Market Report 4Q 2012€¦ · LION GLOBAL INVESTORS LIMITED 65 Chulia Street #18-01, OCBC Centre...

LION GLOBAL IN65 Chulia Street #

SingapoTel: (65)64176800

www.lionglobCo Reg. No

Market Report4Q 2012

18 October 2012

MACRO OVERVIEW 1

EQUITIES 2

US 2

EUROPE 4

JAPAN 6

ASIA PACIFIC EX-JAPAN 7

AUSTRALIA 9

CHINA/HONG KONG 10

INDIA 12

KOREA 13

TAIWAN 15

SINGAPORE 17

ASEAN ex Singapore 18

FIXED INCOME 20

SINGAPORE 20

ASIA 21

US/EUROPE 21

APPENDIX 1 23

APPENDIX 2 24

VESTORS LIMITED18-01, OCBC Centrere 049513Fax: (65)64176801

alinvestors.com
. 198601745D

MACRO OVERVIEWThe third quarter of 2012 turned out to be positive for risk assets as the last month of the quarter,September saw monetary policy action by the various developed market central banks – theEuropean Central Bank’s (ECB) Outright Monetary Transactions (OMT) programme, the USFederal Reserve’s (Fed) open-ended third round of quantitative easing (QE3) and the Bank ofJapan’s expansion of its asset purchase plan.

At the beginning of 3Q 2012, market sentiment was decidedly negative as the unresolvedsovereign debt crisis in Europe, together with global growth concerns continued to weigh onmarkets. Towards the end of July however, comments made by Mario Draghi, the President of theECB, who stated that the ECB would do “whatever it takes” to preserve the Euro, led to animprovement in investor sentiment. This positive sentiment carried over to the start of August asequities experienced a strong beginning to the month. This gave way to caution ahead of theGerman constitutional courts’ ruling on the European Stability Mechanism (ESM) and the US Fed’smeeting in September. September was a month of positive news, starting with the ratification ofthe ESM and ending with the major developed market central banks undergoing significantmonetary policy easing.

Against this backdrop, global risk assets gained ground in 3Q 2012 (the MSCI Asia Pacific exJapan Index rose 6.1%* in that period), while “safe haven” assets underperformed (the WorldGovernment Bond Index was down 0.3%*).

We expect equity markets to grind higher in 4Q 2012. The ECB’s OMT represents the mostsignificant step taken to date in ongoing efforts to resolve the European crisis. The reduction of tailrisk in Europe is structurally positive and would likely result in incrementally more short term fundsflow to risk assets in search of returns. Cyclically, promises of unlimited easing by the Fed and theECB should also result in improving confidence and economic stabilization via asset prices, with agradual and likely modest impact on actual economic recovery. Overall, this would be positive forrisk assets when signs of growth improving start to show up in economic data.

At the moment, data points in Europe and the US are starting to improve, with manufacturingmomentum stabilizing in Europe and the US, and consumer and business confidence turning up.China's economy has continued to trend weaker but fixed asset investments, the end of inventorydestocking, and a pick-up in construction are likely to support growth in the final quarter of 2012.

Having said that, work remains to be done, especially in the Eurozone, to balance unpopularausterity measures with the growth needed to reduce debt. In the near term, we expect the delayin Spain's request for a bailout, as well as any indecisiveness shown by the US in resolving thefiscal cliff, to cause market uncertainty. On Iran, a military engagement over the next 6-12 monthsremains possible, as Iran has continued to develop its nuclear capabilities despite sanctions. A warpremium over oil prices may persist as a result of such an expectation, posing a drag on globalgrowth.

With central banks stating their intentions of keeping rates low for a longer period of time, thesearch for yield will continue to drive fund flows. Asia's domestic consumption-driven companiesoffer both steady growth prospects over the medium term, with dividends supported by healthycash flows and balance sheets. Asia's long-term fundamentals and increasing depth of the bondmarket should continue to support fund flows to this area, benefitting issues in the region. At thesame time, equity valuations are undemanding and this remains an attractive asset class for thelonger term.

We would continue to take advantage of downside volatility to add to equities, as well as investingselectively in Asian corporate bonds.

1

*In Singapore Dollar terms. (Source: Bloomberg)

2

EQUITIES

US

United States 30-Sep-12

Market performance Last close %3M chg %12M chg

MSCI USA 3,504.6 6.2 29.2

S&P 500 INDEX 1,440.7 5.8 27.3

DOW JONES INDUS. AVG 13,437.1 4.3 23.1

NASDAQ COMPOSITE INDEX 3,116.2 6.2 29.0

Exchange rate Last close %3M chg %12M chg

US$/¥ 78.0 2.3 (1.2)

€/US$ 1.3 (1.5) 4.1

£/US$ 1.6 (2.8) (3.6)

CHF/US$ 0.9 0.9 (3.4)

US$/S$ 1.2 3.1 6.5

MSCI USA 2011 2012E 2013E

EPS growth (%) 16.3 6.9 11.3

P/E (x) 15.1 14.1 12.7

P/B (x) 2.3 n/a n/a

DY (x) 2.2 n/a n/a

Source: Bloomberg, Citi, Credit Suisse, Thomson, CEIC, MSCI

Market ReviewThe US stock market rebounded strongly in 3Q 2012. The S&P 500 Index surged 5.8% on theback of central bank easing announcements from the Fed and the ECB as well as solid secondquarter results. The Fed’s QE3 and the ECB’s OMT programmes boosted market sentiment aswell as investors’ risk appetite.

All sectors of the S&P 500, with the exception of Utilities, posted positive returns in 3Q 2012. Thecyclical sectors, such as Energy, Consumer Discretionary, Technology and Financial outperformedand posted more than 6% return. The Energy sector rose 9.3% in the quarter, reflecting the almost15% rebound in the price of Brent crude oil. The Consumer Discretionary sector rose 7.7%, on theback of improving consumer confidence and better than expected back-to-school sales. TheTechnology sector rose 6.8% amid better fundamentals and an improved growth outlook. TheFinancials sector rose 6.4% as the tail risk of Eurozone break-up was significantly reduced afterthe ECB’s announcement of the OMT programme.

The Utilities sector was the only one to post negative returns in the quarter amid sector rotationand rising investor risk appetite. Defensive sectors, such as Healthcare and Consumer Staples,also underperformed the broad market.

Despite the slowing global economic backdrop, 2Q 2012 corporate earnings remained solid, with67% of the companies beating EPS estimates. 2Q 2012 EPS was about US$25.80, representingabout 7% year-on-year growth. Sluggish revenue growth was the major disappointment of thesecond quarter earnings results. The Utilities and Consumer Discretionary sectors had the mostpositive earnings surprises, while the Materials and Energy sectors had the least.

Outlook/StrategyUS economic data continues to be mixed. Despite improving consumer confidence and housingdata, other economic data continues to suggest the underlying trend in the economy remains weak.

3

2Q 2012 GDP growth was revised down to 1.3%, from an earlier estimate of 1.7%. The downwardrevision mostly reflected a larger drag from inventories due to a drought in the Midwest. In addition,the weak Chicago Purchasing Manager Index (PMI) reading and the collapse of the durable goodsorder in August were reminders that the manufacturing sector still remains weak. The labourmarket remains soft, with August’s non-farm payrolls only up by 96,000. Nonfarm payrolls haveaveraged 139,000 per month so far in 2012, which is weaker than the 143,000 per month over thesame period in 2011.

In response to a stagnating labour market and slowing output growth, the Fed’s Federal OpenMarket Committee announced a new QE3 featuring $40 billion in monthly mortgage-backed-securities (MBS) purchases to support a stronger economic recovery. The Fed will undertakeadditional asset purchases and employ other policy tools until labour market conditions improvesubstantially. QE3 is expected to accelerate growth to 3% in 2013, up from the previous projectionof 2.8%.

Given the uncertain macro outlook and weak guidance from companies, 3Q earnings expectationis low. The Energy and Materials sectors will post the biggest year-on-year decline in 3Q and sub-par growth is expected for all sectors. The five sectors are expected to post year-on-year earningsdeclines and the rest will post less than 5% growth on a year-on-year basis.

After the 5.8% rebound in the third quarter, the S&P 500 Index is still trading at a reasonablevaluation of 13x consensus forward earnings, 0.5x standard deviation below its long-term averagemultiple of 14x. In the near term, the US equity market is likely to become more volatile amid anupcoming US president election, the looming fiscal cliff and 3Q earnings reporting season.Furthermore, riots or demonstrations in Spain have made it clear that the situation in the EU ismore difficult than previously expected. Therefore we favor higher quality companies withsustainable and growing yield. Key risks to watch out for include a disorderly outcome in Europedebt crisis, slowing global growth, a hard landing in China, Middle East tension and US fiscalpolicy uncertainty.

4

EUROPE

Europe 30-Sep-12


MSCI EUROPE 3,601.3 6.5 18.2

STXE 600 € Pr 268.5 6.9 18.7

S&P EUROPE 350 INDEX 1,097.2 6.6 18.5


€/US$ 1.3 (1.5) 4.1

£/US$ 1.6 (2.8) (3.6)

CHF/US$ 0.9 0.9 (3.4)

US$/NOK 5.7 4.1 2.5

US$/SEK 6.6 5.4 4.7

MSCI EUROPE 2011 2012E 2013E

EPS growth (%) 2.9 (3.4) 11.5

P/E (x) 10.8 11.2 10.0

P/B (x) 1.4 n/a n/a

DY (x) 3.9 n/a n/a


Market ReviewEuropean equity markets had a temporary hiccup in July, declining 4.9% before recovering to end3Q 2012 up 8.7% in USD terms. The volatility was largely due to concerns over Spain’s fiscalposition after Valencia and Catalonia sought financial assistance from the government. Equitymarkets were buoyed by investors’ optimism following the ECB’s OMT policy, the GermanConstitutional court’s ruling on the ESM and the US Fed’s announcement of QE3.

Concerns over Spain’s fiscal position resurfaced after Valencia, Catalonia, Andalusia and Murciasought financial assistance from the government under an 18 billion euros programme aimed athelping the autonomous regions. The programme is funded by the Spanish Treasury but theregions keep full responsibility over the debt. The Spanish government has also implementedfurther austerity measures to keep its budget deficit in check. On top of this, Spain also injected4.5 billion euros of capital into Bankia immediately following weak 2Q 2012 results.

The ECB's conditional OMT policy, with its unlimited bond buying was positive for the market. Aslong as beneficiary countries agreed and delivered on the appropriate conditions, the EuropeanFinancial Stability Facility / European Stability Mechanism and the ECB would ensure sufficientsovereign funding. In addition, the German Constitutional Court ratified the ESM and the FiscalCompact but the court ruled that any additional obligations beyond 190 billion euros will have to beapproved by the Bundestag.

The Dutch election results reinforced the positive market sentiment. Despite market fears, the'extreme' parties performed poorly, relative to the final opinion polls and the traditional mainstreamparties on the right (People’s Party for Freedom and Democracy) and left (Dutch Labour Party)made larger than anticipated gains.

The Financial sector was the best performing sector during the quarter, rising 13.01% as investorsraised exposure to the sector as they viewed ECB’s OMT programme as reducing risks.

On the other hand, the Telecom sector underperformed the market, rising 3.78% as investorsreduced exposure to the defensive sector.

5

Outlook/StrategyEuropean companies’ 2Q 2012 results continue to suggest that they are facing margin pressure,with 48% of the companies reporting results that were ahead of analysts' expectations, while 51%of companies also had revenue growth ahead of consensus expectations.

Looking ahead, economists expect Eurozone GDP to contract 0.5% in 2012 and likely to be in arecession until 4Q 2012. This is a result of lower global GDP growth expectations and fiscaltightening in the peripheral Eurozone countries. The peripheral countries are expected toexperience persistent and deeper recession while the northern Eurozone economies are expectedto achieve better growth prospects. 2013 GDP is expected to remain subdued, not registering anygrowth.

The MSCI Europe Index consensus earnings are expected to decline 2.5% in 2012 and rise 12.5%in 2013. In terms of valuations, the MSCI Europe Index trades at 11.6x consensus 2012 earningsand 10.3x 2013 earnings which appears reasonable when compared to its long-term average of12.6x. We continue to maintain our overweight position in the luxury goods sector as we believethat stocks in the sector have unique portfolios of strong brands that will benefit from continuedresilience in spending for luxury goods. We also maintain our overweight position in the ConsumerStaples sector, given the steady growth and defensive characteristics of this sector.

We remain vigilant of the tail sovereign default risks in Europe as well as the austerity measuresbeing undertaken by the various governments as they could result in a deeper-than-expectedeconomic slowdown. In addition, there is a possibility that China’s economic growth may slowmore than expected and dent Europe’s amount of exports to China. The US economic growth alsobears watching as it may slow more than expected due to policy impasse.

6

JAPAN

Japan 30-Sep-12


MSCI JAPAN 787.0 (3.3) (0.8)

TOPIX INDEX (TOKYO) 737.4 (4.2) (3.1)

NIKKEI 225 8,870.2 (1.5) 2.0


US$/¥ 78.0 2.3 (1.2)

MSCI JAPAN 2011 2012E 2013E

EPS growth (%) 51.6 (29.0) 61.8

P/E (x) 8.8 20.3 12.6

P/B (x) 0.9 n/a n/a

DY (x) 2.7 n/a n/a


Market ReviewFor the quarter ended September, the MSCI Japan Index was down 3.3% in local currency terms.The market traded in a range for the quarter, driven by news flows on the European debt problemsand measures implemented by ECB to solve the problems, weak economic data from US andChina, and finally in September, strong monetary easing measures announced by the majorcentral banks of Europe, US and Japan. On the political front, tensions rose between Japan andChina in September regarding the sovereignty of the disputed islands known as Senkaku Islandsor Diaoyu Islands after Japan nationalized the islands. On the domestic front, the rulingDemocratic Party of Japan (DPJ) and main opposition, Liberal Democratic Party of Japan (LDP),both elected their leaders, setting the stage for Lower House elections.

The best performing sectors for the quarter were beneficiaries of monetary easing measures bymajor central banks such as non-bank finance and real estate, and defensive sectors such as food.The worst-performing sectors were economically-sensitive cyclical sectors such as shipping,airlines and steel.

Outlook/StrategySignificant monetary easing measures have now been announced by the major central banks,providing a support for the financial markets. China also appears to be providing both monetaryand fiscal stimuli to boost its economy. Nevertheless, economic data remains weak across theregions. In Japan, the September Tankan survey showed business sentiment amongmanufacturing companies deteriorated from the previous quarter. At the same time, negativeearnings revisions are picking up pace as we approach the mid-year results reporting season. Thestock market remains jittery and vulnerable to negative news. We expect the market to be in abottoming-out phase in the coming months. Globally competitive companies are now trading atvery attractive valuations due to the weak short-term earnings outlook and look attractive as long-term investments.

7

ASIA PACIFIC EX-JAPAN

Asia Pacific ex-Japan 30-Sep-12


MSCI AC ASIA PACIFIC 127.7 3.4 9.6

MSCI AC ASIA x JAPAN 296.3 7.2 17.6

MSCI AC ASIA PAC EX JAPAN 262.7 7.6 16.8


A$/US$ 1.0 (1.3) (6.9)

US$/CNY 6.3 1.1 1.5

US$/HK$ 7.8 0.0 0.4

US$/INR 52.9 5.3 (7.4)

US$/IDR 9,591.0 (1.6) (7.5)

US$/KRW 1,111.4 3.1 6.0

US$/MYR 3.1 3.9 4.2

US$/PHP 41.7 1.0 4.9

US$/S$ 1.2 3.1 6.5

US$/TW$ 29.3 1.9 4.0

US$/THB 30.8 2.4 1.2

US$/VND 20,885 0.1 (0.3)

MSCI AC ASIA PACIFIC 2011 2012E 2013E

EPS growth (%) (8.5) 21.4 15.2

P/E (x) 15.2 12.5 10.9

P/B (x) 1.3 n/a n/a

DY (x) 3.0 n/a n/a

MSCI AC ASIA x JAPAN 2011 2012E 2013E

EPS growth (%) (1.8) 10.3 13.2

P/E (x) 13.5 12.3 10.9

P/B (x) 1.6 n/a n/a

DY (x) 2.5 n/a n/a

MSCI AC ASIA PAC EX JAPAN 2011 2012E 2013E

EPS growth (%) 2.5 6.6 11.0

P/E (x) 13.3 12.5 11.2

P/B (x) 1.6 n/a n/a

DY (x) 3.1 n/a n/a


Market ReviewAsian equity markets performed strongly in the third quarter of 2012, reversing the losses made inthe previous quarter. Thus the MSCI AC Asia Pacific ex Japan Index rose consistently throughoutthe quarter, gaining more than 9.5% in US dollar terms. Investors’ risk appetites rose as centralbanks around the world signaled their intent to pump as much liquidity as required into theireconomies in order to avoid a major breakdown in global macroeconomic conditions. This wasperceived by the market as sufficient protection against any major outstanding tail risk, hence theimprovement in investor sentiment.

However, volumes remained stubbornly low relative to historical levels, suggesting that thoughsentiment changed from quarter to quarter, actual conviction remains low. This is reflected in thepersistent rotational trading seen on a monthly basis throughout this year. Furthermore, thoughinflows into the region have picked up again, these inflows have been going into Exchange TradedFunds rather than funds, reinforcing investors’ lack of conviction, and highlighting the need for theincreased liquidity on the back of all the monetary loosening by the central banks to go somewhere.

8

Over the quarter, the best performing market in Asia (in US Dollar terms) was India thus reversingthe previous quarter’s poor performance, with Hong Kong, and Thailand also outperforming theIndex. The Indian government positively surprised everyone with the announcement of anaggressive reform program. Uncertainty remains over how much of the program can actually beimplemented given the state of the coalition. It has nevertheless been viewed as a positivedevelopment. China and the Philippines performed poorly relative to the Index with the formerreflecting increasing disappointment with China’s growth and the latter showing some moderationafter this year’s stellar performance so far. With investors rotating into higher beta markets, theASEAN markets performed worse than the North Asian markets on balance.

Sector-wise, performance in this quarter was dominated by Healthcare, Financials and InformationTechnology-related stocks. The Industrials, Energy and Materials sectors all relativelyunderperformed, reflecting concerns about a slowing China and its impact on the commodity andraw material related companies.

Outlook/StrategyThe performance of the Asian markets continues to be tied to external global events, especiallythose related to the US, Europe and China. On this front the news flow has been incrementallymore positive, resulting in sustained positive investor sentiment. However, though Asian equitymarkets continue to be historically cheap, earnings revisions have continued to decline, andvolumes remain depressed, suggesting that there is still a lack of real conviction among investors.Looking forward we would expect Asian markets to continue to gradually move higher due to theincrease in the global liquidity conditions, but continued risks to the downside in terms of globaleconomic growth still remain.

9

AUSTRALIA

Australia 30-Sep-12


MSCI AUSTRALIA 3,240.9 8.9 14.8

S&P/ASX 200 INDEX 4,387.0 7.1 9.4


A$/US$ 1.0 (1.3) (6.9)

MSCI AUSTRALIA 2011 2012E 2013E

EPS growth (%) 18.8 (2.0) 1.3

P/E (x) 12.7 13.0 12.8

P/B (x) 1.8 n/a n/a

DY (x) 4.8 n/a n/a


Market ReviewThe second quarter’s gloomy global economic outlook and Eurozone tensions led to investorssetting their expectations lower in respect of corporate earnings and market performance. Astrong statement by ECB President Mario Draghi in July sparked a rally in equities. Thesubsequent ratification of the ESM by German constitutional courts, and the US Fed’s QE3announcements provided even more momentum. China continued to disappoint in the form ofweaker macro-economic data and uncertainty over its political transition.

Domestically, the reporting season was on average in line with expectations but companieswere cautious in their forward-looking comments. One area of drama was in the iron ore pricewhich fell sharply, contributing to the underperformance of commodity stocks. BHP Billiton,among others, added more doubt to the case for commodities when it announced plans topostpone its Olympic Dam expansion and slow down other projects. After holding policy ratesunchanged over the quarter, the Reserve Bank of Australia (RBA) surprised the market andfinally cut rates to 3.25% in October, citing concerns over a faster-than-expected slowdown inmining capital expenditure. In terms of performance, the mining-heavy sector continued to lag,while the Healthcare, Consumer Staples and Financial sectors did well.

Outlook/StrategyFinancial conditions in the country have been kept tight over the past 18 months, with theRBA adopting a wait-and-see attitude and a strong Australian dollar. With the latest round ofinterest rate cuts, the domestic economy now has a good chance of making up for theeconomic growth gap created by the mining sector within the next year. The ground hasshifted insofar as financial conditions are concerned and corporate earnings andmacroeconomic growth could possibly trend upwards from here.

The Australian market is trading on 12.8x PER currently, which is on the low side of where ithas traded in recent years. Together with the single digit earnings growth being expected, thissuggests investor skepticism in the market has been discounted to some extent. Andarguably, with financial conditions on the mend, value is clearly available in this market.

We have remained defensive for the year-to-date. The interest rate cuts now warrant a re-positioning away from being defensive. Thus, the exposure to Telecom and Banks couldpossibly be trimmed in favor of domestic industrial and diversified financial stocks over thenext quarter.

10

CHINA/HONG KONG

China/Hong Kong 30-Sep-12


MSCI CHINA 331.6 4.6 17.1

SHANGHAI SE COMPOSITE 2,086.2 (6.3) (11.6)

SHENZHEN SE COMPOSITE IX 853.8 (7.3) (15.0)

MSCI HONG KONG 50,319.5 12.5 28.5

HANG SENG INDEX 20,840.4 7.2 18.5


US$/CNY 6.3 1.1 1.5

US$/HK$ 7.8 0.0 0.4

MSCI CHINA 2011 2012E 2013E

EPS growth (%) 10.3 2.3 9.1

P/E (x) 9.9 9.6 8.8

P/B (x) 1.5 n/a n/a

DY (x) 3.2 n/a n/a

MSCI HONG KONG 2011 2012E 2013E

EPS growth (%) 24.5 (13.0) 10.6

P/E (x) 13.7 15.9 14.4

P/B (x) 1.3 n/a n/a

DY (x) 2.7 n/a n/a


Market ReviewThe Greater China markets lost ground in 2Q 2012 but managed to recover in the last monthof 3Q 2012. In SGD terms, the MSCI Hong Kong and MSCI China Indices were up 8.8% and1.3% respectively.

China’s real GDP growth slowed from 8.1% in 1Q 2012 to 7.6% in 2Q 2012 and most macrodata points remained sluggish over the period. Exports growth was only 2.7% in August dueto weak global demand. Retail Sales growth slowed from 15.2% in March to 13.2% in Augustbut Fixed Assets Investments (FAI) stayed steady at 20.4% over the January-August period.In spite of the overall weak economic picture, there were a few bright spots. Inflation, asmeasured by the Consumer Price Index (CPI) improved significantly during past 6 months,falling from 3.6% in March to 2.0% in August. As such the People’s Bank of China started toloosen monetary policy by cutting banks’ Required Reserve Ratio (RRR) in May and interestrates twice in June and July. Another positive piece of news was the recovery in theresidential property sales, on the back of pent-up demand and the two interest rate cuts.

Hong Kong’s exports slipped into negative growth in June and July but stabilized at +0.7% inAugust. Retail sales’ momentum also fell sharply from 16% in 1Q 2012 to 7.8% in 2Q 2012.Weaker consumption in Hong Kong was mainly due to both the high base effect in 2011 andalso the weaker spending on luxurious goods by Chinese tourists. All in all, a poor tradeperformance and slower tourists’ spending dragged GDP growth down from 5% last year to0.7% in Q1 2012 and 1.2% in Q2 2012. However, supported by the 10 ongoing infrastructureprojects, the unemployment rate stayed at a 14-year low of 3.2% and the residential propertymarket remained healthy. Despite some initial concerns over the new Chief Executive LeungChun-Ying’s uncertain housing policy, the Centaline Property Leading Index showed a steadyprice increase of 4.2% and 2.7% in 2Q 2012 and 3Q 2012 respectively.

11

Outlook/StrategyGiven the strong performance of Hong Kong in 2Q 2012, in the near term there might be areversal of our current overweight in Hong Kong and neutral in China. The Hong Kong marketmight see further re-rating as asset plays in Hong Kong are the key beneficiaries of the Fed’sQE3 and a prolonged low interest rate environment. The status of Hong Kong as an offshorecenter for RMB and the commencement of various infrastructure projects will be the keydomestic growth drivers for the next 2-3 years. Low interest rates would continue to supportasset prices.

While the Chinese economy seems to be shaping up for a soft landing scenario as expected,we have yet to see a full scale recovery in the stock market. Economic growth of 8% in Chinathat leverages on massive investments in FAI is unsustainable. As such it is unlikely thatthere will be massive stimulus to facilitate a V-shaped rebound in profits among thoseinvestment-related cyclical industries. Despite the latest news of the National Developmentand Reform Commission (NDRC) approving more projects, our near term strategy favours aprudent stance in view of the two events: (1) the 18

thNational Party Congress on 8 November

during which China’s new leadership will be finalized; (2) China and Japan’s need to resolvetheir escalating dispute over the sovereignty of the Diaoyu Islands. The MSCI China Index isstill attractively priced but any slight improvement in macro or policy could trigger a rapidupward re-rating.

Our medium-term strategic direction still favours asset-sensitive financials, technology/internet and domestic cyclicals, as well as global cyclicals. QE3 should at least reinforceinvestors’ confidence while the gradual recovery in the Chinese economy in 4Q 2012/1Q2013 could emerge as a market driver. Financials and Cyclical names are cheap whiletechnology/internet’s growth momentum remains intact. We continue to underweightdefensives and commodities. In terms of industrial sectors, we continue to favour those thatcould benefit most from the QE3 and gradual monetary loosening in China, namely HongKong and Chinese Real Estates. The pick-up in residential property sales in China has finallytranslated into signs of new building starts. As such, we could possibly rebuild exposure toBuilding Materials and Construction-related stocks. After their consolidation in 2Q 2012 /3Q2012, Chinese Banks are trading at an average of 5x PER. With anticipated sequentialimprovement in asset quality, we see value emerging again from the banking sector in 4Q2012. Under the current investment environment, we will continue to focus on stocks that aresizable, with high earnings visibility, cheap valuations, and strong cash flow.

12

INDIA

India 30-Sep-12


MSCI INDIA 510.4 9.0 15.8

BSE SENSEX 30 INDEX 18,762.7 7.6 14.0


US$/INR 52.9 5.3 (7.4)

MSCI INDIA 2011 2012E 2013E

EPS growth (%) 7.9 10.4 13.7

P/E (x) 16.3 14.8 13.0

P/B (x) 2.6 n/a n/a

DY (x) 1.3 n/a n/a


Market ReviewThe MSCI India Index rose 8.56% in local currency terms in 3Q 2012.

The best performing sectors were Consumer Staples, Consumer Discretionary and Finance.The underperforming sectors were Telecom Services, Information Technology and Materials

During the quarter, the Indian Rupee had a very strong performance and appreciated by 5%to close at 52.86 INR/USD. This was driven by the Government announcing some importantreforms allowing Foreign Investments in the key areas of Retail, Insurance and Airlines. Whilethe actual benefit of such reforms will only happen over time, investor sentiment has improveda lot since the Indian government was perceived as being stuck in ‘policy paralysis’ mode forthe last few years.

Outlook/StrategyFalling global commodity (specifically, crude oil) prices should provide some respite fromIndia’s sticky inflation problem as we move towards the end of the calendar year. This mightprovide some much needed leeway for the Central Bank to undertake meaningful rate cuts,without having to fear a spike in demand-pull inflation. The new Finance Minister, Mr PChidambaram, has assured the markets that the fiscal deficit of the country is indeed an areaof focus.

13

KOREA

Korea 30-Sep-12


MSCI KOREA 534.6 6.6 15.5

KOSPI INDEX 1,996.2 7.7 12.8


US$/KRW 1,111.4 3.1 6.0

MSCI KOREA 2011 2012E 2013E

EPS growth (%) (16.1) 34.7 17.4

P/E (x) 13.4 9.9 8.4

P/B (x) 1.2 n/a n/a

DY (x) 1.2 n/a n/a


Market ReviewIt was a strong quarter, with the MSCI Korea index gaining 6.6% for the quarter endingSeptember 2012. On the external front, the ECB announced its OMT; Germany’sconstitutional courts ratified the ESM as well as the Fed’s QE3 announcements which werewell-received. Domestically, a 8.5 trillion Won supplementary fiscal budget was announced,with the Government stating their intentions to further support the SMEs if necessary.Investors’ sentiment received another boost with the upward adjustment of South Korea'ssovereign credit rating by all the 3 international credit rating agencies (Moody’s; Standard &Poor’s; Fitch), citing the country’s strong fiscal fundamentals which provide the administrationpolicy flexibility to cope with contingent domestic risks and external shocks. (South Korea'sforeign reserves reached US$316.88 billion as of end-August, up US$2.53 billion from theprevious month, putting South Korea as the world's seventh-largest holder of foreignexchange reserves.) Given the improved sentiment and with Korean corporations’ relativelymore robust and resilient earnings profile versus their global peers, foreign investorscontinued to accumulate blue-chip Korean equities.

Nevertheless, the slowdown in the US and the sovereign debt issues in the Eurozone haveaffected the Korean economy. Exports declined 6.2% on a year-on-year basis in Augustfollowing a 8.8% drop in July. This marks the first time since 2009 that exports had declinedfor two consecutive months by a significant magnitude. As a result of weak exports, businesssentiment dipped to a three-year low while industrial production and capex investmentactivities decelerated on bearish business confidence. With a relatively high household debtand the resulting high debt service burden, consumption growth slowed to 1.1% on a year-on-year basis in 2Q 2012 from 1.6% in 1Q 2012, and inflation declined to a 12-year low of 1.2%on a year-on-year basis in August.

Outlook/StrategyDespite the government’s pump-priming effort to support the economy, Korea’s GDP growthfor 2012 continued to be revised down as global growth slowed considerably and the outlookfor earnings remained sluggish. We are also keenly aware of the upcoming US fiscal cliff andthe manifold issues that need addressing even as attention is currently focused on the EUsituation and the US presidential election race.

Share prices have rallied and we are seeing domestic fund redemptions coming in around the1,950 – 2,000 level on the Kospi Index. Earnings visibility for the cyclical sectors is likely toremain relatively low amid external uncertainties. With election-year policies possiblypressuring large corporations ahead of the presidential election in December 2012 and a timelag expected between policy actions and corporate earnings recovery, we see downside risks

14

to earnings forecasts which may cap near-term performance for the Korean bourse.Nonetheless valuations are attractive both relative to historical and versus their regional peers,which are likely to provide downside support to share prices. Against this backdrop, weexpect share prices to consolidate near term as foreign inflows counterbalance the effects ofdomestic redemption pressure. We view stock selection as key to performance.

15

TAIWAN

Taiwan 30-Sep-12


MSCI TAIWAN 167.0 8.8 10.1

TAIWAN TAIEX INDEX 7,715.2 5.7 6.8


US$/TW$ 29.3 1.9 4.0

MSCI TAIWAN 2011 2012E 2013E

EPS growth (%) (29.1) 10.2 20.9

P/E (x) 19.0 17.3 14.3

P/B (x) 1.8 n/a n/a

DY (x) 3.5 n/a n/a


Market ReviewThe MSCI Taiwan ended the quarter up 8.8% as investors were heartened by the ECB’s OMT;Germany’s constitutional courts’ ratification of the ESM as well as the Fed’s QE3announcements. All sectors registered positive returns, with the Consumer Discretionarysector leading the rise as hotel stocks outperformed the most. Apple’s iPhone 5 waslaunched on 12 September despite early speculations over component shortages arising fromyield issues, thereby assuaging concerns and triggering a rebound in oversold Apple-relatedtech names. Foreigners bought a net amount of US$2.0 billion while domestic ITCs turned netsellers, net selling US$94 million.

Macro-wise, Taiwan’s export orders declined 1.5% on a year-on-year basis in August followinga decline of 4.4% in July. By product, export orders in basic metals,information/communication products (e.g. handsets, PCs and notebooks) and chemicalsdeclined the most with export orders from Europe showing the weakest growth. On a year todate (up to August 2012) basis, exports declined 5.6% year-on-year. As export growthdeclined for six consecutive months and domestic consumption growth remained negativelyaffected by macro headwinds, both S&P and Fitch revised down their forecasts for FY 2012GDP growth to 1.9% and 1.5% respectively, citing global economic uncertainty and the risk ofChina’s economy experiencing a hard landing as major concerns.

On the cross-strait front, the Taiwan-based Straits Exchange Foundation elected Lin Join-saneas the top negotiator to engage in talks while Wang Yu-chi was appointed as the new chief ofthe island's administration that deals with mainland affairs. CBC announced that Bank ofTaiwan (unlisted) will be the clearing bank in China under the NTD/RMB currency clearingmechanism. Taiwan regulators intend to fully open up RMB-related business within thedomestic market after the NTD/RMB clearing mechanism starts in late October 2012, and willnegotiate with China to establish stable RMB repatriation channels.

Outlook/StrategyGlobal macro conditions remain challenging. Since early September, global giants in the tech,transportation and machine tools sectors of the likes of Intel, FedEx and Caterpillar haverevised down their guidance. However, the downward earnings revisions have been largelyignored as investors focused on the positive policy measures that were announced over theperiod. We are also keenly aware of the upcoming US fiscal cliff and its manifold issues thatneed addressing even as attention is currently focused on the EU situation and the USpresidential race.

16

Macro developments will certainly play a key role in determining the performance for Taiwanequities. Nonetheless, new product launches and relatively attractive valuations would likelyhelp underpin share prices. We continue to favour mobile devices such as smartphones andtablets as well as their corresponding key component suppliers, as we view convergencedevices as a growing part of lifestyle consumerism. With negotiations progressing betweenChina and Taiwan for more liberalisation, we also see opportunities within the non-tech space.We will focus on bottom-up stock selection amid the uncertain global environment.

17

SINGAPORE

Singapore 30-Sep-12


MSCI SINGAPORE 605.9 7.2 18.4

Straits Times Index STI 3,060.3 6.3 14.4


US$/S$ 1.2 3.1 6.5

MSCI SINGAPORE 2011 2012E 2013E

EPS growth (%) (5.0) 8.6 5.6

P/E (x) 15.1 13.9 13.1

P/B (x) 1.5 n/a n/a

DY (x) 3.3 n/a n/a


Market ReviewSingapore equities did well for the quarter, as investors continued to be attracted by the safehaven triple-A status of the country. With the Monetary Authority of Singapore (MAS)maintaining an appreciating currency stance, coupled with a yield-paying developed REITsector in the Singapore equity market, this has further enhanced Singapore as a safeinvestment destination.

On the macro-economy front, both industrial production and export-related data exhibitedsigns of weakness. Singapore’s August Industrial Production fell 2.2% on a year-on-year basisversus the consensus of +1.0% on a year-on-year basis. Total exports contracted by 5.9% ona year-on-year basis in August, versus +0.2% in July, while Non-Oil Domestic Exportsdeclined 10.6% on a year-on-year basis. These data indicate that Singapore’s manufacturingmomentum remains weak and lacklustre, and raises the risk of a technical recession inSingapore in 3Q12.

Outlook/StrategyWe are positive on the long-term potential of the Singapore equity market, and expect stronggrowth from the key long-term drivers: the offshore and marine sector, the tourism sector andSingapore’s position as the business hub of Asia. Market valuations are not expensive, stilltrading slightly below its long-term mean. However, earnings growth is also not expected to berobust. In the short term, we expect volatility and range-bound trading from the market due tothe openness of the Singapore economy and its sensitivity to global growth.

18

ASEAN - Malaysia/Indonesia/Philippines/Thailand/Vietnam ex Singapore

ASEAN ex Singapore 30-Sep-12


MSCI MALAYSIA 337.3 1.4 17.8

FTSE Bursa Malaysia KLCI 1,636.7 2.3 18.0

MSCI INDONESIA 1,516.9 9.5 19.2

JAKARTA COMPOSITE INDEX 4,262.6 7.8 20.1

MSCI PHILIPPINES 314.8 3.3 34.0

PSEi - PHILIPPINE SE IDX 5,346.1 1.9 33.7

MSCI THAILAND 704.6 7.7 40.3

STOCK EXCH OF THAI INDEX 1,298.8 10.8 41.8

HO CHI MINH STOCK INDEX 392.6 (7.1) (8.2)


US$/IDR 9,591.0 (1.6) (7.5)

US$/MYR 3.1 3.9 4.2

US$/PHP 41.7 1.0 4.9

US$/THB 30.8 2.4 1.2

US$/VND 20,885.0 0.1 (0.3)

MSCI MALAYSIA 2011 2012E 2013E

EPS growth (%) 7.8 11.2 10.5

P/E (x) 16.8 15.3 13.9

P/B (x) 2.1 n/a n/a

DY (x) 2.9 n/a n/a

MSCI INDONESIA 2011 2012E 2013E

EPS growth (%) 18.9 7.7 13.2

P/E (x) 16.0 14.8 13.1

P/B (x) 3.8 n/a n/a

DY (x) 2.5 n/a n/a

MSCI PHILIPPINES 2011 2012E 2013E

EPS growth (%) 4.6 12.1 12.6

P/E (x) 19.8 17.6 15.6

P/B (x) 2.9 n/a n/a

DY (x) 2.2 n/a n/a

MSCI THAILAND 2011 2012E 2013E

EPS growth (%) 13.2 14.0 19.7

P/E (x) 14.6 12.8 10.7

P/B (x) 2.3 n/a n/a

DY (x) 3.0 n/a n/a

HO CHI MINH STOCK INDEX 2011 2012E 2013E

EPS growth (%) 0.3 20.6 58.5

P/E (x) 9.8 8.1 5.1

P/B (x) 1.5 n/a n/a

DY (x) 4.8 n/a n/a


Market ReviewIn 3Q 2012, the MSCI South East Asia Index jumped by 8.4% in USD terms, outperforming thebroader MSCI Asia-Pacific ex-Japan Index. This was mainly due to the strong performances ofthe Thailand and the Singapore markets, which were among the 2 cheapest markets within theASEAN region. Macro wise, during the quarter, the quantitative easing measures announcedby both the US and Japan, and the offer by the European Central Bank to bail out Spain,improved investor sentiment and allowed equity markets to grind higher.

Regionally, liquidity continued to be ample. Investors started snapping up high-yieldingcompanies in the region as a proxy for bonds/cash. Telecommunication companies and REITsperformed extremely well during the quarter.

19

Outlook/StrategyThe 2Q 2012 results season saw some earnings downgrades, mainly from the cyclical sectorslike the commodity and energy sectors which were impacted by falling commodity prices.Banks were in general in line to slightly above expectations as domestic demand continued tobe resilient. Overall, 2012 EPS for Malaysia, Indonesia and Thailand were nudged down 1.3%,3.6% and 4.3% respectively over the past 3 months.

Macro wise, the data released so far are showing slowing exports which is to be expectedgiven the state of the developed economies, especially in Europe. Fortunately, 2Q 2012 GDPheld up well, thanks to domestic investments and government pump-priming efforts which areexpected to continue for the year as both Malaysia and Indonesia have elections coming soon.

With ample liquidity and fiscal flexibility, we expect the ASEAN markets to be well positioned toweather a global economic slowdown. As the global outlook remains uncertain, we willcontinue to focus our investments on the domestic plays with reasonable valuation and thebanks (which are a good domestic pump-priming proxies).

20

FIXED INCOME

SINGAPORE

Market ReviewThe macro environment generally weakened in 3Q 2012, in particular, for Asia. Leadingindicators such as the Purchasing Managers Index for China, Korea, Taiwan and Singaporehave been below the 50 level, which implies a contraction in economic activities. New exportorders have been weak as well. Inflation, however, has been at manageable levels andtrending lower given the weakened macro outlook. This has allowed some Asian central banksto ease in July, following comments from Mario Draghi, President of the ECB that the ECBwould do “all that it takes” to protect the Euro. In September, the Fed delivered QE3 and theECB launched its unlimited bond purchasing program. All these actions have improved risksentiment even as the macro outlook remains unchanged.

After the initial rally in July, SGD interest rates have been trading in a range with the risksentiment fluctuating between data points and policy actions. Over the quarter, long-end ratesoutperformed short-end rates. The 2-year Singapore Government Securities (SGS) yield roseabout 15 bps but the 10-year SGS yield fell 14 bps. In total return terms, the 1-5 year SGSreturned negatively for 3Q 2012 but the long-end SGS returned more than 1% on the average.

As economic data weakened, the focus turned to the MAS monetary policy statement due inOctober, with general expectations for a loosening policy via a gentler slope of the trade-weighted exchange rate. Those expectations saw the FX implied 6-month swap offer rate(SOR) creep up to above 60 bps (up about 7 bps in 3Q 2012). Surprisingly however, thenominal SGD appreciated above 3% against USD during this period. Whilst expectations areset for a slower pace of appreciation, QE3 has seen some weakness in USD.

Short-end rates in 3Q 2012 have been pressured higher. 3-month T-bill auction yields rose ashigh as 0.35% in September after hovering between the 0.2-0.30% range for a long time. The2-year swap rate was also up by 8 bps in 3Q. In fact, the 6-month SOR yield is almost thesame as the 2-year swap rate as at the end of September.

Corporate bond issuance was very active in 3Q 2012, with more than SGD10 billion issued. Itappears that the low interest rate environment and weak macro outlook have pushed mostinvestors to look at yield products, including REITs and corporate bonds. At the same time,issuers are capitalizing on the low interest rate environment to lock in financing while they can.Singapore has been a major beneficiary of the policy-induced liquidity given its AAA ratingstatus, its position as a financial hub, and the appreciating currency stance by the MAS.

Outlook/StrategyWe do not see any change to the weak macro outlook in the near term. Despite the effortsmade by policymakers, the economic outlook for Europe remains one of contraction. The USfiscal cliff could potentially be another event risk. Locally, with industrial production for Augustshrinking 2.2% on a year-on-year basis, there is a chance that Singapore could experience atechnical recession in 3Q 2012.

So far, general risk sentiment has remained benign only due to the policy-induced liquidity andback-stop measures.

The near-term focus for the Singapore fixed income market is on the monetary policystatement. The weak macro environment and still elevated inflation expectations, as well asrobust labour market are likely to see a moderate easing which is already priced in by themarket.

21

The supply of SGS is almost complete except for the 1-year SGS auction in late October.Supply pressures will come from the corporate issuance if any. The 2013 SGS issuancecalendar should be made available soon. We continue to watch the trend in the corporatebond space where the search for yield has seen less sensitivity to pricing and credit risks.

We expect interest rates to trade in a range. On the other hand, the illiquidity going into 4Q2012 may still see some significant market reaction from time to time.

ASIA

Market ReviewAsian credit markets staged a strong rally in the third quarter of 2012, gaining 4.77% andoutperforming the previous two quarters. In 3Q 2012, JACI composite credit spreads movedtighter by 49 bps, with Investment Grade tightening 43 bps while High Yield spreads tightenedby 66 bps. In terms of total return, Investment Grade posted a return of 4.09%,underperforming High Yield which was up 6.13%.

The robust performance in the last few months was primarily driven by strong market technicalwhich were supported by: 1) a significant reduction in risk aversion following the ECB’sannouncement of their OMT programme; 2) the German constitutional court’s ruling in favourof the ESM which removed the tail risk of a Eurozone break-up in the near term; 3) marketexpectations on policy easing which were eventually confirmed by the Fed’s QE3 programmeas well as the Bank of Japan’s easing program; and 4) the ongoing search for yield byinvestors amid a low interest-rate environment in the developed world. Fund flows into hardcurrency bond funds have already recorded a cumulative inflow of US$15.9 billion on a year-to-date basis as at the end of September 2012, compared to only US$1 billion for the sameperiod of time in 2011.

Asian credit markets also witnessed a total of US$30 billion bonds being issued in 3Q 2012,taking year-to-date issuances to a record of US$87 billion, as more companies took advantageof the low yield environment to tap the bond market for cheap funding. Nonetheless, HighYield issuers have been relatively slow to return to the market, as investors remained selectivein their participation in such bond issuances given the still-weak economic fundamentals.

Outlook/StrategyLooking ahead, major risk factors in the market for the quarter include the US election andfiscal cliff negotiations in November. We also expect to see more headlines on the progress ofthe Eurozone debt crisis. While we are mindful of a possible return of market volatility, we thinkthe recent positive policy actions by the various central banks will likely continue to supportrisk markets. In addition, a low-rate and low-growth environment is also conducive for creditmarkets to outperform other risk assets, especially the Asian credit market, given that it is stilltrading at a premium to its US counterparts. We think credit spreads are likely to finish theyear tighter, and continued our neutral weight positioning in Investment Grade and High Yield.

US/EUROPE

Market ReviewThe third quarter of 2012 was marked by monetary policy action by the various developedmarket central banks – the ECB’s OMT programme, the Fed’s QE3 programme and the Bankof Japan’s expansion of its asset purchase plan. The anticipation of the liquidity boost kept riskassets well supported. Spread products did well with the CDX IG Index tightening 13 bps to

22

close the quarter at 99 bps while the T-spread for the JPMorgan US Liquidity Index came in 47bps to 172 bps, while the US 10-year treasury barely moved and ended September at 1.63%.This was despite some sharp volatility during the quarter which saw 10-year yields reaching aslow as 1.45% and as high as 1.9%.

The final quarter of 2012 has continued on a strong note with the macro backdrop remainingsupportive of spread products characterized by low but steady growth, low default rates andlow rates guidance. The markets appear happy to continue chasing new issues for some fast-disappearing premium while on the other hand, there seems to be no lack of supply ascorporates seize upon the low-yield environment to lock in cheap financing. Going forward,any drag on performance of risk assets is likely to come from Europe, in particular, any furtherdelays in Spain’s formal request for financial assistance, which is expected to take place bylate October. Although the negative developments in Europe could pose a headwind in thenear term for US spread products, they are unlikely to derail the risk-on rally altogether sincethe ECB’s OMT programme effectively provides a backstop.

Outlook/StrategyOn the economic front, concerns about global growth will continue to demand attention. Whilethe Institute of Supply Management (ISM) numbers from the US for both manufacturing andservices for September have delivered strong positive surprises, the data from Europe andsome Asian countries continue to be weak. In the fourth quarter, growing uncertainty abouthow the impending US fiscal cliff and longer-term fiscal challenges in the US will be dealt with,will also command more attention.

Against this backdrop, credit is likely to continue to be an area where investors seeking yieldwill choose to focus on while US rates are likely to remain in their current low trading range.

23

APPENDIX 1Market Valuations

2011 2012E 2013E 2012E 2013E 2011 2012E 2013E current current

Asia/PacificJapan 51.6 (29.0) 61.8 (8.3) (3.6) 8.8 20.3 12.6 0.9 2.7

Topix Index 59.6 15.8 20.9 12.6 10.9 9.0 0.9 2.6

Nikkei 225 50.6 13.2 21.9 14.4 12.7 10.4 1.1 2.3

Australia 18.8 (2.0) 1.3 (5.3) (5.1) 12.7 13.0 12.8 1.8 4.8

S&P/ASX 200 Index 27.5 11.4 8.0 13.1 11.7 10.9 1.7 4.9

China 10.3 2.3 9.1 (4.3) (6.3) 9.9 9.6 8.8 1.5 3.2

Shanghai SE Composite Index 17.8 14.7 13.6 9.7 8.4 7.4 1.6 3.1

Shenzhen SE Composite Index 39.6 28.8 19.9 17.0 13.2 11.0 2.4 -

Hong Kong 24.5 (13.0) 10.6 (0.4) (1.8) 13.7 15.9 14.4 1.3 2.7

Hang Seng Index (4.3) 8.0 10.6 11.0 10.1 9.2 1.4 3.5

India 7.9 10.4 13.7 (2.5) (2.4) 16.3 14.8 13.0 2.6 1.3

BSE Sensex 30 Index 8.3 13.6 10.1 14.9 13.1 11.9 2.7 1.7

Indonesia 18.9 7.7 13.2 (2.7) (3.0) 16.0 14.8 13.1 3.8 2.5

Jakarta Composite Index 21.5 18.1 18.8 15.6 13.2 11.1 2.9 2.2

Korea (16.1) 34.7 17.4 (3.0) (1.5) 13.4 9.9 8.4 1.2 1.2

KOSPI Index 147.2 17.3 15.6 11.0 9.4 8.1 1.2 1.3

Malaysia 7.8 11.2 10.5 (1.1) (1.2) 16.8 15.3 13.9 2.1 2.9

FTSE Bursa Malaysia KLCI 0.9 9.7 8.6 15.1 13.8 12.7 2.3 3.6

Philippines 4.6 12.1 12.6 0.0 (0.3) 19.8 17.6 15.6 2.9 2.2

PSEi - Philippine SE Idx 5.4 12.0 11.6 16.8 15.0 13.4 2.6 2.5

Singapore (5.0) 8.6 5.6 (0.0) (2.6) 15.1 13.9 13.1 1.5 3.3

Straits Times Index (13.9) 8.7 9.6 14.3 13.1 12.0 1.4 3.1

Taiwan (29.1) 10.2 20.9 (6.1) (7.6) 19.0 17.3 14.3 1.8 3.5

Taiwan Taiex Index 39.8 27.7 13.1 17.9 14.0 12.4 1.8 3.2

Thailand 13.2 14.0 19.7 (5.0) (2.4) 14.6 12.8 10.7 2.3 3.0

Stock exchange of Thai Index 29.3 20.2 12.2 14.2 11.8 10.5 2.3 3.4

Vietnam 0.3 20.6 58.5 n/a n/a 9.8 8.1 5.1 1.5 4.8

Asia Pacific (8.5) 21.4 15.2 (5.2) (4.0) 15.2 12.5 10.9 1.3 3.0

Asia ex Japan (1.8) 10.3 13.2 (3.3) (3.8) 13.5 12.3 10.9 1.6 2.5

Asia Pac ex Japan 2.5 6.6 11.0 (3.1) (4.3) 13.3 12.5 11.2 1.6 3.1

Europe 2.9 (3.4) 11.5 (2.8) (2.7) 10.8 11.2 10.0 1.4 3.9

DJ Stoxx 600 € Pr 50.6 12.9 10.9 11.9 10.5 9.5 1.5 4.0

S&P Europe 350 Index 47.7 11.8 10.5 11.5 10.3 9.3 1.5 4.0

United States 16.3 6.9 11.3 (0.6) (1.3) 15.1 14.1 12.7 2.3 2.2

S&P 500 5.3 11.6 11.3 13.9 12.5 11.2 2.2 2.1

Dow Jones Industrial Average 4.0 8.6 8.9 12.7 11.7 10.7 2.7 2.6

NASDAQ Composite Index 0.4 18.5 16.1 17.1 14.4 12.4 2.9 1.2

Source: Credit Suisse, Bloomberg, MSCI, Thomson

3-mths chg in EPS for Australia and Japan correspond to June 2012-2013 and March 2012-2013, respectively.

Source: Credit Suisse, Bloomberg, MSCI, Thomson

DY (%)

Valuation

as of date 30 Sep 2012 EPS Growth (%)3-mth chg. In

EPS est. (%)P/E (x) P/B (x)

2

APPENDIX 2

30-Sep-12 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23

Unemploy-

ment (%of

labor force)

Current

account

balance

(%GDP)

Fiscal

balance

(%GDP)

2011E 2012E 2013E 2011E 2012E 2013E 2 yr 5 yr 10 yr 10-2yr Spot

%3M

chg

%12M

chg 2012E 2012E 2012E latest

%3M

chg latest

%3M

chg

Asia/Pacific

Japan -0.8 2.1 1.3 -0.3 0.2 -0.1 0.10 0.1 0.0 0.8 0.7 US$/¥ 78.0 2.3 -1.2 4.4 1.0 -10.7 45.8 -3.8 40.6 -0.5

Australia 2.1 3.7 3.2 3.4 1.8 3.0 3.25 2.5 2.5 3.0 0.5 A$/US$ 1.0 -1.3 -6.9 5.2 -3.8 -3.0 41.9 -14.1 98.2 2.7

China 9.3 7.9 7.6 5.4 2.9 3.3 3.00 2.4 2.8 3.3 1.0 US$/CNY 6.3 1.1 1.5 4.2 2.0 -2.4 126.9 -0.3 99.4 0.1

Hong Kong** 5.0 2.2 3.8 5.3 3.8 3.2 0.50 0.3 0.3 0.7 0.5 US$/HK$ 7.8 0.0 0.4 3.5 5.0 0.8 71.2 -4.0 74.9 -5.4

India* 6.5 5.4 6.2 8.9 8.0 7.0 8.00 8.1 8.2 8.2 0.1 US$/INR 52.9 5.3 -7.4 N/A -3.0 -8.5 N/A N/A 81.2 N/A

Indonesia 6.5 5.4 6.2 5.4 4.4 4.7 5.75 5.1 5.6 6.0 0.9 US$/IDR 9,591 -1.6 -7.5 6.1 -2.3 -2.1 N/A N/A 115.7 1.1

Korea 3.6 2.6 3.3 4.0 2.4 2.8 3.00 3.3 3.4 3.6 0.3 US$/KRW 1,111.4 3.1 6.0 3.3 2.1 0.8 83.0 -14.8 99.0 -2.0

Malaysia 5.1 5.0 5.3 3.2 1.8 2.4 3.00 3.0 3.2 3.5 0.5 US$/MYR 3.1 3.9 4.2 3.0 5.0 -4.7 111.5 -4.3 114.9 0.5

Philippines 3.9 5.0 5.3 4.8 3.3 3.5 3.75 2.6 5.1 5.9 3.3 US$/PHP 41.7 1.0 4.9 7.0 2.6 -2.4 42.5 -4.5 N/A N/A

Singapore** 4.9 2.3 3.2 5.2 4.5 3.2 0.38 0.2 0.4 1.6 1.5 US$/S$ 1.2 3.1 6.5 2.2 15.1 1.0 4.0 100.0 N/A N/A

Taiwan 4.0 1.7 3.6 1.4 2.0 2.0 1.88 0.8 0.9 1.2 0.4 US$/TW$ 29.3 1.9 4.0 4.3 8.7 -1.6 N/A N/A 30.1 N/A

Thailand 0.1 4.8 4.6 3.8 2.9 3.1 3.00 3.2 3.3 3.5 0.3 US$/THB 30.8 2.4 1.2 1.2 -2.9 -4.7 50.2 -2.5 77.9 -0.9

Vietnam** 5.9 5.2 5.6 18.6 8.9 7.1 9.00 9.6 9.7 10.0 0.4 US$/VND 20,885 0.1 -0.3 4.7 0.3 -4.5 N/A N/A N/A N/A

Europe

Euro Area 1.5 -0.6 -0.9 2.7 2.5 2.2 0.75 0.1 0.6 1.6 1.5 €/US$ 1.3 -1.5 4.1 11.2 0.5 -3.3 -1.3 42.6 -25.9 30.8

UK 0.7 -0.5 0.3 4.5 2.6 2.1 0.50 0.3 0.7 1.7 1.5 £/US$ 1.6 -2.8 -3.6 8.1 -2.4 -6.4 91.9 -1.1 41.0 N/A

Switzerland 1.9 1.2 1.0 0.2 -0.8 -1.3 0.00 -0.2 0.1 0.7 0.9 CHF/US$ 0.9 0.9 -3.4 3.2 12.2 0.4 4.6 -76.6 N/A N/A

Sweden 4.0 1.7 3.6 3.0 1.1 1.5 1.25 1.0 1.2 1.6 0.6 US$/SEK 6.6 5.4 4.7 7.6 6.7 -0.3 100.0 -1.5 9.0 -7.2

Norway 2.5 3.5 3.2 1.3 0.8 1.7 1.50 1.3 1.5 2.1 0.8 US$/NOK 5.7 4.1 2.5 3.0 14.3 13.6 N/A N/A 23.4 6.8

United States 1.8 2.2 3.8 2.4 1.9 1.9 0.25 0.2 0.6 1.6 1.4 - - - - 8.2 -3.1 -7.5 53.7 3.1 70.3 12.1

Source: Bloomberg, CEIC, CIRA Estimates

* India: Wholesale price index (WPI) is used to measure inflation

** Hong Kong: Hong Kong base rate (HKBASE Index) is used as official policy rate

Singapore: 3-month SIBOR is used as offical policy rate

Vietnam: Base lending rate is used as official policy rate

Spot % chg % chg

3M 12M

15.7 -7.9 -63.4

1,772.1 10.9 9.1

92.2 6.9 12.5

Source: Bloomberg

WTI Crude oil (US$/barrel)

30-Sep-12

VIX

Gold (US$/ounce)

Economic data

Exchange rates

Business

confidence

Consumer

confidence

Real GDP

%YoY

CPI

%YoY

Government bond yield

(%)

Current

Official

policy rate

(%)

24

DISCLAIMER: Lion Global Investors Limited (“Lion Global Investors”) is a company incorporatedin Singapore and a member of the OCBC group.

This publication is for information only. It is not an offer or solicitation for the purchase or sale ofany securities/investments and does not have regard to your specific investment objectives,financial situation or particular needs. Any opinion or estimate provided in the publication is madeon a general basis and is not to be relied on by investors as advice. The information providedherein may contain projections or other forward-looking statements regarding future events orfuture financial performance of countries, markets or companies. Investors must make their ownassessment of the relevance, accuracy, adequacy and reliability of the information provided andmake such independent investigations as they may consider necessary or appropriate for thepurpose of such assessment. Lion Global Investors reserves the right to make changes andcorrections to its opinions expressed here at any time, without notice. Accordingly, no warranty isgiven and no liability is accepted for any loss arising directly or indirectly as a result of investorsacting on any information, opinion, forecast, or estimate contained herein. You may wish to seekadvice from a financial adviser before making a commitment to undertake any investment. In theevent that you choose not to seek advice from a financial adviser, you should consider carefullywhether the investment is suitable for you.

© Lion Global Investors Limited. All rights reserved. Lion Global Investors Limited is a Singaporeincorporated company, and is not related to any corporation or trading entity that is domiciled inEurope or the United States (other than entities owned by its holdings companies).

25

Market Report 4Q 2012€¦ · LION GLOBAL INVESTORS LIMITED 65 Chulia Street #18-01, OCBC Centre...

Documents

Transcript of Market Report 4Q 2012€¦ · LION GLOBAL INVESTORS LIMITED 65 Chulia Street #18-01, OCBC Centre...