Emerging Markets December 2011
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Emerging Markets December 2011



Emerging markets analysis from Emerging Markets FX at Swedbank.

Emerging markets analysis from Emerging Markets FX at Swedbank.
This publication is forcasting currency developments for selected emerging markets countries with a time horizon of 3 months.



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Emerging Markets December 2011 Emerging Markets December 2011 Document Transcript

  • Emerging markets outlookEmerging markets analysis — 30 December 2011Low growth and high debt – a tricky balancing actWe expect significant volatility on the currency market China is a centrally controlled economy and adjustments toearly next year with unusually large differences in currency economic conditions have worked relatively well in the past.performance between different emerging markets. Weak Furthermore, leverage in the Chinese property market iseconomic development in Europe, with significant budget much lower than in the West. The balancing act for Chineseconstraints and banks shrinking their balance sheets, will hit economic policy, however, is more difficult now as structuralmost East European countries hard. In recent years a number inflation is higher than before. Assuming that China hasof these countries have only grown through exports to the a soft landing, we see continued support for commodityeurozone, which is a growth factor that is now fading. The prices, especially for energy-related commodities. Supplyrecent weakening of currencies has meant that imported is limited in many commodity markets and extraction costsinflation is now increasing in many East European countries, are high. This provides continued support for countries likeforcing interest rate hikes or expectations of hikes in countries Russia. The Russian economy is growing on the back ofwhich are instead in need of economic stimulus. The situation strong domestic consumption. In the long run a membershipis most problematic for Hungary, which is the most indebted of the WTO is very positive for the modernisation of thecountry in the region and has a government that is pursuing a Russian economy. We expect that economic growth in thehighly populist economic policy. ECB’s long-term repos at low US will be slightly below trend growth during 2012 year asrates will ease the financial pressure on banks in the eurozone, a result of an extension of temporary tax cuts and monetarybut lending capacity will be extremely limited in 2012 and policy stimulus measures. For this reason we are positivethis will impact most East European countries hard. However, towards developments in Mexico which is also attractingwe do not share the highly negative view that many have on major foreign investments. Euro zone is in a recession andChina. We expect the Chinese economy to weaken, but do not there are large uncertainties over how things will play out.expect a hard landing. The Chinese property market needs We therefore expect a negative trend for the euro againstto cool down and the oversupply needs to be absorbed, but the US dollar during the first quarter of 2012.Emerging markets outlook Emerging Markets FXIs published four times a year and is forecasting Provides advice, analysis and foreign exchange products tocurrency developments for selected emerging market clients within emerging markets.countries with a time horizon of 3 months. For further information, call +46 8 700 90 20 Analyst: Hans Gustafson +46 8 700 91 47
  • Emerging markets outlookRussia Poland Stronger economic growth Strong growth and large reserves Increased political uncertainty Negative debt trajectory FX forecast 3 months vs euro FX forecast 3 months vs euroGrowth in the Russian economy was healthy in the third Poland’s economy has continued to grow at a good rate. GDPquarter, with GDP growing by 4.8 percent. It is encouraging increased by an annual rate of 4.3 percent in the third quarter.that domestic consumption and investments are now Domestic demand is still the driving force. Growth in the retailcontributing to growth. Retail trade is increasing by around sector has been consistently high. This is due to the significant9 percent. Real wages are increasing and credit growth has rise in wages. Industrial production has gained renewed impetustaken off on the back of historically low interest rates. Russia’s since the summer, growing by almost 9 percent in real termsWTO membership is very positive in the long term and will in November. This high growth and the currency depreciationhelp to reduce the narrow dependence on energy production. have resulted in higher inflation. In November inflation was 4.8The rate of inflation has fallen during the year owing to lower percent, which is well above the central bank’s upper tolerancefood prices. We expect higher inflation in 2012 due to a weaker level of 3.5 percent. The key interest rate was raised by 100RUB, even stronger growth in lending and an expansive fiscal points to 4.5 percent during the year. Underlying inflation andpolicy. However, the central bank recently cut the repo rate inflation expectations are high and we therefore expect at leastto 8 percent, which is more of symbolic value ahead of the one more interest rate increase of 25 points in 2012. The majorforthcoming presidential election. However, during the year problem for Poland is its budget deficit which amount to aroundshort-term interbank rates increased and are now at levels 8 percent of GDP and government debt that is approachinghigher than 6 percent. In the medium term we believe that the the statutory ceiling of 55 percent of GDP. However, unliketurmoil following the parliamentary election in December may many other countries in the region, Poland recently receivedact as a catalyst for an orientation towards a modernization positive comments from Moody’s regarding the possibilities forof the economy. We do not expect any ”Arab spring” in Russia improving budgetary performance.as average incomes are significantly higher in Russia, but thepolitical challenges should not be overlooked.Forecast ForecastThe ruble performed poorly in the autumn in conjunction with The zloty has continued to weaken as financial uncertainty hasuncertainty following the parliamentary election. The losses increased in Europe. Poland is affected by the risk of contagionsuffered by the governing United Russia party is of high via the banking system, large parts of which are foreign-concern for Putin ahead of the presidential election in March, owned. Poland has better economic fundamentals than manyand we consequently expect an even more expansive fiscal neighbouring countries in Eastern Europe, but it is neverthelesspolicy. We are positive on the ruble on the back of high interest highly sensitive to lower exports and restraint in the activitiesrate carry and continued healthy domestic growth. of the banks. Russia Spot Rate EUR/RUB Poland Spot Rate EUR/PLN 44 44 4,6 4,6 43 43 4,5 4,5 4,4 4,4 42 42 4,3 4,3 41 41EUR/RUB EUR/RUB EUR/PLN EUR/PLN 4,2 4,2 40 40 4,1 4,1 39 39 4,0 4,0 38 38 3,9 3,9 37 37 3,8 3,8 feb apr jun aug okt dec feb apr jun aug okt dec feb apr jun aug okt dec feb apr jun aug okt dec 10 11 12 10 11 12 Source: Reuters EcoWin Source: Reuters EcoWinFX/FI research — Swedbank Large Corporates & Institutions Page 2 of 8
  • Emerging markets outlook Emerging markets outlookHungary Czech Republic High interest rate Low general government debt and credible budget policy Lack of credible economic policy Extremely high dependency on exports to Europe FX forecast 3 months vs euro FX forecast 3 months vs euroIn the autumn Hungary’s credit rating was cut to junk status Economic recovery since the 2008 financial crisis has beenby both Standard & Poors and Moody’s. The government modest in the Czech Republic. In real terms the economy hashas turned to the IMF and EU for financial assistance but been stagnant since 2007. The economic prospects appeardiscussions broke off following strong disagreements. bleak, with leading indicators pointing to falling industrialWe believe that economic reality will eventually force the production. PMI has plummeted from a peak of more than 60 atHungarian government to give in and adjust its economic the start of the year to 48.5 at present. Consumer confidencepolicy to the requirements of the IMF and the EU. The question has collapsed entirely to its weakest level since 1999. This isis how messy things will get before this happens. Government not so surprising against the background of weak economicdebt is 75 percent of GDP but the major problem is the high growth, which means that the government needs to make even tougher savings to achieve its target of a budget deficitlevel of external debt. Total external debt amounts to 140 of 3.2 percent for 2012. In addition, wage increases havepercent of GDP. Hungary is consequently extremely sensitive been very low and the retail sector has been weak. Inflationto European banks’ continued shrinking of their balance has risen as a result of the VAT hikes during the year, reachingsheets. Growth prospects appear very bleak as exports, which 2.5 percent in November which is above the central bank’saccount for more than 75 percent of GDP, are now plummeting. target of 2 percent. In 2012, however, we expect no changeThe retail sector has been weak since 2007 and consumer to the key interest rate, which has been at a historical lowconfidence has collapsed during the year. The weakening of level of 0.75 percent since 2010. The Czech economy is highlythe currency has led to higher inflation, forcing the central vulnerable to a recession in Europe since the country’s sharebank to raise the key interest rate by 125 points to 7 percent of exports as a percentage of GDP is among the highest induring 2011. This is despite the very weak economic growth. Europe. Nevertheless, with government debt at less than 40Hungary thus finds itself in a particularly vicious circle. percent of GDP the Czech Republic is one of the financially strongest countries in Europe.Forecast ForecastHungary is the most indebted economy in Europe. With junk While the Czech Republic has low government debt, itsbond credit rating, an unwillingness to make sustainable economy is highly sensitive to a recession in Europe and theadjustments of the economy for the long term and a law that domestic economy is being weakened by budgetary savings.reduces the central bank’s independence, it is difficult to be Market conditions for the forint are negative in the firstanything other than negative towards the development of the quarter of 2012.currency. The high interest rate is the only factor preventing acollapse in the forint. Hungary Spot Rate EUR/HUF Czech Republic, Spot Rate, EUR/CZK 330 330 26,25 26,25 26,00 26,00 320 320 25,75 25,75 310 310 25,50 25,50 25,25 25,25 300 300 EUR/CZK EUR/CZKEUR/HUF EUR/HUF 25,00 25,00 290 290 24,75 24,75 280 280 24,50 24,50 24,25 24,25 270 270 24,00 24,00 260 260 23,75 23,75 feb apr jun aug okt dec feb apr jun aug okt dec feb apr jun aug okt dec feb apr jun aug okt dec 10 11 12 10 11 12 Source: Reuters EcoWin Source: Reuters EcoWinFX/FI research — Swedbank Large Corporates & Institutions Page 3 of 8
  • Emerging markets outlookTurkey South Africa High growth and strong bank sector Strong terms of trade Risk of a hard landing following incorrect calibration of Very high sensitivity to negative risk sentiment monetary policy FX forecast 3 months vs euro FX forecast 3 months vs euroTurkey currently has one of the highest growth rates in the Prior to the financial crisis growth in South Africa was betweenworld. The country also has one of the world’s largest current 5 and 6 percent. At that time growth was being driven byaccount deficits. This is the result of an incorrectly calibrated preparations for the 2010 Football World Cup. Growth overand overly relaxed monetary policy over the past year. The lira the past year has been more modest, at around 3 percent.has fallen by 20 percent against the U.S. dollar and inflation Exports have continued to increase at a fast pace, particularlyhas risen sharply from 4.5 percent at the start of the year to to Asia which has been South Africa’s largest export market9.5 percent in November. The current account deficit is now since 2009. Domestic demand is strong and this is reflectedaround 11 percent of GDP and is largely financed by short- in significant import growth and car sales. Imports rose by 48term portfolio inflows. The central bank has recently tried percent in November compared with the same period in 2010.to slow the significant deprecitaion of the currency through Retail sales have been high over the past year, increasing byinterventions. During the year the key interest rate has been 7.5 percent. The deficit in the current account has increasedcut to 5.75 percent, while the overnight rate has been raised from -1.5 percent of GDP in 2010 to -3.8 percent in the thirdto 12.5 percent. This has created significant uncertainty over quarter in line with the decline in the trade balance. Inflationmonetary policy, which has weakened the currency. We expect has risen to 6.2 percent from 3.4 percent at the end of 2010that the central bank will soon be forced to adopt a more and is expected to increase slightly more as a result of therestrictive monetary policy with regular policy rate hikes. The depreciation of the rand in the autumn. During 2010 thelira now has a low valuation measured by the real effective central bank kept the policy rate unchanged at a record lowexchange rate and the nominal effective exchange rate with level of 5.5 percent. We do not expect any change in the policythe USD is at a record low. Turkey is one of the countries with rate any time soon, but there is a risk of a hike in the firstthe best conditions for growth in the medium to long term. In quarter if the domestic economy does not cool down.the short term, however, the risk of a hard landing is high.Forecast ForecastTurkey currently finds itself in a sensitive position due to the The rand has recovered relatively well compared with manysize of its large current account deficit and the uncertainty other emerging market currencies since its collapse insurrounding monetary policy. We expect a smooth adjustment September. We are neutral towards the rand at this point sinceof the deficit, but the risk of a turbulent development is not we expect stable commodity prices and moderate growth. Theinsignificant. We are therefore currently neutral on the lira. rand is sensitive to the downside if commodity prices fall and if global risk sentiment weakens. Turkey, Spot Rate, EUR/TRY South Africa, Spot Rate, EUR/ZAR 2,6 2,6 11,5 11,5 2,5 2,5 11,0 11,0 2,4 2,4 10,5 10,5 2,3 2,3EUR/TRY EUR/TRY EUR/ZAR EUR/ZAR 2,2 2,2 10,0 10,0 2,1 2,1 9,5 9,5 2,0 2,0 9,0 9,0 1,9 1,9 1,8 1,8 8,5 8,5 feb apr jun aug okt dec feb apr jun aug okt dec feb apr jun aug okt dec feb apr jun aug okt dec 10 11 12 10 11 12 Source: Reuters EcoWin Source: Reuters EcoWinFX/FI research — Swedbank Large Corporates & Institutions Page 4 of 8
  • Emerging markets outlookMexico Brazil Competitive manufacturing industry Strong domestic consumption High sensitivity to a slowdown in the US High currency valuation and negative leading indicators FX forecast 3 months vs euro FX forecast 3 months vs euroMexico has good possibilities of withstanding a recession in Brazil’s growth has slowed considerably. GDP increased byEurope. The economy is growing at a rate of 4.5 percent and only 2.2 percent in the third quarter, compared with 7 percentgrowth looks like continuing on the back of relatively strong in the same period in 2010. PMI has been under 50 since Junegrowth in the US. Automotive production is growing strongly and industrial production, at annual rates, has been decliningand statistics from November show a production rate of since September. Retail growth has fallen from a peak of 12approximately 2.5 million vehicles, at annual rates, compared percent in 2010 to 5 percent in October and car sales havewith the previous peak of 2.1 million vehicles in 2008. slowed. Wages increased by 7 percent in November, whichMexico has in recent years become much more attractive to is down significantly from the 12.5 percent increase at theforeign auto-makers, who are drawn by the cheap currency, start of the year. Unemployment, however, is at its lowest in modern times, which may explain why consumer confidencerelatively low wages and low transport costs. This positive is relatively high. The central bank raised the policy rate fromdevelopment appears to be continuing. Nissan has stated that 8.75 to 12.5 percent in July this year. Surprisingly they startedit will be investing USD 2 billion in a new production plant to lower the policy rate in September, despite inflation bythat will produce 600,000 vehicles a year. This will enable that time didn’t show any clear sign of slowing. Inflation thenNissan to produce 1.3 million cars in Mexico compared with peaked in August at 6.8 percent and has since fallen to 5.7the 1 million it currently produces in Japan. The domestic percent in November 2011. Expectations on inflation are noweconomy is maintaining good momentum, driven by increased falling rapidly and growth in lending is declining. We expectconsumer credit. Inflation is at 3.5 percent but surveys of further reductions in the interest rate from the current 11inflation expectations point to lower inflation in future. We percent to 9.5 percent in 2012.consequently expect the central bank to keep the policy rateat 4.5 percent in the first quarter of 2012.Forecast ForecastThe Mexican peso is very competitive at its current levels The real continued to weaken in the autumn as a result of theand should be able to appreciate in value given that the US weaker economy and uncertainty about the Chinese economy,economy is maintaining its momentum. Future investments in which is now one of Brazil’s key markets. We expect continuedauto production and a high interest rate differential are also weak growth and interest rate cuts and we are thereforepositive factors for the peso. neutral on the real. Mexico, Spot Rate, EUR/MXN Brazil, Spot Rate, EUR/BRL 19,0 19,0 2,60 2,60 18,5 18,5 2,55 2,55 2,50 2,50 18,0 18,0 2,45 2,45 17,5 17,5 2,40 2,40 EUR/BRL EUR/BRLEUR/MXN EUR/MXN 17,0 17,0 2,35 2,35 16,5 16,5 2,30 2,30 16,0 16,0 2,25 2,25 15,5 15,5 2,20 2,20 15,0 15,0 2,15 2,15 feb apr jun aug okt dec feb apr jun aug okt dec feb apr jun aug okt dec feb apr jun aug okt dec 10 11 12 10 11 12 Source: Reuters EcoWin Source: Reuters EcoWinFX/FI research — Swedbank Large Corporates & Institutions Page 5 of 8
  • Emerging markets outlookIndia China Large domestic market and high carry Strong domestic consumption High inflation and negative leading indicators Lower export growth FX forecast 3 months vs euro FX forecast 3 months vs euroGDP grew by 6.9 percent in the third quarter, which is the The Chinese economy is headed for a slowdown following thelowest rate of increase since the start of 2009. This decline tighter monetary policy introduced at the start of 2010. PMIhas primarily taken place in the industrial sector. Industrial is below the 50 point mark and exports have lost momentum.production has been unchanged over the past 12 months We expect that growth will slow to about 8.5 percent inand leading indicators point to a continued slowdown within 2012. Domestic demand, however, is healthy and is leadingindustry. The decline in the service sector, however, was lower to continued high import growth. Retail trade is growing byand the farming sector has strengthened slightly. Inflation around 17 percent, wages are increasing by almost 20 percenthas come down from levels above 15 percent in 2010 but has and service sector PMI is showing continued good momentum.stabilised at relatively high levels of just under 10 percent. The overheated property market has already started to coolThe central bank has signalled a pause after raising the policy down, according to opinion polls, and we expect a well-orderedrate by 225 points this year and 375 points since the low adjustment as traditionally happens in China. Nevertheless,point in 2009. The significant depreciation of the currency risks are now higher than at previous times of overheatingduring 2011, in combination with high food prices, means periods as the unregulated non-bank credit system hasthat we cannot rule out further interest rate hikes next year. grown in size. Inflation has peaked but will be higher than weThe considerable tightening of monetary policy has had a are used to owing to demographic development leading to asignificant dampening effect on monetary growth, which is tighter labour market. The central bank has started easing itsnow almost unchanged from the year earlier period. The high monetary policy by cutting reserve requirements for somerate of inflation has eroded purchasing power and, together banks. If the economy were to undergo more significantwith substantially higher interest rates, has weighed on the weakening, we would expect the government to introducedomestic economy. This is reflected in such indicators as car strong stimulus measures for infrastructure investments.sales, which performed very poorly in 2011.Forecast ForecastThe Indian rupee is a currency that has a very strong We are not among those who expect a hard landing for China ascorrelation with global risk sentiment. We do not expect a it is a centrally controlled economy. Nevertheless, we believestable investment climate in 2012 and believe that the rupee that the risks are unusually high in view of global weaknesses and structurally high inflation in China. We expect the CNY towill swing up and down with the changes in the risk sentiment. strengthen at an annual rate of 4-5 percent against the USD, which will also result in a strengthening against the euro in the first quarter of 2012. India, Spot Rate, EUR/INR China, Spot Rate, EUR/CNY 72,5 72,5 9,75 9,75 70,0 70,0 9,50 9,50 9,25 9,25 67,5 67,5 9,00 9,00 65,0 65,0 EUR/CNY EUR/CNYEUR/INR EUR/INR 8,75 8,75 62,5 62,5 8,50 8,50 60,0 60,0 8,25 8,25 57,5 57,5 8,00 8,00 55,0 55,0 7,75 7,75 feb apr jun aug okt dec feb apr jun aug okt dec feb apr jun aug okt dec feb apr jun aug okt dec 10 11 12 10 11 12 Source: Reuters EcoWin Source: Reuters EcoWinFX/FI research — Swedbank Large Corporates & Institutions Page 6 of 8
  • Emerging markets outlookContact informationSwedbank Large Corporates & InstitutionsRegeringsgatan 13105 34 StockholmFixed income and foreign Research Salesexchange Credit CreditSVP Ingvar Matsson Tel: 46 8 700 93 49 Fredrik Boklund Tel: 46 8 700 99 17Tomas Hedberg Tel: 46 8 700 99 75 e-mail: ingvar.matsson@swedbank.se e-mail: fredrik.boklund@swedbank.see-mail: tomas.hedberg@swedbank.se Robert Matulin Tel: 46 8 700 97 99 Origination e-mail: andreas.zsiga@swedbank.se Andreas Torp Tel: 46 8 700 99 53 e-mail: andreas.torp@swedbank.seGlobal Institutional Sales Mats Ericsson Tel: 46 8 700 91 61 e-mail: mats.ericsson@swedbank.se Fixed IncomeVP Claes Göthman Tel: 46 8 700 99 78Charlotte Aleblad Tel: 46 8 5859 7715 Macro e-mail: claes.gothman@swedbank.see-mail: charlotte.aleblad@swedbank.se Knut Hallberg Tel: 46 8 700 93 17 e-mail: knut.hallberg@swedbank.se Emerging markets Martin Söderlund Tel: 46 8 700 90 20 Per Selldén Tel: 46 8 700 99 01Research Macro, FI & FX e-mail: martin.soderlund@swedbank.se e-mail: per.sellden@swedbank.seVP FXCecilia Skingsley Tel: 46 8 700 99 76 Anders Eklöf Tel: 46 8 700 91 38e-mail: cecilia.skingsley@swedbank.se e-mail: anders.eklof@swedbank.se Emerging marketsResearch Credit Hans Gustafson Tel: 46 8 700 9147VP e-mail: hans.gustafson@swedbank.seAndreas Zsiga Tel: 46 8 700 92 11 Fixed incomee-mail: andreas.zsiga@swedbank.se Martin Tallroth Tel: 46 8 58 59 00 00 e-mail: martin.tallroth@swedbank.sePictures from Stock.XCHNG, sxc.hu and Getty Images.This research report has been compiled by Swedbank Large Corporations & Institutions, a division of Swedbank AB (publ). The document is not advisory and ismerely intended to serve as information to a limited amount of qualified investors. The information in this document has been compiled from sources believed to bereliable. We accept however no responsibility for correctness or completeness. It is recommended that recipients of this document supplement the basis for theirdecision-making with any material that might be considered necessary. Opinions and recommendations contained in this document represent our present opinionsbut may change. Swedbank Large Corporations & Institutions accepts no liability whatsoever for any direct or consequential loss or injury of any kind arising fromthe use of this document. Recipients should be aware that Swedbank AB and its subsidiaries from time to time may have positions or holdings in securities of suchcompanies or issuers directly or indirectly referred to herein or may be providing or seeking to provide corporate finance and dept capital markets services to suchcompanies or issuers. This document must not be published or distributed in the United States or to other countries or persons to which publication or distribution isprohibited. The material may not be reproduced without the consent of Swedbank Market. Reproduced by Swedbank Large Corporations & Institutions, SwedbankAB (publ), Stockholm 2009.FX/FI research — Swedbank Large Corporates & Institutions Page 7 of 8
  • Emerging markets outlookInformation to the customerAnalyst’s certificationThe analyst(s) responsible for the content of this report hereby confirm that notwithstanding the existence of any such potential conflicts ofinterest referred to herein, the views expressed in this report accurately reflect their personal views about the market covered. The analyst(s)further confirm not to have been, nor are or will be, receiving direct or indirect compensation in exchange for expressing any of the views or thespecific recommendation contained in the report.Issuer, distribution & recipientsThis report by Swedbank Large Corporates & Institutions FX Fixed Income Research, is issued by the Swedbank Large Corporates & Institutionsbusiness area within Swedbank AB (publ) (“Swedbank”).Swedbank is under the supervision of the Swedish Financial Supervisory Authority (Finansinspektionen) and other financial supervisory bodieswhere Swedbank and Large Corporates & Institutions have branches.This report is distributed by Swedbank’s branches. In no instance is this report altered by the distributor before distribution.In Estonia this report is distributed by Swedbank AS, which is under the supervision of the Estonian Financial Supervisory Authority(Finantsinspektsioon).In Lithuania this report is distributed by “Swedbank” AB, which is under the supervision of the Central Bank of the Republic of Lithuania (LietuvosRespublikos centrinis bankas).In Latvia this report is distributed by Swedbank AS, which is under the supervision of The Financial and Capital Market Commission (Finanšu unkapitāla tirgus komisija).Limitation of liabilityAll information, including statements of fact, contained in this research report has been obtained and compiled in good faith from sources believedto be reliable. However, no representation or warranty, express or implied, is made by Swedbank with respect to the completeness or accuracyof its contents, and it is not to be relied upon as authoritative and should not be taken in substitution for the exercise of reasoned, independentjudgment by you.Be aware that investments in capital markets - such as in this document - carry economic risks and that statements regarding future assessmentsare comprehended with uncertainty. You are responsible for such risks alone and we recommend that you supplement your decision-making withthat material which is assessed to be necessary, including (but not limited to) knowledge of the financial instruments in question and the prevailingrequirements as regards trading in financial instruments.Opinions contained in the report represent the analyst’s present opinion only and may be subject to change. In the event that the analyst’s opinionshould change or a new analyst with a different opinion becomes responsible for our coverage of the market covered, we shall endeavour (but donot undertake) to disseminate any such change, within the constraints of any regulations, applicable laws, internal procedures within Swedbank,or other circumstancesThis research report is produced for general distribution to eligible recipients and Swedbank is not advising nor soliciting any action based upon it.If you are not a client of ours, you are not entitled to this research report. This report is not, and should not be construed as, an offer to sell or as asolicitation of an offer to buy any securities.To the extent permitted by applicable law, no liability whatsoever is accepted by Swedbank for any direct or consequential loss arising from theuse of this report.Conflict of interestIn Swedbank Large Corporates & Institutions, internal guidelines are implemented in order to ensure the integrity and independence of the researchanalysts.The guidelines include rules regarding, but not limited to: contacts with the companies covered; personal involvement in the companies covered;participation in investment banking activities and supervision and review of research reports. For example:• The Research department is separated from the rest of Swedbank’s activities by a Chinese wall.• Research reports are independent and based solely on publicly available information.• The remuneration of staff within the Research department may include discretionary awards based on the firm’s total earnings, including investment banking income. However, no such staff shall receive remuneration based upon specific investment banking transactions.• Swedbank AB shall not receive compensation from the company being analysed for making an investment recommendation or enter into an agreement with the said company to make an investment recommendation.Company-specific disclosures & potential conflicts of interestYou should note that it may happen that Swedbank, its directors, its employees or its subsidiary companies at various times have had, or havesought, positions; advisory assignments in connection with corporate finance transactions; investment or merchant banking assignments and/orlending as regards companies and/or financial instruments covered by this report.It may also occur that Swedbank Large Corporates & Institutions may act as a sponsor in trading with financial instruments covered by this report.Reproduction & disseminationThis material may not be reproduced without permission from Swedbank Large Corporates & Institutions. The report may not be disseminatedto physical or legal persons who are citizens of, or have domicile in, a country in which dissemination is not permitted according to applicablelegislation or other decisions.Reproduced by Swedbank Large Corporates & Institutions, Stockholm 2011.AddressSwedbank LC&I, Swedbank AB (publ), SE-105 34 Stockholm.Visiting address: Regeringsgatan 13, Stockholm.FX/FI research — Swedbank Large Corporates & Institutions Page 8 of 8