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From: Daniel Sabba Sent: Thursday, March 19, 2015 5:39 PM To: [email protected]* Cc: Vahe Stepanian; Ariane Dwyer Subject: Fw: Fwd:Special- BRL: Separating Value from Panic Classification: Public From: Isin Sumengen-Ziel (DEUTSCHE BANK AG, LO) Sent: Thursday, March 19, 2015 01:30 PM Subject: Fwd:Special- BRL: Separating Value from Panic Download the complete report: http://pull.db-gmresearch.com/p/11865-0C79/6253575/DB_SpecialReport_2015-03- 19_0900b8c08972ece4.pdf <http://pull.db-gmresearch.com/p/11865-0C79/6253575/DB_SpecialReport_2015-03- 19_0900b8c08972ece4.pdf> We assess the recent sharp move in the BRL and the current balance of risks. The correction does not seem to represent neither overshooting nor panic, and new levels appear justified from a fundamental perspective. Tactically, given the amount of bad news already priced in, retracement on a favorable external backdrop and lack of escalation on the political front is likely, but this would be limited by the BCB's opportunistic unwinding of its position, as well as by USD strength and the wide CA deficit vs. likely diminished portfolio inflows and maybe FDI flows in the years ahead. Strategically, the BRL remains exposed to funding risk, global developments (particularly USD strength and risk aversion, as all other EM currencies), and flare-ups in politics / setbacks in policy implementation. However, dramatic further weakening is unlikely given the favorable external debt position (as opposed to 2002), and would require significant further political deterioration, in our view. The breakevens on USD/BRL risk-reversals expiring by the end of the year are around 3.30-4.00, but valuation, stocks, and positioning suggest a tighter and lower range, in our view (3.00-3.50). Assaf Shtauber <https://itunes.apple.com/gb/app/deutsche-bank-autobahn/id646407534> EFTA_R1_00149993 EFTA01804493 <https://itunes.apple.com/gb/app/deutsche-bank-autobahn/id646407534> Autobahn Mobile - now available on iPhone and iPad. Click here to download 'Deutsche Bank Autobahn' in the App Store: https://itunes.apple.com/gb/app/deutsche-bank-autobahn/id646407534 <https://itunes.apple.com/gb/app/deutsche-bank-autobahn/id646407534> Click/ copy this link into a browser to access the report: http://pull.db-gmresearch.com/p/11865- 0C79/6253575/DB_SpecialReport_2015-03-19_0900b8c08972ece4.pdf <http://pull.db-gmresearch.com/p/11865- 0C79/6253575/DB_SpecialReport_2015-03-19_0900b8c08972ece4.pdf> . If you have any difficulty accessing the report, please forward this email with the word 'PDF' in the subject line to [email protected] <mailto:[email protected]> . After 90 days you can access the report on our web site: http://gm.db.com chttp://gm.db.com> . You have received this mail because you have subscribed to Discipline: Foreign Exchange, Type of research: General For changes to your current research subscription, visit https://gm.db.com/rsm <https://gm.db.com/rsm> or email [email protected] <mailto:[email protected]> . Please refer to the applicable legal disclaimers in the full report. Mail Reference:0900b8c08972ece4 <http://pull.db-gmresearch.com/p/CG-1311298-74747019-2-11865-UK1-700E/0/> This communication may contain confidential and/or privileged information. If you are not the intended recipient (or have received this communication in error► please notify the sender immediately and destroy this communication. Any unauthorized copying, disclosure or distribution of the material in this communication is strictly forbidden. Deutsche Bank does not render legal or tax advice, and the information contained in this communication should not be regarded as such. This has been prepared solely for informational purposes. It is not an offer, recommendation or solicitation to buy or sell, nor is it an official confirmation of terms. It is based on information generally available to the public from sources believed to be reliable. No representation is made that it is accurate or complete or that any returns indicated will be achieved. Changes to assumptions may have a material impact on any returns detailed. Past performance is not indicative of future returns. Price and availability are subject to change without notice. Additional information is available upon request. 2 EFTA_R1_00149994 EFTA01804494 This communication may contain confidential and/or privileged information. If you are not the intended recipient (or have received this communication in error) please notify the sender immediately and destroy this communication. Any unauthorized copying, disclosure or distribution of the material in this communication is strictly forbidden. Deutsche Bank does not render legal or tax advice, and the information contained in this communication should not be regarded as such. 3 EFTA_R1_00149995 EFTA01804495