EFTA01176677.pdf

J.P.Morgan Global Asset Allocation J.P. Morgan Chase Bank NA, J.P. Morgan Securities Lid. May 4, 2012 The J.P. Morgan View Signal versus noise Jan LoeysAc • Asset Allocation — Near-term momentum is negative for risk markets, but we (1-212) 834-5874 find the signal from medium-term drivers more reliable and thus stay with our jan.loeys@jornorgansom long risk assets for coming months. John Normand • Economics —Fall in Global All-Industry PMI eliminates upside risks on (44-20) 7325-5222 growth, but is consistent with 2.2% global growth projection we have for Q2. john.normand@jamorgan.com Loss of US job momentum implies Q2 may come in closer to 2%. Nikolaos Panigirtzoglou • Fixed Income— End of BoE's QE next week a headwind for gilts. (44-20) 7777-0386 nikolaos.panigirrzoglou@jamorgan.com • Equities — OW US vs. Euro area equities, DAX vs Eurostoxx50 and MSCI EM Asia vs. MSCI EM. Seamus Mac Gorain (44-20) 7777-2906 • Credit — Keep the focus on US credit. seamus.macgorain@jamorgan.com • Foreign exchange — Remain risk neutral and focused on earning carry in Matthew Lehmann cyclical currencies with low vol and non-threatening valuations (Scandinavia) (44-20) 7777-1830 while simultaneously selling upside on stretched commodity currencies. marthew.m.lehmann@jamorgan.com • Commodities — Neutral outlook favours spread trades over next 3 months. Leo Evans (44-20) 7742-2537 leonard.a.evans@jamorgan.com • Equity markets this week gave back all their gains of the previous week and have now fallen back to the low end of the range they have held over the past 10 weeks. Commodities and bonds yields continue to fall from the year highs YTD returns through May 3 seen in March. The dollar is up against most currencies 14, equities are in lighter colour. This week fall's in risk prices, and the rally in bonds and the dollar, had for StP500 I once little to do with Europe where periphery, yields are down nicely. Instead, MSCI EM we are seeing a number of economic data releases, punctuated by today's US Topa I payrolls report, that show fading momentum into the second quarter. The msci AC Wade magnitude of the negative surprises are not yet large enough to force EMBIG downgrades of growth forecasts. Our global 2012 projection does slip back to the 2.2% forecast we held all through QI, but this is largely a rounding issue US High Yield caused by last week's US Q1 cut and this week downgrade of Taiwan. EMSCorp. EM FX Market attention has focused on weaker PMIs across the world and US jobs MSCI Europe' = data. Our April Global Manufacturing PMI edged back to the January level and is thus really unchanged this year. Our Global Services PMI, in contrast, fell 3 Gold ~I points, pushing our All-Industry PMI down 2 points and back to its November US HO Grade level. By themselves, these data are consistent with our 2.2% global growth EM Local Bends— forecast for Q2. They leave us with balanced risk on global growth, even as GSCI TR MI the drop eliminates the upside risk bias we had before this month. US Fixed Income • • Similarly, the weaker US jobs data are signalling a loss of momentum into Q2 Global Gov Bends— • and make it more likely that US Q2 will come closer to 2% flat, compared with Europe Fixed Income' 1 our 2.5% projection. At the start of the year, we expected average monthly jobs US cash II growth at 200,000. The first few months came in well above this, while the 0 5 10 15 shortfall over the past 2 months brings the YTD mean exactly to 200,000. From SOttte J.P Want 8betiben Rei.me H uS0 trod nanny. "Heidei n»USO Eu» Feed Ircane e Itom Oeral The certifying analyst is indicated by an Ac. See page 7 for analyst frt. US Ha HY.USG andEMS Cap am JPM »<km EM FX t;ELM, MS certification and important legal and regulatory disclosures. www.morganmarkets.com EFTA01176677 Global Asset Allocation The J.P. Morgan View J.P.Morgan this point, there seems little to worry about, but we need to monitor activity 2012 global GDP growth forecasts: JPMorgan data over the next month to check for a more meaningfull slide in momentum. and Consensus With economic drivers of spending. such as borrowing costs, gas prices, 4.0 prices, lending standards, and profit margins, to name a few, not showing any deterioration and if anything modestly improving, we see no reason yet to get 3.5 overly negative. Consensus 3.0 - • The difficulty we all have on how to react to recent data prints relative to 2.5 - fundamentals and more medium-term trends is known as the signal versus JPM noise issue: Are recent swoons in data and prices just noise around a more 2.0 - reliable trend, or are they the first sign that this trend is reversing? The answer must be that it depends on the strength of the new information relative to the 1.5 medium-term forces. For that, we rely on our economists to sift through the Jan-11 Apr•11 Jul-11 0ct•11 Jan•12 Apr-12 data and on empirical evidence on what information over what "lookback" has Saute. JP. Phrgort Ccmensus Ecorgmes.Camenus Eccomes kaniSrE of Vol AVM. ye Will*. IM -e 00co301 un-° to most signal value. On the former, the stability of the 2012 forecasts, and the saw Sles rain USD GCP otitis WI n use lx o.r von gtbal lack of any clear deterioration of global economic drivers — Europe excepted Tooth !awed. — induce us to "underreact" to recent activity data. For markets, we have found that 6-month momentum on market returns is a lot more reliable than following the last 1.2 months. On this basis, cash should remain the weakest asset class over coming months, keeping us long risk assets. Euro micro sense, and macro non-sense. Europe remains a risk and irritant to markets. We will not review elections and weaker activity data here. Instead, we like to make the single point that much of the Euro area's problems appear self-inflicted and can be reversed, but only in Europe. In a nutshell, Europe appears to have reacted to its sovereign crisis with actions that make eminent sense at a micro level, but are disasters on a macro level. Demanding that countries should be responsible for their own debt; should not rely on other counties to repay their debt; should cut spending when their debt is too high; and should force their banks to have enough capital makes enormous sense, as that is what we demand from individuals and companies. But such rules have the perverse effect of making conditions worse when applied to all EMU member counties and banks at the same time. They destroy growth, bank lending, and the market for safe government debt all at the same time, in our view. A strategy to exit its crisis needs to focus on growth, recapitalizating the bank (Euro-TARP?), and make government debt into a desirable asset class again. Fixed income • Bonds rallied on the week. German Bunds are still on a tear, hitting all-time More details in ... yield lows again. We remain flat duration. We do expect yields to increase from Global Data Watch. Bruce Kasman and David Hensley these very low levels over the next few months, but weakish economic data and Euro area uncertainties (including this weekend's elections) make us Global Markets Outlook and Strategy. Jan Loeys. Bruce reluctant to position for this at present. Kasman. et al. US Fixed Income Markets. Terry Belton and Sdni • Instead we focus risk on exploiting a range of monetary policy crosscurrents. Ramaswanly In the UK, we expect no further easing this year, with persistent inflation Globe/ Fixed Income Markets. Pavan Wadhwa and Fabio having prompted the BoE's typically dovish Posen to withdraw his vote for Bassi more QE last month. That deterioration in the supply-demand imbalance Emerging Markets Outlook and Strategy. Joyce Chang argues for some gilt underperformance. We position for this by adding 10- year gilt swap spread narrowers, with spreads at the wide end of their recent Key trades and Ask: Emerging Market Equity Strategy. Adrian Mont et al. range. Flows and Liquidity. Nikos Panigirtzoglou et al. • We see upside risks to money market rates in both the UK and the US.In the May 4,2012 2 EFTA01176678 Global Asset Allocation J.P,Morgan The J.P. Morgan View UK, very weak growth would seem to rule out hikes in the near term, but we think the money market curve should steepen to incorporate a greater risk of a hiking cycle, say two years ahead. In the US, although the most likely course is for the FOMC to remain on hold through 2014, we think money market rates do not sufficiently reflect the significant tail risk that the unemployment rate falls much faster than expected. sparking an earlier hiking cycle. Equities • What are ow main calls in equities? OW US vs. Euro area equities: as we argued last week, the large divergence between yoy EPS growth for the S&P500 (+8% yoy) vs. DJStoxx (-7% yoy) supports ow OW in US equities. Both the absolute performance of the Q1 reporting season (yoy growth) and the relative performance vs. expectations (EPS surprise) were stronger in US relative to European equities. • OW DAX vs. Eurostorooc50: This trade has performed well in both bullish and bearish environments. Although this position works well as a hedge against Euro risk, the main motivation is German growth outperformance. This theme is still in place as healthier German balance sheets — both private and public — allow the country to escape the painful adjustments that other Euro area countries have to make. German exports are cushioned by their large exposure to EM, even if a Euro area recession materialises. The period that this trade did badly was last August when the short sale ban forced sellers to use the DAX to express a negative view on Euro area equities. • OW inMSCI EMAsia$ vs MSCI EMS:A better Chinese PMI raises confidence that the Chinese economy is in the process of bottoming out. The growth picture in EM Asia x China is also improving (see Daily Economic Briefing, David Hensley, May 2). It is encouraging that EM Asia equities outperformed in April. Admittedly, this is an exposure that may not perform immediately. There is perhaps more upside in the summer as we expect that around July/August, two to three months before leadership change in China, a large FAI spending program will be announced. Credit • Spreads were moving tighter cominginto today, with US HG breaking out of the 2bp range it has held in recent weeks, and double-digit tightening seen in higher-beta sectors. But today's disappointing US job data hit risk markets and a lot of last week's gains could be undone. On a positive note, retail fund flows looked stronger this week, with US HY seeing a solid inflow (above $1bn), having dropped off somewhat since February. Strong US HG flows continue unabated, as do EM hard currency flows. • We published our trade recommendations in GMOS this week, with a general More details in ... theme balancing towards US-based assets. As one of our preferred assets on a medium-term horizon. US HY has been outperforming US HG over the last few EM Corporate Outlook and Strategy, Warren Mar et al. months, which is likely a function of three factors. I) Defaults staying low. We US Credit Markets Outlook and Strategy. Eric Beinstein et al. keep our 1.5% forecast for 2012, relative to the 4% historical average. 2) The HG index is more exposed to Europe due to a higher weight of European H.gh Yield Credit Markets Week/y. Peter Acciavatti et al. issuers, as well as the more global nature of HG companies. 3) Financials have European Credit Outlook B Strategy. Steven Dulake et al. a much lower weight in the HY space, and they remain at the center of global Emerging Markets Cross Product Strategy Weekly. Eric concerns going forward. See today's CMOS for more details as well as a Bensten et al. discussion about recent divergences in credit-related price trends. May0,2012 3 EFTA01176679 Global Asset Allocation J.P, Morgan The J.P. Morgan View Foreign Exchange FX weekly change vs USD • The EUR/USD looks surprisingly indifferent to this weekend's French and 2.0% Greek elections. The current level of EUR/USD is consistent with basic models linking the spot rate to US-European rate differentials and sovereign spreads, 1.0% and the options market shows no extreme bid for euro puts at either the I -week tenor or the 1-month horizon. 0.0% • This pricing is consistent with a view that pre-election campaign rhetoric may be quite pitched but post-election policymaking will not be so contentious. In -1.0% - France, there is little substantive difference in fiscal policy under Hollande versus Sarkozy, since both endorse a balanced budget — Hollande by 2017, -2.0% — Sarkozy by 2016. And while Hollande says he rejects the fiscal compact, in fact, he has simply argued for a growth pact to accompany it. Germany. Italy -3.0% — and Spain also endorse a growth pact, provided it is geared towards structural USD JPY EUR GBP CHF CAD AUD reform and public investment (financed through the European Investment TWI Save,. J P Yawn Bank) rather than through deficit spending to fund public sector pay rises or pensions (the old, discredited European model). The more material risk to the Europe under Hollande could come if this new President fails to implement structural reform to raise trend growth, since weak growth undermines France's creditworthiness. • Greek elections are more of a wildcard since both mainstream parties— New Democracy and Pasok — poll so low that more extreme elements may enter the new governing coalition. An even more fragmented, feckless government would raise tensions with the troika and runs the risk that Europe suspends the Greek financing program out of frustration with missed fiscal targets. Talk of expelling Greece from EMU would then resurface, even though this avenue is not legally permissible. Commodities • Conunoditiessaw broad-based declines, with oil (down around 6%) leading the way. The weakish tone to activity data, especially in Europe, has weighed on commodities as much as other risky assets. More broadly, oil has been challenged by the combination of strong supply (including from rapid progress in rebuilding Libyan and Iraqi output), and weaker demand due to refinery maintenance. Our expectation of stronger oil demand as the year goes on underlies our outlook for higher prices in H2. • The spread between Brent and WTI crude oil has narrowed significantly over the past month. The Brent-WTI spread can be thought of as a proxy for the cost of moving surplus oil from Cushing, where WTI is priced, to the Gulf Coast. The reversal of the Seaway pipeline later this month will allow oil to flow south out of Cushing, and should narrow the spread from its current level of $15/bbl towards $6/bbl over time, reflecting the lower cost of transporting More details in ... oil via the pipeline rather than by rail or barge. See last Monday's Oil Market Weekly, Eagles et al.. FX Markets Weekly. John Normand of at • Our overall commodity outlook remains neutral, and so favours spread trades Commodity Markets Outlook & Strategy. Cohn in the near term. Today's Commodity Market Outlook and Strategy (Colin Fenton et al. Fenton) examines how commodity spreading strategies have performed since Oil Markets Monthly. Lawrence Eagles et al. 1970, depending on the month, inflation environment and weather. For May. Metals Review and Outlook, Michael Jansen this analysis suggests owning natural gas, crude oil and corn, against sales in gasoline, wheat, and cattle. Global Metals Quarterty. Michael Jansen May4,2012 4 EFTA01176680 Global Asset Allocation The J.P. Morgan View J.P,Morgan Interest rates Current Jun.12 Sep-12 Dec-12 Mar-13 YTD Return* United States Fed funds rate 0.125 0.125 0.125 0.125 0.125 10-year yields 1.88 2.40 2.50 2.50 2.50 02% Euro area Refi rate 1.00 1.00 1.00 1.00 1.00 10-year yields 1.58 1.50 2.00 2_00 2.00 1.6% United Kingdom Repo rate 0.50 0.50 0.50 0.50 0.50 10-year yields 2.00 2.55 2.55 2.40 2.40 1.1% Japan Overnight call rate 0.05 0.05 0.05 0.05 0.05 10-year yields 0.88 1.15 1.05 1.05 1.15 0.9% GBI-EM hedged in S Yield . Global Diversfied 6.25 6.30 3.0% Credit Markets Current Index YTD Return' US high grade (bp over UST) 197 JP/Aorgan JULI Portia Spread to Treasury 3.7% Euro high grade (bp over Euro gov) 262 iBenor Euro Corporate Index 4.3% USD high yield (bp vs. UST) 622 JP/Amgen Global High Yield Index STW 7.0% Euro high yield (hp over Euro gov) 852 ifilcou Euro HY Index 12.2% EMBIG (bp vs. UST) 344 EMBI Global 7.5% EM Corporates gx) vs. UST) 386 JPM EM Corporates (CEMBI) 7.4% Quarterly Averages Commodities Current 1202 1203 1204 1301 GSCI Index YTD Return* Brent (VDU) 113 112 120 125 125 Energy 7.8% Gold (Slot) 1644 1825 1900 1925 1850 Precious Metals 5.8% Copper (S/metric ton) 8285 8500 8875 9000 8750 Industrial Metals 6.7% Corn {Silk) 6.20 6.70 6.50 6.60 Agriculture 0.0% 3m cash YID Return' Foreign Exchange Current Jun-12 Sep-12 Dec-12 Mar-13 Index in USD EURIUSD 1.31 1.34 1.36 1.36 1.36 EUR 2.0% USDHPY 79.9 78 80 78 80 JPY 42% GBP/USD 1.62 1.61 1.62 1.62 1.62 GBP 4.9% USD/BRL 1.92 1.90 1.90 1.90 1.90 BRL 0.7% USD/CNY 6.31 6.20 6.20 6.10 6.10 CNY 01% USCHKRW 1132 1120 1100 1090 1090 Km 3.0% USD/TRY 1.76 1.80 1.77 1.75 1.70 TRY 10.4% YTD Return US Europe Japan EM Equities Current (local ccy) Sector Allocation Y11) YID YTD YTD (S) SEP 1372 9.8% Energy 1.1% -2.1% 2.9% 8.8% Nasdaq 2964 13.5% Matenats 8.9% 9.9% 7.4% 7.2% Toplx 793 10.0% Industrials 9.6% 9.3% 8.1% 14.7% FTSE 100 5655 2.9% Discrebonary 17.9% 182% 151% 14.2% MSCI Eurozone 134 3.8% Staples 6.5% 7.1% 12.0% 12.9% hISCI Europe' 1062 5.3% Healthcare 8.6% 4.7% 4.9% 13.8% MSCI EM 5' 1024 12.6% Financials 184% 5.5% 19.2% 12.6% Brazil Bovespa 60831 7.2% Inbrmaton Tech. 18.4% 6.6% 9.0% 22.2% Hang Seng 21086 14.6% Teleccinmunications 8.1% -7.1% -2.5% 11.0% Shanghai SE 2452 10.9% Names -0.3% -2.0% 0.3% 8.7% *Levelsfretums as of May 03, 2012 Overall 9.8% 5.3% 10.0% 12.6% Local currency except MSCI EM S S0VONB100Mterg. UMW. tIES. Slalc1314 8 Pan SOW* .1 P WWI OkrANS May 4, 2012 5 EFTA01176681  Global Asset Allocation The J.P. Morgan View J. P Morgan Global Economic Outlook Summary Real GDP Real GDP Consumer prices %Crier a yea ay) S orec recess mad. saar S Crier a year ago 2011 2012 2013 4Q11 1Q12 2012 3012 4012 1Q13 2Q13 4011 2012 4012 2Q13 The Americas United States 1.7 2.4 22 3.0 2.2 2.5 3.0 2.0 1.5 2.3 3.3 2.1 1.8 1.6 Canada 2.5 2.3 2.5 1.8 2.1 2.6 2.3 2.4 2.7 2.4 2.7 1.7 1.7 2.0 Latn America 4.3 3.8 4.0 2.4 12 4.6 4 4.4 t 4.1 4.4 3.8 1.2 6.4 6.2 4 6.9 Argentina 8.9 4.5 4.0 32 0.0 5.5 6.5 5.0 3.0 4.0 9.6 10.0 10.0 11.0 Brazil 2.9 3.1 4.5 1.3 2.6 4.5 4 5.7t 5.7 4.5 4.5 6.7 0.01 0.01 5.3 Chile 6.0 5.0 4.5 82 5.1 4.9 4.6 4.7 4.5 4.4 4.0 4.2 3.9 3.4 Colombia 5.9 5.0 5.0 5.4 4.5 4.9 4.1 3.0 5.7 6.0 3.9 3.6 3.3 3.0 Ecuadcr 7.8 4.0 4.0 4.1 2.0 3.5 4.0 4.0 4.0 4.0 5.5 5.3 4.7 41 Mexico 3.9 3.8 35 11 1.1 3.9 2.0 3.2 4.9 2.8 3.5 4.2 4.0 3.8 Peru 6.9 5.5 7.0 2.8 12 5.8 6.2 7.3 8.0 8.0 4.5 3.9 3.1 3.0 Venezuela 4.2 4.0 1.0 3.5 6.0 6.0 4.0 -3.0 0.0 0.0 28.5 23.9 23.4 31.7 AsimPacific Japan -0.7 2.0 13 -01 2.8 2.0 1A 1.2 1.0 12 -0.3 0.1 0.1 -0.1 Australia 2.0 3.0 3.3 1.7 3.1 1.9 3.7 4.1 4.5 2.0 3.1 2.5 3.3 3.0 New Zealand 1A 2.9 21 1.4 5.1 2.1 3.7 3.0 0.9 3.4 1.8 1.2 2.5 2.1 Asia ex Japan 7.0 6.44 7.1 4.6 _801 6.7 7.2 t 7.3 7.0 7.0 4.9 3.9 4.34 4.81 China 9.2 8.2 9.1 8.8 6.8 LB 9.5 10.0 9.1 81 4.6 3.3 3.6 4.6 Haig Kong 5.0 2.8 42 1.2 4 LO 4.0 5.5 6.0 3.0 3.5 5.7 4.4 4 3.5 4 3.4 t India 7.0 7.1 7.3 3.8 t31) 5.5 6.3 6.5 6.7 7.5 8.4 7.8 8.2 8.5 Indonesia 6.5 5.3 5.5 9.9 5.0 5.0 4.5 5.0 5.5 5.5 4.1 3.9 7.4 7.3 Korea 3.6 3.3 4.0 1.3 3.7 4.0 4.5 4.0 4.0 4.0 4.0 2.6 4 2.9 4 3.5 4 Malaysia 5.1 3.9 32 4.8 5.0 2.0 2.0 2.5 4.0 4.5 3.2 2.6 2.2 1.8 Philippines 3.7 4.3 4.8 3.5 4.3 4.9 5.7 4.9 4.5 4.5 4.7 3.9 4.0 4.0 Singapore 4.9 3.7 4.0 -2.5 0,0 6.6 3.2 2.0 4.5 4.5 5.5 4.6 3.4 2.8 Taiwan 4.0 2.44 5.0t ],04 4.8 6.5 t 5.8t 4.5 4.6 1.4 1.3 1.7 12 Thailand 0.1 5.1 3.5 -36.4 45.0 20.0 2.0 0.5 5.0 6.5 4.0 3.7 3.5 3.2 Africa/Middle East Israel 4.8 2.9 4.4 32 10 3.2 6.1 7.4 4.5 2.8 2.5 2.3 2.5 2.1 South Africa 3.1 2.7 3.6 32 2.3 2.6 2.8 3.2 3.8 3.5 6.1 6.0 6.2 5.9 Europe Euro area 1.5 -0.4 0.4 -12 -0.5 -0.8 -0.5 0.3 0.5 0.5 2.9 2.4 2.2 1.7 Germany 3.1 0.6 1.4 -0.7 03 1.0 0.8 1.3 1.5 1.5 2.6 2.3 2.1 1.7 France 1.7 0.3 0.7 0.6 0.0 0.0 0.3 0.5 0.8 1.0 2.6 2.6 2.3 1.9 Italy 0.5 -t9 -0.7 -2.6 .25 -2.5 -1.5 -1.0 -0.5 3.7 3.6 4.0 3.6 Norway 2.7 1.4 1.8 25 0.0 0.0 1.0 1.0 2.0 25 0.9 0.9 1.4 11 Sweden 4.0 -0.3 1/ -4.4 &,0 -0.5 0.5 1.0 2.0 2.3 2.3 1.1 1.1 1.5 United Kingdom 0.7 0.1 1.9 -12 -0.8 -1.0 2.5 1.5 2.0 2.0 4.6 3.0 3.0 2.7 Emerging Europe 4.8 2.8 3.4 4 4.6 1.2 1.4 3.0 3.1 3.3 4 3.1 4 6.4 5.0 5.5 6.1 Bulgaria 1.7 1.5 2.5 Czech Republic 1.7 -0.2 0.9 1 -0.5 AB -1.0 1.0 4 2.2 4 1.1 1 -I.7 4 2.4 2.7 2.9 2.5 Hungary 1.7 0.5 13 12 A1.0 0.3 1.0 1.5 1.5 2.0 4.1 5.8 5.9 3.8 Poland 4.3 3.2 3.0 4.5 a 2.0 2.5 3.0 3.0 3.0 4.6 3.9 3.5 2.8 Romania 2.5 0.8 2.7 -0.8 -1.2 -1.5 0.8 2.4 2.5 3.0 3.4 3.3 4.4 4.0 Russia 4.3 3.7 3.7 6.4 1.5 2.0 4.0 3.5 4.0 4.0 6.8 3.9 6.1 6.8 Turkey 8.5 2.5 43 9.2 9.0 6.8 8.8 Global 2.6 2.2 1 2.6 1.5 2.4 2.2 2.7 t 2.5 2.4 1 2.6 3.6 2.7 2.7 2.7 Devebped markets 1.3 1.2 13 0.6 t2 1.0 1.5 1.3 1.3 15 2.8 2.0 1.8 1.6 Emerging markets 5.8 5.0 5.6 4.0 U 4 5.2 4 5.7 5.8 5.7 5.5 5.7 4/ 4 5.0 4 5.6 Scutt: LP kbrign May 4,2012 6 EFTA01176682 Global Asset Allocation The J.P. 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 individually certifies, with respect to each security or issuer that the research analyst covers in this research) that: (1) all of the views expressed in this report accurately reflect his or her personal views about any and all of the subject securities or issuers; and (2) no part of any of the research analyst's compensation was, is, or will be directly or indirectly related to the specific recommendations or views expressed by the research analyst(s) in this report. Other Disclosures J.P. Morgan ("JPM") is the global brand name for J.P. Morgan Securities LLC ("JPMS- ) and its affiliates worldwide. J.P. 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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 JPNISL'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 arc 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 clienti'. 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 761G of the Corpora- tions Act 2001. Germany: This material is distributed in Germany by J.P. Morgan Securities Ltd.. Frankfurt Branch and J.P.Morgan Chase Bank. N.A.. Frankfurt Branch which are regulated by the Bundesanstalt fiir Finanzdienstleistungsaufsicht. Hong Kong: The 1% EFTA01176683 Global Asset Allocation The J.P. 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.) J.P. Morgan Braking (Hong Kong) Limited is the liquidity provider/market maker for derivative warrants, callable bull bear contracts and stock options listed on the Stock Exchange of Hong Kong Limited. An updated list can be found on HKEx website: http://www.hkex.com.hk. Japan: There is a risk that a loss may occur due to a change in the price of the shares in the case of share trading. and that a loss may occur due to the exchange rate in the case of foreign share trading. In the case of share trading. JPMorgan Securities Japan Co.. Ltd.. will be receiving a brokerage fee and consumption tax (shouhizei) calculated by multiplying the executed price by the commission rate which was individually agreed between JPMorgan Securities Japan Co.. Ltd.. and the customer in advance. Financial Instruments Firms: JPMorgan Securities Japan Co.. Ltd.. Kanto Local Finance Bureau (kinsho) No. 82 Participating Association / Japan Securities Dealers Association. The Financial Futures Association of Japan. Type II Financial Instruments Finns Association and Japan Securities Investment Advisers Association. Korea: This report may have been edited or contributed to from time to time by affiliates of J.P. Morgan Securities (Far East) Ltd. Seoul Branch. Singapore: JPMSS and/or its affiliates may have a holding in any of the securities discussed in this report: for securities where the holding is 1% or greater. the specific holding is disclosed in the Important Disclosures section above. 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 request. Information has been obtained from sources believed to be reliable but JPMorgan Chase & Co. or its affiliates and/or subsidiaries (collectively J.P. Morgan) do not warrant its completeness or accuracy except with respect to any disclosures relative to JPMS and/or its affiliates and the analyst's involvement with the issuer that is the subject of the research. All pricing is as of the close of market for the securities discussed, unless otherwise stated. Opinions and estimates constitute our judgment as of the date of this material and are subject to change without notice. Past performance is not indicative of future results. This material is not intended as an offer or solicitation for the purchase or sale of any financial instrument. The opinions and recommendations herein do not take into account individual client circumstances. objectives. or needs and are not intended as recommendations of particular securities. financial instruments or strategies to particular