EFTA01123906.pdf

J.P. Morgan Global Asset Allocation Chase Bank NA,M Morgan Securities Ltd. Oct 14.2011 The Morgan View Turning positive Jan LoeysAc • Economics— Hard activity data are coming in more solid than depressed (1.212) 834-587. surveys and confidence suggest. We raise US Q3 to 2.5% and lower our US recession probability to 113. John Normand • Portfolio strategy — Better data, the start of growth upgrades and signals of (44.20) 7325-5222 coming actions to salvage the euro make us switch to a tactical long position in risk assets. Nikolaos Panigirtzoglou • Fixed Income —A more determined tone of EA policymakers and some (44.20) 7777-0386 encouraging activity data make us turn neutral on duration in DM. • Equities —The turn in economic and market momentum is inducing us to Seamus Mac Gorain close bearish positions. We close our UW in Cyclical sectors. We open an (44-20) 7777-2906 OW in Euro area vs. US equities and an overweight in US banks. • Credit — Economic and policy momentum lead us to take a more positive Matthew Lehmann view into YE. We turn neutral on US HG and close our OW EMBIG vs. CEMBI. (44.20) 7777.1830 • Foreign exchange — Sell FX vol to position for reduced financial stress. • Commodities— Brent crude prices should remain around current levels through to the end of the year, supported by cuts in OPEC production. YTD returns through Oct 13 • Risk markets rallied this week, even as EMU spreads widened, and safer %. equities are in lighter colour. government bonds sold off on a softening of some of the acute macro risks Gold tO that have been battering markets this year. None of this is enough to convert one into a raging bull, but there is enough to expect risk markets to break out US Axed Income O of their recent depressed ranges over coming weeks. We thus reverse some of US High Grade O our defensive exposures into a modest, net long risk position. EMBIG EM Local Bonds" C World markets continue to focus on an unchanged trio of macro risks — US recession, euro meltdown, and a Chinese housing bust. Stacked against these Global Gov Bonds" O three are massive risk premia on equities and credit over cash and safer EMS Cap. I government bonds that make undenveighting riskier assets very expensive. US High Yield Over the two years through QI of this year, the high risk premium dominated, Europe Fixed Income' but over the past four months, each three of these threats escalated and US cash forced the world into a more defensive position. Most investors we talk to remain bearish, if not scarred about the risks facing us, in particular given how EM FX ■ little central bankers can do about and how little fiscal policy makers seem to S&P500 be willing to do. GSCI TR MSCI AC Woad' We have been mouthing the same concerns here in recent months, but an objective look at recent developments does suggest a softening of risk on MSCI Europe' both the US economy andEMU blowup. None of these puts us into the clear MSCI = but they move us in the right direction and should induce continued short Topix' covering of risk positions. We thus reverse the tactical UW we have in global .20 40 0 10 20 equities, energy, base metals and EM FX versus cash and bonds that we Some: IN Morgan. Obtain% Paine n USD. tx:ii have in our CMOS portfolio. tamer. - Hedged So USD. Ewe road bate is tau Owall bin. US HG. HY. EMIG ad nl SC*, we JPIA its SI aisELIA.04. • We find that hard activity data are coming in more solid than suggested by more bearish confidence and survey data. Global IP actually rose at a 0.5% The certifying analyst is indicated by an AC. See page 7 for analyst certification and important legal and regulatory disclosures. EFTA01123906 Global Asset Allocation The Morgan View J.P.Morgan pace in August, a month when global equities took a dive. Global retail sales, 2012 JPMorgan global GDP growth forecast vs. auto sales and capital spending all rose in Q3. The surveys are supposed to be Global equities forward looking, and weak data may thus be just around the corner, as we are 32 2012 JPJA global GDP growth forecast 360 seeing in the Asian tech sector. However, the data are facts and surveys are just that. 3.4 • Our US Economic Activity Surprise Index has been in positive territory for several weeks now and has just induced our economists to raise their Q3 2.9 310 estimate to 2.5% — above the consensus of 1.9%. As a result, the 2-quarter growth pace rises to almost 2%, above the stall speed of 1% that the Fed itself 2.4 is using as a signal of recession risk. We lower our risk of a US recession to 1/3, from 40%. But the risk remains as the real threat to the US economy comes 1.9 260 from the ending of fiscal stimulus measures at year end, and there is still little Jan.11 Mar-11 May-11 Jul-11 Sep-11 hint of impending compromise in Washington. We keep Q4 at a below- Scum*: Ksegsn Censensus Ecceocria Consensus Eccearim consensus pace of I% as inventories seem too high. feet-ails xis man and =Mug Pal .e avenged usng the same Slew ming USD GOPnips .e use to Cu, can OW groolh bread,. • A growing recognition among policy makers around the world that an EMU breakdown would be a super Lehman shock is accelerating efforts to contain the crisis. Investors have been looking for actions to isolate the Greek crisis, 2011 global GDP growth forecasts: JPMorgan and ring fence the banks through higher capital levels, and more broadly fund Consensus sovereigns through the EFSF and IME There is now so much smoke and rumours around these that it is becoming more likely that words will be turned 4.0 into actions. One should not expect that these will produce a TARP-like shock- and-awe that will ovenvhelm a sceptical financial community. At the same time, 3.6 expectations for what Europe can deliver are now so low that commitments and actions coming out of G20 and the EU Summit in coming weeks will likely 32 force investors to upgrade the chance that Europe will salvage the euro. These actions, however, will not include less fiscal austerity and are thus unlikely to 2.8 prevent recession in the Euro area. • In EM, we are seeing a slow movement from monetary tightening to easing, 2.4 and thus reduced downside risks on growth. Overall, we expect EM growth to Jan•10 May-10 Sep-10 Jan.11 May.11 Sepl I move in tandem with DM, with a beta close to I (see Lupton, Hensley, and Space Work Cossensus Ecceocrico Consensus Eccencrics °genes, Nowhere to hide: EM decelerating alongside US and Euro Area, fencasIs ae let realms and aunties Pal .e avenged usog the same Sint ming USD GDP %yips dint., use to Cu! eon cfolaal Oct II). Event risk on EM is largely focused on real estate leverage in China. groat!, ben's:. We recognise this, but believe that low interest rates, improved regulation and a strong fiscal position will prevent a Chinese banking crisis over the next 2-3 years (see Thu, Ng, and Jiang, Chinese banks: rising risk, but still manage- able, Oct 14). More details in ... Fixed income Global Data Watch, Bruce Kasman and David Hensley • Bonds fell again this week, with yields reachinglate August levels. US recession risks are receding, and hopes are rising of decisive policy action on Global Markets Outlook and Strategy. Jan Loeys. Bruce the EMU crisis. In keeping with the position reversals across markets, our Kasman. et al. client surveys point to bond managers switching from slightly net long to US Fixed Income Markets. Teny Belton and Srini short in both the US and Euro area. Ramaswamy Global Fixed Income Markets, Pavan Wadliwa and Fabio • The emerging consensus among EU leaders appears to involve a greater Greek Bassi writedown, aggressive bank recapitalisation. and leveraging the EFSF by Emerging Markets Outlook and Strategy. Joyce Chang turning it into a bond insurer. That policy prescription comes with significant implementation risks, especially around investordemand for EFSF-insured Key trades and risk: Emerging Market Equity Strategy. Adrian Muscat et al. bonds (see this week's GF1MS for an extensive discussion). But we recognise the more determined tone ofEuro area policymakers,and the more encourag- Rows and Liguicro. Nikos Pariginzoglou et al. Oct 14,2011 2 EFTA01123907 Global Asset Allocation J.P.Morgan The Morgan View ing activity data, and turn neutral on duration in DM (closing longs in the UK US EAST Index and Germany). Balance of positive minus negative US economic surprises. • Intra-EMU spreads bucked the trend of risky asset outperforinance, widening 40 - across the board. With many potholes on the horizon, including Spanish 30 supply next week, we remain cautious on this front. Most striking this week 20 was the sharp rise in the France-Germany spread to a post-EMU high, on 10 concerns about French banks. We estimate that French banks would need 0 some €50bn of additional capital in the event of significant sovereign haircuts -10 and a 9% Core Tier I capital target (see Steve Dulake, The Counter Sovereign •20 Buffer, Oct 13). That is not a small number, but at around 2.5% of GDP would not decisively change French debt dynamics. 30= -40 Equities Jan09 Jul39 Jan.10 Jul'10 Jan.11 Jul.' I • Equities rebounded further this week and are now up by almost 10% from Se Megan their lows at the beginning of October. Optimism regarding the Oct 24 EU leaders' summit continues to boost investor sentiment. This, coupled with better than expected economic data, is inducing investors to cover their undenveight positions. • The turn in economic and market momentum is also inducing us to close bearish positions. We close our underweight in Cyclical sectors as recent economic surprises make it likely that the global PMI will post an increase, the first in eight months, with the next release on November 1st. We also open an OW in Euro area (MSCI EMU) vs US equities (S&P500) as investor underweights are more extreme in the Euro area. • The reportingseason is adding to positive momentum. Our equity strategists are looking for a positive surprise in the Q3 reporting season. Tom Lee raised his Q3 S&P 500 EPS forecast to $24.75 (from $24.45) which is $0.30 above the bottom-up consensus. Overall, S&P 500 revenues are forecast to be up 10% Y/ Y and EPS up 12% Y/Y. The incremental driver for this improvement in EPS is actually from Financials, as their EPS is forecast to rise 44% Q/Q vs. Q2 driven by lower credit costs and higher refinancings and loan growth. As a result, we open an overweight in US banks (long BKX vs SPX Index ). • We are more positive about the Q3 reporting season in Europe. Mislay Matejka argues that the hurdle for European companies is lower due to excessive pessimism. Europe faced a higher hurdle rate in the Q2 reporting season vs the US, of the order of 8%, but that is not the case now. The Q3 EPS growth forecast in Europe is now 6% below that of the US. Currency should be less of a drag this time around as well, with the Euro 7% weaker in Q3, in contrast to 2% appreciation in Q2. All this is consistent with an OW in Euro area vs US equities mentioned above. Credit • Credit markets extended the rally that began mid-last week as policy momen- More details in ... tum picked up and hard economic data has been more favourable. The exten- sion of the EFSF is now ratified and investors are gaining confidence in EM Corporate Outlook and Strategy, Warren Mar et al. European policy makers' willingness to stem an EU Lehman-type event. Our US Credit Markets Outlook and Strategy. Eric Beinstein el al. US strategists have turned Neutral from Underweight, revised their YE US HG High Yield Credt Markets Weekly. Paler Acciavalli el al. target to 225bp from 250bp and their CDX.HY target to 125bp. They believe that valuations are attractive, that HG investors want to add risk, and that European Credit Outlook & Strategy, Steven Dulake el al. 0a14,2011 3 EFTA01123908 Global Asset Allocation J.P.Morgan The Morgan View credit fundamentals will remain strong even as earnings weaken (see today's FX weekly change vs USD CMOS, Eric Beinstein et al.). In fact,US High Grade bond funds saw $2.4bn of 6% inflows last week, more than 2.5 times higher than the average weekly inflow this year. 4% - • Similarly in the EU, our strategists are realigning their portfolio towards a more positive view going into year end. They believe that a bank 2% - recapitalisation plan is likely to be the main market-moving event on the horizon and recommend illnuoc Senior Financials vs. iTraxx Main (see Tina Zhang., The state ofPlay, Oct. 13) to position for it. In emerging markets, 0% external corporate debt significantly outperformed external sovereign debt, tightening 50bp relative to 33bp. For tactical reasons, we close the OW EMBIG .2% vs. CEMBI in our GMOS portfolio. Whilst down on the week, it has returned a USD EUR GBP JPV CHF CAD AUD profit since inception. TWI Saute:. Iktgan Foreign Exchange • The dollar is dropping in October as quickly and broadly as it rose in Septem- ber. This relapse isn't surprising in view of the record USD longs with which investors entered the month, the potential for a policy breakthrough in Europe, and a decent start to the Q3 US earnings season. Event risks in the US and Europe remain substantial, which is why the base case has been a modest decline in the dollar indices in Q4 to roughly 76 on DXY and 77 on Morgan's trade-weighted index .113MQUSD, equivalent to EUR/USD 1.38, AUD/USD 1.05 and USD/WY 75. • We continue to position for diminishing financial stress this month by selling vol in pairs where too much recession risk has been priced. Last week, we sold USD/SGD cash and a 1.09 USD/CAD call. We add to this by selling a 9.29 EUR/SEK call and a 0.7550 NZD/USD put. We are still long a basket of 3- month yen options to hedge the numerous event risks which may follow the G-20 summit on Nov 3-4. Commodities • Commodities rallied strongly this week, up around 5% driven largely by energy and agriculture. As we pointed out last week, the sell-off in corn was overdone given how tight global supply and inventories are. This week, corn prices are up over 6% and are now trading inline with our expectation of an average price of $6.40/bu over Q4. The key upside risk to this is Chinese demand. Press reports indicate the Chinese government would like to release a significant amount of corn in November as part of their efforts to help dampen food price inflation. We believe that a considerable portion of Chinese corn demand will come via the US which will add further pressure to the US corn market, offsetting the slightly higher inventories we now expect. More details in ... • Last week, our oil strategists reviewed their outlook and price forecasts and kept their year end 2011 and 2012 forecasts unchanged at SI 15/bbl and $1201 FX Markets Weekly. John Newland et af. bbl respectively for Brent. They also initiated forecasts for 2013, putting Commodity Markets Outlook 8. Strategy. Cohn Brent prices at $130/bbl by the end of 2013 (see Oil Market Monthly, Eagles Fenton et al. et al. 7 Oct). Inventories are being drawn down and the backwardation in the 04 Markets Monthly. Lawrence Eagles et al. Brent curve (downward sloping) remains close to historic highs. OPEC has already cut production over the summer and we would expect them to Metals Review and Outlook Michael Jansen continue should prices fall past S100/bbl. We also do not view the return of Global Metals Ouarterry, Michael Jansen Libyan supply as bearish as it will likely result in an adjustment to other OPEC countries' production levels and as such would not push prices lower. Oct 14, 2011 4 EFTA01123909 Global Asset Allocation Thee Morgan View J.P.Morgan Interest rates Current Dec-11 Mar-12 Jun-12 Sep-12 YTD Return' United Slates Fed hinds rate 0.125 0.125 0.125 0.125 0.125 10-year yields 2.22 2.25 2.60 284 2.80 7.9% Euro area Refi rate 1.50 1.00 1.00 1.00 1.00 10-year yields 2.20 1.55 1.60 I.8rJ 2.00 6.4% United Kingdom Repo rale 0.50 0.50 0.50 0.50 0.50 10-year yields 2.61 2.10 2.10 2.10 2.10 10.9% Japan Overnight call rate 0.10 0.05 0.05 0.05 0.05 10-year yields 1.02 0.85 1.00 1.10 1.10 1b% GBI-EM hedged in $ Yield Gabel Diversified 6.43 6.90 4.5% Credit Markets Current Index YTD Return' US high grade (bp over UST) 239 JP/Amgen JULI Podolio Spread to Treasury 5.5% Euro high grade (bp over Euro gov) 297 iElmor Euro Commie helex 2.3% USD high yeld (bp vs. UST) 785 JPIAorgan Global High Yield Index STW 1.4% Euro high yield (bp over Euro gov) 910 iElou Euro HY Index .5.5% EMBIG (bp vs. UST) 406 EMBI Global 5.2% EM Corporates (bp vs. UST) 457 JPM EM Corporates (CEMBI) 1.1% Quarterly Averages Commodities Current 1104 1201 1202 1203 GSCI Index YTD Return' Brent (SW) 114.7 115.0 120.0 120.0 125.0 Energy -1.6% Gold (Win) 1682 2150 1925 1875 1850 Precious Metals 16.9% Copper ($/mebic ton) 7293 7250 8250 8500 9250 Industrial Metals -21.1% Com ISiBul 6.40 6.40 6.70 7.00 6.80 Agncullure -12.2% 3m cash YTD Return' Foreign Exchange Current Dec-11 Mar.12 Jun-12 Sep-12 Index in USD EURRJSD 1.39 1.38 1.38 1.40 1.42 EUR 3.45: USCUPY 77.3 75 74 73 72 JPY 5.64: GBP/USD 1.58 1.59 1.58 1.58 1.60 GBP 1.4% USOGRL 1.73 1.80 1.80 1.80 1.80 BRL -0.2% USD/CNY 6.38 6.30 6.20 6.10 6.00 CNY 1.7% USOKRW 1156 1070 1050 1020 1010 KRW -0.1% USD/TRY 1.84 1.65 1.65 1.65 1.65 TRY -12.4% YTD Return US Europe Japan EM Equities Current (local my) Sector Allocation YTD YTD no YTD ($) SEP 1216 -1.7% Energy -3.7% 47% .5.7% .19.1% Nasdaq 2646 0.3% Materials -12.8% -22.4% -15.3% -22.6% Topix 749 Industrials -7.9% -17.8% -25.8% FTSE 100 5466 -4.6% Discretionary 2.8% -11.1% -19.7% .5.8% MSCI Eurozone' 132 .13.8% Staples 6.6% 0.0% 4.3% -33% MSCI Europe' 1009 -10.8% Healthcare 5.3% 3.5% .3.5% -16.6% MSCI EM 930 -171% Fmancials -21.1% -20.9% -22.0% -20.7% Brazil Bovespa 54767 .21.0% Information Tech. 2.9% .7.8% 23.7% -16.4% Hang Seng 18502 •15.4% Teleammunicallons 1.0% -0.9% 0.9% -5.4% Shanghai SE 2431 -9.9% Ulildies 10.9% .7.6% 46.9% -16.5% levelstrelums as ol Oct 13, 2011 Overall -1.7% -103% -14.8% -17.1% Local currency except MSCI EM $ Saute: Bkorrberg Cala*earn SES, Suniard a Paces Sem:et.. hbi4n et:, rate: Oct 14, 2011 5 EFTA01123910  Global Asset Allocation The. Morgan View J. P Morgan Global Economic Outlook Summary Real GDP Real GDP Consumer prices er over a year ago 0: over preitous pared. saar ir over a year ago 2010 2011 2012 1011 2011 3011 4011 1012 2012 3012 4010 2011 4011 2012 The Americas United Slates 3.0 1.7 T 1.5 1 0.4 13 T 1.0 0.5 1.5 2.5 1.2 3.3 3.2 1.4 Canada 3.2 2.2 2.2 3.6 -0.4 1.8 2.4 2.6 2.6 2.4 2.3 3.4 2.6 1.6 Latin America 6.0 4.2 3.2 5.6 4.1 3.1 2.5 1.6 4.4 4.7 6.7 6.7 7.2 6.9 Araeniina 9.2 7.5 3.0 13.1 102 4.0 2.0 0.0 6.0 4.0 11.0 9.7 11.0 10.0 Brazil 75 33 34 5.0 31 5 2.7 33 42 42 5.6 6.6 6.7 53 Chile 5.2 6.5 4.0 6.4 5.7 3.5 2.5 3.5 4.5 5.0 2.5 3.3 3.6 3.6 Colombia 4.3 5.3 3.7 2.9 8.5 3.5 1.5 3.0 4.0 5.0 2.7 3.0 3.91 3.0 Ecuador 3.6 6.0 3.0 7.3 3.Q 2.0 1.0 2.0 3.5 4.0 3.4 4.1 3.9 3.6 Mexico 5.4 4.0 2.5 2.4 4.5 5.7 2.6 -1.7 4.1 4.8 42 3.3 3.21 3.5 Peru 8.8 6.3 4.5 6.9 4.5 2.5 3.0 4.5 5.0 6.2 2.1 3.1 4.0T 3.61 Venezuela -1.5 3.5 3.0 14.7 -32 -1.5 3.0 3.0 5.0 6.5 27.3 24.6 29.0 33.6 AsiatPa dig Japan 4.0 -0.6 1.9 -3.7 -2.1 15 2.0 1.8 1.5 1.3 -0.3 -0.4 -0.1 -0.7 Australia 2.7 1.4 3.5 -3.4 4.8 2.1 2.2 4.1 3.4 4.8 2.7 3.6 3.8 3.2 New Zealand 1.7 2.0 3.8 3.5 04 28 4.1 3.9 3.9 5.6 4.0 5.3 3.2 2.4 Asia ex Japan 9.1 7.2 T 6.1 8.9 53 5.9 6.3 6.8 7.2 7.3 4.9 5.7 4.9 4.5 China 10.3 8.9 8.5 8.9 7.0 a 8.5 8.7 8.9 9.0 4.7 5.7 4.6 4.3 Hong Kong 1.0 5.2 4.0 13.0 -2.0 a 3.5 5.5 5.6 4.5 2.7 5.2 5.1 4.3 India 8.5 7.6 8.5 8.3 7.6 7.5 7.1 8.6 9.0 9.5 92 9.1 8.7 7.8 Indonesa 6.1 6.3 5.2 6.8 5.4 6.2 5.5 5.0 4.5 5.0 6.3 5.9 4.5 5.6 Korea 6.2 3.9 4.0 5.4 3.6 3.6 4.2 4.0 4.0 4.0 3.6 4.2 3.7 3.1 Malaysia 7.2 4.0 1.5 5.5 32 1.0 1.0 1.5 1.5 1.5 2.0 3.3 2.8 2.4 PhiPpines 7.6 4.1 4.0 7.8 2.4 4.1 2.4 2.4 7.4 5.3 3.5 5.0 4.6 3.3 Singapore 14.5 4.9 T 1.5 27.2 -6.5 1.6 1 2.0 6.1 1 6.1 4.0 4.7 5.6 4.0 Taiwan 10.9 5.0 3.0 14.6 0.9 ID 2.0 3.5 3.8 4.6 1.1 1.6 2.2 2.0 Thailand 1.8 3.0 1.5 8.1 -0.8 1.8 1.5 1.5 1.5 1.3 2.9 4.1 3.7 3.6 Africalliddle East Israel 4.8 4.3 2.9 4.81' 331 24 1.2 0.8 3.2 6.1 2.5 4.1 2.8 2.3 South Africa 2.8 3.1 2.5 4.5 1.3 1.0 3.9 2.3 2.6 2.8 3.5 4.6 6.2 6.4 Europe Euro area 1.7 1.6 -0.5 3.1 0.6 Q.5 -0.5 -1.0 -1.5 0.0 2.0 2.8 2.8 1.6 Germany 3.6 2.8 0.2 5.5 03 1,5 -0.5 0.0 -0.5 0.5 1.6 2.5 2.6 T 1.6 France 1.4 1.6 -0.1 3.7 0.0 1.0 0.0 -0.5 -1.0 0.5 1.9 2.2 2.31 1.3 Italy 1.2 0.5 -1.2 0.5 12 -1.0 -1.5 -1.5 -2.5 -0.5 2.0 2.9 3.7 2.6 1 Norway 2.1 2.2 0.7 1.9 4.1 j5 0.5 0.0 0.0 1.0 22 1.4 1.3 1.2 Sweden 54 4.1 0.4 3.1 3.6 a 0.0 -0.5 -0.5 0.5 1.9 2.9 2.6 1.3 United Kingdom 1.8 0.9 0.7 1.6 0.4 1.5 1.0 0.5 -1.0 2.5 3.4 4.4 4.9 2.8 Emerging Europe 4.5 3.8 2.5 3.6 12 20 1.3 3.1 3.0 3.8 6.6 1.1 6.2 T 53 1 Bulgaria 0.2 2.8 2.4 Czech Republic 2.3 2.0 1.0 3.5 0.3 a -0.3 0.3 1.3 2.5 2.1 1.8 1.8 2.5 Hungary 1.2 1.4 0.5 1.2 -02 0.3 0.0 0.0 1.0 1.5 4.4 4.0 3.8 4.2 Poland 3.8 3.8 2.7 4.5 4.5 2.5 2.0 2.0 2.5 3.0 2.9 4.6 3.9 2.5 Romania -1.3 1.2 0.8 7.9 8.2 4.0 3.5 Russia 4.0 3.4 3.0 3.1 0.4 2.0 1.0 4.0 3.5 4.5 8.2 9.6 7.4 6.5 Turkey 9.0 6.3 2.7 7.4 5.9 7.61 7.2 1 Global 3.9 2.61 2.0 2.6 1.6 2.7T 1.7 1.5 1.8 2.1 2.7 3.7 3.6 2.4 Developed markets 2.6 13 0.9 1 0.9 0.7 2.1T 0.7 03 0.4 1.5 1.5 2.7 2.7 131 Emerging markets 1.3 5.7 4.9 7.1 43 4.4 4.5T 4.8 5.7 6.0 5.6 6.2 5.7 5.3 1 Sa.rct RI:rgan Oc114. 2011 6 EFTA01123911 Global Asset Allocation Thee Morgan View J.P.Morgan 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 indi- vidually certifies, with respect to each security or issuer that the research analyst covers in this research) that: (I) 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. 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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 JPMSL. Investment research issued by JPMSL has been prepared in accordance with JPMSL'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 be engaged 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. JPMSAL does not issue or distribute this material to "retail clients". 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 terms "wholesale client" and "retail client" have the meanings given to them in section 7610 of the Corpora- tions Act 2001. Germany: This material is distributed in Germany bye Morgan Securities Ltd.. Frankfurt Branch and Chase Bank. M... Frankfurt Branch which are regulated by the Bundcsanstalt fir Finanzdienstleistungsaufsicht. Hong Kong: The 1% EFTA01123912 Global Asset Allocation The e Morgan View J.P.Morgan 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.). 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 he found on HKEx website: . 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 Finns Association and loam Securities Investment Advisers Association. Korea: This report may have been edited or contributed from time to lime by affiliates of e. 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. India: For private circulation only. not for sale. Pakistan: For private circulation only. not for sale. New Zealand: This material is issued and distributed by JPMSAL in New Zealand only to persons whose principal business is the investment of money or who. in the course of and for the purposes of their business. habitually invest money. JPMSAL does not issue or distribute this material to members of "the public- as determined in accordance with section 3 of the Securities Act 1978. The recipient of this material must not distribute it to any third party or outside New Zealand without the prior written consent of JPMSAL. Canada: The information contained herein is not, and under no circumstances is to be construed as. a prospectus. an advertisement. a public offering, an offer to sell securities described herein, or solicitation of an offer to buy securities described herein, in Canada or any province or territory thereof. Any offer or sale of the securities described herein in Canada will be made only under an exemption from the requirements to file a prospectus with the relevant Canadian securities regulators and only by a dealer properly registered under applicable securities laws or. alternatively. pursuant to an exemption from the dealer registration requirement in the relevant province or territory of Canada in which such offer or sale is made. The information contained herein is under no circumstances to be construed as investment advice in any province or territory of Canada and is not tailored to the needs of the recipient. To the extent that the information contained herein references securities of an issuer incorpo- rated, formed or created under the laws of Canada or a province or territory of Canada. any trades in such securities must be conducted through a dealer registered in Canada. 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. General: Additional information is available upon