INVESTMENTS IN EMERGING MARKETS

GBUS 448
Global Markets Report
October 23 October 27

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

Rushika Shekhar Arjun Krishnan Christian Conroy Friederike Kaiser

Highlights
LATAM:
Brazils central bank lowers interest rate; Chamber of Deputies votes against President Temers
indictment.
Former president Sebastian Piera maintains lead in polling ahead of Chiles election.
Colombian central bank lowers interest rate 8th time in 2017.
Volatility continues in Mexican markets amidst U.S. threats against NAFTA.
Perus stock market ends week with mixed results.

EMEA:
IMF is visiting Egypt for second bailout review amid favorable economic indicators.
Negotiators from Greeces creditors returned to Athens on Monday to review the terms of
Greeces third bailout.
The unemployment rate in Poland fell to a new low of 6.8 percent.
In Russia, Qatar Investment Authority is in talks with CEFC and Glencore to take a $1 billion stake
in Russian hydropower-to-aluminum conglomerate EN+, ahead of the Russian companys
scheduled $1.5 billion IPO next month.
The South African finance ministers midterm budget announcement is bleak, raising the risk of
credit downgrade.
Turkeys central bank maintained the status quo on its interest rates due to wariness of inflation.

ASIA:
In China, President Xi enshrines legacy in charter and introduces Politburo Standing Committee
members.
Indian government increases recapitalization plan; injects Rs2.11 trillion into public sector bank.
Indonesian parliament approves budget with 85% of revenue coming from taxes.
Malaysian PM announces RM 260.80B ($61.5 billion) budget proposal with highest-ever aid
package.
Philippine banking sector strengthens financial buffers; NPL ratios shrink; lending activities rises.
US Treasury removal of Taiwan from monitoring list eliminates risk of possible sanctions.
South Korea announces increase in minimum wage by 16.4% next year and by 55% until 2020
Bank of Korea holds interest rate at 1.25% and revised GDP growth projection up to 2.8%.
Thai cabinet approves amendment to strategic plan for public-private partnerships to guide 1.62
trillion baht worth of investments.
 BRAZIL
Country Analyst: Antonio Quintanilla
Central Bank Lowers Target Rate
The Central Bank lowered the target rate by 75 basis points from 8.25% to 7.50%. The
cut had been anticipated and analysts believe that the rate will be 7% by the end of the
year. The plunging inflation rate and slow recovery has led to the drastic cuts in interest
rates this year.
Trading Economics

President Temer Avoids Indictment

The Chamber of Deputies held the final vote on President Michel Temers second indictment. The lower house
voted against proceeding with the indictment, albeit with a smaller margin than the first indictment earlier this
year. In order to encourage lawmakers to vote against the charges, the administration promised them the
president would tone down his reformist agenda.
Bloomberg

Brazil Holds Auction of 8 Pre-salt Blocks

After a court injunction, the government was able to move ahead with the auctioning of 8 of its pre-salt blocks.
These blocks are estimated to hold about 12 billion barrels of reserves. The government was able to bring in USD
1.8 billion of much needed revenue from the auctions. International consortiums won six of the eight blocks.
Financial Times
 CHILE
Country Analyst: Chandler Payne
Piera Maintains Lead in Polling
Former president and pro-business candidate Sebastian Piera slightly widened his lead
in first-round voter preference. Polling center CEP said on October 25 that Piera holds
32.8% of first-round votes, up from 31.3% in CEPs last poll in September. The increase
is within the margin of error of 3.0%. According to the poll, he is also seen defeating his two closest rivals in a
likely runoff. Piera suggested on Wednesday that he will seek to consolidate centrist votes going forward, and
not niche, far-right votes. The first round of elections will be held November 19.
Reuters La Tercera

COLOMBIA
Country Analyst: Rushika Shekhar
Central Bank Surprises Market by Lowering Interest Rate 25 Basis Points
Colombia's central bank unexpectedly lowered the benchmark interest rate 25 basis
points from 5.25% to 5%, as policymakers seek a boost to economic growth even amid
uncertainty about the rate of inflation. The move continues a year-long rate-cutting
trend but surprised the market consensus, which expected the Banco de la Repblica to leave the rate steady
for the second straight month. Markets rose slightly (Colcap main index - rose 0.06%) in response to the
decision.

Trading Economics Finance Colombia Markets Insider

 MEXICO
Country Analyst: Jacob Haberman
Banxico Intervenes in FX Market, Volatility Continues Amid Trump Threats
Mexicos exchange committee said that it will accelerate the $20 billion swap program
that was announced last February and auction $4 billion in swaps before December 6th.
The peso strengthened by as much as 1.3 percent to 18.9829 per dollar on the news.
Neil Shearing, Chief Emerging Markets Economist at Capital Economics: Past form suggests that the FX swap
auctions should provide some relief for the currency, but that this could be fleeting. The prospects for the peso
over the next couple of months will determined by whether NAFTA talks can get back on track. Were
increasingly concerned.The peso sold off later in the week after President Trumps interview with Foxs Lou
Dobbs, in which the President stated that he thought it was necessary to terminate NAFTA in order to achieve
a better deal.

Financial Times

Carstens: Banxico Must Be Patient Before Cutting Rates

Before leaving the helm of Banxico for a new role at the Bank for International Settlements, Governor Carstens
said that Banxico should not be in a hurry to cut interest rates at a time when inflation is still above target and
the peso vulnerable to economic uncertainty. Most analysts expect the central banks next move to be an
interest-rate cut next August, though Governor Carstens doesn't foresee inflation approaching the banks
target until the end of 2018.
Wall Street Journal
YoY Economic Activity Index Increased 2.3% in October, Beating 1.5% Forecast

October 1st Half-Month CPI Meets Expectations of 0.62% Reading

PERU
Country Analyst: Giulia Martins
Lima Stock Market Ends Week with Mixed Results
In light of a stronger dollar, Copper prices fell leading to a drop on metal stocks. Gains
in Banking & Financials, Industrial and Non-Metal Minerals led shares higher. The
opposite trends made the general index to increase 0.04%, but the referential (which
encompasses the most liquid shares) to decrease 0.15%.
Investing.com Gestion
 Egypt
Country Analyst: Olivia Rockwell
IMF Visiting Egypt for Second Review of Bailout
The economic growth rate increased during the last quarter of 2016/17 to 4.8
percent, while the unemployment rate decreased to 11.9 percent in 2017,
compared to 12.7 percent in June 2016, according to official data. Egypt's
foreign reserves registered $36.535 billion at the end of September 2017, continuing the surge over the
past few months. The country's initial budget deficit decreased by 50 percent during 2016/17, falling by
1.8 percent of GDP compared to 3.6 percent in 2015/16.
Al Ahram

Chinese Investment in Egypt Grows

A three-day forum for Chinas One Belt One Road took place in Egypt this week, highlighting Chinas
recent $3.2 billion investments in building a new administrative capital next to Cairo, a $2b oil refinery,
and several significant rail projects in Egypt.
Enterprise Egypt

Investment Act Reforms Finalized

The Executive Regulations for a new Investment Act were released this week, which is meant to pave
the way for more foreign investment into Egypt. The most important reform is the guarantee that
foreign investors have the right and ability to repatriate their profits and earnings. Potential problems
with the regulations include a 10% foreign employee limit, and a 50% local content requirement.
Enterprise Egypt

Greece
Country Analyst: Friederike Kaiser
Mission Chiefs of Greeces Creditors in Athens for Third Bailout Review
Negotiators from Greeces creditors returned to Greece on Monday to review
the terms of Greeces third rescue package. EU and IMF officials will discuss the
need for further reforms and review the government budget to determine
whether it will meet the 2018 surplus targets. The negotiators will likely call on the Greek government to
use the budget surplus to reduce arrears and create a cash buffer before Greece exits its bailout
program. A major concern is the fact that Greece has only completed 22 of the 95 prior actions required
for the third bailout review, a third of which relate to politically sensitive privatizations. Another hurdle
in the review process will be the state of Greek banks. European lenders like the ECB will further
increase pressure on Greek banks to reduce their shares of non-performing loans.
Ekathimerini

Greece Receives 800 Million Euros in Bailout Funds for the Repayment of Arrears
Greece received an extra 800 million euros on Thursday from the European Stability Mechanism (ESM)
to further clear the countrys arrears. ESM Managing Director Klaus Regling noted that Greece had made
progress on its financial reforms, outperforming the targets it had set regarding the clearance of arrears.
This brings the total of EU bailout funds for Greece to 182 billion euros.
Investing.com

Greek Current Account Surplus Grows to 1.83 Billion Euros

Greeces current account surplus increased to 1.83 billion euros in August 2017, compared to 1.66
billion euros in the same month in 2016. This is the largest current account surplus Greece has seen
since August 2015. A notable development was the 588 million euro rise in the surplus of services
balance, with tourism increasing to 3.52 billion euros from 3.02 billion in the same month a year earlier.
There was also a rise in the deficit balance of goods, attributable mainly to a rise in the deficit of the oil
balance.

Bank of Greece TradingEconomics.com

European Central Bank to Taper Stimulus Slowly

The European Central Bank (ECB) announced Thursday that it was halving back its bond-buying to 30
billion euros per month, but will extend the program beyond September 2018 if necessary. Greece is not
currently part of the ECBs bond-buying program. ECB President Mario Draghi stated that the move
indicates confidence in Europes economy. The crisis in high debt countries has eased somewhat. There
was no change in interest rates.
WSJ

Revised Eurostat Data Reveals Lower Budget Surplus and Higher Debt in 2016 than Estimated
Revised data from the EU statistics office Eurostat reveals that in 2016 Greeces budget surplus was
actually lower than estimated, coming in at 0.5% surplus versus the previous 0.7% estimate. Greeces
debt had also been estimated at 179.0% of GDP, but Eurostat now says that 180.8% is more accurate.
These figures coincide with last weeks announcement that Greek was actually in recession in 2016.
Greeces higher debt figures could make exiting the bailout program by August 2018 more difficult.
Reuters

Poland
Country Analyst: Jackie Bakalarski

Employees Market in Poland, With Decreasing Unemployment

Joblessness in Poland fell to a new low of 6.8 percent in September, the
countrys Central Statistical Office (GUS) said earlier this week. What is
pleasing is the increasing interest in employing the 50-plus group, but the
unemployment rate among young people under 30 is also falling. Rafalska added: If we add to that the
factor of rising wages, no one today in Poland has the slightest doubt that we have an employees
market. She warned, however, that such a situation meant challenges that would have to be faced "so
that the economy is not limited by a lack of workers on the Polish market, which already looks to the
countrys eastern neighbors to supply staff.
Radio Poland

Poland's PM Szydlo to reshuffle Cabinet Soon

The governing Law and Justice (PiS) party is planning to get rid of some ministers weighing on the partys
broadly positive popularity ratings as it prepares for regional elections in 2018. On Monday, weekly Sieci
Prawdy suggested Szydlo, 54, might herself be replaced by Jaroslaw Kaczynski, who heads the right-wing
PiS to which they both belong. Tabloid Fakt said on Tuesday that Szydlo was likely to keep her job, but
that others including Foreign Minister Witold Waszczykowski and Environment Minister Jan Szyszko --
both relatively unpopular among the electorate -- might be replaced.
Reuters

Russian Federation
Country Analyst: Johnny Kim
Qatar Considers Joining CEFC and Glencore to Invest in Russias EN+ Ahead
of $1.5 billion IPO
Qatar Investment Authority is in talks with CEFC China Energy and Anglo-
Swiss commodity trader Glencore in taking a $1bn stake in Russian
hydropower-to-aluminum conglomerate EN+, ahead of EN+s scheduled
$1.5bn IPO in London and Moscow next month. CEFC, a private energy group, has already agreed to buy
$500m of stock as part of the offering. This effort represents Qatars growing interest in Russia. If it goes
through, EN+s IPO would be the first IPO of a Russian company in London since Moscows 2014 invasion
of Crimea. It would also act as a key test of western investor sentiment in the heavily sanctioned
country.
Financial Times Financial Times
US Introduces New Sanctions Aimed at Compromising Russias Thriving Defense Industry
On Friday, US authorities unveiled a list of Russian organizations and agencies, in an attempt to ban third
parties from dealing with them at the risk of sanctions. The names on this list, some of which are already
on the US blacklist, include defense sector enterprises like Kalashnikov Group, Russian Technologies
State Corporation (Rostec), Admiralty Shipyard, Almaz-Antey Air and Space Defense Corporation, Izhevsk
Mechanical Plant, and Rosoboronexport. According to the Chairman of State Duma Defense Committee,
these sanctions come as Russias military-industrial complex has demonstrated its efficiency and
competitiveness to the world.
TASS

OPEC+ to Make Final Decision on Extension of Oil Deal in Early 2018

Just as Brent crude reached $60 a barrel for the first time since 2015, Russian Energy Minister Alexander
Novak stated that the decision for a possible OPEC+ oil production cut extension will be discussed on
November 30 but finalized in early 2018. According to Novak, the decision will depend on the market
situation. While it is expected that the deal will go through, if the balance of global oil reserves is
reached by April, there will be no need for an extension.
TASS

South Africa
Country Analyst: Arjun Krishnan
Finance Ministers Midterm Budget Announcement Dismal
Finance Minister Malusi Gigabas mid-term budget displayed a bleak picture
for the South African economy. The rand slid to the lowest in almost a year,
with the economy set to expand 0.7 percent this year, down from 1.3 percent
predicted in the February budget. Yields on the nations bonds rose as the projections raised the risk of
further credit rating downgrades, with the nations debt already rated junk by S&P Global Ratings and
Fitch Ratings Ltd. Lower growth and revenue will result in a higher budget deficit. The gap is expected to
jump to 4.3 percent of GDP in the current FY, up from a project 3.1 percent. The shortfall will probably
stay at 3.9 percent of GDP for the next three years.
Bloomberg Bloomberg

Zuma Rejects Tax Allegations

President Jacob Zuma rejected allegations in a book that he failed to file tax returns for the first five
years of his term and said he has not benefitted from receiving undeclared funds. In an emailed
statement, Zuma suggested that such claims are part of ongoing smear campaigns. Investor confidence
overall in South Africa has been damaged by the Presidents implication in various scandals, including
the accusation that he has allowed members of the wealthy Gupta family to loot billions of rand from
state companies.
Bloomberg

Turkey
Country Analyst: Duy Mai
Turkeys Central Bank Maintains Interest Rates Level
As expected, the TCMB has been wary about inflation and has retained tight
monetary stance, including high interest rate, to battle the CPI surge
recently. The central banker keeps marginal funding rate at 9.25%, Central
Bank borrowing rate at 7.25%, one-week repo rate at 8%, Late Liquidity Window borrowing rate at 0%
and lending rate at 12.25%.

One-week repo rate

TCMB Trading Economics

 CHINA
Country Analyst: Kartik Vadlapatla

Communist Party Congress Revises Charter to Enshrine Xi Legacy

The Communist Party approved a sweeping charter revision at the end of its
twice-a-decade congress Tuesday that elevates President Xi Jinping to a
status alongside Mao Zedong and Deng Xiaoping and declares him the partys
core leader indefinitely. The document listed Xi Jinping thought on
socialism with Chinese characteristics for a new era alongside those of Mao and Deng. The Xi Jinping
era is being characterized as the third era of CCP history, with the previous being the Mao and Deng
eras, said Andrew Polk, co-founder of research firm Trivium China in Beijing. He is establishing a new
imperial political system, said Du Guang, a former researcher at the Central Party School, the partys
think-tank in Beijing, and with the amendment of the party charter and the installation of his own
people on the Central Committee, he can do whatever he wants in the next five years and beyond.
Bloomberg

President Xi Jinping Unveils Standing Committee Members at 19th Party

Chinese President Xi Jinping unveiled a Politburo standing committee roster that didnt include an
explicit potential heir, breaking with a quarter-century-old succession system. Established in 1992 as an
aging Deng Xiaoping sought to ensure stability following the bloody Tiananmen Square crackdown, the
succession framework calls for party chiefs to hand over power after two, five-year terms, and identify a
successor by the halfway point, where Xi is now. The framework also set an unwritten retirement age of
68. All five men appointed to join Xi and Premier Li Keqiang on the Politburo Standing Committee will be
too old to rule after Xi finishes his second term. Those promoted were Xis Chief of Staff, Li Zhanshu, 67;
Vice Premier Wang Yang, 62; party theorist Wang Huning, 62; new anti-graft chief Zhao Leji, 60; and
Shanghai party secretary Han Zheng, 63. The larger 25-member Politburo, however, featured three
younger officials who could potentially succeed Xi, including Chen Miner, 57, Chongqing party chief and
former Xi aide; Ding Xuexiang, 55, who appears in line to become Xis new chief of staff; and Hu
Chunhua, 54, Guangdong party chief and the protege of Xis predecessor. While Xi could still promote a
successor at any point, Joseph Fewsmith, a political science professor at Boston University who has
studied Chinas elite politics for more than 30 years, said that Xi is likely to serve at least three terms.
Bloomberg

China Central Bank Sells 63-day Reverse Repos

Chinas central bank injected 63-day money into the financial system for the first time, reassuring
lenders about year-end funding availability while also intensifying a deleveraging drive by increasing
costs. The Peoples Bank of China offered 50 billion yuan ($7.5 billion) of 2.9 percent 63-day contracts,
according to a statement posted on the PBOC website, as well as 90 billion yuan ($13.5 billion) through
one-week and 14-day contracts. For lenders, the longer-term funds, though more expensive, are a
safeguard against any unexpected or swift liquidity squeezes as year-end regulatory checks loom and
the PBOC focuses on paring back leverage in the financial system. Chinas bond and money markets
have been under pressure this month, with the 10-year yield rising to the highest level since 2014. The
cost of the two-month contracts also helps to fill in the gap in the interest rate curve between the one-
month reverse repo rate and the three-month Medium-term Lending Facility, said Li Liuyang, a
Shanghai-based analyst at China Merchants Bank Co.

The central bank has been stepping up injections recently, providing a total of 950 billion yuan ($142.8
billion) in open-market operations over the past two weeks, the most over a two-week period since
January. The introduction of two-month agreements may lead to a reduction in the amount of money
offered via shorter-term contracts, and consequently a higher average cost of funds provided to the
banking system, Ji Linghao, an analyst at Huachuang Securities Co., said before Fridays operations.
Bloomberg

Chinese Banks Issuing Tier 1 and Tier 2 Bonds

Chinese banks of all sizes have recently been issuing bonds that count toward their capital for regulatory
purposes. This week, Chinas largest bank, ICBC, said it could issue up to 88 billion yuan ($13 billion) of
compliant bonds before the year-end, while Postal Savings Bank issued Asias largest-ever regulatory-
compliant bond last month, raising $7.5 billion. Layers of capital act as cushions for banks in times of
stress. Tier 2 capital is hybrid debt that can be written down. Chinese banks have issued $64 billion of
these types of debt so far, this year, up almost 30% and already more than in all of 2016. New debt
issued by Chinese banks this year now totals over $200 billion, up almost 40% on the year, according to
data provider Dealogic. Some have also resorted to issuing convertible bonds, effectively delayed equity
issuance. Banks straight equity issuance has risen quickly too, up by 57% so far, this year to $26 billion.
For Chines banks, while nonperforming loan (NPL) ratios are going down, substandard loans, where
borrowers ability to service debt is in question, are rising sharply. Doubtful loans, where borrowers
cannot service their debt even though there are guarantees and collateral in place, also continue to rise.
The trends indicate that these banks could be under stress and this round of capital raising might be a
preemptive measure.
WSJ

INDIA
Country Analyst: Jason Yoo
Government to Recapitalize Public Sector Banks by Rs2.11 Trillion ($32
Billion)
The government announced its plans to allocate Rs2.11 trillion ($32 billion)
over the span of the next two years to recapitalize the struggling public-
sector banks (PSBs). This figure marks a sharp increase from the prior 4-year
recapitalization plan of Rs70,000 crore ($11 billion) announced on August 2015. Most PSBs will need this
injection of capital to meet the requirements of Basel 3 without further dampening credit growth,
particularly to corporates. VG Kannan, CEO of the Indian Banks Association, stated that the new capital
would resolve 80% of the capital requirements of the various banks. The government plans to finance
Rs1.35 trillion ($15 billion) through recapitalization bonds, while the remaining Rs76,000 crore ($17
billion) will come through budgetary allocation and capital markets activity. In this case, the government
would take the $15 billion it raises through the recapitalization bond offering and invest the total into
PSBs as equity as a means of bolstering the balance sheets of the PSBs. Under IMF accounting rules, the
recapitalization bonds would not add to the fiscal deficit; however, under Indias accounting rules,
sooner or later, the government will have to recognize the recapitalization bonds as contributing to the
fiscal deficit. Although the announcement of the recapitalization plan bodes well for the Indian
economy, much of the plans success will depend on the execution of the PSBs in cleaning up their
balance sheets post-recapitalization.
Bloomberg LiveMint

Government Approves Outlay of Rs6.92 Trillion ($106 Billion) to Build Road Network
The Indian government announced an outlay of Rs6.92 trillion ($106 billion) to build a 83,677km road
network over the next five years. The robust push to build road infrastructure is part of a series of
moves that attempt to, according to an official statement by the government, further optimize the
efficiency of movement of goods and people across the country. To fund what marks Indias largest
outlay for infrastructure investments yet, the government plans to raise Rs2.09 trillion ($32 billion) in
debt from the market, while covering Rs1.06 trillion ($16 billion) through public-private partnerships.
The balance of Rs2.19 trillion ($34 billion) will be funded by the Central Road Fund, Toll-Operate-
Maintain-Transfer Projects, and toll collections of the National Highway Authority of India.
Most of the road-construction projects will be awarded by December 2018. The government has
announced its plans to digitalize the system for land acquisition for highways, with digitalization
expected to expedite the land acquisition process for highways by 3 to 4 months, which is important
considering that delays in land acquisition accounts for one of the key reasons for delayed highway
projects.
LiveMint The Economic Times The Economic Times

Complete Electrification of Railways Planned for 2021

Indian Railways announced a Rs35,000 crore ($5.4 billion) plan to electrify its entire network by 2021.
Currently, almost half of Indias railway networks has been electrified. Full electrification would reduce
fuel dependency and save energy bills by Rs10,500 crore ($1.6 billion) while boosting the domestic
energy industry.
The Economic Times

INDONESIA
Country Analyst: Katrina Knisely
Indonesian Parliament Approves Governments 2018 Budget
Indonesias House of Representatives (Dewan Perwakilan Rakyat, DPR) on
Wednesday approved the governments proposed 2018 state budget,
thereby signing the bill into law. The budget includes a fiscal deficit target of
2.19% of gross domestic product (GDP), below the revised 2017 target of 2.92% of GDP (the legal limit is
3%). The government is aiming for 4.1% higher spending and expects 9.1% higher revenues, based on a
GDP growth assumption of 5.4%. Tax revenue is crucial for President Widodo to fund ambitious
infrastructure projects across the country, yet over the past five years, on average Indonesia has only
achieved 83% of its annual tax revenue target. Yet Indonesias 2018 targets included 85% of revenues
coming from taxes. As of September 2017, despite the positive impact of the governments recently
completed tax amnesty program, Indonesia had managed to collect 60% of its full-year target.

State Budget of Indonesia

State Budget State Budget State Budget
2016 2017 2018
(Audited) (Revised) (Approved)
Total Revenue 1,894.7
1,555.9 1,736.1
in trillion Rupiah (+9.1%)
Tax Revenue 1,618.1
1,285.0 1,472.7
in trillion Rupiah (+9.9%)
Total Expenditure 2,220.7
1,864.3 2,133.3
in trillion Rupiah (+4.1%)
 Budget Deficit
2.49 2.92 2.19
% of GDP
GDP Growth
5.0 5.2 5.4
annual % change
Inflation
3.0 4.3 3.5
annual % change
Exchange Rate
13,307 13,400 13,500
IDR/USD
Nasdaq

MALAYSIA
Country Analyst: Gregory Bernstein
Malaysias 2018 Budget Heavy on Initiatives for PMs Najib Electoral Base
The 2018 budget proposal Prime Minister Razak Najib presented in a speech
to Parliament on Friday will be Malaysias largest budget since Najib took
office in 2009, totaling RM280.25B ($66.1 billion) 7.5% higher than 2017s
260.80B ($61.5 billion) total. As Malaysians head to the polls in 2018, PM
Najibs unpopularity continues to rise and many therefore view the budgets increases as blatant
handouts to the Prime Ministers electoral base. In the beginning of his speech, Najib acknowledged this
perception and attempted to counter it by highlighting upgrades to Malaysias economy from
international institutions and framing the budgets potential to steer Malaysias future in digital
commerce. In practical terms, the budget includes the highest-ever aid packages worth RM 6.5B ($1.5
billion) for rubber tappers, farmers and fishermen, who comprise a large cross-section of his
governments support base. Additionally, it slashes toll fares on three highways in concentrated voting
areas and cuts income taxes for middle-income Malaysians. However, it offers no increases in security
spending and was heavy on rhetoric for the financial sector without much substance. The budgets
release failed to move markets significantly, but could be the beginning of a momentum cycle as two
important announcements are expected in the next two weeks: GDP growth and the interest rate.
WSJ Speech Transcript The Reserve The Reserve #2 The Star MY Bloomberg

Malaysian Bond Inflows Rally in September may Indicate of Momentum Period

Bloomberg published a report this week that looked at Malaysias shrinking deficit and the uptick in
bond inflows in September. Analysts projected that Najibs budget would be a major factor in
determining whether this rally will continue and whether the ringgit continues to be attractive. Despite
its lack of substance, the budget demonstrated that Najib and his administration are intent on shoring
up the necessary support to win in 2018 and a variety of asset managers were cited by Bloomberg as
having bullish views on Malaysias momentum as a result. According to the report, optimism over an
improving economic outlook saw global funds invest almost RM8B ($1.9 billion) into Malaysian bonds in
September.

Bloomberg

PHILIPPINES
Country Analyst: Bilal Kayani
Philippine Financial System Continues Buildup Buffers Amid Credit Growth
The Philippine financial system continues to build up buffers amid sustained
loan growth in the first half of 2017. According to the Central Bank, financial
institutions have maintained satisfactory asset quality, adequate
provisioning, capital buffers, and ample liquidity to serve as early defenses
against external shocks. The non-performing loan (NPL) ratio of the banking system has declined from
2.2 percent to 1.9 percent from a year ago. Furthermore, banks continue to set aside additional
allowance for credit losses amounting to $22,513,343, resulting in an improved NPL coverage ratio of
114.2 percent. Banks have refocused interest to lending activities and tempered trading activity in
anticipation of rising interest rates. Total loan portfolio expanded YoY on a faster pace of 18 percent
compared to growth in portfolio investments of 11.4 percent. BSP finds the overall quality of earnings
have improved with greater reliance on core revenues and the overall credit expansion remained
broadly in line with the domestic growth momentum.
BSP

SOUTH KOREA
Country Analyst: Beatrice Gohdes

Korean Government to Increase the Countrys Minimum Wage by 55% until

2020
The South Korean government this week decided to raise the countrys
minimum wage by 16.4% next year, and by 55% until 2020, which would
mean that the lowest paid would earn 70% of the countrys current median
wage. This marks the most intense hike since 2000, and underscores President Moons efforts to move
away from relying heavily on exports for growth towards more people-oriented growth. The hope is
that the new minimum wage will boost domestic consumption and reduce inequality. Already, small
business owners are voicing concerns though, which could pose a problem as most workers with small
paychecks work for smaller firms. It is therefore left to be seen whether this hike will affect employment
numbers or have the desired effects.
The Economist

Bank of Korea Advance Estimate: Real GDP Grew by 1.6% in Q3 and 3.6% Year on Year
The Bank of Korea released its Q3 growth analysis, saying that real GDP grew by 1.4 percent in the third
quarter of 2017 compared to the previous quarter, while it increased by 3.6 percent year on year in the
third quarter of 2017. On the expenditure side, the increase in government consumption expanded and
exports turned positive. Private consumption expanded by 0.7 percent, as expenditures on both services
and non-durable goods increased. Government consumption increased by 2.3 percent, as expenditures
on goods and health insurance benefits expanded. Exports expanded by 6.1 percent, with increases in
exports of semiconductors, chemical products and motor vehicles. Imports also rose by 4.5 percent,
owing to expansions in imports such as chemical products and petroleum.
Bank of Korea
 TAIWAN
Country Analyst: Nikunj Beria
Taiwan Removed from US Treasurys Monitoring List
The Foreign Exchange Policies section of the Major Trading Partners report
presented to US Congress by the Treasury announced the removal of Taiwan
from the US Treasurys Monitoring List. Taiwan is the only major emerging
economy in Asia that is not providing full disclosure of its international
reserves pursuant to related International Monetary Fund guidelines. The Taiwan Ministry of Economic
Affairs Bureau of Foreign Trade said it will closely monitor related developments and urged local
businesses to adopt appropriate measures and minimize possible impacts stemming from unfavorable
currency fluctuations. Removal from the list eliminates the risk of possible U.S. sanctions.
Taiwan Today

Taiwan President Tsai Ing-wen Making State Visits under China Stalemate
President Tsai will visit the Marshall and Solomon Islands along with Tuvalu while transiting through
Hawaii and the U.S. territory of Guam. In Beijing, foreign ministry spokesman Geng Shuang demanded
Tsai be barred from transiting through the U.S. The U.S. State Department said Tsais transits through
U.S. soil would be private and unofficial and were based on long-standing U.S. practice consistent with
our unofficial relations with Taiwan. The visit comes after Tsais speech on 10th October with a hope to
reduce dependence on China as Taiwans largest trading partner.
Reuters

THAILAND
Country Analyst: Christian Conroy
Thai Cabinet Approves Amendment to Five-year Strategic Plan for PPPs
To ensure that public-private partnerships (PPPs) are compatible with the
countrys 12th National Economic and Social Development Plan (2016-2020), the
cabinet has amended joint investment guidelines for PPP to be categorized into
two groups: one that should allow the private sector to take part in joint investment and another with
which the government wants to promote joint investment. Total investment in the first group is 987.32
billion baht ($29.7 billion) and is focused on city rail mass transit, toll projects for rail projects in urban
cities, roads, ports, high speed rail, and other projects requiring private investment. Total investment in
the second group is 629.90 billion baht ($19 billion) and is focused on telecom networks, high-speed
internet, intercity tool roads, large-scale convention center development, and residential developments.
55 projects have been approved for 2015-2019. A shorter time frame for PPP investment approvals
down to nine months from two years has increased the approval rate to exceed the quota of 47 billion
baht ($1.4 billion) per year set by the PPP Strategic Plan.
Bangkok Post

Thai Trade Surplus Likely to Increase Due to Strong Electronics Exports

Thailands trade surplus is likely to increase to 126.45 billion baht ($3.8 billion) in September due in large
part to surge in strong demand for electronics. According to the latest Moody Analytics Asia Pacific
Economic Preview, capital goods imports have also strengthened as government-led investment
projects continue to ramp up. The projected increase comes only a few weeks after US President Trump
emphasized a commitment to reduce the US trade deficit with Thailand.
The Nation

NCPO Approves EEC Investment Guidelines

On Tuesday, the National Council for Peace and Order (NCPO) approved guidelines for land utilization in
the Eastern Economic Corridor (EEC) investment project. The approval is part of a process that will
eventually see the Public Works and Town & Country Planning Department issue guidelines for land use
nationwide. The Prime Ministers Office has ordered NCPO to complete details the land use guidelines or
EEC projects within six months. The large-scale EEC investment project will include 30,000 rai (Thai unit
of area) across three provinces and attract investment in 10 targeted industries: next-generation cars;
smart electronics; affluent medical and wellness tourism; agriculture and biotechnology; food; robotics
for industry; logistics and aviation; biofuels and biochemicals; digital; and medical services.
Bangkok Post
 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 7.5% (-0.75%) Oct 2017 (9th 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 5.0% (-0.25%) Oct 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 2.28% (+0.78%) Aug 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% (unch) 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 5.1% (+0.3%) Sep 2017 Monthly
Interest Rate 6.75% (unch) Sep 2017 Monthly
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% (+1.1%) Dec 2016 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 6.8% (-0.1%) Sep 2017 Quarterly
Inflation Rate 1.60% (+0.2%) Sep 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 69.54% (-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 4.3% (+0.7%) 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 2.8% (+0.1%) 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