Emerging

Markets
2nd quarter 2009

Turnaround!

Source: www.pixelio.de
Content

Emerging Markets
Content
Introduction - Emerging Markets - Further outperforming? 3

Investment strategy 4

Asia 6

Latin America 8

South Africa 10

Charts and tables:

Economics 12

Fixed income 16

Chartbook FX 18

Equity markets 20

Risk indicators 22

Technical analysis 24

Correlations 26

Abbreviations 27

Asia: China, India, South Korea, Taiwan, Singapore, Thailand, Malaysia, Philippines, Indonesia
Latin America: Argentina, Brazil, Chile, Colombia, Mexico, Paraguay, Venezuela
Africa and Middle East (MEA); Bahrain, Iran, Iraq, Israel, Yemen, Qatar, Kuwait, Libya, Saudi Arabia, Syria, United Arab Emirates (UAE),
Middle- and Eastern European Countries (CEE): Poland, Slovakia, Czech Republic, Hungary

2
 Introduction

Emerging Markets
Further outperforming?
Equity market performance in the Emerging Markets EM equity performance of regions
since the beginning of the year has been substan- 120
tially better than in the established markets. At the
same time, the currencies in the markets we cover
100
have been able to strengthen versus the US dollar,
and exceptionally strong gains have also been regis-
tered on the local bond markets and on Eurobonds. 80
On the one hand, the Emerging Markets are profiting
from the general relief as market participants begin 60
to grasp that the economic system has survived this
crisis and that the likelihood of a deep, long depres- 40
sion has declined. On the other hand, the economic Jan-08 Apr-08 Jul-08 Oct-08 Jan-09 Apr-09
data from the Emerging Markets has also been sur-
MSCI EM Asia
prisingly positive. For example, in China there are MSCI EM Latin America
clear-cut signs of a relatively rapid recovery in eco- MSCI EM Middle East / Africa
nomic activity, and Brazil’s performance has also
been more robust than expected so far. Against this Source: Thomson Financial Datastream, Raiffeisen RESEARCH
backdrop, more portfolio investment is flowing into
the EM financial markets again, and commodity EM-Bondfunds holdings
prices have also bounced back. 30,000

25,000
The main risk continues to be the necessary process
of deleveraging in the financial sector. As the IMF 20,000
notes in its April issue of the Global Financial Stabil-
15,000
ity Report, Asia requires about 9% of GDP for exter-
nal financing in 2009, and the figure is around 8% 10,000
for Latin America. While the banks in both regions
5,000
are not critically affected by write-downs on asset
backed securities and generally exhibit relatively low 0
levels of leverage, there have been tangible impacts Mar-04 Mar-05 Mar-06 Mar-07 Mar-08 Mar-09
from the increase in default rates stemming from the Asia Latin America
economic crisis. Furthermore, the countries are grap- CE MEA
pling with a decline in direct investment, both in the Total
banking sector and in other sectors of the economy
In USD mn
as well. Financing opportunities for small and me- Source: EmergingPortfolio.com
dium-sized enterprises in the Emerging Markets also
continue to be very limited, and default rates are set Fiscal packages in % of GDP
to rise. 6

At the same time, in respect the markets covered in 5

this publication – China, India, Brazil, Mexico and
South Africa – only China has the ability to massively 4
support domestic demand using public funds. While
all of the other countries have also passed fiscal pack- 3
ages, these pale in comparison to China’s actions.
Over the longer term, past and future rate cuts have 2
a positive effect, along with levels of food prices,
which are hovering at relatively low levels. 1

Although we remain optimistic for the longer term, 0

over the medium term we foresee a correction occur- US JP DE CN IN KR TH ZA AR BR MX
ring on the equity markets.
Veronika Lammer Excl. off budget measures
Source: OECD, Credit Suisse, Raiffeisen RESEARCH

3
Investment strategy

Investment strategy
Corrections ahead
Equities - performance overview in Euro  In retrospect: Emerging Markets have performed
in % 1 week 1 month 1 year very well in recent months: Latin America achieved
MSCI Eastern Europe 10.7 18.0 -53.9 the best performance, ahead of Asia and EMEA.
MSCI Asia 6.6 18.0 -25.5  The investment recommendation for Brazilian
MSCI Latin America 11.0 16.6 -32.7 government bonds resulted in a performance of
S&P Composite 4.1 6.3 -23.4 35% and the investment recommendation for
Germany 3.0 9.4 -29.8 Mexican government bonds brought in +12%.
Austria 13.8 15.4 -50.3  Modest outperformance by our EM portfolio in
Egypt 0.1 5.8 -55.5
Q4
Argentina 15.7 24.8 -30.6
 New weighting for the next 3 months: Within
Brazil 11.5 15.6 -31.5
the regional portfolio, we underweight Eastern
Bulgaria 6.9 26.8 -66.4
Chile 9.5 12.0 -4.5
Europe, overweight Africa and weight Latin
China 4.3 5.2 -5.7 America and Asia neutral. Taking a longer-term
India 4.2 9.5 -34.0 perspective (> 1 year), we would overweight the
Indonesia 7.7 35.8 -26.4 Emerging Markets compared to established mar-
Israel 4.2 7.0 -23.2 kets at any rate.
Colombia 9.1 16.1 -15.8  The expanded range of protection offered by the
Malaysia 3.1 9.6 -16.9 special IMF programmes is generally positive for
Mexico 14.4 15.3 -27.6 the Emerging Markets. Regional development
Pakistan -2.6 -8.1 -52.4 banks are also offering cross-border funds for the
Peru 14.1 18.2 -29.4 first time.
Philippines 7.2 7.7 -17.0
Poland 2.9 3.0 -52.2
Romania 10.5 15.5 -57.5
Russia 10.7 12.4 -53.0
Asia: overweight China over the long run
South Africa 5.4 9.4 -31.4
South Korea 4.3 9.8 -25.8  China and India have seen good performance in
Taiwan 8.2 14.1 -20.5 recent months. HSCE and Sensex are dependent
Thailand 6.7 15.7 -34.6 on international risk sentiment.
Czech Republic 11.3 15.0 -43.8  Over the short term, the markets are showing
Turkey 3.8 11.7 -27.7 some fatigue and the good data is hard to top.
Hungary 15.0 17.3 -43.8  Valuations have risen sharply again
Venezuela -1.7 -0.7 32.9  A correction can be expected
Source: Thomson Financial Datastream, Raiffeisen RESEARCH  Using corrections to build up long-term invest-
ments in the countries China and India
 ADB and IMF are extending their safety nets;
exploit risk premia for investment in EUR-
Investment strategy - equity markets* denominated bonds.
Africa & Middle East:
14% [+5 PP]
Latin America – bonds show potential in 2009

 Economic activity stabilised in Brazil in Q1 2009

(Q1e: -1.5% yoy), whereas the economic situ-
CEE: 9% [-5 PP]
ation continued to deteriorate in Mexico (Q1e:
-4.5% yoy).
 Positive growth expected as early as Q2 in Brazil,
and from H2 in Mexico.
 Inflation is stubbornly high in Mexico, but rates
should subside after the currency stabilises. Brazil:
Latin America: 22% Asia: 55% [+0 PP] inflation is dropping faster.
[+0 PP]
 End of the rate-cutting cycle should be reached
by the end of the summer. Interest rates to remain
* Benchmark: current MSCI EM weightings
Source: Thomson Financial Datastream, Raiffeisen RESEARCH steady until early 2010.

4
 Investment strategy

 More cuts in Brazil of 175bp and 125bp in Mexico Portfolio performance

by year-end.
 Yields on long-term bonds in particular will re- 140 0.60%
main very high, and the decline in inflation has
not yet been priced in. Nevertheless, no buy rec- 130 0.30%

ommendation for LCY bonds based on FX depre-

ciation risks. 120 0.00%
 USD/MXN: appreciation forecast for the entire
110 -0.30%
year. The pace of appreciation will, however,
decline.
100 -0.60%
 USD/BRL: Capital flows have supported appre-
ciation. BRL is now overvalued. We expect a
90 -0.90%
correction.
Jan-09 Feb-09 Apr-09 May-09
 Commodity prices: Potential for a setback, with
sustained increases only projected for H2 RZB portfolio Outperformance (r.h.s)
 Equities: Valuations are now well higher than the
long-term levels (current PER: 16; long-term aver- Source: Thomson Financial Datastream, Raiffeisen RESEARCH
age: 10.3); we expect a sharp correction on the
equity markets

South Africa – bottom of the trough is reached

 2009 will be marked by negative economic Capital market forecasts

growth, with Q1 expected to be sharply negative
current Jun.09 Dec.09 Mar.10
and Q2 near zero
 Political uncertainty has been resolved Equities
 Inflation rates are sinking slowly Hang Seng CE 9758 8700 10500 11500
 More rate cuts of 100 to 150bp are possible Sensex 30 11853 10000 12500 13500

 Currency is driven by risk sentiment, modest de- Bovespa 50325 46500 55000 62000

preciation tendencies over the long term Bolsa 23696 22300 25000 27000
JALSH 21862 22300 23000 25000
 Equity market drifting sideways, with a weak up-
trend possible Interest rates
China 5.31 5.04 4.23 3.69
 Valuations look good by EM standards
India 4.75 4.50 4.00 4.00
 Over the long term, South African equities are
Brazil 10.25 9.50 8.50 8.50
recommended, volatility over the short term
Mexico 6.00 5.00 4.75 4.75
South Africa 8.50 8.00 7.00 7.00
Lydia Kranner, Nina Kukic, Josef Wolfesberger
Yield (10 y)
Brazil 12.68 11.30 10.30 10.80
Mexico 7.69 7.00 6.50 6.80
South Africa 8.43 8.20 8.20 8.20
Exchange rates
USD/CNY 6.82 6.84 6.84 6.84
EUR/CNY 9.34 9.58 10.26 10.26
USD/INR 49.78 50.00 48.00 48.00
EUR/INR 67.49 72.5 72.00 72.00
USD/BRL 2.07 2.30 2.20 2.10
EUR/BRL 2.82 3.34 3.30 3.30
USD/MXN 13.19 13.30 12.60 12.30
EUR/MXN 18.00 19.29 18.90 17.22
USD/ZAR 8.45 9.00 9.35 9.35
EUR/ZAR 11.53 12.60 14.03 14.03
Source: Reuters, Thomson Financial Datastream, Raiffeisen RESEARCH

5
Asia

Asia
risks to the turnaround
Forecasts Hopes for growth
2008 2009e 2010f
The recession has hit Asia as well now. Singapore,
Hong Kong, Taiwan and Japan are all registering
GDP (% yoy)
negative growth rates. In response, the Asian Devel-
China 9.0 5.8 6.5 opment Bank (ADB) has set up a crisis fund with a
India 7.5 4.5 5.5 volume of USD 120 bn, creating Asia’s first multi-
lateral liquidity facility. With regard to 2009, ADB
CPI (% yoy) projects a massive slump in capital inflows from
China 5.9 0.8 2.0 abroad, which amounted to USD 300 bn in 2007
India 7.8 2.5 3.5
and just USD 100 bn in 2008. Along with the new
financing options offered by the IMF, this new fund
will expand the scope of protection for the countries
Current account balance* in Asia.
China 9.6 6.7 6.0 Looking at economic growth in the region, China
India -2.7 -2.4 -1.7 clearly stands out as an exception, because the
* % of GDP country appears poised to weather crisis better than
Source: Thomson Financial Datastream, Raiffeisen RESEARCH many other countries, with 6.1% growth in Q1 and
forecasts for 7.0% in Q2. This is backed up by activ-
China: massive decrease in exports ity and leading indicators, which are pointing to a
turnaround in economic performance. China is the
60 75
only country in the world where the PMI figures are
70
50 over the 50 mark, which indicates expansion in ac-
65
40 tivity. Some of the credit and monetary aggregates
60
are also at record levels.
30 55
50
Nevertheless, all of the news is not good: China’s
20
45 growth is at the lowest level in the last ten years,
10 40 and two-thirds of this growth is being generated by
35 public spending. Some 40% of the growth in credit
0
30 is not occurring in the economy. Based on the April
-10 data, the monetary indicators are extremely volatile.
25
-20 20 China’s economy is highly dependent on exports
95 96 97 98 99 00 01 02 03 04 05 06 07 08
and thus it will have to rely on foreign demand for
Export growth from China to USA (%yoy) any sustainable upturn in economic activity. While
ISM manufacturers new order index (r.h. scale)
public spending can stabilise the economy for a short
Source: Thomson Financial Datastream, Raiffeisen RESEARCH time, it will not be able to power economic growth
for an unlimited period of time. Domestic demand is
China: PMI above 50 still not developed enough to play the role of an en-
80 24
gine for the economy: the savings ratio is extremely
high as households put away money to save for pen-
75 22
sions and healthcare costs, and the share of private
70 20
consumer loans in overall lending is lower than in
65 18
almost any other country. Measures to change this
60 16
situation were taken years ago, but the impact has
55 14
been very subdued.
50 12
In India, the composition of economic growth is
45 10
somewhat different, but the results are the same:
40 8
collapsing exports and private investments, limited
35 6
countermeasures in the form of public investment and
30 4
2004 2005 2006 2007 2008 a massive increase in debt, accompanied by sub-
CH NBS PMI manufacturing - output index dued private consumption due to the problems on the
CH NBS PMI manufacturing - new order index labour market. This is exacerbated by the political
CH change in industrial production index (r.h. scale) stalemate due to the current round of elections, which
In USD bn will only be finished in mid-May.
Source: Thomson Financial Datastream, Raiffeisen RESEARCH

6
 Asia

Running out of interest rate cuts? Asia currencies: worst behind

Although some Asian countries have already resorted 2.8% 7.1% Thailand
to a zero interest rate policy, there is still enough -0.5% Taiwan
room for rates to go lower in China and India. With 0.4%
-0.4%
regard to China, however, some respected advisors 2.6% South Korea
and economists are already calling for a more re- -0.1% Singapore
0.7%
strictive monetary policy stance. The official policy -2.1%
2.4% Philippines
line, however, is to stick with an expansive strategy. -2.0% Malaysia
0.4%
Indeed, as long as conditions hover near deflation, -2.8%
2.0% Indonesia
the trend will be slanted more in favour of rate cuts, -0.5%
1.8% India
in order to bring real interest rates down. The situa- 3.9%
tion is similar in this regard in India. The repo rate 3.7% Hong Kong
-2.6%
was lowered by 25bp to 4.75% in March. Moreo- 2.0% China
ver, the RBI is pursuing a policy of quantitative easing
-4% -2% 0% 2% 4% 6% 8%
as well: this is intended to boost liquidity in the mar-
ket on the one hand and on the other aims to smooth Since 01/01/09 Since 01/04/09
out the extremely steep yield curve via purchases of Source: Thomson Financial Datastream, Raiffeisen RESEARCH
government bonds.
India: decreasing earnings
Exchange rates appreciate moderately 50 18
The policy of keeping the yuan stable has been 40 15
steadfastly followed since the beginning of the year,
30 12
and only in the last few weeks has China’s central
bank shifted over to allowing some modest apprecia- 20 9
tion. This has led to appreciation of around 4.0%
10 6
versus the euro since January, which is more than
the more volatile Korean or Indian currencies have 0 3
registered. For the first time in the last seven months, -10 0
non-deliverable forwards (NDFs) are now pricing in
-20 -3
appreciation of the yuan. On the whole, we stick
with our view that the yuan will remain stable. Stabi- -30 -6
lisation is also being seen in India, occurring hand in May-00 Nov-01 May-03 Nov-04 May-06 Nov-07 May-09
hand with fading risk aversion and inflows of capital EPS Industrial production (r.h.s)
into the equity market. The rupee should be able to
In % p.a.
stay near 50 for most of the year. Source: Thomson Financial Datastream, Raiffeisen RESEARCH

Volatility on the equity market remains MSCI Asia

As we projected, the Asian equity markets tested their 30.5%
26.2% Thailand
lows for the year in March and then shot higher. Chi-
na’s performance has amounted to more than +30% 24.9% Taiwan
42.0%
since early March, with Asia as a whole registering 17.0% South Korea
25.7%
+40.3% and India’s performance at almost +47%.
15.0% Philippines
These developments were driven by the international 19.3%

environment, and in particular hopes that the worst 13.3%

27.0% Malaysia
of the economic downturn is now behind us. Another 22.3% Indonesia
33.5%
factor in favour of the Asian market is that China’s
18.7% India
growth should be more stable. Accordingly, we are 21.1%
convinced that the equity markets will move higher 20.6%
22.4% China
over a one-year horizon. Over the short term, how-
ever, the next turn of events in Asia will probably 0% 10% 20% 30% 40% 50%
feature a downward correction in equities, as it will Since 01/01/09 Since 01/04/09
not be possible to sustain the stream of constantly
In local currency
improving news over the short term. Source: Thomson Financial Datastream, Raiffeisen RESEARCH
Lydia Kranner

7
Latin America

Latin America
economic low reached
Forecasts Partial stabilisation of the economies
2008 2009e 2010f During the first quarter of 2009, economic activity
in Brazil stabilised a great deal. For example, for
GDP (% yoy)
each month industrial production was higher than in
Brazil 5.1 -1.2 3.5
the previous month. The purchasing managers’ index
Mexico 1.4 -5.0 2.2 also continued to recover and is pointing to more im-
provement in the economy. The situation is somewhat
CPI (% yoy) different in Mexico, where industrial production con-
Brazil 5.9 4.1 4.5 tinued to fall in January, with no improvement seen
Mexico 6.0 4.0 4.0 in February either. As a result, the GDP figures for
Q1 2009 will decline even more severely than in
Q2 2008. The impact of the swine flu on production,
Current account balance*
in particular in the services sector, will result in more
Brazil -1.8 -1.4 -1.2
negative performance in the second quarter, but the
Mexico -1.4 -2.1 -2.3 rate will only be slightly in the red in our view. We
* in % of GDP change our forecast for economic growth in Mexico
Source: Thomson Financial Datastream, Raiffeisen RESEARCH
from -3% yoy to -5% yoy. In Brazil, we expect to see
a modest increase as early as the second quarter,
BR: IP / PMI recovering and confirm our forecast of -1.2% yoy for 2009. In-
flation is proving to be stubbornly high (Brazil: 5.6%
15% 65
yoy, and Mexico: 6.2% yoy). Inflation expectations,
10% 60 however, are already dropping fast (e.g. 4.3% in
5% 55
Brazil).

0% 50 End of the rate-cutting cycle in the summer

-5% 45
Since the beginning of the year, the central banks
have lowered their interest rates significantly. Brazil
-10% 40 has seen interest rates fall from a peak 14.75% to the
-15% 35
current level of 10.25%. In our opinion, the situation
in the Brazilian economy and the declines in inflation
-20% 30 will lead to more rate cuts. We project that the down-
Apr-06 Jan-07 Oct-07 Jul-08 Apr-09 ward cycle of rates will end at 8.5% in the summer
Industrial production yoy or the autumn. The situation in Mexico is somewhat
PMI (r.h.s.) more complex, due to the higher inflation rates. But
Source: Thomson Financial Datastream, Raiffeisen RESEARCH the economic situation is also much worse, and thus
we expect to see more cuts from the current 6% to as
low as 4.5% by early in H2.
MX: Low level of activity
120 Bonds profit from FX appreciation
The yield curve in both Brazil and Mexico has grown
steeper since the beginning of the year. For us, it is
115
surprising that in Brazil the decline in inflation and in-
flation expectations is not being reflected in 10-year
110 LCY bonds. In our opinion, there should be more po-
tential for yields to fall on these instruments. With
regard to short-dated bonds, however, there is hardly
105 any potential for lower yields, neither in Mexico nor
in Brazil. Nevertheless, due to the very positive cur-
100
rency developments we do not recommend buying
Mar-04 Mar-05 Mar-06 Mar-07 Mar-08 Mar-09 Latin American bonds.

Index of economic activity

Source: Thomson Financial Datastream, Raiffeisen RESEARCH

8
 Latin America

Currencies profit from strong supply of USD BR: Stronger export growth
Following the outbreak of swine flu, the Mexican 80%
peso came under pressure for a short time. After it
became clear that the illness was apparently easily 60%
treatable, the currency stabilised again quickly. Use
of the IMF’s “flexible line of credit” and positive FX 40%
inflows lead us to believe that developments will be
20%
steady. For the second half of the year, we project
that the Mexican peso will appreciate against USD. 0%
The Brazilian real (BRL) has firmed up significantly
against USD in recent weeks, bolstered by the re- -20%
turn of larger USD capital inflows. The ample supply
of USD is reflected by a measure of the Brazilian -40%
Apr-07 Oct-07 Apr-08 Oct-08 Apr-09
central bank, which has placed a reverse FX swap
and thereby siphoned off USD from the market. In Import growth yoy Export growth yoy
our view, the current level of the Brazilian real is not
commensurate with actual conditions in the country’s Source: Thomson Financial Datastream, Raiffeisen RESEARCH

economy. We expect that BRL will depart from these

exaggerated levels in the weeks ahead, and weaken Commodity exports to China booming
versus USD. 500

Equities: valuations are high

400
Latin American equity markets have been able to
post increases of up to 40% since early March. In
Brazil this performance was mainly borne by strong 300
demand for commodities from China. Mexico prof-
ited from the stabilisation in the US economy. The 200
reporting season which just came to a close in Mex-
ico presented a mixed picture. In the end, 31% of 100
the companies were able to beat expectations while
41% presented disappointing results. On the whole, 0
earnings contracted by 7.3% yoy. We believe that 01 02 03 04 05 06 07 08 09
this will mark the low point. There is also cause for
concern in relation to the current valuation levels for Copper imports China*

Latin American stocks. The 2009 PER for the Brazil- * in tousand tons
ian market is now at 15.7 and at 14.5 in Mexico, Source: Thomson Financial Datastream, Raiffeisen RESEARCH

whereas the long-term average for the price-earnings

Correction on equity markets likely
ratio on the Latin American stock markets is just over
10. Due to the strong trend, more rises will probably 200
be seen in May. By June at the latest, however, we
expect to see a hefty correction.
150
Josef Wolfesberger

100

50
May-06 Feb-07 Nov-07 Aug-08 May-09

Bovespa MexBol

Source: Thomson Financial Datastream, Raiffeisen RESEARCH

9
South Africa

South Africa
First recession in a decade
Forecasts The economy in South Africa has now also techni-
2007 2008 2009e 2010f cally entered into recession: Q1 2009 will be the
second quarter in a row with negative economic
GDP (% yoy) 5.10 3.20 -0.80 2.80
performance. This was reflected by the recently re-
Current account* -7.00 -7.60 -7.20 -8.00 leased data on industrial production (-15%), mining
CPI (% yoy) 7.08 11.20 7.00 5.50 output (-11.5% incl. gold production) and retail sales
* in % of GDP (-4.5%). The country’s strong dependence on exports
Source: Thomson Financial Datastream, Raiffeisen RESEARCH is having a very negative impact on economic per-
formance. In particular, demand from the developed
markets and Asia has dropped off strongly in recent
months. Measures to stimulate the economy have al-
ready been taken, especially within the field of infra-
structure projects and programmes to fight poverty.
Recovery not in sight yet Above and beyond these efforts, there is already
some speculation that South Africa could also use the
20 65
credit line extended by the IMF if it needs to. Nego-
15 60 tiations are also underway with the African Develop-
ment Bank for a loan of USD 2.5 to 5 bn.
10 55
Dim economic prospects, low inflation and the ap-
5 50 preciation of the South African rand will result in
more cuts in interest rates.
0 45

-5 40 Economic growth reaches its low

Domestic consumption remains very weak, and Feb-
-10 35 ruary’s retail sales data surprised market observers
Mar-01 Mar-03 Mar-05 Mar-07 Mar-09 by slipping lower yet again. Looking at credit de-
Retail sales (% yoy) mand, it appears that this is tapering off as well.
Industrial production (% yoy) Another negative surprise came in the form of the
PMI (r.h. scale) latest publication on the purchasing managers’ index
Source: Bloomberg, Thomson Financial Datastream, Raiffeisen RESEARCH (PMI), which fell to the lowest level since the begin-
ning of the time series for this indicator, dropping to
35.8 from 36. The individual sub-indices, however,
reflected some positive developments: for example,
sentiment on production level and new orders im-
proved somewhat. There was also little good news
in the field of foreign trade. Compared to the previ-
Exports' turnaround? ous year, exports dropped 7% in April, as exports
to Europe fell by 24%, whereas the exports to Asia
100%
increased by 20 %. If Asia’s economy is the first to
80% come out of the slump, this will have a very positive
60% effect on the South African economy as well, as Asia
40% is now the country’s biggest trade partner.
On the whole, we project a decline of 0.8% in GDP
20%
in 2009. In 2010, the football World Cup being held
0%
in the country should have a positive effect, and ac-
-20% cordingly we forecast economic growth of 2.8% next
-40% year, which is still below potential.
-60%
Mar-05 Nov-05 Jul-06 Mar-07 Nov-07 Jul-08 Mar-09 Interest rates already at low levels
During recent months, monetary policy in South Af-
Exports USA (% yoy) Exports Europe (% yoy) rica has been expansive, in an effort to stimulate
Exports Asia (% yoy) economic activity. The SARB has lowered its interest
Source: Thomson Financial Datastream, Raiffeisen RESEARCH rates by 350bp since December from 12% to 8.5%.

10
 South Africa

Inflation has not declined as quickly as expected, as Good sentiment made Rand fly
a hike in electricity prices pushed the rate higher.
90 13
Nevertheless, the appreciation of the South African
80 12
rand has also been supportive of the strongly expan-
70 11
sive policy. As the year progresses, we expect to see
more cuts in interest rates, but these will not be as 60 10
pronounced as in the last few months. 50 9
40 8
Yields stable on the long end 30 7
Yields on 10-year South African bonds have moved 20 6
sideways in recent weeks. We do not expect to see 10 5
any above-average performance here in the future. 0 4
May-07 Nov-07 May-08 Nov-08 May-09
Rand – risky business
The South African rand has recorded strong gains VIX ZAR/USD (r.h. scale)
against USD recently. The main reason for this was
the easing on the international equity markets and Source: Thomson Financial Datastream, Raiffeisen RESEARCH

the return of risk appetite. The next move for the

rand, however, will probably be depreciation, as the JALSH follows S&P
currency is now massively overbought. This view is
140
supported by fundamental factors such as the high
current account deficit which speaks against further
120
appreciation.
100
Equities on a topsy-turvy track
The performance of the South African stock index
was sub-average in the first quarter. Since bottoming 80

out in March, however, the market has been able

to get back on its feet again. Nevertheless, on the 60
whole, the market is still below the levels from the
start of the year. While the next move should be 40
Jan-07 Aug-07 Mar-08 Oct-08 May-09
higher, the market will likely be beset by frequent
corrections. Another positive factor should be the re- S&P JALSH
newed rise in commodity prices. And the return of
risk appetite should also have a benign effect on the Source: Thomson Financial Datastream, Raiffeisen RESEARCH

equity market. One negative aspect, however, will

be the uncertainty about the outlook for South Afri- South Africa cheaper than rest of EM
can banks. The economic slump will probably push
up the ratio of non-performing loans, in particular in 18
the field of mortgage loans, as the interest rates were 16
quite high until recently but real estate prices have
14
dropped sharply.
12
Nina Kukic 10

4
Jan-07 Jun-07 Nov-07 Apr-08 Sep-08 Feb-09

Forward PE SA Forward PE EMEA

Forward PE LatAm Forward PE Asia
Source: Thomson Financial Datastream, Raiffeisen RESEARCH

11
Economics

Asia: GDP (% yoy) Latin America: GDP (% yoy)

15% 8% 20%

10% 5% 10%

2% 0%
5%

-1% -10%
0%
-4% -20%
-5% Q4 Q4 Q4 Q4 Q4 Q4 Q4 Q4
Q4 Q4 Q4 Q4 Q4 Q4 Q4 Q4 2001 2002 2003 2004 2005 2006 2007 2008
2001 2002 2003 2004 2005 2006 2007 2008 Brazil Mexico
Latin America Argentina (r.h.s.)
China India Thailand Asia

Source: Thomson Financial Datastream, Raiffeisen RESEARCH Source: Thomson Financial Datastream, Raiffeisen RESEARCH

Asia: C/A balance (% of GDP) Latin America: C/A balance (% of GDP)

15% 4%

2%
10%

0%
5%

-2%
0%
-4%
-5% Argentina Brazil Mexico Chile Latin
America
China India Thailand Malaysia Asia
2008 2009e 2010f
2008 2009e 2010f

Source: Thomson Financial Datastream, Raiffeisen RESEARCH Source: Thomson Financial Datastream, Raiffeisen RESEARCH

Asia: CPI (% yoy) Latin America: CPI (% yoy)

12% 13%

9%
10%

6%
7%
3%
4%
0%

1%
-3%
Feb-04 Feb-05 Feb-06 Feb-07 Feb-08 Feb-09
Feb-04 Feb-05 Feb-06 Feb-07 Feb-08 Feb-09
Argentina Brazil
China India Thailand Asia
Mexico Latin America

Source: Thomson Financial Datastream, Raiffeisen RESEARCH Source: Thomson Financial Datastream, Raiffeisen RESEARCH

12
 Economics

MEA: GDP (% yoy) Reference countries: GDP (% yoy)

14% 10%
12% 8%
10% 6%
8% 4%
6% 2%
4% 0%
2% -2%
0% Q4 Q4 Q4 Q4 Q4 Q4 Q4 Q4
1996 1998 2000 2002 2004 2006 2008 2001 2002 2003 2004 2005 2006 2007 2008

South Africa UAE Africa Middle East EMU USA CE Russia

Source: Thomson Financial Datastream, Raiffeisen RESEARCH Source: Thomson Financial Datastream, Raiffeisen RESEARCH

MEA: C/A balance (% of GDP) Ref. countries: C/A balance (% of GDP)

40% 6%

30% 4%

2%
20%
0%
10%
-2%
0%
-4%
-10%
-6%
South Kuwait UAE Africa Middle
Africa East EMU USA CE Russia

2008 2009e 2010f 2008 2009e 2010f

Source: Thomson Financial Datastream, Raiffeisen RESEARCH Source: Thomson Financial Datastream, Raiffeisen RESEARCH

MEA: CPI (% yoy) Reference countries: CPI (% yoy)

20% 8% 16%

16%
6% 12%
12%

8% 4% 8%
4%
2% 4%
0%

-4%
0% 0%
Feb-04 Feb-05 Feb-06 Feb-07 Feb-08 Feb-09
Feb-04 Feb-05 Feb-06 Feb-07 Feb-08 Feb-09

South Africa Kuwait Africa Middle East

EMU USA CE Russia (r.h.s.)

Source: Thomson Financial Datastream, Raiffeisen RESEARCH Source: Thomson Financial Datastream, Raiffeisen RESEARCH

13
Economics

Economic indicators by comparison

2005 2006 2007 2008 2009e 2010f
GDP (% yoy)
Latin America 4.5 5.3 5.4 4.0 -0.6 3.2
Argentina 9.2 8.5 8.7 6.2 -2.0 1.8
Brazil 3.1 3.7 5.4 5.1 -1.2 3.5
Mexico 3.1 4.9 3.2 1.4 -5.0 2.2
Asia 8.1 8.9 9.5 6.1 2.6 5.4
China 10.4 11.6 13.0 9.0 5.8 6.5
India 9.0 9.6 8.7 7.5 4.5 5.5
Indonesia 5.7 5.5 6.3 6.0 3.6 4.4
Malaysia 5.3 5.8 6.3 5.5 1.1 3.5
Philippines 5.0 5.4 7.2 4.6 1.1 2.8
South Korea 4.2 5.1 5.0 2.6 -3.0 1.7
Thailand 4.5 5.1 4.8 3.6 1.3 3.1
Africa 4.5 5.2 4.2 4.8 2.5 3.4
Egypt 4.4 6.8 7.1 7.2 2.6 3.0
Saudi Arabia 6.1 4.3 3.4 4.9 1.0 3.5
South Africa 5.0 5.4 5.1 3.2 -0.8 2.8
CE 4.5 6.2 6.0 3.9 -1.8 0.5
EMU 1.8 3.0 2.7 0.7 -3.6 0.3
Russia 6.4 7.7 8.1 5.6 -3.5 2.5
USA 2.9 2.8 2.0 1.1 -3.0 0.9

CPI (% yoy)
Latin America 6.4 5.1 5.3 7.8 7.4 6.0
Argentina 9.6 10.9 8.5 7.2 6.5 7.0
Brazil 6.9 4.2 4.5 5.9 4.1 4.5
Mexico 4.0 3.6 3.8 6.0 4.0 4.0
Asia 2.5 2.6 3.6 5.9 1.4 1.7
China 1.8 1.5 4.8 5.9 0.8 2.0
India 3.8 4.4 6.8 6.5 7.8 2.5
Indonesia 10.5 13.1 6.4 10.3 5.3 5.7
Malaysia 3.0 3.6 2.0 5.4 1.4 1.8
Philippines 7.6 6.2 2.8 9.3 5.9 5.0
South Korea 2.8 2.2 2.6 4.7 -0.1 -0.6
Thailand 4.5 4.6 2.2 5.5 -0.4 2.6
Africa 2.4 4.0 4.8 8.0 4.6 4.2
Egypt 4.9 7.6 9.3 18.1 7.6 6.6
Saudi Arabia 0.7 2.3 4.1 9.9 4.2 2.4
South Africa 3.4 4.6 7.1 11.2 7.0 5.5
CE 2.4 2.1 3.5 5.0 2.6 2.5
EMU 2.2 2.2 2.1 3.3 0.3 1.3
Russia 12.5 9.8 9.1 14.1 15.6 11.9
USA 3.4 3.2 2.9 3.8 -0.5 2.6

Current account balance (% of GDP)

Latin America 1.9 1.6 0.7 -0.6 -2.6 -1.9
Argentina 2.8 3.7 2.9 2.5 1.2 1.8
Brazil 1.6 1.3 0.4 -1.8 -1.4 -1.2
Mexico -0.6 -0.2 -0.6 -1.4 -2.1 -2.3
Asia 8.3 10.3 11.3 9.3 7.7 7.7
China 7.1 9.5 11.8 9.6 6.7 6.0
India -0.4 -1.2 -1.0 -1.5 -2.7 -2.4
Indonesia 0.1 3.0 2.4 -0.4 -2.1 -1.3
Malaysia 14.5 16.3 15.5 17.4 10.6 10.8
Philippines 2.0 4.5 4.4 0.5 1.5 2.6
South Korea 2.1 0.6 0.7 -0.6 1.9 2.6
Thailand -4.3 1.1 5.8 0.3 -0.6 0.7
Africa 9.8 11.6 9.4 8.2 2.1 2.5
Egypt 2.3 2.4 0.3 -0.7 -1.2 0.3
Saudi Arabia 28.5 27.8 24.9 27.8 1.3 6.5
South Africa -4.0 -6.5 -7.0 -7.6 -7.2 -8.0
CE -2.8 -3.7 -4.2 -5.5 -5.7 -5.1
EMU 0.1 -0.1 0.1 -0.7 -1.5 -1.5
Russia 11.0 9.6 6.2 5.9 2.8 3.9
USA -6.4 -6.2 -5.3 -4.7 -3.5 -3.7

14
 Economics

2005 2006 2007 2008 2009e 2010f

Budget balance (% of GDP)
Latin America -1.0 -0.8 -0.5 -0.8 -2.7 -2.5
Argentina 1.8 1.8 1.6 1.3 -0.2 -0.4
Brazil -3.0 -3.0 -3.3 -1.3 -2.3 -1.5
Mexico -0.1 0.1 -0.2 -1.8 -2.3 -2.5
Asia -1.3 -0.7 0.8 -0.8 -2.8 -2.1
China -1.2 -0.8 0.7 -1.0 -3.5 -3.0
India -6.7 -5.6 -5.2 -9.5 -12.0 -9.4
Indonesia -0.4 -1.0 -0.7 -0.8 -2.3 -1.4
Malaysia -3.6 -3.3 -3.2 -3.4 -5.1 -5.1
Philippines -2.7 -1.1 -1.0 -1.0 -3.0 -1.3
South Korea 0.4 0.5 3.8 0.5 -5.7 -2.1
Thailand -0.5 1.4 -2.0 -1.0 -2.5 -2.2
Africa 2.9 4.1 0.9 0.6 -4.5 -3.6
Egypt -8.1 -8.7 -6.4 -7.3 -8.6 -8.4
Saudi Arabia 18.4 21.0 12.3 18.5 -12.7 -5.8
South Africa -0.5 0.3 0.7 -0.7 -3.0 -2.0
CE -3.9 -4.3 -2.1 -2.5 -4.1 -3.6
EMU -2.5 -1.3 -0.6 -2.0 -4.4 -4.8
Russia 8.1 8.4 6.0 4.8 -8.8 -5.0
USA -3.6 -2.6 -1.4 -5.7 -12.0 -10.0

International reserves (in USD bn)

Argentina 27.2 30.9 44.7 45.0 - -
Brazil 53.2 85.2 179.4 192.8 - -
Mexico 74.1 76.3 87.1 95.1 - -
China 825.7 1072.8 1530.3 1948.0 - -
India 136.5 145.8 192.3 299.6 - -
Indonesia 33.1 41.1 55.0 47.2 - -
Malaysia 69.9 82.1 101.0 92.5 - -
Philippines 15.9 20.0 30.2 32.7 - -
South Korea 208.0 233.6 261.0 204.0 - -
Thailand 50.7 65.3 85.2 108.3 - -
Egypt 20.6 24.5 30.2 33.4 - -
Saudi Arabia 26.5 27.5 33.8 30.3 - -
South Africa 18.6 23.1 29.6 33.0 - -
CE 33.7 34.2 42.6 47.6 - -
EMU 320.1 325.8 347.4 383.9 - -
Russia 175.9 295.6 465.9 412.5 - -
USA 65.5 65.9 70.6 72.6 - -

Net foreign debt (% of GDP)

Argentina 70.3 64.0 52.6 46.1 54.2 56.5
Brazil 19.2 16.1 14.7 13.0 17.1 18.1
Mexico 20.4 17.8 18.9 18.2 25.0 25.4
China 12.6 12.2 11.0 9.4 8.1 7.1
India 15.2 17.5 17.7 15.9 13.2 12.4
Indonesia 48.4 35.3 31.6 29.1 33.5 30.7
Malaysia 37.9 33.4 30.4 25.9 29.0 27.5
Philippines 62.3 52.4 43.8 37.4 30.3 22.8
South Korea 23.7 29.3 39.3 26.1 29.6 24.9
Thailand 29.6 28.9 25.2 23.8 24.0 22.9
Egypt 32.3 28.3 25.9 23.9 26.8 25.7
Saudi Arabia 10.7 9.2 8.6 7.1 8.5 7.5
South Africa 20.0 23.0 26.6 27.6 30.2 27.7
CE 50.3 53.7 57.0 61.5 67.3 69.2
EMU - - - - - -
Russia 33.7 31.6 36.7 31.1 35.8 31.9
USA 76.2 84.9 97.0 95.6 91.3 86.3
Bold countries: own estimates
Source: Thomson Financial Datastream, Global Insight, Raiffeisen RESEARCH

15
Fixed income

Asia: JPM bond indices* Latin America: JPM bond indices*

145
160

135 140

120
125
100

115 80

60
105
40

95 20
May-06 Nov-06 May-07 Nov-07 May-08 Nov-08 May-09 May-06 Nov-06 May-07 Nov-07 May-08 Nov-08 May-09

China India Thailand Asia Argentina Brazil Mexico Latin America

* in local currency * in local currency

Source: Thomson Financial Datastream, Raiffeisen RESEARCH Source: Thomson Financial Datastream, Raiffeisen RESEARCH

Asia: JPM bond indices (Euro) Latin America: JPM bond indices (Euro)
145 150

135
130

120
115
105

100
90

85 75
May-06 Nov-06 May-07 Nov-07 May-08 Nov-08 May-09 May-06 Nov-06 May-07 Nov-07 May-08 Nov-08 May-09

China India Thailand Asia Argentina Brazil

Mexico Latin America

Source: Thomson Financial Datastream, Raiffeisen RESEARCH Source: Thomson Financial Datastream, Raiffeisen RESEARCH

Key interest rates Key interest rates

base rate current last change change base rate current last change change
Asia Latin America
China Base lending rate (1y) 5.31 22/12/08 -0.27 Brazil SELIC overnight rate 10.25 29/04/09 -1.00
Hong Kong Base rate 0.50 17/12/08 -1.00 Chile Discount rate 1.25 07/05/09 -0.50
India Repo rate 4.75 21/04/09 -0.25 Colombia Repo rate 6.00 30/04/09 -1.00
Indonesia Reference rate 7.25 05/05/09 -0.25 Mexico Repo rate 6.00 17/04/09 -0.75
Malaysia Overnight policy rate 2.00 24/02/09 -0.50 Peru Reference rate 4.00 07/05/09 -0.50
Philippines Reverse repo rate 4.50 16/04/09 -0.25 Source: Reuters, Bloomberg, Raiffeisen RESEARCH
Singapore SIBOR 3 month 0.50 - -
South Call rate 2.00 12/02/09 -0.50
Korea
Taiwan Rediscount rate 1.25 18/02/09 -0.25
Thailand 1-day repo rate 1.25 08/04/09 -0.25
Source: Reuters, Bloomberg, Raiffeisen RESEARCH

16
 Fixed income

MEA: JPM bond indices* Reference countries: JPM bond indices*

127 135

125
118

115

109
105

100 95
May-06 Nov-06 May-07 Nov-07 May-08 Nov-08 May-09 May-06 Nov-06 May-07 Nov-07 May-08 Nov-08 May-09
South Africa EMU USA CE Russia

* in local currency * in local currency

Source: Thomson Financial Datastream, Raiffeisen RESEARCH Source: Thomson Financial Datastream, Raiffeisen RESEARCH

MEA: JPM bond indices (Euro) Ref. countries: JPM bond indices (Euro)
100 140

90 126

80 112

70 98

60 84

50 70
May-06 Nov-06 May-07 Nov-07 May-08 Nov-08 May-09 May-06 Nov-06 May-07 Nov-07 May-08 Nov-08 May-09
South Africa EMU USA CE Russia

Source: Thomson Financial Datastream, Raiffeisen RESEARCH Source: Thomson Financial Datastream, Raiffeisen RESEARCH

Key interest rates Key interest rates

base rate current last change change base rate current last change change
Africa and Middle USA, EMU, CE and
East Russia
Egypt Deposit rate 10.00 26/03/09 -0.50 EMU Tender rate 1.00 07/05/09 -0.25
South Africa Repo rate 8.50 30/04/09 -1.00 Poland Repo rate 3.75 25/03/09 -0.25
Israel Repo rate 0.50 23/03/09 -0.25 Russia Repo rate 7.75 23/04/09 -0.50
Kuwait Discount rate 3.50 13/04/09 -0.25 Czech Republic Repo rate 1.50 07/05/09 -0.25
Saudi Arabia n.a. n.a. n.a. n.a. Hungary Base rate 9.50 19/01/09 -0.50
UAE n.a. n.a. n.a. n.a. USA Target rate 0- 16/12/08 -0,75 -
Source: Reuters, Bloomberg, Raiffeisen RESEARCH 0,25 -1
Source: Reuters, Bloomberg, Raiffeisen RESEARCH

17
Chartbook FX

Exchange rates
to Euro to Dollar currency policy
current since current since
value 01/01/09 -1 month value 01/01/09 -1 month
Latin America
Argentina 5.1 -10.0% -3.7% 3.7 -7.7% -1.0% Managed float with exchange controls
Brazil 2.8 -7.8% 3.1% 2.1 11.7% 5.7% floating exchange rate
Chile 774.1 -6.3% -1.2% 568.3 10.8% 1.6% floating exchange rate
Colombia 3016.6 -2.3% 5.1% 2214.4 1.5% 7.6% floating exchange rate
Mexico 17.8 -11.6% -2.6% 13.1 5.6% 0.2% floating exchange rate with occasional intervention
Peru 4.0 7.9% 1.5% 3.0 5.7% 4.1% floating exchange rate

Asia
China 9.3 13.0% -2.6% 6.8 0.0% 0.1% Managed float with exchange controls on capital tran-
sactions. The rate is determined in the interbank mar-
ket an is subject to a limit of +/-0.3% on movements
against the US$.
Hong Kong 10.6 7.4% -2.8% 7.8 0.0% 0.0% The HK$ is pegged to a HK$ 7.80=US$ 1 currency
board administered rate. A ceiling of HK$ 7.75/US$
and a floor of HK$ 7.85/US$ was introduced in May
2005.
India 67.5 -17.1% -2.0% 49.5 -1.6% 0.7% The Reserve Bank targets a stable real effective ex-
change rate. It intervenes to influence the rupee/US$
rate to offset US$ movements aganinst other trading
partners' currencies.
Indonesia 14072.0 -2.5% 2.8% 10330.0 5.2% 5.4% Managed float.
Malaysia 4.8 0.9% -0.5% 3.5 -1.6% 2.2% Between September 1998 and July 2005 pegged to
the US$ at M$ 3.80. Since then managed float with
exchange controls.
Philippines 64.5 -6.9% -2.1% 47.4 0.4% 0.6% The peso floats independently, although the central
bank intervenes to stabilise the exchange rate.
Singapore 2.0 5.5% -0.1% 1.5 -1.3% 2.6% Free floating, but the S$ is monitored by the Monetary
Authority of Singapore (MAS) against a trade-weighted
basket. The exchange rate ist the main instrument used
in controlling inflation.
South Korea 1686.3 -23.2% 3.9% 1237.9 1.7% 6.5% flexible exchange rate
Taiwan 44.8 5.6% -0.5% 32.9 -0.2% 2.2% Managed float with central bank intervention to smooth
fluctuations in the currency.
Thailand 47.1 4.4% -0.4% 34.6 0.6% 2.3% Managed float with intervention as required.
Source: Bloomberg, Raiffeisen RESEARCH

Asia: Currency * Latin America: Currency *

115
125

105
115

95
105

85
95

75
85

65
75
May-06 Nov-06 May-07 Nov-07 May-08 Nov-08 May-09
May-06 Nov-06 May-07 Nov-07 May-08 Nov-08 May-09
Argentina Brazil
China India Thailand Asia
Mexico Latin America
* Euro to local currency * Euro to local currency
Source: Thomson Financial Datastream, Raiffeisen RESEARCH Source: Thomson Financial Datastream, Raiffeisen RESEARCH

18
 Chartbook FX

Exchange rates
to Euro to Dollar currency policy
current since current since
value 01/01/09 -1 month value 01/01/09 -1 month
Africa and Midd-
le East
Egypt 7.7 5.1% -2.4% 5.6 -1.9% 0.4% Managed float with foreign exchange controls.
Algeria 97.9 0.0% -1.3% 71.8 -1.7% 1.4% Managed float. Rate determined by transactions in the
interbank market.
Morocco 11.2 1.3% -0.5% 8.2 -1.7% 2.2% Pegged to a basket of currencies weighted according to
Morrocco's principal trading partners.
South Africa 11.5 -14.8% 4.2% 8.4 9.0% 6.8% Since the abolition of the financial rand in 1995, the
unified FX rate has been determined by market forces
and exchange controls.
Bahrain 0.5 6.6% -2.8% 0.4 0.0% 0.0% Fixed at Bdr 0.376 = US$ 1.
Israel 5.6 1.1% -0.8% 4.1 -8.1% 1.9% flexible exchange rate
Kuwait 0.4 1.2% -2.3% 0.3 -4.8% 0.5% Pegged to an undisclosed currency basket.
Libya 1.7 2.7% -1.7% 1.3 -3.8% 0.6% Pegged to the SDR at Ld 1 = SDR 0.5175.
Saudi Arabia 5.1 6.8% -2.8% 3.8 0.1% 0.0% Pegged to riyals 3.745 = US$ 1.
United Arabien 5.0 6.8% -2.8% 3.7 0.0% 0.0% Pegged at dirhams 3.67275 = US$ 1.
Emirates
Source: Bloomberg, Raiffeisen RESEARCH

MEA: Currency * Reference countries: Currency *

110 120

100 110

90
100
80
90
70

60 80

50
70
May-06 Nov-06 May-07 Nov-07 May-08 Nov-08 May-09
May-06 Nov-06 May-07 Nov-07 May-08 Nov-08 May-09
South Africa UAE Africa Middle East
USA CE Russia

* Euro to local currency * Euro to local currency

Source: Thomson Financial Datastream, Raiffeisen RESEARCH Source: Thomson Financial Datastream, Raiffeisen RESEARCH

19
Equity markets

Asia: MSCI equity indices Latin America: MSCI equity indices

280 190

240 160

200 130

160
100
120
70
80
40
40 May-06 May-07 May-08 May-09
May-06 May-07 May-08 May-09
Argentina Brazil
China India Thailand Asia Mexico Latin America
In local currency, Return Indizes In local currency, Return Indizes
Source: Thomson Financial Datastream, Raiffeisen RESEARCH Source: Thomson Financial Datastream, Raiffeisen RESEARCH

Asia: Valuation Latin America: Valuation

Price/earnings ratio Profit growth* Price/earnings ratio Profit growth*
2008 2009e 2008 2009e 2008 2009e 2008 2009e
Asia 12.6 14.9 -25.8% -6.8% Latin America 10.8 10.7 -8.7% -0.4%
China 14.9 15.2 -10.2% 4.8% Argentina 3.9 5.0 14.5% -16.8%
India 15.0 14.2 -8.3% 3.9% Brazil 9.7 9.9 -5.6% -2.1%
Malaysia 14.8 16.2 -24.0% -13.9% Chile 17.8 16.5 5.9% 10.0%
Thailand 12.2 10.3 33.3% 2.8% Mexico 13.3 12.1 -25.2% 10.6%
* Consensus * Consensus
Source: IBES, MSCI, Bloomberg, Raiffeisen RESEARCH Source: IBES, MSCI, Bloomberg, Raiffeisen RESEARCH

Asia: Earnings growth* Latin America: Earnings growth*

90% 60%

70%
40%
50%
30%
20%
10%
-10% 0%
-30%
-50% -20%
-70%
-40%
-90%
May-06 May-07 May-08 May-09
May-06 May-07 May-08 May-09
Brazil Mexico
China India Asia Asia forward Latin America Latin America forward

* Forward = rolling earnings expectations for one year * Forward = rolling earnings expectations for one year
Source: IBES, Thomson Financial Datastream, Raiffeisen RESEARCH Source: IBES, Thomson Financial Datastream, Raiffeisen RESEARCH

20
 Equity markets

MEA: MSCI equity indices Reference countries: MSCI equity indices

180 140

135 110

90 80

45 50

0 20
May-06 May-07 May-08 May-09 May-06 May-07 May-08 May-09

South Africa Kuwait UAE Middle East EMU USA CE Russia

In local currency, Return Indizes In local currency, Return Indizes

Source: Thomson Financial Datastream, Raiffeisen RESEARCH Source: Thomson Financial Datastream, Raiffeisen RESEARCH

MEA: Valuation Reference countries: Valuation

Price/earnings ratio Profit growth* Price/earnings ratio Profit growth*
2008 2009e 2008 2009e 2008 2009e 2008 2009e
EMEA 6.5 8.5 6.1% -23.60 MSCI World 13.1 15.5 -23.8% -15.2%
Egypt 7.5 8.8 - 17.3% DJ ES 50 9.6 10.8 -27.0% -11.4%
Kuwait 43.9 34.2 - -22.1% WIG 20 8.3 11.8 -13.1% -30.1%
South Africa 8.8 8.6 8.3% 2.7% RTSI 4.9 9.4 4.8% -47.4%
UAE 8.2 7.2 - -11.6% S&P 500 14.2 16.2 -22.2% -12.1%
* Consensus * IBES/Raiffeisen RESEARCH
Source: IBES, MSCI, Bloomberg, Raiffeisen RESEARCH Source: IBES, MSCI, Bloomberg, Raiffeisen RESEARCH

MEA: Earnings growth* Reference countries: Earnings growth*

40%
140%
30%
120%
20%
100%
10%
80% 0%
60% -10%
40% -20%
-30%
20%
-40%
0%
-50%
-20% May-06 Feb-07 Nov-07 Aug-08 May-09
May-06 Feb-07 Nov-07 Aug-08 May-09
EMU CE USA
Egypt South Africa South Africa forward EMU forward CE forward

* Forward = rolling earnings expectations for one year * Forward = rolling earnings expectations for one year
Source: IBES, Thomson Financial Datastream, Raiffeisen RESEARCH Source: IBES, Thomson Financial Datastream, Raiffeisen RESEARCH

21
Risk indicators

Asia Latin America

MSCI World MSCI World
Beta Beta up Beta down Volatility Beta Beta up Beta down Volatility
China 1.88 3.32 1.06 30.6% Argentina 1.0 0.7 1.0 41.1%
Hong Kong 1.50 2.25 0.88 26.3% Brazil 1.4 1.1 1.5 21.6%
India 1.08 0.19 0.32 37.5% Chile 1.0 0.7 1.4 23.4%
Indonesia 0.96 -0.63 0.29 35.5% Colombia 0.7 -0.2 0.5 16.9%
Malaysia 0.46 0.49 -0.40 18.1% Mexico 1.0 1.6 1.2 33.8%
Philippines 1.08 1.00 0.54 31.9% Peru 1.1 0.9 1.3 39.7%
Singapore 1.03 1.34 0.67 47.1%
South Korea 1.07 1.24 0.63 28.4% MSCI Emerging Markets
Taiwan 1.02 0.04 0.48 22.6% Beta Beta up Beta down Difference
Thailand 1.03 1.22 -0.19 23.1% Argentina 0.8 0.9 0.9 0.1
Brazil 1.1 1.2 1.4 -0.1
MSCI Emerging Markets Chile 0.6 0.4 1.1 -0.6
Beta Beta up Beta down Difference Colombia 0.4 -0.4 0.1 -0.5
China 1.73 2.06 1.84 0.21 Mexico 0.6 1.3 0.6 0.7
Hong Kong 1.15 1.47 1.29 0.19 Peru 0.9 0.9 1.0 0.0
India 1.09 0.73 1.09 -0.36 Source: Thomson Financial Datastream, Raiffeisen RESEARCH
Indonesia 1.06 0.34 0.95 -0.61
Malaysia 0.59 0.70 0.39 0.31
Philippines 0.86 0.99 0.85 0.14
Singapore 0.76 1.36 0.46 0.90
South Korea 0.81 0.71 0.58 0.13
Taiwan 0.86 0.21 0.64 -0.43
Thailand 0.91 0.59 0.41 0.18
Source: Thomson Financial Datastream, Raiffeisen RESEARCH

Asia: CDS 5 years Latin America: CDS 5 years

700 600 4,800

600 500 4,000

500 400 3,200

400
300 2,400
300
200 1,600
200
100 800
100
0 0
0
May-07 Nov-07 May-08 Nov-08 May-09
May-07 Nov-07 May-08 Nov-08 May-09
Brazil Mexico
China India South Korea Thailand
Chile Argentina (r.h.s.)

Source: Thomson Financial Datastream, Raiffeisen RESEARCH Source: Thomson Financial Datastream, Raiffeisen RESEARCH

22
 Risk indicators

MEA Europe and USA

MSCI World MSCI World
Beta Beta up Beta down Volatility Beta Beta up Beta down Volatility
Egypt 0.6 1.3 0.3 25.1% EmEurope 1.2 0.1 1.1 39.4%
Morocco 0.0 0.2 -0.1 20.6% EMU 1.0 1.1 0.7 31.6%
South Africa 0.8 0.0 0.5 26.7% Poland 1.0 -0.9 1.0 35.4%
Bahrain 0.2 0.8 0.1 29.5% Russia 1.1 -0.7 1.0 42.2%
Israel 0.7 0.3 0.4 22.9% Turkey 1.4 -0.4 1.2 31.2%
Qatar 0.1 -1.8 -0.5 50.0% Hungary 1.1 0.3 1.2 57.2%
Kuwait -0.2 -1.5 -0.4 33.2% USA 0.9 0.8 1.3 38.9%
UAE 0.6 -0.4 0.3 35.7%
MSCI Emerging Markets
MSCI Emerging Markets Beta Beta up Beta down Difference
Beta Beta up Beta down Difference EmEurope 1.0 1.2 1.0 0.2
Egypt 0.6 0.4 0.4 0.0 EMU 0.6 0.6 0.4 0.2
Morocco 0.1 -0.3 0.0 -0.3 Poland 0.6 0.9 0.6 0.3
South Africa 0.7 0.3 0.7 -0.4 Russia 1.1 1.5 1.0 0.6
Bahrain 0.3 0.2 0.2 0.0 Turkey 1.1 1.4 1.3 0.2
Israel 0.6 0.4 0.6 -0.2 Hungary 0.8 0.9 0.5 0.4
Qatar 0.5 -0.6 0.4 -1.0 USA 0.4 0.3 0.5 -0.2
Kuwait 0.0 -0.7 0.0 -0.7 Source: Thomson Financial Datastream, Raiffeisen RESEARCH
UAE 0.7 0.3 0.5 -0.2
Source: Thomson Financial Datastream, Raiffeisen RESEARCH

Africa: CDS 5 years Reference countries: CDS 5 years

600 100 1,150

500 80 900

400 60 650

300
40 400

200
20 150
100
0 -100
0 May-07 Nov-07 May-08 Nov-08 May-09
May-07 Nov-07 May-08 Nov-08 May-09
Germany USA
South Africa Hungary (r.h.s.) Russia (r.h.s.)

Source: Thomson Financial Datastream, Raiffeisen RESEARCH Source: Thomson Financial Datastream, Raiffeisen RESEARCH

23
Technical analysis

Hang Seng CE Bovespa Index

Weekly Q/ .HSCE 22.06.2008 - 31.05.2009 (HKG) Monthly Q.BVSP 31.01.2008 - 31.07.2009 (SAO)
Price Price Price Price
HKD HKD Cndl; Q.BVSP; Last Trade
BRL BRL
31.05.2009; 47.289,53; 52.095,85; 47.289,53; 50.976,39

13.000 13.000 72.000 Cndl; Q.BVSP; Last Trade

31.05.2009; 47.289,53; 52.095,85; 47.289,53; 50.976,39

68.000 68.000
12.000 12.000
10500 64.000 63.201,8
64.000

11.000 11.000
60.000 59.831,82 60.000

10.000 10.000 56.000

56.461,83
56.000

52.000 52.000
9.000 9.000
48.000 48.000
8.000 8.000 45.660,16

44.000 44.000
7.000 7.000
40.000 40.000
36.962,01
6.000 6.000 36.000 36.000

5.000 5.000 32.000 32.000

.12 .12
.12 .12
Jul Aug Sep Okt Nov Dez Jän Feb Mär Apr Mai Q1 Q2 Q3 Q4 Q1 Q2 Q3
2008 2009
Q3 2008 Q4 2008 Q1 2009 Q2 2009

Source: Thomson Financial Datastream, Raiffeisen RESEARCH Source: Thomson Financial Datastream, Raiffeisen RESEARCH

Hang Seng CE Bovespa Index

last: 9,722 buy target: 10,500 last: 50,976 position: long target: 56,460
The price could rise towards the resistance 10,500 As the Fibo-area has been left behind at 45,660,
after the breakout of the flag-pattern. an advance towards 56,460 is expectable. Stop
49,100 -> 46,540.

JSE All-Share Index Bombay SENSEX

Weekly Q.BSESN 13.07.2008 - 07.06.2009 (BOM)
Monthly Q/.JALSH 30.11.2007 - 31.07.2009 (JHB)
Price Price
Price Price INR INR
ZAR Cndl; Q/.JALSH; Last Trade ZAR
31.05.2009; 20.647,03; 22.172,41; 20.647,03; 21.800,20
Cndl; Q/.JALSH; Last Trade
32.000 31.05.2009; 20.647,03; 22.172,41; 20.647,03; 21.800,20 32.000
15.000 15.000
31.000 31.000
30.000 30.000 14.000 14.000
29.000 29.070,95
29.000
28.000 28.000 13.000 13.000
27.773,87

27.000 27.000
26.476,78 12.000 12.000
26.000 26.000
25.000 25.000 11.000 11.000
24.000 24.000
23.000 23.000 10.000 10.000
22.218,87
22.000 22.000
9.000 9.000
21.000 21.000
20.000 20.000
8.000 8.000
19.000 18.792,87 19.000
.12 .12
.12 .12
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Aug Sep Okt Nov Dez Jän Feb Mär Apr Mai Jun
2007 2008 2009
Q3 2008 Q4 2008 Q1 2009 Q2 2009

Source: Thomson Financial Datastream, Raiffeisen RESEARCH Source: Thomson Financial Datastream, Raiffeisen RESEARCH

JSE All-Share Index Bombay SENSEX

last: 21,872 position: long target: 26,500 last: 12,026 position: long target: 13,000
Per se rated neutral while inst the range 17,770 - The up-trend is still valid (-> 136,00 - 13,400). There-
23,050, a buy-signal is expectable, stop 20,275 -> fore the index will stay beyond 10,950.
18,090 - 17,770.

24
 Technical analysis

CRB Index USD/MXN

Weekly Q.CRB 19.10.2008 - 14.06.2009 (NYC) Weekly QMXN= 21.09.2008 - 21.06.2009 (GMT)
Price Price Price Price
USD Cndl; Q.CRB; Last Trade USD /USD Cndl; QMXN=; Bid /USD
17.05.2009; 243,11; 243,11; 240,97; 242,60 17.05.2009; 13,0249; 13,2975; 12,9895; 13,2250
300 Cndl; Q.CRB; Last Trade
17.05.2009; 243,11; 243,11; 240,97; 242,60
300 15,5 Cndl; QMXN=; Bid
17.05.2009; 13,0249; 13,2975; 12,9895; 13,2250
15,5
293,79
15 15
290 290

14,5 14,5
280 280
14 14
270 270
13,5 13,5
260 260
13 13
251,91
12,5854
250 250 12,5 12,5

240 238,84 240 12 12

11,662

11,5 11,5
230 230
225,78
11 11
220 220 10,7386

10,5 10,5
210 210 10 10

.1234 .1234
.12 .12 21 28 05 12 19 26 02 09 16 23 30 07 14 21 28 04 11 18 25 01 08 15 22 01 08 15 22 29 05 12 19 26 03 10 17 24 31 07 14 21
19 26 02 09 16 23 30 07 14 21 28 04 11 18 25 01 08 15 22 01 08 15 22 29 05 12 19 26 03 10 17 24 31 07 14 Sep 08 Okt 08 Nov 08 Dez 08 Jän 09 Feb 09 Mär 09 Apr 09 Mai 09 Jun 09
Okt 08 Nov 08 Dez 08 Jän 09 Feb 09 Mär 09 Apr 09 Mai 09 Jun 09

Source: Thomson Financial Datastream, Raiffeisen RESEARCH Source: Thomson Financial Datastream, Raiffeisen RESEARCH

CRB Index USD/MXN

last: 242,60 position: long target: 270 last: 13,22 sell 12,85 target: 12,37 - 10,73
Massive resistance at 245, backed-up by rectangle The price is still testing the trend-channel from above,
and rising-resistance-line. Thus a bounce-back to 234 might fall back into it at 12.37, but in before reverse
- 225 cannot be fully ruled out. to in beyond of 13.35 -> 13.74 - 14.

USD/ZAR USD/BRL
Weekly QZAR= 19.10.2008 - 14.06.2009 (GMT) Monthly QBRL= 30.04.2007 - 30.09.2009 (GMT)
Price Price Price Price
/USD Cndl; QZAR=; Bid /USD /USD Cndl; QBRL=; Bid /USD
17.05.2009; 8,2940; 8,5350; 8,2100; 8,4341 31.05.2009; 2,1893; 2,1893; 2,0509; 2,0665
Cndl; QZAR=; Bid
17.05.2009; 8,2940; 8,5350; 8,2100; 8,4341
2,6 Cndl; QBRL=; Bid
31.05.2009; 2,1893; 2,1893; 2,0509; 2,0665
2,6
11,6 11,5784 11,6
2,5 2,4747 2,5
11,2 11,2
11,0436 2,4 2,4

10,8 10,8 2,3 2,3

10,4 10,4 2,2 2,2

10 10 2,1 2,1

2 2,0010 2
9,6 9,6

9,2818
1,9 1,9
9,2 9,2
1,8 1,8
8,8 8,8
1,7 1,7

8,4 8,4 1,6 1,6

1,5272
.1234 .1234 .1234 .1234
19 26 02 09 16 23 30 07 14 21 28 04 11 18 25 01 08 15 22 01 08 15 22 29 05 12 19 26 03 10 17 24 31 07 14 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3
Okt 08 Nov 08 Dez 08 Jän 09 Feb 09 Mär 09 Apr 09 Mai 09 Jun 09 2007 2008 2009

Source: Thomson Financial Datastream, Raiffeisen RESEARCH Source: Thomson Financial Datastream, Raiffeisen RESEARCH

USD/ZAR USD/BRL
last: 8.44 buy 8.5780 target: 8.90 - 9.27 last: 2.0665 sell 2.04 target: 1.80 - 1.50
Real good support inst the range 7.90 - 8.10, thus With regard to the failure at 2.47 a drop towards 2.0
bullish reversal and recovery towards the target-area and thus 1.8975 -> 1.5541 is likely. Buy 2.0850 ->
expectable. Bearish confirmation: 7.82 -> 7.15 2.1210 - 2.18.

25
26
Emerging Markets
AR BR CN EG IN ID MY MX MA PK PH KR TH EMU USA Nasdaq
AR 1.0 0.7 0.6 0.5 0.6 0.7 0.5 0.6 -0.1 0.1 0.6 0.4 0.7 0.6 0.6 0.5
BR 1.0 0.6 0.4 0.6 0.5 0.2 0.7 -0.2 0.0 0.4 0.7 0.6 0.8 0.7 0.7
CN 1.0 0.5 0.7 0.7 0.5 0.7 -0.1 0.3 0.5 0.5 0.6 0.5 0.6 0.6
EG 1.0 0.6 0.6 0.5 0.4 0.0 0.1 0.5 0.3 0.6 0.4 0.4 0.4
IN 1.0 0.6 0.6 0.6 0.0 0.2 0.3 0.6 0.7 0.7 0.6 0.7
ID 1.0 0.5 0.5 -0.1 0.1 0.5 0.5 0.7 0.5 0.4 0.5
Correlations

MY 1.0 0.4 -0.2 0.2 0.6 0.3 0.6 0.3 0.4 0.4
MX 1.0 -0.2 0.1 0.3 0.7 0.6 0.8 0.8 0.7
MA 1.0 -0.1 -0.2 -0.1 -0.1 -0.2 -0.2 -0.2
PK 1.0 0.2 -0.1 0.0 0.0 0.1 0.1
PH 1.0 0.3 0.5 0.3 0.4 0.4
KR 1.0 0.4 0.8 0.7 0.7
TH 1.0 0.6 0.5 0.5
EMU 1.0 0.8 0.7
USA 1.0 1.0
Nasdaq 1.0

Emerging Europe
HR CZ EE HU IL PL RO RU SK SI TR EMU USA Nasdaq
HR 1.0 0.6 0.7 0.6 0.2 0.5 0.5 0.5 0.2 0.6 0.5 0.6 0.4 0.4
CZ 1.0 0.4 0.8 0.1 0.9 0.7 0.7 0.0 0.4 0.7 0.7 0.5 0.5
EE 1.0 0.4 0.3 0.2 0.3 0.3 0.2 0.6 0.4 0.5 0.3 0.4
HU 1.0 0.2 0.7 0.7 0.7 0.1 0.4 0.8 0.8 0.6 0.5
IL 1.0 0.1 0.1 0.2 0.2 0.5 0.2 0.2 0.5 0.5
PL 1.0 0.7 0.7 0.0 0.3 0.7 0.7 0.5 0.5
RO 1.0 0.5 0.1 0.3 0.5 0.6 0.4 0.4
RU 1.0 -0.1 0.5 0.6 0.7 0.5 0.5
SK 1.0 0.1 0.2 0.0 0.1 0.1
SI 1.0 0.4 0.5 0.5 0.5
TR 1.0 0.8 0.7 0.7
EMU 1.0 0.8 0.7
USA 1.0 1.0
Nasdaq 1.0

Region
Euroarea USA Nasdaq Emerging Eastern Europe Emerging Asia Latin America
Euroarea 1.0 0.8 0.7 0.7 0.7 0.8
USA 1.0 1.0 0.6 0.7 0.8
Nasdaq 1.0 0.6 0.7 0.8
Emerging Eastern Europe 1.0 0.6 0.7
Emerging Asia 1.0 0.8
Latin America 1.0
6 month correlation, calculated from weekly performance values
Source: Thomson Financial Datastream, Raiffeisen RESEARCH
 Abbreviations

Emerging Markets
Abbreviations
Countries Economic abbreviations
AR Argentina GDP Gross Domestic Product
BR Brazil bp basis points
CN China yoy year on year
CZ Czech Republic pp percentage points
DE Germany CPI Consumer Price Index
EE Estonia C/A Current Account
EM Emerging Markets
EMU European monetary union
HR Croatia
HU Hungary
ID Indonesia
IL Israel
IN India
JP Japan
KR Korea (Republic)
MA Morocco
MEA Africa and Middle East
CE Middle- and Eastern European
Countries
MX Mexico
MY Malaysia
PH Philippines
PK Pakistan
PL Poland
RO Romania
RU Russia
SL Slovenia
SK Slovakia
TH Thailand
TR Turkey
USA United States of America
UAE United Arab Emirates
ZA South Africa

Cut-off for data: 11 May 2009

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