Transcript Global Economic Outlook Pablo Goldberg

Global Economic Outlook
Pablo Goldberg
Head, Global EM Research
HSBC Securities (USA) Inc.
+1 212 525 8729
[email protected]
1
November 2013
View HSBC Global Research at: http://www.research.hsbc.com
Issuer of report: HSBC Securities (USA) Inc.
Disclosures and Disclaimer This report must be read with the disclosures and the analyst certifications in the
Disclosure appendix, and with the Disclaimer, which forms part of it
Pablo Goldberg
Global Head EM Research
Three key questions
 How much recovery in developed markets?
Too early to taper in US: unemployment targeting had problems
Politics still matters in Europe: a successful AQR and banking solution is crucial
‘Abe-nomics’ fading: without the third arrow, nothing is new
 How much slowdown in EM?
 Uncertainty over Fed ‘tapering’
 A new growth strategy in China
 Dealing with excesses
 The new global rebalancing
The problem is one of collective failure: not everyone can aim for export-driven growth
FX depreciation vs. growth slowdown
Structural reforms are the answer?
2
Pablo Goldberg
Global Head EM Research
US: too early to taper
 What we’ve learned since tapering was first discussed:
 Unemployment rate targeting is flawed. Underemployment explains
why wage growth is so low.
 The housing recovery is fragile and dependent on low rates.
 Fiscal policy will be decided on a three-month basis, which is hard to
plan and disruptive for the recovery.
 EM growth is important for the US and clearly affected by Fed
tapering.
3
Pablo Goldberg
Global Head EM Research
Was QE successful? Doomsday view
US RECESSION WATCHER
CRITICAL LINE
68
70
72
74
76
78
80
82
84
US Recession
4
Source: HSBC
86
88
90
92
94
96
98
Recession Watcher
00
02
04
06
08
10
12
Today's
Pablo Goldberg
Global Head EM Research
Was QE successful? Real GDP view
210
190
index
170
150
130
110
90
70
50
t+
t + 15
t + 10
t+5
t
quarters after peak
Q4 1969
Q4 1973
Q1 1980
Q3 1990
Q2 2001
Q4 2007
Source: Datastream
5
Q3 1981
Pablo Goldberg
Global Head EM Research
Was QE successful? Stock markets view
Index
220
220
200
200
180
180
160
160
140
140
120
120
100
100
80
80
60
60
40
40
t
t+5
1969
1990
Source: Datastream
6
Index
MSCI USA real total return index
t + 10
1973
2001
t + 15
1980
2007
t+
1981
Pablo Goldberg
Global Head EM Research
State of the economy: gradual labor market improvement
100%
Recessions
Employment, % of previous peak
99%
98%
97%
96%
95%
94%
93%
1959 1962 1965 1969 1972 1975 1979 1982 1985 1989 1992 1995 1999 2002 2005 2009 2012
Source: Bureau of Labor Statistics
7
Pablo Goldberg
Global Head EM Research
Unusually large number of discouraged workers
Source: BLS
8
Pablo Goldberg
Global Head EM Research
Consumer spending growth has not accelerated
12.0
11.6
Real personal consumption expenditures, USDtrn
2.8% growth trend from earlier peak
2.2% growth trend from recession end
11.2
10.8
10.4
10.0
9.6
9.2
05
06
07
08
09
10
11
12
13
14
Source: Bureau of Economic Analysis
9
Pablo Goldberg
Global Head EM Research
Monetary tightening a long way off
U3
U4
U5
U6
Level of unemployment at first rate
hike in previous tightening cycles
Q1 1994
Q2 2004
6.6
5.6
6.9
5.9
7.9
6.6
11.5
9.6
Latest data
September 2013
7.2
7.7
8.6
13.6
Source: BLS, Federal Reserve
10
Pablo Goldberg
Global Head EM Research
Unemployment rate is a moving target
Varying ways of measuring unemployment in the US
Unemployed
Unemployed plus
discouraged
Unemployed plus others
on the sidelines ready to
work
Unemployed plus others
who want a job
Level precrisis (m)
(2007Q1)
Latest (m)
Months to
absorb with
payrolls at
180k/month
6.925
7.324
11.316
12.182
24
27
8.396
13.658
29
11.469
17.607
34
Source: BLS
Source: BLS
11
Pablo Goldberg
Global Head EM Research
The housing recovery is still dependent on low rates
8000
3.5
3.0
7000
2.5
6000
2.0
5000
1.5
4000
1.0
0.5
3000
0.0
2000
-0.5
1000
0
2004
-1.0
-1.5
2005
2006
2007
2008
2009
Refi Index
12
Source: Bloomberg
2010
2011
2012
2013
10yr TIPS
Pablo Goldberg
Global Head EM Research
Core inflation has been low
3.0
2.5
2% FOMC inflation goal
2.0
1.5
1.0
Core CPI inflation, % year-on-year
Core PCE inflation, % year-on-year
0.5
07
08
09
10
11
12
13
Source: Bureau of Labor Statistics, Bureau of Economic Analysis
13
Pablo Goldberg
Global Head EM Research
Choosing between the lesser of two evils
TOO EARLY
– Choke recovery
14
Source: BEA
TOO LATE
- Price pressures
- Balance sheet
constraints
Pablo Goldberg
Global Head EM Research
Why tapering? The volatility case
300
250
200
150
100
50
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
US Interest rate volatility (Move Index)
Source: Bloomberg
15
Pablo Goldberg
Global Head EM Research
What the Fed is trying to achieve
FED does not taper
130
3.00
120
110
100
2.50
90
80
70
2.00
60
FED signals taper
FED signals taper?
50
40
Jan-13
1.50
Mar-13
May-13
US Rates volatility
Jul-13
Sep-13
Nov-13
UST 10yr (rhs)
Source: HSBC, Bloomberg
16
Pablo Goldberg
Global Head EM Research
What the Fed would like to avoid
4.0
%
$
120
3.5
110
3.0
100
2.5
90
2.0
80
QE2 Announcement
1.5
Jan-10
Jul-10
WTI (rhs)
Source: HSBC, Bloomberg
17
70
Jan-11
2011F US GDP
Jul-11
Jan-12
UST 10yr %
Pablo Goldberg
Global Head EM Research
HSBC forecasts
HSBC US economic forecasts
onomic forecasts
____Actual____
Q1 13 Q2 13
% change___
__________Projected__________
avg % change__Annual a
____Actual____
_Annual
___Q4/Q4 % change______Q4/Q4
__________Projected__________
2014 2014 2012 2
2013 2013
Q1 142013Q2 14
Q11313 Q2
2014 2012 2012
14 13 2012
14 13 Q2Q4
Q1Q3
Q4 13
Q3
1.1
1.7(1.8)
2.5
quarter annualized)
Product (% 1.1
Domestic
annualized)
(% quarter
tic Product Gross
0.5
Final Sales to Domestic Purchasers
2.0
2.1
0.5
s to Domestic Purchasers
2.5
1.9(2.4)
2.1
1.9
2.5
1.8(2.0)
2.0 2.8
1.5(1.6)
2.1 2.41.6 1.52.4
2.3
2.2
2.8
2.4
2.0 2.1 2.0 2.21.8
6.0 6.0 5.0 7.32.4
12.011.2 15.5 12.911.9
-0.8-0.6 -1.1 -1.0-1.3
0.1 0.1 0.3 0.1-0.1
0.1 0.0 -0.5 0.20.3
1.82.1
2.76.0
13.611.2
-2.0-0.6
0.00.1
-0.10.0
1.9
5.6
11.1
-0.5
0.0
0.0
2.2
7.3
12.9
-1.0
0.1
0.2
2.8 3.62.5
2.22.7
2.8
3.6
7.5
6.8
8.1
1.51.9
1.51.8
1.81.7
1.8
1.7
1.7
1.7
2.1
2.1
-643
-3.9
-404
-554 -1089
-3.3 -6.8
-417 -440
2.5(2.3)
2.4(2.2)
1.9(2.4) 2.0
1.7(1.8)2.5(2.3)
2.5
1.8(2.0)
2.4(2.2)
2.12.3 1.6 2.3 2.4
2.31.9
2.32.0
1.8
Consumption Personal Consumption 2.3
Business Fixed Investment
4.7
-4.6
Fixed Investment
14.2
l Construction Residential Construction 12.5
-0.4
nt Purchases Government Purchases -4.2
Net Exports
-0.1
-0.3 to GDP)
to GDP)(ppt contribution
s (ppt contribution
to GDP)
Inventory Change
0.4
0.9
to GDP)(ppt contribution
Change (ppt contribution
2.3
1.5
-4.6
4.9
12.5
12.0
-4.2
0.1
-0.3
0.0
0.9
-0.4
1.8
1.7
4.7
5.0
14.2
9.0
-0.4
-0.8
-0.1
0.0
0.4
0.1
1.91.5
5.94.9
11.012.0
-0.20.1
0.10.0
0.0-0.4
2.01.7
6.05.0
12.09.0
-0.8-0.8
0.10.0
0.10.1
2.01.9
5.05.9
11.0
15.5
-1.1-0.2
0.30.1
-0.50.0
Production (% quarter
Industrial
0.4
4.0 annualized)
annualized)
duction (% quarter
4.0
2.4
0.4
3.1
3.02.4
3.53.1
2.83.0 2.5 3.5 2.7
Unemployment Rate (average)
7.7
nt Rate (average)
7.7
7.3
7.6
7.2
7.17.3
6.97.2
1.3
2.4
1.7
1.6
1.9
1.7
0.6
1.8
1.4
1.7
1.8
1.82.4
1.51.6
1.71.7
1.81.8
1.91.4
1.81.8
7.6
annualized)
Price index (% quarter 1.3
GDPannualized)
0.6
dex (% quarter
Price Index (% year-on-year)
1.4
1.7
year-on-year)
ce Index (%Consumer
(% year-on-year)
Price Index, Core1.9
Consumer
1.7
(% year-on-year)
ce Index, Core
Budget Balance (FY), USDbn
(FY), USDbn
et Balance Federal
nominal GDP as a % of nominal GDP
Balance, USDbn (average)
(average)
USDbnAccount
unt Balance,Current
nominal GDP as a % of nominal GDP
7.1
1.8
2.4
11.9
-1.3
-0.1
0.3
6.9
1.81.8 1.6 1.8 1.9
1.91.5 1.4 1.9 1.8
1.91.7 1.8 1.8 1.7
8.1
1.8 1.71.6
1.9 2.11.4
1.9 2.11.8
-1089
-6.8
-440
Source: HSBC
18
Pablo Goldberg
Global Head EM Research
1.5
1
-
-
Eurozone: stuck or moving forward?
 Draghi’s ‘whatever it takes’ bought the eurozone politicians time
 to deliver fiscal consolidation
 to solve the problems in the banking system
 to move towards fiscal union
 Has he helped or hindered Eurozone integration?
 A cyclical upturn has begun, but recovery is set to be weak
 Banking sector fragilities constrain any pick-up in domestic demand
 The recovery remains largely export-led
 Can a strong EURO kill it?
19
Pablo Goldberg
Global Head EM Research
European rebalancing without exchange rate adjustments
Source: Thomson Reuters Datastream
20
Pablo Goldberg
Global Head EM Research
Stabilisation in activity isn’t good enough for Spain and Italy
Eurozone GDP
Index, 2007=100
106
102
102
98
98
94
94
90
90
07
Germany
Portugal
09
Source: Thomson Reuters Datastream
21
Index, 2007=100
106
11
France
Spain
13
Italy
Pablo Goldberg
Global Head EM Research
Debt is far from under control
% GDP
120
110
100
90
80
70
60
50
09
Spain Government Debt-to-GDP
10
11
% GDP
120
110
100
90
80
70
60
50
12 13f 14f 15f 16f 17f 18f
Government April 2009
Government April 2013
IMF August 2013
IMF July 2012
IMF March 2013
Source: 2009-2013 Stability and Growth Programme, IMF report July 2012, IMF Spain Financial Sector Reform report
March 2013, Spanish government plan April 2013
22
Pablo Goldberg
Global Head EM Research
Credit is still contracting…
% Yr, 3mma
EMU new loans to NFCs
% Yr, 3mma
30
30
20
20
10
10
0
0
-10
-10
-20
-20
-30
-30
-40
-40
04
05
06
07
08
09
10
11
12
13
Source: ECB
23
Pablo Goldberg
Global Head EM Research
…because the banking system is not fixed
 Fixing a banking sector requires:
 True worst case scenario for potential losses on assets
 do we know how the loan book will perform? Forecasts were wildly out on Greece
 how do we value government bonds?
 wasn’t it the uniform valuation of all government bonds that got us in this impasse?
 Capital ready to cover the black holes
 the ESM is operational but conditionality stops governments asking for help
 Germany is still focused on finding a private sector solution which ultimately forces
more deleveraging
24
Pablo Goldberg
Global Head EM Research
Links between banks and sovereigns is still growing
Source: Datastream
25
Pablo Goldberg
Global Head EM Research
EURO appreciation can hurt recovery
140
135
130
125
120
115
110
105
100
95
90
2001
2003
2005
2007
2009
2011
2013
EURO REER
Source: Bloomberg
26
Pablo Goldberg
Global Head EM Research
A new LTRO needed to avoid ECB balance sheet shrinkage
Source: Datastream
27
Pablo Goldberg
Global Head EM Research
Domestic politics hostage of unemployment
%
28
Unemployment rate
%
28
24
24
20
20
16
16
12
12
8
8
4
4
00 01 02 03 04 05 06 07 08 09 10 11 12 13
Germany
Spain
France
Greece
Portugal
Source: Thomson Reuters Datastream
28
Pablo Goldberg
Global Head EM Research
HSBC forecasts
29
Pablo Goldberg
Global Head EM Research
Japan: third arrow needed
 The recovery is on solid footing
 Capex and exports have bottomed, and public infrastructure spending
and residential investment should shore up domestic demand
 Growth is expected to slow in 2014 due to consumption tax hike
 Structural reforms are needed for momentum to be sustained
30
Pablo Goldberg
Global Head EM Research
The three arrows of Abenomics: Tough work lies ahead
1. Bold monetary policy
2. Flexible fiscal policy
3. Structural reforms
Flexible fiscal policy
Already announced
 Upgrade to 2% inflation
target
 Monetary base to double in
2 years
 Balance sheet to reach 60%
of GDP by 2014
TBD
 None
 JPY10.3trn stimulus via
FY12 supplementary budget
(2% of GDP)
 VAT hike & JPY 5trn
stimulus via FY13
supplementary budget (1 %
of GDP)
 Social security reform
Structural reforms
 Corporate tax reform
 Sales tax hike in Oct 2015
and beyond?
31
 Entered TPP negotiations
 Green lighted nuclear
restarts*
 Delivered new growth
strategy
 Labour market reforms
 Immigration reform
 Special Economic Zones
Source: HSBC, Cabinet Office, Liberal Democratic Party
NB: The Cabinet has said it would bring back online nuclear reactors that had satisfied tougher safety
standards that came into effect 8 July 2013. Japan’s utilities have submitted applications to restart 10 reactors
at 5 power plants
Pablo Goldberg
Global Head EM Research
Corporate sector holds the key to growth upside
Capex has fallen in tandem with
firms’ growth expectations
% yr
Near-record profits have not
fanned corporate spending
5.0
% cash flow
130
4.5
120
4.0
JPY trn
JPY trn
65
65
60
60
55
55
110
50
50
3.5
100
45
45
3.0
90
40
40
2.5
80
35
35
30
30
2.0
70
25
25
1.5
60
20
20
1.0
50
15
15
80
85
90
95
00
Expected 5-yr ahead growth rate
05
10
Capex* (RHS)
80
85
90
95
Recurring profits
00
05
10
Capex*
Source: Ministry of Finance, CEIC, HSBC
*Excludes spending on software. NB: All industry-basis. Covers enterprises of all sizes. In fiscal-year terms.
32
Pablo Goldberg
32
Global Head EM Research
Japan HSBC Forecasts
33
Pablo Goldberg
Global Head EM Research
Emerging economies slow down
 For some emerging economies, past tailwinds have become headwinds
 Fed tapering has raised financing concerns
 Chinese growth is lower and less commodity-hungry
 The quality of growth in the last few years is being scrutinised
 credit-driven growth should not be such a driving force
 falling competitiveness and rising current account deficits are now in the spotlight
 Governments must show their ability to drive reforms
 Infrastructure spending should be bolstered to support long-term potential
 We cut EM GDP forecasts to 4.5% and 4.9% from 4.6% and 5.2% for 2013 and 2014
 We see China growing 7.7% and 7.4%, this and next year respectively
 Asia ex-Japan forecast stays at 6.1% for 2013, but cut to 6.2% from 6.5% for 2014
 Latin America cut to 2.3% from 2.7%, and from 3.3% to 2.9% for 2013 and 2014
 Brazil and Mexico GDP 2014 forecasts at 2.2% and 4.1%, respectively
34
Pablo Goldberg
Global Head EM Research
Egypt*
Colombia
Ukraine
Israel
Deterioration
Improvement
DM deleverage forces
EM re-leveraging
South Africa
Turkey
Argentina
Current Account Balance Change 2012-2007 (USD bn)
Sweden
Australia
Change in current account positions 2007- 2012 (USD bn)
Philippines
Colombia
China
Israel
Japan
South Africa
Deterioration
Mexico
New Zealand
Czech Republic
Russia
Mexico
Singapore
New Zealand
Czech Republic
Vietnam
Russia
Poland
Singapore
35
UK
Hong Kong
Poland
Taiwan
Hungary
Thailand
UAE
Malaysia
Germany
Chile
Taiwan
Egypt*
Italy
Romania
Ukraine
Norway
Italy
South Korea
Norway
Switzerland
South Korea
Sweden
Switzerland
Colombia
Deterioration
Saudi Arabia
Spain
US
-100
France
UAE
Spain
-150
Indonesia
Vietnam
Saudi Arabia
-200
India
Australia
Canada
Philippines
Brazil
Hungary
Romania
-50
US
0
50
100-200
150-150
-100
200
Source: CEIC, HSBC
Turkey
Argentina
Israel
Improvemen
South Africa
Australia
0 Philippines 50
-50
250
Mexico
New Zealand
Improvemen
100
150
Pablo Goldberg
Global Head EM Research
Capital inflows into EM: from ‘pull’ to ‘push’
2.0
1.5
1.0
0.5
0.0
-0.5
-1.0
-1.5
-2.0
-2.5
-3.0
% of GDP
86 88 90 92 94 96 98 00 02 04 06 08 10 12
Pull
Source: HSBC
36
Push
Pablo Goldberg
Global Head EM Research
Capital inflows into EM: ‘pull’ and ‘push’ factors
2000-07
2009-12
2013 …
 Pull factors:
 EM – DM growth differential
 EM ascension to investment grade
 Commodity super cycle
 China effect
 Push factors:
 QE
 Euro breakup fears
Source: HSBC
37
Pablo Goldberg
Global Head EM Research
Focus moved from carry to external vulnerabilities
10
AE
8
6
SAU
Budget balance (% GDP)
4
HK
2
SG
KR
0
RU
CL
CO
ID
-2
TR
-4
UA
-6
ZA
BR
MX AR
CZ
RO
LK
VN
PO
TH
CN
PH
TW
KZ
IL
HU
MY
IN
-8
VE
-10
-8
-6
-4
-2
0
2
4
6
8
10
12
14
16
18
20
Current a/c balance (% GDP)
Source: HSBC forecasts
38
Pablo Goldberg
Global Head EM Research
EM consumer quite leveraged
Bank credit to GDP
Asian Financial Crisis
Global
Financial
Crisis
Credit to GDP ratio
Asia ex-Japan
39
Asia ex-Japan ex-China
Pablo Goldberg
Global Head EM Research
EM exports still not recovering
65
60
55
50
45
40
35
30
04
05
06
07
08
Series1
09
10
11
12
13
DM output PMI
Source: HSBC, Markit
40
Pablo Goldberg
Global Head EM Research
China to avoid hard landing
 Fears of overinvestment and overcapacity are overdone
 Debt levels have risen but overall Chinese balance sheet is sound
 New strategy is good long-term policymaking
 Quality over quantity of growth
 Less commodity-hungry, infrastructure driven growth
 More domestically-oriented service sector growth
41
Pablo Goldberg
Global Head EM Research
China has a long way to go
Source: BEA, CEIC, China National Bureau of Statistics
42
Pablo Goldberg
Global Head EM Research
EM growth still the only in town
6.0
pp contribution to growth
Forecast
5.0
4.0
3.0
2.0
1.0
0.0
-1.0
-2.0
-3.0
2002
DM
EMEA
Latam
Rest of Asia
China
World growth, % yoy
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
Source: HSBC
43
Pablo Goldberg
Global Head EM Research
The wrong kind of growth for some
Average growth pre-and post-crisis (shaded areas represent a rise in average growth)
Average Annual Growth 2000-2007
Argentina
Brazil
Chile
China
Czech
Greece
Hong Kong
Hungary
India
Indonesia
Israel
Korea
Malaysia
Mexico
Philippines
Poland
Romania
Russia
Saudi Arabia
Singapore
South Africa
Taiwan
Thailand
Turkey
Ukraine (from 02)
Average Annual Growth 2008-2012*
Real GDP
Investment
Consumption
Government
spending
Real GDP
Investment
Consumption
Government
spending
3.8
3.4
4.4
10.3
4.7
4.2
4.9
3.5
6.9
5.1
3.2
4.7
5.1
2.3
5.0
7.2
6.3
6.7
5.2
5.9
4.3
4.2
5.1
4.9
7.9
7.3
3.6
8.2
10.2
5.2
6.1
2.5
3.3
11.1
6.9
0.7
3.3
3.8
3.5
3.1
5.6
14.6
12.6
14.2
2.9
9.4
-0.3
6.9
7.1
18.1
2.9
3.0
5.4
7.8
3.8
4.2
3.4
3.7
5.3
4.0
3.8
4.1
7.3
3.5
4.8
7.0
9.8
10.9
6.5
4.7
5.1
2.7
4.5
5.2
15.4
2.2
3.2
4.8
11.2
2.2
3.1
2.0
1.5
2.9
7.8
1.8
4.9
8.8
0.7
2.7
7.3
-3.4
2.0
6.4
3.8
4.7
0.6
4.9
3.6
3.3
5.1
2.7
4.0
9.2
-0.4
-5.4
2.6
-1.4
6.9
5.9
3.2
3.1
4.1
2.0
4.8
5.9
-1.3
1.0
5.7
5.0
1.9
3.5
2.9
3.7
-1.7
4.8
3.3
6.2
11.4
-3.2
-17.0
5.8
-7.1
5.9
7.6
5.6
0.5
8.5
0.3
6.1
2.4
-5.5
1.4
5.5
3.9
0.9
0.0
3.8
5.0
-13.7
6.1
4.6
6.2
9.0
-0.3
-6.2
4.4
-2.6
7.0
4.9
3.5
2.1
5.4
1.2
4.5
5.8
-2.1
3.3
5.2
3.1
2.8
2.3
2.9
2.8
4.2
8.5
3.1
5.2
11.8
0.1
-3.4
2.9
1.5
7.7
4.9
2.9
3.6
7.2
2.3
7.2
6.0
-0.7
-0.4
6.2
2.9
4.6
1.8
5.6
5.1
0.1
Note: *Shaded area shows an increase in the growth rate from the previous time period
Source: Thomson Reuters Datastream, CEIC, HSBC
44 Source: CEIC
Pablo Goldberg
Global Head EM Research
EM loosing competitiveness
Manufacturing unit labour costs
Index, 2000=100
240
240
220
220
200
200
180
180
160
160
140
140
120
120
100
100
80
80
00
01
02
Indonesia
Source: OECD and national sources
45
Index, 2000=100
03
04
Brazil
05
06
US
07
08
China
09
10
India
11
12
Mexico
Pablo Goldberg
Global Head EM Research
How to adjust?
Boost
exports
Reduce
imports
Boost
inflows
Raise
interest
rates
Depreciate
currency
Source: Clipart, HSBC
46 46
Pablo Goldberg
Global Head EM Research
HSBC EM forecasts summary
Summary of HSBC macroeconomic forecasts
_______ GDP _______
Argentina
Brazil
Chile
China
Colombia
Czech Republic*
Egy pt
Hong Kong
Hungary *
1
India
Indonesia
Israel
Korea
Lebanon
Malay sia
Mex ico
Panama
Peru
Philippines
Poland*
Russia
2
Singapore
South Africa
Taiw an
Thailand
Turkey
UAE
Ukraine
Uruguay
Venezuela
Vietnam
47
_____ Inflation _____
____ Policy rate ____
_______ FX _______
__ Current account __ ___ Fiscal account ___
2012 2013f 2014f 2012 2013f 2014f 2012 2013f 2014f 2012
2013f
2014f 2012 2013f 2014f 2012 2013f 2014f
1.9
2.5
1.0
24.2
24.6
26.8
9.00
9.00
9.00
4.92
6.25
7.75
0.1
-0.2
-0.5
-2.6
-2.2
-2.2
0.9
1.9
2.2
5.4
6.2
6.0
7.25 10.00 10.25
2.04
2.30
2.40
-2.4
-3.7
-3.2
-2.5
-3.3
-3.6
5.6
4.5
4.5
3.0
2.0
2.7
5.00
4.50
4.50
479
500
510
-3.5
-4.5
-4.8
0.6
-0.8
-1.0
7.7
7.7
7.4
2.7
2.6
2.7
6.00
6.00
6.00
6.23
6.12
6.10
2.3
2.3
2.6
-1.5
-2.1
-1.8
4.2
3.8
4.5
2.4
2.7
3.0
4.25
3.25
4.75
1,767
1,950
1,900
-3.2
-4.0
-3.9
0.3
-1.2
-1.2
-1.2
-1.0
1.6
3.3
1.5
1.7
0.05
0.05
0.05
25.1
26.0
25.5
-2.5
-3.3
-2.1
-4.4
-2.9
-2.9
2.2
1.4
3.0
8.7
6.8
9.9
9.50 10.25
9.50
7.00
7.50
7.50
-3.1
-2.2
-2.3 -11.0 -14.0 -11.9
1.5
3.0
3.8
4.1
4.2
4.2
0.50
0.50
0.50
7.75
7.80
7.80
2.3
3.6
5.5
3.1
3.0
1.4
-1.7
0.5
2.0
5.7
1.8
2.2
5.75
3.00
3.00
291
300
285
1.7
2.8
2.5
-1.9
-3.0
-3.0
5.1
4.2
5.0
10.2
8.7
7.7
8.00
7.50
7.75
55.0
62.0
66.0
-5.0
-4.2
-4.0
-4.9
-5.1
-4.7
6.2
5.6
5.5
4.3
7.4
6.6
5.75
7.25
7.25
9,638 11,100 11,500
-2.8
-3.7
-2.7
-1.9
-2.4
-1.8
3.4
3.6
3.4
1.7
1.6
2.1
2.00
1.00
1.25
3.73
3.60
3.50
-0.2
2.9
3.5
-3.8
-3.5
-2.9
2.0
2.7
3.2
2.2
1.4
3.0
2.75
2.50
3.00
1,064
1,070
1,095
3.9
4.4
3.2
1.6
1.0
2.1
1.4
0.0
1.3
7.0
6.0
4.0 10.00 10.00 10.00 1,507.5 1,507.5 1,507.5 -25.6 -23.5 -20.8
-9.3
-9.0
-8.9
5.6
4.3
5.6
1.7
2.2
2.7
3.00
3.00
3.50
3.06
3.18
3.30
6.1
1.8
4.2
-4.5
-4.2
-3.5
3.8
1.3
4.1
4.1
3.4
3.9
4.50
3.50
3.50
12.85
12.70
12.40
-0.8
-1.2
-1.2
-2.6
-2.4
-3.5
10.7
7.0
6.6
4.6
4.1
3.5
2.30
2.00
2.10
1.00
1.00
1.00
-9.1
-8.1
-8.0
-2.2
-3.0
-2.0
6.3
5.1
5.6
2.7
3.1
2.1
4.25
4.25
3.75
2.55
2.70
2.70
-3.6
-5.0
-4.9
2.1
0.5
-0.4
6.8
7.1
5.8
3.2
2.7
3.6
3.50
3.50
4.00
41.1
43.0
43.8
2.7
2.3
2.4
-2.3
-2.4
-2.2
1.9
1.0
2.6
3.7
1.1
2.1
4.25
2.50
3.25
4.07
4.20
3.90
-3.5
-0.8
-1.2
-3.9
-3.9
-3.0
3.4
1.7
2.0
5.1
6.6
5.2
5.50
5.25
5.00
30.5
32.9
35.2
4.0
2.6
2.0
0.0
-0.3
0.0
1.3
2.9
3.5
4.6
2.5
3.1
0.38
0.37
0.37
1.22
1.25
1.29
18.6
17.6
18.9
2.0
1.3
1.4
2.5
2.0
2.7
5.7
6.0
5.6
5.00
5.00
5.00
8.46
9.80
9.20
-6.3
-6.3
-5.8
-5.0
-5.0
-4.4
1.3
2.4
3.6
1.9
1.1
2.0 1.875 1.875 2.250
29.0
29.3
29.7
10.5
9.9
8.8
-1.5
-1.5
-1.3
6.5
2.8
4.4
3.0
2.3
2.8
2.75
2.50
3.00
30.6
31.4
32.2
0.0
-2.4
-0.4
-2.8
-3.8
-4.2
2.2
3.3
3.1
8.9
7.6
7.0
5.50
4.50
4.50
1.78
2.00
1.90
-5.9
-6.4
-5.9
-2.0
-2.2
-2.0
3.7
4.3
4.6
0.4
1.1
3.5
1.00
1.00
1.00
3.67
3.67
3.67
8.5
9.7
9.8
11.1
9.4
10.5
0.2
-0.1
0.1
0.6
-0.6
1.9
8.50
7.50
7.00
8.04
8.60
8.90
-8.4
-8.4
-8.8
-3.8
-3.6
-3.5
3.9
3.5
3.5
7.5
7.8
7.5
9.00
9.50
9.50
19.2
21.5
22.8
-5.4
-4.3
-1.2
-2.1
-1.4
-1.4
5.6
1.3
0.7
20.1
44.2
35.3
N/A
N/A
N/A
4.30
6.30
7.80
2.5
5.1
5.7 -14.0
-8.3
-4.1
5.0
5.1
5.4
9.3
6.8
8.3
7.00
6.00
7.00 20,840 21,250 21,500
1.8
0.3
0.3
-3.6
-2.6
-2.3
* FX forecasts vs. EUR , 1 Fiscal year (April-March), 2 3m interbank rate, Source: HSBC forecasts
Pablo Goldberg
Global Head EM Research
Disclosure appendix
Analyst Certification
The following analyst(s), economist(s), and/or strategist(s) who is(are) primarily responsible for this report, certifies(y) that the opinion(s) on the subject
security(ies) or issuer(s) and/or any other views or forecasts expressed herein accurately reflect their personal view(s) and that no part of their compensation
was, is or will be directly or indirectly related to the specific recommendation(s) or views contained in this research report: Pablo Goldberg
Important Disclosures
This document has been prepared and is being distributed by the Research Department of HSBC and is intended solely for the clients of HSBC and is not for
publication to other persons, whether through the press or by other means.
This document is for information purposes only and it should not be regarded as an offer to sell or as a solicitation of an offer to buy the securities or other
investment products mentioned in it and/or to participate in any trading strategy. Advice in this document is general and should not be construed as personal
advice, given it has been prepared without taking account of the objectives, financial situation or needs of any particular investor. Accordingly, investors
should, before acting on the advice, consider the appropriateness of the advice, having regard to their objectives, financial situation and needs. If necessary,
seek professional investment and tax advice.
Certain investment products mentioned in this document may not be eligible for sale in some states or countries, and they may not be suitable for all types of
investors. Investors should consult with their HSBC representative regarding the suitability of the investment products mentioned in this document and take
into account their specific investment objectives, financial situation or particular needs before making a commitment to purchase investment products.
The value of and the income produced by the investment products mentioned in this document may fluctuate, so that an investor may get back less than
originally invested. Certain high-volatility investments can be subject to sudden and large falls in value that could equal or exceed the amount invested.
Value and income from investment products may be adversely affected by exchange rates, interest rates, or other factors. Past performance of a particular
investment product is not indicative of future results.
HSBC and its affiliates will from time to time sell to and buy from customers the securities/instruments (including derivatives) of companies covered in
HSBC Research on a principal or agency basis.

Analysts, economists, and strategists are paid in part by reference to the profitability of HSBC which includes investment banking revenues.
For disclosures in respect of any company mentioned in this report, please see the most recently published report on that company available at
www.hsbcnet.com/research.
Additional disclosures
1
2
3
This report is dated as at 05 November 2013.
All market data included in this report are dated as at close 05 November 2013, unless otherwise indicated in the report.
HSBC has procedures in place to identify and manage any potential conflicts of interest that arise in connection with its Research business. HSBC's
analysts and its other staff who are involved in the preparation and dissemination of Research operate and have a management reporting line independent
of HSBC's Investment Banking business. Information Barrier procedures are in place between the Investment Banking and Research businesses to ensure
that any confidential and/or price sensitive information is handled in an appropriate manner.
Pablo Goldberg
Global Head EM Research
48
Disclaimer
* Legal entities as at 8 August 2012
Issuer of report
‘UAE’ HSBC Bank Middle East Limited, Dubai; ‘HK’ The Hongkong and Shanghai Banking Corporation Limited, Hong Kong; ‘TW’ HSBC
HSBC Securities (USA) Inc
Securities (Taiwan) Corporation Limited; 'CA' HSBC Bank Canada, Toronto; HSBC Bank, Paris Branch; HSBC France; ‘DE’ HSBC
452 Fifth Avenue, 9th floor
Trinkaus & Burkhardt AG, Düsseldorf; 000 HSBC Bank (RR), Moscow; ‘IN’ HSBC Securities and Capital Markets (India) Private Limited,
HSBC Tower
Mumbai; ‘JP’ HSBC Securities (Japan) Limited, Tokyo; ‘EG’ HSBC Securities Egypt SAE, Cairo; ‘CN’ HSBC Investment Bank Asia
Limited, Beijing Representative Office; The Hongkong and Shanghai Banking Corporation Limited, Singapore Branch; The Hongkong and
New York, NY 10018, USA
Shanghai Banking Corporation Limited, Seoul Securities Branch; The Hongkong and Shanghai Banking Corporation Limited, Seoul
Telephone: +1 212 525 5000
Branch; HSBC Securities (South Africa) (Pty) Ltd, Johannesburg; HSBC Bank plc, London, Madrid, Milan, Stockholm, Tel Aviv; ‘US’
Fax: +1 212 525 0354
HSBC Securities (USA) Inc, New York; HSBC Yatirim Menkul Degerler AS, Istanbul; HSBC México, SA, Institución de Banca Múltiple,
Website: www.research.hsbc.com
Grupo Financiero HSBC; HSBC Bank Brasil SA – Banco Múltiplo; HSBC Bank Australia Limited; HSBC Bank Argentina SA; HSBC Saudi
Arabia Limited; The Hongkong and Shanghai Banking Corporation Limited, New Zealand Branch incorporated in Hong Kong SAR
This material was prepared and is being distributed by HSBC Securities (USA) Inc., ("HSI") a member of the HSBC Group, the NYSE and FINRA. This material is for the information of clients of HSI
and is not for publication to other persons, whether through the press or by other means. It is based on information from sources, which HSI believes to be reliable but it is not guaranteed as to the
accuracy or completeness. This material is not, and should not be construed as, an offer or the solicitation of an offer to buy or sell any securities. The opinions contained within the report are based upon
publicly available information at the time of publication and are subject to change without notice. HSI and/or its affiliated companies will buy or sell from customers on a principal basis the securities of
the issuer(s) whose securities are recommended in this report. Employees of HSI and its affiliates not involved in the preparation of this report may have positions in the securities mentioned in this report
and may from time to time add or dispose of any such securities in a manner different than discussed in this report. Past performance is not necessarily a guide to future performance. The value of any
investment or income may go down as well as up and you may not get back the full amount invested. Where an investment is denominated in a currency other than the local currency of the recipient of the
research report, changes in the exchange rates may have an adverse effect on the value, price or income of that investment. In case of investments for which there is no recognised market it may be
difficult for investors to sell their investments or to obtain reliable information about its value or the extent of the risk to which it is exposed. In the UK this report may only be distributed to persons of a
kind described in Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005. The protections afforded by the UK regulatory regime are available only to those dealing
with a representative of HSBC Bank plc in the UK. In Singapore, this publication is distributed by The Hongkong and Shanghai Banking Corporation Limited, Singapore Branch for the general
information of institutional investors or other persons specified in Sections 274 and 304 of the Securities and Futures Act (Chapter 289) (“SFA”) and accredited investors and other persons in accordance
with the conditions specified in Sections 275 and 305 of the SFA. This publication is not a prospectus as defined in the SFA. It may not be further distributed in whole or in part for any purpose. The
Hongkong and Shanghai Banking Corporation Limited Singapore Branch is regulated by the Monetary Authority of Singapore. Recipients in Singapore should contact a "Hongkong and Shanghai
Banking Corporation Limited, Singapore Branch" representative in respect of any matters arising from, or in connection with this report. In Hong Kong, this document has been distributed by The
Hongkong and Shanghai Banking Corporation Limited in the conduct of its Hong Kong regulated business for the information of its institutional and professional customers; it is not intended for and
should not be distributed to retail customers in Hong Kong. The Hongkong and Shanghai Banking Corporation Limited makes no representations that the products or services mentioned in this document
are available to persons in Hong Kong or are necessarily suitable for any particular person or appropriate in accordance with local law. All inquiries by such recipients must be directed to The Hongkong
and Shanghai Banking Corporation Limited. In Korea, this publication is distributed by either The Hongkong and Shanghai Banking Corporation Limited, Seoul Securities Branch ("HBAP SLS") or The
Hongkong and Shanghai Banking Corporation Limited, Seoul Branch ("HBAP SEL") for the general information of professional investors specified in Article 9 of the Financial Investment Services and
Capital Markets Act (“FSCMA”). This publication is not a prospectus as defined in the FSCMA. It may not be further distributed in whole or in part for any purpose. Both HBAP SLS and HBAP SEL are
regulated by the Financial Services Commission and the Financial Supervisory Service of Korea. In Australia, this publication has been distributed by The Hongkong and Shanghai Banking Corporation
Limited (ABN 65 117 925 970, AFSL 301737) for the general information of its “wholesale” customers (as defined in the Corporations Act 2001). Where distributed to retail customers, this research is
distributed by HSBC Bank Australia Limited (AFSL No. 232595). These respective entities make no representations that the products or services mentioned in this document are available to persons in
Australia or are necessarily suitable for any particular person or appropriate in accordance with local law. No consideration has been given to the particular investment objectives, financial situation or
particular needs of any recipient. This publication is distributed in New Zealand by The Hongkong and Shanghai Banking Corporation Limited, New Zealand Branch incorporated in Hong Kong SAR. In
Canada, this document has been distributed by HSBC Bank Canada and/or its affiliates. Where this document contains market updates/overviews, or similar materials (collectively deemed “Commentary”
in Canada although other affiliate jurisdictions may term “Commentary” as either “macro-research” or “research”), the Commentary is not an offer to sell, or a solicitation of an offer to sell or subscribe
for, any financial product or instrument (including, without limitation, any currencies, securities, commodities or other financial instruments).
© Copyright 2013, HSBC Securities (USA) Inc, ALL RIGHTS RESERVED. No part of this publication may be reproduced, stored in a retrieval system, or transmitted, on any form or by any means,
electronic, mechanical, photocopying, recording, or otherwise, without the prior written permission of HSBC Securities (USA) Inc. MICA (P) 118/04/2013, MICA (P) 068/04/2013 and MICA (P)
110/01/2013
49
Pablo Goldberg
Global Head EM Research