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Emerging Markets

Bosnia begins EU journey, double blow for Turkey, Kazakh inflation soars, EBRD debuts global rouble bond, and miners’ strike in South Africa

Bosnia will become the last Balkan state to sign a Stabilisation and Association Agreement with the European Union today, making its first formal step to becoming a fully-fledged member. The rapprochement deal’s sticking point had been problems with reforming the police force, but after discussions with the government yesterday, EU Enlargement Commissioner Olli Rehn confirmed he was content with Bosnia’s progress. He said: “Leaders of the country have convinced me of their commitment to finish the job concerning police reform.” In October, leaders of the strongest Serb, Bosnian and Croat parties signed an agreement to establish police institutions at state level rather than relying on independent forces split along ethnic lines.

Turkey’s consumer price index exceeded analysts’ expectations last month, reaching 8.4%, up from 7.7% in October. Increases in the cost of cooking gas, water and coal bumped up the headline inflation figure, which is now more than double the central bank’s target of 4% (plus or minus 2%). The news comes as a further blow to Turkey, which heard German chancellor Angela Merkel repeating her assertion today that the ruling Christian Democrat party is steadfastly opposed to Turkish accession to the EU. (For an interview with Turkish central bank governor Durmus Yilmaz, please click here).

Rising food prices have caused Kazakhstan’s inflation rate to surge up to 17.5% in November, the State Statistics Committee reported today. The cost of food products has now risen by almost a quarter since the beginning of the year while services and non-food items have jumped by 14% and 9.2% respectively. To deal with the rampant growth in prices, the Kazakh central bank increased interest rates from 9% to 11% on Saturday, the first increase in rates since July 2006. It had planned to keep rates stable until the beginning of next year to combat the global liquidity crisis but was forced into action early by the inflation concerns. Analysts predict that the inflation rate is likely to remain in double figures over the next six to nine months, buoyed by price hikes in the telecommunications sector. The higher interest rates will also further raise concerns about refinancing risks among some heavily indebted Kazakh banks and companies. (For an interview with National Bank of Kazakhstan governor Anvar Saidenov, please click here).

The European Bank for Reconstruction and Development has issued a 2 billion rouble fixed rate bond – the first global bond in roubles – to help finance its Russian projects. The bond has a three-year maturity, pays annual coupons of 6.5% and has been given a ‘AAA’ rating by credit rating agencies Standard & Poor’s and Fitch. It is hoped the bond will make it easier for Russian firms to raise capital in roubles on the international markets in the future and will widen the EBRD’s investor base, particularly in the US.

Half of South Africa’s miners went on strike today in a row over safety, slashing production rates of gold, platinum and fossil fuels. At least six in ten workers failed to show up for work at Driefontein and Kloof, Africa’s two biggest gold mines, in protest against mining companies’ safety records. Some 201 workers have died so far this year, compared with 199 last year. Embattled President Thabo Mbeki, who ordered a safety audit after 3,200 workers were temporarily trapped in October, has come under pressure to act from rival Jacob Zuma, who has strong ties with the country’s unions. (For analysis of how South Africa’s rising political tensions could undermine investor sentiment, please click here).