jul-30-erste group-cee insigts-fixed income and foreign exchange

8/9/2019 JUL-30-ERSTE GROUP-CEE Insigts-Fixed Income and Foreign Exchange

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CEE InsightsFixed Income and Foreign Exchange 30 July 2010

Croatia: T-bill auction attracted solid interest

Czech Republic: CNB to keep rates on hold, newprognosis more dovish

Hungary: Healthy demand at bond auctions afterIMF negotiation breakdown

Poland:Zloty returned to 4.0, on external factors

Romania: Likely cut in FX MMR at next monetarypolicy meeting

Turkey: Inflation Report confirms central banksdovish monetary stance

Ukraine: Approval of IMF loan followed by ratingupgrade


2/16

CEE Insights http://www.erstegroup.com

Erste Group Research - CEE InsightsFixed Income and Foreign Exchange 30 July 2010 Page 2

Market outlook

Sentiment has improved somewhat since last week, with the firming EUR vs. the dollar resulting in strengthening ofCEE currencies by 1.5% w/w for the Czech koruna, Polish zloty and Hungarian forint. The Czech koruna finally

dropped below 25 vs. the euro, making it the best performing currency YTD. However, we do not see anyfundamental reasons for a stronger rate at this moment. Further strengthening could just bring a rate cut back onthe table. The Polish zloty is another story. While the PLN returned back to 4 vs. the euro, we still see space forfurther strengthening to well below 4.0. However, the zloty should remain volatile, especially if the fiscal situation isquestioned (i.e. the sustainability of public debt below 55% of GDP and slippage in fiscal consolidation). CDSnarrowed by 10-30bp across the region w/w. Approval of a new USD 15bn loan program for Ukraine by the IMFboard triggered a rating upgrade of Ukraines sovereign rating by S&P (by one notch). The most watched eventsthis week were auctions of government securities in the region. The most import test was yesterdays auction ofHungarian T-bonds, where we saw solid demand (which is also the case for other countries, excepting Slovakia,which is struggling with low demand in primary auctions). We expect yields to remain elevated in the short run.Only Czech yields remain low, given the recent ambitious statements on fiscal consolidation and the plan to reduceissuance on the local market. On Thursday, the Czech National Bank will decide on rates; we expect no change.The Romanian central bank should keep rates unchanged on Wednesday, but a reduction of minimum reserve

requirements on FX liabilities (from 25% to 20%) is expected, which should inject about EUR 1.5bn in liquidity intothe market. This should have a positive impact on FX and support demand for government securities.

Rainer Singer(Co-Head CEE Macro/FI Research) [email protected] Kotian(Co-Head CEE Macro/FI Research) [email protected]

Juraj Kotian (Co-Head CEE Macro/FI Research)[email protected] Singer (Co-Head CEE Macro/FI Research) [email protected]

current - 1m 02/01/2010

EUR/CZK 24.77 1.5% 3.9% 6.3%

3Y (yield/bp) 2.07 0 0 -19 113 151 63

10Y (yield/bp) 3.82 -2 -29 -9 113 153 52

5Y CDS 94 -2 -9 0

EUR/HRK 7.244 0.0% -0.7% 0.4%

3Y (yield/bp) 5.51 5 25 -116 440 461 457

10Y (yield/bp) 6.55 -3 11 383 389

5Y CDS 274 -28 -55 45

EUR/HUF 284.6 1 .4% 0.9% -5.2%

3Y (yield/bp) 7.01 -26 -12 -29 607 644 567

10Y (yield/bp) 7.24 -16 -49 -68 455 515 453

5Y CDS 327 -20 -12 101

EUR/PLN 4.003 1.6% 4.2% 2.5%

3Y (yield/bp) 4.88 -4 -10 -53 394 430 378

10Y (yield/bp) 5.90 3 -49 -39 321 336 290

5Y CDS 134 -5 -21 8

EUR/RON 4.250 0.4% 2.2% -0.4%

5Y (yield/bp) 7.43 -9 -18 -273 574 615 773

5Y CDS 352 -20 -64 66

3Y (yield/bp) 2.22 0 -1 -87 111 159 147

10Y (yield/bp) 3.98 1 0 -43 127 142 113

5Y CDS 82 -4 -11 2

EUR/TRY 1.97 -0.9% -0.2% 8.9%

2Y (yield/bp) 8.29 7 -46 -77 558 815 773

10Y (yield/bp) 8.97 15 -87 n.a. 639 726 n.a.

5Y CDS 164 -3 -31 -17

EUR/UAH 10.34 -1.9% -4.7% 11.5%

2Y (yield/bp) 13.3 -75 -175 -1175 1244 1448 23675Y CDS 515 -12 -122 -757

Source: Reuters, Bloomberg (+ means strengthening / - means easing of the e xchange rate)

CurrentInstrument

Czech Republic

Spreads vs. Eurolandytdm/mw/w

Slovakia

Ukraine

Croatia

Hungary

Poland

Romania

Turkey


3/16



Entry Target curr. +carry p.a. flat p.a.

short 10CZGB CZ 5.0 10/25/19 PL 5.5 4/11/19 107.8/94.5 110.6 98 99/103.5

long PLGB CZK/PLN 6.26 6.51

long 5YROGB RO 11.0 03/05/14 111.82 116.30short 6M Euribor RON/EUR 4.141 4.05

3M Wibid/ 3M Euribor 3.82/1.13

EUR/PLN 4.174.5% 23% 9.7% 43.8%33 20/5/2010 4.0%short EURPLN 4.009 3.82

33.5%-0.3%

31 08/2/2010

32

24.6%

0,00 32bplong CZ2Y IRS 2Y CZ IRS 2.13 1.62

Today

Target P/L (%)P/L (%)Values# Position Date of opening

11.2%

Instruments

29 18/12/20096.18

-0.2% 0.1%

23.0%111.424.254

-3.0% 1.7% 3.7%

10/3/2010 -2.45 -0.51 -

29) We see the potential for narrowing of the spread between Czech and Polish government bond yields which, inour view, is fundamentally unjustifiably high. Time horizon is 9 months and target P/L including carry is close to 30%.

31) Romanian government yields will continue to decrease in 2010 as the central bank is likely to extend themonetary policy easing cycle, improving the liquidity in the market our forecast for the end-2010 key rate currently

stands at 6%, while further cuts in RON minimum reserve requirements are not excluded.

32) Czech 2Y swap are too low given the expected development of the economy and the associated IRdevelopment (we expect the average CNB repo rate at 2.2% in 2011 and continuing rise in 2012).

33) We believe that, in light of relatively better macro data, the zloty has already started to return to its long-termappreciating trend. We think that current market turmoil provides a good opportunity to enter position long PLN,short EUR.

Positions

Rationale at inception

Closed positions

To be included in the trading ideas mailing list, p lease, mail to

[email protected], s ubject: trading ideas

# Recommendation opened closed P/L inc.carry

1 long: PLGB10y / 4m Euribor 16/09/2005 27/10/2005 -3 .0%2 short: CZGB15y / 6m PRIBID 16/09/2005 21/11/2005 6.0%

5 long: SKK/CZK 09/11/2005 20/01/2006 1.9%

3 short EUR/SKK 29/09/2005 07/02/2006 3.5%

4 EUR/PLN options 21/10/2005 28/07/2006 -2 .7%

6 SKK/CZK long 23/03/2006 30/10/2006 2.2%

7 FRA 9*12 short 28/07/2006 08/11/2006 8bp

8 long HUGB 5y 13/10/2006 29/01/2006 5.7%

9 short CZGB/ long GDBR 09/01/2007 27/02/2007 1.8%

10 long CZK/EUR 27/02/2007 19/03/2007 2.3%

11 short CZGB/ long PLGB 07/03/2007 10/05/2007 5.5%

14 long SKKFRA 9x12, short EURFRA 9 16/07/2007 13/08/2007 30 bp

13 short EUR/CZK 07/06/2007 14/09/2007 3.0%

15 short EUR/RON 23/10/2007 21/11/2007 -4 .9%

12 short EUR/SKK 04/06/2007 04/12/2007 1.6%16 long USD/CZK 29/11/2007 14/01/2008 -3 .1%

17 long 3y HUGB / 3m Pribor 05/12/2007 08/02/2008 -6 .8%

20 short EUR/SKK 22/01/2008 13/02/2008 2.9%

19 long USD/CZK 21/01/2008 18/02/2008 -3 .6%

18 short EURRON 31/12/2008 28/02/2008 -0 .6%

21 Short USD/RON 02/04/2008 10/04/2008 3.9%

22 Buy EU RFRA, sell SKKFRA 04/04/2008 18/04/2008 26bp

23 Long EUR/C ZK 29/04/2008 19/06/2008 -3 .8%

24 short EUR/RON 05/08/2008 14/10/2008 -4 .7%

25 short EUR/PLN 09/09/2008 21/10/2008 -3% (stop-loss)

27 short GEGB/long CZGB 12/08/2009 22/10/2009 4.9%

28 long 4y HUGB / 6m Euribor 08/09/2009 18/11/2009 7.4%

26 short EUR/PLN 12/08/2010 14/01/2010 5.5%

30 Short EURCZK 05/01/2010 17/01/2010 3.2%


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Question of the weekHow big is the gap between the current exchange rate and its fundamental equilibrium level at this point intime? Is the gap somewhat justified?

Currently, the Hungarian forint exchange rate can be said to be at a weaker level than the equilibrium, although itis pretty difficult to say where the equilibrium is exactly. We believe, however, that a balanced current account, and,last but not least, the still considerable interest rate differential would imply a firmer forint vs. the euro than thecurrent 280-285 level. Before the crisis, the equilibrium was believed to be 245-260. We do not think that thisremains the same, as the forint's equilibrium level should be weaker now, i.e. 270-275 vs. the euro. Due to theincreased risks tied to the breakdown of IMF negotiations, the forint could remain above 280 for the next fewweeks. In the autumn, however, we believe it should firm below this level.

Zoltan Arokszallasi, Erste Bank Hungary

We estimate the fundamentally justified value of the Czech crown at around 25 per EUR, so the current value issomewhat stronger than that. This has, however, only been the case since Wednesday and is apparently due towhat we have talked about as a risk for the last six months that the easing of risk aversion, combined with the

good prospects for the Czech economy and the new government, is translating into pressure on the crown to rise.Fundamentally, we see crown at 24.60 by year-end, so this is a bit too early for that. We think that the crown willnot hold the gains over next few weeks, but will revert back to 25 before strengthening again.

Martin Lobotka, Ceska sporitelna

The Romanian leu is currently pretty much balanced compared to its equilibrium level, which is estimated ataround 4.2 per euro. One month ago, it diverged significantly from its equilibrium level and hit an all-time low,trading shortly above 4.4 vs. the euro, after some austerity measures were rejected by the Constitutional Court.Investor sentiment has improved ever since and the current 4.25 against the European single currency is morelinked to economic fundamentals.

Dumitru Dulgheru, Banca Comerciala Romana

In Ukraine, the current exchange rate vs. the USD is about 25% higher compared to our own estimate of the real

effective exchange rate (REER). This REER is based on GDP deflators of main trade partners and should bring thetrade balance to zero. The current stronger exchange rate is justified by the constant capital inflows and positivesentiment among the population.

Maryan Zablotskyy, Erste Bank Ukraine

We estimate that the gap between the current exchange rate of the Turkish lira vs. the EUR and its fundamentalequilibrium level is around 6.5%. Given the expected capital inflows to Turkey, moreover, we do not expect this gapto be justified unless the sentiment regarding Turkey deteriorates.

Ali Cakiroglu, Erste Securities Istanbul

Croatia conducts a tightly managed float and the exchange rate remains close to long-term average levels. As faras the potential overvaluation of the HRK is concerned, the evidence is not that clear, although recent estimatesfrom the IMF suggest only a mild overvaluation (on average 5%).

Alen Kovac, Erste Bank Croatia


5/16



Major markets

The economic recovery could flatten in the months ahead in the Eurozone. German retail salesdeclined by 0.9% m/m in June, compared to a strong increase in May (+3% m/m). Next week,

retail sales for the aggregated Eurozone will be released and we expect similar dynamics. Finaldemand is still not very robust, which should also be reflected in a moderate July inflation ratearound 1.6-1.7%. Due to base effects and the more pronounced price erosion last year, producerprices for June could reach around 3%. Next weeks ECB meeting should bring no majorsurprises. Given the economic and price development, we expect no change in interest rates.

The US 2Q GDP growth declined to +2.4% q/q (annualized), compared to the revised firstquarters +3.7% (market expectations for Q2: +2.6%). This is the very first GDP estimate; thisfigure normally has to be revised. Personal consumption was weaker (+1.6% after +1.9% inQ1), which could be attributed partly to the weak labor market and the uncertainty about jobprospects. The Feds Bernanke said in his testimony that, after two years of job losses, privatepayrolls expanded at an average of about 100,000 per month during the fist half of this year, apace insufficient to reduce the unemployment rate materially. Next week, on Friday, the labor

market report will be published; it can be expected that the change in private payrolls will notexceed 110,000. On Monday, the purchasing manager index ISM should point to a slowdown inthe economic recovery.

Gudrun Egger, Erste Group, [email protected] Singer, Erste Group, [email protected]

Forecasts

EUL USA EUL Fwd USA Fwd EUL USA EUR/USD Fwd

Spot 1.00 0 - 0.25 0.90 0.45 2.67 2.93 1.303

Sep-10 1.00 0 - 0.25 0.90 1.24 0.60 0.72 3.00 3.50 1.30 1.303

Dec-10 1.00 0.50 1.00 1.53 0.80 1.09 3.10 4.00 1.35 1.302

Mar-11 1.00 0.75 1.20 1.70 1.00 1.45 3.20 4.20 1.33 1.302

Jun-11 1.25 1.00 1.50 1.42 1.30 1.08 3.40 4.40 1.30 1.301

Intervention Rate 3m Money Market Rate 10y Govt. Yield FX

Eurozone:Moderate

economicgrowth withoutany change inmonetary policy

2Q GDP slightlyweaker thanmarketexpectations


6/16



Croatia

June trade balance figures largely corresponded to our view, with exports maintaining therobust pace from May, posting 20% y/y growth. Imports remained largely stagnant on the

annual level, falling 2%, although showing some stabilization and suggesting support forstabilization of domestic demand. Correspondingly, the trade balance deficit continued tonarrow in June, dropping 20%, still with a weaker export-import coverage ratio (53.2% vs. therobust 64.1% seen in May). The export side has been boosted by intermediaries, transportationequipment (shipbuilding) and consumer goods. The import side performance has been largelybalanced, with capital goods and transportation equipment remaining the strongest-hitcategories. Recapping the 2Q trade balance, exports showed a robust performance, up 18%(vs. 5% in 1Q), while imports also stabilized, falling 2% (vs. 10% in 1Q). The export-importcoverage ratio improved a substantial 9.6pp in 2Q,suggesting strong net export support forGDP in 2010. In the remainder of 2010, we see exports maintaining their overall solidperformance, albeit likely less robust than in 2Q, given the diminished recovery outlook. We seefurther stabilization on the import side, although not producing a stronger effect on the tradebalance deficit, as we see domestic demand remaining largely constrained.

The June retail trade -1.5% y/y flash estimate surprised on the positive side, outperforming boththe consensus (-3.1% y/y) and our sub-consensus (-4.5% y/y) estimate. This was the lowestcontraction of retail sales in the last 21 months, finally indicating stabilization of consumerspending. Some support to the June figures could have come from the earlier start of salesseason, although detailed data should reveal more. With no labor market recovery underwayand with consumer sentiment and consumer credit remaining poor, we only expect furtherstabilization in the remainder of 2010 and a low likelihood of a spending recovery.

The FX market brought no surprises this week, as the exchange rate remained stable a notchbelow 7.25, exhibiting limited volatility. The main event was the T-bill auction, as, after a two-week break, the MoF returned to the short-term debt market, with auction results failing to bringany significant surprise. Solid demand allowed for slightly higher than initially planned issuance,also covering this weeks maturities. As far as yields are concerned, 3M and 6M rates remainedflat (at 2% and 3.30%, respectively), while 12M yields were down 10bp and 5bp, respectively,on HRK- and EUR-linked papers (4.25% and 3.55%). Despite the recent hefty bond issuanceseen on the domestic market, investor demand remains fairly strong, allowing for relativelycomfortable short-term debt refinancing and suggesting a relatively stable yield performance.Next week should likely see a lethargic summer mood, with no data releases scheduled andmarkets not suggesting any more dramatic developments.

Alen Kovac, Erste Bank Croatia, [email protected]

Czech Republic

No important data was released in the Czech Republic this past week. The most importantevents were thus the strengthening of the koruna (which hit a level not seen since October2008, 24.60) and another fall of Czech government yields. The first of these events did notreally have any driver except for outside players interest in the crown, following the fall of riskaversion and the rise of the EUR against the dollar. The second event is pretty much due to thesame thing. Having originally been triggered by Czech Minister of Finance Minister Kalousekscomments suggesting less local (and more foreign) issuance to come in 2H10, the recentEuropean-wide tightening of spreads is also visible here (the CZ-GB one contracted to 100bp,from around 160bp a month ago). One can also add the Moodys comment on the possibility ofan upgrade of the rating if the new government goes through with fiscal and reform plans. All inall, the Czech 10Y can be had for 3.80%.

Regarding the crown, we do not think it will keep these gains. While we have long expected the

crown to strengthen to around 24.60 by year-end 2010, the current move is too fast and tooearly. The CNB also will not exactly countenance this pace of strengthening. It is not dangerousyet, but if one imagines three such days in a row, a cut would very likely be back on the table.We still expect some nervousness to arise on the market (the data flow is not going to be as

Another solidexport

performance inJune

June retailtrade down1.5% y/y

T-bill auctionattracted solidinterest

CZK andbonds rising,Czech assetsagainoutperformingregion


7/16



good as during 2Q10; we are not over with debt problems in the developed world), which shouldget the crown back to above 25. However, the overall trend remains clear strengtheningtowards 24.60 by year-end, with an average of 24.4 in 2011.

As for bonds, we switched to a neutral stance (from bearish) a couple of weeks ago, as the talkof issuing more abroad and the new government skew the risks toward pricier bonds (despiteheavy financing needs in 2H10). All will depend on the split between local and foreign issuanceand between short-term (T-Bills) and long-term papers. This is hard to predict, given theMinFins vague communication on the issue. If most of the remaining financing needs areplaced here and in long bonds, we believe that bonds will quickly rise back above 4%.

PMI and the repo rate are the most anticipated events next week. PMI for July will be watchedclosely for signs of whether the cooling-off of the global recovery has already become apparentin the Czech economy. The repo rate should not change, remaining at an all-time low of 0.75%.The board will be cautious about the recovery, the fiscal consolidation in the pipeline and therecent strength of the koruna. They will remain in wait-and-see mode, while their new prognosisshould bring lower growth for 2011 and hence a lower IR trajectory. If it proves more dovish, thecrown may suffer and revert back to the fundamentally justified level of 25 per EUR.

Martin Lobotka, [email protected]

Hungary

This week, markets were closely watching the results of the bond auctions on Thursday, as thepossibility of Hungary not being able to finance its debt and deficit via the markets after thebreakdown of negotiations with the IMF became a concern. The good result at the auctionsshould have eased these fears. The Hungarian Debt Management Agency placed HUF 57.5bn(EUR 203mn) to investors, 15% more than originally planned. The forint also gained somestrength, mainly in the first half of the week. Later in the week, however, some weakeningoccurred, but this can be attributed to international events and not domestic news. For thecoming week, we expect both yields and the forint to stay at roughly the same levels as thoseseen today, but volatile trading can be expected.

This week, retail sales and unemployment figures were disclosed. The May retail sales figuredisappointed to the downside with a 4.7% y/y decline, missing the market consensus (-3.7%)and our forecast (-3.4%). The April figure was -5.0%. The seasonally and working day-adjustedmonthly index declined 0.5%, vs. the 0.7% drop a month earlier. The recent figure shows thatthe recovery of household consumption may not pick up as quickly as the upside surprises inthe first few months may have suggested to some observers. Unemployment, however, wasbetter than expected in the April-June period at 11.1%, beating our 11.3% forecast and themore bullish 11.2% market estimate. This improvement, however, is not unusual in these timesof the year. Altogether, the two figures suggest that household consumption may remain in thered this year. We continue to expect a 1.5% yearly decline in households final consumption in2010. Next week, industrial production and trade balance figures are expected to be disclosed.Industry output could remain strong, but we expect the yearly index to have declined to below10% in June (we forecast +8.5%). Consequently, factory orders from Germany are still healthy,but the previous data there missed expectations slightly. As for the trade balance, the Junesurplus could have been EUR 385mn, after the EUR 429mn figure in May. Until the year-end,we expect the surpluses to decline, as import growth may continue to gain strength relative toexports, as the slowly reviving household consumption could create some additional demand forimports for the remainder of 2010.

Zoltan Arokszallasi, Erste Bank Hungary, zoltan.arokszallasi @erstebank.hu

Poland

This has been a calm week in Poland, with no data releases. The most interesting newsconcerned the zloty exchange rate. The improved market sentiment after the results of thestress tests supported the zloty, which returned to values around 4.0. The zloty has not beenthat strong since mid-May. On both ends, the zloty remains driven mostly by external factors,

CNB to keeprates on hold,new prognosismore dovish

Healthydemand atbond auctionsafter IMFnegotiationbreakdown

Industrialproductiongrowth toreturn tosingle-digitterritory, tradebalance maycontinue topost surplus

Zloty returnedto 4.0, onexternalfactors


8/16



with domestic data playing a secondary role. We remain positive on the zloty. With receding riskaversion, investors should recognize the stronger fundamentals of the Polish economy and thezloty should return to its long-term convergence trend. In the short term, however, persistinguncertainties and continued debt worries will likely affect the zloty and therefore episodes ofhigh volatility can still be expected. At the end of this year, we expect the zloty at 3.7. Nextweeks calendar is also empty.

Polands PAP newswire reported an unofficial draft of the four-year financial plan. The FinanceMinistry allegedly proposed cutting the public finance deficit to 3% of GDP in 2013, a year laterthan the government has pledged. Next years deficit should remain roughly at this years level,which is not good news for markets. There is also a risk that rating agencies may releasenegative comments if this plan is confirmed. The zlotys strengthening may be hindered in suchcircumstances.

Lubos Mokras, Ceska sporitelna, [email protected]

Romania

Our base scenario for the next monetary policy meeting on Wednesday is consistent with a flatkey rate at 6.25% and a 5pp cut in FX minimum reserve requirements to 20%. This shouldrelease around EUR 1.5bn into the market and is positive news for the FX market. At the sametime, it opens the door for further issuances of EUR-denominated government securities on thelocal market and enables the MinFin to cover the budget deficit at lower costs. Part of theadditional liquidity could be used by banks to support investment loans for corporate clients withexport activities and also for mortgage loans on the retail side. Exports are currently a key factorthat lessen the extent of the economic decline and private companies in the manufacturing areatook full advantage of high external orders from Eurozone countries. The hike in VAT to 24%beginning with July will translate immediately into the inflation rate and the NBR is determinedto offset the second round effects of this increase in the taxation level on the consumer prices.Around 91% of the goods and services that compose the consumer basket used by the NationalInstitute of Statistics to calculate the monthly inflation rate will see their corresponding VATincreased from 19% to 24%. The balance is represented by goods and services with a reducedVAT quota that remains unchanged. Some retailers have already announced they will supportthe VAT increase instead of passing it on to consumers via higher prices. This is a strategy toacquire more clients in the midst of the contraction of household consumption determined bythe ambitious fiscal consolidation program followed by the government and a still fragilerecovery of the private segment of the economy. The stability of the RON and a goodagricultural harvest could also reduce the inflationary pressures in the next few months.Considering all of these aspects, the NBR should maintain the key rate flat at 6.25% throughoutthe rest of 2010.

At the end of June, the budget deficit (cash standards) stood at RON 18.1bn, or the equivalentof 3.4% of GDP, slightly below the ceiling agreed with the IMF (RON 18.2bn). Public revenueslimited their annual fall to 0.1%, while expenditures increased by 4%. The development isencouraging, as June was the last month before the introduction of important measures aimedto consolidate public finances a 25% cut in public wages, a 15% cut in some socialallowances and a 5pp increase in VAT to 24% beginning with July 1. The flipside of thisperformance is the building up of domestic arrears, which limit the capacity of privatecompanies to start new investment projects and create new jobs. Since the beginning of thestand-by arrangement with the IMF, the government has constantly missed the target ondomestic payment arrears and requested waivers on the occasion of each review of the IMFprogram. According to the stand-by arrangement with the IMF, the stock of domestic arrearshas to be cleared by April 2011. At the general government level, more spending will beallocated in the budget this year to clear health arrears and a restructuring plan is underway tocontain arrears growth in the future. At the local government level, the government plans to useswap agreements to clear mutual debts between local authorities and public enterprises. Theswap arrangement would involve mutually cancelling overdue tax obligations of publicenterprises with arrears owed to those enterprises by the general government. In recentmonths, the authorities have made progress in reducing arrears in VAT refund payments toexporters.

Likely cut in FXMMR at nextmonetarypolicy meeting

1H10 budgetdeficit meetstarget agreedwith IMF


9/16



Talks between the Romanian authorities and the IMF for another review of the stand-byarrangement are currently underway in Bucharest and the Fund expressed its concern aboutthe low rate of EU fund absorption. It will soon begin to work together with the government toimprove the situation. According to the most recent data, the absorption degree of the structuralEuropean funds is around 10%. Unlike the previous review of the stand-by arrangement fromthe end of April, which focused mainly on fiscal consolidation measures, the present talks tacklethe problem of restoring economic growth and increasing the competitiveness of the Romanianeconomy after emerging from the recession. We remain optimistic about a positive outcome ofthe review, which should lead to the disbursement of EUR 0.9bn to the NBR. As a result, theRON should appreciate to 4.23 by September.

This week, the MinFin sold 1Y EUR-denominated T-bills worth EUR 1.2bn on the local market at4.9%. The initial plans of the MinFin were consistent with a total issuance of only EUR 400mn.Investors placed total bids worth EUR 1.4bn. This comes after the recent decisions of the officials toreject bids above 7% at auctions for RON-denominated bonds and bills. As a result, the totalissuance of RON-denominated government paper was significantly lower than the planned amountduring the last three months and this raised some questions about the financing of the budget deficitin the near future. One month ago, the minister of finance said that the Treasury is not desperate tosell debt, because it still has sufficient funds and is determined to fight investors that ask for highyields. We maintain our forecast of 5Y government yields at 7.7% in December.

Eugen Sinca, BCR, [email protected]

Turkey

This weeks major release was the central banks third period Inflation Report. In line with ourexpectations, the bank revised its 2010 inflation forecast significantly downwards, from 8.4% to7.5%. The downward revision for the 2011 inflation forecast was only 0.1pp, which pulled itdown to 5.3%. Moreover, the bank revised its baseline scenario to limited rate hikes in 2011,with policy rates staying at single-digit levels during the forecast horizon (2010-12). Previously,the bank was planning to start a gradual tightening in the last quarter of this year. The InflationReport is pretty much in line with our expectations. The CBT seems determined to keep itspolicy rates at low levels for as long as possible. Moreover, given the (even more) dovishmonetary policy stance of the CBT and our expectation of a sharp slowdown in economicactivity in the remainder of the year, we think that the bank will likely keep the policy rates onhold until mid-2011. We expect cumulative 75-100bp rate hikes in 2011. Note that, below theCBTs 7.5% inflation target, we expect CPI inflation to come in at 7.0% at end-2010.Nevertheless, we remain skeptical regarding the 2011 5.3% forecast, as we believe that theremight be some fiscal loosening ahead of the general elections (to be held in July 2011), whichin turn might deteriorate the inflation outlook. For 2011, we work with an inflation forecast of6.8%.

Capacity utilization in the manufacturing sector came in at 74.7%, posting 1.1pp m/m and 7.3ppy/y increases, respectively. This was much better than both the 73.1% market consensus andour above-consensus estimate of 73.8%. The seasonally and working day-adjusted capacityutilization, however, turned out flat in m/m terms in July (at 72.4%), suggesting that the increasein capacity utilization is mainly driven by the low base of the previous year. The higher thanexpected figure is mainly attributable to the increase in the capacity utilization of capital goodsand to some extent of intermediate goods. The former increased by 1.8pp to 70% and the latterrose by 0.9pp to 78.2%. Going forward, we expect the pace of the recovery in capacityutilization to lose momentum in 2H10, given that the favorable base effect will start to die out,albeit gradually. We see capacity utilization hovering around 75% during the remainder of theyear, which in turn implies weaker IP growth rates.

In line with the previously announced exit strategy, the CBT increased the FX required reserveratio by 0.5 percentage points to 10.0%. The bank also announced that the aforementionedincrease would reduce the market FX liquidity by around USD 720mn. Note that, in its pressrelease of April 14 on monetary policy exit strategies, the CBT stated that they would drawdown the measures related to FX liquidity to pre-crisis levels gradually, once the normalization

MinFinborrows EUR1.2bn fromlocal market in1Y T-bills

InflationReportconfirmscentral banksdovishmonetarystance

Capacityutilizationcame in at highend ofexpectations

CBT increasedreserverequirement

ratio for FXdeposits by 0.5percentagepoints


10/16



in the global markets becomes more pronounced. Therefore, the CBTs move of increasing theFX required reserve ratio should be perceived as compatible with its exit strategy.

The foreign trade deficit came in on the low end of expectations, at USD 5.6bn, in June. Thiswas lower than the USD 5.9bn market consensus and our above-consensus USD 6.3bnestimate. On a YTD basis, the trade deficit jumped to USD 28.5bn, compared to the USD14.6bn registered in the same period of the previous year. We see exports and imports reachingUSD 117.0bn and USD 176.0bn by end-2010, hence bringing the foreign trade deficit figure upto USD 59bn, from USD 38.7bn at end-2009. Moreover, we believe that the widening in theforeign trade deficit will likely result in a sharp increase in the current account deficit. That said,we expect the current account deficit to rise to USD 30.7bn (or 4.3% of the expected GDP) bythe end of 2010, from USD 13.9bn (or 2.3% of the GDP) at end-2009.

The Treasury will disclose the August borrowing strategy today after the market close.According to the preliminary announcement, the Treasury has a total redemption of TRY18.9bn, of which TRY 17.2bn will be to the markets. The heaviest redemption to the markets willbe executed on August 18, with TRY 18.0bn. Although the CBTs dovish monetary policy stancesupports the current levels, we believe that we might witness a relative increase in bond yields.We see benchmark bond yields rising slightly to around 8.45% in August.

Turkstat will disclose Julys CPI and PPI figures on Tuesday at 9:00 CET. The marketconsensus for Julys CPI inflation stands at a negative figure of 0.31% m/m, while our estimatefavors a decline to the tune of 0.2% m/m. We believe that the clothing component will be themain driver of Julys inflation, by recording 6-7% m/m decline, due to seasonal discounts. Otherthan that, we believe that major boosters of the headline inflation will be the education andentertainment and culture components. If our estimation proves correct, annual inflation willcome down to 7.9%, from 8.4% one month ago. Meanwhile, the market consensus for PPI is -0.05%, which, if realized, would bring the annual PPI inflation up to 8.4% in July, from 7.6% inJune.

Ali Cakiroglu, Erste Securities Istanbul, [email protected]

Ukraine

On July 28, the Executive Board of the International Monetary Fund approved a 29-month SDR10bn (USD 15.2bn) Stand-By Arrangement for Ukraine. An initial disbursement equivalent toSDR 1.25bn (USD 1.9bn) is available immediately. With it, the IMF Board has canceled the oldSDR 11bn (USD 17bn) loan program from which Ukraine already withdrew USD 11bn. The nextprogram revision will be conducted in October-November this year. S&P upgraded Ukraine'sforeign currency long-term rating by one notch to B+ following the IMF loan announcement.S&P now has the highest rating for Ukraine among the top three agencies, as Fitch maintainsits B rating and Moody's has had B2 for more than a year now. The IMF-Ukraine program isaimed to ensure fiscal stability, energy sector reforms, strengthening of the financial sector andmodernizing central bank monetary policies. We do not expect Ukraine to experience anydisagreements with the IMF in the near future on executing program targets, as happened in thepast. The government has already shown that it can make some unpopular austerity decisions,like cutting budget expenditures and increasing utility prices. The news is definitely not asurprise, given the initial IMF-staff level agreement. However, the unexpected S&P ratingupgrade should favor a further decline in sovereign yields.

Maryan Zablotskyy, [email protected]

Foreign tradedeficit at lowend ofexpectations inJune

Treasuryborrowingstrategy forAugust due outtoday

Only releasenext week willbe July CPIand PPIinflationfigures

Approval ofIMF loanfollowed byrating upgrade


11/16



CZK Fwd HRK Fwd HUF Fwd PLN Fwd RON Fwd TRY Fwd UAH Fwd

Spot 24.8 7.25 284.4 4.00 4.25 1.97 10.30

Sep-10 25.2 24.8 7.28 7.28 280.0 286.3 3.85 4.01 4.23 4.37 2.00 1.99 10.80 10.43

Dec-10 24.7 24.8 7.30 7.30 270.0 288.9 3.70 4.04 4.22 4.44 2.07 2.02 11.04 10.60

Mar-11 24.6 24.8 7.30 7.30 265.0 291.3 3.60 4.06 4.20 4.50 2.05 2.04 10.64 10.79

Jun-11 24.4 24.8 7.25 7.25 262.0 293.5 3.57 4.08 4.15 4.56 2.02 2.08 10.40 10.95

Exchange Rate vs EUR

CZ HR HU PL RO TR UA CZ Fwd HU Fwd PL Fwd RO Fwd TR Fwd UA

Spot 0.75 6.00 5.25 3.50 6.25 7.00 8.50 1.22 5.32 3.82 6.90 7.5 2.95

Sep-10 0.75 6.00 5.25 3.75 6.25 7.00 8.50 1.15 1.25 5.25 5.73 4.00 3.88 7.60 7.83 7.50 8.42 3.00

Dec-10 1.00 6.00 5.25 4.00 6.25 7.00 8.50 1.25 1.22 5.20 6.03 4.10 4.08 7.80 6.76 7.50 8.98 3.00

Mar-11 1.00 6.00 5.25 4.00 6.00 7.00 8.00 1.25 1.25 5.20 6.20 4.20 4.23 7.50 6.44 7.60 8.73 4.00

Jun-11 1.25 6.00 5.25 4.25 6.00 7.00 8.00 1.33 1.79 5.20 6.25 4.20 4.37 7.30 5.53 7.60 8.68 4.00

3M Money Market RateIntervention Rate

5y Govt. Yield 2y Govt. Yield 2y Govt. Yield

CZ HR HU PL SK RO TR UA

Spot 3.82 6.55 7.22 5.84 3.98 7.46 8.32 12.5

Sep-10 4.25 6.20 7.30 5.60 4.50 7.50 8.60 14.0

Dec-10 4.15 6.10 7.10 5.65 4.80 7.70 9.00 13.0

Mar-11 4.10 6.00 6.70 5.70 4.90 7.40 9.40 12.0

Jun-11 4.00 6.00 6.30 5.70 5.00 7.10 9.60 11.0

10y Govt. Yield

Capital markets forecasts

Long-term forecastsReal GDP growth (%) 2008 2009f 2010f 2011f CPI (%), eoy 2008 2009f 2010f 2011f

Croatia 2.4 -5 .8 -1.5 1.5 Croatia 2 .9 1.9 3.8 3.0

Czech Republ ic 2.3 -4 .0 1.8 1.7 Czech Republic 3 .6 1.0 2.1 2.4

Hungary 0.6 -6 .3 0.9 3.1 Hungary 3 .5 5.6 3.6 3.2

Poland 4.9 1.8 2.5 3.3 Poland 3 .3 3.5 2.4 3.2

Romania 7.3 -7 .1 -3.0 1.2 Romania 6 .3 4.7 8.5 4.3

Serbia 5.4 -3 .0 1.3 3.1 Serbia 8 .6 7.7 4.9 5.3

Slovakia 6.2 -4 .7 3.1 4.0 Slovakia 4 .4 0.5 2.0 4.0

Turkey 0.7 -4 .7 4.8 5.1 Turkey 10.1 6.5 7.0 6.8

Ukraine 2.1 -15.1 3.3 4.5 Ukraine 22.3 13.0 12.5 9.0

CEE8 average 4.1 -3 .7 1.4 2.8 CEE8 average 5 .8 4.2 4.3 3.9

CEE8+Turkey 2.7 -4 .1 2.8 3.8 CEE8+Turkey 7 .5 5.2 5.4 5.1

Unemployment (%) 2008 2009f 2010f 2011f 3M rates (average, %) 2008 2009f 2010f 2011f

Croatia 8.4 9.1 10.7 10.4 Croatia 7 .0 8.9 2.7 4.0

Czech Republ ic 5.4 8.1 9.1 9.2 Czech Republic 4 .0 2.2 1.3 1.5

Hungary 7.8 10.0 10.9 10.0 Hungary 8 .9 8.6 5.4 4.8

Poland 10.0 11.0 12.7 10.8 Poland 6 .3 4.3 4.1 5.1

Romania 5.8 6.9 8.4 8.2 Romania 13.0 11.7 6.9 6.3

Serbia 13.7 16.1 18.5 18.0 Serbia 15.6 14.4 9.0 8.5

Slovakia 9.6 12.1 14.3 13.5 Slovakia 4 .2 1.2 0.8 1.6Turkey 11.0 14.0 13.1 12.7 Turkey 17.4 9.9 7.5 8.3

Ukraine 6.4 8.8 8.6 8.3 Ukraine 14.8 18.0 9.5 7.0

CEE8 average 8.2 9.9 11.2 10.3 CEE8 average 8 .1 7.0 4.5 4.6

CEE8+Turkey 9.3 11.6 12.0 11.3 CEE8+Turkey 11.9 8.2 5.8 6.2

C/A (%GDP) 2008 2009f 2010f 2011f Budget Balance (%GDP) 2008 2009f 2010f 2011f

Croatia -9.2 -5 .4 -3.5 -3.9 Croatia -1.6 -3.1 -4.7 -3.8

Czech Republ ic -3.1 -1 .0 -0.7 -1.3 Czech Republic -2.1 -5.3 -5.3 -3.9

Hungary -7.1 0.2 -0.4 -1.1 Hungary -3.8 -4.0 -4.2 -3.6

Poland -5.0 -1 .6 -3.1 -4.8 Poland -2.2 -6.9 -6.2 -4.8

Romania -11.6 -4 .5 -4.8 -5.5 Romania -5.4 -8.3 -7.8 -6.5

Serbia -18.2 -5 .7 -7.3 -7.7 Serbia -2.5 -4.0 -4.8 -3.5

Slovakia -6.5 -3 .2 -2.3 -2.8 Slovakia -2.3 -6.8 -7.5 -6.0

Turkey -5.7 -2 .3 -4.4 -4.5 Turkey -1.8 -5.5 -4.2 -3.3

Ukraine -6.7 -1 .7 0.0 0.0 Ukraine -1.2 -6.3 -5.5 -4.0

CEE8 average -6.7 -2 .2 -2.5 -3.4 CEE8 average -2.7 -6.2 -6.0 -4.7

CEE8+Turkey -6.3 -2 .2 -3.3 -3.9 CEE8+Turkey -2.3 -5.9 -5.3 -4.1


12/16



Country Date Release/event/figures Our expectation Consensus* Prior

Czech Republic 5-Aug CNB Rate-Setting meeting, % 0.75 0.75

Croatia No data releases scheduled

Hungary 5-Aug Industrial output (June, prelim., y/y) 8.5% n.a. 13.7%

6-Aug Trade balance (June, EUR mn) 385.0 n.a. 423.6

Poland No data releases scheduled

Romania 3-Aug IPPI - June (y/y) 6.20% - 6.50%

4-Aug Retail sale - June (y/y, s.a.) - - -3.40%

4-Aug CB Supervisory Meeting - key rate 6.25 6.25 6.25

Slovakia 4-Aug June retail sales y/y -1.7 - -3 .1

Turkey 3-Aug CPI Inflation, July -0.2% -0.3% -0.6%

3-Aug PPI In flation, July - -0 .1% -0.5%

Ukraine No data releases scheduled

*Sources: Bloomberg, Reuters

Country Auction-date Pay-date Maturity Cupon Offer Forecast

Czech Republic 4-Aug 9-Aug Sep-16-2013 C ZK 7bn CZK 15bn

5-Aug 6-Aug Feb-04-2011 C ZK 8bn CZK 12bn

Hungary 3-Aug 11-Aug 10-Nov-10 HUF 45bn 5.50%

5-Aug 11-Aug 27-Jul-11 HUF 50bn 5.65%

Poland no auction scheduled

Romania 2-Aug 4-Aug-10 3-Aug-11 - RON 800m 7.0%

5-Aug 9-Aug-10 25-Jul-13 6.25% EUR 300m 7.0%

Slovakia no auction scheduled

Turkey no auction scheduled

Ukraine No auction scheduled

Looking ahead

Auction diary


13/16



Source: Bloomberg

Exchange rates and interest rates (52 weeks)

100

120

140

160

180

200

220

240

260

280

300

Jul Aug Sep Oct Dec Jan Feb Mar Apr May Jun Jul

0.0

1.0

2.0

3.0

4.0

5.0

6.0

7.0

8.0

9.0

HUF/EUR

HUF/USD

3m interbank rate, r.s.

Hungary

1.5

2.0

2.5

3.0

3.5

4.0

4.5


3.4

3.5

3.6

3.7

3.8

3.9

4.0

4.1

4.2

4.3

PLN/EUR

PLN/USD


Poland

10

12

14

16

18

20

22

24

26

28


0.00

0.50

1.00

1.50

2.00

2.50

CZK/EUR

CZK/USD


Czech Republic

4.0

4.5

5.0

5.5

6.0

6.5

7.0

7.5

8.0

Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul

HRK/EUR

HRK/USD

Croatia

2.0

2.5

3.0

3.5

4.0

4.5

5.0


0.0

2.0

4.0

6.0

8.0

10.0

12.0

RON/EUR

RON/USD


Romania

4.0

5.0

6.0

7.0

8.0

9.0

10.0

11.0

12.0

13.0

Jul Aug Oct Nov Dec Jan Feb Mar Apr May Jun Jul

0

5

10

15

20

25

30

35

40

UAH/EUR

UAH/USD


Ukraine

1.0

1.2

1.4

1.6

1.8

2.0

2.2

2.4


4.0

4.5

5.0

5.5

6.0

6.5

7.0

7.5

8.0

8.5

9.0

TRY/EUR

TRY/USD


Turkey


14/16



Benchmarks

0

0.5

1

1.5

2

2.5

3

3.5

4

4.5

3m 1yr 3yr 5yr 10yr

0

0.2

0.4

0.6

0.8

1

1.2

Spread to Euroland, r.s. Yields

Czech Republic

0.0

1.0

2.0

3.0

4.0

5.0

6.0

7.0

8.0

3m 1yr 3yr 5yr 10yr

0.0

1.0

2.0

3.0

4.0

5.0

6.0

7.0


Hungary

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

4.5

3m 1yr 3yr 6yr 9yr

0.0

0.2

0.4

0.6

0.8

1.0

1.2

1.4

1.6

1.8

2.0


Slovakia

0.0

1.0

2.0

3.0

4.0

5.0

6.0

7.0

3m 1yr 3yr 5yr 10yr

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

4.5


Poland

0.0

1.0

2.0

3.0

4.0

5.0

6.0

7.0

8.0

9.0

10.0

3m 1yr 2yr 5yr 10yr

0.0

1.0

2.0

3.0

4.0

5.0

6.0

7.0

8.0


Turkey


15/16



ContactsGroup ResearchHead of Group ResearchFriedrich Mostbck, CEFA +43 (0)5 0100 - 11902 Research TurkeyCEE Equity Research Head: Erkin Sahinoz (Fixed Income) +90 212 371 2540

Co-Head: Gnther Artner, CFA +43 (0)5 0100 - 11523 Ali Cakiroglu (Fixed Income) +90 212 371 2536Co-Head: Henning Ekuchen +43 (0)5 0100 - 19634 Sadrettin Bagci (Equity) +90 212 371 2537Gnter Hohberger (Banks) +43 (0)5 0100 - 17354 Can Oztoprak (Equity) +90 212 371 2539Franz Hrl, CFA (Steel, Construction) +43 (0)5 0100 - 18506 Research, SlovakiaGernot Jany, CFA (Banks, Real Estate) +43 (0)5 0100 - 11903 Head: Juraj Barta, CFA (Fixed income) +421 2 4862 4166Daniel Lion, CIIA (IT) +43 (0)5 0100 - 17420 Michal Musak (Fixed income) +421 2 4862 4512Christoph Schultes, CIIA (Insurance, Utility) +43 (0)5 0100 - 16314 Maria Valachyova (Fixed income) +421 2 4862 4185Thomas Unger; CFA (Oil&Gas) +43 (0)5 0100 - 17344 Research, UkraineVera Sutedja, CFA (Telecom) +43 (0)5 0100 - 11905 Head: Victor Stefanyshyn (Fixed Income) +38 044 593 - 1784Vladimira Urbankova, MBA (Pharma) +43 (0)5 0100 - 17343 Svitlana Bazilevich (Equity) +38 044 593 - 9286Gerald Walek, CFA (Machinery) +43 (0)5 0100 - 16360 Maryan Zablotskyy (Fixed income) +38 044 593 - 9188International Equities Fixed Income & Credit Institutional SalesHans Engel (Market strategist) +43 (0)5 0100 - 19835 Group Institutional SalesStephan Lingnau (Europe) +43 (0)5 0100 - 16574 Head: Jaromir Malak +43 (0)50100 - 84254Ronald Stferle (Asia) +43 (0)5 0100 - 11723 Fixed Income & Credit Institutional Sales G7Macro/Fixed Income Research Head: Thomas Almen +43 (0)50100 - 84323Head: Gudrun Egger, CEFA (Euroland) +43 (0)5 0100 - 11909 Institutional Sales AustriaMildred Hager (SW, Japan) +43 (0)5 0100 - 17331 Head: Thomas Almen +43 (0)50100 84323

Alihan Karadagoglu (Corporates) +43 (0)5 0100 - 19633 Martina Fux +43 (0)50100 - 84113Peter Kaufmann (Corporates) +43 (0)5 0100 - 11183 Michael Konczer +43 (0)50100 - 84121Carmen Riefler-Kowarsch (Corporates) +43 (0)5 0100 - 19632 Margit Hraschek +43 (0)50100 - 84117Rainer Singer (US) +43 (0)5 0100 - 11185 Institutional Sales GermanyElena Statelov, CIIA (Corporates) +43 (0)5 0100 - 19641 Head: Ingo Lusch +43 (0)50100 - 84111Macro/Fixed Income Research CEE Michael Schmotz +43 (0)50100 - 84114Co-Head CEE: Juraj Kotian (Macro/FI) +43 (0)5 0100 - 17357 Institutional Sales LondonCo-Head CEE: Rainer Singer (Macro/FI) +43 (0)5 0100 11185 Antony Brown +44 20 7623 - 4159Editor Research CEE Lukas Linsbichler +44 20 7623 - 4159Brett Aarons +420 233 005 904 Simone Pilz +44 20 7263 - 4159Research, Croatia/Serbia Institutional Sales SlovakiaHead: Mladen Dodig +381 11 22 00 866 Head: Peter Kniz +421 2 4862-5624Alen Kovac (Fixed income) +385 62 37 1383 Sarlota Sipulova +421 2 4862-5629Anela Tomic (Fixed income) +385 62 37 2295 Institutional Sales Czech RepublicDavor Spoljar (Equity) +385 62 37 2825 Head: Ondrej Cech +420 2 2499 - 5577Research, Czech Republic Pavel Zdichynec +420 2 2499 - 5590Head: David Navratil (Fixed income) +420 224 995 439 Milan Bartos +420 2 2499 - 5562Petr Bartek (Equity) +420 224 995 227 Radek Chupik +420 2 2499 - 5565Vaclav Kminek (Media) +420 224 995 289 Institutional Sales Croatia, Hungary, Romania

Jana Krajcova (Fixed income) +420 224 995 232 Head: Jaromir Malak +43 (0)501 00 - 84254Radim Kramule (Oil&Gas) +420 224 995 213 Institutional Sales CroatiaMartin Lobotka (Fixed income) +420 224 995 192 Natalija Petljak +385 (0)6237 - 1638Lubos Mokras (Fixed income) +420 224 995 456 Institutional Sales HungaryResearch, Hungary Istvan Kovacs +36 1 235 5846Head: Jzsef Mir (Equity) +361 235-5131 Norbert Siklosi +36 1 235 - 5842Bernadett Papp (Equity) +361 235-5135 Institutional Sales RomaniaGergely Gabler (Equity) +361 253-5133 Ruxandra Carlan +40 21 310-4449-612Zoltan Arokszallasi (Fixed income) +361 373-2830 Ciprian Mitu +43 (0)50100 - 84253Research, Poland International & High End SalesHead: Artur Iwanski (Equity) +48 22 330 6253 Head: Zachary Carvell +43 (0)50100 - 83308Magda Zabieglik (Equity) +48 22 330 6250 Piotr Zagan +43 (0)50100 - 84256Tomasz Kasowicz (Equity) +48 22 330 6251 Ulrich Inhofner +43 (0)50100 - 84324Piotr Lopaciuk (Equity) +48 22 330 6252 Darko Horvatin +43 (0)50100 - 84259Marek Czachor (Equity) +48 22 330 6254 Ciprian Mitu +43 (0)50100 - 84253Bianka Madej (Equity) +48 22 330 6260Research, RomaniaHead: Lucian Claudiu Anghel +40 21 312 6773

Mihai Caruntu (Equity) +40 21 311 27 54Dumitru Dulgheru (Fixed income) +40 21 312 6773 1028Cristian Mladin (Fixed income) +40 21312 6773 1028Eugen Sinca (Fixed income) +40 21312 6773 1028Raluca Ungureanu (Equity) +40 21311 2754

Treasury - Erste Bank ViennaSaving Banks & Sales RetailHead: Thomas Schaufler +43 (0)5 0100 - 84225Equity Retail SalesHead: Kurt Gerhold +43 (0)5 0100 - 84232Fixed Income & Certificate SalesHead: Markus Kaller +43 (0)5 0100 - 84239Treasury Domestic SalesHead: Gottfried Huscava +43 (0)5 0100 - 84142Corporate SalesHead: Christian Skopek +43 (0)5 0100 - 84146


16/16



Published by Erste Group Bank AG, Neutorgasse 17, 1010 Vienna, Austria.

Phone +43 (0)5 0100 - ext.

Erste Group Homepage: www.erstegroup.com On Bloomberg please type: ERBK .

This research report was prepared by E rste Group Bank AG (Erste Group) or its af filiate named herein. The information herein h as been obtai ned from, a nd anyopinions he rein are based upon, source s believed reliable, but we do n ot represent that it is accurate or complete and it should not be relied upon as such. All

opinions, fo recasts an d estimates herei n reflect our j udgement on the date of this report and are subje ct to ch ange without notice. The repor t is not inte nded t o be anoffer, or the solicitation of any offer, to b uy or sell the securities referred to herein. From time to time, E rste Group or its affiliates or the principals or employees ofErste Group or its affiliates may have a position in the securities referred to herein or hold options, warrants or rights with respect thereto or ot her securities of suchissue rs and m ay make a market or otherwise act as principal in transactions in any of t hese securities. Erste Group or its affiliates o r the principa ls or employees o fErste Group or its affiliates may from time to time provide investment banking or consulting services to or serve as a directo r of a company being rep orted on herein.

Further information on t he securities referred to he rein may be obtained from Erste Group u pon request. Past pe rformance is n ot necessarily indicative for futureresults and transactions in secu rities, options or futures can be considered risky. Not all t ransaction are suitable for every investor. Investors should consult theiradvisor, to make sure that the planned investmen t fits into their needs and preferences and that the involved risks are f ully understood. This document may not bereproduced, distributed or published without the prior consent of Erste Grou p. Erste Group Bank AG confirms that it has approved any investm ent a dvertisements

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jul-30-erste group-cee insigts-fixed income and foreign exchange

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