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  Daily Economic News – July 28, 2014


AUTHORS                Derek Chen (x-81602)                     Eung Ju Kim (x-85804)
                       Gerard Kambou (x-32386)



Russia’ stocks and ruble tumble amid new European
sanctions…Ireland raises GDP forecast…Brazil’s central bank
increases credit supply to boost the economy


Financial Markets

Russia’s stocks and ruble tumbled for a third day amid new European sanctions. Russia ’s benchmark
gauge, Micex, fell 2.0%, extending losses from this year ’s peak to more than 10%; while the ruble
declined for a third day to its weakest level since May. Overall, however, the MSCI Emerging Markets
Index gained 0.1% to 1,079.86 in mid-afternoon in London after climbing 1.5% last week, led by the
Shanghai composite index which rose 2.4% to its highest level since December 2013.

Sub-Saharan Africa’s bond issuance volumes surpassed the level achieved last year with the expectation
of more to come. As of July 25, African and African-related issuers excluding South Africa and the
Maghreb region raised US$9.35bn compared with US$8.28bn in 2013. Sub-Saharan Africa’s sovereign
borrowers have issued 10-year paper at yields around 6%, which is favorable by historical standards
particularly given that the pace of sovereign bond issuance out of the region increased in the last couple
of months and many of the borrowers were not debut issuers, reflecting not only investors ’ search for
higher yielding assets and portfolio diversification but also their attraction to the African growth story.


High Income Economies

Citing strong performance of exports and investment spending, Ireland’s central bank upgraded its
forecast for GDP growth to 2.5% (y/y) in 2014, up from the prior projection of 2.0%. Likewise, the 2015
forecast was revised up to 3.3% from 3.2%. Household consumption is expected to grow 1.0% in 2014
and 1.3% in 2015, while government consumption is projected to fall 1.6% in 2014 and 1.1% in 2015. At
the same time, investment is forecast to increase by 8.5% and 8.6% this year and next, and exports are
expected to increase 4.0% this year and 5.0% in 2015.


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The Istat business confidence index for the Italian manufacturing sector dropped to 99.7 in July from a
revised 99.9 in June. Economists had expected the index to climb to 100.2 from June's original score of
100, which was a three-year high. Assessment on new orders worsened in July, however, production
expectations improved. Meanwhile, the economic sentiment indicator, which is the composite index of
confidence among businesses, improved to 90.9 in July from 88.2 in June.

The composite leading index for Taiwan, China, which measures the perceptions on future economic
conditions, dropped 0.03% (m/m) in June to 104.5, following a 0.04% drop in May, and a 0.01% uptick in
April. The coincident index, measuring current economic activity, rose 0.38% to 105.7 in June, following
a 0.36% rise in May. Meanwhile, the lagging index, a measure of past economic conditions, fell 0.11% in
June, after rising 0.01% in May.


Developing Economies

East Asia and Pacific
Thailand’s trade balance swung into surplus in June as exports rebounded from a three-month slump and
imports fell sharply. Year-on-year, exports grew 3.9% in June, reversing a 2.1% decline in May; while
imports shrank 14.0% after falling 9.3% in May. The trade balance moved from a deficit of US$809 million
in May to a surplus of US$1.79bn in June. Year-to-June, the trade balance recorded a surplus of
US$236.7 million; exports were down 0.4% (y/y) while imports fell 14% (y/y).

Profits of China’s industrial firms grew at a faster pace in June, rising 17.9% (y/y) after increasing 9.0%
(y/y) in May. In the period January-June, industrial profits grew 11.4% compared to the same period in the
previous year, surpassing the 9.8% increase recorded over the January to May period.

Latin America and Caribbean
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Brazil’s central bank announced on July 25 2014 a series of measures aiming at increasing liquidity and
lending from banks to boost the slowing Brazilian economy. The measures, which would inject about
BRL30.0bn (US$13.63bn) into the economy, included allowing financial institutions to use up to 50% of
their reserve requirements on term deposits to make new loans or acquire loan portfolios from other
banks, and increasing the number of banks that can use up to 20% of their reserve requirements on loans
to finance capital goods investment.



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