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INVESTMENTS IN EMERGING MARKETS

GBUS 448
Global Markets Report
October 9 October 13

LATAM Editor: EMEA Editor: ASIA Editor: Global Editor:


Rushika Shekhar Arjun Krishnan Christian Conroy Friederike Kaiser

Highlights
LATAM:
Brazils treasury repurchases $1.7 billion worth of bonds in attempt to stretch out maturities.
IMF lowers 2017 growth projections for Chile, Peru and Colombia, but increases growth projections
for Mexico and Brazil.
Chiles balance of trade widens as price of copper rises.
Mexico continues to see impacts of pre-election and NAFTA tensions as FX and Equity markets slide.
Perus central bank keeps interest rates unchanged.

EMEA:
Foreign purchases of Egypts local-currency debt have finally slowed after a year of strong sales
totaling $18 billion.
Greece is making slow progress on enforcing prior actions; the countrys bailout review will likely be
delayed as a result.
In Poland, LG plans to open Europe's largest factory for building lithium-ion batteries in 2029.
The IMF upgraded its GDP growth outlook for Russia from 1.4% to 1.8 and 1.4% to 1.6% for 2017 and
2018, respectively.
In South Africa, the Supreme Court of Appeals opened the way for reinstatement of criminal charges
against President Jacob Zuma.
In Turkey, the U.S. suspended the visa process for non-immigrant applicants following the arrest of a
U.S. Consulate employee, causing the lira to drop precipitously.

ASIA:
Dim Sum bond market reemerges in China on strength of yuan.
Volume of bad loans in India hits highest level in at least 15 years.
The Indonesian government is investigating Standard Chartered for potential tax evasion.
Malaysia halts imports from North Korea amidst increasing sanctions and stressed ties.
Total external trade in goods in the Philippines rose 10% year-on-year to $13.42 billion.
Taiwans export volume and trade surplus reaches record year-on-year highs.
IMF Global Outlook upgrades Korean GDP growth to 3% for 2017 and 2018.
Thai markets rally on Prime Ministers announcement that elections will take place in 2018.
BRAZIL
Country Analyst: Antonio Quintanilla
Government to Buy Back all 2019 Dollar Bonds
The Brazilian National Treasury indicated it will repurchase USD 1.7 billion worth
of January 2019 coupon-bearing dollar bonds. The effort to buy back all its dollar-
denominated bonds is another step in attempting to stretch out maturities.
Reuters

Rapporteur Overseeing Temers Second Indictment Recommends Acquittal


The congressman charged with making a recommendation to the Brazilian Chamber of Deputies on
whether to continue with President Temers indictment has recommended that the Chamber dismiss the
accusations. The move was widely expected and means Temer will likely avoid indictment and removal
from office.
Folha

CHILE
Country Analyst: Chandler Payne

Chilean Stocks Surge, Balance of Trade Widens as Copper Rises


The price of copper rose 3.35% for the week of October 9-13, propelling the
Chilean iShares ETF (ECH +1.27%) to another week of gains. Chiles trade surplus
also widened to USD 715mm in September 2017, above market consensus of USD
400mm, as copper exports advanced 29.5%. Copper reached its highest price ($3.116) in over a month as
Chinese imports of the metal continued to outpace market expectations. Mining Minister Aurora Williams
said on October 11 that Chile expects a moderate increase in the annual average price of the metal
through the end of 2017. Copper and derivatives account for more than 50% of Chilean exports and,
depending upon the price, up to 15% of GDP in a given year.
ECH vs. Oct 17 Copper future, last 3 months.

La Tercera Reuters Yahoo! Finance Trading Economics

Chilean Center-Left Pledges to Align in Presidential Runoff


Center-left lawmakers in Chile pledged on October 11 to support a single candidate in a potential runoff
against favorite Sebastian Piera. The former president and market-favored candidate holds 40% of voter
intentions, according to polls. This would not be enough to win an absolute majority in the first round.
Senator Alejandro Guillier, ally of sitting president Michelle Bachelet, would seek links with other
progressive candidates to defeat Piera.
Reuters

IMF Revises Chilean GDP Forecast Down for 2017, up for 2018
The IMF released its World Economic Outlook for October 2017 this week, revising down the 2017 Chilean
GDP forecast from 1.6% to 1.4% while raising its 2018 forecast from 2.3% to 2.5%. The revisions are based
on weaker fixed private investment, mining production and public consumption this year but greater
confidence in a positive outcome in Novembers presidential election.
Business Insider

COLOMBIA
Country Analyst: Rushika Shekhar

IMF Lowers Growth Estimates to 1.7%, Markets React Negatively


The IMF reduced Colombia's growth forecast for 2017 to 1.7%, from 2%. IMF
expects that the increase in infrastructure spending, an investment-friendly tax
reform and confidence building following the peace agreement between the
government and FARC would accelerate growth to 2.8% in 2018; however, this is lower than the 3%
growth projection of the previous report. Markets reacted negatively to cuts with Colcap, the main index
of the Colombian Stock Exchange, falling 0.16%.
IMF Markets Insider

IMF Historical Data for Colombia with lowered projections for 2017

IMF FY2017 Forecast IMF FYI2018 Forecast


Indicators
(% Change from April 17 Forecast) (% Change from April 17 Forecast)
GDP Growth 1.7% (-0.3%) 2.8% (-0.2%)
Inflation (Consumer 4.3% (-0.2%) 3.3% (-0.1%)
Prices)
CA Balance -3.8% (+0.2%) -3.6% (+0.3%)

Constitutional Court Rules that Peace Deal Cannot be Modified for 12 Years, President Santos cites as
Reason to Invest in Colombia
Colombias Constitutional Court ruled that the government must comply with the 2016 peace deal signed
with the FARC for the next 12 years, stymieing opponents of President Juan Manuel Santos who have long
rejected the accord and who may have sought to cancel it following elections in 2018. President Santos
cited the ruling as a sign that Colombia is a serious, responsible country to invest in. President Santos
delivered remarks at an investment seminar and cited the peace agreement as opening up doors for more
than half the country to increase production. Despite the lowered IMF projections, Santos referenced IMF
reasoning that that "the increase in infrastructure spending, the tax reform conducive to investment and
the stimulus that the peace agreement are all factors that must increase growth to about 3.5% in the
medium term."
Business Insider US News

MEXICO
Country Analyst: Jacob Haberman

NAFTA/Pre-Election Drama Continues, Prompting FX and Equity Market Slide


Despite a growth forecast upgrade by the IMF, markets continue to be jittery
after the fourth round of trade talks in Washington D.C. this week. Of particular
note, the U.S. has demanded a sunset clause be included in the agreement that
would force negotiations of the pact every 5 years. On Thursday, Mexican Finance Minister Jose Antonio
Meade said, Mexico [is] analyzing tariffs and import substitution plans in case NAFTA [is] scrapped. His
comments drove the peso to a nearly five-month low of 18.92 against the dollar.

Mexicos former first lady Margarita Zavala also left the PAN party this week to register as an independent
candidate. She is generally seen as the most business-friendly prospect for the countrys next President.
The move could split voters aligned against Lopez Obrador, potentially boosting his chances of winning
the presidency.
EWW is down almost 7% since the end of September, largely driven by these political developments.

Reuters Bloomberg

September Inflation Lower Than 16-Year High in August


September CPI data indicated a 0.31% rise in the index for the month and an annualized inflation rate of
6.35% (below analyst estimates). Transient reductions in public transportation and mobile phone charges
offset higher energy and back-to-school costs. The central bank has maintained its 3% inflation target for
2018.

Wall Street Journal


Mexican CB Governor Gives Updated Macroeconomic Outlook, Does Not Rule Out Future Increases in
Policy Rate
In a recent presentation, Deputy Governor Calafell characterized Mexicos macroeconomic situation by:
1) a gradual deceleration of economic activity combined with a substantial decline in slack in the labor
market; 2) a high rate of inflation, with indications that a downward trend has already begun but with
upside risks; 3) a situation of higher than usual uncertainty. He additionally emphasized prudence in
implementing monetary and fiscal policy, as well as the need for continued efforts to enhance the growth
potential of the country.
Banxico

PERU
Country Analyst: Giulia Martins
Central Bank Keeps Interest Rate Unchanged
On Thursday, Perus central bank decided to keep the benchmark interest rate
at 3.5% matching consensus. The bank cut the rate by 25bps last month, which
became the lowest since November 2015. BCRP highlighted that (i) inflation
returned to the target range, (ii) expectations of inflation in 12 months remain within target, and (iii) the
growth of domestic economic activity continues to be below its potential. The Board of BCRP will approve
the Monetary Program for November on its meeting of November 9, 2017.

Trading Economics BCRP


IMF Changes Perus Economic Forecasts
The IMF released the October World Economic Outlook report this past week. The Fund lowered
Perus GDP forecast from 3.5% to 2.7% in 2017, and increased 2018 forecast from 3.7% to 3.8%. In
terms of consumer prices, the IMF increased Perus 2017 annual change from 3.1% to 3.2%, and
decreased 2018 from 2.6% to 2.3%. Current account projections changed from -1.9% to -1.5% in
2017 and from -2.0 to -1.6% in 2018.
IMF

IMF Forecast Changes for Peru


Indicators Updated Previous
GPD 2017 2.7% (-80bps) 3.5%
Growth 2018 3.8% (+10bps) 3.7%
Consumer 2017 3.2% (+10bps) 3.1%
Prices 2018 2.3% (-30 bps) 2.6%
2017 -1.5% (+40bps) -1.9%
CA Balance
2018 -1.6% (+40bps) -2.0%
Egypt
Country Analyst: Olivia Rockwell

Foreign Purchases of Egyptian Slows


Foreign purchases of Egypt's local-currency debt has finally slowed after a year
of strong sales reaching $18 billion. That puts 30% of Egypt's Treasury bonds in
foreign hands. Investors were drawn to the bonds' high yields and rapid
currency devaluation against the US Dollar. Just as inflation seemed to have peaked since the end of
August, the rate of foreign inflows has slowed to about 2% per week, down from 8% per week. This is
consistent with the Central Bank signaling that it would lower interest rates by the end of the year as
inflation eased. With slowing inflows of foreign investment in government debt, concern over how Egypt
will fund its budget shortfall grows. Another $2b IMF loan is expected at the end of the year, and dollar-
bond sales are also expected early 2018 to meet this gap. Going forward, Egypt will have to attract FDI
to sustainably address this problem.
Bloomberg

IMF Expected to Disburse $2 Billion as 3rd Tranche of Loan


Egypt's Finance Minister is in meetings with the IMF and World Bank this week in Washington DC to
discuss the upcoming IMF review of the loan program. He said he expects the third tranche of the IMF
loan to be disbursed after the second review at the end of October or early November. The amount will
be $2 billion and demonstrates the IMF's confidence in the direction of Egypt's recent economic
reforms.
State Information Service

Greece
Country Analyst: Friederike Kaiser

Greece Makes Slow Progress on Enforcing Prior Actions; Bailout Review Likely
to Drag as a Result
Greece has made slow progress on the prior actions of reform that must be
fulfilled in order to complete the countrys bailout review. Of the 46 actions
Greece planned to implement over the summer, it managed only 20. A total of 95 actions must be
implemented by year-end in order for the bailout review to proceed. The Greek government had hoped
that the bailout review would be signed by Eurozone finance ministers at a scheduled meeting on Dec.
4, but this now seems unlikely.
Ekathimerini
Head of Eurozone says German Election Will Not Affect Greek Bailout
At a meeting in Luxembourg on Monday, the head of Eurozone finance ministers Jeroen Dijsselbloem
stated that Greece's 86-billion-euro bailout would proceed as planned. There were concerns in Greece
that the new German coalition government would take a more hawkish stance on the aid plan and debt
relief for Greece. Dijsselbloem and EU economics commissioner Pierre Moscovici assuaged these
worries, stating that the bailout program could not be changed by individual countries
Ekathimerini

IMF forecasts 2.8% growth for Greek economy in 2018, 2.2% Primary Surplus
In the World Economic Outlook published on Wednesday, the IMF raised Greece's growth forecast for
2018 to 2.6%, exceeding the Greek government's estimate of a 2.4% expansion. However, the IMF is still
wary about the sustainability of Greek national debt after the bailout; it estimates that growth in 2022
will amount to just 1%. Of the many developed countries that achieved higher-than-expected growth,
Greece still ranks among the lowest. The report also forecasts that the primary surplus will amount to
2.2% of GDP. If the IMF insists on the target of 3.5% and the EU insists on the IMFs participation in the
bailout, negotiations of Greeces third bailout review could be dragged out.
Ekathimerini

Greek YoY Inflation Rate Increases 1%, Harmonized Consumer Prices Increase 101.93 Index Points
Greek interest rates increased 1% YoY in September, up from 0.9% in August but missing the 1.1%
market consensus.

Harmonized Consumer Pricesa measure of consumer inflation in the euro area that allows for the
comparison of data across EU countriesalso rose to 101.93 Index Points, up from 100.77 Index Points
in the previous month.
TradingEconomics.com TradingEconomics.com

National Bank of Greeces Euro-Covered Bond Issue Deemed a Success


Last week's covered bond issue by the National Bank of Greece was deemed a success. The bank
obtained 750 million euros at 2.9% (compared to the estimated rate of 3.25%). The bond was
oversubscribed 2.7 times. Officials now estimate that the bank will be able to pay off its ELA mechanism
debt by the end of 2017. The success of this bond issue indicates that other banks may also tap the
markets soon.
Ekathimerini

IMF: Capital Injection for Greek Lenders Depends on How Fast NPLs are Dealt With
At the annual meeting of the IMF and World Bank on Thursday, IMF representatives stated that any
capital injection for local Greek lenders would depend on how fast Greece dealt with NPLs. IMF head
Christine Lagarde also urged the Eurozone to grant Greece a measure of debt relief.
Ekathimerini

Poland
Country Analyst: Jackie Bakalarski
PM Takes Control of all State-Run Enterprises
Polish Prime Minister Beata Szydlo plans to take control over all state-run
companies, Gazeta Wyborcza daily said quoting the bill prepared in Prime
Ministers chancellery. Presently the control is shared by different ministers.
Reuters

LG to Open Europes Largest EV Battery Factory in Poland Next Year


LG is opening Europes largest factory for building lithium-ion batteries destined for use in electric cars,
the company announced. Its LG Chem division is going to open the doors for the facility in 2019 in
Poland near Wroclaw. The facility will be able to supply as many as 100,000 EV batteries per year
beginning next year.
TechCrunch Reuters
Poland Stays Cold on Euro Adoption
Poland will adopt the euro only after the reform of the eurozone has been completed and if there are
strong economic arguments supporting the currencys adoption. According to Leszek Skiba, deputy
minister of finance, the Polish government is currently not taking any measures to enter the eurozone as
the currencys future is not clear. Poland needs a stable and well-functioning eurozone, which buys
Polish products, he continued, during a meeting of the Sejm Committee of Economy and Development.
We are interested in such a eurozone. [] Paradoxically, our standpoint is close to that of the German
government, which is concerned about a eurozone which is too centralised.
Emerging Europe

Russian Federation
Country Analyst: Johnny Kim

IMF Upgrades Russias GDP Growth Outlook for 2017-2018


On Tuesday, IMF upgraded its GDP growth outlook for Russia from 1.4% to
1.8% and 1.4% to 1.6% for 2017 and 2018, respectively. This means that
Russia's GDP decline for 2018 amounts to 0.2%, down from 0.6% as stated in
the previous IMF report published in March. Additionally, the revised outlook said inflation is expected
at 4.2% in 2017 and 3.9% in 2018.

TASS

IMF Predicts Oil Prices to Drop to $50 Per Barrel in 2017-2018


In the World Economic Outlook report published Tuesday, The International Monetary Fund expected
global oil prices to be near $50 per barrel in 2017-2018, down from its April projection of $55. The
forecast goes somewhat against OPECs monthly oil market report published Wednesday, which expects
stronger demand for crude oil next year due to stronger consumption growth and lower estimates for
supply from non-OPEC members.
TASS Financial Times

Key Banking Sector Performance Indicators Continue to Improve in September


According to the Central Banks publication Development of the Russian Banking Sector in September
2017, Russias banking sector saw steady improvements in September even after the financial
rehabilitation of two major banks, B&N and Otkritie. From January to September, lending grew by 4.3%,
with a 2.8% increase in loans to non-financial organizations. In addition, banks retail portfolio increased
by 8.4%, reaching a value of 11.7 trillion rubles. Household deposits showed a 5.2% increase as well
since the beginning of the year.
The Central Bank of the Russian Federation TASS

South Africa
Country Analyst: Arjun Krishnan

Zuma Facing Graft Charges after South Africa Court Ruling


South Africas Supreme Court of Appeal opened the way for reinstatement of
criminal charges against President Zuma by upholding a lower courts ruling
that a decision by prosecutors to scrap them was irrational. The NPA spent
eight years investigating allegations that Zuma took 4.07m rand in bribes from arms dealers and charged
him with corruption, racketeering, fraud and money laundering. The court said that the allegations that
the political machinations had tainted the investigation were irrelevant because they were unconnected
to the integrity of the case against Zuma and the prosecution itself. The judgment comes just two
months before the ruling party elects a new leader to replace Zuma. These charges could damage the
campaign of Nkosazana Dlamini-Zuma, the presidents preferred successor for the leadership of the ANC
in December, and possibly lead to the end of his presidency before 2019.
Bloomberg

Analysts Predict Rand to Rebound against Dollar by Year-End


Analysts at Rand Merchant Bank and ING Groep NV predict the South African currency will rebound
against the dollar by year-end as the pull of improving fundamentals and the hunt for yield will support
buyers amid lingering political and fiscal risks. Although the rand fell to a six-month low of 13.86 per
dollar, investors should be looking to the mid-term fiscal update and the ANCs elective conference and
focus on underlying strengths such as a narrowing trade gap, according to the analysts. The South
African currency has benefitted from carry appeal, low inflationary pressures, and the countrys longest
run of trade surpluses in six years which has helped narrow the current-account deficit.

Bloomberg

South Africa Budget Target a Tough Task


Finance Minister Malusi Gigaba pointed to the need for South Africa to implement both revenue-side
and expenditure-side measures to achieve budget targets and spending priorities. The prediction is that
the mid-term fiscal statement may show revenue collections hamstrung by weak economic growth. The
budget deficit could swell to 4.5 percent of GDP in the current financial year, compared with the 3.1%
shortfall the Treasury forecast in February. Further deterioration in the fiscal consolidation path could
see assessments by Moodys Investors Service and S&P Global Ratings of the countrys local sovereign
debt cut to non-investment grade next month.
Bloomberg

Turkey
Country Analyst: Duy Mai

Turkey US visa dispute


The US suspended visa process for non-immigrant applicants from Turkey
following the arrest of a U.S. Consulate employee. Turkey countered by
extending the same measure to the U.S., significantly raising tensions
between Washington and Ankara. This marks a new low in Turkeys souring relationship with the West.
In response to this incident, the Lira experienced a flash crash, trading 2.8% weaker at 3.71 per dollar on
October 9th. MSCI TUR dropped by 6%, and Borsa Istanbul 100 Index fell by 3%. By the end of this week,
all of these indicators had rallied and recovered.
Bloomberg Investing.com

IMF World Economic Outlook


On Tuesday, October 10th, the International Monetary Fund increased real GDP forecast for Turkey from
2.5% and 3.3% to 5.1% and 3.5% in 2017 and 2018, respectively, to reflect positive economic growth.
These projections are still below the 5.5% target across all 3 years (according to Turkey's medium-term
Program). The Fund also increased the inflation forecast to 10.9% and 9.3% in the next two years
(significantly higher than Turkey's target of 9.5% and 7%, respectively). Turkeys current account deficit
is expected to remain at -4.6% for both 2017 and 2018 (in line with the MTPs targets).
IMF Trading Economics
CHINA
Country Analyst: Kartik Vadlapatla
CPC Central Committee Prepares Proposals for Party Congress
Concluding a four-day meeting in Beijing, the Partys Central Committee
declared in a communiqu that the administration of Chinese President Xi
Jinping has consolidated crushing momentum in its fight against graft,
among other achievements in his first term in power. The committee
completed a policy blueprint and a proposal to amend the partys governing charter that the group of
roughly 330 officials will submit to the upcoming party congress. This years personnel shuffle could
have a far-reaching impact on Chinas political future if Mr. Xi upends party norms by blocking the
promotion of any potential successor. Such a move would enhance his authority and boost his chances
of remaining in office after his second term expires in 2022.
WSJ

PBOC Governor Expects GDP Growth Estimate of 6.9%


Economic indicators show "stabilized and stronger growth" and the momentum of a 6.9% expansion in
the first six months of 2017 that "may continue in the second half," according to a statement by Peoples
Bank of China Governor Zhou Xiaochuan. The effects of a campaign to rein in leverage are showing, and
China will continue to monitor and prevent shadow banking and real estate risk, he said. Zhou is also in
Washington for meetings of the World Bank and International Monetary Fund, the latter of which this
week raised its China growth estimate to 6.8 percent this year and 6.5 percent in 2018, up 0.1
percentage point in each year versus July. The PBOC, which has kept its benchmark lending rate at a
record low for almost two years, announced Sept. 30 that it would reduce how much cash some banks
must hold as reserves from next year, with the size of the cut linked to lending to parts of the economy
where credit is scarce. Meanwhile, the PBOCs new tailored move to steer credit to small businesses,
farmers and startups indicates that leadership remains vigilant about economic growth and is not yet
prepared to ease monetary policy across the board. At the same time, Chinas broadest gauge of new
credit (M2 money supply) exceeded projections, and increased by 9.2 percent, signaling that the funding
taps remain open even as the government pushes to curb excessive borrowing.
Credit measures growth trends: M2, New Yuan loans, Aggregate Financing
Bloomberg

Dim Sum Bonds Demand Picks Up


Offshore yuan-denominated bonds, known as Dim Sum, were less sought after in 2015 owing to a shock
yuan devaluation that rattled global markets and shattered the long-held view that Chinas currency was
headed ever higher. Now that the yuan is on the rise again, the Dim Sum market is coming back to life,
with issuance this year at 20 billion yuan ($3 billion), less than a tenth of the peak of 228 billion ($34.6
billion) in 2014. Analysts anticipate sales to grow even as the onshore Panda Bond market also expands
thanks to a new trading connection with Hong Kong. The yuan has been the top-performing Asia
currency over the past three months, with both the onshore and offshore yuan gaining more than 3
percent against the dollar.

Relative cost difference between onshore and offshore debt versus Renminbi Spot
Bloomberg

U.S. Treasury Secretary Criticizes Lending and Trade Surplus Policies at World Bank Meetings
U.S. Treasury Secretary Steven Mnuchin called for more criticism of trading surpluses and an overhaul of
lending practices at the at the IMFs governing committee meeting on Saturday in Washington. He also
urged the World Bank to reduce the amount of lending it does to middle-income countries that have
developed significant resources on their own, saying World Bank programs should be tailored to help
fully transition these borrowers off donor assistance. Though Secretary Mnuchin did not mention China
by name, both causes apply to the worlds second-largest economy, which is the recipient of the largest
volume of World Bank loans and has one of the worlds most significant trade surpluses. Germany,
South Korea, Thailand, and Singapore are among countries that the IMF says have the most distorted
trade surpluses. Countries with similar per capita incomes to China and with significant levels of World
Bank loans include Mexico, Turkey, and Argentina.
Washington Post

INDIA
Country Analyst: Jason Yoo

Signs of Recovery Post-GST Disruption Emerge


A series of positive economic indicators came out of India this week that
highlighted the transitory nature of some of the recent weakness in the
economy. First, Indias factory output increased at 4.3% in August,
representing a major improvement from the 0.9% growth in July. The
countrys manufacturing sector also expanded at 3.1% in August versus a 0.3% decline in July.

In addition, Indias trade deficit hit a 7-month low of $8.98 billion in September as exports rose 25.7% to
$28.6 billion. Increased exports have eased concerns that GST may have disrupted the activity of
exporters by locking up working capital in tax procedures. Overall, for the first half of the fiscal year,
exports grew 11.5% to $147.2 billion, while imports rose 25.1% to $219.3 billion, resulting in an overall
trade deficit for the period of $72.1 billion.
Meanwhile, retail inflation for September remained unchanged at 3.28% in September from the revised
figure for August. The RBI expects inflation to inch up to between 3.5% and 4.5% for the second-half of
the fiscal year.

LiveMint LiveMint

Volume of Bad Loans Hit Record Highs; December Represents an Important Month for Banking Sector
New data by the RBI indicates that bad loans hit a record of Rs9.5 trillion ($145.56 billion) at the end of
June. Bad loans as a percentage of total loans reached 12.6% at the end of June, representing the
highest level in at least 15 years. Importantly, a dozen of the biggest at-risk loans, as stipulated by the
RBI, account for nearly a quarter of the total non-performing assets in the system. If banks fail to shore
up these NPAs by December 2017, an additional Rs18,000 crore ($28 billion) in NPAs will have to be
recorded. The RBI has given an ultimatum to the banks to either restructure the loans of thirty large
defaulters by December 13th, 2017, or force the debtors into bankruptcy. Banks are currently seeking
regulatory exemption from the RBIs orders, which would massively inflate the NPAs on their balance
sheets. In a sign that high NPAs are negatively impacting credit growth, treasury income for banks has
accounted for 22.7% of their operating profits in the last financial year, doubling its share from a year
ago. Given the negative impact that NPAs are having on economic growth in India, it increasingly
appears as though a government-led recapitalization will be inevitable.
LiveMint The Economic Times

Bankruptcy Framework Extended to Individual Businesses


The Insolvency and Bankruptcy Board of India published draft rules this week that established a clearer
insolvency framework to bring individual businesses under its jurisdiction. Because the existing
insolvency and bankruptcy code applies only to corporate defaulters, the formalization of bankruptcy
rules for partnership and proprietorship firmswhich constitute most SMEs in Indiarepresents a
significant step in the government's goal to reform India's bankruptcy framework. Currently, only
archaic insolvency rules govern bankruptcies for individual businesses.
LiveMint

Construction Growth Slows as Stalling Increases


The stalling rate on construction projects in India was at its third-highest level in nine years at 12.7% in
September after hitting a nine-year high of 13.3% in the June quarter. The commercial real estate sector
has fared worse than the residential real estate sector, with a fifth of such projects getting stalled.
LiveMint

INDONESIA
Country Analyst: Katrina Knisely
Indonesia Investigates Standard Chartered $1.4 billion Transfer
The Indonesian government is investigating reports that $1.4 billion held by
Standard Chartered in Guernsey on behalf of 81 Indonesian citizens was
transferred to Singapore just before a new tax transparency program took
effect in Guernsey in 2015, according to tax and regulatory officials. Officials confirmed that no names
from Indonesian military, police or other law enforcement were on the client list, contradicting earlier
reports. The Indonesian government last year had launched a tax amnesty scheme to crack down on tax
evasion and encourage taxpayers to bring back billions of dollars stashed abroad, mostly in Singapore.
Bloomberg Wall Street Journal

Indonesias Supreme Court upholds water rights in Jakarta amid privatization concerns
In a landmark ruling released this week, Indonesias Supreme Court (Mahkamah Agung)
ordered the government to restore public water services in the capital city of Jakartathe second-
largest urban agglomeration in the worldafter finding that two private utility companies failed to
protect citizens right to water. The April ruling was the result of a class-action lawsuit that argued the
private companies deliberately discriminated against poor customers, to whom lower water tariffs were
guaranteed, to prioritize higher-revenue service to wealthier consumers. Many are suspicious as to why
the ruling was announced six months after it was issued, citing concerns over conflict of interest after
elected officials sold off stakes in the private water consortia. The decision is a blow to the government,
which has been actively inviting private investment in infrastructure, including in the water supply.
Jakarta Post The Australian
Malaysia
Country Analyst: Gregory Bernstein
Malaysia Halts Imports from North Korea Amidst Increasing International
Sanctions
Following Prime Minister Najibs visit to the White House last month, there
has been increasing speculation that his meeting with President Trump on
North Koreas nuclear threat would result in some action regarding one of
Malaysias regional trading partners. At the same time, ties between the two Asian countries have been
deteriorating since the assassination of Kim Jong Uns half-brother in the Kuala Lumpur airport in
Feburary. This week, it was announced that Malaysia would cease all imports from North Korea.
Malaysia already had not bought any goods from the regime during June and July, after purchasing
RM20.6 million in the first five months of 2017. Malaysia has historically been a major source of revenue
for the Kim regime, importing goods such as coal and medical devices, as well as smaller volume goods
such as light emitting diodes, crabs, noodles, clothes hangers and fire extinguishers. Despite the import
halt, Malaysia will continue exporting to North Korea, mostly palm oil and medical supplies.
Reuters The Star

Thousands Attend Rally in Support of the Removal of Malaysian Prime Minister


Months ahead of the 2018 election, pressure continues to circulate regarding the 1MDB scandal and
Malaysian Prime Minister Najib Razak. More than 25,000 gathered in Kuala Lumpur this past Saturday to
demand action against Najib after he reportedly oversaw the mismanagement of billions in a state fund.
The rally was promoted as the end of a two-month campaign by the opposition party, Pakatan Harapan
(PH), to demand greater accountability and the ouster of Razak in the election. Although hampered by
the scandal, the Prime Ministers party, Barisan Nasional, is not expected to suffer in 2018 as continued
economic growth and a stronger ringgit continue to bolster Najibs position.
Channel NewsAsia GEO

Renewal of ASEAN Swap Agreements Between Central Banks at World Bank / IMF Annual Meetings
On the sidelines of the World Bank / IMF meetings in Washington this week, Malaysias central bank,
Bank Negara Malaysia, announced that the ASEAN central banks and monetary authorities agreed to
renew the ASEAN Swap Agreements (ASA) for another two years, which will take effect officially on 17
November. Slated to provide USD 2.0billion in financial support to the region, the ASA is part of regional
initiatives designed to promote financial stability through the provision of short-term liquidity support
for member countries that are experiencing temporary balance of payment difficulties.
BNM Press Release
PHILIPPINES
Country Analyst: Bilal Kayani

Exports and Imports Growth Surges in August 2017


The countrys total external trade in goods in August 2017 totaled $13.42
billion, an increase of 10 percent from $12.20 billion registered in August
2016. Total exports rose by 9.3 percent to $5.51 billion in August 2017 from
$5.04 billion in the same month of previous year. This growth is attributed to
increases of seven out of the top ten major commodities for the month: gold (186.7%), machinery and
transport equipment (75%), electronic equipment and parts (71.3%), coconut oil (61.2%), metal
components (22.6%), and other manufactured goods (13.8%). Likewise, total imports increased by 10.5
percent to $7.92 billion August 2017 from $7.17 billion in August 2016. The increase in imports was due
to the positive performance of nine out of the top ten major import commodities; ores and metal scrap
(718%), organic and inorganic chemicals (27.6%), mineral fuels and lubricants (23.8%),
telecommunication equipment and electrical machinery (11.3%), iron and steel (10.9%), food and live
animals (9.7%) and industrial machinery and equipment (6.2%). This resulted in a deficit in the country
balance of trade in goods amounting to $2.41 billion in August 2017; higher than the $2.13 billion in
August 2016.

PSA

SOUTH KOREA
Country Analyst: Beatrice Gohdes
Samsung Expects Record Profits Amid Leadership Crisis
Samsung, which makes up over 30% of the Korean MSCI ETF and 4.5% of the
MSCI emerging markets index, announced it expected an almost threefold
increase in profits this quarter YoY, putting it on track to report its best
annual results so far. The Galaxy Note 8 seems to have consoled consumers
after the Note 7 mishaps of last year, which in tandem with continuously
strong demand for microchips, of which Samsung is the worlds largest vendor, is likely to be responsible
for the positive news. At the same time, Samsung's CEO Kwon Oh-Hyun announced his resignation as
the grandson of the company's founder faces corruption charges, alluding to the company being in
unprecedented crisis despite record financial performance.
Washington Post Market Watch

IMF Global Economic Outlook upgrades Korea


The IMF Global Outlook, released this week, upgrades Korean GDP growth to 3% in 2017 and expected
growth from 2.8% to 3% for 2018 as business investments picked up despite geopolitical turmoil.
Inflation is projected to be at 1.9%.
IMF Press Conference IMF WEO October 2017

IMF

South Korea and China Extend Currency Swap Amid Conflict over US Missile Defense System
At the IMF and WB annual meetings in Washington D.C. this week, Korean officials announced that the
South Korea - Chinese currency swap deal will be prolonged for another 3 years. This allows the
countries to borrow from the other in their own currency, adding stability to financial
markets and boosting trade in what could be turbulent times ahead on the Korean Peninsula. Coming
after half a year of souring of relationships over the U.S. missile defense system deployment, this is a
positive sign that relations are not deteriorating further. Chinese media had called on people to boycott
Korean goods, leading to a negative impact on Korean businesses such as Hyundai, which saw its sales
halved in the first six months of the year.
ABC News
TAIWAN
Country Analyst: Nikunj Beria
Taiwan Exports Jump to Year-on-Year All-time High
Taiwan exports beat forecasts and jumped to an all-time high of $28.90
billion in September 2017. China accounted for 42.1% of total sales, an
increase of 29.6% compared to the previous period. The majority of the sales
was in parts of electronic products (35.2%); information, communication and
audio-video products (10.7%); base metals and article of base metals (8.9%); and Machinery (7.9%). The
markets reached an all-time high with the export rate exceeding earlier projections.

Tradingeconomics

Taiwan's Trade Surplus Reaches All-time High


Taiwan posted a trade surplus of $6.69 billion in September 2017, higher than a $4.37 billion surplus a
year earlier and above market expectations of $5.34 billion. Imports went up 22.2% to $22.20 billion, led
by purchases of parts of electronic products (19.9%); mineral products (16.8%) and chemicals (10.6%),
while imports of machinery declined 7.3%. Imports from China accounted for 20.6% of the total and
increased 27.6%.

Tradingeconomics
THAILAND
Country Analyst: Christian Conroy
Thai Prime Minister Says Elections Will Take Place in November 2018
Thai Prime Minister Prayuth Chan-Ocha told reporters in Bangkok on Tuesday,
October 10th that elections will take place in the country next year. Although
Thai National Assembly President Pornphet Wichitchonchai had originally
speculated that the election would not occur until the first half of 2019 due to the need to put relevant
laws in place first, the Prime Minister assured reporters that elections would take place in November
2018 with the exact date to be settled upon next June. The announcement came during a lunchtime
break in trading for the Thai SET and advanced the benchmark index by 0.9 percent by market close.

Bloomberg
Appendix: Macroeconomic Overview

LATAM
Indicator Latest ( to previous) Reference Period Frequency
Brazil
GDP Growth 0.2% (-0.8%) Sep 2017 Quarterly
Inflation Rate 2.54% (-9.23%) Sep 2017 Monthly
Interest Rate 8.25% (-1.0%) Sep 2017 (8th cut this year)
Debt-to-GDP Ratio 69.5% (6.2%) Dec 2016 Annual
Fiscal Balance -9.0% (+1.2%) Dec 2016 Annual
CA Balance -1.3% (2.0%) Dec 2016 Annual
Chile
GDP Growth 0.7% (0.6%) Jun 2017 Quarterly
Inflation Rate 1.5% (-0.4%) Aug 2017 Monthly
Interest Rate 2.50% (unch) Sep 2017 Monthly
Debt-to-GDP Ratio 21.3% (3.9%) Dec 2016 Annual
Fiscal Balance -2.2% (-0.6%) Dec 2016 Annual
CA Balance -1.4% (0.6%) Dec 2016 Annual
Colombia
GDP Growth 1.3% (0.2%) Aug 2017 Quarterly
Inflation Rate 3.97% (0.1%) Aug 2017 Monthly
Interest Rate 5.25% (unch) Sep 2017 Last lowered Aug 2017
Debt-to-GDP Ratio 47.6% (-3.1%) Dec 2016 Annual
Fiscal Balance -3.8% (-0.7%) Dec 2016 Annual
CA Balance -4.4% (2.0%) Dec 2016 Annual
Peru
GDP Growth 1.55% (-2.0%) Jul 2017 Monthly
Inflation Rate 2.94% (-0.23%) Sep 2017 Monthly
Interest Rate 3.50% (-0.25%) Sep 2017 Monthly
Debt-to-GDP Ratio 25.6% (2.6%) Dec 2016 Annual
Fiscal Balance -2.6% (-0.5%) Dec 2016 Annual
CA Balance -2.8% (1.6%) Dec 2016 Annual
Mexico
GDP Growth 1.8% (-1.0%) Q2'2017 Quarterly
Inflation Rate 6.35% (-0.2%) Sep 2017 Monthly
Interest Rate 7.0% (unch) Sep 2017 ~Monthly
Debt-to-GDP Ratio 58.5% (4.8%) Dec 2016 Annually
Fiscal Balance 2.9% (1.2%) 2016 Annual
CA Balance -2.7% (+0.1%) Dec 2016 Annual

EMEA
Indicator Latest ( to previous) Reference Period Frequency
Egypt
GDP Growth Rate 3.4% (-1.1%) Sep 2017 Quarterly
Inflation Rate 31.6% (-0.03%) Sep 2017 Monthly
Interest Rate 18.75% (unch) Oct 2017 Daily
Debt-to-GDP 92.3% (+7.3%) Dec 2016 Annual
CA Balance -5.9% (-2.3%) Oct 2017 Annual
Fiscal Balance -9.8% (+1.8%) Dec 2016 Annual
Greece
GDP Growth Rate 0.5% (unch) Jun 2017 Quarterly
Inflation Rate 0.9% (-0.1%) Aug 2017 Monthly
Interest Rate 0% (unch) Sept 2017 Monthly
Debt-to-GDP 179.0% (+0.9%) Dec 2016 Annual
Fiscal Balance 0.7% (+6.6%) Dec 2016 Annual
CA Balance -0.6% (-0.7%) Dec 2016 Annual
Poland
GDP Growth Rate 1.1% (0%) Jun 2017 Quarterly
Inflation Rate 2.2% (0.4%) Sep 2017 Monthly
Interest Rate 1.5% (0%) Oct 2017 Daily
Debt-to-GDP 54.4% (+3.3%) Dec 2016 Annual
Fiscal Balance -2.4% (+0.2%) Dec 2016 Annual
CA Balance -0.3%(+50%) Jun 2016 Annual
Russia
GDP Growth Rate 2.5% (+2.2%) Aug 2016 Annual
Inflation Rate 3.0% (-0.3%) Sep 2017 Monthly
Interest Rate 8.5% (-0.5%) Sep 2017 Daily
Debt-to-GDP 17% (-1.1%) Dec 2016 Annual
Fiscal Balance -3.7% (-1.1%) Dec 2016 Annual
CA Balance 1.8% (-3.3%) Jun 2017 Annual
South Africa
GDP Growth 2.5% (-0.6%) Jun 2017 Quarterly
Inflation Rate 4.8% (+0.2%) Aug 2017 Monthly
Interest Rate 6.75% (unch) Sep 2017 Daily
Debt-to-GDP Ratio 51.7% (+2.4%) Dec 2016 Annual
Fiscal Balance 3.9% (+0.2%) Dec 2016 Annual
CA Balance to GDP 3.3% (+25.0%) Jan 2017 Annual
Turkey
GDP Growth Rate 2.1% (+0.8%) Sep 2017 Quarterly
Inflation 11.2% (+ 0.62%) Sep 2017 Annual
Interest Rate 8% (unch) Sep 2017 Quarterly
Debt-to-GDP 28.3% (+0.8%) Dec 2016 Annual
Fiscal Balance -1.1% (-0.1%) Dec 2016
CA Balance - 3.8% (-0.1%) Dec 2016 Annual

ASIA
Indicators Latest ( to previous) Reference Frequency
China
GDP Growth Rate 6.90% (unch) July 2017 Quarterly
Inflation Rate 1.80% (+0.4%) Aug 2017 Monthly
Interest Rate 4.35% (unch) Sep 2017 Daily
Debt-to-GDP 46.20% (-0.4%) Dec 2016 Annual
Fiscal Balance -3.8% (-1.5%) Dec 2016 Annual
CA Balance 1.80% (-0.9%) Dec 2016 Annual
India
GDP Growth Rate 5.7% (-0.4%) Apr 2017 Quarterly
Inflation Rate 3.28% (+1.0%) Sep 2017 Monthly
Interest Rate 6.00% (unch) Aug 2017 Next meeting Oct 2017
Debt-to-GDP 69.50% (-0.1%) Dec 2016 Annual
Fiscal Balance -3.2% (+0.3%) Feb 2017 Annual
CA Balance -2.4% (+0.36%) Dec 2016 Quarterly
Indonesia
GDP Growth Rate 5.01% (unch) June 2017 Quarterly
Inflation Rate 3.72% (-0.10%) Sep 2017 Monthly
Interest Rate 4.25% (-0.25%) Sep 2017 Daily
Debt-to-GDP 27.90% (+1.00) Dec 2016 Annual
Fiscal Balance -2.46% (+0.12) Dec 2016 Annual
CA Balance -1.80% (+0.20) Dec 2016 Annual
Malaysia
GDP Growth Rate 1.3% (-0.5%) Jun 2017 Quarterly
Inflation Rate 3.7% (+0.5%) Aug 2017 Monthly
Interest Rate 3.0% (unch) Sep 2017 Update expected Nov 9th
Debt-to-GDP 53.2% (-1.3%) Dec 2016 Annual
Fiscal Balance -3.2% (+0.3%) Dec 2015 Annual
CA Balance 1.3% (-1.5%) Dec 2016 Annual
Philippines
GDP Growth Rate 6.5% (+0.1%) Jun 2017 Quarterly
Inflation Rate 3.4%(+9.68%) Sep 2017 Monthly
Interest Rate 3.0% (+0.0%) Sep 2017 Next meeting Nov 9
Debt-to-GDP 42.1% (-2.95%) Dec 2016 Annual
Fiscal Balance -2.4% (-1.5%) Dec 2016 Annual
CA Balance 0.2% (-0.5%) Dec 2016 Annual
South Korea
GDP Growth Rate 2.7% (-0.3%) Jun 2017 Quarterly
Inflation Rate 2.1% (-0.5%) Sep 2017 Monthly
Interest Rate 1.25% (unch) Aug 2017 Last cut Jun 2017
Debt-to-GDP 38.6% (+0.8%)) Dec 2016 Annual
Fiscal Balance -2.4% (-0.6%) Dec 2016 Annual
CA Balance 6.99% (-0.71%) Dec 2016 Annual
Taiwan
GDP Growth Rate 2.13% (-0.53%) Jun 2017 Quarterly
Inflation Rate 0.5% (-0.46%) Sep 2017 Monthly
Interest Rate 1.38% (unch) Sep 2017 Daily
Debt-to-GDP 31.2% (-0.4%) Dec 2016 Annual
Fiscal Balance -1.4% (+0.1%) Dec 2016 Annual
CA Balance 13.4% (-0.9%) Dec 2016 Annual
Thailand
GDP Growth Rate 3.7% (+0.4%) June 2017 Quarterly
Inflation Rate 0.86% (+0.54%) Sep 2017 Monthly
Interest Rate 1.5% (+0.0%) Sep 2017 Daily
Debt-to-GDP 41.2% (-2.7%) Dec 2016 Annual
Fiscal Balance -2.7% (-.02%) Dec 2016 Annual
CA Balance 11.5% (3.5%) Dec 2016 Annual