EFTA01790367.pdf

From: Barrett, Paul S Sent: Friday, March 15, 2013 2:13 PM To: Jeffrey Epstein Cc: Ens, Amanda Subject: Interesting angle on KRW and KRW autos Jeffrey Base= on our view that the KRW will weaken given what is going on in Japan, we =hould consider a total return swap to get long the Auto and Transport sect=r (see what happened to Japanese auto names recently on the back of J PY we=kness) =OD • • * EVENT: Today's dovish Bank of Kor=a meeting, Korean Won breaking 200d MA =OA =OA Exhibit 1: Korean Won (red) vs. Korea'= Transport Eqmt Sector (white) &n=sp; *•* Korean Won ne=t currency to weaken: Buy Korean Autos / Transport Equipmt (FIFW KOSPTREQ =ndex GP <GO>). The sector is very liquid and trades USD 300m per d=y. &n=sp; &n=sp; ••• The second stage of the Yen devaluation could forc= other Asian countries to weaken their own currencies too. In 1994, regi=nal central banks just 'watched' when China devalued their own curren=y - only to see their export competitiveness being challenged (FIFW =NY Curncy GP M <GO>). This inactivity will likely not happen again=2E =nbsp; &nb=p; =nbsp; &nb=p; =o:p> <= class="MsoPlainText">••• Today, the KRW {FIFW KRW Curncy GP <GO>}=broke the 1100 level and USD / KRW trades above its 200-day=/b> moving average - for the first time since July 2012. In our view, ma=y market participants have not paid attention to this - yet - but =loser analysis of today's dovish BoK meeting might change this.=nbsp; EFTA_R1_00118264 EFTA01790367 =OD *** Interestingly, inflation pressure has c=early eased. CPI (FIFW KOCPIYOY Index GPC W <GO>} halv=d over the last 12 months to just 1.4%. Compare this to the overnight =all rate of 2.75%. {FIFW KOCPIYOY Index KOCRD Index GR <GO&=t;}. Based on Bank of Korea's dovish policy meeting an April rate cut (A=ril 11) is quite possible, in my view - especially as it would in=rease the competitive vs. Yen weakness. Ex=ibit 2: CPI in Korea (red) is far below Korea's overnight call rate =white) — rate cut possible &nb=p; =nbsp; &nb=p; =nbsp; &nb=p; =nbsp; &nb=p; =nbsp; &nb=p; =OD ••• (FIFW KOSPTREQ Ind=x WGT <GO>) for sector weights. &nb=p; &n=sp; &n=sp; Regards,</=> Paul Barrett I Managing Director I Global Inv=stment Opportunities Group I J.P. Morgan Private Bank I <=:p> 320 Park Avenue, 14=sup>th Floor, New York, NY 10022 I =/div> =OD Thi= email is confidential and subject to important disclaimers and conditions=including on offers for the purchase or sale of securities, accuracy and c=mpleteness of information, viruses, confidentiality, legal privilege, and =egal entity disclaimers, available at http://www.jpmorgan.com/pages/di=closures/email. 2 EFTA_R1_00118265 EFTA01790368