains low but could rise later

Russia Industrial production ( yy) Dec 39 - 25 Expected slowing in line with the global trend

Hungary Retail trade ( yy) Nov 06 - 11 Apparent slight improvement in domestic demand

Turkey Industrial confidence index Jan 972 - 1018 Turkish economy rolling buoyed by domestic demand

Turkey Capacity utilization () Jan 755 - 747 Second consecutive monthly decline still a high level

South Africa PPI ( yy) Dec 101 99 98 Lower on the back of softer commodity prices food prices however continue to gain momentum

Russia Disposable income ( yy) Dec 02 - 63 Consistent growth underpins consumer sector expansion

Russia Real wages ( yy) Dec 71 - 49 Consistent growth underpins consumer sector expansion

Russia Retail sales real ( yy) Dec 86 - 95 Consumer sector outperforms yet again

Russia Unemployment rate () Dec 63 - 61 A welcome decline adding power to consumer demand

Russia Investment in productive capacity ( yy) Dec 77 - 89 Strong investment provides support to mid-term growth

Preview of week ahead

Friday 27 January Period Prev 2 Prev 1 Latest Forecast Consensus

0900 Poland Real GDP growth () 2011 51 17 38 41 42

0900 Poland Unemployment rate () Dec 118 118 121 125 125

0900 Poland Retail sales ( yy) Dec 114 112 126 110 100

1000 Croatia Industrial output ( yy) Dec -23 06 -03 - -

Poland Growth print is likely to be strong again despite softening PMIs ldquohardrdquo data remained strong in Q4 11 therefore a positivesurprise is possible however in Q1 12 we expect growth to slow down gradually Government officials have already hinted thatunemployment in December has increased driven by seasonal factors and cyclical elements as well as overall weakening demand

Croatia Despite the oil refinery fire no longer weighing on IP we still expect only marginally positive growth in December

Monday 30 January Period Prev 2 Prev 1 Latest Forecast Consensus

0900 Lithuania Real GDP ( yy) Q4 P 59 65 67 - -

Poland Budget level YTD (PLN bn) Dec -219 -225 -216 -223 -

Serbia Real GDP ( yy) Q4 P 37 25 05 02 -

Ukraine Current account (USD bn) Q4 -13 -17 -27 - -

Ukraine GDP constant prices ( yy) Q4 P 53 38 66 40 -

Lithuania Lithuania (together with Serbia) will be among the first CEE country to report Q4 GDP growth and it will be interestingto see to what extent the weaker external demand environment will be reflected in Lithuaniarsquos Q4 GDP print After the verystrong growth in 2011 of likely close to 6 yy (annual) we expect it to slow to 25 in 2012 ndash still a comparatively robust number in the regional context however

Poland Overall we expect the central budget deficit gap to come in at around PLN22bn Stronger economic activity particularlystrong retail sales should contribute to tax income while spending has been kept under control Local government deficit mayalso come in below projected numbers

Serbia We expect growth to be only slightly positive as export growth declined considerably in Q4

Ukraine The economy has likely already entered a softer patch while the external account gap continues to widen

Barclays Capital | The Emerging Markets Weekly

26 January 2012 27

Tuesday 31 January Period Prev 2 Prev 1 Latest Forecast Consensus

0600 South Africa Private sector credit ( yy) Dec 54 55 62 58 -

0800 Hungary Unemployment rate () Dec 107 108 106 - 108

0800 Turkey Trade balance (USD bn) Dec -104 -80 -75 -85 -735

1200 South Africa Trade balance (rand bn) Dec 25 -96 -81 - -

Russia Annual real GDP (yy) 2011 52 -78 40 42 -

Serbia Industrial output ( yy) Dec -18 -10 22 - -

Serbia Retail trade ( yy) Dec -183 -162 -164 - -

South Africa Although we expect a moderation in headline PSCE growth consumer spending into the festive season throughother smaller unsecured components of household credit should see the mm growth in PSCE tick up further in December

Hungary We expect to see a slight weakening of domestic labour in Hungary

Turkey We look for a small mm widening of the trade deficit as signalled by stronger customs duties collections in December that implies a pick-up in imports

Russia The growth emphasis shifts to domestic drivers with investment and consumer demand performing well recently

Wednesday 1 February Period Prev 2 Prev 1 Latest Forecast Consensus

0500 Russia Manufacturing PMI Jan 504 526 516 - -

0800 Poland Manufacturing PMI Jan 517 495 488 - -

0800 Turkey Manufacturing PMI Jan 533 523 520 - -

0830 Czech Manufacturing PMI Jan 517 486 492 - -

0900 South Africa Kagiso PMI Jan 502 505 516 - -

Czech Budget balance (CZK bn) Jan -915 -1259 -1428 - -

Hungary PMI Jan 482 478 485 - -

Kazakhstan CPI ( yy) Jan 80 78 74 70 -

Romania International reserves (USD bn) Jan 363 360 373 - -

South Africa Unemployment () Q4 250 257 250 - -

Russia Despite recent slowing Russiarsquos IP performance remains well within positive territory Domestic demand sectors showimproving dynamics This will likely be reflected in manager expectations

Poland Amid a general U-turn in optimism in Europe Polish entrepreneurs are also likely to adopt a more positive approachwhich is likely to be reflected in the survey Also mild winter weather conditions should work in favour of a higher PMI Still weexpect slower industrial production in months to come

Turkey Domestic growth indicators that are still holding up well could be reflected in a stronger PMI reading

Czech Republic Further indications of recession likely with the PMI remaining below 50 in January

South Africa Still-significant global risks and uncertainty along with a still-struggling domestic manufacturing sector are likely to leave the PMI hovering around its neutral level of 50 in January

Hungary Growth indicators have been mixed indicating a modest recession is in process

Kazakhstan We expect disinflation to continue running its course

Romania Stable currency markets have made it possible for the NBR to limit FX intervention helping it maintain its extremelyhigh levels of reserves

Thursday 2 February Period Prev 2 Prev 1 Latest Forecast Consensus

0800 Romania Retail sales ( yy) Dec -52 20 19 - -

1000 South Africa Naamsa vehicle sales ( yy) Jan 189 117 110 - -

1200 Czech Repo rate announcement () Feb 075 075 075 075 075

Romania Interest rate announcement () Feb 625 600 575 550 550

Egypt Deposit rate () Feb 825 825 925 1025 -

Barclays Capital | The Emerging Markets Weekly

26 January 2012 28

Romania The NBR is in the middle of a rate cutting cycle Having reduced rates in each of the past two meetings by 25bp we expect another 25bp reduction to 550 Moreover we expect two more rate cuts in the next two meetings bringing the rate to 50

South Africa Vehicle sales growth should continue to reflect the relatively positive consumer dynamics in the economy providedby low interest rates and high nominal incomes

Czech Republic The CNB is on hold On one hand it will not raise rates even though inflation (adjusted for taxes) is in the middleof the 1-3 target range because the economy is very weak On the other it will not lower rates because at 075 it is at a record low and a rate decrease is unlikely to spur increased lending

Egypt Mounting inflationary pressure and a weakening currency may push the CBE to continue raising rates

Friday 3 February Period Prev 2 Prev 1 Latest Forecast Consensus

0800 Czech Retail sales ( yy) Dec 00 15 05 - -

0800 Turkey CPI ( yy) Jan 77 95 105 1065 1045

1000 Croatia Retail trade real ( yy) Dec P 10 18 10 - -

Kazakhstan International reserves (USD bn) Jan 326 322 293 285 -

Russia CPI ( yy) Jan 72 68 61 43 -

Russia Overnight deposit rate () Feb 375 375 400 400 -

Russia Refinancing rate () Feb 825 825 800 800 -

Czech Republic Domestic demand remains muted

Turkey The trade weighted fall in the lira last year still has some room to pass through to headline CPI as capacity utilisationrates in the country remain high There are some signs of a slowdown but companies in Turkey are probably still able to pass onthe bulk of their cost increases

Kazakhstan The NBK continues to defend the currency

Russia Inflation drops amid the delay in regulated tariff hikes to 1 July The CBR will likely wait until after the 4 March presidentialelections before resuming rate cuts

Barclays Capital | The Emerging Markets Weekly

26 January 2012 29

DATA REVIEW amp PREVIEW LATIN AMERICA Alejandro Arreaza Alejandro Grisanti Bruno Rovai Guilherme Loureiro Marcelo Salomon Sebastian Vargas

Review of the weekrsquos data releases

Main indicators Period Previous BarCap Actual Comments

Brazil IPCA-15 inflation mm Jan 056 055 065 The surprise was in large part driven by a higher-than-expected increase in transportation costs (air and bus fares)

Brazil Current account USD bn Dec -68 -50 -60 The CA deficit reached USD526 bn (21 of GDP) but financing was not an issue as FDI reached USD666bn

Mexico Econ activity index yy Nov 37 40 375 Growing at a moderate pace at the margin (02 mm sa) on track for a sharp deceleration in Q4 GDP to 06 qq saar

Mexico Bi-weekly CPI 2w2w Jan 051 043 032 Lower-than-expected perishable inflation marked the January CPI release

Mexico Bi-weekly CPI core 2w2w Jan 035 026 020 A 115 2w2w drop in airfares helped contain core services inflation

Mexico Trade balance USD mn Dec -232 - 08 Exports and imports are moving further down (81 and 74 respectively)

Colombia Trade balance USD mn Nov 103 - 711 High oil prices compensate for strong increase in imports demand

Brazil COPOM meeting minutes Jan - - - Very dovish minutes with the BCB giving guidance that the Selic rate should fall to single-digit levels

Brazil Unemployment rate Dec 52 50 47 In seasonally adjusted terms the unemployment rate was flat at 56

Mexico Retail sales yy Nov 30 36 75 Strong gain of 22 mm sa probably reflecting the introduction of a local version of Black Friday in November

Preview of the week ahead

Monday 30 January Period Prev 2 Prev 1 Latest Forecast Consensus

- Brazil Central government budget BRL bn Dec 54 112 46 - -

- Colombia Overnight lending rate Jan 450 475 475 475 475

500 Brazil IGP-M inflation mm Jan 053 050 -012 030 030

700 Chile Industrial production yy Dec 52 -08 20 02 10

700 Chile Retail sales yy Dec 96 86 85 80 79

1530 Mexico Budget balance MXN bn Dec YTD -1790 -17939 -2131 - -

Colombia overnight lending rate With still moderate inflation we expected Banrep to remain on hold at its meeting this monthHowever the persistence of fast growth that is expected to offset the uncertainty coming from the European sovereign debtcrisis and the slowdown of the global economy will likely drive it to reassume its tightening cycle before the end of Q1

Chile industrial production and retail sales At the margin we expect industrial production to drop 02 mm sa leaving growth for Q4 11 at -23 3m3m saar This shows that global developments continue to take their toll in the Chilean economyRetail sales are still benefiting from tight labor market conditions but we expect them to soften gradually

Tuesday 31 January Period Prev 2 Prev 1 Latest Forecast Consensus

600 Brazil Industrial production yy Dec -16 -22 -25 01 -08

700 Chile Unemployment rate Dec 74 72 71 71 71

730 Brazil Primary budget balance BRL bn Dec 81 139 82 - -

1100 Colombia Unemployment rate Dec 102 102 103 - 104

Brazil industrial production Our forecast is consistent with a strong 14 mm sa print at the margin pushed mainly by theevolution of the auto sector (+94 mm sa) The December IBC-Br should also benefit from this gain leaving a high GDP carry-over for Q1 12

Chile unemployment rate We expect some deterioration of the unemployment rate in seasonally adjusted terms to 75 from73 The labor market data flow is already showing signs of contagion from global developments

Barclays Capital | The Emerging Markets Weekly

26 January 2012 30

Wednesday 01 February Period Prev 2 Prev 1 Latest Forecast Consensus

- Peru CPI mm Jan 031 043 027 041 -

- Peru WPI mm Jan 021 042 003 - -

1000 Mexico Remittances USD mn Dec 20847 19115 17736 - -

1200 Brazil Trade balance USD mn Jan 2355 582 3817 -1800 -

Brazil trade balance The contraction in the trade balance in January should be led by weak exports of iron ore We expectexports to increase only 16 yy while imports are likely to grow 169 yy

Thursday 02 February Period Prev 2 Prev 1 Latest Forecast Consensus

1100 Uruguay CPI mm Jan 070 040 070 - -

Friday 03 February Period Prev 2 Prev 1 Latest Forecast Consensus

900 Mexico Consumer confidence index Jan 906 895 908 - -

1100 Uruguay Unemployment rate Dec 60 57 55 - -

1600 Colombia PPI inflation mm Jan 09 01 01 - -

Week 30-04 February Period Prev 2 Prev 1 Latest Forecast Consensus

- Argentina Govern tax revenue ARS bn Jan 476 473 489 - -

1900 Colombia CPI inflation mm Jan 019 014 042 084 076

Colombia CPI inflation Considering a seasonal increase in food prices and an acceleration of core prices we expect a fastincrease in prices in January with an inflation rate of 084

Barclays Capital | The Emerging Markets Weekly

26 January 2012 31

FX FORECASTS AND FORWARDS

FX forecasts Forecast vs outright forward

Spot 1m 3m 6m 1y 1m 3m 6m 1y

G7 countries

EUR 131 135 130 125 120 30 -08 -47 -86

JPY 774 750 750 780 800 -31 -31 09 39

GBP 157 157 155 152 150 01 -11 -29 -40

CHF 092 092 096 104 108 -01 44 133 181

CAD 100 103 105 105 102 28 46 44 10

AUD 106 097 098 101 102 -83 -68 -30 -04

NZD 082 077 079 082 083 -58 -29 14 39

Emerging Asia

CNY 631 628 624 617 608 -03 -07 -17 -31

HKD 776 778 778 778 778 02 02 03 03

INR 5011 5000 5000 4900 4800 -06 -20 -54 -94

IDR 8979 8850 8800 8800 8500 -12 -21 -29 -83

KRW 1122 1100 1075 1050 1025 -21 -47 -74 -100

MYR 304 302 300 295 284 -08 -18 -37 -79

PHP 4289 4260 4220 4250 4200 -08 -19 -14 -28

SGD 126 124 123 123 122 -17 -25 -24 -29

THB 3138 3100 3060 2975 2850 -20 -35 -67 -112

TWD 2986 2970 2950 2875 2750 -07 -09 -30 -66

Latin America

ARS 434 435 445 460 540 -06 -09 -12 64

BRL 175 174 173 174 170 -10 -28 -38 -87

CLP 487 485 480 475 475 -07 -23 -40 -54

MXN 1298 1285 1270 1265 1260 -13 -29 -41 -60

COP 1811 1795 1780 1775 1770 -10 -21 -31 -44

PEN 269 268 267 266 264 -04 -12 -19 -34

EEMEA

EURCZK 2514 2550 2575 2550 2525 14 24 14 04

EURHUF 295 310 315 310 300 48 58 30 -23

EURPLN 424 430 450 440 435 12 52 20 -08

EURRON 434 436 445 440 435 02 19 00 -38

USDRUB 3023 3030 3000 3000 3050 -06 -24 -36 -45

BSKRUB 3452 3507 3405 3338 3325 10 -28 -60 -88

USDTRY 179 182 185 182 180 07 11 -24 -68

USDZAR 782 815 820 780 770 38 35 -28 -65

USDILS 376 375 370 365 360 -03 -18 -34 -50

USDEGP 604 600 620 650 700 -29 -44 -19 25

USDUAH 804 803 810 815 820 -15 -36 -71 -162

Source Barclays Capital

Barclays Capital | The Emerging Markets Weekly

26 January 2012 32

OFFICIAL INTEREST RATES

Start of cycle Forecasts as at end of

Official rate Current Date Level Last move Next move expected Q1 12 Q2 12 Q3 12 Q4 12

per annum (unless stated)

Advanced

Fed funds rate 0-025 Easing 17 Sep 07 525 Dec 08 (-75-100) Beyond 2013 0-025 0-025 0-025 0-025

BoJ overnight rate 010 Easing 30 Oct 08 050 Oct 10 (0-10) Q1 14 (+20) 0-010 0-010 0-010 0-010

ECB repo rate 100 Easing 03 Nov 11 150 Dec 11 (-25) Mar 12 (-50) 050 050 050 050

Emerging Asia

China Working capital rate 656 Tightening 19 Oct 10 531 Jul 11 (+25) Beyond Q4 12 656 656 656 656

Hong Kong Base rate 050 Easing 19 Sep 07 675 Dec 08 (-100) Beyond Q4 12 050 050 050 050

India Repo rate 850 Tightening 19 Mar 10 475 Oct 11 (+25) Q2 12 (-25) 850 825 800 775

Indonesia ON policy rate 600 Easing 11 Oct 11 675 Nov 11 (-50) Beyond Q4 12 600 600 600 600

Korea Base rate 325 Tightening 9 Jul 10 225 Jun 11(+25) Beyond Q4 12 325 325 325 325

Sri Lanka Reverse repo 850 Easing 20 Feb 09 1200 Jan 11 (-50) Q2 12 (-50) 850 800 800 800

Malaysia ON policy rate 300 Tightening 4 Mar 10 200 May 11 (+25) Beyond Q4 12 300 300 300 300

Philippines ON lending 425 Easing 19 Jan 12 450 Jan 12 (-25) Q2 12 (-25) 425 400 400 400

Taiwan Rediscount rate 1875 Tightening 24 Jun 10 1375 Jun 11 (+125) Beyond Q4 12 1875 1875 1875 1875

Thailand ON repo rate 300 Easing 30 Nov 11 350 Jan 12 (-25) Q3 12 (+25) 300 300 325 350

Vietnam Reverse repo rate 1400 Easing Jul 11 1500 Jul 11 (-100) Q1 12 (-200) 1200 1100 1000 1000

Emerging Europe Middle East amp Africa

Czech Republic 2w repo rate 075 Easing 8 Aug 08 375 Apr 10 (-25) Beyond Q4 12 075 075 075 075

Hungary 2w deposit rate 700 Tightening 29 Nov 10 525 Dec 11 (+50) Q2 12 (+25) 700 725 725 725

Poland 2w repo rate 450 Tightening 19 Jan 11 350 Jun 11 (+25) Mar 12 (-25) 425 375 375 375

Romania Key policy rate 575 Easing 4 Feb 08 1025 Jan 12 (-25) Feb 12 (-25) 525 500 500 500

Russia Refi rate 800 Easing 23 Dec 11 825 Dec 11 (-25) Mar 12 (-25) 775 750 750 750

South Africa Repo rate 550 Easing 11 Dec 08 1200 Nov 10 (-50) Nov 12 (+50) 550 550 550 600

Turkey 1wk repo rate 575 Easing 20 Nov 08 1675 Aug 11 (-50) Beyond Q4 12 575 575 575 575

Egypt Deposit rate 925 Tightening 24 Nov 11 825 Nov 11 (+100) Feb 12 (+100) 1125 1125 1125 1125

Israel Discount rate 250 Easing 26 Sep 11 325 Jan 12 (-25) Q2 12 (-25) 250 225 225 225

Latin America

Brazil SELIC rate 1050 Easing 31 Aug 11 1250 Jan 12 (-50) Mar 12 (-50) 1000 950 950 950

Chile Monetary policy rate 500 Easing 12 January 12 525 Jan 12 (-25) Feb 12 (-25) 450 425 425 425

Colombia Repo rate 475 Tightening 25 Feb 11 300 Nov 11 (+25) Mar 12 (+25) 500 550 550 550

Mexico Overnight rate 450 Easing 16 Jan 09 825 Jul 09 (-25) Q1 12 (-25) 425 400 400 400

Peru Reference rate 425 Tightening 6 May 10 125 May 11 (+25) Beyond 2012 425 425 425 425

Note Changes denoted in bold Source Barclays Capital

Barclays Capital | The Emerging Markets Weekly

26 January 2012 33

EMERGING MARKETS RESEARCH Piero Ghezzi Head of Global Economics Emerging Markets and FX Research +44 (0)20 3134 2190 pieroghezzibarcapcom

EM Global Michael Gavin Head of Global Macro Strategy and Head of EM Strategy +1 212 412 5915 michaelgavinbarcapcom

Alanna Gregory EM Strategist +1 212 412 5938 alannagregorybarcapcom

Latin America Alejandro Arreaza Economist ndash Latin America +1 212 412 3021 alejandroarreazabarcapcom

Sebastian Brown StrategistEconomist +1 212 412 6721 sebastianbrownbarcapcom

Alejandro Grisanti Chief Economist ndash Latin America Ex-Brazil Mexico +1 212 412 5982 alejandrogrisantibarcapcom

Donato Guarino Senior Strategist +1 212 412 5564 donatoguarinobarcapcom

Guilherme Loureiro Economist ndash Brazil +55 11 3757 7372 guilhermeloureirobarcapcom

Roberto Melzi Senior Strategist +1 212 412 5963 robertomelzibarcapcom

Bruno Rovai Economist +55 11 3757 7392 brunorovaibarcapcom

Marcelo Salomon Chief Economist ndash Brazil Chile Mexico+1 212 412 5717 marcelosalomonbarcapcom

Sebastian Vargas Economist - Argentina Uruguay +1 212 412 6823 sebastianvargasbarcapcom

Asia Pacific Jon Scoffin Head of Credit Research and Head of Research Asia-Pacific +65 6308 3217 jonscoffinbarcapcom

Rohit Arora FI Strategist Emerging Asia +65 6308 2092 rohitarora3barcapcom

Rahul Bajoria Regional Economist ndash India Malaysia Thailand +65 6308 3511 rahulbajoriabarcapcom

Jian Chang Regional Economist ndash China Hong Kong+852 2903 2654 jianchangbarcapcom

Joey Chew Regional Economist - Singapore +65 6308 3211 joeychewbarcapcom

Olivier Desbarres Head of FX Strategy Asia-Pacific ex-Japan +65 6308 2073 olivierdesbarresbarcapcom

Yiping Huang Chief Economist Emerging Asia +852 2903 3291 yipinghuangbarcapcom

Wai Ho Leong Senior Regional Economist ndash Korea Malaysia Singapore Taiwan +65 6308 3292 waiholeongbarcapcom

Hamish Pepper FX Strategist Asia-Pacific ex-Japan +65 6308 2220 hamishpepperbarcapcom

Kumar Rachapudi FI Strategist Emerging Asia +65 6308 3383 kumarrachapudibarcapcom

Siddhartha Sanyal Chief Economist India +91 22 6719 6177 siddharthasanyalbarcapcom

Prakriti Sofat Regional Economist ndash Indonesia Philippines Sri Lanka Vietnam +65 6308 3201 prakritisofatbarcapcom

Nick Verdi FX Strategist Asia-Pacific ex-Japan +65 6308 3093 nickverdibarcapcom

Ju Wang FI Strategist Emerging Asia +65 6308 2801 juwangbarcapcom

Lingxiu (Steven) Yang Regional Economist ndash China Hong Kong +852 2903 2653 lingxiuyangbarcapcom

Krishna Hegde CFA Asia Credit Strategist and Senior Financial Institutions +65 6308 2979 krishnahegdebarcapcom

Avanti Save Credit Strategy +65 6308 3116 avantisavebarcapcom

Emerging EMEA Christian Keller Head of Emerging EMEA Research +44 (0)20 7773 2031 christiankellerbarcapcom

Koon Chow Head of Emerging EMEA Strategy +44 (0)20 777 37572 koonchowbarcapcom

Jeff Gable Head of ABSA Capital Research +27 11 895 5368 jeffgableabsacapitalcom

Gina Schoeman Economist ndash South Africa +27 (0)11 895 5403 ginaschoemanabsacapitalcom

Daniel Hewitt Senior Emerging EMEA Economist +44 (0)20 3134 3522 danielhewittbarcapcom

Piotr Chwiejczak Rates Strategist +44 (0)20 3134 4606 piotrchwiejczak barcapcom

Ridle Markus Economist ndash Sub-Saharan Africa +27 11 895 5374 ridlemarkusabsacapitalcom

Fahad Al Turki Economist ndash Saudi Arabia +966 1880 6577 fahadalturkibarcapcom

Vladimir Pantyushin Chief Economist ndash Russia and CIS +7 495 7868450 vladimirpantyushinbarcapcom

Andreas Kolbe Credit Strategist +44 (0)20 313 43134 andreaskolbebarcapcom

Jeffrey Schultz Economist ndash South Africa +27 (0)11 895 5349 jeffreyschultzabsacapitalcom

Eldar Vakhitov Emerging EMEA Economist +44 (0)20 777 32192 eldarvakhitovbarcapcom

Alia Moubayed Senior Economist ndash Middle East amp North Africa +44 (0)20 313 41120 aliamoubayedbarcapcom

Dumisani Ngwenya Strategist ndash Africa +27 (0)11 895 5346 dumisaningwenyaabsacapitalcom

Michael Keenan Sub-Saharan FX and Rates Strategist +27 (0) 11 895 5513 mikekeenanabsacapitalcom

EM Corporate Credit Juan C Cruz Head of Latin America amp EEMEA Corporate Credit Research +1 212 412 3424 juancruzbarcapcom

Christopher Buck +1 212 412 3418 christopherbuckbarcapcom

Stella Cridge +44 (0)20 313 49618 stellacridgebarcapcom

Miguel Crivelli +1 212 412 5231 miguelcrivellibarcapcom

Ivan Fernandes +1 212 412 3428 ivanfernandesbarcapcom

Autumn Graham +1 212 412 2839 autumngrahambarcapcom

Milena Ianeva +44 (0)20 7773 8536 milenaianevabarcapcom

Stanislav Ponomarenko +7 495 786 8451 stanislavponomarenkobarcapcom

Aziz Sunderji +1 212 412 2218 azizsunderjibarcapcom

Antoine Yacoub + 44 207 7731727 antoineyacoubbarcapcom

Golib Zohidov +44 (0)20 777 31513 golibzohidovbarcapcom

Barclays Capital | The Emerging Markets Weekly

26 January 2012 20

FX VIEWS ON A PAGE

Currency Tactical bias Strategic directional view Current strategy trades we like

Vol adj 6m returns

Score (1-5)

Emerging Asia

THB Bullish The performance of the THB has been remarkably resilient despite political change and the effect of flooding on economic activity Expansionary monetary and fiscal policy should support economic growth and the currency

058 400

KRW Bullish Elevated inflation robust export growth and a tight labour market augur for KRW appreciation

Sell AUDKRW 1m forward 029 390

INR Neutral The INR has outperformed its regional peers year-to-date If risk appetite continues to improve USDINR could fall further However weak fundamentals are likely to limit INR appreciation

035 380

MYR Bullish Resilient growth a healthy fiscal position and the roll-out of the governmentrsquos divestment program should support the currency

032 380

IDR Bullish The recent underperformance of the IDR vis-agrave-vis the wider region is likely to reverse as risk appetite rises

016 325

TWD Neutral While economic activity remains relatively firm core inflationary pressures are benign running at about 1 yy As such the CBC has little incentive to allow the TWD to appreciate

-004 300

PHP Bullish The central bankrsquos preference for the PHP not to be an outlier in terms of regional performance points to modest currency appreciation

010 295

HKD Neutral Rising CNY deposits onshore could result in the ldquoRMB-isationrdquo of the economy

-030 260

CNY Bullish We expect the USDCNY to slowly move lower as the PBoC leans against still-elevated inflation

-002 255

SGD Bullish We expect the MAS to maintain a bias towards currency appreciation near the centre of the NEER policy band which we estimate to be +-275bp with a +2 slope

Long SGD vs USD (60)-EUR (40) basket 004 230

Latin America

MXN Bullish Still inexpensive valuation not crowded positioning limited intervention risks and capped depreciation potential by existing intervention programs (selling USD)

Sell CHFMXN (target 135) 020 330

PEN Neutral Strong FX intervention biases us to a neutral stance 020 320

CLP Neutral Copper prices supportive but monetary policy easing in the pipeline

020 320

COP Bullish Should remain supported by high oil prices (Barclays Capital sees significant upside risks to oil prices)

016 280

BRL Neutralbullish Risk environment is supportive yet intervention remains a threat especially if USDBRL falls below 170

Sell AUDBRL (target 18) 016 250

Barclays Capital | The Emerging Markets Weekly

26 January 2012 21

Currency Tactical bias Strategic directional view Current strategy trades we like

Vol adj 6m returns

Score (1-5)

Emerging EMEA

EGP Bearish The CBE has tried to stabilise the EGP against capital flight but FX reserves have fallen sharply It may take a hard decision in a couple of months to allow a lsquofloatdevaluationrsquo before reserves fall below a prudent level

034 370

RUB Bullish Russiarsquos resilience to euro contagion is supported by sticky oil prices and argues for going long the RUB against a EUR-USD basket Strong local growth and higher yields should help retain capital in the country

Short EUR-USD basketlong RUB 019 310

HUF Neutral The willingness voiced by the Hungarian government to agree to what is needed to bring IMFEU loans plus stronger global risk appetite will likely trigger for hedging of HUF shorts Fundamentals remain fragile however

-031 300

RON NeutralBearish The risk environment is supportive for the RON but low yields and recent signs of political unrest (public protests against the governmentrsquos past austerity measures) keep us in our short RON recommendation for now

Long EURshort RON

000 295

TRY Neutralbearish Turkeyrsquos high external funding needs and uncertain monetary policy will likely weigh against the lira relative to the stronger currencies in EEMEA The CBT has stopped its daily FX auctions which could leave the TRY vulnerable if and when global investor risk appetites were to recede

Short TRYlong ZAR

003 275

ZAR Bullish Strong commodity prices and attractive local asset prices (on bonds) should mean capital inflows if global liquidity conditions stabilise This should benefit the ZAR more than other high-beta EEMEA currencies

Short TRYlong ZAR

011 275

PLN Neutral We remain cautious on the PLN given the external funding needs of Poland but the recent increase in global risk appetite has stopped us out of our shorts and we await a stabilization in the market before setting new ones

-019 265

ILS NeutralBullish Opportunity for an RV trade against the CZK given Israelrsquos stronger balance of payments and lower vulnerability to euro area contagion The ILS should benefit from our house view of lower EURUSD (and the past correlation between ILSCZK and EURUSD)

Long ILSShort CZK

-010 205

CZK Neutralbearish The Czech Republic has the strongest balance sheet among CEE countries however the currency should still suffer as the Czech economy may slip back into a recession

Long ILSShort CZK -018 180

UAH Neutralbearish High carry reflects investor fears of devaluation An agreement with the IMF or Russia on gas imports may alleviate these concerns but there has been little progress in this direction Meanwhile FX reserves are being depleted slowly by some internal capital flight

KZT Neutralbullish Being a commodity producer (oil) and having a positive CA create a cushion for uncertainty in global capital flows However low liquidity in this FX market may limit the appeal of the KZT

Note Versus EUR The variable score is an index that ranks EM currencies according to vol-adjusted returns PPP valuation carry systemic risk basic balanceGDP and reserves accumulated over the past 5yGDP For more details on the trade recommendations please see the EM Dashboard Note that bold text indicates changes in view Source Barclays Capital

Barclays Capital | The Emerging Markets Weekly

26 January 2012 22

CREDIT PORTFOLIO OAS (bp) OAD Weights () Duration Bias Total Returns () Bonds we recommendhellip

30-Dec-

11 25-Jan-

12 3mF Benchmark Model Adj

Duration 1w2012 QTD

2012 YTD 3m F Buying Selling

EM Portfolio 377 358 338 72 100 1000 Long 80 10 08 08 24 Arg Ven Ukr 1031 935 897 56 136 129 under Short 43 41 61 61 59 Other 272 267 249 75 864 871 neutral Long 86 05 00 00 18 EM Asia 244 238 213 80 15 16 over Long 99 07 01 01 29 Philippines 212 199 179 85 74 63 under Long 87 07 03 03 22 Philip 24s 25s 34s 37s Philip 13s 14s 15s 16s 17sIndonesia 237 240 210 78 67 87 over Long 120 07 -02 -02 37 Indo 14s 15s 16s 17s 18s sukuk 21s Sri Lanka 475 455 430 59 06 07 neutral Long 76 11 05 05 29 Sri Lanka 20 21s Vietnam 522 512 492 49 05 03 under Short 26 -01 08 08 23 Vietnam 20s EMEA 383 378 369 62 38 37 under Neutral 66 09 02 02 09 Turkey 369 384 373 72 93 102 neutral Neutral 78 02 -13 -13 11 Turkey 15s 16s 17s 18s Russia 327 304 281 58 91 117 over Long 90 03 14 14 23 Russia 28s Russia 30s Russia 15s Qatar 224 227 203 67 46 50 over Long 88 04 -05 -05 24 Qatar 40s42s Poland 314 289 285 58 29 30 neutral Long 70 13 10 10 01 Poland 21s 22s Lebanon 370 372 387 44 28 14 under Neutral 22 03 05 05 -13 Ukraine 926 923 972 43 20 13 under Short 23 47 10 10 -27 Ukr 12s 13s Ukr 20s 21s Hungary 657 610 635 63 18 07 under Short 19 36 28 28 -29 Hungary 20s 21s 41s South Africa 222 239 227 73 23 08 under Neutral 25 06 -15 -15 09 Lithuania 448 464 431 53 15 22 over Neutral 77 02 -08 -08 37 Lithuania 17s 20s 21s Croatia 601 601 616 65 10 05 under Neutral 32 14 01 01 -17 Egypt 622 534 539 78 03 00 under Short 00 58 61 61 -09 Egypt 20s 40s Latin America 412 378 350 80 45 46 over Long 88 12 16 16 35 Brazil 168 150 128 82 116 158 over Long 134 07 06 06 24 BR41 Mexico 167 169 146 88 97 114 over Long 124 01 -08 -08 25 MX22N MX 40 MX 100yr Venezuela 1175 1071 1011 56 74 80 over Short 49 42 63 63 85 PD 17N PD 15 Argentina 827 703 663 61 42 36 neutral Short 42 38 81 81 55 Boden 15 Colombia 184 184 169 89 41 24 under Short 42 05 -04 -04 13 CO 27 CO 33 CO 41 Peru 207 213 188 107 27 29 neutral Long 137 -11 -22 -22 37 PE33 PE50 PE37 Panama 198 189 171 92 24 04 under Short 12 -02 -02 -02 18 PA 36 Uruguay 191 184 169 103 16 10 under Short 51 -07 -09 -09 15 UY25 El Salvador 447 452 462 85 10 00 under Short 00 04 -06 -06 -21 EL Salv 35 Dominican Republic 583 551 544 53 05 05 neutral Short 39 27 18 18 11 DR21 DR27 Additional Countries 427 432 423 39 19 12 under Neutral 28 04 05 05 11 Abu Dhabi 166 180 177 41 09 00 under Long 00 07 -07 -07 -01 ADGB14s Bulgaria 366 340 349 27 03 00 under Neutral 00 08 11 11 -02 Bulgaria 15s Gabon 419 414 382 47 02 05 over Neutral 112 06 13 13 31 Gabon 17s Pakistan 1377 1422 1422 37 02 03 neutral Short 35 07 -04 -04 28

Ghana 556 529 490 44 02 04 over Neutral 88 08 17 17 39 Ghana 17s

Note Benchmark forecast Benchmark is a variant of the Barclays Capital Global EM Sovereigns index featuring USD only bonds Changes in view denoted in bold Additional Countries was previously known as Off-Index Allocations Source Barclays Capital

Barclays Capital | The Emerging Markets Weekly

26 January 2012 23

EM LOCAL BOND PORTFOLIO

1252012 Weights Total Returns FX Unhedged () Bonds we recommend

Duration Yield to Worst Mkt val

Current Market Model

Past Week QTD YTD

3m Forecast Buying Selling

EM Local 452 593 1448857 10000 10000 163 -245 555 353

Latin America 390 837 388169 2845 3318 over 125 -108 961 424

Brazil 259 1033 195289 1558 2011 over 093 -190 988 430 Jan 17 NTNF Jan21 NTNF Global BRL Jan 22

Chile 414 437 5922 036 009 under 149 355 466 174 May 18 BCP

Colombia 444 642 63049 392 440 over 082 282 1640 561 Local TES Jul 24

Mexico 583 586 112994 784 848 over 218 -282 568 390 Jun 27 Nov 36 Nov 38

Peru 812 609 10915 074 010 under 029 1178 1205 061 May 15

EEMEA 432 653 424001 2908 2320 under 213 -1026 -361 055

Czech Republic 586 274 46202 304 000 under 281 -1026 229 -094 May 25s

Hungary 344 868 28452 222 101 under 672 -2207 -565 -080 13E 14D

Israel 439 348 45510 301 277 under 049 -384 004 -034 Sept 13s Feb 19s

Poland 418 501 96524 660 574 neutral 269 -1382 -425 -346 Apr 16s Oct 20s

Russia 422 756 64926 470 220 under 295 -699 483 568

South Africa 592 765 76846 515 720 over 007 -936 -963 216 R157s

Turkey 212 1006 65541 438 428 neutral 119 -791 -1018 150 Jan 16s Jan 21s

EM Asia 509 392 636687 4247 4361 neutral 154 195 899 509

India 683 835 8869 054 075 over 077 -586 -409 755 IGB GS 18 GS 15

Indonesia 727 596 62383 400 400 neutral 458 1495 2947 455 INDOGB Apr 17 (FR60)

Malaysia 484 328 83145 543 550 neutral 131 161 575 268 MGS Sep 18

Philippines 783 532 37731 257 244 neutral 047 1452 1901 486

South Korea 428 362 374713 2524 2642 over 135 -132 706 553 3-5y bonds

Thailand 615 323 69846 469 450 neutral 091 277 162 580 LB176A

Note Bolding indicates change in bias Source Barclays Capital

Barclays Capital | The Emerging Markets Weekly

26 January 2012 24

DATA REVIEW amp PREVIEW ASIA Rahul Bajoria Jian Chang

Review of last weekrsquos data releases

Main indicators Period Previous BarCap Actual Comments

India Repo rate () Jan 850 850 850 Elevated core inflation prevents cut in repo rate

India Cash reserve ratio () Jan 600 600 550 Policy gearing moving towards supporting growth

Singapore CPI ( yy) Dec 57 56 55 Core inflation expected to remain sticky in Singapore

Thailand BoT policy rate () ndash 325 300 300 We do not expect any further rate cuts from Bank of Thailand

Korea GDP ( yy) Q4 35 39 34 We see potential for upside revisions in the second estimate next month

Preview of week ahead

Monday 30 January Period Prev 2 Prev 1 Latest Forecast Consensus

0700 Korea Current account balance (USD bn) Dec 283 413 505 40

1000 Philippines GDP ( yy) Q4 46 31 32 38 37

1600 Taiwan Unemployment rate (sa) Dec 43 43 43 43 43

Korea We expect the current account surplus to narrow as year-end outbound travelling typically opens up a wide services trade deficit The goods trade balance on a customs basis was USD4bn in December

Philippines Growth is likely to remain soft given weak export performance and continued government under-spending However consumption should remain strong given holiday-related spending

Taiwan Employment in non-agricultural sectors started to decline in November with a slight increase in the number of workers on unpaid leave

Tuesday 31 January Period Prev 2 Prev 1 Latest Forecast Consensus

0700 Korea IP ( yy) Dec 69 63 56 40 61

1000 Singapore Unemployment rate () Q4 19 21 20 21

1600 Taiwan GDP ( yy) Q4 66 45 34 33 28

1800 Malaysia BNM policy rate ndash 300 300 300 300 300

Korea We expect manufacturing output to increase 17 mm sa in December which will more than offset the small declines in the previous two months Exports in December were unusually resilient

Singapore We expect net job creation to slow as suggested by various hiring surveys But restrictions on foreign workers will keep the labour market tight

Taiwan We expect investment to become a smaller drag on GDP in Q4 than in Q3 as suggested by the stabilisation in imports of capital goods Consumption is likely to remain robust supported in part by tourism and will mitigate weakness in the external sector We forecast a 05 qq sa expansion in Q4 GDP following a 01 contraction last quarter We expect 44 GDP growth for 2011

Malaysia With growth moderating only gradually our base case is for the policy rate to be unchanged in H1

Wednesday 1 February Period Prev 2 Prev 1 Latest Forecast Consensus

0700 Korea CPI ( yy) Jan 36 42 42 37 36

0900 Korea Exports ( yy) Jan 76 116 108 65

0900 China PMI Manufacturing Jan 504 490 503 495 496

1200 Indonesia CPI ( yy) Jan 44 42 38 39

1200 Indonesia CPI core ( yy) Jan 44 44 43 44

1200 Indonesia Exports ( yy) Dec 440 178 83 100

1200 Thailand CPI ( yy) Jan 42 42 35 34 33

1200 Thailand Core CPI ( yy) Jan 29 29 27 26 27

2130 Singapore Electronics PMI Jan 521 509 497 ndash 499

Barclays Capital | The Emerging Markets Weekly

26 January 2012 25

Korea Lunar New Year demand and electricity tariff hikes for businesses last December should keep the cost of food energy and services high Nonetheless inflation is expected to moderate on base effects We expect exports to rise 6 mm sa extending Decemberrsquos 84 increase due to last-minute festive shipments in the early part of the month Lunar New Year holidays should exert a dampening effect on trade and manufacturing data in January and we expect a temporary trade deficit in January given high energy imports

China We look for a post-Chinese New Year mm decline and expect the PMI to hover around 50 in Q1

Indonesia Inflation to remain contained at 39 however we should see a mm pick-up driven by food prices and health costs We expect inflation to rise gradually in 2012 and end the year at 53 core inflation is likely to hold steady at about 44 We look for soft export growth given the uncertain external environment

Thailand Higher fuel prices coupled with a seasonal uptick in food prices should translate into only a modest decline in inflation

Friday 3 February Period Prev 2 Prev 1 Latest Forecast Consensus

0900 China Non-manufacturing PMI Jan 577 497 560 ndash

Barclays Capital | The Emerging Markets Weekly

26 January 2012 26

DATA REVIEW amp PREVIEW EMERGING EUROPE MIDDLE EAST AND AFRICA Eldar Vakhitov Daniel Hewitt Christian Keller Vladimir Pantyushin Jeffrey Schultz Alia Moubayed Piotr Chwiejczak

Review of last weekrsquos data releases

Main indicators Period Previous Barclays Actual Comments

Israel Base rate announcement () Jan 275 250 250 Rate cut due to rapid deceleration of inflation

Turkey Benchmark repo rate () Jan 575 575 575 Rate on hold but revisions in FX auction more ad hoc

Hungary Base rate announcement () Jan 700 725 700 Rates on hold because of HUF strength and high real rate

Israel Unemployment rate () Nov 54 - 54 Unemployment rate remains low but could rise later

Russia Industrial production ( yy) Dec 39 - 25 Expected slowing in line with the global trend

Hungary Retail trade ( yy) Nov 06 - 11 Apparent slight improvement in domestic demand

Turkey Industrial confidence index Jan 972 - 1018 Turkish economy rolling buoyed by domestic demand

Turkey Capacity utilization () Jan 755 - 747 Second consecutive monthly decline still a high level

South Africa PPI ( yy) Dec 101 99 98 Lower on the back of softer commodity prices food prices however continue to gain momentum

Russia Disposable income ( yy) Dec 02 - 63 Consistent growth underpins consumer sector expansion

Russia Real wages ( yy) Dec 71 - 49 Consistent growth underpins consumer sector expansion

Russia Retail sales real ( yy) Dec 86 - 95 Consumer sector outperforms yet again

Russia Unemployment rate () Dec 63 - 61 A welcome decline adding power to consumer demand

Russia Investment in productive capacity ( yy) Dec 77 - 89 Strong investment provides support to mid-term growth

Preview of week ahead

Friday 27 January Period Prev 2 Prev 1 Latest Forecast Consensus

0900 Poland Real GDP growth () 2011 51 17 38 41 42

0900 Poland Unemployment rate () Dec 118 118 121 125 125

0900 Poland Retail sales ( yy) Dec 114 112 126 110 100

1000 Croatia Industrial output ( yy) Dec -23 06 -03 - -

Poland Growth print is likely to be strong again despite softening PMIs ldquohardrdquo data remained strong in Q4 11 therefore a positivesurprise is possible however in Q1 12 we expect growth to slow down gradually Government officials have already hinted thatunemployment in December has increased driven by seasonal factors and cyclical elements as well as overall weakening demand

Croatia Despite the oil refinery fire no longer weighing on IP we still expect only marginally positive growth in December

Monday 30 January Period Prev 2 Prev 1 Latest Forecast Consensus

0900 Lithuania Real GDP ( yy) Q4 P 59 65 67 - -

Poland Budget level YTD (PLN bn) Dec -219 -225 -216 -223 -

Serbia Real GDP ( yy) Q4 P 37 25 05 02 -

Ukraine Current account (USD bn) Q4 -13 -17 -27 - -

Ukraine GDP constant prices ( yy) Q4 P 53 38 66 40 -

Lithuania Lithuania (together with Serbia) will be among the first CEE country to report Q4 GDP growth and it will be interestingto see to what extent the weaker external demand environment will be reflected in Lithuaniarsquos Q4 GDP print After the verystrong growth in 2011 of likely close to 6 yy (annual) we expect it to slow to 25 in 2012 ndash still a comparatively robust number in the regional context however

Poland Overall we expect the central budget deficit gap to come in at around PLN22bn Stronger economic activity particularlystrong retail sales should contribute to tax income while spending has been kept under control Local government deficit mayalso come in below projected numbers

Serbia We expect growth to be only slightly positive as export growth declined considerably in Q4

Ukraine The economy has likely already entered a softer patch while the external account gap continues to widen

Barclays Capital | The Emerging Markets Weekly

26 January 2012 27

Tuesday 31 January Period Prev 2 Prev 1 Latest Forecast Consensus

0600 South Africa Private sector credit ( yy) Dec 54 55 62 58 -

0800 Hungary Unemployment rate () Dec 107 108 106 - 108

0800 Turkey Trade balance (USD bn) Dec -104 -80 -75 -85 -735

1200 South Africa Trade balance (rand bn) Dec 25 -96 -81 - -

Russia Annual real GDP (yy) 2011 52 -78 40 42 -

Serbia Industrial output ( yy) Dec -18 -10 22 - -

Serbia Retail trade ( yy) Dec -183 -162 -164 - -

South Africa Although we expect a moderation in headline PSCE growth consumer spending into the festive season throughother smaller unsecured components of household credit should see the mm growth in PSCE tick up further in December

Hungary We expect to see a slight weakening of domestic labour in Hungary

Turkey We look for a small mm widening of the trade deficit as signalled by stronger customs duties collections in December that implies a pick-up in imports

Russia The growth emphasis shifts to domestic drivers with investment and consumer demand performing well recently

Wednesday 1 February Period Prev 2 Prev 1 Latest Forecast Consensus

0500 Russia Manufacturing PMI Jan 504 526 516 - -

0800 Poland Manufacturing PMI Jan 517 495 488 - -

0800 Turkey Manufacturing PMI Jan 533 523 520 - -

0830 Czech Manufacturing PMI Jan 517 486 492 - -

0900 South Africa Kagiso PMI Jan 502 505 516 - -

Czech Budget balance (CZK bn) Jan -915 -1259 -1428 - -

Hungary PMI Jan 482 478 485 - -

Kazakhstan CPI ( yy) Jan 80 78 74 70 -

Romania International reserves (USD bn) Jan 363 360 373 - -

South Africa Unemployment () Q4 250 257 250 - -

Russia Despite recent slowing Russiarsquos IP performance remains well within positive territory Domestic demand sectors showimproving dynamics This will likely be reflected in manager expectations

Poland Amid a general U-turn in optimism in Europe Polish entrepreneurs are also likely to adopt a more positive approachwhich is likely to be reflected in the survey Also mild winter weather conditions should work in favour of a higher PMI Still weexpect slower industrial production in months to come

Turkey Domestic growth indicators that are still holding up well could be reflected in a stronger PMI reading

Czech Republic Further indications of recession likely with the PMI remaining below 50 in January

South Africa Still-significant global risks and uncertainty along with a still-struggling domestic manufacturing sector are likely to leave the PMI hovering around its neutral level of 50 in January

Hungary Growth indicators have been mixed indicating a modest recession is in process

Kazakhstan We expect disinflation to continue running its course

Romania Stable currency markets have made it possible for the NBR to limit FX intervention helping it maintain its extremelyhigh levels of reserves

Thursday 2 February Period Prev 2 Prev 1 Latest Forecast Consensus

0800 Romania Retail sales ( yy) Dec -52 20 19 - -

1000 South Africa Naamsa vehicle sales ( yy) Jan 189 117 110 - -

1200 Czech Repo rate announcement () Feb 075 075 075 075 075

Romania Interest rate announcement () Feb 625 600 575 550 550

Egypt Deposit rate () Feb 825 825 925 1025 -

Barclays Capital | The Emerging Markets Weekly

26 January 2012 28

Romania The NBR is in the middle of a rate cutting cycle Having reduced rates in each of the past two meetings by 25bp we expect another 25bp reduction to 550 Moreover we expect two more rate cuts in the next two meetings bringing the rate to 50

South Africa Vehicle sales growth should continue to reflect the relatively positive consumer dynamics in the economy providedby low interest rates and high nominal incomes

Czech Republic The CNB is on hold On one hand it will not raise rates even though inflation (adjusted for taxes) is in the middleof the 1-3 target range because the economy is very weak On the other it will not lower rates because at 075 it is at a record low and a rate decrease is unlikely to spur increased lending

Egypt Mounting inflationary pressure and a weakening currency may push the CBE to continue raising rates

Friday 3 February Period Prev 2 Prev 1 Latest Forecast Consensus

0800 Czech Retail sales ( yy) Dec 00 15 05 - -

0800 Turkey CPI ( yy) Jan 77 95 105 1065 1045

1000 Croatia Retail trade real ( yy) Dec P 10 18 10 - -

Kazakhstan International reserves (USD bn) Jan 326 322 293 285 -

Russia CPI ( yy) Jan 72 68 61 43 -

Russia Overnight deposit rate () Feb 375 375 400 400 -

Russia Refinancing rate () Feb 825 825 800 800 -

Czech Republic Domestic demand remains muted

Turkey The trade weighted fall in the lira last year still has some room to pass through to headline CPI as capacity utilisationrates in the country remain high There are some signs of a slowdown but companies in Turkey are probably still able to pass onthe bulk of their cost increases

Kazakhstan The NBK continues to defend the currency

Russia Inflation drops amid the delay in regulated tariff hikes to 1 July The CBR will likely wait until after the 4 March presidentialelections before resuming rate cuts

Barclays Capital | The Emerging Markets Weekly

26 January 2012 29

DATA REVIEW amp PREVIEW LATIN AMERICA Alejandro Arreaza Alejandro Grisanti Bruno Rovai Guilherme Loureiro Marcelo Salomon Sebastian Vargas

Review of the weekrsquos data releases

Main indicators Period Previous BarCap Actual Comments

Brazil IPCA-15 inflation mm Jan 056 055 065 The surprise was in large part driven by a higher-than-expected increase in transportation costs (air and bus fares)

Brazil Current account USD bn Dec -68 -50 -60 The CA deficit reached USD526 bn (21 of GDP) but financing was not an issue as FDI reached USD666bn

Mexico Econ activity index yy Nov 37 40 375 Growing at a moderate pace at the margin (02 mm sa) on track for a sharp deceleration in Q4 GDP to 06 qq saar

Mexico Bi-weekly CPI 2w2w Jan 051 043 032 Lower-than-expected perishable inflation marked the January CPI release

Mexico Bi-weekly CPI core 2w2w Jan 035 026 020 A 115 2w2w drop in airfares helped contain core services inflation

Mexico Trade balance USD mn Dec -232 - 08 Exports and imports are moving further down (81 and 74 respectively)

Colombia Trade balance USD mn Nov 103 - 711 High oil prices compensate for strong increase in imports demand

Brazil COPOM meeting minutes Jan - - - Very dovish minutes with the BCB giving guidance that the Selic rate should fall to single-digit levels

Brazil Unemployment rate Dec 52 50 47 In seasonally adjusted terms the unemployment rate was flat at 56

Mexico Retail sales yy Nov 30 36 75 Strong gain of 22 mm sa probably reflecting the introduction of a local version of Black Friday in November

Preview of the week ahead

Monday 30 January Period Prev 2 Prev 1 Latest Forecast Consensus

- Brazil Central government budget BRL bn Dec 54 112 46 - -

- Colombia Overnight lending rate Jan 450 475 475 475 475

500 Brazil IGP-M inflation mm Jan 053 050 -012 030 030

700 Chile Industrial production yy Dec 52 -08 20 02 10

700 Chile Retail sales yy Dec 96 86 85 80 79

1530 Mexico Budget balance MXN bn Dec YTD -1790 -17939 -2131 - -

Colombia overnight lending rate With still moderate inflation we expected Banrep to remain on hold at its meeting this monthHowever the persistence of fast growth that is expected to offset the uncertainty coming from the European sovereign debtcrisis and the slowdown of the global economy will likely drive it to reassume its tightening cycle before the end of Q1

Chile industrial production and retail sales At the margin we expect industrial production to drop 02 mm sa leaving growth for Q4 11 at -23 3m3m saar This shows that global developments continue to take their toll in the Chilean economyRetail sales are still benefiting from tight labor market conditions but we expect them to soften gradually

Tuesday 31 January Period Prev 2 Prev 1 Latest Forecast Consensus

600 Brazil Industrial production yy Dec -16 -22 -25 01 -08

700 Chile Unemployment rate Dec 74 72 71 71 71

730 Brazil Primary budget balance BRL bn Dec 81 139 82 - -

1100 Colombia Unemployment rate Dec 102 102 103 - 104

Brazil industrial production Our forecast is consistent with a strong 14 mm sa print at the margin pushed mainly by theevolution of the auto sector (+94 mm sa) The December IBC-Br should also benefit from this gain leaving a high GDP carry-over for Q1 12

Chile unemployment rate We expect some deterioration of the unemployment rate in seasonally adjusted terms to 75 from73 The labor market data flow is already showing signs of contagion from global developments

Barclays Capital | The Emerging Markets Weekly

26 January 2012 30

Wednesday 01 February Period Prev 2 Prev 1 Latest Forecast Consensus

- Peru CPI mm Jan 031 043 027 041 -

- Peru WPI mm Jan 021 042 003 - -

1000 Mexico Remittances USD mn Dec 20847 19115 17736 - -

1200 Brazil Trade balance USD mn Jan 2355 582 3817 -1800 -

Brazil trade balance The contraction in the trade balance in January should be led by weak exports of iron ore We expectexports to increase only 16 yy while imports are likely to grow 169 yy

Thursday 02 February Period Prev 2 Prev 1 Latest Forecast Consensus

1100 Uruguay CPI mm Jan 070 040 070 - -

Friday 03 February Period Prev 2 Prev 1 Latest Forecast Consensus

900 Mexico Consumer confidence index Jan 906 895 908 - -

1100 Uruguay Unemployment rate Dec 60 57 55 - -

1600 Colombia PPI inflation mm Jan 09 01 01 - -

Week 30-04 February Period Prev 2 Prev 1 Latest Forecast Consensus

- Argentina Govern tax revenue ARS bn Jan 476 473 489 - -

1900 Colombia CPI inflation mm Jan 019 014 042 084 076

Colombia CPI inflation Considering a seasonal increase in food prices and an acceleration of core prices we expect a fastincrease in prices in January with an inflation rate of 084

Barclays Capital | The Emerging Markets Weekly

26 January 2012 31

FX FORECASTS AND FORWARDS

FX forecasts Forecast vs outright forward

Spot 1m 3m 6m 1y 1m 3m 6m 1y

G7 countries

EUR 131 135 130 125 120 30 -08 -47 -86

JPY 774 750 750 780 800 -31 -31 09 39

GBP 157 157 155 152 150 01 -11 -29 -40

CHF 092 092 096 104 108 -01 44 133 181

CAD 100 103 105 105 102 28 46 44 10

AUD 106 097 098 101 102 -83 -68 -30 -04

NZD 082 077 079 082 083 -58 -29 14 39

Emerging Asia

CNY 631 628 624 617 608 -03 -07 -17 -31

HKD 776 778 778 778 778 02 02 03 03

INR 5011 5000 5000 4900 4800 -06 -20 -54 -94

IDR 8979 8850 8800 8800 8500 -12 -21 -29 -83

KRW 1122 1100 1075 1050 1025 -21 -47 -74 -100

MYR 304 302 300 295 284 -08 -18 -37 -79

PHP 4289 4260 4220 4250 4200 -08 -19 -14 -28

SGD 126 124 123 123 122 -17 -25 -24 -29

THB 3138 3100 3060 2975 2850 -20 -35 -67 -112

TWD 2986 2970 2950 2875 2750 -07 -09 -30 -66

Latin America

ARS 434 435 445 460 540 -06 -09 -12 64

BRL 175 174 173 174 170 -10 -28 -38 -87

CLP 487 485 480 475 475 -07 -23 -40 -54

MXN 1298 1285 1270 1265 1260 -13 -29 -41 -60

COP 1811 1795 1780 1775 1770 -10 -21 -31 -44

PEN 269 268 267 266 264 -04 -12 -19 -34

EEMEA

EURCZK 2514 2550 2575 2550 2525 14 24 14 04

EURHUF 295 310 315 310 300 48 58 30 -23

EURPLN 424 430 450 440 435 12 52 20 -08

EURRON 434 436 445 440 435 02 19 00 -38

USDRUB 3023 3030 3000 3000 3050 -06 -24 -36 -45

BSKRUB 3452 3507 3405 3338 3325 10 -28 -60 -88

USDTRY 179 182 185 182 180 07 11 -24 -68

USDZAR 782 815 820 780 770 38 35 -28 -65

USDILS 376 375 370 365 360 -03 -18 -34 -50

USDEGP 604 600 620 650 700 -29 -44 -19 25

USDUAH 804 803 810 815 820 -15 -36 -71 -162

Source Barclays Capital

Barclays Capital | The Emerging Markets Weekly

26 January 2012 32

OFFICIAL INTEREST RATES

Start of cycle Forecasts as at end of

Official rate Current Date Level Last move Next move expected Q1 12 Q2 12 Q3 12 Q4 12

per annum (unless stated)

Advanced

Fed funds rate 0-025 Easing 17 Sep 07 525 Dec 08 (-75-100) Beyond 2013 0-025 0-025 0-025 0-025

BoJ overnight rate 010 Easing 30 Oct 08 050 Oct 10 (0-10) Q1 14 (+20) 0-010 0-010 0-010 0-010

ECB repo rate 100 Easing 03 Nov 11 150 Dec 11 (-25) Mar 12 (-50) 050 050 050 050

Emerging Asia

China Working capital rate 656 Tightening 19 Oct 10 531 Jul 11 (+25) Beyond Q4 12 656 656 656 656

Hong Kong Base rate 050 Easing 19 Sep 07 675 Dec 08 (-100) Beyond Q4 12 050 050 050 050

India Repo rate 850 Tightening 19 Mar 10 475 Oct 11 (+25) Q2 12 (-25) 850 825 800 775

Indonesia ON policy rate 600 Easing 11 Oct 11 675 Nov 11 (-50) Beyond Q4 12 600 600 600 600

Korea Base rate 325 Tightening 9 Jul 10 225 Jun 11(+25) Beyond Q4 12 325 325 325 325

Sri Lanka Reverse repo 850 Easing 20 Feb 09 1200 Jan 11 (-50) Q2 12 (-50) 850 800 800 800

Malaysia ON policy rate 300 Tightening 4 Mar 10 200 May 11 (+25) Beyond Q4 12 300 300 300 300

Philippines ON lending 425 Easing 19 Jan 12 450 Jan 12 (-25) Q2 12 (-25) 425 400 400 400

Taiwan Rediscount rate 1875 Tightening 24 Jun 10 1375 Jun 11 (+125) Beyond Q4 12 1875 1875 1875 1875

Thailand ON repo rate 300 Easing 30 Nov 11 350 Jan 12 (-25) Q3 12 (+25) 300 300 325 350

Vietnam Reverse repo rate 1400 Easing Jul 11 1500 Jul 11 (-100) Q1 12 (-200) 1200 1100 1000 1000

Emerging Europe Middle East amp Africa

Czech Republic 2w repo rate 075 Easing 8 Aug 08 375 Apr 10 (-25) Beyond Q4 12 075 075 075 075

Hungary 2w deposit rate 700 Tightening 29 Nov 10 525 Dec 11 (+50) Q2 12 (+25) 700 725 725 725

Poland 2w repo rate 450 Tightening 19 Jan 11 350 Jun 11 (+25) Mar 12 (-25) 425 375 375 375

Romania Key policy rate 575 Easing 4 Feb 08 1025 Jan 12 (-25) Feb 12 (-25) 525 500 500 500

Russia Refi rate 800 Easing 23 Dec 11 825 Dec 11 (-25) Mar 12 (-25) 775 750 750 750

South Africa Repo rate 550 Easing 11 Dec 08 1200 Nov 10 (-50) Nov 12 (+50) 550 550 550 600

Turkey 1wk repo rate 575 Easing 20 Nov 08 1675 Aug 11 (-50) Beyond Q4 12 575 575 575 575

Egypt Deposit rate 925 Tightening 24 Nov 11 825 Nov 11 (+100) Feb 12 (+100) 1125 1125 1125 1125

Israel Discount rate 250 Easing 26 Sep 11 325 Jan 12 (-25) Q2 12 (-25) 250 225 225 225

Latin America

Brazil SELIC rate 1050 Easing 31 Aug 11 1250 Jan 12 (-50) Mar 12 (-50) 1000 950 950 950

Chile Monetary policy rate 500 Easing 12 January 12 525 Jan 12 (-25) Feb 12 (-25) 450 425 425 425

Colombia Repo rate 475 Tightening 25 Feb 11 300 Nov 11 (+25) Mar 12 (+25) 500 550 550 550

Mexico Overnight rate 450 Easing 16 Jan 09 825 Jul 09 (-25) Q1 12 (-25) 425 400 400 400

Peru Reference rate 425 Tightening 6 May 10 125 May 11 (+25) Beyond 2012 425 425 425 425

Note Changes denoted in bold Source Barclays Capital

Barclays Capital | The Emerging Markets Weekly

26 January 2012 33

EMERGING MARKETS RESEARCH Piero Ghezzi Head of Global Economics Emerging Markets and FX Research +44 (0)20 3134 2190 pieroghezzibarcapcom

EM Global Michael Gavin Head of Global Macro Strategy and Head of EM Strategy +1 212 412 5915 michaelgavinbarcapcom

Alanna Gregory EM Strategist +1 212 412 5938 alannagregorybarcapcom

Latin America Alejandro Arreaza Economist ndash Latin America +1 212 412 3021 alejandroarreazabarcapcom

Sebastian Brown StrategistEconomist +1 212 412 6721 sebastianbrownbarcapcom

Alejandro Grisanti Chief Economist ndash Latin America Ex-Brazil Mexico +1 212 412 5982 alejandrogrisantibarcapcom

Donato Guarino Senior Strategist +1 212 412 5564 donatoguarinobarcapcom

Guilherme Loureiro Economist ndash Brazil +55 11 3757 7372 guilhermeloureirobarcapcom

Roberto Melzi Senior Strategist +1 212 412 5963 robertomelzibarcapcom

Bruno Rovai Economist +55 11 3757 7392 brunorovaibarcapcom

Marcelo Salomon Chief Economist ndash Brazil Chile Mexico+1 212 412 5717 marcelosalomonbarcapcom

Sebastian Vargas Economist - Argentina Uruguay +1 212 412 6823 sebastianvargasbarcapcom

Asia Pacific Jon Scoffin Head of Credit Research and Head of Research Asia-Pacific +65 6308 3217 jonscoffinbarcapcom

Rohit Arora FI Strategist Emerging Asia +65 6308 2092 rohitarora3barcapcom

Rahul Bajoria Regional Economist ndash India Malaysia Thailand +65 6308 3511 rahulbajoriabarcapcom

Jian Chang Regional Economist ndash China Hong Kong+852 2903 2654 jianchangbarcapcom

Joey Chew Regional Economist - Singapore +65 6308 3211 joeychewbarcapcom

Olivier Desbarres Head of FX Strategy Asia-Pacific ex-Japan +65 6308 2073 olivierdesbarresbarcapcom

Yiping Huang Chief Economist Emerging Asia +852 2903 3291 yipinghuangbarcapcom

Wai Ho Leong Senior Regional Economist ndash Korea Malaysia Singapore Taiwan +65 6308 3292 waiholeongbarcapcom

Hamish Pepper FX Strategist Asia-Pacific ex-Japan +65 6308 2220 hamishpepperbarcapcom

Kumar Rachapudi FI Strategist Emerging Asia +65 6308 3383 kumarrachapudibarcapcom

Siddhartha Sanyal Chief Economist India +91 22 6719 6177 siddharthasanyalbarcapcom

Prakriti Sofat Regional Economist ndash Indonesia Philippines Sri Lanka Vietnam +65 6308 3201 prakritisofatbarcapcom

Nick Verdi FX Strategist Asia-Pacific ex-Japan +65 6308 3093 nickverdibarcapcom

Ju Wang FI Strategist Emerging Asia +65 6308 2801 juwangbarcapcom

Lingxiu (Steven) Yang Regional Economist ndash China Hong Kong +852 2903 2653 lingxiuyangbarcapcom

Krishna Hegde CFA Asia Credit Strategist and Senior Financial Institutions +65 6308 2979 krishnahegdebarcapcom

Avanti Save Credit Strategy +65 6308 3116 avantisavebarcapcom

Emerging EMEA Christian Keller Head of Emerging EMEA Research +44 (0)20 7773 2031 christiankellerbarcapcom

Koon Chow Head of Emerging EMEA Strategy +44 (0)20 777 37572 koonchowbarcapcom

Jeff Gable Head of ABSA Capital Research +27 11 895 5368 jeffgableabsacapitalcom

Gina Schoeman Economist ndash South Africa +27 (0)11 895 5403 ginaschoemanabsacapitalcom

Daniel Hewitt Senior Emerging EMEA Economist +44 (0)20 3134 3522 danielhewittbarcapcom

Piotr Chwiejczak Rates Strategist +44 (0)20 3134 4606 piotrchwiejczak barcapcom

Ridle Markus Economist ndash Sub-Saharan Africa +27 11 895 5374 ridlemarkusabsacapitalcom

Fahad Al Turki Economist ndash Saudi Arabia +966 1880 6577 fahadalturkibarcapcom

Vladimir Pantyushin Chief Economist ndash Russia and CIS +7 495 7868450 vladimirpantyushinbarcapcom

Andreas Kolbe Credit Strategist +44 (0)20 313 43134 andreaskolbebarcapcom

Jeffrey Schultz Economist ndash South Africa +27 (0)11 895 5349 jeffreyschultzabsacapitalcom

Eldar Vakhitov Emerging EMEA Economist +44 (0)20 777 32192 eldarvakhitovbarcapcom

Alia Moubayed Senior Economist ndash Middle East amp North Africa +44 (0)20 313 41120 aliamoubayedbarcapcom

Dumisani Ngwenya Strategist ndash Africa +27 (0)11 895 5346 dumisaningwenyaabsacapitalcom

Michael Keenan Sub-Saharan FX and Rates Strategist +27 (0) 11 895 5513 mikekeenanabsacapitalcom

EM Corporate Credit Juan C Cruz Head of Latin America amp EEMEA Corporate Credit Research +1 212 412 3424 juancruzbarcapcom

Christopher Buck +1 212 412 3418 christopherbuckbarcapcom

Stella Cridge +44 (0)20 313 49618 stellacridgebarcapcom

Miguel Crivelli +1 212 412 5231 miguelcrivellibarcapcom

Ivan Fernandes +1 212 412 3428 ivanfernandesbarcapcom

Autumn Graham +1 212 412 2839 autumngrahambarcapcom

Milena Ianeva +44 (0)20 7773 8536 milenaianevabarcapcom

Stanislav Ponomarenko +7 495 786 8451 stanislavponomarenkobarcapcom

Aziz Sunderji +1 212 412 2218 azizsunderjibarcapcom

Antoine Yacoub + 44 207 7731727 antoineyacoubbarcapcom

Golib Zohidov +44 (0)20 777 31513 golibzohidovbarcapcom

Barclays Capital | The Emerging Markets Weekly

26 January 2012 21

Currency Tactical bias Strategic directional view Current strategy trades we like

Vol adj 6m returns

Score (1-5)

Emerging EMEA

EGP Bearish The CBE has tried to stabilise the EGP against capital flight but FX reserves have fallen sharply It may take a hard decision in a couple of months to allow a lsquofloatdevaluationrsquo before reserves fall below a prudent level

034 370

RUB Bullish Russiarsquos resilience to euro contagion is supported by sticky oil prices and argues for going long the RUB against a EUR-USD basket Strong local growth and higher yields should help retain capital in the country

Short EUR-USD basketlong RUB 019 310

HUF Neutral The willingness voiced by the Hungarian government to agree to what is needed to bring IMFEU loans plus stronger global risk appetite will likely trigger for hedging of HUF shorts Fundamentals remain fragile however

-031 300

RON NeutralBearish The risk environment is supportive for the RON but low yields and recent signs of political unrest (public protests against the governmentrsquos past austerity measures) keep us in our short RON recommendation for now

Long EURshort RON

000 295

TRY Neutralbearish Turkeyrsquos high external funding needs and uncertain monetary policy will likely weigh against the lira relative to the stronger currencies in EEMEA The CBT has stopped its daily FX auctions which could leave the TRY vulnerable if and when global investor risk appetites were to recede

Short TRYlong ZAR

003 275

ZAR Bullish Strong commodity prices and attractive local asset prices (on bonds) should mean capital inflows if global liquidity conditions stabilise This should benefit the ZAR more than other high-beta EEMEA currencies

Short TRYlong ZAR

011 275

PLN Neutral We remain cautious on the PLN given the external funding needs of Poland but the recent increase in global risk appetite has stopped us out of our shorts and we await a stabilization in the market before setting new ones

-019 265

ILS NeutralBullish Opportunity for an RV trade against the CZK given Israelrsquos stronger balance of payments and lower vulnerability to euro area contagion The ILS should benefit from our house view of lower EURUSD (and the past correlation between ILSCZK and EURUSD)

Long ILSShort CZK

-010 205

CZK Neutralbearish The Czech Republic has the strongest balance sheet among CEE countries however the currency should still suffer as the Czech economy may slip back into a recession

Long ILSShort CZK -018 180

UAH Neutralbearish High carry reflects investor fears of devaluation An agreement with the IMF or Russia on gas imports may alleviate these concerns but there has been little progress in this direction Meanwhile FX reserves are being depleted slowly by some internal capital flight

KZT Neutralbullish Being a commodity producer (oil) and having a positive CA create a cushion for uncertainty in global capital flows However low liquidity in this FX market may limit the appeal of the KZT

Note Versus EUR The variable score is an index that ranks EM currencies according to vol-adjusted returns PPP valuation carry systemic risk basic balanceGDP and reserves accumulated over the past 5yGDP For more details on the trade recommendations please see the EM Dashboard Note that bold text indicates changes in view Source Barclays Capital

Barclays Capital | The Emerging Markets Weekly

26 January 2012 22

CREDIT PORTFOLIO OAS (bp) OAD Weights () Duration Bias Total Returns () Bonds we recommendhellip

30-Dec-

11 25-Jan-

12 3mF Benchmark Model Adj

Duration 1w2012 QTD

2012 YTD 3m F Buying Selling

EM Portfolio 377 358 338 72 100 1000 Long 80 10 08 08 24 Arg Ven Ukr 1031 935 897 56 136 129 under Short 43 41 61 61 59 Other 272 267 249 75 864 871 neutral Long 86 05 00 00 18 EM Asia 244 238 213 80 15 16 over Long 99 07 01 01 29 Philippines 212 199 179 85 74 63 under Long 87 07 03 03 22 Philip 24s 25s 34s 37s Philip 13s 14s 15s 16s 17sIndonesia 237 240 210 78 67 87 over Long 120 07 -02 -02 37 Indo 14s 15s 16s 17s 18s sukuk 21s Sri Lanka 475 455 430 59 06 07 neutral Long 76 11 05 05 29 Sri Lanka 20 21s Vietnam 522 512 492 49 05 03 under Short 26 -01 08 08 23 Vietnam 20s EMEA 383 378 369 62 38 37 under Neutral 66 09 02 02 09 Turkey 369 384 373 72 93 102 neutral Neutral 78 02 -13 -13 11 Turkey 15s 16s 17s 18s Russia 327 304 281 58 91 117 over Long 90 03 14 14 23 Russia 28s Russia 30s Russia 15s Qatar 224 227 203 67 46 50 over Long 88 04 -05 -05 24 Qatar 40s42s Poland 314 289 285 58 29 30 neutral Long 70 13 10 10 01 Poland 21s 22s Lebanon 370 372 387 44 28 14 under Neutral 22 03 05 05 -13 Ukraine 926 923 972 43 20 13 under Short 23 47 10 10 -27 Ukr 12s 13s Ukr 20s 21s Hungary 657 610 635 63 18 07 under Short 19 36 28 28 -29 Hungary 20s 21s 41s South Africa 222 239 227 73 23 08 under Neutral 25 06 -15 -15 09 Lithuania 448 464 431 53 15 22 over Neutral 77 02 -08 -08 37 Lithuania 17s 20s 21s Croatia 601 601 616 65 10 05 under Neutral 32 14 01 01 -17 Egypt 622 534 539 78 03 00 under Short 00 58 61 61 -09 Egypt 20s 40s Latin America 412 378 350 80 45 46 over Long 88 12 16 16 35 Brazil 168 150 128 82 116 158 over Long 134 07 06 06 24 BR41 Mexico 167 169 146 88 97 114 over Long 124 01 -08 -08 25 MX22N MX 40 MX 100yr Venezuela 1175 1071 1011 56 74 80 over Short 49 42 63 63 85 PD 17N PD 15 Argentina 827 703 663 61 42 36 neutral Short 42 38 81 81 55 Boden 15 Colombia 184 184 169 89 41 24 under Short 42 05 -04 -04 13 CO 27 CO 33 CO 41 Peru 207 213 188 107 27 29 neutral Long 137 -11 -22 -22 37 PE33 PE50 PE37 Panama 198 189 171 92 24 04 under Short 12 -02 -02 -02 18 PA 36 Uruguay 191 184 169 103 16 10 under Short 51 -07 -09 -09 15 UY25 El Salvador 447 452 462 85 10 00 under Short 00 04 -06 -06 -21 EL Salv 35 Dominican Republic 583 551 544 53 05 05 neutral Short 39 27 18 18 11 DR21 DR27 Additional Countries 427 432 423 39 19 12 under Neutral 28 04 05 05 11 Abu Dhabi 166 180 177 41 09 00 under Long 00 07 -07 -07 -01 ADGB14s Bulgaria 366 340 349 27 03 00 under Neutral 00 08 11 11 -02 Bulgaria 15s Gabon 419 414 382 47 02 05 over Neutral 112 06 13 13 31 Gabon 17s Pakistan 1377 1422 1422 37 02 03 neutral Short 35 07 -04 -04 28

Ghana 556 529 490 44 02 04 over Neutral 88 08 17 17 39 Ghana 17s

Note Benchmark forecast Benchmark is a variant of the Barclays Capital Global EM Sovereigns index featuring USD only bonds Changes in view denoted in bold Additional Countries was previously known as Off-Index Allocations Source Barclays Capital

Barclays Capital | The Emerging Markets Weekly

26 January 2012 23

EM LOCAL BOND PORTFOLIO

1252012 Weights Total Returns FX Unhedged () Bonds we recommend

Duration Yield to Worst Mkt val

Current Market Model

Past Week QTD YTD

3m Forecast Buying Selling

EM Local 452 593 1448857 10000 10000 163 -245 555 353

Latin America 390 837 388169 2845 3318 over 125 -108 961 424

Brazil 259 1033 195289 1558 2011 over 093 -190 988 430 Jan 17 NTNF Jan21 NTNF Global BRL Jan 22

Chile 414 437 5922 036 009 under 149 355 466 174 May 18 BCP

Colombia 444 642 63049 392 440 over 082 282 1640 561 Local TES Jul 24

Mexico 583 586 112994 784 848 over 218 -282 568 390 Jun 27 Nov 36 Nov 38

Peru 812 609 10915 074 010 under 029 1178 1205 061 May 15

EEMEA 432 653 424001 2908 2320 under 213 -1026 -361 055

Czech Republic 586 274 46202 304 000 under 281 -1026 229 -094 May 25s

Hungary 344 868 28452 222 101 under 672 -2207 -565 -080 13E 14D

Israel 439 348 45510 301 277 under 049 -384 004 -034 Sept 13s Feb 19s

Poland 418 501 96524 660 574 neutral 269 -1382 -425 -346 Apr 16s Oct 20s

Russia 422 756 64926 470 220 under 295 -699 483 568

South Africa 592 765 76846 515 720 over 007 -936 -963 216 R157s

Turkey 212 1006 65541 438 428 neutral 119 -791 -1018 150 Jan 16s Jan 21s

EM Asia 509 392 636687 4247 4361 neutral 154 195 899 509

India 683 835 8869 054 075 over 077 -586 -409 755 IGB GS 18 GS 15

Indonesia 727 596 62383 400 400 neutral 458 1495 2947 455 INDOGB Apr 17 (FR60)

Malaysia 484 328 83145 543 550 neutral 131 161 575 268 MGS Sep 18

Philippines 783 532 37731 257 244 neutral 047 1452 1901 486

South Korea 428 362 374713 2524 2642 over 135 -132 706 553 3-5y bonds

Thailand 615 323 69846 469 450 neutral 091 277 162 580 LB176A

Note Bolding indicates change in bias Source Barclays Capital

Barclays Capital | The Emerging Markets Weekly

26 January 2012 24

DATA REVIEW amp PREVIEW ASIA Rahul Bajoria Jian Chang

Review of last weekrsquos data releases

Main indicators Period Previous BarCap Actual Comments

India Repo rate () Jan 850 850 850 Elevated core inflation prevents cut in repo rate

India Cash reserve ratio () Jan 600 600 550 Policy gearing moving towards supporting growth

Singapore CPI ( yy) Dec 57 56 55 Core inflation expected to remain sticky in Singapore

Thailand BoT policy rate () ndash 325 300 300 We do not expect any further rate cuts from Bank of Thailand

Korea GDP ( yy) Q4 35 39 34 We see potential for upside revisions in the second estimate next month

Preview of week ahead

Monday 30 January Period Prev 2 Prev 1 Latest Forecast Consensus

0700 Korea Current account balance (USD bn) Dec 283 413 505 40

1000 Philippines GDP ( yy) Q4 46 31 32 38 37

1600 Taiwan Unemployment rate (sa) Dec 43 43 43 43 43

Korea We expect the current account surplus to narrow as year-end outbound travelling typically opens up a wide services trade deficit The goods trade balance on a customs basis was USD4bn in December

Philippines Growth is likely to remain soft given weak export performance and continued government under-spending However consumption should remain strong given holiday-related spending

Taiwan Employment in non-agricultural sectors started to decline in November with a slight increase in the number of workers on unpaid leave

Tuesday 31 January Period Prev 2 Prev 1 Latest Forecast Consensus

0700 Korea IP ( yy) Dec 69 63 56 40 61

1000 Singapore Unemployment rate () Q4 19 21 20 21

1600 Taiwan GDP ( yy) Q4 66 45 34 33 28

1800 Malaysia BNM policy rate ndash 300 300 300 300 300

Korea We expect manufacturing output to increase 17 mm sa in December which will more than offset the small declines in the previous two months Exports in December were unusually resilient

Singapore We expect net job creation to slow as suggested by various hiring surveys But restrictions on foreign workers will keep the labour market tight

Taiwan We expect investment to become a smaller drag on GDP in Q4 than in Q3 as suggested by the stabilisation in imports of capital goods Consumption is likely to remain robust supported in part by tourism and will mitigate weakness in the external sector We forecast a 05 qq sa expansion in Q4 GDP following a 01 contraction last quarter We expect 44 GDP growth for 2011

Malaysia With growth moderating only gradually our base case is for the policy rate to be unchanged in H1

Wednesday 1 February Period Prev 2 Prev 1 Latest Forecast Consensus

0700 Korea CPI ( yy) Jan 36 42 42 37 36

0900 Korea Exports ( yy) Jan 76 116 108 65

0900 China PMI Manufacturing Jan 504 490 503 495 496

1200 Indonesia CPI ( yy) Jan 44 42 38 39

1200 Indonesia CPI core ( yy) Jan 44 44 43 44

1200 Indonesia Exports ( yy) Dec 440 178 83 100

1200 Thailand CPI ( yy) Jan 42 42 35 34 33

1200 Thailand Core CPI ( yy) Jan 29 29 27 26 27

2130 Singapore Electronics PMI Jan 521 509 497 ndash 499

Barclays Capital | The Emerging Markets Weekly

26 January 2012 25

Korea Lunar New Year demand and electricity tariff hikes for businesses last December should keep the cost of food energy and services high Nonetheless inflation is expected to moderate on base effects We expect exports to rise 6 mm sa extending Decemberrsquos 84 increase due to last-minute festive shipments in the early part of the month Lunar New Year holidays should exert a dampening effect on trade and manufacturing data in January and we expect a temporary trade deficit in January given high energy imports

China We look for a post-Chinese New Year mm decline and expect the PMI to hover around 50 in Q1

Indonesia Inflation to remain contained at 39 however we should see a mm pick-up driven by food prices and health costs We expect inflation to rise gradually in 2012 and end the year at 53 core inflation is likely to hold steady at about 44 We look for soft export growth given the uncertain external environment

Thailand Higher fuel prices coupled with a seasonal uptick in food prices should translate into only a modest decline in inflation

Friday 3 February Period Prev 2 Prev 1 Latest Forecast Consensus

0900 China Non-manufacturing PMI Jan 577 497 560 ndash

Barclays Capital | The Emerging Markets Weekly

26 January 2012 26

DATA REVIEW amp PREVIEW EMERGING EUROPE MIDDLE EAST AND AFRICA Eldar Vakhitov Daniel Hewitt Christian Keller Vladimir Pantyushin Jeffrey Schultz Alia Moubayed Piotr Chwiejczak

Review of last weekrsquos data releases

Main indicators Period Previous Barclays Actual Comments

Israel Base rate announcement () Jan 275 250 250 Rate cut due to rapid deceleration of inflation

Turkey Benchmark repo rate () Jan 575 575 575 Rate on hold but revisions in FX auction more ad hoc

Hungary Base rate announcement () Jan 700 725 700 Rates on hold because of HUF strength and high real rate

Israel Unemployment rate () Nov 54 - 54 Unemployment rate remains low but could rise later

Russia Industrial production ( yy) Dec 39 - 25 Expected slowing in line with the global trend

Hungary Retail trade ( yy) Nov 06 - 11 Apparent slight improvement in domestic demand

Turkey Industrial confidence index Jan 972 - 1018 Turkish economy rolling buoyed by domestic demand

Turkey Capacity utilization () Jan 755 - 747 Second consecutive monthly decline still a high level

South Africa PPI ( yy) Dec 101 99 98 Lower on the back of softer commodity prices food prices however continue to gain momentum

Russia Disposable income ( yy) Dec 02 - 63 Consistent growth underpins consumer sector expansion

Russia Real wages ( yy) Dec 71 - 49 Consistent growth underpins consumer sector expansion

Russia Retail sales real ( yy) Dec 86 - 95 Consumer sector outperforms yet again

Russia Unemployment rate () Dec 63 - 61 A welcome decline adding power to consumer demand

Russia Investment in productive capacity ( yy) Dec 77 - 89 Strong investment provides support to mid-term growth

Preview of week ahead

Friday 27 January Period Prev 2 Prev 1 Latest Forecast Consensus

0900 Poland Real GDP growth () 2011 51 17 38 41 42

0900 Poland Unemployment rate () Dec 118 118 121 125 125

0900 Poland Retail sales ( yy) Dec 114 112 126 110 100

1000 Croatia Industrial output ( yy) Dec -23 06 -03 - -

Poland Growth print is likely to be strong again despite softening PMIs ldquohardrdquo data remained strong in Q4 11 therefore a positivesurprise is possible however in Q1 12 we expect growth to slow down gradually Government officials have already hinted thatunemployment in December has increased driven by seasonal factors and cyclical elements as well as overall weakening demand

Croatia Despite the oil refinery fire no longer weighing on IP we still expect only marginally positive growth in December

Monday 30 January Period Prev 2 Prev 1 Latest Forecast Consensus

0900 Lithuania Real GDP ( yy) Q4 P 59 65 67 - -

Poland Budget level YTD (PLN bn) Dec -219 -225 -216 -223 -

Serbia Real GDP ( yy) Q4 P 37 25 05 02 -

Ukraine Current account (USD bn) Q4 -13 -17 -27 - -

Ukraine GDP constant prices ( yy) Q4 P 53 38 66 40 -

Lithuania Lithuania (together with Serbia) will be among the first CEE country to report Q4 GDP growth and it will be interestingto see to what extent the weaker external demand environment will be reflected in Lithuaniarsquos Q4 GDP print After the verystrong growth in 2011 of likely close to 6 yy (annual) we expect it to slow to 25 in 2012 ndash still a comparatively robust number in the regional context however

Poland Overall we expect the central budget deficit gap to come in at around PLN22bn Stronger economic activity particularlystrong retail sales should contribute to tax income while spending has been kept under control Local government deficit mayalso come in below projected numbers

Serbia We expect growth to be only slightly positive as export growth declined considerably in Q4

Ukraine The economy has likely already entered a softer patch while the external account gap continues to widen

Barclays Capital | The Emerging Markets Weekly

26 January 2012 27

Tuesday 31 January Period Prev 2 Prev 1 Latest Forecast Consensus

0600 South Africa Private sector credit ( yy) Dec 54 55 62 58 -

0800 Hungary Unemployment rate () Dec 107 108 106 - 108

0800 Turkey Trade balance (USD bn) Dec -104 -80 -75 -85 -735

1200 South Africa Trade balance (rand bn) Dec 25 -96 -81 - -

Russia Annual real GDP (yy) 2011 52 -78 40 42 -

Serbia Industrial output ( yy) Dec -18 -10 22 - -

Serbia Retail trade ( yy) Dec -183 -162 -164 - -

South Africa Although we expect a moderation in headline PSCE growth consumer spending into the festive season throughother smaller unsecured components of household credit should see the mm growth in PSCE tick up further in December

Hungary We expect to see a slight weakening of domestic labour in Hungary

Turkey We look for a small mm widening of the trade deficit as signalled by stronger customs duties collections in December that implies a pick-up in imports

Russia The growth emphasis shifts to domestic drivers with investment and consumer demand performing well recently

Wednesday 1 February Period Prev 2 Prev 1 Latest Forecast Consensus

0500 Russia Manufacturing PMI Jan 504 526 516 - -

0800 Poland Manufacturing PMI Jan 517 495 488 - -

0800 Turkey Manufacturing PMI Jan 533 523 520 - -

0830 Czech Manufacturing PMI Jan 517 486 492 - -

0900 South Africa Kagiso PMI Jan 502 505 516 - -

Czech Budget balance (CZK bn) Jan -915 -1259 -1428 - -

Hungary PMI Jan 482 478 485 - -

Kazakhstan CPI ( yy) Jan 80 78 74 70 -

Romania International reserves (USD bn) Jan 363 360 373 - -

South Africa Unemployment () Q4 250 257 250 - -

Russia Despite recent slowing Russiarsquos IP performance remains well within positive territory Domestic demand sectors showimproving dynamics This will likely be reflected in manager expectations

Poland Amid a general U-turn in optimism in Europe Polish entrepreneurs are also likely to adopt a more positive approachwhich is likely to be reflected in the survey Also mild winter weather conditions should work in favour of a higher PMI Still weexpect slower industrial production in months to come

Turkey Domestic growth indicators that are still holding up well could be reflected in a stronger PMI reading

Czech Republic Further indications of recession likely with the PMI remaining below 50 in January

South Africa Still-significant global risks and uncertainty along with a still-struggling domestic manufacturing sector are likely to leave the PMI hovering around its neutral level of 50 in January

Hungary Growth indicators have been mixed indicating a modest recession is in process

Kazakhstan We expect disinflation to continue running its course

Romania Stable currency markets have made it possible for the NBR to limit FX intervention helping it maintain its extremelyhigh levels of reserves

Thursday 2 February Period Prev 2 Prev 1 Latest Forecast Consensus

0800 Romania Retail sales ( yy) Dec -52 20 19 - -

1000 South Africa Naamsa vehicle sales ( yy) Jan 189 117 110 - -

1200 Czech Repo rate announcement () Feb 075 075 075 075 075

Romania Interest rate announcement () Feb 625 600 575 550 550

Egypt Deposit rate () Feb 825 825 925 1025 -

Barclays Capital | The Emerging Markets Weekly

26 January 2012 28

Romania The NBR is in the middle of a rate cutting cycle Having reduced rates in each of the past two meetings by 25bp we expect another 25bp reduction to 550 Moreover we expect two more rate cuts in the next two meetings bringing the rate to 50

South Africa Vehicle sales growth should continue to reflect the relatively positive consumer dynamics in the economy providedby low interest rates and high nominal incomes

Czech Republic The CNB is on hold On one hand it will not raise rates even though inflation (adjusted for taxes) is in the middleof the 1-3 target range because the economy is very weak On the other it will not lower rates because at 075 it is at a record low and a rate decrease is unlikely to spur increased lending

Egypt Mounting inflationary pressure and a weakening currency may push the CBE to continue raising rates

Friday 3 February Period Prev 2 Prev 1 Latest Forecast Consensus

0800 Czech Retail sales ( yy) Dec 00 15 05 - -

0800 Turkey CPI ( yy) Jan 77 95 105 1065 1045

1000 Croatia Retail trade real ( yy) Dec P 10 18 10 - -

Kazakhstan International reserves (USD bn) Jan 326 322 293 285 -

Russia CPI ( yy) Jan 72 68 61 43 -

Russia Overnight deposit rate () Feb 375 375 400 400 -

Russia Refinancing rate () Feb 825 825 800 800 -

Czech Republic Domestic demand remains muted

Turkey The trade weighted fall in the lira last year still has some room to pass through to headline CPI as capacity utilisationrates in the country remain high There are some signs of a slowdown but companies in Turkey are probably still able to pass onthe bulk of their cost increases

Kazakhstan The NBK continues to defend the currency

Russia Inflation drops amid the delay in regulated tariff hikes to 1 July The CBR will likely wait until after the 4 March presidentialelections before resuming rate cuts

Barclays Capital | The Emerging Markets Weekly

26 January 2012 29

DATA REVIEW amp PREVIEW LATIN AMERICA Alejandro Arreaza Alejandro Grisanti Bruno Rovai Guilherme Loureiro Marcelo Salomon Sebastian Vargas

Review of the weekrsquos data releases

Main indicators Period Previous BarCap Actual Comments

Brazil IPCA-15 inflation mm Jan 056 055 065 The surprise was in large part driven by a higher-than-expected increase in transportation costs (air and bus fares)

Brazil Current account USD bn Dec -68 -50 -60 The CA deficit reached USD526 bn (21 of GDP) but financing was not an issue as FDI reached USD666bn

Mexico Econ activity index yy Nov 37 40 375 Growing at a moderate pace at the margin (02 mm sa) on track for a sharp deceleration in Q4 GDP to 06 qq saar

Mexico Bi-weekly CPI 2w2w Jan 051 043 032 Lower-than-expected perishable inflation marked the January CPI release

Mexico Bi-weekly CPI core 2w2w Jan 035 026 020 A 115 2w2w drop in airfares helped contain core services inflation

Mexico Trade balance USD mn Dec -232 - 08 Exports and imports are moving further down (81 and 74 respectively)

Colombia Trade balance USD mn Nov 103 - 711 High oil prices compensate for strong increase in imports demand

Brazil COPOM meeting minutes Jan - - - Very dovish minutes with the BCB giving guidance that the Selic rate should fall to single-digit levels

Brazil Unemployment rate Dec 52 50 47 In seasonally adjusted terms the unemployment rate was flat at 56

Mexico Retail sales yy Nov 30 36 75 Strong gain of 22 mm sa probably reflecting the introduction of a local version of Black Friday in November

Preview of the week ahead

Monday 30 January Period Prev 2 Prev 1 Latest Forecast Consensus

- Brazil Central government budget BRL bn Dec 54 112 46 - -

- Colombia Overnight lending rate Jan 450 475 475 475 475

500 Brazil IGP-M inflation mm Jan 053 050 -012 030 030

700 Chile Industrial production yy Dec 52 -08 20 02 10

700 Chile Retail sales yy Dec 96 86 85 80 79

1530 Mexico Budget balance MXN bn Dec YTD -1790 -17939 -2131 - -

Colombia overnight lending rate With still moderate inflation we expected Banrep to remain on hold at its meeting this monthHowever the persistence of fast growth that is expected to offset the uncertainty coming from the European sovereign debtcrisis and the slowdown of the global economy will likely drive it to reassume its tightening cycle before the end of Q1

Chile industrial production and retail sales At the margin we expect industrial production to drop 02 mm sa leaving growth for Q4 11 at -23 3m3m saar This shows that global developments continue to take their toll in the Chilean economyRetail sales are still benefiting from tight labor market conditions but we expect them to soften gradually

Tuesday 31 January Period Prev 2 Prev 1 Latest Forecast Consensus

600 Brazil Industrial production yy Dec -16 -22 -25 01 -08

700 Chile Unemployment rate Dec 74 72 71 71 71

730 Brazil Primary budget balance BRL bn Dec 81 139 82 - -

1100 Colombia Unemployment rate Dec 102 102 103 - 104

Brazil industrial production Our forecast is consistent with a strong 14 mm sa print at the margin pushed mainly by theevolution of the auto sector (+94 mm sa) The December IBC-Br should also benefit from this gain leaving a high GDP carry-over for Q1 12

Chile unemployment rate We expect some deterioration of the unemployment rate in seasonally adjusted terms to 75 from73 The labor market data flow is already showing signs of contagion from global developments

Barclays Capital | The Emerging Markets Weekly

26 January 2012 30

Wednesday 01 February Period Prev 2 Prev 1 Latest Forecast Consensus

- Peru CPI mm Jan 031 043 027 041 -

- Peru WPI mm Jan 021 042 003 - -

1000 Mexico Remittances USD mn Dec 20847 19115 17736 - -

1200 Brazil Trade balance USD mn Jan 2355 582 3817 -1800 -

Brazil trade balance The contraction in the trade balance in January should be led by weak exports of iron ore We expectexports to increase only 16 yy while imports are likely to grow 169 yy

Thursday 02 February Period Prev 2 Prev 1 Latest Forecast Consensus

1100 Uruguay CPI mm Jan 070 040 070 - -

Friday 03 February Period Prev 2 Prev 1 Latest Forecast Consensus

900 Mexico Consumer confidence index Jan 906 895 908 - -

1100 Uruguay Unemployment rate Dec 60 57 55 - -

1600 Colombia PPI inflation mm Jan 09 01 01 - -

Week 30-04 February Period Prev 2 Prev 1 Latest Forecast Consensus

- Argentina Govern tax revenue ARS bn Jan 476 473 489 - -

1900 Colombia CPI inflation mm Jan 019 014 042 084 076

Colombia CPI inflation Considering a seasonal increase in food prices and an acceleration of core prices we expect a fastincrease in prices in January with an inflation rate of 084

Barclays Capital | The Emerging Markets Weekly

26 January 2012 31

FX FORECASTS AND FORWARDS

FX forecasts Forecast vs outright forward

Spot 1m 3m 6m 1y 1m 3m 6m 1y

G7 countries

EUR 131 135 130 125 120 30 -08 -47 -86

JPY 774 750 750 780 800 -31 -31 09 39

GBP 157 157 155 152 150 01 -11 -29 -40

CHF 092 092 096 104 108 -01 44 133 181

CAD 100 103 105 105 102 28 46 44 10

AUD 106 097 098 101 102 -83 -68 -30 -04

NZD 082 077 079 082 083 -58 -29 14 39

Emerging Asia

CNY 631 628 624 617 608 -03 -07 -17 -31

HKD 776 778 778 778 778 02 02 03 03

INR 5011 5000 5000 4900 4800 -06 -20 -54 -94

IDR 8979 8850 8800 8800 8500 -12 -21 -29 -83

KRW 1122 1100 1075 1050 1025 -21 -47 -74 -100

MYR 304 302 300 295 284 -08 -18 -37 -79

PHP 4289 4260 4220 4250 4200 -08 -19 -14 -28

SGD 126 124 123 123 122 -17 -25 -24 -29

THB 3138 3100 3060 2975 2850 -20 -35 -67 -112

TWD 2986 2970 2950 2875 2750 -07 -09 -30 -66

Latin America

ARS 434 435 445 460 540 -06 -09 -12 64

BRL 175 174 173 174 170 -10 -28 -38 -87

CLP 487 485 480 475 475 -07 -23 -40 -54

MXN 1298 1285 1270 1265 1260 -13 -29 -41 -60

COP 1811 1795 1780 1775 1770 -10 -21 -31 -44

PEN 269 268 267 266 264 -04 -12 -19 -34

EEMEA

EURCZK 2514 2550 2575 2550 2525 14 24 14 04

EURHUF 295 310 315 310 300 48 58 30 -23

EURPLN 424 430 450 440 435 12 52 20 -08

EURRON 434 436 445 440 435 02 19 00 -38

USDRUB 3023 3030 3000 3000 3050 -06 -24 -36 -45

BSKRUB 3452 3507 3405 3338 3325 10 -28 -60 -88

USDTRY 179 182 185 182 180 07 11 -24 -68

USDZAR 782 815 820 780 770 38 35 -28 -65

USDILS 376 375 370 365 360 -03 -18 -34 -50

USDEGP 604 600 620 650 700 -29 -44 -19 25

USDUAH 804 803 810 815 820 -15 -36 -71 -162

Source Barclays Capital

Barclays Capital | The Emerging Markets Weekly

26 January 2012 32

OFFICIAL INTEREST RATES

Start of cycle Forecasts as at end of

Official rate Current Date Level Last move Next move expected Q1 12 Q2 12 Q3 12 Q4 12

per annum (unless stated)

Advanced

Fed funds rate 0-025 Easing 17 Sep 07 525 Dec 08 (-75-100) Beyond 2013 0-025 0-025 0-025 0-025

BoJ overnight rate 010 Easing 30 Oct 08 050 Oct 10 (0-10) Q1 14 (+20) 0-010 0-010 0-010 0-010

ECB repo rate 100 Easing 03 Nov 11 150 Dec 11 (-25) Mar 12 (-50) 050 050 050 050

Emerging Asia

China Working capital rate 656 Tightening 19 Oct 10 531 Jul 11 (+25) Beyond Q4 12 656 656 656 656

Hong Kong Base rate 050 Easing 19 Sep 07 675 Dec 08 (-100) Beyond Q4 12 050 050 050 050

India Repo rate 850 Tightening 19 Mar 10 475 Oct 11 (+25) Q2 12 (-25) 850 825 800 775

Indonesia ON policy rate 600 Easing 11 Oct 11 675 Nov 11 (-50) Beyond Q4 12 600 600 600 600

Korea Base rate 325 Tightening 9 Jul 10 225 Jun 11(+25) Beyond Q4 12 325 325 325 325

Sri Lanka Reverse repo 850 Easing 20 Feb 09 1200 Jan 11 (-50) Q2 12 (-50) 850 800 800 800

Malaysia ON policy rate 300 Tightening 4 Mar 10 200 May 11 (+25) Beyond Q4 12 300 300 300 300

Philippines ON lending 425 Easing 19 Jan 12 450 Jan 12 (-25) Q2 12 (-25) 425 400 400 400

Taiwan Rediscount rate 1875 Tightening 24 Jun 10 1375 Jun 11 (+125) Beyond Q4 12 1875 1875 1875 1875

Thailand ON repo rate 300 Easing 30 Nov 11 350 Jan 12 (-25) Q3 12 (+25) 300 300 325 350

Vietnam Reverse repo rate 1400 Easing Jul 11 1500 Jul 11 (-100) Q1 12 (-200) 1200 1100 1000 1000

Emerging Europe Middle East amp Africa

Czech Republic 2w repo rate 075 Easing 8 Aug 08 375 Apr 10 (-25) Beyond Q4 12 075 075 075 075

Hungary 2w deposit rate 700 Tightening 29 Nov 10 525 Dec 11 (+50) Q2 12 (+25) 700 725 725 725

Poland 2w repo rate 450 Tightening 19 Jan 11 350 Jun 11 (+25) Mar 12 (-25) 425 375 375 375

Romania Key policy rate 575 Easing 4 Feb 08 1025 Jan 12 (-25) Feb 12 (-25) 525 500 500 500

Russia Refi rate 800 Easing 23 Dec 11 825 Dec 11 (-25) Mar 12 (-25) 775 750 750 750

South Africa Repo rate 550 Easing 11 Dec 08 1200 Nov 10 (-50) Nov 12 (+50) 550 550 550 600

Turkey 1wk repo rate 575 Easing 20 Nov 08 1675 Aug 11 (-50) Beyond Q4 12 575 575 575 575

Egypt Deposit rate 925 Tightening 24 Nov 11 825 Nov 11 (+100) Feb 12 (+100) 1125 1125 1125 1125

Israel Discount rate 250 Easing 26 Sep 11 325 Jan 12 (-25) Q2 12 (-25) 250 225 225 225

Latin America

Brazil SELIC rate 1050 Easing 31 Aug 11 1250 Jan 12 (-50) Mar 12 (-50) 1000 950 950 950

Chile Monetary policy rate 500 Easing 12 January 12 525 Jan 12 (-25) Feb 12 (-25) 450 425 425 425

Colombia Repo rate 475 Tightening 25 Feb 11 300 Nov 11 (+25) Mar 12 (+25) 500 550 550 550

Mexico Overnight rate 450 Easing 16 Jan 09 825 Jul 09 (-25) Q1 12 (-25) 425 400 400 400

Peru Reference rate 425 Tightening 6 May 10 125 May 11 (+25) Beyond 2012 425 425 425 425

Note Changes denoted in bold Source Barclays Capital

Barclays Capital | The Emerging Markets Weekly

26 January 2012 33

EMERGING MARKETS RESEARCH Piero Ghezzi Head of Global Economics Emerging Markets and FX Research +44 (0)20 3134 2190 pieroghezzibarcapcom

EM Global Michael Gavin Head of Global Macro Strategy and Head of EM Strategy +1 212 412 5915 michaelgavinbarcapcom

Alanna Gregory EM Strategist +1 212 412 5938 alannagregorybarcapcom

Latin America Alejandro Arreaza Economist ndash Latin America +1 212 412 3021 alejandroarreazabarcapcom

Sebastian Brown StrategistEconomist +1 212 412 6721 sebastianbrownbarcapcom

Alejandro Grisanti Chief Economist ndash Latin America Ex-Brazil Mexico +1 212 412 5982 alejandrogrisantibarcapcom

Donato Guarino Senior Strategist +1 212 412 5564 donatoguarinobarcapcom

Guilherme Loureiro Economist ndash Brazil +55 11 3757 7372 guilhermeloureirobarcapcom

Roberto Melzi Senior Strategist +1 212 412 5963 robertomelzibarcapcom

Bruno Rovai Economist +55 11 3757 7392 brunorovaibarcapcom

Marcelo Salomon Chief Economist ndash Brazil Chile Mexico+1 212 412 5717 marcelosalomonbarcapcom

Sebastian Vargas Economist - Argentina Uruguay +1 212 412 6823 sebastianvargasbarcapcom

Asia Pacific Jon Scoffin Head of Credit Research and Head of Research Asia-Pacific +65 6308 3217 jonscoffinbarcapcom

Rohit Arora FI Strategist Emerging Asia +65 6308 2092 rohitarora3barcapcom

Rahul Bajoria Regional Economist ndash India Malaysia Thailand +65 6308 3511 rahulbajoriabarcapcom

Jian Chang Regional Economist ndash China Hong Kong+852 2903 2654 jianchangbarcapcom

Joey Chew Regional Economist - Singapore +65 6308 3211 joeychewbarcapcom

Olivier Desbarres Head of FX Strategy Asia-Pacific ex-Japan +65 6308 2073 olivierdesbarresbarcapcom

Yiping Huang Chief Economist Emerging Asia +852 2903 3291 yipinghuangbarcapcom

Wai Ho Leong Senior Regional Economist ndash Korea Malaysia Singapore Taiwan +65 6308 3292 waiholeongbarcapcom

Hamish Pepper FX Strategist Asia-Pacific ex-Japan +65 6308 2220 hamishpepperbarcapcom

Kumar Rachapudi FI Strategist Emerging Asia +65 6308 3383 kumarrachapudibarcapcom

Siddhartha Sanyal Chief Economist India +91 22 6719 6177 siddharthasanyalbarcapcom

Prakriti Sofat Regional Economist ndash Indonesia Philippines Sri Lanka Vietnam +65 6308 3201 prakritisofatbarcapcom

Nick Verdi FX Strategist Asia-Pacific ex-Japan +65 6308 3093 nickverdibarcapcom

Ju Wang FI Strategist Emerging Asia +65 6308 2801 juwangbarcapcom

Lingxiu (Steven) Yang Regional Economist ndash China Hong Kong +852 2903 2653 lingxiuyangbarcapcom

Krishna Hegde CFA Asia Credit Strategist and Senior Financial Institutions +65 6308 2979 krishnahegdebarcapcom

Avanti Save Credit Strategy +65 6308 3116 avantisavebarcapcom

Emerging EMEA Christian Keller Head of Emerging EMEA Research +44 (0)20 7773 2031 christiankellerbarcapcom

Koon Chow Head of Emerging EMEA Strategy +44 (0)20 777 37572 koonchowbarcapcom

Jeff Gable Head of ABSA Capital Research +27 11 895 5368 jeffgableabsacapitalcom

Gina Schoeman Economist ndash South Africa +27 (0)11 895 5403 ginaschoemanabsacapitalcom

Daniel Hewitt Senior Emerging EMEA Economist +44 (0)20 3134 3522 danielhewittbarcapcom

Piotr Chwiejczak Rates Strategist +44 (0)20 3134 4606 piotrchwiejczak barcapcom

Ridle Markus Economist ndash Sub-Saharan Africa +27 11 895 5374 ridlemarkusabsacapitalcom

Fahad Al Turki Economist ndash Saudi Arabia +966 1880 6577 fahadalturkibarcapcom

Vladimir Pantyushin Chief Economist ndash Russia and CIS +7 495 7868450 vladimirpantyushinbarcapcom

Andreas Kolbe Credit Strategist +44 (0)20 313 43134 andreaskolbebarcapcom

Jeffrey Schultz Economist ndash South Africa +27 (0)11 895 5349 jeffreyschultzabsacapitalcom

Eldar Vakhitov Emerging EMEA Economist +44 (0)20 777 32192 eldarvakhitovbarcapcom

Alia Moubayed Senior Economist ndash Middle East amp North Africa +44 (0)20 313 41120 aliamoubayedbarcapcom

Dumisani Ngwenya Strategist ndash Africa +27 (0)11 895 5346 dumisaningwenyaabsacapitalcom

Michael Keenan Sub-Saharan FX and Rates Strategist +27 (0) 11 895 5513 mikekeenanabsacapitalcom

EM Corporate Credit Juan C Cruz Head of Latin America amp EEMEA Corporate Credit Research +1 212 412 3424 juancruzbarcapcom

Christopher Buck +1 212 412 3418 christopherbuckbarcapcom

Stella Cridge +44 (0)20 313 49618 stellacridgebarcapcom

Miguel Crivelli +1 212 412 5231 miguelcrivellibarcapcom

Ivan Fernandes +1 212 412 3428 ivanfernandesbarcapcom

Autumn Graham +1 212 412 2839 autumngrahambarcapcom

Milena Ianeva +44 (0)20 7773 8536 milenaianevabarcapcom

Stanislav Ponomarenko +7 495 786 8451 stanislavponomarenkobarcapcom

Aziz Sunderji +1 212 412 2218 azizsunderjibarcapcom

Antoine Yacoub + 44 207 7731727 antoineyacoubbarcapcom

Golib Zohidov +44 (0)20 777 31513 golibzohidovbarcapcom

Barclays Capital | The Emerging Markets Weekly

26 January 2012 22

CREDIT PORTFOLIO OAS (bp) OAD Weights () Duration Bias Total Returns () Bonds we recommendhellip

30-Dec-

11 25-Jan-

12 3mF Benchmark Model Adj

Duration 1w2012 QTD

2012 YTD 3m F Buying Selling

EM Portfolio 377 358 338 72 100 1000 Long 80 10 08 08 24 Arg Ven Ukr 1031 935 897 56 136 129 under Short 43 41 61 61 59 Other 272 267 249 75 864 871 neutral Long 86 05 00 00 18 EM Asia 244 238 213 80 15 16 over Long 99 07 01 01 29 Philippines 212 199 179 85 74 63 under Long 87 07 03 03 22 Philip 24s 25s 34s 37s Philip 13s 14s 15s 16s 17sIndonesia 237 240 210 78 67 87 over Long 120 07 -02 -02 37 Indo 14s 15s 16s 17s 18s sukuk 21s Sri Lanka 475 455 430 59 06 07 neutral Long 76 11 05 05 29 Sri Lanka 20 21s Vietnam 522 512 492 49 05 03 under Short 26 -01 08 08 23 Vietnam 20s EMEA 383 378 369 62 38 37 under Neutral 66 09 02 02 09 Turkey 369 384 373 72 93 102 neutral Neutral 78 02 -13 -13 11 Turkey 15s 16s 17s 18s Russia 327 304 281 58 91 117 over Long 90 03 14 14 23 Russia 28s Russia 30s Russia 15s Qatar 224 227 203 67 46 50 over Long 88 04 -05 -05 24 Qatar 40s42s Poland 314 289 285 58 29 30 neutral Long 70 13 10 10 01 Poland 21s 22s Lebanon 370 372 387 44 28 14 under Neutral 22 03 05 05 -13 Ukraine 926 923 972 43 20 13 under Short 23 47 10 10 -27 Ukr 12s 13s Ukr 20s 21s Hungary 657 610 635 63 18 07 under Short 19 36 28 28 -29 Hungary 20s 21s 41s South Africa 222 239 227 73 23 08 under Neutral 25 06 -15 -15 09 Lithuania 448 464 431 53 15 22 over Neutral 77 02 -08 -08 37 Lithuania 17s 20s 21s Croatia 601 601 616 65 10 05 under Neutral 32 14 01 01 -17 Egypt 622 534 539 78 03 00 under Short 00 58 61 61 -09 Egypt 20s 40s Latin America 412 378 350 80 45 46 over Long 88 12 16 16 35 Brazil 168 150 128 82 116 158 over Long 134 07 06 06 24 BR41 Mexico 167 169 146 88 97 114 over Long 124 01 -08 -08 25 MX22N MX 40 MX 100yr Venezuela 1175 1071 1011 56 74 80 over Short 49 42 63 63 85 PD 17N PD 15 Argentina 827 703 663 61 42 36 neutral Short 42 38 81 81 55 Boden 15 Colombia 184 184 169 89 41 24 under Short 42 05 -04 -04 13 CO 27 CO 33 CO 41 Peru 207 213 188 107 27 29 neutral Long 137 -11 -22 -22 37 PE33 PE50 PE37 Panama 198 189 171 92 24 04 under Short 12 -02 -02 -02 18 PA 36 Uruguay 191 184 169 103 16 10 under Short 51 -07 -09 -09 15 UY25 El Salvador 447 452 462 85 10 00 under Short 00 04 -06 -06 -21 EL Salv 35 Dominican Republic 583 551 544 53 05 05 neutral Short 39 27 18 18 11 DR21 DR27 Additional Countries 427 432 423 39 19 12 under Neutral 28 04 05 05 11 Abu Dhabi 166 180 177 41 09 00 under Long 00 07 -07 -07 -01 ADGB14s Bulgaria 366 340 349 27 03 00 under Neutral 00 08 11 11 -02 Bulgaria 15s Gabon 419 414 382 47 02 05 over Neutral 112 06 13 13 31 Gabon 17s Pakistan 1377 1422 1422 37 02 03 neutral Short 35 07 -04 -04 28

Ghana 556 529 490 44 02 04 over Neutral 88 08 17 17 39 Ghana 17s

Note Benchmark forecast Benchmark is a variant of the Barclays Capital Global EM Sovereigns index featuring USD only bonds Changes in view denoted in bold Additional Countries was previously known as Off-Index Allocations Source Barclays Capital

Barclays Capital | The Emerging Markets Weekly

26 January 2012 23

EM LOCAL BOND PORTFOLIO

1252012 Weights Total Returns FX Unhedged () Bonds we recommend

Duration Yield to Worst Mkt val

Current Market Model

Past Week QTD YTD

3m Forecast Buying Selling

EM Local 452 593 1448857 10000 10000 163 -245 555 353

Latin America 390 837 388169 2845 3318 over 125 -108 961 424

Brazil 259 1033 195289 1558 2011 over 093 -190 988 430 Jan 17 NTNF Jan21 NTNF Global BRL Jan 22

Chile 414 437 5922 036 009 under 149 355 466 174 May 18 BCP

Colombia 444 642 63049 392 440 over 082 282 1640 561 Local TES Jul 24

Mexico 583 586 112994 784 848 over 218 -282 568 390 Jun 27 Nov 36 Nov 38

Peru 812 609 10915 074 010 under 029 1178 1205 061 May 15

EEMEA 432 653 424001 2908 2320 under 213 -1026 -361 055

Czech Republic 586 274 46202 304 000 under 281 -1026 229 -094 May 25s

Hungary 344 868 28452 222 101 under 672 -2207 -565 -080 13E 14D

Israel 439 348 45510 301 277 under 049 -384 004 -034 Sept 13s Feb 19s

Poland 418 501 96524 660 574 neutral 269 -1382 -425 -346 Apr 16s Oct 20s

Russia 422 756 64926 470 220 under 295 -699 483 568

South Africa 592 765 76846 515 720 over 007 -936 -963 216 R157s

Turkey 212 1006 65541 438 428 neutral 119 -791 -1018 150 Jan 16s Jan 21s

EM Asia 509 392 636687 4247 4361 neutral 154 195 899 509

India 683 835 8869 054 075 over 077 -586 -409 755 IGB GS 18 GS 15

Indonesia 727 596 62383 400 400 neutral 458 1495 2947 455 INDOGB Apr 17 (FR60)

Malaysia 484 328 83145 543 550 neutral 131 161 575 268 MGS Sep 18

Philippines 783 532 37731 257 244 neutral 047 1452 1901 486

South Korea 428 362 374713 2524 2642 over 135 -132 706 553 3-5y bonds

Thailand 615 323 69846 469 450 neutral 091 277 162 580 LB176A

Note Bolding indicates change in bias Source Barclays Capital

Barclays Capital | The Emerging Markets Weekly

26 January 2012 24

DATA REVIEW amp PREVIEW ASIA Rahul Bajoria Jian Chang

Review of last weekrsquos data releases

Main indicators Period Previous BarCap Actual Comments

India Repo rate () Jan 850 850 850 Elevated core inflation prevents cut in repo rate

India Cash reserve ratio () Jan 600 600 550 Policy gearing moving towards supporting growth

Singapore CPI ( yy) Dec 57 56 55 Core inflation expected to remain sticky in Singapore

Thailand BoT policy rate () ndash 325 300 300 We do not expect any further rate cuts from Bank of Thailand

Korea GDP ( yy) Q4 35 39 34 We see potential for upside revisions in the second estimate next month

Preview of week ahead

Monday 30 January Period Prev 2 Prev 1 Latest Forecast Consensus

0700 Korea Current account balance (USD bn) Dec 283 413 505 40

1000 Philippines GDP ( yy) Q4 46 31 32 38 37

1600 Taiwan Unemployment rate (sa) Dec 43 43 43 43 43

Korea We expect the current account surplus to narrow as year-end outbound travelling typically opens up a wide services trade deficit The goods trade balance on a customs basis was USD4bn in December

Philippines Growth is likely to remain soft given weak export performance and continued government under-spending However consumption should remain strong given holiday-related spending

Taiwan Employment in non-agricultural sectors started to decline in November with a slight increase in the number of workers on unpaid leave

Tuesday 31 January Period Prev 2 Prev 1 Latest Forecast Consensus

0700 Korea IP ( yy) Dec 69 63 56 40 61

1000 Singapore Unemployment rate () Q4 19 21 20 21

1600 Taiwan GDP ( yy) Q4 66 45 34 33 28

1800 Malaysia BNM policy rate ndash 300 300 300 300 300

Korea We expect manufacturing output to increase 17 mm sa in December which will more than offset the small declines in the previous two months Exports in December were unusually resilient

Singapore We expect net job creation to slow as suggested by various hiring surveys But restrictions on foreign workers will keep the labour market tight

Taiwan We expect investment to become a smaller drag on GDP in Q4 than in Q3 as suggested by the stabilisation in imports of capital goods Consumption is likely to remain robust supported in part by tourism and will mitigate weakness in the external sector We forecast a 05 qq sa expansion in Q4 GDP following a 01 contraction last quarter We expect 44 GDP growth for 2011

Malaysia With growth moderating only gradually our base case is for the policy rate to be unchanged in H1

Wednesday 1 February Period Prev 2 Prev 1 Latest Forecast Consensus

0700 Korea CPI ( yy) Jan 36 42 42 37 36

0900 Korea Exports ( yy) Jan 76 116 108 65

0900 China PMI Manufacturing Jan 504 490 503 495 496

1200 Indonesia CPI ( yy) Jan 44 42 38 39

1200 Indonesia CPI core ( yy) Jan 44 44 43 44

1200 Indonesia Exports ( yy) Dec 440 178 83 100

1200 Thailand CPI ( yy) Jan 42 42 35 34 33

1200 Thailand Core CPI ( yy) Jan 29 29 27 26 27

2130 Singapore Electronics PMI Jan 521 509 497 ndash 499

Barclays Capital | The Emerging Markets Weekly

26 January 2012 25

Korea Lunar New Year demand and electricity tariff hikes for businesses last December should keep the cost of food energy and services high Nonetheless inflation is expected to moderate on base effects We expect exports to rise 6 mm sa extending Decemberrsquos 84 increase due to last-minute festive shipments in the early part of the month Lunar New Year holidays should exert a dampening effect on trade and manufacturing data in January and we expect a temporary trade deficit in January given high energy imports

China We look for a post-Chinese New Year mm decline and expect the PMI to hover around 50 in Q1

Indonesia Inflation to remain contained at 39 however we should see a mm pick-up driven by food prices and health costs We expect inflation to rise gradually in 2012 and end the year at 53 core inflation is likely to hold steady at about 44 We look for soft export growth given the uncertain external environment

Thailand Higher fuel prices coupled with a seasonal uptick in food prices should translate into only a modest decline in inflation

Friday 3 February Period Prev 2 Prev 1 Latest Forecast Consensus

0900 China Non-manufacturing PMI Jan 577 497 560 ndash

Barclays Capital | The Emerging Markets Weekly

26 January 2012 26

DATA REVIEW amp PREVIEW EMERGING EUROPE MIDDLE EAST AND AFRICA Eldar Vakhitov Daniel Hewitt Christian Keller Vladimir Pantyushin Jeffrey Schultz Alia Moubayed Piotr Chwiejczak

Review of last weekrsquos data releases

Main indicators Period Previous Barclays Actual Comments

Israel Base rate announcement () Jan 275 250 250 Rate cut due to rapid deceleration of inflation

Turkey Benchmark repo rate () Jan 575 575 575 Rate on hold but revisions in FX auction more ad hoc

Hungary Base rate announcement () Jan 700 725 700 Rates on hold because of HUF strength and high real rate

Israel Unemployment rate () Nov 54 - 54 Unemployment rate remains low but could rise later

Russia Industrial production ( yy) Dec 39 - 25 Expected slowing in line with the global trend

Hungary Retail trade ( yy) Nov 06 - 11 Apparent slight improvement in domestic demand

Turkey Industrial confidence index Jan 972 - 1018 Turkish economy rolling buoyed by domestic demand

Turkey Capacity utilization () Jan 755 - 747 Second consecutive monthly decline still a high level

South Africa PPI ( yy) Dec 101 99 98 Lower on the back of softer commodity prices food prices however continue to gain momentum

Russia Disposable income ( yy) Dec 02 - 63 Consistent growth underpins consumer sector expansion

Russia Real wages ( yy) Dec 71 - 49 Consistent growth underpins consumer sector expansion

Russia Retail sales real ( yy) Dec 86 - 95 Consumer sector outperforms yet again

Russia Unemployment rate () Dec 63 - 61 A welcome decline adding power to consumer demand

Russia Investment in productive capacity ( yy) Dec 77 - 89 Strong investment provides support to mid-term growth

Preview of week ahead

Friday 27 January Period Prev 2 Prev 1 Latest Forecast Consensus

0900 Poland Real GDP growth () 2011 51 17 38 41 42

0900 Poland Unemployment rate () Dec 118 118 121 125 125

0900 Poland Retail sales ( yy) Dec 114 112 126 110 100

1000 Croatia Industrial output ( yy) Dec -23 06 -03 - -

Poland Growth print is likely to be strong again despite softening PMIs ldquohardrdquo data remained strong in Q4 11 therefore a positivesurprise is possible however in Q1 12 we expect growth to slow down gradually Government officials have already hinted thatunemployment in December has increased driven by seasonal factors and cyclical elements as well as overall weakening demand

Croatia Despite the oil refinery fire no longer weighing on IP we still expect only marginally positive growth in December

Monday 30 January Period Prev 2 Prev 1 Latest Forecast Consensus

0900 Lithuania Real GDP ( yy) Q4 P 59 65 67 - -

Poland Budget level YTD (PLN bn) Dec -219 -225 -216 -223 -

Serbia Real GDP ( yy) Q4 P 37 25 05 02 -

Ukraine Current account (USD bn) Q4 -13 -17 -27 - -

Ukraine GDP constant prices ( yy) Q4 P 53 38 66 40 -

Lithuania Lithuania (together with Serbia) will be among the first CEE country to report Q4 GDP growth and it will be interestingto see to what extent the weaker external demand environment will be reflected in Lithuaniarsquos Q4 GDP print After the verystrong growth in 2011 of likely close to 6 yy (annual) we expect it to slow to 25 in 2012 ndash still a comparatively robust number in the regional context however

Poland Overall we expect the central budget deficit gap to come in at around PLN22bn Stronger economic activity particularlystrong retail sales should contribute to tax income while spending has been kept under control Local government deficit mayalso come in below projected numbers

Serbia We expect growth to be only slightly positive as export growth declined considerably in Q4

Ukraine The economy has likely already entered a softer patch while the external account gap continues to widen

Barclays Capital | The Emerging Markets Weekly

26 January 2012 27

Tuesday 31 January Period Prev 2 Prev 1 Latest Forecast Consensus

0600 South Africa Private sector credit ( yy) Dec 54 55 62 58 -

0800 Hungary Unemployment rate () Dec 107 108 106 - 108

0800 Turkey Trade balance (USD bn) Dec -104 -80 -75 -85 -735

1200 South Africa Trade balance (rand bn) Dec 25 -96 -81 - -

Russia Annual real GDP (yy) 2011 52 -78 40 42 -

Serbia Industrial output ( yy) Dec -18 -10 22 - -

Serbia Retail trade ( yy) Dec -183 -162 -164 - -

South Africa Although we expect a moderation in headline PSCE growth consumer spending into the festive season throughother smaller unsecured components of household credit should see the mm growth in PSCE tick up further in December

Hungary We expect to see a slight weakening of domestic labour in Hungary

Turkey We look for a small mm widening of the trade deficit as signalled by stronger customs duties collections in December that implies a pick-up in imports

Russia The growth emphasis shifts to domestic drivers with investment and consumer demand performing well recently

Wednesday 1 February Period Prev 2 Prev 1 Latest Forecast Consensus

0500 Russia Manufacturing PMI Jan 504 526 516 - -

0800 Poland Manufacturing PMI Jan 517 495 488 - -

0800 Turkey Manufacturing PMI Jan 533 523 520 - -

0830 Czech Manufacturing PMI Jan 517 486 492 - -

0900 South Africa Kagiso PMI Jan 502 505 516 - -

Czech Budget balance (CZK bn) Jan -915 -1259 -1428 - -

Hungary PMI Jan 482 478 485 - -

Kazakhstan CPI ( yy) Jan 80 78 74 70 -

Romania International reserves (USD bn) Jan 363 360 373 - -

South Africa Unemployment () Q4 250 257 250 - -

Russia Despite recent slowing Russiarsquos IP performance remains well within positive territory Domestic demand sectors showimproving dynamics This will likely be reflected in manager expectations

Poland Amid a general U-turn in optimism in Europe Polish entrepreneurs are also likely to adopt a more positive approachwhich is likely to be reflected in the survey Also mild winter weather conditions should work in favour of a higher PMI Still weexpect slower industrial production in months to come

Turkey Domestic growth indicators that are still holding up well could be reflected in a stronger PMI reading

Czech Republic Further indications of recession likely with the PMI remaining below 50 in January

South Africa Still-significant global risks and uncertainty along with a still-struggling domestic manufacturing sector are likely to leave the PMI hovering around its neutral level of 50 in January

Hungary Growth indicators have been mixed indicating a modest recession is in process

Kazakhstan We expect disinflation to continue running its course

Romania Stable currency markets have made it possible for the NBR to limit FX intervention helping it maintain its extremelyhigh levels of reserves

Thursday 2 February Period Prev 2 Prev 1 Latest Forecast Consensus

0800 Romania Retail sales ( yy) Dec -52 20 19 - -

1000 South Africa Naamsa vehicle sales ( yy) Jan 189 117 110 - -

1200 Czech Repo rate announcement () Feb 075 075 075 075 075

Romania Interest rate announcement () Feb 625 600 575 550 550

Egypt Deposit rate () Feb 825 825 925 1025 -

Barclays Capital | The Emerging Markets Weekly

26 January 2012 28

Romania The NBR is in the middle of a rate cutting cycle Having reduced rates in each of the past two meetings by 25bp we expect another 25bp reduction to 550 Moreover we expect two more rate cuts in the next two meetings bringing the rate to 50

South Africa Vehicle sales growth should continue to reflect the relatively positive consumer dynamics in the economy providedby low interest rates and high nominal incomes

Czech Republic The CNB is on hold On one hand it will not raise rates even though inflation (adjusted for taxes) is in the middleof the 1-3 target range because the economy is very weak On the other it will not lower rates because at 075 it is at a record low and a rate decrease is unlikely to spur increased lending

Egypt Mounting inflationary pressure and a weakening currency may push the CBE to continue raising rates

Friday 3 February Period Prev 2 Prev 1 Latest Forecast Consensus

0800 Czech Retail sales ( yy) Dec 00 15 05 - -

0800 Turkey CPI ( yy) Jan 77 95 105 1065 1045

1000 Croatia Retail trade real ( yy) Dec P 10 18 10 - -

Kazakhstan International reserves (USD bn) Jan 326 322 293 285 -

Russia CPI ( yy) Jan 72 68 61 43 -

Russia Overnight deposit rate () Feb 375 375 400 400 -

Russia Refinancing rate () Feb 825 825 800 800 -

Czech Republic Domestic demand remains muted

Turkey The trade weighted fall in the lira last year still has some room to pass through to headline CPI as capacity utilisationrates in the country remain high There are some signs of a slowdown but companies in Turkey are probably still able to pass onthe bulk of their cost increases

Kazakhstan The NBK continues to defend the currency

Russia Inflation drops amid the delay in regulated tariff hikes to 1 July The CBR will likely wait until after the 4 March presidentialelections before resuming rate cuts

Barclays Capital | The Emerging Markets Weekly

26 January 2012 29

DATA REVIEW amp PREVIEW LATIN AMERICA Alejandro Arreaza Alejandro Grisanti Bruno Rovai Guilherme Loureiro Marcelo Salomon Sebastian Vargas

Review of the weekrsquos data releases

Main indicators Period Previous BarCap Actual Comments

Brazil IPCA-15 inflation mm Jan 056 055 065 The surprise was in large part driven by a higher-than-expected increase in transportation costs (air and bus fares)

Brazil Current account USD bn Dec -68 -50 -60 The CA deficit reached USD526 bn (21 of GDP) but financing was not an issue as FDI reached USD666bn

Mexico Econ activity index yy Nov 37 40 375 Growing at a moderate pace at the margin (02 mm sa) on track for a sharp deceleration in Q4 GDP to 06 qq saar

Mexico Bi-weekly CPI 2w2w Jan 051 043 032 Lower-than-expected perishable inflation marked the January CPI release

Mexico Bi-weekly CPI core 2w2w Jan 035 026 020 A 115 2w2w drop in airfares helped contain core services inflation

Mexico Trade balance USD mn Dec -232 - 08 Exports and imports are moving further down (81 and 74 respectively)

Colombia Trade balance USD mn Nov 103 - 711 High oil prices compensate for strong increase in imports demand

Brazil COPOM meeting minutes Jan - - - Very dovish minutes with the BCB giving guidance that the Selic rate should fall to single-digit levels

Brazil Unemployment rate Dec 52 50 47 In seasonally adjusted terms the unemployment rate was flat at 56

Mexico Retail sales yy Nov 30 36 75 Strong gain of 22 mm sa probably reflecting the introduction of a local version of Black Friday in November

Preview of the week ahead

Monday 30 January Period Prev 2 Prev 1 Latest Forecast Consensus

- Brazil Central government budget BRL bn Dec 54 112 46 - -

- Colombia Overnight lending rate Jan 450 475 475 475 475

500 Brazil IGP-M inflation mm Jan 053 050 -012 030 030

700 Chile Industrial production yy Dec 52 -08 20 02 10

700 Chile Retail sales yy Dec 96 86 85 80 79

1530 Mexico Budget balance MXN bn Dec YTD -1790 -17939 -2131 - -

Colombia overnight lending rate With still moderate inflation we expected Banrep to remain on hold at its meeting this monthHowever the persistence of fast growth that is expected to offset the uncertainty coming from the European sovereign debtcrisis and the slowdown of the global economy will likely drive it to reassume its tightening cycle before the end of Q1

Chile industrial production and retail sales At the margin we expect industrial production to drop 02 mm sa leaving growth for Q4 11 at -23 3m3m saar This shows that global developments continue to take their toll in the Chilean economyRetail sales are still benefiting from tight labor market conditions but we expect them to soften gradually

Tuesday 31 January Period Prev 2 Prev 1 Latest Forecast Consensus

600 Brazil Industrial production yy Dec -16 -22 -25 01 -08

700 Chile Unemployment rate Dec 74 72 71 71 71

730 Brazil Primary budget balance BRL bn Dec 81 139 82 - -

1100 Colombia Unemployment rate Dec 102 102 103 - 104

Brazil industrial production Our forecast is consistent with a strong 14 mm sa print at the margin pushed mainly by theevolution of the auto sector (+94 mm sa) The December IBC-Br should also benefit from this gain leaving a high GDP carry-over for Q1 12

Chile unemployment rate We expect some deterioration of the unemployment rate in seasonally adjusted terms to 75 from73 The labor market data flow is already showing signs of contagion from global developments

Barclays Capital | The Emerging Markets Weekly

26 January 2012 30

Wednesday 01 February Period Prev 2 Prev 1 Latest Forecast Consensus

- Peru CPI mm Jan 031 043 027 041 -

- Peru WPI mm Jan 021 042 003 - -

1000 Mexico Remittances USD mn Dec 20847 19115 17736 - -

1200 Brazil Trade balance USD mn Jan 2355 582 3817 -1800 -

Brazil trade balance The contraction in the trade balance in January should be led by weak exports of iron ore We expectexports to increase only 16 yy while imports are likely to grow 169 yy

Thursday 02 February Period Prev 2 Prev 1 Latest Forecast Consensus

1100 Uruguay CPI mm Jan 070 040 070 - -

Friday 03 February Period Prev 2 Prev 1 Latest Forecast Consensus

900 Mexico Consumer confidence index Jan 906 895 908 - -

1100 Uruguay Unemployment rate Dec 60 57 55 - -

1600 Colombia PPI inflation mm Jan 09 01 01 - -

Week 30-04 February Period Prev 2 Prev 1 Latest Forecast Consensus

- Argentina Govern tax revenue ARS bn Jan 476 473 489 - -

1900 Colombia CPI inflation mm Jan 019 014 042 084 076

Colombia CPI inflation Considering a seasonal increase in food prices and an acceleration of core prices we expect a fastincrease in prices in January with an inflation rate of 084

Barclays Capital | The Emerging Markets Weekly

26 January 2012 31

FX FORECASTS AND FORWARDS

FX forecasts Forecast vs outright forward

Spot 1m 3m 6m 1y 1m 3m 6m 1y

G7 countries

EUR 131 135 130 125 120 30 -08 -47 -86

JPY 774 750 750 780 800 -31 -31 09 39

GBP 157 157 155 152 150 01 -11 -29 -40

CHF 092 092 096 104 108 -01 44 133 181

CAD 100 103 105 105 102 28 46 44 10

AUD 106 097 098 101 102 -83 -68 -30 -04

NZD 082 077 079 082 083 -58 -29 14 39

Emerging Asia

CNY 631 628 624 617 608 -03 -07 -17 -31

HKD 776 778 778 778 778 02 02 03 03

INR 5011 5000 5000 4900 4800 -06 -20 -54 -94

IDR 8979 8850 8800 8800 8500 -12 -21 -29 -83

KRW 1122 1100 1075 1050 1025 -21 -47 -74 -100

MYR 304 302 300 295 284 -08 -18 -37 -79

PHP 4289 4260 4220 4250 4200 -08 -19 -14 -28

SGD 126 124 123 123 122 -17 -25 -24 -29

THB 3138 3100 3060 2975 2850 -20 -35 -67 -112

TWD 2986 2970 2950 2875 2750 -07 -09 -30 -66

Latin America

ARS 434 435 445 460 540 -06 -09 -12 64

BRL 175 174 173 174 170 -10 -28 -38 -87

CLP 487 485 480 475 475 -07 -23 -40 -54

MXN 1298 1285 1270 1265 1260 -13 -29 -41 -60

COP 1811 1795 1780 1775 1770 -10 -21 -31 -44

PEN 269 268 267 266 264 -04 -12 -19 -34

EEMEA

EURCZK 2514 2550 2575 2550 2525 14 24 14 04

EURHUF 295 310 315 310 300 48 58 30 -23

EURPLN 424 430 450 440 435 12 52 20 -08

EURRON 434 436 445 440 435 02 19 00 -38

USDRUB 3023 3030 3000 3000 3050 -06 -24 -36 -45

BSKRUB 3452 3507 3405 3338 3325 10 -28 -60 -88

USDTRY 179 182 185 182 180 07 11 -24 -68

USDZAR 782 815 820 780 770 38 35 -28 -65

USDILS 376 375 370 365 360 -03 -18 -34 -50

USDEGP 604 600 620 650 700 -29 -44 -19 25

USDUAH 804 803 810 815 820 -15 -36 -71 -162

Source Barclays Capital

Barclays Capital | The Emerging Markets Weekly

26 January 2012 32

OFFICIAL INTEREST RATES

Start of cycle Forecasts as at end of

Official rate Current Date Level Last move Next move expected Q1 12 Q2 12 Q3 12 Q4 12

per annum (unless stated)

Advanced

Fed funds rate 0-025 Easing 17 Sep 07 525 Dec 08 (-75-100) Beyond 2013 0-025 0-025 0-025 0-025

BoJ overnight rate 010 Easing 30 Oct 08 050 Oct 10 (0-10) Q1 14 (+20) 0-010 0-010 0-010 0-010

ECB repo rate 100 Easing 03 Nov 11 150 Dec 11 (-25) Mar 12 (-50) 050 050 050 050

Emerging Asia

China Working capital rate 656 Tightening 19 Oct 10 531 Jul 11 (+25) Beyond Q4 12 656 656 656 656

Hong Kong Base rate 050 Easing 19 Sep 07 675 Dec 08 (-100) Beyond Q4 12 050 050 050 050

India Repo rate 850 Tightening 19 Mar 10 475 Oct 11 (+25) Q2 12 (-25) 850 825 800 775

Indonesia ON policy rate 600 Easing 11 Oct 11 675 Nov 11 (-50) Beyond Q4 12 600 600 600 600

Korea Base rate 325 Tightening 9 Jul 10 225 Jun 11(+25) Beyond Q4 12 325 325 325 325

Sri Lanka Reverse repo 850 Easing 20 Feb 09 1200 Jan 11 (-50) Q2 12 (-50) 850 800 800 800

Malaysia ON policy rate 300 Tightening 4 Mar 10 200 May 11 (+25) Beyond Q4 12 300 300 300 300

Philippines ON lending 425 Easing 19 Jan 12 450 Jan 12 (-25) Q2 12 (-25) 425 400 400 400

Taiwan Rediscount rate 1875 Tightening 24 Jun 10 1375 Jun 11 (+125) Beyond Q4 12 1875 1875 1875 1875

Thailand ON repo rate 300 Easing 30 Nov 11 350 Jan 12 (-25) Q3 12 (+25) 300 300 325 350

Vietnam Reverse repo rate 1400 Easing Jul 11 1500 Jul 11 (-100) Q1 12 (-200) 1200 1100 1000 1000

Emerging Europe Middle East amp Africa

Czech Republic 2w repo rate 075 Easing 8 Aug 08 375 Apr 10 (-25) Beyond Q4 12 075 075 075 075

Hungary 2w deposit rate 700 Tightening 29 Nov 10 525 Dec 11 (+50) Q2 12 (+25) 700 725 725 725

Poland 2w repo rate 450 Tightening 19 Jan 11 350 Jun 11 (+25) Mar 12 (-25) 425 375 375 375

Romania Key policy rate 575 Easing 4 Feb 08 1025 Jan 12 (-25) Feb 12 (-25) 525 500 500 500

Russia Refi rate 800 Easing 23 Dec 11 825 Dec 11 (-25) Mar 12 (-25) 775 750 750 750

South Africa Repo rate 550 Easing 11 Dec 08 1200 Nov 10 (-50) Nov 12 (+50) 550 550 550 600

Turkey 1wk repo rate 575 Easing 20 Nov 08 1675 Aug 11 (-50) Beyond Q4 12 575 575 575 575

Egypt Deposit rate 925 Tightening 24 Nov 11 825 Nov 11 (+100) Feb 12 (+100) 1125 1125 1125 1125

Israel Discount rate 250 Easing 26 Sep 11 325 Jan 12 (-25) Q2 12 (-25) 250 225 225 225

Latin America

Brazil SELIC rate 1050 Easing 31 Aug 11 1250 Jan 12 (-50) Mar 12 (-50) 1000 950 950 950

Chile Monetary policy rate 500 Easing 12 January 12 525 Jan 12 (-25) Feb 12 (-25) 450 425 425 425

Colombia Repo rate 475 Tightening 25 Feb 11 300 Nov 11 (+25) Mar 12 (+25) 500 550 550 550

Mexico Overnight rate 450 Easing 16 Jan 09 825 Jul 09 (-25) Q1 12 (-25) 425 400 400 400

Peru Reference rate 425 Tightening 6 May 10 125 May 11 (+25) Beyond 2012 425 425 425 425

Note Changes denoted in bold Source Barclays Capital

Barclays Capital | The Emerging Markets Weekly

26 January 2012 33

EMERGING MARKETS RESEARCH Piero Ghezzi Head of Global Economics Emerging Markets and FX Research +44 (0)20 3134 2190 pieroghezzibarcapcom

EM Global Michael Gavin Head of Global Macro Strategy and Head of EM Strategy +1 212 412 5915 michaelgavinbarcapcom

Alanna Gregory EM Strategist +1 212 412 5938 alannagregorybarcapcom

Latin America Alejandro Arreaza Economist ndash Latin America +1 212 412 3021 alejandroarreazabarcapcom

Sebastian Brown StrategistEconomist +1 212 412 6721 sebastianbrownbarcapcom

Alejandro Grisanti Chief Economist ndash Latin America Ex-Brazil Mexico +1 212 412 5982 alejandrogrisantibarcapcom

Donato Guarino Senior Strategist +1 212 412 5564 donatoguarinobarcapcom

Guilherme Loureiro Economist ndash Brazil +55 11 3757 7372 guilhermeloureirobarcapcom

Roberto Melzi Senior Strategist +1 212 412 5963 robertomelzibarcapcom

Bruno Rovai Economist +55 11 3757 7392 brunorovaibarcapcom

Marcelo Salomon Chief Economist ndash Brazil Chile Mexico+1 212 412 5717 marcelosalomonbarcapcom

Sebastian Vargas Economist - Argentina Uruguay +1 212 412 6823 sebastianvargasbarcapcom

Asia Pacific Jon Scoffin Head of Credit Research and Head of Research Asia-Pacific +65 6308 3217 jonscoffinbarcapcom

Rohit Arora FI Strategist Emerging Asia +65 6308 2092 rohitarora3barcapcom

Rahul Bajoria Regional Economist ndash India Malaysia Thailand +65 6308 3511 rahulbajoriabarcapcom

Jian Chang Regional Economist ndash China Hong Kong+852 2903 2654 jianchangbarcapcom

Joey Chew Regional Economist - Singapore +65 6308 3211 joeychewbarcapcom

Olivier Desbarres Head of FX Strategy Asia-Pacific ex-Japan +65 6308 2073 olivierdesbarresbarcapcom

Yiping Huang Chief Economist Emerging Asia +852 2903 3291 yipinghuangbarcapcom

Wai Ho Leong Senior Regional Economist ndash Korea Malaysia Singapore Taiwan +65 6308 3292 waiholeongbarcapcom

Hamish Pepper FX Strategist Asia-Pacific ex-Japan +65 6308 2220 hamishpepperbarcapcom

Kumar Rachapudi FI Strategist Emerging Asia +65 6308 3383 kumarrachapudibarcapcom

Siddhartha Sanyal Chief Economist India +91 22 6719 6177 siddharthasanyalbarcapcom

Prakriti Sofat Regional Economist ndash Indonesia Philippines Sri Lanka Vietnam +65 6308 3201 prakritisofatbarcapcom

Nick Verdi FX Strategist Asia-Pacific ex-Japan +65 6308 3093 nickverdibarcapcom

Ju Wang FI Strategist Emerging Asia +65 6308 2801 juwangbarcapcom

Lingxiu (Steven) Yang Regional Economist ndash China Hong Kong +852 2903 2653 lingxiuyangbarcapcom

Krishna Hegde CFA Asia Credit Strategist and Senior Financial Institutions +65 6308 2979 krishnahegdebarcapcom

Avanti Save Credit Strategy +65 6308 3116 avantisavebarcapcom

Emerging EMEA Christian Keller Head of Emerging EMEA Research +44 (0)20 7773 2031 christiankellerbarcapcom

Koon Chow Head of Emerging EMEA Strategy +44 (0)20 777 37572 koonchowbarcapcom

Jeff Gable Head of ABSA Capital Research +27 11 895 5368 jeffgableabsacapitalcom

Gina Schoeman Economist ndash South Africa +27 (0)11 895 5403 ginaschoemanabsacapitalcom

Daniel Hewitt Senior Emerging EMEA Economist +44 (0)20 3134 3522 danielhewittbarcapcom

Piotr Chwiejczak Rates Strategist +44 (0)20 3134 4606 piotrchwiejczak barcapcom

Ridle Markus Economist ndash Sub-Saharan Africa +27 11 895 5374 ridlemarkusabsacapitalcom

Fahad Al Turki Economist ndash Saudi Arabia +966 1880 6577 fahadalturkibarcapcom

Vladimir Pantyushin Chief Economist ndash Russia and CIS +7 495 7868450 vladimirpantyushinbarcapcom

Andreas Kolbe Credit Strategist +44 (0)20 313 43134 andreaskolbebarcapcom

Jeffrey Schultz Economist ndash South Africa +27 (0)11 895 5349 jeffreyschultzabsacapitalcom

Eldar Vakhitov Emerging EMEA Economist +44 (0)20 777 32192 eldarvakhitovbarcapcom

Alia Moubayed Senior Economist ndash Middle East amp North Africa +44 (0)20 313 41120 aliamoubayedbarcapcom

Dumisani Ngwenya Strategist ndash Africa +27 (0)11 895 5346 dumisaningwenyaabsacapitalcom

Michael Keenan Sub-Saharan FX and Rates Strategist +27 (0) 11 895 5513 mikekeenanabsacapitalcom

EM Corporate Credit Juan C Cruz Head of Latin America amp EEMEA Corporate Credit Research +1 212 412 3424 juancruzbarcapcom

Christopher Buck +1 212 412 3418 christopherbuckbarcapcom

Stella Cridge +44 (0)20 313 49618 stellacridgebarcapcom

Miguel Crivelli +1 212 412 5231 miguelcrivellibarcapcom

Ivan Fernandes +1 212 412 3428 ivanfernandesbarcapcom

Autumn Graham +1 212 412 2839 autumngrahambarcapcom

Milena Ianeva +44 (0)20 7773 8536 milenaianevabarcapcom

Stanislav Ponomarenko +7 495 786 8451 stanislavponomarenkobarcapcom

Aziz Sunderji +1 212 412 2218 azizsunderjibarcapcom

Antoine Yacoub + 44 207 7731727 antoineyacoubbarcapcom

Golib Zohidov +44 (0)20 777 31513 golibzohidovbarcapcom

Barclays Capital | The Emerging Markets Weekly

26 January 2012 23

EM LOCAL BOND PORTFOLIO

1252012 Weights Total Returns FX Unhedged () Bonds we recommend

Duration Yield to Worst Mkt val

Current Market Model

Past Week QTD YTD

3m Forecast Buying Selling

EM Local 452 593 1448857 10000 10000 163 -245 555 353

Latin America 390 837 388169 2845 3318 over 125 -108 961 424

Brazil 259 1033 195289 1558 2011 over 093 -190 988 430 Jan 17 NTNF Jan21 NTNF Global BRL Jan 22

Chile 414 437 5922 036 009 under 149 355 466 174 May 18 BCP

Colombia 444 642 63049 392 440 over 082 282 1640 561 Local TES Jul 24

Mexico 583 586 112994 784 848 over 218 -282 568 390 Jun 27 Nov 36 Nov 38

Peru 812 609 10915 074 010 under 029 1178 1205 061 May 15

EEMEA 432 653 424001 2908 2320 under 213 -1026 -361 055

Czech Republic 586 274 46202 304 000 under 281 -1026 229 -094 May 25s

Hungary 344 868 28452 222 101 under 672 -2207 -565 -080 13E 14D

Israel 439 348 45510 301 277 under 049 -384 004 -034 Sept 13s Feb 19s

Poland 418 501 96524 660 574 neutral 269 -1382 -425 -346 Apr 16s Oct 20s

Russia 422 756 64926 470 220 under 295 -699 483 568

South Africa 592 765 76846 515 720 over 007 -936 -963 216 R157s

Turkey 212 1006 65541 438 428 neutral 119 -791 -1018 150 Jan 16s Jan 21s

EM Asia 509 392 636687 4247 4361 neutral 154 195 899 509

India 683 835 8869 054 075 over 077 -586 -409 755 IGB GS 18 GS 15

Indonesia 727 596 62383 400 400 neutral 458 1495 2947 455 INDOGB Apr 17 (FR60)

Malaysia 484 328 83145 543 550 neutral 131 161 575 268 MGS Sep 18

Philippines 783 532 37731 257 244 neutral 047 1452 1901 486

South Korea 428 362 374713 2524 2642 over 135 -132 706 553 3-5y bonds

Thailand 615 323 69846 469 450 neutral 091 277 162 580 LB176A

Note Bolding indicates change in bias Source Barclays Capital

Barclays Capital | The Emerging Markets Weekly

26 January 2012 24

DATA REVIEW amp PREVIEW ASIA Rahul Bajoria Jian Chang

Review of last weekrsquos data releases

Main indicators Period Previous BarCap Actual Comments

India Repo rate () Jan 850 850 850 Elevated core inflation prevents cut in repo rate

India Cash reserve ratio () Jan 600 600 550 Policy gearing moving towards supporting growth

Singapore CPI ( yy) Dec 57 56 55 Core inflation expected to remain sticky in Singapore

Thailand BoT policy rate () ndash 325 300 300 We do not expect any further rate cuts from Bank of Thailand

Korea GDP ( yy) Q4 35 39 34 We see potential for upside revisions in the second estimate next month

Preview of week ahead

Monday 30 January Period Prev 2 Prev 1 Latest Forecast Consensus

0700 Korea Current account balance (USD bn) Dec 283 413 505 40

1000 Philippines GDP ( yy) Q4 46 31 32 38 37

1600 Taiwan Unemployment rate (sa) Dec 43 43 43 43 43

Korea We expect the current account surplus to narrow as year-end outbound travelling typically opens up a wide services trade deficit The goods trade balance on a customs basis was USD4bn in December

Philippines Growth is likely to remain soft given weak export performance and continued government under-spending However consumption should remain strong given holiday-related spending

Taiwan Employment in non-agricultural sectors started to decline in November with a slight increase in the number of workers on unpaid leave

Tuesday 31 January Period Prev 2 Prev 1 Latest Forecast Consensus

0700 Korea IP ( yy) Dec 69 63 56 40 61

1000 Singapore Unemployment rate () Q4 19 21 20 21

1600 Taiwan GDP ( yy) Q4 66 45 34 33 28

1800 Malaysia BNM policy rate ndash 300 300 300 300 300

Korea We expect manufacturing output to increase 17 mm sa in December which will more than offset the small declines in the previous two months Exports in December were unusually resilient

Singapore We expect net job creation to slow as suggested by various hiring surveys But restrictions on foreign workers will keep the labour market tight

Taiwan We expect investment to become a smaller drag on GDP in Q4 than in Q3 as suggested by the stabilisation in imports of capital goods Consumption is likely to remain robust supported in part by tourism and will mitigate weakness in the external sector We forecast a 05 qq sa expansion in Q4 GDP following a 01 contraction last quarter We expect 44 GDP growth for 2011

Malaysia With growth moderating only gradually our base case is for the policy rate to be unchanged in H1

Wednesday 1 February Period Prev 2 Prev 1 Latest Forecast Consensus

0700 Korea CPI ( yy) Jan 36 42 42 37 36

0900 Korea Exports ( yy) Jan 76 116 108 65

0900 China PMI Manufacturing Jan 504 490 503 495 496

1200 Indonesia CPI ( yy) Jan 44 42 38 39

1200 Indonesia CPI core ( yy) Jan 44 44 43 44

1200 Indonesia Exports ( yy) Dec 440 178 83 100

1200 Thailand CPI ( yy) Jan 42 42 35 34 33

1200 Thailand Core CPI ( yy) Jan 29 29 27 26 27

2130 Singapore Electronics PMI Jan 521 509 497 ndash 499

Barclays Capital | The Emerging Markets Weekly

26 January 2012 25

Korea Lunar New Year demand and electricity tariff hikes for businesses last December should keep the cost of food energy and services high Nonetheless inflation is expected to moderate on base effects We expect exports to rise 6 mm sa extending Decemberrsquos 84 increase due to last-minute festive shipments in the early part of the month Lunar New Year holidays should exert a dampening effect on trade and manufacturing data in January and we expect a temporary trade deficit in January given high energy imports

China We look for a post-Chinese New Year mm decline and expect the PMI to hover around 50 in Q1

Indonesia Inflation to remain contained at 39 however we should see a mm pick-up driven by food prices and health costs We expect inflation to rise gradually in 2012 and end the year at 53 core inflation is likely to hold steady at about 44 We look for soft export growth given the uncertain external environment

Thailand Higher fuel prices coupled with a seasonal uptick in food prices should translate into only a modest decline in inflation

Friday 3 February Period Prev 2 Prev 1 Latest Forecast Consensus

0900 China Non-manufacturing PMI Jan 577 497 560 ndash

Barclays Capital | The Emerging Markets Weekly

26 January 2012 26

DATA REVIEW amp PREVIEW EMERGING EUROPE MIDDLE EAST AND AFRICA Eldar Vakhitov Daniel Hewitt Christian Keller Vladimir Pantyushin Jeffrey Schultz Alia Moubayed Piotr Chwiejczak

Review of last weekrsquos data releases

Main indicators Period Previous Barclays Actual Comments

Israel Base rate announcement () Jan 275 250 250 Rate cut due to rapid deceleration of inflation

Turkey Benchmark repo rate () Jan 575 575 575 Rate on hold but revisions in FX auction more ad hoc

Hungary Base rate announcement () Jan 700 725 700 Rates on hold because of HUF strength and high real rate

Israel Unemployment rate () Nov 54 - 54 Unemployment rate remains low but could rise later

Russia Industrial production ( yy) Dec 39 - 25 Expected slowing in line with the global trend

Hungary Retail trade ( yy) Nov 06 - 11 Apparent slight improvement in domestic demand

Turkey Industrial confidence index Jan 972 - 1018 Turkish economy rolling buoyed by domestic demand

Turkey Capacity utilization () Jan 755 - 747 Second consecutive monthly decline still a high level

South Africa PPI ( yy) Dec 101 99 98 Lower on the back of softer commodity prices food prices however continue to gain momentum

Russia Disposable income ( yy) Dec 02 - 63 Consistent growth underpins consumer sector expansion

Russia Real wages ( yy) Dec 71 - 49 Consistent growth underpins consumer sector expansion

Russia Retail sales real ( yy) Dec 86 - 95 Consumer sector outperforms yet again

Russia Unemployment rate () Dec 63 - 61 A welcome decline adding power to consumer demand

Russia Investment in productive capacity ( yy) Dec 77 - 89 Strong investment provides support to mid-term growth

Preview of week ahead

Friday 27 January Period Prev 2 Prev 1 Latest Forecast Consensus

0900 Poland Real GDP growth () 2011 51 17 38 41 42

0900 Poland Unemployment rate () Dec 118 118 121 125 125

0900 Poland Retail sales ( yy) Dec 114 112 126 110 100

1000 Croatia Industrial output ( yy) Dec -23 06 -03 - -

Poland Growth print is likely to be strong again despite softening PMIs ldquohardrdquo data remained strong in Q4 11 therefore a positivesurprise is possible however in Q1 12 we expect growth to slow down gradually Government officials have already hinted thatunemployment in December has increased driven by seasonal factors and cyclical elements as well as overall weakening demand

Croatia Despite the oil refinery fire no longer weighing on IP we still expect only marginally positive growth in December

Monday 30 January Period Prev 2 Prev 1 Latest Forecast Consensus

0900 Lithuania Real GDP ( yy) Q4 P 59 65 67 - -

Poland Budget level YTD (PLN bn) Dec -219 -225 -216 -223 -

Serbia Real GDP ( yy) Q4 P 37 25 05 02 -

Ukraine Current account (USD bn) Q4 -13 -17 -27 - -

Ukraine GDP constant prices ( yy) Q4 P 53 38 66 40 -

Lithuania Lithuania (together with Serbia) will be among the first CEE country to report Q4 GDP growth and it will be interestingto see to what extent the weaker external demand environment will be reflected in Lithuaniarsquos Q4 GDP print After the verystrong growth in 2011 of likely close to 6 yy (annual) we expect it to slow to 25 in 2012 ndash still a comparatively robust number in the regional context however

Poland Overall we expect the central budget deficit gap to come in at around PLN22bn Stronger economic activity particularlystrong retail sales should contribute to tax income while spending has been kept under control Local government deficit mayalso come in below projected numbers

Serbia We expect growth to be only slightly positive as export growth declined considerably in Q4

Ukraine The economy has likely already entered a softer patch while the external account gap continues to widen

Barclays Capital | The Emerging Markets Weekly

26 January 2012 27

Tuesday 31 January Period Prev 2 Prev 1 Latest Forecast Consensus

0600 South Africa Private sector credit ( yy) Dec 54 55 62 58 -

0800 Hungary Unemployment rate () Dec 107 108 106 - 108

0800 Turkey Trade balance (USD bn) Dec -104 -80 -75 -85 -735

1200 South Africa Trade balance (rand bn) Dec 25 -96 -81 - -

Russia Annual real GDP (yy) 2011 52 -78 40 42 -

Serbia Industrial output ( yy) Dec -18 -10 22 - -

Serbia Retail trade ( yy) Dec -183 -162 -164 - -

South Africa Although we expect a moderation in headline PSCE growth consumer spending into the festive season throughother smaller unsecured components of household credit should see the mm growth in PSCE tick up further in December

Hungary We expect to see a slight weakening of domestic labour in Hungary

Turkey We look for a small mm widening of the trade deficit as signalled by stronger customs duties collections in December that implies a pick-up in imports

Russia The growth emphasis shifts to domestic drivers with investment and consumer demand performing well recently

Wednesday 1 February Period Prev 2 Prev 1 Latest Forecast Consensus

0500 Russia Manufacturing PMI Jan 504 526 516 - -

0800 Poland Manufacturing PMI Jan 517 495 488 - -

0800 Turkey Manufacturing PMI Jan 533 523 520 - -

0830 Czech Manufacturing PMI Jan 517 486 492 - -

0900 South Africa Kagiso PMI Jan 502 505 516 - -

Czech Budget balance (CZK bn) Jan -915 -1259 -1428 - -

Hungary PMI Jan 482 478 485 - -

Kazakhstan CPI ( yy) Jan 80 78 74 70 -

Romania International reserves (USD bn) Jan 363 360 373 - -

South Africa Unemployment () Q4 250 257 250 - -

Russia Despite recent slowing Russiarsquos IP performance remains well within positive territory Domestic demand sectors showimproving dynamics This will likely be reflected in manager expectations

Poland Amid a general U-turn in optimism in Europe Polish entrepreneurs are also likely to adopt a more positive approachwhich is likely to be reflected in the survey Also mild winter weather conditions should work in favour of a higher PMI Still weexpect slower industrial production in months to come

Turkey Domestic growth indicators that are still holding up well could be reflected in a stronger PMI reading

Czech Republic Further indications of recession likely with the PMI remaining below 50 in January

South Africa Still-significant global risks and uncertainty along with a still-struggling domestic manufacturing sector are likely to leave the PMI hovering around its neutral level of 50 in January

Hungary Growth indicators have been mixed indicating a modest recession is in process

Kazakhstan We expect disinflation to continue running its course

Romania Stable currency markets have made it possible for the NBR to limit FX intervention helping it maintain its extremelyhigh levels of reserves

Thursday 2 February Period Prev 2 Prev 1 Latest Forecast Consensus

0800 Romania Retail sales ( yy) Dec -52 20 19 - -

1000 South Africa Naamsa vehicle sales ( yy) Jan 189 117 110 - -

1200 Czech Repo rate announcement () Feb 075 075 075 075 075

Romania Interest rate announcement () Feb 625 600 575 550 550

Egypt Deposit rate () Feb 825 825 925 1025 -

Barclays Capital | The Emerging Markets Weekly

26 January 2012 28

Romania The NBR is in the middle of a rate cutting cycle Having reduced rates in each of the past two meetings by 25bp we expect another 25bp reduction to 550 Moreover we expect two more rate cuts in the next two meetings bringing the rate to 50

South Africa Vehicle sales growth should continue to reflect the relatively positive consumer dynamics in the economy providedby low interest rates and high nominal incomes

Czech Republic The CNB is on hold On one hand it will not raise rates even though inflation (adjusted for taxes) is in the middleof the 1-3 target range because the economy is very weak On the other it will not lower rates because at 075 it is at a record low and a rate decrease is unlikely to spur increased lending

Egypt Mounting inflationary pressure and a weakening currency may push the CBE to continue raising rates

Friday 3 February Period Prev 2 Prev 1 Latest Forecast Consensus

0800 Czech Retail sales ( yy) Dec 00 15 05 - -

0800 Turkey CPI ( yy) Jan 77 95 105 1065 1045

1000 Croatia Retail trade real ( yy) Dec P 10 18 10 - -

Kazakhstan International reserves (USD bn) Jan 326 322 293 285 -

Russia CPI ( yy) Jan 72 68 61 43 -

Russia Overnight deposit rate () Feb 375 375 400 400 -

Russia Refinancing rate () Feb 825 825 800 800 -

Czech Republic Domestic demand remains muted

Turkey The trade weighted fall in the lira last year still has some room to pass through to headline CPI as capacity utilisationrates in the country remain high There are some signs of a slowdown but companies in Turkey are probably still able to pass onthe bulk of their cost increases

Kazakhstan The NBK continues to defend the currency

Russia Inflation drops amid the delay in regulated tariff hikes to 1 July The CBR will likely wait until after the 4 March presidentialelections before resuming rate cuts

Barclays Capital | The Emerging Markets Weekly

26 January 2012 29

DATA REVIEW amp PREVIEW LATIN AMERICA Alejandro Arreaza Alejandro Grisanti Bruno Rovai Guilherme Loureiro Marcelo Salomon Sebastian Vargas

Review of the weekrsquos data releases

Main indicators Period Previous BarCap Actual Comments

Brazil IPCA-15 inflation mm Jan 056 055 065 The surprise was in large part driven by a higher-than-expected increase in transportation costs (air and bus fares)

Brazil Current account USD bn Dec -68 -50 -60 The CA deficit reached USD526 bn (21 of GDP) but financing was not an issue as FDI reached USD666bn

Mexico Econ activity index yy Nov 37 40 375 Growing at a moderate pace at the margin (02 mm sa) on track for a sharp deceleration in Q4 GDP to 06 qq saar

Mexico Bi-weekly CPI 2w2w Jan 051 043 032 Lower-than-expected perishable inflation marked the January CPI release

Mexico Bi-weekly CPI core 2w2w Jan 035 026 020 A 115 2w2w drop in airfares helped contain core services inflation

Mexico Trade balance USD mn Dec -232 - 08 Exports and imports are moving further down (81 and 74 respectively)

Colombia Trade balance USD mn Nov 103 - 711 High oil prices compensate for strong increase in imports demand

Brazil COPOM meeting minutes Jan - - - Very dovish minutes with the BCB giving guidance that the Selic rate should fall to single-digit levels

Brazil Unemployment rate Dec 52 50 47 In seasonally adjusted terms the unemployment rate was flat at 56

Mexico Retail sales yy Nov 30 36 75 Strong gain of 22 mm sa probably reflecting the introduction of a local version of Black Friday in November

Preview of the week ahead

Monday 30 January Period Prev 2 Prev 1 Latest Forecast Consensus

- Brazil Central government budget BRL bn Dec 54 112 46 - -

- Colombia Overnight lending rate Jan 450 475 475 475 475

500 Brazil IGP-M inflation mm Jan 053 050 -012 030 030

700 Chile Industrial production yy Dec 52 -08 20 02 10

700 Chile Retail sales yy Dec 96 86 85 80 79

1530 Mexico Budget balance MXN bn Dec YTD -1790 -17939 -2131 - -

Colombia overnight lending rate With still moderate inflation we expected Banrep to remain on hold at its meeting this monthHowever the persistence of fast growth that is expected to offset the uncertainty coming from the European sovereign debtcrisis and the slowdown of the global economy will likely drive it to reassume its tightening cycle before the end of Q1

Chile industrial production and retail sales At the margin we expect industrial production to drop 02 mm sa leaving growth for Q4 11 at -23 3m3m saar This shows that global developments continue to take their toll in the Chilean economyRetail sales are still benefiting from tight labor market conditions but we expect them to soften gradually

Tuesday 31 January Period Prev 2 Prev 1 Latest Forecast Consensus

600 Brazil Industrial production yy Dec -16 -22 -25 01 -08

700 Chile Unemployment rate Dec 74 72 71 71 71

730 Brazil Primary budget balance BRL bn Dec 81 139 82 - -

1100 Colombia Unemployment rate Dec 102 102 103 - 104

Brazil industrial production Our forecast is consistent with a strong 14 mm sa print at the margin pushed mainly by theevolution of the auto sector (+94 mm sa) The December IBC-Br should also benefit from this gain leaving a high GDP carry-over for Q1 12

Chile unemployment rate We expect some deterioration of the unemployment rate in seasonally adjusted terms to 75 from73 The labor market data flow is already showing signs of contagion from global developments

Barclays Capital | The Emerging Markets Weekly

26 January 2012 30

Wednesday 01 February Period Prev 2 Prev 1 Latest Forecast Consensus

- Peru CPI mm Jan 031 043 027 041 -

- Peru WPI mm Jan 021 042 003 - -

1000 Mexico Remittances USD mn Dec 20847 19115 17736 - -

1200 Brazil Trade balance USD mn Jan 2355 582 3817 -1800 -

Brazil trade balance The contraction in the trade balance in January should be led by weak exports of iron ore We expectexports to increase only 16 yy while imports are likely to grow 169 yy

Thursday 02 February Period Prev 2 Prev 1 Latest Forecast Consensus

1100 Uruguay CPI mm Jan 070 040 070 - -

Friday 03 February Period Prev 2 Prev 1 Latest Forecast Consensus

900 Mexico Consumer confidence index Jan 906 895 908 - -

1100 Uruguay Unemployment rate Dec 60 57 55 - -

1600 Colombia PPI inflation mm Jan 09 01 01 - -

Week 30-04 February Period Prev 2 Prev 1 Latest Forecast Consensus

- Argentina Govern tax revenue ARS bn Jan 476 473 489 - -

1900 Colombia CPI inflation mm Jan 019 014 042 084 076

Colombia CPI inflation Considering a seasonal increase in food prices and an acceleration of core prices we expect a fastincrease in prices in January with an inflation rate of 084

Barclays Capital | The Emerging Markets Weekly

26 January 2012 31

FX FORECASTS AND FORWARDS

FX forecasts Forecast vs outright forward

Spot 1m 3m 6m 1y 1m 3m 6m 1y

G7 countries

EUR 131 135 130 125 120 30 -08 -47 -86

JPY 774 750 750 780 800 -31 -31 09 39

GBP 157 157 155 152 150 01 -11 -29 -40

CHF 092 092 096 104 108 -01 44 133 181

CAD 100 103 105 105 102 28 46 44 10

AUD 106 097 098 101 102 -83 -68 -30 -04

NZD 082 077 079 082 083 -58 -29 14 39

Emerging Asia

CNY 631 628 624 617 608 -03 -07 -17 -31

HKD 776 778 778 778 778 02 02 03 03

INR 5011 5000 5000 4900 4800 -06 -20 -54 -94

IDR 8979 8850 8800 8800 8500 -12 -21 -29 -83

KRW 1122 1100 1075 1050 1025 -21 -47 -74 -100

MYR 304 302 300 295 284 -08 -18 -37 -79

PHP 4289 4260 4220 4250 4200 -08 -19 -14 -28

SGD 126 124 123 123 122 -17 -25 -24 -29

THB 3138 3100 3060 2975 2850 -20 -35 -67 -112

TWD 2986 2970 2950 2875 2750 -07 -09 -30 -66

Latin America

ARS 434 435 445 460 540 -06 -09 -12 64

BRL 175 174 173 174 170 -10 -28 -38 -87

CLP 487 485 480 475 475 -07 -23 -40 -54

MXN 1298 1285 1270 1265 1260 -13 -29 -41 -60

COP 1811 1795 1780 1775 1770 -10 -21 -31 -44

PEN 269 268 267 266 264 -04 -12 -19 -34

EEMEA

EURCZK 2514 2550 2575 2550 2525 14 24 14 04

EURHUF 295 310 315 310 300 48 58 30 -23

EURPLN 424 430 450 440 435 12 52 20 -08

EURRON 434 436 445 440 435 02 19 00 -38

USDRUB 3023 3030 3000 3000 3050 -06 -24 -36 -45

BSKRUB 3452 3507 3405 3338 3325 10 -28 -60 -88

USDTRY 179 182 185 182 180 07 11 -24 -68

USDZAR 782 815 820 780 770 38 35 -28 -65

USDILS 376 375 370 365 360 -03 -18 -34 -50

USDEGP 604 600 620 650 700 -29 -44 -19 25

USDUAH 804 803 810 815 820 -15 -36 -71 -162

Source Barclays Capital

Barclays Capital | The Emerging Markets Weekly

26 January 2012 32

OFFICIAL INTEREST RATES

Start of cycle Forecasts as at end of

Official rate Current Date Level Last move Next move expected Q1 12 Q2 12 Q3 12 Q4 12

per annum (unless stated)

Advanced

Fed funds rate 0-025 Easing 17 Sep 07 525 Dec 08 (-75-100) Beyond 2013 0-025 0-025 0-025 0-025

BoJ overnight rate 010 Easing 30 Oct 08 050 Oct 10 (0-10) Q1 14 (+20) 0-010 0-010 0-010 0-010

ECB repo rate 100 Easing 03 Nov 11 150 Dec 11 (-25) Mar 12 (-50) 050 050 050 050

Emerging Asia

China Working capital rate 656 Tightening 19 Oct 10 531 Jul 11 (+25) Beyond Q4 12 656 656 656 656

Hong Kong Base rate 050 Easing 19 Sep 07 675 Dec 08 (-100) Beyond Q4 12 050 050 050 050

India Repo rate 850 Tightening 19 Mar 10 475 Oct 11 (+25) Q2 12 (-25) 850 825 800 775

Indonesia ON policy rate 600 Easing 11 Oct 11 675 Nov 11 (-50) Beyond Q4 12 600 600 600 600

Korea Base rate 325 Tightening 9 Jul 10 225 Jun 11(+25) Beyond Q4 12 325 325 325 325

Sri Lanka Reverse repo 850 Easing 20 Feb 09 1200 Jan 11 (-50) Q2 12 (-50) 850 800 800 800

Malaysia ON policy rate 300 Tightening 4 Mar 10 200 May 11 (+25) Beyond Q4 12 300 300 300 300

Philippines ON lending 425 Easing 19 Jan 12 450 Jan 12 (-25) Q2 12 (-25) 425 400 400 400

Taiwan Rediscount rate 1875 Tightening 24 Jun 10 1375 Jun 11 (+125) Beyond Q4 12 1875 1875 1875 1875

Thailand ON repo rate 300 Easing 30 Nov 11 350 Jan 12 (-25) Q3 12 (+25) 300 300 325 350

Vietnam Reverse repo rate 1400 Easing Jul 11 1500 Jul 11 (-100) Q1 12 (-200) 1200 1100 1000 1000

Emerging Europe Middle East amp Africa

Czech Republic 2w repo rate 075 Easing 8 Aug 08 375 Apr 10 (-25) Beyond Q4 12 075 075 075 075

Hungary 2w deposit rate 700 Tightening 29 Nov 10 525 Dec 11 (+50) Q2 12 (+25) 700 725 725 725

Poland 2w repo rate 450 Tightening 19 Jan 11 350 Jun 11 (+25) Mar 12 (-25) 425 375 375 375

Romania Key policy rate 575 Easing 4 Feb 08 1025 Jan 12 (-25) Feb 12 (-25) 525 500 500 500

Russia Refi rate 800 Easing 23 Dec 11 825 Dec 11 (-25) Mar 12 (-25) 775 750 750 750

South Africa Repo rate 550 Easing 11 Dec 08 1200 Nov 10 (-50) Nov 12 (+50) 550 550 550 600

Turkey 1wk repo rate 575 Easing 20 Nov 08 1675 Aug 11 (-50) Beyond Q4 12 575 575 575 575

Egypt Deposit rate 925 Tightening 24 Nov 11 825 Nov 11 (+100) Feb 12 (+100) 1125 1125 1125 1125

Israel Discount rate 250 Easing 26 Sep 11 325 Jan 12 (-25) Q2 12 (-25) 250 225 225 225

Latin America

Brazil SELIC rate 1050 Easing 31 Aug 11 1250 Jan 12 (-50) Mar 12 (-50) 1000 950 950 950

Chile Monetary policy rate 500 Easing 12 January 12 525 Jan 12 (-25) Feb 12 (-25) 450 425 425 425

Colombia Repo rate 475 Tightening 25 Feb 11 300 Nov 11 (+25) Mar 12 (+25) 500 550 550 550

Mexico Overnight rate 450 Easing 16 Jan 09 825 Jul 09 (-25) Q1 12 (-25) 425 400 400 400

Peru Reference rate 425 Tightening 6 May 10 125 May 11 (+25) Beyond 2012 425 425 425 425

Note Changes denoted in bold Source Barclays Capital

Barclays Capital | The Emerging Markets Weekly

26 January 2012 33

EMERGING MARKETS RESEARCH Piero Ghezzi Head of Global Economics Emerging Markets and FX Research +44 (0)20 3134 2190 pieroghezzibarcapcom

EM Global Michael Gavin Head of Global Macro Strategy and Head of EM Strategy +1 212 412 5915 michaelgavinbarcapcom

Alanna Gregory EM Strategist +1 212 412 5938 alannagregorybarcapcom

Latin America Alejandro Arreaza Economist ndash Latin America +1 212 412 3021 alejandroarreazabarcapcom

Sebastian Brown StrategistEconomist +1 212 412 6721 sebastianbrownbarcapcom

Alejandro Grisanti Chief Economist ndash Latin America Ex-Brazil Mexico +1 212 412 5982 alejandrogrisantibarcapcom

Donato Guarino Senior Strategist +1 212 412 5564 donatoguarinobarcapcom

Guilherme Loureiro Economist ndash Brazil +55 11 3757 7372 guilhermeloureirobarcapcom

Roberto Melzi Senior Strategist +1 212 412 5963 robertomelzibarcapcom

Bruno Rovai Economist +55 11 3757 7392 brunorovaibarcapcom

Marcelo Salomon Chief Economist ndash Brazil Chile Mexico+1 212 412 5717 marcelosalomonbarcapcom

Sebastian Vargas Economist - Argentina Uruguay +1 212 412 6823 sebastianvargasbarcapcom

Asia Pacific Jon Scoffin Head of Credit Research and Head of Research Asia-Pacific +65 6308 3217 jonscoffinbarcapcom

Rohit Arora FI Strategist Emerging Asia +65 6308 2092 rohitarora3barcapcom

Rahul Bajoria Regional Economist ndash India Malaysia Thailand +65 6308 3511 rahulbajoriabarcapcom

Jian Chang Regional Economist ndash China Hong Kong+852 2903 2654 jianchangbarcapcom

Joey Chew Regional Economist - Singapore +65 6308 3211 joeychewbarcapcom

Olivier Desbarres Head of FX Strategy Asia-Pacific ex-Japan +65 6308 2073 olivierdesbarresbarcapcom

Yiping Huang Chief Economist Emerging Asia +852 2903 3291 yipinghuangbarcapcom

Wai Ho Leong Senior Regional Economist ndash Korea Malaysia Singapore Taiwan +65 6308 3292 waiholeongbarcapcom

Hamish Pepper FX Strategist Asia-Pacific ex-Japan +65 6308 2220 hamishpepperbarcapcom

Kumar Rachapudi FI Strategist Emerging Asia +65 6308 3383 kumarrachapudibarcapcom

Siddhartha Sanyal Chief Economist India +91 22 6719 6177 siddharthasanyalbarcapcom

Prakriti Sofat Regional Economist ndash Indonesia Philippines Sri Lanka Vietnam +65 6308 3201 prakritisofatbarcapcom

Nick Verdi FX Strategist Asia-Pacific ex-Japan +65 6308 3093 nickverdibarcapcom

Ju Wang FI Strategist Emerging Asia +65 6308 2801 juwangbarcapcom

Lingxiu (Steven) Yang Regional Economist ndash China Hong Kong +852 2903 2653 lingxiuyangbarcapcom

Krishna Hegde CFA Asia Credit Strategist and Senior Financial Institutions +65 6308 2979 krishnahegdebarcapcom

Avanti Save Credit Strategy +65 6308 3116 avantisavebarcapcom

Emerging EMEA Christian Keller Head of Emerging EMEA Research +44 (0)20 7773 2031 christiankellerbarcapcom

Koon Chow Head of Emerging EMEA Strategy +44 (0)20 777 37572 koonchowbarcapcom

Jeff Gable Head of ABSA Capital Research +27 11 895 5368 jeffgableabsacapitalcom

Gina Schoeman Economist ndash South Africa +27 (0)11 895 5403 ginaschoemanabsacapitalcom

Daniel Hewitt Senior Emerging EMEA Economist +44 (0)20 3134 3522 danielhewittbarcapcom

Piotr Chwiejczak Rates Strategist +44 (0)20 3134 4606 piotrchwiejczak barcapcom

Ridle Markus Economist ndash Sub-Saharan Africa +27 11 895 5374 ridlemarkusabsacapitalcom

Fahad Al Turki Economist ndash Saudi Arabia +966 1880 6577 fahadalturkibarcapcom

Vladimir Pantyushin Chief Economist ndash Russia and CIS +7 495 7868450 vladimirpantyushinbarcapcom

Andreas Kolbe Credit Strategist +44 (0)20 313 43134 andreaskolbebarcapcom

Jeffrey Schultz Economist ndash South Africa +27 (0)11 895 5349 jeffreyschultzabsacapitalcom

Eldar Vakhitov Emerging EMEA Economist +44 (0)20 777 32192 eldarvakhitovbarcapcom

Alia Moubayed Senior Economist ndash Middle East amp North Africa +44 (0)20 313 41120 aliamoubayedbarcapcom

Dumisani Ngwenya Strategist ndash Africa +27 (0)11 895 5346 dumisaningwenyaabsacapitalcom

Michael Keenan Sub-Saharan FX and Rates Strategist +27 (0) 11 895 5513 mikekeenanabsacapitalcom

EM Corporate Credit Juan C Cruz Head of Latin America amp EEMEA Corporate Credit Research +1 212 412 3424 juancruzbarcapcom

Christopher Buck +1 212 412 3418 christopherbuckbarcapcom

Stella Cridge +44 (0)20 313 49618 stellacridgebarcapcom

Miguel Crivelli +1 212 412 5231 miguelcrivellibarcapcom

Ivan Fernandes +1 212 412 3428 ivanfernandesbarcapcom

Autumn Graham +1 212 412 2839 autumngrahambarcapcom

Milena Ianeva +44 (0)20 7773 8536 milenaianevabarcapcom

Stanislav Ponomarenko +7 495 786 8451 stanislavponomarenkobarcapcom

Aziz Sunderji +1 212 412 2218 azizsunderjibarcapcom

Antoine Yacoub + 44 207 7731727 antoineyacoubbarcapcom

Golib Zohidov +44 (0)20 777 31513 golibzohidovbarcapcom

Barclays Capital | The Emerging Markets Weekly

26 January 2012 24

DATA REVIEW amp PREVIEW ASIA Rahul Bajoria Jian Chang

Review of last weekrsquos data releases

Main indicators Period Previous BarCap Actual Comments

India Repo rate () Jan 850 850 850 Elevated core inflation prevents cut in repo rate

India Cash reserve ratio () Jan 600 600 550 Policy gearing moving towards supporting growth

Singapore CPI ( yy) Dec 57 56 55 Core inflation expected to remain sticky in Singapore

Thailand BoT policy rate () ndash 325 300 300 We do not expect any further rate cuts from Bank of Thailand

Korea GDP ( yy) Q4 35 39 34 We see potential for upside revisions in the second estimate next month

Preview of week ahead

Monday 30 January Period Prev 2 Prev 1 Latest Forecast Consensus

0700 Korea Current account balance (USD bn) Dec 283 413 505 40

1000 Philippines GDP ( yy) Q4 46 31 32 38 37

1600 Taiwan Unemployment rate (sa) Dec 43 43 43 43 43

Korea We expect the current account surplus to narrow as year-end outbound travelling typically opens up a wide services trade deficit The goods trade balance on a customs basis was USD4bn in December

Philippines Growth is likely to remain soft given weak export performance and continued government under-spending However consumption should remain strong given holiday-related spending

Taiwan Employment in non-agricultural sectors started to decline in November with a slight increase in the number of workers on unpaid leave

Tuesday 31 January Period Prev 2 Prev 1 Latest Forecast Consensus

0700 Korea IP ( yy) Dec 69 63 56 40 61

1000 Singapore Unemployment rate () Q4 19 21 20 21

1600 Taiwan GDP ( yy) Q4 66 45 34 33 28

1800 Malaysia BNM policy rate ndash 300 300 300 300 300

Korea We expect manufacturing output to increase 17 mm sa in December which will more than offset the small declines in the previous two months Exports in December were unusually resilient

Singapore We expect net job creation to slow as suggested by various hiring surveys But restrictions on foreign workers will keep the labour market tight

Taiwan We expect investment to become a smaller drag on GDP in Q4 than in Q3 as suggested by the stabilisation in imports of capital goods Consumption is likely to remain robust supported in part by tourism and will mitigate weakness in the external sector We forecast a 05 qq sa expansion in Q4 GDP following a 01 contraction last quarter We expect 44 GDP growth for 2011

Malaysia With growth moderating only gradually our base case is for the policy rate to be unchanged in H1

Wednesday 1 February Period Prev 2 Prev 1 Latest Forecast Consensus

0700 Korea CPI ( yy) Jan 36 42 42 37 36

0900 Korea Exports ( yy) Jan 76 116 108 65

0900 China PMI Manufacturing Jan 504 490 503 495 496

1200 Indonesia CPI ( yy) Jan 44 42 38 39

1200 Indonesia CPI core ( yy) Jan 44 44 43 44

1200 Indonesia Exports ( yy) Dec 440 178 83 100

1200 Thailand CPI ( yy) Jan 42 42 35 34 33

1200 Thailand Core CPI ( yy) Jan 29 29 27 26 27

2130 Singapore Electronics PMI Jan 521 509 497 ndash 499

Barclays Capital | The Emerging Markets Weekly

26 January 2012 25

Korea Lunar New Year demand and electricity tariff hikes for businesses last December should keep the cost of food energy and services high Nonetheless inflation is expected to moderate on base effects We expect exports to rise 6 mm sa extending Decemberrsquos 84 increase due to last-minute festive shipments in the early part of the month Lunar New Year holidays should exert a dampening effect on trade and manufacturing data in January and we expect a temporary trade deficit in January given high energy imports

China We look for a post-Chinese New Year mm decline and expect the PMI to hover around 50 in Q1

Indonesia Inflation to remain contained at 39 however we should see a mm pick-up driven by food prices and health costs We expect inflation to rise gradually in 2012 and end the year at 53 core inflation is likely to hold steady at about 44 We look for soft export growth given the uncertain external environment

Thailand Higher fuel prices coupled with a seasonal uptick in food prices should translate into only a modest decline in inflation

Friday 3 February Period Prev 2 Prev 1 Latest Forecast Consensus

0900 China Non-manufacturing PMI Jan 577 497 560 ndash

Barclays Capital | The Emerging Markets Weekly

26 January 2012 26

DATA REVIEW amp PREVIEW EMERGING EUROPE MIDDLE EAST AND AFRICA Eldar Vakhitov Daniel Hewitt Christian Keller Vladimir Pantyushin Jeffrey Schultz Alia Moubayed Piotr Chwiejczak

Review of last weekrsquos data releases

Main indicators Period Previous Barclays Actual Comments

Israel Base rate announcement () Jan 275 250 250 Rate cut due to rapid deceleration of inflation

Turkey Benchmark repo rate () Jan 575 575 575 Rate on hold but revisions in FX auction more ad hoc

Hungary Base rate announcement () Jan 700 725 700 Rates on hold because of HUF strength and high real rate

Israel Unemployment rate () Nov 54 - 54 Unemployment rate remains low but could rise later

Russia Industrial production ( yy) Dec 39 - 25 Expected slowing in line with the global trend

Hungary Retail trade ( yy) Nov 06 - 11 Apparent slight improvement in domestic demand

Turkey Industrial confidence index Jan 972 - 1018 Turkish economy rolling buoyed by domestic demand

Turkey Capacity utilization () Jan 755 - 747 Second consecutive monthly decline still a high level

South Africa PPI ( yy) Dec 101 99 98 Lower on the back of softer commodity prices food prices however continue to gain momentum

Russia Disposable income ( yy) Dec 02 - 63 Consistent growth underpins consumer sector expansion

Russia Real wages ( yy) Dec 71 - 49 Consistent growth underpins consumer sector expansion

Russia Retail sales real ( yy) Dec 86 - 95 Consumer sector outperforms yet again

Russia Unemployment rate () Dec 63 - 61 A welcome decline adding power to consumer demand

Russia Investment in productive capacity ( yy) Dec 77 - 89 Strong investment provides support to mid-term growth

Preview of week ahead

Friday 27 January Period Prev 2 Prev 1 Latest Forecast Consensus

0900 Poland Real GDP growth () 2011 51 17 38 41 42

0900 Poland Unemployment rate () Dec 118 118 121 125 125

0900 Poland Retail sales ( yy) Dec 114 112 126 110 100

1000 Croatia Industrial output ( yy) Dec -23 06 -03 - -

Poland Growth print is likely to be strong again despite softening PMIs ldquohardrdquo data remained strong in Q4 11 therefore a positivesurprise is possible however in Q1 12 we expect growth to slow down gradually Government officials have already hinted thatunemployment in December has increased driven by seasonal factors and cyclical elements as well as overall weakening demand

Croatia Despite the oil refinery fire no longer weighing on IP we still expect only marginally positive growth in December

Monday 30 January Period Prev 2 Prev 1 Latest Forecast Consensus

0900 Lithuania Real GDP ( yy) Q4 P 59 65 67 - -

Poland Budget level YTD (PLN bn) Dec -219 -225 -216 -223 -

Serbia Real GDP ( yy) Q4 P 37 25 05 02 -

Ukraine Current account (USD bn) Q4 -13 -17 -27 - -

Ukraine GDP constant prices ( yy) Q4 P 53 38 66 40 -

Lithuania Lithuania (together with Serbia) will be among the first CEE country to report Q4 GDP growth and it will be interestingto see to what extent the weaker external demand environment will be reflected in Lithuaniarsquos Q4 GDP print After the verystrong growth in 2011 of likely close to 6 yy (annual) we expect it to slow to 25 in 2012 ndash still a comparatively robust number in the regional context however

Poland Overall we expect the central budget deficit gap to come in at around PLN22bn Stronger economic activity particularlystrong retail sales should contribute to tax income while spending has been kept under control Local government deficit mayalso come in below projected numbers

Serbia We expect growth to be only slightly positive as export growth declined considerably in Q4

Ukraine The economy has likely already entered a softer patch while the external account gap continues to widen

Barclays Capital | The Emerging Markets Weekly

26 January 2012 27

Tuesday 31 January Period Prev 2 Prev 1 Latest Forecast Consensus

0600 South Africa Private sector credit ( yy) Dec 54 55 62 58 -

0800 Hungary Unemployment rate () Dec 107 108 106 - 108

0800 Turkey Trade balance (USD bn) Dec -104 -80 -75 -85 -735

1200 South Africa Trade balance (rand bn) Dec 25 -96 -81 - -

Russia Annual real GDP (yy) 2011 52 -78 40 42 -

Serbia Industrial output ( yy) Dec -18 -10 22 - -

Serbia Retail trade ( yy) Dec -183 -162 -164 - -

South Africa Although we expect a moderation in headline PSCE growth consumer spending into the festive season throughother smaller unsecured components of household credit should see the mm growth in PSCE tick up further in December

Hungary We expect to see a slight weakening of domestic labour in Hungary

Turkey We look for a small mm widening of the trade deficit as signalled by stronger customs duties collections in December that implies a pick-up in imports

Russia The growth emphasis shifts to domestic drivers with investment and consumer demand performing well recently

Wednesday 1 February Period Prev 2 Prev 1 Latest Forecast Consensus

0500 Russia Manufacturing PMI Jan 504 526 516 - -

0800 Poland Manufacturing PMI Jan 517 495 488 - -

0800 Turkey Manufacturing PMI Jan 533 523 520 - -

0830 Czech Manufacturing PMI Jan 517 486 492 - -

0900 South Africa Kagiso PMI Jan 502 505 516 - -

Czech Budget balance (CZK bn) Jan -915 -1259 -1428 - -

Hungary PMI Jan 482 478 485 - -

Kazakhstan CPI ( yy) Jan 80 78 74 70 -

Romania International reserves (USD bn) Jan 363 360 373 - -

South Africa Unemployment () Q4 250 257 250 - -

Russia Despite recent slowing Russiarsquos IP performance remains well within positive territory Domestic demand sectors showimproving dynamics This will likely be reflected in manager expectations

Poland Amid a general U-turn in optimism in Europe Polish entrepreneurs are also likely to adopt a more positive approachwhich is likely to be reflected in the survey Also mild winter weather conditions should work in favour of a higher PMI Still weexpect slower industrial production in months to come

Turkey Domestic growth indicators that are still holding up well could be reflected in a stronger PMI reading

Czech Republic Further indications of recession likely with the PMI remaining below 50 in January

South Africa Still-significant global risks and uncertainty along with a still-struggling domestic manufacturing sector are likely to leave the PMI hovering around its neutral level of 50 in January

Hungary Growth indicators have been mixed indicating a modest recession is in process

Kazakhstan We expect disinflation to continue running its course

Romania Stable currency markets have made it possible for the NBR to limit FX intervention helping it maintain its extremelyhigh levels of reserves

Thursday 2 February Period Prev 2 Prev 1 Latest Forecast Consensus

0800 Romania Retail sales ( yy) Dec -52 20 19 - -

1000 South Africa Naamsa vehicle sales ( yy) Jan 189 117 110 - -

1200 Czech Repo rate announcement () Feb 075 075 075 075 075

Romania Interest rate announcement () Feb 625 600 575 550 550

Egypt Deposit rate () Feb 825 825 925 1025 -

Barclays Capital | The Emerging Markets Weekly

26 January 2012 28

Romania The NBR is in the middle of a rate cutting cycle Having reduced rates in each of the past two meetings by 25bp we expect another 25bp reduction to 550 Moreover we expect two more rate cuts in the next two meetings bringing the rate to 50

South Africa Vehicle sales growth should continue to reflect the relatively positive consumer dynamics in the economy providedby low interest rates and high nominal incomes

Czech Republic The CNB is on hold On one hand it will not raise rates even though inflation (adjusted for taxes) is in the middleof the 1-3 target range because the economy is very weak On the other it will not lower rates because at 075 it is at a record low and a rate decrease is unlikely to spur increased lending

Egypt Mounting inflationary pressure and a weakening currency may push the CBE to continue raising rates

Friday 3 February Period Prev 2 Prev 1 Latest Forecast Consensus

0800 Czech Retail sales ( yy) Dec 00 15 05 - -

0800 Turkey CPI ( yy) Jan 77 95 105 1065 1045

1000 Croatia Retail trade real ( yy) Dec P 10 18 10 - -

Kazakhstan International reserves (USD bn) Jan 326 322 293 285 -

Russia CPI ( yy) Jan 72 68 61 43 -

Russia Overnight deposit rate () Feb 375 375 400 400 -

Russia Refinancing rate () Feb 825 825 800 800 -

Czech Republic Domestic demand remains muted

Turkey The trade weighted fall in the lira last year still has some room to pass through to headline CPI as capacity utilisationrates in the country remain high There are some signs of a slowdown but companies in Turkey are probably still able to pass onthe bulk of their cost increases

Kazakhstan The NBK continues to defend the currency

Russia Inflation drops amid the delay in regulated tariff hikes to 1 July The CBR will likely wait until after the 4 March presidentialelections before resuming rate cuts

Barclays Capital | The Emerging Markets Weekly

26 January 2012 29

DATA REVIEW amp PREVIEW LATIN AMERICA Alejandro Arreaza Alejandro Grisanti Bruno Rovai Guilherme Loureiro Marcelo Salomon Sebastian Vargas

Review of the weekrsquos data releases

Main indicators Period Previous BarCap Actual Comments

Brazil IPCA-15 inflation mm Jan 056 055 065 The surprise was in large part driven by a higher-than-expected increase in transportation costs (air and bus fares)

Brazil Current account USD bn Dec -68 -50 -60 The CA deficit reached USD526 bn (21 of GDP) but financing was not an issue as FDI reached USD666bn

Mexico Econ activity index yy Nov 37 40 375 Growing at a moderate pace at the margin (02 mm sa) on track for a sharp deceleration in Q4 GDP to 06 qq saar

Mexico Bi-weekly CPI 2w2w Jan 051 043 032 Lower-than-expected perishable inflation marked the January CPI release

Mexico Bi-weekly CPI core 2w2w Jan 035 026 020 A 115 2w2w drop in airfares helped contain core services inflation

Mexico Trade balance USD mn Dec -232 - 08 Exports and imports are moving further down (81 and 74 respectively)

Colombia Trade balance USD mn Nov 103 - 711 High oil prices compensate for strong increase in imports demand

Brazil COPOM meeting minutes Jan - - - Very dovish minutes with the BCB giving guidance that the Selic rate should fall to single-digit levels

Brazil Unemployment rate Dec 52 50 47 In seasonally adjusted terms the unemployment rate was flat at 56

Mexico Retail sales yy Nov 30 36 75 Strong gain of 22 mm sa probably reflecting the introduction of a local version of Black Friday in November

Preview of the week ahead

Monday 30 January Period Prev 2 Prev 1 Latest Forecast Consensus

- Brazil Central government budget BRL bn Dec 54 112 46 - -

- Colombia Overnight lending rate Jan 450 475 475 475 475

500 Brazil IGP-M inflation mm Jan 053 050 -012 030 030

700 Chile Industrial production yy Dec 52 -08 20 02 10

700 Chile Retail sales yy Dec 96 86 85 80 79

1530 Mexico Budget balance MXN bn Dec YTD -1790 -17939 -2131 - -

Colombia overnight lending rate With still moderate inflation we expected Banrep to remain on hold at its meeting this monthHowever the persistence of fast growth that is expected to offset the uncertainty coming from the European sovereign debtcrisis and the slowdown of the global economy will likely drive it to reassume its tightening cycle before the end of Q1

Chile industrial production and retail sales At the margin we expect industrial production to drop 02 mm sa leaving growth for Q4 11 at -23 3m3m saar This shows that global developments continue to take their toll in the Chilean economyRetail sales are still benefiting from tight labor market conditions but we expect them to soften gradually

Tuesday 31 January Period Prev 2 Prev 1 Latest Forecast Consensus

600 Brazil Industrial production yy Dec -16 -22 -25 01 -08

700 Chile Unemployment rate Dec 74 72 71 71 71

730 Brazil Primary budget balance BRL bn Dec 81 139 82 - -

1100 Colombia Unemployment rate Dec 102 102 103 - 104

Brazil industrial production Our forecast is consistent with a strong 14 mm sa print at the margin pushed mainly by theevolution of the auto sector (+94 mm sa) The December IBC-Br should also benefit from this gain leaving a high GDP carry-over for Q1 12

Chile unemployment rate We expect some deterioration of the unemployment rate in seasonally adjusted terms to 75 from73 The labor market data flow is already showing signs of contagion from global developments

Barclays Capital | The Emerging Markets Weekly

26 January 2012 30

Wednesday 01 February Period Prev 2 Prev 1 Latest Forecast Consensus

- Peru CPI mm Jan 031 043 027 041 -

- Peru WPI mm Jan 021 042 003 - -

1000 Mexico Remittances USD mn Dec 20847 19115 17736 - -

1200 Brazil Trade balance USD mn Jan 2355 582 3817 -1800 -

Brazil trade balance The contraction in the trade balance in January should be led by weak exports of iron ore We expectexports to increase only 16 yy while imports are likely to grow 169 yy

Thursday 02 February Period Prev 2 Prev 1 Latest Forecast Consensus

1100 Uruguay CPI mm Jan 070 040 070 - -

Friday 03 February Period Prev 2 Prev 1 Latest Forecast Consensus

900 Mexico Consumer confidence index Jan 906 895 908 - -

1100 Uruguay Unemployment rate Dec 60 57 55 - -

1600 Colombia PPI inflation mm Jan 09 01 01 - -

Week 30-04 February Period Prev 2 Prev 1 Latest Forecast Consensus

- Argentina Govern tax revenue ARS bn Jan 476 473 489 - -

1900 Colombia CPI inflation mm Jan 019 014 042 084 076

Colombia CPI inflation Considering a seasonal increase in food prices and an acceleration of core prices we expect a fastincrease in prices in January with an inflation rate of 084

Barclays Capital | The Emerging Markets Weekly

26 January 2012 31

FX FORECASTS AND FORWARDS

FX forecasts Forecast vs outright forward

Spot 1m 3m 6m 1y 1m 3m 6m 1y

G7 countries

EUR 131 135 130 125 120 30 -08 -47 -86

JPY 774 750 750 780 800 -31 -31 09 39

GBP 157 157 155 152 150 01 -11 -29 -40

CHF 092 092 096 104 108 -01 44 133 181

CAD 100 103 105 105 102 28 46 44 10

AUD 106 097 098 101 102 -83 -68 -30 -04

NZD 082 077 079 082 083 -58 -29 14 39

Emerging Asia

CNY 631 628 624 617 608 -03 -07 -17 -31

HKD 776 778 778 778 778 02 02 03 03

INR 5011 5000 5000 4900 4800 -06 -20 -54 -94

IDR 8979 8850 8800 8800 8500 -12 -21 -29 -83

KRW 1122 1100 1075 1050 1025 -21 -47 -74 -100

MYR 304 302 300 295 284 -08 -18 -37 -79

PHP 4289 4260 4220 4250 4200 -08 -19 -14 -28

SGD 126 124 123 123 122 -17 -25 -24 -29

THB 3138 3100 3060 2975 2850 -20 -35 -67 -112

TWD 2986 2970 2950 2875 2750 -07 -09 -30 -66

Latin America

ARS 434 435 445 460 540 -06 -09 -12 64

BRL 175 174 173 174 170 -10 -28 -38 -87

CLP 487 485 480 475 475 -07 -23 -40 -54

MXN 1298 1285 1270 1265 1260 -13 -29 -41 -60

COP 1811 1795 1780 1775 1770 -10 -21 -31 -44

PEN 269 268 267 266 264 -04 -12 -19 -34

EEMEA

EURCZK 2514 2550 2575 2550 2525 14 24 14 04

EURHUF 295 310 315 310 300 48 58 30 -23

EURPLN 424 430 450 440 435 12 52 20 -08

EURRON 434 436 445 440 435 02 19 00 -38

USDRUB 3023 3030 3000 3000 3050 -06 -24 -36 -45

BSKRUB 3452 3507 3405 3338 3325 10 -28 -60 -88

USDTRY 179 182 185 182 180 07 11 -24 -68

USDZAR 782 815 820 780 770 38 35 -28 -65

USDILS 376 375 370 365 360 -03 -18 -34 -50

USDEGP 604 600 620 650 700 -29 -44 -19 25

USDUAH 804 803 810 815 820 -15 -36 -71 -162

Source Barclays Capital

Barclays Capital | The Emerging Markets Weekly

26 January 2012 32

OFFICIAL INTEREST RATES

Start of cycle Forecasts as at end of

Official rate Current Date Level Last move Next move expected Q1 12 Q2 12 Q3 12 Q4 12

per annum (unless stated)

Advanced

Fed funds rate 0-025 Easing 17 Sep 07 525 Dec 08 (-75-100) Beyond 2013 0-025 0-025 0-025 0-025

BoJ overnight rate 010 Easing 30 Oct 08 050 Oct 10 (0-10) Q1 14 (+20) 0-010 0-010 0-010 0-010

ECB repo rate 100 Easing 03 Nov 11 150 Dec 11 (-25) Mar 12 (-50) 050 050 050 050

Emerging Asia

China Working capital rate 656 Tightening 19 Oct 10 531 Jul 11 (+25) Beyond Q4 12 656 656 656 656

Hong Kong Base rate 050 Easing 19 Sep 07 675 Dec 08 (-100) Beyond Q4 12 050 050 050 050

India Repo rate 850 Tightening 19 Mar 10 475 Oct 11 (+25) Q2 12 (-25) 850 825 800 775

Indonesia ON policy rate 600 Easing 11 Oct 11 675 Nov 11 (-50) Beyond Q4 12 600 600 600 600

Korea Base rate 325 Tightening 9 Jul 10 225 Jun 11(+25) Beyond Q4 12 325 325 325 325

Sri Lanka Reverse repo 850 Easing 20 Feb 09 1200 Jan 11 (-50) Q2 12 (-50) 850 800 800 800

Malaysia ON policy rate 300 Tightening 4 Mar 10 200 May 11 (+25) Beyond Q4 12 300 300 300 300

Philippines ON lending 425 Easing 19 Jan 12 450 Jan 12 (-25) Q2 12 (-25) 425 400 400 400

Taiwan Rediscount rate 1875 Tightening 24 Jun 10 1375 Jun 11 (+125) Beyond Q4 12 1875 1875 1875 1875

Thailand ON repo rate 300 Easing 30 Nov 11 350 Jan 12 (-25) Q3 12 (+25) 300 300 325 350

Vietnam Reverse repo rate 1400 Easing Jul 11 1500 Jul 11 (-100) Q1 12 (-200) 1200 1100 1000 1000

Emerging Europe Middle East amp Africa

Czech Republic 2w repo rate 075 Easing 8 Aug 08 375 Apr 10 (-25) Beyond Q4 12 075 075 075 075

Hungary 2w deposit rate 700 Tightening 29 Nov 10 525 Dec 11 (+50) Q2 12 (+25) 700 725 725 725

Poland 2w repo rate 450 Tightening 19 Jan 11 350 Jun 11 (+25) Mar 12 (-25) 425 375 375 375

Romania Key policy rate 575 Easing 4 Feb 08 1025 Jan 12 (-25) Feb 12 (-25) 525 500 500 500

Russia Refi rate 800 Easing 23 Dec 11 825 Dec 11 (-25) Mar 12 (-25) 775 750 750 750

South Africa Repo rate 550 Easing 11 Dec 08 1200 Nov 10 (-50) Nov 12 (+50) 550 550 550 600

Turkey 1wk repo rate 575 Easing 20 Nov 08 1675 Aug 11 (-50) Beyond Q4 12 575 575 575 575

Egypt Deposit rate 925 Tightening 24 Nov 11 825 Nov 11 (+100) Feb 12 (+100) 1125 1125 1125 1125

Israel Discount rate 250 Easing 26 Sep 11 325 Jan 12 (-25) Q2 12 (-25) 250 225 225 225

Latin America

Brazil SELIC rate 1050 Easing 31 Aug 11 1250 Jan 12 (-50) Mar 12 (-50) 1000 950 950 950

Chile Monetary policy rate 500 Easing 12 January 12 525 Jan 12 (-25) Feb 12 (-25) 450 425 425 425

Colombia Repo rate 475 Tightening 25 Feb 11 300 Nov 11 (+25) Mar 12 (+25) 500 550 550 550

Mexico Overnight rate 450 Easing 16 Jan 09 825 Jul 09 (-25) Q1 12 (-25) 425 400 400 400

Peru Reference rate 425 Tightening 6 May 10 125 May 11 (+25) Beyond 2012 425 425 425 425

Note Changes denoted in bold Source Barclays Capital

Barclays Capital | The Emerging Markets Weekly

26 January 2012 33

EMERGING MARKETS RESEARCH Piero Ghezzi Head of Global Economics Emerging Markets and FX Research +44 (0)20 3134 2190 pieroghezzibarcapcom

EM Global Michael Gavin Head of Global Macro Strategy and Head of EM Strategy +1 212 412 5915 michaelgavinbarcapcom

Alanna Gregory EM Strategist +1 212 412 5938 alannagregorybarcapcom

Latin America Alejandro Arreaza Economist ndash Latin America +1 212 412 3021 alejandroarreazabarcapcom

Sebastian Brown StrategistEconomist +1 212 412 6721 sebastianbrownbarcapcom

Alejandro Grisanti Chief Economist ndash Latin America Ex-Brazil Mexico +1 212 412 5982 alejandrogrisantibarcapcom

Donato Guarino Senior Strategist +1 212 412 5564 donatoguarinobarcapcom

Guilherme Loureiro Economist ndash Brazil +55 11 3757 7372 guilhermeloureirobarcapcom

Roberto Melzi Senior Strategist +1 212 412 5963 robertomelzibarcapcom

Bruno Rovai Economist +55 11 3757 7392 brunorovaibarcapcom

Marcelo Salomon Chief Economist ndash Brazil Chile Mexico+1 212 412 5717 marcelosalomonbarcapcom

Sebastian Vargas Economist - Argentina Uruguay +1 212 412 6823 sebastianvargasbarcapcom

Asia Pacific Jon Scoffin Head of Credit Research and Head of Research Asia-Pacific +65 6308 3217 jonscoffinbarcapcom

Rohit Arora FI Strategist Emerging Asia +65 6308 2092 rohitarora3barcapcom

Rahul Bajoria Regional Economist ndash India Malaysia Thailand +65 6308 3511 rahulbajoriabarcapcom

Jian Chang Regional Economist ndash China Hong Kong+852 2903 2654 jianchangbarcapcom

Joey Chew Regional Economist - Singapore +65 6308 3211 joeychewbarcapcom

Olivier Desbarres Head of FX Strategy Asia-Pacific ex-Japan +65 6308 2073 olivierdesbarresbarcapcom

Yiping Huang Chief Economist Emerging Asia +852 2903 3291 yipinghuangbarcapcom

Wai Ho Leong Senior Regional Economist ndash Korea Malaysia Singapore Taiwan +65 6308 3292 waiholeongbarcapcom

Hamish Pepper FX Strategist Asia-Pacific ex-Japan +65 6308 2220 hamishpepperbarcapcom

Kumar Rachapudi FI Strategist Emerging Asia +65 6308 3383 kumarrachapudibarcapcom

Siddhartha Sanyal Chief Economist India +91 22 6719 6177 siddharthasanyalbarcapcom

Prakriti Sofat Regional Economist ndash Indonesia Philippines Sri Lanka Vietnam +65 6308 3201 prakritisofatbarcapcom

Nick Verdi FX Strategist Asia-Pacific ex-Japan +65 6308 3093 nickverdibarcapcom

Ju Wang FI Strategist Emerging Asia +65 6308 2801 juwangbarcapcom

Lingxiu (Steven) Yang Regional Economist ndash China Hong Kong +852 2903 2653 lingxiuyangbarcapcom

Krishna Hegde CFA Asia Credit Strategist and Senior Financial Institutions +65 6308 2979 krishnahegdebarcapcom

Avanti Save Credit Strategy +65 6308 3116 avantisavebarcapcom

Emerging EMEA Christian Keller Head of Emerging EMEA Research +44 (0)20 7773 2031 christiankellerbarcapcom

Koon Chow Head of Emerging EMEA Strategy +44 (0)20 777 37572 koonchowbarcapcom

Jeff Gable Head of ABSA Capital Research +27 11 895 5368 jeffgableabsacapitalcom

Gina Schoeman Economist ndash South Africa +27 (0)11 895 5403 ginaschoemanabsacapitalcom

Daniel Hewitt Senior Emerging EMEA Economist +44 (0)20 3134 3522 danielhewittbarcapcom

Piotr Chwiejczak Rates Strategist +44 (0)20 3134 4606 piotrchwiejczak barcapcom

Ridle Markus Economist ndash Sub-Saharan Africa +27 11 895 5374 ridlemarkusabsacapitalcom

Fahad Al Turki Economist ndash Saudi Arabia +966 1880 6577 fahadalturkibarcapcom

Vladimir Pantyushin Chief Economist ndash Russia and CIS +7 495 7868450 vladimirpantyushinbarcapcom

Andreas Kolbe Credit Strategist +44 (0)20 313 43134 andreaskolbebarcapcom

Jeffrey Schultz Economist ndash South Africa +27 (0)11 895 5349 jeffreyschultzabsacapitalcom

Eldar Vakhitov Emerging EMEA Economist +44 (0)20 777 32192 eldarvakhitovbarcapcom

Alia Moubayed Senior Economist ndash Middle East amp North Africa +44 (0)20 313 41120 aliamoubayedbarcapcom

Dumisani Ngwenya Strategist ndash Africa +27 (0)11 895 5346 dumisaningwenyaabsacapitalcom

Michael Keenan Sub-Saharan FX and Rates Strategist +27 (0) 11 895 5513 mikekeenanabsacapitalcom

EM Corporate Credit Juan C Cruz Head of Latin America amp EEMEA Corporate Credit Research +1 212 412 3424 juancruzbarcapcom

Christopher Buck +1 212 412 3418 christopherbuckbarcapcom

Stella Cridge +44 (0)20 313 49618 stellacridgebarcapcom

Miguel Crivelli +1 212 412 5231 miguelcrivellibarcapcom

Ivan Fernandes +1 212 412 3428 ivanfernandesbarcapcom

Autumn Graham +1 212 412 2839 autumngrahambarcapcom

Milena Ianeva +44 (0)20 7773 8536 milenaianevabarcapcom

Stanislav Ponomarenko +7 495 786 8451 stanislavponomarenkobarcapcom

Aziz Sunderji +1 212 412 2218 azizsunderjibarcapcom

Antoine Yacoub + 44 207 7731727 antoineyacoubbarcapcom

Golib Zohidov +44 (0)20 777 31513 golibzohidovbarcapcom

Barclays Capital | The Emerging Markets Weekly

26 January 2012 25

Korea Lunar New Year demand and electricity tariff hikes for businesses last December should keep the cost of food energy and services high Nonetheless inflation is expected to moderate on base effects We expect exports to rise 6 mm sa extending Decemberrsquos 84 increase due to last-minute festive shipments in the early part of the month Lunar New Year holidays should exert a dampening effect on trade and manufacturing data in January and we expect a temporary trade deficit in January given high energy imports

China We look for a post-Chinese New Year mm decline and expect the PMI to hover around 50 in Q1

Indonesia Inflation to remain contained at 39 however we should see a mm pick-up driven by food prices and health costs We expect inflation to rise gradually in 2012 and end the year at 53 core inflation is likely to hold steady at about 44 We look for soft export growth given the uncertain external environment

Thailand Higher fuel prices coupled with a seasonal uptick in food prices should translate into only a modest decline in inflation

Friday 3 February Period Prev 2 Prev 1 Latest Forecast Consensus

0900 China Non-manufacturing PMI Jan 577 497 560 ndash

Barclays Capital | The Emerging Markets Weekly

26 January 2012 26

DATA REVIEW amp PREVIEW EMERGING EUROPE MIDDLE EAST AND AFRICA Eldar Vakhitov Daniel Hewitt Christian Keller Vladimir Pantyushin Jeffrey Schultz Alia Moubayed Piotr Chwiejczak

Review of last weekrsquos data releases

Main indicators Period Previous Barclays Actual Comments

Israel Base rate announcement () Jan 275 250 250 Rate cut due to rapid deceleration of inflation

Turkey Benchmark repo rate () Jan 575 575 575 Rate on hold but revisions in FX auction more ad hoc

Hungary Base rate announcement () Jan 700 725 700 Rates on hold because of HUF strength and high real rate

Israel Unemployment rate () Nov 54 - 54 Unemployment rate remains low but could rise later

Russia Industrial production ( yy) Dec 39 - 25 Expected slowing in line with the global trend

Hungary Retail trade ( yy) Nov 06 - 11 Apparent slight improvement in domestic demand

Turkey Industrial confidence index Jan 972 - 1018 Turkish economy rolling buoyed by domestic demand

Turkey Capacity utilization () Jan 755 - 747 Second consecutive monthly decline still a high level

South Africa PPI ( yy) Dec 101 99 98 Lower on the back of softer commodity prices food prices however continue to gain momentum

Russia Disposable income ( yy) Dec 02 - 63 Consistent growth underpins consumer sector expansion

Russia Real wages ( yy) Dec 71 - 49 Consistent growth underpins consumer sector expansion

Russia Retail sales real ( yy) Dec 86 - 95 Consumer sector outperforms yet again

Russia Unemployment rate () Dec 63 - 61 A welcome decline adding power to consumer demand

Russia Investment in productive capacity ( yy) Dec 77 - 89 Strong investment provides support to mid-term growth

Preview of week ahead

Friday 27 January Period Prev 2 Prev 1 Latest Forecast Consensus

0900 Poland Real GDP growth () 2011 51 17 38 41 42

0900 Poland Unemployment rate () Dec 118 118 121 125 125

0900 Poland Retail sales ( yy) Dec 114 112 126 110 100

1000 Croatia Industrial output ( yy) Dec -23 06 -03 - -

Poland Growth print is likely to be strong again despite softening PMIs ldquohardrdquo data remained strong in Q4 11 therefore a positivesurprise is possible however in Q1 12 we expect growth to slow down gradually Government officials have already hinted thatunemployment in December has increased driven by seasonal factors and cyclical elements as well as overall weakening demand

Croatia Despite the oil refinery fire no longer weighing on IP we still expect only marginally positive growth in December

Monday 30 January Period Prev 2 Prev 1 Latest Forecast Consensus

0900 Lithuania Real GDP ( yy) Q4 P 59 65 67 - -

Poland Budget level YTD (PLN bn) Dec -219 -225 -216 -223 -

Serbia Real GDP ( yy) Q4 P 37 25 05 02 -

Ukraine Current account (USD bn) Q4 -13 -17 -27 - -

Ukraine GDP constant prices ( yy) Q4 P 53 38 66 40 -

Lithuania Lithuania (together with Serbia) will be among the first CEE country to report Q4 GDP growth and it will be interestingto see to what extent the weaker external demand environment will be reflected in Lithuaniarsquos Q4 GDP print After the verystrong growth in 2011 of likely close to 6 yy (annual) we expect it to slow to 25 in 2012 ndash still a comparatively robust number in the regional context however

Poland Overall we expect the central budget deficit gap to come in at around PLN22bn Stronger economic activity particularlystrong retail sales should contribute to tax income while spending has been kept under control Local government deficit mayalso come in below projected numbers

Serbia We expect growth to be only slightly positive as export growth declined considerably in Q4

Ukraine The economy has likely already entered a softer patch while the external account gap continues to widen

Barclays Capital | The Emerging Markets Weekly

26 January 2012 27

Tuesday 31 January Period Prev 2 Prev 1 Latest Forecast Consensus

0600 South Africa Private sector credit ( yy) Dec 54 55 62 58 -

0800 Hungary Unemployment rate () Dec 107 108 106 - 108

0800 Turkey Trade balance (USD bn) Dec -104 -80 -75 -85 -735

1200 South Africa Trade balance (rand bn) Dec 25 -96 -81 - -

Russia Annual real GDP (yy) 2011 52 -78 40 42 -

Serbia Industrial output ( yy) Dec -18 -10 22 - -

Serbia Retail trade ( yy) Dec -183 -162 -164 - -

South Africa Although we expect a moderation in headline PSCE growth consumer spending into the festive season throughother smaller unsecured components of household credit should see the mm growth in PSCE tick up further in December

Hungary We expect to see a slight weakening of domestic labour in Hungary

Turkey We look for a small mm widening of the trade deficit as signalled by stronger customs duties collections in December that implies a pick-up in imports

Russia The growth emphasis shifts to domestic drivers with investment and consumer demand performing well recently

Wednesday 1 February Period Prev 2 Prev 1 Latest Forecast Consensus

0500 Russia Manufacturing PMI Jan 504 526 516 - -

0800 Poland Manufacturing PMI Jan 517 495 488 - -

0800 Turkey Manufacturing PMI Jan 533 523 520 - -

0830 Czech Manufacturing PMI Jan 517 486 492 - -

0900 South Africa Kagiso PMI Jan 502 505 516 - -

Czech Budget balance (CZK bn) Jan -915 -1259 -1428 - -

Hungary PMI Jan 482 478 485 - -

Kazakhstan CPI ( yy) Jan 80 78 74 70 -

Romania International reserves (USD bn) Jan 363 360 373 - -

South Africa Unemployment () Q4 250 257 250 - -

Russia Despite recent slowing Russiarsquos IP performance remains well within positive territory Domestic demand sectors showimproving dynamics This will likely be reflected in manager expectations

Poland Amid a general U-turn in optimism in Europe Polish entrepreneurs are also likely to adopt a more positive approachwhich is likely to be reflected in the survey Also mild winter weather conditions should work in favour of a higher PMI Still weexpect slower industrial production in months to come

Turkey Domestic growth indicators that are still holding up well could be reflected in a stronger PMI reading

Czech Republic Further indications of recession likely with the PMI remaining below 50 in January

South Africa Still-significant global risks and uncertainty along with a still-struggling domestic manufacturing sector are likely to leave the PMI hovering around its neutral level of 50 in January

Hungary Growth indicators have been mixed indicating a modest recession is in process

Kazakhstan We expect disinflation to continue running its course

Romania Stable currency markets have made it possible for the NBR to limit FX intervention helping it maintain its extremelyhigh levels of reserves

Thursday 2 February Period Prev 2 Prev 1 Latest Forecast Consensus

0800 Romania Retail sales ( yy) Dec -52 20 19 - -

1000 South Africa Naamsa vehicle sales ( yy) Jan 189 117 110 - -

1200 Czech Repo rate announcement () Feb 075 075 075 075 075

Romania Interest rate announcement () Feb 625 600 575 550 550

Egypt Deposit rate () Feb 825 825 925 1025 -

Barclays Capital | The Emerging Markets Weekly

26 January 2012 28

Romania The NBR is in the middle of a rate cutting cycle Having reduced rates in each of the past two meetings by 25bp we expect another 25bp reduction to 550 Moreover we expect two more rate cuts in the next two meetings bringing the rate to 50

South Africa Vehicle sales growth should continue to reflect the relatively positive consumer dynamics in the economy providedby low interest rates and high nominal incomes

Czech Republic The CNB is on hold On one hand it will not raise rates even though inflation (adjusted for taxes) is in the middleof the 1-3 target range because the economy is very weak On the other it will not lower rates because at 075 it is at a record low and a rate decrease is unlikely to spur increased lending

Egypt Mounting inflationary pressure and a weakening currency may push the CBE to continue raising rates

Friday 3 February Period Prev 2 Prev 1 Latest Forecast Consensus

0800 Czech Retail sales ( yy) Dec 00 15 05 - -

0800 Turkey CPI ( yy) Jan 77 95 105 1065 1045

1000 Croatia Retail trade real ( yy) Dec P 10 18 10 - -

Kazakhstan International reserves (USD bn) Jan 326 322 293 285 -

Russia CPI ( yy) Jan 72 68 61 43 -

Russia Overnight deposit rate () Feb 375 375 400 400 -

Russia Refinancing rate () Feb 825 825 800 800 -

Czech Republic Domestic demand remains muted

Turkey The trade weighted fall in the lira last year still has some room to pass through to headline CPI as capacity utilisationrates in the country remain high There are some signs of a slowdown but companies in Turkey are probably still able to pass onthe bulk of their cost increases

Kazakhstan The NBK continues to defend the currency

Russia Inflation drops amid the delay in regulated tariff hikes to 1 July The CBR will likely wait until after the 4 March presidentialelections before resuming rate cuts

Barclays Capital | The Emerging Markets Weekly

26 January 2012 29

DATA REVIEW amp PREVIEW LATIN AMERICA Alejandro Arreaza Alejandro Grisanti Bruno Rovai Guilherme Loureiro Marcelo Salomon Sebastian Vargas

Review of the weekrsquos data releases

Main indicators Period Previous BarCap Actual Comments

Brazil IPCA-15 inflation mm Jan 056 055 065 The surprise was in large part driven by a higher-than-expected increase in transportation costs (air and bus fares)

Brazil Current account USD bn Dec -68 -50 -60 The CA deficit reached USD526 bn (21 of GDP) but financing was not an issue as FDI reached USD666bn

Mexico Econ activity index yy Nov 37 40 375 Growing at a moderate pace at the margin (02 mm sa) on track for a sharp deceleration in Q4 GDP to 06 qq saar

Mexico Bi-weekly CPI 2w2w Jan 051 043 032 Lower-than-expected perishable inflation marked the January CPI release

Mexico Bi-weekly CPI core 2w2w Jan 035 026 020 A 115 2w2w drop in airfares helped contain core services inflation

Mexico Trade balance USD mn Dec -232 - 08 Exports and imports are moving further down (81 and 74 respectively)

Colombia Trade balance USD mn Nov 103 - 711 High oil prices compensate for strong increase in imports demand

Brazil COPOM meeting minutes Jan - - - Very dovish minutes with the BCB giving guidance that the Selic rate should fall to single-digit levels

Brazil Unemployment rate Dec 52 50 47 In seasonally adjusted terms the unemployment rate was flat at 56

Mexico Retail sales yy Nov 30 36 75 Strong gain of 22 mm sa probably reflecting the introduction of a local version of Black Friday in November

Preview of the week ahead

Monday 30 January Period Prev 2 Prev 1 Latest Forecast Consensus

- Brazil Central government budget BRL bn Dec 54 112 46 - -

- Colombia Overnight lending rate Jan 450 475 475 475 475

500 Brazil IGP-M inflation mm Jan 053 050 -012 030 030

700 Chile Industrial production yy Dec 52 -08 20 02 10

700 Chile Retail sales yy Dec 96 86 85 80 79

1530 Mexico Budget balance MXN bn Dec YTD -1790 -17939 -2131 - -

Colombia overnight lending rate With still moderate inflation we expected Banrep to remain on hold at its meeting this monthHowever the persistence of fast growth that is expected to offset the uncertainty coming from the European sovereign debtcrisis and the slowdown of the global economy will likely drive it to reassume its tightening cycle before the end of Q1

Chile industrial production and retail sales At the margin we expect industrial production to drop 02 mm sa leaving growth for Q4 11 at -23 3m3m saar This shows that global developments continue to take their toll in the Chilean economyRetail sales are still benefiting from tight labor market conditions but we expect them to soften gradually

Tuesday 31 January Period Prev 2 Prev 1 Latest Forecast Consensus

600 Brazil Industrial production yy Dec -16 -22 -25 01 -08

700 Chile Unemployment rate Dec 74 72 71 71 71

730 Brazil Primary budget balance BRL bn Dec 81 139 82 - -

1100 Colombia Unemployment rate Dec 102 102 103 - 104

Brazil industrial production Our forecast is consistent with a strong 14 mm sa print at the margin pushed mainly by theevolution of the auto sector (+94 mm sa) The December IBC-Br should also benefit from this gain leaving a high GDP carry-over for Q1 12

Chile unemployment rate We expect some deterioration of the unemployment rate in seasonally adjusted terms to 75 from73 The labor market data flow is already showing signs of contagion from global developments

Barclays Capital | The Emerging Markets Weekly

26 January 2012 30

Wednesday 01 February Period Prev 2 Prev 1 Latest Forecast Consensus

- Peru CPI mm Jan 031 043 027 041 -

- Peru WPI mm Jan 021 042 003 - -

1000 Mexico Remittances USD mn Dec 20847 19115 17736 - -

1200 Brazil Trade balance USD mn Jan 2355 582 3817 -1800 -

Brazil trade balance The contraction in the trade balance in January should be led by weak exports of iron ore We expectexports to increase only 16 yy while imports are likely to grow 169 yy

Thursday 02 February Period Prev 2 Prev 1 Latest Forecast Consensus

1100 Uruguay CPI mm Jan 070 040 070 - -

Friday 03 February Period Prev 2 Prev 1 Latest Forecast Consensus

900 Mexico Consumer confidence index Jan 906 895 908 - -

1100 Uruguay Unemployment rate Dec 60 57 55 - -

1600 Colombia PPI inflation mm Jan 09 01 01 - -

Week 30-04 February Period Prev 2 Prev 1 Latest Forecast Consensus

- Argentina Govern tax revenue ARS bn Jan 476 473 489 - -

1900 Colombia CPI inflation mm Jan 019 014 042 084 076

Colombia CPI inflation Considering a seasonal increase in food prices and an acceleration of core prices we expect a fastincrease in prices in January with an inflation rate of 084

Barclays Capital | The Emerging Markets Weekly

26 January 2012 31

FX FORECASTS AND FORWARDS

FX forecasts Forecast vs outright forward

Spot 1m 3m 6m 1y 1m 3m 6m 1y

G7 countries

EUR 131 135 130 125 120 30 -08 -47 -86

JPY 774 750 750 780 800 -31 -31 09 39

GBP 157 157 155 152 150 01 -11 -29 -40

CHF 092 092 096 104 108 -01 44 133 181

CAD 100 103 105 105 102 28 46 44 10

AUD 106 097 098 101 102 -83 -68 -30 -04

NZD 082 077 079 082 083 -58 -29 14 39

Emerging Asia

CNY 631 628 624 617 608 -03 -07 -17 -31

HKD 776 778 778 778 778 02 02 03 03

INR 5011 5000 5000 4900 4800 -06 -20 -54 -94

IDR 8979 8850 8800 8800 8500 -12 -21 -29 -83

KRW 1122 1100 1075 1050 1025 -21 -47 -74 -100

MYR 304 302 300 295 284 -08 -18 -37 -79

PHP 4289 4260 4220 4250 4200 -08 -19 -14 -28

SGD 126 124 123 123 122 -17 -25 -24 -29

THB 3138 3100 3060 2975 2850 -20 -35 -67 -112

TWD 2986 2970 2950 2875 2750 -07 -09 -30 -66

Latin America

ARS 434 435 445 460 540 -06 -09 -12 64

BRL 175 174 173 174 170 -10 -28 -38 -87

CLP 487 485 480 475 475 -07 -23 -40 -54

MXN 1298 1285 1270 1265 1260 -13 -29 -41 -60

COP 1811 1795 1780 1775 1770 -10 -21 -31 -44

PEN 269 268 267 266 264 -04 -12 -19 -34

EEMEA

EURCZK 2514 2550 2575 2550 2525 14 24 14 04

EURHUF 295 310 315 310 300 48 58 30 -23

EURPLN 424 430 450 440 435 12 52 20 -08

EURRON 434 436 445 440 435 02 19 00 -38

USDRUB 3023 3030 3000 3000 3050 -06 -24 -36 -45

BSKRUB 3452 3507 3405 3338 3325 10 -28 -60 -88

USDTRY 179 182 185 182 180 07 11 -24 -68

USDZAR 782 815 820 780 770 38 35 -28 -65

USDILS 376 375 370 365 360 -03 -18 -34 -50

USDEGP 604 600 620 650 700 -29 -44 -19 25

USDUAH 804 803 810 815 820 -15 -36 -71 -162

Source Barclays Capital

Barclays Capital | The Emerging Markets Weekly

26 January 2012 32

OFFICIAL INTEREST RATES

Start of cycle Forecasts as at end of

Official rate Current Date Level Last move Next move expected Q1 12 Q2 12 Q3 12 Q4 12

per annum (unless stated)

Advanced

Fed funds rate 0-025 Easing 17 Sep 07 525 Dec 08 (-75-100) Beyond 2013 0-025 0-025 0-025 0-025

BoJ overnight rate 010 Easing 30 Oct 08 050 Oct 10 (0-10) Q1 14 (+20) 0-010 0-010 0-010 0-010

ECB repo rate 100 Easing 03 Nov 11 150 Dec 11 (-25) Mar 12 (-50) 050 050 050 050

Emerging Asia

China Working capital rate 656 Tightening 19 Oct 10 531 Jul 11 (+25) Beyond Q4 12 656 656 656 656

Hong Kong Base rate 050 Easing 19 Sep 07 675 Dec 08 (-100) Beyond Q4 12 050 050 050 050

India Repo rate 850 Tightening 19 Mar 10 475 Oct 11 (+25) Q2 12 (-25) 850 825 800 775

Indonesia ON policy rate 600 Easing 11 Oct 11 675 Nov 11 (-50) Beyond Q4 12 600 600 600 600

Korea Base rate 325 Tightening 9 Jul 10 225 Jun 11(+25) Beyond Q4 12 325 325 325 325

Sri Lanka Reverse repo 850 Easing 20 Feb 09 1200 Jan 11 (-50) Q2 12 (-50) 850 800 800 800

Malaysia ON policy rate 300 Tightening 4 Mar 10 200 May 11 (+25) Beyond Q4 12 300 300 300 300

Philippines ON lending 425 Easing 19 Jan 12 450 Jan 12 (-25) Q2 12 (-25) 425 400 400 400

Taiwan Rediscount rate 1875 Tightening 24 Jun 10 1375 Jun 11 (+125) Beyond Q4 12 1875 1875 1875 1875

Thailand ON repo rate 300 Easing 30 Nov 11 350 Jan 12 (-25) Q3 12 (+25) 300 300 325 350

Vietnam Reverse repo rate 1400 Easing Jul 11 1500 Jul 11 (-100) Q1 12 (-200) 1200 1100 1000 1000

Emerging Europe Middle East amp Africa

Czech Republic 2w repo rate 075 Easing 8 Aug 08 375 Apr 10 (-25) Beyond Q4 12 075 075 075 075

Hungary 2w deposit rate 700 Tightening 29 Nov 10 525 Dec 11 (+50) Q2 12 (+25) 700 725 725 725

Poland 2w repo rate 450 Tightening 19 Jan 11 350 Jun 11 (+25) Mar 12 (-25) 425 375 375 375

Romania Key policy rate 575 Easing 4 Feb 08 1025 Jan 12 (-25) Feb 12 (-25) 525 500 500 500

Russia Refi rate 800 Easing 23 Dec 11 825 Dec 11 (-25) Mar 12 (-25) 775 750 750 750

South Africa Repo rate 550 Easing 11 Dec 08 1200 Nov 10 (-50) Nov 12 (+50) 550 550 550 600

Turkey 1wk repo rate 575 Easing 20 Nov 08 1675 Aug 11 (-50) Beyond Q4 12 575 575 575 575

Egypt Deposit rate 925 Tightening 24 Nov 11 825 Nov 11 (+100) Feb 12 (+100) 1125 1125 1125 1125

Israel Discount rate 250 Easing 26 Sep 11 325 Jan 12 (-25) Q2 12 (-25) 250 225 225 225

Latin America

Brazil SELIC rate 1050 Easing 31 Aug 11 1250 Jan 12 (-50) Mar 12 (-50) 1000 950 950 950

Chile Monetary policy rate 500 Easing 12 January 12 525 Jan 12 (-25) Feb 12 (-25) 450 425 425 425

Colombia Repo rate 475 Tightening 25 Feb 11 300 Nov 11 (+25) Mar 12 (+25) 500 550 550 550

Mexico Overnight rate 450 Easing 16 Jan 09 825 Jul 09 (-25) Q1 12 (-25) 425 400 400 400

Peru Reference rate 425 Tightening 6 May 10 125 May 11 (+25) Beyond 2012 425 425 425 425

Note Changes denoted in bold Source Barclays Capital

Barclays Capital | The Emerging Markets Weekly

26 January 2012 33

EMERGING MARKETS RESEARCH Piero Ghezzi Head of Global Economics Emerging Markets and FX Research +44 (0)20 3134 2190 pieroghezzibarcapcom

EM Global Michael Gavin Head of Global Macro Strategy and Head of EM Strategy +1 212 412 5915 michaelgavinbarcapcom

Alanna Gregory EM Strategist +1 212 412 5938 alannagregorybarcapcom

Latin America Alejandro Arreaza Economist ndash Latin America +1 212 412 3021 alejandroarreazabarcapcom

Sebastian Brown StrategistEconomist +1 212 412 6721 sebastianbrownbarcapcom

Alejandro Grisanti Chief Economist ndash Latin America Ex-Brazil Mexico +1 212 412 5982 alejandrogrisantibarcapcom

Donato Guarino Senior Strategist +1 212 412 5564 donatoguarinobarcapcom

Guilherme Loureiro Economist ndash Brazil +55 11 3757 7372 guilhermeloureirobarcapcom

Roberto Melzi Senior Strategist +1 212 412 5963 robertomelzibarcapcom

Bruno Rovai Economist +55 11 3757 7392 brunorovaibarcapcom

Marcelo Salomon Chief Economist ndash Brazil Chile Mexico+1 212 412 5717 marcelosalomonbarcapcom

Sebastian Vargas Economist - Argentina Uruguay +1 212 412 6823 sebastianvargasbarcapcom

Asia Pacific Jon Scoffin Head of Credit Research and Head of Research Asia-Pacific +65 6308 3217 jonscoffinbarcapcom

Rohit Arora FI Strategist Emerging Asia +65 6308 2092 rohitarora3barcapcom

Rahul Bajoria Regional Economist ndash India Malaysia Thailand +65 6308 3511 rahulbajoriabarcapcom

Jian Chang Regional Economist ndash China Hong Kong+852 2903 2654 jianchangbarcapcom

Joey Chew Regional Economist - Singapore +65 6308 3211 joeychewbarcapcom

Olivier Desbarres Head of FX Strategy Asia-Pacific ex-Japan +65 6308 2073 olivierdesbarresbarcapcom

Yiping Huang Chief Economist Emerging Asia +852 2903 3291 yipinghuangbarcapcom

Wai Ho Leong Senior Regional Economist ndash Korea Malaysia Singapore Taiwan +65 6308 3292 waiholeongbarcapcom

Hamish Pepper FX Strategist Asia-Pacific ex-Japan +65 6308 2220 hamishpepperbarcapcom

Kumar Rachapudi FI Strategist Emerging Asia +65 6308 3383 kumarrachapudibarcapcom

Siddhartha Sanyal Chief Economist India +91 22 6719 6177 siddharthasanyalbarcapcom

Prakriti Sofat Regional Economist ndash Indonesia Philippines Sri Lanka Vietnam +65 6308 3201 prakritisofatbarcapcom

Nick Verdi FX Strategist Asia-Pacific ex-Japan +65 6308 3093 nickverdibarcapcom

Ju Wang FI Strategist Emerging Asia +65 6308 2801 juwangbarcapcom

Lingxiu (Steven) Yang Regional Economist ndash China Hong Kong +852 2903 2653 lingxiuyangbarcapcom

Krishna Hegde CFA Asia Credit Strategist and Senior Financial Institutions +65 6308 2979 krishnahegdebarcapcom

Avanti Save Credit Strategy +65 6308 3116 avantisavebarcapcom

Emerging EMEA Christian Keller Head of Emerging EMEA Research +44 (0)20 7773 2031 christiankellerbarcapcom

Koon Chow Head of Emerging EMEA Strategy +44 (0)20 777 37572 koonchowbarcapcom

Jeff Gable Head of ABSA Capital Research +27 11 895 5368 jeffgableabsacapitalcom

Gina Schoeman Economist ndash South Africa +27 (0)11 895 5403 ginaschoemanabsacapitalcom

Daniel Hewitt Senior Emerging EMEA Economist +44 (0)20 3134 3522 danielhewittbarcapcom

Piotr Chwiejczak Rates Strategist +44 (0)20 3134 4606 piotrchwiejczak barcapcom

Ridle Markus Economist ndash Sub-Saharan Africa +27 11 895 5374 ridlemarkusabsacapitalcom

Fahad Al Turki Economist ndash Saudi Arabia +966 1880 6577 fahadalturkibarcapcom

Vladimir Pantyushin Chief Economist ndash Russia and CIS +7 495 7868450 vladimirpantyushinbarcapcom

Andreas Kolbe Credit Strategist +44 (0)20 313 43134 andreaskolbebarcapcom

Jeffrey Schultz Economist ndash South Africa +27 (0)11 895 5349 jeffreyschultzabsacapitalcom

Eldar Vakhitov Emerging EMEA Economist +44 (0)20 777 32192 eldarvakhitovbarcapcom

Alia Moubayed Senior Economist ndash Middle East amp North Africa +44 (0)20 313 41120 aliamoubayedbarcapcom

Dumisani Ngwenya Strategist ndash Africa +27 (0)11 895 5346 dumisaningwenyaabsacapitalcom

Michael Keenan Sub-Saharan FX and Rates Strategist +27 (0) 11 895 5513 mikekeenanabsacapitalcom

EM Corporate Credit Juan C Cruz Head of Latin America amp EEMEA Corporate Credit Research +1 212 412 3424 juancruzbarcapcom

Christopher Buck +1 212 412 3418 christopherbuckbarcapcom

Stella Cridge +44 (0)20 313 49618 stellacridgebarcapcom

Miguel Crivelli +1 212 412 5231 miguelcrivellibarcapcom

Ivan Fernandes +1 212 412 3428 ivanfernandesbarcapcom

Autumn Graham +1 212 412 2839 autumngrahambarcapcom

Milena Ianeva +44 (0)20 7773 8536 milenaianevabarcapcom

Stanislav Ponomarenko +7 495 786 8451 stanislavponomarenkobarcapcom

Aziz Sunderji +1 212 412 2218 azizsunderjibarcapcom

Antoine Yacoub + 44 207 7731727 antoineyacoubbarcapcom

Golib Zohidov +44 (0)20 777 31513 golibzohidovbarcapcom

Barclays Capital | The Emerging Markets Weekly

26 January 2012 26

DATA REVIEW amp PREVIEW EMERGING EUROPE MIDDLE EAST AND AFRICA Eldar Vakhitov Daniel Hewitt Christian Keller Vladimir Pantyushin Jeffrey Schultz Alia Moubayed Piotr Chwiejczak

Review of last weekrsquos data releases

Main indicators Period Previous Barclays Actual Comments

Israel Base rate announcement () Jan 275 250 250 Rate cut due to rapid deceleration of inflation

Turkey Benchmark repo rate () Jan 575 575 575 Rate on hold but revisions in FX auction more ad hoc

Hungary Base rate announcement () Jan 700 725 700 Rates on hold because of HUF strength and high real rate

Israel Unemployment rate () Nov 54 - 54 Unemployment rate remains low but could rise later

Russia Industrial production ( yy) Dec 39 - 25 Expected slowing in line with the global trend

Hungary Retail trade ( yy) Nov 06 - 11 Apparent slight improvement in domestic demand

Turkey Industrial confidence index Jan 972 - 1018 Turkish economy rolling buoyed by domestic demand

Turkey Capacity utilization () Jan 755 - 747 Second consecutive monthly decline still a high level

South Africa PPI ( yy) Dec 101 99 98 Lower on the back of softer commodity prices food prices however continue to gain momentum

Russia Disposable income ( yy) Dec 02 - 63 Consistent growth underpins consumer sector expansion

Russia Real wages ( yy) Dec 71 - 49 Consistent growth underpins consumer sector expansion

Russia Retail sales real ( yy) Dec 86 - 95 Consumer sector outperforms yet again

Russia Unemployment rate () Dec 63 - 61 A welcome decline adding power to consumer demand

Russia Investment in productive capacity ( yy) Dec 77 - 89 Strong investment provides support to mid-term growth

Preview of week ahead

Friday 27 January Period Prev 2 Prev 1 Latest Forecast Consensus

0900 Poland Real GDP growth () 2011 51 17 38 41 42

0900 Poland Unemployment rate () Dec 118 118 121 125 125

0900 Poland Retail sales ( yy) Dec 114 112 126 110 100

1000 Croatia Industrial output ( yy) Dec -23 06 -03 - -

Poland Growth print is likely to be strong again despite softening PMIs ldquohardrdquo data remained strong in Q4 11 therefore a positivesurprise is possible however in Q1 12 we expect growth to slow down gradually Government officials have already hinted thatunemployment in December has increased driven by seasonal factors and cyclical elements as well as overall weakening demand

Croatia Despite the oil refinery fire no longer weighing on IP we still expect only marginally positive growth in December

Monday 30 January Period Prev 2 Prev 1 Latest Forecast Consensus

0900 Lithuania Real GDP ( yy) Q4 P 59 65 67 - -

Poland Budget level YTD (PLN bn) Dec -219 -225 -216 -223 -

Serbia Real GDP ( yy) Q4 P 37 25 05 02 -

Ukraine Current account (USD bn) Q4 -13 -17 -27 - -

Ukraine GDP constant prices ( yy) Q4 P 53 38 66 40 -

Lithuania Lithuania (together with Serbia) will be among the first CEE country to report Q4 GDP growth and it will be interestingto see to what extent the weaker external demand environment will be reflected in Lithuaniarsquos Q4 GDP print After the verystrong growth in 2011 of likely close to 6 yy (annual) we expect it to slow to 25 in 2012 ndash still a comparatively robust number in the regional context however

Poland Overall we expect the central budget deficit gap to come in at around PLN22bn Stronger economic activity particularlystrong retail sales should contribute to tax income while spending has been kept under control Local government deficit mayalso come in below projected numbers

Serbia We expect growth to be only slightly positive as export growth declined considerably in Q4

Ukraine The economy has likely already entered a softer patch while the external account gap continues to widen

Barclays Capital | The Emerging Markets Weekly

26 January 2012 27

Tuesday 31 January Period Prev 2 Prev 1 Latest Forecast Consensus

0600 South Africa Private sector credit ( yy) Dec 54 55 62 58 -

0800 Hungary Unemployment rate () Dec 107 108 106 - 108

0800 Turkey Trade balance (USD bn) Dec -104 -80 -75 -85 -735

1200 South Africa Trade balance (rand bn) Dec 25 -96 -81 - -

Russia Annual real GDP (yy) 2011 52 -78 40 42 -

Serbia Industrial output ( yy) Dec -18 -10 22 - -

Serbia Retail trade ( yy) Dec -183 -162 -164 - -

South Africa Although we expect a moderation in headline PSCE growth consumer spending into the festive season throughother smaller unsecured components of household credit should see the mm growth in PSCE tick up further in December

Hungary We expect to see a slight weakening of domestic labour in Hungary

Turkey We look for a small mm widening of the trade deficit as signalled by stronger customs duties collections in December that implies a pick-up in imports

Russia The growth emphasis shifts to domestic drivers with investment and consumer demand performing well recently

Wednesday 1 February Period Prev 2 Prev 1 Latest Forecast Consensus

0500 Russia Manufacturing PMI Jan 504 526 516 - -

0800 Poland Manufacturing PMI Jan 517 495 488 - -

0800 Turkey Manufacturing PMI Jan 533 523 520 - -

0830 Czech Manufacturing PMI Jan 517 486 492 - -

0900 South Africa Kagiso PMI Jan 502 505 516 - -

Czech Budget balance (CZK bn) Jan -915 -1259 -1428 - -

Hungary PMI Jan 482 478 485 - -

Kazakhstan CPI ( yy) Jan 80 78 74 70 -

Romania International reserves (USD bn) Jan 363 360 373 - -

South Africa Unemployment () Q4 250 257 250 - -

Russia Despite recent slowing Russiarsquos IP performance remains well within positive territory Domestic demand sectors showimproving dynamics This will likely be reflected in manager expectations

Poland Amid a general U-turn in optimism in Europe Polish entrepreneurs are also likely to adopt a more positive approachwhich is likely to be reflected in the survey Also mild winter weather conditions should work in favour of a higher PMI Still weexpect slower industrial production in months to come

Turkey Domestic growth indicators that are still holding up well could be reflected in a stronger PMI reading

Czech Republic Further indications of recession likely with the PMI remaining below 50 in January

South Africa Still-significant global risks and uncertainty along with a still-struggling domestic manufacturing sector are likely to leave the PMI hovering around its neutral level of 50 in January

Hungary Growth indicators have been mixed indicating a modest recession is in process

Kazakhstan We expect disinflation to continue running its course

Romania Stable currency markets have made it possible for the NBR to limit FX intervention helping it maintain its extremelyhigh levels of reserves

Thursday 2 February Period Prev 2 Prev 1 Latest Forecast Consensus

0800 Romania Retail sales ( yy) Dec -52 20 19 - -

1000 South Africa Naamsa vehicle sales ( yy) Jan 189 117 110 - -

1200 Czech Repo rate announcement () Feb 075 075 075 075 075

Romania Interest rate announcement () Feb 625 600 575 550 550

Egypt Deposit rate () Feb 825 825 925 1025 -

Barclays Capital | The Emerging Markets Weekly

26 January 2012 28

Romania The NBR is in the middle of a rate cutting cycle Having reduced rates in each of the past two meetings by 25bp we expect another 25bp reduction to 550 Moreover we expect two more rate cuts in the next two meetings bringing the rate to 50

South Africa Vehicle sales growth should continue to reflect the relatively positive consumer dynamics in the economy providedby low interest rates and high nominal incomes

Czech Republic The CNB is on hold On one hand it will not raise rates even though inflation (adjusted for taxes) is in the middleof the 1-3 target range because the economy is very weak On the other it will not lower rates because at 075 it is at a record low and a rate decrease is unlikely to spur increased lending

Egypt Mounting inflationary pressure and a weakening currency may push the CBE to continue raising rates

Friday 3 February Period Prev 2 Prev 1 Latest Forecast Consensus

0800 Czech Retail sales ( yy) Dec 00 15 05 - -

0800 Turkey CPI ( yy) Jan 77 95 105 1065 1045

1000 Croatia Retail trade real ( yy) Dec P 10 18 10 - -

Kazakhstan International reserves (USD bn) Jan 326 322 293 285 -

Russia CPI ( yy) Jan 72 68 61 43 -

Russia Overnight deposit rate () Feb 375 375 400 400 -

Russia Refinancing rate () Feb 825 825 800 800 -

Czech Republic Domestic demand remains muted

Turkey The trade weighted fall in the lira last year still has some room to pass through to headline CPI as capacity utilisationrates in the country remain high There are some signs of a slowdown but companies in Turkey are probably still able to pass onthe bulk of their cost increases

Kazakhstan The NBK continues to defend the currency

Russia Inflation drops amid the delay in regulated tariff hikes to 1 July The CBR will likely wait until after the 4 March presidentialelections before resuming rate cuts

Barclays Capital | The Emerging Markets Weekly

26 January 2012 29

DATA REVIEW amp PREVIEW LATIN AMERICA Alejandro Arreaza Alejandro Grisanti Bruno Rovai Guilherme Loureiro Marcelo Salomon Sebastian Vargas

Review of the weekrsquos data releases

Main indicators Period Previous BarCap Actual Comments

Brazil IPCA-15 inflation mm Jan 056 055 065 The surprise was in large part driven by a higher-than-expected increase in transportation costs (air and bus fares)

Brazil Current account USD bn Dec -68 -50 -60 The CA deficit reached USD526 bn (21 of GDP) but financing was not an issue as FDI reached USD666bn

Mexico Econ activity index yy Nov 37 40 375 Growing at a moderate pace at the margin (02 mm sa) on track for a sharp deceleration in Q4 GDP to 06 qq saar

Mexico Bi-weekly CPI 2w2w Jan 051 043 032 Lower-than-expected perishable inflation marked the January CPI release

Mexico Bi-weekly CPI core 2w2w Jan 035 026 020 A 115 2w2w drop in airfares helped contain core services inflation

Mexico Trade balance USD mn Dec -232 - 08 Exports and imports are moving further down (81 and 74 respectively)

Colombia Trade balance USD mn Nov 103 - 711 High oil prices compensate for strong increase in imports demand

Brazil COPOM meeting minutes Jan - - - Very dovish minutes with the BCB giving guidance that the Selic rate should fall to single-digit levels

Brazil Unemployment rate Dec 52 50 47 In seasonally adjusted terms the unemployment rate was flat at 56

Mexico Retail sales yy Nov 30 36 75 Strong gain of 22 mm sa probably reflecting the introduction of a local version of Black Friday in November

Preview of the week ahead

Monday 30 January Period Prev 2 Prev 1 Latest Forecast Consensus

- Brazil Central government budget BRL bn Dec 54 112 46 - -

- Colombia Overnight lending rate Jan 450 475 475 475 475

500 Brazil IGP-M inflation mm Jan 053 050 -012 030 030

700 Chile Industrial production yy Dec 52 -08 20 02 10

700 Chile Retail sales yy Dec 96 86 85 80 79

1530 Mexico Budget balance MXN bn Dec YTD -1790 -17939 -2131 - -

Colombia overnight lending rate With still moderate inflation we expected Banrep to remain on hold at its meeting this monthHowever the persistence of fast growth that is expected to offset the uncertainty coming from the European sovereign debtcrisis and the slowdown of the global economy will likely drive it to reassume its tightening cycle before the end of Q1

Chile industrial production and retail sales At the margin we expect industrial production to drop 02 mm sa leaving growth for Q4 11 at -23 3m3m saar This shows that global developments continue to take their toll in the Chilean economyRetail sales are still benefiting from tight labor market conditions but we expect them to soften gradually

Tuesday 31 January Period Prev 2 Prev 1 Latest Forecast Consensus

600 Brazil Industrial production yy Dec -16 -22 -25 01 -08

700 Chile Unemployment rate Dec 74 72 71 71 71

730 Brazil Primary budget balance BRL bn Dec 81 139 82 - -

1100 Colombia Unemployment rate Dec 102 102 103 - 104

Brazil industrial production Our forecast is consistent with a strong 14 mm sa print at the margin pushed mainly by theevolution of the auto sector (+94 mm sa) The December IBC-Br should also benefit from this gain leaving a high GDP carry-over for Q1 12

Chile unemployment rate We expect some deterioration of the unemployment rate in seasonally adjusted terms to 75 from73 The labor market data flow is already showing signs of contagion from global developments

Barclays Capital | The Emerging Markets Weekly

26 January 2012 30

Wednesday 01 February Period Prev 2 Prev 1 Latest Forecast Consensus

- Peru CPI mm Jan 031 043 027 041 -

- Peru WPI mm Jan 021 042 003 - -

1000 Mexico Remittances USD mn Dec 20847 19115 17736 - -

1200 Brazil Trade balance USD mn Jan 2355 582 3817 -1800 -

Brazil trade balance The contraction in the trade balance in January should be led by weak exports of iron ore We expectexports to increase only 16 yy while imports are likely to grow 169 yy

Thursday 02 February Period Prev 2 Prev 1 Latest Forecast Consensus

1100 Uruguay CPI mm Jan 070 040 070 - -

Friday 03 February Period Prev 2 Prev 1 Latest Forecast Consensus

900 Mexico Consumer confidence index Jan 906 895 908 - -

1100 Uruguay Unemployment rate Dec 60 57 55 - -

1600 Colombia PPI inflation mm Jan 09 01 01 - -

Week 30-04 February Period Prev 2 Prev 1 Latest Forecast Consensus

- Argentina Govern tax revenue ARS bn Jan 476 473 489 - -

1900 Colombia CPI inflation mm Jan 019 014 042 084 076

Colombia CPI inflation Considering a seasonal increase in food prices and an acceleration of core prices we expect a fastincrease in prices in January with an inflation rate of 084

Barclays Capital | The Emerging Markets Weekly

26 January 2012 31

FX FORECASTS AND FORWARDS

FX forecasts Forecast vs outright forward

Spot 1m 3m 6m 1y 1m 3m 6m 1y

G7 countries

EUR 131 135 130 125 120 30 -08 -47 -86

JPY 774 750 750 780 800 -31 -31 09 39

GBP 157 157 155 152 150 01 -11 -29 -40

CHF 092 092 096 104 108 -01 44 133 181

CAD 100 103 105 105 102 28 46 44 10

AUD 106 097 098 101 102 -83 -68 -30 -04

NZD 082 077 079 082 083 -58 -29 14 39

Emerging Asia

CNY 631 628 624 617 608 -03 -07 -17 -31

HKD 776 778 778 778 778 02 02 03 03

INR 5011 5000 5000 4900 4800 -06 -20 -54 -94

IDR 8979 8850 8800 8800 8500 -12 -21 -29 -83

KRW 1122 1100 1075 1050 1025 -21 -47 -74 -100

MYR 304 302 300 295 284 -08 -18 -37 -79

PHP 4289 4260 4220 4250 4200 -08 -19 -14 -28

SGD 126 124 123 123 122 -17 -25 -24 -29

THB 3138 3100 3060 2975 2850 -20 -35 -67 -112

TWD 2986 2970 2950 2875 2750 -07 -09 -30 -66

Latin America

ARS 434 435 445 460 540 -06 -09 -12 64

BRL 175 174 173 174 170 -10 -28 -38 -87

CLP 487 485 480 475 475 -07 -23 -40 -54

MXN 1298 1285 1270 1265 1260 -13 -29 -41 -60

COP 1811 1795 1780 1775 1770 -10 -21 -31 -44

PEN 269 268 267 266 264 -04 -12 -19 -34

EEMEA

EURCZK 2514 2550 2575 2550 2525 14 24 14 04

EURHUF 295 310 315 310 300 48 58 30 -23

EURPLN 424 430 450 440 435 12 52 20 -08

EURRON 434 436 445 440 435 02 19 00 -38

USDRUB 3023 3030 3000 3000 3050 -06 -24 -36 -45

BSKRUB 3452 3507 3405 3338 3325 10 -28 -60 -88

USDTRY 179 182 185 182 180 07 11 -24 -68

USDZAR 782 815 820 780 770 38 35 -28 -65

USDILS 376 375 370 365 360 -03 -18 -34 -50

USDEGP 604 600 620 650 700 -29 -44 -19 25

USDUAH 804 803 810 815 820 -15 -36 -71 -162

Source Barclays Capital

Barclays Capital | The Emerging Markets Weekly

26 January 2012 32

OFFICIAL INTEREST RATES

Start of cycle Forecasts as at end of

Official rate Current Date Level Last move Next move expected Q1 12 Q2 12 Q3 12 Q4 12

per annum (unless stated)

Advanced

Fed funds rate 0-025 Easing 17 Sep 07 525 Dec 08 (-75-100) Beyond 2013 0-025 0-025 0-025 0-025

BoJ overnight rate 010 Easing 30 Oct 08 050 Oct 10 (0-10) Q1 14 (+20) 0-010 0-010 0-010 0-010

ECB repo rate 100 Easing 03 Nov 11 150 Dec 11 (-25) Mar 12 (-50) 050 050 050 050

Emerging Asia

China Working capital rate 656 Tightening 19 Oct 10 531 Jul 11 (+25) Beyond Q4 12 656 656 656 656

Hong Kong Base rate 050 Easing 19 Sep 07 675 Dec 08 (-100) Beyond Q4 12 050 050 050 050

India Repo rate 850 Tightening 19 Mar 10 475 Oct 11 (+25) Q2 12 (-25) 850 825 800 775

Indonesia ON policy rate 600 Easing 11 Oct 11 675 Nov 11 (-50) Beyond Q4 12 600 600 600 600

Korea Base rate 325 Tightening 9 Jul 10 225 Jun 11(+25) Beyond Q4 12 325 325 325 325

Sri Lanka Reverse repo 850 Easing 20 Feb 09 1200 Jan 11 (-50) Q2 12 (-50) 850 800 800 800

Malaysia ON policy rate 300 Tightening 4 Mar 10 200 May 11 (+25) Beyond Q4 12 300 300 300 300

Philippines ON lending 425 Easing 19 Jan 12 450 Jan 12 (-25) Q2 12 (-25) 425 400 400 400

Taiwan Rediscount rate 1875 Tightening 24 Jun 10 1375 Jun 11 (+125) Beyond Q4 12 1875 1875 1875 1875

Thailand ON repo rate 300 Easing 30 Nov 11 350 Jan 12 (-25) Q3 12 (+25) 300 300 325 350

Vietnam Reverse repo rate 1400 Easing Jul 11 1500 Jul 11 (-100) Q1 12 (-200) 1200 1100 1000 1000

Emerging Europe Middle East amp Africa

Czech Republic 2w repo rate 075 Easing 8 Aug 08 375 Apr 10 (-25) Beyond Q4 12 075 075 075 075

Hungary 2w deposit rate 700 Tightening 29 Nov 10 525 Dec 11 (+50) Q2 12 (+25) 700 725 725 725

Poland 2w repo rate 450 Tightening 19 Jan 11 350 Jun 11 (+25) Mar 12 (-25) 425 375 375 375

Romania Key policy rate 575 Easing 4 Feb 08 1025 Jan 12 (-25) Feb 12 (-25) 525 500 500 500

Russia Refi rate 800 Easing 23 Dec 11 825 Dec 11 (-25) Mar 12 (-25) 775 750 750 750

South Africa Repo rate 550 Easing 11 Dec 08 1200 Nov 10 (-50) Nov 12 (+50) 550 550 550 600

Turkey 1wk repo rate 575 Easing 20 Nov 08 1675 Aug 11 (-50) Beyond Q4 12 575 575 575 575

Egypt Deposit rate 925 Tightening 24 Nov 11 825 Nov 11 (+100) Feb 12 (+100) 1125 1125 1125 1125

Israel Discount rate 250 Easing 26 Sep 11 325 Jan 12 (-25) Q2 12 (-25) 250 225 225 225

Latin America

Brazil SELIC rate 1050 Easing 31 Aug 11 1250 Jan 12 (-50) Mar 12 (-50) 1000 950 950 950

Chile Monetary policy rate 500 Easing 12 January 12 525 Jan 12 (-25) Feb 12 (-25) 450 425 425 425

Colombia Repo rate 475 Tightening 25 Feb 11 300 Nov 11 (+25) Mar 12 (+25) 500 550 550 550

Mexico Overnight rate 450 Easing 16 Jan 09 825 Jul 09 (-25) Q1 12 (-25) 425 400 400 400

Peru Reference rate 425 Tightening 6 May 10 125 May 11 (+25) Beyond 2012 425 425 425 425

Note Changes denoted in bold Source Barclays Capital

Barclays Capital | The Emerging Markets Weekly

26 January 2012 33

EMERGING MARKETS RESEARCH Piero Ghezzi Head of Global Economics Emerging Markets and FX Research +44 (0)20 3134 2190 pieroghezzibarcapcom

EM Global Michael Gavin Head of Global Macro Strategy and Head of EM Strategy +1 212 412 5915 michaelgavinbarcapcom

Alanna Gregory EM Strategist +1 212 412 5938 alannagregorybarcapcom

Latin America Alejandro Arreaza Economist ndash Latin America +1 212 412 3021 alejandroarreazabarcapcom

Sebastian Brown StrategistEconomist +1 212 412 6721 sebastianbrownbarcapcom

Alejandro Grisanti Chief Economist ndash Latin America Ex-Brazil Mexico +1 212 412 5982 alejandrogrisantibarcapcom

Donato Guarino Senior Strategist +1 212 412 5564 donatoguarinobarcapcom

Guilherme Loureiro Economist ndash Brazil +55 11 3757 7372 guilhermeloureirobarcapcom

Roberto Melzi Senior Strategist +1 212 412 5963 robertomelzibarcapcom

Bruno Rovai Economist +55 11 3757 7392 brunorovaibarcapcom

Marcelo Salomon Chief Economist ndash Brazil Chile Mexico+1 212 412 5717 marcelosalomonbarcapcom

Sebastian Vargas Economist - Argentina Uruguay +1 212 412 6823 sebastianvargasbarcapcom

Asia Pacific Jon Scoffin Head of Credit Research and Head of Research Asia-Pacific +65 6308 3217 jonscoffinbarcapcom

Rohit Arora FI Strategist Emerging Asia +65 6308 2092 rohitarora3barcapcom

Rahul Bajoria Regional Economist ndash India Malaysia Thailand +65 6308 3511 rahulbajoriabarcapcom

Jian Chang Regional Economist ndash China Hong Kong+852 2903 2654 jianchangbarcapcom

Joey Chew Regional Economist - Singapore +65 6308 3211 joeychewbarcapcom

Olivier Desbarres Head of FX Strategy Asia-Pacific ex-Japan +65 6308 2073 olivierdesbarresbarcapcom

Yiping Huang Chief Economist Emerging Asia +852 2903 3291 yipinghuangbarcapcom

Wai Ho Leong Senior Regional Economist ndash Korea Malaysia Singapore Taiwan +65 6308 3292 waiholeongbarcapcom

Hamish Pepper FX Strategist Asia-Pacific ex-Japan +65 6308 2220 hamishpepperbarcapcom

Kumar Rachapudi FI Strategist Emerging Asia +65 6308 3383 kumarrachapudibarcapcom

Siddhartha Sanyal Chief Economist India +91 22 6719 6177 siddharthasanyalbarcapcom

Prakriti Sofat Regional Economist ndash Indonesia Philippines Sri Lanka Vietnam +65 6308 3201 prakritisofatbarcapcom

Nick Verdi FX Strategist Asia-Pacific ex-Japan +65 6308 3093 nickverdibarcapcom

Ju Wang FI Strategist Emerging Asia +65 6308 2801 juwangbarcapcom

Lingxiu (Steven) Yang Regional Economist ndash China Hong Kong +852 2903 2653 lingxiuyangbarcapcom

Krishna Hegde CFA Asia Credit Strategist and Senior Financial Institutions +65 6308 2979 krishnahegdebarcapcom

Avanti Save Credit Strategy +65 6308 3116 avantisavebarcapcom

Emerging EMEA Christian Keller Head of Emerging EMEA Research +44 (0)20 7773 2031 christiankellerbarcapcom

Koon Chow Head of Emerging EMEA Strategy +44 (0)20 777 37572 koonchowbarcapcom

Jeff Gable Head of ABSA Capital Research +27 11 895 5368 jeffgableabsacapitalcom

Gina Schoeman Economist ndash South Africa +27 (0)11 895 5403 ginaschoemanabsacapitalcom

Daniel Hewitt Senior Emerging EMEA Economist +44 (0)20 3134 3522 danielhewittbarcapcom

Piotr Chwiejczak Rates Strategist +44 (0)20 3134 4606 piotrchwiejczak barcapcom

Ridle Markus Economist ndash Sub-Saharan Africa +27 11 895 5374 ridlemarkusabsacapitalcom

Fahad Al Turki Economist ndash Saudi Arabia +966 1880 6577 fahadalturkibarcapcom

Vladimir Pantyushin Chief Economist ndash Russia and CIS +7 495 7868450 vladimirpantyushinbarcapcom

Andreas Kolbe Credit Strategist +44 (0)20 313 43134 andreaskolbebarcapcom

Jeffrey Schultz Economist ndash South Africa +27 (0)11 895 5349 jeffreyschultzabsacapitalcom

Eldar Vakhitov Emerging EMEA Economist +44 (0)20 777 32192 eldarvakhitovbarcapcom

Alia Moubayed Senior Economist ndash Middle East amp North Africa +44 (0)20 313 41120 aliamoubayedbarcapcom

Dumisani Ngwenya Strategist ndash Africa +27 (0)11 895 5346 dumisaningwenyaabsacapitalcom

Michael Keenan Sub-Saharan FX and Rates Strategist +27 (0) 11 895 5513 mikekeenanabsacapitalcom

EM Corporate Credit Juan C Cruz Head of Latin America amp EEMEA Corporate Credit Research +1 212 412 3424 juancruzbarcapcom

Christopher Buck +1 212 412 3418 christopherbuckbarcapcom

Stella Cridge +44 (0)20 313 49618 stellacridgebarcapcom

Miguel Crivelli +1 212 412 5231 miguelcrivellibarcapcom

Ivan Fernandes +1 212 412 3428 ivanfernandesbarcapcom

Autumn Graham +1 212 412 2839 autumngrahambarcapcom

Milena Ianeva +44 (0)20 7773 8536 milenaianevabarcapcom

Stanislav Ponomarenko +7 495 786 8451 stanislavponomarenkobarcapcom

Aziz Sunderji +1 212 412 2218 azizsunderjibarcapcom

Antoine Yacoub + 44 207 7731727 antoineyacoubbarcapcom

Golib Zohidov +44 (0)20 777 31513 golibzohidovbarcapcom

Barclays Capital | The Emerging Markets Weekly

26 January 2012 27

Tuesday 31 January Period Prev 2 Prev 1 Latest Forecast Consensus

0600 South Africa Private sector credit ( yy) Dec 54 55 62 58 -

0800 Hungary Unemployment rate () Dec 107 108 106 - 108

0800 Turkey Trade balance (USD bn) Dec -104 -80 -75 -85 -735

1200 South Africa Trade balance (rand bn) Dec 25 -96 -81 - -

Russia Annual real GDP (yy) 2011 52 -78 40 42 -

Serbia Industrial output ( yy) Dec -18 -10 22 - -

Serbia Retail trade ( yy) Dec -183 -162 -164 - -

South Africa Although we expect a moderation in headline PSCE growth consumer spending into the festive season throughother smaller unsecured components of household credit should see the mm growth in PSCE tick up further in December

Hungary We expect to see a slight weakening of domestic labour in Hungary

Turkey We look for a small mm widening of the trade deficit as signalled by stronger customs duties collections in December that implies a pick-up in imports

Russia The growth emphasis shifts to domestic drivers with investment and consumer demand performing well recently

Wednesday 1 February Period Prev 2 Prev 1 Latest Forecast Consensus

0500 Russia Manufacturing PMI Jan 504 526 516 - -

0800 Poland Manufacturing PMI Jan 517 495 488 - -

0800 Turkey Manufacturing PMI Jan 533 523 520 - -

0830 Czech Manufacturing PMI Jan 517 486 492 - -

0900 South Africa Kagiso PMI Jan 502 505 516 - -

Czech Budget balance (CZK bn) Jan -915 -1259 -1428 - -

Hungary PMI Jan 482 478 485 - -

Kazakhstan CPI ( yy) Jan 80 78 74 70 -

Romania International reserves (USD bn) Jan 363 360 373 - -

South Africa Unemployment () Q4 250 257 250 - -

Russia Despite recent slowing Russiarsquos IP performance remains well within positive territory Domestic demand sectors showimproving dynamics This will likely be reflected in manager expectations

Poland Amid a general U-turn in optimism in Europe Polish entrepreneurs are also likely to adopt a more positive approachwhich is likely to be reflected in the survey Also mild winter weather conditions should work in favour of a higher PMI Still weexpect slower industrial production in months to come

Turkey Domestic growth indicators that are still holding up well could be reflected in a stronger PMI reading

Czech Republic Further indications of recession likely with the PMI remaining below 50 in January

South Africa Still-significant global risks and uncertainty along with a still-struggling domestic manufacturing sector are likely to leave the PMI hovering around its neutral level of 50 in January

Hungary Growth indicators have been mixed indicating a modest recession is in process

Kazakhstan We expect disinflation to continue running its course

Romania Stable currency markets have made it possible for the NBR to limit FX intervention helping it maintain its extremelyhigh levels of reserves

Thursday 2 February Period Prev 2 Prev 1 Latest Forecast Consensus

0800 Romania Retail sales ( yy) Dec -52 20 19 - -

1000 South Africa Naamsa vehicle sales ( yy) Jan 189 117 110 - -

1200 Czech Repo rate announcement () Feb 075 075 075 075 075

Romania Interest rate announcement () Feb 625 600 575 550 550

Egypt Deposit rate () Feb 825 825 925 1025 -

Barclays Capital | The Emerging Markets Weekly

26 January 2012 28

Romania The NBR is in the middle of a rate cutting cycle Having reduced rates in each of the past two meetings by 25bp we expect another 25bp reduction to 550 Moreover we expect two more rate cuts in the next two meetings bringing the rate to 50

South Africa Vehicle sales growth should continue to reflect the relatively positive consumer dynamics in the economy providedby low interest rates and high nominal incomes

Czech Republic The CNB is on hold On one hand it will not raise rates even though inflation (adjusted for taxes) is in the middleof the 1-3 target range because the economy is very weak On the other it will not lower rates because at 075 it is at a record low and a rate decrease is unlikely to spur increased lending

Egypt Mounting inflationary pressure and a weakening currency may push the CBE to continue raising rates

Friday 3 February Period Prev 2 Prev 1 Latest Forecast Consensus

0800 Czech Retail sales ( yy) Dec 00 15 05 - -

0800 Turkey CPI ( yy) Jan 77 95 105 1065 1045

1000 Croatia Retail trade real ( yy) Dec P 10 18 10 - -

Kazakhstan International reserves (USD bn) Jan 326 322 293 285 -

Russia CPI ( yy) Jan 72 68 61 43 -

Russia Overnight deposit rate () Feb 375 375 400 400 -

Russia Refinancing rate () Feb 825 825 800 800 -

Czech Republic Domestic demand remains muted

Turkey The trade weighted fall in the lira last year still has some room to pass through to headline CPI as capacity utilisationrates in the country remain high There are some signs of a slowdown but companies in Turkey are probably still able to pass onthe bulk of their cost increases

Kazakhstan The NBK continues to defend the currency

Russia Inflation drops amid the delay in regulated tariff hikes to 1 July The CBR will likely wait until after the 4 March presidentialelections before resuming rate cuts

Barclays Capital | The Emerging Markets Weekly

26 January 2012 29

DATA REVIEW amp PREVIEW LATIN AMERICA Alejandro Arreaza Alejandro Grisanti Bruno Rovai Guilherme Loureiro Marcelo Salomon Sebastian Vargas

Review of the weekrsquos data releases

Main indicators Period Previous BarCap Actual Comments

Brazil IPCA-15 inflation mm Jan 056 055 065 The surprise was in large part driven by a higher-than-expected increase in transportation costs (air and bus fares)

Brazil Current account USD bn Dec -68 -50 -60 The CA deficit reached USD526 bn (21 of GDP) but financing was not an issue as FDI reached USD666bn

Mexico Econ activity index yy Nov 37 40 375 Growing at a moderate pace at the margin (02 mm sa) on track for a sharp deceleration in Q4 GDP to 06 qq saar

Mexico Bi-weekly CPI 2w2w Jan 051 043 032 Lower-than-expected perishable inflation marked the January CPI release

Mexico Bi-weekly CPI core 2w2w Jan 035 026 020 A 115 2w2w drop in airfares helped contain core services inflation

Mexico Trade balance USD mn Dec -232 - 08 Exports and imports are moving further down (81 and 74 respectively)

Colombia Trade balance USD mn Nov 103 - 711 High oil prices compensate for strong increase in imports demand

Brazil COPOM meeting minutes Jan - - - Very dovish minutes with the BCB giving guidance that the Selic rate should fall to single-digit levels

Brazil Unemployment rate Dec 52 50 47 In seasonally adjusted terms the unemployment rate was flat at 56

Mexico Retail sales yy Nov 30 36 75 Strong gain of 22 mm sa probably reflecting the introduction of a local version of Black Friday in November

Preview of the week ahead

Monday 30 January Period Prev 2 Prev 1 Latest Forecast Consensus

- Brazil Central government budget BRL bn Dec 54 112 46 - -

- Colombia Overnight lending rate Jan 450 475 475 475 475

500 Brazil IGP-M inflation mm Jan 053 050 -012 030 030

700 Chile Industrial production yy Dec 52 -08 20 02 10

700 Chile Retail sales yy Dec 96 86 85 80 79

1530 Mexico Budget balance MXN bn Dec YTD -1790 -17939 -2131 - -

Colombia overnight lending rate With still moderate inflation we expected Banrep to remain on hold at its meeting this monthHowever the persistence of fast growth that is expected to offset the uncertainty coming from the European sovereign debtcrisis and the slowdown of the global economy will likely drive it to reassume its tightening cycle before the end of Q1

Chile industrial production and retail sales At the margin we expect industrial production to drop 02 mm sa leaving growth for Q4 11 at -23 3m3m saar This shows that global developments continue to take their toll in the Chilean economyRetail sales are still benefiting from tight labor market conditions but we expect them to soften gradually

Tuesday 31 January Period Prev 2 Prev 1 Latest Forecast Consensus

600 Brazil Industrial production yy Dec -16 -22 -25 01 -08

700 Chile Unemployment rate Dec 74 72 71 71 71

730 Brazil Primary budget balance BRL bn Dec 81 139 82 - -

1100 Colombia Unemployment rate Dec 102 102 103 - 104

Brazil industrial production Our forecast is consistent with a strong 14 mm sa print at the margin pushed mainly by theevolution of the auto sector (+94 mm sa) The December IBC-Br should also benefit from this gain leaving a high GDP carry-over for Q1 12

Chile unemployment rate We expect some deterioration of the unemployment rate in seasonally adjusted terms to 75 from73 The labor market data flow is already showing signs of contagion from global developments

Barclays Capital | The Emerging Markets Weekly

26 January 2012 30

Wednesday 01 February Period Prev 2 Prev 1 Latest Forecast Consensus

- Peru CPI mm Jan 031 043 027 041 -

- Peru WPI mm Jan 021 042 003 - -

1000 Mexico Remittances USD mn Dec 20847 19115 17736 - -

1200 Brazil Trade balance USD mn Jan 2355 582 3817 -1800 -

Brazil trade balance The contraction in the trade balance in January should be led by weak exports of iron ore We expectexports to increase only 16 yy while imports are likely to grow 169 yy

Thursday 02 February Period Prev 2 Prev 1 Latest Forecast Consensus

1100 Uruguay CPI mm Jan 070 040 070 - -

Friday 03 February Period Prev 2 Prev 1 Latest Forecast Consensus

900 Mexico Consumer confidence index Jan 906 895 908 - -

1100 Uruguay Unemployment rate Dec 60 57 55 - -

1600 Colombia PPI inflation mm Jan 09 01 01 - -

Week 30-04 February Period Prev 2 Prev 1 Latest Forecast Consensus

- Argentina Govern tax revenue ARS bn Jan 476 473 489 - -

1900 Colombia CPI inflation mm Jan 019 014 042 084 076

Colombia CPI inflation Considering a seasonal increase in food prices and an acceleration of core prices we expect a fastincrease in prices in January with an inflation rate of 084

Barclays Capital | The Emerging Markets Weekly

26 January 2012 31

FX FORECASTS AND FORWARDS

FX forecasts Forecast vs outright forward

Spot 1m 3m 6m 1y 1m 3m 6m 1y

G7 countries

EUR 131 135 130 125 120 30 -08 -47 -86

JPY 774 750 750 780 800 -31 -31 09 39

GBP 157 157 155 152 150 01 -11 -29 -40

CHF 092 092 096 104 108 -01 44 133 181

CAD 100 103 105 105 102 28 46 44 10

AUD 106 097 098 101 102 -83 -68 -30 -04

NZD 082 077 079 082 083 -58 -29 14 39

Emerging Asia

CNY 631 628 624 617 608 -03 -07 -17 -31

HKD 776 778 778 778 778 02 02 03 03

INR 5011 5000 5000 4900 4800 -06 -20 -54 -94

IDR 8979 8850 8800 8800 8500 -12 -21 -29 -83

KRW 1122 1100 1075 1050 1025 -21 -47 -74 -100

MYR 304 302 300 295 284 -08 -18 -37 -79

PHP 4289 4260 4220 4250 4200 -08 -19 -14 -28

SGD 126 124 123 123 122 -17 -25 -24 -29

THB 3138 3100 3060 2975 2850 -20 -35 -67 -112

TWD 2986 2970 2950 2875 2750 -07 -09 -30 -66

Latin America

ARS 434 435 445 460 540 -06 -09 -12 64

BRL 175 174 173 174 170 -10 -28 -38 -87

CLP 487 485 480 475 475 -07 -23 -40 -54

MXN 1298 1285 1270 1265 1260 -13 -29 -41 -60

COP 1811 1795 1780 1775 1770 -10 -21 -31 -44

PEN 269 268 267 266 264 -04 -12 -19 -34

EEMEA

EURCZK 2514 2550 2575 2550 2525 14 24 14 04

EURHUF 295 310 315 310 300 48 58 30 -23

EURPLN 424 430 450 440 435 12 52 20 -08

EURRON 434 436 445 440 435 02 19 00 -38

USDRUB 3023 3030 3000 3000 3050 -06 -24 -36 -45

BSKRUB 3452 3507 3405 3338 3325 10 -28 -60 -88

USDTRY 179 182 185 182 180 07 11 -24 -68

USDZAR 782 815 820 780 770 38 35 -28 -65

USDILS 376 375 370 365 360 -03 -18 -34 -50

USDEGP 604 600 620 650 700 -29 -44 -19 25

USDUAH 804 803 810 815 820 -15 -36 -71 -162

Source Barclays Capital

Barclays Capital | The Emerging Markets Weekly

26 January 2012 32

OFFICIAL INTEREST RATES

Start of cycle Forecasts as at end of

Official rate Current Date Level Last move Next move expected Q1 12 Q2 12 Q3 12 Q4 12

per annum (unless stated)

Advanced

Fed funds rate 0-025 Easing 17 Sep 07 525 Dec 08 (-75-100) Beyond 2013 0-025 0-025 0-025 0-025

BoJ overnight rate 010 Easing 30 Oct 08 050 Oct 10 (0-10) Q1 14 (+20) 0-010 0-010 0-010 0-010

ECB repo rate 100 Easing 03 Nov 11 150 Dec 11 (-25) Mar 12 (-50) 050 050 050 050

Emerging Asia

China Working capital rate 656 Tightening 19 Oct 10 531 Jul 11 (+25) Beyond Q4 12 656 656 656 656

Hong Kong Base rate 050 Easing 19 Sep 07 675 Dec 08 (-100) Beyond Q4 12 050 050 050 050

India Repo rate 850 Tightening 19 Mar 10 475 Oct 11 (+25) Q2 12 (-25) 850 825 800 775

Indonesia ON policy rate 600 Easing 11 Oct 11 675 Nov 11 (-50) Beyond Q4 12 600 600 600 600

Korea Base rate 325 Tightening 9 Jul 10 225 Jun 11(+25) Beyond Q4 12 325 325 325 325

Sri Lanka Reverse repo 850 Easing 20 Feb 09 1200 Jan 11 (-50) Q2 12 (-50) 850 800 800 800

Malaysia ON policy rate 300 Tightening 4 Mar 10 200 May 11 (+25) Beyond Q4 12 300 300 300 300

Philippines ON lending 425 Easing 19 Jan 12 450 Jan 12 (-25) Q2 12 (-25) 425 400 400 400

Taiwan Rediscount rate 1875 Tightening 24 Jun 10 1375 Jun 11 (+125) Beyond Q4 12 1875 1875 1875 1875

Thailand ON repo rate 300 Easing 30 Nov 11 350 Jan 12 (-25) Q3 12 (+25) 300 300 325 350

Vietnam Reverse repo rate 1400 Easing Jul 11 1500 Jul 11 (-100) Q1 12 (-200) 1200 1100 1000 1000

Emerging Europe Middle East amp Africa

Czech Republic 2w repo rate 075 Easing 8 Aug 08 375 Apr 10 (-25) Beyond Q4 12 075 075 075 075

Hungary 2w deposit rate 700 Tightening 29 Nov 10 525 Dec 11 (+50) Q2 12 (+25) 700 725 725 725

Poland 2w repo rate 450 Tightening 19 Jan 11 350 Jun 11 (+25) Mar 12 (-25) 425 375 375 375

Romania Key policy rate 575 Easing 4 Feb 08 1025 Jan 12 (-25) Feb 12 (-25) 525 500 500 500

Russia Refi rate 800 Easing 23 Dec 11 825 Dec 11 (-25) Mar 12 (-25) 775 750 750 750

South Africa Repo rate 550 Easing 11 Dec 08 1200 Nov 10 (-50) Nov 12 (+50) 550 550 550 600

Turkey 1wk repo rate 575 Easing 20 Nov 08 1675 Aug 11 (-50) Beyond Q4 12 575 575 575 575

Egypt Deposit rate 925 Tightening 24 Nov 11 825 Nov 11 (+100) Feb 12 (+100) 1125 1125 1125 1125

Israel Discount rate 250 Easing 26 Sep 11 325 Jan 12 (-25) Q2 12 (-25) 250 225 225 225

Latin America

Brazil SELIC rate 1050 Easing 31 Aug 11 1250 Jan 12 (-50) Mar 12 (-50) 1000 950 950 950

Chile Monetary policy rate 500 Easing 12 January 12 525 Jan 12 (-25) Feb 12 (-25) 450 425 425 425

Colombia Repo rate 475 Tightening 25 Feb 11 300 Nov 11 (+25) Mar 12 (+25) 500 550 550 550

Mexico Overnight rate 450 Easing 16 Jan 09 825 Jul 09 (-25) Q1 12 (-25) 425 400 400 400

Peru Reference rate 425 Tightening 6 May 10 125 May 11 (+25) Beyond 2012 425 425 425 425

Note Changes denoted in bold Source Barclays Capital

Barclays Capital | The Emerging Markets Weekly

26 January 2012 33

EMERGING MARKETS RESEARCH Piero Ghezzi Head of Global Economics Emerging Markets and FX Research +44 (0)20 3134 2190 pieroghezzibarcapcom

EM Global Michael Gavin Head of Global Macro Strategy and Head of EM Strategy +1 212 412 5915 michaelgavinbarcapcom

Alanna Gregory EM Strategist +1 212 412 5938 alannagregorybarcapcom

Latin America Alejandro Arreaza Economist ndash Latin America +1 212 412 3021 alejandroarreazabarcapcom

Sebastian Brown StrategistEconomist +1 212 412 6721 sebastianbrownbarcapcom

Alejandro Grisanti Chief Economist ndash Latin America Ex-Brazil Mexico +1 212 412 5982 alejandrogrisantibarcapcom

Donato Guarino Senior Strategist +1 212 412 5564 donatoguarinobarcapcom

Guilherme Loureiro Economist ndash Brazil +55 11 3757 7372 guilhermeloureirobarcapcom

Roberto Melzi Senior Strategist +1 212 412 5963 robertomelzibarcapcom

Bruno Rovai Economist +55 11 3757 7392 brunorovaibarcapcom

Marcelo Salomon Chief Economist ndash Brazil Chile Mexico+1 212 412 5717 marcelosalomonbarcapcom

Sebastian Vargas Economist - Argentina Uruguay +1 212 412 6823 sebastianvargasbarcapcom

Asia Pacific Jon Scoffin Head of Credit Research and Head of Research Asia-Pacific +65 6308 3217 jonscoffinbarcapcom

Rohit Arora FI Strategist Emerging Asia +65 6308 2092 rohitarora3barcapcom

Rahul Bajoria Regional Economist ndash India Malaysia Thailand +65 6308 3511 rahulbajoriabarcapcom

Jian Chang Regional Economist ndash China Hong Kong+852 2903 2654 jianchangbarcapcom

Joey Chew Regional Economist - Singapore +65 6308 3211 joeychewbarcapcom

Olivier Desbarres Head of FX Strategy Asia-Pacific ex-Japan +65 6308 2073 olivierdesbarresbarcapcom

Yiping Huang Chief Economist Emerging Asia +852 2903 3291 yipinghuangbarcapcom

Wai Ho Leong Senior Regional Economist ndash Korea Malaysia Singapore Taiwan +65 6308 3292 waiholeongbarcapcom

Hamish Pepper FX Strategist Asia-Pacific ex-Japan +65 6308 2220 hamishpepperbarcapcom

Kumar Rachapudi FI Strategist Emerging Asia +65 6308 3383 kumarrachapudibarcapcom

Siddhartha Sanyal Chief Economist India +91 22 6719 6177 siddharthasanyalbarcapcom

Prakriti Sofat Regional Economist ndash Indonesia Philippines Sri Lanka Vietnam +65 6308 3201 prakritisofatbarcapcom

Nick Verdi FX Strategist Asia-Pacific ex-Japan +65 6308 3093 nickverdibarcapcom

Ju Wang FI Strategist Emerging Asia +65 6308 2801 juwangbarcapcom

Lingxiu (Steven) Yang Regional Economist ndash China Hong Kong +852 2903 2653 lingxiuyangbarcapcom

Krishna Hegde CFA Asia Credit Strategist and Senior Financial Institutions +65 6308 2979 krishnahegdebarcapcom

Avanti Save Credit Strategy +65 6308 3116 avantisavebarcapcom

Emerging EMEA Christian Keller Head of Emerging EMEA Research +44 (0)20 7773 2031 christiankellerbarcapcom

Koon Chow Head of Emerging EMEA Strategy +44 (0)20 777 37572 koonchowbarcapcom

Jeff Gable Head of ABSA Capital Research +27 11 895 5368 jeffgableabsacapitalcom

Gina Schoeman Economist ndash South Africa +27 (0)11 895 5403 ginaschoemanabsacapitalcom

Daniel Hewitt Senior Emerging EMEA Economist +44 (0)20 3134 3522 danielhewittbarcapcom

Piotr Chwiejczak Rates Strategist +44 (0)20 3134 4606 piotrchwiejczak barcapcom

Ridle Markus Economist ndash Sub-Saharan Africa +27 11 895 5374 ridlemarkusabsacapitalcom

Fahad Al Turki Economist ndash Saudi Arabia +966 1880 6577 fahadalturkibarcapcom

Vladimir Pantyushin Chief Economist ndash Russia and CIS +7 495 7868450 vladimirpantyushinbarcapcom

Andreas Kolbe Credit Strategist +44 (0)20 313 43134 andreaskolbebarcapcom

Jeffrey Schultz Economist ndash South Africa +27 (0)11 895 5349 jeffreyschultzabsacapitalcom

Eldar Vakhitov Emerging EMEA Economist +44 (0)20 777 32192 eldarvakhitovbarcapcom

Alia Moubayed Senior Economist ndash Middle East amp North Africa +44 (0)20 313 41120 aliamoubayedbarcapcom

Dumisani Ngwenya Strategist ndash Africa +27 (0)11 895 5346 dumisaningwenyaabsacapitalcom

Michael Keenan Sub-Saharan FX and Rates Strategist +27 (0) 11 895 5513 mikekeenanabsacapitalcom

EM Corporate Credit Juan C Cruz Head of Latin America amp EEMEA Corporate Credit Research +1 212 412 3424 juancruzbarcapcom

Christopher Buck +1 212 412 3418 christopherbuckbarcapcom

Stella Cridge +44 (0)20 313 49618 stellacridgebarcapcom

Miguel Crivelli +1 212 412 5231 miguelcrivellibarcapcom

Ivan Fernandes +1 212 412 3428 ivanfernandesbarcapcom

Autumn Graham +1 212 412 2839 autumngrahambarcapcom

Milena Ianeva +44 (0)20 7773 8536 milenaianevabarcapcom

Stanislav Ponomarenko +7 495 786 8451 stanislavponomarenkobarcapcom

Aziz Sunderji +1 212 412 2218 azizsunderjibarcapcom

Antoine Yacoub + 44 207 7731727 antoineyacoubbarcapcom

Golib Zohidov +44 (0)20 777 31513 golibzohidovbarcapcom

Barclays Capital | The Emerging Markets Weekly

26 January 2012 28

Romania The NBR is in the middle of a rate cutting cycle Having reduced rates in each of the past two meetings by 25bp we expect another 25bp reduction to 550 Moreover we expect two more rate cuts in the next two meetings bringing the rate to 50

South Africa Vehicle sales growth should continue to reflect the relatively positive consumer dynamics in the economy providedby low interest rates and high nominal incomes

Czech Republic The CNB is on hold On one hand it will not raise rates even though inflation (adjusted for taxes) is in the middleof the 1-3 target range because the economy is very weak On the other it will not lower rates because at 075 it is at a record low and a rate decrease is unlikely to spur increased lending

Egypt Mounting inflationary pressure and a weakening currency may push the CBE to continue raising rates

Friday 3 February Period Prev 2 Prev 1 Latest Forecast Consensus

0800 Czech Retail sales ( yy) Dec 00 15 05 - -

0800 Turkey CPI ( yy) Jan 77 95 105 1065 1045

1000 Croatia Retail trade real ( yy) Dec P 10 18 10 - -

Kazakhstan International reserves (USD bn) Jan 326 322 293 285 -

Russia CPI ( yy) Jan 72 68 61 43 -

Russia Overnight deposit rate () Feb 375 375 400 400 -

Russia Refinancing rate () Feb 825 825 800 800 -

Czech Republic Domestic demand remains muted

Turkey The trade weighted fall in the lira last year still has some room to pass through to headline CPI as capacity utilisationrates in the country remain high There are some signs of a slowdown but companies in Turkey are probably still able to pass onthe bulk of their cost increases

Kazakhstan The NBK continues to defend the currency

Russia Inflation drops amid the delay in regulated tariff hikes to 1 July The CBR will likely wait until after the 4 March presidentialelections before resuming rate cuts

Barclays Capital | The Emerging Markets Weekly

26 January 2012 29

DATA REVIEW amp PREVIEW LATIN AMERICA Alejandro Arreaza Alejandro Grisanti Bruno Rovai Guilherme Loureiro Marcelo Salomon Sebastian Vargas

Review of the weekrsquos data releases

Main indicators Period Previous BarCap Actual Comments

Brazil IPCA-15 inflation mm Jan 056 055 065 The surprise was in large part driven by a higher-than-expected increase in transportation costs (air and bus fares)

Brazil Current account USD bn Dec -68 -50 -60 The CA deficit reached USD526 bn (21 of GDP) but financing was not an issue as FDI reached USD666bn

Mexico Econ activity index yy Nov 37 40 375 Growing at a moderate pace at the margin (02 mm sa) on track for a sharp deceleration in Q4 GDP to 06 qq saar

Mexico Bi-weekly CPI 2w2w Jan 051 043 032 Lower-than-expected perishable inflation marked the January CPI release

Mexico Bi-weekly CPI core 2w2w Jan 035 026 020 A 115 2w2w drop in airfares helped contain core services inflation

Mexico Trade balance USD mn Dec -232 - 08 Exports and imports are moving further down (81 and 74 respectively)

Colombia Trade balance USD mn Nov 103 - 711 High oil prices compensate for strong increase in imports demand

Brazil COPOM meeting minutes Jan - - - Very dovish minutes with the BCB giving guidance that the Selic rate should fall to single-digit levels

Brazil Unemployment rate Dec 52 50 47 In seasonally adjusted terms the unemployment rate was flat at 56

Mexico Retail sales yy Nov 30 36 75 Strong gain of 22 mm sa probably reflecting the introduction of a local version of Black Friday in November

Preview of the week ahead

Monday 30 January Period Prev 2 Prev 1 Latest Forecast Consensus

- Brazil Central government budget BRL bn Dec 54 112 46 - -

- Colombia Overnight lending rate Jan 450 475 475 475 475

500 Brazil IGP-M inflation mm Jan 053 050 -012 030 030

700 Chile Industrial production yy Dec 52 -08 20 02 10

700 Chile Retail sales yy Dec 96 86 85 80 79

1530 Mexico Budget balance MXN bn Dec YTD -1790 -17939 -2131 - -

Colombia overnight lending rate With still moderate inflation we expected Banrep to remain on hold at its meeting this monthHowever the persistence of fast growth that is expected to offset the uncertainty coming from the European sovereign debtcrisis and the slowdown of the global economy will likely drive it to reassume its tightening cycle before the end of Q1

Chile industrial production and retail sales At the margin we expect industrial production to drop 02 mm sa leaving growth for Q4 11 at -23 3m3m saar This shows that global developments continue to take their toll in the Chilean economyRetail sales are still benefiting from tight labor market conditions but we expect them to soften gradually

Tuesday 31 January Period Prev 2 Prev 1 Latest Forecast Consensus

600 Brazil Industrial production yy Dec -16 -22 -25 01 -08

700 Chile Unemployment rate Dec 74 72 71 71 71

730 Brazil Primary budget balance BRL bn Dec 81 139 82 - -

1100 Colombia Unemployment rate Dec 102 102 103 - 104

Brazil industrial production Our forecast is consistent with a strong 14 mm sa print at the margin pushed mainly by theevolution of the auto sector (+94 mm sa) The December IBC-Br should also benefit from this gain leaving a high GDP carry-over for Q1 12

Chile unemployment rate We expect some deterioration of the unemployment rate in seasonally adjusted terms to 75 from73 The labor market data flow is already showing signs of contagion from global developments

Barclays Capital | The Emerging Markets Weekly

26 January 2012 30

Wednesday 01 February Period Prev 2 Prev 1 Latest Forecast Consensus

- Peru CPI mm Jan 031 043 027 041 -

- Peru WPI mm Jan 021 042 003 - -

1000 Mexico Remittances USD mn Dec 20847 19115 17736 - -

1200 Brazil Trade balance USD mn Jan 2355 582 3817 -1800 -

Brazil trade balance The contraction in the trade balance in January should be led by weak exports of iron ore We expectexports to increase only 16 yy while imports are likely to grow 169 yy

Thursday 02 February Period Prev 2 Prev 1 Latest Forecast Consensus

1100 Uruguay CPI mm Jan 070 040 070 - -

Friday 03 February Period Prev 2 Prev 1 Latest Forecast Consensus

900 Mexico Consumer confidence index Jan 906 895 908 - -

1100 Uruguay Unemployment rate Dec 60 57 55 - -

1600 Colombia PPI inflation mm Jan 09 01 01 - -

Week 30-04 February Period Prev 2 Prev 1 Latest Forecast Consensus

- Argentina Govern tax revenue ARS bn Jan 476 473 489 - -

1900 Colombia CPI inflation mm Jan 019 014 042 084 076

Colombia CPI inflation Considering a seasonal increase in food prices and an acceleration of core prices we expect a fastincrease in prices in January with an inflation rate of 084

Barclays Capital | The Emerging Markets Weekly

26 January 2012 31

FX FORECASTS AND FORWARDS

FX forecasts Forecast vs outright forward

Spot 1m 3m 6m 1y 1m 3m 6m 1y

G7 countries

EUR 131 135 130 125 120 30 -08 -47 -86

JPY 774 750 750 780 800 -31 -31 09 39

GBP 157 157 155 152 150 01 -11 -29 -40

CHF 092 092 096 104 108 -01 44 133 181

CAD 100 103 105 105 102 28 46 44 10

AUD 106 097 098 101 102 -83 -68 -30 -04

NZD 082 077 079 082 083 -58 -29 14 39

Emerging Asia

CNY 631 628 624 617 608 -03 -07 -17 -31

HKD 776 778 778 778 778 02 02 03 03

INR 5011 5000 5000 4900 4800 -06 -20 -54 -94

IDR 8979 8850 8800 8800 8500 -12 -21 -29 -83

KRW 1122 1100 1075 1050 1025 -21 -47 -74 -100

MYR 304 302 300 295 284 -08 -18 -37 -79

PHP 4289 4260 4220 4250 4200 -08 -19 -14 -28

SGD 126 124 123 123 122 -17 -25 -24 -29

THB 3138 3100 3060 2975 2850 -20 -35 -67 -112

TWD 2986 2970 2950 2875 2750 -07 -09 -30 -66

Latin America

ARS 434 435 445 460 540 -06 -09 -12 64

BRL 175 174 173 174 170 -10 -28 -38 -87

CLP 487 485 480 475 475 -07 -23 -40 -54

MXN 1298 1285 1270 1265 1260 -13 -29 -41 -60

COP 1811 1795 1780 1775 1770 -10 -21 -31 -44

PEN 269 268 267 266 264 -04 -12 -19 -34

EEMEA

EURCZK 2514 2550 2575 2550 2525 14 24 14 04

EURHUF 295 310 315 310 300 48 58 30 -23

EURPLN 424 430 450 440 435 12 52 20 -08

EURRON 434 436 445 440 435 02 19 00 -38

USDRUB 3023 3030 3000 3000 3050 -06 -24 -36 -45

BSKRUB 3452 3507 3405 3338 3325 10 -28 -60 -88

USDTRY 179 182 185 182 180 07 11 -24 -68

USDZAR 782 815 820 780 770 38 35 -28 -65

USDILS 376 375 370 365 360 -03 -18 -34 -50

USDEGP 604 600 620 650 700 -29 -44 -19 25

USDUAH 804 803 810 815 820 -15 -36 -71 -162

Source Barclays Capital

Barclays Capital | The Emerging Markets Weekly

26 January 2012 32

OFFICIAL INTEREST RATES

Start of cycle Forecasts as at end of

Official rate Current Date Level Last move Next move expected Q1 12 Q2 12 Q3 12 Q4 12

per annum (unless stated)

Advanced

Fed funds rate 0-025 Easing 17 Sep 07 525 Dec 08 (-75-100) Beyond 2013 0-025 0-025 0-025 0-025

BoJ overnight rate 010 Easing 30 Oct 08 050 Oct 10 (0-10) Q1 14 (+20) 0-010 0-010 0-010 0-010

ECB repo rate 100 Easing 03 Nov 11 150 Dec 11 (-25) Mar 12 (-50) 050 050 050 050

Emerging Asia

China Working capital rate 656 Tightening 19 Oct 10 531 Jul 11 (+25) Beyond Q4 12 656 656 656 656

Hong Kong Base rate 050 Easing 19 Sep 07 675 Dec 08 (-100) Beyond Q4 12 050 050 050 050

India Repo rate 850 Tightening 19 Mar 10 475 Oct 11 (+25) Q2 12 (-25) 850 825 800 775

Indonesia ON policy rate 600 Easing 11 Oct 11 675 Nov 11 (-50) Beyond Q4 12 600 600 600 600

Korea Base rate 325 Tightening 9 Jul 10 225 Jun 11(+25) Beyond Q4 12 325 325 325 325

Sri Lanka Reverse repo 850 Easing 20 Feb 09 1200 Jan 11 (-50) Q2 12 (-50) 850 800 800 800

Malaysia ON policy rate 300 Tightening 4 Mar 10 200 May 11 (+25) Beyond Q4 12 300 300 300 300

Philippines ON lending 425 Easing 19 Jan 12 450 Jan 12 (-25) Q2 12 (-25) 425 400 400 400

Taiwan Rediscount rate 1875 Tightening 24 Jun 10 1375 Jun 11 (+125) Beyond Q4 12 1875 1875 1875 1875

Thailand ON repo rate 300 Easing 30 Nov 11 350 Jan 12 (-25) Q3 12 (+25) 300 300 325 350

Vietnam Reverse repo rate 1400 Easing Jul 11 1500 Jul 11 (-100) Q1 12 (-200) 1200 1100 1000 1000

Emerging Europe Middle East amp Africa

Czech Republic 2w repo rate 075 Easing 8 Aug 08 375 Apr 10 (-25) Beyond Q4 12 075 075 075 075

Hungary 2w deposit rate 700 Tightening 29 Nov 10 525 Dec 11 (+50) Q2 12 (+25) 700 725 725 725

Poland 2w repo rate 450 Tightening 19 Jan 11 350 Jun 11 (+25) Mar 12 (-25) 425 375 375 375

Romania Key policy rate 575 Easing 4 Feb 08 1025 Jan 12 (-25) Feb 12 (-25) 525 500 500 500

Russia Refi rate 800 Easing 23 Dec 11 825 Dec 11 (-25) Mar 12 (-25) 775 750 750 750

South Africa Repo rate 550 Easing 11 Dec 08 1200 Nov 10 (-50) Nov 12 (+50) 550 550 550 600

Turkey 1wk repo rate 575 Easing 20 Nov 08 1675 Aug 11 (-50) Beyond Q4 12 575 575 575 575

Egypt Deposit rate 925 Tightening 24 Nov 11 825 Nov 11 (+100) Feb 12 (+100) 1125 1125 1125 1125

Israel Discount rate 250 Easing 26 Sep 11 325 Jan 12 (-25) Q2 12 (-25) 250 225 225 225

Latin America

Brazil SELIC rate 1050 Easing 31 Aug 11 1250 Jan 12 (-50) Mar 12 (-50) 1000 950 950 950

Chile Monetary policy rate 500 Easing 12 January 12 525 Jan 12 (-25) Feb 12 (-25) 450 425 425 425

Colombia Repo rate 475 Tightening 25 Feb 11 300 Nov 11 (+25) Mar 12 (+25) 500 550 550 550

Mexico Overnight rate 450 Easing 16 Jan 09 825 Jul 09 (-25) Q1 12 (-25) 425 400 400 400

Peru Reference rate 425 Tightening 6 May 10 125 May 11 (+25) Beyond 2012 425 425 425 425

Note Changes denoted in bold Source Barclays Capital

Barclays Capital | The Emerging Markets Weekly

26 January 2012 33

EMERGING MARKETS RESEARCH Piero Ghezzi Head of Global Economics Emerging Markets and FX Research +44 (0)20 3134 2190 pieroghezzibarcapcom

EM Global Michael Gavin Head of Global Macro Strategy and Head of EM Strategy +1 212 412 5915 michaelgavinbarcapcom

Alanna Gregory EM Strategist +1 212 412 5938 alannagregorybarcapcom

Latin America Alejandro Arreaza Economist ndash Latin America +1 212 412 3021 alejandroarreazabarcapcom

Sebastian Brown StrategistEconomist +1 212 412 6721 sebastianbrownbarcapcom

Alejandro Grisanti Chief Economist ndash Latin America Ex-Brazil Mexico +1 212 412 5982 alejandrogrisantibarcapcom

Donato Guarino Senior Strategist +1 212 412 5564 donatoguarinobarcapcom

Guilherme Loureiro Economist ndash Brazil +55 11 3757 7372 guilhermeloureirobarcapcom

Roberto Melzi Senior Strategist +1 212 412 5963 robertomelzibarcapcom

Bruno Rovai Economist +55 11 3757 7392 brunorovaibarcapcom

Marcelo Salomon Chief Economist ndash Brazil Chile Mexico+1 212 412 5717 marcelosalomonbarcapcom

Sebastian Vargas Economist - Argentina Uruguay +1 212 412 6823 sebastianvargasbarcapcom

Asia Pacific Jon Scoffin Head of Credit Research and Head of Research Asia-Pacific +65 6308 3217 jonscoffinbarcapcom

Rohit Arora FI Strategist Emerging Asia +65 6308 2092 rohitarora3barcapcom

Rahul Bajoria Regional Economist ndash India Malaysia Thailand +65 6308 3511 rahulbajoriabarcapcom

Jian Chang Regional Economist ndash China Hong Kong+852 2903 2654 jianchangbarcapcom

Joey Chew Regional Economist - Singapore +65 6308 3211 joeychewbarcapcom

Olivier Desbarres Head of FX Strategy Asia-Pacific ex-Japan +65 6308 2073 olivierdesbarresbarcapcom

Yiping Huang Chief Economist Emerging Asia +852 2903 3291 yipinghuangbarcapcom

Wai Ho Leong Senior Regional Economist ndash Korea Malaysia Singapore Taiwan +65 6308 3292 waiholeongbarcapcom

Hamish Pepper FX Strategist Asia-Pacific ex-Japan +65 6308 2220 hamishpepperbarcapcom

Kumar Rachapudi FI Strategist Emerging Asia +65 6308 3383 kumarrachapudibarcapcom

Siddhartha Sanyal Chief Economist India +91 22 6719 6177 siddharthasanyalbarcapcom

Prakriti Sofat Regional Economist ndash Indonesia Philippines Sri Lanka Vietnam +65 6308 3201 prakritisofatbarcapcom

Nick Verdi FX Strategist Asia-Pacific ex-Japan +65 6308 3093 nickverdibarcapcom

Ju Wang FI Strategist Emerging Asia +65 6308 2801 juwangbarcapcom

Lingxiu (Steven) Yang Regional Economist ndash China Hong Kong +852 2903 2653 lingxiuyangbarcapcom

Krishna Hegde CFA Asia Credit Strategist and Senior Financial Institutions +65 6308 2979 krishnahegdebarcapcom

Avanti Save Credit Strategy +65 6308 3116 avantisavebarcapcom

Emerging EMEA Christian Keller Head of Emerging EMEA Research +44 (0)20 7773 2031 christiankellerbarcapcom

Koon Chow Head of Emerging EMEA Strategy +44 (0)20 777 37572 koonchowbarcapcom

Jeff Gable Head of ABSA Capital Research +27 11 895 5368 jeffgableabsacapitalcom

Gina Schoeman Economist ndash South Africa +27 (0)11 895 5403 ginaschoemanabsacapitalcom

Daniel Hewitt Senior Emerging EMEA Economist +44 (0)20 3134 3522 danielhewittbarcapcom

Piotr Chwiejczak Rates Strategist +44 (0)20 3134 4606 piotrchwiejczak barcapcom

Ridle Markus Economist ndash Sub-Saharan Africa +27 11 895 5374 ridlemarkusabsacapitalcom

Fahad Al Turki Economist ndash Saudi Arabia +966 1880 6577 fahadalturkibarcapcom

Vladimir Pantyushin Chief Economist ndash Russia and CIS +7 495 7868450 vladimirpantyushinbarcapcom

Andreas Kolbe Credit Strategist +44 (0)20 313 43134 andreaskolbebarcapcom

Jeffrey Schultz Economist ndash South Africa +27 (0)11 895 5349 jeffreyschultzabsacapitalcom

Eldar Vakhitov Emerging EMEA Economist +44 (0)20 777 32192 eldarvakhitovbarcapcom

Alia Moubayed Senior Economist ndash Middle East amp North Africa +44 (0)20 313 41120 aliamoubayedbarcapcom

Dumisani Ngwenya Strategist ndash Africa +27 (0)11 895 5346 dumisaningwenyaabsacapitalcom

Michael Keenan Sub-Saharan FX and Rates Strategist +27 (0) 11 895 5513 mikekeenanabsacapitalcom

EM Corporate Credit Juan C Cruz Head of Latin America amp EEMEA Corporate Credit Research +1 212 412 3424 juancruzbarcapcom

Christopher Buck +1 212 412 3418 christopherbuckbarcapcom

Stella Cridge +44 (0)20 313 49618 stellacridgebarcapcom

Miguel Crivelli +1 212 412 5231 miguelcrivellibarcapcom

Ivan Fernandes +1 212 412 3428 ivanfernandesbarcapcom

Autumn Graham +1 212 412 2839 autumngrahambarcapcom

Milena Ianeva +44 (0)20 7773 8536 milenaianevabarcapcom

Stanislav Ponomarenko +7 495 786 8451 stanislavponomarenkobarcapcom

Aziz Sunderji +1 212 412 2218 azizsunderjibarcapcom

Antoine Yacoub + 44 207 7731727 antoineyacoubbarcapcom

Golib Zohidov +44 (0)20 777 31513 golibzohidovbarcapcom

Barclays Capital | The Emerging Markets Weekly

26 January 2012 29

DATA REVIEW amp PREVIEW LATIN AMERICA Alejandro Arreaza Alejandro Grisanti Bruno Rovai Guilherme Loureiro Marcelo Salomon Sebastian Vargas

Review of the weekrsquos data releases

Main indicators Period Previous BarCap Actual Comments

Brazil IPCA-15 inflation mm Jan 056 055 065 The surprise was in large part driven by a higher-than-expected increase in transportation costs (air and bus fares)

Brazil Current account USD bn Dec -68 -50 -60 The CA deficit reached USD526 bn (21 of GDP) but financing was not an issue as FDI reached USD666bn

Mexico Econ activity index yy Nov 37 40 375 Growing at a moderate pace at the margin (02 mm sa) on track for a sharp deceleration in Q4 GDP to 06 qq saar

Mexico Bi-weekly CPI 2w2w Jan 051 043 032 Lower-than-expected perishable inflation marked the January CPI release

Mexico Bi-weekly CPI core 2w2w Jan 035 026 020 A 115 2w2w drop in airfares helped contain core services inflation

Mexico Trade balance USD mn Dec -232 - 08 Exports and imports are moving further down (81 and 74 respectively)

Colombia Trade balance USD mn Nov 103 - 711 High oil prices compensate for strong increase in imports demand

Brazil COPOM meeting minutes Jan - - - Very dovish minutes with the BCB giving guidance that the Selic rate should fall to single-digit levels

Brazil Unemployment rate Dec 52 50 47 In seasonally adjusted terms the unemployment rate was flat at 56

Mexico Retail sales yy Nov 30 36 75 Strong gain of 22 mm sa probably reflecting the introduction of a local version of Black Friday in November

Preview of the week ahead

Monday 30 January Period Prev 2 Prev 1 Latest Forecast Consensus

- Brazil Central government budget BRL bn Dec 54 112 46 - -

- Colombia Overnight lending rate Jan 450 475 475 475 475

500 Brazil IGP-M inflation mm Jan 053 050 -012 030 030

700 Chile Industrial production yy Dec 52 -08 20 02 10

700 Chile Retail sales yy Dec 96 86 85 80 79

1530 Mexico Budget balance MXN bn Dec YTD -1790 -17939 -2131 - -

Colombia overnight lending rate With still moderate inflation we expected Banrep to remain on hold at its meeting this monthHowever the persistence of fast growth that is expected to offset the uncertainty coming from the European sovereign debtcrisis and the slowdown of the global economy will likely drive it to reassume its tightening cycle before the end of Q1

Chile industrial production and retail sales At the margin we expect industrial production to drop 02 mm sa leaving growth for Q4 11 at -23 3m3m saar This shows that global developments continue to take their toll in the Chilean economyRetail sales are still benefiting from tight labor market conditions but we expect them to soften gradually

Tuesday 31 January Period Prev 2 Prev 1 Latest Forecast Consensus

600 Brazil Industrial production yy Dec -16 -22 -25 01 -08

700 Chile Unemployment rate Dec 74 72 71 71 71

730 Brazil Primary budget balance BRL bn Dec 81 139 82 - -

1100 Colombia Unemployment rate Dec 102 102 103 - 104

Brazil industrial production Our forecast is consistent with a strong 14 mm sa print at the margin pushed mainly by theevolution of the auto sector (+94 mm sa) The December IBC-Br should also benefit from this gain leaving a high GDP carry-over for Q1 12

Chile unemployment rate We expect some deterioration of the unemployment rate in seasonally adjusted terms to 75 from73 The labor market data flow is already showing signs of contagion from global developments

Barclays Capital | The Emerging Markets Weekly

26 January 2012 30

Wednesday 01 February Period Prev 2 Prev 1 Latest Forecast Consensus

- Peru CPI mm Jan 031 043 027 041 -

- Peru WPI mm Jan 021 042 003 - -

1000 Mexico Remittances USD mn Dec 20847 19115 17736 - -

1200 Brazil Trade balance USD mn Jan 2355 582 3817 -1800 -

Brazil trade balance The contraction in the trade balance in January should be led by weak exports of iron ore We expectexports to increase only 16 yy while imports are likely to grow 169 yy

Thursday 02 February Period Prev 2 Prev 1 Latest Forecast Consensus

1100 Uruguay CPI mm Jan 070 040 070 - -

Friday 03 February Period Prev 2 Prev 1 Latest Forecast Consensus

900 Mexico Consumer confidence index Jan 906 895 908 - -

1100 Uruguay Unemployment rate Dec 60 57 55 - -

1600 Colombia PPI inflation mm Jan 09 01 01 - -

Week 30-04 February Period Prev 2 Prev 1 Latest Forecast Consensus

- Argentina Govern tax revenue ARS bn Jan 476 473 489 - -

1900 Colombia CPI inflation mm Jan 019 014 042 084 076

Colombia CPI inflation Considering a seasonal increase in food prices and an acceleration of core prices we expect a fastincrease in prices in January with an inflation rate of 084

Barclays Capital | The Emerging Markets Weekly

26 January 2012 31

FX FORECASTS AND FORWARDS

FX forecasts Forecast vs outright forward

Spot 1m 3m 6m 1y 1m 3m 6m 1y

G7 countries

EUR 131 135 130 125 120 30 -08 -47 -86

JPY 774 750 750 780 800 -31 -31 09 39

GBP 157 157 155 152 150 01 -11 -29 -40

CHF 092 092 096 104 108 -01 44 133 181

CAD 100 103 105 105 102 28 46 44 10

AUD 106 097 098 101 102 -83 -68 -30 -04

NZD 082 077 079 082 083 -58 -29 14 39

Emerging Asia

CNY 631 628 624 617 608 -03 -07 -17 -31

HKD 776 778 778 778 778 02 02 03 03

INR 5011 5000 5000 4900 4800 -06 -20 -54 -94

IDR 8979 8850 8800 8800 8500 -12 -21 -29 -83

KRW 1122 1100 1075 1050 1025 -21 -47 -74 -100

MYR 304 302 300 295 284 -08 -18 -37 -79

PHP 4289 4260 4220 4250 4200 -08 -19 -14 -28

SGD 126 124 123 123 122 -17 -25 -24 -29

THB 3138 3100 3060 2975 2850 -20 -35 -67 -112

TWD 2986 2970 2950 2875 2750 -07 -09 -30 -66

Latin America

ARS 434 435 445 460 540 -06 -09 -12 64

BRL 175 174 173 174 170 -10 -28 -38 -87

CLP 487 485 480 475 475 -07 -23 -40 -54

MXN 1298 1285 1270 1265 1260 -13 -29 -41 -60

COP 1811 1795 1780 1775 1770 -10 -21 -31 -44

PEN 269 268 267 266 264 -04 -12 -19 -34

EEMEA

EURCZK 2514 2550 2575 2550 2525 14 24 14 04

EURHUF 295 310 315 310 300 48 58 30 -23

EURPLN 424 430 450 440 435 12 52 20 -08

EURRON 434 436 445 440 435 02 19 00 -38

USDRUB 3023 3030 3000 3000 3050 -06 -24 -36 -45

BSKRUB 3452 3507 3405 3338 3325 10 -28 -60 -88

USDTRY 179 182 185 182 180 07 11 -24 -68

USDZAR 782 815 820 780 770 38 35 -28 -65

USDILS 376 375 370 365 360 -03 -18 -34 -50

USDEGP 604 600 620 650 700 -29 -44 -19 25

USDUAH 804 803 810 815 820 -15 -36 -71 -162

Source Barclays Capital

Barclays Capital | The Emerging Markets Weekly

26 January 2012 32

OFFICIAL INTEREST RATES

Start of cycle Forecasts as at end of

Official rate Current Date Level Last move Next move expected Q1 12 Q2 12 Q3 12 Q4 12

per annum (unless stated)

Advanced

Fed funds rate 0-025 Easing 17 Sep 07 525 Dec 08 (-75-100) Beyond 2013 0-025 0-025 0-025 0-025

BoJ overnight rate 010 Easing 30 Oct 08 050 Oct 10 (0-10) Q1 14 (+20) 0-010 0-010 0-010 0-010

ECB repo rate 100 Easing 03 Nov 11 150 Dec 11 (-25) Mar 12 (-50) 050 050 050 050

Emerging Asia

China Working capital rate 656 Tightening 19 Oct 10 531 Jul 11 (+25) Beyond Q4 12 656 656 656 656

Hong Kong Base rate 050 Easing 19 Sep 07 675 Dec 08 (-100) Beyond Q4 12 050 050 050 050

India Repo rate 850 Tightening 19 Mar 10 475 Oct 11 (+25) Q2 12 (-25) 850 825 800 775

Indonesia ON policy rate 600 Easing 11 Oct 11 675 Nov 11 (-50) Beyond Q4 12 600 600 600 600

Korea Base rate 325 Tightening 9 Jul 10 225 Jun 11(+25) Beyond Q4 12 325 325 325 325

Sri Lanka Reverse repo 850 Easing 20 Feb 09 1200 Jan 11 (-50) Q2 12 (-50) 850 800 800 800

Malaysia ON policy rate 300 Tightening 4 Mar 10 200 May 11 (+25) Beyond Q4 12 300 300 300 300

Philippines ON lending 425 Easing 19 Jan 12 450 Jan 12 (-25) Q2 12 (-25) 425 400 400 400

Taiwan Rediscount rate 1875 Tightening 24 Jun 10 1375 Jun 11 (+125) Beyond Q4 12 1875 1875 1875 1875

Thailand ON repo rate 300 Easing 30 Nov 11 350 Jan 12 (-25) Q3 12 (+25) 300 300 325 350

Vietnam Reverse repo rate 1400 Easing Jul 11 1500 Jul 11 (-100) Q1 12 (-200) 1200 1100 1000 1000

Emerging Europe Middle East amp Africa

Czech Republic 2w repo rate 075 Easing 8 Aug 08 375 Apr 10 (-25) Beyond Q4 12 075 075 075 075

Hungary 2w deposit rate 700 Tightening 29 Nov 10 525 Dec 11 (+50) Q2 12 (+25) 700 725 725 725

Poland 2w repo rate 450 Tightening 19 Jan 11 350 Jun 11 (+25) Mar 12 (-25) 425 375 375 375

Romania Key policy rate 575 Easing 4 Feb 08 1025 Jan 12 (-25) Feb 12 (-25) 525 500 500 500

Russia Refi rate 800 Easing 23 Dec 11 825 Dec 11 (-25) Mar 12 (-25) 775 750 750 750

South Africa Repo rate 550 Easing 11 Dec 08 1200 Nov 10 (-50) Nov 12 (+50) 550 550 550 600

Turkey 1wk repo rate 575 Easing 20 Nov 08 1675 Aug 11 (-50) Beyond Q4 12 575 575 575 575

Egypt Deposit rate 925 Tightening 24 Nov 11 825 Nov 11 (+100) Feb 12 (+100) 1125 1125 1125 1125

Israel Discount rate 250 Easing 26 Sep 11 325 Jan 12 (-25) Q2 12 (-25) 250 225 225 225

Latin America

Brazil SELIC rate 1050 Easing 31 Aug 11 1250 Jan 12 (-50) Mar 12 (-50) 1000 950 950 950

Chile Monetary policy rate 500 Easing 12 January 12 525 Jan 12 (-25) Feb 12 (-25) 450 425 425 425

Colombia Repo rate 475 Tightening 25 Feb 11 300 Nov 11 (+25) Mar 12 (+25) 500 550 550 550

Mexico Overnight rate 450 Easing 16 Jan 09 825 Jul 09 (-25) Q1 12 (-25) 425 400 400 400

Peru Reference rate 425 Tightening 6 May 10 125 May 11 (+25) Beyond 2012 425 425 425 425

Note Changes denoted in bold Source Barclays Capital

Barclays Capital | The Emerging Markets Weekly

26 January 2012 33

EMERGING MARKETS RESEARCH Piero Ghezzi Head of Global Economics Emerging Markets and FX Research +44 (0)20 3134 2190 pieroghezzibarcapcom

EM Global Michael Gavin Head of Global Macro Strategy and Head of EM Strategy +1 212 412 5915 michaelgavinbarcapcom

Alanna Gregory EM Strategist +1 212 412 5938 alannagregorybarcapcom

Latin America Alejandro Arreaza Economist ndash Latin America +1 212 412 3021 alejandroarreazabarcapcom

Sebastian Brown StrategistEconomist +1 212 412 6721 sebastianbrownbarcapcom

Alejandro Grisanti Chief Economist ndash Latin America Ex-Brazil Mexico +1 212 412 5982 alejandrogrisantibarcapcom

Donato Guarino Senior Strategist +1 212 412 5564 donatoguarinobarcapcom

Guilherme Loureiro Economist ndash Brazil +55 11 3757 7372 guilhermeloureirobarcapcom

Roberto Melzi Senior Strategist +1 212 412 5963 robertomelzibarcapcom

Bruno Rovai Economist +55 11 3757 7392 brunorovaibarcapcom

Marcelo Salomon Chief Economist ndash Brazil Chile Mexico+1 212 412 5717 marcelosalomonbarcapcom

Sebastian Vargas Economist - Argentina Uruguay +1 212 412 6823 sebastianvargasbarcapcom

Asia Pacific Jon Scoffin Head of Credit Research and Head of Research Asia-Pacific +65 6308 3217 jonscoffinbarcapcom

Rohit Arora FI Strategist Emerging Asia +65 6308 2092 rohitarora3barcapcom

Rahul Bajoria Regional Economist ndash India Malaysia Thailand +65 6308 3511 rahulbajoriabarcapcom

Jian Chang Regional Economist ndash China Hong Kong+852 2903 2654 jianchangbarcapcom

Joey Chew Regional Economist - Singapore +65 6308 3211 joeychewbarcapcom

Olivier Desbarres Head of FX Strategy Asia-Pacific ex-Japan +65 6308 2073 olivierdesbarresbarcapcom

Yiping Huang Chief Economist Emerging Asia +852 2903 3291 yipinghuangbarcapcom

Wai Ho Leong Senior Regional Economist ndash Korea Malaysia Singapore Taiwan +65 6308 3292 waiholeongbarcapcom

Hamish Pepper FX Strategist Asia-Pacific ex-Japan +65 6308 2220 hamishpepperbarcapcom

Kumar Rachapudi FI Strategist Emerging Asia +65 6308 3383 kumarrachapudibarcapcom

Siddhartha Sanyal Chief Economist India +91 22 6719 6177 siddharthasanyalbarcapcom

Prakriti Sofat Regional Economist ndash Indonesia Philippines Sri Lanka Vietnam +65 6308 3201 prakritisofatbarcapcom

Nick Verdi FX Strategist Asia-Pacific ex-Japan +65 6308 3093 nickverdibarcapcom

Ju Wang FI Strategist Emerging Asia +65 6308 2801 juwangbarcapcom

Lingxiu (Steven) Yang Regional Economist ndash China Hong Kong +852 2903 2653 lingxiuyangbarcapcom

Krishna Hegde CFA Asia Credit Strategist and Senior Financial Institutions +65 6308 2979 krishnahegdebarcapcom

Avanti Save Credit Strategy +65 6308 3116 avantisavebarcapcom

Emerging EMEA Christian Keller Head of Emerging EMEA Research +44 (0)20 7773 2031 christiankellerbarcapcom

Koon Chow Head of Emerging EMEA Strategy +44 (0)20 777 37572 koonchowbarcapcom

Jeff Gable Head of ABSA Capital Research +27 11 895 5368 jeffgableabsacapitalcom

Gina Schoeman Economist ndash South Africa +27 (0)11 895 5403 ginaschoemanabsacapitalcom

Daniel Hewitt Senior Emerging EMEA Economist +44 (0)20 3134 3522 danielhewittbarcapcom

Piotr Chwiejczak Rates Strategist +44 (0)20 3134 4606 piotrchwiejczak barcapcom

Ridle Markus Economist ndash Sub-Saharan Africa +27 11 895 5374 ridlemarkusabsacapitalcom

Fahad Al Turki Economist ndash Saudi Arabia +966 1880 6577 fahadalturkibarcapcom

Vladimir Pantyushin Chief Economist ndash Russia and CIS +7 495 7868450 vladimirpantyushinbarcapcom

Andreas Kolbe Credit Strategist +44 (0)20 313 43134 andreaskolbebarcapcom

Jeffrey Schultz Economist ndash South Africa +27 (0)11 895 5349 jeffreyschultzabsacapitalcom

Eldar Vakhitov Emerging EMEA Economist +44 (0)20 777 32192 eldarvakhitovbarcapcom

Alia Moubayed Senior Economist ndash Middle East amp North Africa +44 (0)20 313 41120 aliamoubayedbarcapcom

Dumisani Ngwenya Strategist ndash Africa +27 (0)11 895 5346 dumisaningwenyaabsacapitalcom

Michael Keenan Sub-Saharan FX and Rates Strategist +27 (0) 11 895 5513 mikekeenanabsacapitalcom

EM Corporate Credit Juan C Cruz Head of Latin America amp EEMEA Corporate Credit Research +1 212 412 3424 juancruzbarcapcom

Christopher Buck +1 212 412 3418 christopherbuckbarcapcom

Stella Cridge +44 (0)20 313 49618 stellacridgebarcapcom

Miguel Crivelli +1 212 412 5231 miguelcrivellibarcapcom

Ivan Fernandes +1 212 412 3428 ivanfernandesbarcapcom

Autumn Graham +1 212 412 2839 autumngrahambarcapcom

Milena Ianeva +44 (0)20 7773 8536 milenaianevabarcapcom

Stanislav Ponomarenko +7 495 786 8451 stanislavponomarenkobarcapcom

Aziz Sunderji +1 212 412 2218 azizsunderjibarcapcom

Antoine Yacoub + 44 207 7731727 antoineyacoubbarcapcom

Golib Zohidov +44 (0)20 777 31513 golibzohidovbarcapcom

Barclays Capital | The Emerging Markets Weekly

26 January 2012 30

Wednesday 01 February Period Prev 2 Prev 1 Latest Forecast Consensus

- Peru CPI mm Jan 031 043 027 041 -

- Peru WPI mm Jan 021 042 003 - -

1000 Mexico Remittances USD mn Dec 20847 19115 17736 - -

1200 Brazil Trade balance USD mn Jan 2355 582 3817 -1800 -

Brazil trade balance The contraction in the trade balance in January should be led by weak exports of iron ore We expectexports to increase only 16 yy while imports are likely to grow 169 yy

Thursday 02 February Period Prev 2 Prev 1 Latest Forecast Consensus

1100 Uruguay CPI mm Jan 070 040 070 - -

Friday 03 February Period Prev 2 Prev 1 Latest Forecast Consensus

900 Mexico Consumer confidence index Jan 906 895 908 - -

1100 Uruguay Unemployment rate Dec 60 57 55 - -

1600 Colombia PPI inflation mm Jan 09 01 01 - -

Week 30-04 February Period Prev 2 Prev 1 Latest Forecast Consensus

- Argentina Govern tax revenue ARS bn Jan 476 473 489 - -

1900 Colombia CPI inflation mm Jan 019 014 042 084 076

Colombia CPI inflation Considering a seasonal increase in food prices and an acceleration of core prices we expect a fastincrease in prices in January with an inflation rate of 084

Barclays Capital | The Emerging Markets Weekly

26 January 2012 31

FX FORECASTS AND FORWARDS

FX forecasts Forecast vs outright forward

Spot 1m 3m 6m 1y 1m 3m 6m 1y

G7 countries

EUR 131 135 130 125 120 30 -08 -47 -86

JPY 774 750 750 780 800 -31 -31 09 39

GBP 157 157 155 152 150 01 -11 -29 -40

CHF 092 092 096 104 108 -01 44 133 181

CAD 100 103 105 105 102 28 46 44 10

AUD 106 097 098 101 102 -83 -68 -30 -04

NZD 082 077 079 082 083 -58 -29 14 39

Emerging Asia

CNY 631 628 624 617 608 -03 -07 -17 -31

HKD 776 778 778 778 778 02 02 03 03

INR 5011 5000 5000 4900 4800 -06 -20 -54 -94

IDR 8979 8850 8800 8800 8500 -12 -21 -29 -83

KRW 1122 1100 1075 1050 1025 -21 -47 -74 -100

MYR 304 302 300 295 284 -08 -18 -37 -79

PHP 4289 4260 4220 4250 4200 -08 -19 -14 -28

SGD 126 124 123 123 122 -17 -25 -24 -29

THB 3138 3100 3060 2975 2850 -20 -35 -67 -112

TWD 2986 2970 2950 2875 2750 -07 -09 -30 -66

Latin America

ARS 434 435 445 460 540 -06 -09 -12 64

BRL 175 174 173 174 170 -10 -28 -38 -87

CLP 487 485 480 475 475 -07 -23 -40 -54

MXN 1298 1285 1270 1265 1260 -13 -29 -41 -60

COP 1811 1795 1780 1775 1770 -10 -21 -31 -44

PEN 269 268 267 266 264 -04 -12 -19 -34

EEMEA

EURCZK 2514 2550 2575 2550 2525 14 24 14 04

EURHUF 295 310 315 310 300 48 58 30 -23

EURPLN 424 430 450 440 435 12 52 20 -08

EURRON 434 436 445 440 435 02 19 00 -38

USDRUB 3023 3030 3000 3000 3050 -06 -24 -36 -45

BSKRUB 3452 3507 3405 3338 3325 10 -28 -60 -88

USDTRY 179 182 185 182 180 07 11 -24 -68

USDZAR 782 815 820 780 770 38 35 -28 -65

USDILS 376 375 370 365 360 -03 -18 -34 -50

USDEGP 604 600 620 650 700 -29 -44 -19 25

USDUAH 804 803 810 815 820 -15 -36 -71 -162

Source Barclays Capital

Barclays Capital | The Emerging Markets Weekly

26 January 2012 32

OFFICIAL INTEREST RATES

Start of cycle Forecasts as at end of

Official rate Current Date Level Last move Next move expected Q1 12 Q2 12 Q3 12 Q4 12

per annum (unless stated)

Advanced

Fed funds rate 0-025 Easing 17 Sep 07 525 Dec 08 (-75-100) Beyond 2013 0-025 0-025 0-025 0-025

BoJ overnight rate 010 Easing 30 Oct 08 050 Oct 10 (0-10) Q1 14 (+20) 0-010 0-010 0-010 0-010

ECB repo rate 100 Easing 03 Nov 11 150 Dec 11 (-25) Mar 12 (-50) 050 050 050 050

Emerging Asia

China Working capital rate 656 Tightening 19 Oct 10 531 Jul 11 (+25) Beyond Q4 12 656 656 656 656

Hong Kong Base rate 050 Easing 19 Sep 07 675 Dec 08 (-100) Beyond Q4 12 050 050 050 050

India Repo rate 850 Tightening 19 Mar 10 475 Oct 11 (+25) Q2 12 (-25) 850 825 800 775

Indonesia ON policy rate 600 Easing 11 Oct 11 675 Nov 11 (-50) Beyond Q4 12 600 600 600 600

Korea Base rate 325 Tightening 9 Jul 10 225 Jun 11(+25) Beyond Q4 12 325 325 325 325

Sri Lanka Reverse repo 850 Easing 20 Feb 09 1200 Jan 11 (-50) Q2 12 (-50) 850 800 800 800

Malaysia ON policy rate 300 Tightening 4 Mar 10 200 May 11 (+25) Beyond Q4 12 300 300 300 300

Philippines ON lending 425 Easing 19 Jan 12 450 Jan 12 (-25) Q2 12 (-25) 425 400 400 400

Taiwan Rediscount rate 1875 Tightening 24 Jun 10 1375 Jun 11 (+125) Beyond Q4 12 1875 1875 1875 1875

Thailand ON repo rate 300 Easing 30 Nov 11 350 Jan 12 (-25) Q3 12 (+25) 300 300 325 350

Vietnam Reverse repo rate 1400 Easing Jul 11 1500 Jul 11 (-100) Q1 12 (-200) 1200 1100 1000 1000

Emerging Europe Middle East amp Africa

Czech Republic 2w repo rate 075 Easing 8 Aug 08 375 Apr 10 (-25) Beyond Q4 12 075 075 075 075

Hungary 2w deposit rate 700 Tightening 29 Nov 10 525 Dec 11 (+50) Q2 12 (+25) 700 725 725 725

Poland 2w repo rate 450 Tightening 19 Jan 11 350 Jun 11 (+25) Mar 12 (-25) 425 375 375 375

Romania Key policy rate 575 Easing 4 Feb 08 1025 Jan 12 (-25) Feb 12 (-25) 525 500 500 500

Russia Refi rate 800 Easing 23 Dec 11 825 Dec 11 (-25) Mar 12 (-25) 775 750 750 750

South Africa Repo rate 550 Easing 11 Dec 08 1200 Nov 10 (-50) Nov 12 (+50) 550 550 550 600

Turkey 1wk repo rate 575 Easing 20 Nov 08 1675 Aug 11 (-50) Beyond Q4 12 575 575 575 575

Egypt Deposit rate 925 Tightening 24 Nov 11 825 Nov 11 (+100) Feb 12 (+100) 1125 1125 1125 1125

Israel Discount rate 250 Easing 26 Sep 11 325 Jan 12 (-25) Q2 12 (-25) 250 225 225 225

Latin America

Brazil SELIC rate 1050 Easing 31 Aug 11 1250 Jan 12 (-50) Mar 12 (-50) 1000 950 950 950

Chile Monetary policy rate 500 Easing 12 January 12 525 Jan 12 (-25) Feb 12 (-25) 450 425 425 425

Colombia Repo rate 475 Tightening 25 Feb 11 300 Nov 11 (+25) Mar 12 (+25) 500 550 550 550

Mexico Overnight rate 450 Easing 16 Jan 09 825 Jul 09 (-25) Q1 12 (-25) 425 400 400 400

Peru Reference rate 425 Tightening 6 May 10 125 May 11 (+25) Beyond 2012 425 425 425 425

Note Changes denoted in bold Source Barclays Capital

Barclays Capital | The Emerging Markets Weekly

26 January 2012 33

EMERGING MARKETS RESEARCH Piero Ghezzi Head of Global Economics Emerging Markets and FX Research +44 (0)20 3134 2190 pieroghezzibarcapcom

EM Global Michael Gavin Head of Global Macro Strategy and Head of EM Strategy +1 212 412 5915 michaelgavinbarcapcom

Alanna Gregory EM Strategist +1 212 412 5938 alannagregorybarcapcom

Latin America Alejandro Arreaza Economist ndash Latin America +1 212 412 3021 alejandroarreazabarcapcom

Sebastian Brown StrategistEconomist +1 212 412 6721 sebastianbrownbarcapcom

Alejandro Grisanti Chief Economist ndash Latin America Ex-Brazil Mexico +1 212 412 5982 alejandrogrisantibarcapcom

Donato Guarino Senior Strategist +1 212 412 5564 donatoguarinobarcapcom

Guilherme Loureiro Economist ndash Brazil +55 11 3757 7372 guilhermeloureirobarcapcom

Roberto Melzi Senior Strategist +1 212 412 5963 robertomelzibarcapcom

Bruno Rovai Economist +55 11 3757 7392 brunorovaibarcapcom

Marcelo Salomon Chief Economist ndash Brazil Chile Mexico+1 212 412 5717 marcelosalomonbarcapcom

Sebastian Vargas Economist - Argentina Uruguay +1 212 412 6823 sebastianvargasbarcapcom

Asia Pacific Jon Scoffin Head of Credit Research and Head of Research Asia-Pacific +65 6308 3217 jonscoffinbarcapcom

Rohit Arora FI Strategist Emerging Asia +65 6308 2092 rohitarora3barcapcom

Rahul Bajoria Regional Economist ndash India Malaysia Thailand +65 6308 3511 rahulbajoriabarcapcom

Jian Chang Regional Economist ndash China Hong Kong+852 2903 2654 jianchangbarcapcom

Joey Chew Regional Economist - Singapore +65 6308 3211 joeychewbarcapcom

Olivier Desbarres Head of FX Strategy Asia-Pacific ex-Japan +65 6308 2073 olivierdesbarresbarcapcom

Yiping Huang Chief Economist Emerging Asia +852 2903 3291 yipinghuangbarcapcom

Wai Ho Leong Senior Regional Economist ndash Korea Malaysia Singapore Taiwan +65 6308 3292 waiholeongbarcapcom

Hamish Pepper FX Strategist Asia-Pacific ex-Japan +65 6308 2220 hamishpepperbarcapcom

Kumar Rachapudi FI Strategist Emerging Asia +65 6308 3383 kumarrachapudibarcapcom

Siddhartha Sanyal Chief Economist India +91 22 6719 6177 siddharthasanyalbarcapcom

Prakriti Sofat Regional Economist ndash Indonesia Philippines Sri Lanka Vietnam +65 6308 3201 prakritisofatbarcapcom

Nick Verdi FX Strategist Asia-Pacific ex-Japan +65 6308 3093 nickverdibarcapcom

Ju Wang FI Strategist Emerging Asia +65 6308 2801 juwangbarcapcom

Lingxiu (Steven) Yang Regional Economist ndash China Hong Kong +852 2903 2653 lingxiuyangbarcapcom

Krishna Hegde CFA Asia Credit Strategist and Senior Financial Institutions +65 6308 2979 krishnahegdebarcapcom

Avanti Save Credit Strategy +65 6308 3116 avantisavebarcapcom

Emerging EMEA Christian Keller Head of Emerging EMEA Research +44 (0)20 7773 2031 christiankellerbarcapcom

Koon Chow Head of Emerging EMEA Strategy +44 (0)20 777 37572 koonchowbarcapcom

Jeff Gable Head of ABSA Capital Research +27 11 895 5368 jeffgableabsacapitalcom

Gina Schoeman Economist ndash South Africa +27 (0)11 895 5403 ginaschoemanabsacapitalcom

Daniel Hewitt Senior Emerging EMEA Economist +44 (0)20 3134 3522 danielhewittbarcapcom

Piotr Chwiejczak Rates Strategist +44 (0)20 3134 4606 piotrchwiejczak barcapcom

Ridle Markus Economist ndash Sub-Saharan Africa +27 11 895 5374 ridlemarkusabsacapitalcom

Fahad Al Turki Economist ndash Saudi Arabia +966 1880 6577 fahadalturkibarcapcom

Vladimir Pantyushin Chief Economist ndash Russia and CIS +7 495 7868450 vladimirpantyushinbarcapcom

Andreas Kolbe Credit Strategist +44 (0)20 313 43134 andreaskolbebarcapcom

Jeffrey Schultz Economist ndash South Africa +27 (0)11 895 5349 jeffreyschultzabsacapitalcom

Eldar Vakhitov Emerging EMEA Economist +44 (0)20 777 32192 eldarvakhitovbarcapcom

Alia Moubayed Senior Economist ndash Middle East amp North Africa +44 (0)20 313 41120 aliamoubayedbarcapcom

Dumisani Ngwenya Strategist ndash Africa +27 (0)11 895 5346 dumisaningwenyaabsacapitalcom

Michael Keenan Sub-Saharan FX and Rates Strategist +27 (0) 11 895 5513 mikekeenanabsacapitalcom

EM Corporate Credit Juan C Cruz Head of Latin America amp EEMEA Corporate Credit Research +1 212 412 3424 juancruzbarcapcom

Christopher Buck +1 212 412 3418 christopherbuckbarcapcom

Stella Cridge +44 (0)20 313 49618 stellacridgebarcapcom

Miguel Crivelli +1 212 412 5231 miguelcrivellibarcapcom

Ivan Fernandes +1 212 412 3428 ivanfernandesbarcapcom

Autumn Graham +1 212 412 2839 autumngrahambarcapcom

Milena Ianeva +44 (0)20 7773 8536 milenaianevabarcapcom

Stanislav Ponomarenko +7 495 786 8451 stanislavponomarenkobarcapcom

Aziz Sunderji +1 212 412 2218 azizsunderjibarcapcom

Antoine Yacoub + 44 207 7731727 antoineyacoubbarcapcom

Golib Zohidov +44 (0)20 777 31513 golibzohidovbarcapcom

Barclays Capital | The Emerging Markets Weekly

26 January 2012 31

FX FORECASTS AND FORWARDS

FX forecasts Forecast vs outright forward

Spot 1m 3m 6m 1y 1m 3m 6m 1y

G7 countries

EUR 131 135 130 125 120 30 -08 -47 -86

JPY 774 750 750 780 800 -31 -31 09 39

GBP 157 157 155 152 150 01 -11 -29 -40

CHF 092 092 096 104 108 -01 44 133 181

CAD 100 103 105 105 102 28 46 44 10

AUD 106 097 098 101 102 -83 -68 -30 -04

NZD 082 077 079 082 083 -58 -29 14 39

Emerging Asia

CNY 631 628 624 617 608 -03 -07 -17 -31

HKD 776 778 778 778 778 02 02 03 03

INR 5011 5000 5000 4900 4800 -06 -20 -54 -94

IDR 8979 8850 8800 8800 8500 -12 -21 -29 -83

KRW 1122 1100 1075 1050 1025 -21 -47 -74 -100

MYR 304 302 300 295 284 -08 -18 -37 -79

PHP 4289 4260 4220 4250 4200 -08 -19 -14 -28

SGD 126 124 123 123 122 -17 -25 -24 -29

THB 3138 3100 3060 2975 2850 -20 -35 -67 -112

TWD 2986 2970 2950 2875 2750 -07 -09 -30 -66

Latin America

ARS 434 435 445 460 540 -06 -09 -12 64

BRL 175 174 173 174 170 -10 -28 -38 -87

CLP 487 485 480 475 475 -07 -23 -40 -54

MXN 1298 1285 1270 1265 1260 -13 -29 -41 -60

COP 1811 1795 1780 1775 1770 -10 -21 -31 -44

PEN 269 268 267 266 264 -04 -12 -19 -34

EEMEA

EURCZK 2514 2550 2575 2550 2525 14 24 14 04

EURHUF 295 310 315 310 300 48 58 30 -23

EURPLN 424 430 450 440 435 12 52 20 -08

EURRON 434 436 445 440 435 02 19 00 -38

USDRUB 3023 3030 3000 3000 3050 -06 -24 -36 -45

BSKRUB 3452 3507 3405 3338 3325 10 -28 -60 -88

USDTRY 179 182 185 182 180 07 11 -24 -68

USDZAR 782 815 820 780 770 38 35 -28 -65

USDILS 376 375 370 365 360 -03 -18 -34 -50

USDEGP 604 600 620 650 700 -29 -44 -19 25

USDUAH 804 803 810 815 820 -15 -36 -71 -162

Source Barclays Capital

Barclays Capital | The Emerging Markets Weekly

26 January 2012 32

OFFICIAL INTEREST RATES

Start of cycle Forecasts as at end of

Official rate Current Date Level Last move Next move expected Q1 12 Q2 12 Q3 12 Q4 12

per annum (unless stated)

Advanced

Fed funds rate 0-025 Easing 17 Sep 07 525 Dec 08 (-75-100) Beyond 2013 0-025 0-025 0-025 0-025

BoJ overnight rate 010 Easing 30 Oct 08 050 Oct 10 (0-10) Q1 14 (+20) 0-010 0-010 0-010 0-010

ECB repo rate 100 Easing 03 Nov 11 150 Dec 11 (-25) Mar 12 (-50) 050 050 050 050

Emerging Asia

China Working capital rate 656 Tightening 19 Oct 10 531 Jul 11 (+25) Beyond Q4 12 656 656 656 656

Hong Kong Base rate 050 Easing 19 Sep 07 675 Dec 08 (-100) Beyond Q4 12 050 050 050 050

India Repo rate 850 Tightening 19 Mar 10 475 Oct 11 (+25) Q2 12 (-25) 850 825 800 775

Indonesia ON policy rate 600 Easing 11 Oct 11 675 Nov 11 (-50) Beyond Q4 12 600 600 600 600

Korea Base rate 325 Tightening 9 Jul 10 225 Jun 11(+25) Beyond Q4 12 325 325 325 325

Sri Lanka Reverse repo 850 Easing 20 Feb 09 1200 Jan 11 (-50) Q2 12 (-50) 850 800 800 800

Malaysia ON policy rate 300 Tightening 4 Mar 10 200 May 11 (+25) Beyond Q4 12 300 300 300 300

Philippines ON lending 425 Easing 19 Jan 12 450 Jan 12 (-25) Q2 12 (-25) 425 400 400 400

Taiwan Rediscount rate 1875 Tightening 24 Jun 10 1375 Jun 11 (+125) Beyond Q4 12 1875 1875 1875 1875

Thailand ON repo rate 300 Easing 30 Nov 11 350 Jan 12 (-25) Q3 12 (+25) 300 300 325 350

Vietnam Reverse repo rate 1400 Easing Jul 11 1500 Jul 11 (-100) Q1 12 (-200) 1200 1100 1000 1000

Emerging Europe Middle East amp Africa

Czech Republic 2w repo rate 075 Easing 8 Aug 08 375 Apr 10 (-25) Beyond Q4 12 075 075 075 075

Hungary 2w deposit rate 700 Tightening 29 Nov 10 525 Dec 11 (+50) Q2 12 (+25) 700 725 725 725

Poland 2w repo rate 450 Tightening 19 Jan 11 350 Jun 11 (+25) Mar 12 (-25) 425 375 375 375

Romania Key policy rate 575 Easing 4 Feb 08 1025 Jan 12 (-25) Feb 12 (-25) 525 500 500 500

Russia Refi rate 800 Easing 23 Dec 11 825 Dec 11 (-25) Mar 12 (-25) 775 750 750 750

South Africa Repo rate 550 Easing 11 Dec 08 1200 Nov 10 (-50) Nov 12 (+50) 550 550 550 600

Turkey 1wk repo rate 575 Easing 20 Nov 08 1675 Aug 11 (-50) Beyond Q4 12 575 575 575 575

Egypt Deposit rate 925 Tightening 24 Nov 11 825 Nov 11 (+100) Feb 12 (+100) 1125 1125 1125 1125

Israel Discount rate 250 Easing 26 Sep 11 325 Jan 12 (-25) Q2 12 (-25) 250 225 225 225

Latin America

Brazil SELIC rate 1050 Easing 31 Aug 11 1250 Jan 12 (-50) Mar 12 (-50) 1000 950 950 950

Chile Monetary policy rate 500 Easing 12 January 12 525 Jan 12 (-25) Feb 12 (-25) 450 425 425 425

Colombia Repo rate 475 Tightening 25 Feb 11 300 Nov 11 (+25) Mar 12 (+25) 500 550 550 550

Mexico Overnight rate 450 Easing 16 Jan 09 825 Jul 09 (-25) Q1 12 (-25) 425 400 400 400

Peru Reference rate 425 Tightening 6 May 10 125 May 11 (+25) Beyond 2012 425 425 425 425

Note Changes denoted in bold Source Barclays Capital

Barclays Capital | The Emerging Markets Weekly

26 January 2012 33

EMERGING MARKETS RESEARCH Piero Ghezzi Head of Global Economics Emerging Markets and FX Research +44 (0)20 3134 2190 pieroghezzibarcapcom

EM Global Michael Gavin Head of Global Macro Strategy and Head of EM Strategy +1 212 412 5915 michaelgavinbarcapcom

Alanna Gregory EM Strategist +1 212 412 5938 alannagregorybarcapcom

Latin America Alejandro Arreaza Economist ndash Latin America +1 212 412 3021 alejandroarreazabarcapcom

Sebastian Brown StrategistEconomist +1 212 412 6721 sebastianbrownbarcapcom

Alejandro Grisanti Chief Economist ndash Latin America Ex-Brazil Mexico +1 212 412 5982 alejandrogrisantibarcapcom

Donato Guarino Senior Strategist +1 212 412 5564 donatoguarinobarcapcom

Guilherme Loureiro Economist ndash Brazil +55 11 3757 7372 guilhermeloureirobarcapcom

Roberto Melzi Senior Strategist +1 212 412 5963 robertomelzibarcapcom

Bruno Rovai Economist +55 11 3757 7392 brunorovaibarcapcom

Marcelo Salomon Chief Economist ndash Brazil Chile Mexico+1 212 412 5717 marcelosalomonbarcapcom

Sebastian Vargas Economist - Argentina Uruguay +1 212 412 6823 sebastianvargasbarcapcom

Asia Pacific Jon Scoffin Head of Credit Research and Head of Research Asia-Pacific +65 6308 3217 jonscoffinbarcapcom

Rohit Arora FI Strategist Emerging Asia +65 6308 2092 rohitarora3barcapcom

Rahul Bajoria Regional Economist ndash India Malaysia Thailand +65 6308 3511 rahulbajoriabarcapcom

Jian Chang Regional Economist ndash China Hong Kong+852 2903 2654 jianchangbarcapcom

Joey Chew Regional Economist - Singapore +65 6308 3211 joeychewbarcapcom

Olivier Desbarres Head of FX Strategy Asia-Pacific ex-Japan +65 6308 2073 olivierdesbarresbarcapcom

Yiping Huang Chief Economist Emerging Asia +852 2903 3291 yipinghuangbarcapcom

Wai Ho Leong Senior Regional Economist ndash Korea Malaysia Singapore Taiwan +65 6308 3292 waiholeongbarcapcom

Hamish Pepper FX Strategist Asia-Pacific ex-Japan +65 6308 2220 hamishpepperbarcapcom

Kumar Rachapudi FI Strategist Emerging Asia +65 6308 3383 kumarrachapudibarcapcom

Siddhartha Sanyal Chief Economist India +91 22 6719 6177 siddharthasanyalbarcapcom

Prakriti Sofat Regional Economist ndash Indonesia Philippines Sri Lanka Vietnam +65 6308 3201 prakritisofatbarcapcom

Nick Verdi FX Strategist Asia-Pacific ex-Japan +65 6308 3093 nickverdibarcapcom

Ju Wang FI Strategist Emerging Asia +65 6308 2801 juwangbarcapcom

Lingxiu (Steven) Yang Regional Economist ndash China Hong Kong +852 2903 2653 lingxiuyangbarcapcom

Krishna Hegde CFA Asia Credit Strategist and Senior Financial Institutions +65 6308 2979 krishnahegdebarcapcom

Avanti Save Credit Strategy +65 6308 3116 avantisavebarcapcom

Emerging EMEA Christian Keller Head of Emerging EMEA Research +44 (0)20 7773 2031 christiankellerbarcapcom

Koon Chow Head of Emerging EMEA Strategy +44 (0)20 777 37572 koonchowbarcapcom

Jeff Gable Head of ABSA Capital Research +27 11 895 5368 jeffgableabsacapitalcom

Gina Schoeman Economist ndash South Africa +27 (0)11 895 5403 ginaschoemanabsacapitalcom

Daniel Hewitt Senior Emerging EMEA Economist +44 (0)20 3134 3522 danielhewittbarcapcom

Piotr Chwiejczak Rates Strategist +44 (0)20 3134 4606 piotrchwiejczak barcapcom

Ridle Markus Economist ndash Sub-Saharan Africa +27 11 895 5374 ridlemarkusabsacapitalcom

Fahad Al Turki Economist ndash Saudi Arabia +966 1880 6577 fahadalturkibarcapcom

Vladimir Pantyushin Chief Economist ndash Russia and CIS +7 495 7868450 vladimirpantyushinbarcapcom

Andreas Kolbe Credit Strategist +44 (0)20 313 43134 andreaskolbebarcapcom

Jeffrey Schultz Economist ndash South Africa +27 (0)11 895 5349 jeffreyschultzabsacapitalcom

Eldar Vakhitov Emerging EMEA Economist +44 (0)20 777 32192 eldarvakhitovbarcapcom

Alia Moubayed Senior Economist ndash Middle East amp North Africa +44 (0)20 313 41120 aliamoubayedbarcapcom

Dumisani Ngwenya Strategist ndash Africa +27 (0)11 895 5346 dumisaningwenyaabsacapitalcom

Michael Keenan Sub-Saharan FX and Rates Strategist +27 (0) 11 895 5513 mikekeenanabsacapitalcom

EM Corporate Credit Juan C Cruz Head of Latin America amp EEMEA Corporate Credit Research +1 212 412 3424 juancruzbarcapcom

Christopher Buck +1 212 412 3418 christopherbuckbarcapcom

Stella Cridge +44 (0)20 313 49618 stellacridgebarcapcom

Miguel Crivelli +1 212 412 5231 miguelcrivellibarcapcom

Ivan Fernandes +1 212 412 3428 ivanfernandesbarcapcom

Autumn Graham +1 212 412 2839 autumngrahambarcapcom

Milena Ianeva +44 (0)20 7773 8536 milenaianevabarcapcom

Stanislav Ponomarenko +7 495 786 8451 stanislavponomarenkobarcapcom

Aziz Sunderji +1 212 412 2218 azizsunderjibarcapcom

Antoine Yacoub + 44 207 7731727 antoineyacoubbarcapcom

Golib Zohidov +44 (0)20 777 31513 golibzohidovbarcapcom

Barclays Capital | The Emerging Markets Weekly

26 January 2012 32

OFFICIAL INTEREST RATES

Start of cycle Forecasts as at end of

Official rate Current Date Level Last move Next move expected Q1 12 Q2 12 Q3 12 Q4 12

per annum (unless stated)

Advanced

Fed funds rate 0-025 Easing 17 Sep 07 525 Dec 08 (-75-100) Beyond 2013 0-025 0-025 0-025 0-025

BoJ overnight rate 010 Easing 30 Oct 08 050 Oct 10 (0-10) Q1 14 (+20) 0-010 0-010 0-010 0-010

ECB repo rate 100 Easing 03 Nov 11 150 Dec 11 (-25) Mar 12 (-50) 050 050 050 050

Emerging Asia

China Working capital rate 656 Tightening 19 Oct 10 531 Jul 11 (+25) Beyond Q4 12 656 656 656 656

Hong Kong Base rate 050 Easing 19 Sep 07 675 Dec 08 (-100) Beyond Q4 12 050 050 050 050

India Repo rate 850 Tightening 19 Mar 10 475 Oct 11 (+25) Q2 12 (-25) 850 825 800 775

Indonesia ON policy rate 600 Easing 11 Oct 11 675 Nov 11 (-50) Beyond Q4 12 600 600 600 600

Korea Base rate 325 Tightening 9 Jul 10 225 Jun 11(+25) Beyond Q4 12 325 325 325 325

Sri Lanka Reverse repo 850 Easing 20 Feb 09 1200 Jan 11 (-50) Q2 12 (-50) 850 800 800 800

Malaysia ON policy rate 300 Tightening 4 Mar 10 200 May 11 (+25) Beyond Q4 12 300 300 300 300

Philippines ON lending 425 Easing 19 Jan 12 450 Jan 12 (-25) Q2 12 (-25) 425 400 400 400

Taiwan Rediscount rate 1875 Tightening 24 Jun 10 1375 Jun 11 (+125) Beyond Q4 12 1875 1875 1875 1875

Thailand ON repo rate 300 Easing 30 Nov 11 350 Jan 12 (-25) Q3 12 (+25) 300 300 325 350

Vietnam Reverse repo rate 1400 Easing Jul 11 1500 Jul 11 (-100) Q1 12 (-200) 1200 1100 1000 1000

Emerging Europe Middle East amp Africa

Czech Republic 2w repo rate 075 Easing 8 Aug 08 375 Apr 10 (-25) Beyond Q4 12 075 075 075 075

Hungary 2w deposit rate 700 Tightening 29 Nov 10 525 Dec 11 (+50) Q2 12 (+25) 700 725 725 725

Poland 2w repo rate 450 Tightening 19 Jan 11 350 Jun 11 (+25) Mar 12 (-25) 425 375 375 375

Romania Key policy rate 575 Easing 4 Feb 08 1025 Jan 12 (-25) Feb 12 (-25) 525 500 500 500

Russia Refi rate 800 Easing 23 Dec 11 825 Dec 11 (-25) Mar 12 (-25) 775 750 750 750

South Africa Repo rate 550 Easing 11 Dec 08 1200 Nov 10 (-50) Nov 12 (+50) 550 550 550 600

Turkey 1wk repo rate 575 Easing 20 Nov 08 1675 Aug 11 (-50) Beyond Q4 12 575 575 575 575

Egypt Deposit rate 925 Tightening 24 Nov 11 825 Nov 11 (+100) Feb 12 (+100) 1125 1125 1125 1125

Israel Discount rate 250 Easing 26 Sep 11 325 Jan 12 (-25) Q2 12 (-25) 250 225 225 225

Latin America

Brazil SELIC rate 1050 Easing 31 Aug 11 1250 Jan 12 (-50) Mar 12 (-50) 1000 950 950 950

Chile Monetary policy rate 500 Easing 12 January 12 525 Jan 12 (-25) Feb 12 (-25) 450 425 425 425

Colombia Repo rate 475 Tightening 25 Feb 11 300 Nov 11 (+25) Mar 12 (+25) 500 550 550 550

Mexico Overnight rate 450 Easing 16 Jan 09 825 Jul 09 (-25) Q1 12 (-25) 425 400 400 400

Peru Reference rate 425 Tightening 6 May 10 125 May 11 (+25) Beyond 2012 425 425 425 425

Note Changes denoted in bold Source Barclays Capital

Barclays Capital | The Emerging Markets Weekly

26 January 2012 33

EMERGING MARKETS RESEARCH Piero Ghezzi Head of Global Economics Emerging Markets and FX Research +44 (0)20 3134 2190 pieroghezzibarcapcom

EM Global Michael Gavin Head of Global Macro Strategy and Head of EM Strategy +1 212 412 5915 michaelgavinbarcapcom

Alanna Gregory EM Strategist +1 212 412 5938 alannagregorybarcapcom

Latin America Alejandro Arreaza Economist ndash Latin America +1 212 412 3021 alejandroarreazabarcapcom

Sebastian Brown StrategistEconomist +1 212 412 6721 sebastianbrownbarcapcom

Alejandro Grisanti Chief Economist ndash Latin America Ex-Brazil Mexico +1 212 412 5982 alejandrogrisantibarcapcom

Donato Guarino Senior Strategist +1 212 412 5564 donatoguarinobarcapcom

Guilherme Loureiro Economist ndash Brazil +55 11 3757 7372 guilhermeloureirobarcapcom

Roberto Melzi Senior Strategist +1 212 412 5963 robertomelzibarcapcom

Bruno Rovai Economist +55 11 3757 7392 brunorovaibarcapcom

Marcelo Salomon Chief Economist ndash Brazil Chile Mexico+1 212 412 5717 marcelosalomonbarcapcom

Sebastian Vargas Economist - Argentina Uruguay +1 212 412 6823 sebastianvargasbarcapcom

Asia Pacific Jon Scoffin Head of Credit Research and Head of Research Asia-Pacific +65 6308 3217 jonscoffinbarcapcom

Rohit Arora FI Strategist Emerging Asia +65 6308 2092 rohitarora3barcapcom

Rahul Bajoria Regional Economist ndash India Malaysia Thailand +65 6308 3511 rahulbajoriabarcapcom

Jian Chang Regional Economist ndash China Hong Kong+852 2903 2654 jianchangbarcapcom

Joey Chew Regional Economist - Singapore +65 6308 3211 joeychewbarcapcom

Olivier Desbarres Head of FX Strategy Asia-Pacific ex-Japan +65 6308 2073 olivierdesbarresbarcapcom

Yiping Huang Chief Economist Emerging Asia +852 2903 3291 yipinghuangbarcapcom

Wai Ho Leong Senior Regional Economist ndash Korea Malaysia Singapore Taiwan +65 6308 3292 waiholeongbarcapcom

Hamish Pepper FX Strategist Asia-Pacific ex-Japan +65 6308 2220 hamishpepperbarcapcom

Kumar Rachapudi FI Strategist Emerging Asia +65 6308 3383 kumarrachapudibarcapcom

Siddhartha Sanyal Chief Economist India +91 22 6719 6177 siddharthasanyalbarcapcom

Prakriti Sofat Regional Economist ndash Indonesia Philippines Sri Lanka Vietnam +65 6308 3201 prakritisofatbarcapcom

Nick Verdi FX Strategist Asia-Pacific ex-Japan +65 6308 3093 nickverdibarcapcom

Ju Wang FI Strategist Emerging Asia +65 6308 2801 juwangbarcapcom

Lingxiu (Steven) Yang Regional Economist ndash China Hong Kong +852 2903 2653 lingxiuyangbarcapcom

Krishna Hegde CFA Asia Credit Strategist and Senior Financial Institutions +65 6308 2979 krishnahegdebarcapcom

Avanti Save Credit Strategy +65 6308 3116 avantisavebarcapcom

Emerging EMEA Christian Keller Head of Emerging EMEA Research +44 (0)20 7773 2031 christiankellerbarcapcom

Koon Chow Head of Emerging EMEA Strategy +44 (0)20 777 37572 koonchowbarcapcom

Jeff Gable Head of ABSA Capital Research +27 11 895 5368 jeffgableabsacapitalcom

Gina Schoeman Economist ndash South Africa +27 (0)11 895 5403 ginaschoemanabsacapitalcom

Daniel Hewitt Senior Emerging EMEA Economist +44 (0)20 3134 3522 danielhewittbarcapcom

Piotr Chwiejczak Rates Strategist +44 (0)20 3134 4606 piotrchwiejczak barcapcom

Ridle Markus Economist ndash Sub-Saharan Africa +27 11 895 5374 ridlemarkusabsacapitalcom

Fahad Al Turki Economist ndash Saudi Arabia +966 1880 6577 fahadalturkibarcapcom

Vladimir Pantyushin Chief Economist ndash Russia and CIS +7 495 7868450 vladimirpantyushinbarcapcom

Andreas Kolbe Credit Strategist +44 (0)20 313 43134 andreaskolbebarcapcom

Jeffrey Schultz Economist ndash South Africa +27 (0)11 895 5349 jeffreyschultzabsacapitalcom

Eldar Vakhitov Emerging EMEA Economist +44 (0)20 777 32192 eldarvakhitovbarcapcom

Alia Moubayed Senior Economist ndash Middle East amp North Africa +44 (0)20 313 41120 aliamoubayedbarcapcom

Dumisani Ngwenya Strategist ndash Africa +27 (0)11 895 5346 dumisaningwenyaabsacapitalcom

Michael Keenan Sub-Saharan FX and Rates Strategist +27 (0) 11 895 5513 mikekeenanabsacapitalcom

EM Corporate Credit Juan C Cruz Head of Latin America amp EEMEA Corporate Credit Research +1 212 412 3424 juancruzbarcapcom

Christopher Buck +1 212 412 3418 christopherbuckbarcapcom

Stella Cridge +44 (0)20 313 49618 stellacridgebarcapcom

Miguel Crivelli +1 212 412 5231 miguelcrivellibarcapcom

Ivan Fernandes +1 212 412 3428 ivanfernandesbarcapcom

Autumn Graham +1 212 412 2839 autumngrahambarcapcom

Milena Ianeva +44 (0)20 7773 8536 milenaianevabarcapcom

Stanislav Ponomarenko +7 495 786 8451 stanislavponomarenkobarcapcom

Aziz Sunderji +1 212 412 2218 azizsunderjibarcapcom

Antoine Yacoub + 44 207 7731727 antoineyacoubbarcapcom

Golib Zohidov +44 (0)20 777 31513 golibzohidovbarcapcom

Barclays Capital | The Emerging Markets Weekly

26 January 2012 33

EMERGING MARKETS RESEARCH Piero Ghezzi Head of Global Economics Emerging Markets and FX Research +44 (0)20 3134 2190 pieroghezzibarcapcom

EM Global Michael Gavin Head of Global Macro Strategy and Head of EM Strategy +1 212 412 5915 michaelgavinbarcapcom

Alanna Gregory EM Strategist +1 212 412 5938 alannagregorybarcapcom

Latin America Alejandro Arreaza Economist ndash Latin America +1 212 412 3021 alejandroarreazabarcapcom

Sebastian Brown StrategistEconomist +1 212 412 6721 sebastianbrownbarcapcom

Alejandro Grisanti Chief Economist ndash Latin America Ex-Brazil Mexico +1 212 412 5982 alejandrogrisantibarcapcom

Donato Guarino Senior Strategist +1 212 412 5564 donatoguarinobarcapcom

Guilherme Loureiro Economist ndash Brazil +55 11 3757 7372 guilhermeloureirobarcapcom

Roberto Melzi Senior Strategist +1 212 412 5963 robertomelzibarcapcom

Bruno Rovai Economist +55 11 3757 7392 brunorovaibarcapcom

Marcelo Salomon Chief Economist ndash Brazil Chile Mexico+1 212 412 5717 marcelosalomonbarcapcom

Sebastian Vargas Economist - Argentina Uruguay +1 212 412 6823 sebastianvargasbarcapcom

Asia Pacific Jon Scoffin Head of Credit Research and Head of Research Asia-Pacific +65 6308 3217 jonscoffinbarcapcom

Rohit Arora FI Strategist Emerging Asia +65 6308 2092 rohitarora3barcapcom

Rahul Bajoria Regional Economist ndash India Malaysia Thailand +65 6308 3511 rahulbajoriabarcapcom

Jian Chang Regional Economist ndash China Hong Kong+852 2903 2654 jianchangbarcapcom

Joey Chew Regional Economist - Singapore +65 6308 3211 joeychewbarcapcom

Olivier Desbarres Head of FX Strategy Asia-Pacific ex-Japan +65 6308 2073 olivierdesbarresbarcapcom

Yiping Huang Chief Economist Emerging Asia +852 2903 3291 yipinghuangbarcapcom

Wai Ho Leong Senior Regional Economist ndash Korea Malaysia Singapore Taiwan +65 6308 3292 waiholeongbarcapcom

Hamish Pepper FX Strategist Asia-Pacific ex-Japan +65 6308 2220 hamishpepperbarcapcom

Kumar Rachapudi FI Strategist Emerging Asia +65 6308 3383 kumarrachapudibarcapcom

Siddhartha Sanyal Chief Economist India +91 22 6719 6177 siddharthasanyalbarcapcom

Prakriti Sofat Regional Economist ndash Indonesia Philippines Sri Lanka Vietnam +65 6308 3201 prakritisofatbarcapcom

Nick Verdi FX Strategist Asia-Pacific ex-Japan +65 6308 3093 nickverdibarcapcom

Ju Wang FI Strategist Emerging Asia +65 6308 2801 juwangbarcapcom

Lingxiu (Steven) Yang Regional Economist ndash China Hong Kong +852 2903 2653 lingxiuyangbarcapcom

Krishna Hegde CFA Asia Credit Strategist and Senior Financial Institutions +65 6308 2979 krishnahegdebarcapcom

Avanti Save Credit Strategy +65 6308 3116 avantisavebarcapcom

Emerging EMEA Christian Keller Head of Emerging EMEA Research +44 (0)20 7773 2031 christiankellerbarcapcom

Koon Chow Head of Emerging EMEA Strategy +44 (0)20 777 37572 koonchowbarcapcom

Jeff Gable Head of ABSA Capital Research +27 11 895 5368 jeffgableabsacapitalcom

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Daniel Hewitt Senior Emerging EMEA Economist +44 (0)20 3134 3522 danielhewittbarcapcom

Piotr Chwiejczak Rates Strategist +44 (0)20 3134 4606 piotrchwiejczak barcapcom

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Fahad Al Turki Economist ndash Saudi Arabia +966 1880 6577 fahadalturkibarcapcom

Vladimir Pantyushin Chief Economist ndash Russia and CIS +7 495 7868450 vladimirpantyushinbarcapcom

Andreas Kolbe Credit Strategist +44 (0)20 313 43134 andreaskolbebarcapcom

Jeffrey Schultz Economist ndash South Africa +27 (0)11 895 5349 jeffreyschultzabsacapitalcom

Eldar Vakhitov Emerging EMEA Economist +44 (0)20 777 32192 eldarvakhitovbarcapcom

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Dumisani Ngwenya Strategist ndash Africa +27 (0)11 895 5346 dumisaningwenyaabsacapitalcom

Michael Keenan Sub-Saharan FX and Rates Strategist +27 (0) 11 895 5513 mikekeenanabsacapitalcom

EM Corporate Credit Juan C Cruz Head of Latin America amp EEMEA Corporate Credit Research +1 212 412 3424 juancruzbarcapcom

Christopher Buck +1 212 412 3418 christopherbuckbarcapcom

Stella Cridge +44 (0)20 313 49618 stellacridgebarcapcom

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Antoine Yacoub + 44 207 7731727 antoineyacoubbarcapcom

Golib Zohidov +44 (0)20 777 31513 golibzohidovbarcapcom

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Barclays Capital Japan Limited is a joint-stock company incorporated in Japan with registered office of 6-10-1 Roppongi Minato-ku Tokyo 106-6131 Japan It is a subsidiary of Barclays Bank PLC and a registered financial instruments firm regulated by the Financial Services Agency of Japan Registered NumberKanto Zaimukyokucho (kinsho) No 143 Barclays Bank PLC Hong Kong Branch is distributing this material in Hong Kong as an authorised institutionregulated by the Hong Kong Monetary Authority Registered Office 41F Cheung Kong Center 2 Queens Road Central Hong Kong This material is issued inTaiwan by Barclays Capital Securities Taiwan Limited This material on securities not traded in Taiwan is not to be construed as recommendation in Taiwan Barclays Capital Securities Taiwan Limited does not accept orders from clients to trade in such securities This material may not be distributed to the publicmedia or used by the public media without prior written consent of Barclays Capital This material is distributed in South Korea by Barclays Capital SecuritiesLimited Seoul Branch All equity research material is distributed in India by Barclays Securities (India) Private Limited (SEBI Registration No INBINF 231292732 (NSE) INBINF 011292738 (BSE) Registered Office 208 | Ceejay House | Dr Annie Besant Road | Shivsagar Estate | Worli | Mumbai - 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