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But proposed exchange believes it will not harm plans to bring new volumes and efficiencies to the FX market

Indirect tax collections of KM 3.5bn meet full-year target. BiH Indirect Tax Authority has collected KM 3.5bn (EUR 1.8bn) worth of revenues from indirect taxes as of Nov 10, thus fulfilling its full-year plan in advance, FENA reported. ITA press department representative Ratko Kovacevic stated that by end-2006 ITA expects to collect another KM 500mn, which will represent surplus against planned amount of revenues. We note that thus ITA has managed to collect by KM 700mn (25%) more than the three separate customs and tax administrations in full-2003. In the meantime, ITA has so far prevented illegal trade worth KM 14.3mn, up by 9.5 times compared to full-2005 . In addition, the tax authority seized goods in 345 cases in Jan-Sep compared 213 cases during the previous year.

NBU: Inflation to exceed 10% y/y in 2006. According to NBU, inflation will make up more than 10% y/y in 2006. In Jan-Oct 2006, inflation has already reached 8.7% ytd. And taking into account the seasonal spike-up of prices and announced increase of tariffs for regulated administratively services, prices will add at least 1.3% to that. But most likely, it will be considerably more. Keeping inflation within the target is possible only in case of a moratorium on the increase of tariffs for housing services until the end of 2006. The National Bank informs about its intention to try to constrain inflationary pressure by using its own instruments of credit and FX rate policy. In particular, NBU will try to boost the role of interest rates. On the other hand, EconMin keeps the inflation growth forecast at the level of up to 10%. The state budget for 2006 is developed based on an 8.7% inflation forecast. Government forecasts a slowdown of inflation in 2007 to 7.5% compared to 10.3% in 2005.

Crown appreciates beyond SKK/EUR 36 to hit new record high. The crown appreciated against the euro and reached a new all-time record high during yesterday’s trading, local dealers reported. The exchange rate passed through the psychological barrier of SKK /EUR 36 and strengthened to 35.83. It was supported by the developments of the regional markets as well but the pace of the crown appreciation was stronger. Forex market players reported that the bullish mood was still prevalent on the market, which in our opinion might be due to positive expectations for data on the economic performance in Q3. Strong economic fundamentals might support the exchange rate of the local currency in the near term although dealers noted that profit-taking and closing of crown positions before the end of the year might restrain the upward trend in the exchange rate.

World Bank revises China's 2007 growth prospects to 9.6%. In its latest quarterly update released on Tuesday, the World Bank (WB) has revised its forecast for China's economic growth in 2007 from 9.3% to 9.6%, while leaving its projection for this year unchanged at 10.4%. The WB has warned that the country's large trade surplus could aggravate its economic imbalance. Meanwhile, China's central bank has placed economic growth at above 10% for this year. The projection was released yesterday in a policy report for the Q3/2006.

Net FDI inflows soar 69% y/y to EUR 2.8bn in Jan-Sep. Data revisions based on transfer of inflows from the group of errors and omissions to direct investments in the country pushed up net FDI inflows by 69% y/y to EUR 2.8bn in Jan-Sep, according to preliminary data of the central bank. The change was even more impressive in terms of gross FDI inflows, which marked more than a twofold expansion due mostly to base effects from the merger and acquisition account. As recalled, net errors and omissions were initially reported at a net inflow of more than EUR 1.1bn in Jan-Aug but the figure was brought down by nearly EUR 900mn with the new data release on symmetric hikes in the inflow of FDI. The breakdown by economic sectors shows that 35% of the FDI inflows in Jan-Sep were directed to real estates and additional 9% to construction projects. Manufacturing firms attracted 21% of the total FDI inflow.

When interest rates are moving little or predictably, it is time for fixed-interest investors to turn to thoughts of … currency. Our view is necessarily long term.

Yields correct downwards at 3-month T-bills auction on moderate demand. Investors demonstrated moderate demand at 3-month T-bills auction organised by the State Debt Management Agency (AKK). Total valid bids amounted to HUF 67.44bn against the HUF 30bn offer of AKK, which was entirely placed. The average yield achieved at the auction stood at 8.04%, which is 5bps below the average yield achieved at the previous tender for similar papers (on Nov 7) and 11bps below the Monday’s secondary market benchmark. The next auctions organised by AKK are scheduled for Wednesday and Thursday when the agency will offer HUF 35bn in 6-month T-bills and HUF 40bn in 12-month T-bills, respectively.

But proposed exchange believes it will not harm plans to bring new volumes and efficiencies to the FX market

Poland blocks Russia-EU partnership talks over energy issues. Poland’s EconMin Piotr Wozniak said Poland will insist on Russia ’s ratification of Energy Charter’s transit protocol before any talks can proceed on a new EU-Russia Partnership and Cooperation Agreement. The current PCA runs out in 2007. Besides demanding to open Russia ’s oil and gas pipeline network to foreign companies, Poland called for lifting a yearlong ban on its food imports. EU-Russia negotiations are scheduled for Nov 24. According to EU External Relations Commissioner Benita Ferrero-Waldner, the discussion on the issue will continue in the next few weeks. Russia resists EU demands concerning Energy Charter adoption for several years already. Worth noting, Ferrero-Waldner said the current PCA could be extended.

M3 money supply rises 1.3% m/m to PLN 458.79bn at end-October. Money supply was PLN 458.79mn at end-October compared with PLN 453,102.4mn (after revision) a month earlier, announced the National Bank of Poland ( NBP ) in a communiqué on Tuesday. This means a rise of 1.3% m/m and 11.2% from the end of 2005. Net foreign assets in October reached PLN 168,048.8mn, or EUR 43,232.4mn. In September, they amounted to PLN 171,445.8mn, i.e. EUR 43,039.0 (after revision). Total deposits were PLN 378,527.8mn up 1.2% m/m, and 9.6% on the end of 2005, of which household deposits were PLN 214,274.7mn (-0.1% m/m, +5.3% since December), whereas corporate ones – PLN 113,830.7mn (+2.6% m/m and +14.6% since December. Total credits amounted to PLN 353,040.3mn at the end of October, a rise of 2.0% on the month, and 18.6% since December, of which household credits were PLN 178,850.7mn (+2.1% m/m and +26.6% since December), whereas corporate ones – PLN 139,663.7mn (+1.2% m/m and +11.7% since December). ISB

Cabinet cuts personal income, profit tax rates. The cabinet has adopted a bill for amending the personal income and profit tax laws, reducing the tax rates to 12% in 2007 and 10% as of the beginning of 2008. The bill has to pass the approval of the parliament in order to come into force. Presently, the personal income tax has three brackets with rates of 15%, 18% and 24%, while the profit tax rate is 15%. Reinvested profits will not be taxed. There will be also preferential tax treatment in free economic zones, which will be renamed to technological industrial development zones. According to the original budget for this year, revenues from personal income and profit taxes are expected to be MKD 8.1bn (EUR 132mn) and 3.2bn respectively, out of total budgeted tax revenues of MKD 57.6bn. PM Nikola Gruevski comments that the change will make the country very competitive in terms of investment climate. He said that introduction of flat taxation in other European countries have raised investments significantly. Gruevski adds that the tax cuts are broadly accepted by the IMF.