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Emerging Markets Monitor
Published by Business Monitor International Ltd

ISSN

1359-0006

1 NOVEMBER 2010 |

VOL 16 | NO 30

Analysis and market intelligence on fixed income, forex and equities in Asia, EMEA and Latin America
CONTENTS
MARKET LEADER ....................................................1-3 coMMoDiTiEs (sugAR&ALuMiniuM) ...................4-5 AsiA...........................................................................6-8 LATin AMERicA ......................................................9-12 EuRoPE ................................................................13-16 MiDDLE EAsT ........................................................17-19 AFRicA ..................................................................20-22 FX FoREcAsTs – cnY, cRc....................................6,9 FX, FiXED incoME & EquiTY DATA ...................23-24

The Fed game changer...

GLOBAL

QE2: Implications For EM Monetary Policy
Central banks, especially in emerging marLooking Like 2007 kets, will face increasingly complex chalGross Portfolio Investment Liabilities, US$mn, 3mma 12,000 lenges in 2011 as quantitative easing (QE) Turkey 10,000 Poland by the USFederal Reserve (Fed) and Bank 8,000 Brazil of Japan (BoJ) alter global monetary dynamSouth Korea 6,000 ics. The resulting rise in portfolio investment 4,000 flows, inflationary pressures, dollar weakness 2,000 and credit growth will force decision-makers 0 to increasingly balance potentially conflict-2,000 ing objectives. These will include supporting -4,000 exports, controlling inflation andpreventing -6,000 the build-up of macroeconomic imbalances. -8,000 In this environment, managing domestic interest rates will likely be a secondary policy Source: Central Banks prescription, with authorities utilising a full range of options including capital controls, FX intervention, taxes on foreign investment, increasing bank reserve requirements and lifting restrictions on investing abroad. Wepresent our core views. Holding on for a comeback...
Mar-01 Aug-01 Jan-02 Jun-02 Nov-02 Apr-03 Sep-03 Feb-04 Jul-04 Dec-04 May-05 Oct-05 Mar-06 Aug-06 Jan-07 Jun-07 Nov-07 Apr-08 Sep-08 Feb-09 Jul-09 Dec-09 May-10

The next issue of Emerging Markets Monitor will be on November 15 due to a publication holiday (48 issues a year).
MARKET MOVERS

Big Week In The US

continued on page 2Three major US-based market movers are on tap over the span of just a few days. The first is the preliminary release of US Q310 GDP figures on October 29, which could move markets if it comes in far from the consensus estimate of 2.0% q-o-q annualised (we anticipate a number below this). The second is the US congressional elections on November 2, where we and the market expect the Republicans to takeover control of the house of representatives but fall short of wresting the senate from the Democrats. The third is a Fed meeting culminating in an announcement on November 3 on the scope, scale and timing of the next round of quantitative easing. With bond purchase expectations ranging between US$250bn and US$2trn, a low number (eg below US$500bn) could force an unwind of short dollarpositions, but an upside surprise could refuel the dollar carry trade. Given the technical outlook, which is pointing to a continuation of the nearterm bounce in the dollar, we are on the sidelines waiting for a chance to enter into some of our preferred EM currencies.

ASIA

CNY: Still Bearish Versus The Market
The yuan is expected to remain broadly stable over the next few months, as it has beenallowed to float more freely and the US dollar remains under pressure.
see page 6

End of an era...

LATIN AMERICA

Argentina: Kirchner Death – Initial Thoughts
Néstor Kirchner has been a dominant force in Argentine politics for much of the last decade. We set out our initial reaction to his death for the realms of politics and finance.
see page 12

The long-awaited steppe...

EuROpE...