Amidst all the bad news some good news The outlook for Emerging Markets Lars Christensen Chief Analyst, Head of Emerging Markets Research Danske Research, Danske Bank + 45 33 44 5 45 (direct) + 45 4 74 49 51 (mobile) larch@danskebankdk Investment Research Lars Tranberg Rasmussen Analyst + 45 45 12 85 34 (direct) + 45 2 55 27 98 (mobile) laras@danskebankdk
Agenda Market overview Emerging Markets remain under pressure and a look at some of the more spectacular stories Macro overview The bad news: The horrific growth slowdown The good news: Inflation is coming down fast Q&A session 2
Market overview I: The past month has not been good Risk-adjusted FX change against EUR and USD Stock market performance 15 1 5 % -1-15 -2-25 -3 SKK HUF TRY PLN ZAR CZK IDR RON KRW ILS BRL INR PHP MXN SGD (A nnualised return divided by 1-year histo rical vo latility) EGP TWD KZT RUB UAH 15 1 5 % -1-15 CNY TWD BRL KRW MXN ZAR SKK SGD INR PHP PLN UAH HUF (Local currency) ILS RON TRY EGP RUB IDR CZK MYR
Market overview II: CEE FX 25-25 -75-1 -125-15 -175-2 Aug Change vs EUR since August 1, 28 Ecowin Sep Oct Nov Dec 8 CZK RON HUF PLN 25-25 -75-1 -125-15 -175-2
Market overview III: CIS FX 2 15 Percent change since Jan 28 2 15 8 75 USD / UAH 8 75 1 5-1 -15 Jan EUR/USD matters for RUB Mar May Jul Sep Nov Jan 8 USD vs EUR RUB vs EUR RUB vs basket RUB vs USD Mar 9 1 7 5 65 6 55-1 5-15 45 1 2 3 4 5 6 7 8 7 65 6 55 5 45
Market overview IV: Latam FX 5 Change in %, since August 1, 28-1 -15-2 -25 MXN vs USD -3-35 CRB spot BRL vs USD -4 Aug Sep Oct Nov Dec Jan 8 9 5-1 -15-2 -25-3 -35-4
Market overview V: Emerging Asia FX 5 Change in %, since August 1, 28-1 PHP -15-2 IDR -25-3 KRW -35 Aug Sep Oct Nov Dec 8 5-1 -15-2 -25-3 -35
Macro overview I: The horrific slowdown 175 15 % y/y Industrial production 175 15 125 Asia 125 1 1 75 5 75 5 25-25 LATAM CIS CEE 2 3 4 5 6 7 8 9 25-25
Macro overview II: The horrific slowdown CEE 6 Index PMI, Euro Zone 55 5 45 PMI, Poland 4 35 1 2 3 4 5 6 7 8 6 55 5 45 4 35 15 % y/y 125 1 75 5 25-25 GDP, Latvia Business confidence >> % y/y 1 2 3 4 5 6 7 8 4 3 2 1-1 -2-3 -4 65 Index % y/y << PMI, Hungary 6 55 5 45 Industrial production, Hungary >> 4 1 2 3 4 5 6 7 8 3 25 2 15 1 5-1 -15 15 Index Index 1 5 Business confidence, Lithuania -1-15 -2-25 -3 1 2 3 4 5 6 7 8 15 1 5-1 -15-2 -25-3
Macro overview III: The horrific slowdown: CIS 15 % y/y Industrial production, Russia, sa % y/y 125 1 75 5 25-25 6 cma -75 2 3 4 5 6 7 8 15 125 1 75 5 25-25 -75 2 1-1 -2-3 % y/y % y/y Industrial production, Ukraine 2 3 4 5 6 7 8 2 1-1 -2-3
Macro overview IV: The horrific slowdown: No escape here either 12 % y/y % y/y Retail sales, 6M cma, Brazil 1 8 6 4 2 Industrial Production, 6M cma 5 6 7 8 Index = 1, 25 Jan 12 115 11 15 1 Brazil, Consumer confidence 95 5 6 7 8 12 1 8 6 4 2 12 115 11 15 1 95 125 % y/y Industrial production, Mexico % y/y 1 75 5 25-25 4 5 6 7 8 115 Index Index 11 15 1 95 9 85 8 Consumer confidence, Mexico 4 5 6 7 8 125 1 75 5 25-25 115 11 15 1 95 9 85 8
Macro overview V: The horrific slowdown: Now even Asia is suffering China Taiwan 65 Diffusion index Real export>> % y/y 55 45 35 << New export orders, CLSA PMI 25 5 6 7 8 4 3 2 1-1 -2 15 1 5-1 -15 Industrial production Export 97 98 99 1 2 3 4 5 6 7 8 15 1 5-1 -15
Macro overview VI: Inflation coming down 175 % y/y Inflation 15 CIS 125 1 LATAM 75 5 25 CEE Asia 4 5 6 7 8 175 15 125 1 75 5 25 Factors pushing inflation: Lower commodity prices Growth slowdown Base effects But no risk of widespread deflation Lower inflation = easier monetary policy and weaker currencies
Macro overview VII: Inflation coming down: CEE 225 % 3m/3m annualised 2 Latvia 175 15 125 1 Lithuania 75 5 Estonia 25 7 8 225 2 175 15 125 1 75 5 25 175 % 3m/3m annualised Inflation in 15 125 1 Czeck Republic 75 Hungary 5 25 Poland 7 8 175 15 125 1 75 5 25
Macro overview VIII: Inflation coming down: Asian deflation? 5 3m/3m annualised Inflation in 5 3 3 1-1 South Korea Taiwan Thailand 1-1 -3-3 7 8 9
Macro overview IX: Inflation coming down: Not here yet 1 8 3m/3m annualised Inflation in Brazil 1 8 6 4 2 Mexico 6 4 2-2 7 8-2
Macro overview X: Inflation coming down: CEE 225 % 3m/3m annualised 2 Latvia 175 15 125 1 Lithuania 75 5 Estonia 25 7 8 225 2 175 15 125 1 75 5 25 175 % 3m/3m annualised Inflation in 15 125 1 Czeck Republic 75 Hungary 5 25 Poland 7 8 175 15 125 1 75 5 25
Q&A session
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