Financial Market Analysis Unit

Treasury Department

Member of

DAILY REPORT August 25, 2016

FX RATES

EUR mn 124 EUR/RSD 60 FX rates on domestic market 123 50 Currency Value Previous Change YTD 122 40

EUR/RSD 123.3773 123.4071 -0.02% -1.44% 121 30 USD/RSD 109.4450 109.2292 0.20% 1.62% 120 20 CHF/RSD 113.1590 113.2903 -0.12% -0.57% GBP/RSD 144.7241 143.9318 0.55% 12.26% 119 10 Source: NBS 118 0 entral bank informed us that till 12:30 total amount of trading was 7,3 mio EUR at average rate 123,3886. Turnover on FX market (right axis) Source: NBS

International markets Currency Value Previous Change YTD EUR/USD EUR/USD 1.1264 1.1305 -0.36% -3.70% 1.16 1.15 EUR/CHF 1.0892 1.0891 0.01% -0.09% 1.14 EUR/GBP 0.8512 0.8566 -0.63% 10.21% 1.13 GBP/USD 1.3232 1.3198 0.26% 16.44% 1.12 USD/JPY 100.45 100.24 0.21% -15.50% 1.11 Source: Bloomberg 1.1 1.09 Economic indicators 1.08 Country/ Time Indicator Period Previous Projection Region 14:30 US Durable goods orders July -3.90% 3.40% Source: Bloomberg Source: Bloomberg MONEY MARKET

National Bank of Serbia Interest rates Value Key policy rate 4.00% RSD Interest rates 10 Next decision 8.9.2016 Deposit facility 2.50% 9 NBS key rate Lending facility 5.50% 8 Beonia Repo operations (1 week) 2.98% 7 Belibor 3M Source: NBS 6 5 Interbank interest rates - Serbia 4 Value Previous Change 3 BEONIA 2.95% 2.93% 0.02 2 BELIBOR1M 3.30% 3.30% 0.00 BELIBOR3M 3.56% 3.57% -0.01 BELIBOR 6M 3.78% 3.78% 0.00 Source: Reuters Source: NBS

Major interest rates EUR Interest rates Value Next decision 0.3 Eurozone (ECB) 0.00% 8.9.2016. ECB main rate 0.2 US (Fed) 0.50% 21.09.2016. Euribor 3M United Kingdom (BOE) 0.25% 0.1 Switzerland (SNB) -0.75% 0 Source: Bloomberg -0.1

Interbank Interest rates - Europe -0.2 24.8.2016 23.8.2016 Change (bps) -0.3 EONIA -0.339% -0.340% 0.001 EURIBOR1M -0.368% -0.369% 0.001 -0.4 EURIBOR3M -0.298% -0.298% 0.000 EURIBOR6M -0.191% -0.192% 0.001 Source: Bloomberg, EBF Sources: ECB, EBF Note: Values are with 2 days delay

Libor Interest rates Interest rate Swap Value Previous Change Value Previous Change Libor 1M (USD) 0.520% 0.524% -0.004 EURIBOR ISDA 3Y FIXING -0.192% -0.200% 0.008 Libor 3M (USD) 0.825% 0.825% 0.000 EURIBOR ISDA 5Y FIXING -0.122% -0.131% 0.009 Libor 6M (USD) 1.223% 1.229% -0.006 EURIBOR ISDA 10Y FIXING 0.304% 0.281% 0.023 Libor 1M (CHF) -0.806% -0.806% 0.000 USD ISDA 3Y FIXING 1.043% 1.054% -0.011 Libor 3M (CHF) -0.739% -0.739% 0.000 USD ISDA 5Y FIXING 1.144% 1.160% -0.016 Libor 6M (CHF) -0.655% -0.655% 0.000 USD ISDA 10Y FIXING 1.383% 1.413% -0.030 Sources: ICE, Bloomberg Sources: IBA, Bloomberg Služba za analizu finansijskih tržišta

FIXED INCOME

Yields on RSD government securities on primary sales 2013- present

14.5

RSD Government securities 12.5 Maturity Date Value Previous 10.5 3 month 04.02.2016 2.75% 2.79% 6 month 03.03.2016 3.25% 3.25% 8.5 53 week 27.07.2016 3.59% 4.01% 6.5 2 year 13.06.2016 4.30% 4.95% 3 year 11.08.2016 5.00% 5.37% 4.5 5 year 20.10.2015 6.50% 10.80% 2.5 7 year 19.07.2016 5.98% 10.75% 10 year 21.10.2014 12.99% NBS key NBS key rate 23.06.2016 3y 3m 53w 6m NBS key rate 5y 10y + 0.45% 24 month amortizing rate + 0.25% Source: Public Debt Management Agency Source: Public Debt Management Agency

Scheduled auctions for this week Date Instrument Currency Volume bps JP Morgan EMBI Serbia 53 week T-bills 50,000,000 24-Aug EUR 450

400

350

300

250

200 EUR government securities Maturity Date Value Previous 150 53 week 20.06.2016 0.79% 0.85% 2 year 28.07.2016 1.09% 1.18% 3 year 22.06.2016 2.59% 2.59% 5 year 22.03.2016 3.45% 4.00% 10 year 25.05.2016 4.20% 4.40% Source: Bloomberg, JPMorgan Source: Public Debt Management Agency

Sources: Ministry of finance, Banca Intesa

Serbian Eurobond yields (USD) Serbia Credit rating Moody's S&P Fitch Value Previous UST spread B1 BB- BB- Serbia 5y 2017 2.361% 2.364% 1.921% Outlook Positive Stable Stable Serbia 5y 2018 3.035% 3.042% 2.237% Latest update 18.3.2016 1.7.2016 17.6.2016 Serbia 7y 2020 3.585% 3.614% 2.623% Source: Bloomberg Serbia 10y 2021 3.757% 3.766% 2.647% Serbia 20y 2024 6.467% 6.465% Source: Bloomberg

Serbian 10-year Eurobond 2021

117 Price Yield (right axis) 4.9 116 4.7 115

4.5 114

4.3 113

112 4.1

111 3.9 Source: Bloomberg

110 3.7

jul.16

jan.16

feb.16 okt.15 jun.16

apr.16

sep.15 maj.16 avg.15 dec.15

nov.15 mar.16

Source: Bloomberg

2 Služba za analizu finansijskih tržišta

EQUITIES

SERBIA

Value Value from the previous day Change (%) Change YTD

Belex 15 620.28 622.35 -0.33% -7.01% Belex line 1,368.74 1,374.99 -0.45% 1.78% Turnover 8,428,569 Din. 13,803,275 Din. -38.94% Source: Beogradska berza 68,299 € 111,848 € -38.94%

Ratios P / B P / E Belex15 0,67 12,15

BELEX15 Belex line 800 1,600 750 700 1,400 650 600 1,200 550

500 1,000 avg.14 nov.14 feb.15 maj.15 avg.15 nov.15 feb.16 maj.16 avg.16 avg.14 nov.14 feb.15 maj.15 avg.15 nov.15 feb.16 maj.16 avg.16

Daily change of Belex 15 members

1.66% 1.95% 0.00% 0.00% 0.00% 0.00% 0.10% 0.16%

-0.43% -0.34%

-8.56% FITO MTLC NIIS AIKB KMBN SJPT ALFA JESV TGAS AERO ENHL

The most traded stocks on Belgrade stock exchange from the previous day Turnover Daily Weekly Company Ticker Price RSD P/BV P/E ROE Market capitalization RSD change change NIS AD NOVI SAD NIIS 579 986,037 -0.32% 1.83% #N/A N/A #N/A N/A #N/A N/A 94,411,971,600 Din. ENERGOPROJEKT HOLDING AD BEO ENHL 1,256 2,530,840 1.77% 1.17% 1.63 331.01 0.53 13,729,702,752 Din. AERODROM NIKOLA TESLA AD BEO AERO 1,041 2,269,380 1.66% -0.19% 1.43 10.44 14.52 35,695,213,350 Din. RUDO AD BEOGRAD RUDO 150 0 0.00% 0.00% 0.41 #N/A N/A -5.68 99,907,650 Din. MESSER TEHNOGAS AD TGAS 10,156 406,240 0.15% -4.07% 0.87 20.01 4.23 10,528,298,648 Din. TERMOVENT SC LIVNICA CELIKA TLVC 2,600 0 0.00% 0.00% 0.97 15.94 6.19 157,479,400 Din. ENERGOPROJEKT INDUSTRIJA EPIN 2,491 0 0.00% 0.00% 1.59 40.32 2.68 491,499,210 Din. IMPOL SEVAL AD SEVOJNO IMPL 2,000 0 0.00% 0.00% 0.69 7.10 10.27 1,884,574,000 Din. GOSA FOM A.D. SMEDEREVSKA PA GFOM 370 108,040 0.00% 0.00% 0.34 158.39 0.21 506,531,110 Din. ENERGOPROJEKT ENTEL AD BEOGREPEN 13,117 0 0.00% 0.00% 5.03 13.98 42.27 5,541,866,915 Din. INSTITUT ZA ISPITIVANJE MATE INMT 10,000 0 0.00% 0.00% 0.12 92.59 0.13 191,660,000 Din. ENERGOPROJEKT OPREMA AD ENOP 4,001 0 0.00% -0.28% 1.69 7.97 22.27 1,406,511,540 Din. Source: Belex

Serbia, China expected to agree estimated value of works to modernize railway linking Belgrade with Hungary's capital Budapest within a month, Serbia infrastructure minister says - Serbia and China have not yet agreed on the financing model for the modernization of the railway linking Belgrade with Hungary’s capital Budapest because they are yet to align positions on the estimated value of the works, “which is close to EUR 1 billion,” according to Construction, Transportation, and Infrastructure Minister Zorana Mihajlovic, Beta reported yesterday. Mihajlovic said that she expects the exact value of the project to be determined within a month, based on a feasibility study. Mihajlovic also recalled that the Stara Pazova-Novi Sad portion of the Belgrade-Budapest railway is financed under Russia’s loan for Serbia’s railway modernization projects, according to Beta. (Source: Executive newsletter)

Kazakhstan’s president, top Serbian officials call for boosting bilateral trade, economic cooperation during meetings in Belgrade - Serbian President Tomislav Nikolic said yesterday following a meeting with Kazakhstan’s President Nursultan Nazarbayev in Belgrade that he expects that Kazakhstan will help Serbia reach a free trade agreement with the entire Eurasian Economic Union (EEU), adding that Nazarbayev “provided guarantees” that a certain quantity of Serbia-made Fiat cars will be imported into the EEU free of duties, local media reported. Nikolic also thanked Nazarbayev on Kazakhstan’s non-recognition of Kosovo as an independent state, asking him that Kazakhstan again withhold its support for Kosovo’s membership of UNESCO, which he said is expected to be again put to the vote next year. For his part, Nazarbayev said that there is ample room for improvement in trade and economic relations between Kazakhstan and Serbia, noting that 15 Serbian companies operate in Kazakhstan, with the arrival of new ones expected, especially for infrastructural construction, including railway construction along the new Silk Road. The two countries could boost cooperation in the petrochemical, agricultural, pharmaceutical, and tourism sectors, according to Nazarbayev. He said that Kazakhstan, as an EEU member, will support creating a free trade agreement between Serbia and the bloc, which, apart from Kazakhstan, also comprises Russia, Belarus, Armenia, and Kyrgyzstan. Nazarbayev recalled that leaders of EEU member states decided in May in Astana to open talks on unifying the trade regime between Serbia and the bloc in order to create a free trade area. (Source: Executive newsletter)

Serbia’s largest dairy firm Imlek delists from Belgrade Stock Exchange following squeeze-out of small shareholders - Serbia’s largest dairy company, Imlek, has delisted from the Belgrade Stock Exchange (BSE) following a squeeze-out of small shareholders, local media reported yesterday, citing an announcement from the BSE. Imlek is owned by private equity firm Mid Europa Partners, Tanjug recalled. Mid Europa Partners bought the Netherlands-registered Danube Foods Group, which owns Imlek, confectionery producer Bambi, and drinks firm Knjaz Milos, for EUR 575 million in 2015, according to earlier reports. (Source: Executive newsletter)

3 Služba za analizu finansijskih tržišta

REGION

Value from the Change Index Country/Region Value Change YTD (%) previous day (%) Crobex Croatia 1,799.97 1,799.90 0.00% 6.53% SBITOP Slovenia 723.21 720.81 0.33% 3.89% SOFIX Bulgaria 472.20 470.03 0.46% 2.45% BET Romania 6,952.84 6,895.55 0.83% -0.73% DJ Stoxx Balkan 50 Balkans 395.58 395.24 0.09% -0.73% Source: Bloomberg

CROBEX SBITOP 2,000 900 1,950 850 1,900 1,850 800 1,800 1,750 crobex 750 sbi20 1,700 700 1,650

1,600 650 1,550 1,500 600 avg.14 nov.14 feb.15 maj.15 avg.15 nov.15 feb.16 maj.16 avg.16 avg.14 nov.14 feb.15 maj.15 avg.15 nov.15 feb.16 maj.16 avg.16

SOFIX BET 580 8,000 560 540 7,500 520 sofix bet-c 7,000 500 480 6,500 460

440 6,000 420 400 5,500 avg.14 nov.14 feb.15 maj.15 avg.15 nov.15 feb.16 maj.16 avg.16 avg.14 nov.14 feb.15 maj.15 avg.15 nov.15 feb.16 maj.16 avg.16

DJ Stoxx Balkan 50 600

500 dj balkan

400

300 avg.14 okt.14 dec.14 feb.15 apr.15 jun.15 avg.15 okt.15 dec.15 feb.16 apr.16 jun.16 avg.16

Turkish Incursion Could Prove a Game Changer in Syrian Civil War - Turkey’s incursion into Syria reflects a shift away from its insistence that President Bashar al-Assad be removed from power in any settlement there and may start to close the gap between the international coalitions that have helped keep the country’s civil war raging, analysts and diplomats say. In recent months, Turkey has indicated a readiness to accept a transitional role for Assad in any political solution, something Unal Cevikoz, a retired senior Turkish diplomat, called a major change. “Turkey has realized there are more important challenges than removing Assad,” said Cevikoz, and that in turn has opened the door to improvements in Ankara’s relationships with Russia and Iran, Assad’s main backers. Turkey would not have launched “Operation Euphrates Shield” on Wednesday without a green light from Russia, he said. Outside powers involved in Syria’s conflict have divided sharply over the fate of Assad. Turkey and the Gulf states insisted he must step down before any settlement, while Russia and Iran demanded that he stay in power. The U.S. has carved out a middle position open to a transitional role for him. (Source: Bloomberg)

Hungary banking sector concentration little changed in ten years - Market share of Hungary's biggest banks has changed little in the past ten years, data from the National Bank of Hungary show. The data show market share of the country's biggest ten banks, in terms of total assets, has fluctuated between 71pc and 74pc since the end of 2005. At the end of last year, their share was just under 71pc. Market share of the country's five biggest banks fluctuated between 49pc and 53pc during the period. At the end of last year, they accounted for 49.5pc of total assets. (Source: Bloomberg)

4 Služba za analizu finansijskih tržišta

WORLD

Value from the Index Country/Region Value Change (%) Change YTD (%) previous day Dow Jones Industrial US 18,481.48 18,547.30 -0.35% 6.06% S&P 500 US 2,175.44 2,186.90 -0.52% 6.43% NASDAQ US 5,217.70 5,260.08 -0.81% 4.20% DAX Germany 10,622.97 10,592.88 0.28% -1.12% FTSE UK 6,835.78 6,868.51 -0.48% 9.51% Dow Jones Stoxx 600 EU 344.93 343.60 0.39% -5.71% Nikkei 225 Japan 16,597.30 16,497.36 0.61% -12.80% Source: Bloomberg

Dow Jones Industrial S&P 500 19,000 2,300 18,500 18,000 2,200 17,500 17,000 2,100 16,500 16,000 2,000 15,500 dow jones s&p 15,000 1,900 14,500 14,000 1,800 13,500 13,000 1,700 12,500 12,000 1,600 avg.14 nov.14 feb.15 maj.15 avg.15 nov.15 feb.16 maj.16 avg.16 avg.14 nov.14 feb.15 maj.15 avg.15 nov.15 feb.16 maj.16 avg.16

NASDAQ Composite DAX 5,400 13,500 5,200 5,000 12,500 4,800 4,600 nasdaq 11,500 dax 4,400 10,500 4,200 4,000 9,500 3,800 3,600 8,500 3,400 3,200 7,500 3,000 2,800 6,500 avg.14 nov.14 feb.15 maj.15 avg.15 nov.15 feb.16 maj.16 avg.16 avg.14 okt.14 dec.14 feb.15 apr.15 jun.15 avg.15 okt.15 dec.15 feb.16 apr.16 jun.16 avg.16

DJ Stoxx 600 Nikkei 225 440 23,000 420 21,000 400 19,000 380 360 17,000 nikkei dj stoxx 340 15,000 \ 320 13,000 300 11,000 280 260 9,000 avg.14 nov.14 feb.15 maj.15 avg.15 nov.15 feb.16 maj.16 avg.16 avg.14 nov.14 feb.15 maj.15 avg.15 nov.15 feb.16 maj.16 avg.16

Brent (USD/bbl) Gold 60 1,400

55 1,350

50 1,300

45 1,250

\ 40 1,200

35 1,150

30 1,100

25 1,050 avg.15 nov.15 feb.16 maj.16 avg.15 nov.15 feb.16 maj.16

Vix Index 30 28 26 24 22 20 18 16 14 12 10 Apr-16 Apr-16 May-16 May-16 May-16 May-16 Jun-16 Jun-16 Jun-16 Jun-16 Jun-16 Jul-16 Jul-16 Jul-16 Jul-16 Aug-16 Aug-16 Aug-16

U.S. Stocks Fall as Drugmaker Selloff Ends Lull Before Yellen - A selloff in drugmakers dragged U.S. stocks lower, a jolt to markets that had been in a holding pattern before a speech Friday from Federal Reserve Chair Janet Yellen that may provide clues on when to expect higher borrowing costs. Losses accelerated in afternoon trading, led by Mylan NV’s 5.4 percent slide, after the company drew the ire of lawmakers over a 400 percent increase in the price of a life-saving allergy shot. Investors were further spooked after Democratic presidential candidate Hillary Clinton called the price hike “outrageous,” a reminder of critical remarks she made last year on drug prices which helped spur a 20 percent selloff in the Nasdaq Biotechnology Index. The S&P 500 Index fell 0.5 percent to 2,175.44 at 4 p.m. in New York, to a two-week low. The Nasdaq Composite Index dropped 0.8 percent, its biggest slide in three weeks. The Dow Jones Industrial Average lost 65.82 points, or 0.4 percent, to 18,481.48. About 6.2 billion shares traded hands on U.S. exchanges, 9 percent lower than the three-month average. “You have the news about drug pricing, and you had oil come down a bit,” said Matt Maley, an equity strategist in New York at Miller Tabak & Co LLC. “I don’t know why we reacted to them later in the day, other than we’re getting closing to Yellen’s speech on Friday. You had the VIX higher all day before the late-afternoon move down. It was almost like options traders were anticipating this kind of selloff.” (Source: Bloomberg)

Banks Lead Europe Stocks Up 3rd Day in Calmest Market in a Year - European equities climbed for a third day, with investor confidence slowly coming back amid the calmest market in more than a year. The Stoxx Europe 600 Index rose 0.4 percent at the close of trading. A gauge of banks reached its highest level since the U.K. referendum on European Union membership, with Italy’s UniCredit SpA up 8 percent, while Commerzbank AG and UBS Group AG added at least 2.9 percent. At the same time, a measure of volatility is recording its lowest monthly average since March 2015. nEuropean equities are recovering after their biggest weekly slide in two months. The Stoxx 600 came close to the level it reached on Aug. 11, its highest since May, amid a rebound that pushed most of its industry groups higher on Wednesday. The gains are coming as investors await more clarity on the path of Federal Reserve interest-rate increases, with Fed Chair Janet Yellen speaking on Friday at the annual monetary policy symposium in Jackson Hole, Wyoming. “It’s a good time for opportunistic investors,” said Pierre Mouton, a fund manager who helps oversee about $8.5 billion at Notz, Stucki & Cie. in Geneva. “A lot of prices were just too depressed and some people are clearly taking advantage of that. But it’s not like everyone is going on a full-risk on mode -- they’re just testing the market for now. There’s a lot coming up on the agenda.” (Source: Bloomberg)

Contact

Financial Market Analysis Broker-Dealer Office Olivera Glišić 201-1314 Snežana Spasojević 201-3621 Vladimir Gavović 201-1263 Dragomir Milin 201-3622 [email protected] [email protected]

Custody Dealing Vitomir Marić 201-1315 Darko Karanović 201-3624 Biljana Radosavljević 201-3622 Nikola Ostojić 201-3626 [email protected] Dragan Ignja 201-3627 201-3625 [email protected]

Disclaimer This overview is written to inform and does not represent a call for making business decisions and buying or selling mentioned financial instruments. Banca Intesa ad Beograd does not guarantee exactness of summoned data. Information, opinions and commentaries in this overview are given with the best intention according to available data provided from relevant sources and as a result of professional attitudes and orientations of analytical team working in Banca Intesa ad Beograd. Banca Intesa ad Beograd does not assume responsibility for possible loss and damage caused by business activities according to any element and contents of the overview. This document may only be reproduced in whole or in part together with the name of Banca Intesa Beograd.

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