2011-06-03 Erste CEE FI & FX Insights

8/6/2019 2011-06-03 Erste CEE FI & FX Insights

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CEE InsightsFixed Income and Foreign Exchange 3 June 2011 Spot prices as of 03 June 2011

Croatia: Strong performance in April

Czech Republic : Final 1Q11 GDP closely watched

Hungary : Hungarian forint strengthens, despiteshaky global sentiment

Poland: Central banks rate-setting meeting willbe focus of next week

Romania: April retail sales disappoint

Turkey: Food inflation surprises on the upside

Ukraine: Ukraine may see governmental changes


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CEE Insights http://www.erstegroup.com

Erste Group Research - CEE Insights Fixed Income and Foreign Exchange 3 June 2011 Page 2

Market outlookThe coming week will be rich in data - May inflation, April industrial output and the final GDP data for 1Q (includingthe breakdown) will be in focus across the region. Poland already published its GDP structure this week.

Consumption was again the main contributor (2.9pp) to overall GDP growth (4.4%) in 1Q, which is in line with thetightening policy (75bp so far this year). It is very likely that the NBP will deliver another 25bp rate hike next weekand pause afterwards for the remainder of the year. The GDP structure for other CEE countries could bring moreevidence of a reversal of investment growth, which should positively contribute to GDP growth in all countries apartfrom Croatia, where the economy has still been struggling. However, April retail sales and industrial output databrought a little more optimism that the country could emerge from recession in 2Q. Industrial output data, due nextweek for Hungary, the Czech Republic, Romania and Slovakia, should reveal whether the March deceleration wasa one-off or the start of a new trend. It will be very important to monitor inflation data, which is going to increasefurther - up about 0.2pp on average. Next week, the Romanian MinFin will start a roadshow on for the issue of euromedium-term notes (EMTNs) worth EUR 500mn to EUR 1.5bn, with a maturity of five years. If successfully placed,these could trigger a temporary boost for the RON.

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

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

current - 1m 02/01/2011EUR/CZK 24.46 0.4% -1.2% 2.4%3Y (yield/bp) 2.19 -6 0 -5 38 38 12010Y (yield/bp) 3.78 -6 -29 -12 77 77 945Y CDS 76 0 0 -13EUR/HRK 7.451 -0.1% -0.9% -0.9%2Y (yield/bp) 3.67 6 -20 2 205 208 43810Y (yield/bp) 6.01 0 -12 -1 309 295 3525Y CDS 267 2 19 9EUR/HUF 265.3 0.9% 0.2% 4.8%3Y (yield/bp) 6.62 -3 11 -110 481 435 66810Y (yield/bp) 7.20 -3 14 -75 419 376 4995Y CDS 261 -2 23 -122EUR/PLN 3.958 0.4% 0.1% -0.1%3Y (yield/bp) 5.16 -7 -11 6 334 311 40510Y (yield/bp) 6.02 -7 -8 -3 301 281 3095Y CDS 145 -3 -2 3EUR/RON 4.133 -0.1% -0.5% 3.6%5Y (yield/bp) 7.43 -1 -4 22 513 478 5385Y CDS 235 2 12 -573Y (yield/bp) 2.98 0 -15 37 115 107 1579Y (yield/bp) 4.48 1 -16 26 147 139 1325Y CDS 82 -1 1 0EUR/TRY 2.30 -0.2% -1.8% -10.3%2Y (yield/bp) 8.80 -17 28 172 582 661 62210Y (yield/bp) 9.52 -4 10 n.a. 622 612 n.a.5Y CDS 167 -1 17 26

EUR/UAH 11.58 -1.4% 0.3% -7.9%2Y (yield/bp) 9.4 40 20 -260 775 732 1114

5Y CDS 450 -16 23 -63Source: Reuters, Bloomberg (+ means strengthening / - m eans easing of the exchange rate)

Slovakia

Ukraine

Croatia

Hungary

Poland

Romania

Turkey

Spreads vs. Eurolandytdm/mw/wCurrentInstrument

Czech Republic


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No trading idea at the moment.

Positions

Rationale at inception

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Closed positions# Recommendation opened closed P/L inc.carry1 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 8bp8 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 bp13 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 EURFRA, sell SKKFRA 04/04/2008 18/04/2008 26bp23 Long EUR/CZK 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%33 Short EURPLN 20/05/2010 18/08/2010 6.0%

31 Long 5yr ROGB 08/02/2010 18/08/2010 2.4%

32 Long 2yr CZ Swap 10/03/2010 10/09/2010 -0.5%

29 short 10CZGB/long 10PLGB 19/12/2009 19/10/2010 0.6%34 short Euribor6M/long 3YROGB 10/02/2011 09/05/2011 5.1%


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Question of the weekHow much are investment dynamics going to change this year and why?

In Romania , after falling by 2.9% y/y in 1Q11, investments should enter positive territory later this year, due to thestart of some ambitious infrastructure projects and the development of new production facilities in manufacturing.We forecast the full-year growth at about 3-4%.

Eugen Sinca, Banca Comerciala Romana

In Turkey , investment growth (30% y/y) was the main driver of GDP growth in 2010, contributing 6pp to 8.9% GDPgrowth. Though it seems likely to keep growing in the first quarter of 2011, leading indicators such as capacityutilization and machinery and equipment production point to a slowdown for the remainder of the year. This wouldnot be in the form of a contraction, but we expect a cut of the investment pace to low double-digit growth in 2011,partly due to base effects and partly due to the expected cooling off in the economy.

Ozlem Derici, Erste Securities Istanbul

After a decline of 30% in 2009, investments in Slovakia grew by 13% in 2010 and we expect them to increasefurther, by around 8%, this year. Fixed investments should be supported by new investments in the automotive andelectronics industries. While a higher accumulation of stock contributed more to the GDP growth in 2010 than fixedinvestments, we expect fixed investments to be the somewhat more dominant driver in 2011.

Maria Valachyova, Slovenska sporitelna

Having fallen in 2008 (-1.5%), 2009 (-7.9%) and 2010 (-4.6%), fixed investment in the Czech Republic will reversethe trend and we expect it to rise at around 3-4% this year. The reasons for this include rising capacity utilization,relaxed financing conditions and pent-up investments (some replacement investments need to be done, as theycannot be postponed indefinitely).

Martin Lobotka, Ceska sporitelna

After the decrease of fixed capital formation in Hungary in 2010 by 5.4%, we expect a small, 2% increase thisyear. 1Q11 investment statistics clearly reflect the duality in the Hungarian economy. While manufacturinginvestments (tied mainly to export related industry) expanded 38% y/y, investments that can mainly be tied to thedomestic economy performed poorly. While, in the coming 1-2 years, investments in manufacturing may remainelevated, due to the announced investments by car manufacturers, construction may remain sluggish, although avery slight revival may also come in this branch this year.

Zoltan Arokszallasi, Erste Bank Hungary

In Ukraine , real investment may rise by around 10% y/y in 2011 (in 2010, it rose 5%). The main reason ispreparation for the EURO 2012 football championship, with investments worth 12% of GDP, half of which is to bespent in 2011. Also, business confidence and the ease of getting a loan continue to improve.

Maryan Zablotskyy, Erste Bank Ukraine

The data released this week suggest that, last year, fixed investment in Poland contracted 1.0% y/y, compared tothe originally released -3.0%. Based on revised data, a quick recalculation suggests that, this year, fixedinvestment growth should accelerate to about 4.5%. This has been indicated by the gradually increasing capacityutilization (which, though improved, has still not returned to pre-crisis levels). Non-negligible support in 2011 willalso come from the public sector, which will continue investing in projects co-financed by EU funds. We expectfixed investment to provide the second most important (after household consumption) support to growth this year.

Jana Krajcova, Ceska sporitelna

Investment momentum remains weak in Croatia , given the still troubled construction activity performance and theprivate sector being reluctant to enter a new investment cycle, given the still very fragile economic outlook. Somestabilization is expected in the coming quarters through the base effect and end to the sentiment deterioration, butwe expect another negative figure on the FY11 level (-1.9% y/y).

Alen Kovac, Erste Bank Croatia


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Major marketsThis weeks data set the toneAfter the important data released this week, next weeks issuance calendar is rather thin. This weeks disappointinglabor market data, together with the ISM index, which decreased from 60.4 to 53.5, and another high number forthe initial jobless data, cast doubts on the recovery of the US economy. Economic sentiment is unlikely to recovernext week. Thursday will bring the usual initial jobless claims. Initial jobless claims increased strongly in April, andcame down again in May, though not reaching previous low levels. Even if the upcoming number should show animprovement, the markets will remain skeptical, after the slew of disappointing data during recent weeks. Alsoscheduled for next week are the Feds Beige Book on Wednesday and the trade balance on Thursday. Neither islikely to have any market impact.

Following along with the decrease of oil prices (in euro), German and, to a lesser extent, eurozone inflation ratesdecreased in May. Furthermore, even though the German unemployment rate decreased slightly further, theeurozone rate remained stable, at 9.9%, in contrast to our expectations. Both of these facts taken togetherdecrease the likelihood of a July rate hike at the forthcoming meeting of the ECB. After the very strong 1Q GDPfigures, the components of which we will get next Wednesday, we expect a slowdown in growth rates in the secondquarter. This could already be reflected in next weeks release of industrial production figures for France andGermany, in accordance with sentiment decreases visible in the PMIs. The ECB will also release new staffprojections, which should give further hints for the medium-term rate outlook. Finally, we expect the bank toannounce a continuation of the very generous liquidity provision of up to three months. Besides the macro data, themarkets will be mostly focused on the announcements to be made about Greece (Troika report, possible expansionof financing), that could overshadow economic news in the eurozone over the next week.

Mildred Hager, Erste Group, [email protected] Rainer Singer, Erste Group, [email protected]

Forecasts

EUL USA EUL Fwd USA Fwd EUL USA EUR/USD FwdSpot 1.25 0 - 0.25 1.44 0.25 3.01 3.01 1.450Jun 11 1.25 0 - 0.25 1.60 1.58 0.40 0.31 3.40 3.60 1.35 1.449

Sep 11 1.50 0 - 0.25 2.11 2.08 0.60 0.64 3.50 3.70 1.30 1.445Dec 11 1.75 0.50 2.48 2.45 0.80 0.96 3.60 3.80 1.30 1.441Mar 12 2.00 0.75 2.46 2.56 1.00 1.12 3.60 3.90 1.30 1.436

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


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CroatiaStrong performance in AprilAfter a disappointing March, the monthly-frequency indicators showed robust performance in April. Industrialproduction finally reverted to the positive region, growing 2.7% y/y (supported by capital and non-durable goods),after a 5% y/y slump in 1Q and showing that solid order book performance kicked into the figures. Solid EU growthmomentum suggests favorable external order book performance, while we remain fairly cautious on the still fragiledomestic demand recovery. The coming months should reveal more on the sustainability of the April data, althoughwe are anticipating some stabilization (growth rates in the modest positive region) after the 1Q slump.The trade balance also offered a positive surprise on robust exports performance (+34% y/y), while importsperformed in line with expectations, i.e., being virtually flat on an annual level and translating into a 71.7% exports-imports coverage ratio. On top of steady industrial supplies performance, exports were supported by strong fuelsand capital goods (heavily supported by ship-related one-offs) performance. On the imports side, capital goodsimports confirmed weakness, while fuel imports continued to create the strongest pressure (in line with global oilprice developments). With an expected exports recovery in 2Q, after a mediocre 1Q, and with still modest importspicking up, we see the net exports contribution reverting back to the positive region in 2Q.

The positive picture was rounded off with a strong 3.7% y/y retail trade growth, hence suggesting someconsumption rebound, after a 2% y/y decline in March. The figure has been supported by later Easter holidays, i.e.,consumption shifting from March to April. Strong tourist season performance was also supportive (overnight stays+25% y/y in April). The coming months are likely to bring some moderation, as the April figures were supported bythe abovementioned one-offs, although they are expected to maintain some mild positive tone, as the still fragilelabor market trends and consumer credit seem to cap any stronger upside potential.

T-bills rates performed robustly, HRK still fragileAfter a three-week break, the MoF returned to the liquidity-flooded market with a hefty issuance (EUR 22mn andHRK 1.180mn), aiming to keep the roll-over ratio close to 100%. As expected, market interest has been robust(HRK 3bn), resulting in some MoF deviation from the planned issuance. The strong demand (2.27 bid-to-coverratio) also favored T-bill rates, as the benchmark 12M rate inched down 30bp (2.70%). EUR-linked T-bills issuance

remained well below maturing volumes (EUR 103mn vs. 22mn), suggesting ongoing depreciation pressuresstemming from declining EUR-linked T-bills stock. Some additional liquidity-driven T-bill rate drops could not beruled out, but we see limited potential for a more significant drop, with the 12M EUR-linked and 12M HRK ratesbeing aligned (105bp down from end-Feb). The exchange rate (currently around 7.45) continued to test 7.45thresholds, slipping at one point towards 7.46-7.47, but still in very stable manner, thus the CNB remained on theside-lines. The kuna outlook would remain burdened by the reduction of ST EUR-linked sovereign debt, although,in the short term, we see tourist-related FX inflows and sovereign debt accumulation (upcoming Eurobondplacement) boosting some appreciation pressures in the coming period.

Alen Kovac, Erste Bank Croatia, [email protected]

Czech Republic PMI confirmed slowdown seen elsewhere, remains in expansionary territoryPMI confirmed what was seen elsewhere in the (core) Eurozone, a slowdown from levels of around 60 to (the morenormal) level of 55.9. This comes as no surprise, as we have been saying that the slowdown in Germanperformance (especially exports) would come in 2H11, as pricier oil, tightening in emerging markets and thestronger euro take a toll on German performance. The slowdown was across the board, with new orders, output,hiring and (importantly, for the CNB) input/output prices contributing. This, as is almost always the case, did nothave any impact on the markets, but provides important insight into inflation over the summer (as any inflationarypressures that may have until now been coming from the external environment have probably eased).

Final 1Q11 GDP closely watchedNext week, inflation, industrial production and final GDP for 1Q11 will be released. The CZK will probably notrespond to either of these, but the markets may push the yield curve down if inflation comes below expectations(+0.3% m/m), even though the short-end already seems (from the baseline point of view) a bit too bearish.However, the combination of falling yields in the EMU, the stable EU-CZ spread and anti-inflationary local data(CPI over 1Q11, low household demand) may push the overall yield curve further down and even make it justified,if the slowdown that we are now seeing in the real economy becomes more pronounced (which we do not nowexpect). Final GDP will be important - not that the markets will respond and the figure itself should come close to


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what we expected in the January quarterly (0.4% q/q) - but the structure will be revealing. We are curious to seewhat impact on household consumption fiscal consolidation will have, and also to see whether fixed investmentsreversed the three-year long slide and grew, as the relaxed financing conditions of banks and rising capacityutilization seem to suggest.

Martin Lobotka, Ceska sporitelna, [email protected]

Hungary Agreement announced between banks and government has no strong effect on growthDetails of the agreement between the banks and the government on the package to support troubled FX mortgagedebtors were announced on Monday. The package consists of five points: 1) fixing the CHF/HUF exchange rate at180, EUR/HUF at 250 and JPY/HUF at 200 (per 100 JPY) for FX debtors until the end of 2014 (the differencebetween the installments based on the official spot exchange rates and the beneficial rates remains the obligationof the original debtor which he / she has to pay as of the beginning of 2015), 2) the moratorium on foreclosures andevictions will be lifted, but repossessions can only take place to a limited extent, 3) the creation of the NationalAsset Management Company (NAMC), which will start a homebuilding program to purchase flats from troubleddebtors, who will subsequently be able to continue living in their homes as renters, 4) EUR lending will again beallowed, but only for people with a monthly income at least 15 times the minimum wage in EUR, and 5) a home-switching subsidy, which means that a troubled FX mortgage debtor who is willing to change to a smaller flat willbe given an interest rate subsidy for a maximum of five years and up to 3.5 percentage points. The news is mostlyin-line with earlier information but several details will only be fixed later (e.g., the eligibility criteria for debtors whoseflats will be bought by the NAMC). The fact that the moratorium will be lifted could help lending to restart inHungary, but the strict quotas for selling the real estate limits the speed with which the loan portfolios can becleaned. The fixing of the FX rate may only create some minimal impetus to consumption, as probably aconsiderable part of the debtors will not ask for this option, and people who eventually apply will most likely save asignificant part of the amount that is not to be paid to the banks for the grace period until the end of 2014. As for theeffects on the budget, EconMin Matolcsy indicated that the interest rate subsidy will be capped at HUF 1.5bn (onlyEUR 5.6mn) per annum, while the purchase of housing by the NAMC will cost HUF 5bn p.a. There should also becosts incurred by the homebuilding program, but we think that the overall effect on the budget will not be toosignificant.

Hungarian forint strengthens, despite shaky global sentimentThe forint performed well this week, despite negative investor sentiment generated by ongoing debt woes inGreece and disappointing macro releases from the US. The EUR/HUF dropped by 1 percent, to below 265, onFriday. The high domestic interest rate, the ongoing faith in fiscal consolidation and the very strong trade balance(the final March figure came in at a record high, almost reaching EUR 840mn, above the preliminary figure of831mn) helps the exchange rate. Nevertheless, for the coming weeks, international sentiment may remain shaky;therefore, further strengthening of the forint is also dependent on global sentiment remaining calm, in our view. Asfor bonds, yields also decreased by around 5-10bp. At the bond auction yesterday, the Debt Management Agencycould again sell bonds above planned, as has occurred at several previous auctions. Last week, the Agency saidthat Hungary may increase net planned HUF T-bond issuance this year by 44%, but recent healthy demand at thebond auctions underpins the fact that Hungary may be able to conduct this plan. The good demand is still a sign ofinvestor confidence in the governments fiscal plan, while the relatively high yield of Hungarian assets in the regionis also attractive. Nevertheless, we think that further considerable decrease of yields may only come if risks tied tothe governments package ease.

Industrial production and trade balance figures to be released next weekThe industrial output figure is to be released on Tuesday. Industry is expected to have increased by 11.1% in April,after the disappointing 9.2% figure for March. The 3.6% m/m decrease posted for March may have also beencaused by unfortunate working-day effects, as industrial orders have still expanded at a healthy pace: new ordersrose 21.5% y/y. Nevertheless, later this year, we expect that the growth figures could permanently drop into single-digit territory, due also to deteriorating sentiment in the German manufacturing sector. As for the trade balance(scheduled for Thursday), the surplus of nearly EUR 840mn posted for March should narrow to EUR 570mn inApril. Nevertheless, this can simply be considered normalization after the all-time high figure, and we shouldcontinue to see very strong monthly surpluses for the rest of this year. The reason for this is not only strong exportperformance: domestic demand (both investments and household consumption) is still sluggish, and imports thuscannot catch up with exports.

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


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Poland1Q data confirms domestic-driven growth, economy expanded by 1.0% q/qTuesdays data release came out in line with expectations: in the first quarter of this year, the Polish economyexpanded by 4.4%, just a notch below the previous quarters 4.5%. The structure confirms that growth is driven bydomestic demand, with individual consumption contributing 2.6pp and total consumption 2.9pp. As expected, thecontribution from inventories weakened, while that of fixed investment was slightly higher (0.7pp) than in theprevious quarter (0.5pp). The contribution of net exports remained negative (-0.1pp), but less so than in 4Q10 (-1.7pp). This is better than we expected, but we will have to wait and see what the long-awaited revision to the C/Adata will do to this number. After adjusting for seasonality, the Polish economy added 1.0% q/q, which is what weexpected and stronger than the 0.8% in the final quarter of 2010 (annually, this means 4.3% y/y). The data was inline with expectations and, therefore, should not trigger any reaction from the MPC (although domestic-drivengrowth plays into the hands of the hawkish wing of the MPC). It is important to see that the January VAT hike hadno visible impact on individual consumption, which has remained a robust pillar for growth and this should also bethe case also in the coming quarters (we could see some slowdown in 2012, however, if the government managesto deliver further fiscal reforms). With regard to other components, we expect fixed investment to continue gainingstrength and to become one of the major growth drivers this year (along with individual consumption), whileinventories will enter the downward side of the cycle. Net exports will be a negative factor for growth this year.Overall, we expect the economy to grow by 4.2% this year.

Central banks rate-setting meeting will be focus of next weekAfter the latest meeting, which surprised the markets with a rate hike, the governor has said that the council isgoing for acceleration, rather than expansion of the tightening cycle. Comments between then and now alsoconfirm that the central bank expects inflation to start easing in the second half of the year (on base effect and oilprices), but so far they maintain the tightening bias. From that point of view, a new prognosis might be crucial, asone of the less-talkative members, Jerzy Hausner, suggested that, if the new projection were to reaffirmexpectations, the council might consider changing the bias to neutral. This would, in our view, make sense. On theone hand, we have strong domestic demand (with no visible impact on inflation so far), while on the other, therehave already been 75bp of hikes delivered (which will take some time to show), the expected easing of inflationand, most importantly, the fiscal consolidation that the government has been promising and which will weigh onconsumers and overall economic growth next year. With regard to our rate forecast, the central bank has alreadydelivered what we expected for this year, but stronger domestic demand, the weaker zloty and higher inflation,

justify, in our view, one more hike. This, we believe, is most likely to happen quickly (because, as some of themembers also pointed out, that would make it more effective and also because this is what the current mood of thecouncil seems to be) but afterwards, for the abovementioned reasons, rates should remain flat. Then, dependingon the economic situation and the nature of fiscal consolidation (how much the government will rely on short-termmeasures and how much on real long-term sustainable reforms) tightening should continue at a moderate pace in2012.

Jana Krajcova, Ceska sporitelna, [email protected]

RomaniaFiscal deficit to be capped at 3%, new draft constitutionRomania's budget gap should not be wider than 3% of GDP, while public debt should not be higher than 60% of GDP,according to a draft constitution released this week by the presidential administration. External borrowings should beused solely for investments, except for in some exceptional cases, such as natural disasters that may affect publicfinances. Both targets - the budget deficit and the public debt - could be temporarily overshot if the Parliament endorsessuch a decision and if clear remedies are put in place so as to regain the budget deficit balance of 3% of GDP in thenext three years. The number of MPs will be capped at 300 and the Parliament will consist of a single chamber. Fiscaland budgetary issues, such as the recent hike in VAT or the cut in public wages and social allowances, will no longerbe challenged in the courts by people affected by such measures. Over the last year, many people succeeded ingetting money back from the government and this created a difficult situation in terms of the expected results of thefiscal consolidation program. In our opinion, these forward-looking moves are also a reflection of the new internationalcontext, in which the issue of sovereign debts is high on the agenda. They will help the country remain balanced interms of public finances and also will lead to the more efficient allocation of public resources, which has been the baneof Romania for too many years. Romania seems to have hit its stride with regard to the fiscal consolidation process,managing to slash the budget deficit to 6.4% of GDP in 2010, from as high as 8.6% a year before (under ESA). Thenew constitution should be approved by the Parliament, and then by the people, in a referendum which might bescheduled for 2012.


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Government signals continuation of fiscal consolidation efforts ahead of EMTN issueThe deputy finance minister said that the new stand-by arrangement with the IMF and EU will ensure that Romaniaavoids fiscal slippage ahead of the 2012 elections. At the same time, the government announced new concrete stepsthis week to put public finances on a sustainable trajectory: 4,900 additional jobs will be cut in the public sector, somebonuses received by policemen will be eliminated and social allowances will be granted only to people in real need,according to a new law. The MinFin will start a roadshow on June 6 for the issue of euro medium-term notes (EMTNs)worth EUR 500mn to EUR 1.5bn, with a maturity of five years. We expect the issue to be oversubscribed, as themarkets are confident that tough reforms followed under the agreement with the IMF and EU will yield positive effects.The MinFin also plans to issue RON-denominated debt worth RON 4.3bn on the local market in June, including a 10-year bond issue worth RON 600mn.

April retail sales disappointAlthough consumer sentiment indicator has been on an upward trend during recent months, April retail sales remainedweak. Retail sales (seasonally-adjusted data) fell 1.8% m/m and 6.2% y/y. Considering that real wages are in negativeterritory, the economy started to create new jobs only in the last two months and consumer lending has not yet shownsigns of sustainable revival, we have the picture of still fragile households consumption. We stick to our scenarioregarding a flat key rate at 6.25% in 2011 and a gradual tightening of monetary policy in 2012, due to inflationarypressures and the NBRs need to counterbalance potential populist fiscal measures ahead of the 2012 elections.

Eugen Sinca [email protected]

TurkeyFood inflation surprises on the upsideCPI inflation in May surprised on the upside and came in at 2.4%, higher than both our and marketexpectations of around 0.95% and 1.1%, respectively. The deviation mainly stemmed from higher thanexpected food inflation, which rose by 4.7% m/m, contrary to its usual seasonal weakness in May. The goodnews is that the increase in prices was not broad-based, with food and the seasonally-rising clothing sectormaking up some 2.1pp out of 2.4% monthly inflation. The pass-through from depreciation and high oil pricesalso seemed to remain limited in May. Core inflation, excluding food and beverages, energy, tobacco andgold (I-index) rose to 4.7% in May, from 4.4%, which was expected by the CBT and might be a reason forthe CBT to take the increase as transitory and wait for the second-round effects to be more visible beforetaking any action against rising inflation. We will see how the CBT considers those price developments in itsinflation note on Monday, but we expect rate hike expectations of around 100bp from the CBT at the end ofthe year to be brought forward by the market after this unfavorable reading. We technically increase ouryear-end inflation expectation to 8.5%, from 7.5%, while the amount of volatility in food prices might bringfurther adjustments in year-end inflation expectations on both sides. As the CBT does not think thatoverheating in the economy is in the making right now, we do not think it would be in a hurry to raise policyrates from its current level of 6.25%. Besides, it would refrain from raising short-term rates so as not to invitea higher amount of short-term flows, which it is trying to avoid in order to sustain financial stability. However,if second-round effects start to emerge and ongoing depreciation in TRY prevails - against which it wouldfirst use the elimination of FX purchase auctions, before taking any other action - we might see a rate hikefrom the CBT to contain inflation, rather than announcing a possible target revision, as in 2008. Note that, in2008, the CBT revised the year-end targets for 2009 and 2010 from 4% to 6.5% and 5.5%, respectively, toreduce the increasing credibility gap between actual and expected inflation rates.

Sort of an ease in import growthThe trade balance in April generated a USD 9.1bn deficit, close to our estimate of USD 8.8bn, but lowerthan the market consensus of almost USD 10bn. Imports rose by 2.8% over the last month in seasonally-adjusted terms, while the increase in exports stood at 9.2%. It is good to see some slowdown of sorts,especially in non-energy imports, while we need to see whether this would turn into a downward trend,contributing positively to the current account deficit. If this trend continues, it would contribute to the creditgrowth as well, via lower financing needs, adding to the CBTs credibility, as the CBT was insistentlysaying that the impact of the new monetary policy would be seen in the second quarter.

Ozlem Derici, Erste Securities Istanbul, [email protected]


10/16



Ukraine Ukraine may see governmental changesThere was notable public criticism of Prime Minister Mykola Azarov from the president and the NBU governorthis week. The head of the NBU sent a letter to Azarov criticizing the loss of IMF support. There are nowrumors among politicians and the press that the criticism is part of a public campaign prior to the appointmentof a new government. It is possible that Ukraine may see new a prime minister appointed over the next fewweeks. It is completely in the power of the president to appoint a new government, as he enjoys the support ofaround two thirds of the Parliament. Over the last year, the current government made strong improvements infiscal stabilization, as the budget deficit dropped from 9% of GDP in 2009 to 3.5% in 2011. It also introduced anew tax code, making life harder for tax avoiders. However, it did not manage to push through stronger reformsin the energy sector and pension system. Also, mainly due to food prices, the government, along with thepresident and the Party of Regions, has been losing public support. In May 2010, the Party of Regions enjoyedthe support of 41.6% of the population people willing to vote for them in an election - according to aRazumkov Center survey. The April 2011 survey showed a decline in public support to just 15.7%. Now, only11.3% of surveyed Ukrainians stated that they fully support the presidents actions; in the same period of lastyear, public support was at 40.9%. Possible government changes may come as a move from the president tostart new popular policies and reverse the trend of declining public support. Possible governmental changesare possible, but are still not a certainly in the often-changing political environment of Ukraine. Also, there areno indications as to who could be the possible substitute or what the resulting economic policies could be. It isthus premature to speculate on the possible impact on financial markets.

Maryan Zablotskyy, Erste Bank Ukraine, [email protected]


11/16



CZK Fwd HRK Fwd HUF Fwd PLN Fwd RON Fwd TRY Fwd UAH FwdSpot 24.5 7.44 265.3 3.96 4.14 2.30 11.57Jun-11 24.3 24.5 7.34 7.34 267.5 266.1 3.89 3.96 4.12 4.15 2.23 2.31 10.60 11.81Sep-11 24.2 24.5 7.38 7.38 268.5 268.4 3.85 3.99 4.10 4.19 2.18 2.34 10.40 12.08Dec-11 24.0 24.4 7.45 7.45 267.5 270.3 3.81 4.01 4.10 4.25 2.10 2.37 10.34 12.35Mar-12 23.8 24.4 7.45 7.45 266.3 273.6 3.76 4.04 4.00 4.29 2.21 2.40 9.81 12.60

Exchange Rate vs EUR

CZ HR HU PL RO TR UA CZ Fwd HU Fwd PL Fwd RO Fwd TR Fwd UASpot 0.75 6.00 6.00 4.25 6.25 6.25 7.75 1.20 6.10 4.45 5.54 8.44 5.64Jun-11 0.75 6.00 6.00 4.50 6.25 6.25 7.75 1.01 1.25 6.10 6.15 4.70 4.64 5.70 6.13 8.00 8.85 4.00Sep-11 1.00 6.00 6.00 4.50 6.25 6.25 7.75 1.25 1.42 6.10 6.15 4.70 4.89 6.10 6.43 8.50 8.94 4.50Dec-11 1.25 6.00 6.00 4.50 6.25 7.00 7.75 1.45 1.61 6.10 6.15 4.80 5.13 6.30 6.72 9.00 9.28 5.50Mar-12 1.25 6.00 6.00 4.50 6.50 7.50 7.75 1.73 2.13 6.10 6.19 4.80 5.20 6.50 7.19 9.00 9.69 5.80

3M Money Market RateIntervention Rate

5y Govt . Yield 2y Govt . Yield 2y Govt . YieldCZ HR HU PL SK RO TR UA

Spot 3.78 6.01 7.20 6.03 4.49 7.58 8.93 9.40Jun-11 4.00 6.00 7.10 6.10 4.60 7.30 8.50 8.80Sep-11 4.20 6.00 7.00 6.20 4.60 7.20 9.00 8.50Dec-11 4.25 6.00 7.00 6.20 4.60 7.20 10.50 8.50Mar-12 4.35 6.00 6.90 6.10 4.60 7.10 10.50 8.50

10y Govt. Yield

Capital markets forecasts

Long-term forecastsReal GDP growth (%) 2009 2010 2011f 2012f CPI (%), eoy 2009 2010 2011f 2012fCroatia -6.0 -1.2 1.0 2.2 Croatia 1.9 1.8 3.8 3.3Czech Republic -4.0 2.2 1.8 2.8 Czech Republic 1.0 2.3 2.2 2.8Hungary -6.7 1.2 2.7 3.1 Hungary 5.6 4.7 3.9 3.0Poland 1.7 3.8 4.2 4.0 Poland 3.5 3.1 2.7 2.4Romania -7.1 -1.3 2.0 3.9 Romania 4.7 8.0 5.2 4.7Serbia -3.1 1.8 3.0 3.8 Serbia 6.6 10.3 8.5 5.7Slovakia -4.8 4.0 4.0 4.5 Slovakia 0.5 1.3 4.0 4.0Turkey -4.8 8.9 6.0 4.5 Turkey 6.5 6.4 7.5 6.5Ukraine -14.8 4.2 4.5 6.0 Ukraine 13.0 9.2 10.0 8.0CEE8 average -3.8 2.3 3.2 3.8 CEE8 average 4.2 4.4 4.1 3.6CEE8+Turkey -4.2 5.0 4.3 4.1 CEE8+Turkey 5.1 5.2 5.5 4.8

Unemployment (%) 2009 2010 2011f 2012f 3M rates (average, %) 2009 2010 2011f 2012fCroatia 9.1 11.8 12.2 11.9 Croatia 8.9 2.4 2.1 3.0Czech Republic 8.6 9.0 8.9 8.4 Czech Republic 2.2 1.3 1.4 2.1Hungary 10.0 11.2 10.7 9.9 Hungary 8.6 5.5 6.1 5.7Poland 11.0 12.1 11.5 10.1 Poland 4.3 3.8 4.4 5.0Romania 6.9 7.3 6.9 6.8 Romania 11.7 6.8 6.0 6.6Serbia 16.1 19.2 19.0 18.5 Serbia 14.4 10.8 13.0 10.5

Slovakia 12.1 14.4 12.9 12.0 Slovakia 1.2 0.8 1.5 2.4Turkey 14.0 11.9 11.0 11.0 Turkey 9.9 7.5 8.0 9.0Ukraine 8.8 8.1 7.8 7.5 Ukraine 18.0 7.7 4.5 5.1CEE8 average 9.9 10.9 10.5 9.7 CEE8 average 7.0 4.3 4.3 4.7CEE8+Turkey 11.6 11.3 10.7 10.2 CEE8+Turkey 8.2 5.6 5.8 6.5

C/A (%GDP) 2009 2010 2011f 2012f Budget Balance (%GDP) 2009 2010 2011f 2012fCroat ia -5.5 -1.4 -2.5 -3.3 Croatia -4.5 -5.0 -5.9 -5.5Czech Republic -3.2 -3.8 -3.3 -3.2 Czech Republic -5.8 -5.3 -4.5 -3.7Hungary 0.4 2.1 1.5 0.6 Hungary -4.5 -4.2 2.6 -2.9Poland -2.1 -3.4 -4.4 -4.8 Poland -7.1 -7.8 -6.0 -3.7Romania -4.2 -4.1 -4.9 -4.8 Romania -8.6 -7.3 -4.7 -4.0Serbia -6.9 -7.0 -7.4 -8.1 Serbia -4.3 -4.5 -4.1 -3.5Slovakia -3.6 -3.3 -2.3 -2.9 Slovakia -8.0 -7.9 -5.0 -4.0Turkey -2.3 -6.6 -8.5 -6.2 Turkey -5.5 -3.6 -2.3 -2.3Ukraine -1.7 -1.9 -2.2 -3.0 Ukraine -6.3 -5.5 -3.5 -2.5CEE8 average -2.7 -2.8 -3.3 -3.7 CEE8 average -6.6 -6.5 -4.3 -3.7CEE8+Turkey -2.5 -4.4 -5.5 -4.7 CEE8+Turkey -6.2 -5.3 -3.5 -3.1


12/16



Country Date Release/event/figures Our expectation Consensus* PriorCzech Republic 6-Jun Industrial output, Apr, % y/y 7.1 8

6-Jun Trade balance, Apr, CZK bn. 17 14.88-Jun Unemployment rate, Apr, % 8.1 8.29-Jun CPI, Apr, % y/y 1.8 1.89-Jun GDP 1Q F, % q/q 0.6 0.6

Croatia 8-Jun May PPI +7.5% y/y +8.1% y/yHungary 7-Jun Industrial prodution (April, y/y) 11.1% 8.8% 9.2%

9-Jun Trade balance (April) EUR 570mn EUR 562.8mn EUR 839.7mn9-Jun 1Q11 GDP detailed (y/y; q/q) 2.4% / 0.7% n.a. 2.4% / 0.7% (flash)

Poland 8-Jun NBP rates, % 4.5 4.5Romania 8-Jun GDP 1Q11 - detailed press release 0.6% q/q / 1.6% y/y - 0.1%q/q / -0.6% y/y

8-Jun IPI - April (%, y/y s.a.) 9.6 - 7.49-Jun Foreign trade balance - April (EUR million) -750.0 - -806.0

10-Jun CPI - May 0.3% m/m / 8.5% y/y - 0.7%m/m / 8.3% y/ySlovakia 8-Jun Detailed GDP estimate 3.5% y/y 3.5% y/y 3.5%

8-Jun April industrial production 6.5% y/y - 6.8%

9-Jun April foreign trade EUR 168m EUR 144m EUR 136mTurkey 8-Jun Industrial Production, Apr-11 10.4%10-Jun Consumption Index, May-11 18.0%

Ukraine 7-Jun May CPI, m/m 1.0% 0.8% 1.3%

*Sources: Bloomberg, Reuters

Country Auction-date Pay-date Maturity Cupon Offer ForecastCzech Republic 8-Jun 13-Jun May-25-2024 CZK 6bn

9-Jun 10-Jun Jun-08-2012 CZK 8bnHungary 7-Jun 8-Jun Sep-14-2011 HUF 50bn 5.90%

9-Jun 8-Jun May-02-2012 HUF 50bn 5.90%Poland 9-Jun 13-Jun n.a. PLN 1.5-3.0bnRomania 6-Jun 8-Jun-11 6-Jun-12 - RON 1,200mn 6.90%

9-Jun 14-Jun-11 25-Oct-14 6.3% RON 500mn 7.30%Slovakia No auction scheduledTurkey 7-Jun 8-Jun 2013-Feb-20

7-Jun 8-Jun 2014-Jun-04Ukraine 7-Jun 1-Jun 2011-Dec-09 7.00%

7-Jun 1-Jun 2012-Jun-06 9.00%7-Jun 1-Jun 2014-Jun-06 10.00%

Looking ahead

Auction diary


13/16



Source: Bloomberg

Exchange rates and interest rates (52 weeks)

10

12

14

16

18

20

22

24

26

28

Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May1.14

1.16

1.18

1.20

1.22

1.24

1.26

CZK/EURCZK/USD3m interbank rate, r.s.

Czech Republic

4.0

4.5

5.0

5.5

6.0

6.5

7.0

7.5

8.0

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

HRK/EURHRK/USD

Croatia

2.0

2.5

3.0

3.5

4.0

4.5

5.0


1.0

2.0

3.0

4.0

5.0

6.0

7.0

8.0

RON/EURRON/USD3m interbank rate, r.s.

Romania

4.0

5.0

6.0

7.0

8.0

9.0

10.0

11.012.0

13.0

Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May0

5

10

15

20

25

30

35

40

UAH/EURUAH/USD3m interbank rate, r.s.

Ukraine

1.0

1.2

1.4

1.6

1.8

2.0

2.2

2.4


4.5

5.0

5.5

6.0

6.5

7.0

7.5

8.08.5

9.0

TRY/EURTRY/USD3m interbank rate, r.s.

Turkey

100

120

140

160

180

200

220

240

260

280

300


1.0

2.0

3.0

4.0

5.0

6.0

7.0

HUF/EURHUF/USD3m interbank rate, r.s.

Hungary

1.5

2.0

2.5

3.0

3.5

4.0

4.5


3.4

3.6

3.8

4.0

4.2

4.4

4.6

PLN/EURPLN/USD3m interbank rate, r.s.

Poland

0

5

10

15

20

25

30

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec0

0.2

0.4

0.6

0.8

1

1.2

1.4

1.6

SKK/USD3m interbank rate, r.s.

Slovaki


14/16



Benchmarks

0

0.5

1

1.5

2

2.5

3

3.5

4

3m 1yr 3yr 5yr 10yr-0.4

-0.2

0

0.2

0.4

0.6

0.8

1

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 10yr3.8

3.9

4.0

4.1

4.2

4.3

4.4

4.5

4.6

4.7

4.8

4.9


Hungary

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

4.5

5.0


0.2

0.4

0.6

0.8

1.0

1.2

1.4

1.6


Slovakia

0.0

1.0

2.0

3.0

4.0

5.0

6.0

7.0


2.8

2.9

3.0

3.1

3.2

3.3

3.4


Poland

7.8

8.0

8.2

8.4

8.6

8.8

9.0

9.2

9.4

9.6


5.4

5.6

5.8

6.0

6.2

6.4

6.6

6.8

7.0

7.2


Turkey

0.0

1.0

2.0

3.0

4.0

5.0

6.0

7.0

3m 1yr 3yr 5yr 9yr-2.0

-1.0

0.0

1.0

2.0

3.0

4.0


Croatia


15/16



ContactsGroup Research Research, SlovakiaHead of Group Research Head: Juraj Barta, CFA (Fixed income) +421 2 4862 4166Friedrich Mostbck, CEFA +43 (0)5 0100 - 11902 Michal Musak (Fixed income) +421 2 4862 4512Macro/Fixed Income Research Maria Valachyova (Fixed income) +421 2 4862 4185Head: Gudrun Egger, CEFA (Euroland) +43 (0)5 0100 - 11909 Research, UkraineMildred Hager (SW, JP, Euroland) +43 (0)5 0100 - 17331 Head: Maryan Zablotskyy (Fixed income) +38 044 593 - 9188Alihan Karadagoglu (Corporates) +43 (0)5 0100 - 19633 Ivan Ulitko (Equity) +38 044 593 - 0003Peter Kaufmann (Corporates) +43 (0)5 0100 - 11183 Igor Zholonkivskyi (Equity) +38 044 593 - 1784 Carmen Riefler-Kowarsch (Corporates) +43 (0)5 0100 - 19632 Treasury - Erste Bank ViennaRainer Singer (US) +43 (0)5 0100 - 11185 Saving Banks & Sales RetailElena Statelov, CIIA (Corporates) +43 (0)5 0100 - 19641 Head: Thomas Schaufler +43 (0)5 0100 - 84225Macro/Fixed Income Research CEE Equity Retail SalesCo-Head CEE: Juraj Kotian (Macro/FI) +43 (0)5 0100 - 17357 Head: Kurt Gerhold +43 (0)5 0100 - 84232Co-Head CEE: Rainer Singer (Macro/FI) +43 (0)5 0100 - 11185 Fixed Income & Certificate SalesCEE Equity Research Head: Uwe Kolar +43 (0)5 0100 - 83214Co-Head: Gnther Artner, CFA +43 (0)5 0100 - 11523 Treasury Domestic SalesCo-Head: Henning Ekuchen +43 (0)5 0100 - 19634 Head: Markus Kaller +43 (0)5 0100 - 84239Gnter Hohberger (Banks) +43 (0)5 0100 - 17354 Corporate Sales ATFranz Hrl, CFA (Steel, Construction) +43 (0)5 0100 - 18506 Head: Christian Skopek +43 (0)5 0100 - 84146Elisabeth Springer, (Banks, Real Estate) +43 (0)5 0100 - 11903Daniel Lion, CIIA (IT) +43 (0)5 0100 - 17420 Fixed Income & Credit Institutional SalesChristoph Schultes, CIIA (Insurance, Utility) +43 (0)5 0100 - 16314 Institutional Sales InternationalThomas Unger; CFA (Oil&Gas) +43 (0)5 0100 - 17344 Head: Christoph Kampitsch +43 (0)5 0100 - 84979Vera Sutedja, CFA (Telecom) +43 (0)5 0100 - 11905 Institutional Sales AustriaVladimira Urbankova, MBA (Pharma) +43 (0)5 0100 - 17343 Head: Thomas Almen +43 (0)50100 - 84323Martina Valenta, MBA (Real Estate) +43 (0)5 0100 - 11913 Martina Fux +43 (0)50100 - 84113Gerald Walek, CFA (Machinery) +43 (0)5 0100 - 16360 Michael Konczer +43 (0)50100 - 84121International Equities Margit Hraschek +43 (0)50100 - 84117Hans Engel (Market strategist) +43 (0)5 0100 - 19835 Institutional Sales GermanyStephan Lingnau (Europe) +43 (0)5 0100 - 16574 Head: Jrgen Niemeier +49 (0)308 105 800 - 5503Ronald Stferle (Asia) +43 (0)5 0100 - 11723 Marc Friebertshuser +49 (0)711 810 400 - 5540Editor Research CEE Sven Kienzle +49 (0)711 810 400 - 5541Brett Aarons +420 233 005 904 Michael Schmotz +43 (0)50100 - 85542Research, Croatia/Serbia Sabine Loris +49 (0)711 810 400 - 5543Head: Mladen Dodig +381 11 22 09 178 Ingo Lusch +43 (0)50100 - 85520Alen Kovac (Fixed income) +385 62 37 1383 Rene Klasen +49 (0)308 105 800 - 5521Anela Tomic (Fixed income) +385 62 37 2295 Klaus Vosseler +49 (0)711 810 400 - 5560Davor Spoljar (Equity) +385 62 37 2825 Milosz Chrustek +43 (0)50100 - 85522Research, Czech Republic Andreas Goll +49 (0)711 810 400 - 5561Head: David Navratil (Fixed income) +420 224 995 439 Mathias Gindele +49 (0)711 810 400 - 5562

Petr Bittner (Fixed income) +420 224 995 172 Institutional SolutionsPetr Bartek (Equity) +420 224 995 227 Head: Zachary Carvell +43 (0)50100 - 83308Vaclav Kminek (Media) +420 224 995 289 Brigitte Mayr +43 (0)50100 - 87481Jana Krajcova (Fixed income) +420 224 995 232 Institutional & High End SalesMartin Krajhanzl (Equity) +420 224 995 434 Head: Patrick Lehnert +43 (0)5 0100 - 84259Radim Kramule (Oil&Gas) +420 224 995 213 Antony Brown +44 20 7623 - 4159Martin Lobotka (Fixed income) +420 224 995 192 Ulrich Inhofner +43 (0)50100 - 84324Lubos Mokras (Fixed income) +420 224 995 456 Simone Pilz +44 20 7263 - 4159Research, Hungary Institutional Sales CEEHead: Jzsef Mir (Equity) +361 235-5131 Head: Jaromir Malak +43 (0)50100 - 84254Bernadett Papp (Equity) +361 235-5135 Sales CEEGergely Gabler (Equity) +361 253-5133 Head: Jaromir Malak +43 (0)50100 - 84254Zoltan Arokszallasi (Fixed income) +361 373-2830 Piotr Zagan +43 (0)50100 - 84256Research, Poland Ciprian Mitu +43 (0)50100 - 84253Magda Zabieglik (Equity) +48 22 330 6250 Institutional Sales SlovakiaTomasz Kasowicz (Equity) +48 22 330 6251 Head: Peter Kniz +421 2 4862-5624Piotr Lopaciuk (Equity) +48 22 330 6252 Sarlota Sipulova +421 2 4862-5629Marek Czachor (Equity) +48 22 330 6254 Institutional Sales Czech RepublicBianka Madej (Equity) +48 22 330 6260 Head: Ondrej Cech +420 2 2499 - 5577Research, Romania Pavel Zdichynec +420 2 2499 - 5590Head: Lucian Claudiu Anghel +40 21 312 6773 Milan Bartos +420 2 2499 - 5562Mihai Caruntu (Equity) +40 21 311 2754 Radek Chupik +420 2 2499 - 5565Dorina Cobiscan (Fixed Income) +40 21 312 6773 1028 Institutional Sales CroatiaDumitru Dulgheru (Fixed income) +40 21 312 6773 1028 Head:Darko Horvatin +385 (0)6237 - 1788Eugen Sinca (Fixed income) +40 21 312 6773 1028 Natalija Petljak +385 (0)6237 - 1638Raluca Ungureanu (Equity) +40 21311 2754 Institutional Sales HungaryResearch Turkey Norbert Siklosi +36 1 235 - 5842Head: Erkin Sahinoz (Fixed Income) +90 212 371 2540 Institutional Sales RomaniaSevda Sarp (Equity) +90 212 371 2537 Head: Valentin Popovici +40 21 310-4449 - 59Evrim Dairecioglu (Equity) +90 212 371 2535 Ruxandra Carlan +40 21 310-4449 - 612Ozlem Derici (Fixed Income) +90 212 371 2536Duygu Kalfaoglu (Equity) +90 212 371 2534Mehmet Emin Zumrut (Equity) +90 212 371 2539


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 Erste Group Bank AG (Erste Group) or its affiliate named herein. The individual(s) involved in the preparation of the reportwere at the relevant time employed in Erste Group or any of its affiliates. The report was prepared for Erste Group clients. The information herein has been obtainedfrom, and any opinions herein are based upon, sources believed reliable, but we do not represent that it is accurate or complete and it should not be relied upon assuch. All opinions, forecasts and estimates herein reflect our judgment on the date of this report and are subject to change without notice. The report is not intendedto be an offer, or the solicitation of any offer, to buy or sell the securities referred to herein. From time to time, Erste Group or its affiliates or the principals oremployees of Erste Group or its affiliates may have a position in the securities referred to herein or hold options, warrants or rights with respect thereto or othersecurities of such issuers and may make a market or otherwise act as principal in transactions in any of these securities. Erste Group or its affiliates or the principalsor employees of Erste Group or its affiliates may from time to time provide investment banking or consulting services to or serve as a director of a company beingreported on herein. Further information on the securities referred to herein may be obtained from Erste Group upon request. Past performance is not necessarilyindicative for future results and transactions in securities, options or futures can be considered risky. Not all transactions are suitable for every investor. Investorsshould consult their advisor, to make sure that the planned investment fits into their needs and preferences and that the involved risks are fully understood. Thisdocument may not be reproduced, distributed or published without the prior consent of Erste Group. Erste Group Bank AG confirms that it has approved anyinvestment advertisements contained in this material. Erste Group Bank AG is regulated by the Financial Market Authority (FMA) Otto-Wagner-Platz 5,1090 Vienna,and for the conduct of investment business in the UK by the Financial Services Authority (FSA).

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Documents

2011-06-03 Erste CEE FI & FX Insights