Key Trades and Risks - Zarifis...2013 Market performance 3Q GDP YoY 2012 EPS 2013E EPS Greece 40.0...

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www.jpmorganmarkets.com Emerging Markets Equity Research 22 January 2014 Key Trades and Risks Emerging Markets Equity Strategy Emerging Markets Equity Strategy Adrian Mowat AC (852) 2800-8599 [email protected] Bloomberg JPMA MOWAT <GO> J.P. Morgan Securities (Asia Pacific) Limited Pedro Martins Junior, CFA (55-11) 4950-4121 [email protected] Bloomberg JPMA MARTINS <GO> Banco J.P. Morgan S.A. David Aserkoff, CFA (44-20) 7134-5887 [email protected] Bloomberg JPMA ASERKOFF <GO> J.P. Morgan Securities plc Rajiv Batra (91-22) 6157-3568 [email protected] J.P. Morgan India Private Limited Sanaya Tavaria (1-212) 622-5469 [email protected] J.P. Morgan Securities LLC Kevyn H Kadakia (91-22) 6157-3250 [email protected] J.P. Morgan India Private Limited See page 101 for analyst certification and important disclosures, including non-US analyst disclosures. J.P. Morgan does and seeks to do business with companies covered in its research reports. As a result, investors should be aware that the firm may have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as only a single factor in making their investment decision. Our four non-consensus calls are: (1) High return from EM equities in 2014 (2) Value outperforms growth (3) Net inflows into EM bonds and tapering is bullish for EM equities (4) China lags, stay UW Our new MSCI EM target is 1200 (projected return of 23%, see page 5). We expect the initial rally to be driven by lower tail-risk, an unwind of low expectations and bearish positioning. The next stage will be improved relative EPS growth versus developed markets. Our key trades are: 1. EM joins the equity bull market (page 3) 2. Value outperforms (Russia, Korea, Taiwan, page 6) 3. Broadening global growth (Mexico, IT, Korean auto, page 8) 4. Mexico’s four drivers for 2014 (page 9) 5. Monetary and CAD headwinds (UW: Turkey, Brazil; page 11) 6. New versus old China (page 13) Asset allocation: OW: Korea, Taiwan, Mexico, India, Russia, Greece (13 Jan), Thailand, Peru UW: China, Turkey (7 Jan), Brazil, Colombia and Poland EM top 10 stocks: SK Hynix (000660 KS), Gazprom (GAZP RX), TSMC (2330 TT), Kasikornbank (KBANK TB), ICICI Bank (ICICIBC IN), Credicorp (BAP US), Sberbank (SBER RX), Hyundai Motor (005380 KS), Land and Houses (LH TB) and Cemex (CEMEXCPO MM). For our key trade stock ideas, click here for the Bloomberg linked spreadsheet. The key risks to our view are DXY strength plus China tail-risk: (1) property bubble (2) carry trade unwind (3) regulation in interbank and shadow banking. A disappointment in DM growth would hurt our OW on global cyclical. The risk to our China UW is that we underestimate policymakers’ conviction to pursue reform. For more, see page 17. Figure 1: Emerging markets strategy heat map…. OW sectors in green, UW sectors in red Source: J.P. Morgan.

Transcript of Key Trades and Risks - Zarifis...2013 Market performance 3Q GDP YoY 2012 EPS 2013E EPS Greece 40.0...

Page 1: Key Trades and Risks - Zarifis...2013 Market performance 3Q GDP YoY 2012 EPS 2013E EPS Greece 40.0 (3.0) (140.4) 20.1 Ireland 33.0 1.7 (0.5) 2.5 Spain 22.2 (1.1) 44.9 54.1 Portugal

www.jpmorganmarkets.com

Emerging Markets Equity Research22 January 2014

Key Trades and RisksEmerging Markets Equity Strategy

Emerging Markets Equity Strategy

Adrian Mowat AC

(852) 2800-8599

[email protected]

Bloomberg JPMA MOWAT <GO>

J.P. Morgan Securities (Asia Pacific) Limited

Pedro Martins Junior, CFA

(55-11) 4950-4121

[email protected]

Bloomberg JPMA MARTINS <GO>

Banco J.P. Morgan S.A.

David Aserkoff, CFA

(44-20) 7134-5887

[email protected]

Bloomberg JPMA ASERKOFF <GO>

J.P. Morgan Securities plc

Rajiv Batra

(91-22) 6157-3568

[email protected]

J.P. Morgan India Private Limited

Sanaya Tavaria

(1-212) 622-5469

[email protected]

J.P. Morgan Securities LLC

Kevyn H Kadakia

(91-22) 6157-3250

[email protected]

J.P. Morgan India Private Limited

See page 101 for analyst certification and important disclosures, including non-US analyst disclosures.J.P. Morgan does and seeks to do business with companies covered in its research reports. As a result, investors should be aware that the firm may have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as only a single factor in making their investment decision.

Our four non-consensus calls are:(1) High return from EM equities in 2014(2) Value outperforms growth(3) Net inflows into EM bonds and tapering is bullish for EM equities(4) China lags, stay UW

Our new MSCI EM target is 1200 (projected return of 23%, see page 5). We expect the initial rally to be driven by lower tail-risk, an unwind of low expectations and bearish positioning. The next stage will beimproved relative EPS growth versus developed markets.

Our key trades are:1. EM joins the equity bull market (page 3)2. Value outperforms (Russia, Korea, Taiwan, page 6)3. Broadening global growth (Mexico, IT, Korean auto, page 8)4. Mexico’s four drivers for 2014 (page 9)5. Monetary and CAD headwinds (UW: Turkey, Brazil; page 11)6. New versus old China (page 13)

Asset allocation:OW: Korea, Taiwan, Mexico, India, Russia, Greece (13 Jan), Thailand, PeruUW: China, Turkey (7 Jan), Brazil, Colombia and Poland

EM top 10 stocks: SK Hynix (000660 KS), Gazprom (GAZP RX), TSMC (2330 TT), Kasikornbank (KBANK TB), ICICI Bank (ICICIBC IN), Credicorp (BAP US), Sberbank (SBER RX), Hyundai Motor(005380 KS), Land and Houses (LH TB) and Cemex (CEMEXCPO MM).

For our key trade stock ideas, click here for the Bloomberg linked spreadsheet.

The key risks to our view are DXY strength plus China tail-risk: (1) property bubble (2) carry trade unwind (3) regulation in interbank and shadow banking. A disappointment in DM growth would hurt our OW on global cyclical. The risk to our China UW is that we underestimate policymakers’ conviction to pursue reform. For more, see page 17.

Figure 1: Emerging markets strategy heat map…. OW sectors in green, UW sectors in red

Source: J.P. Morgan.

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Emerging Markets Equity Research22 January 2014

Adrian Mowat(852) [email protected]

Table of ContentsKey Trades: EM joins the equity bull market .........................3

Risks to our strategy..............................................................17

Global emerging markets model portfolio by country ........24

Global emerging markets model portfolio by sector...........25

China: Stay with New China ..................................................30

Brazil: Rising global tide does not lift all boats...................32

South Korea: Positive fundamentals intact for 2014E ........34

Taiwan: Technology to lead in 2014 .....................................36

India: Micro support, Macro resistance................................38

Russia: Catalysts wanted ......................................................40

South Africa: Neutral MSCI SA within MSCI EM ..................42

Mexico: Its all about growth ..................................................44

Malaysia: Improving external sector.....................................46

Indonesia: Rebuilding Reserves ...........................................48

Thailand: Value starting to emerge.......................................50

Poland: February - Pension reform starts............................52

Turkey: Tighter policy, lower PE’s ........................................54

Philippines: Inflation spike keeps PSEi at bay ....................56

MENA & Saudi: Inflows, rallies, petchems ...........................58

Greece: Add Greece to your diet...........................................60

Extended markers ..................................................................63

Consensus Asset Allocation .................................................65

Hindsight trades: What has worked......................................66

Composite valuation indicators ............................................68

EMBIG100................................................................................72

Emerging Markets Strategy Dashboards .............................80

J.P. Morgan Emerging Markets Coverage (see page 153)

1072 stocks covered in EM

US$9.6 trillion of total market capitalization

US$26.6 billion of daily trading

volume

In this report, we highlight:

Our top trade ideas

Risks

Our model portfolio

Key ratios for EMBIG 100

Consensus country weights

Two pages on each significant emerging market. The first page

has a qualitative review of

events driving the past 12 months, the outlook and a

comment on valuations. The

second page displays the scorecard, which presents key

economic and equity market

data

The extended markers: This

report contains 36 pages of data designed to help track emerging

economies and markets

The emerging market

dashboards efficiently display

key economic, equity and debt data, demonstrating change and

perspective

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Emerging Markets Equity Research22 January 2014

Adrian Mowat(852) [email protected]

Key Trades: EM joins the equity bull market

J.P. Morgan's non-consensus calls:

High return from EM equities in 2014. The drivers of the rally are reduced tail-risks and better relative EPS growth.

Value outperforms growth

Net inflows into EM bonds and tapering is bullish for EM equities

China lags, stay UW

Reduction in tail-risk is a powerful driver of markets. This was demonstrated in peripheral Europe in 2013 (see Table 1). It was demonstrated in Indonesia last week.

Investors fear the impact of tapering on EM. We believe this fear is misplaced. History has proved conventional wisdom, that central bank buying of bonds drives down bond yields and when QE ends yields rise, is wrong. The opposite has occurred. US bond yield lows were just before Chairman Bernanke's Jackson Hole speech in November 2010. Bond yields increased during QE2. Then fell post QE2. Governor's Kuroda speech on QQE in April 2013 was concurrent with the low in JGB yields. JGB yields rose sharply post the speech. From the start of tapering of QE3, US bond yields fell. Bond investors are driving this surprising result. Central bank buying of bonds is part of a pro-growth policy. Bond investors respond to growth policies by selling bonds. Towards the end of QE, economic data are strengthening and central banks are still pursuing aggressive policies, a poor environment for bonds. As QE is removed we are left with good economic data but less central bank help. The delta is less policy support for growth, hence bond yields fall.

EM financial systems are not as fragile as feared. The banking system proved resilient in 2H13 when stress tested with large net redemptions in EM bond funds. A feared credit crunch did not materialize (see Figure 4).

The depreciation in EM currencies last year was painful for investors. But currency flexibility is a shock absorber. It facilitates the reduction in current account deficit. Indonesia reported a trade surplus in the last two months. J.P. Morgan revised Indonesia’s 2014 CAD/GDP forecast from 3.5% to 3% of GDP. India’s 3Q13 CAD fell to 1.2% of GDP versus 4.9% in 2Q.

Table 1: Rally on reduced tail risk rather than GDP/EPS growth2013 Market performance

3Q GDP YoY 2012 EPS 2013E EPS

Greece 40.0 (3.0) (140.4) 20.1 Ireland 33.0 1.7 (0.5) 2.5 Spain 22.2 (1.1) 44.9 54.1 Portugal 2.8 (1.0) 6.8 5.6

Source: Bloomberg, I/B/E/S, 15 January 2014 , Note: EPS forecasts and market

performance are in Euros

Figure 2: FX reserves recovering

Source: Bloomberg, 31 December 2013, Note: FX reserves rebased to 100 in December 2012.

Figure 3: Bond yields fell after the end of QE1 and QE2

Source: Bloomberg, 16 January 2014. Note: Grey area denotes periods of QE. Red circle used to demarcate the decline in bond yields after QE ended.

Figure 4: What credit crunch? 2013 loan growth

Source: CEIC

5%

15%

25%

35%

Jan-13 Apr-13 Jul-13 Oct-13

Indonesia India BrazilSA Turkey Malaysia

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Emerging Markets Equity Research22 January 2014

Adrian Mowat(852) [email protected]

J.P. Morgan’s fixed income team forecasts net inflows of $30-40bn into EM debt funds this year. EM debt offers a higher spread for the same credit risk than DM corporates and sovereigns. It is this relative value that should attract dedicated fixed income investors. Again the tail-risk of tapering falls.

Undervalued currencies reduce risk for cross-border investors. FX reserves are higher than they were in May in India, Brazil, South Africa and Turkey. Indonesia's FX reserves are lower than May levels but have risen in four out of the last five months.

Risks from the election cycle are skewed to the upside. Investors are disappointed with current policy and its implementation in those countries with upcoming elections. Opinion polls forecasting change may boost investors’ confidence. Again we believe politics is less of a tail-risk than feared.

The second stage of EM strong performance is harder to justify than a reduction in tail-risks. International investors buy EM equities searching for higher growth. Since 2010 the forward EPS in EM has lagged DM (see Figure 8). It is reasonable to argue that better economic growth combined with more cautious management can lead to better EPS growth.

Post the sharp depreciation in 2013, EM currencies are more competitive. DM demand is accelerating. Stronger exports should support GDP growth in EM. J.P. Morgan’s economist David Hensley notes: ‘EM export volume grew at close to 10% annualized in 2Q13-3Q13, compared with a 2.5% pace in the previous two quarters. Although the NIPA data exclude China, they have the major advantage of being free of distortions from pricing and FX effects. In fact, DM growth is tracking even stronger than we had anticipated, with domestic demand now expected to rise 2.1% over the four quarters ending 1Q14, a half-point more than before. EM export growth has exceeded expectations in symmetric fashion’. For more, please see pages 19 to 22. Clearly better economic growth is supportive of EPS growth.

Figure 5: More competitive EM FX (REER), less risk

Source: J.P. Morgan economics, 16 January 2014. Note: Chart shows real effective exchange rate rebased to 100 in January 2004.

Figure 6: DM domestic demand and EM ex China exports

Source: J.P. Morgan, national sources.

Figure 7: EM forward PE relative to DM

Source: Datastream

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Emerging Markets Equity Research22 January 2014

Adrian Mowat(852) [email protected]

What is a reasonable index target?

To calculate the index target we assume:

1. The consensus forecast for EM’s 2015 EPS is correct at 105

2. EM discount to US narrows to 20%. This is the median discount from 1990.

3. MSCI US return is similar to J.P. Morgan’s S&P500 target of 2075. This implies MSCI US target of 1985 and a forward PE of 16 by end of 2014 (consensus EPS forecast is 125).

4. MSCI EM discount to reduce from 35% to median 20%. This implies an end 2014 EM PE of 13.

Based on this, end 2014 MSCI EM target would be 1345. The implied return of 38% feels excessive. A larger discount of 25% implies a target of 1250.

To be conservative on our formal target, we are revising up our index target for MSCI EM from 1100 to 1200(23% potential return). If tail-risks continue to fall and EM relative EPS growth improves we can review the target.

MSCI EM is currently trading at a 35% discount to MSCI US (see Table 4). All sectors in MSCI EM are trading at a discount to MSCI US sectors except consumer staples (21% premium) and healthcare (17% premium). This underpins our UW stance on consumer staples in EM.

Table 2: Potential MSCI EM targets based on discount to US PE

Disc\US PE 14 14.5 15 15.5 16 16.5 170% 1475 1528 1581 1633 1686 1739 17915% 1402 1452 1502 1552 1602 1652 170210% 1328 1375 1423 1470 1517 1565 161215% 1254 1299 1344 1388 1433 1478 152320% 1180 1222 1265 1307 1349 1391 143325% 1106 1146 1186 1225 1265 1304 134430% 1033 1070 1106 1143 1180 1217 125435% 959 993 1027 1062 1096 1130 116440% 885 917 948 980 1012 1043 107545% 811 840 869 898 927 956 985

Source: Datastream, J.P. Morgan calculation

Note: US end 2014 forward PE column heading vs. EM PE discount rows.

Table 3: Returns to Index targets based on discount to US PE

Disc\US PE 14 14.5 15 15.5 16 16.5 170% 52% 58% 63% 68% 74% 79% 85%5% 44% 50% 55% 60% 65% 70% 75%10% 37% 42% 47% 52% 56% 61% 66%15% 29% 34% 39% 43% 48% 52% 57%20% 22% 26% 30% 35% 39% 43% 48%25% 14% 18% 22% 26% 30% 34% 39%30% 6% 10% 14% 18% 22% 25% 29%35% -1% 2% 6% 9% 13% 17% 20%40% -9% -5% -2% 1% 4% 8% 11%45% -16% -13% -10% -7% -4% -1% 2%

Source: Datastream, J.P. Morgan calculations

Note: US end 2014 forward PE column heading vs. EM PE discount rows

Table 4: EM vs US sectors prem/disc to fwd PE

Sector Current prem/disc (%)

Energy (52)CD (41)Financials (38)IT (27)Utilities (26)Materials (25)Industrials (19)Telecom (19)HC 17 CS 21 EM vs US (35)

Source: MSCI, I/B/E/S, Datastream, 20 January 2014.

Figure 8: EM must deliver premium EPS growth to outperform: Forward EPS and performance of MSCI EM relative to DM

Source: MSCI, I/B/E/S, Datastream, Bloomberg, 17 January 2014

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Emerging Markets Equity Research22 January 2014

Adrian Mowat(852) [email protected]

Value Outperforms (Russia, Korea, Taiwan)In this section we highlight a list of value stocks in Russia, Korea, Taiwan, Thailand, South Africa and Indian metals & mining based on the following methodology:

1) We rank JPM covered stocks in each region by 2014E PE and PB (giving equal weight to both)

2) We shortlist the cheapest stocks in each region and then rank based on premium/discount to last 10Y average of PE and PB

Table 5: KoreaTicker Name Re

coMCap (US$b

n)

3M return (US$)

6M return (US$)

PE 14E

PB 14E

ROE 14E

DY 14E

Prem/Disc 10Y avg PE

Prem/Disc 10Y avg PB

000720 KS Hyundai E&C OW 3.9 (8.8) 5.6 7.8 1.1 14.1 0.9 (17.7) (50.6)003690 KS Korean Reinsur. OW 1.0 (1.0) 16.7 6.0 0.7 12.0 3.5 (14.8) (51.0)005930 KS Samsung Elec OW 135.0 (10.5) 4.5 6.7 1.1 17.3 0.6 (30.6) (36.0)034220 KS LG Display OW 5.8 8.6 (0.6) 9.6 0.8 8.7 1.9 1.5 (45.7)060980 KS Mando N 1.6 (1.1) 26.9 8.7 1.0 12.3 0.8 (15.9) (34.1)105560 KS KB Financial OW 14.5 0.1 20.0 8.9 0.6 6.6 1.9 4.0 (49.1)000270 KS Kia Motors N 12.8 (19.5) (8.2) 5.0 0.8 18.3 1.2 (38.5) (11.2)066570 KS LG Electronics OW 6.9 (1.9) 0.3 9.9 0.8 8.4 0.0 13.4 (49.2)096770 KS SK Innovation OW 7.4 (13.2) (6.2) 7.8 0.6 7.9 1.9 (11.7) (33.2)012630 KS Hyundai Dev. OW 1.3 11.8 5.8 9.3 0.8 8.4 1.2 6.2 (43.5)005380 KS Hyundai Motor OW 33.5 (12.0) 14.8 6.4 1.1 17.0 1.0 (22.8) (7.5)005490 KS POSCO N 19.1 (0.4) 4.4 12.3 0.6 4.8 2.3 36.0 (45.3)023530 KS Lotte Shopping N 4.1 (0.4) 12.7 10.8 0.7 7.3 0.4 (4.8) (31.4)086790 KS Hana Financial OW 10.8 4.4 30.1 9.6 0.6 6.1 1.4 3.9 (32.9)000080 KS Hite Jinro Co UW 0.6 (12.7) (16.9) 8.5 1.0 12.1 4.9 17.1 (37.6)082640 KS Tong Yang Life NR 0.3 7.1 18.4 8.9 0.8 9.3 3.3 3.9 (23.6)004020 KS Hyundai Steel OW 4.1 (8.6) 23.3 9.4 0.6 6.3 0.6 31.2 (29.6)

Source: MSCI, I/B/E/S, Datastream, 15 January 2014

Table 6: TaiwanTicker Name Re

coMCap (US$b

n)

3M return (US$)

6M return (US$)

PE 14E

PB 14E

ROE 14E

DY 14E

Prem/Disc 10Y avg PE

Prem/Disc 10Y avg PB

2317 TT Hon Hai Prec. OW 30.6 10.2 16.0 9.5 1.2 13.1 2.8 (20.3) (53.6)3044 TT Tripod Tech N 0.8 (2.4) (16.9) 9.5 1.1 12.2 3.4 2.3 (56.0)3673 TT TPK N 1.4 (26.8) (57.1) 11.7 1.3 11.3 5.8 7.8 (63.7)2887 TT Taishin Fin. N 3.1 (3.7) 15.7 9.4 1.0 12.4 2.3 (16.4) (5.1)3231 TT Wistron Corp N 1.9 (5.8) (5.0) 11.0 0.9 8.4 4.8 6.9 (47.9)2311 TT ASE OW 5.9 (3.5) 13.4 11.1 1.7 14.9 3.9 (10.3) (16.7)2892 TT First Financial N 4.2 (1.6) 6.1 12.3 1.0 8.8 2.4 (1.8) (17.7)2890 TT Sinopac Fin. N 3.2 (3.0) 4.0 10.0 1.0 10.6 2.5 (17.1) 5.5 2324 TT Compal Elec OW 3.3 1.7 23.5 11.1 0.9 8.3 1.1 10.1 (36.0)2891 TT Chinatrust OW 8.8 (2.9) 10.4 10.9 1.4 12.9 3.7 (11.6) 1.5 3189 TT Kinsus Tech. OW 0.9 (6.6) (11.5) 11.0 1.6 15.1 3.0 (0.8) (9.4)2884 TT E.Sun Financial N 3.0 (6.6) 4.8 10.5 1.2 11.5 1.9 (15.4) 8.3 3037 TT Unimicron Tech N 1.1 0.1 (18.4) 12.7 0.8 6.3 4.5 54.3 (46.9)2303 TT UMC N 5.1 (2.7) (12.4) 18.3 0.7 4.0 3.5 14.4 (32.7)2615 TT Wan Hai Lines N 0.3 (13.0) (8.5) 9.4 1.0 11.2 2.6 17.9 (23.7)2886 TT Mega Holdings OW 7.6 (3.4) 0.3 11.2 1.2 10.8 4.5 (1.7) 4.0

Source: MSCI, I/B/E/S, Datastream, 15 January 2014

Table 7: India Metals & MiningTicker Name Re

coMCap (US$b

n)

3M return (US$)

6M return (US$)

PE 14E

PB 14E

ROE 14E

DY 14E

Prem/Disc 10Y avg PE

Prem/Disc 10Y avg PB

NMDC IN NMDC OW 9.2 11.1 28.0 8.1 1.7 22.0 6.3 (45.2) (63.8)SSLT IN Sesa Sterlite OW 9.5 7.2 22.6 5.8 0.7 12.7 3.3 5.4 (71.0)HNDL IN Hindalco OW 3.7 (0.6) 2.3 6.3 0.5 8.8 1.8 (8.0) (53.0)SAIL IN Steel Authority OW 4.5 16.6 34.3 6.9 0.6 8.9 2.9 25.1 (61.2)NACL IN National Alum. N 1.5 13.7 17.0 14.2 0.8 5.4 3.5 7.4 (58.4)MOIL IN MOIL Ltd OW 0.6 6.9 11.4 8.4 1.1 14.4 3.5 (2.4) (7.7)TATA IN Tata Steel Ltd OW 6.2 21.4 41.6 6.9 0.9 13.3 2.9 37.0 (47.9)JSTL IN JSW Steel OW 3.9 26.2 63.0 8.8 1.0 11.6 1.1 47.6 (22.5)Source: MSCI, I/B/E/S, Datastream, 15 January 2014

Figure 9: Forward P/E of MSCI Korea relative to EM

Source: MSCI, I/B/E/S, Datastream, 10 January 2014

Figure 10: Yields rising but value still underperforming growth

Source: Bloomberg, 17 January 2014. Note: The chart shows

performance of MSCI EM value vs growth index.

Figure 11: Forward PE of MSCI EM growth vs. value

Source: Bloomberg, 17 January 2014

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Emerging Markets Equity Research22 January 2014

Adrian Mowat(852) [email protected]

Table 8: Russia

Ticker Name Reco

Mcap (US$b

n)

3M return (US$)

6M return (US$)

PE 14E

PB 14E

ROE 14E

DY 14E

Prem/Disc 10Y

avg PE

Prem/Disc 10Y avg PB

PHST LI Pharmstandard N 1.5 (33.1) (24.2) 3.3 0.7 25.2 0.0 (63.4) (76.6)FEES RX FSK UW 3.5 (8.7) (14.7) 5.1 0.1 2.7 4.6 (71.0) (70.7)MSNG RX Mosenergo OW 1.1 (13.7) (25.0) 7.6 0.2 2.1 5.8 (32.0) (83.4)SBER RX Sberbank OW 65 (6.8) (1.3) 5.6 1.0 19.7 4.0 (51.6) (48.4)TMKS LI TMK OW 2.7 (11.3) 3.6 7.9 1.1 15.0 3.2 (13.4) (72.6)LSRG LI LSR OW 2.1 (3.3) 2.7 8.2 1.1 13.8 0.0 (50.0) (5.5)IRAO RX Inter RAO OW 3.0 (9.2) (28.3) 11.4 0.2 2.2 0.0 0.0 (71.7)BSPB RX Bank St. Peters OW 0.6 (11.5) (9.8) 3.1 0.4 12.8 1.0 (22.0) (59.3)GAZP RU Gazprom OW 98.0 (15.0) 9.5 2.9 0.3 10.6 5.8 (13.1) (42.3)VZRZ RX Vozrozhdenie UW 0.3 12.4 18.0 5.1 0.5 9.6 1.1 (40.8) (0.0)SNGS RX SurgutNG N 30.0 (8.3) 2.3 4.9 0.5 10.1 3.1 (10.7) (27.7)TATN RX Tatneft OW 12.9 (13.6) (6.2) 5.5 0.9 16.7 4.7 8.5 (13.5)MFON LI MegaFon OW 19.3 (14.8) (7.7) 11.0 5.4 51.3 8.0 2.7 (0.9)MBT US Mobile Tele OW 20.8 (13.9) 0.9 10.2 5.6 54.7 8.1 (1.1) 0.1 PHOR LI PhosAgro OW 3.9 (2.8) (20.3) 12.1 1.7 19.4 5.6 40.7 (0.6)

Source: MSCI, I/B/E/S, Datastream, 15 January 2014

Table 9: Thailand

Ticker Name Reco

Mcap (US$b

n)

3M return (US$)

6M return (US$)

PE 14E

PB 14E

ROE 14E

DY 14E

Prem/Disc 10Y

avg PE

Prem/Disc 10Y avg PB

AP TB Asian Property N 0.4 (28.7) (30.7) 5.6 0.8 15.4 6.5 (31.0) (43.1)PTT TB PTT Public Co OW 24.9 (14.7) (20.3) 6.7 1.1 17.2 5.6 (16.4) (46.6)PS TB Pruksa Real Est OW 1.2 (25.0) (16.8) 7.6 1.5 20.2 4.6 (14.5) (25.1)KBANK TB Kasikornbank OW 11.7 (19.6) (17.7) 8.1 1.5 20.0 2.5 (17.2) (10.8)KTB TB Krung Thai OW 5.7 (24.4) (19.3) 6.9 1.0 15.9 5.4 (16.4) (13.3)BBL TB Bangkok Bank N 10.3 (18.9) (17.2) 8.6 1.1 12.8 4.5 (12.2) (15.3)QH TB Quality Houses N 0.7 (25.1) (17.9) 7.5 1.2 16.1 6.7 (19.5) 1.1 BANPU TB Banpu Public N 0.2 (14.4) 5.7 13.3 0.9 8.0 9.0 55.5 (52.1)TISCO TB Tisco Financial N 0.9 (11.7) (13.6) 5.9 1.2 21.5 6.2 (15.4) (3.3)TOP TB Thai Oil N 3.4 (20.6) (22.1) 9.8 1.2 12.1 5.6 15.0 (31.8)SPALI TB Supalai Public N 0.8 (15.6) (15.4) 5.8 1.6 28.3 6.9 (0.8) (14.8)KKP TB Kiatnakin Bank UW 0.7 (21.0) (33.6) 8.5 0.9 10.3 8.2 (13.3) (0.1)TCAP TB Thanachart Cap UW 1.3 (10.3) (19.4) 7.6 0.8 10.5 4.6 (10.4) (2.1)PTTGC TB PTT Global OW 10.3 (9.1) (3.6) 8.7 1.3 15.3 4.6 6.8 (5.5)BAY TB Bank Ayudhya N 6.1 (18.5) (17.2) 10.4 1.5 14.8 3.7 (3.5) 37.7

Source: MSCI, I/B/E/S, Datastream, 15 January 2014

Table 10: South Africa

Ticker Name Reco

Mcap (US$b

n)

3M return (US$)

6M return (US$)

PE 14E

PB 14E

ROE 14E

DY 14E

Prem/Disc 10Y

avg PE

Prem/Disc 10Y avg PB

LON SJ Lonmin plc OW 2.2 (4.8) 15.2 10.1 0.8 8.4 5.3 (6.9) (77.4)ABL SJ African Bank OW 1.4 (21.9) (13.8) 6.6 1.0 15.5 4.3 3.6 (73.9)BGA SJ Barclays Africa N 4.1 (21.2) (15.5) 8.7 1.4 16.3 5.7 (3.1) (32.3)INVP LN Investec Plc N 4.2 5.4 8.6 10.5 1.1 12.2 5.9 8.2 (39.1)SBK SJ Standard Bank OW 14.3 (5.9) 6.3 10.7 1.6 15.3 4.2 9.5 (24.2)AMS SJ Anglo American OW 2.4 (15.3) 16.5 12.3 1.8 14.4 3.0 20.4 (56.3)IMP SJ Impala Platinum UW 5.7 (12.8) 16.0 14.4 1.2 8.7 3.5 37.0 (56.1)RBP SJ Royal Bafokeng OW 0.3 (5.7) 12.3 14.5 0.8 5.7 0.0 9.7 5.5 FSR SJ FirstRand Ltd N 9.7 (12.3) 6.4 10.0 2.2 21.9 5.0 10.7 0.7

Source: MSCI, I/B/E/S, Datastream, 15 January 2014

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8

Emerging Markets Equity Research22 January 2014

Adrian Mowat(852) [email protected]

Broadening Global Growth: OW Mexico, IT, Korean auto

DM domestic demand accelerated in late 2013. This is forecast to continue to 2014. EM exports are responding. We are OW exporters, i.e., IT and consumer discretionary. This results in an OW on Taiwan and Korea. Mexico has few listed exporters but the market should benefit from the economy’s leverage to US growth.

The Taiwan market is half tech. Operational leverage usually drives profits. Supply discipline should support pricing. Increase in IT spending should drive a recovery in commercial PCs, where expectations are particularly bearish.

Korean equities typically do well as DM growth accelerates. We expect real GDP to grow 3.8% in 2014 driven by increasing demand from DM economies. Our style bias is value. Both SEC and HMC are at trough valuations. A new model cycle is the catalyst for HMC. J.P. Morgan’s currency strategist forecast an end to yen weakness (100JPY/USD by June).

Mexico’s economy is closely linked to the US. Signs of manufacturing sector recovery due to strong external demand started in 2H13. Industrial production increased 4% in October 2013. J.P. Morgan economists forecast 3.4% GDP growth for 2014 up from 1.2% in 2013.External demand typically lifts sectors closely related to manufacturing cycle, allowing for a broader recovery.

We are also OW Greece (recently added to MSCI EM). Europe is accelerating faster than US or Japan in 2014. Greece is one of the few ways for dedicated GEM investors to get exposure to the Eurozone recovery. It is probably the best way in our view given that pension reform in Poland will sharply cut equity market inflows. Greek GDP growth is expected to turn positive in 2014, for the first time since 2007.

Table 1: DM acceleration beneficiariesStock Ticker JPM Mkt cap Price P/E (x) DY (%) ROE (%)

Rating (US$B) (LC) 14E 15E 14E 14ETaiwan Semiconductor 2330 TT OW 92 107 12.7 11.3 2.8 21.6Tata Consultancy Svcs Ltd TCS IN N 73 2289 21.3 18.7 1.0 31.0Hyundai Motor Co 005380 KS OW 49 237000 6.6 5.8 1.0 16.5Infosys Ltd INFO IN OW 35 3725 18.1 15.6 1.6 22.5Grupo Mexico Sab De Cv GMEXICOB MM OW 25 43 14.7 13.1 2.0 16.4Sk Hynix Inc 000660 KS OW 24 36450 7.3 6.9 0.4 21.4Wipro Ltd WPRO IN N 23 573 16.5 14.5 1.3 21.7Kia Motors Corporation 000270 KS N 20 51600 5.0 4.5 1.2 16.8Grupo Televisa Sa-Spon Adr TV US N 17 30 26.4 23.3 0.0 11.3Grupo Televisa Sa-Spon Adr TV US N 17 30 26.4 23.3 0.0 11.3Mediatek Inc 2454 TT N 17 388 14.2 11.6 3.8 19.2Erste Group Bank Ag EBS AV OW 17 28 12.3 10.0 2.3 7.9Hcl Technologies Ltd HCLT IN OW 16 1439 15.4 13.5 0.6 29.0Alfa S.A.B.-A ALFAA MM N 14 37 19.1 18.7 1.0 15.2Cemex Sab-Spons Adr Part CX US OW 14 13 58.3 30.4 0.0 1.4Cez As CEZ CP N 14 522 9.0 11.8 6.1 11.1Grupo Bimbo Sab- Series A BIMBOA MM N 13 36 19.3 15.8 0.4 16.0Gerdau Sa-Pref GGBR4 BZ N 12 17 12.5 10.3 1.6 7.4Jbs Sa JBSS3 BZ OW 11 9 11.5 11.0 1.6 10.0Lg Electronics Inc 066570 KS OW 11 69700 10.0 7.1 0.0 8.1Quanta Computer Inc 2382 TT N 10 77 13.4 11.5 4.6 15.6Koc Holding As KCHOL TI N 9.3 8 9.2 6.9 2.1 6.9Lg Display Co Ltd 034220 KS OW 9.0 26900 9.7 7.2 1.9 8.3Mexichem Sab De Cv-* MEXCHEM* MM OW 8.4 53 18.2 16.2 1.2 11.9Komercni Banka As KOMB CP OW 8.1 4358 12.5 11.3 5.9 14.9Advanced Semiconductor 2311 TT OW 7.3 29 10.9 9.9 4.2 14.7Hankook Tire Co Ltd 161390 KS OW 7.3 62800 8.8 8.2 0.6 22.7Copa Holdings Sa-Class A CPA US OW 6.5 146 12.7 11.2 2.6 24.3Embraer Sa-Adr ERJ US N 6.3 34 16.5 13.0 1.5 9.6Alpek Sa De Cv ALPEKA MM N 4.5 28 22.3 17.2 2.5 9.7Grupo Aeroport Del ASURB MM N 3.5 154 20.6 18.7 3.4 12.5Tmk-Gdr Reg S TMKS LI OW 2.8 12 8.1 7.3 3.1 13.6Titan Cement Co. S.A. TITK GA NC 2.3 21 54.4 21.9 0.3 2.1Korean Air Lines Co Ltd 003490 KS OW 1.8 33200 9.9 6.9 0.0 11.0Iochpe-Maxion S.A. MYPK3 BZ OW 1.1 26 12.3 9.4 3.0 13.4Source: Bloomberg, I/B/E/S, J.P. Morgan estimates. Share prices as of 20 January 2014

Figure 12: GDP forecast higher for 2014

Source: J.P. Morgan Economics

Figure 13: DM real domestic demand and imports

Source: J.P. Morgan

Figure 14: Taiwan IT & Korea IT outperforms

Source: Bloomberg, 16 January 2014.

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9

Emerging Markets Equity Research22 January 2014

Adrian Mowat(852) [email protected]

Mexico’s four drivers

Mexican GDP growth is forecast to accelerate from 1.2% in 2013 to 3.4% in 2014. The four drivers are:

1. US demand and a stronger manufacturing sector

2. Government spending picking up reigniting construction activity

3. Easy monetary and fiscal policy with no inflationary pressures

4. Structural reforms supporting long-term potential GDP growth expansion

US demand and a stronger manufacturing sector

Mexico is a manufacturing country (84% of non-oil exports and 15% of workforce).Over 70% of Mexican exports go to the US. Strong domestic demand and industrial production in the US provide support to Mexican manufacturing growth. This in turnboosts job creation and consumer confidence. Remittances also increase with US economic activity. Money from remittances is almost 100% used for current consumption with very little destined for savings.

Figure 15: Manufacturing Industrial production Mexico and US

Source: INEGI, FRB.

Figure 16: Remittances vs. SSS

Source: ANTAD, INEGI

Government spending picking up reigniting construction activity

Government spending was down by 4.5% during the 1H13, the largest drop in over 20 years. However, spending recovered during 2H and only in September government expenditures rose by over 30%. Infrastructure investments increased by 28% during the 2H13 vs. same period 2012, compared to a drop of 25% in the 1H13 vs. 1H12. Late last year, at least three major infrastructure projects were bid by the government. The expectation of a more dynamic public infrastructure sector has beendriving up demand for construction jobs, which should eventually translate (again) into an improved environment for domestic consumption. The construction industry employs over 7% of the total employed population in Mexico.

Easy monetary and fiscal policy with no inflationary pressures

The central bank cut interest rates by 100bp in 2013. Low growth and inflation expectations provide policy flexibility. J.P. Morgan forecast Banmex to be on hold through 2014. The other monetary boost is a weak Peso. As part of Fiscal Reform, Congress approved a 1.5% increase to the government’s fiscal deficit target up to 3.5% considering investments by Pemex. The additional budget will be spent on government’s social programs and infrastructure investments, as budget planned for the latter increased by +40% from 2013 to 2014.

GDP growth accelerates

Over 70% of Mexican exports go

to the US

Government spending was down

by 4.5% during the 1H13, the

largest drop in over 20 years.

Recovery/rebound in 2014

Recovery in construction

Last year's interest rate cuts feed through

Fiscal boost of 1.5%

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10

Emerging Markets Equity Research22 January 2014

Adrian Mowat(852) [email protected]

Structural reforms supporting long-term potential GDP growth expansion

2013 was the year of passing reform. Investment sensibly waited for the implementation of reform. There is now a greater openness for private investors in key industries (Telecom and Energy) while improving legal certainty for those companies coming in (labor reform approved in 2012). Our economists estimate incremental FDI inflows from these changes to be ~$20bn annually in the mid/long term. Overall, all of the reforms approved could bring potential GDP growth up to 4.5% from current 3.3%. The Energy Reform eliminates Pemex’s 60year monopoly in oil-related activities via licenses schemes or profit and/or production sharing agreements. It also introduces competition in electricity generation. Greater investment helps costs and profitability for industrial companies and boosts job creation which in turn increases consumption.

These four themes interact and have driven S&P to upgrade Mexico from BBB to BBB+ late last year. Further upgrades are likely but very dependent on the outcome of the secondary legislation of the Energy Reform. Nonetheless, healthy macro plus positive outlook for current and future GDP growth provide support to our bullish view on the currency as we expect it to be the best performing currency in EM in 2014.

Our top picks are selected as those that will benefit from the improving outlook for industrials and infrastructure investments in Mexico as well as a recovery in construction activities (Cemex, Pinfra, Alfa and Fibra Macquarie). We include Liverpool in our list of top picks to get exposure to the local consumer driven by a recovery of domestic demand and increasing credit availability.

Figure 17: Government Investments in Infrastructure

Source: SHCP.

Figure 18: We expect Mexico to be the best performing currency in EM in 2014

Source: J.P. Morgan estimates.

Table 1: OW MexicoStock Ticker JPM Mkt cap Price P/E (x) DY (%) ROE (%)

Rating (US$B) (LC) 14E 15E 14E 14EEl Puerto De Liverpool-C1 LIVEPOLC MM OW 15 143 22.4 19.6 0.4 13.6Alfa S.A.B.-A ALFAA MM N 14 37 19.1 18.7 1.0 15.2Cemex Sab-Spons Adr Part Cer CX US OW 14 13 58.3 30.4 0.0 1.4Promotora Y Operadora De Inf PINFRA* MM OW 4.8 166 32.8 30.0 0.0 18.6Macquarie Mexico Real Estate FIBRAMQ MM OW 1.1 25 12.8 12.5 7.4 8.8

Source: Bloomberg, I/B/E/S, J.P. Morgan estimates. Share prices as of 20 January 2014

Potential GDP growth boost to

4.5% from current 3.3%

US$20billion of new FDI

Table 11: Reforms Contribution to Growth – JPM ScenarioContribution to growth: Potential

GDP

Telecom Reform 0.1% - 0.3% Financial Reform 0.2% - 0.4% Energy Reform 0.4% - 0.7% Total Impact in Potential GDP Growth

0.8% - 1.7%

Estimated Annual Potential Output w/Reforms

4.1% - 5%

Source: J.P. Morganestimates

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11

Emerging Markets Equity Research22 January 2014

Adrian Mowat(852) [email protected]

Monetary & CAD headwinds: UW Turkey and Brazil

Tightening cycles are a significant headwind for equities. In both Brazil and Turkey we are still in the phase of rate hikes and slowing growth.

Tighter monetary policy, including macroprudential measures, is hitting growth. Our economists have just cut our 2014 GDP forecast from 3% to 2.5% and raised our end-14 CPI forecast from 6.3% to 7.0% (Bloomberg consensus is 3.6% GDP and 6.7% CPI). We expect further consensus EPS downgrades to follow.

There is no valuation cushion. MSCI Turkey forward PE of 8.7 and banks’ P/BV of 1.4 are near average. At previous lows MSCI Turkey fell to a PE of 4.2 and banks were on 0.88 P/BV. In fact, the stock market is only 9% below its average 12M PE multiple. Given the rise in interest rates – 10 year yields +175 bps since 23 October and +400 bps from May– equities should be cheap. Foreigners have only sold 4.2% of the free float, which is far less than the drop in the GFC or even 2001. There is plenty of room for further declines. The two key risks to our call are first that the political tension calms dramatically and second that firmer EM FX means rates do not have to go up as much as we expect.

Figure 19: 12 month trailing CAD and ex-Gold

Source: Turkstat, J.P. Morgan, Bloomberg

Table 12: Turkey - Foreign ownership peaks and troughs

Period % Foreign Ownership

Exact Date Change

2007 peak 72.63 15-Oct-072009 trough 62.10 24-Mar-09 -10.532010 peak 68.57 11-Nov-10 6.472012 trough 61.59 01-Jun-12 -6.982013 peak 66.41 17-May-13 4.822013 trough 62.19 23-Dec-13 -4.22

Source: J.P. Morgan.

Figure 20: MSCI Turkey 12m Forward PE

Source: I/B/E/S, Datastream, J.P. Morgan

Figure 21: The monetary & growth cycle

Source: J.P. Morgan.

Monetary tightening

Slowing growth

Fair/not cheap valuations

Consensus EPS is too high

Political noise

(see Reducing risk in Turkish

equities dated 8 January).

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12

Emerging Markets Equity Research22 January 2014

Adrian Mowat(852) [email protected]

We remain UW Brazil. The cost of trend-like global growth is policy normalization. The cost of money is moving higher and we see the following lastingconsequences for Brazil equities in 2014: weaker currency, below trend economic growth, downside risk to earnings and high long rates given the twin deficit (Figure 22).

FX depreciation remains a risk for foreign investors and serves as a deterrent to adding to Brazilian equity exposure. J.P. Morgan forecasts the USD-BRL at R$2.50/US$ by 2014E year-end and 2.60 by 2015E, driven by a 3% current account deficit (Figure 23) and a more challenging global environment for capital flows.

Below-trend economic growth. J.P. Morgan forecast of 2.1% 2014E GDP growth and 2.2% in 2015E challenges Bloomberg consensus earnings growth expectations of 19% (in USD) for 2014 (Table 13). Companies will not have the benefit of operating leverage, while cost pressures will likely persist in labor, logistics and real estate.

Mind the gap below the EBITDA line. Rising sovereign risk perception and domestic monetary tightening amid fiscal underperformance, elevates the opportunity cost for equity investments. Below the operating line, downside risk to earnings increase as cost of debt has been increasing markedly given higher yields on the US Treasury and higher sovereign risk perception.

Policy Divergence. Investors lack confidence in the government’s willingness to embrace more prudent and lasting macro policies ahead of the Oct 2014 presidential elections.

We do not see valuation offering much cushion

MSCI Brazil’s consensus forward P/E at 9.6x is below the LatAm and Global averages. It is nearly in line with that of emerging markets and Brazil’s own historical ratio. However, we believe the room for re-rating is narrow in 2014, given the policy uncertainties created by the coming October 2014 presidential election, market scrutiny on the country’s fiscal accounts, the ongoing domestic monetary tightening cycle and global rate normalization.

We recommend investors to OW Financials (lower NPL risk and competition from public sector banks has likely peaked) and Industrials (infrastructure investment a government priority, with regulatory woes mostly being addressed).

Table 13: Earnings risk remains for 2014E

Source: Bloomberg and J.P. Morgan estimates

Figure 22: 2014 twin deficits in LatAm

Source: J.P. Morgan estimates

Figure 23: Brazil key economic forecasts

Source: IBGE and J.P. Morgan estimates

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13

Emerging Markets Equity Research22 January 2014

Adrian Mowat(852) [email protected]

New vs. old China trade

2013 was all about new China. Thematic growth re-rated to 23 times and reform beneficiaries’ to18 times. Old China stocks de-rated and significantly underperformed. Based on forward P/E, deep value in China is limited to the banks, building materials and IPPs. For more on our new and old China baskets, please see China reforms versus growth floor, Mowat et al, 15 December 2013.

China is the exception to our value outperforms growth call. In China we are reducing expensive thematic growth, particularly policy beneficiaries, but not buying value.

The battle between old and new China is likely to continue this year. We believe that many policymakers have a strong will to reform. The reforms announced in November read well. However, we continue to struggle with the disconnect between 7% economic growth and reform that is designed to improve return on capital. The recent local government audit is not about a potential debt crisis, but if the existing economic model were to continue, debt would become excessive. As our regional financials team notes in ‘The world is not enough’, the current model is already straining local financial resources. The problem for China's policymakers is how much to dial back expansion in leverage without sacrificing too much economic growth. Our base case is that debt to GDP continues to rise. But the expansion in debt to GDP will not be as fast as witnessed since 2008. This implicitly means that GDP growth in China will continue to slow. The audit is an overhang for the banks and those stocks whose revenue is dependent on public sector projects. For the banks, investors will remain concerned about asset quality, declining returns on assets as bank loans are replaced by bonds and finally a continuing fear of rights issues. Many of these concerns are priced into current low valuations for old China. As has been the case for a number of years, the banks sector will likely remain a policy trading sector.

China's growth floor arguably provides trading opportunities. In September 2012 andin June 2013, faced with slowing economic growth, policymakers in China resorted to mini stimuli. This resulted in a sharp recovery in deep-value sectors. If this pattern repeats, then we think investors should sell deep value cyclical sectors after PMIs peak and buy as PMIs drop below 50. We think the pattern of the last two years will continue into 2014. The risk to this view is that we are underestimating the conviction to pursue reform.

*These baskets have been created by Sue Lee of our Asia Pacific Equity Derivatives Strategy team to leverage the themes discussed above. Bloomberg subscribers can use the tickers JPHCHRFB <Index>, JPHCHTGW <Index> and JPHCHRFS <Index> to access tracking information on these baskets. Over time, the performance of these indices could diverge from returns quoted in our research, because of differences in methodology. J.P. Morgan Research does not provide research coverage of this basket and investors should not expect continuous analysis or additional reports relating to it. For more information, please contact your J.P. Morgan salesperson or the Asia Pacific Equity Derivatives Strategy team.

Figure 24: The winners: J.P. Morgan China reform beneficiaries (JPHCHRFB Index) and China thematic growth winners baskets (JPHCHTGW Index)

Figure 25: J.P. Morgan China reform sufferers basket (JPHCHRFS Index)* vs. PMI

Source: J.P. Morgan, Bloomberg, Markit, NBS, 10 January2014

Table 14: Valuations of new and old China

New and old China baskets

P/E (X)

Fwd P/E rel

14E China

Thematic Growth 15.4 162Reform Beneficiaries 18.3 977% growth floor winners 8.5 5Reform Sufferers 7.6 -7

Source: I/B/E/S, J.P. Morgan estimates. 10 January

2014. Table shows simple average valuations.

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14

Emerging Markets Equity Research22 January 2014

Adrian Mowat(852) [email protected] Table 15: OW India

Stock Ticker JPM Mkt cap Price P/E (x) DY (%) ROE (%)

Rating (US$B) (LC) 14E 15E 14E 14E

Tata Consultancy Svcs Ltd TCS IN N 73 2289 21.3 18.7 1.0 31.0Infosys Ltd INFO IN OW 35 3725 18.1 15.6 1.6 22.5Wipro Ltd WPRO IN N 23 573 16.5 14.5 1.3 21.7Icici Bank Ltd ICICIBC IN OW 20 1071 11.8 9.5 2.6 13.3Hcl Technologies Ltd HCLT IN OW 16 1439 15.4 13.5 0.6 29.0Sesa Sterlite Ltd SSLT IN OW 10 208 6.6 6.1 2.8 11.4Mahindra & Mahindra Ltd MM IN OW 9.2 917 14.5 9.5 1.5 19.2Tata Steel Ltd TATA IN OW 6.0 380 7.7 5.1 2.7 11.7Dlf Ltd DLFU IN OW 4.6 157 19.6 11.2 1.5 5.1Source: Bloomberg, I/B/E/S, J.P. Morgan estimates. Share prices as of 20 January 2014.

Table 16: OW KoreaStock Ticker JPM Mkt cap Price P/E (x) DY (%) ROE (%)

Rating (US$B) (LC) 14E 15E 14E 14E

Samsung Electronics Co Ltd 005930 KS OW 183 1325000 6.8 6.6 0.6 16.0Hyundai Motor Co 005380 KS OW 49 237000 6.6 5.8 1.0 16.5Sk Hynix Inc 000660 KS OW 24 36450 7.3 6.9 0.4 21.4Naver Corp 035420 KS OW 22 700000 35.6 22.9 0.5 23.6Kia Motors Corporation 000270 KS N 20 51600 5.0 4.5 1.2 16.8Samsung Life Insurance Co Lt 032830 KS OW 19 101000 14.0 NA 2.2 6.4Kb Financial Group Inc 105560 KS OW 14 39150 8.7 8.2 1.9 7.0Lg Electronics Inc 066570 KS OW 11 69700 10.0 7.1 0.0 8.1Hankook Tire Co Ltd 161390 KS OW 7.3 62800 8.8 8.2 0.6 22.7Source: Bloomberg, I/B/E/S, J.P. Morgan estimates. Share prices as of 20 January 2014.

Table 17: OW TaiwanStock Ticker JPM Mkt cap Price P/E (x) DY (%) ROE (%)

Rating (US$B) (LC) 14E 15E 14E 14E

Taiwan Semiconductor 2330 TT OW 92 107 12.7 11.3 2.8 21.6Mediatek Inc 2454 TT N 17 388 14.2 11.6 3.8 19.2Mega Financial Holding Co Lt 2886 TT OW 10 25 11.2 10.3 4.5 10.5Ctbc Financial Holding Co Lt 2891 TT OW 10 20 11.0 9.9 3.6 12.4Advanced Semiconductor 2311 TT OW 7.3 29 10.9 9.9 4.2 14.7Largan Precision Co Ltd 3008 TT OW 5.6 1250 15.9 14.1 2.5 29.0Synnex Technology Intl Corp 2347 TT OW 2.9 54 12.3 10.6 5.8 17.2Hiwin Technologies Corp 2049 TT OW 2.3 270 22.4 18.2 0.8 21.4Source: Bloomberg, I/B/E/S, J.P. Morgan estimates. Share prices as of 20 January 2014.

Table 18: OW GreeceStock Ticker JPM Mkt cap Price P/E (x) DY (%) ROE (%)

Rating (US$B) (LC) 14E 15E 14E 14E

Piraeus Bank S.A TPEIR GA OW 12 2 NM 20.2 0.0 -6.6Alpha Bank A.E. ALPHA GA OW 10 1 NM 22.3 0.0 -9.3Hellenic Telecommun HTO GA OW 7.3 11 16.7 13.1 3.7 13.4Source: Bloomberg, I/B/E/S, J.P. Morgan estimates. Share prices as of 20 January 2014.

Table 19: OW ThailandStock Ticker JPM Mkt cap Price P/E (x) DY (%) ROE (%)

Rating (US$B) (LC) 14E 15E 14E 14E

Siam Commercial Bank Pub SCB TB OW 15 149 9.1 8.3 3.7 19.4Siam Cement SCC TB OW 15 410 14.1 12.2 3.5 18.7Kasikornbank Pcl KBANK TB OW 12 170 8.6 7.7 2.4 18.5Ptt Global Chemical Pcl PTTGC TB OW 10 74 8.6 8.4 4.7 14.6Krung Thai Bank Pub Co Ltd KTB TB OW 7.3 17 7.2 6.3 5.2 15.2Bec World Public Co Ltd BEC TB OW 2.9 48 15.3 13.9 6.2 66.7Land & Houses Pub Co Ltd LH TB OW 2.7 9 12.4 10.3 6.5 21.2Thai Union Frozen Prod Pub TUF TB OW 2.2 64 14.4 12.4 3.5 13.5Electricity Generating Pcl EGCO TB OW 2.0 125 7.3 6.2 4.2 11.5Source: Bloomberg, I/B/E/S, J.P. Morgan estimates. Share prices as of 20 January 2014.

Table 20: OW MexicoStock Ticker JPM Mkt cap Price P/E (x) DY (%) ROE (%)

Rating (US$B) (LC) 14E 15E 14E 14E

El Puerto De Liverpool-C1 LIVEPOLC MM OW 15 143 22.4 19.6 0.4 13.6Alfa S.A.B.-A ALFAA MM N 14 37 19.1 18.7 1.0 15.2Cemex Sab-Spons CX US OW 14 13 58.3 30.4 0.0 1.4Promotora Y Operadora PINFRA* MM OW 4.8 166 32.8 30.0 0.0 18.6Macquarie Mexico Real Est. FIBRAMQ MM OW 1.1 25 12.8 12.5 7.4 8.8Source: Bloomberg, I/B/E/S, J.P. Morgan estimates. Share prices as of 20 January 2014.

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Emerging Markets Equity Research22 January 2014

Adrian Mowat(852) [email protected]

Strategy summary

Our non-consensus bullish view on EM equities is driven by a reduction in tapering tail-risk and better earningsgrowth. We welcome tapering. Historically US bond yields fell once QE was withdrawn. Since the start of tapering, US bond yields are down, EM FX and fixed income are stable. Tapering tail-risk is falling. Indonesia's bond issue last week was oversubscribed. This probably indicates that yields and FX have declined to attractive levels. Reduction in tail-risk can be a powerful driver for markets. The second stage is delivery of GDP and EPS growth. More competitive currenciesand stronger exports are powerful tailwinds that should support GDP and EPS growth in EM.

Our derivatives team notes that correlation between EM and DM equities is close to ten-year lows, which in their view is unsustainable in the long term (see Volatility Review, Marko Kolanovic, 15 January 2014).

Our new MSCI EM target is 1200 (projected return of 23%, see page 5). We expect the initial rally will be driven by lower tail-risk, an unwind of low expectations and bearish positioning. The next stage will be improved relative EPS growth versus developed markets.

Recent asset allocation changes are:

Upgraded Greece to OW on 13th Jan

Downgraded Turkey to UW on 7th Jan

Key asset allocation:

OW: Korea, Taiwan, Mexico, India, Russia, Greece, Thailand and Peru UW: China, Turkey, Brazil, Colombia and Poland

Our key trades are:

1. EM joins the equity bull market

2. Value outperforms (Russia, Korea, Taiwan)

3. Broadening global growth (Mexico, IT, Korean auto)

4. Mexico’s four drivers for 2014

5. Monetary and CAD headwinds (UW: Turkey, Brazil)

6. New vs. old China trade

The key risks to our view are DXY strength and Chinatail-risk: (1) complacency on the property bubble, (2) carry trade unwind, and (3) regulation in interbank and shadow banking. A disappointment in DM growth would hurt our OW on global cyclical. For more, see page 17.

For our GEMs Model Portfolio and changes made this month, please see pages 17, 24 and 25.

For detailed country reviews, please see pages 30 to 62.

Figure 26: Emerging markets strategy heat map…. OW sectors in green, UW sectors in red

Source: J.P. Morgan

Table 21: EM strategy Top 10 picks

Bloomberg JPM Date Performance % from % upside 3M P/E Div Yld. ROETop 10 picks Price Code Rating Of since 10 yr Avg To JPM ADTV 14E 15E 14E 14E

(LC) Inclusion Inclusion Fwd PE Target (US$ MN) (x) (x) (%) (%)Gazprom 137 GAZP RX OW 21-Jan-14 - -17% 45% 215 2.9 3.2 5.4 12.2Sberbank 101.1 SBER RX OW 21-Jan-14 - -53% 47% 233 5.6 5.0 4.0 19.7Hyundai Motor 228500 005380 KS OW 21-Jan-14 - -21% 44% 102 6.5 5.7 1.0 17.0Sk Hynix Inc 36000 000660 KS OW 19-Jul-13 30% 28% 25% 131 7.3 7.0 0.0 24.4Kasikornbank Pcl 168 KBANK TB OW 21-Jan-14 - -18% 37% 46 8.4 7.5 2.4 20.0Credicorp Ltd 132.5 BAP US OW 21-Jan-14 0% 17% 46 11.9 10.3 1.7 19.0Land & Houses Pc 8.95 LH TB OW 21-Jan-14 - -18% 56% 7 12.4 10.3 6.4 21.6TSMC 107.5 2330 TT OW 21-Jan-14 - -5% 21% 104 12.8 11.4 2.8 21.6Icici Bank Ltd 1035 ICICIBC IN OW 19-Sep-13 6% -29% 16% 56 12.9 10.7 2.2 12.9Cemex Sab-Cpo 16.5 CEMEXCPO MM OW 19-Jun-13 19% NA 12% 41 NM NM 0.0 NMAverage -15% 32% 98 9.0 7.9 2.6 18.7

Source: Datastream, MSCI, J.P. Morgan estimates, 20 January 2014, Sorted by P/E 2014E.

China CS

China CDChina Ind. Mexico Mat. Mexico Tele.

Colombia

India IT Twn. Mater. Korea Others

India Energy SA Materials Turkey Fin

SA Telecom Turkey Other

SA Others

Russia Fin. PhilippinesIndia Others

Malaysia

Indonesia

ThailandTaiwan IT

Taiwan Financials

China Banks

China Fin.

Ex Banks

China IT

China

Telecom

China

Energy

Brazil

Materials

Brazil Others

Brazil

Energy

Brazil CS

China Others

India

Financials

Korea CD

Korea IT

Korea

Financials

Korea

Industrials

Korea

Materials

Taiwan

Others

Chile

CE3

Mexico CSMexico

Others

Russia

Others

Russia

EnergySA

Financials

SA CD

Brazil

Financials

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Emerging Markets Equity Research22 January 2014

Adrian Mowat(852) [email protected]

Table 22: Key country and sector recommendations, performance and fundamentals

Country/Sector Wt Rec DemandPerformance

(US$ Returns) P/E (x) EPS Growth (%)EPS

CAGREPS

CAGR PEGDY (%)

ROE (%)

Classific-ation 1M 3M 12M YTD 14E 15E 14E 15E (09-15E) by SD Ratio 14E 14E

EM 100.0 -- -1 -4 -9 -3 10.3 9.3 10.2 11.9 10.5 0.9 1.1 3.1 12.9China 19.6 UW -4 -2 -6 -4 8.6 7.7 11.2 10.2 15.9 1.4 0.6 3.8 14.8China Financials 7.4 UW DD -7 -6 -12 -5 5.9 5.2 14.9 10.3 18.9 2.3 0.4 5.5 16.3China Energy 2.7 N GPT -8 -8 -22 -6 8.0 7.5 -6.5 2.2 11.6 0.6 0.8 4.4 13.1China Telecom 2.0 UW DD -5 -9 -14 -4 10.5 10.3 0.5 -3.1 4.3 1.2 2.5 4.1 11.8China Industrials 1.3 UW 50% DD -4 2 -5 -5 11.5 9.6 7.8 14.5 15.4 0.3 1.0 2.6 9.8China CS 1.2 N DD -1 -1 7 -2 23.5 19.5 11.7 19.5 3.4 0.2 8.8 2.0 14.6China IT 2.3 N GCO 6 16 74 1 25.6 20.7 55.1 50.5 50.4 0.6 0.9 0.7 22.6China Cons Disc. 1.0 N DD -4 -5 -8 -2 11.0 9.5 38.7 19.8 16.8 0.8 0.9 2.0 17.5Brazil 10.5 UW -3 -14 -24 -4 10.2 9.1 4.3 19.4 6.3 0.4 2.1 4.2 12.4Brazil Financials 3.0 N DD -3 -16 -24 -4 9.2 8.1 1.3 15.2 11.5 1.4 0.9 4.6 15.0Brazil Materials 1.9 N GPT -4 -8 -27 -7 8.2 7.6 -0.2 20.6 15.7 0.3 0.7 4.2 11.8Brazil Energy 1.5 UW GPT -7 -19 -33 -7 7.3 6.4 17.2 24.9 -3.3 -0.1 NM 4.6 8.2Brazil CS 1.8 N DD -1 -14 -17 -4 19.3 16.6 26.9 25.3 21.1 1.9 1.3 3.2 19.4Korea 15.8 OW -2 -3 -2 -4 8.6 7.9 7.7 20.3 16.8 0.8 0.6 1.2 11.2Korea IT 5.8 OW GC/C -6 -4 -4 -5 7.2 7.1 40.2 5.2 28.3 0.6 0.3 0.6 16.5Korea Financials 2.2 OW DD 1 1 7 -5 10.0 8.8 -22.3 23.8 11.9 0.4 1.2 2.1 7.2Korea Industrials 1.9 N 60% DD 2 -7 -8 -3 12.6 10.2 -48.1 140.9 7.2 0.1 6.4 1.2 8.1Korea Materials 1.5 UW GPT -3 -3 -12 -6 10.7 9.2 -19.7 40.0 -0.4 0.0 NM 1.5 6.8Korea Cons. Disc. 2.8 OW GCO -2 -6 10 -4 7.2 6.6 3.4 16.2 19.5 0.7 0.4 1.0 15.1Taiwan 11.7 OW 0 -1 3 -2 14.3 12.9 32.6 9.5 16.0 0.4 1.1 3.4 11.7Taiwan IT 6.2 OW GC/C 1 0 0 -1 13.2 11.7 28.7 15.4 18.3 0.4 0.9 3.3 13.3Taiwan Financials 2.2 OW DD 0 0 18 -2 12.8 12.0 30.0 2.8 18.6 1.5 0.8 3.0 9.8Taiwan Materials 1.4 UW GPT -3 -2 -2 -3 19.2 16.8 83.0 14.5 3.2 0.1 7.8 3.6 8.4India 6.5 OW 4 2 -6 1 14.4 12.5 10.9 20.3 14.6 2.0 1.2 1.7 16.4India Financials 1.5 OW DD 0 1 -22 0 13.6 11.4 9.9 23.7 16.4 1.6 0.9 1.9 16.2India IT 1.6 OW GC 13 11 37 6 17.2 15.1 18.1 23.3 22.9 7.7 1.0 1.3 24.7India Energy 0.8 N GPT 3 2 -12 -1 9.3 8.5 8.7 10.1 13.8 1.5 0.7 2.4 15.6South Africa 7.4 N 2 -4 -9 -3 14.1 12.7 3.7 12.3 15.4 2.1 1.2 3.4 16.1S Africa Materials 0.8 OW GPT 1 -11 -47 -4 13.8 12.7 -41.5 21.6 20.2 0.3 0.8 2.6 9.5S Africa Financials 1.9 N DD 2 -5 -13 -3 11.8 10.5 10.0 11.7 14.5 5.2 1.1 4.4 13.4S Africa Cons Disc. 1.7 N DD 3 3 23 -2 20.6 17.3 16.8 19.5 23.4 12.2 1.3 1.8 21.0S Africa Telecom 1.0 N DD 6 1 -2 -4 14.0 13.0 21.1 12.7 14.7 2.6 1.2 5.2 28.9Russia 6.1 OW 0 -7 -8 -3 5.2 5.2 -1.3 -1.9 11.5 0.5 0.5 4.6 11.2Russia Energy 3.4 OW GPT 1 -9 -9 -3 4.1 4.4 -6.1 -6.3 7.0 0.3 0.5 5.1 9.9Russia Financials 1.2 OW DD 1 -3 -9 -2 5.1 4.7 7.6 11.5 73.0 0.3 0.1 3.9 16.5Mexico 5.5 OW 1 3 -7 -1 17.8 15.7 -5.3 15.0 7.6 0.4 3.0 1.6 13.3Mexico Telecom 1.1 UW DD -1 5 -10 -5 12.0 11.8 -3.8 5.0 1.6 0.2 9.4 1.4 25.8Mexico CS 1.4 N DD -1 -3 -13 -2 21.0 18.8 -6.2 16.5 10.4 0.4 2.5 2.0 13.3Mexico Materials 1.0 OW GPT 4 3 -16 2 26.7 19.1 -33.8 46.1 5.1 0.0 12.7 1.3 6.4Malaysia 3.9 N -1 0 2 -1 15.5 14.2 -2.2 12.2 13.1 1.3 1.3 3.2 13.2Indonesia 2.4 N 9 -8 -20 6 12.6 11.0 1.5 8.8 14.9 2.1 1.0 3.1 20.5Turkey 1.5 UW -13 -19 -32 -1 8.8 7.5 7.5 7.5 11.7 1.3 0.7 3.9 14.4Turkey Financials 0.8 UW DD -15 -23 -40 -1 7.2 5.9 9.7 4.9 9.8 0.9 0.7 3.2 13.3Thailand 2.2 OW -6 -16 -18 0 10.8 9.6 10.1 14.7 15.2 2.1 0.8 4.1 16.2Chile 1.6 N -1 -12 -29 -3 14.5 12.3 4.6 24.2 6.2 0.3 3.4 2.9 10.8Poland 1.7 UW -2 -4 -4 -2 12.6 11.5 -23.0 3.2 5.5 0.3 2.3 4.4 9.6Colombia 1.0 UW -7 -16 -27 -4 13.7 11.9 -7.8 11.7 18.7 1.1 1.0 3.8 12.0Philippines 0.9 NR 2 -10 -8 1 17.4 15.0 6.2 5.7 15.2 1.6 1.2 2.4 14.3Hungary 0.3 UW 6 -1 -9 4 9.4 8.1 -19.6 20.1 0.8 0.0 14.9 3.1 8.7Czech Republic 0.2 UW 3 -2 -13 0 10.8 11.6 -6.8 -11.7 -9.0 -2.0 NM 6.6 11.5Peru 0.4 OW 5 -2 -33 -1 11.3 9.6 -29.8 26.7 9.0 0.4 1.6 2.3 16.1Source: MSCI, I/B/E/S, Bloomberg, 16 January 2014. Note: Outperformance of more than 2% vs. MSCI EM. Underperformance of more than 2% vs. MSCI EM. DD=Domestic Demand, GPT=Global Price Takers, GC/C=Global Capex/Consumer, GC=Global Capex, GCO=Global Consumer. ** We are UW China Banks which is a major part of China Financials. We are OW China Financials ex banks.

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Emerging Markets Equity Research22 January 2014

Adrian Mowat(852) [email protected]

Risks to our strategyChina tail risk

Investors maybe too complacent on China risk. The three areas to fear are: property price correction, disruption of the interbank market and an unwind of the short dollar long Renminbi carry trade. Simply slower growth would hit profit growth for cyclical and near cyclical banks.

Dollar strength

A strong dollar is usually bad for EM. DXY strength could be triggered by relative tightening in the US relative to Japan and Euro. It is DXY strength rather than higher interest rates that is bad for EM. In the post Asian financial crisis period of flexible exchange rates EM equities outperformed while the Fed fund target rate increased from 1 to 5.25% (2004 to 2006).

Unclear Fed communication

Fed minutes debating tapering were the catalyst for the 2013 market correction. US treasury yields increased 100bp. Risk assets fell. EM bonds, currencies and equities led the decline. We think the Fed tightened policy by mistake. It backtracked by increasing ambiguity on economic targets. Risk assets rallied.

A change of leadership adds to the risk. Fed Chairman Bernanke is due to step down on 31 January 2014. To build credibility, the prospective chairperson Janet Yellen may need to move to the centre from her normal dovish stance. The market may view this as a hawkish shift by the Fed.

Our fixed-income colleagues forecast 12-month returns of +/-5% across bond markets. Low to negative return expectations combined with Fed communication risk is a recipe for volatility. We believe periods of EM bond, currency and equity corrections are likely in 2014.

US policy and economic surprise

A quick benign resolution to the fiscal impasse would boost business confidence. This may lead to the combination of a pick-up in business investment and job creation. This would be good for equity markets but lead to weaker bonds.

US economic growth disappoints (again)

This is a threat to our OW exporters (Korea and Taiwan).

It is not clear why US corporate capex is so weak. In 3Q13, business investment declined 3.7% saar, only the second quarter of contraction.

The US fiscal impasse can was kicked into 2014. The next date for a potential shutdown is 15 January and then we estimate the debt ceiling will be hit on 7 February. The result could be a repeat of 1Q13 larger-than-forecast fiscal drag.

Inflation complacency

With economic growth still below trend, inflation is forecast to remain low. An inflation surprise would be very disruptive.

Figure 27: Volatile journey to neutral policy - J.P. Morgan EM currency volatility index and US 5Y bond yield

Source: Bloomberg, J.P Morgan, 16 January 2014

Figure 28: US GDP forecast revision (% oya)

Source: J.P. Morgan economics

Figure 29: Higher rates and EM outperforms!!

Source: Bloomberg, 20 January 2014

50

100

150

200

250

0

2

4

6

8

10

90 92 94 96 98 00 02 04 06 08 10 12 14

FDTR EM rel DM (RHS)

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Emerging Markets Equity Research22 January 2014

Adrian Mowat(852) [email protected]

Uncertain Chinese economic policy

Chinese economic policy is confusing. We see two possible extreme scenarios. The first is credible economic reform and rational capital allocation leading to significantly lower economic growth, an outcome that would be good for equity investors. The second is that leverage continues to increase to support the current growth model. As a result, investors are forced to manage for cyclical rallies driven by mini-stimulus similar to 3Q13. The second outcome exacerbates China’s high debt/GDP problem and increases risks in the financial system. This leads to the final risk which is a liquidity event in the onshore interbank market or unwind of the short US dollar – long Renminbi carry trade.

Political deadlock in Thailand

Anti-government demonstrators continue to demand thatPrime Minister Yingluck Shinawatra's administration be replaced by a non-elected "people's council." There is no obvious resolution to the current deadlock.

Chinese environmental crisis

China needs to reduce the use of fossil fuels in urban areas. An aggressive anti-pollution drive would hit both coal and oil demand.

Political cycle frustrates reform

There are important elections in six emerging markets next year: South Africa (April general elections), India (May general elections), Colombia (May presidential elections), Indonesia (July presidential elections), Turkey (August presidential elections) and Brazil (October presidential elections). Investors are generally frustrated by economic policy in those countries with upcoming elections. Possibly the risk is to the upside.

European political risk

We believe tail risks are no longer priced in for Europe. Fiscal consolidation continues. The electorates and thus politicians’ willingness to pursue reform may fall as the sense of crisis diminishes.

Volatility in F/X and energy not priced into markets

It is a difficult environment to forecast currency and oil price movements. Our forecasts are close to spot. F/X volatility could increase if the US economy accelerates and the Fed exits QE.

Our commodity strategist, Colin Fenton, notes: The bull case is a seasonal pick-up in refinery runs, increased MENA supply outages and accelerating 4Q13 demand. The bear case is a peace deal with Iran (rapid supply increase), weak refinery margins prompting run cuts, improved efficiency of shale extraction, impending US debt ceiling and needed budget resolution in 1Q14.

The rapid decline in the cost of solar energy makes it a disruptive technology. It is scalable, which allows for faster adoption. It is another bear factor for thermal coal. Although at an early stage, large autos companies are launching appealing electric cars in 2014. If successful, these may change the long-term demand forecasts for oil.

India faces deteriorating growth inflation trade-off

The key risk to our OW on India is that inflation accelerates while domestic demand is still weak. India’s PMI is below 50 for the last five months. With the exception of export orders, all other PMI components reflect a weakening macro environment. Notably, the PMI orders-to-inventory ratio is at a 57-month low. Sluggish manufacturing activity has failed to contain inflation. The PMI output price index is at a seven-month high. The concern is that firms will begin to raise prices and normalize margins at the first sign of demand recovery. This could lead to further policy tightening.

Figure 30: Just plus or minus 5%.....2014 return forecasts for FX, Brent and fixed income (%)

Source: Bloomberg, J.P. Morgan estimates, 16 January 2014

Risk to OW on technology

Smartphone sales are forecast to decelerate in 2014. Our Asia-Pacific Head of Technology Research analyst, Alvin Kwock, notes that “there are signs of saturation in two key markets for late-cycle smartphones: a) Brands with high DM exposure have found it difficult to see further unit growth; for instance, recent supply chain checks suggest while iPhone 5S has seen ~5MM increase in order rates, 5C order rate almost halved, with a net unit cut of ~7MM overall for 4Q; b) China smartphone diffusion rate is estimated at 80+%. Non-China EMs smartphone demand is at an early stage of conversion. The potential market unit size is 3-4x bigger than China. A pick-up in enterprise spending could off-set some consumer weakness.” For more, see ‘Heard from the Herd: Feedback in Asian tech marketing’, Kwock, 14 October 2013.

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19

Emerging Markets Equity Research22 January 2014

Adrian Mowat(852) [email protected]

EM exports spurred by stronger DM domestic demand

David Hensley AC (1-212) 834-5516, JPMorgan Chase Bank NA

DM domestic demand has bounced back, spurring a strong recovery in EM exports

The pass-through to EM economic growth has been muted by stiff headwinds to EM domestic demand

On net, the forecast assumes continued, stable GDP growth in the emerging economies

EM export volume rebounded from a near standstill to a 10% annual rate in the middle two quarters of 2013, fueled by a recovery in DM domestic demand. The export bounceback is promoting stronger EM economic growth; however, this impulse is being offset by significant constraints on EM domestic demand, so the net effect on EM IP and GDP has been muted. Indeed, following a pickup in 2Q13, EM GDP growth appears to have been little changed over the balance of last year. In our forecast, the positives and negatives affecting EM growth remain roughly balanced and thus net to continued, stable EM growth.

Export lift offset by domestic constraints

The DM economies have staged a strong recovery over the past year, bolstered by powerful shifts in policy in the Euro area and Japan, in addition to new steps taken by the Fed. This policy action dissipated a cloud of uncertainty, spurring confidence, financial markets, and private-sector spending. Consequently, after having contracted through much of 2012, DM domestic demand began to grow again in 2013, strengthening over the course of the year. The demand pickup was especially pronounced for household durable goods.

Indeed, our high-frequency trackers suggest DM retail sales and capex continued to accelerate into year-end. Household spending recently has been bolstered by low inflation and buoyant equity markets on top of decent gains in labor income. Likewise, capex likely is strengthening in response to expectations for faster sales growth amid reduced uncertainty and a low cost of capital.

The benefits of this demand recovery extend beyond the developed economies to the emerging market economies. In response to improving domestic demand, DM import demand has picked up smartly in recent quarters. Based on the national product accounts, DM real imports rose at an average 5.2% annual rate in 2Q13-3Q13 after having contracted in the previous two quarters. Monthly volume data from the G-3 indicate that something close to this pace was maintained in 4Q. Roughly half of DM imports come from the EM.

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20

Emerging Markets Equity Research22 January 2014

Adrian Mowat(852) [email protected]

The recovery in EM exports is occurring in textbook fashion, closely in line with what we predicted last August (see “Don’t ignore export boost amid EM gloom,” GDW, Aug 30, 2013). Based on the national product accounts, EM export volume grew at close to 10% annualized in 2Q13-3Q13, compared with a 2.5% pace in the previous two quarters. Although the NIPA data exclude China, they have the major advantage of being free of distortions from pricing and FX effects. In fact, DM growth is tracking even stronger than we had anticipated, with domestic demand now expected to rise 2.1% over the four quarters ending 1Q14, a half-point more than before. EM export growth has exceeded expectations in symmetric fashion (i.e., consistent with our model).

The recovery in EM exports should alleviate any concern that the channel of trade transmission between the DM and the EM has been disrupted since the financial crisis. For example, some have speculated that the import elasticity of DM demand might be significantly lower now that the EM economies, notably China, are more thoroughly absorbed in the global system. In particular, the large gap in cost structures has narrowed somewhat, so that the EM as a whole, or some subset of the EM, might have lost competitive position vis à vis the DM. In a previous analysis, we found that our model results were relatively insensitive to the time period used in the estimation. The subsequent confirmation that EM exports are tracking the model provides further reassurance. (Our colleagues in EM Asia come to a similar conclusion; see the research note “EM Asia’s troubled DM dependency” in this week’s GDW.)

The upside surprise is that EM exports have contributed to faster growth in IP and GDP than previously anticipated. Indeed, it appears that EM GDP growth will average about 0.5%-pt higher from 2Q13-4Q14 than we forecast in late August (when we published our initial research note on this topic). Our EM economists have not extrapolated the upside GDP surprise to 2014, however. For the most part, this judgment reflects a more downbeat view on EM domestic demand. The tightening in domestic financial conditions as a result of excess credit creation will damp consumer and business spending. At the same time, a squeeze on EM corporate profit margins has caused businesses to curtail capital spending and hiring. In our forecast, the interplay of the cross-currents affecting EM growth, with stronger export gains being offset by domestic headwinds, is roughly balanced and thus nets to little acceleration in EM growth. The forecast anticipates a wide range of outcomes at the country level, however.

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21

Emerging Markets Equity Research22 January 2014

Adrian Mowat(852) [email protected]

The great rotation: EM gaining ground on DM in global GDP

Joseph LuptonAC (1-212) 834-5735, JPMorgan Chase Bank NA

EM share of global GDP jumps to one-third

Pace of convergence at risk of slowing in coming years

Rising EM limits decline in global potential growth

Amid the twists and turns of a global economy that has been buffeted over the past seven years by financial crises, fiscal crises, geopolitical flare-ups, and natural disasters, a tectonic shift in the macroeconomic landscape has gone largely unnoticed. Specifically, following a gradual gain in the share of global GDP attributed to the emerging markets (EM) of 5%-pts between 1990 and 2003, the past 10 years has seen a remarkable 17%-pt surge in EM share. We estimate that the EM contributed 36% of global nominal economic activity in 2013. Accordingly, this shift has been accompanied by an equally significant decline in the share of global activity attributed to the developed markets (DM).

It would be a mistake to dismiss the jump in the EM’s share of global nominal activity as merely a reflection of the region’s higher underlying rates of inflation. A considerable portion of the rise does owe to pricing. According to our estimates, EM inflation added 14%-pts to the region’s global GDP share. However, to the extent that this inflation was not offset by declining FX rates, the purchasing power of EM GDP is effectively increased and should not be discounted. Moreover, real GDP growth in the EM also contributed a considerable 12%-pt to the share increase. The resulting 26%-pt gain is dampened 5%-pts by DM inflation and by an additional 2%-pts by DM real GDP growth. Note that the inflation impact implicitly includes movements in currencies relative to the USD.

Not surprisingly, the great rotation is due largely to gains made by the major EM economies at the expense of the major DM economies. Specifically, China’s remarkable boom in GDP over the past decade has lifted its share of global GDP from 5% in 2003 to an estimated 14% as of 2013.The other major EM economies made smaller, though still notable, gains of roughly 1%-3%-pts. These gains were made entirely at the expense of the US, Euro area, Japan, and the UK. Again, while inflation differentials played a role, the resilience of EM currencies along with their strong real growth over the past decade give validity to the increasing role of the region.

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Emerging Markets Equity Research22 January 2014

Adrian Mowat(852) [email protected]

Global convergence after a long wait

Despite having been overshadowed by the higher-frequency moves, the implications of this great rotation are significant. Foremost is that a long-awaited convergence in regional GDP is taking place. Economic theory argues that the diminishing of returns to capital in the DM coupled with the diffusion of technology to the EM should ultimately lead to a convergence of GDP per capita across economies.

While this process lagged over most of the post-WWII era, the considerable strides made in institution-building in the EM over the past two decades reached a tipping point in 2003. Moves toward independent, inflation-targeting central banks, liberalizing capital accounts, and the correction of fiscal imbalances all contributed to a more attractive platform for investment. In response, risk-adjusted returns to capital improved considerably, sparking a surge in investment that lifted productive capacity. This was amplified following the crisis when central banks flooded the world with excess liquidity and returns to capital in the DM fell sharply.

GDP per capita in the EM remains far below that of the DM, however. In contrast to its one-third share of global nominal GDP, the population of our EM aggregate makes up over 80% of the global total. A key question for the EM in the coming decade is whether it gets caught in the “middle-income” trap whereby the initial burst of investment and productivity owing to technology diffusion and urbanization fades and is not replaced by domestic innovation and labor efficiencies. The recent slowing in productivity growth along with a hangover from excess credit growth suggests the EM faces challenges in the coming years, a realization not lost on many policymakers—particularly in China.

Adjusting the global yardstick

The great rotation also has important implications for the more practical matter of how we track global activity. The increased role of the EM needs to be taken into account when considering underlying economic trends. For example, a major theme of the past year and that we expect to continue into the current year has been the underperformance of EM GDP growth relative to the recovery in DM GDP growth. Specifically, the re-acceleration in DM GDP that got under way in the middle of 2013 was not echoed as usual in the EM, an outcome we attribute to EM domestic factors related to excess credit growth and corporate profit concerns. However, given the EM’s rising share of global production, its contribution to global GDP growth has been remarkably stable over the past three years despite the sharp slowing in growth. Put differently, in terms of global GDP, EM’s rising share of global activity has offset its growth underperformance. Another important implication of EM’s increased footprint is that it opens

the global economy to higher levels of potential growth. Indeed, global real potential GDP growth would be 0.7%-pt lower if not for the EM’s increased presence.

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Emerging Markets Equity Research22 January 2014

Adrian Mowat(852) [email protected]

Model portfolio changes

This month’s regional model portfolio reflects the changes made in the APxJ Model Portfolio in Perspectives and Portfolios Lite: Back the underdogs, Mowat et al, 14 January 2014.

In Turkey, we sell Turkcell (TCELL TI) and Halk Bank (HALKB TI) to reflect our downgrade to UW.

In China, we switched from Ping An Insurance (2318 HK) to China Cinda Asset Management (1359 HK).

In Taiwan, we replace Largan Precision (3008 TT) with Synnex Technology (2347 TT).

In India, we sell HCL Technologies (HCLT IN) and Tata Steel (TATA IN). We add Infosys (INFO IN) and Bajaj Auto (BJAUT IN).

We include Greece in the portfolio by adding Piraeus Bank (TPEIR GA)

Investment case for new portfolio stocks

Synnex Technology (2347 TT)

Best cost structure amongst distributors. Collaboration with Apple in India and Taiwan.

Underappreciated growth prospects in Synnex USA

Management guides for NT$10 cumulative cash dividend in coming 3 years – this is 20% of the current share price.

Infosys (INFO IN)

Margin expansion driven by cost optimization

Strength in sector demand should help Infosys’s return to healthy growth trajectory.

Bajaj Auto (BJAUT IN)

Encouraging market response to the ‘Discover’ range of bikes in the executive segment.

Exports to sustain growth. Improving demand for two wheelers in African market, Egypt etc

Piraeus Bank S.A (TPEIR GA)

Leading bank of Greece. 30% market share in loans, 29% in deposits and 35% in branches

EBA core tier 1 of 13.5% and loans reserves of c.17% provide a buffer against asset quality deterioration, thereby limiting risks of equity capital issuance

Table 23: Country asset allocation relative to MSCI EMCountry DeviationThailand 3.4Russia 2.9India 2.6Korea 2.3Taiwan 2.3Mexico 2.3Peru 2.1Greece 1.0Philippines 0.6Indonesia 0.1Chile -0.1Malaysia -0.8Colombia -1.0Turkey -1.5South Africa -1.8CE3 -2.2Brazil -4.6China -7.5

Source: J.P. Morgan.

Table 24: Sector asset allocation relative to MSCI EM

Sector Deviation

Information Technology 10.2Semiconductor & Semiconductor Equipment 11.0Software & Software Services 0.7Technology Hardware & Equipment -1.5Consumer Discretionary 3.1Financials 3.0Insurance 2.0Real Estate 0.8Banks 0.4Diversified Financials -0.1Industrials 0.3Health Care -0.1Energy -0.2Materials -1.7Utilities -1.9Consumer Staples -5.5Telecommunication Services -7.4

Source: J.P. Morgan.

Figure 31: Performance of J.P. Morgan’s GEMS Model Portfolio relative to MSCI EM (%)

Source: MSCI, J.P. Morgan, 16 January 2014. Note: This chart only shows capital returns.

Past performance cannot and should not be used as an indicator of future results

.

Page 24: Key Trades and Risks - Zarifis...2013 Market performance 3Q GDP YoY 2012 EPS 2013E EPS Greece 40.0 (3.0) (140.4) 20.1 Ireland 33.0 1.7 (0.5) 2.5 Spain 22.2 (1.1) 44.9 54.1 Portugal

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Emerging Markets Equity Research22 January 2014

Adrian Mowat(852) [email protected]

Global emerging markets model portfolio by countryTicker Price JPM Change Change Portfolio MSCI Deviation P/E P/E DY ROE

LC Rating 1M (%) YTD (%) Weight (%) Wt (%) (%) 14E (x) 15E (x) 14E (%) 14E (%)China 60.9 -3.3 -3.4 12.2 19.7 -7.5 8.5 7.7 3.8 15.5Gcl-Poly Energy 3800 HK 3.0 NC 33.3 23.3 2.0 0.1 1.9 33.4 18.2 0.3 6.9China Petroleu-H 386 HK 6.0 OW -7.3 -6.0 2.1 0.5 1.5 7.0 6.5 5.8 13.2 Tencent 700 HK 512.5 OW 8.4 3.6 1.7 1.8 -0.2 30.4 22.1 0.3 39.1 Brilliance China 1114 HK 12.4 OW -1.9 -2.1 1.5 0.1 1.4 10.3 8.5 1.0 29.7 China Cinda As-H 1359 HK 5.1 NC 1.8 4.3 2.5 0.0 2.5 15.6 12.2 1.8 13.1China State Cons 3311 HK 14.6 OW 12.0 5.0 2.5 0.1 2.4 18.5 13.7 1.6 20.2 Brazil 191,205 -4.5 -5.0 5.8 10.4 -4.6 9.9 8.8 4.3 12.9Itau Uniban-Pref ITUB4 BZ 30.6 OW -1.1 -2.3 1.5 0.9 0.7 8.9 7.9 3.9 20.2Ambev Sa ABEV3 BZ 16.8 OW 3.1 -3.1 1.5 0.9 0.6 21.5 19.6 0.0 35.8Vale Sa-Sp Adr VALE US 13.8 OW -6.6 -9.6 1.4 0.5 0.9 6.2 6.8 5.6 16.4Ccr Sa CCRO3 BZ 16.4 OW -3.0 -7.5 1.5 0.2 1.3 17.4 15.7 5.5 70.0Korea 567.0 -2.8 -4.5 18.2 15.8 2.3 8.6 7.7 1.2 11.8Kb Financial Gro 105560 KS 39,500 OW 1.8 -6.5 3.8 0.4 3.4 8.8 8.3 1.9 6.6Samsung Electronics 005930 KS 1,301,000 OW -7.1 -5.2 4.8 3.7 1.1 6.7 6.5 0.6 17.3Samsung Life Ins 032830 KS 100,000 OW 1.1 -3.8 3.0 0.2 2.8 16.9 13.1 1.8 5.4Sk Hynix Inc 000660 KS 36,550 OW -1.6 -0.7 3.0 0.5 2.5 7.3 7.0 0.0 24.4Hyundai Motor 005380 KS 233,000 OW 2.2 -1.5 3.6 0.9 2.7 6.5 5.7 1.0 17.0Taiwan 302.8 2.1 -0.9 14.2 11.9 2.3 14.0 12.7 3.3 12.0Mediatek Inc 2454 TT 418.0 OW 0.2 -5.7 2.5 0.5 1.9 13.1 12.0 3.6 24.5Cathay Financial 2882 TT 47.2 OW 3.3 -2.2 2.5 0.3 2.1 14.9 13.7 2.0 13.7Synnex Tech Intl 2347 TT 52.1 OW 20.9 10.1 2.0 0.1 1.9 12.1 10.4 5.9 17.6TSMC 2330 TT 107.0 OW 4.9 1.4 5.2 2.4 2.8 12.8 11.4 2.8 21.6Advanced Semicon 2311 TT 28.9 OW 12.2 4.3 2.1 0.2 1.9 10.9 10.1 4.0 14.9India 825 4.3 1.4 9.2 6.6 2.6 13.9 12.0 1.7 17.6Sesa Sterlite Lt SSLT IN 200.1 OW -0.2 -0.9 1.1 0.1 1.0 8.6 5.9 2.2 9.6Icici Bank Ltd ICICIBC IN 1,058.9 OW -3.5 -3.6 1.7 0.1 1.6 12.9 10.7 2.2 12.9Bajaj Auto Ltd BJAUT IN 1,907.8 UW 0.3 -0.2 1.5 0.1 1.4 NM 13.7 2.5 NMDlf Ltd DLFU IN 162.1 OW 6.5 -2.8 1.5 0.0 1.5 50.0 16.9 0.0 2.2Infosys Ltd INFO IN 3,725.1 OW 7.9 6.9 1.9 0.8 1.2 20.3 17.3 1.6 23.9Mahindra & Mahin MM IN 892.7 OW -3.7 -5.5 1.5 0.1 1.4 14.9 13.9 1.5 20.4South Africa 1,138 1.3 -4.2 5.5 7.3 -1.8 14.1 12.7 3.4 16.7Aspen APN SJ 25,870.0 OW 0.9 -3.7 1.6 0.2 1.4 27.3 17.9 0.0 20.9Lonmin Plc LON SJ 5,539.0 OW 13.1 4.0 1.5 0.0 1.5 14.4 9.6 0.0 5.5Sasol Ltd SOL SJ 53,217.0 OW 10.0 3.4 2.4 0.7 1.7 9.8 9.6 3.9 23.4Russia 758 -1.0 -3.7 8.9 6.1 2.9 5.0 5.1 4.7 11.7Gazprom GAZP RX 137.3 OW 0.7 -1.0 3.1 1.3 1.7 2.9 3.2 5.5 12.1Sberbank SBER RX 100.6 OW 0.8 -0.4 2.4 0.9 1.5 5.6 5.0 4.0 19.7Lukoil Oao-Adr LKOD LI 59.4 OW -3.3 -5.0 1.9 0.8 1.0 3.6 3.6 6.5 14.2Yandex Nv-A YNDX US 43.8 OW 14.2 1.4 1.6 0.0 1.6 30.4 24.3 0.0 26.0Mexico 40,210 -2.1 -3.0 7.7 5.4 2.3 18.0 15.9 1.6 13.9Cemex Sab-Cpo CX US 16.5 OW 11.8 7.3 2.6 0.4 2.2 NM 0.0 0.0 NMLiverpool LIVEPOLC MM 143.3 OW -6.4 -3.9 2.4 0.1 2.3 22.5 19.6 0.4 14.4Promotora Y Oper PINFRA* MM 163.3 OW 7.0 4.7 2.7 0.1 2.6 32.4 29.5 0.0 20.5Malaysia 648 -2.7 -3.5 3.0 3.9 -0.8 15.0 13.6 3.3 13.7Tenaga Nasional TNB MK 11.5 OW 5.6 0.7 1.5 0.3 1.2 12.2 12.1 2.7 14.4Sapurakencana SAKP MK 4.7 OW 0.0 -4.7 1.5 0.1 1.4 28.4 18.0 0.0 12.0Indonesia 5,163 10.1 5.6 2.5 2.4 0.1 12.6 11.4 3.1 21.8Bank Rakyat Indo BBRI IJ 8,100.0 N 19.1 11.7 2.5 0.2 2.3 10.0 9.1 3.0 22.5Thailand 463 -4.7 0.8 5.6 2.2 3.4 10.9 9.8 4.0 17.0Land & Houses Pc LH TB 9.0 OW -0.6 0.0 1.3 0.0 1.3 12.4 10.3 6.4 21.6Kasikornbank Pcl KBANK TB 166.0 OW -1.2 6.4 1.5 0.1 1.4 8.4 7.5 2.4 20.0Krung Thai Bank KTB TB 17.2 OW -3.4 4.2 1.3 0.0 1.3 7.2 6.3 5.2 15.9Siam Cement Pcl SCC TB 408.0 OW 3.3 2.0 1.5 0.0 1.4 14.0 12.1 3.6 19.7Turkey 945,623 -17.6 -4.5 0.0 1.5 -1.5 8.6 7.3 4.0 15.1Greece 233 -1.1 -1.3 1.5 0.5 1.0 14.2 13.8 1.6 NAPiraeus Bank TPEIR GA 1.8 OW 23.5 20.3 1.5 0.1 1.4 NM 20.9 0.0 NMCE3 NA NA NA 0.0 2.2 -2.2 11.7 11.3 4.7 9.9Philippines 1,014 0.5 0.0 1.5 0.9 0.6 17.0 14.7 2.4 14.6Puregold Price C PGOLD PM 39.0 OW 4.3 2.9 1.5 0.0 1.5 20.2 17.0 1.0 16.3Chile 4,113 -1.6 -2.4 1.5 1.6 -0.1 14.3 12.3 2.9 10.9Falabella FALAB CI 4,437.1 OW -3.3 -5.9 1.5 0.2 1.4 17.4 14.2 1.7 17.3Peru 1,108 4.8 0.6 2.5 0.4 2.1 6.7 5.6 4.1 NACredicorp Ltd BAP US 131 OW 1.2 -1.1 2.5 0.2 2.3 11.9 10.3 1.7 19.0Colombia 984 -5.7 -5.2 0.0 1.0 -1.0 5.2 4.5 10.1 NAEmerging Markets 46,245 -1.5 -2.8 100.0 100.0 0.0 10.3 9.3 3.1 13.4

Source: Bloomberg, Datastream, J.P. Morgan estimates. Prices and valuations are as of 16 January 2014.

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Emerging Markets Equity Research22 January 2014

Adrian Mowat(852) [email protected]

Global emerging markets model portfolio by sectorTicker Price JPM Change Change Portfolio MSCI Deviation P/E P/E DY ROE

LC Rating 1M (%) YTD (%) Weight (%) Weight (%) (%) 14E (x) 15E (x) 14E (%) 14E (%)

Consumer Discretionary 662.7 -0.3 -2.4 12.0 8.9 3.1 10.2 8.9 2.1 16.0Mahindra & Mahin MM IN 892.7 OW -3.7 -5.5 1.5 0.1 1.4 14.9 13.9 1.5 20.4Brilliance China 1114 HK 12.4 OW -1.9 -2.1 1.5 0.1 1.4 10.3 8.5 1.0 29.7Liverpool LIVEPOLC MM 143.3 OW -6.4 -3.9 2.4 0.1 2.3 22.5 19.6 0.4 14.4Falabella FALAB CI 4,437.1 OW -3.3 -5.9 1.5 0.2 1.4 17.4 14.2 1.7 17.3Bajaj Auto Ltd BJAUT IN 1,907.8 UW 0.3 -0.2 1.5 0.1 1.4 NM 13.7 2.5 NMHyundai Motor 005380 KS 233,000.0 OW 2.2 -1.5 3.6 0.9 2.7 6.5 5.7 1.0 17.0Consumer Staples 487.7 -2.9 -4.2 3.0 8.4 -5.5 14.6 12.6 3.3 15.4Ambev Sa ABEV3 BZ 16.8 OW 3.1 -3.1 1.5 0.9 0.6 21.5 19.6 0.0 35.8Puregold Price C PGOLD PM 39.0 OW 4.3 2.9 1.5 0.0 1.5 20.2 17.0 1.0 16.3Energy 577.9 -4.2 -4.5 10.9 11.1 -0.2 5.2 5.1 5.4 10.6China Petroleu-H 386 HK 6.0 OW -7.3 -6.0 2.1 0.5 1.5 7.0 6.5 5.8 13.2Sasol Ltd SOL SJ 53,217.0 OW 10.0 3.4 2.4 0.7 1.7 9.8 9.6 3.9 23.4Gazprom GAZP RX 137.3 OW 0.7 -1.0 3.1 1.3 1.7 2.9 3.2 5.5 12.1Lukoil Oao-Adr LKOD LI 59.4 OW -3.3 -5.0 1.9 0.8 1.0 3.6 3.6 6.5 14.2Sapurakencana SAKP MK 4.7 OW 0.0 -4.7 1.5 0.1 1.4 28.4 18.0 0.0 12.0Financials 321.2 -2.9 -3.1 29.6 26.6 3.0 6.7 5.9 4.9 13.6Banks 341.9 -2.8 -2.7 18.8 18.5 0.4Itau Uniban-Pref ITUB4 BZ 30.6 OW -1.1 -2.3 1.5 0.9 0.7 8.9 7.9 3.9 20.2Piraeus Bank TPEIR GA 1.8 OW 23.5 20.3 1.5 0.1 1.4 NM 20.9 0.0 NMBank Rakyat Indo BBRI IJ 8,100.0 N 19.1 11.7 2.5 0.2 2.3 10.0 9.1 3.0 22.5Kb Financial Gro 105560 KS 39,500.0 OW 1.8 -6.5 3.8 0.4 3.4 8.8 8.3 1.9 6.6Credicorp Ltd BAP US 131.2 OW 1.2 -1.1 2.5 0.2 2.3 11.9 10.3 1.7 19.0Icici Bank Ltd ICICIBC IN 1,058.9 OW -3.5 -3.6 1.7 0.1 1.6 12.9 10.7 2.2 12.9Sberbank SBER RX 100.6 OW 0.8 -0.4 2.4 0.9 1.5 5.6 5.0 4.0 19.7Krung Thai Bank KTB TB 17.2 OW -3.4 4.2 1.3 0.0 1.3 7.2 6.3 5.2 15.9Kasikornbank Pcl KBANK TB 166.0 OW -1.2 6.4 1.5 0.1 1.4 8.4 7.5 2.4 20.0Real Estate 116.7 -2.6 -1.5 2.8 2.1 0.8Dlf Ltd DLFU IN 162.1 OW 6.5 -2.8 1.5 0.0 1.5 50.0 16.9 0.0 2.2Land & Houses Pc LH TB 9.0 OW -0.6 0.0 1.3 0.0 1.3 12.4 10.3 6.4 21.6Diversified Financials 250.1 -2.5 -5.2 2.5 2.6 -0.1China Cinda As-H 1359 HK 5.1 NC 1.8 4.3 2.5 0.0 2.5 15.6 12.2 1.8 13.1Insurance 252.5 -3.8 -4.4 5.5 3.4 2.0Cathay Financial 2882 TT 47.2 OW 3.3 -2.2 2.5 0.3 2.1 14.9 13.7 2.0 13.7Samsung Life Ins 032830 KS 100,000.0 OW 1.1 -3.8 3.0 0.2 2.8 16.9 13.1 1.8 5.4Health Care 720.1 2.5 -0.1 1.6 1.7 -0.1 17.1 14.1 1.7 15.1Aspen APN SJ 25,870.0 OW 0.9 -3.7 1.6 0.2 1.4 27.3 17.9 0.0 20.9Industrials 194.4 -1.3 -3.3 6.7 6.5 0.3 11.9 9.9 2.3 9.8Ccr Sa CCRO3 BZ 16.4 OW -3.0 -7.5 1.5 0.2 1.3 17.4 15.7 5.5 70.0China State Cons 3311 HK 14.6 OW 12.0 5.0 2.5 0.1 2.4 18.5 13.7 1.6 20.2Promotora Y Oper PINFRA* MM 163.3 OW 7.0 4.7 2.7 0.1 2.6 32.4 29.5 0.0 20.5Information Technology 304.6 1.4 -0.1 26.6 16.4 10.2 12.0 11.4 1.8 17.0Software & Software Services 578.5 7.3 3.4 5.2 4.5 0.7Tencent 700 HK 512.5 OW 8.4 3.6 1.7 1.8 -0.2 30.4 22.1 0.3 39.1Yandex Nv-A YNDX US 43.8 OW 14.2 1.4 1.6 0.0 1.6 30.4 24.3 0.0 26.0Infosys Ltd INFO IN 3,725.1 OW 7.9 6.9 1.9 0.8 1.2 20.3 17.3 1.6 23.9Technology Hardware 165.3 5.4 2.1 2.0 3.5 -1.5Synnex Tech Intl 2347 TT 52.1 OW 20.9 10.1 2.0 0.1 1.9 12.1 10.4 5.9 17.6Semiconductor Equipment 326.0 -2.9 -2.8 19.5 8.4 11.0Samsung Electronics 005930 KS 1,301,000.0 OW -7.1 -5.2 4.8 3.7 1.1 6.7 6.5 0.6 17.3TSMC 2330 TT 107.0 OW 4.9 1.4 5.2 2.4 2.8 12.8 11.4 2.8 21.6Sk Hynix Inc 000660 KS 36,550.0 OW -1.6 -0.7 3.0 0.5 2.5 7.3 7.0 0.0 24.4Advanced Semicon 2311 TT 28.9 OW 12.2 4.3 2.1 0.2 1.9 10.9 10.1 4.0 14.9Gcl-Poly Energy 3800 HK 3.0 NC 33.3 23.3 2.0 0.1 1.9 33.4 18.2 0.3 6.9Mediatek Inc 2454 TT 418.0 OW 0.2 -5.7 2.5 0.5 1.9 13.1 12.0 3.6 24.5Materials 402.4 -1.0 -3.2 8.0 9.6 -1.7 11.1 9.8 3.2 9.8Cemex Sab-Cpo CX US 16.5 OW 11.8 7.3 2.6 0.4 2.2 NM 0.0 0.0 NMLonmin Plc LON SJ 5,539.0 OW 13.1 4.0 1.5 0.0 1.5 14.4 9.6 0.0 5.5Siam Cement Pcl SCC TB 408.0 OW 3.3 2.0 1.5 0.0 1.4 14.0 12.1 3.6 19.7Vale Sa-Sp Adr VALE US 13.8 OW -6.6 -9.6 1.4 0.5 0.9 6.2 6.8 5.6 16.4Sesa Sterlite Lt SSLT IN 200.1 OW -0.2 -0.9 1.1 0.1 1.0 8.6 5.9 2.2 9.6Telecommunication Services 225.9 -0.8 -3.1 0.0 7.4 -7.4 9.3 8.8 5.8 15.7Utilities 267.6 0.0 -2.2 1.5 3.4 -1.9 9.3 8.4 4.4 9.1Tenaga Nasional TNB MK 11.5 OW 5.6 0.7 1.5 0.3 1.2 12.2 12.1 2.7 14.4Emerging Markets 46,244.6 -1.5 -2.8 100.0 100.0 0.0 10.3 9.3 3.1 13.4Source: Bloomberg, Datastream, J.P. Morgan. estimates. Prices and valuations are as of 16 January 2014.

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Emerging Markets Equity Research22 January 2014

Adrian Mowat(852) [email protected]

Country asset allocation changesTable 25: Summary of OW and UW recommendations Country From To Rec. Relative return from the date of rec. YTD relative returnChina Nov ‘05 16-May-08 OW 78.3 Indonesia Start '06 19-Oct-06 UW (29.8)Malaysia Start '06 18-Oct-06 UW 1.2 Taiwan Start '06 20-Feb-07 OW (17.0)Thailand Start '06 3-Mar-06 OW 0.3 South Africa Start '06 13-Jun-07 OW (19.2)Czech 18-Jan-06 14-Jun-06 UW 10.1 Hungary 18-Jan-06 14-Jun-06 UW 12.4 Russia 18-Jan-06 17-May-07 OW (12.0)Turkey 18-Jan-06 14-Jun-06 OW (30.7)India 1-May-06 1-Nov-07 UW (31.0)Philippines 4-May-06 16-Mar-09 OW 16.7 Czech 14-Jun-06 23-Aug-06 OW 14.2 Hungary 14-Jun-06 23-Aug-06 OW 3.2 Poland 14-Jun-06 23-Aug-06 OW 9.5 South Korea 10-Aug-06 26-Feb-09 UW 16.3 Thailand 18-Oct-06 18-Dec-06 OW (5.7)Czech 27-Nov-06 18-Apr-07 OW 1.4 Hungary 27-Nov-06 18-Apr-07 OW 5.2 Poland 27-Nov-06 18-Apr-07 OW 6.9 Malaysia 3-Dec-06 13-Jun-07 OW 15.1 Turkey 31-Jan-07 21-Mar-07 UW (1.7)Thailand 20-Mar-07 20-Jul-09 OW 4.0 Brazil 18-May-07 31-Jan-08 OW 22.4 Malaysia 24-Aug-07 14-Mar-08 OW (0.7)South Africa 24-Aug-07 5-Feb-08 OW (11.3)Taiwan 24-Aug-07 27-Feb-08 UW 9.4 Turkey 24-Sep-07 27-Jul-08 UW 18.2 India 17-Jan-08 7-Jan-09 UW 16.7 Czech 17-Jan-08 18-Aug-09 UW (6.9)Hungary 17-Jan-08 18-Aug-09 UW 11.2 Poland 17-Jan-08 18-Aug-09 UW 15.3 Mexico 1-Feb-08 26-Feb-09 OW (2.4)Taiwan 27-Feb-08 1-Apr-08 OW 6.2 Taiwan 18-Apr-08 20-Nov-08 OW 0.1 Brazil 16-Jun-08 22-Sep-08 UW 7.0 China 16-Jun-08 14-May-09 OW 13.6 South Africa 16-Jun-08 27-Jul-08 UW (4.5)Russia 27-Jul-08 14-May-09 UW 21.6 Turkey 27-Jul-08 5-Oct-08 OW 13.0 Indonesia 3-Nov-08 30-Mar-09 UW (5.3)South Korea 26-Feb-09 3-Sep-09 OW 25.6 Mexico 23-Mar-09 18-Aug-09 OW 6.5 Taiwan 30-Mar-09 22-Oct-10 OW (33.0)South Africa 14-May-09 17-Sep-09 UW (6.4)Indonesia 15-May-09 3-Sep-09 OW 21.2 Malaysia 14-May-09 2-Feb-10 UW 5.9 India 5-Aug-09 14-Jan-11 OW (11.4)Czech 18-Aug-09 25-Oct-09 OW (17.0)Hungary 18-Aug-09 25-Oct-09 OW 12.6 Poland 18-Aug-09 25-Oct-09 OW 11.2 Philippines 3-Sep-09 18-Nov-13 OW 90.5 China 17-Sep-09 18-Oct-10 UW 9.7 Thailand 17-Sep-09 14-Dec-09 OW (8.2)Russia 18-Oct-09 7-Dec-09 OW (5.9)Turkey 1-Dec-09 25-May-11 OW 7.9 Mexico 1-Dec-09 14-Jul-10 OW 2.8 South Africa 16-Apr-10 14-Jul-10 OW 2.2 Brazil 16-Apr-10 15-Nov-10 UW 6.9 South Korea 1-Jun-10 1-Sep-10 OW 0.9 Thailand 14-Jul-10 13-May-11 OW 26.4 Malaysia 1-Sep-10 3-Feb-12 OW 6.8 South Korea 12-Nov-10 6-Jul-11 UW (18.0)Mexico 15-Nov-10 13-Apr-12 UW (10.2)Taiwan 14-Jan-11 9-Mar-11 OW (1.5)Russia 14-Jan-11 17-Mar-11 OW 11.8 Indonesia 9-Mar-11 3-Feb-12 OW 16.7 India 4-Apr-11 2-Aug-11 OW (2.8)Russia 20-Apr-11 21-Oct-11 UW 5.8

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Emerging Markets Equity Research22 January 2014

Adrian Mowat(852) [email protected] 26: Summary of OW and UW recommendations (cont’d.)Country From To Rec. Relative return from the date of rec. YTD relative return

Brazil 20-Apr-11 1-Sep-11 UW 2.2 Poland 20-Apr-11 25-May-11 OW 1.1 Czech 20-Apr-11 25-May-11 OW 2.9 Hungary 20-Apr-11 25-May-11 OW (3.9)Turkey 25-May-11 27-Jun-11 UW 3.3 China 6-Jul-11 28-Oct-11 UW 1.4 Thailand 6-Jul-11 - OW 14.6 2.5 Brazil 1-Sep-11 21-Oct-11 OW (1.7)Russia 21-Oct-11 13-Apr-12 OW (0.1)South Africa 21-Oct-11 13-Apr-12 UW 1.9 Turkey 27-Oct-11 14-Feb-12 UW 0.5 Taiwan 28-Oct-11 15-Jan-12 UW (1.6)Malaysia 3-Feb-12 16-Aug-12 UW (7.2)China 14-Feb-12 14-Dec-12 UW (4.1)South Korea 28-Mar-12 6-Jul-12 OW 0.2 Indonesia 28-Mar-12 21-Jun-12 OW 0.9 Mexico 13-Apr-12 - OW 16.0 1.9 Brazil 13-Apr-12 7-Mar-13 UW 11.0 South Africa 13-Apr-12 13-Sep-12 OW 4.8 Turkey 21-Jun-12 18-Jul-13 OW 17.8 Russia 21-Jun-12 23-Jul-12 UW (3.5)India 21-Jun-12 19-Aug-13 OW (4.7)Czech 21-Jun-12 13-Sep-12 UW (6.4)Hungary 21-Jun-12 13-Sep-12 UW (4.1)Poland 21-Jun-12 13-Sep-12 UW (6.3)South Africa 17-Oct-12 20-Sep-13 UW 1.6 South Korea 19-Nov-12 9-Jul-13 UW 1.4 Taiwan 19-Nov-12 18-Jun-13 UW (11.4)Indonesia 7-Feb-13 7-Jun-13 OW 7.3 China 18-Mar-13 19-Aug-13 UW (7.6)Malaysia 22-Mar-13 20-Sep-13 OW 9.7 Russia 17-Apr-13 9-Jul-13 UW (5.9)Taiwan 18-Jun-13 - OW 2.1 0.7 Brazil 10-Jul-13 - UW 3.8 1.9 Indonesia 10-Jul-13 - UW 22.5 (8.2)Turkey 20-Sep-13 25-Nov-13 OW (4.0)Russia 20-Sep-13 25-Nov-13 UW 2.0 China 15-Oct-13 - UW (2.1) 1.1 South Korea 18-Nov-13 - OW 0.1 (1.7)India 18-Nov-13 - OW 8.1 3.2 Russia 25-Nov-13 - OW (0.6) (0.8)Poland 25-Nov-13 - UW 3.9 (0.3)Turkey 7-Jan-14 - UW 2.1 2.1

Source: MSCI, J.P. Morgan, 16 January 2014. Note: YTD relative return for existing calls. All returns are relative to MSCI EM and in US$ terms. For overweight/neutral markets, the relative return is positive if the markets outperform the benchmark. For underweight markets, the relative return is positive if the markets underperform the benchmark. In case of calls changed during the current year, YTD return is same as return from date of recommendation. Past performance cannot and should not be used to indicate future performance. Additional information is available upon request

Table 27: Summary of neutral recommendations – the calls we missedCountry From To Reco' Relative return from the date of reco YTD relative returnIndia Start '06 1-May-06 N 8.4 Philippines Start '06 4-May-06 N (5.7)South Korea Start '06 10-Aug-06 N (8.2)Poland 18-Jan-06 14-Jun-06 N (3.7)Thailand 3-Mar-06 18-Oct-06 N (3.3)Czech 23-Aug-06 27-Nov-06 N (0.1)Hungary 23-Aug-06 27-Nov-06 N 4.8 Poland 23-Aug-06 27-Nov-06 N 0.6 Turkey 14-Jun-06 31-Jan-07 N 15.0 Indonesia 19-Oct-06 3-Nov-08 N 0.9 Malaysia 18-Oct-06 3-Dec-06 N 5.2 Thailand 18-Dec-06 20-Mar-07 N (0.9)Taiwan 20-Feb-07 24-Aug-07 N (4.4)Turkey 21-Mar-07 24-Sep-07 N 14.3 Czech 18-Apr-07 17-Jan-08 N 3.7 Hungary 18-Apr-07 17-Jan-08 N (23.5)Poland 18-Apr-07 17-Jan-08 N (26.0)Russia 17-May-07 27-Jul-08 N 6.0 Malaysia 13-Jun-07 24-Aug-07 N (8.9)South Africa 13-Jun-07 24-Aug-07 N (7.5)India 1-Nov-07 17-Jan-08 N 18.3 Brazil 31-Jan-08 16-Jun-08 N 18.1 South Africa 5-Feb-08 16-Jun-08 N 3.1

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28

Emerging Markets Equity Research22 January 2014

Adrian Mowat(852) [email protected] 28: Summary of neutral recommendations – the calls we missed (cont’d.)Country From To Reco' Relative return from the date of reco YTD relative return

Malaysia 14-Mar-08 14-May-09 N 10.0 Taiwan 1-Apr-08 18-Apr-08 N 2.0 China 16-May-08 16-Jun-08 N (4.7)South Africa 27-Jul-08 14-May-09 N 9.9 Brazil 22-Sep-08 16-Apr-10 N 1.5 Turkey 5-Oct-08 1-Dec-09 N (20.0)Taiwan 20-Nov-08 30-Mar-09 N 4.4 India 7-Jan-09 5-Aug-09 N 31.2 Mexico 26-Feb-09 23-Mar-09 N 1.4 Philippines 16-Mar-09 3-Sep-09 N (2.0)Indonesia 30-Mar-09 15-May-09 N 7.2 Russia 14-May-09 18-Oct-09 N 2.8 China 14-May-09 17-Sep-09 N (3.0)Thailand 20-Jul-09 17-Sep-09 N 0.3 Mexico 18-Aug-09 1-Dec-09 N (2.0)Indonesia 3-Sep-09 9-Mar-11 N 21.9 South Korea 3-Sep-09 1-Jun-10 N (3.8)South Africa 17-Sep-09 16-Apr-10 N (6.1)Czech 25-Oct-09 20-Apr-11 N (21.2)Hungary 25-Oct-09 20-Apr-11 N (14.3)Poland 25-Oct-09 20-Apr-11 N 1.5 Russia 7-Dec-09 14-Jan-11 N 8.5 Thailand 14-Dec-09 14-Jul-10 N 16.4 Malaysia 2-Feb-10 1-Sep-10 N 17.6 South Africa 14-Jul-10 21-Oct-11 N 9.1 Mexico 14-Jul-10 15-Nov-10 N (0.2)South Korea 1-Sep-10 12-Nov-10 N 0.2 China 18-Oct-10 6-Jul-11 N (8.8)Taiwan 22-Oct-10 14-Jan-11 N 13.1 Brazil 15-Nov-10 20-Apr-11 N (1.8)India 14-Jan-11 4-Apr-11 N 3.1 Taiwan 9-Mar-11 28-Oct-11 N (3.9)Russia 17-Mar-11 20-Apr-11 N (5.2)Thailand 13-May-11 6-Jul-11 N (3.7)Poland 25-May-11 21-Jun-12 N (17.9)Czech 25-May-11 21-Jun-12 N (12.1)Hungary 25-May-11 21-Jun-12 N (21.9)Turkey 27-Jun-11 27-Oct-11 N (3.1)South Korea 6-Jul-11 28-Mar-12 N 0.1 India 2-Aug-11 21-Jun-12 N (9.3)Brazil 21-Oct-11 13-Apr-12 N (3.5)China 28-Oct-11 14-Feb-12 N 1.7 Taiwan 15-Jan-12 19-Nov-12 N (1.3)Indonesia 3-Feb-12 28-Mar-12 N (1.8)Turkey 14-Feb-12 21-Jun-12 N 8.9 Russia 13-Apr-12 21-Jun-12 N (8.7)Indonesia 21-Jun-12 7-Feb-13 N 1.0 South Korea 6-Jul-12 19-Nov-12 N 1.2 Russia 23-Jul-12 17-Apr-13 N (9.0)Malaysia 16-Aug-12 22-Mar-13 N (5.0)South Africa 13-Sep-12 17-Oct-12 N (2.2)Czech 13-Sep-12 - N (20.9) 2.1 Hungary 13-Sep-12 - N (5.8) 6.9 Poland 13-Sep-12 25-Nov-13 N 12.4 China 14-Dec-12 18-Mar-13 N (3.3)Brazil 8-Mar-13 9-Jul-13 N (13.3)Indonesia 7-Jun-13 9-Jul-13 N (3.1)Russia 10-Jul-13 20-Sep-13 N 5.0 South Korea 10-Jul-13 18-Nov-13 N 11.0 Turkey 19-Jul-13 20-Sep-13 N (6.7)India 20-Aug-13 18-Nov-13 N 4.8 China 20-Aug-13 15-Oct-13 N (2.6)South Africa 20-Sep-13 - N (0.3) (0.7)Malaysia 20-Sep-13 - N 1.7 1.1 Philippines 18-Nov-13 - NR (3.2) 3.1 Turkey 25-Nov-13 7-Jan-14 N (12.5)Indonesia 13-Jan-14 - N 0.0 0.0

Source: MSCI, J.P. Morgan, 16 January 2014. Note: YTD relative return for existing calls. All returns are relative to MSCI Emerging Markets and in US$ terms. For overweight/neutral markets, the

relative return is positive if the markets outperform the benchmark. For underweight markets, the relative return is positive if the markets underperform the benchmark. In case of calls changed

during the current year, YTD return is same as return from date of recommendation. Past performance cannot and should not be used to indicate future performance. Additional information is

available upon request.

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Emerging Markets Equity Research22 January 2014

Adrian Mowat(852) [email protected]

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Emerging Markets Equity Research22 January 2014

Adrian Mowat(852) [email protected]

China

Market Strategy

China: Stay with New China

Michael YuAC

(852) [email protected]

J.P. Morgan Securities (Asia Pacific) Limited

Performance, USD (%)

1M 3M 12M

MSCI China (3.3) (2.4) (6.2)MSCI EM (1.6) (5.5) (9.0)CNY 0.3 0.7 2.7

Source: Datastream. Prices as of 16 January 2014

Market Performance, Local currency (%)Sector 1M 3M 12M

IT 8.6 19.7 73.3 Health care 4.5 24.3 22.6 Utilities 4.2 11.1 31.4 Cons. Staples (1.5) (2.6) 6.9 Materials (1.7) 2.8 (19.8)China (3.3) (2.4) (6.2)Industrials (3.9) 0.6 (5.9)Telecom (4.0) (8.8) (12.3)Financials (5.9) (5.7) (13.5)Cons. Disc (6.5) (9.1) (11.3)Energy (7.0) (8.7) (21.4)

Source: Datastream. Prices as of 16 January 2014

Quant Style performance (%)Factor 1M 3M 12M

Valuation (4.2) (9.2) (13.4)Earnings (0.2) 0.8 10.9 Quality 1.7 (0.7) 3.8 Price 5.7 7.6 30.1 Model 0.7 (3.9) 8.5

Source: Datastream. Prices as of 17 January 2014

Distinct Country Drivers

The new government's desire for structural reforms (we expect steady progress), along with tighter liquidity, conflict with the protection of 7% growth. These conflicting objectives are likely to generate interesting investment opportunities. Meanwhile, we expect steady progress in several consensus-reached areas (e.g. environment protection, selected deregulation). Tougher and controversial reforms that could risk growth and social balance are likely to be delayed. As such, we expect moderate and volatile progress towards land reform, SOE reform, fiscal reform and a full-scale financial reform. In 2014, we expect the equity market’s return to be largely driven by earnings, together with a mild rerating driven by policy hopes. Investors should focus on the dispersion in earningssustainability and visibility among sectors: alpha, not beta.

Factors driving future performance

We expect China to maintain a certain pace of leverage (0-10% pa) to protect growth. We forecast China GDP growth to modestly edge down to 7.4% in 2014E vs. 7.6% 2013E. Big-bang reforms are not expected as the new leadership is likely to try to avoid binary policy bets (boom or bust). We expect dispersion in profitability and stock returns to continue.

We like sectors with endogenous growth drivers or policy beneficiaries. The rise of e-Commerce (from logistics to payment systems), clean energy and internet stocks are plays on the evolution of the Chinese economy towards consumption and services. While valuations aren’t necessarily cheap in static manners, we value their growth visibility and sustainability. Healthcare, insurance and environmental protection stocks are reform beneficiaries. These themes are likely to outperform the reform/deleveraging losers. Looking into 2014, there will likely be an opportunistic trading opportunity in 2H14 for certain industrial stocks, such as construction equipment, property and railway capex stocks.

Portfolio implications

Overweight: Utilities, Healthcare, IT, Consumer staples, Insurance, Diversified Financials. Underweight: Materials, Industrials, Consumer Discretionary, Banks.Neutral: Energy, Real Estate, Telecom.

JPM Mkt cap P/E EPS Div Yld. ROE

Price Code Rating (US$B) 14E 15E 14E 15E 14E 14E

Top picksEnn Energy Holdi 55.4 2688 HK OW 7.7 20.5 17.4 2.1 2.5 1.0 20.4China Mengniu Da 37.3 2319 HK OW 8.8 26.1 19.2 1.1 1.5 0.5 13.8Ping An Insura-H 68.8 2318 HK OW 60.1 11.6 9.7 4.6 5.5 0.8 17.3China State Cons 14.4 3311 HK OW 7.2 14.4 12.1 1.0 1.2 2.1 23.2Tencent Holdings 529.0 700 HK OW 127.0 30.9 22.5 13.3 18.4 0.2 39.1Stocks to AvoidChina Minsheng-H 7.9 1988 HK UW 32.2 5.1 4.4 1.6 1.80 3.9 19.9Zoomlion Heavy-H 6.8 1157 HK UW 6.5 12.6 14.3 0.5 0.5 1.7 9.0China Coal Ene-H 4.2 1898 HK N 8.7 16.1 13.6 0.3 0.3 1.9 3.9

Source: Datastream, J.P. Morgan estimates. Note: The share price and valuations are as of 16 January 2014

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31

Emerging Markets Equity Research22 January 2014

Adrian Mowat(852) [email protected]

China scorecardKey Financial Data Summary Local Interest Rates and Inflation Trend

EPS Growth P/E ROE Yield Spot -3M ∆ +3M ∆2011 10.9 10.6 17.3 3.1 3 Month 6.5 2.0 -3.02012E 1.4 10.4 15.4 3.3 Long Bond 4.6 0.4 -1.02013E 11.2 9.4 15.5 3.5 Inflation 2.5 -0.7 0.92014E 10.2 8.5 15.5 3.8 Real 3 Month 4.0 2.7 -3.9

Economic Forecasts Risk AppetiteGDP (YoY) Forecast -3M ∆ - EMF - Cons US$ Spread Spot -3M ∆ +3M ∆2012 7.8 0.0 3.2 0.0 BAA 2.4 -0.3 na2013E 7.6 0.0 3.1 -0.1 EMBI 3.4 0.1 -0.42014E 7.4 0.1 2.8 -0.1 Country 1.6 -0.1 na

Country Relative -1.9 -0.3 naEconomic Momentum Foreign Fund Flows (US$ mils)

GDP Q1 13E Q2 13E Q3 13E Q4 13E Month YTD Avg 12-Mo AvgGDP SAAR 7.2 6.8 7.2 7.2 EM Funds* -3,695 -1,445 -1,753

Asia ex Japan* -154 -231 -243China 1,059 -369 200

MSCI China Absolute and Relative (vs EMF) Index MSCI Fair value Range

Currency Outlook (CNY/USD) EPS Integer over Time

Source: MSCI, Bloomberg, I/B/E/S, Datastream, CEIC, J.P. Morgan estimates, Consensus Economics, EPFR Global, EPFR Global. Unless stated all forecasts are J.P. Morgan’s. The scorecards are designed to assist in tracking trends and expectations. -3M∆ refers to the change in this factor over the past three months and +3M∆ refers to the forecast change in this factor over the next three months. The Economic Forecast table contains J.P. Morgan’s real GDP forecasts, the change in these forecasts over the past three months, the difference between these forecasts and the average for emerging markets and the final column is the difference between J.P. Morgan’s forecast and consensus expectations. The MSCI Fair Value chart is designed to show current valuations relative 10 year valuation history. The vertical dotted line is the current index level. The five horizontal bars show a +/- one standard deviation range for these valuation measures. A dotted line to the left indicates a market that is cheap relative to history. *US Mutual fund subscriptions

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Emerging Markets Equity Research22 January 2014

Adrian Mowat(852) [email protected]

JPM Mkt cap P/E EPS Div Yld. ROE

Price Code Rating (US$B) 14E 15E 14E 15E 14E 14E

Top picksAmbev Sa 16.8 ABEV3 BZ OW 111.3 21.3 19.4 0.8 0.9 NA 35.8Anhanguera 14.0 AEDU3 BZ OW 2.6 20.5 16.8 0.7 0.8 0.0 11.7Ccr Sa 16.4 CCRO3 BZ OW 12.3 17.2 15.5 1.0 1.1 5.5 70.0Itau Uniban-Pref 30.6 ITUB4 BZ OW 62.6 8.9 7.9 3.4 3.9 4.0 20.2Vale Sa-Sp Adr 13.8 VALE US OW 71.8 6.3 6.8 2.2 2.0 5.6 16.3Stocks to AvoidSid Nacional 13.8 CSNA3 BZ UW 8.5 13.3 15.2 1.0 0.9 2.4 14.8Cesp-Pref B 21.3 CESP6 BZ UW 2.9 3.8 7.7 5.6 2.8 3.8 5.9Gol-Pref 10.8 GOLL4 BZ N 1.3 NM NM -2.3 -1.8 0.0 -167.2

Source: Datastream, J.P. Morgan estimates. Note: The share prices and valuations are as of 16 January 2014

BrazilMarket Strategy Brazil: Rising global tide does not lift all boatsEmy Shayo

AC

(5511) [email protected]. Morgan.comBanco J.P. Morgan S.A

Distinct Country Drivers

New Year, old pattern: Brazil continues to underperform EM. The reasons for market underperformance are well known, as detailed in the sequence, but they have not been able to create an extreme negative view to foster the “contrarian buying” spirit among investors: a) J.P. Morgan Consensus Asset Allocation report indicates that clients are close to Neutral on Brazil, b) Brazil is trading at 9.6x consensus forward P/E – in line with its historical average and c) consensus earnings growth expectations are yet too optimist at 19% (USD) for 2014, as discussed in the LatAm Strategy Dashboard. Absent any of these three externalities, the base case in Brazil should not change materially. We remain Underweight Brazil on: (1) forecast below-trend 2014E GDP growth at 2.1% and 2015E 2.2% challenges consensus earnings growth expectations; (2) sovereign risk perception is rising given fiscal concerns. Investors lack confidence in the government’s willingness to embrace more prudent macro policies ahead of the October 2014 elections; (3) FX depreciation remains a risk for foreign investors and potentially deters adding to Brazilian equity positions and (4) the developing domestic monetary tightening cycle lifts the opportunity cost for equity investments. J.P. Morgan forecasts the Selic at 11.0% by 2014E year-end and 11.75% by 2015E.

Factors driving future performance

On the external front, we look at conflicting forces to indicate the trajectory for Brazil equities. Global economic growth is forecasted to accelerate and an expected pickup in global capital spending should drive a sharp upturn in manufacturing output which should support Brazil growth as well. But the cost of trend-like global growth is policy normalization. The cost of money is moving higher globally and we see slower growth, weaker currency and higher long rates for countries with macro imbalances (e.g., twin deficits), such as Brazil. On the local front all eyes are on government execution, as investors remain focused on fiscal performance and proper inflation targeting - policy reforms are expected to be limited given Brazil October 2014 election cycle. The Central Bank has been raising policy rates faster than anticipated, a positive development in our view to better anchor inflation expectations and build up credibility. The greatest area of concern has been on fiscal performance. No news on fiscal policy is good news, but fears of slippage and creativity remain a key concern. J.P. Morgan forecasts 2014 primary surplus at 1.4%, amid better tax collection but still strong expenditures growth.

Portfolio implications

We recommend investors to: (1) OW Industrials via CCR based on the assumption that private sector participation in capex is expected to increase; (2) OW Financials via Itau Unibanco on relatively safer lending products and improved efficiency; (3) OW growth-resilient consumer names, such as Anhaguera and AmBev; and (4) OW stock leveraged to strong global GDP growth and weaker BRL – Vale.

Performance, USD (%)

1M 3M 12M

MSCI Brazil (4.9) (16.3) (24.5)

MSCI EM (1.6) (5.5) (9.0)

BRL (1.5) (7.7) (13.6)Source: Datastream. Prices as of 16 January 2014

Market Performance, Local currency (%)Sector 1M 3M 12MTelecom 14.7 5.5 (5.7)IT 2.6 (0.2) 32.7 Industrials (0.8) (4.1) (6.5)Cons. Stpl. (2.0) (8.5) (7.7)Materials (2.5) (3.6) (14.8)Cons. Disc (2.6) (4.3) (8.7)

Brazil (2.9) (8.3) (12.4)Financials (2.9) (11.6) (12.0)Utilities (3.4) (9.2) (16.4)Health care (5.1) (1.8) (5.9)Energy (8.5) (13.6) (22.6)

Source: Datastream. Prices as of 16 January 2014

Quant Style performance (%)Factor 1M 3M 12MValuation (2.7) (6.1) 0.3 Earnings (1.1) 4.8 15.1 Quality (2.1) (3.7) 16.1 Price 0.4 2.2 13.4 Model (1.8) 1.6 16.3

Source: Datastream. Prices as of 17 January 2014

.

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33

Emerging Markets Equity Research22 January 2014

Adrian Mowat(852) [email protected]

Brazil scorecardKey Financial Data Summary Local Interest Rates and Inflation Trend

EPS Growth P/E ROE Yield Spot -3M ∆ +3M ∆2011 -2.7 8.6 14.6 4.3 3 Month 10.1 0.4 na2012E -30.5 12.4 9.8 3.8 Long Bond 10.6 0.1 -0.12013E 3.6 12.0 10.8 3.9 Inflation 5.9 0.1 -0.32014E 19.7 10.0 12.9 4.2 Real 3 Month 4.2 0.3 na

Economic Forecasts Risk AppetiteGDP (YoY) Forecast -3M ∆ - EMF - Cons US$ Spread Spot -3M ∆ +3M ∆2012 0.9 0.0 -3.8 0.0 BAA 2.4 -0.3 na2013E 2.3 -0.2 -2.2 0.0 EMBI 3.4 0.1 -0.42014E 2.1 -0.1 -2.5 -0.1 Country 2.6 0.3 na

Country Relative -0.9 0.1 naEconomic Momentum Foreign Fund Flows (US$ mils)

GDP Q1 13E Q2 13E Q3 13E Q4 13E Month YTD Avg 12-Mo AvgGDP SAAR 2.0 1.8 3.0 2.6 EM Funds* -3,695 -1,445 -1,753

LatAm* -789 -721 -787Brazil -9 484 483

MSCI Brazil Absolute and Relative (vs EMF) Index MSCI Fair value Range

Currency Outlook (BRL/USD) EPS Integer over Time

: Source: MSCI, Bloomberg, I/B/E/S, Datastream, CEIC, J.P. Morgan estimates, Consensus Economics, EPFR Global. Unless stated all forecasts are J.P. Morgan’s. The scorecards are designed to

assist in tracking trends and expectations. -3M∆ refers to the change in this factor over the past three months and +3M∆ refers to the forecast change in this factor over the next three months. The

Economic Forecast table contains J.P. Morgan’s real GDP forecasts, the change in these forecasts over the past three months, the difference between these forecasts and the average for

emerging markets and the final column is the difference between J.P. Morgan’s forecast and consensus expectations. The MSCI Fair Value chart is designed to show current valuations relative 10

year valuation history. The vertical dotted line is the current index level. The five horizontal bars show a +/- one standard deviation range for these valuation measures. A dotted line to the left

indicates a market that is cheap relative to history. *US Mutual fund subscriptions.

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Emerging Markets Equity Research22 January 2014

Adrian Mowat(852) [email protected]

JPM Mkt cap P/E EPS Div Yld. ROE

Price Code Rating (US$B) 14E 15E 14E 15E 14E 14E

(KRW) (x) (x) (KRW) (KRW) (%) (%)

Top picksNaver Corp 715000 035420 KS OW 22.2 36.3 23.3 19680 30628 0.5 26.7Sk Hynix Inc 36000 000660 KS OW 24.1 7.2 6.9 5016 5255 NA 24.4Hyundai Dept Sto 150000 069960 KS OW 3.3 10.1 8.8 14819 17127 0.5 10.6Kb Financial Gro 39100 105560 KS OW 14.2 8.7 8.2 4499 4754 1.9 6.6Hyundai Motor 228500 005380 KS OW 47.4 6.4 5.6 35835 41017 1.0 17.0Stocks to AvoidCj Cheil 266500 097950 KS UW 3.3 19.9 15.0 13380 17823 0.6 3.3Hanjin Shipping 7070 117930 KS UW 0.8 NM 12.0 -1096 588 0.0 -20.6Samsung Engineer 68700 028050 KS UW 2.6 28.8 11.5 2382 5975 1.5 9.1Source: Datastream, J.P. Morgan estimates. Note: The share price and valuations are as of 16 January 2014

South KoreaMarket Strategy

South Korea: Positive fundamentals intact for

2014E

Scott YH SeoAC

(82-2) 758 5759 [email protected]. Morgan Securities (Far East) Ltd, Seoul Branch

Distinct Country Drivers

MSCI Korea is tracking EM. Key themes have been currency risk, with JPY/USD reaching 105 in early January, and weaker than expected 4Q13E preliminary earnings by Samsung Electronics. Analysts’ EPS downward revisions have intensified across the board with low earnings visibility heading into the 4Q13E earnings season. Government policy looks tied up in 1H14E with a tight fiscal budget, restructuring of government agencies, and minimal room for another round of housing market measures. Recent share price performance indicates IT as a key underperformer, led by earnings downgrades at Samsung Electronics. Utilities, on the other hand, outperformed by +10% during the past month, on expectations of earnings turnaround and favorable government policy.

Factors driving future performance

Overall 4Q13 earnings of Korea Inc. are likely to disappoint again, leaving KOSPI range-bound in the short term But, fundamentals remain intact for 2014E, we think. Confidence in DM growth remains high and threat of JPY weakness is expected to remain subdued (J.P. Morgan forecasts 100 JPY/USD by June 2014). Despite market chatter of another BoK policy rate cut, we expect the BoK to put policy rates on hold during 1H14E which would be positive for Korea financials. Finally, a more consistent earnings delivery by Korea cyclicals from 1Q14E should induce higher confidence in Korea Inc.’s EPS growth for 2014E, currently projected to grow at 20% Y/Y off a low base.

Portfolio implications

We remain selective buyers of Korean equities, preferring DM growth beneficiaries, as well as domestic housing market recovery plays. We are OW Korea exporters and Korea financials. While we do get incrementally positive on Korea cyclicals (i.e., industrials, materials, energy, and utilities), we would rather wait for higher earnings visibility in 1H14E.

Performance, USD (%)1M 3M 12M

MSCI Korea (2.8) (4.8) (1.1)MSCI EM (1.6) (5.5) (9.0)KRW (1.0) 0.4 (0.4)

Source: Datastream. Prices as of 16 January 2014

Market Performance, Local currency (%)Sector 1M 3M 12MHealth care 20.5 1.2 (3.4)Utilities 7.5 17.7 2.2 Telecom 5.2 (5.2) 22.0 Industrials 2.6 (7.5) (6.2)Cons. Staples 2.4 4.7 (8.3)

Financials 1.2 (3.0) 4.8 Cons. Disc (0.8) (7.4) 10.2 Korea (1.7) (5.0) (0.7)Materials (2.3) (5.5) (9.6)Energy (3.6) (12.7) (22.9)IT (5.6) (5.2) (0.7)

Source: Datastream. Prices as of 16 January 2014

Quant Style performance (%)

Factor 1M 3M 12MValuation (1.6) (1.3) (1.5)Earnings (3.0) 2.4 6.6 Quality (4.1) 2.1 2.5 Price (1.5) 0.9 (0.4)Model (3.8) (3.3) 4.0

Source: Datastream. Prices as of 13 January 2014

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Emerging Markets Equity Research22 January 2014

Adrian Mowat(852) [email protected]

South Korea scorecardKey Financial Data Summary Local Interest Rates and Inflation Trend

EPS Growth P/E ROE Yield Spot -3M ∆ +3M ∆2011 -16.0 12.0 12.7 1.0 3 Month 2.8 0.1 -0.22012E 7.7 11.1 11.6 1.0 Long Bond 3.6 0.2 0.02013E 7.7 10.3 10.9 1.1 Inflation 1.1 0.3 0.52014E 20.3 8.6 11.8 1.2 Real 3 Month 1.7 -0.2 -0.6

Economic Forecasts Risk AppetiteGDP (YoY) Forecast -3M ∆ - EMF - Cons US$ Spread Spot -3M ∆ +3M ∆2012 2.0 0.0 -2.6 0.0 BAA 2.4 -0.3 na2013E 2.8 0.0 -1.8 0.1 EMBI 3.4 0.1 -0.42014E 3.8 0.1 -0.9 0.3 Country na na na

Country Relative na na naEconomic Momentum Foreign Fund Flows (US$ mils)

GDP Q1 13E Q2 13E Q3 13E Q4 13E Month YTD Avg 12-Mo AvgGDP SAAR 3.5 3.8 3.8 3.5 EM Funds* -3,695 -1,445 -1,753

Asia ex Japan* -154 -231 -243Korea -268 405 382

MSCI Korea Absolute and Relative (vs EMF) Index MSCI Fair value Range

Currency Outlook (KRW/USD) EPS Integer over Time

Source: MSCI, Bloomberg, I/B/E/S, Datastream, CEIC, J.P. Morgan estimates, Consensus Economics, EPFR Global. Unless stated all forecasts are J.P. Morgan’s. The scorecards are designed to

assist in tracking trends and expectations. -3M∆ refers to the change in this factor over the past three months and +3M∆ refers to the forecast change in this factor over the next three months. The

Economic Forecast table contains J.P. Morgan’s real GDP forecasts, the change in these forecasts over the past three months, the difference between these forecasts and the average for

emerging markets and the final column is the difference between J.P. Morgan’s forecast and consensus expectations. The MSCI Fair Value chart is designed to show current valuations relative 10

year valuation history. The vertical dotted line is the current index level. The five horizontal bars show a +/- one standard deviation range for these valuation measures. A dotted line to the left

indicates a market that is cheap relative to history.* US Mutual fund subscriptions.

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Emerging Markets Equity Research22 January 2014

Adrian Mowat(852) [email protected]

JPM Mkt cap P/E EPS Div Yld. ROE

Price Code Rating (US$B) 14E 15E 14E 15E 14E 14E

(TWD) (x) (x) (TWD) (TWD) (%) (%)Top picksTsmc 108 2330 TT OW 92.6 12.8 11.4 8.4 9.4 2.8 21.6Advanced Semicon 29 2311 TT OW 7.4 10.9 10.1 2.6 2.8 4.0 14.9Cathay Financial 47 2882 TT OW 18.7 14.9 13.7 3.2 3.4 2.0 13.7Makalot Industri 143 1477 TT OW 0.8 12.7 9.8 11.3 14.5 5.2 34.8Hiwin Technologi 260 2049 TT OW 2.2 21.6 17.5 12.0 14.8 0.8 23.4Stocks to AvoidFar Eastone Tele 63 4904 TT UW 6.8 15.4 18.6 4.1 3.4 7.0 18.0Cheng Shin Rubbe 79 2105 TT N 8.5 13.4 13.2 5.9 6.0 2.9 23.0Pegatron Corp 40 4938 TT UW 3.1 10.9 10.7 3.7 3.8 5.5 7.7

Source: Datastream, J.P. Morgan estimates Note: The share price and valuations are as of 16 January 2014.

TaiwanMarket Strategy Taiwan: Technology to lead in 2014Adrian MowatAC

(852) [email protected] J.P. Morgan Securities (Taiwan) Limited

Distinct Country Drivers

Taiwan market outperformed EM over the last one month. Technology sector took the lead on the expectation of strong 4Q13 results and good economic data (Dec. PMI peaked in three years). Staples underperformed the most. Low inflation and wage growth suggested poor earnings outlook on the consumer sectors. Deregulation in equity trading (allowing buying and selling on the same day) came into effect on the 1st of January. YTD average daily turnover has boosted to NT$130bn, up 35% from the average in 2013.

Factors driving future performance

Although 1Q14 would be the low season, we see the trend of handset commoditisation benefitting component makers/retailers. Apple’s production shift and end to the inventory correction will support the semiconductor players. In downstream tech, 1) volume plays will benefit from the drought of innovation and rise of low-cost smartphones; 2) cheap tablet makers and data centre providers benefit from the cloud-wave proliferation; 3) stick with the market-share gainers in the PC sector rather than those with broad exposures to the end market. Among upstream tech, we favour TSMC as a structural winner with strong market share gains (Game Consoles and AMD APUs in 2013, and Apple in 2014-2015). The global economy is expected to record above-trend growth. Rebound in the global manufacturing sector should support Taiwan’s export and industrial sectors in 1H14. On the other hand, we continue to remain overweight on the financial sector, especially the life insurers who are the key beneficiaries of the rising yields in the region. Legislative review on the cross-strait Trade in Service Agreement is expected by end-1Q14. The result will indicate the likelihood of further cross-strait deregulation this year.

Portfolio implications

We remain OW on financials, and technology (TSMC, low-end smart phone manufacturers and component suppliers). Avoid consumer staples as domestic consumption remains weak, and materials (no pricing power).

OW: Technology, FinancialsNeutral: Telecom, Consumer DiscretionaryUW: Materials, Consumer Staples

Performance, USD (%)1M 3M 12M

MSCI Taiwan 2.1 0.8 5.8 MSCI EM (1.6) (5.5) (9.0)TWD (1.4) (2.2) (3.7)

Source: Datastream. Prices as of 16 January 2014

Market Performance, Local currency (%)Sector 1M 3M 12M

IT 6.3 5.8 8.9 Taiwan 3.7 3.1 9.8 Financials 2.3 2.0 22.8 Industrials 2.1 1.5 2.0 Energy 1.9 1.2 (2.5)Cons. Disc 1.4 2.2 24.1 Telecom (0.2) (4.3) (6.6)Materials (0.2) 0.1 3.2 Cons. Staples (3.3) (7.2) 9.2

Source: Datastream. Prices as of 16 January 2014

Quant Style performance (%)Factor 1M 3M 12MValuation 2.6 (0.3) 4.5 Earnings (3.4) (0.2) 13.4 Quality 0.5 1.2 5.7 Price (2.4) 1.2 16.4 Model (1.9) 0.5 10.4

Source: Datastream. Prices as of 17 January 2014

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37

Emerging Markets Equity Research22 January 2014

Adrian Mowat(852) [email protected]

Taiwan scorecardKey Financial Data Summary Local Interest Rates and Inflation Trend

EPS Growth P/E ROE Yield Spot -3M ∆ +3M ∆2011 -27.8 21.0 9.5 3.8 3 Month 1.1 0.0 -0.12012E 3.8 20.2 9.4 3.0 Long Bond 1.6 -0.1 1.12013E 32.6 15.3 11.8 3.1 Inflation 0.2 -0.3 0.42014E 9.5 13.9 12.0 3.4 Real 3 Month 0.9 0.3 -0.5

Economic Forecasts Risk AppetiteGDP (YoY) Forecast -3M ∆ - EMF - Cons US$ Spread Spot -3M ∆ +3M ∆2012 1.2 -0.1 -3.4 0.0 BAA 2.4 -0.3 na2013E 1.9 0.1 -2.6 -0.1 EMBI 3.4 0.1 -0.42014E 3.1 0.0 -1.6 -0.3 Country na na na

Country Relative na na naEconomic Momentum Foreign Fund Flows (US$ mils)

GDP Q1 13E Q2 13E Q3 13E Q4 13E Month YTD Avg 12-Mo AvgGDP SAAR 3.4 3.7 4.0 4.2 EM Funds* -3,695 -1,445 -1,753

Asia ex Japan* -154 -231 -243Taiwan 1,612 772 906

MSCI Taiwan Absolute and Relative (vs EMF) Index MSCI Fair value Range

Currency Outlook (TWD/USD) EPS Integer over Time

Source: MSCI, Bloomberg, I/B/E/S, Datastream, CEIC, J.P. Morgan estimates, Consensus Economics, EPFR Global. Unless stated all forecasts are J.P. Morgan’s. The scorecards are designed to assist in tracking trends and expectations. -3M∆ refers to the change in this factor over the past three months and +3M∆ refers to the forecast change in this factor over the next three months. The Economic Forecast table contains J.P. Morgan’s real GDP forecasts, the change in these forecasts over the past three months, the difference between these forecasts and the average for emerging markets and the final column is the difference between J.P. Morgan’s forecast and consensus expectations. The MSCI Fair Value chart is designed to show current valuations relative 10 year valuation history. The vertical dotted line is the current index level. The five horizontal bars show a +/- one standard deviation range for these valuation measures. A dotted line to the left indicates a market that is cheap relative to history. *US Mutual fund subscriptions.

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Emerging Markets Equity Research22 January 2014

Adrian Mowat(852) [email protected]

IndiaMarket Strategy

India: Micro support, Macro resistance

Bharat IyerAC

(91-22) [email protected]. Morgan India Private Limited

Distinct Country Drivers

The undesired combination of weak growth, elevated inflation and uncertainty related to policy environment is expected to continue in the near-term. Growth disappointment continues. December PMI services fell from 47.2 to 46.7 month-on-month. November IP declined 2.1% oya. December CPI print surprised positively. A sharp fall in vegetable prices resulted in inflation easing to 9.9% oya. CPI core inflation however remained elevated at 8.0% oya. Indian currency has stabilized in 61-63 vs. US$ range. November trade deficit remained comfortable at US$10.1 bn. Exports growth has slowed down over the last quarter and that’s a risk for the growth ahead. 3Q FY earnings season has started with positive surprises from IT services companies. Private sector banks have seen marginal uptick inNPA’s.

Factors driving future performance •Quarterly earnings. Early reporting typically tends to be supportive of equity

performance. For our coverage universe, analysts expect earnings growth of 14% oya, (ex energy), led by global sectors.

•Interest rate outlook: The sharp fall in vegetable prices and lower headline inflation prints have allayed fears of a rate hike in the quarterly credit policy on 28th January. The trend in core inflation remains worrisome and our economics team expects a 50-75 rate hike over CY2014.

•Political development: National election is likely to be held in April-May. The result will have a significant impact on growth ahead and Indian equity performance. The recent development around a new party – AAP – has increased political uncertainty.

Portfolio implicationsOur portfolio bias is defensive. Visibility on start of an earnings upgrade cycle is low. Fundamentally, global sectors are better positioned. Improved business outlook and weak INR are likely to support earnings growth outlook for global sector companies. OW sectors are IT services, Health care, and Materials. We are underweight on domestic cyclicals.

Performance, USD (%)

1M 3M 12M

MSCI India 4.2 4.2 (5.8)

MSCI EM (1.6) (5.5) (9.0)

INR 0.3 0.3 (11.2)Source: Datastream. Prices as of 16 January 2014

Market Performance, Local currency (%)

Sector 1M 3M 12MIT 11.1 9.7 52.0 Health care 8.1 1.7 27.3 Energy 4.1 2.4 (2.1)India 3.6 3.7 5.9 Cons. Staples 2.3 (4.0) 16.4 Financials 1.0 5.2 (11.4)Materials (0.3) 3.6 (8.8)Cons. Disc (0.7) (1.8) 2.5 Utilities (2.6) (1.8) (17.4)Telecom (2.9) (11.9) 9.9 Industrials (3.1) 13.0 (12.5)

Source: Datastream. Prices as of 16 January 2014

Quant Style performance (%)Factor 1M 3M 12MValuation (1.0) 6.9 (2.1)Earnings 2.9 (1.0) 11.5 Quality 3.5 (0.1) 13.5 Price 2.4 (6.3) 3.8 Model 1.2 0.6 7.6

Source: Datastream. Prices as of 17 January 2014

JPM Mkt cap P/E EPS Div Yld. ROE

Price

(INR)

Code Rating (US$B) 14E

(x)

15E

(x)

14E

(INR)

15E

(INR)

14E(%)

14E(%)

Top picksIcici Bank Ltd 1048 ICICIBC IN OW 19.7 12.7 10.6 82.2 98.9 2.2 12.9Dr Reddy'S Labs 2650 DRRD IN OW 7.3 23.1 18.1 114.5 146.7 0.7 20.8Tata Motors Ltd 370 TTMT IN OW 17.7 8.7 7.3 42.3 50.3 0.5 26.8Hcl Tech Ltd 1386 HCLT IN OW 15.8 16.7 15.1 83.0 91.8 0.6 35.9Dlf Ltd 158 DLFU IN OW 4.6 48.7 16.5 3.2 9.6 NA 2.2Stocks to AvoidHindustan Unilev 560 HUVR IN UW 19.7 32.8 30.1 17.1 18.6 2.0 109.7Colgate Palmoliv 1326 CLGT IN UW 2.9 34.4 30.1 38.5 44.0 2.7 102.5Punjab Natl Bank 605 PNB IN UW 3.6 4.7 3.7 129.1 161.7 5.0 13.9

Source: Datastream, J.P. Morgan estimates. Note: The share price and valuations are as of 16 January 2014

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39

Emerging Markets Equity Research22 January 2014

Adrian Mowat(852) [email protected]

India scorecardKey Financial Data Summary Local Interest Rates and Inflation Trend EPS Growth P/E ROE Yield Spot -3M ∆ +3M ∆

2011 8.1 20.5 16.6 1.3 3 Month 9.2 0.4 na2012E 10.2 18.6 16.5 1.4 Long Bond 8.7 0.1 0.02013E 10.9 16.8 16.6 1.5 Inflation 11.0 0.0 -0.92014E 20.3 14.0 17.6 1.7 Real 3 Month -1.9 0.4 na

Economic Forecasts Risk AppetiteGDP (YoY) Forecast -3M ∆ - EMF - Cons US$ Spread Spot -3M ∆ +3M ∆2012 5.2 0.2 0.6 0.0 BAA 2.4 -0.3 na2013E 4.6 0.5 0.1 -0.4 EMBI 3.4 0.1 -0.42014E 5.0 0.0 0.3 0.2 Country na na na

Country Relative na na naEconomic Momentum Foreign Fund Flows (US$ mils)

GDP Q1 13E Q2 13E Q3 13E Q4 13E Month YTD Avg 12-Mo AvgGDP SAAR 3.4 5.0 5.5 6.0 EM Funds* -3,695 -1,445 -1,753

Asia ex Japan* -154 -231 -243India 241 1,678 1,698

MSCI India Absolute and Relative (vs EMF) Index MSCI Fair value Range

Currency Outlook (INR/USD) EPS Integer over Time

Source: MSCI, Bloomberg, I/B/E/S, Datastream, CEIC, J.P. Morgan estimates, Consensus Economics, EPFR Global. Unless stated all forecasts are J.P. Morgan’s. The scorecards are designed to assist in tracking trends and expectations. -3M∆ refers to the change in this factor over the past three months and +3M∆ refers to the forecast change in this factor over the next three months. The Economic Forecast table contains J.P. Morgan’s real GDP forecasts, the change in these forecasts over the past three months, the difference between these forecasts and the average for emerging markets and the final column is the difference between J.P. Morgan’s forecast and consensus expectations. The MSCI Fair Value chart is designed to show current valuations relative 10 year valuation history. The vertical dotted line is the current index level. The five horizontal bars show a +/- one standard deviation range for these valuation measures. A dotted line to the left indicates a market that is cheap relative to history. *US Mutual fund subscriptions.

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Emerging Markets Equity Research22 January 2014

Adrian Mowat(852) [email protected]

JPM Mkt cap P/E EPS Div Yld. ROE

Price(USD)

Code Rating (US$B) 14E(x)

15E(x)

14E(USD)

15E(USD)

14E(%)

14E(%)

Top picksGazprom 4.14 GAZP RU OW 98.0 2.9 3.2 1.4 1.3 5.8 10.6Yandex Nv-A 43.8 YNDX US OW 14.3 30.5 24.3 48.0* 60.1* NA 26.0Sberbank 100.6* SBER RX OW 64.8 5.6 5.0 17.9* 20.1* 4.0 19.7Uralkali-Gdr 27.3 URKA LI OW 16.1 15.6 12.9 1.7 2.1 3.2 10.4Stocks to AvoidPolyus Gold Inte** 190 PGIL LN N 9.4 10.3 6.2 0.18 0.31 0.0 NARussian Grids Oa 0.768* RSTI RX UW 3.7 3.0 5.5 0.26* 0.14* NA 6.5Evraz Plc 103.5 EVR LN UW 2.5 NM NM -0.18 -0.01 0.0 -5.9

. Source: Datastream, J.P. Morgan estimates. Note: The share price and valuations are as of 16 January 2014. * Price/EPS in Rubbles

RussiaMarket Strategy Russia: Catalysts wantedAlex Kantarovich

AC

(7-495) 967 [email protected]. Morgan Bank International LLC

Distinct Country DriversRussian stocks remain range bound with the country indices tracking the general EM trend amidst soft oil prices reflecting supply worries. The ruble is duly testing the support level in the absence of any CBR action and inflation is stubbornly high at over 6%. Relative sector performance surprised with the unlikely winners including Materials and Utilities while Consumers underperformed after a warning from the sector flagship Magnit. We remain nervous about the decelerating consumption yet the recent macro indicators including retail sales, labor market and capital investments surprised positively against downbeat expectations.

Factors driving future performance

Russian stocks remain sensitive to the pace of the global economic recovery, oil price being the main transmission link, as well as to the pace of tapering. Thus the relative EM/DM economic dynamics are the key external drivers. For oil price, we are watching the supply side of the global energy balance with the US production and the potential nuclear deal with Iran among other important aspects. The interesting point remains Gazprom’s Chinese deal expected in February and we are hopeful that the agreed pricing levels will turn out to be positive. In Materials, we are watching Chinese growth slowdown weighing on steel, copper, nickel and coal; the domestic market remains stagnant with the state investments staying hostage to deteriorating budget balance and private capital outflows. Outlook for gold remains uncertain however global consumer growth remains supportive of diamonds. In Fertilizers, reintroduction of supply discipline after the disruptive events around Uralkali may be supportive of the sector names. On the domestic policy front, we are watching the CBR steadily moving toward the full flotation of the Ruble making further weakness in the Russian currency a possibility, offering a helping hand to exporters. The ongoing cleanup of the banking sector launched by the CBR in 2H13 is resulting in market share redistribution in favor of safer state-controlled banks. At the same time the government expects these to support various politically important projects (Olympics, Ukraine, Metallurgy to name a few); these have uncertain economic rationale thus increasing the sector risks. For Telecoms, the key development remains the emergence of the fourth big player likely disrupting the existing oligopoly.

Portfolio implications

Our key picks include Gazprom (with China deal a clear catalyst), Sberbank (the strongest name in the sector benefiting from the sector consolidation), Uralkali benefiting from the better supply/demand dynamics and Yandex (with partnerships with Mail.ru and Facebook among the positive events). We avoid Polyus Gold (on disruptive management changes), Evraz, which we think is likely to have to raise new capital and Russian Grids where the upcoming review of RAB and accumulation of tariff deficit may damage valuations.

Performance, USD (%)1M 3M 12M

MSCI Russia (1.0) (8.8) (9.1)MSCI EM (1.6) (5.5) (9.0)RUB (1.5) (4.2) (9.4)

Source: Datastream. Prices as of 16 January 2014

Market Performance, Local currency (%)

Sector 1M 3M 12MMaterials 6.4 7.3 (18.0)Utilities 2.9 (7.3) (49.0)Financials 1.3 (1.7) (0.7)Russia 0.1 (6.0) (1.7)Energy (0.5) (9.2) (1.8)Telecom (1.7) (8.6) 9.8 Cons. Staples (3.2) (0.6) 40.6

Source: Datastream. Prices as of 16 January 2014

Quant Style performance (%)

Factor 1M 3M 12M

Valuation 1.4 4.2 23.6 Earnings (1.5) (3.1) 17.9 Quality (2.9) (2.5) 28.1 Price (3.7) (0.9) 53.4 Model (2.8) (5.1) 42.3

Source: Datastream. Prices as of 17 January 2014

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41

Emerging Markets Equity Research22 January 2014

Adrian Mowat(852) [email protected]

Russia scorecardKey Financial Data Summary Local Interest Rates and Inflation Trend

EPS Growth P/E ROE Yield Spot -3M ∆ +3M ∆2011 39.5 4.5 19.4 2.9 3 Month 6.8 0.0 na2012E -11.0 5.0 14.9 2.4 Long Bond 6.8 0.0 na2013E -0.9 5.1 13.2 4.3 Inflation 6.5 0.2 -0.32014E -2.2 5.2 11.7 4.6 Real 3 Month 0.3 -0.2 na

Economic Forecasts Risk AppetiteGDP (YoY) Forecast -3M ∆ - EMF - Cons US$ Spread Spot -3M ∆ +3M ∆2012 3.4 0.0 -1.2 0.0 BAA 2.4 -0.3 na2013E 1.5 0.0 -3.1 0.0 EMBI 3.4 0.1 -0.42014E 1.8 -0.4 -2.9 -0.6 Country 2.2 0.1 na

Country Relative -1.3 -0.1 naEconomic Momentum Foreign Fund Flows (US$ mils)

GDP Q1 13E Q2 13E Q3 13E Q4 13E Month YTD Avg 12-Mo AvgGDP SAAR 1.3 1.5 2.0 2.5 EM Funds* -3,695 -1,445 -1,753

EM Europe* -117 -546 -555Russia -710 -280 -242

MSCI Russia Absolute and Relative (vs EMF) Index MSCI Fair value Range

Currency Outlook (RUB/USD) EPS Integer over Time

Source: MSCI, Bloomberg, I/B/E/S, Datastream, CEIC, J.P. Morgan estimates, Consensus Economics, EPFR Global. Unless stated all forecasts are J.P. Morgan’s. The scorecards are designed to assist in tracking trends and expectations. -3M∆ refers to the change in this factor over the past three months and +3M∆ refers to the forecast change in this factor over the next three months. The Economic Forecast table contains J.P. Morgan’s real GDP forecasts, the change in these forecasts over the past three months, the difference between these forecasts and the average for emerging markets and the final column is the difference between J.P. Morgan’s forecast and consensus expectations. The MSCI Fair Value chart is designed to show current valuations relative 10 year valuation history. The vertical dotted line is the current index level. The five horizontal bars show a +/- one standard deviation range for these valuation measures. A dotted line to the left indicates a market that is cheap relative to history. *US Mutual fund subscriptions

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42

Emerging Markets Equity Research22 January 2014

Adrian Mowat(852) [email protected]

JPM Mkt cap P/E EPS Div Yld. ROE

Price Code Rating (US$B) 14E 15E 14E 15E 14E 14E(ZAR) (x) (x) (ZAR) (ZAR) (%) (%)

Top picksNaspers Ltd-N 118112 NPN SJ OW 45.3 45.6 31.1 2591 3796 0.4 18.0Aspen Pharmacare 25559 APN SJ OW 10.7 11.4 8.8 1119 1448 NA 20.9Standard Bank Gr 12750 SBK SJ OW 19.0 10.6 9.1 1201 1401 4.3 15.3Lonmin Plc 5473 LON SJ OW 2.9 14.2 9.5 384 576 0.0 5.5Sasol Ltd 52955 SOL SJ OW 31.7 9.8 9.6 5416 5528 4.0 23.4Stocks to AvoidDiscovery Ltd 8038 DSY SJ UW 4.4 16.4 14.9 491 539 1.8 50.0Drdgold Ltd 410 DRD SJ UW 0.1 11.6 8.3 35 50 4.4 9.2Liberty Hldgs 12590 LBH SJ UW 3.3 11.3 10.9 1119 1151 4.9 15.8Massmart Hldgs 12800 MSM SJ UW 2.6 18.0 13.8 710 929 3.6 26.1Source: Datastream, J.P. Morgan estimates. Note: The share price and valuations are as of 16 January 2014

South AfricaMarket Strategy South Africa: Neutral MSCI SA within MSCI EM

Ayan GhoshAC

(27-11) [email protected]. Morgan Equities Ltd

Distinct Country DriversSA equity market is currently trading at a premium to the MSCI EM with the MSCI SA forward P/E for 2014 at 14.3x vs. 10.7x for MSCI EM. MSCI SA outperformed MSCI EM by 12% in local currency terms in 2013. However, MSCI SA underperformed MSCI EM by 3.5% in dollar currency terms over the same time period, given significant rand weakness. The rand was one of the worst performing EM currencies in 2013, depreciating by 19.2% against the dollar in 2013. However, in 4Q13, SA (+2.4%) outperformed EM (+1.9%) in dollars, despite a weaker currency.

Factors driving future performance

We expect the ZAR weakness to broadly persist in the near-term, given poor external positions and financing dependent on portfolio inflows. While the rand looks oversold on all valuation metrics, we forecast some of the ZAR weakness to begin to unwind moderately only in 2H13 as the worst of the current account deterioration would have passed by then, and on the back of normalizing policy rates in South Africa (+50bp, Sep14).

Unsurprisingly, the SA industrial rand hedges continue to be the winners, with c60% of corporate earnings coming from offshore. Our preference is to stick with the weak ZAR tilt, which should also benefit from the anticipated acceleration in US and Western Europe. Meanwhile, a weaker currency is a margin squeeze for the domestic sectors, unless they can pass it to consumers. A domestic SA consumer recovery early this year may be another positive surprise for investors in our view.

Although Governor Marcus disclosed that a considerable amount of time was spent discussing circumstances that would warrant higher rates as well as the time frame involved at the recent MPC meeting, we believe that a rate hike is not likely in the near-term, given the sizeable output gap. Our SA Economics team forecasts a first rate hike of 50bp in September 2014, with a further 100bp of tightening in 2015.

Portfolio implicationsWe recommend a long position in Value stocks. The valuation dispersion between Growth and Value is still extreme. We see Value in Platinum, Banks and Oil & Gas.

We would OW SA Platinum, trading on what we see as potentially trough earnings and RoE metrics. Sasol trades on a 9.5x PE vs. its trailing average of 10x. We think that Sasol will continue to re-rate as an increasingly assertive management looks to transform Sasol via domestic restructuring and US expansions. OW SA Banks, with profitability levels likely to continue to improve, while they are trading close to LT price-to-book levels. We are less constructive on Food Staples, as they remain stretched on valuation metrics. Likewise, Telecoms already had a strong re-rating.

Performance, USD (%)1M 3M 12M

MSCI S. Africa 1.2 (7.9) (8.4)MSCI EM (1.6) (5.5) (9.0)ZAR (5.5) (9.4) (19.1)

Source: Datastream. Prices as of 16 January 2014

Market Performance, Local currency (%)

Sector 1M 3M 12MCons. Disc 10.7 10.0 59.7 Energy 9.7 5.3 40.7 Telecom 9.5 6.0 19.4 Materials 8.9 (2.9) (32.0)Industrials 8.0 3.3 19.7 South Africa 7.3 2.1 13.6 Financials 4.3 (2.6) 5.3 Cons. Staples 1.5 (8.4) (11.3)Health care 1.3 (0.8) 38.8

Source: Datastream. Prices as of 16 January 2014

Quant Style performance (%)Factor 1M 3M 12MValuation 2.5 2.1 (2.5)Earnings (4.6) (3.2) 17.2 Quality (5.9) (6.0) (9.4)Price (2.2) 3.7 25.3 Model (0.8) 2.3 12.2

Source: Datastream. Prices as of 17 January 2014

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Emerging Markets Equity Research22 January 2014

Adrian Mowat(852) [email protected]

South Africa scorecardKey Financial Data Summary Local Interest Rates and Inflation Trend

EPS Growth P/E ROE Yield Spot -3M ∆ +3M ∆2011 20.6 17.7 17.5 2.7 3 Month 5.3 0.2 na2012E 8.2 16.4 16.9 2.9 Long Bond 7.9 0.3 na2013E 3.9 15.8 16.1 3.1 Inflation 5.3 -0.2 0.32014E 11.8 14.1 16.7 3.4 Real 3 Month 0.0 0.4 na

Economic Forecasts Risk AppetiteGDP (YoY) Forecast -3M ∆ - EMF - Cons US$ Spread Spot -3M ∆ +3M ∆2012 2.5 0.0 -2.1 0.0 BAA 2.4 -0.3 na2013E 1.9 0.0 -2.6 0.0 EMBI 3.4 0.1 -0.42014E 3.0 -0.1 -1.7 0.2 Country 2.6 -0.1 na

Country Relative -0.8 -0.2 naEconomic Momentum Foreign Fund Flows (US$ mils)

GDP Q1 13E Q2 13E Q3 13E Q4 13E Month YTD Avg 12-Mo AvgGDP SAAR 3.1 3.0 3.5 3.5 EM Funds* -3,695 -1,445 -1,753

EM Europe* -117 -546 -555South Africa -185 18 3

MSCI South Africa Absolute and Relative (vs EMF) Index MSCI Fair value Range

Currency Outlook (ZAR/USD) EPS Integer over Time

Source: MSCI, Bloomberg, I/B/E/S, Datastream, CEIC, J.P. Morgan estimates, Consensus Economics, EPFR Global. Unless stated all forecasts are J.P. Morgan’s. The scorecards are designed to assist in tracking trends and expectations. -3M∆ refers to the change in this factor over the past three months and +3M∆ refers to the forecast change in this factor over the next three months. The Economic Forecast table contains J.P. Morgan’s real GDP forecasts, the change in these forecasts over the past three months, the difference between these forecasts and the average for emerging markets and the final column is the difference between J.P. Morgan’s forecast and consensus expectations. The MSCI Fair Value chart is designed to show current valuations relative 10 year valuation history. The vertical dotted line is the current index level. The five horizontal bars show a +/- one standard deviation range for these valuation measures. A dotted line to the left indicates a market that is cheap relative to history. *US Mutual fund subscriptions

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Emerging Markets Equity Research22 January 2014

Adrian Mowat(852) [email protected]

JPM Mkt cap P/E EPS Div Yld. ROEPrice Code Rating (US$B) 14E 15E 14E 15E 14E 14E

(MXN) (x) (x) (MXN) (MXN) (%) (%)

Top picksPinfra 163.3 PINFRA* MM OW 4.7 32.4 29.5 5.0 5.5 NM 20.5Cemex $12.4 CX US OW 14.1 57.6 NA 0.2 NA 2.9 1.4Fibra Macquarie 24.6 FIBRAMQ MM OW 1.1 12.7 12.4 1.9 2.0 7.4 8.8Grupo Alfa 37.7 ALFAA MM N 14.6 19.4 19.0 1.9 2.0 1.0 16.2Liverpool 143.3 LIVEPOLC MM OW 15.2 22.5 19.6 6.4 7.3 0.4 14.4Stocks to avoidSoriana 40.9 SORIANAB MM UW 5.6 18.6 16.9 2.2 2.4 1.1 8.7Santander Mexico 34.0 SANMEXB MM UW 17.4 15.1 13.4 2.3 2.5 3.2 15.6Bimbo 36.3 BIMBOA MM N 12.9 19.3 15.8 1.9 2.3 0.4 18.5

Source: Datastream, J.P. Morgan estimates. Note: The share price and valuations are as of 16 January 2014.

MexicoMarket Strategy

Nur CristianiAC

(5255)5540 [email protected]. Morgan Casa de Bolsa, S.A. de C.V. J.P. Morgan Grupo Financiero

Mexico: It’s all about growth

Distinct country drivers

Mexico outperformed EM and the rest of LatAm in the past month. However currency depreciation of 1.5% dragged down performance to 0.5% in USD vs. 1.7% in local currency terms. With low volumes characteristic of the holidays, 2013’s year-end rally vanished early January, leaving month-on-month performance fairly flat. Best performing sectors were materials and consumer discretionary, led by Cemex and Televisa respectively. Industrial production came in weak, dragged down mainly by construction. Nonetheless, the details were encouraging, as construction posted its first increase in a 5-month streak of declines. Together with improving dynamics in the US, a recovery in the construction industry would accompany strength in the manufacturing sector, and together provide support to our thesis that the Mexican economy should recover in 2014, posting the strongest pick-up in growth in LatAm (from 1.2% this year to 3.4% expected for full-year 2014). Furthermore, late last year the much-awaited Energy Reform was approved by Federal and local congresses. Though details of implementation are pending, investments are expected to come on the back of these changes will help drive potential GDP to ~4.5% (3.3% currently) according to our economists’ estimates.

Factors driving future performanceWith the reform agenda behind us, investors’ focus will shift to economic data and companies’

abilities to monetize economic growth as earnings. Current consensus earnings expectations for 2014 Mexico look high at 18%, considering GDP growth of 3.4% for this year according to our estimates. Hence, we do not rule out downward revisions to earnings estimates. In terms of risks, we continue to note that valuations in Mexico are close to their highs, which allows no room for disappointment on earnings growth, especially considering there was no significant de-rating in 2013 despite weak economic growth and poor results from companies.

We highlight the approval of the secondary regulation of the Energy Reform as a significant catalyst, as then it will be clearer the size of investments to flow to Mexico.

Portfolio implications

We remain OW in Mexico on exposure to US and accelerating economic growth. Though the core of our top picks continues to be made up of stocks that are beneficiaries of the infrastructure and industrial development in the country, we warm up to the consumer sector through exposure to discretionary consumption as this sector recovers from a very weak 2013. We are neutral Financials as we see the sector more as a second derivative of a pick up in consumption, besides the fact that we find valuations unattractive. We are UW consumer staples and telecom on high valuations for the former and lack of catalysts for the latter. Hence, our top picks remain Cemex, Pinfra, Alfa, Fibra Macquarie and Liverpool.

Performance, USD (%)

1M 3M 12MMSCI Mexico (2.4) 0.6 (9.8)MSCI EM (1.6) (5.5) (9.0)MXN (2.6) (3.2) (4.9)

Source: Datastream. Prices as of 16 January 2014

Market Performance, Local currency (%)

Sector 1M 3M 12MCons. Disc 6.6 8.9 16.7 Materials 4.9 6.1 (11.8)Industrials 1.5 6.9 12.4 Mexico 0.4 4.0 (5.0)Telecom 0.0 3.9 (6.8)Financials (2.2) 7.7 (4.0)Cons. Staples (2.8) (2.2) (11.4)

Source: Datastream. Prices as of 16 January 2014

Quant Style performance (%)Factor 1M 3M 12M

Valuation 0.0 (0.8) 1.6

Earnings 4.6 3.7 3.1 Quality (1.9) 1.8 2.9 Price 1.9 5.2 13.7 Model 0.6 0.0 16.3

Source: Datastream. Prices as of 17 January 2014

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Emerging Markets Equity Research22 January 2014

Adrian Mowat(852) [email protected]

Mexico scorecardKey Financial Data Summary Local Interest Rates and Inflation Trend

EPS Growth P/E ROE Yield Spot -3M ∆ +3M ∆2011 -0.9 27.1 13.4 2.9 3 Month 4.4 0.0 na2012E 37.5 19.7 15.3 1.6 Long Bond 7.9 1.8 na2013E -4.9 20.7 13.5 1.6 Inflation 3.6 0.3 0.52014E 14.4 18.1 13.9 1.5 Real 3 Month 0.7 -0.3 na

Economic Forecasts Risk AppetiteGDP (YoY) Forecast -3M ∆ - EMF - Cons US$ Spread Spot -3M ∆ +3M ∆2012 3.9 0.0 -0.7 0.0 BAA 2.4 -0.3 na2013E 1.2 -0.3 -3.4 -0.1 EMBI 3.4 0.1 -0.42014E 3.4 -0.1 -1.3 -0.1 Country 2.0 0.0 na

Country Relative -1.5 -0.1 naEconomic Momentum Foreign Fund Flows (US$ mils)

GDP Q1 13E Q2 13E Q3 13E Q4 13E Month YTD Avg 12-Mo AvgGDP SAAR 4.0 3.2 3.5 3.6 EM Funds* -3,695 -1,445 -1,753

LatAm* -789 -721 -787Mexico -745 42 122

MSCI Mexico Absolute and Relative (vs EMF) Index MSCI Fair value Range

Currency Outlook (MXN/USD EPS Integer over Time

Source: MSCI, Bloomberg, I/B/E/S, Datastream, CEIC, J.P. Morgan estimates, Consensus Economics, EPFR Global. Unless stated all forecasts are J.P. Morgan’s. The scorecards are designed to assist in tracking trends and expectations. -3M∆ refers to the change in this factor over the past three months and +3M∆ refers to the forecast change in this factor over the next three months. The Economic Forecast table contains J.P. Morgan’s real GDP forecasts, the change in these forecasts over the past three months, the difference between these forecasts and the average for emerging markets and the final column is the difference between J.P. Morgan’s forecast and consensus expectations. The MSCI Fair Value chart is designed to show current valuations relative 10 year valuation history. The vertical dotted line is the current index level. The five horizontal bars show a +/- one standard deviation range for these valuation measures. A dotted line to the left indicates a market that is cheap relative to history. *US Mutual fund subscriptions

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Emerging Markets Equity Research22 January 2014

Adrian Mowat(852) [email protected]

JPM Mkt cap P/E EPS Div Yld. ROE

Price Code Rating (US$B) 14E 15E 14E 15E 14E 14E

(MYR) (x) (x) (MYR) (MYR) (%) (%)Top picksGamuda Bhd 4.3 GAM MK OW 3.0 13.3 10.3 0.3 0.4 2.6 14.9Genting Plantati 10.7 GENP MK OW 2.5 22.6 18.8 0.5 0.6 1.0 11.6Sapurakencana 4.7 SAKP MK OW 8.5 29.2 18.0 0.2 0.3 0.0 12.0Tenaga Nasional 11.5 TNB MK OW 19.6 12.2 12.1 0.9 0.9 2.7 14.4Top Glove Corp B 5.5 TOPG MK OW 1.0 14.5 12.8 0.4 0.4 3.4 17.0Stocks to AvoidMaxis Bhd 7.0 MAXIS MK UW 15.9 27.5 25.6 0.3 0.3 5.7 35.3Uem Sunrise Bhd 2.2 UEMS MK N 3.0 18.2 16.8 0.1 0.1 1.8 8.9Source: Datastream, J.P. Morgan estimates. Note: The share price and valuations are of 16 January 2014.

MalaysiaMarket Strategy

Malaysia: Improving external sector

Mak Hoy KitAC

(60-3) [email protected] Securities (Malaysia) Sdn. Bhd

Distinct Country DriversMSCI Malaysia is tracking EM. Our economist forecast a 5.5% capex-led growth for Malaysia. Main capex drivers are private investments (+15% in 2014), Petronas’ major capex outlay and rollout of railway-related infrastructure. A source of narrowing currentaccount surplus is the imported capital goods. Near record high government bond ownership by foreigners (43% of outstanding) is a source of MYR volatility. The resultant prudent fiscal stance by the government will lead to consumption weakness. Free-to-air Adex which has historically been robust in 4Q was marginally weaker in 4Q13, at -2.0% Y/Y. Subsidy cuts have commenced, leading to higher energy and food prices. Positive for Tenaga from a tariff hike perspective. Exports are recovering, rising 28.7% 3m/3m saar in Nov.

Factors driving future performance1) Accelerating oil and gas project awards, averaging M$60B p.a. vs M$45.6B in 2012; 2) Expect moderating private consumption growth; in addition we track retail sales data, and property transactions; 3) Sustained private investments growth (2014E: +15%); 4)For external sector green shoots - we track monthly export data, CPO price/supply trends, and new housing starts in Japan; 5)Tracking tourist arrival/passenger growth for Visit Malaysia 2014-led growth; 6) In contrast to 2013, 2014 market earnings growth of 11% is evenly split between domestic and external sectors.

Portfolio implicationsOur sector/stock selection is split between domestic capex/ thematic winners, and exposure to external sector recovery. Our “Best Malaysia Five” picks are Tenaga, SAKP, Gamuda, Top Glove and Genting Plantations. Stocks to avoid: Maxis, an expensive defensive with little growth, UEM Sunrise, on increased competition in Iskandar Malaysia amidst property-demand cooling measures.

Key risks: 1) Sharp rise in bond yields, 2) sharper-than-expected fall in CPO and LNG prices, and 3) sharper-than-expected slowdown in consumption on the back of subsidy cuts.

OW: Oil and Gas, Infrastructure, Utilities, Plantations (selective, go for volume growth), Media, Gaming (domestic), Healthcare (gloves).

UW: Telecom, Consumer-led banks, Property Developers/REITs; Shipping, and Petrochemicals.

Performance, USD (%)

1M 3M 12MMSCI Malaysia (3.1) (3.0) (0.5)MSCI EM (1.6) (5.5) (9.0)MYR (1.7) (3.8) (8.4)

Source: Datastream. Prices as of 16 January 2014

Market Performance , Local currency(%)

Sector 1M 3M 12MUtilities 2.1 14.2 33.6 Energy 1.1 13.1 37.9 Cons. Disc (0.5) (2.2) 2.8 Malaysia (1.3) 0.8 8.7 Telecom (1.9) (2.1) (1.1)Industrials (2.1) (0.8) 6.4 Financials (2.2) (2.0) 3.9 Cons. Staples (2.3) 3.4 9.2 Materials (3.0) (8.3) 1.8

Source: Datastream. Prices as of 16 January 2014

Quant Style performance (%)Factor 1M 3M 12M

Valuation 2.5 (1.1) 14.7

Earnings 0.1 0.7 8.2 Quality 1.3 (0.7) (6.1)Price 1.8 2.6 8.2 Model 1.5 0.9 1.9

Source: Datastream. Prices as of 17 January 2014

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Emerging Markets Equity Research22 January 2014

Adrian Mowat(852) [email protected]

Malaysia scorecardKey Financial Data Summary Local Interest Rates and Inflation Trend

EPS Growth P/E ROE Yield Spot -3M ∆ +3M ∆2011 7.8 19.1 13.5 2.7 3 Month 3.3 0.1 0.02012E 15.7 16.6 14.0 3.0 Long Bond 4.1 0.6 0.02013E -2.2 16.9 12.9 3.1 Inflation 2.7 0.0 0.12014E 12.2 15.1 13.7 3.2 Real 3 Month 0.5 0.1 -0.1

Economic Forecasts Risk AppetiteGDP (YoY) Forecast -3M ∆ - EMF - Cons US$ Spread Spot -3M ∆ +3M ∆2012 5.3 -0.3 0.7 0.0 BAA 2.4 -0.3 na2013E 4.5 1.2 -0.1 0.0 EMBI 3.4 0.1 -0.42014E 5.5 -0.2 0.9 0.5 Country 1.4 0.0 na

Country Relative -2.1 -0.1 naEconomic Momentum Foreign Fund Flows (US$ mils)

GDP Q1 13E Q2 13E Q3 13E Q4 13E Month YTD Avg 12-Mo AvgGDP SAAR 5.5 5.3 5.0 5.0 EM Funds* -3,695 -1,445 -1,753

Asia ex Japan* -154 -231 -243Malaysia -137 -4 18

MSCI Malaysia Absolute and Relative (vs EMF) Index MSCI Fair value Range

Currency Outlook (MYR/USD) EPS Integer over TimeFigure 32: Input Title Here

Source: MSCI, Bloomberg, I/B/E/S, Datastream, CEIC, J.P. Morgan estimates, Consensus Economics, EPFR Global. Unless stated all forecasts are J.P. Morgan’s. The scorecards are designed to

assist in tracking trends and expectations. -3M∆ refers to the change in this factor over the past three months and +3M∆ refers to the forecast change in this factor over the next three months. The

Economic Forecast table contains J.P. Morgan’s real GDP forecasts, the change in these forecasts over the past three months, the difference between these forecasts and the average for

emerging markets and the final column is the difference between J.P. Morgan’s forecast and consensus expectations. The MSCI Fair Value chart is designed to show current valuations relative 10

year valuation history. The vertical dotted line is the current index level. The five horizontal bars show a +/- one standard deviation range for these valuation measures. A dotted line to the left

indicates a market that is cheap relative to history. *US Mutual fund subscriptions.

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Emerging Markets Equity Research22 January 2014

Adrian Mowat(852) [email protected]

JPM Mkt cap P/E EPS Div Yld. ROE

Price Code Rating (US$B) 14E 15E 14E 15E 14E 14E

(IDR) (x) (x) (IDR) (IDR) (%) (%)Top picksUnited Tractors 19250 UNTR IJ OW 5.9 11.5 10.7 1669 1806 3.5 18.3Astra Internatio 7000 ASII IJ OW 23.5 13.9 12.2 502.00 575.00 3.3 23.9Bank Rakyat Indo 8350 BBRI IJ N 17.0 10.4 9.4 806.33 891.28 2.9 22.5Indofood Sukses 6700 INDF IJ OW 4.9 10.6 9.8 630 680 3.1 23.9Indocement Tungg 21800 INTP IJ OW 6.6 13.5 12.1 1620 1807 2.3 23.6Stocks to AvoidUnilever Ind Tbk 27625 UNVR IJ UW 17.4 37.2 37.5 744 736 2.1 202.0Bank Mandiri 8725 BMRI IJ UW 16.8 13.0 11.1 673 787 2.3 17.3Indosat Tbk Pt 4095 ISAT IJ UW 1.8 17.2 11.4 239 360 2.9 6.6Source: Datastream, J.P. Morgan estimates. Note: The share price and valuations are of 16 January 2014

IndonesiaMarket Strategy Indonesia: Rebuilding ReservesAditya S SrinathAC

(62-21) [email protected] J.P. Morgan Securities Indonesia

Distinct Country Drivers

Indonesia has outperformed EM by c10% in the last 1M. This follows a 20% underperformance last year, fuelled by a depreciating Rupiah. After deteriorating for an extended period, Fx data improved in 4Q. The trade balance was in surplus in October & November. FX reserves rose in 4 of the last 5 months of FY13, ending at $99.4bn in Dec. Indonesia's latest bond issue was oversubscribed. Materials, Financials and consumer discretionary drove market performance. Energy remains a laggard. Inflation has declined from its peak in August, now hovering at c8.3%. The Central Bank has kept interest rates at 7.5%, unchanged since November.

Factors driving future performance

Fears of the impact of tapering were overdone. Indonesia's latest bond issue was oversubscribed. With reduction of tapering tail risk, we recently upgraded Indonesia from UW to neutral. Going forward, Indonesia will grapple with these issues: a) Elections in April/July are a source of uncertainty, and we do not think investors are discounting any substantial change in governance style. b) Consensus UW positioning and 24% underperformance of its peers last year are arguments for a less cautious tack on Indonesia. A relaxation on raw material exports ban helped raising confidence in trade balance and rupiah. c) Divergence in growth forecast is another source of uncertainty. Consensus’ GDP forecast ranges 4.8-6.3% (mean 5. 5%). Our economics team expects 4.9% FY14E real GDP growth, much slower than government target of 5.8-6.2%. d) EPS estimates may have downside risk. Tightening may be ending, thoughit is unclear when policy may take a growth bias e) a gradual recovery in external balances, which may be vulnerable risk if portfolio flows hit airpockets.

Portfolio implications

Our top picks include contrarian stances on UNTR where we think risk-reward supports positioning for a cyclical recovery. After an underperformance fueled by macro fears, we think investors should look beyond the slow down and OW the cement sector (top pick: INTP). Positive EPS revisions are reasons for us to recommend INDF and TLKM.. On the avoid side, we see UNVR as an expensive defensive. We have concerns on profitability and capex needs at ISAT and have a contrarian negative thesis on Indonesian Banks ex-BBRI (where we think opportunity may arise due to valuation).

Performance, USD (%)1M 3M 12M

MSCI Indonesia 10.1 (7.7) (22.6)MSCI EM (1.6) (5.5) (9.0)IDR (0.1) (6.2) (20.3)

Source: Datastream. Prices as of 16 January 2014

Market Performance, Local currency (%)Sector 1M 3M 12M

Materials 17.8 9.8 (1.5)Health care 16.7 7.7 38.6 Cons. Disc 14.4 1.7 (8.5)Financials 12.4 (2.2) (1.3)Cons. Stpls. 10.5 1.5 8.2 Indonesia 10.2 (1.6) (2.9)Telecom 6.9 (1.8) 8.7 Industrials 4.4 (1.9) (10.7)Utilities (4.8) (21.1) (7.9)Energy (12.7) (21.0) (44.6)

Source: Datastream. Prices as of 16 January 2014

Quant Style performance (%)Factor 1M 3M 12MValuation 6.2 10.2 8.8 Earnings (2.3) (1.3) 6.1 Quality 6.8 0.4 17.1 Price (1.1) 0.9 16.5 Model 4.0 1.5 53.5

Source: Datastream. Prices as of 17 January 2014

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Emerging Markets Equity Research22 January 2014

Adrian Mowat(852) [email protected]

Indonesia scorecardKey Financial Data Summary Local Interest Rates and Inflation Trend EPS Growth P/E ROE Yield Spot -3M ∆ +3M ∆

2011 19.8 16.0 27.2 2.3 3 Month 6.4 0.0 na2012E 13.7 14.0 25.6 2.9 Long Bond 8.7 0.9 0.32013E 1.5 13.8 22.6 2.9 Inflation 8.3 0.0 -2.12014E 8.8 12.7 21.8 3.1 Real 3 Month -2.0 0.0 na

Economic Forecasts Risk AppetiteGDP (YoY) Forecast -3M ∆ - EMF - Cons US$ Spread Spot -3M ∆ +3M ∆2012 5.7 -0.5 1.1 0.0 BAA 2.4 -0.3 na2013E 5.5 0.1 1.0 -0.2 EMBI 3.4 0.1 -0.42014E 4.9 0.0 0.2 -0.6 Country na na na

Country Relative na na naEconomic Momentum Foreign Fund Flows (US$ mils)

GDP Q1 13E Q2 13E Q3 13E Q4 13E Month YTD Avg 12-Mo AvgGDP SAAR 5.0 5.0 5.0 4.5 EM Funds* -3,695 -1,445 -1,753

Asia ex Japan* -154 -231 -243Indonesia 236 -150 -130

MSCI Indonesia Absolute and Relative (vs EMF) Index MSCI Fair value Range

Currency Outlook (IDR/USD) EPS Integer over Time

Source: MSCI, Bloomberg, I/B/E/S, Datastream, CEIC, J.P. Morgan estimates, Consensus Economics. Unless stated all forecasts are J.P. Morgan’s. The scorecards are designed to assist in

tracking trends and expectations. -3M∆ refers to the change in this factor over the past three months and +3M∆ refers to the forecast change in this factor over the next three months. The

Economic Forecast table contains J.P. Morgan’s real GDP forecasts, the change in these forecasts over the past three months, the difference between these forecasts and the average for

emerging markets and the final column is the difference between J.P. Morgan’s forecast and consensus expectations. The MSCI Fair Value chart is designed to show current valuations relative 10

year valuation history. The vertical dotted line is the current index level. The five horizontal bars show a +/- one standard deviation range for these valuation measures. A dotted line to the left

indicates a market that is cheap relative to history. *US Mutual fund subscriptions.

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Emerging Markets Equity Research22 January 2014

Adrian Mowat(852) [email protected]

ThailandMarket Strategy Thailand: Value starting to emergeAnne JirajariyavechAC

(66-2) [email protected] Securities (Thailand) Limited

Distinct country drivers

MSCI Thailand has underperformed MSCI EM over the last three and twelve months. There is no clear resolution for the government and opposition standoff. This will frustrate policy implementations, importantly key infrastructure projects. But exports plus a more competitive Baht and lower repo rates should help offset this drag. Domestic economies continue to slow amid political problems. Tourism sector is feeling the negative impact. However, export sectors and manufacturing are improving. Basic consumption especially convenient stores are seeing resilient demand and earnings.

Factors driving future performance

Political development will largely lead equity market performance. Political situation in Thailand remains fairly unstable. This will lead to further cuts in street forecasts. Without an effective government in place, exports will play a big part in driving Thailand’seconomy. Central bank continues to be cautious on growth and with a benign inflationary environment, monetary policy should remain on the easy side.

Portfolio implications

Key trades would include exports (CPF & TUF) and the leader in convenience stores like CPALL. Also we like the banks after the recent selloff. While we have SCB and KBANK in our portfolio, we see BBL trading close to its value having limited downside risk. We remains cautious over discretionary spending (BIGC and ROBINS) and telco (expensive valuations and potential EPS downgrade is still substantial). Property sector has the most attractive valuation profile but the sector needs a GDP uplift to drive price performance (unlikely in 1H14).

Performance, USD (%)1M 3M 12M

MSCI Thailand (4.8) (15.2) (17.5)MSCI EM (1.6) (5.5) (9.0)THB (2.4) (4.7) (9.0)

Source: Datastream. Prices as of 16 January 2014

Market Performance , Local currency(%)

Sector 1M 3M 12MTelecom 3.8 (16.7) 8.1 Utilities 0.0 (5.6) (14.6)Materials (0.2) (5.4) (8.2)Thailand (2.5) (11.0) (9.4)Energy (3.0) (8.4) (12.4)Financials (3.6) (13.9) (13.2)Cons. Staples (4.1) 6.2 (3.3)Cons. Disc (7.0) (21.1) (31.3)

Source: Datastream. Prices as of 16 January 2014

Quant Style performance (%)

Factor 1M 3M 12M

Valuation 6.0 12.1 2.1 Earnings 0.0 (6.2) 2.2 Quality 2.9 3.5 8.3 Price 0.8 (8.1) 10.3 Model 2.8 0.6 13.2

Source: Datastream. Prices as of 17 January 2014

JPM Mkt cap P/E EPS Div Yld. ROE

Price Code Rating (US$B) 14E 15E 14E 15E 14E 14E

(THB) (x) (x) (THB) (THB) (%) (%)

Top picksSiam Comm Bk Pcl 147.0 SCB TB OW 15.2 8.9 8.2 16.4 17.9 3.7 20.7Kasikornbank Pcl 166.0 KBANK TB OW 12.1 8.4 7.5 19.7 22.1 2.4 20.0Thai Union Froze 64.0 TUF TB OW 2.2 15.3 13.6 4.2 4.7 3.3 13.1Charoen Pok Food 29.3 CPF TB OW 6.9 19.2 13.0 1.5 2.3 2.6 9.4Cp All Pcl 39.5 CPALL TB OW 10.8 24.7 17.9 1.6 2.2 2.3 44.0Bangkok Bank Pub 178.5 BBL TB N 10.4 8.7 7.9 20.6 22.6 4.5 12.8Stocks to AvoidBig C Supercente 176 BIGC TB N 4.4 18.1 15.0 9.7 11.7 1.7 20.2Robinson Dept St 47 ROBINS TB N 1.6 19.1 15.0 2.4 3.1 2.6 22.6

Source: Datastream, J.P. Morgan estimates. Note: The share price and valuations are of 16 January 2014

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51

Emerging Markets Equity Research22 January 2014

Adrian Mowat(852) [email protected]

Thailand scorecardKey Financial Data Summary Local Interest Rates and Inflation Trend

EPS Growth P/E ROE Yield Spot -3M ∆ +3M ∆2011 14.1 15.7 15.7 3.1 3 Month 2.4 -0.2 0.22012E 16.3 13.5 16.5 4.2 Long Bond 4.0 0.0 0.22013E 10.1 12.2 16.4 3.6 Inflation 1.6 0.1 0.42014E 14.7 10.7 17.0 4.1 Real 3 Month 0.8 -0.3 -0.2

Economic Forecasts Risk AppetiteGDP (YoY) Forecast -3M ∆ - EMF - Cons US$ Spread Spot -3M ∆ +3M ∆2012 6.1 -0.4 1.4 0.0 BAA 2.4 -0.3 na2013E 2.6 -0.1 -2.0 -0.7 EMBI 3.4 0.1 -0.42014E 3.0 0.1 -1.6 -1.3 Country 0.5 0.0 na

Country Relative -2.9 -0.1 naEconomic Momentum Foreign Fund Flows (US$ mils)

GDP Q1 13E Q2 13E Q3 13E Q4 13E Month YTD Avg 12-Mo AvgGDP SAAR 3.8 4.0 4.2 4.0 EM Funds* -3,695 -1,445 -1,753

Asia ex Japan* -154 -231 -243Thailand 65 -516 -511

MSCI Thailand Absolute and Relative (vs EMF) Index MSCI Fair value Range

Currency Outlook (THB/USD) EPS Integer over Time

Source: MSCI, Bloomberg, I/B/E/S, Datastream, CEIC, J.P. Morgan estimates, Consensus Economics, EPFR Global. Unless stated all forecasts are J.P. Morgan’s. The scorecards are designed to

assist in tracking trends and expectations. -3M∆ refers to the change in this factor over the past three months and +3M∆ refers to the forecast change in this factor over the next three months. The

Economic Forecast table contains J.P. Morgan’s real GDP forecasts, the change in these forecasts over the past three months, the difference between these forecasts and the average for

emerging markets and the final column is the difference between J.P. Morgan’s forecast and consensus expectations. The MSCI Fair Value chart is designed to show current valuations relative 10

year valuation history. The vertical dotted line is the current index level. The five horizontal bars show a +/- one standard deviation range for these valuation measures. A dotted line to the left

indicates a market that is cheap relative to history. *US Mutual fund subscriptions.

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52

Emerging Markets Equity Research22 January 2014

Adrian Mowat(852) [email protected]

PolandMarket Strategy Poland: February - Pension reform starts

David Aserkoff, CFA AC

+44 207 325 [email protected]. Morgan Securities Ltd.

Distinct Country Drivers

The hope of the Polish stock market is that the European recovery continues to feed the Polish economy and pushes EPS and valuations higher. But, we can't find anybody who doesn't believe in the European and Polish GDP revival - this is consensus and almost certainly baked into stock prices. GEM investors may appreciate that Poland (along with Greece) is one of few place to get Euro-linked exposure in EM. And the Fed's tapering contrasts with the unambiguously lower-for-longer monetary policy.

Factors driving future performance

The fears for the market revolve around the upcoming pension reform - and that drives our UW recommendation on the market. The pension funds for the last ten+ years have been the key marginal buyer, dominating the primary markets and stepping up nearly every day in the secondary market. But, from February, the pension funds are going to stop as net buyers. With valuations looking lofty, we fear that the shift from locally dominated to GEM/internationally dominated could mean more volatility and lower valuations.

Portfolio implications

Our key OW, Erste Bank, has had a very strong start to the year. We think it can continue to outperform. The negative of the pension fund reform doesn't impact the Vienna- and Prague-listed regional bank. We also diversify out of banks into copper giant KGH which has struggled with the copper price.We stick with it for now. The pension fund changes should push the pension funds into high dividend payers (only source of cash inflows) and we stick with PZU despite its recent underperformance.

Performance, USD (%)

1M 3M 12MMSCI Poland (1.9) (4.2) (2.7)MSCI EM (1.6) (5.5) (9.0)PLN (0.9) 0.6 1.3

Source: Datastream. Prices as of 16 January 2014

Market Performance , Local currency(%)

Sector 1M 3M 12MTelecom 5.0 15.9 (20.5)Financials 0.4 (1.6) 15.1 Cons. Disc (0.6) (19.5) 10.7 Poland (1.0) (4.9) (3.8)Materials (2.8) (10.3) (33.1)Cons. Staples (3.7) (17.4) (25.0)Energy (3.8) (9.5) (13.1)Utilities (4.4) (8.4) (11.8)

Source: Datastream. Prices as of 16 January 2014

Quant Style performance (%)

Factor 1M 3M 12M

Valuation 0.8 (0.6) (15.0)Earnings 0.4 (1.1) 24.3 Quality 0.5 1.9 15.1 Price (4.1) (7.1) 12.7 Model 3.7 1.5 (1.6)

Source: Datastream. Prices as of 17 January 2014

JPM Mkt cap P/E EPS Div Yld. ROEPrice Code Rating (US$B) 14E 15E 14E 15E 14E 14E

(PLN) (x) (x) (PLN) (PLN) (%) (%)

Top picksErste Group Bank 28.8 EBS AV OW 16.9 10.6 7.5 2.7 3.8 3.7 9.7Kghm 114.3 KGH PW OW 7.5 8.3 7.4 13.8 15.5 4.3 11.9Pzu 438 PZU PW OW 12.4 11.5 11.4 38 38 8.7 23.3Source: Datastream, J.P. Morgan estimates. Note: The share price and valuations are as of 16 January 2014

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53

Emerging Markets Equity Research22 January 2014

Adrian Mowat(852) [email protected]

Poland scorecardKey Financial Data Summary Local Interest Rates and Inflation Trend EPS Growth P/E ROE Yield Spot -3M ∆ +3M ∆

2011 26.4 9.6 15.8 3.5 3 Month 3.0 -0.4 na2012E -5.6 10.1 14.0 4.4 Long Bond 5.7 0.0 na2013E -22.9 13.1 10.0 4.9 Inflation 0.6 -0.2 0.52014E 2.8 12.8 9.8 4.4 Real 3 Month 2.4 0.3 na

Economic Forecasts Risk AppetiteGDP (YoY) Forecast -3M ∆ - EMF - Cons US$ Spread Spot -3M ∆ +3M ∆2012 2.0 0.1 -2.6 0.0 BAA 2.4 -0.3 na2013E 1.4 0.0 -3.2 0.0 EMBI 3.4 0.1 -0.42014E 2.8 0.0 -1.9 -0.1 Country 1.2 -0.2 na

Country Relative -2.3 -0.3 naEconomic Momentum Foreign Fund Flows (US$ mils)

GDP Q1 13E Q2 13E Q3 13E Q4 13E Month YTD Avg 12-Mo AvgGDP SAAR 2.5 2.5 3.0 3.5 EM Funds* -3,695 -1,445 -1,753

EM Europe* -117 -546 -555Poland 13 -9 4

MSCI Poland Absolute and Relative (vs EMF) Index MSCI Fair value Range

Currency Outlook (PLN/USD) EPS Integer over Time

Source: MSCI, Bloomberg, I/B/E/S, Datastream, CEIC, J.P. Morgan estimates, Consensus Economics, EPFR Global. Unless stated all forecasts are J.P. Morgan’s. The scorecards are designed to

assist in tracking trends and expectations. -3M∆ refers to the change in this factor over the past three months and +3M∆ refers to the forecast change in this factor over the next three months. The

Economic Forecast table contains J.P. Morgan’s real GDP forecasts, the change in these forecasts over the past three months, the difference between these forecasts and the average for

emerging markets and the final column is the difference between J.P. Morgan’s forecast and consensus expectations. The MSCI Fair Value chart is designed to show current valuations relative 10

year valuation history. The vertical dotted line is the current index level. The five horizontal bars show a +/- one standard deviation range for these valuation measures. A dotted line to the left

indicates a market that is cheap relative to history. *US Mutual fund subscriptions

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54

Emerging Markets Equity Research22 January 2014

Adrian Mowat(852) [email protected]

JPM Mkt cap P/E EPS Div Yld. ROEPrice Code Rating (US$B) 14E 15E 14E 15E 14E 14E

(TRY) (x) (x) (TRY) (TRY) (%) (%)

Top picksTurkcell Iletisi 11.2 TCELL TI OW 11.1 8.9 8.1 0.6 0.6 0.0 15.7Koc Hldg 8.5 KCHOL TI N 9.7 9.3 6.8 0.9 1.3 2.0 12.1Stocks to AvoidAkbank 6.6 AKBNK TI UW 12.0 7.2 6.3 0.9 1.0 4.2 14.6Isbank-C 4.8 ISCTR TI N 9.7 6.2 5.4 0.8 0.9 3.2 13.7Turkiye Garanti 6.7 GARAN TI N 12.7 6.7 5.8 1.0 1.1 4.5 17.4Migros Ticaret A 14.7 MGROS TI N 1.2 17.0 13.3 0.9 1.1 0.0 10.6

Source: Datastream, J.P. Morgan estimates. Note: The share price and valuations are of 16 January 2014.

TurkeyMarket Strategy

Turkey: Tighter policy, lower PE’s

David Aserkoff, CFA AC

+44 207 325 [email protected]. Morgan Securities Ltd.

Distinctive Country DriversWe have just cut Turkey from N to UW (see Reducing risk in Turkish equities dated 8 Jan) for three reasons. First, the monetary tightening, including macro-prudential measures, is cutting the growth outlook. Second, despite the drop, MSCI Turkey is only at an 8% discount to its historical 12m fwd PE average – not that cheap, while we expect further cuts to consensus EPS. And foreign selling is far less than we haveseen in previous sell-offs. Third, in the short term, our economists see potential for further political noise driving further pressure on the lira.

Factors driving future performance We might be getting closer to a period of FX stability (our FX team forecasts USDTRY 2.20 in '14), especially if the central bank hikes rates inline with our 75 bp forecast. But high rates (10%+ bond yields) would keep the cost of equity high. We expect Turkish stocks could lag both the local bond market and EM equities when the TRY stabilises. The annual guidance from bank sector (Akbank and Garanti have just held analyst days with the others coming soon) looks more bearish than what’s baked into the consensus. Finally, foreigners have only sold 4.2% of the free float, which is far less than the drop in the GFC or even 2001. Moreover, looking at the most recent monthly data, net sales were only US$167m in December with more than 100% in one stock (Emlak) – or, put differently, there was net foreign buying in Turkey if we exclude Emlak. For now, we see further room for foreign holdings to decline.

Investment strategyWithin Turkey, we recommend a defensive portfolio: Turkcell (high cash position, possible dividend restart); Koç Holding (diversified, high export exposure to Europe, but N-rated). We would UW banks, fearing NIM compression in 1H14 via higher cost of funding. Our stocks to avoid include banks: Akbank (UW), Isbank (N), Garanti (N) plus Migros (N retailer with high €-denominated debt)

Performance, USD (%)

1M 3M 12MMSCI Turkey (17.6) (21.7) (36.9)MSCI EM (1.6) (5.5) (9.0)TRY (8.1) (10.6) (20.0)

Source: Datastream. Prices as of 16 January 2014

Market Performance, Local currency (%)

Sector 1M 3M 12MIndustrials (3.9) (4.1) 7.2 Materials (6.5) (0.7) (8.9)Energy (6.8) 0.6 (16.8)Telecom (8.9) (13.0) (13.9)Turkey (10.2) (12.4) (21.0)Cons. Disc (10.3) (11.8) 1.2 Financials (11.4) (16.1) (31.3)Cons. Staples (14.4) (12.3) (14.3)

Source: Datastream. Prices as of 16 January 2014

Quant Style performance(%)

Factor 1M 3M 12M

Valuation (5.3) (9.1) (14.8)Earnings 3.0 5.3 11.0 Quality (6.1) (5.4) (0.2)Price 7.9 9.0 10.5 Model 5.1 1.7 6.2

Source: Datastream. Prices as of 17 January 2014

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55

Emerging Markets Equity Research22 January 2014

Adrian Mowat(852) [email protected]

Turkey scorecardKey Financial Data Summary Local Interest Rates and Inflation Trend EPS Growth P/E ROE Yield Spot -3M ∆ +3M ∆

2011 -5.9 11.9 16.3 2.5 3 Month 9.0 1.8 na2012E 17.0 10.1 17.0 1.9 Long Bond 9.6 1.7 -1.12013E 7.3 9.4 15.8 3.3 Inflation 7.3 -0.3 -0.42014E 7.5 8.8 15.1 3.9 Real 3 Month 1.6 2.2 na

Economic Forecasts Risk AppetiteGDP (YoY) Forecast -3M ∆ - EMF - Cons US$ Spread Spot -3M ∆ +3M ∆2012 2.6 0.4 -2.0 0.0 BAA 2.4 -0.3 na2013E 3.8 0.2 -0.8 0.0 EMBI 3.4 0.1 -0.42014E 2.5 -1.3 -2.1 -1.0 Country 3.1 0.5 na

Country Relative -0.3 0.4 naEconomic Momentum Foreign Fund Flows (US$ mils)

GDP Q1 13E Q2 13E Q3 13E Q4 13E Month YTD Avg 12-Mo AvgGDP SAAR 1.2 2.0 4.3 5.0 EM Funds* -3,695 -1,445 -1,753

EM Europe* -117 -546 -555Turkey -189 1 42

MSCI Turkey Absolute and Relative (vs EMF) Index MSCI Fair value Range

Currency Outlook (TRL/USD) EPS Integer over Time

Source: MSCI, Bloomberg, I/B/E/S, Datastream, CEIC, J.P. Morgan estimates, Consensus Economics, EPFR Global. Unless stated all forecasts are J.P. Morgan’s. The scorecards are designed to

assist in tracking trends and expectations. -3M∆ refers to the change in this factor over the past three months and +3M∆ refers to the forecast change in this factor over the next three months. The

Economic Forecast table contains J.P. Morgan’s real GDP forecasts, the change in these forecasts over the past three months, the difference between these forecasts and the average for

emerging markets and the final column is the difference between J.P. Morgan’s forecast and consensus expectations. The MSCI Fair Value chart is designed to show current valuations relative 10

year valuation history. The vertical dotted line is the current index level. The five horizontal bars show a +/- one standard deviation range for these valuation measures. A dotted line to the left

indicates a market that is cheap relative to history. *US Mutual fund subscriptions.

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56

Emerging Markets Equity Research22 January 2014

Adrian Mowat(852) [email protected]

JPM Mkt cap P/E EPS Div Yld. ROE

Price Code Rating (US$B) 14E 15E 14E 15E 14E 14E

(PHP) (x) (x) (PHP) (PHP) (%) (%)

Top picksMetro Pacific In 4.1 MPI PM OW 2.4 13.0 11.8 0.3 0.3 0.8 8.6Ayala Land Inc 26.5 ALI PM OW 8.3 24.3 19.7 1.1 1.3 2.1 14.8Ayala Corp 537.5 AC PM OW 7.2 19.8 16.2 27.1 33.3 0.7 11.6Puregold Price C 39.0 PGOLD PM OW 2.4 20.2 17.0 1.9 2.3 1.0 16.3Stocks to AvoidAboitiz Power 35.8 AP PM UW 5.9 14.1 14.9 2.5 2.4 3.6 19.7

Source: Datastream, J.P. Morgan estimates. Note: The share price and valuations are as of 16 January 2014

PhilippinesMarket Strategy

Philippines: Inflation spike keeps PSEi at bay

Jeanette YutanAC

(63-2) [email protected]. Morgan Securities Philippines, Inc

Distinct Country Drivers

Philippine equities are underperforming MSCI EM YTD. Heady valuations, lack of upward EPS revision strength, and inflation spike from the typhoon Haiyan prompted foreign selling of US$826m in the last quarter of 2013. It also didn’t help that currency weakened to Php44 against the USD, which is close to its three-year low. Inflation spike in December to 4.1% oya, moving towards the middle of the target range of the BSP due to the impact of the typhoon. On the other hand, ample domestic liquidity and government spending should support domestic growth despite delays in the PPP execution.

Factors driving future performance

QE easing impact on yield curve remains a major factor that the market is closely watching. Rising yields make Philippine equity prices vulnerable given their relatively high valuations.

Inflation expectations remain manageable as CPI is still within the 3-5% range of BSP. However, continued Fed tapering and stronger economic growth could lead to a change in monetary policy stance by latter part of 2014. Currency weakness should be capped by declining SDA.

Domestic demand growth is robust. Government spending momentum is intact while capex up cycle is seen across the major Philippine conglomerates. OFW remittances and robust BPO remain key domestic growth drivers.

Portfolio Implications

We are Neutral on the Philippines due to the heady valuations and lack of upward EPS revision momentum. Sectors like property and consumer have relatively premium valuations but we pick quality names with strong earnings outlook on any share price weakness. We like domestic demand plays like Puregold which has great structural growth, and enjoys strong momentum in earnings growth. We like Ayala Land given its solid business model, robust earnings momentum, and reasonable valuations. We also like MPI for its portfolio of quality assets and compelling valuations. On the other hand, we have an UW on Aboitiz Power due to downside earnings risk.

Performance, USD (%)

1M 3M 12MMSCI Philippines 0.5 (10.2) (8.5)MSCI EM (1.6) (5.5) (9.0)PHP (2.4) (4.3) (9.8)

Source: Datastream. Prices as of 16 January 2014

Market Performance, Local currency (%)

Sector 1M 3M 12MUtilities 9.3 (1.0) (14.1)Cons. Staples 6.6 0.9 41.6 Telecom 3.9 (2.4) 14.1 Philippines 2.7 (6.2) 1.7 Financials 2.4 (12.6) (7.1)Industrials 1.3 (1.3) 3.5 Cons. Disc (3.7) (4.3) 53.5

Source: Datastream. Prices as of 16 January 2014

Quant Style performance (%)

Factor 1M 3M 12M

Valuation 2.7 2.3 (3.6)Earnings 1.3 0.7 5.1 Quality 1.6 4.8 (10.3)Price 0.3 0.9 6.1 Model 2.7 1.5 13.3

Source: Datastream. Prices as of 17 January 2014

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57

Emerging Markets Equity Research22 January 2014

Adrian Mowat(852) [email protected]

Philippines scorecardKey Financial Data Summary Local Interest Rates and Inflation Trend EPS Growth P/E ROE Yield Spot -3M ∆ +3M ∆

2011 3.8 20.8 17.4 2.1 3 Month 0.7 -0.2 na2012E 9.1 19.1 16.2 2.1 Long Bond 4.3 0.6 -0.42013E 6.2 18.0 15.0 2.3 Inflation 4.1 1.2 -0.32014E 5.7 17.0 14.6 2.4 Real 3 Month -3.4 -1.4 na

Economic Forecasts Risk AppetiteGDP (YoY) Forecast -3M ∆ - EMF - Cons US$ Spread Spot -3M ∆ +3M ∆2012 6.6 0.0 2.0 0.0 BAA 2.4 -0.3 na2013E 6.9 -0.1 2.4 0.0 EMBI 3.4 0.1 -0.42014E 6.5 0.9 1.8 0.1 Country 1.4 -0.1 na

Country Relative -2.0 -0.2 naEconomic Momentum Foreign Fund Flows (US$ mils)

GDP Q1 13E Q2 13E Q3 13E Q4 13E Month YTD Avg 12-Mo AvgGDP SAAR 9.5 8.2 6.1 7.0 EM Funds* -3,695 -1,445 -1,753

Asia ex Japan* -154 -231 -243Philippines -32 57 54

MSCI Philippines Absolute and Relative (vs EMF) Index MSCI Fair value Range

Currency Outlook (PHP/USD) EPS Integer over Time

Source: MSCI, Bloomberg, I/B/E/S, Datastream, CEIC, J.P. Morgan estimates, Consensus Economics, EPFR Global. Unless stated all forecasts are J.P. Morgan’s. The scorecards are designed to

assist in tracking trends and expectations. -3M∆ refers to the change in this factor over the past three months and +3M∆ refers to the forecast change in this factor over the next three months. The

Economic Forecast table contains J.P. Morgan’s real GDP forecasts, the change in these forecasts over the past three months, the difference between these forecasts and the average for

emerging markets and the final column is the difference between J.P. Morgan’s forecast and consensus expectations. The MSCI Fair Value chart is designed to show current valuations relative 10

year valuation history. The vertical dotted line is the current index level. The five horizontal bars show a +/- one standard deviation range for these valuation measures. A dotted line to the left

indicates a market that is cheap relative to history. *US Mutual fund subscriptions

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58

Emerging Markets Equity Research22 January 2014

Adrian Mowat(852) [email protected]

JPM Mkt cap P/E EPS Div Yld. ROE

Price Code Rating (US$B) 14E 15E 14E 15E 14E 14E

(SAR) (x) (x) (LC) (LC) (%) (%)

Top picksEmaar Prop Pjsc 8 EMAAR DB OW 13.2 25.0 15.2 0.3 0.5 1.3 5.4Saudi Telecom Co 59 STC AB OW 31.6 10.2 9.8 5.8 6.0 4.2 19.2Sabic 118 SABIC AB OW 94.2 12.0 11.0 9.8 10.7 4.7 17.3Nic 32 NIC AB OW 5.7 11.2 10.1 2.9 3.2 6.7 16.0First Gulf Bank 19 FGB UH OW 15.5 10.7 9.6 1.8 2.0 4.7 16.3Stocks to AvoidAl Rajhi Bank 72 RJHI AB UW 28.8 11.6 10.7 6.2 6.7 6.0 23.3Emirates Integra 7 DU UH UW 8.2 17.4 19.8 0.4 0.3 4.6 23.6Almarai Co 55 ALMARAI AB N 8.8 20.7 18.4 2.7 3.0 1.5 14.1Source: Datastream, J.P. Morgan estimates. Note: The share price and valuations are as of 16 January 2014

MENA & SaudiMarket Strategy MENA & Saudi: Inflows, rallies, petchems

David Aserkoff, CFA AC

+44 207 325 [email protected]. Morgan Securities Ltd.

Distinct Country Drivers

The ongoing rally in GCC stock markets is driven primarily by the ongoing local economic recovery but the global cycle is beginning to push the petchems sector as well. SABIC's rally - past 116 now - hasn't been as strong as some of the smaller cap petchems. Meanwhile, Emaar hit AED 8 for the first time since the GFC, but the early conversion of Emaar's convertible bonds could provide some technical overhang. The real estate boom is in full swing in Dubai with construction accelerating again. UAE investors seem to rotating into smaller caps (i.e. out of Emaar). Foreign inflows in UAE and Qatar are running as fast as we can recall. Completely opposite to Greece, GEM investors seem to be jumping in ahead of MSCI inclusion.

Factors driving future performance

We are midway through the Saudi Q4 earnings season. The banks have missed a few numbers, while the petchems have mostly hit or exceeded expectations. Qatari earnings have been just fine so far. We are awaiting numbers from most of the UAE.

Portfolio implications

Our portfolio longs are all performing. While we are getting closer to the exits given the strong rally, we will leave the long side unchanged. Also, our stocks to avoid are in aggregate lagging the regional indices and we leave them unchanged.

Performance, USD (%)1M 3M 12M

MSCI Saudi 5.0 11.8 26.2 MSCI EM (1.6) (5.5) (9.0)SAR 0.0 0.0 0.0

Source: Datastream. Prices as of 16 January 2014

Market Performance , Local currency(%)

Sector 1M 3M 12MEnergy 18.7 58.1 48.6 Cons. Staples 8.5 14.6 47.8 Telecom 6.0 14.1 28.0 Materials 5.2 15.8 23.9 Saudi Arabia 5.0 11.9 26.2 Industrials 4.3 19.5 35.4 Financials 3.2 3.0 23.0 Utilities 2.8 13.3 7.6

Source: Datastream. Prices as of 16 January 2014

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59

Emerging Markets Equity Research22 January 2014

Adrian Mowat(852) [email protected]

Saudi Arabia scorecardKey Financial Data Summary Local Interest Rates and Inflation Trend

EPS Growth P/E ROE Yield Spot -3M ∆ +3M ∆2012E 32.8 13.6 15.4 3.9 3 Month 1.0 0.0 na2013E 11.0 12.2 15.8 4.4 Long Bond 3.7 0.1 na2014E 8.3 11.3 16.2 3.9 Inflation 3.0 -0.2 na

Real 3 Month -2.0 0.2 na

Economic Forecasts Risk AppetiteGDP (YoY) Forecast -3M ∆ - EMF - Cons US$ Spread Spot -3M ∆ +3M ∆2012 5.6 0.0 1.0 -0.1 BAA 2.4 -0.3 na2013E 4.4 0.2 -0.1 0.4 EMBI 3.4 0.1 -0.42014E 3.8 -0.7 -0.9 -0.6 Country na na na

Country Relative na na naEconomic Momentum Foreign Fund Flows (US$ mils)

GDP Q1 13E Q2 13E Q3 13E Q4 13E Month YTD Avg 12-Mo AvgGDP SAAR NA NA NA NA EM Funds* -3,695 -1,445 -1,753

EM Europe* -117 -546 -555Saudi na na na

MSCI Saudi Absolute and Relative (vs EMF) Index MSCI Qatar Absolute and Relative (vs EMF) Index

MSCI UAE Absolute and Relative (vs EMF) Index MSCI Egypt Absolute and Relative (vs EMF) Index

Source: MSCI, Bloomberg, I/B/E/S, Datastream, CEIC, J.P. Morgan estimates, Consensus Economics, EPFR Global. Unless stated all forecasts are J.P. Morgan’s. The scorecards are designed to

assist in tracking trends and expectations. -3M∆ refers to the change in this factor over the past three months and +3M∆ refers to the forecast change in this factor over the next three months. The

Economic Forecast table contains J.P. Morgan’s real GDP forecasts, the change in these forecasts over the past three months, the difference between these forecasts and the average for

emerging markets and the final column is the difference between J.P. Morgan’s forecast and consensus expectations. The MSCI Fair Value chart is designed to show current valuations relative 10

year valuation history. The vertical dotted line is the current index level. The five horizontal bars show a +/- one standard deviation range for these valuation measures. A dotted line to the left

indicates a market that is cheap relative to history. *US Mutual fund subscriptions

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JPM Mkt cap P/E EPS Div Yld. ROE

Price Code Rating (US$B) 14E 15E 14E 15E 14E 14E

(LC) (x) (x) (LC) (LC) (%) (%)

Top picksPiraeus Bank 1.84 TPEIR GA OW 12.7 NM 20.4 -0.1 0.1 0.0 -6.4Alpha Bank A.E. 0.71 ALPHA GA OW 10.5 NM 23.6 -0.05 0.03 0.0 -7.7Hellenic Telecom 11.3 HTO GA NC 7.5 17.4 13.6 0.65 0.83 2.4 14.3Stocks to AvoidNatl Bank Greece 4.05 ETE GA UW 13.2 101.3 18.4 0.04 0.22 0.0 1.6Source: Datastream, J.P. Morgan estimates. Note: The share price and valuations are as of 16 January 2014

GreeceMarket Strategy Greece: Add Greece to your diet

David Aserkoff, CFA AC

+44 207 325 [email protected]. Morgan Securities Ltd.

Distinct Country Drivers

The recovery from sovereign default and the brush with Euro exit is more or less complete and Greece is now showing solid signs of positive GDP growth for the first time since 2007. With nominal GDP down 25% from the peak and unemployment still 28%, there is much healing still to do. Stocks look much cheaper than Western European peers in key sectors banks, telecoms and utilities. And performance accelerated in 2H13.

Factors driving future performance

We are watching peripheral European yields fall with more countries issuing longer and bigger bonds (Ireland 3.75bn 10 year) – we expect Greek stocks to follow this rally. Really, the key stat is that 87% of EM fund managers are zero-weighted in Greece. This is the single biggest UW in EM; fewer investors own Greece than Egypt. We think the inflows from dedicated funds can drive an ongoing re-rating in the market. The next round of bank stress test, the “Blackrock 2“ process should be announced by end-Jan (after being delayed from end-Nov and again from end-Dec) –we doubt that this will be a negative catalyst. And we think the delay in disbursement by the Troika is not that important either – technical not terminal.

Portfolio implications

We would be OW the banks – with Piraeus our top pick and in the CEEMEA Strategy Top 10 list followed by Alpha. The consolidation of the bank sector (4 banks have 95% of the loans) should drive above-normal returns in the medium term while the government, the majority shareholder in the sector wants profitable banks. We would also own Hellenic Telecom, which trades at half the EFCF yield of the western European incumbents. Its unlevered balance sheet should enable high dividends as Greek companies can return to the lending markets. We would avoid National Bank of Greece as we see it as the least attractive bank of the three listed.

Performance, USD (%)1M 3M 12M

MSCI Greece 5.0 11.8 26.2 MSCI EM (1.6) (5.5) (9.0)EUR (1.1) 0.8 2.3

Source: Datastream. Prices as of 16 January 2014

Market Performance , Local currency(%)

Sector 1M 3M 12MTelecom 24.6 31.4 Greece 13.5 6.8 51.7 Financials 13.4 Cons. Disc 12.4 Utilities 9.3 Materials 8.6 97.4 97.4 Industrials 0.0

Source: Datastream. Prices as of 16 January 2014

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Greece scorecardKey Financial Data Summary Local Interest Rates and Inflation Trend

EPS Growth P/E ROE Yield Spot -3M ∆ +3M ∆2012E -75.0 31.3 4.2 1.5 3 Month 0.3 0.2 na2013E 95.0 16.0 7.7 2.2 Long Bond 7.8 -0.5 na2014E 41.0 11.3 9.9 3.1 Inflation -1.7 -0.6 na

Real 3 Month 2.0 0.8 na

Economic Forecasts Risk AppetiteGDP (YoY) Cons -3M ∆ - EMF US$ Spread Spot -3M ∆ +3M ∆

2012 -6.5 na -11.1 BAA 2.4 -0.3 na

2013E -3.8 0.25 -8.3 EMBI 3.4 0.1 -0.4

2014E 0.0 0.35 -4.7 Country na na naCountry Relative na na na

Economic Momentum Foreign Fund Flows (US$ mils)GDP Q1 13E Q2 13E Q3 13E Q4 13E Month YTD Avg 12-Mo AvgGDP SAAR NA NA NA NA EM Funds* -3,695 -1,445 -1,753

EM Europe* -117 -546 -555Greece na na na

MSCI Greece Absolute and Relative (vs EMF) Index MSCI Greece Sector Break up

Currency Outlook (USD/EUR) EPS Integer over Time

Source: MSCI, Bloomberg, I/B/E/S, Datastream, CEIC, J.P. Morgan estimates, Consensus Economics, EPFR Global. Unless stated all forecasts are J.P. Morgan’s. The scorecards are designed to assist in tracking trends and expectations. -3M∆ refers to the change in this factor over the past three months and +3M∆ refers to the forecast change in this factor over the next three months. The Economic Forecast table contains J.P. Morgan’s real GDP forecasts, the change in these forecasts over the past three months, the difference between these forecasts and the average for emerging markets and the final column is the difference between J.P. Morgan’s forecast and consensus expectations. The MSCI Fair Value chart is designed to show current valuations relative 10 year valuation history. The vertical dotted line is the current index level. The five horizontal bars show a +/- one standard deviation range for these valuation measures. A dotted line to the left indicates a market that is cheap relative to history. *US Mutual fund subscriptions

1.10

1.20

1.30

1.40

1.50

1.60

1.70

Mar 05 Nov 06 Jun 08 Feb 10 Sep 11 May 13 Dec 14

J.P. Morgan

Consensus

J.P. Morgan forecast:end Mar 14: 1.33end Jun 14: 1.32end Sep 14:1.32

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Scorecard notes

Key financial data

Market forecast numbers are derived from bottom-up calculations of each MSCI constituent where estimates are available from J.P. Morgan for covered stocks and I/B/E/S for stocks not covered by J.P. Morgan.

Local interest rates and inflation trends

Interest ratesCountry Long rate Three-month rate

South Korea 10 year treasury bond 91 day commercial paperSouth Africa Longest dated bond 91 day treasury billTaiwan 10 year treasury bond 90 day money marketBrazil Fixed to floating swap 12 month Fixed to floating swap 3 monthChina Government Bond maturing in 2011 3 month interbankMexico CETES 364 90 day 2nd market bankers acceptanceRussia 90 day interbank 90 day interbankTurkey 3 month interbank 3 month interbankPoland 1 year interbank 3 month interbankHungary 10 year treasury bond 3 month interbankCzech Republic 10 year treasury bond 3 month interbankIndia 10 year treasury bond 91 day bank CDMalaysia 10 year treasury bond 3month interbankIsrael 1 year secondary treasury bill 3 month secondary treasury billThailand 10 year treasury bond 3 month interbankTurkey 12 month interbank 3 month interbankIndonesia SBI/DISC 90 day 3 month interbankPhilippines 10 year treasury bond 91 day T Bill

Inflation

Year-over-year change in Consumer Price Index used.

Real three-month rate

This is calculated using three-month rate minus latest inflation data available.

Risk appetite

Countries included in the Emerging Market Bond Index (EMBI) are South Africa, Brazil, Mexico, Russia, Malaysia, Thailand and Turkey. Data for EMBI is as such available only for these countries. Country relative is the Country EMBI blended yield minus the EMBI Index blended yield.

Foreign fund flows

EM, Asia ex Japan, LatAm and EM Europe Funds are net subscriptions of US mutual funds data into specified regions. Country data where available is total net foreign investment.

EPS integer over time

All year-ends are for December. EPS figures are normalized, starting at 100 on base date February 2012 for ease of comparison. EPS integers are mean EPS forecasts for each index.

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Extended markers

Table 29: Exports

Country Index Current %oya 3M/3M % One year ago %oya Latest data for Reporting lag

Australia AUITEXP Index (3.4) 6.5 (7.2) Nov 13 One monthBrazil BZTBEXPM Index 5.6 2.1 (10.8) Dec 13 One monthChile CHTBEXPM Index (12.7) 4.5 1.8 Dec 13 One monthChina CNFREXP$ Index 4.3 5.9 14.0 Dec 13 One monthHong Kong HKETEXP Index 5.7 8.6 10.8 Nov 13 One monthHungary HUTREXP Index 5.4 16.2 (5.3) Nov 13 One quarterIndia INMTEXIR Index 3.9 0.6 0.9 Dec 13 One quarterIndonesia IDEXP Index (2.4) 7.9 (5.3) Nov 13 One monthMalaysia MAETEXP Index 0.6 7.8 7.2 Nov 13 One monthMexico MXTBBEXP Index 0.8 2.4 1.3 Nov 13 One monthPhilippines PHEXEXP Index 18.8 3.4 7.3 Nov 13 One monthPoland POMECBGE Index 5.1 10.3 10.7 Oct 13 One monthRussia RUTBEX Index (5.6) 3.7 2.9 Oct 13 One monthSingapore SIEXP Index 5.4 0.5 (8.5) Dec 13 One monthSouth Africa SATBEX Index (1.4) (0.3) (8.7) Nov 13 One monthSouth Korea KOEXTOT Index 7.0 7.0 (6.0) Dec 13 One monthTaiwan TWTREXP Index (1.9) 0.5 8.9 Dec 13 One monthThailand THNFEXP Index (4.0) (1.4) 27.1 Nov 13 One monthTurkey TUTBEX Index 3.6 7.7 24.1 Nov 13 One month

Source: Bloomberg.

Table 30: Imports

Country Index Current %oya 3M/3M % One year ago %oya Latest data for Reporting lagAustralia AUITIMP Index (13.9) 3.7 5.9 Nov 13 One monthBrazil BZTBIMPM Index 3.9 (2.3) (4.5) Dec 13 One monthChile CHTBIMPM Index (0.2) (1.1) 2.3 Dec 13 One monthChina CNFRIMP$ Index 8.5 0.8 6.1 Dec 13 One monthHong Kong HKETIMP Index 5.2 7.3 9.3 Nov 13 One monthHungary HUTRIMP Index 1.7 13.1 (3.7) Nov 13 One quarterIndia INMTIMIR Index (15.0) 1.2 8.1 Dec 13 One quarterIndonesia IDIMPTL Index (10.5) 0.6 10.0 Nov 13 One monthMalaysia MAETIMP Index 0.2 0.9 8.9 Nov 13 One monthMexico MXTBBIMP Index (4.1) 0.6 4.7 Nov 13 One monthPhilippines PHIMIMP Index (8.6) 3.1 5.0 Oct 13 One monthPoland POMECBGI Index 7.4 9.5 2.2 Oct 13 One monthRussia RUTBIM Index (4.3) 3.6 12.0 Oct 13 One monthSingapore SIIMP Index 0.0 (1.0) 4.5 Dec 13 One monthSouth Africa SATBIM Index (1.2) 1.5 (11.7) Nov 13 One monthSouth Korea KOIMTOT Index 3.0 5.6 (5.3) Dec 13 One monthTaiwan TWTRIMP Index 10.1 3.2 1.5 Dec 13 One monthThailand THNFIMP Index (9.3) (4.0) 24.8 Nov 13 One monthTurkey TUTBIM Index 2.2 (1.1) 12.3 Nov 13 One month

Source: Bloomberg.

Table 31: Retail sales

Country Index Current %oya Previous %oya One year ago %oya Latest data for Reporting lagArgentina ARSSTOTL Index 27.3 22.8 22.3 Oct 13 One monthAustralia AURSTTSA Index 4.6 3.6 2.6 Nov 13 One monthBrazil BZRTRETA INDEX 7.0 5.4 8.4 Nov 13 One monthChile CHRSTOTL Index 7.1 16.0 9.8 Nov 13 One monthChina CNRSCONS INDEX 0.0 0.0 12.6 Nov 13 One monthCzech Republic CZRSYOY Index (0.6) 4.5 2.2 Nov 13 One monthHong Kong HKRSN INDEX 8.5 6.3 9.4 Nov 13 One monthHungary HURTAYOY Index 4.9 2.5 (4.7) Nov 13 VariableMexico MXWRTRET Index (1.1) (4.0) 3.5 Oct 13 One quarterPoland PORSYOY Index 3.8 3.2 2.4 Nov 13 One monthRussia RURSL INDEX 10.6 9.5 12.2 Nov 13 One monthSingapore SRSAT Index (8.7) (9.2) (1.2) Nov 13 One monthSouth Africa SARSCONY Index 4.2 1.4 3.9 Nov 13 One quarterSouth Korea KODSDEPT Index 5.3 (2.2) 9.1 Nov 13 One monthTaiwan TARSTTL Index 5.5 4.3 1.7 Nov 13 One monthThailand THRSTOTL Index (7.7) (7.9) 39.4 Oct 13 One monthSource: Bloomberg

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Table 32: Industrial production

Country Index Current %oya One year ago %oya Latest data for Reporting lag

Brazil BZIPYOY% Index 0.4 (0.8) Nov 13 One quarterChile CHIPYOY Index 0.5 3.9 Dec 11 One monthChina CHVAIOY Index 10.0 10.1 Nov 13 One monthHong Kong HKIPIYOY Index (0.9) (0.1) Sep 13 One quarterHungary HUIPIYOY Index 5.8 (7.4) Nov 13 One quarterIndia INPIINDY Index (2.1) (1.0) Nov 13 One monthIndonesia IDMPIYOY Index 12.4 (4.6) Aug 13 One quarterMalaysia MAIPINDY Index 4.4 7.2 Nov 13 One monthMexico MXIPTYOY Index (1.4) 1.8 Nov 13 Irregular updatesPoland POISCYOY Index 2.9 (0.8) Nov 13 One monthRussia RUIPRNYY Index (1.0) 1.9 Nov 13 One monthSingapore SIIPYOY% Index 4.0 2.8 Nov 13 One monthSouth Africa SFPMYOY Index 1.7 4.2 Nov 13 One monthSouth Korea KOIPIY Index (1.3) 2.1 Nov 13 One monthTaiwan TWINDPIY Index (0.1) 6.0 Nov 13 One monthTurkey TUIOIYOY Index 4.6 13.3 Nov 13 One month

Source: Bloomberg.

Table 33: Consumer confidence

Country Index Current Previously One year ago Latest data for Reporting lagAustralia WMCCCONN Index 105.0 110.4 100.0 Dec 13 One monthBrazil BZCCIFGV Index 120.8 123.1 112.3 Oct 11 One monthChina CHCSCONF Index 98.9 102.9 105.1 Nov 13 One monthHungary HUCCINDX Index (22.7) (23.3) (49.3) Dec 13 One monthIndonesia IDCCI Index 116.5 114.3 116.4 Dec 13 One quarterMalaysia MIERCSI Index 102.0 109.7 115.8 Sep 13 One quarterMexico MXCFCONF Index 89.7 88.7 99.0 Dec 13 Irregular updatesPoland POCCWOK Index 82.8 81.2 72.1 Oct 13 Irregular updatesRussia RUCICSI Index 83.0 76.0 83.0 Dec 13 Irregular updatesSouth Korea KOCCCSI Index 107.0 107.0 99.0 Dec 13 One monthThailand THCCECON Index 63.2 65.0 70.6 Dec 13 One monthTurkey TUCNCC Index 89.0 89.2 92.0 Dec 12 One quarter

Source: Bloomberg.

Table 34: Auto/Motor vehicle sales

Country Index Current %oya 3m/3m % One year ago %oya Latest data for Reporting lagAustralia AUVHSALE Index 0.1 1.1 17.1 Dec 13 One monthBrazil BZVLTLVH Index (1.5) 0.6 3.1 Dec 13 One monthChina* CNVSPSGR Index 21.7 21.5 6.9 Dec 13 One monthHong Kong HKRSVOV Index (7.4) (2.2) (5.6) Nov 13 One monthIndia INVSTOTL Index 0.5 7.5 3.8 Dec 13 One monthIndonesia* IDVHCLOC Index 9.2 5.0 11.4 Dec 13 One monthMalaysia MAVSTTL Index (2.1) (6.3) 10.5 Nov 13 One monthMexico MXVHTOTL Index 7.7 21.6 (4.2) Dec 13 One monthPhilippines PHCSTOTL Index 8.9 8.8 20.9 Nov 13 One monthSingapore SIRSMVEH Index (41.8) (3.9) (11.1) Nov 13 One monthSouth Africa NAAMTOTL Index 3.0 (8.1) 1.0 Dec 13 One monthSouth Korea* KOVMTOTS Index 0.1 24.4 (4.6) Dec 13 One monthThailand* THVHSCAR Index (36.9) (8.9) 477.6 Nov 13 One monthTurkey TUCSMT Index 12.0 30.9 (9.8) Dec 13 One month

Source: Bloomberg. *Motor/Passenger car sales.

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Consensus Asset Allocation

We come out with the Consensus Asset Allocation report every month, where we review the asset allocation of managers of major emerging market funds relative to the MSCI EM index as at the end of the reporting month. We use two approaches. Our preferred is to count the number of managers that are meaningfully OW or UW a market; this is defined as a greater than 2% deviationfrom the benchmark. These results are displayed in the tables. The other is a simple average of the managers’ country weightings compared with the benchmark. Extreme positions of a few managers distorts this analysis.

In this report we analyze the country asset allocation of the emerging market funds for 55 EM fund managers surveyed by EPFR Global as of the end November2013.

Consensus overweight markets

India, Russia, Thailand and Turkey

Consensus underweight markets

Taiwan, South Africa, China, Malaysia, Mexico, Korea, Indonesia, Brazil, Czech, Egypt, Hungary, Peru, Poland, Philippines, Chile and Greece

Consensus reduced net underweight in China to 1 (from 6). MSCI China underperformed EM by 2% in the last month, led by energy and financials. We are underweight China.

India remains the highest net overweight market in EM. The herd continues to be undecided about its position on Brazil. Managers reduce net underweights in EM export economies, except Malaysia.

The sectors and markets that significantly outperformed in the past month were India IT, China IT, S Africa telecom, Mexico materials, Peru and India. Seasonality, price momentum and earnings momentum are outperforming quant factors over the last month. Beta and price to book are key underperformers.

For more, please see, “Consensus Asset Allocation: EM funds asset allocation and performance,” Mowat et al, 4January 2014

Table 3: Survey of Key EM Managers Positioning Relative to MSCI EM – For major EMs

Country > 2% OW < 2% UW OW-UW < 0.1% MSCI EM Funds asset allocation relative to MSCI EM BenchmarkWts (%) Minimum Bottom quartile Median Top quartile Maximum

India 21 (22) 4 (5) 17 (17) 0 (1) 6.0 (3.4) (0.5) 1.0 3.4 16.8 Russia 21 (20) 7 (9) 14 (11) 1 (2) 5.9 (5.9) (0.3) 1.5 2.7 6.2 Thailand 12 (15) 2 (2) 10 (13) 2 (2) 2.4 (2.4) (0.7) (0.1) 1.7 3.5 Turkey 7 (8) 0 (0) 7 (8) 5 (5) 1.7 (1.7) (0.7) 0.2 1.0 4.4 China+HK 16 (13) 17 (19) -1 (-6) 0 (0) 20.2 (12.2) (3.1) (0.6) 2.2 10.1 Brazil 13 (15) 15 (15) -2 (0) 0 (0) 11.1 (8.8) (2.4) 0.0 1.6 7.7 Indonesia 2 (3) 8 (8) -6 (-5) 7 (8) 2.2 (2.2) (1.6) (1.0) (0.1) 3.2 Mexico 5 (4) 18 (19) -13 (-15) 1 (0) 5.3 (5.3) (2.8) (1.3) (0.4) 6.6 Korea 11 (8) 24 (25) -13 (-17) 0 (0) 16.1 (13.0) (3.4) (1.5) 1.0 9.5 China 7 (7) 29 (31) -22 (-24) 0 (0) 20.2 (18.8) (6.4) (3.2) 0.8 10.1 South Africa 5 (4) 28 (30) -23 (-26) 0 (0) 7.2 (6.0) (3.7) (2.0) (0.7) 5.1 Malaysia 2 (3) 27 (28) -25 (-25) 11 (11) 3.8 (3.8) (3.1) (1.9) (0.8) 13.3 Taiwan 0 (1) 30 (38) -30 (-37) 2 (2) 11.3 (11.3) (5.5) (3.5) (0.9) 1.9

Source: EPFR Global, MSCI, J.P. Morgan calculations.

Table 4: Survey of Key EM Managers Positioning Relative to MSCI EM – For EMs that are less than 2% of the benchmark

Country > 2% OW < 0.1%(1) OW-UW MSCI EM Funds asset allocation relative to MSCI EM BenchmarkWts (%) Minimum Bottom quartile Median Top quartile Maximum

Philippines 6 (6) 17 (18) -11 (-12) 0.9 (0.9) (0.9) (0.2) 0.6 9.6 Chile 2 (2) 23 (23) -21 (-21) 1.6 (1.6) (1.6) (1.2) (0.6) 5.5 Poland 1 (1) 24 (27) -23 (-26) 1.7 (1.7) (1.7) (1.5) (0.2) 5.8 Peru 3 (4) 27 (25) -24 (-21) 0.4 (0.4) (0.4) (0.2) 0.3 2.6 Colombia 1 (0) 33 (31) -32 (-31) 1.0 (1.0) (1.0) (1.0) (0.4) 2.5 Czech Republic 0 (0) 35 (40) -35 (-40) 0.3 (0.3) (0.3) (0.3) 0.1 1.1 Hungary 1 (1) 41 (42) -40 (-41) 0.3 (0.3) (0.3) (0.3) (0.1) 2.4 Egypt 1 (1) 42 (43) -41 (-42) 0.2 (0.2) (0.2) (0.2) (0.2) 4.3 Greece 1 (1) 48 (51) -47 (-56) 0.5 (0.5) (0.5) (0.5) (0.5) 2.2 Source: EPFR Global, MSCI, J.P. Morgan calculations. Note: (1) <0.1% = zero weighting or bearish view. (2) The fund weightings are simple averages of global emerging market funds’ country weights tracked by EPFR. The survey covers 55 fund managers. (3) The calculation of OW is greater than 2% overweight versus the MSCI benchmark. UW is less than -2% of benchmark weighting. (4) Fund weightings are as of 30 November 2013 and MSCI weightings as of 1 December 2013. Numbers in brackets are the previous-month values.

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Hindsight trades: What has worked

Table 35: Performance of sectors in EM (in US$)

Sector/Country 1M Sector/Country 3M Sector/Country YTD Sector/Country 12M

India IT 11.8 China IT 19.8 India IT 7.3 China IT 74.4 Indonesia 10.1 India IT 10.7 Indonesia 5.6 India IT 37.4 China IT 8.6 India Financials 5.7 China IT 5.0 South Africa CD 31.0 India Energy 4.7 India 4.4 Hungary 3.4 Taiwan Financials 21.3 Taiwan IT 4.6 Taiwan IT 3.4 India Financials 1.6 Korea CD 10.7 South Africa CD 4.5 India Energy 3.3 India 1.4 Taiwan 8.9 India 4.3 Mexico Materials 3.2 Taiwan IT 1.0 China CS 8.6 South Africa Telecom 3.2 Mexico 1.8 Thailand 0.8 Taiwan IT 8.3 South Africa Materials 3.1 Mexico Telecom 1.3 Philippines 0.0 Korea Financials 6.1 Taiwan 2.1 Taiwan 0.8 Mexico Materials 0.0 Malaysia 2.9 Mexico Materials 2.0 China Industrials 0.6 India Energy (0.1) Poland 2.6 Hungary 1.8 Hungary (0.2) Taiwan (0.9) South Africa Telecom 1.5 India Financials 1.6 Taiwan Financials (0.3) Poland (1.4) Taiwan Materials 1.4 Korea Industrials 1.4 South Africa CD (0.4) South Africa CD (1.4) Korea (0.1)South Africa 1.3 Taiwan Materials (2.2) South Africa Materials (1.5) Korea IT (0.5)Taiwan Financials 0.7 Malaysia (2.3) Czech Republic (1.9) China (2.9)Czech Republic 0.6 China (2.4) Taiwan Financials (2.1) China Industrials (3.3)Philippines 0.5 China CS (2.5) Chile (2.4) India (4.3)Korea Financials 0.1 Korea Financials (2.8) Russia Financials (2.4) South Africa (5.3)Russia Financials (0.2) Poland (3.6) EM (2.8) Russia (5.5)Russia (1.0) South Africa Telecom (3.9) China CS (2.9) Korea Industrials (5.6)EM (1.5) Mexico CS (4.1) Mexico (3.0) Russia Energy (6.2)China CS (1.5) Czech Republic (4.6) Korea Industrials (3.2) Philippines (6.3)Chile (1.6) Korea (4.8) Taiwan Materials (3.4) EM (6.4)South Africa Financials (1.6) Korea IT (5.0) China (3.4) Czech Republic (6.5)Russia Energy (1.7) EM (5.2) Turkey Financials (3.4) Russia Financials (7.2)Taiwan Materials (1.7) Russia Financials (5.3) Malaysia (3.5) Mexico (7.8)Korea CD (1.9) Korea Materials (5.3) Russia (3.7) Hungary (8.6)Poland (1.9) China Financials (5.7) Korea CD (3.9) Korea Materials (8.6)Mexico (2.1) Korea CD (7.2) Russia Energy (3.9) China Telecom (9.0)Malaysia (2.7) Korea Industrials (7.3) South Africa (4.2) China Financials (9.5)Korea (2.8) South Africa (7.5) China Telecom (4.3) China CD (9.8)Mexico Telecom (2.8) Indonesia (7.5) Brazil Financials (4.3) Mexico Telecom (10.1)Brazil CS (3.2) Russia (8.6) Turkey (4.5) India Energy (11.1)China (3.3) China Energy (8.7) Korea (4.5) South Africa Financials (11.3)Korea Materials (3.3) China Telecom (8.8) China CD (4.7) Mexico CS (13.6)China Industrials (4.0) China CD (9.1) Brazil (4.9) Thailand (15.0)China Telecom (4.02) Philippines (10.0) Brazil CS (5.0) Mexico Materials (15.1)Brazil Financials (4.2) Brazil Materials (10.1) China Financials (5.0) China Energy (18.0)Brazil (4.5) Chile (11.3) Korea IT (5.1) Brazil CS (18.4)Brazil Materials (4.6) South Africa Financials (11.6) Colombia (5.2) India Financials (20.1)Thailand (4.7) South Africa Materials (12.0) China Industrials (5.6) Indonesia (20.7)Mexico CS (5.4) Russia Energy (12.2) China Energy (5.8) Brazil Financials (21.4)Colombia (5.7) Thailand (15.1) Mexico Telecom (5.8) Brazil (21.7)China Financials (5.9) Brazil (15.5) Mexico CS (5.9) Brazil Materials (23.2)China CD (6.5) Brazil CS (15.6) Korea Financials (5.9) Colombia (25.5)Korea IT (6.6) Colombia (17.3) South Africa Telecom (6.0) Chile (27.0)China Energy (7.0) Brazil Financials (18.4) Korea Materials (6.4) Brazil Energy (31.5)Brazil Energy (10.4) Brazil Energy (21.2) Brazil Materials (6.7) Turkey (35.5)Turkey (17.6) Turkey (21.6) South Africa Financials (6.8) South Africa Materials (44.1)Turkey Financials (18.7) Turkey Financials (25.0) Brazil Energy (8.1) Turkey Financials (44.2)

Source: Datastream, MSCI. 16 January 2014.

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Emerging Markets Equity Research22 January 2014

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Table 36: Valuation of key sectors in EM – ranked by P/E 14E

MSCI Sector Index Value Market Value(US$M)

P/E 13 P/E 14E P/E 15E EPS Growth 14E(%)

EPS Growth 15E(%)

ROE 14E(%)

DY 14E(%)

Russia Energy 958 123 3.9 4.1 4.4 (6.3) (5.4) 9.9 5.1Russia Financials 602 44 5.6 5.1 4.7 11.5 6.9 16.5 3.9Russia 758 223 5.1 5.2 5.2 (1.9) (0.6) 11.2 4.6China Financials 423 274 6.6 6.0 5.4 10.2 11.5 16.3 5.2Korea CD 2,231 103 8.3 7.1 6.2 16.2 13.9 15.1 0.9Turkey Financials 328 27 7.5 7.2 5.9 4.9 20.5 13.3 3.2Korea IT 810 213 7.6 7.2 6.8 5.2 6.4 16.5 0.6Brazil Energy 481 56 9.1 7.3 6.4 24.9 13.9 8.2 4.6Brazil Materials 975 69 9.9 8.2 7.6 20.6 7.5 11.8 4.2China Energy 606 98 8.8 8.6 8.6 2.2 0.7 13.1 4.2Korea 422 585 10.6 8.8 7.9 20.3 11.7 11.2 1.1Turkey 436 55 9.5 8.8 7.5 7.5 17.9 14.4 3.9China 61 726 9.7 8.8 8.0 10.3 10.7 14.8 3.6Brazil Financials 576 111 10.6 9.2 8.1 15.2 14.6 15.0 4.6India Energy 780 29 10.2 9.3 8.5 10.1 9.3 15.6 2.3Hungary 483 10 11.2 9.4 8.1 20.1 15.0 8.7 3.3Brazil 2,104 384 12.2 10.2 9.1 19.4 12.3 12.4 4.2Thailand 352 82 11.7 10.2 9.2 14.5 10.8 16.2 4.2Korea Financials 241 82 12.7 10.2 9.3 23.9 9.9 7.3 2.0EM 975 3,691 11.5 10.3 9.3 11.9 10.2 12.9 3.1Czech Republic 362 9 9.5 10.8 11.6 (11.7) (6.6) 11.7 6.9China CD 211 38 13.0 10.9 9.4 19.9 16.1 17.5 2.0China Telecom 124 75 10.9 11.2 11.2 (3.1) 0.2 11.8 4.0South Africa Financials 213 69 13.2 11.8 10.5 11.7 13.0 13.4 4.4Mexico Telecom 759 39 12.6 12.0 11.8 5.0 1.6 25.8 1.4China Industrials 130 47 13.9 12.1 10.5 14.5 15.1 9.8 2.5Korea Materials 566 56 17.1 12.2 10.8 40.2 12.4 6.8 1.4Korea Industrials 200 69 29.1 12.3 9.9 136.7 23.9 8.1 1.2Poland 876 64 13.0 12.6 11.5 3.2 9.6 9.6 4.5Taiwan Financials 94 79 13.1 12.7 11.4 2.7 12.1 9.8 2.9Taiwan IT 144 235 15.0 13.0 12.0 15.4 8.5 13.3 3.2India Financials 3,235 57 16.2 13.1 10.6 23.7 23.5 16.2 1.9Indonesia 703 88 14.3 13.1 11.8 8.8 10.8 20.5 3.0Colombia 984 37 15.3 13.7 11.9 11.7 15.3 12.0 3.8South Africa Materials 230 29 16.7 13.8 12.7 21.6 8.1 9.5 2.6India 413 244 16.8 14.0 12.1 20.3 15.9 16.4 1.7South Africa Telecom 1,187 37 15.8 14.0 13.0 12.7 8.2 28.9 5.2South Africa 507 270 15.9 14.1 12.7 12.3 11.0 16.1 3.4Taiwan 287 439 15.6 14.2 12.9 9.5 10.2 11.7 3.3Chile 1,798 59 18.0 14.5 12.3 24.2 17.3 10.8 2.9Malaysia 489 141 17.1 15.2 13.8 12.2 10.4 13.2 3.2Philippines 467 33 18.2 17.2 14.8 6.0 15.9 14.3 2.4India IT 776 59 21.3 17.3 15.2 23.1 13.7 24.7 1.3Mexico 6,767 198 20.5 17.8 15.7 15.0 13.1 13.3 1.6Brazil CS 917 65 24.1 19.3 16.6 25.3 16.2 19.4 3.2Taiwan Materials 235 53 23.0 20.0 17.4 15.2 14.9 8.4 3.6South Africa CD 1,379 64 24.7 20.6 17.3 19.5 19.3 21.0 1.8Mexico CS 506 49 24.5 21.0 18.8 16.5 11.8 13.3 2.0China IT 253 88 35.9 23.9 18.5 50.3 29.2 22.6 0.6China CS 1,288 44 29.5 24.7 20.3 19.5 21.5 14.6 2.0Mexico Materials 293 36 39.0 26.7 19.1 46.1 39.6 6.4 1.3

Source: Datastream, I/B/E/S, MSCI 16 January 2014.

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Emerging Markets Equity Research22 January 2014

Adrian Mowat(852) [email protected]

Composite valuation indicators

Our composite valuation indicators (CVIs) monitor valuations relative to each market’s valuation history with a focus on valuation variables that have historically been indicative of 12-month forward performance.

Malaysia is the most expensive market. On the other side, the inexpensive markets compared to its history are Russia, Singapore, China, Australia, Korea, Hungary, Thailand, Chile, Czech Republic, Indonesia, Turkey, Hong Kong, Poland, Brazil and Taiwan.

The CVI assumes mean reversal. After years of structural decline in interest rates, reflation in Asia and economic stability helped drive a structural re-rating of emerging equity markets; arguably we are in a stage of mean reversal now.

Figure 33: CVI ranking

Source: MSCI, Datastream, J.P. Morgan 16 January 2014.

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Emerging Markets Equity Research22 January 2014

Adrian Mowat(852) [email protected]

Table 37: Updated market valuations

Country 16-Jan LT LT 3Y 3Y LT Index LT Index Percent from #SD #SD Valuation Measure Index Avg SD Avg SD High Level Low Level High Low (LT) (ST) CVI

US 1768P/E 18.7 20.5 5.1 17.3 2.8 34.6 1079 11.6 784 -46% 61% (0.36) 0.49 P/B 2.5 2.9 0.9 2.4 0.4 5.5 1446 1.4 701 -55% 76% (0.53) 0.29 D/Y 2.0 2.2 0.6 2.2 0.3 4.0 282 1.1 1453 -51% 81% 0.37 0.71 12m Fwd PER 15.3 15.8 3.5 13.9 1.4 25.2 1367 10.2 282 -39% 50% (0.13) 0.97 Bond/Earnings Yield Ratio 0.5 1.0 0.5 0.6 0.2 1.9 1465 0.2 1315 -73% 143% (1.10) (0.34)Bond / Dividends Yield Ratio 1.4 2.4 1.1 1.6 0.6 5.7 1465 0.7 1315 -75% 116% (0.91) (0.30)Composite Score (0.49) 0.29 -0.29

Australia 1071.6P/E 15.7 16.8 2.6 14.9 1.5 21.8 655 11.4 268 -28% 38% (0.42) 0.51 P/B 1.9 2.1 0.3 2.1 0.4 2.8 1361 1.3 690 -31% 48% (0.35) (0.37)D/Y 4.6 4.1 0.8 4.5 0.6 6.7 690 2.8 624 -31% 62% (0.66) (0.14)12m Fwd PER 14.1 14.0 2.4 13.3 1.7 20.7 624 8.0 307 -32% 75% 0.01 0.47 Bond/Earnings Yield Ratio 0.7 1.1 0.4 0.8 0.2 1.9 357 0.4 823 -65% 87% (1.21) (0.48)Bond / Dividends Yield Ratio 0.9 1.7 0.6 1.2 0.3 2.9 433 0.5 823 -68% 74% (1.37) (0.73)Composite Score (0.67) (0.12) -0.67

Hong Kong 13222.6P/E 15.9 16.2 3.9 16.1 2.0 28.5 9231 8.2 1995 -44% 94% (0.08) (0.10)P/B 1.3 1.5 0.3 1.5 0.3 2.6 8220 0.9 3962 -50% 47% (0.72) (0.67)D/Y 2.8 3.5 0.8 3.1 0.6 6.2 1995 2.3 14463 -55% 20% 0.87 0.58 12m Fwd PER 14.7 14.1 3.1 15.5 1.9 21.9 8525 7.1 2170 -33% 107% 0.19 (0.41)Bond/Earnings Yield Ratio 0.4 0.8 0.5 0.5 0.2 2.2 9231 0.1 12259 -84% 304% (1.06) (0.45)Bond / Dividends Yield Ratio 0.8 1.5 0.7 0.9 0.4 3.0 9231 0.2 12259 -73% 309% (1.03) (0.26)Composite Score (0.10) (0.49) -0.25

Singapore 358.2P/E 15.0 18.3 4.6 14.7 1.8 37.7 212 8.9 193 -60% 68% (0.72) 0.15 P/B 1.4 1.8 0.4 1.7 0.3 2.7 322 0.9 130 -49% 44% (1.09) (1.04)D/Y 3.6 2.9 1.1 3.8 0.6 5.9 193 1.2 365 -39% 194% (0.61) 0.47 12m Fwd PER 13.4 15.6 2.9 13.8 1.6 23.7 210 8.2 215 -43% 64% (0.76) (0.23)Bond/Earnings Yield Ratio 0.4 0.6 0.3 0.4 0.1 1.7 212 0.2 350 -78% 109% (0.84) (0.06)Bond / Dividends Yield Ratio 0.7 1.4 0.8 0.7 0.2 3.3 327 0.4 193 -79% 96% (0.82) 0.12 Composite Score (0.91) (0.10) -0.91

Korea 565.7P/E 10.2 14.6 5.4 11.4 1.8 45.5 121 7.7 256 -78% 32% (0.83) (0.70)P/B 1.06 1.3 0.3 1.5 0.2 2.1 558 0.5 63 -49% 126% (0.68) (1.72)D/Y 1.1 1.7 0.5 1.4 0.5 2.9 87 0.9 481 -63% 24% 1.15 0.66 12m Fwd PER 8.3 11.5 4.0 9.6 1.4 25.5 121 5.5 126 -67% 53% (0.79) (0.86)Bond/Earnings Yield Ratio 0.4 1.1 0.9 0.5 0.2 5.2 121 0.3 256 -93% 24% (0.88) (1.04)Bond / Dividends Yield Ratio 3.3 4.9 2.2 3.5 1.0 11.7 115 1.4 256 -71% 142% (0.70) (0.18)Composite Score (0.68) (0.64) -0.66

Taiwan 301.5P/E 15.1 23.2 8.6 16.7 2.7 65.1 477 11.7 296 -77% 30% (0.93) (0.56)P/B 1.7 2.3 0.7 1.9 0.2 4.4 232 1.2 160 -61% 47% (0.84) (0.65)D/Y 3.2 2.3 1.4 3.7 0.9 7.8 160 0.6 477 -59% 472% (0.66) 0.62 12m Fwd PER 14.3 18.1 6.3 14.0 3.6 41.3 199 9.5 244 -65% 50% (0.61) 0.09 Bond/Earnings Yield Ratio 0.2 1.1 1.0 0.3 0.1 4.2 288 0.2 270 -94% 34% (0.87) (0.69)Bond / Dividends Yield Ratio 0.5 3.3 3.2 0.5 0.2 13.4 288 0.2 173 -96% 173% (0.85) 0.14 Composite Score (0.80) (0.16) -0.16

China 60.9P/E 9.3 14.5 4.2 13.7 3.8 31.2 26 7.2 20 -70% 29% (1.24) (1.16)P/B 1.4 1.8 0.7 2.1 0.6 4.8 103 0.5 20 -71% 205% (0.59) (1.16)D/Y 3.5 2.7 0.7 2.8 0.6 5.7 20 1.2 26 -39% 198% (1.10) (1.25)12m Fwd PER 8.6 12.4 4.3 11.8 3.0 35.0 33 6.0 20 -75% 43% (0.90) (1.05)Bond/Earnings Yield Ratio 0.4 0.8 0.4 0.5 0.2 1.9 26 0.3 53 -78% 40% (0.86) (0.45)Bond / Dividends Yield Ratio 1.3 2.1 1.1 1.4 0.5 5.8 97 0.8 35 -77% 58% (0.71) (0.19)Composite Score (0.95) (0.85) -0.90

Source: Datastream, MSCI, J.P. Morgan calculations. Note: #SD refers to the number of standard deviations from the long-term (LT) and short-term (ST) means.

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Country 16-Jan LT LT 3Y 3Y LT Index LT Index Percent from #SD #SD Valuation Measure Index Avg SD Avg SD High Level Low Level High Low (LT) (ST) CVI

India 825.4P/E 16.5 17.7 4.8 19.5 4.6 32.8 855 9.6 126 -50% 71% (0.24) (0.64)P/B 2.6 2.8 0.7 3.0 0.7 4.6 148 1.4 340 -43% 83% (0.33) (0.61)D/Y 1.5 1.6 0.3 1.6 0.3 2.6 340 0.9 169 -41% 69% 0.24 0.07 12m Fwd PER 14.4 13.8 3.1 15.0 2.6 23.6 163 8.2 383 -39% 75% 0.19 (0.25)Bond/Earnings Yield Ratio 1.4 1.6 0.6 1.5 0.4 3.5 169 0.6 126 -59% 152% (0.33) (0.19)Bond / Dividends Yield Ratio 5.6 6.0 2.2 5.1 1.1 12.5 169 2.3 126 -55% 143% (0.17) 0.45 Composite Score (0.05) 0.07 0.00

Malaysia 652.0P/E 16.7 18.7 4.6 15.5 1.8 39.0 455 9.9 317 -57% 69% (0.43) 0.67 P/B 2.1 2.1 0.7 2.0 0.2 4.9 455 0.6 101 -57% 228% (0.02) 0.39 D/Y 3.1 2.7 0.8 3.2 0.4 5.1 101 1.1 455 -39% 184% (0.55) 0.26 12m Fwd PER 15.4 15.7 3.5 14.1 1.2 27.2 455 7.8 101 -43% 97% (0.10) 1.03 Bond/Earnings Yield Ratio 0.7 1.1 0.7 0.6 0.1 3.6 455 0.3 321 -81% 111% (0.56) 0.82 Bond / Dividends Yield Ratio 1.3 2.4 1.6 1.2 0.2 8.4 455 0.8 327 -84% 68% (0.71) 0.44 Composite Score (0.33) 0.82 0.82

Thailand 454.1P/E 12.1 18.3 10.2 14.7 4.5 62.2 639 7.7 214 -81% 57% (0.61) (0.60)P/B 1.9 2.1 0.7 2.1 0.3 5.1 639 0.6 74 -63% 206% (0.24) (0.63)D/Y 3.6 3.2 0.9 3.8 0.6 5.9 166 0.9 217 -39% 295% (0.48) 0.20 12m Fwd PER 10.8 13.8 7.1 10.4 1.2 44.9 156 5.4 345 -76% 100% (0.42) 0.29 Bond/Earnings Yield Ratio 0.49 1.3 1.2 0.6 0.2 5.7 510 0.3 175 -91% 78% (0.64) (0.54)Bond / Dividends Yield Ratio 1.1 2.4 1.7 1.1 0.2 8.5 217 0.5 185 -87% 117% (0.76) (0.11)Composite Score (0.62) (0.54) -0.58

Indonesia 5208.3P/E 13.7 15.8 6.3 14.9 2.8 54.3 540 4.8 451 -75% 184% (0.33) (0.40)P/B 2.9 2.7 1.0 3.4 0.7 5.5 3960 0.9 316 -47% 237% 0.23 (0.70)D/Y 3.0 2.7 1.0 2.9 0.5 5.9 475 0.8 961 -50% 265% (0.27) (0.09)12m Fwd PER 13.2 12.2 4.9 12.2 2.1 35.4 860 3.7 406 -63% 258% 0.20 0.45 Bond/Earnings Yield Ratio 1.2 1.8 0.8 1.4 0.4 6.3 540 0.6 475 -81% 91% (0.76) (0.52)Bond / Dividends Yield Ratio 2.9 6.1 5.3 3.3 0.8 31.5 576 1.8 5181 -91% 66% (0.59) (0.46)Composite Score (0.44) (0.52) -0.46

Philippines 1012.3P/E 17.9 22.2 7.0 19.6 4.7 46.0 210 8.8 308 -61% 103% (0.63) (0.37)P/B 2.5 2.2 0.9 2.4 0.4 4.7 830 0.9 210 -46% 197% 0.33 0.32 D/Y 2.3 2.0 1.0 3.0 0.7 4.9 374 0.6 884 -53% 304% (0.32) 1.00 12m Fwd PER 17.2 14.0 3.7 14.3 2.4 21.8 777 4.0 176 -21% 334% 0.88 1.19 Bond/Earnings Yield Ratio 0.8 2.4 1.3 1.6 0.9 5.4 884 0.7 997 -86% 13% (1.33) (0.87)Bond / Dividends Yield Ratio 1.8 7.7 5.8 2.6 1.0 29.5 884 1.5 374 -94% 20% (1.01) (0.74)Composite Score (0.14) (0.29) -0.14

SouthAfrica 1133.3P/E 15.6 13.7 1.8 14.0 1.4 17.7 182 9.1 221 -12% 72% 1.05 1.11 P/B 2.4 2.1 0.3 2.3 0.2 2.9 248 1.4 138 -17% 77% 0.99 0.53 D/Y 3.1 3.3 0.4 3.3 0.3 4.7 221 2.3 248 -33% 36% 0.31 0.82 12m Fwd PER 14.1 11.0 1.7 11.0 1.3 15.5 174 6.7 545 -9% 109% 1.83 2.33 Bond/Earnings Yield Ratio 1.2 1.5 0.5 1.1 0.2 3.0 182 0.6 513 -59% 91% (0.49) 0.47 Bond / Dividends Yield Ratio 2.5 3.4 1.3 2.5 0.4 6.9 182 1.6 513 -63% 60% (0.67) 0.19 Composite Score 0.50 0.91 0.71

Brazil 190617P/E 11.7 11.5 4.2 10.9 1.6 42.6 21547 6.5 24255 -73% 80% 0.03 0.46 P/B 1.3 1.4 0.7 1.9 0.6 3.2 291681 0.4 17017 -58% 248% (0.18) (1.14)D/Y 4.0 3.9 1.2 3.3 0.8 7.6 25508 2.0 242287 -48% 94% (0.11) (0.81)12m Fwd PER 10.3 9.0 2.7 10.5 2.3 15.8 291681 4.2 50366 -35% 146% 0.47 (0.08)Bond/Earnings Yield Ratio 1.2 1.7 0.7 1.3 0.3 5.0 61568 0.8 197955 -75% 55% (0.60) (0.25)Bond / Dividends Yield Ratio 2.7 4.0 1.1 3.8 1.1 7.3 37879 1.9 197955 -64% 39% (1.22) (1.02)Composite Score 0.47 (0.87) -0.20

Source: Datastream, MSCI, J.P. Morgan calculations. Note: #SD refers to the number of standard deviations from the long-term (LT) and short-term (ST) means.

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Country 16-Jan LT LT 3Y 3Y LT Index LT Index Percent from #SD #SDValuation Measure Index Avg SD Avg SD High Level Low Level High Low (LT) (ST) CVI

Mexico 40150P/E 20.3 16.4 7.2 17.4 3.5 79.1 2566 9.0 2558 -74% 126% 0.54 0.83 P/B 2.6 2.3 0.9 2.8 1.1 6.0 18728 0.7 17106 -57% 262% 0.34 (0.24)D/Y 1.6 2.1 0.6 2.2 0.8 4.1 26918 0.7 35644 -61% 138% 0.82 0.76 12m Fwd PER 17.7 12.3 2.3 13.9 2.2 18.1 42599 8.0 17106 -2% 121% 2.38 1.79 Bond/Earnings Yield Ratio 1.6 2.2 1.8 1.3 0.2 13.9 2302 0.9 39967 -88% 81% (0.32) 2.03 Bond / Dividends Yield Ratio 5.0 7.4 5.6 3.9 1.8 25.6 3098 1.8 34918 -81% 175% (0.43) 0.58 Composite Score 1.11 0.27 0.68

Russia 773.5P/E 5.0 10.5 7.1 8.4 3.5 54.0 83 3.5 379 -91% 43% (0.76) (0.96)P/B 0.6 1.2 0.5 1.3 0.6 2.8 1567 0.2 38 -77% 222% (1.17) (1.19)D/Y 4.3 1.7 1.0 2.0 0.9 4.3 773 0.1 223 0% 3167% (2.67) (2.60)12m Fwd PER 4.7 7.5 2.8 7.4 2.6 22.8 332 2.5 59 -79% 89% (1.00) (1.06)Bond/Earnings Yield Ratio 0.3 2.0 4.7 0.5 0.2 43.8 83 0.0 793 -99% #DIV/0! (0.36) (0.88)Bond / Dividends Yield Ratio 1.6 23.0 40.4 4.4 3.1 249.1 223 0.0 793 -99% #DIV/0! (0.53) (0.90)Composite Score (1.08) (1.78) -1.78

Poland 1675.9P/E 12.9 15.5 9.7 12.4 2.5 98.7 861 6.6 917 -87% 95% (0.27) 0.21 P/B 1.4 1.8 0.4 1.7 0.4 3.1 589 1.0 1192 -56% 42% (1.06) (0.94)D/Y 4.6 2.8 1.4 4.1 0.9 7.1 1192 0.8 1463 -35% 452% (1.22) (0.55)12m Fwd PER 12.6 11.8 3.2 11.7 1.8 25.1 1630 5.5 618 -50% 130% 0.25 0.49 Bond/Earnings Yield Ratio 0.7 1.2 0.8 0.7 0.1 5.5 861 0.4 917 -87% 80% (0.52) 0.21 Bond / Dividends Yield Ratio 1.2 3.3 3.2 1.5 0.4 15.0 1463 0.8 2253 -92% 50% (0.64) (0.63)Composite Score (0.52) 0.21 -0.21

Turkey 963461P/E 9.4 12.1 6.1 11.0 2.4 46.2 234490 5.1 9691 -80% 84% (0.45) (0.68)P/B 1.6 2.1 0.9 1.7 0.2 6.7 237918 1.0 179225 -77% 62% (0.52) (0.36)D/Y 2.9 3.6 1.8 3.2 1.2 9.4 13825 1.0 237918 -69% 195% 0.35 0.24 12m Fwd PER 8.6 8.4 2.9 9.5 1.6 18.7 264873 2.7 34351 -54% 217% 0.07 (0.53)Bond/Earnings Yield Ratio 0.9 5.0 5.3 1.6 0.8 27.7 234490 0.7 1219326 -97% 24% (0.77) (0.85)Bond / Dividends Yield Ratio 3.2 13.6 12.0 4.6 2.1 46.4 189935 1.6 553055 -93% 99% (0.86) (0.67)Composite Score 0.05 (0.76) -0.33

Hungary 942.5P/E 11.7 12.7 3.5 11.3 2.5 22.1 872 4.4 559 -47% 163% (0.29) 0.13 P/B 0.9 1.9 0.7 1.6 0.6 3.7 616 0.6 148 -75% 65% (1.29) (1.16)D/Y 2.5 2.2 0.8 2.8 0.6 5.3 857 0.9 752 -53% 173% (0.40) 0.45 12m Fwd PER 9.7 9.8 2.0 9.3 1.7 17.0 872 4.3 810 -43% 127% (0.04) 0.25 Bond/Earnings Yield Ratio 0.3 1.1 0.6 0.8 0.2 2.5 596 0.3 890 -86% 4% (1.31) (2.11)Bond / Dividends Yield Ratio 1.2 4.4 3.0 2.5 0.6 13.3 545 1.2 942 -91% 0% (1.07) (2.31)Composite Score (0.60) 0.26 -0.60

Czech 263.3P/E 10.0 13.9 5.1 13.9 4.6 39.6 111 7.3 76 -75% 38% (0.76) (0.83)P/B 1.4 1.5 0.7 2.1 0.5 3.2 480 0.5 104 -56% 164% (0.09) (1.22)D/Y 6.6 4.6 2.7 6.2 2.1 10.0 374 0.8 540 -35% 712% (0.73) (0.20)12m Fwd PER 11.6 12.7 3.5 12.4 2.8 28.7 135 6.7 318 -60% 72% (0.33) (0.30)Bond/Earnings Yield Ratio 0.2 0.6 0.3 0.5 0.2 2.6 111 0.1 257 -91% 55% (1.06) (1.32)Bond / Dividends Yield Ratio 0.3 1.3 1.7 0.8 0.8 8.2 110 0.2 257 -96% 45% (0.59) (0.56)Composite Score (0.81) (0.26) -0.48

Chile 4048.1P/E 17.2 20.6 5.4 20.2 2.7 52.4 1660 11.4 910 -67% 51% (0.62) (1.09)P/B 1.6 1.7 0.4 1.9 0.4 2.7 5858 0.9 910 -42% 69% (0.34) (0.73)D/Y 2.8 3.1 1.1 3.2 1.5 8.9 2601 1.7 5929 -69% 60% 0.32 0.32 12m Fwd PER 14.0 15.3 2.1 16.0 1.7 20.8 1806 8.2 953 -33% 70% (0.63) (1.19)Bond/Earnings Yield Ratio 0.8 1.7 0.9 1.2 0.5 4.8 1660 -0.1 4119 -83% -793% (1.02) (0.68)Bond / Dividends Yield Ratio 1.7 2.9 1.4 2.0 1.2 7.2 1478 -0.3 4119 -77% -702% (0.83) (0.28)Composite Score (0.52) (0.61) -0.56

Source: Datastream, MSCI, J.P. Morgan calculations. Note: #SD refers to the number of standard deviations from the long-term (LT) and short-term (ST) means.

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72

Emerging Markets Equity Research22 January 2014

Adrian Mowat(852) [email protected]

EMBIG100

The equity EMBIG100 is the Top 100 companies in the MSCI Emerging Markets FreeIndex sorted by MSCI free float market capitalization. We are interested in tracking the major stocks in the emerging market universe as country and sector aggregates can hide key trends. Also these names need to be attractive relative to global valuations and growth in order to attract net flows in emerging markets. This table gives a valuation summary for these stocks.

Table 41: EMBIG100 valuation summary (ranked by 2014E P/E)Stock Code Country Rec Price P/E P/E DY ROE

16-Jan-14 2014E 2015E 2014E 2014EGazprom GAZP RU Russia OW 4.1 2.9 3.2 5.8 10.6Lukoil LKOD LI Russia OW 59.4 3.6 3.6 6.5 14.2Bank of China - H 3988 HK China OW 3.4 4.5 4.2 7.7 16.9China Const. Bank 939 HK China OW 5.6 4.7 4.3 7.5 19.9Agri. Bank of China - H 1288 HK China N 3.5 4.7 4.3 7.5 20.2Industrial & Com. Bank 1398 HK China OW 4.9 4.8 4.4 7.4 20.4Kia Motors 000270 KS S Korea N 51500.0 5.0 4.5 1.2 18.3Tatneft TATN RX Russia OW 197.7 5.5 5.4 4.7 16.7Sberbank SBER RX Russia OW 100.6 5.6 5.0 4.0 19.7Vale PN VALE/P US Brazil OW 12.7 5.8 6.3 6.1 16.4Hyundai Motor 005380 KS S Korea OW 233000.0 6.5 5.7 1.0 17.0Garanti GARAN TI Turkey N 6.6 6.6 5.8 4.5 17.4PTT PTT TB Thailand OW 288.0 6.7 6.2 5.6 17.2Samsung Electronics 005930 KS S Korea OW 1301000.0 6.7 6.5 0.6 17.3Hyundai Mobis 012330 KS S Korea N 281500.0 6.7 6.0 0.7 18.1COMI (Egypt) COMI EY Egypt OW 33.1 6.9 7.8 6.5 27.2PETROBRAS PN PETR4 BZ Brazil N 15.6 6.9 6.0 4.2 9.4Sinopec Corp - H 386 HK China OW 6.0 7.0 6.5 5.8 13.2Akbank AKBNK TI Turkey UW 6.6 7.2 6.3 4.2 14.6SK Hynix 000660 KS S Korea OW 36550.0 7.3 7.0 0.4 24.4Itausa-Pref ITSA4 BZ Brazil NC 8.6 7.4 6.3 5.1 NMCNOOC 883 HK China N 13.8 7.4 8.1 4.1 20.1OTP Bank OTP HB Hungary OW 4481.0 7.5 5.6 4.3 9.7China Overseas L & I 688 HK China OW 21.9 7.7 6.7 2.6 20.2CEZ CEZ CP Czech N 516.6 7.9 10.4 6.8 8.5China Shenhua Energy 1088 HK China OW 21.7 8.4 7.8 4.7 13.6KASIKORNBANK KBANK TB Thailand OW 166.0 8.4 7.5 2.4 20.0Banco Bradesco BBDC4 BZ Brazil N 27.6 8.7 7.6 4.0 18.0KB Financial Group 105560 KS S Korea OW 39500.0 8.8 8.3 1.9 6.6Norilsk Nickel MNOD LI Russia UW 16.7 8.8 7.6 13.1 19.6Itau Unibanco ITUB4 BZ Brazil OW 30.6 8.9 7.9 3.9 20.2Shinhan Financial 055550 KS S Korea NR 43700.0 8.9 8.4 1.7 8.7Siam Commercial Bank SCB TB Thailand OW 147.5 9.0 8.2 3.7 20.7PetroChina 857 HK China OW 8.1 9.3 9.5 4.9 10.7Hana Financial Group 086790 KS S Korea OW 41400.0 9.5 8.4 1.4 6.1Hon Hai Precision 2317 TT Taiwan OW 83.8 9.6 9.4 2.8 13.1Sasol SOL SJ S Africa OW 53217.0 9.8 9.6 3.9 23.4Ecopetrol S.A. ECOPETL CB Colombia N 3440.0 10.0 7.8 5.4 26.1Genting Berhad GENT MK Malaysia N 10.2 10.0 9.1 0.7 15.4

Source: I/B/E/S, Datastream, J.P. Morgan estimates. All estimates are for the calendar year. IBES estimates for non-covered (NC) stocks, J.P.

Morgan estimates for all others. NM = not meaningful due to negative numbers. SA stands for South Africa. CZ stands for Czech Republic.HK

stands for Hong Kong. Recommendations: OW = Overweight, N = Neutral, UW = Underweight, NR = Not Rated, NC = Not Covered. 16

January 2014. Under applicable law and/or J.P. Morgan Chase & Co. policy the rating for NR companies has been removed.

Table 38: Cheaper valuations and higher ROE than the US

EMBIG USMedian Median

2014 PE 11.5 16.82015 PE 10.4 14.92014 DY 3.4 1.62014 ROE 17.3 16.0Source: J.P. Morgan estimates.

Table 39: Quartile valuation ranking

P/E

2014 2015Min 2.9 3.2Lower Quartile 8.3 7.7Median 11.5 10.4Top Quartile 16.0 13.8Max 57.7 41.3

Source: J.P. Morgan estimates.

Table 40: Quartile valuation ranking

Div Yld ROE2014 2014

Min 0.0 1.4Lower Quartile 1.7 13.3Median 3.4 17.3Top Quartile 4.7 22.0Max 13.1 88.3

Source: J.P. Morgan estimates.

Figure 34: ROE vs. P/E

Source: J.P. Morgan, IBES. Scatter plot of ROE

and P/E. Stocks in second quadrant have higher

ROE and lower P/E than the MSCI US median.

US position is indicated by the red dot.

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73

Emerging Markets Equity Research22 January 2014

Adrian Mowat(852) [email protected]

EMBIG100 valuation summary (cont’d)Stock Code Country Rec Price P/E P/E DY ROE

16-Jan-14 2014E 2015E 2014E 2014EBank Rakyat BBRI IJ Indonesia N 8100.0 10.0 9.1 3.0 22.5PTT Exploration PTTEP TB Thailand N 159.5 10.0 11.7 3.4 16.3Mobile Telesystems MBT US Russia OW 19.9 10.2 9.3 8.1 54.7America Movil AMX US Mexico N 21.9 10.6 13.0 0.1 40.8Standard Bnk Group SBK SJ S Africa OW 12751.0 10.6 9.1 4.3 15.3BM&F Bovespa BVMF3 BZ Brazil OW 10.2 10.8 9.5 5.9 7.8Chinatrust 2891 TT Taiwan OW 20.1 10.9 9.9 3.7 12.9Bancolombia CIB US Colombia N 47.8 11.1 9.5 3.1 14.0China Mobile Limited 941 HK China N 77.6 11.3 11.7 4.3 13.3Novatek NVTK LI Russia N 129.0 11.3 9.9 0.3 23.1FirstRand Ltd FSR SJ S Africa N 3380.0 11.4 10.0 4.4 21.6CIMB Group Hlds CIMB MK Malaysia N 7.1 11.5 9.2 4.6 14.8PZU PZU PW Poland OW 441.3 11.5 11.5 8.6 23.3Ping An Insurance 2318 HK China OW 68.8 11.6 9.7 1.0 17.3LG Chem Ltd 051910 KS S Korea N 270500.0 11.6 10.4 1.5 12.4Credicorp BAP US Peru OW 131.2 11.9 10.3 1.7 19.0Tenaga TNB MK Malaysia OW 11.5 12.2 12.1 2.7 14.4Reliance Industries RIL IN India OW 886.2 12.2 11.0 1.1 14.9POSCO 005490 KS S Korea N 311500.0 12.3 10.6 2.2 4.8TSMC 2330 TT Taiwan OW 107.5 12.8 11.4 2.8 21.6PT Bank Mandiri BMRI IJ Indonesia UW 8625.0 12.8 11.0 2.3 17.3Telekomuniksi Indon TLKM IJ Indonesia OW 2230.0 12.9 11.9 5.0 31.1MediaTek Inc. 2454 TT Taiwan OW 415.0 13.1 12.0 3.6 24.5Remgro REM SJ S Africa N 20272.0 13.1 11.5 2.4 12.6PKO Bank Polski PKO PW Poland OW 40.7 13.2 10.9 4.5 14.4Maybank MAY MK Malaysia N 9.8 13.3 11.8 5.9 15.5Sanlam LTD SLM SJ S Africa OW 5110.0 13.9 12.2 4.2 13.0MTN Group Limited MTN SJ S Africa OW 21360.0 14.5 13.6 5.1 27.9Astra International ASII IJ Indonesia OW 7300.0 14.5 12.7 3.1 23.4Grupo Mexico GMEXICOB MM Mexico OW 42.6 14.6 12.9 2.0 17.3Philip Long Distance TEL PM Philippines N 2686.0 14.6 13.7 6.8 26.7China Life Insurance 2628 HK China N 22.9 14.7 12.0 2.2 13.7Cathay Financial Hld 2882 TT Taiwan OW 47.0 14.9 13.7 2.0 13.7Copec COPEC CI Chile N 7020.0 14.9 13.9 2.4 8.8Banorte GFNORTEO MM Mexico N 91.2 15.5 13.7 1.0 12.7Bank Central Asia BBCA IJ Indonesia UW 10000.0 16.0 14.7 1.5 22.3Advanced Info Serv. ADVANC TB Thailand UW 215.0 16.1 15.1 6.2 83.9Brasil Foods BRFS3 BZ Brazil N 43.5 16.4 14.4 1.1 13.4Sime Darby Berhad SIME MK Malaysia N 9.1 16.9 15.3 3.3 11.7Cielo CIEL3 BZ Brazil N 66.8 17.1 15.5 4.2 88.3Falabella FALAB CI Chile OW 4439.0 17.4 14.2 1.7 17.3OTE HTO GA Greece OW 11.5 17.6 13.8 3.5 14.3Chunghwa Telecom 2412 TT Taiwan N 92.0 17.8 17.5 5.6 11.2Delta Electronics 2308 TT Taiwan OW 167.0 17.9 16.2 3.4 22.9HDFC Bank HDFCB IN India OW 673.1 19.4 14.8 1.0 19.2FEMSA FMX US Mexico OW 92.8 20.0 17.2 2.4 8.0Infosys INFO IN India OW 3725.1 20.3 17.3 1.6 23.9Ultrapar S.A. UGPA3 BZ Brazil OW 54.2 21.4 19.1 2.5 19.1AmBev ABEV3 BZ Brazil OW 16.9 21.5 19.6 4.2 35.8Magnit MGNT LI Russia OW 61.6 22.0 17.8 1.1 28.3Wal-Mart de Mexico WALMEXV MM Mexico N 33.0 22.5 20.9 3.5 17.6China Steel Corp 2002 TT Taiwan N 26.5 23.5 20.5 3.7 5.7Ayala Land ALI PM Philippines OW 26.5 24.3 19.7 2.1 14.8HDFC HDFC IN India OW 857.6 24.4 20.0 1.6 20.0TCS TCS IN India N 2350.3 24.6 21.1 1.1 38.9Televisa TV US Mexico N 30.9 26.8 23.7 0.9 12.0ITC Limited ITC IN India OW 325.5 30.0 25.5 1.8 36.1Tencent 700 HK China OW 512.5 30.4 22.1 0.3 39.1Naver 035420 KS S Korea OW 720000.0 36.6 23.5 0.5 26.7Naspers Ltd NPN SJ S Africa OW 115250.0 50.7 41.3 0.4 18.0

Source: I/B/E/S, Datastream, J.P. Morgan estimates. All estimates are for the calendar year. IBES estimates for non-covered (NC) stocks, J.P.

Morgan estimates for all others. NM = not meaningful due to negative numbers. SA stands for South Africa. CZ stands for Czech Republic. HK

stands for Hong Kong. Recommendations: OW = Overweight, N = Neutral, UW = Underweight, NR = Not Rated, NC = Not Covered. 16

January 2014. Under applicable law and/or J.P. Morgan Chase & Co. policy the rating for NR companies has been removed.

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Emerging Markets Equity Research22 January 2014

Adrian Mowat(852) [email protected]

Table 43: EMBIG100 earnings growth

NAME BBG Country Reco Earnings Growth CAGR

2013E 2014E 2015E 2012-15ECopec COPEC CI Chile N 203.1 22.6 7.9 58.9 China Life Insurance - H 2628 HK China N 163.4 18.2 21.8 55.9 Naspers Ltd NPN SJ S Africa OW 159.9 15.8 22.8 54.6 Brasil Foods BRFS3 BZ Brazil N 117.6 33.3 13.4 48.7 China Steel Corp 2002 TT Taiwan N 112.4 34.2 14.5 48.3 Mobile Telesystems MBT US Russia OW 205.9 -14.8 9.6 41.9 MediaTek Inc. 2454 TT Taiwan OW 61.7 56.7 8.9 40.3 Tencent 700 HK China OW 22.1 56.8 37.7 38.1 Naver 035420 KS S Korea OW -1.9 51.1 55.6 32.1 Ping An Insurance 2318 HK China OW 43.8 27.0 19.9 29.9 Cathay Financial Hlds 2882 TT Taiwan OW 79.1 10.5 8.7 29.1 HDFC Bank HDFCB IN India OW 28.4 22.7 31.1 27.3 TCS TCS IN India N 32.6 32.5 16.6 27.0 Ayala Land ALI PM Philippines OW 24.1 33.2 23.6 26.9 Magnit MGNT LI Russia OW 40.4 16.6 23.8 26.6 Falabella FALAB CI Chile OW 30.8 24.1 22.7 25.8 Novatek NVTK LI Russia N 21.2 27.7 14.1 20.9 OTP Bank OTP HB Hungary OW -29.8 82.9 34.1 19.9 Tenaga TNB MK Malaysia OW 23.5 32.5 0.2 17.9 PETROBRAS PN PETR4 BZ Brazil N 15.1 23.6 14.9 17.8 ITC Limited ITC IN India OW 19.0 16.2 17.6 17.6 Remgro REM SJ S Africa N 19.2 15.1 13.5 15.9 Delta Electronics, Inc. 2308 TT Taiwan OW 11.3 25.4 10.4 15.5 HDFC HDFC IN India OW 12.3 12.1 21.7 15.3 Ultrapar S.A. UGPA3 BZ Brazil OW 17.6 15.3 11.8 14.9 Siam Commercial Bank SCB TB Thailand OW 24.2 11.9 9.0 14.8 Norilsk Nickel MNOD LI Russia UW 14.5 13.9 15.7 14.7 Standard Bank Group SBK SJ S Africa OW 8.8 18.2 16.7 14.5 KASIKORNBANK KBANK TB Thailand OW 16.9 14.6 12.0 14.5 FirstRand Ltd FSR SJ S Africa N 20.7 9.5 13.3 14.4 Infosys INFO IN India OW 13.5 11.5 17.3 14.1 TSMC 2330 TT Taiwan OW 13.2 15.7 12.4 13.8 Cielo CIEL3 BZ Brazil N 15.8 13.9 10.7 13.4 MTN Group Limited MTN SJ S Africa OW 24.3 9.2 7.1 13.3 Itausa-Pref ITSA4 BZ Brazil NC 6.1 17.2 16.4 13.1 Garanti GARAN TI Turkey N 9.2 14.5 15.6 13.1 Vale PN VALE/P US Brazil OW -87.6 NM -8.6 12.9 China Overseas L & It 688 HK China OW 20.7 2.3 16.1 12.8 FEMSA FMX US Mexico OW 2.8 19.8 16.3 12.8 Agr.l Bank of China 1288 HK China N 17.5 10.5 10.1 12.7 Sanlam LTD SLM SJ S Africa OW 23.2 2.2 13.3 12.6 Banorte GFNORTEO MM Mexico N 16.4 7.8 13.4 12.5 Bank Central Asia BBCA IJ Indonesia UW 20.1 8.0 9.3 12.3

Source: I/B/E/S, Datastream, J.P. Morgan estimates. All estimates are for the calendar year. IBES estimates for non-covered (NC)

stocks, J.P. Morgan estimates for all others. NM = not meaningful due to negative numbers. SA stands for South Africa. CZ stands for

Czech Republic. Recommendations: OW = Overweight, N = Neutral, UW = Underweight, NR = Not Rated, NC = Not Covered. 16

January 2014. Under applicable law and/or J.P. Morgan Chase & Co. policy the rating for NR companies has been removed.

Table 42: Quartile earnings growth ranking

Earnings growth

2014E 2015EMin -184.0 -23.8Lower Quartile 7.4 7.8Median 12.5 12.2Top Quartile 22.0 15.9Max 82.9 55.6

Source: J.P. Morgan calculations.

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75

Emerging Markets Equity Research22 January 2014

Adrian Mowat(852) [email protected]

EMBIG100 earnings growth (cont’d)

Stock BBG Country Reco Earnings Growth CAGR

2013E 2014E 2015E 2012-15EItau Unibanco ITUB4 BZ Brazil OW 11.1 13.2 12.2 12.2 Telekom Indonesia TLKM IJ Indonesia OW 13.8 13.7 8.2 11.8 Akbank AKBNK TI Turkey UW 5.1 16.1 14.3 11.7 AmBev ABEV3 BZ Brazil OW 6.4 17.9 10.0 11.3 Sasol SOL SJ S Africa OW 10.7 16.3 7.1 11.3 Reliance Industries Ltd RIL IN India OW 7.2 12.5 10.7 10.1 CIMB Group Holdings CIMB MK Malaysia N 2.9 3.4 25.3 10.1 Banco Bradesco BBDC4 BZ Brazil N 6.4 9.2 14.6 10.0 Sberbank SBER RX Russia OW 5.4 9.9 12.5 9.2 Hyundai Motor 005380 KS S Korea OW 2.4 10.9 14.5 9.1 Indl and Com. Bank 1398 HK China OW 10.4 7.2 9.7 9.1 China Const. Bank 939 HK China OW 10.9 7.9 7.9 8.9 Bank of China - H 3988 HK China OW 7.6 9.7 8.8 8.7 Credicorp BAP US Peru OW -23.1 45.4 14.8 8.7 Samsung Electronics 005930 KS S Korea OW 29.1 -4.8 3.8 8.4 PTT Public Company PTT TB Thailand OW 3.4 13.2 8.9 8.4 Hyundai Mobis 012330 KS S Korea N -4.2 17.4 13.0 8.4 BM&F Bovespa BVMF3 BZ Brazil OW 2.9 8.8 13.4 8.3 Chinatrust 2891 TT Taiwan OW -15.8 34.3 10.9 7.8 PKO Bank Polski PKO PW Poland OW -16.7 23.3 20.8 7.5 Hon Hai Precision 2317 TT Taiwan OW 7.4 11.5 2.0 6.9 Advanced Info Services ADVANC TB Thailand UW 0.7 13.1 6.5 6.7 Bancolombia CIB US Colombia N -14.8 22.3 16.2 6.6 Ecopetrol S.A. ECOPETL CB Colombia N -5.4 0.0 27.8 6.5 Wal-Mart de Mexico WALMEXV MM Mexico N 3.1 8.1 7.8 6.3 Astra International ASII IJ Indonesia OW -4.4 9.4 14.6 6.2 Philio Long Distance TEL PM Philippines N -0.9 13.3 6.7 6.2 Kia Motors 000270 KS S Korea N -1.1 7.2 12.3 6.0 PT Bank Mandiri Tbk. BMRI IJ Indonesia UW 6.5 -4.9 16.9 5.8 LG Chem Ltd 051910 KS S Korea N -1.5 7.2 11.1 5.4 Bank Rakyat Indonesia BBRI IJ Indonesia N 8.5 -4.6 10.5 4.6 Maybank MAY MK Malaysia N 1.9 -0.4 12.3 4.4 COMI (Egypt) COMI EY Egypt OW 34.3 -5.3 -10.9 4.2 Televisa TV US Mexico N -7.4 7.0 13.0 3.8 Lukoil LKOD LI Russia OW -12.6 27.5 -0.1 3.6 Shinhan Financial 055550 KS S Korea NR -7.3 12.3 6.0 3.3 KB Financial Group 105560 KS S Korea OW -21.5 30.0 5.7 2.6 Tatneft TATN RX Russia OW -5.1 11.6 1.0 2.3 Genting Berhad GENT MK Malaysia N -38.5 54.1 10.7 1.6 PetroChina 857 HK China OW -3.4 11.3 -2.6 1.5 POSCO 005490 KS S Korea N -31.0 29.5 16.2 1.3 Chunghwa Telecom 2412 TT Taiwan N -0.8 1.5 1.4 0.7 PZU PZU PW Poland OW -4.1 5.7 0.2 0.5 Sinopec Corp - H 386 HK China OW -16.2 7.7 8.2 (0.8)PTT Exploration PTTEP TB Thailand N 2.2 7.5 -14.0 (1.9)America Movil AMX US Mexico N -6.5 21.7 -18.6 (2.5)CNOOC 883 HK China N 6.1 -4.2 -8.9 (2.5)China Shenhua Energy 1088 HK China OW -12.5 -6.0 7.3 (4.1)OTE HTO GA Greece OW -6.9 -27.9 27.4 (5.1)Sime Darby Berhad SIME MK Malaysia N -20.2 -3.2 10.3 (5.2)China Mobile Limited 941 HK China N -4.1 -11.9 -3.3 (6.5)Grupo Mexico GMEXICOB MM Mexico OW -27.8 0.3 12.7 (6.5)Gazprom GAZP RU Russia OW -2.5 -10.6 -10.8 (8.0)Hana Financial Group 086790 KS S Korea OW -41.3 10.7 12.5 (9.9)CEZ CEZ CP Czech N 8.1 -26.2 -23.8 (15.3)Cemex CX US Mexico OW -69.1 -184.0 NA NMSK Hynix 000660 KS S Korea OW NM 36.0 4.8 NM

Source: I/B/E/S, Datastream, J.P. Morgan estimates. All estimates are for the calendar year. IBES estimates for non-covered (NC)

stocks, J.P. Morgan estimates for all others. NM = not meaningful due to negative numbers. SA stands for South Africa. CZ stands for

Czech Republic. Recommendations: OW = Overweight, N = Neutral, UW = Underweight, NR = Not Rated, NC = Not Covered. 16

January 2014. Under applicable law and/or J.P. Morgan Chase & Co. policy the rating for NR companies has been removed.

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Table 44: Ranked total returns of EMBIG100 (%)Name 1-month return Name 3 month return Name 12-month return

LC US$ LC US$ LC US$OTE 24.6 23.2 OTE 31.4 32.5 Naver 153.2 152.1 Astra International 19.7 19.6 Tenaga 27.7 22.9 OTE 99.0 103.5 Bank Rakyat Indonesia 19.1 19.0 COMI (Egypt) 23.7 22.4 Tencent 92.4 92.4 Tata Consultancy Services 16.4 17.1 Tencent 21.6 21.6 Naspers Ltd 110.3 69.6 PT Bank Mandiri Tbk. 15.0 14.9 Naver 21.0 21.3 Delta Electronics, Inc. 65.3 59.2 Cemex 11.8 8.7 Ping An Insurance Group 17.2 17.2 Tata Consultancy Services 77.1 57.5 Infosys 7.9 8.5 Cemex 20.1 16.1 Cathay Financial Holdings 61.9 55.9 Tencent 8.4 8.3 Delta Electronics, Inc. 15.8 13.2 Tenaga 68.7 54.5 HDFC 7.4 8.0 Infosys 11.7 12.3 Magnit 42.4 42.4 Naspers Ltd 14.3 7.8 Norilsk Nickel 16.5 12.2 SK Hynix 39.5 38.9 Delta Electronics, Inc. 9.0 7.4 Hon Hai Precision 14.2 11.6 MediaTek Inc. 38.5 33.4 Telekomikasi Indonesia 7.5 7.4 China Life Insurance - H 10.9 10.9 COMI (Egypt) 39.9 32.2 Bank Central Asia (BCA) 7.0 6.8 SK Hynix 9.4 9.7 Cielo 52.5 31.3 Ayala Land 8.9 6.5 Banorte 11.2 7.5 Chinatrust 34.0 29.0 Hon Hai Precision 8.1 6.5 HDFC 6.9 7.5 Cemex 30.4 23.8 Televisa 8.6 5.6 Naspers Ltd 18.8 7.2 Sasol 52.4 22.9 Reliance Industries Ltd 4.9 5.5 Tata Consultancy Services 6.3 6.8 Infosys 37.0 21.9Norilsk Nickel 6.3 4.8 Cathay Financial Holdings 9.2 6.8 PZU 20.3 21.7 ITC Limited 4.1 4.7 Televisa 10.0 6.4 PKO Bank Polski 17.9 19.3 Tenaga 5.6 3.8 PKO Bank Polski 5.4 6.1 Novatek 14.7 14.7 Sasol 10.0 3.7 MediaTek Inc. 7.3 4.9 Televisa 18.8 12.8 Hana Financial Group 4.8 3.7 HDFC Bank 3.2 3.7 Shinhan Financial Group 11.3 10.9 MTN Group Limited 9.8 3.6 PZU 2.6 3.4 Hana Financial Group 11.0 10.6 TSMC 4.9 3.3 CEZ 9.1 2.8 Mobile Telesystems 10.2 10.2 Advanced Info Services 5.4 3.0 Reliance Industries Ltd 2.1 2.6 Hyundai Motor Company 10.7 10.2 Grupo Mexico 5.5 2.6 Grupo Mexico 5.5 2.0 Hyundai Mobis 9.3 8.9 OTP Bank 3.9 2.5 OTP Bank 3.0 1.8 Hon Hai Precision 11.8 7.7 PKO Bank Polski 3.2 2.3 America Movil 4.2 0.8 TSMC 10.9 6.8 COMI (Egypt) 3.2 2.1 China Steel Corp 3.1 0.8 Maybank 14.7 5.0 China Steel Corp 3.5 1.9 Hana Financial Group 0.0 0.2 Advanced Info Services 15.2 4.9 Cathay Financial Holdings 3.3 1.7 POSCO 0.0 0.2 Ultrapar S.A. 20.4 3.7 Cielo 3.5 1.3 FEMSA 3.4 (0.0) ITC Limited 16.4 3.6 Chinatrust 2.8 1.3 Magnit (0.6) (0.6) MTN Group Limited 27.8 3.1 Credicorp 1.2 1.2 TSMC 0.9 (1.3) KB Financial Group 2.6 2.2 Hyundai Motor Company 2.2 1.1 Genting Berhad 2.5 (1.4) Genting Berhad 11.1 1.8 AmBev 3.2 1.0 Chinatrust 0.3 (2.0) OTP Bank 0.9 1.3 KB Financial Group 1.8 0.7 Astra International 4.3 (2.2) Ping An Insurance Group 1.0 1.0 Remgro 6.7 0.6 Credicorp (3.0) (3.0) Remgro 24.4 0.3 Naver 1.7 0.6 Hyundai Mobis (3.4) (3.2) Chunghwa Telecom 3.6 (0.2)Standard Bank Group Ltd 6.2 0.2 ITC Limited (4.3) (3.8) Bank of China - H (0.7) (0.7)CEZ 0.8 (0.1) Chunghwa Telecom (1.6) (3.8) Banorte 4.0 (1.3)Philippine Long Distance 2.0 (0.2) Sinopec Corp - H (4.0) (4.0) Telekomunikasi Indonesia 21.7 (3.0)Sberbank 0.8 (0.6) Sasol 6.1 (4.2) Philippine Long Distance 5.8 (4.8)Genting Berhad 1.0 (0.8) PT Bank Mandiri Tbk. 2.1 (4.3) China Steel Corp (1.3) (4.9)Gazprom 0.6 (0.8) Sime Darby Berhad (0.6) (4.3) HDFC 6.3 (5.4)HDFC Bank (1.6) (1.1) Wal-Mart de Mexico (1.6) (4.8) Norilsk Nickel 3.7 (5.8)Mobile Telesystems (1.3) (1.3) KB Financial Group (5.2) (5.0) Lukoil 3.7 (5.9)MediaTek Inc. 0.2 (1.3) MTN Group Limited 5.3 (5.0) Agricultural Bank of China - (6.0) (6.0)Chunghwa Telecom 0.1 (1.4) Shinhan Financial Group (5.3) (5.1) Kia Motors (5.7) (6.1)Copec (0.5) (1.5) Maybank (1.4) (5.1) Sberbank 3.3 (6.2)PTT Public Company 0.4 (1.9) Agricultural Bank of China (5.2) (5.2) PTT Exploration 2.5 (6.7)KASIKORNBANK 0.3 (2.0) Bank of China - H (5.5) (5.5) Sanlam LTD 15.4 (6.9)FEMSA 0.7 (2.1) Bank Rakyat Indonesia (0.6) (6.8) Reliance Industries Ltd 4.0 (7.4)China Overseas Land (2.2) (2.2) Sberbank (3.3) (6.8) China Mobile Limited (7.6) (7.6)Bancolombia (1.8) (2.5) China Shenhua Energy - H (6.9) (6.9) HDFC Bank 2.8 (8.6)Shinhan Financial Group (1.6) (2.7) Novatek (7.1) (7.1) Standard Bank Group Ltd 13.3 (8.7)America Movil 0.1 (2.7) Sanlam LTD 2.6 (7.4) Sime Darby Berhad (1.4) (9.7)SK Hynix (1.6) (2.7) China Mobile Limited (7.9) (7.9) Sinopec Corp - H (9.7) (9.7)Lukoil (1.6) (3.0) Telekomunikasi Indonesia (2.0) (8.1) Ind. & Com. Bank of China (9.8) (9.8)Sanlam LTD 2.8 (3.0) Cielo 0.5 (8.3) China Construction Bank (9.8) (9.8)Source: Datastream, 16 January 2014.

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Table 45: Ranked total returns of EMBIG 100 (cont’d)Name 1-month return Name YTD return Name 12-month return

LC US$ LC US$ LC US$Hyundai Mobis (2.1) (3.2) AmBev 0.5 (8.3) China Overseas Land (10.3) (10.3)FirstRand Ltd 2.7 (3.2) Remgro 1.7 (8.3) America Movil (5.7) (10.5)Magnit (3.2) (3.2) CIMB Group Holdings (4.7) (8.3) FirstRand Ltd 10.7 (10.7)Itau Unibanco (1.1) (3.2) China Construction Bank (8.4) (8.4) Gazprom (1.7) (10.8)China Mobile Limited (3.4) (3.4) Standard Bank Group Ltd 0.0 (9.7) CNOOC (11.1) (11.1)Ping An Insurance Group - H (3.4) (3.4) Copec (3.3) (9.8) Ayala Land (1.6) (11.4)Maybank (Malayan Banking) (1.8) (3.5) PTT Exploration (5.3) (9.8) Copec (0.9) (11.4)Sime Darby Berhad (1.9) (3.7) Samsung Electronics (10.3) (10.1) CIMB Group Holdings (3.3) (11.5)Tatneft (2.5) (3.9) Philippine Long Distance (6.1) (10.1) Bank Central Asia (BCA) 10.5 (11.9)Falabella (3.3) (4.2) Lukoil (6.8) (10.3) FEMSA (7.5) (12.2)LG Chem Ltd (3.4) (4.5) China Overseas Land (10.4) (10.4) Grupo Mexico (7.7) (12.3)Itausa-Pref (2.6) (4.6) Ind. & Com. Bank of China (10.7) (10.7) POSCO (12.0) (12.4)Novatek (4.9) (4.9) Bank Central Asia (BCA) (4.8) (10.7) Samsung Electronics (12.8) (13.1)Bank of China - H (5.0) (5.0) PetroChina (11.3) (11.3) China Life Insurance - H (13.4) (13.5)Ultrapar S.A. (3.2) (5.2) Hyundai Motor Company (12.4) (12.2) Tatneft (4.8) (13.6)Banco Bradesco (3.2) (5.3) Tatneft (10.1) (13.4) Brasil Foods (0.0) (13.9)PZU (4.6) (5.5) PTT Public Company (9.7) (14.0) LG Chem Ltd (13.7) (14.1)Siam Commercial Bank (3.3) (5.5) CNOOC (14.0) (14.0) Credicorp (15.1) (15.1)PTT Exploration (3.3) (5.5) Vale PN (5.9) (14.1) Itau Unibanco (1.6) (15.3)POSCO (4.7) (5.8) Itau Unibanco (6.0) (14.2) AmBev (1.6) (15.3)CNOOC (6.4) (6.4) Siam Commercial Bank (10.1) (14.3) Bank Rakyat Indonesia 5.8 (15.7)Ind. & Com. Bank of China (6.6) (6.6) Itausa-Pref (6.3) (14.5) CEZ (13.4) (17.7)Vale PN (4.7) (6.7) Mobile Telesystems (14.7) (14.7) Itausa-Pref (5.0) (18.2)China Construction Bank (6.7) (6.7) LG Chem Ltd (14.9) (14.8) PT Bank Mandiri Tbk. 2.2 (18.6)China Life Insurance - H (6.9) (6.9) FirstRand Ltd (5.7) (14.9) PTT Public Company (10.9) (19.0)PetroChina (6.9) (6.9) Ayala Land (11.8) (15.6) KASIKORNBANK (11.3) (19.3)Sinopec Corp - H (7.3) (7.3) KASIKORNBANK (12.0) (16.1) Siam Commercial Bank (11.8) (19.7)BM&F Bovespa (5.7) (7.7) Gazprom (13.0) (16.2) Astra International (1.7) (21.6)Kia Motors (6.7) (7.7) Ultrapar S.A. (8.6) (16.6) Falabella (13.8) (22.9)Banorte (5.1) (7.8) Bancolombia (13.7) (16.8) PetroChina (23.1) (23.2)Wal-Mart de Mexico (5.3) (7.9) Falabella (12.1) (18.0) Wal-Mart de Mexico (19.3) (23.4)Samsung Electronics (7.1) (8.1) Kia Motors (20.0) (19.9) Banco Bradesco (16.4) (28.0)China Shenhua Energy - H (8.6) (8.6) Advanced Info Services (17.3) (21.2) China Shenhua Energy - H (29.2) (29.2)CIMB Group Holdings (7.5) (9.2) Banco Bradesco (14.6) (22.1) Bancolombia (22.8) (29.7)Agricultural Bank of China (10.3) (10.3) PETROBRAS PN (15.0) (22.5) PETROBRAS PN (18.4) (29.7)Ecopetrol S.A. (11.0) (11.6) Akbank (13.9) (23.0) BM&F Bovespa (20.5) (31.5)PETROBRAS PN (10.1) (12.0) Garanti (15.6) (24.6) Vale PN (21.2) (32.2)Brasil Foods (10.9) (12.7) Ecopetrol S.A. (23.8) (26.6) Ecopetrol S.A. (32.9) (38.8)Akbank (7.8) (15.4) Brasil Foods (19.8) (26.8) Akbank (29.5) (43.7)Garanti (10.1) (17.5) BM&F Bovespa (20.2) (27.2) Garanti (31.3) (45.1)Source: Datastream. Price as of 16 January 2014

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Emerging Markets Strategy DashboardsSummary: Regional and Country Valuations

P/E (x) Div. Yield (%) P/BV (x) Earnings growth (%) ROE (%)15-Jan-14 Hist.^ P/ EPS Current 12m Prospective Hist.^ Current Prospective Hist.^ Current Prospective

MSCI Index Trough (Trend) Trailing Fwd 2012 2013E 2014E Peak Trailing 2013E 2014E Trough Trailing 2013E 2014E 2011 2012 2013E 2014E 2012 2013E 2014E

Global* 441 9.4 14.2 15.6 14.1 16.6 15.7 14.2 4.1 2.5 2.5 2.6 1.3 2.0 2.0 1.8 7.5 3.2 5.8 10.6 12.8 13.0 13.5USA 1,768 11.6 15.9 17.2 15.7 18.4 17.3 15.8 4.0 2.0 2.0 2.1 1.4 2.5 2.5 2.3 16.2 5.5 6.3 9.6 15.0 14.9 15.2Europe* 1,381 9.8 11.6 15.3 13.6 14.8 15.4 13.6 6.1 3.4 3.3 3.6 1.1 1.7 1.7 1.6 0.5 -2.6 -3.8 12.7 12.1 11.4 12.4Japan* 798 11.5 30.2 17.4 14.8 30.3 27.0 15.9 3.0 1.7 1.7 1.9 0.9 1.4 1.4 1.3 51.1 -14.0 12.1 70.0 5.1 5.5 8.6Emerging Markets* 46,289 7.9 8.7 11.5 10.3 12.7 11.5 10.3 3.6 2.9 2.8 3.1 1.0 1.4 1.4 1.3 3.4 -1.5 9.9 11.8 12.4 13.0 13.4EMF Asia 670 8.5 12.1 11.6 10.2 13.0 11.7 10.2 3.4 2.5 2.5 2.8 1.0 1.5 1.5 1.4 -3.9 5.7 11.0 14.5 13.3 13.4 13.9EMF LatAm* 6,754,821 8.6 7.1 14.2 12.1 14.5 14.3 12.1 5.1 3.1 3.1 3.3 0.6 1.6 1.6 1.5 -1.1 -18.4 1.3 18.1 11.0 11.5 13.0EMF EMEA* 473 6.8 5.7 8.7 8.6 10.2 8.7 8.6 4.9 3.7 3.7 3.9 1.1 1.1 1.1 1.0 28.1 -4.7 17.3 1.4 12.8 13.3 12.3China 61 7.2 6.5 9.3 8.5 10.4 9.4 8.5 5.7 3.5 3.5 3.8 0.5 1.4 1.4 1.3 10.9 1.4 11.2 10.2 15.4 15.5 15.5Brazil* 192,948 6.5 5.9 11.9 10.0 12.4 12.0 10.0 7.6 3.9 3.9 4.2 0.4 1.3 1.3 1.2 -2.7 -30.5 3.6 19.7 9.8 10.8 12.9Korea 566 7.7 8.5 10.3 8.6 11.1 10.3 8.6 2.9 1.1 1.1 1.2 0.5 1.1 1.1 1.0 -16.0 7.7 7.7 20.3 11.6 10.9 11.8Taiwan 301 11.8 13.8 15.2 13.9 20.2 15.3 13.9 7.8 3.2 3.1 3.4 1.2 1.7 1.7 1.6 -27.8 3.8 32.6 9.5 9.4 11.8 12.0South Africa* 1,135 9.1 11.8 15.7 14.0 16.4 15.8 14.1 4.7 3.1 3.1 3.4 1.4 2.5 2.5 2.3 20.6 8.2 3.9 11.8 16.9 16.1 16.7India 825 9.6 14.3 16.6 13.9 18.6 16.8 14.0 2.6 1.5 1.5 1.7 1.4 2.6 2.6 2.3 8.1 10.2 10.9 20.3 16.5 16.6 17.6Russia* 777 3.5 2.4 5.1 5.2 5.0 5.1 5.2 4.3 4.3 4.3 4.6 0.2 0.6 0.6 0.6 39.5 -11.0 -0.9 -2.2 14.9 13.2 11.7Mexico* 40,543 9.0 9.6 20.6 18.0 19.7 20.7 18.1 4.1 1.6 1.6 1.5 0.7 2.6 2.6 2.4 -0.9 37.5 -4.9 14.4 15.3 13.5 13.9Malaysia 652 9.9 17.0 16.8 15.0 16.6 16.9 15.1 5.1 3.1 3.1 3.2 0.6 2.1 2.1 2.0 7.8 15.7 -2.2 12.2 14.0 12.9 13.7Chile* 4,093 11.4 12.7 17.6 14.2 18.5 17.8 14.3 8.9 2.7 2.7 2.9 0.9 1.6 1.6 1.5 -9.8 -19.5 4.1 24.5 10.0 9.5 10.9Indonesia 5,208 4.8 11.6 13.8 12.7 14.0 13.8 12.7 5.9 2.9 2.9 3.1 0.9 2.9 3.0 2.6 19.8 13.7 1.5 8.8 25.6 22.6 21.8Turkey* 965,220 5.1 5.0 9.4 8.7 10.1 9.4 8.8 4.0 3.3 3.3 3.9 1.0 1.4 1.4 1.3 -5.9 17.0 7.3 7.5 17.0 15.8 15.1Thailand 454 7.7 7.0 12.2 10.6 13.5 12.2 10.7 5.9 3.6 3.6 4.1 0.6 1.9 1.9 1.7 14.1 16.3 10.1 14.7 16.5 16.4 17.0Poland* 1,698 6.6 9.5 13.1 12.7 10.1 13.1 12.8 7.1 4.9 4.9 4.4 1.0 1.3 1.3 1.2 26.4 -5.6 -22.9 2.8 14.0 10.0 9.8Czech Republic* 263 7.3 4.2 10.0 11.4 9.2 9.9 11.3 10.0 6.9 6.9 6.6 0.5 1.3 1.3 1.3 -12.4 -3.2 -7.7 -12.3 15.4 13.5 11.7Egypt* 1,420 5.5 4.5 14.0 9.0 11.5 14.3 9.0 8.4 2.5 2.5 3.1 1.0 1.1 1.1 1.1 22.6 4.7 -19.5 58.8 9.7 6.9 11.9Philippines 1,012 8.8 26.6 17.9 16.9 19.1 18.0 17.0 4.9 2.3 2.3 2.4 0.9 2.5 2.6 2.4 3.8 9.1 6.2 5.7 16.2 15.0 14.6Hungary* 942 4.4 4.0 11.8 9.8 9.5 11.9 9.9 5.3 2.5 2.5 3.1 0.6 0.9 0.9 0.9 23.6 -12.3 -19.8 20.3 9.5 8.0 9.0

Source: I/B/E/S, MSCI, J.P. Morgan. Updated 15 January 2014

* Market forecast numbers are derived from bottom-up calculations of each individual MSCI constituents using I/B/E/S estimates. IBES Estimates are not available for Morocco, Jordan, Peru and Colombia.

For all other markets, forecast numbers are derived from bottom-up calculations of each individual MSCI constituents using JPM estimates for covered stocks and I/B/E/S estimates for the rest.

Hist.^ refers to the historically lowest valuation of the MSCI indices since Jan 1991. Trough PE represents the lowest 12 month trailing PE. For dividend yield the highest values are taken to represent the best multiple.

USA, Europe and Japan PE are I/B/E/S aggregate estimates. Japan Valuation estimates are for the financial year ending March

P / EPS (Trend) uses the trend EPS for the indices calculated by the linear regression on the natural log of trailing EPS. For more, please refer to 'Welcoming the Weakness - Perspectives and Portfolios', 5 May 2009, Mowat et al.

P / EPE (Trend)' is NM for indices where the modeled relationship is weak with a less than 0.50 R-square. The start dates China and Singapore models are modified to make them more relevant. Sector indices inputs have not been altered.

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Emerging Markets Equity Research22 January 2014

Adrian Mowat(852) [email protected]

Market Performance: MSCI AC Performance by Region, Country and Sector

YTD 2014

Glo

bal

No

rth

Am

eric

a

Eu

rop

e

Jap

an

EM

F

EM

F A

sia

EM

F L

atin

A

mer

ica

EM

EA

EM

F A

sia

Ko

rea

Tai

wan

Ch

ina

Ind

ia

Mal

aysi

a

Th

aila

nd

Ind

ones

ia

Ph

ilip

pin

es

Consumer Discretionary -1.0% -1.6% -0.1% -0.8% -1.8% -2.6% -0.3% -0.2% -2.6% -3.3% -2.7% -2.8% -1.2% -0.9% -3.1% 6.0% -5.5%Consumer Staples -2.0% -1.3% -2.8% -1.6% -3.5% -1.7% -4.1% -7.5% -1.7% -1.6% -3.9% -2.8% 0.2% -2.8% -7.0% 5.5% 8.0%Energy -2.4% -2.8% -1.0% -2.3% -4.0% -4.5% -5.1% -2.9% -4.5% -7.0% -0.9% -5.6% -0.6% -2.8% -3.2% -11.7%Financials 0.6% 0.5% 3.9% -2.0% -2.6% -2.8% -2.1% -2.1% -2.8% -4.7% -1.4% -4.9% 1.1% -2.5% 0.2% 9.8% 2.8%Healthcare 2.1% 3.0% 0.3% 0.4% 0.8% 5.1% 0.0% -5.1% 5.1% 0.0% 0.1% 3.6% 3.7% -0.8% 2.1% 0.0%Industrials -0.2% -0.4% 0.9% -0.2% -3.0% -3.8% -0.9% -0.2% -3.8% -2.6% -1.6% -5.7% -6.7% -2.8% 1.0% 0.8% -0.9%Information Technology 0.6% 0.9% -2.3% 2.2% -0.8% -0.9% 0.8% -0.9% -4.7% 1.1% 3.7% 6.1%Materials -1.5% 0.4% -2.1% -2.1% -3.1% -3.7% -2.9% -1.8% -3.7% -6.1% -2.3% -1.5% -4.7% -4.0% -1.5% 10.4%Telecoms -1.2% -2.8% 1.2% -2.4% -2.8% -2.7% -1.3% -4.1% -2.7% 0.6% -2.2% -4.5% 0.0% -2.7% 2.6% 2.5% 2.2%Utilities -1.0% -0.5% -0.7% -3.6% -2.0% -1.1% -4.0% -0.9% -1.1% 1.3% -1.0% -4.2% -0.5% -4.3% -2.3% 3.4%Region / Country Benchmark

-0.3% -0.1% 0.4% -0.9% -2.5% -2.3% -2.8% -2.7% -2.3% -4.0% -0.4% -3.4% 1.0% -2.3% -1.4% 6.1% 1.5%

Change vs dollar 1.4% 0.6% -1.2% -1.0% 0.1% 0.4% -0.3% -0.5% 0.7% -1.3%

YTD 2014

EM

F L

atin

A

mer

ica

Bra

zil

Mex

ico

Ch

ile

Arg

entin

a

Per

u

Co

lom

bia

EM

Eu

rop

e&

ME

So

uth

Afr

ica

Ru

ssia

Tu

rkey

Po

lan

d

Hu

ng

ary

Cze

ch R

epu

blic

Eg

ypt

Gre

ece

Consumer Discretionary -0.3% -2.4% 4.9% -5.9% 4.6% 3.0% -0.3% -4.0% 11.6%Consumer Staples -4.1% -3.8% -3.4% -7.9% -4.0% -7.8% -3.3% -5.8% -7.2% -7.3%Energy -5.1% -5.3% -0.9% -1.0% -5.6% -3.1% 1.9% -1.8% 0.0% 0.7% -1.2%Financials -2.1% -2.6% 0.2% -1.1% -6.2% -0.9% -2.0% -0.3% -1.8% -0.6% 1.2% 0.8% 9.3% 2.0% 4.1% 14.5%Healthcare 0.0% -7.0% 5.4% -3.1% 8.0%Industrials -0.9% -3.3% 1.5% 2.3% 3.7% 1.0% 5.7%Information Technology 0.8% 0.7%Materials -2.9% -6.5% 2.8% 4.5% 2.3% -2.8% -0.6% 0.9% 1.6% 5.6% -3.5%Telecoms -1.3% 8.2% -3.3% -0.1% 5.5% -1.8% -3.1% -3.5% -0.8% 2.3% -0.3% 5.6% 20.4%Utilities -4.0% -5.2% -1.8% -3.0% -0.9% -0.5% -0.4% 5.3%

Region / CountryBenchmark

-2.8% -3.7% -0.5% -1.8% -1.2% 0.5% -3.3% -1.8% -0.3% -1.7% 0.3% -0.2% 5.9% 0.5% 4.6% 12.8%

Change vs dollar 0.1% -0.7% -0.7% -2.8% -0.4% -0.7% -3.1% -1.5% -1.7% -1.5% -2.4% -1.8% -0.2% 1.4%

Source: Bloomberg, MSCI. 15 January 2014.

Notes: Regional headings first sorted by regional weights in the MSCI EMF and then country headings from left to right by relative weights within the MSCI EMF

Indices: Regions in US$ and countries in local currency. Local currency movements against the dollar: appreciation / (depreciation).

Country and sector cross sections in italic blue have outperformed their indices by more than 2%; numbers in red have underperformed their indices by more than 2%.

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82

Emerging Markets Equity Research22 January 2014

Adrian Mowat(852) [email protected]

Equity Markets Liquidity Monitor

Country StockFF

Mkt CapDaily Trading Value

(US$ bn)Daily Velocity Ratio (%)

Exchange (US$ Bn) 1 Wk Avg 3 MMA 13 Avg 1 Wk Avg 3M Avg 13 Avg

Developed MarketsUS NYSE + NASDAQ + AMEX 20,833 39 42 38 0.19 0.21 0.21UK London Stk Exchange 3,694 6 6.1 6.5 0.16 0.17 0.19Japan Tokyo Stk Exchange 3,501 22 22 25 0.64 0.63 0.76Australia ASX 1,319 2.1 3.6 4.3 0.16 0.26 0.32HK HKSE 2,197 7.0 5.9 5.9 0.32 0.27 0.28Singapore SSE 339 0.8 0.8 1.1 0.23 0.22 0.32EM AsiaChina Shanghai & Shenzhen A 1,670 15 20 21 0.89 1.19 1.29India BSE & NSE 357 2.2 2.1 2.3 0.61 0.61 0.64Indonesia JSE 141 0.3 0.4 0.6 0.2 0.28 0.33Korea KSE 749 3.70 3.40 3.60 0.50 0.45 0.49Malaysia Bursa Malaysia 203 0.50 0.50 0.60 0.27 0.25 0.3Philippines PSE 61 0.10 0.20 0.30 0.17 0.31 0.38Taiwan TWSE & OTC 646 4.40 3.3 3.20 0.67 0.52 0.53Thailand TSE 114 1.10 1.0 1.60 0.97 0.80 1.12EMEARussia RTS + MICEX + DR 358 0.90 1.40 1.50 0.25 0.42 0.44South Africa Johannesburg Stk Exchange 548 0.80 1.30 1.70 0.13 0.23 0.3Turkey Istanbul Stk Exchange 79 1.50 1.40 1.70 1.91 1.54 1.61Poland Warsaw Stk Exchange 98 0.70 0.70 0.70 0.70 0.68 0.76Egypt Egyptian Exchange 38 0.08 0.07 0.05 0.20 0.18 0.14LatAmBrazil Bovespa + DR 474 4.80 4.3 4.8 0.99 0.83 0.86Mexico Mexico Stk Exchange + DR 288 1.20 1.40 1.70 0.41 0.49 0.54Chile Santiago Stk Exchange 99 0.10 0.14 0.18 0.10 0.14 0.15Colombia Bogota Stk Exchange 56 0.03 0.08 0.09 0.05 0.13 0.14Peru Lima Stk Exchange 36 0.04 0.02 0.02 0.10 0.06 0.06Argentina Argentina Stk Exchange 17 0.20 0.16 0.14 1.19 0.9 0.98

Source: Bloomberg, J.P. Morgan. Notes: Market cap uses all exchanges covered by Bloomberg for a specific country and primary security of

company only.

The latest one week average is red (gray box in B&W, dark blue in blue scale) if less than 90% of the three month average or blue (solid black box in

B&W, light blue in blue scale) if greater than 110% of the three month average.

To calculate the free float we use the MSCI free float factor for all markets except for Hong Kong, Russia and South Africa where we calculate the

free float for the Hong Kong Composite Index, MICEX, and JSE.

Trading value calculation for Russia, Mexico and Brazil, includes value of depository receipts traded (DR) along with local stock exchange turnover.

South Africa and Australia market capitalization and trading value includes only local listed portion of dual listed stocks. Velocity Ratio = (Trading

Value / Free float market cap) * 100Updated 10 January 2014

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83

Emerging Markets Equity Research22 January 2014

Adrian Mowat(852) [email protected]

Monitoring Inflation: The real threat to EM equitiesCentral bank

Inflation JPM f'cast CPI (YoY) CPI (YoY) CPI (%)FOOD CPI

(YOY) CORE CPI (%)Policy Rate Policy Rate Policy Rate

Country Inflation Rate Target/Est (%) CY2014 Date Pre. Latest Mom 3M ann Pre. Latest YoY 3M ann Current Last Change Next Change

Developed MarketsUnited States Chained CPI na 1.6 Nov-13 0.9 1.2 0.0 0.6 1.2 1.1 1.7 1.6 0.13 16 Dec 08 (-87.5bp) 4Q 15 (+25bp)US core PPI Core PPI SA na na Dec-13 1.3 1.4 0.3 2.0 - - - - - - -US Unit Labor Cost LC Nonfarm na na Sep-13 2.0 2.1 NA (1.4) - - - - - - -Euro Area CPI under 2% 1.6 Dec-13 0.9 0.8 0.3 0.5 1.4 1.1 0.7 1.1 0.25 7 Nov 13 (-25bp) 4Q 16 (+25bp)Japan CPI na -0.7 Nov-13 1.1 1.5 0.1 2.0 1.4 1.9 0.5 0.8 0.05 5 Oct 10 (-5bp) On holdAustralia CPI 2 - 3 2.9 Sep-13 2.4 2.2 NA 4.8 1.1 (0.6) na na 2.50 6 Aug 13 (-25bp) 4 Feb 14 (-25bp)Hong Kong CPI na 2.3 Nov-13 4.3 4.3 0.3 14.5 4.5 4.4 4.2 5.4 0.50 17 Dec 08 (-100bp) 4Q 15 (+25bp)Singapore CPI na 2.8 Nov-13 2.0 2.6 0.7 4.2 2.5 2.6 2.8 6.3 - - -

EM AsiaChina CPI 4% 3.3 Dec-13 3.2 2.5 (0.8) (2.8) 5.9 4.1 1.8 1.9 6.00 7 Jul 12 (-31bp) On holdKorea CPI 3.0 (±1) 2.9 Dec-13 1.2 1.1 0.1 (0.8) (0.5) (0.9) 1.9 1.9 2.50 9 May 13 (-25bp) 4Q 14 (+25bp)Indonesia CPI 4.5 (±1) 5.1 Dec-13 8.4 8.4 (0.2) 3.1 12.2 11.4 5.2 6.2 7.50 12 Nov 13 (+25bp) 2Q 14 (+25bp)India WPI 7% 9.6 Dec-13 7.5 6.2 (1.3) (3.3) 19.9 13.7 3.0 2.0 7.75 29 Oct 13 (+25bp) 1Q 14 (+25bp)India (CPI) CPI Combined na na Dec-13 11.2 9.9 (11.6) 1.2 na na na na - - -Malaysia CPI na 1.7 Nov-13 2.8 2.9 0.3 6.1 3.7 3.9 1.4 2.1 3.00 5 May 11 (+25bp) On holdPhilippines CPI 4.0 (±1) 3.8 Dec-13 3.3 4.1 0.7 5.4 4.6 4.0 2.5 1.2 3.50 25 Oct 12 (-25bp) 4Q 14 (+25bp)Thailand CPI 0.5 - 3.0 3.3 Dec-13 1.9 1.7 0.1 1.6 0.9 0.7 0.5 1.6 2.25 27 Nov 13 (-25bp) 1Q 15 (+25bp)Taiwan CPI na 1.0 Dec-13 0.7 0.3 (0.1) (4.2) 2.7 1.4 1.1 3.1 1.88 30 Jun 11 (+12.5bp) 1Q 15 (+12.5bp)

Latin AmericaBrazil CPI IPCA 4.5 (±2) 5.0 Dec-13 5.8 5.9 0.9 8.4 8.6 8.5 5.7 6.6 10.00 27 Nov 13 (+50bp) 15 Jan 14 (+25bp)Colombia CPI 3.0 (±1) 4.3 Dec-13 1.8 1.9 0.3 (0.9) 0.6 0.9 na na 3.25 22 Mar 13 (-50bp) Jul 14 (+25bp)Mexico CPI 3.0 (±1) 4.2 Dec-13 3.6 4.0 0.6 8.2 3.8 4.1 2.8 2.7 3.50 25 Oct 13 (-25bp) 2Q 15 (+25bp)Peru CPI 2.0 (±1) 1.5 Dec-13 3.0 2.9 0.2 (0.1) 2.9 2.2 3.0 3.2 4.00 7 Nov 13 (-25bp) On holdChile CPI NSA 3.0 (±1) 1.4 Dec-13 2.4 3.0 0.6 4.5 4.5 4.9 2.3 3.7 4.50 19 Nov 13 (-25bp) 18 Feb 14 (-25bp)

Europe, Middle East and AfricaCzech Republic CPI 2.0 (±1) 1.5 Dec-13 1.1 1.4 0.9 4.4 4.1 4.9 0.4 (1.8) 0.05 1 Nov 12 (-20bp) On holdHungary CPI 3% 4.9 Dec-13 0.9 0.4 2.0 6.9 0.5 0.2 3.5 2.7 3.00 17 Dec 13 (-20bp) 26 Jan 14 (-10bp)Poland CPI 1.5 - 3.5% 2.6 Dec-13 0.6 0.7 (0.5) (1.2) 2.0 1.9 1.4 1.2 2.50 3 Jul 13 (-25bp) 4Q 14 (+25bp)Russia CPI 5-6% Dec-13 6.4 6.5 1.9 10.5 7.6 7.5 1.4 4.6 5.50 13 Sep 12 (+25bp) 2Q 14 (-25bp)South Africa CPI 3-6% 4.3 Nov-13 5.5 5.3 0.1 3.1 4.2 3.7 5.3 5.4 5.00 19 Jul 12 (-50bp) Sep 14 (+50bp)Greece CPI 2% - Dec-13 (2.9) (1.7) 0.9 (2.1) (1.2) (0.8) (4.3) 8.7 0.25 - -Turkey CPI 5.0 (±2) 8.6 Dec-13 7.3 7.4 0.5 9.4 9.8 9.7 7.1 9.5 7.30

Source: J.P. Morgan Economics, Bloomberg. Note: Current inflation data for countries which outside/above target range is highlighted.

# Countries where central banks target is not available. We have given J.P. Morgan Economic estimates.

No target is available for China, but general expectation is that the Central Bank would continue raising rates when the headline CPI rises above 3.0 % Updated as of 15 Jan 2014

In case of Taiwan, Estimate by DGBAS,CB targets M2 growth (2.5-6.5% for 2011)

Russia's CBR is not yet in a full-fledged inflation targeting, so they can change the target during the year.

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84

Emerging Markets Equity Research22 January 2014

Adrian Mowat(852) [email protected]

Outlook: Market DriversGlobal and developed market drivers

Country Positive NegativeGlobal Acceleration in DM growth Bond yields grinding higherUS Recovering housing market, fiscal drag easing Higher bond yields. higher mortgage rates, declining NIMsEurope ECB turning more accommodative, signs of economic recovery – exiting recession, peripheral spreads

compressingBanks deleveraging, need for more restructuring in peripheral Europe

UK Strong domestic recovery and still supportive BoE High commodity exposureJapan New PM's pro-growth policy of fiscal boost and inflation targeting, more competitive Yen, QQE Rising energy costs and fiscal sustainability worriesAustralia Low sovereign debt, monetary policy flexibility, high dividend yield market attracting local and global flows. Rising risk to growth from capex/terms of trade downturn, currency fragility, high household debt levels,

continued dependence on wholesale funding of banks.Hong Kong Stabilizing property price, slower land sales. DM economic recovery drives HK exports. Closer integration to

Pearl River Delta is positive in the long run.Vulnerable to the Fed’s policy normalization. Economic fundamentals remain weak with slowly recovering GDP. Credit risk from trade financing for banks.

Singapore We expect a modest rebound in 2014 GDP growth expectations with general economic conditions starting to rebound against 2Q13 lows. General economic growth for 2014 is expected to benefit from low-base effects in 2013 (note that Street has lowered GDP forecasts seven times since January 2013).

Ongoing foreign labor tightening is expected to structurally impact corporate earnings and GDP growth, with long-term GDP growth to moderate from a 10-year historical CAGR of 6.2% to 4.1% on our estimates. We also estimate Singapore to transition up to 172,000 jobs away from Manufacturing into Services while progressing into a productivity-led growth model, which would create long-term structural drag.

Source: J.P Morgan

Emerging Market Drivers

Country Positive NegativeChina Stabilizing growth prospects; valuations partly discounting fundamental weakness Less policy flexibility, growth sectors expensive, excessive leverageBrazil Large and liquid market offering many bottom up options, large infrastructure investment program, labor

market still sturdyLarge share of commodity stocks in the index, government interventionism, high inflation, consensus earnings are too high

Korea Recovery in domestic demand, benefitting from DM economic growth Weakening of the JPY

Taiwan Recovery in the US and the strengthening purchasing power in the developed markets should support the export sector. PMI has stayed above 50 for 3 consecutive months. We are positive on upstream tech supported by Apple production shift and normalizing inventory level. Selective non-tech sectors provide resilient earnings growth, i.e. textile, contact lens, and bicycle. On the other hand, macro environment and policy support the financial sector.

Taiwan is vulnerable to the external environment. Domestic consumption and employment are showing sluggish momentum

South Africa Cheap ZAR could bounce back. Pick up in commodity prices. Labour relations could beat rock-bottom expectations

Policy paralysis. Growth remains sluggish. Consumer credit growth remains weak. Weak and volatile ZAR

India Reduced trade deficit, RBI's policy normalization, Good monsoon and consumption boost, Pre-election spending

QE Tapering, Sticky inflation, Limited signs of revival in investment cycle, Lack of domestic investor interest in Financial savings

Russia Global value rally into Q4 helps Russia, the least expensive EM. Government delivers on dividend hopes in state-owned big caps

Governance. Policy risk. Sluggish macro with slow GDP growth, decelerating consumption and high inflation.

Mexico High correlation to US manufacturing recovery, undervalued FX, underpenetrated credit sector, internal economy picking up from government spending & manufacturing activity, reform agenda to boost growth, low inflation allows easing monetary policy from Central Bank.

High valuations, earnings disappointment, no room for disappointment on reforms or economic growth, depth of market.

Malaysia UMNO general assembly concluded, more policy certainty; government addresses fiscal position, oil and gas/railway-related capex fueling domestic growth, CPO price rise on supply tightness/bio fuel blending requirements, increased tourist arrivals on the back of Visit Malaysia Year 2014.

Diminishing current account surplus, government fiscal consolidation suggests lower overall government capex, property demand slowdown on cooling measures, moderating consumption growth on the back of subsidy cuts, 3-year peak in foreign ownership.

Indonesia Healthy transmission of nominal GDP growth to EPS growth, reform thrust picked up with fuel price increases and recent BI actions, underweight investor positioning

Infrastructure bottlenecks, financing persistent CA deficit, entering 2014 election cycle, decelerating economic growth

Turkey Best long-term story in CEEMEA. World’s best demographics. Consensus well below guidance on banks High CAD. CBRT looking to keep rates steady but let FX take the brunt of adjustment.Thailand Flexible monetary condition, healthy corporate balance sheet, strong FDI, increase in public spending Political uncertainties, high household debt, weaker than expected external demand, negative EPS revision

Poland Further upside from European recovery. Negative EPS revisions turn up again Pension fund reform cut inflows and mid-cap valuations. Expensive stocks come back to earthGreece Low valuations, a return to economic growth and falling risk premium. EM funds are yet to buy in post-MSCI

movesDebt/GDP still high. Medium-term growth a huge challenge. Government has a small minority. Banks no longer cheap post-rally.

Czech Rep. Weathered EM bond sell-off like a DM. Faster eurozone growth should mean faster 2H13 & 2014 growth. Low-beta market in an EM rallyPhilippines Rising investment spending, improving consumption driven by steady remittances flow, greatly improved

fiscal position, positive CA position, ample domestic liquidityIncrease in interest rates, government execution on infrastructure projects, upward inflation pressure from weather-related disturbances

Source: J.P Morgan Updated as of 15 January 2014

Page 85: Key Trades and Risks - Zarifis...2013 Market performance 3Q GDP YoY 2012 EPS 2013E EPS Greece 40.0 (3.0) (140.4) 20.1 Ireland 33.0 1.7 (0.5) 2.5 Spain 22.2 (1.1) 44.9 54.1 Portugal

85

Emerging Markets Equity Research22 January 2014

Adrian Mowat(852) [email protected]

Profit Outlook: Earnings Forecasts Matrix for Countries and SectorsWeight EPS Growth Weight EPS Growth Weight EPS Growth

Emerging Markets (%) JPMorgan Consensus China (%) J.P. Morgan Consensus India (%) JPMorgan ConsensusMedian 2013 2014 Median 2013 2014 Median 2013 2014 Median 2013 2014 Median 2013 2014 Median 2013 2014

Total Market 100.0 - - - 8.7 9.9 11.8 Total Market 100.0 14.4 11.2 10.2 11.5 11.3 9.3 Total Market 100 11.3 10.9 20.3 13.1 8.7 15.4Consumer Discretionary 8.9 - - - 10.5 8.5 12.3 Consumer Discretionary 5.3 26.3 38.7 19.8 20.2 34.1 20.5 Consumer Discretionary 6.5 13.1 10.7 16.3 13.1 11.1 17.7Consumer Staples 8.6 - - - 7.7 3.6 19.1 Consumer Staples 6.1 13.1 11.7 19.5 9.2 1.1 18.9 Consumer Staples 10.8 19.4 22.8 19.7 18.8 22.5 21.8Energy 11.1 - - - 2.4 -3.4 2.3 Energy 13.6 -12.5 -6.5 2.2 0.3 -1.3 5.0 Energy 11.8 1.0 8.7 10.1 3.6 3.6 9.5Financials 26.7 - - - 11.2 22.7 9.6 Financials 38.0 17.8 14.9 10.3 12.2 13.1 9.3 Financials 23.2 12.5 9.9 23.7 15.2 12.5 17.1Health Care 1.7 - - - 21.7 20.4 22.7 Health Care 1.6 16.9 14.7 17.1 25.6 17.7 19.1 Health Care 7.0 23.3 26.4 25.2 21.7 22.7 23.9Industrials 6.4 - - - 6.3 -16.9 40.8 Industrials 6.6 10.6 7.8 14.5 10.3 12.7 12.6 Industrials 4.3 4.0 -12.9 8.9 0.4 -10.1 6.4Information Technology 16.2 - - - 15.0 30.7 15.8 Information Technology 11.5 33.2 55.1 50.5 26.5 66.2 30.5 Information Technology 23.5 22.3 18.1 23.3 22.2 20.1 18.1Materials 9.6 - - - -3.4 -9.6 21.5 Materials 3.1 3.8 16.8 27.9 -2.1 13.5 16.3 Materials 6.6 -18.2 1.4 36.3 -9.9 -4.3 16.8Telecommunication Services 7.4 - - - 5.0 5.3 5.7 Telecommunication Services 10.4 12.1 0.5 -3.1 15.2 1.9 -1.4 Telecommunication Services 2.5 89.1 56.6 38.3 49.0 41.6 51.0Utilities 3.4 - - - 4.0 44.7 17.0 Utilities 3.8 22.2 38.5 9.4 19.5 36.4 6.8 Utilities 3.7 5.8 6.8 14.4 -0.7 -6.0 3.9

Weight EPS Growth Weight EPS Growth Weight EPS GrowthIndonesia (%) JPMorgan Consensus Korea (%) JPMorgan Consensus Malaysia (%) JPMorgan Consensus

Median 2013 2014 Median 2013 2014 Median 2013 2014 Median 2013 2014 Median 2013 2014 Median 2013 2014Total Market 100.0 8.5 1.5 8.8 6.7 1.1 11.6 Total Market 100.0 1.6 7.7 20.3 -1.8 2.5 26.1 Total Market 100.0 3.0 -2.2 12.2 3.2 -2.0 8.8Consumer Discretionary 18.9 7.5 -5.1 15.1 4.1 -6.8 15.9 Consumer Discretionary 17.4 4.0 3.4 16.2 8.1 4.6 11.9 Consumer Discretionary 10.4 -2.4 -22.9 30.9 0.4 -17.9 9.9Consumer Staples 13.5 10.8 7.2 28.2 10.3 5.7 17.6 Consumer Staples 4.9 -3.8 -3.5 13.6 -2.7 -4.1 15.5 Consumer Staples 10.8 -0.8 -6.8 7.3 -2.8 -7.9 10.0Energy 3.1 -44.6 NA 14.9 -39.3 NA 2.9 Energy 2.2 -1.2 -2.5 30.0 -1.8 -1.8 35.2 Energy 6.1 22.9 21.3 27.7 22.7 22.2 35.2Financials 33.7 18.8 13.2 -3.9 17.3 12.4 10.0 Financials 14.3 -9.4 -22.3 23.8 -19.6 -34.8 25.2 Financials 28.5 6.8 2.3 10.7 6.8 3.1 6.7Health Care 3.0 12.5 12.5 19.4 12.5 12.5 19.4 Health Care 0.7 11.8 10.1 44.4 11.8 10.1 44.4 Health Care 2.0 -20.4 -20.4 29.5 -20.4 -20.4 29.5Industrials 4.1 -16.8 -22.5 40.5 -13.3 -16.6 16.4 Industrials 12.0 2.9 -48.1 140.9 6.0 -50.7 132.3 Industrials 13.1 12.9 -3.0 12.6 3.7 -5.8 12.6Information Technology 0.0 NA NA NA NA NA NA Information Technology 36.1 9.9 40.2 5.2 2.2 30.5 12.1 Information Technology 0.0 NA NA NA NA NA NAMaterials 7.2 9.3 9.7 10.9 9.3 9.7 10.9 Materials 9.5 -10.1 -19.7 40.0 -14.8 -20.5 48.0 Materials 4.7 1.5 1.5 3.1 2.5 3.4 5.2Telecommunication Services 11.8 11.9 5.6 17.2 11.6 6.9 9.4 Telecommunication Services 0.9 5.0 NM 10.8 -3.5 NM 30.0 Telecommunication Services 12.0 8.3 4.7 -1.7 6.5 11.4 7.5Utilities 4.7 -6.4 -6.4 5.5 -17.5 -17.5 9.1 Utilities 1.8 12.5 NM NM -71.4 NM NM Utilities 12.5 14.9 18.9 11.6 4.4 7.3 3.1

Weight EPS Growth Weight EPS Growth Weight EPS GrowthPhilippines (%) JPMorgan Consensus Taiwan (%) JPMorgan Consensus Thailand (%) JPMorgan Consensus

Median 2013 2014 Median 2013 2014 Median 2013 2014 Median 2013 2014 Median 2013 2014 Median 2013 2014Total Market 100.0 12.3 6.2 5.7 13.1 7.1 5.1 Total Market 100.0 14.1 32.6 9.5 14.1 33.1 6.9 Total Market 100.0 14.4 10.1 14.7 14.5 12.3 12.1Consumer Discretionary 4.8 28.2 28.2 27.4 23.6 23.6 16.8 Consumer Discretionary 4.9 16.1 77.6 -31.5 14.0 70.1 -31.2 Consumer Discretionary 4.0 18.1 15.7 15.6 15.8 15.0 14.0Consumer Staples 7.1 NA NA NA NA NA NA Consumer Staples 2.9 4.5 7.8 12.8 7.2 10.7 8.8 Consumer Staples 9.9 -8.2 -3.8 55.0 -8.6 -4.3 54.9Energy 0.0 NA NA NA NA NA NA Energy 0.7 NA NA 16.3 NA NA 16.3 Energy 21.5 -2.1 -3.9 12.1 -1.5 1.5 7.9Financials 37.8 21.2 20.7 5.4 21.8 24.7 5.0 Financials 18.5 17.2 30.0 2.8 22.5 28.0 -1.9 Financials 35.9 19.2 19.6 13.5 16.8 18.2 10.3Health Care 0.0 NA NA NA NA NA NA Health Care 0.1 22.9 22.9 18.3 22.9 22.9 18.3 Health Care 1.4 2.6 2.6 15.6 2.6 2.6 15.6Industrials 31.5 5.5 -2.0 12.0 6.5 -0.6 10.8 Industrials 3.3 5.0 4.6 47.9 -1.7 -12.7 60.8 Industrials 4.2 45.4 58.8 -7.0 70.6 72.0 -9.3Information Technology 0.0 NA NA NA NA NA NA Information Technology 52.4 11.5 28.7 15.4 11.3 29.8 13.2 Information Technology 0.0 NA NA NA NA NA NAMaterials 0.0 NA NA NA NA NA NA Materials 12.2 22.3 83.0 14.5 30.5 93.2 11.7 Materials 12.5 27.2 18.1 14.8 22.1 16.9 14.3Telecommunication Services 11.6 10.3 5.6 8.4 3.0 3.8 8.7 Telecommunication Services 4.9 8.3 3.8 3.1 8.3 3.8 2.1 Telecommunication Services 9.4 1.0 -4.0 28.9 5.7 1.9 30.8Utilities 7.2 -9.8 -12.9 -0.6 -15.7 -17.3 -0.2 Utilities 0.0 NA NA NA NA NA NA Utilities 1.3 112.2 112.2 0.4 56.1 56.1 10.7

Weight EPS Growth Weight EPS Growth Weight EPS GrowthSouth Africa (%) JPMorgan Consensus Brazil (%) JPMorgan Consensus Mexico (%) JPMorgan Consensus

Median 2013 2014 Median 2013 2014 Median 2013 2014 Median 2013 2014 Median 2013 2014 Median 2013 2014Total Market 100.0 - - - 12.4 3.9 11.8 Total Market 100.0 - - - 11.1 3.6 19.7 Total Market 100.0 - - - 0.1 -4.9 14.4Consumer Discretionary 23.4 - - - 19.1 16.9 19.3 Consumer Discretionary 4.9 - - - 12.6 17.0 22.5 Consumer Discretionary 9.0 - - - 5.1 2.6 11.3Consumer Staples 5.4 - - - 12.8 10.8 12.6 Consumer Staples 17.3 - - - 17.7 24.9 25.5 Consumer Staples 24.8 - - - 2.9 -6.2 16.4Energy 10.5 - - - 7.3 11.6 -0.5 Energy 14.4 - - - 18.3 15.9 25.3 Energy 0.0 - - - NA NA NAFinancials 26.1 - - - 15.8 10.3 11.5 Financials 29.1 - - - 2.7 0.2 16.1 Financials 17.5 - - - 12.1 15.8 12.0Health Care 6.1 - - - 36.3 32.4 23.6 Health Care 0.7 - - - 99.5 84.2 16.2 Health Care 1.0 - - - 13.4 13.4 21.8Industrials 3.9 - - - 9.3 8.4 7.9 Industrials 4.8 - - - 16.1 4.9 32.2 Industrials 10.1 - - - -2.4 -3.8 12.6Information Technology 0.0 - - - NA NA NA Information Technology 3.1 - - - 21.6 17.5 14.7 Information Technology 0.0 - - - NA NA NAMaterials 10.8 - - - 3.0 -41.6 17.0 Materials 17.6 - - - 3.5 -0.4 21.1 Materials 18.2 - - - -31.2 -33.4 45.3Telecommunication Services 13.9 - - - 17.3 21.2 13.0 Telecommunication Services 3.1 - - - -17.9 -15.0 5.1 Telecommunication Services 19.3 - - - -3.9 -3.9 4.9Utilities 0.0 - - - NA NA NA Utilities 5.0 - - - 1.5 79.2 8.6 Utilities 0.0 - - - NA NA NA

Weight EPS Growth Weight EPS Growth Weight EPS GrowthRussia (%) JPMorgan Consensus Poland (%) JPMorgan Consensus Turkey (%) JPMorgan Consensus

Median 2013 2014 Median 2013 2014 Median 2013 2014 Median 2013 2014 Median 2013 2014 Median 2013 2014Total Market 100.0 - - - 3.5 -0.9 -2.2 Total Market 100.0 - - - -10.8 -22.9 2.8 Total Market 100.0 - - - 10.9 7.3 7.5Consumer Discretionary 0.0 - - - NA NA NA Consumer Discretionary 1.7 - - - -33.3 -33.3 12.1 Consumer Discretionary 4.9 - - - 5.0 8.2 15.8Consumer Staples 6.9 - - - 29.6 29.6 20.9 Consumer Staples 2.9 - - - -6.6 -13.1 27.1 Consumer Staples 14.6 - - - 14.6 17.7 9.3Energy 55.3 - - - 6.7 -5.7 -6.7 Energy 12.8 - - - -63.3 -42.3 41.3 Energy 4.3 - - - -28.6 -28.6 15.4Financials 19.4 - - - 9.8 7.9 11.5 Financials 57.3 - - - -4.8 -9.5 9.0 Financials 49.8 - - - 9.2 9.7 4.6Health Care 0.0 - - - NA NA NA Health Care 0.0 - - - NA NA NA Health Care 0.0 - - - NA NA NAIndustrials 0.0 - - - NA NA NA Industrials 0.0 - - - NA NA NA Industrials 13.1 - - - 13.5 6.1 16.2Information Technology 0.0 - - - NA NA NA Information Technology 0.0 - - - NA NA NA Information Technology 0.0 - - - NA NA NAMaterials 7.9 - - - -30.6 -18.6 8.5 Materials 12.2 - - - -30.3 -38.6 -12.2 Materials 4.0 - - - 41.8 37.9 4.3Telecommunication Services 9.2 - - - 16.7 44.8 2.7 Telecommunication Services 3.4 - - - -63.4 -63.4 -10.1 Telecommunication Services 9.2 - - - -7.4 0.2 9.7Utilities 1.2 - - - -23.8 NA 4.1 Utilities 9.7 - - - -8.6 -10.3 -30.8 Utilities 0.0 - - - NA NA NA

Source: I/B/E/S, MSCI, J.P. Morgan estimates. Note: Average earnings growth calculated based on earnings aggregate of MSCI constituents. Consensus numbers are used for stocks not covered by J.P. Morgan under J.P. Morgan forecasts calculation. Median

numbers are for the year 2013. Updated as of 15 January 2014.

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86

Emerging Markets Equity Research22 January 2014

Adrian Mowat(852) [email protected]

Monitoring the Trend in Country EPS Forecasts (2013 and 2014)World Emerging Markets (EM) EM Asia EM Europe

EM Latin America Korea Taiwan China

Brazil Russia South Africa Mexico

Source: I/B/E/S. Notes: The dashboard aims to show changes in earnings expectations. All year ends are for December. EPS figures are normalized, starting at 100 on base date Feb 2012 for ease of comparison. These numbers are directly from IBES aggregate and may differ from those in the growth expectations pages where adjustments are made for exceptional items. Countries earnings revisions are in local currencies term whereas APxJ regions earnings revisions is in US $ term. Updated as of 9 January 2014

80

85

90

95

100

105

110

115

Feb-12 Aug-12 Feb-13 Aug-13 Jan-14

22

2014

2013

75

80

85

90

95

100

105

110

115

Feb-12 Aug-12 Feb-13 Aug-13 Jan-14

2

2013

2014

80

90

100

110

120

Feb-12 Aug-12 Feb-13 Aug-13 Jan-14

2013

2

2014

80

90

100

110

120

Feb-12 Aug-12 Feb-13 Aug-13 Jan-14

2 2

2013

2014

2

76

87

98

109

120

Feb-12 Aug-12 Feb-13 Aug-13 Jan-14

2

2013

2014

90

95

100

105

110

Feb-12 Aug-12 Feb-13 Aug-13 Jan-14

2

2014

2013

75

85

95

105

115

Feb-12 Aug-12 Feb-13 Aug-13 Jan-14

2

2013

2014

65

75

85

95

105

115

125

135

145

155

Feb-12 Aug-12 Feb-13 Aug-13 Jan-14

2

2014

2013

Page 87: Key Trades and Risks - Zarifis...2013 Market performance 3Q GDP YoY 2012 EPS 2013E EPS Greece 40.0 (3.0) (140.4) 20.1 Ireland 33.0 1.7 (0.5) 2.5 Spain 22.2 (1.1) 44.9 54.1 Portugal

87

Emerging Markets Equity Research22 January 2014

Adrian Mowat(852) [email protected]

Monitoring the Trend in Country EPS Forecasts (2013 and 2014)India Malaysia Thailand Poland

Chile Turkey Philippines Indonesia

Hungary Czech. Republic

Source:I/B/E/S Notes: The dashboard aims to show changes in earnings expectations. All year ends are for December. EPS figures are normalized, starting at 100 on base date Feb 2012 for ease of comparison. These numbers are directly from IBES aggregate and may differ from those in the growth expectations pages where adjustments are made for exceptional items. Countries earnings revisions are in local currencies term whereas APxJ regions earnings revisions is in US $ term. Updated as of 9 January 2014

80

90

100

110

120

Feb-12 Aug-12 Feb-13 Aug-13 Jan-14

22

2013

2014

85

95

105

115

Feb-12 Aug-12 Feb-13 Aug-13 Jan-14

2013

2

2014

75

80

85

90

95

100

105

110

115

Feb-12 Aug-12 Feb-13 Aug-13 Jan-14

2

2013

2014

60

70

80

90

100

110

120

Feb-12 Aug-12 Feb-13 Aug-13 Jan-14

2013

2

2014

50

70

90

110

130

150

Feb-12 Aug-12 Feb-13 Aug-13 Jan-14

2013

2

2014

Page 88: Key Trades and Risks - Zarifis...2013 Market performance 3Q GDP YoY 2012 EPS 2013E EPS Greece 40.0 (3.0) (140.4) 20.1 Ireland 33.0 1.7 (0.5) 2.5 Spain 22.2 (1.1) 44.9 54.1 Portugal

88

Emerging Markets Equity Research22 January 2014

Adrian Mowat(852) [email protected]

Monitoring the Trend in Sector EPS Forecasts (2013 and 2014)Emerging Markets Consumer Discretionary Consumer Staples Energy

Financials Health Care Industrials Information Technology

Materials Telecom Utilities

Source:I/B/E/S Notes: The dashboard aims to show changes in earnings expectations. All year ends are for December. EPS figures are normalized, starting at 100 on base date Feb 2012 for ease of comparison. These numbers are directly from IBES aggregate and may differ from those in the growth expectations pages where adjustments are made for exceptional items. Sector earnings revisions are in US$. Updated as of 9 January 2014

Page 89: Key Trades and Risks - Zarifis...2013 Market performance 3Q GDP YoY 2012 EPS 2013E EPS Greece 40.0 (3.0) (140.4) 20.1 Ireland 33.0 1.7 (0.5) 2.5 Spain 22.2 (1.1) 44.9 54.1 Portugal

89

Emerging Markets Equity Research22 January 2014

Adrian Mowat(852) [email protected]

Value: PE Matrix for Countries and Sectors

12-month forward PE

US

A*

Em

erg

ing

M

arke

ts*

EM

F E

ME

A*

EM

F L

AT

AM

*

EM

F A

sia*

Ko

rea

Tai

wan

Ch

ina

Ind

ia

Mal

aysi

a

Ind

ones

ia

Th

aila

nd

Ph

ilip

pin

es

Consumer Discretionary 18.8 11.7 19.9 18.4 9.5 6.9 16.9 10.7 11.7 12.5 14.0 17.0 28.8Consumer Staples 17.0 20.2 19.2 19.5 21.2 16.6 19.7 23.9 30.6 18.8 14.3 22.7 23.3Energy 13.8 6.5 4.9 7.8 8.6 8.5 27.3 8.2 9.2 21.9 9.4 8.2 NAFinancials 13.3 8.5 8.8 10.4 8.0 9.9 12.4 5.7 12.9 11.9 11.7 8.5 17.4Health Care 16.7 20.3 18.3 19.9 21.2 15.7 34.7 20.5 23.7 37.3 26.6 23.7 NAIndustrials 16.8 13.6 11.1 17.3 13.2 12.1 17.7 11.4 15.2 15.9 12.2 20.3 16.2Information Technology 15.1 11.1 NA 17.2 10.8 7.0 12.7 23.1 17.4 NA NA NA NAMaterials 15.7 12.0 12.8 11.1 12.4 11.5 19.5 8.8 9.7 15.2 13.5 10.7 NATelecommunication Services 15.3 12.5 11.9 12.4 12.7 12.2 16.6 10.8 11.7 23.6 13.0 20.3 14.9Utilities 15.2 11.0 9.0 10.3 12.1 NA NA 12.3 9.5 14.2 9.6 11.9 13.2Market Aggregate 15.7 10.3 8.6 12.1 10.2 8.6 13.9 8.5 13.9 15.0 12.7 10.6 16.9Sector Neutral** 15.0 10.7 9.8 12.3 10.3 9.5 15.5 9.4 12.9 14.3 11.9 11.3 13.4

12-month forward PE

EM

F E

ME

A*

Ru

ssia

*

So

uth

Afr

ica*

Po

lan

d*

Tu

rkey

*

Hu

ng

ary*

Cze

ch R

epu

blic

*

Gre

ece

EM

F L

AT

AM

*

Bra

zil*

Mex

ico

*

Ch

ile*

Consumer Discretionary 19.9 NA 21.0 12.4 11.2 NA NM 18.3 18.4 14.5 25.1 18.9Consumer Staples 19.2 22.0 17.2 10.5 22.5 NA NA NA 19.5 18.8 20.9 15.6Energy 4.9 4.1 9.9 10.0 8.7 8.7 NA 18.4 7.8 7.1 NA NAFinancials 8.8 5.0 11.6 14.2 7.1 8.4 13.4 NM 10.4 9.0 15.7 11.9Health Care 18.3 NA 19.0 NA NA 15.2 NA NA 19.9 23.2 16.8 NAIndustrials 11.1 NA 13.3 NA 9.0 NA NA NA 17.3 15.8 19.1 17.0Information Technology NA NA NA NA NA NA NA NA 17.2 17.2 NA NAMaterials 12.8 11.9 14.1 10.5 9.5 NA NA 52.1 11.1 7.9 27.5 13.4Telecommunication Services 11.9 9.6 13.7 46.3 9.6 NA 16.8 16.7 12.4 15.3 11.8 10.6Utilities 9.0 5.7 NA 10.8 NA NA 9.0 12.6 10.3 8.2 NA 13.2Market Aggregate 8.6 5.2 14.0 12.7 8.7 9.8 11.4 31.8 12.1 10.0 18.0 14.2Sector Neutral** 9.8 7.5 12.6 12.6 9.4 10.6 11.7 13.2 12.3 10.9 13.5 11.6

Source: I/B/E/S, MSCI, J.P. Morgan. Note: Market forecast numbers are derived from bottom-up calculations of each individual MSCI constituents using I/B/E/S estimates. IBES Estimates are not available for Morocco, Jordan, Peru and Colombia.

**Sector neutral PE are calculated by using sector weights of MSCI EM and sector PE of respective markets (MSCI EM sector PE used where country sector does not exist) Updated as of 15 January 2014

Page 90: Key Trades and Risks - Zarifis...2013 Market performance 3Q GDP YoY 2012 EPS 2013E EPS Greece 40.0 (3.0) (140.4) 20.1 Ireland 33.0 1.7 (0.5) 2.5 Spain 22.2 (1.1) 44.9 54.1 Portugal

90

Emerging Markets Equity Research22 January 2014

Adrian Mowat(852) [email protected]

Value: Distribution Tables for PE, PBR, DY and RoE2014E: Price to Earnings Ratio (x) 2014E: Price to Book Value Ratio (x)

Weighted Quartiles Weighted QuartilesAverage Min Lower Median Higher Max Average Min Lower Median Higher Max

Global* 15.7 0.0 12.2 15.5 19.9 1206.3 Global* 2.0 0.1 1.1 1.8 3.1 55.7USA* 17.3 0.0 13.5 16.8 20.9 1206.3 USA* 2.5 0.5 1.5 2.5 4.1 40.6Europe* 15.4 0.0 12.5 15.0 18.3 100.5 Europe* 1.7 0.4 1.1 2.0 3.0 25.3Japan* 27.0 5.4 13.6 17.3 23.3 130.7 Japan* 1.4 0.5 1.0 1.4 1.9 13.4Emerging Markets* 11.5 2.8 9.9 13.3 18.3 193.8 Emerging Markets* 1.4 0.1 1.0 1.6 2.7 55.7China 9.4 2.8 7.7 10.8 15.4 193.8 China 1.4 0.3 0.8 1.3 2.1 10.3Brazil* 12.0 4.7 8.4 14.0 18.5 50.2 Brazil* 1.3 0.2 0.9 1.7 3.5 14.8Korea 10.3 5.1 8.9 11.2 15.0 33.9 Korea 1.1 0.4 0.7 1.0 1.5 8.0Taiwan 15.3 3.5 11.3 14.2 18.5 108.1 Taiwan 1.7 0.5 1.1 1.5 2.3 7.4South Africa* 15.8 8.6 10.7 13.3 16.9 33.9 South Africa* 2.5 0.4 1.4 2.1 3.9 8.3India 16.8 3.8 9.4 14.4 20.9 71.7 India 2.6 0.4 1.2 2.3 4.2 24.5Russia* 5.1 3.1 5.0 6.2 10.4 22.2 Russia* 0.6 0.1 0.5 0.9 1.9 5.6Mexico* 20.7 10.7 16.9 19.9 22.0 27.1 Mexico* 2.6 1.2 1.9 2.5 3.1 13.8Malaysia 16.9 8.3 12.5 16.4 22.2 37.6 Malaysia 2.1 1.0 1.5 1.9 2.7 32.4Greece 12.7 12.8 15.8 17.8 25.7 53.3 Greece 1.0 0.4 1.0 1.3 2.0 2.9Chile* 17.8 8.2 12.4 15.0 17.3 19.6 Chile* 1.6 0.7 1.3 1.6 2.1 3.0Indonesia 13.8 8.1 11.4 13.8 17.0 26.8 Indonesia 3.0 1.0 2.0 2.8 3.6 31.9Turkey* 9.4 6.0 7.5 8.6 11.2 25.7 Turkey* 1.4 0.7 1.0 1.4 2.5 10.6Thailand 12.2 6.4 8.5 13.4 18.4 38.6 Thailand 1.9 0.8 1.3 1.7 3.4 55.7Poland* 13.1 6.5 10.4 12.9 16.1 46.8 Poland* 1.3 0.4 0.7 1.3 1.9 5.2Czech Republic* 9.9 9.0 11.2 13.4 15.1 16.8 Czech Republic* 1.3 1.0 1.4 1.7 1.8 1.8Egypt* 14.3 6.4 8.7 9.9 12.2 17.5 Egypt* 1.1 0.6 0.6 0.8 1.2 2.1Philippines 18.0 11.8 13.9 15.4 19.2 29.0 Philippines 2.6 1.1 2.1 2.6 3.3 6.3Hungary* 11.9 8.4 8.6 8.7 12.0 15.3 Hungary* 0.9 0.7 0.7 0.7 1.1 1.5

2014E: Dividend Yield (%) 2014E: Return on Equity (%)Weighted Quartiles Weighted Quartiles

Average Min Lower Median Higher Max Average Min Lower Median Higher Max

Global* 2.5 0.0 1.3 2.3 3.6 15.1 Global* 13.0 -5.7 8.4 12.5 18.6 181.2USA* 2.0 0.0 0.6 1.7 2.8 14.3 USA* 14.9 0.1 9.8 15.1 21.4 181.2Europe* 3.3 0.0 2.2 3.0 4.3 10.9 Europe* 11.4 1.2 9.2 13.0 18.9 147.5Japan* 1.7 0.0 1.1 1.6 2.1 4.7 Japan* 5.5 1.3 5.9 8.3 10.6 53.1Emerging Markets* 2.8 0.0 1.5 2.6 4.0 15.1 Emerging Markets* 13.0 -5.7 8.9 13.4 18.4 157.5China 3.5 0.0 1.6 2.7 4.3 8.6 China 15.5 0.4 9.3 13.5 17.9 39.6Brazil* 3.9 0.0 1.7 3.5 5.1 15.1 Brazil* 10.8 0.9 9.1 14.1 20.9 86.0Korea 1.1 0.0 0.6 1.3 2.0 7.2 Korea 10.9 3.0 6.4 8.8 12.9 23.6Taiwan 3.1 0.0 2.3 3.4 4.7 8.4 Taiwan 11.8 1.1 8.0 10.9 18.2 39.9South Africa* 3.1 0.5 2.3 3.8 4.9 8.1 South Africa* 16.1 1.5 12.4 17.8 24.1 60.4India 1.5 0.0 0.7 1.5 2.7 5.7 India 16.6 1.3 11.7 17.0 22.2 80.7Russia* 4.3 0.0 2.4 3.7 5.8 8.4 Russia* 13.2 2.3 10.0 13.3 17.6 42.7Mexico* 1.6 0.0 0.5 1.1 2.4 4.9 Mexico* 13.5 -0.5 10.7 13.2 17.4 62.3Malaysia 3.1 0.2 1.9 2.9 3.8 7.1 Malaysia 12.9 4.8 10.6 12.9 15.4 158.1Greece 0.7 0.0 0.1 1.5 2.2 3.7 Greece 11.5 -5.7 2.5 4.7 12.3 13.4Chile* 2.7 0.0 2.2 3.2 4.5 6.1 Chile* 9.5 3.7 8.7 14.4 16.2 21.1Indonesia 2.9 0.0 2.1 2.5 3.3 9.1 Indonesia 22.6 8.7 16.3 20.9 25.4 182.1Turkey* 3.3 1.1 2.1 3.0 4.6 10.0 Turkey* 15.8 7.3 12.0 16.2 21.8 41.3Thailand 3.6 0.0 2.5 3.6 4.8 9.1 Thailand 16.4 4.0 12.3 15.9 18.8 127.9Poland* 4.9 0.0 2.7 3.0 5.0 8.1 Poland* 10.0 2.0 6.0 10.9 13.3 29.5Czech Republic* 6.9 5.3 5.8 6.4 8.1 9.9 Czech Republic* 13.5 10.9 10.9 11.0 12.0 13.0Egypt* 2.5 0.0 0.7 2.4 5.1 8.9 Egypt* 6.9 3.7 7.5 9.3 13.0 22.3Philippines 2.3 0.3 1.3 2.1 2.5 6.9 Philippines 15.0 7.6 12.0 14.9 18.5 28.0Hungary* 2.5 1.7 2.6 3.4 3.7 3.9 Hungary* 8.0 8.5 8.5 8.5 9.1 9.7

Source: Datastream, I/B/E/S, MSCI, J.P. Morgan estimates. Note: Weighted average numbers based on aggregate of MSCI constituents. Consensus numbers area used for stocks not covered by J.P. Morgan. * only consensus numbers are used. 15 January 2014

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91

Emerging Markets Equity Research22 January 2014

Adrian Mowat(852) [email protected]

Value: Demand Classification: MSCI Emerging Markets Index Composition by Countries

MSCI Emerging Markets Free Index

Domestic Demand

Global Capex Global Consumer

Global Price Takers

Total EM Domestic Demand Sector Absolute and relative (vs EMF) Index

EM Global Capex Sector Absolute and relative (vs EMF) Index

EM Global Consumer Sector Absolute and relative (vs EMF) Index

EM Global Price Taker Sector Absolute and relative (vs EMF) Index

China 16.0 0.3 0.4 2.8 19.6

India 3.5 1.6 0.1 1.4 6.6

Indonesia 2.3 0.0 0.1 0.1 2.4

Korea 6.0 3.1 4.9 1.7 15.8

Malaysia 2.9 0.2 0.1 0.7 3.9

Philippines 0.8 0.0 0.0 0.1 0.9

Taiwan 4.2 3.2 3.2 1.3 11.8

Thailand 1.6 0.0 0.0 0.5 2.2

Asia 37.3 8.4 8.8 8.7 63.1

Czech Republic 0.2 0.0 0.0 0.0 0.2

Egypt 0.2 0.0 0.0 0.0 0.2

Hungary 0.1 0.0 0.0 0.2 0.3

Greece 0.4 0.0 0.0 0.1 0.5

Poland 1.4 0.0 0.0 0.3 1.7

Russia 2.2 0.0 0.0 3.8 6.1

South Africa 5.6 0.0 0.0 1.6 7.3

Turkey 1.4 0.0 0.0 0.1 1.5

EMEA 11.7 0.0 0.1 6.0 17.9

Brazil 7.2 0.1 0.1 3.2 10.6

Chile 1.5 0.0 0.0 0.0 1.6

Colombia 0.7 0.1 0.0 0.2 1.0

Mexico 4.5 0.4 0.1 0.5 5.5

Peru 0.2 0.0 0.0 0.2 0.4

LatAm 14.1 0.5 0.2 4.2 19.0

Total 63.1 9.0 9.1 18.9 100.0

Source: Datastream, MSCI. J.P. Morgan. MSCI emerging markets companies have been classified in five categories. Of the five categories, Global Consumer/Capex (Tech-Hardware) weighting equally divided between Global consumer and Global Capex. The above

table contains MSCI free float market capitalization as a percentage of MSCI emerging markets. Charts show the relative absolute and relative performance of emerging markets sectors by demand classification. Updated as of 15 January 2014

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92

Emerging Markets Equity Research22 January 2014

Adrian Mowat(852) [email protected]

Value: Equities relative to Bonds

Relative out performance of equities versus bonds by country (%)

Country 1-month 3-month 6-month 12-month 36-month36-month

annualized

Brazil -1.6 -4.8 6.0 8.6 -18.0 -6.4Chile -0.3 -7.4 -7.4 -23.3 -27.7 -10.3China -4.1 -0.8 13.7 -1.7 -5.4 -1.8Colombia -7.7 -13.4 -6.7 -12.6 -4.2 -1.4Czech 3.6 1.6 16.1 -1.7 -14.0 -4.9Hungary 3.5 -3.7 -17.8 -18.5 -30.4 -11.4India 1.5 2.4 7.7 4.2 8.4 2.7Indonesia 10.1 1.6 -2.5 13.5 22.2 6.9Malaysia -0.8 2.9 2.4 12.0 19.9 6.2Mexico 1.8 7.5 7.2 -2.4 13.9 4.4Peru 5.9 -0.7 6.7 -21.3 -33.6 -12.8Poland -1.6 -4.9 6.5 -1.0 -0.8 -0.3Russia 1.1 -6.0 3.6 -0.3 -13.3 -4.7South Africa 6.8 3.5 12.8 17.3 42.1 12.4Thailand -5.8 -14.7 -13.1 -11.9 17.0 5.4Turkey -6.1 -8.2 -13.6 -12.5 2.0 0.7

Relative value of equities versus bonds by country

CountryGeneric 10

yearsBond Maturity

(years)Bond Yield To

MaturityEarnings

YieldDividend

YieldDDM Implied

GrowthBrazil 10.9 9.2 10.6 10.0 4.2 11.2Chile 4.5 4.9 4.8 7.1 2.9 6.4China 4.6 6.3 4.6 11.8 3.8 6.5Colombia 7.1 7.4 6.0 5.6 3.2 8.0Czech 2.4 5.6 1.7 8.8 6.6 -1.3Hungary 5.4 4.4 4.5 10.2 3.1 5.9India 8.6 9.5 8.9 7.2 1.7 11.6Indonesia 8.5 11.6 8.8 7.9 3.1 11.2Malaysia 4.1 5.9 4.0 6.7 3.3 6.2Mexico 6.5 9.8 6.5 5.6 1.6 9.0Peru 5.6 11.7 6.3 6.9 2.2 7.4Poland 4.4 4.5 3.7 7.9 4.4 3.7Russia 7.9 5.6 7.3 19.3 4.6 11.2South Africa 8.3 11.4 8.3 7.1 3.5 10.4Thailand 4.0 5.9 3.6 9.4 4.1 5.8Turkey 9.9 4.9 9.8 11.5 3.9 11.2

Source: Bloomberg, J.P. Morgan, Datastream, MSCI, IBES Note: GBI-EM Bond Maturity and Yield to Maturity are used for each country. Updated as of 15 January 2014.

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93

Emerging Markets Equity Research22 January 2014

Adrian Mowat(852) [email protected]

Economic Forecasts: Changes in Real GDP ForecastsReal GDP Growth (% Y/Y) Change in Forecasts Past 3 months (%) Economic Momentum Inflation

JPM Consensus JPM Consensus GDP SAAR (% Y/Y)2013E 2014E 2013E 2014E 2013E 2014E 2013E 2014E 1Q13 2Q13E 3Q13E 4Q13E 2013E 2014E

US 1.9 2.9 1.7 2.6 0.3 0.4 0.1 0.0 2.8 2.5 2.5 3.0 1.5 1.4Euro -0.4 1.0 -0.4 1.0 0.0 -0.3 -0.1 0.0 0.8 1.0 1.0 1.5 1.4 0.8Japan 1.7 1.4 1.7 1.6 -0.1 -0.1 -0.2 0.0 3.8 4.0 -4.5 1.2 0.3 3.0China 7.6 7.4 7.7 7.5 0.0 0.1 0.1 0.1 7.8 7.2 6.8 7.2 2.7 3.3Brazil 2.3 2.1 2.3 2.3 -0.2 -0.1 -0.2 -0.2 3.0 2.0 1.8 3.0 6.2 5.8S Korea 2.8 3.8 2.7 3.5 0.0 0.1 0.1 0.0 3.8 3.5 3.8 3.8 1.3 2.3Taiwan 1.9 3.1 2.0 3.4 0.1 0.0 -0.3 -0.1 3.5 na 3.7 4.0 0.8 1.2South Africa 1.9 3.0 1.9 2.8 0.0 -0.1 -0.2 -0.1 3.9 3.1 3.0 3.5 5.7 5.8India 4.6 5.0 5.0 4.8 0.5 0.0 -0.1 0.1 5.3 3.4 5.0 5.5 9.9 9.0Russia 1.5 1.8 1.5 2.4 0.0 -0.4 -0.4 -0.4 3.0 1.3 1.5 2.0 6.8 5.3Mexico 1.2 3.4 1.3 3.5 -0.3 -0.1 -0.2 -0.2 3.6 4.0 3.2 3.5 3.8 4.1Malaysia 4.5 5.5 4.5 5.0 1.2 -0.2 0.0 0.0 5.5 5.5 5.3 5.0 2.0 3.0Chile 4.1 3.7 4.3 4.2 0.0 -0.3 0.0 0.0 1.9 4.0 3.6 3.0 1.8 3.3Indonesia 5.5 4.9 5.7 5.4 0.1 0.0 0.0 -0.3 4.5 5.0 5.0 5.0 7.0 5.7Turkey 3.8 2.5 3.8 3.6 0.2 -1.3 0.2 -0.5 3.5 1.2 2.0 4.3 7.5 6.9Thailand 2.6 3.0 3.3 4.3 -0.1 0.1 -0.7 -0.2 3.5 na 4.0 4.2 2.3 2.6Poland 1.4 2.8 1.4 2.9 0.0 0.0 0.2 0.2 2.5 2.5 2.5 3.0 0.9 1.7Czech Republic -1.4 1.9 -1.3 1.7 -0.5 0.1 -0.3 -0.1 0.9 1.7 2.4 3.6 1.4 0.9Peru 5.0 5.5 5.1 5.5 0.0 -0.5 -0.3 -0.6 7.0 6.0 5.0 5.0 2.8 2.7Colombia 4.2 4.8 4.0 4.5 0.3 0.3 0.0 0.0 4.7 4.5 4.7 4.7 2.2 3.0Philippines 6.9 6.5 6.9 6.4 -0.1 0.9 -0.1 0.4 2.0 9.5 8.2 6.1 2.9 3.9Hungary 1.1 2.3 0.7 1.8 0.5 0.3 0.2 0.3 2.5 2.0 2.0 1.8 1.7 1.7

2013E GDP Growth in EM: J.P. Morgan and Consensus Forecasts Consensus Forecasts for 2013E GDP growth in EM and DM

Source: Bloomberg, J.P. Morgan estimates. Updated 15 January 2014

Note: Consensus estimates for Jordan, Egypt, and Pakistan sourced from WES and Morocco from EIU.

3.8

4.1

4.4

4.7

5.0

5.3

5.6

5.9

6.2

6.5

Jan-12 Apr-12 Aug-12 Nov-12 Feb-13 Jun-13 Sep-13 Jan-14

JC

0.60

0.80

1.00

1.20

1.40

1.60

1.80

2.00

4.04.24.44.64.85.05.25.45.65.86.06.26.4

Jan-12 Apr-12 Aug-12 Nov-12 Feb-13 Jun-13 Sep-13 Jan-14

EM

EM consensus growth forecast (LHS)

DM consensus growth forecast (RHS)

J.P. Morgan EM growth forecast

Consensus EM growth forecast

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94

Emerging Markets Equity Research22 January 2014

Adrian Mowat(852) [email protected]

Economic Forecasts: Policy Rate Trend and Forecasts

Policy RateCountry Official interest rate 1Q'13 2Q'13 3Q'13 4Q'13 Current 1Q'14F 2Q'14F 3Q'14F 4Q'14F Last Change Next ChangeDeveloped MarketsUnited States Federal funds rate 0.125 0.125 0.125 0.125 0.125 0.125 0.125 0.125 0.125 16 Dec 08 (-87.5bp) 4Q 15 (+25bp)Euro Area Refi Rate 0.75 0.50 0.50 0.25 0.25 0.25 0.25 0.25 0.25 7 Nov 13 (-25bp) 4Q 16 (+25bp)Japan Overnight Call Rate 0.05 0.05 0.05 0.05 0.05 0.05 0.05 0.05 0.05 5 Oct 10 (-5bp) On holdLatin AmericaBrazil SELIC overnight rate 7.25 8.00 9.00 10.00 10.00 10.50 10.50 10.50 10.50 27 Nov 13 (+50bp) 15 Jan 14 (+25bp)Mexico Repo rate 4.00 4.00 3.50 3.50 3.50 3.50 3.50 3.50 3.50 25 Oct 13 (-25bp) 2Q 15 (+25bp)Chile Discount rate 5.00 5.00 5.00 4.50 4.50 4.25 4.00 4.00 4.00 19 Nov 13 (-25bp) 18 Feb 14 (-25bp)Europe, Middle East and AfricaCzech Republic 2-week repo rate 0.05 0.05 0.05 0.05 0.05 0.05 0.05 0.05 0.05 1 Nov 12 (-20bp) On holdHungary 2-week deposit rate 5.00 4.25 3.60 3.00 3.00 2.70 2.70 2.70 3.00 17 Dec 13 (-20bp) 26 Jan 14 (-10bp)Poland 7-day intervention rate 3.25 2.50 2.50 2.50 2.50 2.50 2.50 2.50 2.75 3 Jul 13 (-25bp) 4Q 14 (+25bp)Russia Rep Rate 5.50 5.50 5.50 5.50 5.50 5.50 5.25 5.00 5.00 13 Sep 12 (+25bp) 2Q 14 (-25bp)South Africa Repo rate 5.00 5.00 5.00 5.00 5.00 5.00 5.00 5.50 5.50 19 Jul 12 (-50bp) Sep 14 (+50bp)Turkey Top of IRC 5.40 4.75 6.50 7.75 7.30 8.50 8.00 7.50 7.75 - -EM Asia 5.47 5.39 5.51 5.55 5.57 5.60 5.62 5.65 5.71China 1-year working capital 6.00 6.00 6.00 6.00 6.00 6.00 6.00 6.00 6.00 7 Jul 12 (-31bp) On holdKorea Overnight call rate 2.75 2.50 2.50 2.50 2.50 2.50 2.50 2.50 2.75 9 May 13 (-25bp) 4Q 14 (+25bp)Indonesia BI rate 5.75 6.00 7.25 7.50 7.50 7.50 7.75 7.75 7.75 12 Nov 13 (+25bp) 2Q 14 (+25bp)India Repo rate 7.50 7.25 7.50 7.75 7.75 8.00 8.00 8.25 8.50 29 Oct 13 (+25bp) 1Q 14 (+25bp)Malaysia Overnight policy rate 3.00 3.00 3.00 3.00 3.00 3.00 3.00 3.00 3.00 5 May 11 (+25bp) On holdPhilippines Reverse repo rate 3.50 3.50 3.50 3.50 3.50 3.50 3.50 3.50 3.75 25 Oct 12 (-25bp) 4Q 14 (+25bp)Thailand 1-day repo rate 2.75 2.50 2.50 2.25 2.25 2.25 2.25 2.25 2.25 27 Nov 13 (-25bp) 1Q 15 (+25bp)Taiwan Official discount rate 1.88 1.88 1.88 1.88 1.88 1.88 1.88 1.88 1.88 30 Jun 11 (+12.5bp) 1Q 15 (+12.5bp)

Change in policy rates Emerging Markets policy rate

Source: J.P. Morgan Economics, Bloomberg. Bold figures on next column indicate tightening. Updated 15 January 2014.

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95

Emerging Markets Equity Research22 January 2014

Adrian Mowat(852) [email protected]

Economic Forecasts: Currency Movements and ForecastsEuro (EUR) Japanese Yen (JPY) ) South Korean Won (KRW) Taiwan Dollar (TWD) Chinese Yuan Renminbi (CNY) Brazilian Real (BRL)

Russian Rouble (RUB) South African Rand (ZAR) Mexican Peso (MXN) Indian Rupee (INR) Malaysian Ringgit (MYR) Colombian Peso (COP)

Polish Zloty (PLN) Philippine Peso (PHP) Turkish Lira (TRL) Thai Baht (THB) Indonesian Rupiah (IDR) Hungarian Forint (HUF)

Czech Koruna (CZK) Peruvian Nuevo Sol (PEN) Expected % Gain vs USD till December 2014 (J.P. Morgan)

Note: Expected % gain of ARS vs USD till Dec 2013 is -19.16

Source: Bloomberg, Datastream, J.P. Morgan estimates. Updated 15 January 2014

1.12

1.32

1.52

1.72

Jan 05 Jul 07 Dec 09 Jun 12 Dec 14

Consensus

J.P. Morgan

Consensus

J.P. Morgan forecast:end Mar 14: 1.33end Jun 14: 1.32end Sep 14: 1.32

60

70

80

90

100

110

120

Jan 05 Jul 07 Dec 09 Jun 12 Dec 14

J.P. Consensus

J.P. Morgan

ConsensusJ.P. Morgan forecast:end Mar 14: 104end Jun 14: 100end Sep 14: 102

800

900

1,000

1,100

1,200

1,300

1,400

1,500

1,600

Jan 05 Jul 07 Dec 09 Jun 12 Dec 14

Consensus

J.P. Morgan

J.P. Morgan

J.P. Morgan forecast:end Mar 14: 1070end Jun 14: 1040end Sep 14: 1030

27

28

29

30

31

32

33

34

35

36

37

Jan 05 Jul 07 Dec 09 Jun 12 Dec 14

Consensus

J.P. Morgan

JJ.P. Morgan forecast:end Mar 14: 29.30end Jun 14: 29.20end Sep 14: 29.20

5.8

6.2

6.6

7.0

7.4

7.8

8.2

8.6

Jan 05 Jul 07 Dec 09 Jun 12 Dec 14

J.P. Consensus

Consensus

J.P. Morgan

J.P. Morgan forecast:end Mar 14: 6.01end Jun 14: 5.98end Sep 14: 5.96

1.4

1.6

1.8

2.0

2.2

2.4

2.6

2.8

Jan 05 Jul 07 Dec 09 Jun 12 Dec 14

Consensus

J.P. Morgan

JJ.P. Morgan forecast:

end Mar 14: 2.40end Jun 14: 2.45end Sep 14: 2.50

20

24

28

32

36

40

Jan 05 Jul 07 Dec 09 Jun 12 Dec 14

Consensus

J.P. Morgan

Consensus

J.P. Morgan forecast:end Mar 14: 33.09end Jun 14: 33.65end Sep 14: 34.31

5.0

6.0

7.0

8.0

9.0

10.0

11.0

12.0

13.0

14.0

Jan 05 Jul 07 Dec 09 Jun 12 Dec 14

J.P.Morgan

Consensus

J.P. Morgan

J.P. Morgan forecast:

end Mar 14: 10.60end Jun 14: 10.80end Sep 14: 10.75

9.5

10.1

10.7

11.3

11.9

12.5

13.1

13.7

14.3

14.9

15.5

Jan 05 Jul 07 Dec 09 Jun 12 Dec 14

J.P. MorganConsensus

J.P. Morgan

Consensus

J.P. Morgan forecast:end Mar 14: 13.15end Jun 14: 12.90end Sep 14: 12.60

38.0

42.0

46.0

50.0

54.0

58.0

62.0

66.0

Jan 05 Jul 07 Dec 09 Jun 12 Dec 14

Consensus

J.P. MorganJ.P. Morgan forecast:end Mar 14: 65.00end Jun 14: 63.00end Sep 14: 62.00

2.6

2.8

3.0

3.2

3.4

3.6

3.8

4.0

Jan 05 Jul 07 Dec 09 Jun 12 Dec 14

J.P. Morgan

Consensus

Consensus

J.P. Morgan forecast:end Mar 14: 3.30end Jun 14: 3.32end Sep 14: 3.35

1,500

1,700

1,900

2,100

2,300

2,500

2,700

Jan 05 Jul 07 Dec 09 Jun 12 Dec 14

J.P. Morgan

Consensus

Consensus

J.P. Morgan forecast:end Mar 14: 1950end Jun 14: 1950end Sep 14: 1950

1.9

2.1

2.3

2.5

2.7

2.9

3.1

3.3

3.5

3.7

3.9

4.1

Jan 05 Jul 07 Dec 09 Jun 12 Dec 14

J.P. Morgan

Consensus

J.P. Morgan forecast:end Mar 14: 3.23end Jun 14: 3.22end Sep 14: 3.18

36

40

44

48

52

56

60

Jan 05 Jul 07 Dec 09 Jun 12 Dec 14

J.P. Morgan

Consensus

J.P. Morgan forecast:end Mar 14: 44.60end Jun 14: 45.00end Sep 14: 45.25

1.11.21.31.41.51.61.71.81.92.02.12.22.32.42.5

Jan 05 Jul 07 Dec 09 Jun 12 Dec 14

ConsensusJ.P.Morgan

Consensus

J.P. Morgan

J.P. Morgan forecast:end Mar 14: 2.20end Jun 14: 2.15end Sep 14: 2.15

26

28

30

32

34

36

38

40

42

44

Jan 05 Jul 07 Dec 09 Jun 12 Dec 14

Consensus

J.P.

J.P. Morgan

J.P. Morgan forecast:end Mar 14: 33.20end Jun 14: 33.30end Sep 14: 33.40

7,500

8,500

9,500

10,500

11,500

12,500

Jan 05 Jul 07 Dec 09 Jun 12 Dec 14

Consensus

J.P.

J.P. Morgan

J.P. Morgan forecast:end Mar 14: 12300end Jun 14: 12300end Sep 14: 12400

130

143

156

169

182

195

208

221

234

247

260

Jan 05 Jul 07 Dec 09 Jun 12 Dec 14

J.P. Morgan

Consensus

J.P. Morgan forecast:end Mar 14: 228end Jun 14: 227end Sep 14: 223

13

15

17

19

21

23

25

Jan 05 Jul 07 Dec 09 Jun 12 Dec 14

Consensus

J.P.

J.P. Morgan

J.P. Morgan forecast:end Mar 14: 27.00end Jun 14: 27.00end Sep 14: 27.00

2.4

2.7

2.9

3.2

3.4

3.7

Jan 05 Jul 07 Dec 09 Jun 12 Dec 14

J.P. Morgan

Consensus

J.P. Morgan forecast:end Mar 14: 2.80end Jun 14: 2.82end Sep 14: 2.83

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96

Emerging Markets Equity Research22 January 2014

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Economic Forecasts: Credit RiskExternal (2013E) Fiscal Position Sovereign Ratings (Long Term Foreign Debt)

Foreign Current Account External Debt Fiscal Deficit Public Sector DebtReserves 2012 2013F** 2012 2012 2012 2013F** 2012 2013F** Moody’s S & P(US$bil) % GDP % GDP (US$bil) %GDP % GDP % GDP % GDP % GDP Rating Action Date Rating Action Date

China 3820 2.4 2.2 800 10 -2.0 -1.7 18.6 15.9 Aa3O/L changed to stable, Affirmed

Apr-16-13 AA- Affirmed, O/L stable Nov-29-12

Brazil 376 -2.4 -3.6 485 22 -2.7 -3.1 54.5 52.5 Baa2O/L changed to stable, Affirmed

Oct-02-13 BBB (-) O/L changed to (-), Affirmed Jun-06-13

Korea 346 3.7 5.2 422 37 1.2 1.9 33.9 31.8 Aa3Upgrade, O/L changed to stable

Aug-27-12 A+ Affirmed, O/L stable Sep-24-13

Taiwan 417 10.5 9.9 94 20 -2.0 -1.3 na na Aa3 Affirmed, O/L stable Oct-09-13 AA- Affirmed, O/L stable Aug-29-13South Africa 42 -6.3 -6.2 138 36 -4.7 -4.6 40.1 40.9 Baa1 (-) Affirmed, O/L (-) Jul-17-13 BBB (-) Affirmed, O/L (-) Mar-13-13India 267 -4.8 -3.6 390 21 -5.6 -5.4 46.1 45.3 Baa3 Affirmed, O/L stable Nov-26-12 BBB- (-) Affirmed, O/L (-) Nov-08-13Russia 512 3.5 2.5 624 31 0.0 -1.0 4.8 4.3 Baa1 Affirmed, O/L stable Mar-27-13 BBB Affirmed, O/L stable Jun-28-13Mexico 177 -0.8 -1.0 191 16 -2.4 -2.2 34.6 34.7 Baa1 Affirmed, O/L stable Aug-18-11 BBB (+) Affirmed, O/L (+) Oct-10-13Malaysia 132 6.1 2.1 65 21 -4.7 -5.2 54.1 55.0 A3 Affirmed, O/L stable Jun-07-12 A- (+) O/L changed to (+), Affirmed Nov-20-13

Chile 40 -3.8 -4.7 95 35 -0.2 1.1 5.2 5.0 Aa3 Affirmed, O/L stable Oct-29-13 AA-Upgrade, O/L changed to stable

Dec-26-12

Indonesia 99 -2.6 -3.5 253 29 -2.1 -1.9 28.1 25.9 Baa3 Affirmed, O/L stable Jul-16-12 BB+O/L changed to stable, Affirmed

May-02-13

Poland 76 -3.7 -1.5 336 68 -3.8 -3.3 58.0 57.5 A2 Affirmed, O/L stable Dec-07-12 A- Affirmed, O/L stable Aug-16-13Turkey 110 -6.0 -6.9 314 40 -2.5 -1.7 25.7 24.2 Baa3 Upgrade, O/L stable May-16-13 BB+ Affirmed, O/L stable Nov-22-13Thailand 159 0.8 0.6 90 25 -3.5 -4.1 37.4 39.3 Baa1 Affirmed, O/L stable Apr-16-12 BBB+ Affirmed, O/L stable Dec-11-12Czech Republic

56 -2.4 -1.6 102 52 -3.5 -3.4 41.4 42.9 A1 Affirmed, O/L stable Jul-19-13 AA- Affirmed, O/L stable Jul-26-13

Peru 66 -3.6 -5.5 48 24 2.0 0.4 18.6 17.7 Baa2 (+) Upgrade, O/L (+) Aug-16-12 BBB+ Upgrade, O/L stable Aug-19-13Egypt* 17 na na na na na na na na Caa1 (-) Affirmed, O/L (-) Jul-25-13 B- Upgrade, O/L stable Nov-18-13Colombia 43 -3.3 -3.4 63 17 -0.8 -2.2 45.1 45.1 Baa3 (+) O/L changed to (+), Affirmed Jul-08-13 BBB Upgrade, O/L stable Apr-24-13Philippines 84 2.8 3.4 67 27 -2.4 -1.8 45.6 44.1Hungary 32 1.0 2.3 152 122 -2.8 -3.6 60.7 60.4 Ba1 (-) Affirmed, O/L (-) Feb-08-13 BB (-) Affirmed, O/L (-) Oct-25-13Greece 0.2 na na na na na na na na - - - - - -Emerging Asia

5324 1.9 2.2 2181 16 -2.0 -1.7 29.0 27.1 - - - - - -

Emerging Europe

845 -0.1 -0.6 1708 45 -1.9 -2.2 27.5 27.0 - - - - - -

Latin America 752 -1.6 -2.4 1152 22 -2.7 -2.5 41.2 40.7 - - - - - -

EMBI Global Spreads and Yields EMBI Asia Spreads and Yields EMBI Europe Spreads and Yields EMBI Latin America Spreads and Yields

Source: Bloomberg, J.P. Morgan. Source: CEIC, JP Morgan estimates, Moody's, Standard & Poor's, Bloomberg * Data from World Economic Outlook for April 2010 for Current Account data, ** F denotes forecast Note: Forex reserves as of August 2013 or latest

available data. Updated 15 January 2014

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97

Emerging Markets Equity Research22 January 2014

Adrian Mowat(852) [email protected]

Perspective: Emerging Markets Balance Sheets

No. of Companies Debt/Equity Debt/Assets Debt/Market. Cap Asset Turnover Current Ratio Interest Coverage Altman Z ScoreChina 117 0.59 0.26 0.75 0.87 1.05 9.9 2.8Brazil 70 0.55 0.28 0.73 0.46 1.61 5.0 3.9Korea 84 0.29 0.17 0.25 0.94 1.25 11.4 4.4Taiwan 96 0.30 0.17 0.15 1.07 1.21 16.0 4.7South Africa 37 0.35 0.18 0.13 0.88 1.42 7.0 5.8India 58 0.80 0.32 0.30 0.76 1.30 6.5 5.1Russia 24 0.29 0.19 0.54 0.51 1.83 19.4 3.7Mexico 22 0.75 0.33 0.35 0.69 1.28 5.6 5.7Malaysia 34 0.61 0.30 0.31 0.50 1.75 6.8 5.2Chile 17 0.61 0.29 0.15 0.63 1.16 6.0 3.1Indonesia 21 0.38 0.22 0.08 0.90 1.54 14.0 8.3Turkey 17 0.76 0.27 0.32 1.00 1.11 7.6 4.9Thailand 18 0.79 0.35 0.26 1.23 1.36 7.1 6.1Poland 14 0.21 0.13 0.20 1.12 1.62 14.2 3.6Czech Republic 2 0.62 0.27 0.40 0.39 1.05 11.8 4.0Peru 2 0.26 0.18 0.08 0.50 3.85 27.9 9.2Egypt 4 0.74 0.29 0.58 0.37 1.40 3.0 2.5Colombia 7 0.37 0.23 0.28 0.34 0.79 5.0 4.7Philippines 14 0.82 0.36 0.23 0.43 1.49 4.4 3.2Hungary 2 0.55 0.25 0.65 0.97 1.11 4.6 2.4Morocco 2 0.66 0.25 0.24 0.40 1.69 37.4 2.7

Debt to Equity Ratios Quartile Distribution Chart (x)

Source: Datastream, Bloomberg, J.P. Morgan. Data as of January 2013

Note: 1. All ratios are calculated from latest financial reports available ex Financial sector and calculations are based on weighted average of companies in the MSCI EMF universe. For Altman z-score, its application on company level is such that a score of less than

1.8 indicates bankruptcy likely, between 1.8-2.7 bankruptcy likely within 2 years and more than 3 most likely safe from bankruptcy. For market as a whole, the ratio is a weighted average of companies' z-score, thereby giving a general quality of companies in the

market.2. For the debt to equity distribution chart, each box indicates quartile levels and markets with values exceeding the scale are indicated by the open-ended top box. The diamond indicates weighted average for each market. 3. Quartile Distribution Charts: each

quartile is separated by a line, with the exception of the top quartile which is subdivided in order to show the top decile of companies, shaded in blue. Markets with values exceeding the scale are indicated by the open-ended top box. The diamond indicates the

weighted mean for each market.

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Emerging Markets Equity Research22 January 2014

Adrian Mowat(852) [email protected]

Perspective: Demographic and Key Economic StatisticsPopulation and demographics Nominal GDP Real GDP

Population Age Gross 2012 10 year CAGR*** 10 year CAGR***2012 Growth Dependency Ratio* Enrollment Ratio US$ Per capita Total Per capita Total Per capita

million %YoY Young Old Secondary** billion (US$) (%) (%) (%) (%)

USA 315 0.9 na na 98 16,262 51,673 4.3 3.4 1.6 0.8

China 1354 0.5 0.3 0.1 73 9428 6963 20.6 19.9 10.4 9.9Brazil 197 0.8 0.4 0.1 102 2365 12035 16.7 15.4 3.8 2.7Russia 142 -0.3 0.2 0.2 93 2116 14907 19.9 20.1 4.7 4.9India 1249 1.4 0.5 0.1 54 2065 1653 15.1 13.4 8.1 6.5Mexico 115 1.0 0.5 0.1 80 1363 11867 6.7 5.4 2.4 1.1Korea 49 0.1 0.3 0.1 91 1295 26446 8.4 8.1 3.6 3.3Indonesia 245 1.2 0.4 0.1 64 979 3993 17.5 16.2 5.7 4.5Turkey 75 1.3 0.4 0.1 79 900 12014 14.5 13.1 4.9 3.6Poland 38 -0.8 0.2 0.2 97 515 13681 10.0 10.2 4.3 4.5Taiwan 23 0.3 0.3 0.1 na 502 21538 5.2 4.9 4.0 3.7Argentina 41 0.9 0.4 0.2 86 487 11806 17.0 15.9 7.4 6.3South Africa 51 1.2 0.5 0.1 90 412 8042 14.0 12.6 3.5 2.2Thailand 69 0.6 0.3 0.1 77 404 5854 12.4 11.7 4.2 3.5Colombia 47 1.2 0.5 0.1 75 362 7773 14.6 13.2 4.7 3.5Malaysia 29 2.0 0.5 0.1 76 331 11260 13.3 11.2 5.1 3.2Chile 18 1.2 0.4 0.1 89 289 16436 15.7 14.3 4.6 3.3Philippines 97 1.8 0.6 0.1 86 280 2895 13.8 11.8 5.1 3.3Egypt 81 2.0 0.5 0.1 87 273 3377 12.1 9.8 4.6 2.5Israel 8 2.2 0.4 0.2 93 253 32610 8.5 6.3 3.9 1.8Peru 30 1.5 0.5 0.1 92 199 6535 13.4 11.6 6.4 4.7Czech Rep. 11 0.2 0.2 0.2 96 195 18434 10.0 9.6 3.0 2.7Hungary 10 -0.2 0.2 0.2 97 142 14236 7.8 8.0 1.3 1.5Morocco 33 1.0 0.5 0.1 48 107 3298 10.3 9.1 4.7 3.5MSCI EM 4,017 21,754 6,297 19.0 15.5

Source: CEIC, Datastream, Bloomberg, US Consensus Bureau, World Bank, UNESCO, J.P. Morgan estimates

* Age dependency ratio defined as dependents to working-age population.

** Gross Enrollment Ratio is defined as pupils enrolled in a secondary level, regardless of age expressed as a percentage of the population in the relevant official age group

*** 10-year CAGR for period 2002-2012, in local currency. Population data based on IMF estimate as on October 2009.

Data for Gross enrollment data for 2004 except for Malaysia, Brazil and Argentina which is for 2003. Updated Dec 2012.

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99

Emerging Markets Equity Research22 January 2014

Adrian Mowat(852) [email protected]

Perspective: Global Emerging Capital MarketsMSCI EMF Index Markets Concentration JPM EMBI Global

Total Market

Cap

Estimated Free Float

CompaniesAverage

Daily Turnover

% of Emerging

Market Trading Volume

Weighting in MSCI EMF

Stocks constituting

75% of Country Market Cap

Stocks constituting 75% of Country

Market CapMarket Cap Issues

US$ Bn (%) Number US $ Mn % (%) Number (%) US$ Bn NumberChina 1417 51 138 3308 21.0 19.6 37 27 16.6 19Korea 904 65 105 2593 16.5 15.8 30 29 na naTaiwan 615 71 107 1384 8.8 11.8 34 32 na naBrazil 757 52 75 2191 13.9 10.6 23 31 44.1 26South Africa 376 72 50 738 4.7 7.3 19 38 14.4 naIndia 761 32 71 1083 6.9 6.6 24 34 1.2 naRussia 562 40 22 1021 6.5 6.1 9 41 62.4 27Mexico 339 60 29 496 3.1 5.5 11 38 68.4 32Malaysia 347 41 44 286 1.8 3.9 20 45 7.5 6Indonesia 216 41 30 193 1.2 2.4 13 43 38.2 29Thailand 235 34 28 560 3.6 2.2 13 46 na naPoland 127 50 22 226 1.4 1.7 9 41 14.1 6Chile 151 38 21 105 0.7 1.6 11 52 13.4 18Turkey 157 36 25 1076 6.8 1.5 13 52 41.4 2Colombia 135 28 15 49 0.3 1.0 8 53 16.4 9Philippines 115 29 19 95 0.6 0.9 12 63 27.0 15Greece 63 32 10 132 0.8 0.5 6 60 na naPeru 38 43 3 129 0.8 0.4 2 67 11.9 8Hungary 16 61 3 40 0.3 0.3 3 100 15.1 9Czech Republic 27 34 3 30 0.2 0.2 2 67 na naTotal 7373 50 824 15747 100 100 394 206

AC World Index Market Capitalization MSCI Regional Market Capitalization Top 8 versus Rest of Emerging Markets

Source: MSCI, J.P. Morgan. Updated 15 January 2014

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100

Emerging Markets Equity Research22 January 2014

Adrian Mowat(852) [email protected]

Perspective: MSCI Emerging Market Index Composition by Country and Sector

Number of Companies: 824 Total Market Capitalization (in billion US$): 7373 Estimated Free float : 50%

MSCI Emerging Markets Free Index

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China 1.0 1.2 2.7 7.4 0.3 1.3 2.3 0.6 2.0 0.8 19.6Korea 2.8 0.8 0.3 2.2 0.1 1.9 5.7 1.5 0.1 0.3 15.8Taiwan 0.6 0.3 0.1 2.1 0.0 0.4 6.3 1.4 0.6 11.8India 0.4 0.7 0.8 1.5 0.5 0.3 1.6 0.4 0.2 0.2 6.6Malaysia 0.4 0.4 0.2 1.1 0.1 0.5 0.2 0.5 0.5 3.9Indonesia 0.4 0.3 0.1 0.8 0.1 0.1 0.2 0.3 0.1 2.4Thailand 0.1 0.2 0.5 0.8 0.0 0.1 0.3 0.2 0.0 2.2Philippines 0.0 0.1 0.3 0.3 0.1 0.1 0.9Asia 5.8 4.0 4.7 16.4 1.1 4.8 15.9 4.6 3.9 1.9 63.1South Africa 1.7 0.4 0.8 1.9 0.4 0.3 0.8 1.0 7.3Russia 0.4 3.3 1.2 0.5 0.6 0.1 6.1Turkey 0.1 0.2 0.1 0.8 0.2 0.1 0.1 1.5Poland 0.0 0.0 0.2 1.0 0.2 0.1 0.2 1.7Egypt 0.1 0.1 0.2Czech Republic 0.1 0.0 0.1 0.2Hungary 0.1 0.1 0.1 0.3Greece 0.2 0.0 0.2 0.0 0.1 0.0 0.5EMEA 2.0 1.1 4.5 5.3 0.5 0.5 1.6 2.0 0.4 17.9Brazil 0.5 1.8 1.5 3.1 0.1 0.5 0.3 1.9 0.3 0.5 10.6Mexico 0.5 1.3 0.9 0.1 0.5 1.0 1.1 5.5Chile 0.2 0.2 0.2 0.3 0.1 0.2 0.0 0.4 1.6Colombia 0.1 0.2 0.4 0.2 0.1 1.0Peru 0.2 0.2 0.4LatAm 1.2 3.4 1.9 4.9 0.1 1.2 0.3 3.4 1.4 1.0 19.0Total 9.0 8.5 11.1 26.6 1.7 6.5 16.3 9.6 7.4 3.4 100.0

Source: MSCI, J.P. Morgan. Updated 15 January 2014

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101

Emerging Markets Equity Research22 January 2014

Adrian Mowat(852) [email protected]

Companies Discussed in This Report (all prices in this report as of market close on 21 January 2014, unless otherwise indicated)African Bank Investments Ltd (ABLJ.J/1105c/Overweight), Akbank (AKBNK.IS/TL6.59/Underweight), Al Rajhi Bank (1120.SE/SRls71.75/Underweight), Almarai (2280.SE/SRls59.00/Neutral), Alpha Bank (ACBr.AT/€0.66/Overweight), Anglo American Platinum Ltd (AMSJ.J/41790c/Overweight), Aspen (APNJ.J/25800c/Overweight), Bank St. Petersburg (BSPB.MM/R41.90/Overweight), Bank Vozrozhdenie (VZRZ.MM/R449.50/Underweight), Barclays Africa Group Ltd (BGAJ.J/13030c/Neutral), CEZ (CEZP.PR/CZK523.60/Neutral), CJ Cheiljedang (097950.KS/W265500/Underweight), DRDGold Ltd (DRDJ.J/419c/Underweight), Discovery Holdings Limited (DSYJ.J/8198c/Underweight), EVRAZ (EVR.L/106p[20 January 2014]/Underweight), Emaar Properties (EMAR.DU/Dh7.90/Overweight), Erste Bank (ERST.VI/€28.49[20 January 2014]/Overweight), FSK (FEES.MM/R0.09/Underweight), First Gulf Bank (FGB.AD/Dh19.05/Overweight), FirstRand Ltd (FSRJ.J/3385c/Neutral), Garanti (GARAN.IS/TL6.83/Neutral), Gazprom (GAZP.RTS/$4.14[15 January 2014]/Overweight), HCL-Technologies (HCLT.BO/Rs1440.15/Overweight), Halkbank (HALKB.IS/TL13.00/Overweight), Hana Financial Group (086790.KS/W40500/Overweight), Hanjin Shipping Co Ltd (117930.KS/W6860/Underweight), Hankook Tire (161390.KS/W62800/Overweight), Hite Jinro Co Ltd (000080.KS/W20900/Underweight), Hyundai Department Store (069960.KS/W147000/Overweight), Hyundai Development Company (012630.KS/W25150/Overweight), Hyundai E&C (000720.KS/W59500/Overweight), Hyundai Motor Company (005380.KS/W236000/Overweight), Hyundai Steel Company (004020.KS/W79400/Overweight), Impala Platinum Holdings Ltd (IMPJ.J/12336c/Underweight), Inter RAO (IRAO.MM/R0.01/Overweight), Investec Plc (INPJ.J/7784c/Neutral), Isbank (ISCTR.IS/TL4.74/Neutral), KB Financial Group (105560.KS/W39250/Overweight), KGHM (KGHM.WA/zl113.90/Overweight), Kia Motors (000270.KS/W51400/Neutral), Koc Holding (KCHOL.IS/TL8.24/Neutral), Korean Air (003490.KS/W33200/Overweight), Korean Reinsurance Company (003690.KS/W11450/Overweight), LG Display (034220.KS/W26900/Overweight), LG Electronics (066570.KS/W69600/Overweight), LSR (LSRGq.L/$4.04[20 January 2014]/Overweight), Largan Precision Co Ltd (3008.TW/NT$1250.00/Overweight), Liberty Holdings Ltd (LBHJ.J/12531c/Underweight), Lonmin plc (LONJ.J) (LONJ.J/5600c/Overweight), Lotte Shopping (023530.KS/W380000/Neutral), Lukoil (LKOHq.L/$58.95[20 January 2014]/Overweight), Mando (060980.KS/W127000/Neutral), Massmart (MSMJ.J/12538c/Underweight), MegaFon (MFON.L/$31.37[20 January 2014]/Overweight), Migros Ticaret (MGROS.IS/TL14.60/Neutral), Mobile Telesystems (MBT/$19.70[17 January 2014]/Overweight), Mosenergo (MSNG.MM/R0.87/Overweight), NIC (Tasnee) (2060.SE/SRls31.40/Overweight), Naspers Ltd (NPNJn.J/116787c/Overweight), National Bank of Greece (NBGr.AT/€3.87/Underweight), Naver (035420.KS/W700000/Overweight), OTE (OTEr.AT/€10.51/Overweight), POSCO (005490.KS/W309500/Neutral), PZU (PZU.WA/zl435.70/Overweight), Pharmstandard (PHSTq.L/$8.84[20 January 2014]/Neutral), PhosAgro (PHOR.L/$10.20[20 January 2014]/Overweight), Ping An Insurance Group - A (601318.SS/Rmb41.20/Overweight), Ping An Insurance Group - H (2318.HK/HK$67.45/Overweight), Piraeus Bank S.A (BOPr.AT/€1.74/Overweight), Polyus Gold International (PGIL.L/198p[20 January 2014]/Neutral), Royal Bafokeng Platinum Limited (RBPJ.J/6448c/Overweight), Russian Grids (MRKH.MM/R0.78[30 December 2013]/Underweight), SABIC (2010.SE/SRls111.75/Overweight), SK Hynix (000660.KS/W36400/Overweight), SK Innovation Co Ltd (096770.KS/W130000/Overweight), STC (7010.SE/SRls62.00/Overweight), Samsung Electronics (005930.KS/W1324000/Overweight), Samsung Engineering (028050.KS/W71900/Underweight), Samsung Life Insurance (032830.KS/W101500/Overweight), Sasol (SOLJ.J/54461c/Overweight), Sberbank (SBER.MM/R102.14/Overweight), Standard Bank Group Ltd (SBKJ.J/12500c/Overweight), SurgutNG (SNGS.MM/R27.92/Neutral), TMK (TRMKq.L/$12.10[20 January 2014]/Overweight), Tata Steel Ltd (TISC.BO/Rs383.60/Overweight), Tatneft (TATN.MM/R199.67/Overweight), Tong Yang Life Insurance (082640.KS/W11400/Overweight), Turkcell (TCELL.IS/TL11.39/Overweight), Uralkali (URKAq.L/$27.41[20 January 2014]/Neutral), Yandex (YNDX/$43.02[17 January 2014]/Overweight), du (DU.DU/Dh6.62/Underweight)

Analyst Certification: The research analyst(s) denoted by an “AC” on the cover of this report certifies (or, where multiple research analysts are primarily responsible for this report, the research analyst denoted by an “AC” on the cover or within the document individually certifies, with respect to each security or issuer that the research analyst covers in this research) that: (1) all of the views expressed in this report accurately reflect his or her personal views about any and all of the subject securities or issuers; and (2) no part of any of the research analyst's compensation was, is, or will be directly or indirectly related to the specific recommendations or views expressed by the research analyst(s) in this report. For all Korea-based research analysts listed on the front cover, they also certify, as per KOFIA requirements, that their analysis was made in good faith and that the views reflect their own opinion, without undue influence or intervention.

Important Disclosures

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102

Emerging Markets Equity Research22 January 2014

Adrian Mowat(852) [email protected]

Market Maker: JPMS makes a market in the stock of DRDGold Ltd, Yandex.

Market Maker/ Liquidity Provider: J.P. Morgan Securities plc and/or an affiliate is a market maker and/or liquidity provider in African Bank Investments Ltd, Almarai, Anglo American Platinum Ltd, Bank St. Petersburg, Barclays Africa Group Ltd, CEZ, Discovery Holdings Limited, DRDGold Ltd, du, Emaar Properties, Erste Bank, First Gulf Bank, FSK, National Bank of Greece, Alpha Bank, Aspen, EVRAZ, FirstRand Ltd, Garanti, Gazprom, Impala Platinum Holdings Ltd, Isbank, KGHM, Koc Holding, Liberty Holdings Ltd, Lonminplc (LONJ.J), OTE, Halkbank, Inter RAO, Lukoil, LSR, Massmart, MegaFon, Migros Ticaret, Mobile Telesystems, Mosenergo, Naspers Ltd, NIC (Tasnee), Pharmstandard, PhosAgro, Al Rajhi Bank, PZU, Royal Bafokeng Platinum Limited, SABIC, Sberbank, Standard Bank Group Ltd, Polyus Gold International, Bank Vozrozhdenie, Piraeus Bank S.A, Sasol, STC, SurgutNG, Tatneft, TMK, Uralkali, Yandex, Turkcell, Akbank, Investec Plc, Russian Grids.

Lead or Co-manager: J.P. Morgan acted as lead or co-manager in a public offering of equity and/or debt securities for Hyundai Motor Company, LG Electronics, Bank St. Petersburg, Barclays Africa Group Ltd, Erste Bank, First Gulf Bank, Alpha Bank, EVRAZ, Garanti, Gazprom, Isbank, Halkbank, Massmart, Mobile Telesystems, Sberbank, Ping An Insurance Group - A, Ping An Insurance Group - H, Polyus Gold International, Piraeus Bank S.A, TMK, Yandex, Akbank within the past 12 months.

Director: A senior employee, executive officer or director of JPMorgan Chase & Co. and/or J.P. Morgan is a director and/or officer of Massmart.

Analyst Position: The following analysts (and/or their associates or household members) own a long position in the shares of Gazprom: David Aserkoff. The following analysts (and/or their associates or household members) own a long position in the shares of Tata Steel Ltd: Kevyn Kadakia.

Beneficial Ownership (1% or more): J.P. Morgan beneficially owns 1% or more of a class of common equity securities of Polyus Gold International.

Client: J.P. Morgan currently has, or had within the past 12 months, the following company(ies) as clients: CJ Cheiljedang, Hana Financial Group, Hanjin Shipping Co Ltd, Hite Jinro Co Ltd, Hyundai E&C, Hyundai Motor Company, Hyundai Steel Company, KB Financial Group, Kia Motors, Korean Air, Korean Reinsurance Company, LG Display, LG Electronics, Lotte Shopping, Mando, Naver, POSCO, Samsung Electronics, Samsung Engineering, Samsung Life Insurance, SK Hynix, SK Innovation Co Ltd, African Bank Investments Ltd, Almarai, Anglo American Platinum Ltd, Bank St. Petersburg, Barclays Africa Group Ltd, CEZ, Discovery Holdings Limited, du, Emaar Properties, Erste Bank, First Gulf Bank, FSK, National Bank of Greece, Alpha Bank, Aspen, EVRAZ, FirstRand Ltd, Garanti, Gazprom, Impala Platinum Holdings Ltd, Isbank, KGHM, Koc Holding, Lonmin plc (LONJ.J), OTE, Halkbank, HCL-Technologies, Inter RAO, Lukoil, LSR, Massmart, Migros Ticaret, Mobile Telesystems, Mosenergo, Naspers Ltd, NIC (Tasnee), PhosAgro, Al Rajhi Bank, PZU, Royal Bafokeng Platinum Limited, SABIC, Sberbank, Standard Bank Group Ltd, Ping An Insurance Group - A, Ping An Insurance Group - H, Polyus Gold International, Bank Vozrozhdenie, Piraeus Bank S.A, Sasol, STC, SurgutNG, Tatneft, TMK, Uralkali, Yandex, Tata Steel Ltd, Turkcell, Akbank, Hankook Tire, Investec Plc, Russian Grids.

Client/Investment Banking: J.P. Morgan currently has, or had within the past 12 months, the following company(ies) as investment banking clients: Hyundai Motor Company, KB Financial Group, LG Electronics, Naver, POSCO, Samsung Electronics, Bank St. Petersburg, Barclays Africa Group Ltd, Emaar Properties, Erste Bank, First Gulf Bank, Alpha Bank, EVRAZ, FirstRand Ltd, Garanti, Gazprom, Isbank, Koc Holding, Lonmin plc (LONJ.J), Halkbank, Inter RAO, Massmart, Mobile Telesystems, Naspers Ltd, SABIC, Sberbank, Ping An Insurance Group - A, Ping An Insurance Group - H, Polyus Gold International, Piraeus Bank S.A, Sasol, TMK, Yandex, Akbank.

Client/Non-Investment Banking, Securities-Related: J.P. Morgan currently has, or had within the past 12 months, the following company(ies) as clients, and the services provided were non-investment-banking, securities-related: CJ Cheiljedang, Hana Financial Group, Hyundai E&C, Hyundai Motor Company, Hyundai Steel Company, KB Financial Group, Kia Motors, Korean Air, LG Display, LG Electronics, Lotte Shopping, Mando, POSCO, Samsung Electronics, Samsung Engineering, Samsung Life Insurance, SK Innovation Co Ltd, Almarai, Anglo American Platinum Ltd, Bank St. Petersburg, Barclays Africa Group Ltd, CEZ, Erste Bank, First Gulf Bank, National Bank of Greece, Alpha Bank, FirstRand Ltd, Garanti, Gazprom, Isbank, KGHM, Koc Holding, Lonmin plc (LONJ.J), Halkbank, HCL-Technologies, Massmart, Mobile Telesystems, Naspers Ltd, Al Rajhi Bank, PZU, Sberbank, Standard Bank Group Ltd, Ping An Insurance Group - A, Ping An Insurance Group - H, Bank Vozrozhdenie, Piraeus Bank S.A, Sasol, SurgutNG, TMK, Uralkali, Tata Steel Ltd, Turkcell, Akbank, Hankook Tire, Investec Plc.

Client/Non-Securities-Related: J.P. Morgan currently has, or had within the past 12 months, the following company(ies) as clients, and the services provided were non-securities-related: Hana Financial Group, Hyundai Motor Company, KB Financial Group, Kia Motors, LG Electronics, Lotte Shopping, POSCO, Samsung Electronics, Samsung Life Insurance, SK Innovation Co Ltd, Almarai, Anglo American Platinum Ltd, Barclays Africa Group Ltd, First Gulf Bank, FirstRand Ltd, Garanti, Gazprom, Isbank, Koc Holding, Lonmin plc (LONJ.J), Halkbank, HCL-Technologies, Lukoil, Massmart, Naspers Ltd, Al Rajhi Bank, Sberbank, Standard Bank Group Ltd, Ping An Insurance Group - A, Ping An Insurance Group - H, TMK, Uralkali, Tata Steel Ltd, Akbank, Hankook Tire.

Investment Banking (past 12 months): J.P. Morgan received in the past 12 months compensation from investment banking Hyundai Motor Company, KB Financial Group, LG Electronics, Naver, POSCO, Samsung Electronics, Bank St. Petersburg, Barclays Africa

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103

Emerging Markets Equity Research22 January 2014

Adrian Mowat(852) [email protected]

Group Ltd, Emaar Properties, Erste Bank, First Gulf Bank, Alpha Bank, EVRAZ, FirstRand Ltd, Garanti, Gazprom, Isbank, Koc Holding, Lonmin plc (LONJ.J), Halkbank, Inter RAO, Massmart, Mobile Telesystems, Naspers Ltd, SABIC, Sberbank, Ping An Insurance Group -A, Ping An Insurance Group - H, Polyus Gold International, Piraeus Bank S.A, Sasol, TMK, Yandex, Akbank.

Investment Banking (next 3 months): J.P. Morgan expects to receive, or intends to seek, compensation for investment banking services in the next three months from Hyundai Motor Company, KB Financial Group, LG Electronics, Naver, POSCO, Samsung Electronics, Bank St. Petersburg, Barclays Africa Group Ltd, du, Emaar Properties, Erste Bank, First Gulf Bank, National Bank of Greece, Alpha Bank, EVRAZ, FirstRand Ltd, Garanti, Gazprom, Isbank, Koc Holding, Lonmin plc (LONJ.J), Halkbank, Inter RAO, Massmart, Mobile Telesystems, Naspers Ltd, SABIC, Sberbank, Ping An Insurance Group - A, Ping An Insurance Group - H, Polyus Gold International, Piraeus Bank S.A, Sasol, TMK, Uralkali, Yandex, Tata Steel Ltd, Akbank.

Non-Investment Banking Compensation: J.P. Morgan has received compensation in the past 12 months for products or services other than investment banking from CJ Cheiljedang, Hana Financial Group, Hyundai E&C, Hyundai Motor Company, Hyundai Steel Company, KB Financial Group, Kia Motors, Korean Air, LG Display, LG Electronics, Lotte Shopping, Mando, POSCO, Samsung Electronics, Samsung Engineering, Samsung Life Insurance, SK Innovation Co Ltd, Almarai, Anglo American Platinum Ltd, Bank St. Petersburg, Barclays Africa Group Ltd, CEZ, Erste Bank, First Gulf Bank, National Bank of Greece, Alpha Bank, FirstRand Ltd, Garanti, Gazprom, Isbank, KGHM, Koc Holding, Lonmin plc (LONJ.J), Halkbank, HCL-Technologies, Massmart, Mobile Telesystems, Naspers Ltd, Al Rajhi Bank, PZU, Sberbank, Standard Bank Group Ltd, Ping An Insurance Group - A, Ping An Insurance Group - H, Bank Vozrozhdenie, Piraeus Bank S.A, Sasol, SurgutNG, TMK, Uralkali, Tata Steel Ltd, Turkcell, Akbank, Hankook Tire, Investec Plc.

Broker: J.P. Morgan Securities plc acts as Corporate Broker to Lonmin plc (LONJ.J), Polyus Gold International, Uralkali.

‘J.P. Morgan is acting as financial advisor to Alpha Bank who on October 1st 2012 has entered into exclusive negotiations with Credit Agricole S.A. on the acquisition of Emporiki Bank.’

"J.P. Morgan Securities (Asia Pacific) Limited (“J.P. Morgan”) is acting as Joint Bookrunner to Ping An Insurance (Group) Company of China Ltd (“Ping An”) on its senior unsecured bond offering as announced on 21 January 2014. J.P. Morgan will be receiving fees for so acting. J.P. Morgan and/or its affiliates may perform, or may seek to perform, other financial or advisory services for Ping An and/or its affiliates and may have other interests in or relationships with Ping An and/or its affiliates, and receive fees, commissions or other compensation in such capacities. This research report and the information herein is not intended to serve as an endorsement of the proposed transaction or result in procurement, withholding or revocation of a proxy or any other action by a security holder. This report is based solely on publicly available information. No representation is made that it is accurate or complete.”

"J.P. Morgan Securities (Asia Pacific) Limited (“J.P. Morgan”) is acting as Joint Bookrunner to Ping An Insurance (Group) Company of China Ltd (“Ping An”) on its senior unsecured bond offering as announced on 21 January 2014. J.P. Morgan will be receiving fees forso acting. J.P. Morgan and/or its affiliates may perform, or may seek to perform, other financial or advisory services for Ping An and/or its affiliates and may have other interests in or relationships with Ping An and/or its affiliates, and receive fees, commissions or other compensation in such capacities. This research report and the information herein is not intended to serve as an endorsement of the proposed transaction or result in procurement, withholding or revocation of a proxy or any other action by a security holder. This report is based solely on publicly available information. No representation is made that it is accurate or complete.”

MSCI: The MSCI sourced information is the exclusive property of MSCI. Without prior written permission of MSCI, this information and any other MSCI intellectual property may not be reproduced, redisseminated or used to create any financial products, including any indices. This information is provided on an 'as is' basis. The user assumes the entire risk of any use made of this information. MSCI, its affiliates and any third party involved in, or related to, computing or compiling the information hereby expressly disclaim all warranties of originality, accuracy, completeness, merchantability or fitness for a particular purpose with respect to any of this information. Without limiting any of the foregoing, in no event shall MSCI, any of its affiliates or any third party involved in, or related to, computing or compiling the information have any liability for any damages of any kind. MSCI and the MSCI indexes are services marks of MSCI and its affiliates.

Company-Specific Disclosures: Important disclosures, including price charts, are available for compendium reports and all J.P. Morgan–covered companies by visiting https://jpmm.com/research/disclosures, calling 1-800-477-0406, or e-mailing [email protected] with your request. J.P. Morgan’s Strategy, Technical, and Quantitative Research teams may screen companies not covered by J.P. Morgan. For important disclosures for these companies, please call 1-800-477-0406 or e-mail [email protected].

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104

Emerging Markets Equity Research22 January 2014

Adrian Mowat(852) [email protected]

Date Rating Share Price (HK$)

Price Target (HK$)

08-Jun-11 N 3.96 3.70

11-Aug-11 UW 3.67 3.00

18-Nov-11 UW 2.24 2.00

16-Mar-12 UW 2.53 1.80

18-May-12 UW 1.77 1.70

Date Rating Share Price (W)

Price Target (W)

13-Apr-12 N 325000 370000

15-Jun-12 N 330000 390000

22-Jul-12 OW 274000 350000

02-Nov-12 OW 342500 380000

03-Mar-13 N 386500 380000

03-May-13 N 318000 350000

16-Jul-13 N 264500 310000

01-Aug-13 N 285000 290000

31-Oct-13 UW 257500 200000

0

1

2

3

4

5

6

7

8

9

Price(HK$)

Nov07

Aug08

May09

Feb10

Nov10

Aug11

May12

Feb13

Nov13

GCL Poly Energy (3800.HK, 3800 HK) Price Chart

UW HK$2

UW HK$3 UW HK$1.7

N HK$3.7 UW HK$1.8

Source: Bloomberg and J.P. Morgan; price data adjusted for stock splits and dividends.

Initiated coverage Jun 08, 2011.

0

91,954

183,908

275,862

367,816

459,770

551,724

643,678

Price(W)

Oct08

Jul09

Apr10

Jan11

Oct11

Jul12

Apr13

Jan14

CJ Cheiljedang (097950.KS, 097950 KS) Price Chart

OW W350,000 N W310,000

N W390,000 N W350,000UW W200,000

N W370,000OW W380,000N W380,000N W290,000

Source: Bloomberg and J.P. Morgan; price data adjusted for stock splits and dividends.

Initiated coverage Apr 13, 2012.

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105

Emerging Markets Equity Research22 January 2014

Adrian Mowat(852) [email protected]

Date Rating Share Price (W)

Price Target (W)

29-Oct-06 UW 44450 42000

26-Feb-07 N 53500 54000

10-Oct-07 N 43900 51000

04-Nov-07 OW 43950 60000

15-Jan-08 OW 46200 56000

27-Apr-08 N 45500 46000

27-Jul-08 N 39100 40000

06-Nov-08 N 23600 18000

03-Feb-09 N 23100 23000

13-Feb-09 N 20400 22000

26-Apr-09 N 20650 21000

13-Jul-09 N 28850 28000

26-Jul-09 N 31450 33000

25-Oct-09 N 37800 36000

17-Apr-10 N 37200 40000

02-Dec-10 N 37950 40500

11-Feb-11 OW 45500 54000

21-Jul-11 OW 38200 50000

23-Oct-11 OW 38200 44000

25-Mar-12 OW 44500 48000

20-Oct-12 OW 32950 42000

28-Jan-13 OW 40500 48000

28-Apr-13 OW 36800 42000

20-Oct-13 OW 42500 46000

Date Rating Share Price (W)

Price Target (W)

13-Jun-07 N 36850 40000

12-Sep-07 UW 46100 40000

28-Feb-08 UW 36950 25000

17-Sep-08 UW 26450 24000

04-Nov-10 UW 34000 28000

14-Aug-11 UW 16750 17000

06-Nov-11 UW 10800 10000

31-Jan-12 UW 12300 11800

11-May-12 UW 15900 12000

02-Aug-12 N 14550 14000

06-Nov-12 N 11950 13000

14-Oct-13 N 8320 8000

17-Nov-13 UW 6990 5000

0

13,834

27,668

41,502

55,336

69,170

83,004

Price(W)

Oct06

Apr08

Oct09

Apr11

Oct12

Hana Financial Group (086790.KS, 086790 KS) Price Chart

OW W56,000 N W22,000N W33,000

N W54,000OW W60,000N W40,000N W23,000N W28,000 OW W54,000OW W44,000 OW W42,000

UW W42,000N W51,000N W46,000N W18,000N W21,000N W36,000N W40,000N W40,500OW W50,000OW W48,000OW W42,000OW W48,000OW W46,000

Source: Bloomberg and J.P. Morgan; price data adjusted for stock splits and dividends.

Initiated coverage Oct 29, 2006.

0

17,008

34,016

51,024

68,032

85,040

102,048

Price(W)

Oct06

Apr08

Oct09

Apr11

Oct12

Hanjin Shipping Co Ltd (117930.KS, 117930 KS) Price Chart

UW W11,800N W13,000

UW W40,000 UW W10,000N W14,000 UW W5,000

N W40,000UW W25,000UW W24,000 UW W28,000UW W17,000UW W12,000 N W8,000

Source: Bloomberg and J.P. Morgan; price data adjusted for stock splits and dividends.

Initiated coverage Jun 13, 2007.

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106

Emerging Markets Equity Research22 January 2014

Adrian Mowat(852) [email protected]

Date Rating Share Price (W)

Price Target (W)

17-Nov-09 OW 41950 190200

31-Mar-10 OW 35550 162000

14-May-10 UW 33050 124000

09-Jul-10 UW 35500 120000

16-Jan-11 UW 35050 110000

28-Jan-11 OW 32600 130000

23-May-11 OW 35950 120000

03-Apr-12 UW 26050 22000

16-May-13 UW 28950 25000

Date Rating Share Price (W)

Price Target (W)

20-Jun-07 OW 112000 140700

24-Jul-07 OW 110500 135000

27-Nov-07 OW 111500 127000

24-Mar-08 OW 87000 105000

28-Apr-08 N 106500 105000

25-Jul-08 N 89000 109000

03-Mar-10 OW 100500 129000

23-Apr-10 OW 105000 120000

27-Jul-10 OW 122500 125000

21-Jan-11 OW 126000 136000

27-Apr-11 OW 154000 162000

14-Jun-11 OW 174500 210000

11-Nov-11 OW 163500 224000

17-Apr-12 OW 178000 201000

23-Apr-12 N 168500 173000

31-Jul-12 N 121500 140000

08-May-13 NR 161500 --

04-Jul-13 OW 152500 180000

0

9,279

18,558

27,837

37,116

46,395

55,674

64,953

74,232

Price(W)

Oct09

Jul10

Apr11

Jan12

Oct12

Jul13

Hite Jinro Co Ltd (000080.KS, 000080 KS) Price Chart

UW W120,000

UW W124,000 OW W130,000

OW W190,200OW W162,000 UW W110,000OW W120,000 UW W22,000 UW W25,000

Source: Bloomberg and J.P. Morgan; price data adjusted for stock splits and dividends.

Initiated coverage Nov 17, 2009.

0

50,744

101,488

152,232

202,976

253,720

304,464

Price(W)

Oct06

Apr08

Oct09

Apr11

Oct12

Hyundai Department Store (069960.KS, 069960 KS) Price Chart

N W109,000 OW W125,000OW W210,000 N W140,000

OW W135,000N W105,000 OW W120,000OW W162,000N W173,000 OW W180,000

OW W140,700OW W127,000OW W105,000 OW W129,000OW W136,000OW W224,000OW W201,000 NR

Source: Bloomberg and J.P. Morgan; price data adjusted for stock splits and dividends.

Break in coverage May 08, 2013 - Jul 04, 2013.

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107

Emerging Markets Equity Research22 January 2014

Adrian Mowat(852) [email protected]

Date Rating Share Price (W)

Price Target (W)

24-Oct-06 OW 43900 56000

06-Apr-07 OW 54100 70000

31-Jul-07 N 77000 70000

29-Oct-07 N 101000 75000

12-Mar-08 OW 57300 75000

19-Aug-08 OW 46450 76000

17-Dec-08 OW 33850 45000

12-Jun-09 N 45600 45000

25-Jun-09 N 46250 40000

20-Jan-10 OW 36150 44000

29-Apr-10 N 28350 31000

06-Aug-10 N 27500 29000

29-Sep-10 N 31700 38000

10-Feb-11 N 36550 40000

03-Apr-11 N 32100 37000

04-Aug-11 N 29950 33000

01-Nov-11 N 23500 27000

26-Jan-12 OW 20850 27000

07-Feb-12 OW 23800 30000

Date Rating Share Price (W)

Price Target (W)

31-Oct-06 N 52700 54000

25-May-07 OW 64800 73000

31-Jul-07 N 80800 73000

31-Oct-07 N 88700 75000

25-Jan-08 N 76000 77000

24-Apr-08 N 90300 79000

19-Aug-08 N 65500 73000

17-Dec-08 N 60000 50000

12-Jun-09 UW 61900 50000

20-Jan-10 N 73700 75000

04-Feb-10 N 62300 71000

29-Apr-10 N 54200 60000

29-Sep-10 OW 73300 85000

24-Oct-10 OW 76400 87000

17-Nov-10 OW 62200 81000

06-Feb-11 OW 86200 101000

03-Apr-11 OW 80000 97000

01-May-11 OW 90900 94000

31-Jul-11 N 85500 89000

30-Oct-11 N 72800 86000

30-Apr-12 OW 71300 86000

12-Oct-12 OW 60300 87000

19-Apr-13 N 58000 67000

27-Oct-13 OW 60900 80000

0

28,254

56,508

84,762

113,016

141,270

169,524

Price(W)

Oct06

Apr08

Oct09

Apr11

Oct12

Hyundai Development Company (012630.KS, 012630 KS) Price Chart

N W29,000 OW W27,000

N W75,000 N W40,000 N W31,000 N W37,000N W27,000

OW W56,000OW W70,000N W70,000OW W75,000OW W76,000OW W45,000N W45,000OW W44,000N W38,000N W40,000N W33,000OW W30,000

Source: Bloomberg and J.P. Morgan; price data adjusted for stock splits and dividends.

Initiated coverage Oct 24, 2006.

0

22,784

45,568

68,352

91,136

113,920

136,704

159,488

Price(W)

Oct06

Apr08

Oct09

Apr11

Oct12

Hyundai E&C (000720.KS, 000720 KS) Price Chart

N W75,000 N W60,000OW W81,000OW W94,000

N W73,000N W79,000 N W71,000OW W87,000OW W97,000N W86,000

N W54,000OW W73,000N W77,000N W73,000N W50,000UW W50,000N W75,000OW W85,000OW W101,000N W89,000OW W86,000OW W87,000N W67,000OW W80,000

Source: Bloomberg and J.P. Morgan; price data adjusted for stock splits and dividends.

Initiated coverage Oct 31, 2006.

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108

Emerging Markets Equity Research22 January 2014

Adrian Mowat(852) [email protected]

Date Rating Share Price (W)

Price Target (W)

31-Oct-06 N 76600 78000

25-Jan-07 N 67000 75000

09-Apr-07 OW 65900 85000

26-Jul-07 OW 80300 94000

25-Oct-07 OW 63200 86000

27-Sep-08 OW 72600 85000

24-Oct-08 OW 46700 68000

23-Jan-09 N 42250 40000

24-Apr-09 OW 68100 77000

09-Jul-09 OW 77200 88000

24-Jul-09 OW 81700 94000

01-Sep-09 OW 106000 140000

29-Jan-10 OW 113500 145000

23-Apr-10 OW 125500 155000

06-Jul-10 OW 131000 160000

10-Oct-10 OW 160000 210000

03-Apr-11 OW 203500 250000

29-Apr-11 OW 250500 300000

28-Oct-11 OW 223500 280000

27-Apr-12 OW 257500 310000

04-Nov-12 OW 199500 290000

26-Apr-13 OW 185000 250000

25-Jul-13 OW 223500 280000

24-Oct-13 OW 253500 330000

Date Rating Share Price (W)

Price Target (W)

24-Sep-12 OW 90300 118000

01-Feb-13 OW 82900 109000

27-Apr-13 OW 72700 100000

27-Jul-13 OW 70300 90000

27-Oct-13 OW 86500 100000

0

73,134

146,268

219,402

292,536

365,670

438,804

Price(W)

Oct06

Apr08

Oct09

Apr11

Oct12

Hyundai Motor Company (005380.KS, 005380 KS) Price Chart

OW W85,000 N W40,000OW W94,000OW W160,000 OW W330,000

N W75,000OW W86,000 OW W68,000OW W88,000OW W155,000OW W300,000 OW W280,000

N W78,000OW W94,000 OW W85,000OW W77,000OW W140,000OW W145,000OW W210,000OW W250,000OW W280,000OW W310,000OW W290,000OW W250,000

Source: Bloomberg and J.P. Morgan; price data adjusted for stock splits and dividends.

Initiated coverage Oct 31, 2006.

0

39,624

79,248

118,872

158,496

198,120

237,744

Price(W)

Oct06

Apr08

Oct09

Apr11

Oct12

Hyundai Steel Company (004020.KS, 004020 KS) Price Chart

OW W90,000

OW W100,000

OW W118,000OW W109,000OW W100,000

Source: Bloomberg and J.P. Morgan; price data adjusted for stock splits and dividends.

Initiated coverage Sep 24, 2012.

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109

Emerging Markets Equity Research22 January 2014

Adrian Mowat(852) [email protected]

Date Rating Share Price (W)

Price Target (W)

31-Oct-08 N 31308 41000

03-May-09 N 44712 42000

13-Jul-09 OW 45935 54000

31-Jul-09 OW 54500 60000

30-Oct-09 OW 58800 72000

11-Feb-10 OW 51000 76000

08-Apr-10 OW 52300 61000

01-Aug-10 OW 52200 62000

16-Jan-11 OW 61300 75000

30-Jul-11 OW 53800 80000

13-Sep-11 OW 37250 70000

29-Oct-11 OW 43200 60000

13-Jan-12 OW 36850 45000

27-Apr-12 OW 40000 49000

28-Jul-12 OW 34500 45000

04-Oct-12 OW 39250 52000

26-Oct-12 OW 37000 48000

28-Apr-13 OW 35350 44000

25-Oct-13 OW 42000 49000

Date Rating Share Price (W)

Price Target (W)

13-Oct-06 N 14900 14000

22-Feb-07 UW 13250 11000

06-May-07 UW 11200 10000

29-Jul-07 UW 14550 13000

26-Oct-07 UW 10850 9500

27-Sep-08 UW 14250 11000

26-Nov-08 UW 5850 5500

26-Apr-09 N 10500 11300

02-Jul-09 OW 12450 15000

09-Jul-09 OW 14450 17000

13-Aug-09 OW 16150 18700

25-Oct-09 OW 18300 22000

31-Jan-10 OW 20650 24000

25-Apr-10 OW 26350 32000

20-Jul-10 OW 30650 35000

01-Nov-10 OW 49500 50000

31-Jan-11 OW 57300 63000

03-Apr-11 OW 68700 79000

01-May-11 OW 77300 92000

31-Jul-11 OW 80900 94000

30-Oct-11 OW 72600 90000

29-Jan-12 OW 66500 83000

17-Apr-12 OW 79100 95000

03-Jun-12 OW 76700 100000

28-Oct-12 OW 59800 85000

04-Nov-12 OW 56300 81000

11-Jan-13 N 54900 63000

17-Jun-13 N 57100 67000

25-Oct-13 N 63300 74000

0

14,502

29,004

43,506

58,008

72,510

87,012

101,514

Price(W)

Oct08

Jul09

Apr10

Jan11

Oct11

Jul12

Apr13

Jan14

KB Financial Group (105560.KS, 105560 KS) Price Chart

OW W60,000 OW W60,000 OW W52,000

OW W54,000 OW W61,000 OW W70,000 OW W45,000

N W41,000N W42,000OW W72,000OW W76,000OW W62,000OW W75,000OW W80,000OW W45,000OW W49,000OW W48,000OW W44,000OW W49,000

Source: Bloomberg and J.P. Morgan; price data adjusted for stock splits and dividends.

Initiated coverage Oct 31, 2008.

0

23,974

47,948

71,922

95,896

119,870

143,844

Price(W)

Oct06

Apr08

Oct09

Apr11

Oct12

Kia Motors (000270.KS, 000270 KS) Price Chart

UW W10,000 OW W17,000OW W24,000 OW W79,000OW W90,000OW W100,000N W63,000

UW W11,000UW W9,500 UW W5,500OW W15,000OW W22,000OW W35,000OW W63,000OW W94,000OW W95,000OW W81,000

N W14,000UW W13,000 UW W11,000N W11,300OW W18,700OW W32,000OW W50,000OW W92,000OW W83,000OW W85,000N W67,000N W74,000

Source: Bloomberg and J.P. Morgan; price data adjusted for stock splits and dividends.

Initiated coverage Oct 13, 2006.

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110

Emerging Markets Equity Research22 January 2014

Adrian Mowat(852) [email protected]

Date Rating Share Price (W)

Price Target (W)

27-Oct-10 N 86362 47519

28-Jul-11 N 81373 44297

01-Aug-11 N 79829 47519

19-Oct-11 N 57614 41075

03-May-12 OW 54169 42686

20-Jul-12 OW 61535 45102

01-Feb-13 OW 53041 41881

15-Aug-13 OW 36600 33827

14-Oct-13 OW 34700 40000

Date Rating Share Price (W)

Price Target (W)

01-Feb-09 OW 9275 12700

23-Mar-09 OW 9510 13000

03-Jun-09 OW 11520 15700

02-Aug-09 OW 11667 16600

17-Aug-09 OW 12892 15000

29-Oct-10 OW 12650 15700

01-Jul-11 OW 13950 18800

09-Aug-11 OW 13150 18300

01-Nov-11 OW 15050 19200

01-Feb-12 OW 14350 21800

03-May-12 OW 13700 17500

31-Jul-12 OW 9680 15000

0

22,387

44,774

67,161

89,548

111,935

134,322

156,709

Price(W)

Sep10

Dec10

Mar11

Jun11

Sep11

Dec11

Mar12

Jun12

Sep12

Dec12

Mar13

Jun13

Sep13

Dec13

Korean Air (003490.KS, 003490 KS) Price Chart

N W41,075.398

N W47,518.602 OW W45,102.398 OW W40,000

N W47,518.602 N W44,297 OW W42,686.199 OW W41,880.801OW W33,826.801

Source: Bloomberg and J.P. Morgan; price data adjusted for stock splits and dividends.

Initiated coverage Oct 27, 2010.

0

3,622

7,244

10,866

14,488

18,110

21,732

25,354

Price(W)

Apr08

Jan09

Oct09

Jul10

Apr11

Jan12

Oct12

Jul13

Korean Reinsurance Company (003690.KS, 003690 KS) Price Chart

OW W15,700 OW W19,200OW W15,000

OW W13,000OW W15,000 OW W18,300OW W17,500

OW W12,700OW W16,600 OW W15,700OW W18,800OW W21,800

Source: Bloomberg and J.P. Morgan; price data adjusted for stock splits and dividends.

Initiated coverage Feb 01, 2009.

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111

Emerging Markets Equity Research22 January 2014

Adrian Mowat(852) [email protected]

Date Rating Share Price (W)

Price Target (W)

11-Oct-06 OW 28700 40000

10-Apr-07 OW 32400 45000

22-May-07 OW 39600 50000

03-Jul-07 OW 42700 56000

10-Oct-07 OW 45000 60000

31-Oct-07 OW 47000 70000

03-Jul-08 OW 37750 60000

10-Jul-08 N 32900 36000

20-Aug-08 N 29600 31000

02-Dec-08 N 20850 24000

17-Apr-09 N 31150 28000

10-Jun-09 N 31350 31000

17-Jul-09 N 34800 36000

12-Nov-09 OW 30000 40000

06-Jan-10 OW 41350 53000

01-Apr-10 OW 41700 55000

23-Apr-10 OW 43950 60000

17-Sep-10 OW 38200 55000

13-Jan-11 OW 38200 52000

28-Mar-11 OW 34850 50000

01-Jul-11 OW 29550 45000

22-Jul-11 OW 30550 42000

13-Sep-11 OW 18550 32000

28-Jan-12 OW 28000 36000

25-Jun-12 OW 21500 34000

22-Aug-12 OW 26650 36000

26-Oct-12 OW 30500 40000

19-Nov-12 OW 34650 50000

22-Apr-13 OW 30450 46000

24-Jun-13 OW 26450 40000

03-Oct-13 OW 24150 34000

Date Rating Share Price (W)

Price Target (W)

19-Jan-07 OW 52400 70000

11-Apr-07 OW 64100 82000

18-Jun-07 OW 79700 93000

19-Jul-07 OW 72600 96000

21-Sep-07 OW 80700 105000

17-Oct-07 OW 93200 115000

12-Nov-07 OW 97300 135000

08-Apr-08 OW 137500 160000

16-May-08 N 158500 160000

01-Jul-08 N 118500 115000

22-Jul-08 N 110000 110000

15-Sep-08 N 98400 100000

09-Dec-08 N 79500 75000

23-Jan-09 UW 72500 60000

19-Mar-09 UW 84000 74000

22-Apr-09 UW 106000 92000

17-Jun-09 UW 118000 105000

23-Jul-09 UW 127000 115000

28-Jan-10 N 110000 125000

25-Jul-10 OW 103500 140000

07-Oct-10 OW 96400 130000

0

13,474

26,948

40,422

53,896

67,370

80,844

94,318

Price(W)

Oct06

Apr08

Oct09

Apr11

Oct12

LG Display (034220.KS, 034220 KS) Price Chart

OW W56,000 N W31,000 N W36,000OW W55,000 OW W45,000 OW W40,000

OW W50,000OW W70,000N W36,000 N W31,000OW W53,000 OW W50,000OW W32,000OW W36,000OW W40,000

OW W40,000OW W45,000OW W60,000OW W60,000N W24,000N W28,000OW W40,000OW W60,000OW W55,000OW W52,000OW W42,000OW W36,000OW W34,000OW W50,000OW W46,000OW W34,000

Source: Bloomberg and J.P. Morgan; price data adjusted for stock splits and dividends.

Initiated coverage Oct 11, 2006.

0

38,904

77,808

116,712

155,616

194,520

233,424

272,328

Price(W)

Oct06

Apr08

Oct09

Apr11

Oct12

LG Electronics (066570.KS, 066570 KS) Price Chart

OW W93,000OW W115,000N W115,000N W75,000UW W92,000 OW W130,000OW W110,000OW W130,000 OW W85,000

OW W82,000OW W105,000N W160,000N W100,000UW W74,000UW W115,000 OW W130,000OW W140,000OW W100,000OW W110,000OW W100,000OW W100,000

OW W70,000OW W96,000OW W135,000OW W160,000N W110,000UW W60,000UW W105,000N W125,000OW W140,000OW W150,000OW W120,000OW W100,000OW W110,000OW W120,000OW W80,000

Source: Bloomberg and J.P. Morgan; price data adjusted for stock splits and dividends.

Initiated coverage Jan 19, 2007.

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112

Emerging Markets Equity Research22 January 2014

Adrian Mowat(852) [email protected]

15-Jan-11 OW 114000 150000

08-Apr-11 OW 102000 140000

07-Jun-11 OW 93100 130000

28-Jul-11 OW 81700 120000

16-Sep-11 OW 59700 100000

27-Oct-11 OW 77500 110000

01-Dec-11 OW 73300 100000

02-Feb-12 OW 84300 110000

13-Mar-12 OW 91000 130000

14-Jun-12 OW 67200 110000

26-Jul-12 OW 56100 100000

25-Apr-13 OW 90000 120000

16-Jul-13 OW 71000 100000

10-Oct-13 OW 69100 85000

08-Jan-14 OW 66200 80000

Date Rating Share Price (W)

Price Target (W)

26-Oct-06 OW 358000 390000

26-Jul-07 OW 385500 460000

17-Sep-07 OW 394500 438000

26-Oct-07 OW 432000 519000

16-Apr-08 OW 333500 352000

27-Apr-08 OW 360000 374000

29-Jul-08 OW 304000 372000

18-Oct-08 UW 191500 167000

24-Apr-09 OW 214000 238000

11-Jul-09 OW 270000 342000

26-Oct-09 OW 321500 367000

30-Apr-10 OW 316000 379000

29-Jul-10 OW 345000 388000

13-Sep-10 OW 456000 590000

19-May-11 OW 490500 630000

11-Nov-11 OW 374500 490000

21-Feb-12 OW 364000 463000

08-May-12 OW 344000 419000

09-Aug-12 OW 308500 388000

08-Feb-13 N 394500 405000

08-May-13 NR 400500 --

04-Jul-13 N 348000 360000

10-Aug-13 N 347000 380000

24-Nov-13 N 377000 410000

0

135,304

270,608

405,912

541,216

676,520

811,824

Price(W)

Oct06

Apr08

Oct09

Apr11

Oct12

Lotte Shopping (023530.KS, 023530 KS) Price Chart

OW W519,000OW W372,000 OW W590,000 OW W388,000N W360,000

OW W438,000OW W374,000 OW W342,000OW W388,000 OW W419,000 NR

OW W390,000OW W460,000OW W352,000UW W167,000OW W238,000OW W367,000OW W379,000OW W630,000OW W490,000OW W463,000N W405,000N W380,000N W410,000

Source: Bloomberg and J.P. Morgan; price data adjusted for stock splits and dividends.

Break in coverage May 08, 2013 - Jul 04, 2013.

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113

Emerging Markets Equity Research22 January 2014

Adrian Mowat(852) [email protected]

Date Rating Share Price (W)

Price Target (W)

01-Jul-10 OW 112500 130000

29-Oct-10 OW 139000 145000

11-Jan-11 OW 135500 170000

03-Apr-11 OW 178000 200000

31-Jul-11 OW 211000 239000

28-Mar-12 OW 168000 220000

11-Jan-13 N 124000 100000

16-Apr-13 UW 84600 68000

27-Oct-13 N 144500 150000

Date Rating Share Price (W)

Price Target (W)

15-Sep-10 N 312674 200000

18-Mar-13 NR 413765 --

28-Oct-13 OW 607000 770000

0

52,144

104,288

156,432

208,576

260,720

312,864

365,008

Price(W)

May10

Feb11

Nov11

Aug12

May13

Feb14

Mando (060980.KS, 060980 KS) Price Chart

OW W200,000

OW W170,000 UW W68,000

OW W130,000OW W145,000 OW W239,000 OW W220,000 N W100,000 N W150,000

Source: Bloomberg and J.P. Morgan; price data adjusted for stock splits and dividends.

Initiated coverage Jul 01, 2010.

0

167,148

334,296

501,444

668,592

835,740

1,002,888

1,170,036

Price(W)

Aug10

May11

Feb12

Nov12

Aug13

Naver (035420.KS, 035420 KS) Price Chart

N W200,000 NR OW W770,000

Source: Bloomberg and J.P. Morgan; price data adjusted for stock splits and dividends.

Break in coverage Mar 18, 2013 - Oct 28, 2013.

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114

Emerging Markets Equity Research22 January 2014

Adrian Mowat(852) [email protected]

Date Rating Share Price (W)

Price Target (W)

05-Jun-07 OW 455000 534000

17-Jul-07 OW 555000 590000

18-Oct-07 N 619000 675000

10-Jan-08 OW 543000 650000

11-Apr-08 OW 489500 597000

13-Jul-08 OW 511000 600000

15-Oct-08 N 354500 430000

10-Apr-09 N 379500 400000

12-Jun-09 OW 432500 500000

20-Sep-09 OW 515000 570000

15-Oct-09 OW 515000 600000

29-Jun-10 OW 489000 620000

05-Oct-10 OW 520000 600000

14-Jan-11 OW 494000 560000

29-Mar-11 OW 516000 600000

24-Jul-11 OW 474000 540000

16-Oct-11 OW 374000 480000

18-Jan-12 OW 394000 420000

06-Apr-12 OW 372000 480000

24-Sep-12 OW 381000 460000

24-Oct-12 OW 348500 450000

29-Jan-13 OW 356000 428000

02-Apr-13 N 321500 350000

Date Rating Share Price (W)

Price Target (W)

17-Oct-06 N 650000 650000

12-Mar-07 N 602000 600000

31-May-07 N 535000 570000

15-Jul-07 N 650000 630000

22-Nov-07 OW 515000 700000

09-Apr-08 OW 646000 850000

11-Jul-08 OW 568000 760000

01-Sep-08 OW 516000 680000

26-Oct-08 OW 407500 580000

15-Dec-08 N 465000 410000

14-Mar-09 N 528000 440000

26-Apr-09 N 585000 520000

07-Jun-09 N 569000 560000

26-Jul-09 N 699000 620000

06-Sep-09 N 767000 780000

31-Jan-10 N 777000 800000

02-May-10 N 829000 820000

30-Jan-11 N 1010000 950000

09-Sep-11 N 798000 920000

09-Oct-11 OW 860000 1200000

29-Oct-11 OW 945000 1300000

28-Jan-12 OW 1125000 1400000

28-Mar-12 OW 1311000 1800000

29-Apr-12 OW 1374000 2000000

21-Jun-12 OW 1227000 1800000

04-Dec-12 OW 1430000 1900000

29-Mar-13 OW 1527000 2100000

06-Jun-13 OW 1427000 1900000

26-Jul-13 OW 1303000 1600000

0

181,704

363,408

545,112

726,816

908,520

1,090,224

1,271,928

Price(W)

Oct06

Apr08

Oct09

Apr11

Oct12

POSCO (005490.KS, 005490 KS) Price Chart

N W675,000OW W600,000 OW W420,000OW W428,000

OW W590,000OW W597,000 OW W500,000OW W600,000OW W600,000OW W600,000OW W480,000OW W450,000

OW W534,000OW W650,000N W430,000N W400,000OW W570,000OW W620,000OW W560,000OW W540,000OW W480,000OW W460,000N W350,000

Source: Bloomberg and J.P. Morgan; price data adjusted for stock splits and dividends.

Initiated coverage Jun 05, 2007.

0

391,304

782,608

1,173,912

1,565,216

1,956,520

2,347,824

2,739,128

Price(W)

Oct06

Apr08

Oct09

Apr11

Oct12

Samsung Electronics (005930.KS, 005930 KS) Price Chart

N W630,000 OW W680,000N W440,000N W620,000 OW W1,300,000OW W2,000,000OW W1,600,000

N W570,000 OW W760,000N W410,000N W560,000N W820,000 OW W1,200,000OW W1,800,000OW W1,900,000OW W1,600,000

N W650,000N W600,000OW W700,000OW W850,000OW W580,000N W520,000N W780,000N W800,000 N W950,000N W920,000OW W1,400,000OW W1,800,000OW W1,900,000OW W2,100,000OW W1,750,000

Source: Bloomberg and J.P. Morgan; price data adjusted for stock splits and dividends.

Initiated coverage Oct 17, 2006.

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115

Emerging Markets Equity Research22 January 2014

Adrian Mowat(852) [email protected]

25-Oct-13 OW 1449000 1750000

07-Jan-14 OW 1304000 1600000

Date Rating Share Price (W)

Price Target (W)

01-Apr-07 OW 58700 65000

26-Apr-07 N 73700 65000

25-May-07 N 76800 78000

12-Jun-07 N 96200 93000

25-Jul-07 N 107000 95000

25-Oct-07 N 117500 97000

24-Jan-08 OW 81000 97000

27-Apr-08 OW 90000 105000

19-Aug-08 OW 70800 89000

22-Oct-08 OW 56000 77000

17-Dec-08 OW 47400 60000

02-Apr-09 N 61900 60000

12-Jun-09 UW 88600 65000

20-Jan-10 OW 110000 146000

03-Feb-10 OW 111000 150000

29-Apr-10 OW 106000 135000

31-Aug-10 OW 132000 158000

26-Sep-10 OW 157500 181000

31-Jan-11 OW 202500 216000

06-Feb-11 OW 206000 250000

26-Jul-11 OW 280500 330000

25-Oct-11 OW 237500 300000

25-Apr-12 OW 222500 270000

12-Oct-12 OW 170000 260000

24-Jan-13 OW 153500 220000

17-Apr-13 UW 94700 75000

17-Jul-13 UW 71600 55000

19-Oct-13 UW 80100 50000

Date Rating Share Price (W)

Price Target (W)

15-Feb-11 OW 103000 130000

15-Aug-11 OW 86700 135000

27-Nov-11 OW 81000 126000

11-May-12 OW 96600 140000

10-Nov-12 OW 92300 145000

0

78,354

156,708

235,062

313,416

391,770

470,124

Price(W)

Oct06

Apr08

Oct09

Apr11

Oct12

Samsung Engineering (028050.KS, 028050 KS) Price Chart

N W78,000N W97,000 OW W60,000 OW W135,000 UW W55,000

N W65,000N W95,000OW W105,000OW W77,000UW W65,000OW W150,000OW W181,000OW W250,000OW W300,000 UW W75,000

OW W65,000N W93,000OW W97,000OW W89,000N W60,000OW W146,000OW W158,000OW W216,000OW W330,000OW W270,000OW W260,000OW W220,000UW W50,000

Source: Bloomberg and J.P. Morgan; price data adjusted for stock splits and dividends.

Initiated coverage Apr 01, 2007.

0

18,634

37,268

55,902

74,536

93,170

111,804

130,438

149,072

167,706

186,340

Price(W)

May10

Feb11

Nov11

Aug12

May13

Feb14

Samsung Life Insurance (032830.KS, 032830 KS) Price Chart

OW W130,000OW W135,000OW W126,000OW W140,000OW W145,000

Source: Bloomberg and J.P. Morgan; price data adjusted for stock splits and dividends.

Initiated coverage Feb 15, 2011.

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116

Emerging Markets Equity Research22 January 2014

Adrian Mowat(852) [email protected]

Date Rating Share Price (W)

Price Target (W)

01-Feb-07 UW 31250 28000

25-May-07 UW 29900 25000

28-Jul-07 UW 36350 28000

19-Oct-07 UW 26000 25000

21-Nov-07 N 22500 25000

02-Feb-08 N 26000 23000

26-Aug-08 N 20550 20000

18-Sep-08 N 19900 18000

08-Oct-08 N 15100 15000

31-Oct-08 N 10750 10000

22-Dec-08 N 8520 8000

17-Feb-09 UW 8210 8000

12-Jun-09 UW 12900 9000

25-Jul-09 UW 18000 11000

13-Oct-09 N 20000 19000

22-Jan-10 N 26100 22000

14-Apr-10 N 27900 27000

23-Jul-10 N 23600 25000

23-Sep-10 N 22100 23000

19-Jan-11 N 27650 25000

29-Apr-11 N 34350 28000

13-Jul-11 N 26450 22000

30-Sep-11 N 21850 19000

03-Feb-12 N 27200 23000

27-Apr-12 N 27050 26000

11-Jun-12 N 21750 25000

26-Jul-12 N 20400 23000

11-Oct-12 N 23000 22000

04-Apr-13 N 29200 26000

27-Jun-13 N 30250 31000

27-Sep-13 OW 30350 39000

03-Jan-14 OW 36300 45000

Date Rating Share Price (W)

Price Target (W)

05-Oct-07 OW 155500 185000

31-Oct-07 OW 208500 230000

26-Jul-08 OW 107500 175000

26-Oct-08 OW 48650 125000

19-Jan-09 OW 75300 100000

19-Jun-09 OW 104000 130000

19-Oct-09 OW 116500 150000

13-Sep-10 OW 139500 165000

15-Apr-11 N 212500 205000

12-Jun-12 N 143000 160000

28-Oct-12 N 157500 150000

29-Apr-13 N 149500 145000

12-Jun-13 OW 142000 180000

0

10,594

21,188

31,782

42,376

52,970

63,564

Price(W)

Oct06

Apr08

Oct09

Apr11

Oct12

SK Hynix (000660.KS, 000660 KS) Price Chart

UW W25,000 N W15,000UW W8,000N W19,000N W25,000 N W19,000N W25,000 OW W39,000

UW W28,000N W23,000N W18,000N W8,000UW W11,000N W27,000 N W22,000N W26,000N W22,000N W31,000

UW W28,000UW W25,000N W25,000N W20,000N W10,000UW W9,000N W22,000N W23,000N W25,000N W28,000N W23,000N W23,000N W26,000OW W45,000

Source: Bloomberg and J.P. Morgan; price data adjusted for stock splits and dividends.

Initiated coverage Feb 01, 2007.

0

66,474

132,948

199,422

265,896

332,370

398,844

Price(W)

Jul07

Apr08

Jan09

Oct09

Jul10

Apr11

Jan12

Oct12

Jul13

SK Innovation Co Ltd (096770.KS, 096770 KS) Price Chart

OW W100,000

OW W230,000 OW W125,000 OW W180,000

OW W185,000OW W175,000OW W130,000OW W150,000OW W165,000N W205,000 N W160,000N W150,000N W145,000

Source: Bloomberg and J.P. Morgan; price data adjusted for stock splits and dividends.

Initiated coverage Oct 05, 2007.

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117

Emerging Markets Equity Research22 January 2014

Adrian Mowat(852) [email protected]

Date Rating Share Price (W)

Price Target (W)

15-Feb-11 N 12600 14200

15-Aug-11 N 13700 14900

15-Nov-11 N 14050 15000

10-May-12 N 11100 13300

05-Jul-12 N 10500 13100

06-Feb-13 N 11550 13300

17-May-13 N 10100 12600

09-Aug-13 N 9960 12000

07-Oct-13 OW 10200 13000

07-Nov-13 OW 11150 14000

Date Rating Share Price (c)

Price Target (c)

01-Dec-05 OW 2210 2500

29-Mar-07 OW 2901 3876

09-Jul-07 OW 3240 3694

25-Sep-07 OW 3130 3670

16-Nov-07 OW 3475 4545

11-Feb-08 OW 2837 4195

13-Mar-08 OW 2949 3887

08-May-08 OW 2470 3887

02-Jun-08 OW 2364 3985

28-Oct-08 N 2265 3928

01-Dec-08 N 2750 3259

27-May-09 N 2623 3064

02-Jul-09 UW 2750 3064

25-Sep-09 N 2985 3587

24-Nov-09 N 3030 3516

15-Mar-10 OW 3390 3949

25-May-10 OW 2940 3627

08-Jul-10 OW 3157 3752

27-Sep-10 N 3532 3433

24-Nov-10 N 3640 3350

24-Jan-11 N 3800 3350

14-Feb-11 N 3649 3850

24-May-11 N 3480 3691

22-Nov-11 N 3350 3825

20-Nov-12 N 3115 3400

10-Jun-13 OW 1715 2800

06-Aug-13 OW 1513 2000

12-Nov-13 OW 1314 1600

0

3,342

6,684

10,026

13,368

16,710

20,052

23,394

26,736

Price(W)

Oct09

Jul10

Apr11

Jan12

Oct12

Jul13

Tong Yang Life Insurance (082640.KS, 082640 KS) Price Chart

N W12,000

N W15,000 N W13,100 N W12,600OW W14,000

N W14,200 N W14,900 N W13,300 N W13,300 OW W13,000

Source: Bloomberg and J.P. Morgan; price data adjusted for stock splits and dividends.

Initiated coverage Feb 15, 2011.

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

Price(c)

Sep06

Mar08

Sep09

Mar11

Sep12

African Bank Investments Ltd (ABLJ.J, ABL SJ) Price Chart

OW 4,545cOW 3,887c N 3,586.633cOW 3,752.362cN 3,350c OW 1,600c

OW 3,670cOW 3,886.578cN 3,259.159cUW 3,063.987cOW 3,626.792cN 3,350.484cN 3,691.045c OW 2,000c

OW 3,876cOW 3,694cOW 4,195.205cOW 3,985cN 3,928cN 3,063.987cN 3,516.335cOW 3,949.115cN 3,432.818cN 3,850.272cN 3,824.692c N 3,400cOW 2,800c

Source: Bloomberg and J.P. Morgan; price data adjusted for stock splits and dividends.

Initiated coverage Dec 01, 2005.

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118

Emerging Markets Equity Research22 January 2014

Adrian Mowat(852) [email protected]

Date Rating Share Price (SRls)

Price Target (SRls)

09-Jan-13 OW 66.00 87.00

29-Aug-13 OW 80.25 95.00

10-Sep-13 OW 54.67 63.00

09-Oct-13 N 53.75 60.00

Date Rating Share Price (c)

Price Target (c)

05-Oct-06 N 77999 87400

20-Nov-06 N 80900 77600

08-Mar-07 N 101010 121000

12-Mar-07 OW 102300 121000

16-Jul-07 OW 110550 137400

16-Aug-07 OW 90100 106300

20-Nov-07 N 95500 98100

13-Dec-07 N 99000 89400

28-Feb-08 N 120001 130500

28-Jul-08 N 93470 96100

22-Aug-08 N 92100 86800

07-Nov-08 N 38000 46000

26-Jan-09 UW 43499 36900

09-Mar-09 UW 41800 35900

14-May-09 N 47700 61300

02-Sep-09 OW 66000 91000

14-Dec-09 OW 80400 96000

08-Mar-10 OW 69145 99500

24-Mar-10 OW 71560 97500

08-Sep-10 OW 64605 78300

10-Jan-11 OW 68195 87100

09-May-11 OW 62000 85900

16-Sep-11 OW 54612 68000

31-Jan-12 OW 55400 68300

09-May-12 OW 47787 59100

05-Sep-12 OW 41300 54700

31-Jan-13 N 44321 48500

07-May-13 N 34500 37000

10-Sep-13 OW 41000 56300

0

20

40

60

80

100

120

140

Price(SRls)

Oct09

Jul10

Apr11

Jan12

Oct12

Jul13

Almarai (2280.SE, ALMARAI AB) Price Chart

N SRls60

OW SRls63

OW SRls87 OW SRls95

Source: Bloomberg and J.P. Morgan; price data adjusted for stock splits and dividends.

Initiated coverage Jan 09, 2013.

0

38,323

76,646

114,969

153,292

191,615

229,938

Price(c)

Sep06

Mar08

Sep09

Mar11

Sep12

Anglo American Platinum Ltd (AMSJ.J, AMS SJ) Price Chart

N 98,100c N 46,000cN 61,300cOW 97,500c

N 77,600cOW 121,000cOW 106,300cN 130,500cN 86,800cUW 35,900c OW 99,500c OW 59,100c N 37,000c

N 87,400cN 121,000cOW 137,400cN 89,400cN 96,100cUW 36,900cOW 91,000cOW 96,000cOW 78,300cOW 87,100cOW 85,900cOW 68,000cOW 68,300cOW 54,700cN 48,500cOW 56,300c

Source: Bloomberg and J.P. Morgan; price data adjusted for stock splits and dividends.

Initiated coverage Oct 05, 2006.

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119

Emerging Markets Equity Research22 January 2014

Adrian Mowat(852) [email protected]

Date Rating Share Price (R)

Price Target (R)

01-Feb-12 OW 94.62 138.26

20-Feb-12 UW 86.99 115.86

13-Jun-12 UW 56.30 89.74

07-Sep-12 UW 63.50 83.58

29-Apr-13 N 38.78 75.30

06-Jun-13 OW 42.50 76.06

24-Sep-13 OW 44.19 79.00

Date Rating Share Price (c)

Price Target (c)

12-Aug-05 OW 9950 11000

20-Oct-06 UW 10650 12870

29-Jan-07 N 13175 12870

13-Mar-07 N 13555 18195

09-Jul-07 N 13250 15896

25-Sep-07 N 12225 16320

06-Dec-07 N 12025 15804

13-Mar-08 N 10050 14497

15-Apr-08 N 9851 15561

04-Jun-08 UW 8390 13242

25-Aug-08 UW 10275 12905

28-Oct-08 N 8600 12202

12-Jan-09 OW 10800 12202

13-Feb-09 OW 9500 13149

04-May-09 OW 9845 13154

02-Jul-09 OW 10855 15371

07-Dec-09 OW 12500 15455

17-Feb-10 OW 13440 15577

22-Apr-10 OW 13900 16143

08-Jul-10 OW 13005 15463

09-Aug-10 OW 12820 14963

07-Dec-10 OW 13350 12932

17-Feb-11 OW 13200 14754

03-Oct-11 OW 13412 15559

13-Feb-12 OW 15135 17929

21-Aug-12 NR 14101 --

02-May-13 N 14851 15400

07-Nov-13 N 14900 17000

0

52

104

156

208

260

312

Price(R)

Jan09

Oct09

Jul10

Apr11

Jan12

Oct12

Jul13

Bank St. Petersburg (BSPB.MM, BSPB RX) Price Chart

UW R115.856UW R83.584 OW R76.058

OW R138.263UW R89.736 N R75.298OW R79

Source: Bloomberg and J.P. Morgan; price data adjusted for stock splits and dividends.

Initiated coverage Feb 01, 2012.

0

3,618

7,236

10,854

14,472

18,090

21,708

25,326

28,944

Price(c)

Sep06

Mar08

Sep09

Mar11

Sep12

Barclays Africa Group Ltd (BGAJ.J, BGA SJ) Price Chart

N 18,195cN 15,803.898cUW 13,242cOW 12,202.166cOW 15,371cOW 16,143c

N 12,870cN 16,320.056cN 15,561cN 12,202.166cOW 13,154cOW 15,577cOW 14,963cOW 14,754c

UW 12,870cN 15,895.814cN 14,497cUW 12,905cOW 13,149cOW 15,455cOW 15,463cOW 12,932cOW 15,559cOW 17,929cNR N 15,400cN 17,000c

Source: Bloomberg and J.P. Morgan; price data adjusted for stock splits and dividends.

Break in coverage Aug 21, 2012 - May 02, 2013.

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120

Emerging Markets Equity Research22 January 2014

Adrian Mowat(852) [email protected]

Date Rating Share Price (CZK)

Price Target (CZK)

28-Feb-08 N 1229.00 1450.00

29-Jun-08 N 1346.00 1580.00

07-Jan-09 N 846.00 1050.00

04-Mar-09 N 643.40 950.00

20-May-10 N 890.00 1040.00

27-Aug-10 N 827.00 1080.00

27-Oct-10 N 769.90 900.00

12-May-11 N 947.00 1050.00

29-Sep-11 OW 703.70 980.00

11-Jan-12 N 777.90 900.00

17-Jul-13 N 468.00 490.00

Date Rating Share Price (c)

Price Target (c)

16-Feb-07 N 2970 3000

19-Feb-07 UW 2934 3000

05-Sep-07 UW 2690 3200

04-Dec-07 UW 2680 --

09-Feb-10 OW 3030 4000

15-Mar-10 OW 3430 3850

24-Aug-10 OW 3537 4050

13-Sep-10 OW 3670 4150

25-Jan-11 N 3966 4400

07-Jun-11 N 3844 4250

08-Sep-11 N 4020 4500

12-Dec-11 N 4350 4600

08-Feb-12 UW 4690 4750

25-Jun-12 UW 5310 4950

17-Sep-12 UW 5515 5100

26-Nov-12 UW 5698 5280

28-Feb-13 UW 7258 5500

24-Jun-13 UW 7830 5750

11-Sep-13 UW 8899 5950

0

345

690

1,035

1,380

1,725

2,070

2,415

Price(CZK)

Sep06

Mar08

Sep09

Mar11

Sep12

CEZ (CEZP.PR, CEZ CP) Price Chart

N CZK900

N CZK950 N CZK1,080

N CZK1,450N CZK1,580N CZK1,050 N CZK1,040 N CZK1,050OW CZK980N CZK900 N CZK490

Source: Bloomberg and J.P. Morgan; price data adjusted for stock splits and dividends.

Initiated coverage Feb 28, 2008.

0

2,590

5,180

7,770

10,360

12,950

15,540

Price(c)

Sep06

Mar08

Sep09

Mar11

Sep12

Discovery Holdings Limited (DSYJ.J, DSY SJ) Price Chart

N 4,600c UW 5,280c

UW 3,000c UW OW 3,850cOW 4,150c N 4,500c UW 5,100c UW 5,950c

N 3,000cUW 3,200c OW 4,000cOW 4,050cN 4,400cN 4,250cUW 4,750cUW 4,950cUW 5,500cUW 5,750c

Source: Bloomberg and J.P. Morgan; price data adjusted for stock splits and dividends.

Break in coverage Dec 04, 2007 - Feb 09, 2010.

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121

Emerging Markets Equity Research22 January 2014

Adrian Mowat(852) [email protected]

Date Rating Share Price (c)

Price Target (c)

05-Oct-06 OW 1010 1560

23-Oct-06 OW 970 1460

20-Nov-06 OW 850 1190

12-Dec-06 OW 637 1070

01-Mar-07 OW 524 660

17-Apr-07 OW 514 590

17-Jul-07 N 490 510

13-Sep-07 UW 510 500

28-Feb-08 UW 988 600

01-Sep-08 UW 415 430

10-Nov-08 UW 380 420

06-Mar-09 UW 940 850

13-May-09 UW 745 570

03-Sep-09 UW 565 450

11-Dec-09 OW 419 530

19-Apr-10 N 367 420

09-Sep-10 UW 309 330

12-Jan-11 UW 338 310

05-May-11 UW 366 380

14-Sep-11 OW 400 540

08-Nov-11 OW 550 827

26-Jan-12 OW 503 680

06-Mar-12 OW 570 790

08-May-12 N 545 620

06-Sep-12 N 478 500

01-Feb-13 N 726 820

08-May-13 N 568 630

12-Sep-13 UW 577 510

Date Rating Share Price (Dh)

Price Target (Dh)

19-Oct-10 OW 2.95 4.00

15-Feb-11 OW 3.31 4.25

03-Mar-11 OW 2.82 4.50

25-Apr-11 OW 3.28 4.70

03-Aug-11 OW 3.18 4.75

01-Nov-11 OW 2.91 5.00

15-Oct-12 OW 3.59 5.25

10-Dec-12 UW 3.50 3.00

11-Dec-12 N 3.50 4.00

22-Apr-13 N 4.75 4.25

31-Oct-13 UW 6.42 4.40

0

271

542

813

1,084

1,355

1,626

1,897

Price(c)

Sep06

Mar08

Sep09

Mar11

Sep12

DRDGold Ltd (DRDJ.J, DRD SJ) Price Chart

OW 1,190cOW 590c OW 680c

OW 1,460cOW 660cUW 500c UW 420cUW 570cOW 530c OW 827cN 620c N 630c

OW 1,560cOW 1,070cN 510c UW 600cUW 430cUW 850cUW 450c N 420cUW 330cUW 310cUW 380cOW 540cOW 790cN 500cN 820c UW 510c

Source: Bloomberg and J.P. Morgan; price data adjusted for stock splits and dividends.

Initiated coverage Oct 05, 2006.

0

6

12

Price(Dh)

Sep06

Mar08

Sep09

Mar11

Sep12

du (DU.DU, DU UH) Price Chart

OW Dh4.7 N Dh4

OW Dh4.5OW Dh5 UW Dh3

OW Dh4OW Dh4.25OW Dh4.75 OW Dh5.25N Dh4.25UW Dh4.4

Source: Bloomberg and J.P. Morgan; price data adjusted for stock splits and dividends.

Initiated coverage Oct 19, 2010.

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122

Emerging Markets Equity Research22 January 2014

Adrian Mowat(852) [email protected]

Date Rating Share Price (Dh)

Price Target (Dh)

10-Aug-09 N 3.14 3.50

02-Nov-09 N 4.05 4.40

12-Apr-10 OW 4.06 5.00

30-Jan-11 OW 3.11 4.80

06-Apr-11 OW 3.17 5.00

18-Oct-11 OW 2.47 4.30

04-Oct-12 OW 3.66 4.50

21-Jan-13 OW 4.39 5.35

03-Apr-13 OW 5.09 6.30

20-Aug-13 OW 6.15 8.50

Date Rating Share Price (€)

Price Target (€)

20-Dec-06 OW 58.89 77.00

26-Oct-07 OW 56.34 72.00

03-Oct-08 OW 34.10 60.00

20-Nov-08 OW 13.79 20.00

05-Aug-09 OW 26.40 35.00

11-Jan-10 OW 27.43 42.00

11-Aug-10 OW 29.07 50.00

23-Mar-11 OW 35.12 48.00

20-Sep-11 OW 19.67 32.00

17-Oct-11 N 16.38 23.00

20-Apr-12 OW 15.76 25.00

29-Jan-13 OW 24.52 32.00

13-Aug-13 OW 25.72 35.00

0

8

16

24

Price(Dh)

Sep06

Mar08

Sep09

Mar11

Sep12

Emaar Properties (EMAR.DU, EMAAR DB) Price Chart

N Dh4.4 OW Dh5 OW Dh6.3

N Dh3.5 OW Dh5 OW Dh4.8OW Dh4.3 OW Dh4.5OW Dh5.35OW Dh8.5

Source: Bloomberg and J.P. Morgan; price data adjusted for stock splits and dividends.

Initiated coverage Aug 10, 2009.

0

21

42

63

84

105

Price(€)

Sep06

Mar08

Sep09

Mar11

Sep12

Erste Bank (ERST.VI, EBS AV) Price Chart

OW €20 N €23

OW €77 OW €72 OW €60 OW €35OW €42OW €50 OW €48OW €32OW €25 OW €32OW €35

Source: Bloomberg and J.P. Morgan; price data adjusted for stock splits and dividends.

Initiated coverage Dec 20, 2006.

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123

Emerging Markets Equity Research22 January 2014

Adrian Mowat(852) [email protected]

Date Rating Share Price (Dh)

Price Target (Dh)

01-Jul-09 OW 13.25 17.00

22-Oct-09 OW 18.35 26.00

01-Mar-10 OW 16.85 23.00

21-Dec-10 OW 18.30 26.00

04-Jan-12 OW 15.50 26.00

13-Mar-12 OW 10.20 13.00

19-Oct-12 OW 9.99 13.50

19-Feb-13 OW 12.95 13.50

03-May-13 OW 14.55 18.00

28-Oct-13 OW 16.60 21.00

Date Rating Share Price (R)

Price Target (R)

26-Jul-13 UW 0.12 0.12

12-Sep-13 UW 0.11 0.11

0

11

22

33

44

Price(Dh)

Sep06

Mar08

Sep09

Mar11

Sep12

First Gulf Bank (FGB.AD, FGB UH) Price Chart

OW Dh13.001 OW Dh17.999

OW Dh16.995OW Dh25.997OW Dh22.996OW Dh26.001 OW Dh26.005OW Dh13.5OW Dh13.5OW Dh20.996

Source: Bloomberg and J.P. Morgan; price data adjusted for stock splits and dividends.

Initiated coverage Jul 01, 2009.

0

0.40179

0.80358

Price(R)

Jul10

Apr11

Jan12

Oct12

Jul13

FSK (FEES.MM, FEES RX) Price Chart

UW R0.106

UW R0.121

Source: Bloomberg and J.P. Morgan; price data adjusted for stock splits and dividends.

Initiated coverage Jul 26, 2013.

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124

Emerging Markets Equity Research22 January 2014

Adrian Mowat(852) [email protected]

Date Rating Share Price (€)

Price Target (€)

09-Dec-10 UW 35.79 8.20

17-Jan-12 UW 8.05 1.10

20-Dec-13 NR 4.12 --

09-Jan-14 UW 4.26 3.92

Date Rating Share Price (€)

Price Target (€)

18-Dec-06 OW 23.34 32.00

24-Nov-08 OW 8.08 11.00

24-Aug-09 OW 10.53 16.00

27-Aug-09 OW 12.34 20.00

16-Feb-10 OW 6.60 10.00

25-May-10 UW 4.75 4.70

29-Nov-10 UW 4.37 5.20

11-May-11 NR 3.62 --

09-Jan-14 OW 0.71 0.84

0

19

38

57

76

95

Price(€)

May10

Feb11

Nov11

Aug12

May13

Feb14

National Bank of Greece (NBGr.AT, ETE GA) Price Chart

UW €3.92

UW €8.2 UW €1.1 NR

Source: Bloomberg and J.P. Morgan; price data adjusted for stock splits and dividends.

Break in coverage Dec 20, 2013 - Jan 09, 2014.

0

11

22

33

44

Price(€)

Sep06

Mar08

Sep09

Mar11

Sep12

Alpha Bank (ACBr.AT, ALPHA GA) Price Chart

OW €20 UW €4.7

OW €32 OW €11 OW €16OW €10 UW €5.2NR OW €0.84

Source: Bloomberg and J.P. Morgan; price data adjusted for stock splits and dividends.

Break in coverage May 11, 2011 - Jan 09, 2014.

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125

Emerging Markets Equity Research22 January 2014

Adrian Mowat(852) [email protected]

Date Rating Share Price (c)

Price Target (c)

28-Nov-06 UW 3315 -

20-Apr-07 UW 3783 4300

22-Apr-07 N 3735 4300

14-Aug-07 N 3204 4050

12-Oct-07 OW 3489 4300

07-Dec-07 OW 3990 4620

28-Feb-08 OW 3106 4400

26-Jun-08 OW 2821 3900

03-Jul-08 OW 3464 4850

28-Jul-08 OW 3956 5500

23-Sep-08 N 4089 4900

13-Feb-09 OW 4350 5400

11-Mar-09 OW 4690 5600

18-May-09 OW 5151 6300

16-Oct-09 N 6600 7500

01-Apr-10 N 7955 9100

23-Aug-10 OW 8065 9900

18-Jan-11 OW 8900 10700

14-Mar-11 OW 7547 9500

30-Sep-11 OW 9005 10600

09-Mar-12 OW 10900 12300

24-Apr-12 OW 12525 13200

19-Oct-12 OW 14999 17300

30-Apr-13 OW 19520 21700

03-Jul-13 OW 22505 25700

15-Aug-13 OW 23199 27200

16-Sep-13 OW 27150 31800

Date Rating Share Price (p)

Price Target (p)

09-Dec-11 N 375 539

02-Mar-12 N 412 510

16-Jul-12 N 254 326

12-Sep-12 N 260 274

28-Feb-13 UW 270 252

10-Sep-13 UW 134 116

0

7,828

15,656

23,484

31,312

39,140

46,968

Price(c)

Sep06

Mar08

Sep09

Mar11

Sep12

Aspen (APNJ.J, APN SJ) Price Chart

OW 4,620cOW 5,500cOW 6,300c OW 27,200c

N 4,300cOW 4,300cOW 4,850cOW 5,600c OW 9,500c OW 13,200c OW 25,700c

UWUW 4,300cN 4,050cOW 4,400cOW 3,900cN 4,900cOW 5,400cN 7,500cN 9,100cOW 9,900cOW 10,700cOW 10,600cOW 12,300cOW 17,300cOW 21,700cOW 31,800c

Source: Bloomberg and J.P. Morgan; price data adjusted for stock splits and dividends.

Initiated coverage Nov 28, 2006.

0

123

246

369

492

615

738

Price(p)

Nov11

Feb12

May12

Aug12

Nov12

Feb13

May13

Aug13

Nov13

Feb14

EVRAZ (EVR.L, EVR LN) Price Chart

N 510p N 274p

N 538.638p N 326p UW 252p UW 116p

Source: Bloomberg and J.P. Morgan; price data adjusted for stock splits and dividends.

Initiated coverage Dec 09, 2011.

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126

Emerging Markets Equity Research22 January 2014

Adrian Mowat(852) [email protected]

Date Rating Share Price (c)

Price Target (c)

31-Mar-05 N 1655 1450

20-Oct-06 OW 1720 2796

29-Jan-07 OW 2174 2865

13-Mar-07 OW 2142 3237

09-Jul-07 OW 2169 2843

26-Sep-07 OW 2038 2818

06-Dec-07 OW 2145 2670

04-Feb-08 OW 1790 2389

13-Mar-08 OW 1686 2469

15-Apr-08 OW 1668 2386

04-Jun-08 OW 1483 1910

25-Aug-08 OW 1510 2335

22-Sep-08 OW 1645 2174

28-Oct-08 OW 1220 1986

03-Dec-08 OW 1455 1841

13-Mar-09 N 1200 1505

04-May-09 N 1305 1563

26-Jun-09 OW 1380 1555

02-Jul-09 OW 1392 1689

12-Jan-10 OW 1880 2078

10-Mar-10 OW 1969 2174

22-Apr-10 OW 1991 2180

08-Jul-10 OW 1965 2096

17-Sep-10 OW 2021 2238

07-Dec-10 OW 1860 1972

18-Mar-11 OW 1911 2217

19-Jul-11 OW 1947 2396

15-Sep-11 N 2060 2280

29-Feb-12 N 2390 2814

20-Nov-12 N 2995 2700

02-May-13 N 3136 2900

11-Sep-13 N 3230 3300

07-Nov-13 N 3428 3800

Date Rating Share Price (TL)

Price Target(TL)

05-Oct-06 OW 2.58 6.10

23-Mar-07 OW 3.53 9.42

26-Apr-07 OW 4.22 10.46

30-Aug-07 OW 4.60 11.00

15-Feb-08 OW 4.74 12.00

28-May-08 OW 3.35 8.50

05-Sep-08 OW 3.68 4.70

18-Dec-08 OW 2.49 2.90

16-Apr-09 OW 2.88 3.32

04-Aug-09 OW 5.34 6.29

09-Apr-10 OW 7.70 9.80

10-Feb-11 OW 7.46 9.20

24-Jun-11 OW 7.34 8.70

14-Nov-11 OW 6.54 8.30

16-Oct-12 N 8.30 9.60

02-May-13 N 9.90 12.00

10-May-13 OW 10.45 12.90

24-Jun-13 N 7.74 9.50

05-Nov-13 N 7.56 9.90

0

866

1,732

2,598

3,464

4,330

5,196

6,062

Price(c)

Sep06

Mar08

Sep09

Mar11

Sep12

FirstRand Ltd (FSRJ.J, FSR SJ) Price Chart

OW 3,237cOW 2,669.532cOW 2,386cOW 2,174cN 1,505cOW 1,689cOW 2,180cOW 1,972c

OW 2,865cOW 2,817.936cOW 2,469cOW 2,335cOW 1,841.431cOW 1,555cOW 2,174cOW 2,238c N 2,280c N 3,800c

OW 2,796cOW 2,842.809cOW 2,389.008cOW 1,910cOW 1,986.488cN 1,563cOW 2,078cOW 2,096cOW 2,217cOW 2,396cN 2,814c N 2,700cN 2,900cN 3,300c

Source: Bloomberg and J.P. Morgan; price data adjusted for stock splits and dividends.

Initiated coverage Mar 31, 2005.

0

7

14

21

Price(TL)

Sep06

Mar08

Sep09

Mar11

Sep12

Garanti (GARAN.IS, GARAN TI) Price Chart

N TL9.5

OW TL10.457 OW TL4.7 OW TL12.9

OW TL6.1OW TL9.419OW TL11OW TL12OW TL8.5OW TL2.9OW TL3.325OW TL6.294OW TL9.8 OW TL9.2OW TL8.7OW TL8.3 N TL9.6N TL12N TL9.9

Source: Bloomberg and J.P. Morgan; price data adjusted for stock splits and dividends.

Initiated coverage Oct 05, 2006.

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127

Emerging Markets Equity Research22 January 2014

Adrian Mowat(852) [email protected]

Date Rating Share Price ($)

Price Target ($)

27-May-08 N 15.04 14.70

26-Jun-08 N 14.42 14.80

01-Oct-08 N 8.00 9.80

04-Nov-08 N 5.14 7.40

20-Jan-09 N 3.20 5.80

31-Mar-09 N 3.70 5.10

05-Jun-09 N 5.97 5.90

26-Oct-09 OW 6.68 9.90

22-Jun-10 OW 5.10 8.40

22-Oct-10 OW 5.39 7.80

16-May-11 N 7.22 8.78

07-Oct-11 N 4.62 6.94

24-Feb-12 N 6.62 7.17

20-Sep-12 N 5.53 5.96

25-Sep-12 N 5.17 6.48

04-Oct-12 N 5.17 6.64

28-May-13 N 3.90 5.00

12-Nov-13 OW 4.52 6.00

Date Rating Share Price (c)

Price Target (c)

05-Oct-06 N 15901 136000

20-Nov-06 N 17195 17000

20-Dec-06 N 17600 19000

21-Dec-06 OW 18400 19000

16-Jul-07 OW 22400 25800

12-Sep-07 OW 21600 23800

13-Dec-07 OW 24450 23100

28-Feb-08 OW 31000 40700

18-Apr-08 OW 32949 42300

28-Jul-08 OW 22299 24800

22-Aug-08 OW 22000 22200

26-Jan-09 OW 12225 14100

09-Mar-09 OW 12950 13400

14-May-09 OW 16600 22400

02-Sep-09 N 17850 22000

14-Dec-09 N 19100 21000

24-Mar-10 N 20000 22000

08-Sep-10 N 17551 19300

10-Jan-11 N 22700 25800

19-Apr-11 N 18520 22400

09-May-11 N 18560 21600

16-Sep-11 N 16484 19400

31-Jan-12 UW 17169 19700

22-Mar-12 N 15700 17500

09-May-12 N 14113 16900

05-Sep-12 N 13000 14600

31-Jan-13 UW 16397 15600

07-May-13 UW 11800 8500

10-Sep-13 UW 11777 11400

0

8

16

24

Price($)

Sep06

Mar08

Sep09

Mar11

Sep12

Gazprom (GAZP.RTS, GAZP RU) Price Chart

N $9.8 N $5.1 N $6.64

N $14.8 N $5.8 N $6.48

N $14.7N $7.4 N $5.9OW $9.9 OW $8.4OW $7.8N $8.784N $6.94N $7.17 N $5.96 N $5 OW $6

Source: Bloomberg and J.P. Morgan; price data adjusted for stock splits and dividends.

Initiated coverage May 27, 2008.

0

9,324

18,648

27,972

37,296

46,620

55,944

Price(c)

Sep06

Mar08

Sep09

Mar11

Sep12

Impala Platinum Holdings Ltd (IMPJ.J, IMP SJ) Price Chart

N 19,000c OW 23,100c OW 22,400c N 21,600c N 16,900c

N 17,000cOW 23,800cOW 42,300cOW 22,200cOW 13,400c N 22,000c N 22,400c N 17,500c UW 8,500c

N 136,000cOW 19,000cOW 25,800cOW 40,700cOW 24,800cOW 14,100cN 22,000cN 21,000cN 19,300cN 25,800cN 19,400cUW 19,700cN 14,600cUW 15,600cUW 11,400c

Source: Bloomberg and J.P. Morgan; price data adjusted for stock splits and dividends.

Initiated coverage Oct 05, 2006.

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128

Emerging Markets Equity Research22 January 2014

Adrian Mowat(852) [email protected]

Date Rating Share Price (TL)

Price Target (TL)

05-Oct-06 N 4.68 9.60

23-Mar-07 N 5.73 6.67

30-Aug-07 N 5.14 6.69

15-Feb-08 N 4.93 7.00

28-May-08 N 4.49 5.50

05-Sep-08 UW 4.80 5.50

18-Dec-08 UW 3.61 3.40

16-Apr-09 UW 3.78 3.92

09-Apr-10 N 4.98 5.80

10-Feb-11 N 5.38 6.10

24-Jun-11 UW 4.84 5.10

14-Nov-11 UW 4.06 4.60

16-Oct-12 N 5.84 6.90

10-May-13 N 7.42 8.90

24-Jun-13 N 5.16 6.50

05-Nov-13 N 5.10 6.70

Date Rating Share Price (zl)

Price Target (zl)

17-Feb-12 UW 133.30 121.60

12-Jul-12 UW 118.20 110.00

25-Sep-12 N 151.50 158.06

11-Jan-13 N 190.80 189.60

28-Mar-13 OW 157.80 172.00

10-Apr-13 OW 157.20 172.00

11-Jun-13 OW 149.95 171.80

14-Aug-13 OW 127.45 152.00

09-Oct-13 OW 119.30 150.00

0

19,203

38,406

57,609

76,812

96,015

Price(TL)

Sep06

Mar08

Sep09

Mar11

Sep12

Isbank (ISCTR.IS, ISCTR TI) Price Chart

N TL6.5

N TL9.6N TL6.67N TL6.686N TL7N TL5.5UW TL5.5UW TL3.4UW TL3.915 N TL5.8 N TL6.1UW TL5.1UW TL4.6 N TL6.9N TL8.9N TL6.7

Source: Bloomberg and J.P. Morgan; price data adjusted for stock splits and dividends.

Initiated coverage Oct 05, 2006.

0

58

116

174

232

290

348

Price(zl)

Nov08

Aug09

May10

Feb11

Nov11

Aug12

May13

Feb14

KGHM (KGHM.WA, KGH PW) Price Chart

OW zl172.001OW zl150

N zl158.06OW zl172OW zl152

UW zl121.6UW zl110N zl189.6OW zl171.8

Source: Bloomberg and J.P. Morgan; price data adjusted for stock splits and dividends.

Initiated coverage Feb 17, 2012.

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129

Emerging Markets Equity Research22 January 2014

Adrian Mowat(852) [email protected]

Date Rating Share Price (TL)

Price Target (TL)

27-Oct-06 N 3.05 5.40

13-Jun-07 OW 3.84 6.45

23-May-12 OW 6.10 7.80

11-Jun-12 OW 6.04 7.43

18-Dec-12 NR 9.12 --

18-Mar-13 OW 9.66 11.00

28-May-13 N 11.00 11.25

25-Jun-13 N 8.58 9.10

28-Nov-13 N 9.48 11.20

20-Jan-14 N 8.28 10.20

Date Rating Share Price (c)

Price Target (c)

27-Nov-08 UW 6320 6800

18-Dec-08 N 5950 7050

09-Feb-09 UW 6950 7400

21-May-09 UW 6000 6600

21-Jul-09 UW 6520 6800

02-Sep-09 UW 6460 6600

08-Mar-10 UW 7269 6800

21-Jul-10 UW 7576 7000

25-Jan-11 N 7415 7800

01-Mar-11 UW 7643 7650

27-Jul-11 UW 7590 7700

22-Aug-11 UW 7300 7500

08-Feb-12 UW 8650 8200

25-Jun-12 UW 8600 8400

21-Jan-13 UW 11400 9300

08-Mar-13 UW 11950 9600

19-Nov-13 UW 12438 10000

0

7

14

21

Price(TL)

Sep06

Mar08

Sep09

Mar11

Sep12

Koc Holding (KCHOL.IS, KCHOL TI) Price Chart

N TL11.25

OW TL7.43OW TL11N TL10.204

N TL5.4OW TL6.45 OW TL7.8 NR N TL9.1N TL11.2

Source: Bloomberg and J.P. Morgan; price data adjusted for stock splits and dividends.

Break in coverage Dec 18, 2012 - Mar 18, 2013.

0

3,004

6,008

9,012

12,016

15,020

18,024

21,028

Price(c)

Sep06

Mar08

Sep09

Mar11

Sep12

Liberty Holdings Ltd (LBHJ.J, LBH SJ) Price Chart

UW 7,400cUW 6,600c

N 7,050cUW 6,800c UW 7,650cUW 7,500c UW 9,600c

UW 6,800cUW 6,600cUW 6,800cUW 7,000cN 7,800cUW 7,700cUW 8,200cUW 8,400cUW 9,300cUW 10,000c

Source: Bloomberg and J.P. Morgan; price data adjusted for stock splits and dividends.

Initiated coverage Nov 27, 2008.

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130

Emerging Markets Equity Research22 January 2014

Adrian Mowat(852) [email protected]

Date Rating Share Price (c)

Price Target (c)

05-Oct-06 OW 34637 44300

25-Oct-06 OW 38279 44700

20-Nov-06 OW 38524 43800

20-Dec-06 OW 38899 39000

21-Dec-06 N 38618 39000

07-Mar-07 N 40421 48800

12-Mar-07 UW 40511 48800

16-Jul-07 UW 52956 57100

27-Aug-07 UW 43188 43400

16-Nov-07 UW 40045 43900

13-Dec-07 UW 41486 36000

28-Feb-08 N 47025 58400

24-Apr-08 N 45152 58000

28-Jul-08 N 33028 35200

07-Nov-08 N 15588 18600

20-Nov-08 N 10947 19200

26-Jan-09 N 11171 11800

13-May-09 UW 15100 19000

30-Jun-09 UW 15460 14200

02-Sep-09 N 17300 24000

14-Dec-09 OW 22300 27000

24-Mar-10 OW 22231 29000

27-Jul-10 OW 17515 25000

08-Sep-10 OW 17550 21000

10-Jan-11 N 19900 24600

09-May-11 N 17300 22300

08-Jun-11 OW 17530 24300

06-Jul-11 OW 15430 24100

16-Sep-11 OW 13671 17900

31-Jan-12 OW 12989 17800

09-May-12 OW 12200 16800

05-Sep-12 N 7743 --

12-Nov-12 N 6325 5900

31-Jan-13 OW 4500 5800

07-May-13 OW 3952 4800

10-Sep-13 OW 5336 6300

11-Nov-13 OW 5655 7200

0

16,470

32,940

49,410

65,880

82,350

98,820

Price(c)

Sep06

Mar08

Sep09

Mar11

Sep12

Lonmin plc (LONJ.J) (LONJ.J, LON SJ) Price Chart

OW 43,800cN 48,800cUW 43,900cN 58,000cN 11,800cN 24,000c OW 24,100c OW 5,800c

OW 44,700cN 39,000cUW 43,400cN 58,400cN 19,200cUW 14,200cOW 29,000cOW 21,000cOW 24,300cOW 16,800cN 5,900c OW 7,200c

OW 44,300cOW 39,000cUW 48,800cUW 57,100cUW 36,000cN 35,200cN 18,600cUW 19,000cOW 27,000cOW 25,000cN 24,600cN 22,300cOW 17,900cOW 17,800c N OW 4,800cOW 6,300c

Source: Bloomberg and J.P. Morgan; price data adjusted for stock splits and dividends.

Break in coverage Sep 05, 2012 - Nov 12, 2012.

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131

Emerging Markets Equity Research22 January 2014

Adrian Mowat(852) [email protected]

Date Rating Share Price (€)

Price Target (€)

17-Sep-08 OW 13.50 19.00

28-Nov-08 OW 11.60 16.10

23-Jan-09 OW 11.40 15.40

08-May-09 UW 11.83 12.90

24-Aug-09 N 10.64 11.50

09-Nov-09 N 11.53 12.00

12-Mar-10 N 9.60 11.00

16-Jul-10 N 6.63 8.00

16-Sep-10 N 5.80 7.50

18-Oct-10 N 5.68 7.00

19-Jul-11 N 5.64 6.50

16-Nov-11 N 3.36 5.00

16-Jul-12 N 2.27 3.00

16-Oct-12 N 3.60 3.60

22-Nov-12 N 4.00 4.40

01-Mar-13 N 5.92 7.00

16-Oct-13 N 9.00 8.70

10-Dec-13 OW 9.70 11.00

Date Rating Share Price (TL)

Price Target (TL)

30-Aug-07 OW 7.05 9.08

15-Feb-08 OW 7.54 12.00

28-May-08 OW 7.06 10.00

18-Dec-08 OW 4.58 5.30

10-Aug-09 OW 7.70 10.70

09-Apr-10 OW 11.80 15.80

03-Aug-10 OW 12.60 18.00

10-Feb-11 OW 12.75 17.00

10-May-11 OW 13.00 16.00

24-Jun-11 OW 11.35 15.00

14-Nov-11 OW 11.35 16.10

16-Oct-12 OW 15.25 21.20

25-Apr-13 OW 19.00 25.00

10-May-13 OW 20.75 28.20

24-Jun-13 OW 15.30 22.20

05-Nov-13 OW 15.35 22.40

0

8

16

24

Price(€)

Aug08

May09

Feb10

Nov10

Aug11

May12

Feb13

Nov13

OTE (OTEr.AT, HTO GA) Price Chart

OW €15.4 N €7 N €4.4

OW €16.1 N €12 N €7.5 N €3.6 OW €11

OW €19 UW €12.9N €11.5 N €11 N €8 N €6.5 N €5 N €3 N €7 N €8.7

Source: Bloomberg and J.P. Morgan; price data adjusted for stock splits and dividends.

Initiated coverage Sep 17, 2008.

0

9

18

27

36

Price(TL)

May07

Feb08

Nov08

Aug09

May10

Feb11

Nov11

Aug12

May13

Feb14

Halkbank (HALKB.IS, HALKB TI) Price Chart

OW TL15 OW TL22.2

OW TL9.076 OW TL16 OW TL28.2

TL9.077 OW TL12OW TL10OW TL5.3OW TL10.7OW TL15.8OW TL18OW TL17 OW TL16.1 OW TL21.2OW TL25OW TL22.4

Source: Bloomberg and J.P. Morgan; price data adjusted for stock splits and dividends.

Initiated coverage Aug 30, 2007.

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132

Emerging Markets Equity Research22 January 2014

Adrian Mowat(852) [email protected]

Date Rating Share Price (Rs)

Price Target (Rs)

16-Oct-06 OW 292.30 725.00

16-Jan-07 OW 314.90 775.00

17-Apr-07 OW 301.90 375.00

16-Oct-07 OW 302.50 360.00

19-Dec-07 N 301.20 325.00

18-Jan-08 N 267.60 310.00

23-Jan-08 OW 240.90 310.00

15-Apr-08 OW 230.20 300.00

29-May-08 OW 310.05 380.00

05-Aug-08 OW 220.10 325.00

29-Sep-08 N 212.95 225.00

16-Oct-08 N 155.85 200.00

28-Jan-09 N 112.50 130.00

16-Jul-09 OW 194.80 250.00

26-Aug-09 OW 307.00 375.00

27-Jan-10 OW 361.20 450.00

22-Apr-10 OW 373.90 460.00

30-Jul-10 OW 372.55 440.00

21-Oct-10 OW 439.25 490.00

10-Dec-10 OW 425.40 465.00

20-Jan-11 OW 488.75 560.00

09-Sep-11 OW 411.35 480.00

19-Oct-11 OW 401.60 470.00

18-Jan-12 OW 425.40 485.00

19-Apr-12 OW 480.85 570.00

26-Jul-12 OW 513.55 600.00

18-Oct-12 OW 584.50 650.00

18-Jan-13 OW 704.00 775.00

18-Apr-13 OW 751.30 820.00

01-Aug-13 OW 937.55 1000.00

24-Sep-13 OW 1072.60 1100.00

20-Nov-13 OW 1086.90 1250.00

15-Dec-13 OW 1185.70 1300.00

17-Jan-14 OW 1330.35 1500.00

Date Rating Share Price (R)

Price Target (R)

11-Jan-13 N 0.02 0.03

15-May-13 OW 0.01 0.02

11-Jul-13 OW 0.01 0.02

13-Sep-13 N 0.01 0.01

16-Oct-13 N 0.01 0.01

29-Nov-13 OW 0.01 0.01

0

418

836

1,254

1,672

2,090

2,508

Price(Rs)

Oct06

Apr08

Oct09

Apr11

Oct12

HCL-Technologies (HCLT.BO, HCLT IN) Price Chart

OW Rs375 N Rs310OW Rs380N Rs200 OW Rs440OW Rs560 OW Rs485OW Rs650 OW Rs1,250

OW Rs775 N Rs325OW Rs300N Rs225 OW Rs375OW Rs460OW Rs465 OW Rs470OW Rs600OW Rs820OW Rs1,100OW Rs1,500

OW Rs725 OW Rs360OW Rs310OW Rs325N Rs130OW Rs250OW Rs450OW Rs490 OW Rs480OW Rs570OW Rs775OW Rs1,000OW Rs1,300

Source: Bloomberg and J.P. Morgan; price data adjusted for stock splits and dividends.

Initiated coverage Oct 16, 2006.

0

0.05886

0.11772

Price(R)

Dec09

Sep10

Jun11

Mar12

Dec12

Sep13

Inter RAO (IRAO.MM, IRAO RX) Price Chart

N R0.013

OW R0.018OW R0.009

N R0.026OW R0.022N R0.013

Source: Bloomberg and J.P. Morgan; price data adjusted for stock splits and dividends.

Initiated coverage Jan 11, 2013.

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133

Emerging Markets Equity Research22 January 2014

Adrian Mowat(852) [email protected]

Date Rating Share Price (NT$)

Price Target (NT$)

17-Oct-06 OW 624.76 798.00

25-Jan-07 N 471.16 481.00

05-Mar-07 N 393.89 360.00

02-Apr-07 UW 453.73 360.00

25-Apr-07 UW 409.91 322.00

02-Jul-07 UW 434.41 309.00

17-Aug-07 UW 297.96 298.00

22-Aug-07 UW 296.52 270.00

12-Oct-07 UW 355.63 343.00

05-Nov-07 OW 368.13 510.00

23-Apr-08 N 386.87 348.00

19-Aug-08 N 408.33 390.00

09-Oct-08 UW 292.16 275.00

30-Nov-08 UW 202.45 150.00

07-Jul-09 UW 385.78 290.00

07-Oct-09 UW 411.00 335.00

18-Aug-10 UW 606.00 550.00

28-Feb-11 UW 811.00 --

24-Sep-12 UW 652.00 570.00

06-Nov-12 UW 615.00 600.00

06-Dec-12 UW 787.00 700.00

26-Apr-13 N 688.00 750.00

26-Jul-13 OW 935.00 1200.00

20-Aug-13 OW 1055.00 1300.00

Date Rating Share Price ($)

Price Target ($)

22-Mar-13 OW 62.95 85.60

10-Oct-13 OW 65.35 83.20

0

346

692

1,038

1,384

1,730

2,076

Price(NT$)

Oct06

Apr08

Oct09

Apr11

Oct12

Largan Precision Co Ltd (3008.TW, 3008 TT) Price Chart

N NT$360UW NT$309UW NT$343 UW NT$150 UW NT$700OW NT$1,300

N NT$481UW NT$322UW NT$270 UW NT$275 UW NT$335 UW NT$600OW NT$1,200

OW NT$798UW NT$360UW NT$298OW NT$510N NT$348N NT$390 UW NT$290 UW NT$550UW UW NT$570N NT$750

Source: Bloomberg and J.P. Morgan; price data adjusted for stock splits and dividends.

Break in coverage Feb 28, 2011 - Sep 24, 2012.

0

17

34

51

68

85

102

119

Price($)

Mar10

Dec10

Sep11

Jun12

Mar13

Dec13

Lukoil (LKOHq.L, LKOD LI) Price Chart

OW $85.6 OW $83.2

Source: Bloomberg and J.P. Morgan; price data adjusted for stock splits and dividends.

Initiated coverage Mar 22, 2013.

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134

Emerging Markets Equity Research22 January 2014

Adrian Mowat(852) [email protected]

Date Rating Share Price ($)

Price Target ($)

02-Jul-08 N 15.42 19.00

14-Aug-08 N 11.80 16.50

08-Oct-08 N 2.00 9.00

02-Feb-09 UW 0.66 0.70

29-Apr-09 OW 2.00 3.00

03-Sep-09 OW 4.00 5.00

19-Nov-09 OW 7.20 10.00

25-Mar-10 OW 8.37 11.00

20-Apr-10 OW 10.00 12.80

04-Nov-10 OW 8.20 11.00

21-Feb-11 OW 9.95 12.00

30-Aug-11 N 4.60 7.55

07-Nov-12 UW 4.88 5.30

28-Mar-13 N 4.33 5.50

13-Nov-13 OW 3.75 5.15

Date Rating Share Price (c)

Price Target (c)

04-Dec-07 N 7358 9119

16-May-08 N 7520 8631

18-May-08 OW 7520 8631

11-Aug-08 OW 7610 9168

13-Oct-08 OW 7395 8883

01-Dec-08 OW 8000 9655

06-Feb-09 OW 8206 8667

27-Feb-09 N 7330 7516

13-Jul-09 UW 8147 6573

18-Sep-09 UW 8474 7334

30-Oct-09 UW 8830 7390

29-Jan-10 UW 8720 7291

11-May-10 UW 11285 9195

24-Oct-11 UW 15153 14585

17-Jan-12 UW 18163 190053

05-Dec-12 N 18510 19500

18-Jul-13 UW 16851 17200

28-Aug-13 UW 15720 15500

0

8

16

24

32

Price($)

Nov07

Aug08

May09

Feb10

Nov10

Aug11

May12

Feb13

Nov13

LSR (LSRGq.L, LSRG LI) Price Chart

N $8.996

N $16.503 OW $3.002OW $10.003OW $12.801

N $19 UW $0.702OW $5.004OW $11 OW $11OW $12 N $7.55 UW $5.3N $5.5 OW $5.146

Source: Bloomberg and J.P. Morgan; price data adjusted for stock splits and dividends.

Initiated coverage Jul 02, 2008.

0

5,026

10,052

15,078

20,104

25,130

30,156

35,182

Price(c)

Sep06

Mar08

Sep09

Mar11

Sep12

Massmart (MSMJ.J, MSM SJ) Price Chart

OW 9,168cOW 8,667cUW 7,390c

OW 8,631cOW 9,655cUW 7,334c UW 190,053c UW 15,500c

N 9,119cN 8,631cOW 8,883cN 7,516cUW 6,573cUW 7,291cUW 9,195c UW 14,585c N 19,500cUW 17,200c

Source: Bloomberg and J.P. Morgan; price data adjusted for stock splits and dividends.

Initiated coverage Dec 04, 2007.

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135

Emerging Markets Equity Research22 January 2014

Adrian Mowat(852) [email protected]

Date Rating Share Price ($)

Price Target ($)

12-Dec-12 OW 22.30 29.00

28-Feb-13 OW 27.37 30.00

05-Apr-13 N 29.66 33.00

08-Aug-13 OW 31.00 38.50

11-Nov-13 OW 35.00 38.00

Date Rating Share Price (TL)

Price Target (TL)

21-May-07 N 15.96 18.10

22-Jan-09 N 12.90 --

09-Feb-11 N 35.20 37.92

26-May-11 N 21.45 23.86

15-Aug-11 N 15.05 23.86

12-Oct-11 N 15.05 18.23

26-Oct-12 N 18.85 20.47

16-May-13 N 24.90 22.50

0

11

22

33

44

55

66

Price($)

Nov12

Feb13

Jun13

Sep13

Jan14

MegaFon (MFON.L, MFON LI) Price Chart

N $33.002

OW $30.002 OW $38

OW $29.001 OW $38.5

Source: Bloomberg and J.P. Morgan; price data adjusted for stock splits and dividends.

Initiated coverage Dec 12, 2012.

0

13

26

39

52

65

Price(TL)

May06

Nov07

May09

Nov10

May12

Nov13

Migros Ticaret (MGROS.IS, MGROS TI) Price Chart

N TL18.235

N TL23.86

N TL18.1 N N TL37.917N TL23.857 N TL20.468N TL22.5

Source: Bloomberg and J.P. Morgan; price data adjusted for stock splits and dividends.

Break in coverage Jan 22, 2009 - Feb 09, 2011.

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136

Emerging Markets Equity Research22 January 2014

Adrian Mowat(852) [email protected]

Date Rating Share Price ($)

Price Target ($)

03-May-07 OW 22.70 33.60

20-Nov-07 OW 35.38 46.40

19-Dec-07 OW 37.97 50.00

04-Dec-08 OW 11.24 24.00

27-Jan-09 OW 9.64 20.00

17-Jun-09 OW 15.88 22.00

25-Nov-09 OW 20.58 25.08

11-Feb-10 OW 19.55 28.00

24-Feb-11 OW 18.51 25.00

30-Aug-11 OW 16.04 24.00

18-Oct-11 N 14.37 19.00

21-May-12 N 15.69 20.50

28-Aug-12 N 18.28 20.50

20-Sep-12 UW 18.39 20.50

13-Mar-13 N 20.98 25.00

05-Apr-13 OW 20.49 26.00

20-Aug-13 OW 20.82 28.50

12-Sep-13 OW 21.52 27.00

11-Nov-13 OW 22.57 26.00

Date Rating Share Price (R)

Price Target (R)

11-Jan-13 OW 1.44 3.00

04-Apr-13 OW 1.26 2.55

11-Jul-13 OW 1.08 2.74

13-Sep-13 OW 1.08 1.54

16-Oct-13 OW 0.99 1.55

0

14

28

42

56

70

Price($)

May07

Feb08

Nov08

Aug09

May10

Feb11

Nov11

Aug12

May13

Feb14

Mobile Telesystems (MBT, MBT US) Price Chart

UW $20.5 OW $26

OW $50 OW $20 OW $28 N $18.998 N $20.5OW $25.997OW $27

OW $33.6OW $46.4 OW $24 OW $22OW $25.08 OW $25OW $24 N $20.496 N $24.997OW $28.5

Source: Bloomberg and J.P. Morgan; price data adjusted for stock splits and dividends.

Initiated coverage May 03, 2007.

0

1

2

3

4

5

6

7

Price(R)

Dec09

Sep10

Jun11

Mar12

Dec12

Sep13

Mosenergo (MSNG.MM, MSNG RX) Price Chart

OW R2.738

OW R2.552 OW R1.55

OW R2.997 OW R1.537

Source: Bloomberg and J.P. Morgan; price data adjusted for stock splits and dividends.

Initiated coverage Jan 11, 2013.

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137

Emerging Markets Equity Research22 January 2014

Adrian Mowat(852) [email protected]

Date Rating Share Price (c)

Price Target (c)

04-Dec-06 OW 14450 18637

11-Apr-07 OW 18102 20650

02-Jul-07 OW 18200 23000

11-Dec-07 OW 18300 25300

15-Apr-08 OW 15851 21100

17-Jul-08 OW 16580 24000

26-Jun-09 OW 19800 25969

06-Aug-09 OW 23198 28507

06-Nov-09 OW 27900 34109

31-May-10 OW 30130 41944

12-Aug-10 OW 30329 40818

02-Dec-10 OW 37125 44842

20-Dec-10 OW 38300 46463

17-Mar-11 OW 38270 48969

19-Jul-11 OW 38574 49430

16-Nov-11 OW 37078 48700

23-Apr-12 OW 45500 52550

16-Jul-12 OW 44778 57670

03-Oct-12 OW 52910 62511

11-Dec-12 OW 55376 68630

22-Mar-13 OW 59587 69540

01-Aug-13 OW 83000 95791

24-Sep-13 OW 93994 106343

11-Dec-13 OW 103800 122519

Date Rating Share Price (SRls)

Price Target (SRls)

06-Jul-11 OW 44.20 58.00

27-Jun-12 OW 30.30 41.00

25-Sep-12 OW 31.70 42.00

24-Oct-12 N 27.00 32.50

22-Feb-13 N 28.60 32.00

29-Aug-13 OW 26.00 32.30

07-Oct-13 OW 26.50 32.00

10-Dec-13 OW 31.00 31.90

0

32,980

65,960

98,940

131,920

164,900

197,880

Price(c)

Sep06

Mar08

Sep09

Mar11

Sep12

Naspers Ltd (NPNJn.J, NPN SJ) Price Chart

OW 34,108.664c OW 48,969.117c OW 62,511c OW 122,519.16c

OW 23,000c OW 24,000cOW 28,507.379cOW 40,818cOW 46,463.266c OW 57,670c OW 106,343.264c

OW 18,637cOW 20,650cOW 25,300cOW 21,100c OW 25,969.01cOW 41,944cOW 44,842.398cOW 49,430cOW 48,700cOW 52,550cOW 68,630cOW 69,540cOW 95,790.999c

Source: Bloomberg and J.P. Morgan; price data adjusted for stock splits and dividends.

Initiated coverage Dec 04, 2006.

0

17

34

51

68

85

Price(SRls)

Jun08

Mar09

Dec09

Sep10

Jun11

Mar12

Dec12

Sep13

NIC (Tasnee) (2060.SE, NIC AB) Price Chart

N SRls32.5 OW SRls31.9

OW SRls42 OW SRls32

OW SRls58 OW SRls41 N SRls32OW SRls32.3

Source: Bloomberg and J.P. Morgan; price data adjusted for stock splits and dividends.

Initiated coverage Jul 06, 2011.

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138

Emerging Markets Equity Research22 January 2014

Adrian Mowat(852) [email protected]

Date Rating Share Price ($)

Price Target ($)

06-Dec-07 N 26.42 26.50

23-May-08 OW 27.25 33.00

01-Sep-08 OW 23.52 36.40

16-Sep-08 OW 18.00 31.00

28-Oct-08 OW 9.75 14.80

06-Feb-09 OW 5.25 9.50

20-Feb-09 OW 7.16 9.00

08-Apr-09 N 10.26 9.00

27-Apr-09 N 9.66 12.00

02-Jul-09 UW 15.40 13.00

04-Sep-09 N 17.15 18.50

15-Apr-10 OW 24.56 30.50

16-Aug-10 OW 24.14 33.00

19-Nov-10 N 28.80 33.00

14-Jul-11 OW 23.30 31.50

30-Aug-11 OW 18.25 29.00

04-May-12 N 16.66 20.10

27-Jul-12 OW 14.30 19.95

26-Oct-12 OW 14.75 20.00

26-Feb-13 OW 20.08 27.00

30-Apr-13 OW 20.68 27.00

12-Jul-13 N 11.91 13.50

06-Aug-13 N 15.00 13.50

14-Aug-13 N 13.89 15.00

Date Rating Share Price ($)

Price Target ($)

31-Jul-12 N 12.70 14.50

09-Nov-12 OW 13.48 16.40

02-Apr-13 OW 14.05 15.90

10-Dec-13 OW 9.74 10.30

0

12

24

36

48

60

Price($)

May07

Feb08

Nov08

Aug09

May10

Feb11

Nov11

Aug12

May13

Feb14

Pharmstandard (PHSTq.L, PHST LI) Price Chart

OW $14.796N $9.001N $18.5 OW $19.996N $13.502

N $26.499 OW $31.001OW $9.001UW $13 N $33 OW $29 OW $19.952OW $27.004N $15

$24.004OW $32.999OW $36.396OW $9.503N $11.999 OW $30.503OW $33.003 OW $31.504 N $20.098 OW $26.996N $13.5

Source: Bloomberg and J.P. Morgan; price data adjusted for stock splits and dividends.

Initiated coverage Dec 06, 2007.

0

6

12

18

24

Price($)

Jul11

Oct11

Jan12

Apr12

Jul12

Oct12

Jan13

Apr13

Jul13

Oct13

Jan14

PhosAgro (PHOR.L, PHOR LI) Price Chart

N $14.5 OW $16.4 OW $15.9 OW $10.3

Source: Bloomberg and J.P. Morgan; price data adjusted for stock splits and dividends.

Initiated coverage Jul 31, 2012.

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139

Emerging Markets Equity Research22 January 2014

Adrian Mowat(852) [email protected]

Date Rating Share Price (SRls)

Price Target (SRls)

13-Oct-11 N 69.00 78.00

03-Oct-12 N 71.50 85.00

19-Feb-13 N 67.25 85.00

19-Aug-13 UW 81.00 77.00

Date Rating Share Price (zl)

Price Target (zl)

20-Aug-10 OW 384.90 472.00

13-May-11 OW 385.00 460.00

26-Aug-11 OW 336.50 402.00

19-Jul-12 OW 342.00 414.00

22-Oct-12 OW 376.00 421.00

17-Dec-12 OW 419.90 430.00

18-Mar-13 OW 415.50 447.00

17-May-13 OW 440.75 467.00

22-Oct-13 OW 460.85 466.00

0

23

46

69

92

115

138

161

Price(SRls)

Jun08

Mar09

Dec09

Sep10

Jun11

Mar12

Dec12

Sep13

Al Rajhi Bank (1120.SE, RJHI AB) Price Chart

N SRls78.001 N SRls85N SRls84.999UW SRls77.003

Source: Bloomberg and J.P. Morgan; price data adjusted for stock splits and dividends.

Initiated coverage Oct 13, 2011.

0

88

176

264

352

440

528

616

704

792

Price(zl)

May10

Feb11

Nov11

Aug12

May13

Feb14

PZU (PZU.WA, PZU PW) Price Chart

OW zl430

OW zl421 OW zl467

OW zl472 OW zl460OW zl402 OW zl414 OW zl447 OW zl466

Source: Bloomberg and J.P. Morgan; price data adjusted for stock splits and dividends.

Initiated coverage Aug 20, 2010.

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140

Emerging Markets Equity Research22 January 2014

Adrian Mowat(852) [email protected]

Date Rating Share Price (c)

Price Target (c)

10-Nov-10 N 6885 6730

10-Jan-11 N 6585 7920

09-May-11 N 6690 7150

16-Sep-11 UW 5799 6280

31-Jan-12 UW 5940 6270

09-May-12 UW 6000 6020

05-Sep-12 N 4525 5100

31-Jan-13 N 5805 6320

07-May-13 OW 5350 6530

10-Sep-13 OW 5750 7510

04-Dec-13 OW 5900 7730

Date Rating Share Price (SRls)

Price Target (SRls)

03-Sep-09 OW 68.75 96.00

22-Mar-10 OW 96.75 118.00

02-Jul-10 OW 85.75 124.00

19-Apr-11 OW 106.25 141.00

10-Aug-12 OW 92.00 109.00

16-May-13 OW 91.25 112.00

17-Jan-14 OW 115.00 135.00

0

1,224

2,448

3,672

4,896

6,120

7,344

8,568

9,792

11,016

Price(c)

Nov10

Feb11

May11

Aug11

Nov11

Feb12

May12

Aug12

Nov12

Feb13

May13

Aug13

Nov13

Feb14

Royal Bafokeng Platinum Limited (RBPJ.J, RBP SJ) Price Chart

N 7,920c UW 6,020c OW 6,530c OW 7,730c

N 6,730c N 7,150c UW 6,280c UW 6,270c N 5,100c N 6,320c OW 7,510c

Source: Bloomberg and J.P. Morgan; price data adjusted for stock splits and dividends.

Initiated coverage Nov 10, 2010.

0

51

102

153

204

255

306

Price(SRls)

Sep06

Mar08

Sep09

Mar11

Sep12

SABIC (2010.SE, SABIC AB) Price Chart

OW SRls96OW SRls118OW SRls124OW SRls141 OW SRls109OW SRls112OW SRls135

Source: Bloomberg and J.P. Morgan; price data adjusted for stock splits and dividends.

Initiated coverage Sep 03, 2009.

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141

Emerging Markets Equity Research22 January 2014

Adrian Mowat(852) [email protected]

Date Rating Share Price (R)

Price Target (R)

31-Aug-12 OW 93.49 147.31

18-Jan-13 OW 103.40 136.38

29-Apr-13 OW 95.73 131.13

24-Sep-13 OW 100.41 149.00

Date Rating Share Price (c)

Price Target (c)

08-Aug-05 N 7354 7500

20-Oct-06 N 7894 11560

29-Jan-07 N 9395 11730

13-Mar-07 N 9640 14249

09-Jul-07 N 9891 11982

25-Sep-07 N 9257 12482

06-Dec-07 N 10188 11372

13-Mar-08 N 9449 11237

15-Apr-08 N 9040 11327

04-Jun-08 N 8400 9006

25-Aug-08 N 8500 11390

28-Oct-08 UW 7370 8973

09-Mar-09 UW 6285 8973

04-May-09 N 8650 9509

02-Jul-09 N 8980 11900

17-Aug-09 N 9045 10891

05-Mar-10 N 11265 10756

22-Apr-10 N 11304 11518

08-Jul-10 N 10920 10124

08-Oct-10 N 10838 10370

06-Dec-10 UW 10145 9369

07-Mar-11 UW 9918 10638

12-Aug-11 UW 9554 10747

25-Oct-11 UW 9735 10458

09-Mar-12 UW 10890 11980

20-Nov-12 OW 10630 12300

02-May-13 OW 11290 12500

07-Nov-13 OW 12450 15000

0

27

54

81

108

135

162

189

Price(R)

Aug09

May10

Feb11

Nov11

Aug12

May13

Feb14

Sberbank (SBER.MM, SBER RX) Price Chart

OW R147.314OW R136.384OW R131.126OW R149

Source: Bloomberg and J.P. Morgan; price data adjusted for stock splits and dividends.

Initiated coverage Aug 31, 2012.

0

2,710

5,420

8,130

10,840

13,550

16,260

18,970

21,680

Price(c)

Sep06

Mar08

Sep09

Mar11

Sep12

Standard Bank Group Ltd (SBKJ.J, SBK SJ) Price Chart

N 14,249cN 11,372.107cN 9,006c N 11,900c N 10,124cUW 10,638c

N 11,730cN 12,482.477cN 11,327cUW 8,973.124cN 9,509c N 11,518cUW 9,369c UW 10,458c

N 11,560cN 11,982.121cN 11,237cN 11,390cUW 8,973cN 10,891cN 10,756cN 10,370c UW 10,747cUW 11,980cOW 12,300cOW 12,500cOW 15,000c

Source: Bloomberg and J.P. Morgan; price data adjusted for stock splits and dividends.

Initiated coverage Aug 08, 2005.

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142

Emerging Markets Equity Research22 January 2014

Adrian Mowat(852) [email protected]

Date Rating Share Price (Rmb)

Price Target (Rmb)

18-Jun-10 OW 44.93 59.00

02-Sep-10 OW 48.61 62.00

28-Oct-10 OW 64.02 76.00

07-Mar-11 OW 52.13 68.00

28-Apr-11 OW 51.57 65.00

07-Jul-11 OW 49.00 62.00

23-Sep-11 OW 38.89 51.00

26-Oct-11 OW 37.53 54.00

09-Jan-12 OW 33.85 46.00

13-Apr-12 OW 39.07 52.00

02-Aug-12 OW 44.84 51.00

02-Sep-12 OW 38.85 49.00

30-Oct-12 OW 38.06 51.00

09-Jan-13 OW 45.07 55.00

07-May-13 NR 41.32 --

22-Jun-13 OW 37.11 52.00

30-Aug-13 OW 33.77 54.00

27-Oct-13 OW 35.60 58.00

Date Rating Share Price (HK$)

Price Target (HK$)

05-Jan-07 N 39.70 35.00

12-Apr-07 OW 42.75 50.20

17-Jul-07 OW 61.40 70.10

25-Oct-07 N 108.50 91.10

17-Mar-08 N 53.20 73.50

15-Aug-08 OW 48.30 61.90

16-Oct-08 OW 38.30 54.20

16-Jan-09 OW 36.35 50.70

09-Apr-09 N 52.40 50.40

07-Jul-09 N 55.70 61.60

15-Aug-09 N 61.20 64.00

16-Nov-09 N 72.50 81.00

14-Apr-10 N 69.65 --

18-Jun-10 OW 62.70 82.00

02-Sep-10 OW 64.35 86.00

28-Oct-10 OW 84.15 105.00

07-Mar-11 OW 82.75 101.00

07-Jul-11 OW 81.95 97.00

23-Sep-11 OW 56.55 80.00

26-Oct-11 OW 53.50 84.00

09-Jan-12 OW 48.70 72.00

02-Aug-12 OW 61.05 68.00

02-Sep-12 OW 55.55 65.00

30-Oct-12 OW 61.20 70.00

09-Jan-13 OW 68.15 76.00

07-May-13 NR 62.50 --

22-Jun-13 OW 53.60 77.00

30-Aug-13 OW 53.85 78.00

27-Oct-13 OW 58.00 84.00

0

43

86

129

172

215

258

Price(Rmb)

May07

Feb08

Nov08

Aug09

May10

Feb11

Nov11

Aug12

May13

Feb14

Ping An Insurance Group - A (601318.SS, 601318 CH) Price Chart

OW Rmb76OW Rmb62OW Rmb46 OW Rmb51 OW Rmb54

OW Rmb62OW Rmb65OW Rmb54 OW Rmb49OW Rmb52

OW Rmb59OW Rmb68OW Rmb51OW Rmb52OW Rmb51OW Rmb55NR OW Rmb58

Source: Bloomberg and J.P. Morgan; price data adjusted for stock splits and dividends.

Break in coverage May 07, 2013 - Jun 22, 2013.

0

34

68

102

136

170

204

Price(HK$)

Oct06

Apr08

Oct09

Apr11

Oct12

Ping An Insurance Group - H (2318.HK, 2318 HK) Price Chart

OW HK$70.1 OW HK$50.7N HK$64 OW HK$86 OW HK$84 OW HK$70 OW HK$78

OW HK$50.2 OW HK$54.2N HK$61.6 OW HK$82 OW HK$80 OW HK$65OW HK$77

N HK$35 N HK$91.1N HK$73.5OW HK$61.9N HK$50.4N HK$81N OW HK$105OW HK$101OW HK$97OW HK$72OW HK$68OW HK$76NR OW HK$84

Source: Bloomberg and J.P. Morgan; price data adjusted for stock splits and dividends.

Break in coverage Apr 14, 2010 - Jun 18, 2010.

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143

Emerging Markets Equity Research22 January 2014

Adrian Mowat(852) [email protected]

Date Rating Share Price (p)

Price Target (p)

07-Sep-12 OW 213 290

12-Sep-12 NR 216 --

27-Feb-13 OW 220 270

23-Apr-13 OW 205 250

03-Jun-13 OW 206 240

22-Jul-13 N 205 230

Date Rating Share Price (R)

Price Target (R)

01-Feb-12 N 701.00 982.06

13-Jun-12 N 493.00 789.62

01-Aug-12 OW 551.70 906.58

07-Mar-13 OW 598.60 897.78

29-Apr-13 N 505.80 768.02

06-Jun-13 N 444.70 560.56

24-Sep-13 UW 343.80 437.00

0

35

70

105

140

175

210

245

280

315

350

Price(p)

Jun12

Sep12

Jan13

Apr13

Aug13

Dec13

Polyus Gold International (PGIL.L, PGIL LN) Price Chart

OW 240p

NR OW 250p

OW 290p OW 270p N 230p

Source: Bloomberg and J.P. Morgan; price data adjusted for stock splits and dividends.

Break in coverage Sep 12, 2012 - Feb 27, 2013.

0

433

866

1,299

1,732

2,165

2,598

Price(R)

Jan09

Oct09

Jul10

Apr11

Jan12

Oct12

Jul13

Bank Vozrozhdenie (VZRZ.MM, VZRZ RX) Price Chart

N R560.563

OW R906.583 N R768.025

N R982.057N R789.62 OW R897.784UW R437

Source: Bloomberg and J.P. Morgan; price data adjusted for stock splits and dividends.

Initiated coverage Feb 01, 2012.

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144

Emerging Markets Equity Research22 January 2014

Adrian Mowat(852) [email protected]

Date Rating Share Price (€)

Price Target (€)

06-Oct-11 UW 3.33 0.30

20-Dec-13 NR 1.46 --

09-Jan-14 OW 1.68 2.00

Date Rating Share Price (c)

Price Target (c)

07-Mar-07 OW 22250 28500

22-May-07 OW 27610 30000

28-Sep-07 OW 29701 35700

07-Jan-08 OW 35001 43800

28-Mar-08 OW 40475 49900

05-May-08 OW 44200 54800

27-Jun-08 OW 46250 66300

08-Oct-08 OW 25850 48500

16-Oct-08 OW 26025 45800

01-Dec-08 OW 27250 41700

08-Jan-09 OW 31250 36100

13-Mar-09 OW 25808 31800

11-May-09 OW 29499 34400

16-Jun-09 OW 30975 37200

10-Jul-09 OW 26650 35800

28-Sep-09 OW 28495 37900

12-Feb-10 OW 27305 37500

04-May-10 OW 29650 39700

10-Aug-10 OW 29450 38800

04-Oct-10 OW 31175 41800

22-Feb-11 OW 37250 44100

17-Jun-11 OW 34588 46700

22-Aug-11 OW 31250 39800

21-Nov-11 OW 36200 43900

27-Feb-12 OW 39763 46100

23-Jul-12 OW 34063 41400

17-Oct-12 OW 37930 45700

25-Feb-13 OW 38800 44300

12-Jul-13 OW 43900 46700

01-Nov-13 OW 51290 57400

0

11

22

33

44

Price(€)

Jun10

Mar11

Dec11

Sep12

Jun13

Piraeus Bank S.A (BOPr.AT, TPEIR GA) Price Chart

OW €2

UW €0.3 NR

Source: Bloomberg and J.P. Morgan; price data adjusted for stock splits and dividends.

Break in coverage Dec 20, 2013 - Jan 09, 2014.

0

12,042

24,084

36,126

48,168

60,210

72,252

84,294

Price(c)

Sep06

Mar08

Sep09

Mar11

Sep12

Sasol (SOLJ.J, SOL SJ) Price Chart

OW 54,800cOW 41,700cOW 34,400cOW 37,900cOW 38,800c OW 43,900c

OW 30,000cOW 49,900cOW 45,800cOW 31,800cOW 35,800cOW 39,700c OW 39,800c OW 45,700c

OW 28,500cOW 35,700cOW 43,800cOW 66,300cOW 48,500cOW 36,100cOW 37,200cOW 37,500cOW 41,800cOW 44,100cOW 46,700cOW 46,100cOW 41,400cOW 44,300cOW 46,700cOW 57,400c

Source: Bloomberg and J.P. Morgan; price data adjusted for stock splits and dividends.

Initiated coverage Mar 07, 2007.

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145

Emerging Markets Equity Research22 January 2014

Adrian Mowat(852) [email protected]

Date Rating Share Price (SRls)

Price Target (SRls)

08-Oct-09 OW 51.25 70.00

24-May-12 OW 40.20 51.50

09-Oct-12 OW 42.60 56.50

28-Aug-13 OW 39.80 58.50

26-Sep-13 OW 42.30 59.00

17-Dec-13 OW 52.75 65.50

Date Rating Share Price (R)

Price Target (R)

22-Mar-13 N 27.91 35.00

03-Apr-13 OW 28.31 37.00

10-Oct-13 N 28.45 32.00

0

27

54

81

108

135

162

Price(SRls)

Sep06

Mar08

Sep09

Mar11

Sep12

STC (7010.SE, STC AB) Price Chart

OW SRls65.5

OW SRls59

OW SRls70 OW SRls51.5OW SRls56.5OW SRls58.5

Source: Bloomberg and J.P. Morgan; price data adjusted for stock splits and dividends.

Initiated coverage Oct 08, 2009.

0

10

20

30

40

50

60

Price(R)

Mar10

Dec10

Sep11

Jun12

Mar13

Dec13

SurgutNG (SNGS.MM, SNGS RX) Price Chart

OW R37

N R35 N R32

Source: Bloomberg and J.P. Morgan; price data adjusted for stock splits and dividends.

Initiated coverage Mar 22, 2013.

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146

Emerging Markets Equity Research22 January 2014

Adrian Mowat(852) [email protected]

Date Rating Share Price (R)

Price Target (R)

22-Mar-13 UW 202.43 210.00

10-Oct-13 OW 214.51 280.00

Date Rating Share Price ($)

Price Target ($)

28-Nov-08 N 4.65 5.80

06-Nov-09 N 18.72 24.05

28-Jan-10 OW 18.50 29.20

06-Aug-10 OW 17.40 27.00

30-Mar-11 OW 19.60 28.00

09-Nov-11 OW 12.39 23.00

19-Apr-12 OW 13.40 20.00

06-Nov-12 OW 14.46 19.00

31-Oct-13 OW 12.92 16.00

0

47

94

141

188

235

282

329

376

Price(R)

Mar10

Dec10

Sep11

Jun12

Mar13

Dec13

Tatneft (TATN.MM, TATN RX) Price Chart

UW R210 OW R280

Source: Bloomberg and J.P. Morgan; price data adjusted for stock splits and dividends.

Initiated coverage Mar 22, 2013.

0

17

34

51

68

85

Price($)

Oct06

Apr08

Oct09

Apr11

Oct12

TMK (TRMKq.L, TMKS LI) Price Chart

OW $29.2

N $5.8 N $24.05 OW $27 OW $28 OW $23OW $20OW $19 OW $16

Source: Bloomberg and J.P. Morgan; price data adjusted for stock splits and dividends.

Initiated coverage Nov 28, 2008.

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147

Emerging Markets Equity Research22 January 2014

Adrian Mowat(852) [email protected]

Date Rating Share Price ($)

Price Target ($)

20-Jul-10 UW 19.91 20.00

14-Apr-11 N 42.02 45.00

25-Jan-12 N 35.65 40.00

21-Jun-12 N 36.83 37.00

29-Jul-13 N 28.76 30.00

31-Jul-13 UW 21.70 18.00

10-Dec-13 UW 25.49 20.00

15-Jan-14 N 27.50 24.00

Date Rating Share Price ($)

Price Target ($)

03-Aug-11 OW 32.47 46.00

27-Sep-11 OW 25.54 41.00

31-Oct-11 OW 27.52 40.00

01-Mar-12 OW 21.60 40.00

29-Mar-12 OW 25.00 44.00

20-Sep-12 OW 24.83 44.00

07-Nov-12 OW 21.16 42.00

20-Feb-13 OW 23.01 40.00

25-Apr-13 OW 24.94 40.42

20-May-13 OW 29.26 40.42

25-Jul-13 OW 31.81 45.00

24-Oct-13 OW 40.79 50.00

0

27

54

81

108

135

Price($)

Oct07

Jul08

Apr09

Jan10

Oct10

Jul11

Apr12

Jan13

Oct13

Uralkali (URKAq.L, URKA LI) Price Chart

UW $18N $24

UW $20 N $45 N $40 N $37 N $30UW $20

Source: Bloomberg and J.P. Morgan; price data adjusted for stock splits and dividends.

Initiated coverage Jul 20, 2010.

0

13

26

39

52

65

78

Price($)

May11

Aug11

Nov11

Feb12

May12

Aug12

Nov12

Feb13

May13

Aug13

Nov13

Feb14

Yandex (YNDX, YNDX US) Price Chart

OW $40.002 OW $40.42

OW $40.999 OW $43.997 OW $41.997 OW $40.424 OW $50.001

OW $46.001 OW $40 OW $43.996 OW $40.001 OW $44.997

Source: Bloomberg and J.P. Morgan; price data adjusted for stock splits and dividends.

Initiated coverage Aug 03, 2011.

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148

Emerging Markets Equity Research22 January 2014

Adrian Mowat(852) [email protected]

Date Rating Share Price (Rs)

Price Target (Rs)

21-Sep-07 N 654.72 740.00

15-May-08 N 886.35 800.00

11-Aug-08 N 644.80 740.00

29-Aug-08 N 571.80 690.00

17-Oct-08 N 248.20 290.00

03-Dec-08 N 148.65 155.00

29-Jun-09 N 397.15 415.00

03-Sep-09 N 416.45 425.00

30-Oct-09 N 471.55 475.00

15-Jan-10 N 645.15 605.00

14-Nov-10 N 606.95 665.00

14-Jan-11 OW 637.55 820.00

23-May-11 OW 559.40 785.00

09-Sep-11 OW 476.90 685.00

11-Nov-11 OW 447.60 630.00

03-Feb-12 OW 467.50 605.00

19-Jul-12 OW 411.65 590.00

14-Aug-12 OW 395.45 580.00

09-Nov-12 OW 390.55 530.00

14-Feb-13 OW 376.00 505.00

20-May-13 OW 311.85 530.00

16-Jul-13 OW 257.45 455.00

14-Aug-13 OW 236.55 500.00

14-Nov-13 OW 357.75 525.00

Date Rating Share Price (TL)

Price Target (TL)

04-Jul-07 OW 8.24 --

15-Nov-07 OW 11.19 15.50

09-May-08 OW 8.65 14.00

17-Dec-08 N 8.31 11.50

11-May-09 N 7.47 10.00

02-Jul-09 N 8.65 10.50

25-Nov-09 N 9.25 11.97

04-Jun-10 N 8.65 10.60

15-Apr-11 N 9.04 9.50

17-Oct-11 N 8.82 10.00

05-Jul-12 OW 8.94 12.00

03-Oct-12 OW 11.05 14.00

30-Jan-13 OW 11.85 15.00

10-May-13 OW 11.05 14.00

17-Oct-13 OW 12.60 14.50

05-Nov-13 OW 12.40 15.00

0

254

508

762

1,016

1,270

1,524

Price(Rs)

Sep06

Mar08

Sep09

Mar11

Sep12

Tata Steel Ltd (TISC.BO, TATA IN) Price Chart

N Rs690 N Rs475 OW Rs605OW Rs530OW Rs455

N Rs740N Rs155 N Rs425 OW Rs820 OW Rs630OW Rs580OW Rs530OW Rs525

N Rs740N Rs800N Rs290 N Rs415N Rs605 N Rs665OW Rs785OW Rs685 OW Rs590OW Rs505OW Rs500

Source: Bloomberg and J.P. Morgan; price data adjusted for stock splits and dividends.

Initiated coverage Sep 21, 2007.

0

6

12

18

24

Price(TL)

Sep06

Mar08

Sep09

Mar11

Sep12

Turkcell (TCELL.IS, TCELL TI) Price Chart

N TL10.5 OW TL14OW TL14OW TL15

OW OW TL15.5OW TL14N TL11.5N TL10N TL11.97N TL10.6 N TL9.5N TL10 OW TL12OW TL15OW TL14.5

Source: Bloomberg and J.P. Morgan; price data adjusted for stock splits and dividends.

Break in coverage Jul 04, 2007 - Nov 15, 2007.

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Emerging Markets Equity Research22 January 2014

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Date Rating Share Price (TL)

Price Target (TL)

04-Oct-06 OW 5.47 10.30

23-Mar-07 OW 6.70 12.08

02-Jul-07 OW 6.83 9.66

30-Aug-07 OW 7.25 9.68

15-Feb-08 OW 5.40 9.50

27-May-08 OW 4.05 7.25

05-Sep-08 N 4.61 7.10

18-Dec-08 N 3.50 4.00

15-Apr-09 UW 3.98 4.16

30-Jul-09 UW 6.23 7.40

09-Apr-10 UW 7.80 10.00

23-Apr-10 UW 7.35 7.50

29-Oct-10 UW 9.00 9.00

10-Feb-11 UW 7.86 7.40

24-Jun-11 UW 7.40 7.50

14-Nov-11 UW 6.60 7.20

16-Oct-12 UW 8.16 8.80

03-May-13 UW 9.42 10.70

10-May-13 UW 9.98 11.60

24-Jun-13 UW 7.26 8.30

05-Nov-13 UW 7.18 8.40

Date Rating Share Price (W)

Price Target (W)

02-Nov-12 OW 44150 57000

11-Jan-13 OW 46050 56000

28-Apr-13 OW 49900 57000

30-Jul-13 OW 58800 67000

28-Oct-13 OW 66000 78000

0

6

12

18

Price(TL)

Sep06

Mar08

Sep09

Mar11

Sep12

Akbank (AKBNK.IS, AKBNK TI) Price Chart

UW TL8.3

OW TL9.678 UW TL7.5 UW TL11.6

OW TL10.3OW TL12.075OW TL9.66OW TL9.5OW TL7.25N TL7.1N TL4UW TL4.155UW TL7.4UW TL10UW TL9UW TL7.4UW TL7.5UW TL7.2 UW TL8.8UW TL10.7UW TL8.4

Source: Bloomberg and J.P. Morgan; price data adjusted for stock splits and dividends.

Initiated coverage Oct 04, 2006.

0

11,784

23,568

35,352

47,136

58,920

70,704

82,488

94,272

106,056

Price(W)

Oct12

Jan13

May13

Aug13

Dec13

Hankook Tire (161390.KS, 161390 KS) Price Chart

OW W78,000

OW W56,000 OW W67,000

OW W57,000 OW W57,000

Source: Bloomberg and J.P. Morgan; price data adjusted for stock splits and dividends.

Initiated coverage Nov 02, 2012.

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Emerging Markets Equity Research22 January 2014

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Date Rating Share Price (c)

Price Target (c)

30-Mar-07 UW 9399 10814

09-Jul-07 UW 9587 9037

25-Sep-07 UW 7030 8883

06-Feb-08 N 6119 9089

13-Mar-08 N 5529 7274

07-Jul-08 N 4251 6232

28-Oct-08 UW 4300 5874

05-Feb-09 UW 3540 4293

24-May-09 UW 4240 4482

02-Jul-09 UW 4400 4787

13-Oct-09 N 5473 5532

21-May-10 N 5241 6763

08-Jul-10 N 5309 6382

19-Nov-10 N 5665 5513

23-May-11 OW 5445 6377

18-Nov-11 OW 4597 6466

20-Nov-12 N 5414 6300

24-May-13 N 6998 7100

20-Jan-14 N 7732 8000

Date Rating Share Price (R)

Price Target (R)

26-Jul-13 UW 1.19 0.93

12-Sep-13 UW 1.04 0.78

The chart(s) show J.P. Morgan's continuing coverage of the stocks; the current analysts may or may not have covered it over the entire period. J.P. Morgan ratings or designations: OW = Overweight, N= Neutral, UW = Underweight, NR = Not Rated

Explanation of Equity Research Ratings, Designations and Analyst(s) Coverage Universe: J.P. Morgan uses the following rating system: Overweight [Over the next six to twelve months, we expect this stock will outperform the average total return of the stocks in the analyst’s (or the analyst’s team’s) coverage universe.] Neutral [Over the next six to twelve months, we expect this stock will perform in line with the average total return of the stocks in the analyst’s (or the analyst’s team’s) coverage universe.] Underweight [Over the next six to twelve months, we expect this stock will underperform the average total return of the stocks in the analyst’s (or the analyst’s team’s) coverage universe.] Not Rated (NR): J.P. Morgan has removed the rating and, if applicable, the price target, for this stock because of either a lack of a sufficient fundamental basis or for legal, regulatory or policy reasons. The previous rating and, if applicable, the price target, no longer should be relied upon. An NR designation is not a recommendation or a rating. In our Asia (ex-Australia) and U.K. small- and mid-cap equity research, each stock’s expected total return is compared to the expected total return of a benchmark country market index, not to those analysts’ coverage universe. If it does not appear in the Important Disclosures section of this report, the certifying analyst’s coverage universe can be found on J.P. Morgan’s research website, www.jpmorganmarkets.com.

0

2,678

5,356

8,034

10,712

13,390

16,068

Price(c)

Sep06

Mar08

Sep09

Mar11

Sep12

Investec Plc (INPJ.J, INP SJ) Price Chart

UW 8,883.049cN 7,274c UW 4,787.268cN 6,381.858c

UW 10,814cUW 9,036.687cN 9,088.813cN 6,232.274cUW 5,874.209cUW 4,293.225cUW 4,482.402cN 5,532.382cN 6,762.57cN 5,512.695cOW 6,377.462cOW 6,466.328c N 6,300cN 7,100cN 8,000c

Source: Bloomberg and J.P. Morgan; price data adjusted for stock splits and dividends.

Initiated coverage Mar 30, 2007.

0

1

2

3

4

5

6

7

8

9

10

Price(R)

Jul10

Apr11

Jan12

Oct12

Jul13

Russian Grids (MRKH.MM, MRKH RX) Price Chart

UW R0.779

UW R0.926

Source: Bloomberg and J.P. Morgan; price data adjusted for stock splits and dividends.

Initiated coverage Jul 26, 2013.

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J.P. Morgan Equity Research Ratings Distribution, as of January 1, 2014

Overweight(buy)

Neutral(hold)

Underweight(sell)

J.P. Morgan Global Equity Research Coverage 43% 45% 12%IB clients* 57% 49% 36%

JPMS Equity Research Coverage 43% 50% 7%IB clients* 75% 66% 59%

*Percentage of investment banking clients in each rating category.For purposes only of FINRA/NYSE ratings distribution rules, our Overweight rating falls into a buy rating category; our Neutral rating falls into a hold rating category; and our Underweight rating falls into a sell rating category. Please note that stocks with an NR designation are not included in the table above.

Equity Valuation and Risks: For valuation methodology and risks associated with covered companies or price targets for covered companies, please see the most recent company-specific research report at http://www.jpmorganmarkets.com, contact the primary analyst or your J.P. Morgan representative, or email [email protected].

Equity Analysts' Compensation: The equity research analysts responsible for the preparation of this report receive compensation based upon various factors, including the quality and accuracy of research, client feedback, competitive factors, and overall firm revenues.

Registration of non-US Analysts: Unless otherwise noted, the non-US analysts listed on the front of this report are employees of non-US affiliates of JPMS, are not registered/qualified as research analysts under NASD/NYSE rules, may not be associated persons of JPMS, and may not be subject to FINRA Rule 2711 and NYSE Rule 472 restrictions on communications with covered companies, public appearances, and trading securities held by a research analyst account.

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holder of Capital Markets Services License issued by the Securities Commission in Malaysia. Pakistan: J. P. Morgan Pakistan Broking (Pvt.) Ltd is a member of the Karachi Stock Exchange and regulated by the Securities and Exchange Commission of Pakistan. Saudi Arabia: J.P. Morgan Saudi Arabia Ltd. is authorized by the Capital Market Authority of the Kingdom of Saudi Arabia (CMA) to carry out dealing as an agent, arranging, advising and custody, with respect to securities business under licence number 35-07079 and its registered address is at 8th Floor, Al-Faisaliyah Tower, King Fahad Road, P.O. Box 51907, Riyadh 11553, Kingdom of Saudi Arabia. Dubai: JPMorgan Chase Bank, N.A., Dubai Branch is regulated by the Dubai Financial Services Authority (DFSA) and its registered address is Dubai International Financial Centre - Building 3, Level 7, PO Box 506551, Dubai, UAE.

Country and Region Specific Disclosures U.K. and European Economic Area (EEA): Unless specified to the contrary, issued and approved for distribution in the U.K. and the EEA by JPMS plc. Investment research issued by JPMS plc has been prepared in accordance with JPMS plc's policies for managing conflicts of interest arising as a result of publication and distribution of investment research. Many European regulators require a firm to establish, implement and maintain such a policy. This report has been issued in the U.K. only to persons of a kind described in Article 19 (5), 38, 47 and 49 of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005 (all such persons being referred to as "relevant persons"). This document must not be acted on or relied on by persons who are not relevant persons. Any investment or investment activity to which this document relates is only available to relevant persons and will beengaged in only with relevant persons. In other EEA countries, the report has been issued to persons regarded as professional investors (or equivalent) in their home jurisdiction. Australia: This material is issued and distributed by JPMSAL in Australia to "wholesale clients" only. This material does not take into account the specific investment objectives, financial situation or particular needs of the recipient. The recipient of this material must not distribute it to any third party or outside Australia without the prior written consent of JPMSAL. For the purposes of this paragraph the term "wholesale client" has the meaning given in section 761G of the Corporations Act 2001. Germany: This material is distributed in Germany by J.P. Morgan Securities plc, Frankfurt Branch and J.P.Morgan Chase Bank, N.A., Frankfurt Branch which are regulated by the Bundesanstalt für Finanzdienstleistungsaufsicht. Hong Kong: The 1% ownership disclosure as of the previous month end satisfies the requirements under Paragraph 16.5(a) of the Hong Kong Code of Conduct for Persons Licensed by or Registered with the Securities and Futures Commission. (For research published within the first ten days of the month, the disclosure may be based on the month end data from two months prior.) J.P. Morgan Broking (Hong Kong) Limited is the liquidity provider/market maker for derivative warrants, callable bull bear contracts and stock options listed on the Stock Exchange of Hong Kong Limited. An updated list can be found on HKEx website: http://www.hkex.com.hk. Japan: There is a risk that a loss may occur due to a change in the price of the shares in the case of share trading, and that a loss may occur due to the exchange rate in the case of foreign share trading. In the case of share trading, JPMorgan Securities Japan Co., Ltd., will be receiving a brokerage fee and consumption tax (shouhizei) calculated by multiplying the executed price by the commission rate which was individually agreed between JPMorgan Securities Japan Co., Ltd., and the customer in advance. Financial Instruments Firms: JPMorgan Securities Japan Co., Ltd., Kanto Local Finance Bureau (kinsho) No. 82 Participating Association / Japan Securities Dealers Association, The Financial Futures Association of Japan, Type II Financial Instruments Firms Association and Japan Investment Advisers Association. Korea: This report may have been edited or contributed tofrom time to time by affiliates of J.P. Morgan Securities (Far East) Ltd, Seoul Branch. Singapore: JPMSS and/or its affiliates may have a holding in any of the securities discussed in this report; for securities where the holding is 1% or greater, the specific holding is disclosed in the Important Disclosures section above. 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No securities commission or similar regulatory authority in Canada has reviewed or in any way passed judgment upon these materials, the information contained herein or the merits of the securities described herein, and any representation to the contrary is an offence. Dubai: This report has been issued to persons regarded as professional clients as defined under the DFSA rules. Brazil: Ombudsman J.P. Morgan: 0800-7700847 / [email protected].

General: Additional information is available upon request. Information has been obtained from sources believed to be reliable but JPMorgan Chase & Co. or its affiliates and/or subsidiaries (collectively J.P. Morgan) do not warrant its completeness or accuracy except with respect to any disclosures relative to JPMS and/or its affiliates and the analyst's involvement with the issuer that is the subject of the research. All pricing is as of the close of market for the securities discussed, unless otherwise stated. Opinions and estimates constitute our judgment as of the date of this material and are subject to change without notice. Past performance is not indicative of future results. This material is not intended as an offer or solicitation for the purchase or sale of any financial instrument. The opinions and recommendations herein do not take into account individual client circumstances, objectives, or needs and are not intended as recommendations of particular securities, financial instruments or strategies to particular clients. The recipient of this report must make its own independent decisions regarding any securities or financial instruments mentioned herein. JPMS distributes in the U.S. research published by non-U.S. affiliates and accepts responsibility for its contents. Periodic updates may be provided on companies/industries based on company specific developments or announcements, market conditions or any other publicly available information. Clients should contact analysts and execute transactions through a J.P. Morgan subsidiary or affiliate in their home jurisdiction unless governing law permits otherwise.

"Other Disclosures" last revised December 7, 2013.

Copyright 2014 JPMorgan Chase & Co. All rights reserved. This report or any portion hereof may not be reprinted, sold or redistributed without the written consent of J.P. Morgan. #$J&098$#*P

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J.P. Morgan emerging markets coverage

J.P. Morgan covers 1072 companies in Emerging markets. The total market capitalization of the covered universe is US$9.6trillion. The daily trading volume of the universe is US$26.6 billion. The table below provides a summary of J.P. Morgan’s EM coverage.

Figure 35: Companies covered in EM

Country Cons. Disc

Cons. Staples Energy Financials Health Care Industrials IT Materials Telecom Utilities Total

China 31 10 12 35 13 35 29 15 3 11 194Brazil 21 16 6 21 3 14 4 15 3 16 119India 15 8 10 27 7 14 7 15 4 10 117South Korea 16 9 2 17 1 16 14 6 4 2 87Taiwan 8 2 1 16 1 10 30 7 3 78South Africa 10 5 1 14 5 8 21 3 67Russia 2 6 11 8 2 6 4 14 6 7 66Malaysia 5 5 4 18 3 10 2 4 2 53Indonesia 7 7 6 5 1 3 1 6 5 1 42Mexico 7 10 10 1 7 4 1 40Thailand 4 6 4 15 2 3 2 3 39Saudi Arabia 2 7 1 13 3 26Philippines 1 1 1 12 4 2 4 25Turkey 6 1 10 1 2 2 22Poland 2 1 1 10 2 1 3 20Chile 1 3 1 3 1 1 1 2 1 14UAE 6 1 2 9.0Greece 4 2 1 1 8.0Egypt 4 3 7.0Colombia 1 2 1 1 1 6.0Peru 1 1 1 3 6.0Qatar 3 1 2 6.0Argentina 1 2 1 4.0Nigeria 4 4.0Czech Republic 1 1 1 3.0Hungary 1 1 2.0Kazakhstan 2 2.0Kuwait 2 2.0Oman 2 2.0Panama 1 1.0Bahrain 1 1.0Total 131 99 64 257 38 139 90 132 61 61 1072

Source: J.P. Morgan, Bloomberg. 20 January 2014

Figure 36: Top liquid names which J.P. Morgan does not cover

Name Ticker Country Sector Total Mkt Cap (US$ B) 3M Avg daily T/O (US$ MM)

Samsung C&T Corp 000830 KS Korea Industrials 8.6 26Turk Hava Yollari Ao THYAO TI Turkey Industrials 4.4 81Eregli Demir Ve Celik Fabrik EREGL TI Turkey Materials 4.3 22Gome Electrical Appliances 493 HK China Consumer Discretionary 2.9 31Hyosung Corporation 004800 KS Korea Materials 2.3 17Motech Industries Inc 6244 TT Taiwan Information Technology 0.9 11Dogan Sirketler Grubu Hldgs DOHOL TI Turkey Industrials 0.8 3Dogan Yayin Holding As DYHOL TI Turkey Consumer Discretionary 0.6 2

Source: J.P. Morgan, Bloomberg. 20 January 2014

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Figure 37: Total market capitalization of coverage universe (US$ B)

Country Cons. Disc Cons. Staples EnergyFinancial

s Health Care Industrials IT Materials Telecom Utilities TotalChina 113 82 310 1159 51 145 281 67 269 76 2554Brazil 39 320 106 304 5 45 26 136 39 52 1072India 67 91 140 144 40 42 156 67 38 45 829South Korea 152 43 19 118 4 72 262 62 30 26 789Russia 3 63 335 95 2 11 26 98 86 21 740South Africa 74 16 32 113 24 14 249 56 579Taiwan 20 15 24 96 1 21 248 72 41 538Mexico 36 177 80 3 30 52 77 455Malaysia 26 28 15 101 11 42 16 50 23 313Saudi Arabia 18 78 6 150 52 304Thailand 8 40 50 64 4 28 27 7 228Indonesia 32 29 8 64 5 7 0 19 29 9 203Colombia 6 146 10 2 6 171UAE 75 15 34 124Turkey 20 5 64 9 2 20 121Philippines 4 2 2 45 21 18 15 108Chile 20 17 17 24 2 9 2 14 3 107Poland 7 2 1 62 9 4 13 99Qatar 44 29 15 89Greece 39 2 7 3 53Peru 2 11 3 29 44Argentina 26 2 3 32Czech Rep 8 5 14 27Egypt 7 9 16Nigeria 15 15Kuwait 13 13Panama 6 6.5Hungary 0 6 6.0Oman 4 4.0Kazakhstan 4 3.7Bahrain 2 1.9Total 601 973 1236 2835 150 537 1000 1079 930 306 9645Source: J.P. Morgan, Bloomberg. 21 August 2013

Figure 38: 3M Average daily trading value (US$ MM)

Country Cons. Disc Cons. Staples Energy Financial Health Care Industrial IT Materials Telecom Utilities TotalChina 682 344 484 2966 317 300 2393 292 308 153 8239Russia 6 1096 399 748 1 266 121 789 131 39 3597Brazil 244 350 739 769 17 159 53 566 66 106 3067South Korea 400 96 59 233 31 366 780 217 101 80 2363South Africa 214 42 65 315 72 32 1445 93 2277India 136 101 99 483 47 93 180 125 56 79 1399Taiwan 57 26 10 160 5 49 775 66 51 1198Mexico 58 149 115 12 57 595 147 1134Turkey 41 17 739 18 35 34 884Saudi Arabia 13 104 13 244 76 450Thailand 12 47 72 179 20 35 63 5 434Philippines 2 3 1 40 216 15 6 284Malaysia 16 20 18 67 7 52 10 48 34 271Poland 3 9 2 112 36 10 13 184Indonesia 21 21 15 55 7 6 2 17 26 10 180Peru 0 46 2 84 132UAE 86 3 7 96Chile 11 13 7 9 1 15 4 22 4 85Greece 32 15 12 5 64Argentina 39 11 4 54Colombia 3 34 12 2 50Panama 45 45Qatar 18 11 8 37Czech Rep 11 5 13 29Hungary 4 20 24Egypt 13 4 17Nigeria 7 7.4Kuwait 2 2.3Oman 2 2.1Kazakhstan 1 0.9Total 1867 2373 2059 7349 518 1738 4307 4580 1271 544 26606

Source: J.P. Morgan, Bloomberg. 20 January 2014

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Figure 39: Corrections in MSCI Emerging Markets US dollar index

Source: Datastream, MSCI, J.P. Morgan

J.P. Morgan Emerging Market Strategy TeamChief Equity StrategistsAdrian Mowat Asia and Emerging Markets (852) 2800 8599 [email protected] Martins Junior LatAm (55-11) 4950 4121 [email protected] Aserkoff CEEMEA (44-20) 7134-5887 [email protected] Frontier MarketsAditya Srinath ASEAN (66-21) 5291 8573 [email protected] Kern MENA (971) 4428 1789 [email protected] Celedon Southern cone and Andean (562) 425 5245 [email protected] Developed MarketsThomas J Lee US (1) 212 622 6505 [email protected] Matejka Europe (44-20) 7325 5242 [email protected] J Koll Japan Equity Strategy (81-3) 6736 8600 [email protected] StrategistsMichael Yu China (852) 2800 8511 [email protected] Shayo Brazil (55-11) 3048 6684 [email protected] Iyer India (91-22) 6157 3600 [email protected] Srinath Indonesia (62-21) 5291 8573 [email protected] Seo Korea (82-2) 758 5759 [email protected] Kit Mak Malaysia (60-3) 2270 4728 [email protected] Cristiani Mexico (5255) 5540 9374 [email protected] Yutan Philippines (63-2) 878-1131 [email protected] Kantarovich Russia (7-495) 967 3172 [email protected] Ghosh South Africa (27-11) 507-0372 [email protected] Jirajariyavech Thailand (66-2) 684 2684 [email protected] Kwock Taiwan (852) 2800-8533 [email protected] & Policy Research Joyce Chang Global Head, Emerging Markets Research (1-212) 834 4203 [email protected] P Fenton Global Commodities Research and Strategy (1-212) 834-5648 [email protected] Aziz Emerging Asia (1-202) 585 1254 [email protected] Oganes Regional Head, Latin America (1-212) 834-4326 [email protected] Ng Taiwan (852) 2800 7002 [email protected] Zhu China (852) 2800 7039 [email protected] Lim Korea (82-2) 758 5509 [email protected] Z Chinoy India (9122) 6157 3386 [email protected] Jiang Hong Kong (852) 2800-7053 [email protected] Werning Argentina and Chile (1-212) 834 4144 [email protected] Akira Brazil (55-11) 3048 3634 [email protected] Lozano Mexico (52-55)-5540-9558 [email protected] Marrese Regional Head, Emerging Europe (44-20) 7777 4627 [email protected] Keller South Africa (27-11) 507 0376 [email protected] Cebeci Turkey (90-212) 326 5890 [email protected] A Shal Russia (7-495) 937-7321 [email protected] Szentivanyi Hungary, Poland (44-20) 7777 3981 [email protected] Alexandru Czech Republic (44-20) 7742 2466 [email protected]

4.490 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13

19 Feb 90, 2399 Apr 90, 198Decline 17%Duration 36 days

1 Aug 90, 25716 Jan 91, 175Decline 32%Duration 121 daysIraq invades Kuwait

22 Sep 94, 5869 Mar 95, 396Decline 33%Duration 121 daysMexican Tequila Crisis

10 Jul 97, 5715 Oct 98, 241Decline 58%Duration 323 daysAsian Crisis

18-Apr-02, 36410-Oct-02, 254Decline 30%

10 Feb 00, 531.03 Oct 01, 247Decline 54%Duration 430 days2000 Global Correction

22 Apr 92, 35324 Aug 92, 286Decline 19%Duration 89 daysBrazilian Fall

16 Feb 94, 56324 Aug 94, 454Decline 19%Duration 59 daysFed tightening

25% rally

23 July 07, 116316 August 07, 957

Decline 18%Duration 19 days

US sub-prime and global credit market

concerns

31 October 2007, 1338 27 October 2008, 454

Decline 66%Duration 268 days

Credit Crisis and EM Inflation

10 May 06, 87913 Jun 06, 665Decline 24%Duration 25 daysFear of Fed overtightening

12-April-04, 49717-May-04, 396Decline 20%Duration 26 daysStart of Fed tightening

19 Feb 90, 2399 Apr 90, 198Decline 17%Duration 36 days

1 Aug 90, 25716 Jan 91, 175Decline 32%Duration 121 daysIraq invades Kuwait

10 Jul 97, 5715 Oct 98, 241Decline 58%Duration 323 daysAsian Crisis

18-Apr-02, 36410-Oct-02, 254Decline 30%

10 Feb 00, 531.03 Oct 01, 247Decline 54%Duration 430 days2000 Global Correction

22 Apr 92, 35324 Aug 92, 286Decline 19%Duration 89 daysBrazilian Fall

16 Feb 94, 56324 Aug 94, 454Decline 19%Duration 59 daysFed tightening

25% rally

26 Feb 07, 9405 Mar 07, 844Decline 10%

Duration 8 daysA-shares fall, US

profit fears

23 July 07, 116316 August 07, 957

Decline 18%Duration 19 days

US sub-prime and global credit market

concerns

31 October 2007, 1338 27 October 2008, 454

Decline 66%Duration 268 days

Credit Crisis and EM Inflation

4July 2011, 1169 4 October 2011, 824

Decline 29%Duration 91 days

S&P downgrade of US credit outlook, heightened

Euro sovereign stress and China hardlanding

fears

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