em macro and strategy focus -...

Deutsche Bank Markets Research

Emerging Markets

Foreign Exchange Rates Credit

Date 29 January 2016

EM Macro and Strategy Focus

________________________________________________________________________________________________________________

Deutsche Bank Securities Inc.

DISCLOSURES AND ANALYST CERTIFICATIONS ARE LOCATED IN APPENDIX 1. MCI (P) 124/04/2015.

Taimur Baig, Ph.D

Chief Economist - Asia

(+65) 64238681

Guilherme Marone

Strategist - LatAm

(+1) 212 250-8640

Daniel Brehon

Strategist

(+44) 20 754-50946

Gautam Kalani

Strategist – EMEA

+44(20)754-57066

Christian Wietoska

Strategist – EMEA

(+44) 20 754-52424

Editors

Drausio Giacomelli

(+1) 212 250-7355

Jed Evans

(+1) 212 250-8605

Economics Focus: In Asia, we expect RBI to stay on hold; BoT will likely keep rates unchanged on risk of commodities-driven deflation. In EMEA, we also expect CBs in Poland, Czech Republic and Romania to stay on hold. Watch for possible CNB postponing the end of the FX cap. We expect Banxico on hold, but it may turn more hawkish if USD/MXN surges. On the data side, PMIs and Turkish inflation will be in focus. In Argentina, eyes will be on the development of the negotiations with the holdouts and the behavior of government tax revenues.

Strategy Focus: Although major CBs anchor EM FI, FX rallies should remain technical in nature while structural deleveraging weighs on growth.

— FX: With growth at stake, lingering reminbi anxiety ahead of the Chinese New Year, and – for the most part – more tolerant CBs, EMFX will remain the adjustment valve. In RV, stay bullish PLN/HUF as valuation is stretched, and favor RUB vs. COP via put options on RUB’s underperformance in the recent rebound in oil – outright and especially in options markets. We also believe the high-carry BRL has lagged CLP and favor buying USD/ZAR on dips as lasting external vulnerability and weakening growth overshadow tighter policy. Keep long USD/Asia and INR vs. SGD and IDR vs. SGD, PHP, and THB.

— Rates: Focus on outright receivers in BRL (through Jul17/Jan18), and Turkey. We turn more bullish ZAR cash on better anchored inflation, but turn more cautions ILS bonds on valuation. Favor front-end flatteners in South Africa, Mexico (6M vs.1Y1Y) and Colombia (1Y vs. 3Y). Hold long 3Y CLP swaps vs. US and ILS flatteners (2s10s). In contrast, we prefer steepeners in Brazil (Jan18/Jan21) and Colombia, but staying overweight MBONO 31s vs. TIIE. Stay long CGB, HKD IRS, and Indo cash, and steepeners in THB and SGD curves (Asia Weekly).

— Credit: We have observed a return to a two-way market. But the additional rout in commodities, risk of downward adjust in growth forecasts (relative to our 2016 outlook), tight valuation of EM sovereigns relative to domestic credit markets, and contagious effect from commodity producing quasi-sovereigns under pressure suggest only a partial retracement is justified. We nevertheless stay overweight Indonesia despite headwinds from the commodity sector, favoring long 10s30s curve flattener and CDS/bond basis. (EM Credit Weekly)

Best & Worst FX Performance: Best & Worst Rates Performance: South Africa still offers premium

5.50%

6.00%

6.50%

7.00%

7.50%

8.00%

8.50%

9.00%

Jan

/15

Ma

r/15

Ma

y/1

5

Jul/1

5

Se

p/1

5

No

v/1

5

Jan

/16

Ma

r/16

Ma

y/1

6

Jul/1

6

Se

p/1

6

No

v/1

6

Jan

/17

Ma

r/17

Ma

y/1

7

Jul/1

7

Se

p/1

7

No

v/1

7

Jan

/18

Policy rate DB-forecast market pricing

Source: Bloomberg Finance LP Source: Deutsche Bank Source: Deutsche Bank, Bloomberg Finance LP

29 January 2016



Top Trade Recommendations *

ID Status Country Trade Name Weights Initiation Last ActionLast Action

DateEntry Current Target Stop

1 Maintain Israel Long USD/ILS FXOutright 08Jan16 Initiation 3.92 3.95 4.05 3.87

2 Maintain Poland/ Hungary Long PLN/HUF FXOutright 23Oct15 Chg Stop 21Jan16 72.80 70.40 75.00 69.50

3 Maintain Romania Short EUR/RON FXOutright 14Jan16 Initiation 4.54 4.54 4.45 4.57

4 MaintainSouth Africa/

TurkeySell 6M USD/ZAR puts to fund 6M EUR/TRY puts Option Payoff 06Nov15 Initiation 0.00% 0.00%

5 Maintain Brazil/ Chile Buy BRL/CLP FXOutright 14Jan16 Initiation 181 175 195 170

6 Maintain Russia/ Colombia Long RUB/COP FXOutright 21Jan16 Initiation 39.60 42.70 45.00 38.00

1 Maintain Czech 2s10s IRS flattener DV01 Neutral 08Oct15 Initiation 0.68 0.52 0.40 0.90

2 Maintain Czech/ Israel Long Israel (Aug-25) vs Short Czech (sep-25) DV01 Neutral 14Jan16 Initiation 1.32 1.37 1.00 1.60

3 Maintain Hungary Long Nov-23 Outright 25Jun15 Initiation 3.74 3.02 2.75 3.75

4 Maintain Israel Receive 1Y1Y IRS Outright 08Dec15 Chg Target 21Jan16 0.56 0.38 0.30 0.70

5 Maintain Israel 2s 10s IRS flattener DV01 Neutral 17Sep15 Chg Stop 21Jan16 1.97 1.61 1.25 2.50

6 Maintain Poland Long Apr-29 Outright 19Jan16 Initiation 3.42 3.37 3.00 3.75

7 Maintain Poland Long Oct-21 Outright 19Jan16 Initiation 2.51 2.47 2.00 2.80

8 Maintain Poland Pay 1Y1Y IRS Outright 12Jan16 Initiation 1.48 1.60 1.70 1.30

9 Maintain Russia Receive 1Y XCCY Outright 06Nov15 Chg Target 18Nov15 10.72 10.49 9.90 10.80

10 Maintain South Africa 6x9 - 15x18 FRA flattener DV01 Neutral 14Jan16 Initiation 0.85 0.57 0.55 1.25

11 New South Africa Long Dec-18 Outright 29Jan16 Initiation 8.71 8.71 8.25 9.50

12 New South Africa Long Mar-21 Outright 29Jan16 Initiation 9.16 9.16 8.75 9.75

13 Maintain Turkey Receive 1Y XCCY Outright 04Jan16 Initiation 11.43 11.04 10.75 11.75

14 Maintain Brazil Receive Jan17 Outright 14Jan16 Chg Stop 29Jan16 15.43 14.38 14.00 14.60

15 Maintain Chile Receive 1Y1Y vs US 1Y1Y DV01 Neutral 14Jan16 Chg Target 21Jan16 2.69 2.76 2.50 3.00

16 Maintain Colombia Buy COLTES20s vs COLTES30s DV01 Neutral 14Jan16 Initiation 1.34 1.41 1.60 1.20

17 Maintain Mexico Pay 6M TIIE vs 2Y1Y DV01 Neutral 14Jan16 Initiation 1.80 1.63 1.50 2.00

1 Maintain Argentina Switch from Bonar 17s to Global 17s Dv01-neutral 21Jan16 Initiation 298.00 284.00 140.00 310.00

2 Maintain Argentina Long EUR Warrant Outright 07Jan16 Initiation 9.70 9.89 13.00 8.00

3 Maintain Argentina Swtich to EUR Discount from USD Discount Dv01-neutral 23Nov15 Initiation 56.25 50.24 15.00 80.00

4 Maintain Brazil Brazil 2s5s CDS curve flattener Dv01-neutral 13Jan16 Initiation 179.63 192.07 100.00 200.00

5 Maintain Colombia Long 24Ns vs 5Y CDS Dv01-neutral 21Jan16 Initiation 64.00 37.00 20.00 75.00

6 Maintain Hungary/ Romania Long Hungary 24s vs Romania 24s Dv01-neutral 17Sep15 Initiation 33 33 0 45

7 Maintain Indonesia Long 24Ns vs 5Y CDS Dv01-neutral 21Jan16 Initiation 61.00 41.00 25.00 75.00

8 New Indonesia Long 44s vs short 26s Dv01-neutral 28Jan16 Initiation 119 119 85 135

9 Maintain Mexico Switch from 25s to 45s Dv01-neutral 07Oct15 Initiation 86 85 65 95

10 Maintain Petrobra Switch to 41s from 15s Dv01-neutral 13Jan16 Initiation 0.31 0.35 -0.10 0.50

11 Maintain Philippines Switch to 26s from 40s Dv01-neutral 03Dec15 Initiation 0 -1 -30 10

12 Maintain Poland Swtich from 21s to 22s Dv01-neutral 22Oct15 Initiation 19 20 0 32

13 Maintain Russia Short Russia 30s Outright 03Dec15 Initiation 176 140 220 100

14 Maintain Russia Switch from 22s to 42s Dv01-neutral 01Oct15 Chg Target 84 71 35 100

15 Maintain Russia Sell 5Y CDS vs 19s Dv01-neutral 23Apr15 Initiation 105 83 50 125

Credit Trades

Fx Trades

Rates Trades

Sources: DB Global Markets Research

* For a complete list of trades please see our Trade Tracker at: Trade Tracker

Guilherme Marone, New York, 1 212 250 8640 Christian Wietoska, London, 44 20 754 52424

29 January 2016



Top Economic Releases

Country Release Date Release (month) Period Previous DB Expected Consensus

2/1/2016 Government Tax Revenue * Jan-2016 ARS145bn ARS154bn

Indonesia 2/1/2016 CPI (YoY) Jan-2016 3.40% 3.60%

2/1/2016 CPI (YoY) Jan-2016 4.40% 4.60%

Thailand 2/1/2016 CPI (YoY) * Jan-2016 -0.90% -0.50% -0.50%

India 2/2/2016 RBI Meeting Feb-2016 6.75% 6.75%

S. Korea 2/2/2016 CPI (YoY) * Jan-2016 1.30% 1.00%

2/3/2016 MPC meeting Feb-2016 1.50% 1.50%

Thailand 2/3/2016 BoT Meeting Feb-2016 1.50% 1.50%

2/3/2016 CPI (YoY) Jan-2016 8.80% 9.70%

2/4/2016 CNB Board meeting Feb-2016 0.05% 0.05%

2/4/2016 Overnight rate Feb-2016 3.25% 3.25%

2/5/2016 IBGE Inflation IPCA (YoY) Jan-2016 10.67%

2/5/2016 Economic Activity (YoY) Dec-2015 1.80% 1.60% 1.40%

2/5/2016 Economic Activity Index (YoY) Nov-2015 3.30% 3.80%

2/5/2016 CPI (YoY) Jan-2016 6.77% 7.05% 7.02%

Indonesia 2/5/2016 GDP (YoY) * Q4-2015 4.70% 4.70%

Israel 2/5/2016 S&P Credit Rating

Philippines 2/5/2016 CPI (YoY) Jan-2016 1.50% 1.30%

2/5/2016 NBR rate decision Feb-2016 1.75% 1.75%

Taiwan 2/5/2016 CPI (YoY) Jan-2016 0.10% 1.20% 0.70%

Romania

With the policy rate set to remain unchanged and further reserve requirements cuts

not likely just yet the focus will be on any indications of NBR tolerance for a weaker

currency.

Chile

We expect the internal activity levels to decelerate further due to the sharp fall seen

in copper price recently.

Colombia

We expect economic activity to accelerate driven by rising manufacturing output

after the reopening of the Cartagena Refinery in November. Finance and commerce

will be less supportive of growth due to the …Continued on Econ Release section

Colombia

We expect inflation to continue rising on the back of weather-related food supply

distortions, the strong pass-through of currency depreciation to domestic prices and

the indexation of electricity tariffs and wages in January.

Czech Republic

The CNB will have new forecasts this month and will significantly downgrade their

inflation profile. With exit from the fx floor dependent on a sustainable return of

inflation to the 2% target we do not …Continued on Econ Release section

Mexico

Given that the next FOMC's decision will take place in March, we see Banxico

staying pat and leaving the policy rate at 3.25% next week. However, this view is

heavily dependent on the exchange rate …Continued on Econ Release section

Brazil

inflation remained under pressure mainly due to increases in public transportation,

food and tobacco.

Poland

The February meeting will have 5 new MPC members and will be the last meeting

for 3 of the remaining 5. With no new inflation data and new NBP forecasts due in

March the MPC should be firmly on hold.

Turkey

January is a seasonally high inflation month. 2016 will be no exception with the

monthly headline exceeding its historical average due to higher administered prices,

tax and wage hikes and rampant food …Continued on Econ Release section

Argentina

It is expected a faster pace of increase than the previous prints due to the hike in

internal prices after the readjustment in official exchange rate.

Peru

We expect adverse weather shocks and currency depreciation to continue putting

upward pressure on food prices and housing, fuel and electricity tariffs, which are

indexed to the US dollar. Inflation will …Continued on Econ Release section

Sources: DB Global Markets Research

Gautam Kalani, London, 44 20 754 5706

29 January 2016



Economics Focus

Summary In Asia, Reserve Bank of India meets next week; we expect no change in rates. Bank of Thailand is also expected to keep rates unchanged amid risk of deflation on the back of renewed weakness in global energy prices. Indonesia’s Q4 GDP growth is expected to remain steady at 4.7%, while CPI inflation will likely rise a tad in January. Taiwan’s inflation is also expected to rise in January, while Thailand’s will remain in negative territory. We expect Philippines and South Korea’s CPI to moderate in January. In EMEA, Poland, Czech Republic and Romania will all hold policy meetings in the coming week. We expect all three to remain on hold and watch out for any decision by the CNB to extend the tentative timeframe for exiting the fx cap. On the data side, the PMIs and Turkish inflation will be in focus, In Latam, we expect Banxico to stay pat and leave the policy rate unchanged, but this view is heavily dependent on the exchange rate and a hike is not off the table if the MXN depreciates further. In Argentina, eyes will be on the development of the negotiations with the holdouts and the behavior of government tax revenues. We see increasing risks of a revision of Colombia’s BBB stable outlook to negative in April, when S&P is due for its annual credit review. Rising external vulnerabilities and the postponed submission of a tax reform to congress originally targeted for March would be the main triggers for the outlook revision.

Asia Reserve Bank of India meets on Tuesday next week and we expect the central bank to keep rates on hold. Even then, the monetary policy meeting will assume importance, as market participants will try to ascertain whether RBI’s views about growth-inflation risks have changed materially since the last policy in December, in the backdrop of the ongoing global and domestic financial market developments. We expect only one 25bps rate cut in 2016 in our base case scenario, but in case the global economy tips into a recession, thereby delaying India's growth recovery, and if inflation remains along the glide path as projected by the central bank, then room could open up for further rate cuts in the second half of this year. We also expect Bank of Thailand to keep rates unchanged next week amid risk of deflation, on the back of renewed weakness in global energy prices. Thailand’s CPI inflation will likely remain in negative territory (-0.5% in January) following a -0.9% annual average outturn in 2015.

Indonesia will release its Q4 GDP report next week; we expect growth to be steady at 4.7% for the fourth consecutive quarter, resulting in an average growth of 4.7% in 2015. Meanwhile, we see CPI inflation rising

slightly to 3.6% in January from 3.4% in December. Fuel price cuts in early January will keep CPI inflation in the range of 3.5%-4% this year, providing room for Bank Indonesia to deliver another 25 bps rate cut in February, following a 25 bps rate cut in January.

Three other Asian economies report CPI inflation for January next week; we see a slight moderation in Philippines (1.3% vs. 1.5%) and South Korea’s (1.0% vs. 1.3%) inflation, while rising to 1.2% from 0.1% in case of Taiwan. South Korea will report a lower trade surplus of USD4.2bn in January versus USD7.2bn in December, led by a contraction in exports (-11.9% vs. -14.1%). In contrast, Malaysia’s trade surplus will rise to MYR11.5bn in December from MYR10.2bn in November as exports (5.0% vs. 6.3%) will fare relatively better than imports (1.4% vs. 9.1%).

Other key releases will be Hong Kong retail sales and South Korea’s current account balance. We expect Hong Kong’s retail sales to contract, albeit at a slower pace, both in value and volume terms while Korea will likely report a smaller current account surplus of USD8.4bn in January versus USD9.4bn in December.

EMEA Three central banks in EMEA will hold policy meetings next week namely Poland (Wednesday), Czech Republic (Thursday) and Romania (Friday). We expect all three to remain on hold. It is an Inflation Report month in the Czech Republic and with CPI forecasts set to shift lower we see some possibility for the CNB to push out their tentative timeframe for exiting the fx cap from the current end 2016. On the data side, Turkish CPI on Wednesday will be in focus while Monday is PMI across Europe and elsewhere.

Poland: NBP to remain on hold. The MPC changeover is underway with five of the 10-member MPC finishing their terms in recent weeks. Comments from the new members (Ancyparowicz, Lon, Chrzanowski, Gatnar and Kropiwnicki) do not suggest any near-term push for rate cuts while recent comments from the most dovish of the remaining members (Osiatynski) have not been remotely dovish either. Ongoing weakness in the zloty also reduces space for any near-term rate cuts.

With an early-month flash estimate for inflation released since September last year the MPC would usually have this ahead of the policy decisions (the full release always comes mid month). But given the annual updating of the CPI basket the statistics office will not publish a January estimate leaving the December -0.5% YoY full reading the last available info (this was unchanged from the flash estimate). As such the MPC are likely to concentrate on the 2015 annual GDP data released in recent days plus the latest IP / retail sales / labour market data. The 3.6% full-year GDP reading was higher than the NBP’s 3.4% forecast

29 January 2016



and implies a Q4 reading of 0.9-1.0% QoQ assuming no earlier revisions. Components for the full year also indicate that domestic demand continued to be the main driver of growth in Q4. And with IP and retail sales coming in above expectations in December and labour market data remaining strong the statement should probably repeat that stable growth in Poland continues. Overall, we do not expect that the February statement will be particularly changed versus January.

The main topics in the press conference are likely to be different from last month however with the impact on the monetary policy outlook from the ongoing fx weakness, the January 15th S&P rating downgrade and the President’s fx mortgage proposals. Belka will likely repeat his earlier comments that the fx mortgage proposals would be disastrous for the banking sector and the budget and point to earlier work by the Financial Stability Committee and the NBP highlighting that there are no systemic issues from fx mortgages in Poland. In terms of the longer-term rates outlook Belka will likely again defer on this saying that only from the March meeting when all the new MPC members have joined and the Council will have new forecasts from the research department can a more informed decision be made. (C Grady)

Turkey: No respite in January CPI. January is a seasonally high inflation month. 2016 will be no exception with the monthly headline this time even exceeding its historical average due to domestic cost-push factors in the form of tax, wage and administered price hikes. Food prices are likely to display another visible rise not only due to the impact of adverse weather conditions on fruits/vegetables but also in light of higher bread and meat prices. While lower pump prices (-3%MoM on average) and seasonally lower clothing will exert some downward pressure, annual headline is set to accelerate also due to a negative base and reach 9.7%YoY, i.e. just shy of double-digit territory. Core indicators, both momentum-wise and in annual terms, could however display some improvement as upside pressure emanating from FX pass-through has finally peaked in December 2015. (K Ozturk)

LatAm

Argentina: Negotiations with creditors and tax revenues The main focus continues to be the negotiations with Argentina’s disgruntled creditors. Even though such negotiations are a priority for the new government, a big departure from the last administration’s approach, the process ahead is likely to be rocky and arduous. Frictions and the permanent possibility that negotiations may stall will continue to create volatility but we see persistent investors’ confidence in the capacity of both parties to move forward. Some painful but necessary measures, such as the recently announced changes to electricity prices to reduce the amount of subsidies, may keep the mood of investors relatively high. Against this backdrop, government revenues are expected to accelerate due to the hike in

internal prices following the readjustment in official exchange rate. As the fiscal stance continues to improve moderately, we see the agenda of the new government on track.

Looming risks of a negative sovereign rating action in April. Rating agencies have traditionally praised Colombia’s economic resilience and proven record of responding to fiscal challenges. However, widening twin deficits, rising inflation and the authorities’ wavering commitment to implement a fiscal adjustment commensurate with the permanent loss of 3% of GDP in oil fiscal revenue will put the sovereign ratings to the test in 2016. We see increasing risks of a revision of Colombia’s BBB stable outlook to negative in April, when Standard & Poor’s is due for its annual credit review. The postponed submission of a tax reform to congress originally targeted for March due to the government’s decision to invest all its political capital in the peace negotiations with the FARC would be the main trigger for the outlook revision. More importantly, failure to correct the ongoing deterioration in credit fundamentals and rising external vulnerabilities could increase the likelihood of a downgrade to BBB- in the 4Q16, when Fitch and Moody’s will update their ratings. Nonetheless, this is not yet our baseline scenario. Colombia’s general government debt jumped to an estimated 46% of GDP and the current account deficit net of foreign direct investment approached 4% of GDP in 2015. Both indicators are increasingly diverging from the public indebtedness (43% of GDP) and current external surplus (0.4% of GDP) medians of sovereigns rated in the BBB category.

Mexico: Banxico is likely to stay pat Given that the next FOMC’s decision will take place in March, we see Banxico staying pat and leaving the policy rate at 3.25% next week. However, this view is heavily dependent on the exchange rate behavior. We reiterate that if the MXN weakens further (go above 18.50 again), Banxico may strongly consider a rate hike to support the Peso. This view is reinforced by the recent announcement by the Exchange Commission about sticking to rules-based FX intervention mechanisms that are triggered only under extreme volatility, thus leaving the policy rate as the main tool to deal with extreme volatility in the near future. We see easing pressures on the exchange rate ahead, as the price of oil recovers somewhat and markets realize that the oil balance of Mexico is close to zero, so the underperformance of MXN in tandem with currencies of oil exporters is an overreaction. Moreover, falling oil prices represent a public finances problem that may call for additional budget cuts but not in 2016, since the government’s oil revenues are hedged well above current spot prices. In any case, considering that oil prices seem to have bottomed out, we think that it is too soon to call for the 2017 fiscal implications at this early stage of the year.

Taimur Baig, Singapore, 65 6423 8681 Caroline Grady, London, 44 20 754 59913

29 January 2016



Strategy Focus

LatAm FX: TIIE and MXN Dangerous Liaison It is no news that monetary policy expectations have been collapsing in Mexico. Besides the accommodative local backdrop (positive inflation news and lackluster activity) the re-pricing in Fed Funds expectations, concerns on China’s prospective growth and the collapse in oil prices resulted on the significant compression in monetary policy premium and consequent bull-flattening of the curve, favoring outright FRA’s receivers (like the rather crowded 1Y1Y), the front ends of MBONO and UDIs (where month on month inflation favored carry harvesting) and short volatility/long duration option trades such as selling front end payers. Meanwhile the USD/MXN touched all year highs with the culprits behind the move being the same (external) drivers behind the re-pricing of the curve: lower oil prices, growth concerns about China and the re-pricing of the Fed. Beyond active intervention in the spot market, Banxico has been expressing concerns regarding the currency levels sometimes referring to future effects on inflation (despite the low realized pass-through and overall low level of inflation), sometimes referring to financial stability. Despite Banxico’s concerns, the spillover of weaker FX in rates markets have been optically small given the aforementioned re-pricing of monetary policy premium, low inflation breakevens, the range bound behavior of asset swaps and the high levels of foreign participation in MBONOs.

Front end TIIE and MXN: Factually Disconnected…..

Source: Deutsche Bank

However, while optically small the effects have far from

being negligible. Taking the US as a counterfactual one notices that despite the rally in absolute levels, in

relative terms the re-pricing has been “timid” in actuality. Taking the 1s3s spread of spread vs US for example (expressed below) one can notice that TIIE has bull-flattened less than the US in the recent rally but in line with the widening with FX (and CDS). Rather than through the regular inflation pass-through, the link between TIIE’s front end and MXN seem to be of fiscal nature, especially given the intimate relationship between FX and CDS (and of course oil). Vulnerabilities regarding capital outflows are in our view secondary at this point given the level of foreign participation and the range bound nature of swap-spreads, instead the perception of Mexico’s ability to finance itself in for a given oil price (ultimately a call on PEMEX) will continue to effect the premium embedded in the front end through the term-premium channel. In a nutshell, we expect TIIE’s front end to trade as a combination of US rates and FX/credit (all oil related risk).

…..but Counterfactually Connected


Beyond market perceptions, it is worth noticing that the oil balance of Mexico is close to zero and should turn negative soon as oil exports are on free fall and imports of gasoline are growing above 30%YoY. That said, falling oil prices represent a public finances problem that may call for additional budget cuts but not in 2016, since the government’s oil revenues are hedged well above current spot prices. Considering that oil prices seem to have bottomed out, in our view it is too soon to read too much for the fiscal implications at this early in the year. The eventual lower beta of the front end to CDS should result on further bull-flattening of the front end, fall in front end rates volatility (implied and realized) and the eventual convergence of the ever popular MX-US compression trades.

Guilherme Marone, New York, +1212-250-8640

Alexis Milo, Mexico City, +52(55)52018534,

29 January 2016



South Africa – Turning more constructive on local debt

**for more details please refer to the Friday’s EMEA Compass**

At yesterday’s interest rate meeting the SARB in South Africa hiked the repo rate by 50bp to 6.75% in line with DB forecasts but somewhat more aggressive than priced into the market.

Given less than the 50bp of hikes priced the flattening of domestic curves came not as a surprise. Also the outperformance of bonds vs swaps was in line with our expectations given historical wide swap-spreads (bonds rich vs swaps) and a tendency of swap-spread tightening during bull-flattening moves. Nevertheless the rally in the long-end of the curve was more aggressive than expected. 10Y bonds rallied from 9.60% to 9.45% over the day and reached the lowest yield level YTD.

Curve flattened in line with expectations but long-end

rally more aggressive than expected

0

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10Y bonds 1Y - 1Y1Y IRS flattener in bps - rhs


We update our views on local rates in South Africa.

Trade recommendations: Remain positioned into tactical short-end flatteners best via 6x9 – 15x18 FRA (new target 0.55%, stop: 1.25%) or 1Y – 1Y1Y IRS (new target: 0.75%, stop: 1.50%) but close the 3m FX implied yield – 1Y1Y IRS flattener which hit the target at 65bp. For a medium-term view add risk in short-end bonds best via Dec-18 or Mar-21 (target: 8.25% and 8.75%).

Rationale: The recent strong performance makes our flattener trade recommendations clearly less appealing. However, we still expect some further flattening in the near-term but with limited room (25bp-30bp) given still less aggressive hiking priced in the very near-term vs a too aggressive hiking cycle expected by markets thereafter.

On the back of the rate hike we are now favoring being long short-end bonds to express a more directional bullish view on South African rates.

ASW-spreads in the short-end remain wide and bonds provide an attractive yield-pickup vs short-end funding. Most importantly however, we still see the hiking cycle priced into the short-end (up to 2 years) as too aggressive and have increased doubts that this will be delivered on the back of the recent dovishness by the Fed, disappointing US activity data, the drop in oil prices, some stabilization in domestic activity data and the rand appreciation.

DB Economics rate path vs current market pricing –

market remains on the hawkish side

5.50%

6.00%

6.50%

7.00%

7.50%

8.00%

8.50%

9.00%

Jan/1

5

Mar/1

5

May/1

5

Jul/1

5

Sep/1

5

No

v/15

Jan/1

6

Mar/1

6

May/1

6

Jul/1

6

Sep/1

6

No

v/16

Jan/1

7

Mar/1

7

May/1

7

Jul/1

7

Sep/1

7

No

v/17

Jan/1

8

Policy rate DB-forecast market pricing


Local bonds: Switch country weight from “neutral” to “overweight” and favour the bonds Mar-21, Feb-23 and Feb-48. We revise our end Q1-16 10Y bond target from 9.50% to 9.20% and also reduce it by 10bp for Q2-16 and Q3-16, respectively.

Rationale: On the domestic front our concerns on the South African economy have not vanished and risk premia for higher inflation expectations will remain priced in. On the external front we still see South African assets as highly sensitive to external shocks in particular the yuan devaluation and the US rate normalization cycle. However, we turn somewhat more constructive on local debt in the near-term. We justify this with a) reduced monetary policy uncertainty, b) the strong commitment of the SARB to take a hawkish stance if necessary, c) current light position in local bonds and d) rich valuation with real yields, B/Es and 10Y spread vs funding at multiple year highs.

29 January 2016



B/Es, real yields and long-end bonds vs funding at

multiple year wide levels

7.99

456

267

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Mar/14

May/14

Jul/14

Sep/14

No

v/14

Jan/15

Mar/15

May/15

Jul/15

Sep/15

No

v/15

10Y B/Es real yield* - rhs in bps 10Y spread vs funding** - rhs in bps

Source: Deutsche Bank, Bloomberg Financial LP, Note: * 10Y yield – spot inflation / ** 10Y bonds – 1x4 FRA

South Africa FX: Remain bearish on ZAR

FX: We retain our bearish medium-term bias on ZAR, but near-term appreciation amid a general risk-on environment is possible

After Rub, ZAR has the highest negative beta to crud in

EM FX


As expected, today’s 50bps hike provided temporary support to the rand, especially given the current risk-on environment. However, the key word is temporary – we believe ZAR remains highly exposed to the trifecta of external factors currently impacting EM FX (China, commodities, Fed) while domestic issues have not yet been addressed (slowing activity, structural problems, fiscal concerns, ratings downgrade possibility). External risks will continue to weigh on EM FX for the next few months. Despite short periods of risk-on (e.g. potentially in the next few weeks due to Chinese New Year-related stability), these risks should eventually

dominate and push USD/EM higher. The upside trend in USD/EM still has legs at least for the next few months, and USD/ZAR is at the forefront of this: it has elevated exposure to both China and commodities, and domestic issues compound the impact of external pressure. Like last year, we expect ZAR to be disproportionately affected amid an environment of general EM FX weakness. Particularly until we have clarity on the fiscal front via the budget announcement (24 Feb), ZAR is likely to trade in a volatile fashion but with a bearish bias. To provide some context, SARB’s surprise pre-emptive 25bps rate hike in November only provided temporary support to the rand. Lastly, positioning in the rand is net short, but still far from stretched levels: our CORAX index shows that short positioning is less stretched than in PLN, MXN, TRY and ILS. Therefore, positioning is not likely to provide a backstop to FX weakness either.

Bottom line: we stay bearish on ZAR and view potential

dips in USD/ZAR as good opportunities to add/enter longs

in the pair.

Current short ZAR positioning is not stretched in

historical terms: it is less extensive than in early 2016

and the pre-2013 period


Updating fiscal breakevens for EM oil producers

Oil prices took another nosedive at the beginning of 2016, with Brent dipping below $30bbl (a 13-year low) before staging a modest recovery. This persistent drop, combined with uncertainty about whether we have reached the bottom, has raised concerns about the ability of major oil producers to endure a further period of low oil prices. The sustainability of their budgets has come under particular scrutiny.

In this report, we update our assessment of the oil price needed to balance the budgets of major EM

29 January 2016



oil producers, taking into account the Commodities research team’s new crude forecasts. This provides an indication simultaneously of the pain thresholds and further adjustment required on the fiscal front for each country.

Recent fiscal adjustments and/or currency weakness have led to the breakevens for most producers falling since our previous update (May-15). However, despite adjustments made by oil producers, breakevens for all countries remain above 2016 crude forecasts, due to the sharp drop in oil prices. This means that fiscal deficits are here to stay, requiring continuous draw down of fiscal reserves and/or rising debt issuance.

For countries with limited buffers to absorb these shocks (e.g. Nigeria), substantial further adjustment – either via fiscal contraction, or in some cases currency depreciation – will likely be required.

There is also a vast difference in the breakeven prices for different producers, reflecting the varying degrees of adjustment already made. Breakevens are the highest for Bahrain (the only country with a three-digit breakeven), while Kuwait and Qatar are in comparatively the best shape, with breakeven prices around $50bbl.

Russia has made some adjustment via both a contraction in expenditures and currency depreciation; therefore breakevens have fallen since our last update. Despite making some initial expenditure adjustments, the Nigerian government has again reverted to an expansionary draft budget for 2016; we therefore believe a naira devaluation is on the cards in 2016 to boost the local currency value of oil sales. Though Saudi Arabia has a substantial stock of assets and reserves that provide a robust buffer against low oil prices, the relentless oil price weakness has forced the government to tighten fiscal policy in the latest budget plan for 2016. Even accounting for some expected overshooting, this has resulted in a sharp drop in the 2016 forecasted breakeven, from levels near $105bbl (May-15 update) to $78bbl.

Lastly, we have added Iran – which has a breakeven price in the middle of the pack ($74bbl) – to our analysis, given the increasing likelihood of Iranian oil supply coming on stream this year with the lifting of sanctions.

Oil prices now below breakeven levels in all cases

Bahrain Bahrain

Kuwait

Oman

Oman

Qatar

S. Arabia

S. ArabiaUAE

UAE

Iran

Iran

NigeriaRussia

Russia

0

20

40

60

80

100

120

140

Jan/1

4

Mar/1

4

May/1

4

Jul/1

4

Sep/1

4

No

v/14

Jan/1

5

Mar/1

5

May/1

5

Jul/1

5

Sep/1

5

No

v/15

Jan/1

6

Brent oil price, $ per barrel

Budget deficits

Budget surplus

Nigeria

Qatar

Kuwait

Brent oil price, $ per barrel

Budget deficits

Budget surplus

Qatar

Kuwait


Gautam Kalani, EMEA Strategist Christian Wietoska, EMEA Strategist

29 January 2016



Economics and Markets Highlights

Manufacturing PMI Indicies (PPP- weighted averages)

Inflation Outlook and Breakevens

‘

Source: Deutsche Bank, Bloomberg Finance LP

Source: Deutsche Bank, Bloomberg Finance LP, Thailand BMA, Korea FSS

FX: Long Term & Short Term (Financial) Valuation FX Carry: (3m interest differential / 3m implied vol)

Source: Deutsche Bank, Bloomberg Finance LP (Positive value means overvalued)

Source: Deutsche Bank, Bloomberg Finance LP

Rates: What’s priced year-end 2016 vs DB Forecasts Rates snapshot (10 yr carry vs. z-scores; 3m horizon)



Jed Evans, +1 212 250 8605, New York

EM

Macro

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29

Jan

uary

20

16

Deu

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an

k S

ecu

rities In

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Pag

e 1

1

Bond Auction Calendar

Date Size sold Bid-cover Yield

JV5233277 NTN-B 6% 15-May-21 - BRL 4.7tr BRL 2.20bn 19-Jan-16 BRL 2.51bn - 7.03%

JV5230828 NTN-B 6% 15-Aug-26 - BRL 233bn BRL 0.11bn 19-Jan-16 BRL 0.14bn - 7.19%

EF3237759 NTN-B 6% 15-May-35 - BRL 37.9tr BRL 0.20bn 19-Jan-16 BRL 0.005bn - 7.25%

EK6971114 NTN-B 6% 15-May-55 - BRL 10.2tr BRL 0.23bn 19-Jan-16 BRL 0.05bn - 7.25%

PDBC 30 Days - 1-Mar-16 CLP 400bn CLP 337bn 21-Jan-16 CLP 300bn 1.52x 3.36%

PDBC 90 Days - 3-May-16 CLP 100bn CLP 94bn 7-Jan-16 CLP 100bn 1.34x 3.50%

PDBC 180 Days - 1-Aug-16 CLP 50bn CLP 58bn 12-Feb-16 CLP 100bn 2.69x 3.10%

PDBC 360 Days - 26-Jan-17 CLP 50bn

MCET 1M - MXN 7.5bn MXN 5.5bn 26-Jan-16 MXN 5.5bn 3.01x 3.14%

MCET 3M - MXN 10.5bn MXN 9.5bn 26-Jan-16 MXN 9.5bn 3.04x 3.34%

MCET 6M - MXN 11bn MXN 11bn 26-Jan-16 MXN 11bn 3.68x 3.44%

MCET 12M - MXN 11bn MXN 11bn 5-Jan-16 MXN 11bn 4.64x 3.58%

EJ1291206 MBONO 30Y 7.75% 13-Nov-42 MXN 2.5bn MXN 133tr MXN 2.5bn 22-Dec-15 MXN 2.5bn 2.37x 6.90%

EK3222743 MUDI 30Y 4% 8-Nov-46 UDIS 450mn UDIS 13.35tr UDIS 496mn 5-Jan-16 UDIS 450mn 2.89x 3.94%

Bondes D 5Y Floating-Rate MXN 4.5bn MXN 3.82bn 19-Jan-16 MXN 4.5bn 3.84x




EK0225079 TES UVR 3.50% 17-Apr-19 COU 27997bn COP 142.4bn 20-Jan-16 COP 133bn 1.14x 3.12%

EK8502982 TES UVR 3.50% 7-May-25 COU 19602bn COP 119.8bn 20-Jan-16 COP 122bn 1.15x 4.35%

EJ7094968 TES UVR 3.00% 25-Mar-33 COU 27528bn COP 87.8bn 20-Jan-16 COP 93bn 1.15x 4.57%

EK3678258 LTN - 1-Oct-16 - BRL 73.1tr BRL 2.89bn 21-Jan-16 BRL 1.82bn - 14.54%

JV5290509 LTN - 1-Apr-18 - BRL 4.3tr BRL 0.90bn 28-Jan-16 BRL 1.47bn - 15.37%

JV5290624 LTN - 1-Jan-20 - BRL 4.61tr BRL 0.89bn 28-Jan-16 BRL 1.12bn - 16.12%

JV5300712 LFT Floating-Rate 1-Mar-22 - BRL 38.2tr BRL 20.5bn 21-Jan-16 BRL 14.93bn - 0.0009%




12:45

Chile 12:45

Chile

Brazil 11:00

Mexico 12:30

12:45

Last auction detail

Monday, February 01

Avg. offer sizeAmountCountry CodeAvg. bid-

coverNominal Outs'g

Submission

deadline (Local

Time)

MaturityCouponDetail

New instrument to be auctioned

**At the time of publication, the EMEA and Asia auctions were not available. We will add them on our web site as they become available

Tuesday, February 02

No important auctions scheduled

Sunday, February 07

Saturday, February 06

No important auctions scheduled

Brazil 11:00

Friday, February 05

Wednesday, February 03

Thursday, February 04

Colombia 9:30 UVR 350bn combined

Chile


29 January 2016



Economic Releases:

Country Release (month) Period

Time

(London)

Time

(NY)

Time

(HK) Previous DB Expected Consensus

Government Tax Revenue * Jan-2016 ARS145bn ARS154bn

FGV CPI IPC-S (WE) we-30-Jan-2016 10:00 5:00 1.55% 1.60%

Trade balance (FOB)- monthly Jan-2016 17:00 12:00 USD6240mn USD500mn

Czech Republic PMI Jan-2016 8:30 3:30 55.6

Czech Republic State budget balance Jan-2016 13:00 8:00 CZK-62.8bn

Hungary PMI Jan-2016 8:00 3:00 49.1

Indonesia CPI (YoY) Jan-2016 12:00 3.40% 3.60%

Peru CPI (MoM) Jan-2016 5:00 0:00 0.50% 0.40%

CPI (YoY) Jan-2016 5:00 0:00 4.40% 4.60%

PMI Jan-2016 8:00 3:00 52.1

Romania NBR FX reserves Jan-2016 12:00 7:00 EUR32.2bn

Russia PMI Jan-2016 6:00 1:00 48.7

S. Korea Exports (YoY) Jan-2016 8:00 -14.10% -11.90%

S. Korea Imports (YoY) Jan-2016 8:00 -19.20% -9.80%

S. Korea Trade Balance Jan-2016 8:00 USD7.2bn USD4.2bn

S. Korea Current account balance * Dec-2015 USD9.4bn USD8.4bn

S. Korea Fx Reserves * Jan-2016 USD367.9bn

South Africa PMI Jan-2016 9:00 4:00 45.5

Thailand CPI (YoY) * Jan-2016 -0.90% -0.50% -0.50%

Thailand Core CPI (YoY) * Jan-2016 0.70% 0.60% 0.60%

Turkey PMI Jan-2016 8:00 3:00 52.2

IP (MoM) Dec-2015 11:00 6:00 -2.40% 0.00%

Hong Kong Retail Sales (YoY) Dec-2015 16:30 -7.80% -0.50%

Hong Kong Retail Sales (Volume) (YoY) Dec-2015 16:30 -6.00% -1.50%

Hungary Merchandise trade balance(final) Nov-2015 8:00 3:00 EUR605mn

India RBI Meeting Feb-2016 13:30 6.75% 6.75%

Romania PPI (YoY) Dec-2015 7:00 2:00 -2.60%

S. Korea CPI (YoY) * Jan-2016 1.30% 1.00%

S. Korea Core CPI (YoY) * Jan-2016 2.40% 1.50%

Hungary Retail sales (YoY, sa/wda) Dec-2015 8:00 3:00 4.40%

Kazakhstan CPI (MoM) * Jan-2016 1.20%

Kazakhstan CPI (YoY) * Jan-2016 13.60%

Kazakhstan PPI (YoY) * Jan-2016 -4.80%

Argentina

It is expected a faster pace of increase than the previous prints due to the hike in internal prices after the

readjustment in official exchange rate.

Monday, February 01

National Holiday in Malaysia, and Mexico

Brazil

The seasonal increase in school tuitions and hike in tobacco prices will keep inflation under pressure.

Brazil

The domestic recession and weak brl continue to favor net exports.

Tuesday, February 02

Brazil

We do not expect a recovery after several declines, as domestic demand remains depressed.


Peru

We expect adverse weather shocks and currency depreciation to continue putting upward pressure on

food prices and housing, fuel and electricity tariffs, which are indexed to the US dollar. Inflation will

accelerate its divergence from the official tolerance target range of 1%-3%.

Poland

The declines in the flash manufacturing PMIs in Germany / EuroArea does not bode well for CEE. That

said, even with some drop back the PMIs in Czech Republic and Poland these should remain comfortably

in expansionary territory.


29 January 2016



Economic Releases:


Time

(London)

Time

(NY)

Time


MPC meeting Feb-2016 12:00 7:00 1.50% 1.50%

Romania Retail Sales (YoY) Dec-2015 7:00 2:00 13.00%

Russia Weekly CPI (WE) we-30-Jan-2016 13:00 8:00 0.20%

Thailand BoT Meeting Feb-2016 15:30 1.50% 1.50%

Turkey CPI (MoM) Jan-2016 8:00 3:00 0.20% 1.90%

CPI (YoY) Jan-2016 8:00 3:00 8.80% 9.70%

Turkey PPI (YoY) Jan-2016 8:00 3:00 5.70%

Uruguay CPI (MoM) Jan-2016 17:00 12:00 -0.55%

Uruguay CPI (YoY) Jan-2016 17:00 12:00 9.44%

Colombia PPI (MoM) Jan-2016 19:00 14:00 1.50%

Czech Republic Retail sales (YoY) Dec-2015 8:00 3:00 8.70%

CNB Board meeting Feb-2016 12:00 7:00 0.05% 0.05%

Gross Fixed Investment (YoY) Nov-2015 14:00 9:00 1.00% 0.80%

Overnight rate Feb-2016 19:00 14:00 3.25% 3.25%

Russia CBR FX reserves we-30-Jan-2016 12:00 7:00

Turkey CBT FX reserves we-30-Jan-2016 8:00 3:00

FGV Inflation IGP- DI (MoM) Jan-2016 10:00 5:00 0.44% 1.20%

Brazil IBGE Inflation IPCA (MoM) Jan-2016 11:00 6:00 0.96% 1.10%

IBGE Inflation IPCA (YoY) Jan-2016 11:00 6:00 10.67%

Economic Activity (YoY) Dec-2015 11:30 6:30 1.80% 1.60% 1.40%

Economic Activity Index (YoY) Nov-2015 19:00 14:00 3.30% 3.80%

Colombia CPI (MoM) Jan-2016 0:00 19:00 0.62% 0.91% 0.89%

Colombia

We expect economic activity to accelerate driven by rising manufacturing output after the reopening of

the Cartagena Refinery in November. Finance and commerce will be less supportive of growth due to the

deceleration of credit and private consumption.


Poland

The February meeting will have 5 new MPC members and will be the last meeting for 3 of the remaining

5. With no new inflation data and new NBP forecasts due in March the MPC should be firmly on hold.

Turkey

January is a seasonally high inflation month. 2016 will be no exception with the monthly headline

exceeding its historical average due to higher administered prices, tax and wage hikes and rampant food

prices. While lower pump prices and seasonally lower clothing will exert some downward pressure,

annual headline is set to accelerate due to negative base and reach levels just shy of the double-digit

territory.

Czech Republic

The CNB will have new forecasts this month and will significantly downgrade their inflation profile. With

exit from the fx floor dependent on a sustainable return of inflation to the 2% target we do not rule out

the Board shifting the timeframe out from the current tentative date of end 2016.

Brazil

inflation remained under pressure mainly due to increases in public transportation, food and tobacco.

Chile

We expect the internal activity levels to decelerate further due to the sharp fall seen in copper price

recently.

Thursday, February 04

Mexico

We expect investment to keep decelerating as the imported component of machinery and equipment

loses steam due to a weaker MXN and construction shrinks further.

Brazil

The index will reflect an increase in wholesale agricultural prices, as well as pressure on school tuitions.

Mexico

Given that the next FOMC's decision will take place in March, we see Banxico staying pat and leaving the

policy rate at 3.25% next week. However, this view is heavily dependent on the exchange rate behavior.

We reiterate that if the MXN weakens further (go above 18.50 again), Banxico may strongly consider a

rate hike to support the Peso. This view is reinforced by the recent announcement by the Exchange

Commission about sticking to rules-based interventions mechanisms that are triggered only under

extreme volatility, thus leaving the policy rate as the main tool to deal with extreme volatility in the near

future.

Friday, February 05

National Holiday in Taiwan


29 January 2016



Economic Releases:


Time

(London)

Time

(NY)

Time


CPI (YoY) Jan-2016 0:00 19:00 6.77% 7.05% 7.02%

Hong Kong Fx Reserves * Jan-2016 USD358.8bn

Hungary Industrial production (prelim) (YoY, wda) Dec-2015 8:00 3:00 7.00%

Hungary NBH FX reserves Jan-2016 9:00 4:00 EUR29.95bn

Indonesia Fx Reserves * Jan-2016 USD105.9bn USD106.5bn

Indonesia GDP (YoY) * Q4-2015 4.70% 4.70%

Israel S&P Credit Rating

Malaysia Exports (YoY) Dec-2015 12:00 6.30% 5.00%

Malaysia Imports (YoY) Dec-2015 12:00 9.10% 1.40%

Malaysia Trade Balance Dec-2015 12:00 MYR10.2bn MYR11.5bn

Malaysia Fx Reserves * Jan-2016 USD95.3bn USD96.1bn

Philippines CPI (YoY) Jan-2016 9:00 1.50% 1.30%

Philippines Core CPI (YoY) Jan-2016 9:00 2.10% 2.20%

Philippines Gross International Reserves * Jan-2016 USD80.6bn USD80.4bn

Poland NBP FX reserves Jan-2016 13:00 8:00 EUR81.9bn

NBR rate decision Feb-2016 10:30 5:30 1.75% 1.75%

Russia CPI (MoM) * Jan-2016 0.80%

Russia CPI (YoY) * Jan-2016 12.90%

Singapore Fx Reserves Jan-2016 17:00 USD247.8bn USD247bn

South Africa SARB FX reserves Jan-2016 6:00 1:00 USD45.8bn

Taiwan CPI (YoY) Jan-2016 8:30 0.10% 1.20% 0.70%

Taiwan Core CPI (YoY) Jan-2016 8:30 0.80% 0.90%

Taiwan Fx Reserves Jan-2016 16:20 USD426bn

Thailand FX Reserves Jan-2016 15:30 USD156.5bn USD156bn

Venezuela Venezuela crude oil basket (WE) * we-06-Feb-2016

Egypt CBE FX reserves * Jan-2016 USD16.5bn

Israel BoI FX reserves Jan-2016 9:00 4:00 USD90.6bn

* Data may be released before or after this date** Date of release is listed for the country's regional time zone, ie, NY for Latam, London for EEMEA, Hong Kong for Asia

Colombia

We expect inflation to continue rising on the back of weather-related food supply distortions, the strong

pass-through of currency depreciation to domestic prices and the indexation of electricity tariffs and

wages in January.

Friday, February 05

S&P is likely to keep Israel's sovereign ratings (A+) and outlook (stable) unchanged in light of strong

external balances, resilient growth trajectory, well-developed institutions and contained fiscal risks.

Romania

With the policy rate set to remain unchanged and further reserve requirements cuts not likely just yet the

focus will be on any indications of NBR tolerance for a weaker currency.

Saturday, February 06

No important releases scheduled for Saturday

Sunday, February 07


Kaushik Das, Mumbai, 91 22 71584909 Diana Del-Rosario, Singapore, 65 6423 5261

José Carlos de Faria, São Paulo, (5511) 2113-5185 Caroline Grady. London, 44 20 754 59913 Gautam Kalani, London, 44 20 754 57066

Juliana Lee, Hong Kong, 852 2203 8312 Danelee Masia, Johannesburg, 27(11)775-7267

Alexis Milo, Mexico City, (52) 55 5201 8534 Kubilay M. Öztürk, London, 44 20 754 58774

29 January 2016



Recent Publications

28 Jan 16 South Africa: SARB will have to step up the pace of hikes

27 Jan 16 Mexico: Trade balance

26 Jan 16 Mexico: Retail sales and international reserves

26 Jan 16 Hungary: NBH - door remains open for further unconventional

measures

25 Jan 16 Mexico: Economic activity and unemployment

25 Jan 16 Israel (BoI): Remaining on a wait-and-see mode

24 Jan 16 Newsflash: the HKD peg works

22 Jan 16 Brazil Update Week Ahead

22 Jan 16 Mexico: CPI inflation in January 2016

21 Jan 16 Poland: What's next?

20 Jan 16 South Africa: Inflation has bottomed, significant risks ahead

20 Jan 16 Brazil: BCB is having second thoughts about raising interest

rates?

19 Jan 16 Is the BCB having second thoughts?

19 Jan 16 CBT: Turkey's new black box?

18 Jan 16 A multiplicity of risks - externally and from within

18 Jan 16 South Africa: Cry the Beloved Currency

15 Jan 16 Brazil: Walking a Fine Line

15 Jan 16 EMEA Strategy: A bumpy road ahead

15 Jan 16 Turkey: All eyes on policy implementation

14 Jan 16 EM Monthly EM's Policy Dilemma

14 Jan 16 Poland: NBP uneventful, latest CHF mortgage proposals due on

Friday

14 Jan 16 Turkey (CBT): To nudge, or not nudge

13 Jan 16 Saudi Arabia: The 2016 Budget Announcement

13 Jan 16 Turkey (CBT): Who is guiding whom

11 Jan 16 Mexico: Industrial production and motor vehicles

07 Jan 16 Mexico: CPI inflation December 2015

07 Jan 16 Romania: NBR cuts fx reserve requirements

07 Jan 16 Opening up the RMB bond market

05 Jan 16 EMEA: While you were away

29 Dec 15 Israel (BoI): Aligning staff forecasts with the forward guidance

22 Dec 15 Turkey (CBT): Who is more perplexed? Markets or the CBT?

18 Dec 15 EM Currency Handbook 2016

18 Dec 15 EMEA: While you were away

17 Dec 15 Israel (BoI): Aligning staff forecasts with the forward guidance

16 Dec 15 Turkey (CBT): Who is more perplexed? Markets or the CBT?

18 Dec 15 Important Changes Ahead

17 Dec 15 Oil fields auction results

16 Dec 15 Mexico: Banxico hikes following the Fed

15 Dec 15 Hungary: NBH focusing on further (but not yet specified)

unconventional tools

10 Dec 15 Turkey (Q3 GDP): Headline (inventories) defies expectations

10 Dec 15 South Africa: What now?

09 Dec 15 Mexico: CPI inflation in November

08 Dec 15 South Africa: C/A and growth heading in the wrong direction

07 Dec 15 Hungary: NBH focusing on further (but not yet specified)

unconventional tools

10 Dec 15 Turkey (Q3 GDP): Headline (inventories) defies expectations

10 Dec 15 South Africa: What now?

09 Dec 15 Mexico: CPI inflation in November

08 Dec 15 South Africa: C/A and growth heading in the wrong direction

07 Dec 15 EM FX Relative Value: For better or for worse

07 Dec 15 Thailand 2016 Outlook: Looking for value despite

underperformance

06 Dec 15 China Monthly: Rising challenges will trigger more policy

easing in 2016

06 Dec 15 Hong Kong Monthly: HKD rates to outperform

04 Dec 15 Taiwan Monthly: Staying long USD/TWD into 2016

04 Dec 15 Singapore Monthly: Another challenging year ahead

04 Dec 15 Korea Monthly: Bear steepening amid weak Korean won in

2016

04 Dec 15 Indonesia Monthly: Turning a wide corner

04 Dec 15 India Monthly: Still a relative case

04 Dec 15 Philippines Monthly: Brace for more volatility

04 Dec 15 Malaysia Monthly: Five stabilizers for the MYR

04 Dec 15 Brazil: Political Uncertainty Clouds Economic Outlook

04 Dec 15 EM Debt Raising the Funding Bar

03 Dec 15 EM Sovereign Credit in 2016 - Seeking Alpha amid Diminishing

Returns

03 Dec 15 Israel in 2016: Returning to potential

03 Dec 15 Turkey in 2016: A balancing act

03 Dec 15 Emerging Markets Monthly

03 Dec 15 Mexico: Gross fixed investment

02 Dec 15 Poland: NBP on hold once again

01 Dec 15 Mexico: Banxico survey, remittances, international reserves

and PMI

01 Dec 15 Yuan to the basket

01 Dec 15 RUB: Always darkest before the dawn

30 Nov15 Turning constructive on RUB over the medium term

24 Nov 15 Mexico: CPI inflation in November

24 Nov 15 Turkey (CBT): Not now, yet decision time looms

23 Nov 15 Israel (BoI): Awaiting liftoff, too

19 Nov 15 Mexico: 3Q15 GDP

19 Nov 15 Ukraine: Pricing GDP Warrants, Part III - Discounting with bond

yield curve

19 Nov15 Mexico: FX intervention mechanism is modified

19 Nov 15 South Africa: The SARB's hike - fear of Fed?

17 Nov 15 Macro implications of China's SDR approval

16 Nov15 Israel: Exports rebound in Q3, BoI to stay put

16 Nov 15 Brazil Daily Update Government Mulls Credit Stimulus

13 Nov 15 Ukraine's new bond curve - a first look

13 Nov 15 CEE: Q3 GDP - holding up

10 Nov 15 LatAm FX: Monthly Compendium

09 Nov 15 South Africa: Feedback from offshore marketing

09 Nov15 EM Vulnerability Monitor: Debt Burdens

06 Nov 15 Turkey: No longer in political limbo

06 Nov 15 Israel: BoI introduces forward guidance

06 Nov 15 EM Monthly Stop and Go

06 Nov 15 China Monthly: Q4 outlook encouraging

06 Nov15 Hong Kong Monthly: HKD rates to stay low

06 Nov 15 Singapore Monthly: Higher DVo1 supply next year

06 Nov 15 Korea Monthly: Biased towards pay on dips

06 Nov15 Malaysia Monthly: Maintain modest underweight

06 Nov 15 Taiwan Monthly: Struggling ahead of elections

06 Nov 15 Indonesia Monthly: Keeping the pressure at bay

06 Nov 15 Thailand Monthly: Back to a low beta bahtn

06 Nov 15 India Monthly: We need fresh catalysts

06 Nov15 Romania: NBR on hold but a "difficult" decision due to politics

05 Nov 15 Czech Republic: CNB extends the fx commitment to end 2016

04 Nov 15 Poland: NBP on hold as expected

03 Nov 15 China: President Xi indicates growth target of 6.5% for five year

plan

03 Nov 15 Banxico survey, remittances and PMI

02 Nov15 Repeat elections, yet no repeat results

02 Nov 15 CEE Rates Preview: NBP, NBR and CNB

02 Nov 15 Tactical overweight on Turkey on surprising AKP victory

30 Oct 15 Week ahead: That same Becket play....

30 Oct 15 Russia: central bank keeps rates on hold

29 Oct 15 Mexico: Banxico leaves the policy rate unchanged

30 Oct 15 LatAm Rates:Trading the CDS component in TIIE

30 Oct 15 Relative value snapshot - basis, curve, and Argentina bonds

27 Oct 15 Mexico: Trade balance and international reserves

22 Oct 15 South Africa: Underweight on budget slippage and downgrade

pressure

20 Oct 15 Brazil: Stay underweight

19 Oct 15 Rousseff Says Levy Stays

16 Oct 15 South Africa: Budget Preview - finding the middle ground

16 Oct 15 LatAm Weak Ahead: Measured Complacency

16 Oct 15 Turkey (CBT): Flat tight

14 Oct 15 Asia FX Strategy Notes

14 Oct 15 Growth concerns weigh on the markets again

14 Oct 15 Asia FX Strategy Notes

13 Oct 15 Fight Over Impeachment Raises Uncertainty

12 Oct 15 Turkey: Off the saddle path

12 Oct 15 Asia Macro: Investor Feedback

12 Oct 15 Trade Recommendation EM Credit RV: Curve trades, basis

positions, and switches

12 Oct 15 Mexico: Industrial production in August

11 Oct 15 Notes from the IMF meetings in Lima

11 Oct 15 South Africa: Taking stock of macro forecasts

09 Oct 15 EMEA Strategy - The reprieve that deceives

09 Oct 15 Indonesia Monthly: Positioning pullback

29 January 2016



Appendix 1

Important Disclosures

Additional information available upon request

*Prices are current as of the end of the previous trading session unless otherwise indicated and are sourced from local exchanges via Reuters, Bloomberg and other vendors . Other information is sourced from Deutsche Bank, subject companies, and other sources. For disclosures pertaining to recommendations or estimates made on securities other than the primary subject of this research, please see the most recently published company report or visit our global disclosure look-up page on our website at http://gm.db.com/ger/disclosure/DisclosureDirectory.eqsr

Analyst Certification

The views expressed in this report accurately reflect the personal views of the undersigned lead analyst(s). In addition, the undersigned lead analyst(s) has not and will not receive any compensation for providing a specific recommendation or view in this report. Drausio Giacomelli/Guilherme Marone/Christian Wietoska/Taimur Baig/Jed Evans/Gautam Kalani/Daniel Brehon

(a) Regulatory Disclosures

(b) 1.Important Additional Conflict Disclosures

Aside from within this report, important conflict disclosures can also be found at https://gm.db.com/equities under the "Disclosures Lookup" and "Legal" tabs. Investors are strongly encouraged to review this information before investing.

(c) 2.Short-Term Trade Ideas

Deutsche Bank equity research analysts sometimes have shorter-term trade ideas (known as SOLAR ideas) that are consistent or inconsistent with Deutsche Bank's existing longer term ratings. These trade ideas can be found at the SOLAR link at http://gm.db.com.

29 January 2016



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the risks related to rates movements.

29 January 2016



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29 January 2016



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Copyright © 2016 Deutsche Bank AG

David Folkerts-Landau Chief Economist and Global Head of Research

Raj Hindocha Global Chief Operating Officer

Research

Marcel Cassard Global Head

FICC Research & Global Macro Economics

Steve Pollard Global Head

Equity Research

Michael Spencer Regional Head

Asia Pacific Research

Ralf Hoffmann Regional Head

Deutsche Bank Research, Germany

Andreas Neubauer Regional Head

Equity Research, Germany

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