June 19th, 2008

KRW: 1020 - 1035 range; President Lee said intends to maintain price stability



South Africa
c/a deficit at 9% of GDP and widest in 26 years; increased from 7.5% in Q4
net outflow of portfolio investment in Q1, first time since Q1 2005; out flow of US$2.4bn
- portfolio investment outflow offset by FDI from China into buying 20% of Standard Bank
- gap rose to 194.6bn ZAR from 157.7bn ZAR

Thailand
Oil price bounce and Asian equity selloff with Thai bourse falling 14% since May triggered reversal of funds
Central bank just trying to temper weakness

June 18th, 2008

KRW: Spot came off to 1019 but firm buying pushed back up to 1024 then 1029

- FX swaps higher across board after lower USD rates







South Africa

NERSA said tariff increases of 20-25% over next 3 years

Granted eskom 13.3% tariff rise for 08/09 so avg 27.5% total increase for period

Can increase prices 20-25% each year



USDZAR coming off high of 8.0775 back towards 8.0500 level. Market collapsed overnight to 7.9650 low on s/l selling and anticipation of positive news, however was bid back up first on weak retail sales number and then a somewhat tame Eskom tariff decision that didnt cause a major reaction but reminded market of tenuous domestic situation.



Eskom was gratned a one-off tariff increase of 13.3%, coupled with a 14.2% increase from December '07, making a 27.5% hike for '08. They were also granted ability to increase tariffs over next 3 years b/w 20-25% . Decision by NERSA was fairly prudent in balancing Eskom's needs while spreading out implementation over time and not a major shock to market in either direction, bringing focus back to domestic economic data



. Concerns remain though both in implementation and whether the increase will be enough to meet Eskom's financing needs and allow it to keep it's high debt rating from Moody's.

June 14th, 2008

KRW: BoK sold $1.5bio USD to 1024, s/l triggered below 1030; BoK capping to fight inflation and appease striking labourers
CNY: CP set below 6.90 for the first time; NDFs didnt follow too much
PHP: Massive long liquidation pushed swap points down across curve, unemployment up to 8.0% in April from 7.4%

"Political tea leaves are larger than others. They are a more potent bew and they leave an unmistakeable mark in the "cup" that is the domestic economy"

Singapore
Pair collapsed on weaker USD, expect support around 1.3650 where NEER will be at 2%
Singtel looking to invest in China telecom market;
NoDX terrible, fell the most in 17 months, down 10.5%

Thailand
Selling pressure in late session, offshore curve collapsed, onshore names still buying spot

South Africa
CBS (Central Bank of Swaziland) wont take its cue from SARB and stayed at 11.5%
- in the past SA, Lesotho, Swaziland, and Namibia all took cues from the SARB
- smaller economies dependent on SA, and have fixed=parity to ZAR
- Bank of Namibia deviated in Dec '07 and Apr '08
c/a deficit figures out on Thursday; expectation had been 8.4%, worst ever recorded but Mboweni saying 9%
- no long term funding coming in
NERSA decision and retail sales
- no way will be granted 60% tariff hike, but more likely a 30% increase over 4 to 5yr horizon
market now pricing in 50bp in Aug and another 50bp in Dec
- 8.1700 move hgh; key longer term resistance at 8.25

June 12th, 2008

BoK totally out of market, Korea exploded with spot at the days high
INR: Spot very well bid and state banks only supplier of dollars
Bernanke: acknowledge that weak USD alters inflation expectations

Singapore
Retail sales in April at 7.5% up from 5.6% in March

Thailand
Consumer confidence slipped in April to 71.8 in May and within expectations

June 11th, 2008

ECB opposition to pushing low inflation and strong growth vs. ECB's mandate of only containing inflation



South Africa
Manufacturing output rose 9.8% (mktexp of 2.6%) vs. -1.1% in March
- because of increase in working days and weaker rand boosting exports (easter fell in March this year)
100bp hike would be biggest since Sept 2002
COSATU labor federation said it'd call a national strike to protest job losses linked to countrys power crisis
- in response to Eskom's layoffs from reduction in electricity supply + call to prevent any new construction initiatives
- begin on 02July provincially until massive 30July "national stayaway"
originally Eskom asked for a doubling in electricity tariffs but ANC backlash => hurt poor and stoke inflation
- now agreed to gradual increase over 5 years
- 8.0120 16Apr high; 8.0470 31Mar low, 8.1140 10Mar high

June 10th, 2008

KRW: BoK sold at 1031 and again at 1025...market fell to 1021 even with stocks down 2%; hoping FX can curb inflation we see capping at 1035



Hong Kong

USDHKD Bullish momentum on back of stronger USD and concerns about foreign outflows from stock losses

Hang Seng down 4.21%



Thailand

A6 came in and "finished the job" down to 33.00 from high of 33.57



South Africa

More risk of a 50bp hike than market assumes

5 appearances by CB governor in last 2 months

Reasons why it could be 50bp

- 2004 a total surprise where CB talked tough but acted differently (they're paid to talk tough)

- most of comments were made off the cuff, not necessarily representative of committee

- comments came before this weeks poor real economy data and manufavturing data





7.9470, 8.000 7.9135, 7.8500,



Singapore

Rallied on back of weaker EUR and weaker CNY, look for 1.3732 but MAS to smooth out rallies

June 9th, 2008

India stock market down over 3% but RBI capping at 43.00;
BoK suspected of selling USD around 1033.0
BI sold USDIDR to meet market demand and force lower;
HK Holiday

Thailand
Spot flew to 33.45 before A6 sold 100mio USD, offshore curve remains well bid

Singapore
FM said no sign economy headed to a recession but inflation might be long term
Malaysian fuel hike will push costs in Singapore as well

Russia
Basket has been at 29.61 since beginning of March, probably expand the range against the basket to 29.30 to 29.95
Calculate basket by USD/RUB*0.55 + EUR/RUB*0.45
Raised rates a qtr pt for 3rd time this year; refinancing rate to 10.75%; one-day repo at 6.75%

South Africa
Reserves data indicates SARB bought at 7.50
100bp widely expected but risk of a 50bp move to 12.5%
Mboweni mention of 200bp makes 100bp more likely; big change in Q2 is inflation expectations
While mandate is price stability exclusively, need to make medium term FDI attractive (especially with world cup infrastructure development agenda)
Expect a followup August hike to 13% of 50bp
Recent SARB forecasts dont take into account electricity tariff hike (18Jun decision)
Expect political arena to dissent strongly from any action with Zuma in power, Coastu and SACP weigh more
7.9310, downside 7.8370, 7.7790

June 5th, 2008

USD continues to be bid on Bernanke's comments; Dollar should not be Fed's concern
O/N Fed funds wont fall below 2% unles seconomy dies

KRW: Bid across the curve, spot near previous level where BoK sold USD
CNY: NDF curve jumped higher on USD global strength
INR: RBI sold dollars around 42.95 which prevented spot from jumping; market watching if they defend 43.00
- govt hiked fuel prices about 10% to curb losses of state-owned oil refiners with risks of political tensions and inflation
- RBI said would allow oil firms to hedge on overseas exchanges and increased investment limits on overseas energy companies
- 10% was much lower than 15-22% asked by oil companies;
- expect RBI to steer clear of rate hikes, instead using CRR still by 50bp
- communist allies calling for protests against the hikes
IDR: BI Hiked rates by 25bp to 8.5% and moved policy rate to o/n from 1moth SBI

Singapore
Pair well bid lal day on weak EUR; tried to trigger stops above 1.3700 bt offers came in on any EUR recovery

Thailand
Pair still heading higher, offshore curve remains well bid with daily funding coming back to positive territory
People's Alliance for Democracy (PAD) protests have lasxted 2 weeks; unless Samak reacts with forcel should fizle out
Thaksin had extended an olive branch to Privy Council Prem Tinsulanond, fitting mediator was Gen Anupong Paochinda, the army chief who's mother's funeral provided the veue
PM Office Minister Jakraprob Penkhair resigned around same time for alleged anti-monarchy comments


South Africa
Expect 7.49 - 7.82 trading with SARB next week and not too much data on forefront
Calm past 3 sessions should not be misconstrued as quiet, but rather "calm before the storm"
Mugabe's decision to suspend relief of CARE => massive migrants to SA => more domestic political riots
With Eskom, violence, and impending economic slowdown, onus will be on Tito to reassure investors of price stability => preventing volatility in the c/a
NERSA decision moved to 18Jun from 06Jun but complicated nature of tariff hike should make for a lengthy adjustment process;
Levels: 7.8710, 100% fib, 7.7910- 76.4% fib, 7.7420 - 61.8%, 7.8445 - upper end of bollinger band; 100d - 7.7042

June 3rd, 2008

KRW: dropped to 1014 on comments that MoFE would "double their effort to tackle inflation"
INR: opened up with a gap of 10 paise on weak equities and govt unable to make a decision on the fuel price hike


Singapore
Malaysia CB chief said will not use MYR to curb price pressures

Thailand
Spot higher with same names bying; deep discounted daily funding. Spot to slowly grind through 32.80
May CPI at 7.6%, considered "not a surprise given oil prices", much higher than 6.6% mktexp

South Africa
UK's Vodafone in talks to acquire another 12.5% of Vodacom for R18.75bn from Telkom;
Been range trading since end of April as rate hike momentum was replaced by impending economic slowdown
Energy shortage combined with high borrowing costs and general weakening of biz and consumer confidence => domestic firms curtailing capital investment => negative future growth potential
High c/a deficit sparked more fear as portfolio flows are not stable right now

June 2nd, 2008

KRW: May trade balance in surplus and CPI at 4.9% vs 4.3%, spot broke from 1026 to 1022

South Africa

8.4% c/a deficit in Q1

10bn ZAR in May shows will continue int Q2; negative trend should turn on higher commodity prices, weaker ZAR and domestic slowdown

Rate differential attractiveness is lower off of lower commodity prices, trade data, and global stagflation fears as EUinflation at 3.6%

Latest media reports on Reliance/MTN indicate may do a share swap in which case would have no cash inflows

Reserves data on Friday morning,

Big events this month = 12Jun SARB decision and 18Jun NERSA decision on electricity tariff hike

with all the negative data market would be more concerned about detrimental effects of rate hikes vs. differential vs. USD

ZAR always more in tune with general risk sentiment as c/a deficit is financed by portfolio equity inflows

Thailand

Cabinet Minister Jakrapob resigned after allegations of insulting the King