May 7th, 2008

I will make my budget. Whatever else may happen, that cannot be taken away!
THB: BoT Dep Governor Atchana Waiquamdee said central bank monitoring inflation after major surprise in April CPI; BoT still hesitant to raise rates after economy just getting out of military regime and capital controls; probably maintain at 3.25% until H2


South Africa
- Bharti/MTN takeover talks still dominating sentiment; if deal is finalized then will see strength to supports of 7.49 then 7.46, above resistance at 7.56 then 7.62;
- USDZAR slightly oversold so moves to the downside will be slow and will be vulnerable to the topside on risk aversion
- 7 consecutive sessions in 7.50 - 7.65 range; several factors keeping in deadlock; 2 week bull run (16Apr to 28Apr) has exposed profit takeers
Fundamentals: all releaseas have been ZAR positive, with private credit number, PMI, JSE Top-40 index highe with metals prices

Russia
Inflation at 10%, highest since April '03; Medvedev given task of balancing inflation and economic growth
Alexei Ulyuakayev - Deputy Central Bank Governor: will use all tools availale including exchange rate policy
"we don't exclude --but we're not saying that we're going to do it -- the use of exchange rate policy to control inflation"
Commerzbank: central bank trying to confuse the market from intentions on RUB to deter people from betting
After Ulyuakayev's comments; fellow deputy Konstantin Korischenko said that betting on an advance in RUB is "irrational"
last time RUB strengthened was August, when inflation was 8.5%
two rate hikes hasnt curbed as low domestic demand
Medvedev remains chairman of Gazprom, natural gas export monopoly; while commenting on corruption Medvedev has said Russia's problem pervades government on an "enormous scale"
- In Nov '06 study estimated $240bn in bribes taken a year
Putin claims he wont push through a constitutional amendment to increase his power, but 05May report he will

A negative day throughout the globe as the market corrected from the positive sentiment of the past week. Asian currencies were massively sold off as rumors that CNY appreciation would be slowed saw short-covering in USD/Asia with INR, PHP, and TWD all seeing +1% moves. Markets were dominated by inflation concerns as record oil prices continue to put most EM central banks in hawkish stances. Speculation of a Russian revaluaton continue as inflation is the predominant concern and rate hikes have had a negligible impact. US markets continued the global selloff with equities coming off significantly as the day progressed and all EM selling off against the USD while EURJPY (the best proxy of risk appetite) came off nearly 200 pts.