EFTA01169776.pdf

J.P. Morgan Global Asset Allocation J.R.Morgan Chase Bank NA. J.P. Morgan Securities Ltd. Oct 7, 2011 he J.P. Morgan View It is all up to fiscal policy. Monetary is done. Jan LoeysAC • Economics —Growth forecasts reduced for UK, EM Asia, and Latin America, bringing 2012 EM growth down by 0.2%. US data are tracking a soft growth picture, but one that is not falling into recession at the moment. John Normand • Portfolio strategy — Monetary policy has provided great help to the world economy but is now nearly done. Fiscal and regulatory policy makers have done more damage than good, by creating huge uncertainty. We do not see Nikolaos Panigirtzoglou imminent changes here and thus remain defensive on risk assets. • Fixed Income — EM bonds are at risk of further foreign outflows. • Equities — The market rebound over the past week was largely driven by Seamus Mac Gorain short covering, induced by rumours and speculation. We stay with a defensive stance, undenveighting Cyclical sectors. • Credit — Keep a preference for EM sovereign vs. EM corporate credit and Matthew Lehmann US vs. Euro credit as flight to quality prevails. • Foreign exchange — Take profits on the last USD short (vs NOK), but keep sovereign hedges in USD/WY, EUR/IPY and GBP/JPY. • Commodities — Copper prices below $7,000/mt are likely to encourage restocking in China. YTD returns through Oct 6 %. equities are in lighter coour. • With the exception of credit, most riskier asset classes — equities, commodi- ties, and EM FX — are on net up this week, and bond yields rose amidst still Gold US Fixed Income I • sky-high volatility. US economic data came out better than expected across the board, punctuated by an upward surprise on US Payrolls today, while inves- tors keep speculating about imminent action on a TARP-like recapitalization of US High Grade Gabel Gov Bonds" • Europe's banks. We would love to be proven too pessimistic, but feel instead merely realistic about the uncertainties that investors face. We retain a defensive stance, EM Local Bonds" Emen Europe Fixed Income' O underweighting riskier asset classes versus cash and safe government debt. US cash Of the quartet that we monitor to signal a need to change our defensiveness US High Yield — positions, data, value, and policy — the first two are at least partially in place for a rebound. It is our sense that tactical investors are now indeed EM S Corp. ■ underweight riskier asset classes, though not by as much as during the 2007- EM FX ■ 08 crisis. US data are now beating expectations, with modest upside risk on Q3 S&p500 O GDP, even as the rest of the world is still showing quite a mixed picture. China GSCI TR is stabilizing with its PMI above 50, but the rest of EM Asia is much weaker, as MSCI AC WNW O industrial and trade data there have clearly disappointed. MSCI Europe' O • Value is harder to assess as markets are priced as a probability-weighted Topix average of two binary risks — developed economy recession, and Euro MSCI EM = breakdown. Risk markets are dirt cheap if neither of these risks materialises, .20 .10 0 10 20 but remain expensive if one or more of these become reality. We project a Son: .LP. Ihnzet 01>mberg. Pain n USD. 'Leal recession in Europe but not in the US, at the moment, even as the US economy tiorency. rip USD. Ewe rand Immo is Wu Cuerzil is hostage to the amount of fiscal tightening next year. We consider a euro lodes. US HG. NY. DABIG rd EM S Cop ate Sirs EU ais ELM. Ent breakdown very unlikely, but do believe that conditions in the Euro area will, and need, to become much worse before EMU member countries are forced to www.morganmarkets.com The certifying analyst is indicated by an *c. See page 7 for analyst certification and important legal and regulatory disclosures. EFTA01169776 Global Asset Allocation The J.P. Morgan View J.P.Morgan take the difficult decisions required to keep the union together. 2012 JPMorgan global GDP growth forecast vs. Global equities • It is on the fourth corner of our quartet — policy actions — that we have seen 3.9 2012 JPM global GDP growth forecast 399 the least progress and where the biggest risks remain. We are very happy with monetary policy makers as they have given it their all to provide stimulus to developed economies without sacrificing their reputation, so far. Central banks 3.4 335 have gone way beyond their traditional tool kit, massively expanding their balance sheets, but have combined this with clean communication of intent 2.9 310 such that inflation expectations have remained stable. By now, though, it is not clear what they can do more without endangering their reputation and 2.4 285 credibility, or that they have much more impact. 1.9 260 • The Bank of England's MPC promised extra QE buying of gilts this week, while Jan•ll Merit May11 Jul.11 Sent' the ECB indicated it would again buy covered bonds issued by banks and Sawcc JP. L'afan Csasuus Eurasia Commas Emearics would create two 1-year repos to provide bank with longer-term funding than tefecals re Is reams and waft= Pal ace avenged usn the their normal repos. All this is great, but does not do much to solve the main same Simi ming USD GOP %airs that., Lae bf COI can Vaal growth beast uncertainty gripping economic agents, which is on fiscal policy. • Much of the fall in global equities this year took place in a 5-day crash in early 2011 global GDP growth forecasts: JPMorgan and August, around the time of the chaos around the US debt ceiling, its down- Consensus grade from AAA, and the collapse in consumer and company confidence. This timing coincidence provides good evidence that uncertainty around fiscal and 4.0 regulatory policies, in both the US and the Euro area, is the root cause of weaker economies and asset markets. This uncertainty, if not chaos, was not 3.6 preordained, but is a self-inflicted wound. 32 • Our US political observers report here that there is little movement towards compromise in Washington to combine near-term fiscal stimulus with longer- 2.8 term fiscal control. In Europe, we need sufficient non-ECB funding for illiquid sovereigns, a restructuring of insolvent sovereigns (i.e. Greece), and a ringfencing of the banks through large scale recapitalization. We think some 2.4 €200bn in new bank capital will be needed (see Kian Abouhossein, European Janie May-10 Sep 10 Jw1.1I May11 Sep.11 Banks, Euro TARP macro sensitivity analysis, Oct I). There remain strong Same JP. i 14/ (9lrk Gammas Scummier. Gammas Ec.crarks differences of opinion among European policy makers on this and we thus do fefecasIs ae la reams and caaraws Pal ve award usng the we Siam wing USD GDP miiblsdmi ace tee bf COI can Vaal not expect much progress soon. As has been too regular a pattern, European groat!, breast policy makers are more likely to stay one step behind what the markets need. Fixed income • Yields backed up to the top of their one-month range, on some better activity data and hopes of a European bank recap. The ECB's new steps to support More details in ... bank funding were trumped by a surprisingly aggressive £75bn of QE from the Global Data Watch. Bruce Kasman and David Hensley BoE. Our forecast of another £75-£ I25bn of purchases beyond this announce- ment would leave the BoE owning over a third of the UK gilt market. Global Markets Outlook and Strategy. Jan Loeys. Bruce Kasman. el al. • Yet monetary policy takes second place right now to the keenly awaited US Fixed Income Markets. Terry Belton and Srini decisions of EU politicians, first on bank capital and then on Greek funding. Ramaswamy The increased likelihood of bank recaps has helped Spanish and Italian Global Fixed Income Markets, Pavan Wadhwa and Fabio bonds to rally in the past two weeks, even as ECB buying has slowed. More Bassi concrete proposals on this score at the EU summit the week after next would Emerging Markets Outlook and Strategy. Joyce Chang bolster peripheral bonds some more. But further ahead, we remain defensive on the periphery, as the Euro area remains a house divided, making it difficult for Key trades and risk: Emerging Market Equity Strategy. Adrian Mower et al. policy makers to get decisively ahead of markets' exalted expectations. Rows and Liquidity. Nikos Paniginzoglou el al. Oct 7, 2011 2 EFTA01169777 Global Asset Allocation J.P,Morgan The J.P. Morgan View • EM local bonds have stabilised in the past two weeks, in spite of heavy Global PMI against Cyclicals vs Non cyclicals outflows from EM bond funds. Nonetheless, the risk of a self-reinforcing spell of falling prices and foreign outflows remains, with markets with the greatest 65 150 foreign participation — e.g. Hungary, Indonesia — the most vulnerable. We thus turn underweight duration in EM local markets. See this week's Emerg- ing Markets Outlook and Strategy (Joyce Chang) for details. Equities • The market rebound over the past week was largely driven by short covering, induced by rumours and speculation. We still see a high risk of disappointment in terms of policy makers' actions over the coming weeks. As a result, we retain a defensive stance. • The prospective rebound in global manufacturing has yet to materialize. Our 98 01 04 07 10 Global PMI downshifted fora seventh straight month inSeptember (released Scum. JP. Mccgan on Oct I ). Our Cyclical vs. Defensive trading rule, which goes short Cyclicals when the monthly change in the global PMI is negative and vice versa, points to an underweight in Cyclical sectors. • The high beta of EM equities makes us believe that it is too early to over- weight EM versus DM equities, despite better fundamentals in EM economies. Similarly, we find it less attractive to overweight Small caps. Within EM, we continue to underweight BRICs and focus our exposure on ASEAN countries. Investors remain sceptical about BRICs and are concerned about overheating and corporate governance. We recommend a long in MSCI South East Asia$ vs MSCI China$. Other country trades include: longDAX vs. Eurostoxx5O, and long MSCI Japan$ vs.MSCI WorldS. • For value investors, who are not constrained by near-term marking to market, we recommend buying dividend futures — 2012 Euroston50 dividends. The prospect of a recession in the Euro area does not meaningfully change the attractiveness of 2012 dividends, since they are paid out of 2011 earnings which are nearly 3/4 accrued. See Peng Cheng, European Equity Derivatives Strategy, Sep 28. Credit • Major credit indices moved wider into Tuesday and then tightened into week end. Expectations about EU bank recapitalizations as well as the ECB's an- nouncement on resuming covered bonds purchases helped push European spreads lower in particular. • Still, we witnessed two similar credit rallies in September which were followed by subsequent, larger corrections. Whilst true of US, European, and EM credit markets, the speed of the sell-off of late has been particularly surprising in EM where, with the exception of the EM sovereigns, all EM debt classes as now posting YTD losses. We remain defensive and stay overweight EM sovereigns vs. EM corporates as a preferred way to trade up in quality. More details in ... • US payrolls surprised to the upside today and should provide some relief for EM Corporate Outlook and Strategy. Warren Mar al al. risk assets as concerns about the US economy abate for now. We see Europe US Credit Markets Outlook and Strategy. Eric 8einstain el al. edging closer towards recession and so maintain overweights in US vs. Euro High Yield Crock Markets Weekly. Paler Acciavalli el al. credit (see this week's GMOS). European Credit Outlook 8 Strategy. Steven Dulake al al. Od7,2011 3 EFTA01169778 Global Asset Allocation J.P.Morgan The J.P. Morgan View Foreign Exchange FX weekly change vs USD 4% - • After breaking a five-month range in September, the dollar peaked this week, falling 1.5% in trade-weighted terms and declining versus all currencies but 2% - CHF, GBP, INR and COP. Rebounds in commodity currencies and the emerging markets have been particularly sharp, and the euro has benefited per usual 0% during a dollar sell-off, confirming that a sovereign crisis hasn't altered the typical behavior of currency markets. EM central bank intervention and .2% - recycling into euros will probably resume before year end. at% - • Macro developments haven't been particularly conclusive in that Europe has .6% - only hinted at comprehensive bank recapitalization by the Nov 3 G-20 summit; holdout voter Slovakia has inched closer towards approving the EFSF; and US .8% - data have stabilized at sub-trend levels. Still, in a market where investors are USD EUR GBP ,WY CHF CAD AUD longer of dollars than they have been entering any previous recession or IWI global easing cycle , the dollar's vulnerability to collapse on even marginally Seam:JR. t9in positive events should be clear. • There are still too many event risks in the US and Europe over the next several months to suggest that the dollar downtrend will be forceful, which is why the baseline forecasts only show a I% decline in Q4. But for the next few weeks, earnings seasons could reinforce this week's cap. EPS expectations are tame given Q3 GDP growth; equity hedge funds hold little exposure to stocks; and valuation extremes like the current one in stocks tend to align with the dollar's inflection points. Take profits on the last USD short (vs NOK); sell options where recession premix are too high (USD/CAD); but keep sovereign hedges in USD/JPY, EUR/JPY and GBP/JPY. Commodities • Commodities are up around 3% on the week. Better than expected economic data in the US and rumours of bank recapitalizations in Europe saw some position squaring and a relief rally across risky assets. Copper was the top performing commodity with prices rallying 6% since the low at the beginning of the week. We believe that prices between $6,500/mt and $6,800/mt are likely to encourage restocking in China and so support prices. Brent also regained its early losses and is now up 3% since last week. We maintain the view that OPEC will act to keep a floor on global oil prices of around $100 bbl should demand begin to fade. • Corn prices are down 22% since the recent peak at the end of August. This is due both to the increase in fears of a DM recession and the large increase in estimated US corn inventories reported by the USDA last week. Just as one can derive a fair price through fundamental supply and demand factors, it is also possible to reverse engineer this process to arrive at an implied inven- tory number from current prices. More details In ... • Our commodity strategist, Colin Fenton, has done just this and makes the FX Markets Weekly. John Normand el al. point that the current level of prices implies an inventory number double that Commodity Markets Outlook & Strategy. Cohn what is currently estimated by the USDA. This seems somewhat unlikely, and Fenton et al. for investors who have a strong view that we will not see a DM recession, 04 Markets Monthly. Lawrence Eagles et al. this is a good entry point. We remain neutral for now given our view that the odds of going into recession are about even. Metals Review and Outlook. Michael Jansen Global Metals Ouarteny. Michael Jansen Oct 7,2011 4 EFTA01169779 Global Asset Allocation The J.P. Morgan View J.P.Morgan Interest rates Current Dec•11 Mar-12 Jun•12 Sep•12 YTD Return' United States Fed funds rate 0.125 0.125 0.125 0.125 0.125 10-year yields 2.04 2.25 2.60 2.80 2.80 8.7% Euro area Refi rate 1.50 1.00 1.00 1.00 1.00 10-year yields 2.00 1.55 1.60 1.80 2.00 7.2% United Kingdom Repo rate 0.50 0.50 0.50 0.50 0.50 10-year yields 2.47 2.10 2.10 2.10 2.10 12.0% Japan Overnight cal rate 0.10 0.05 0.05 0.05 0.05 10-year yields 0.99 0.85 1.00 1.10 1.10 2.0% GBI-EM hedged in $ Yield Global Diversified 6.62 6.90 3.5% Credit Markets Current Index YTD Return' US high grade (bp over UST) 257 JPMorgan JULI Podolio Spread to Treasury 5.2% Euro high grade (bp over Euro gov) 322 Bon Euro Corporate Index 2.8% USD high yield (bp vs. UST) 837 JPMorgan Global High Yield Index STW 0.8% Euro high yield (bp over Euro gov) 993 Bon Euro HY Index -8.1% EMBIG (bp vs. UST) 450 EMBI Gobal 3.4% EM Corporates (bp vs. UST) 527 JPM EM Corporates (CEM80 -2.4% Ouarterty Averages Commodities Current 1104 1201 1202 1203 GSCI Index YTD Return' Brent ($bbl) 105.7 115.0 120.0 120.0 125.0 Energy 4.5% Gold (3:02) 1633 2150 1925 1875 1850 Precious Metals 15.8% Capper (Srmetric ton) 7208 7250 8250 8500 9250 Industrial Metals -21.5% Corn (Shut 6.02 6.90 7.10 7.40 7.00 Agriculture -15.7% 3m cash YID Return' Foreign Exchange Current Dec•11 Mar•12 Jun•12 Sep-12 Index In USD EURUSD 1.34 1.38 1.38 1.40 1.42 EUR 1.1% USD3PY 76.8 75 74 73 72 JPY 6.0% GBP/USD 1.56 1.59 1.58 1.58 1.60 GBP -0.9% USDBRL 1J8 1.80 1.80 1.80 1.80 BRL -1.8% USD/CNY 6.36 6.30 6.20 6.10 6.00 CNV 1.8% USDICRW 1178 1070 1050 1020 1010 KRW -3.1% USD/TRY 1.85 1.65 1.72 1.65 1.65 TRY -12.8% YTD Return US Europe Japan EM Equities Current (local ecy) Sector Allocation • YTD YTD YTD YTD ($) SEP 1156 4.6% Energy -72% •95% 40.1% -24.7% Nasdaq 2483 -5.8% Materials -15.6% -25.1% 20.2% 18.7% Topix 742 •15.6% Industrials -11.4% -17.9% -33.1% FTSE 100 5303 -7.5% screbonary -1.7% -16.4% 21.4% -14.3% MSCI aroma' 128 •16.9% Staples 3.9% -1.0% 5.6% .7.7% MSCI Europe' 983 -13.1% Healthcare 3.0% 2.8% •25% -20.3% MSCI EM 864 •23.1% Financials -22.2% 12.6% -25.1% -27.9% Brazil Bovespa 51299 -26.0% Inbrmabon Tech. -2.1% -11.3% 17.1% -21.6% Hang Sorg 17707 •20.9% Teleocrnmunications 4.5% •3.8% •7A% Shanghai SE 2359 -16.0% Utilities 9.5% 4.7% 45.7% -21.2% levelsiretums as of Oct 04 2011 Overall 4.6% .13.1% 45.6% -23.1% Local currency except MSCI EM $ Sarre: Bkorrber; Dalasteara SES, Stsniard a Pout SeniCe J.P Deegan Serafts Oct 7, 2011 5 EFTA01169780  Global Asset Allocation The J.P. Morgan View IP Morgan Global Economic Outlook Summary The global economic outlook in summary Real GDP Real GDP Consumer prices % wee a fear ago vier p000.is penoa sae A: ow a year ago 2010 2011 2012 1011 2011 3011 4011 1012 2012 3012 4010 2011 4011 2Q12 The Americas Untied States 3.0 1.6 13 0.4 1.3 IL 1.0 0.5 1.5 2.5 1.2 3.3 3.2 1.4 Canada 3.2 2.2 22 3.6 -0.4 1.6 2.4 2.6 2.6 2.4 2.3 3.4 2.6 1.6 Latin America 6.0 421 321 5.6 4.1 3.1 4 2.5 1 1.61 4.4 1 4.7 1 6.7 6.7 7.2 6.9 1 Argentina 9.2 7.5 T 3.0 1 13.1 102 LP 1 2.0 1 0.0 1 6.0 4.D 11.0 9.7 11.0 10.0 Brazil 7.5 331 3.41 5.0 3.1 1.9 1 2.71 331 42 T 42 T 5.6 6.6 6.7 8.3 Chile 5.2 6.5 491 6.4 5.7 3.25 2.5 3.51 4.5 5.0 1 2.5 3.3 3.61 3.6 Colombia 4.3 5.3 3.7 2.9 8.5 35 1.5 3.0 4.0 5.0 2.7 3.0 3.5 3.1 Ecuador 3.6 6.0 3.0 7.3 3.0 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 1 4.17 4.8 1 4.2 3.3 3.3 1 3S 1 Peru 8.8 6.3 4L 6.9 4.5 2.5 3.0 4.5 1 5.0 1 62 1 2.1 3.1 3.6 3.0 Venezuela -1.5 3.5 3.0 14.7 -32 -15 3.0 3.0 5.0 6.5 27.3 24.6 29.0 33.6 AsiaiPacific Japan 4.0 -0.6 1.9 -3.7 -2.1 55 2.0 1.8 1.5 1.3 -0.3 -0.4 -0.1 1 -0.7 Australia 2.7 1.4 3.5 -3.4 4.8 21 2.2 4.1 3.4 4.8 2.7 3.6 3.8 32 New Zealand 1.7 2.0 3.8 3.5 0.4 2.8 4.1 3.9 3.9 5.6 4.0 5.3 3.2 2.4 Asia ex Japan 9.1 7.1 1 63 1 8.9 5,3 5.9 6.3 1 6.8 1 721 7.31 4.9 5.7 4.9 4S Chita 10.3 8.9 8S 8.9 7.0 /5 8.5 8.7 8.9 9.0 4.7 5.7 4.6 43 Bang Kong 7.0 5.2 4.0 13.0 -2.0 1.5 3.5 5.5 5.6 4.5 2.7 5.2 5.1 4.3 hda 8.5 7.6 8.5 8.3 L6 7.5 7.1 8.6 9.0 9.5 9.2 9.1 8.7 7.8 thdonesia 6.1 6.3 1 52 1 6.8 5.4 6_21 5.5 1 5.01 4.51 5.0 1 6.3 5.9 4.5 5.6 Korea 6.2 3.9 4.0 5.4 3.6 3.8 4.2 4.0 4.0 4.0 3.6 4.2 3.7 3.1 Malaysia 7.2 4.0 1 1.5 1 5.5 32 1.0 1.0 1 1.5 1 1.51 1S 1 2.0 3.3 2.8 2.4 Philippines 7.6 4.1 1 4.0 1 7.8 2.4 4.1 2.4 1 2.41 7.4 T 5.3 3.5 5.0 4.6 3.3 Singapore 14.5 4.6 1 1.5 1 272 -6.5 0.0 1 2.0 1 8.2 1 6.1 1 4.0 4.7 5.6 4.0 Taiwan 10.9 5.0 3.0 1 14.6 0.9 L1 Q 1 2.0 1 3S 1 3.8 1 4.6 1 1.1 1.6 2.2 2.0 Thailand 7.8 3.01 151 8.1 -0.8 _181 1.51 131 1.51 1.31 2.9 4.1 3.7 3.6 Africalliddle East Israel 4.8 4.3 2.9 4.7 3S 2.4 1.2 0.8 32 6.1 2.5 4.1 2.8 2S South Mica 2.8 3.1 23 4.5 1.3 1.0 3.9 2.3 2.6 2.8 3.5 4.6 6.2T 6.4 1 Europe Euro area 1.7 1.6 -0.5 3.1 0.6 0.5 -0.5 -1.0 -1.5 0.0 2.0 2.8 2.8 1.7 Germany 3.6 2.8 02 5.5 0.5 L5 -0.5 0.0 -0.5 0.5 1.6 2.5 2.5 13 France 1.4 1.6 -0.1 3.7 0.0 a 0.0 -0.5 -1.0 0.5 1.9 2.2 2.4 1.4 hay 1.2 0.5 -12 0.5 12 ±Q -1S -1.5 -2.5 -0.5 2.0 2.9 3.5 2S Norway 2.1 2.2 03 1.9 4.1 11 0.5 0.0 0.0 1.0 2.2 1.4 1.3 12 Sweden 5.4 4.1 0.4 3.1 3.6 29 0.0 -0.5 -0.5 0.5 1.9 2.9 2.6 1.3 Brined Kingdom 1.81 091 0.31 1.6 1 0.4 1 1.5 1.0 0.5 -1.0 25 3.4 4.4 4.9 2.8 Emerging Europe 4.5 3.8 2.5 3.6 12 2.0 1.3 3.1 3.0 3.8 6.6 7.1 6.0 52 Bulgaria 0.2 2.8 2.4 Czech Republic 2.3 2.0 1.0 3.5 0.3 0.5 -0.3 0.3 1.3 2.5 2.1 1.8 1.8 2L HAW/ 1.2 1A OS 12 -02 DI 0.0 0.0 1.0 15 4.4 4.0 3.8 42 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 2S Romania -1.3 1.2 0.8 7.9 8.2 4.0 3.5 Russia 4.0 3.4 3.0 3.7 0.4 2.0 1.0 4.0 3.5 4.5 8.2 9.6 7.4 6S Turkey 9.0 6.3 2.7 7.4 5.9 6.7 6.0 Global 3.9 2.5 2.0 2.6 1.5 2.41 1.71 131 1.8 2.7 23 3.7 3.61 2.4 Developed maikets 2.6 1.3 0.8 0.9 0,2 1.7 0.7 0.3 0.4 1.5 IS 2.7 2.7 1.4 Emerging markets 7.3 5.7 4.9 1 7.1 LI 4.4 1 4.4 1 4.8 1 5.71 6.0 5.6 6.2 5.7 52 1 Sa.rct RI:rgan Oct 7.2011 6 EFTA01169781 Global Asset Allocation The J.P. 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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 76IG of the Corpora- tions Act 2001. Germany: This material is distributed in Germany by J.P. Morgan Securities Ltd.. Frankfun Branch and J.P.Morgan Chase Bank. N.A.. 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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 Japan Securities Investment Advisers Association. Korea: This report may have been edited or contributed to from time to lime by affiliates of J.P. Morgan Securities (Far East) Ltd. Seoul Branch. 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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 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 c