STRATEGY RESEARCH | Global Strategy

March 18, 2015

The Strategist Asset-class anomalies & unconvincing policy moves Negative on equities. As we enter 2Q15, we continue to expect greater volatility. We are now in an odd environment where implied volatility in forex, oil and bond markets has gone up, but implied equity volatility has not. In the context of a FED that is in tightening mode, we would be negative equities.

Strategist Sadiq Currimbhoy (65) 6231 5836 [email protected] Willie Chan (852) 2268 0631 [email protected]

Long H-shrs, short A-shrs. In the region, we see more easing and weaker exchange rates. This includes China. One of our concerns is Chinese policy makers are falling further behind the curve. There is arguably too much spare capacity hence “targeted easing” is unlikely to be successful. With A-share premiums to H-shares rising again to nearly 30%, we would sell A-shares and buy H-shares. Begin buying China consumer staples relative to Discretionary. Valuations have also moved and consumer discretionary is starting to look less interesting than consumer staples. Talking to our analysts, they would BUY Hengan and Want Want China, and SELL GAC Group and BAIC Motor. USD risk, again. The USD strength could create further stresses. Our cover chart shows China and India’s Real Effective Exchange Rates. In China’s case, the fall in competitiveness is likely to mean muted exports (see Figure 11 on page 7). Not out of the woods yet. This latter issue is potentially key; looking at non-oil imports in USD terms as a proxy for domestic demand, the US is the only place where there is positive growth. Both Europe and Japan are seeing negative import growth in USD terms. For a more positive outlook, we think we need to see stronger, more sustainable growth out of Europe and Japan so that growth differentials with the US narrow. That would potentially hold back the USD, supporting emerging-market and Asian assets. We are not convinced we are there yet. China and India’s Real Effective Exchange Rate China Real Effective Exchange Rate 140

India Real Effective Exchange Rate

130 120 110 100 90 80 70 60 Feb-94

Feb-97

Feb-00

Feb-03

Feb-06

Feb-09

Feb-12

Feb-15

Source: Bloomberg, Maybank Kim Eng Research

SEE PAGE 21 FOR IMPORTANT DISCLOSURES AND ANALYST CERTIFICATIONS

Co. Reg No: 198700034E MICA (P) : 099/03/2012

Strategy Research Figure 1: Summary of recent thoughts

Theme USD strength & higher forex volatility

Structurally positive

Cyclical concerns

Relative value in Asia x Japan

Policy ease

Trades

Recent data/updated thoughts

Selective Asia – Sell S&P 500

Rather than falling, the S&P 500 is stalling. Odd setup with rising forex and commodity implied vol, relatively high bond market implied vol, but low equity implied vol. The biggest risk is a USD deleveraging cycle. Still expect Asian forex to weaken, the RMB too.

Long India

Improving macro fundamentals. Also, beneficiary of falling inflation, which we think is needed to maintain rich valuations.

Long Vietnam

Low global bond yields mean a preference for duration assets and Vietnam, a frontier market, is enjoying contained inflation.

Long Philippines

Growth spreading to second and third-tier cities. Need to watch the local money markets as short rates rising.

Avoid Indonesia

Currency concerns but interest rates have encouragingly remained low. Protectionist sentiment is a worry.

Long China, Short Taiwan

Relative value of China is bottoming out vs Taiwan; technology sector dominates weighting within MSCI Taiwan.

Long financials, short non-financials

Relative P/B bouncing off historical low. Getting concerned about this trade given the flattening of yield curves.

Long banks, short tech

Tech has been very strong but we remain negative given valuations and our concerns about global equity markets.

Long consumer goods, short tech

Another trade impacted by strong tech. Staples are looking interesting vs autos.

Long Singapore, short Thailand

Thailand, while less owned by foreigners, is still relatively expensive vs Singapore and the Baht is finally weakening.

Long Hong Kong H-index, short Shanghai A index

A-shares now at 17x PER, and the premium is back at over 30%.

Long China consumer staples, short China consumer discretionary

Up/downgrade earnings ratio for consumer staples has started to pick up relative to consumer discretionary and valuations are not expensive for consumer staples.

Long Chinese banks, fade property

The PBoC is behind the curve. We need to see much stronger easing by China for the banks to do much better. We still see little case for the property stocks.

Source: Maybank Kim Eng

March 18, 2015

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Strategy Research

Not targeted easing again This report is divided into two parts: One: China’s recent policy moves and what it has not achieved. The implication is more relative value trades: Long H-shares, Short A-shares. And selectively get into China consumer staples and away from consumer discretionary. Two: Given our negative stance on equities, an assessment on our views and what would make us wrong. One is that we think cross-asset-class volatility would need to normalize. And, a broadening out of global growth, where indicators appear very mixed to us. Targeted easing has not worked: low asset turns the reason why? We like to use RoE decompositions to assess the sustainability of returns and to understand how we got to the current environment for any country or sector. The first two lines of the decomposition for China are shown below. Asset turnover is defined as total sales divided by average total assets and this has fallen to a level very close to the 2009 low. The universe used is MSCI China non-financials of 150 companies with a total market capitalization of USD1.6tr. While it will be dominated by SOEs, the data shows little progress in restructuring so far at least.

Figure 2: China EBIT margin & asset turns Asset Turnover

95%

EBIT Margin (RHS)

16%

90%

14%

85% 80%

12%

75%

10%

70% 8%

65% 60%

6% 2006

2007

2008

2009

2010

2011

2012

2013

2014E

Source: Factset, Maybank Kim Eng Research

Likewise by sector, the picture isn’t great. The table below shows the change in asset turnover by sector from 2007 to the end of last year (limiting any bottom up positive bias for 2014 and 2015 expectations). Telecoms, energy and consumer discretionary (ex-autos) are the only sectors where asset turns rose. The rest saw declines and we reckon this is a key reason why many sectors do not have any pricing power. And this is why “targeted easing”, by being too focused, has low odds of success. While such easing has the potential to benefit some sectors, we think there are too many others where returns of capital have fallen too low.

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Strategy Research Figure 3: Asset turns by sector

China Consumer Discretionary (ex Autos) Consumer Staples Energy Health Care Industrials IT Materials Property Telecom Utilities

Asset turnover (%) 2007 2014E 86 75 123 125 116 105 106 108 156 136 89 72 166 112 89 71 32 29 169 174 38 34

Difference (%) -11 1 -11 1 -20 -17 -54 -18 -4 5 -4

Source: Factset, Maybank Kim Eng Research

Chinese policy we reckon is increasingly behind the curve The latest economic data shows that China’s economy continues to deteriorate even though the government has already tried different stimulus. As we can see from China’s real M1 growth, a lead indicator (particularly of imported capital goods so a proxy for capex), there is little sign of recovery. And other data shows that China is still behind the curve.

Figure 4: China Real M1 YoY (%) (%) 45

China Real M1 YoY (%)

40 35 30 25 20 15 10 5 0 Jan-03

Jan-05

Jan-07

Jan-09

Jan-11

Jan-13

Jan-15

Source: CEIC, Maybank Kim Eng Research

The rate cut is still not effective and not enough The bond and money markets remain unconvinced by China’s monetary policy moves. After the first rate cut in Nov 2014 and since Dec 2014, the PBoC has injected RMB118b into banks via open market operations. However, both the 7-day repo rate and the 3-month SHIBOR rate have still not come down. The spread between the 10-year and 1-year government bond flattened. This suggests the bond market sees little improvement. The spread between the 10-year government bond and 3-month SHIBOR suggests market liquidity remains very tight. Therefore, unless global growth picks up or the government launches a more aggressive policy, the ability of the stock market to move up further from here will be limited.

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Strategy Research Figure 5: China bond curve and equities I

Figure 6: China bond curve and equities II

China Govt Bond Yield Spread (10yr-1yr) Shanghai Composite index (RHS)

(%) 2.5

7,000

2.0 1.5 1.0 0.5 0.0 Nov-06

Nov-08

Nov-10

Nov-12

China Govt Bond Yield Spread (10yr-3mth) Shanghai Composite index (RHS)

(%) 3.0

7,000

6,000

2.0

6,000

5,000

1.0

5,000

4,000

0.0

4,000

3,000

(1.0)

3,000

2,000

(2.0)

2,000

1,000

(3.0) Nov 06

Nov-14

Source: Bloomberg, Maybank Kim Eng Research

1,000 Nov 08

Nov 10

Nov 12

Nov 14

Source: Bloomberg, Maybank Kim Eng Research

If we look at corporate bond data, the spread between the government 10year bond and AAA corporate bond has widened to +129bps. The spread between the government 10-year bond to BBB+ corporate bond has also widened, to +1118bps. This could be due to the PBoC stopping the use of BBB+ corporate bond as collateral for repo refinancing. This is long-term positive and we think, together with deposit insurance, allows a better pricing of credit and ultimately sets the stage where we shall see weak companies default. However, in the short term, it drives up spreads and limits the impact of policy easing. Therefore the corporate funding costs have arguably not improved after the last two rounds of interest rate cuts.

Figure 7: China 7-day repo rate & 3-mth SHIBOR (%) 9

China 7-day repo (%)

Figure 8: Spread between 10-yr govt & AAA, BBB+ corp bond

China 3-mth SHIBOR (%) (bps) 200

8 7

Spread between China 10-yr Govt & AAA Corp Bond Spread between China 10-yr Govt & BBB+ Corp Bond (RHS) (bps) 1,150

6

180

1,120

5

160

1,090

3

140

1,060

2

120

1,030

4

1 0 Jan 10

Jan 11

Jan 12

Jan 13

Source: Bloomberg, Maybank Kim Eng Research

Jan 14

Jan 15

100 Jan-14

1,000 Apr-14

Jul-14

Oct-14

Jan-15

Source: Bloomberg, Wind, Maybank Kim Eng Research

Yield curve and real policy rates The following table shows that, year-to-date, the 10-year government bond yields are uniformly down not only in developed markets but also in emerging markets. This indicates to us that there is little sign of inflation. The flattening of the curves in Asia also suggests growth is weak. While the real policy rates in most of the developed markets remain at very low or negative levels, Asian real policy rates still have room to decline, especially in China and Vietnam.

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Figure 9: Bond yield and real policy rate Country US Europe UK Japan

3-mth interbank rate (%) 17-Mar-15 YTD bps change 0.3 1 0.0 (5) 0.6 0 0.1 (1)

10-yr bond yield (%) 17-Mar-15 YTD bps change 2.1 (12) 0.3 (26) 1.7 (7) 0.4 10

Policy rate (%) 0.25 0.05 0.50 0.08

Inflation YoY (%) 1.6 1.2 1.4 2.2

Real policy rate (%) (1.4) (1.1) (0.9) (2.1)

Australia

2.3

(44)

2.5

(27)

2.25

1.7

0.6

China

4.9

(23)

3.6

(10)

5.35

1.4

4.0

Hong Kong Korea Taiwan Singapore Malaysia Indonesia Thailand Philippines India Vietnam

0.4 1.8 0.9 0.9 3.8 6.8 1.9 2.3 8.6

1 (33) 1 47 (9) (38) (24) 46 (4)

1.6 2.3 1.6 2.4 3.9 7.4 2.7 4.1 7.8 6.5

(28) (29) (5) 17 (17) (37) 0 (30) (7) (50)

0.50 1.75 1.88 0.18 3.25 7.50 1.75 4.00 7.50 9.00

4.1 0.5 (0.2) (0.4) 1.0 6.3 (0.5) 2.5 5.4 0.3

(3.6) 1.3 2.1 0.6 2.3 1.2 2.3 1.5 2.1 8.7

Brazil Mexico

13.0 3.3

80 1

13.1 6.0

73 20

12.75 3.00

7.7 3.0

5.1 0.0

Russia South Africa Turkey

16.9 6.1 10.0

(723) (2) 26

13.4 7.9 8.3

(50) (5) 40

14.00 5.75 7.50

16.7 4.4 7.6

(2.7) 1.4 (0.0)

Source: Bloomberg, CEIC, Maybank Kim Eng Research

Rising pressure on CNY depreciation Looking at our cover chart, China’s real effective exchange rate (REER) has appreciated by 96% since Jan-1994 and by 8% since Jan-2014. We have yet to find another currency to have experienced this kind of appreciation in the past 20 years. The chart on the right below shows the year-on-year change in the REER, pushed six months forward is a reasonably good lead indicator of export growth (note the inverted scale). On current reading, exports are likely to be flat in coming months. While this appreciating currency can push companies up the valued-added chain, the current speed could be an issue. Figure 11 shows China manufacturing export growth has faced a sharp downtrend since June 2010. We suspect the combination of a strong currency and higher wage costs could be hurting manufacturers. Recently, some big local handset components manufacturers in Dongguan and Suzhou shut down. We have also started to see more large manufacturing companies choosing to move their factories outside of China or slow down investments in China. For example, Foxconn announced it will invest USD2b in India; some big Japanese companies like Citizen, TDK and Panasonic are also moving their manufacturing bases back to Japan; and Samsung is also increasing investments in India and Vietnam.

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Strategy Research

Figure 10: China and India Real Effective Exchange Rate

Figure 11: China REER & manufacturing export growth

China Real Effective Exchange Rate India Real Effective Exchange Rate

140 130 120 110 100 90 80 70 60

(%) (0.15)

China REER YoY (%) - 6-mth fwd, inv China export - manufacturing YoY (%), 3 mth ma (RHS) (%)

(0.10)

40

(0.05)

30

0.00 0.05

Source: Bloomberg, Maybank Kim Eng Research

50

20 10 0

0.10

-10

0.15

-20

0.20 Jan 96 Jan 99 Jan 02 Jan 05 Jan 08 Jan 11 Jan 14

-30

Source: Bloomberg, CEIC, Maybank Kim Eng Research

Even though the utilized foreign direct investment was still up 29% in January, the net FDI has slowed, so it is a trend that cannot be ignored. This requires watching particularly as the standard minimum wage in Shenzhen and Guangdong is reportedly going to increase by between 1222% in 2015. In some ways, we wonder if wage growth is amongst the most important macro variables this year. High wage growth helps the transition to a consumer economy but can potentially eat into profits that are already under strain. For exporters, some input costs have fallen, but it does appear the strong currency and higher wages overall are likely to hurt exports. Too high wage growth and too strong a currency could potentially be very negative. From a portfolio perspective, the fact the USD is attracting capital away does not help either. Portfolio outflows have also started to pick up sharply since Jan-2014 and it reached USD134b in 2014. Therefore there is rising pressure on the CNY to depreciate further from the current levels. One possibility is the PBoC widens the trading band from the current up to 2% on either side of a daily fixing rate. Last time the CNY’s trading band was widened was from 1% to 2% in Mar 2014. The CNY 12-month forward has already corrected by 2.5% since the first rate cut in Nov-2014. Figure 12: China estimated capital flow & CNY 12-mth forward China estimated captial flow (US$bn)

CNY 12-mth forward (RHS)

100

6.0

80

6.2

60

6.4

40

6.6

20

6.8

0

7.0

-20

7.2

-40

7.4

-60

7.6

-80

7.8

-100 Jan-06

8.0 Jan-08

Jan-10

Jan-12

Jan-14

Source: Bloomberg, Maybank Kim Eng Research

March 18, 2015

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Strategy Research Earnings expectations are low Many China companies will report their earnings this month. However, earnings expectations for 2015 continue to be revised down. Only the diversified financials, insurance and industrials sectors have recorded positive earnings revisions over the past three months. Energy, food/drugs retail and materials’ earnings expectations keep getting revised down. Figure 13: China earnings revision in 2014 & 2015

Figure 14: China 3-mth earnings revision by sector 30% 17% 20% 4% 1% 0% 10% 0% -10% 0% 0% 0%-1%-1%-1%-1%-2%-2%-2%-2%-2%-3%-3%-4% -6% -20% -30% -21% -40% -50% -47% -60%

MSCI China 2015 earnings revision trend MSCI China 2014 earnings revision trend

Div. financials Insurance Industrials Health Care Auto Components Consumer Disc Real Estate Food/Bev/Tob Telcom Semi Financials Banks Tech hardware IT Software services Utilities Consumer Staple Capital Goods Materials MSCI China Food/Drug Retail Energy

(rebased) 102 100 98 96 94 92 90 88 86

Source: MSCI, Factset, Maybank Kim Eng Research

Source: MSCI, Factset, Maybank Kim Eng Research

Long H-shares, Short A-shares Right now, we think the A-share market has built up too much expectation on reforms and ignored the risks of forthcoming earnings disappointments, deteriorating credit quality, capital outflows from China and recorded high-levels of margin financing. And policy moves have already been announced. The Hang Seng A-H premium index is now at 31%. In terms of valuations, the Shanghai A-share is trading at 17x 2015 PER while Hong Kong’s H-share index is trading 8.3x 2015 PER. All the aforementioned factors indicate the downside risk for the A-share index is a lot more than the upside potential. Hence we would Long H-shares and Short A-shares. Figure 15: Shanghai-A PER (x) 9.0 8.0 7.0 6.0 5.0 4.0 3.0 2.0 1.0 0.0 Aug 96

Figure 16: Hang Seng A-H premium

Shanghai A PE rel H share PE (x)

Hang Seng A-H premium

220 200 180 160 140 120 100

Aug 99

Aug 02

Aug 05

Aug 08

Aug 11

Aug 14

80 06

Source: CEIC, Maybank Kim Eng Research

March 18, 2015

07

08

09

10

11

12

13

14

15

Source: Bloomberg, Maybank Kim Eng Research

8

Strategy Research Long China consumer staples, Short China consumer discretionary In terms of sectors, there are signs that relative value is returning to China consumer staples relative to discretionary. The chart below shows the beginnings of the Street starting to upgrade staples’ earnings relative to discretionary. In terms of valuations, consumer staples’ PB is also not expensive relative to consumer discretionary. Our consumer staples analyst, Jacqueline Ko, thinks falling material costs will continue to improve profit margins. Even though pricing would stay flattish, product-mix upgrade she reckons will continue to increase ASPs. Her favourite stocks are Hengan and Want Want China. Our consumer discretionary analyst, KL Lo, has sell ratings on GAC Group and BAIC Motor. Figure 17: Staples rel discretionary, up/downgrade ratio (x)

China Consumer Staples rel to China Consumer Discretionary - up-downgrade

Figure 18: Staples rel discretionary, relative PB (x) 3.0

3.0 2.5

China Consumer Staples rel to China Consumer Discretionary - PB

2.5

2.0 2.0

1.5 1.0

1.5

0.5 0.0 Jan 08

Jan 09

Jan 10

Jan 11

Jan 12

Jan 13

Source: MSCI, Factset, Maybank Kim Eng Research

Jan 14

Jan 15

1.0 Nov 07 Nov 08 Nov 09 Nov 10 Nov 11 Nov 12 Nov 13 Nov 14 Source: MSCI, Factset, Maybank Kim Eng Research

Where could we be wrong? That cautious equities outlook One reason for our negative stance on US equities is the rise in implied currency volatility (see the cover chart of our report, “Here a Vol, There a Vol, Everywhere a Vol Vol,” dated January 21, 2015). We think higher implied currency volatility means a higher cost of capital for global companies, for example via higher hedging costs or through higher hurdle rates for cross-border transactions. This is in addition to the directional move in currencies. We wonder if the fixation of economists on bond yields during QE – the idea that bond yields will break out of a 30-year downtrend – was driven by a closed-economy view of the world. In open capital accounts, central banks can control the currency or interest rates, but not both. By focusing on interest rates, and making the yield curve less reflective of fundamentals, markets have responded by allowing currencies to move. So, it’s the USD that’s breaking out of a 30-year downtrend, not long-term bond yields.

Implied equity and forex vol The chart below compares the three-month at-the-money implied volatility of the Euro$ and the VIX. Over the past 10 years or so, whenever implied currency vol rose, so did implied equity vol. Indeed, short-term spikes forex vol translated into spikes in equity vol.

March 18, 2015

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Strategy Research The one time where there was arguably a rise in forex vol that did not translate into a rise in the VIX was in Sep/Oct 2010. But this was when the FED was about to launch QE2. This seems unlikely this time around. Figure 19: VIX and EURUSD 3-mth implied volatility VIX Index

EURUSD 3mth ATM implied volatility (RHS)

90

30

80

25

70 60

20

50

15

40 30

10

20

5

10

0 0 Oct-05 Oct-06 Oct-07 Oct-08 Oct-09 Oct-10 Oct-11 Oct-12 Oct-13 Oct-14 Source: Bloomberg, Maybank Kim Eng Research

Implied vols in other asset classes The chart below shows three-month implied volatility of WTI crude oil and the MOVE Index, which is a measure of implied volatility for the US bond market. Implied vol of crude oil is unsurprisingly high. Implied vol of the bond market is back to where it was during the taper tantrum and much higher than the levels of the summer.

Figure 20: WTI 3-mth implied vol and MOVE index WTI - 3mth implied volatility (%) 90 80 70 60 50 40 30 20 10

MOVE Index (RHS) 300 250 200 150 100 50

0 0 Oct-05 Oct-06 Oct-07 Oct-08 Oct-09 Oct-10 Oct-11 Oct-12 Oct-13 Oct-14 Source: Bloomberg, Maybank Kim Eng Research

Can equity vol continue to diverge? For oil, currencies and to an extent, bonds too, we are at elevated implied volatility levels. Not so for equities. Over the shorter history since January 2011, the divergence appears even greater. We are skeptical this divergence can persist in large part as we think in a globalized world of trade and capital flows, the probability volatility in other asset classes has no impact on equities seems very low. So, either the implied volatility in the other asset classes falls, or the implied vol in equities (measured by the S&P 500) rises. March 18, 2015

10

Strategy Research That USD view, again At this stage, we have not changed our thinking of a stronger USD and weaker Asian forex. Our expectation is that the negative impact on growth from a stronger USD (thanks to large USD borrowing) is greater than the positive impact of lower oil prices. Where could we be wrong? Should the rest of the world experience an acceleration of growth so that that gap between US growth and the rest of the world narrows, and the global growth picture improves, then this could be positive for equities outside of the US and the USD we expect would then weaken. Essentially, as growth is cheaper outside the US, a change in global growth perceptions means capital will be attracted away. We could then have a weaker USD, stronger commodities and better performance from emerging markets too. We are watching a number of indicators. The charts below show that in Europe, while the German IFO is looking better, the Belgian Business Confidence index, arguably a better reflection of Eurozone growth, remains weak. In Japan, the good news is that the Inventory to Shipment ratio is improving, suggesting some cyclical recovery, though the absolute levels are still high. Perhaps this is one reason why in USD terms, Japan has outperformed Europe.

Figure 21: Belgian & German cycle indicators

Figure 22: Korea and Japan inventory cycle

Belgium General Index Business Confidence Ifo Pan Germany Business Climate (RHS)

20

120 115

10

110

0

105

(10)

Korea I/S ratio

1.4

Japan I/S (RHS)

150

1.3

140 1.2

130

1.1

120

100 95

(20)

90

(30)

85

(40)

80 91

93

95

97

99

01

03

05

Source: Bloomberg, Maybank Kim Eng Research

07

09

11

13

15

160

110 1.0 0.9 Jan-03

100 Jan-05

Jan-07

Jan-09

Jan-11

Jan-13

90 Jan-15

Source: MSCI, Factset, Maybank Kim Eng Research

A peek at the global growth The cyclical charts on Europe and Japan suggest to us those economies remain relatively fragile. And in the ECB’s QE, the yields on a number of countries have collapsed to levels below the US. That could ultimately help growth, but fiscal pressures mean that a lot of the growth is likely to be export driven. Synchronicity? The chart below shows retail sales for Germany and Japan, along with ex motor vehicle sales for France. What has been quite interesting is how closely linked the Germany’s and Japan’s retail sales has been. This could reflect how in recent years, global growth has been somewhat synchronized.

March 18, 2015

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Strategy Research In the context of what is now very aggressive moves in the EuroYen, we wonder if the correlation can persist. For Europe as a whole, the picture again is mixed: Germany appears to be doing better, while the rest of the Eurozone remains a concern, consistent with the Belgian Business Confidence and German IFO data above.

Figure 23: France, Germany & Japan retail sales YoY (%) (%) 10

France retail sales ex motor, 3ma, YoY (%) Germany retail trade, 3ma, YoY (%) Japan retail trade, 3ma, YoY (%)

5

0

(5)

(10) Jan 96

Jan 00

Jan 04

Jan 08

Jan 12

Source: Bloomberg, Maybank Kim Eng Research

Non-oil imports as a proxy To look at domestic demand trends, the chart below plots import growth, excluding oil and related products. US import growth, excluding oil, remains firm. The weakness in Chinese growth is clear. In Europe, there is a nice recovery in non-oil import growth from the very low levels of 2013 and 1H14, but this is in Euro terms. The chart shows European non-oil imports in USD terms.

Figure 24: EU, China & US non-oil import growth YoY (%)

80

EU import growth, non-oil, 3ma, YoY (%) (USD adjusted) China import growth, non-oil, 3ma, YoY (%) (USD adjusted) US import growth, non-oil, 3ma, YoY (%)

60 40 20 0 -20 -40

Source: Bloomberg, Maybank Kim Eng Research

In USD terms, the chart shows the US arguably remains the only game in town. If growth elsewhere accelerates, then perhaps the USD can sell off, commodities recover, and emerging markets perform too. However, we think if US growth were to deteriorate, the risk is the USD would rally further as growth elsewhere may be even more fragile.

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Performance and valuation summary Figure 25: Equity performance by country (in local currency terms) Name MSCI All Country World MSCI Emerging Market MSCI Asia Pac (inc JP) MSCI Asia Pac x JP MSCI Asia x JP MSCI Far East x JP MSCI Emerging Asia MSCI EM Latin America MSCI EMMEA MSCI Frontie MSCI Asia x JP Small Cap

--- Absolute performance (local currency) ---3m -6m -1y MTD QTD 4 (1) 5 (2) 1 3 (11) 1 (4) (1) 8 0 8 (1) 5 6 (4) 4 (3) 2 6 (2) 9 (2) 2 5 (3) 7 (2) 2 7 (2) 10 (2) 3 (9) (32) (17) (10) (13) 2 (18) (13) (8) (3) 5 (16) (2) (2) (3) 5 (6) (0) (2) 2

Index level 423 949 145 475 575 538 471 2,376 262 593 1,041

FX rate

-1w 1 1 1 0 0 0 1 1 (1) (1) (0)

-1m (1) (3) 1 (2) (1) (1) (1) (10) (8) (1) (0)

China - Shanghai Composite China - H-shares

3,503 11,838

6.2 7.8

7 3

8 (1)

14 5

52 9

73 27

6 (3)

8 (1)

8 (1)

Hong Kong - HSI

23,901

7.8

0

(4)

6

(2)

11

(4)

1

1

Taiwan - TAIEX

9,539

31.6

0

0

8

4

10

(1)

2

2

Korea - KOSPI

2,030

1,129

2

3

7

(2)

5

2

6

6

Singapore - STI

3,370

1.4

(1)

(1)

4

2

9

(1)

0

0

Malaysia - KLCI

1,788

3.7

(0)

(1)

6

(3)

(2)

(2)

2

2

Thailand - SET

1,513

32.9

(1)

(5)

2

(4)

10

(5)

1

1

Indonesia - JCI

5,439

13,170

(0)

2

8

5

12

(0)

4

4

Philippines - PSEi

7,789

44.5

(1)

(0)

12

8

22

1

8

8

India - Sensex

28,736

62.7

0

(1)

8

8

32

(2)

4

4

582

21,475

(1)

(1)

12

(7)

(3)

(2)

7

7

Australia ASX 200

5,842

1.3

0

(0)

13

8

10

(1)

8

8

New Zealand - NZX50

5,905

1.4

0

3

7

15

16

0

6

6

Japan - Nikkei 225 Japan - TOPIX

19,437 1,571

121.3 121.3

4 3

8 7

16 16

22 20

36 36

3 3

11 12

11 12

S&P 500 Russell 2000

2,074 1,242

1.0 1.0

1 3

(1) 1

3 6

4 8

12 5

(1) 1

1 3

1 3

FTSE 100

6,838

1.5

2

(1)

8

1

4

(2)

4

4

Euro Stoxx

3,672

1.1

3

7

20

13

20

2

17

17

Vietnam - Ho Chi Minh

YTD 1 (1) 5 2 2 2 3 (13) (3) (3) 2

Source: Maybank Kim Eng, Factset, MSCI, data as of 17 March 2015

March 18, 2015

13

Strategy Research Figure 26: Equity performance by country (in USD terms) Name MSCI All Country World MSCI Emerging Market MSCI Asia Pac (inc JP) MSCI Asia Pac x JP MSCI Asia x JP MSCI Far East x JP MSCI Emerging Asia MSCI EM Latin America MSCI EMMEA MSCI Frontie MSCI Asia x JP Small Cap

--- Absolute performance (USD) ---3m -6m -1y MTD 4 (1) 5 (2) 3 (11) 1 (4) 8 0 8 (1) 6 (4) 4 (3) 6 (2) 9 (2) 5 (3) 7 (2) 7 (2) 10 (2) (9) (32) (17) (10) 2 (18) (13) (8) 5 (16) (2) (2) 5 (6) (0) (2)

Index level 423 949 145 475 575 538 471 2,376 262 593 1,041

FX rate

-1w 1 1 1 0 0 0 1 1 (1) (1) (0)

-1m (1) (3) 1 (2) (1) (1) (1) (10) (8) (1) (0)

QTD 1 (1) 5 2 2 2 3 (13) (3) (3) 2

YTD 1 (1) 5 2 2 2 3 (13) (3) (3) 2

China - Shanghai Composite China - H-shares

3,503 11,838

6.2 7.8

7 3

8 (1)

13 5

49 9

71 27

6 (3)

7 (1)

7 (1)

Hong Kong - HSI

23,901

7.8

(0)

(4)

6

(2)

11

(4)

1

1

Taiwan - TAIEX

9,539

31.6

(0)

(0)

7

(1)

5

(1)

3

3

Korea - KOSPI

2,030

1,129

2

1

4

(10)

(0)

(1)

3

3

Singapore - STI

3,370

1.4

(1)

(4)

(2)

(7)

(1)

(3)

(5)

(5)

Malaysia - KLCI

1,788

3.7

0

(4)

0

(16)

(13)

(4)

(4)

(4)

Thailand - SET

1,513

32.9

(2)

(6)

2

(6)

8

(6)

1

1

Indonesia - JCI

5,439

13,170

(1)

(1)

4

(5)

(4)

(2)

(2)

(2)

Philippines - PSEi

7,789

44.5

(1)

(1)

12

7

22

(0)

8

8

India - Sensex

28,736

62.7

0

(2)

9

5

29

(3)

5

5

582

21,475

(2)

(2)

12

(8)

(5)

(2)

6

6

Australia ASX 200

5,842

1.3

(0)

(3)

6

(9)

(8)

(4)

0

0

New Zealand - NZX50

5,905

1.4

1

(0)

2

3

(1)

(3)

(1)

(1)

Japan - Nikkei 225 Japan - TOPIX

19,437 1,571

121.3 121.3

4 3

6 5

12 12

8 7

14 14

2 2

10 10

10 10

S&P 500 Russell 2000

2,074 1,242

1.0 1.0

1 3

(1) 1

3 6

4 8

12 5

(1) 1

1 3

1 3

FTSE 100

6,838

1.5

(0)

(5)

2

(9)

(8)

(6)

(2)

(2)

Euro Stoxx

3,672

1.1

2

(1)

3

(7)

(8)

(4)

2

2

Vietnam - Ho Chi Minh

Source: Maybank Kim Eng, Factset, MSCI, data as of 17 March 2015

March 18, 2015

14

Strategy Research Figure 27: Equity performance by country – relative performance Name MSCI All Country World MSCI Emerging Market MSCI Asia Pac (inc JP) MSCI Asia Pac x JP MSCI Asia x JP MSCI Far East x JP MSCI Emerging Asia MSCI EM Latin America MSCI EMMEA MSCI Frontie MSCI Asia x JP Small Cap

Index level 423 949 145 475 575 538 471 2,376 262 593 1,041

FX rate

China - Shanghai Composite China - H-shares

3,503 11,838

Hong Kong - HSI

--- Relative performance to -3m -6m (2) 1 (2) (8) 3 3 (0) (2)

MSCI Asia -1y (4) (8) (1) (4)

x Japan --MTD QTD (0) (1) (2) (3) 1 3 (0) (0)

-1w 1 0 1 (0)

-1m 0 (2) 3 (0)

0 0 0 (1) (2) (1)

(0) 1 (9) (7) 1 1

(1) 1 (15) (4) (0) (1)

(1) 0 (29) (16) (13) (4)

(2) 1 (25) (22) (11) (9)

(0) 0 (8) (5) 0 0

(1) 1 (15) (5) (5) 0

(1) 1 (15) (5) (5) 0

6.2 7.8

6 2

9 (0)

8 (1)

52 11

62 18

8 (1)

5 (3)

5 (3)

23,901

7.8

(0)

(2)

(0)

0

3

(2)

(1)

(1)

Taiwan - TAIEX

9,539

31.6

(1)

1

1

1

(4)

1

0

0

Korea - KOSPI

2,030

1,129

1

2

(2)

(7)

(9)

2

1

1

Singapore - STI

3,370

1.4

(1)

(2)

(8)

(5)

(10)

(1)

(7)

(7)

Malaysia - KLCI

1,788

3.7

(0)

(3)

(6)

(13)

(21)

(2)

(6)

(6)

Thailand - SET

1,513

32.9

(2)

(4)

(3)

(3)

(1)

(4)

(1)

(1)

Indonesia - JCI

5,439

13,170

(2)

0

(2)

(2)

(13)

0

(4)

(4)

Philippines - PSEi

7,789

44.5

(2)

1

6

9

13

2

6

6

India - Sensex

28,736

62.7

(0)

(1)

3

7

20

(1)

3

3

582

21,475

(2)

(0)

6

(6)

(14)

(0)

4

4

Australia ASX 200

5,842

1.3

(0)

(1)

(0)

(7)

(17)

(2)

(2)

(2)

New Zealand - NZX50

5,905

1.4

0

1

(4)

5

(10)

(1)

(3)

(3)

Japan - Nikkei 225 Japan - TOPIX

19,437 1,571

121.3 121.3

4 2

7 7

6 7

11 9

5 5

4 4

8 8

8 8

S&P 500 Russell 2000

2,074 1,242

1.0 1.0

1 2

0 3

(3) (0)

6 10

3 (4)

1 3

(1) 1

(1) 1

FTSE 100

6,838

1.5

(1)

(3)

(4)

(7)

(17)

(4)

(4)

(4)

Euro Stoxx

3,672

1.1

1

1

(3)

(5)

(17)

(1)

0

0

Vietnam - Ho Chi Minh

YTD (1) (3) 3 (0)

Source: Maybank Kim Eng, Factset, MSCI, data as of 17 March 2015

March 18, 2015

15

Strategy Research Figure 28: Equity performance by MSCI Asia ex Japan sector --- Absolute performance --Name MSCI Asia ex Japan

Index 575

-1w 0

-1m (1)

-3m 6

-6m (2)

-1y 9

MTD (2)

QTD 2

YTD 2

Energy

533

(2)

(7)

(0)

(22)

(11)

(7)

(4)

(4)

Materials

287

(1)

(2)

4

(13)

(5)

(4)

0

0

Industrials Capital goods Transportation

170 156 221

(0) (1) 2

(1) (1) (1)

5 5 5

(5) (9) 6

1 (4) 18

(3) (4) (3)

2 2 2

2 2 2

Consumer discretionary Automobiles & Components Retailing

496 835 270

(0) 1 (2)

(3) 2 (3)

(0) 4 (1)

(14) (13) (14)

(16) (9) (7)

(2) 1 (5)

(2) 2 (4)

(2) 2 (4)

Consumer staples Food/staples retail Food/beverage/tobacco

430 109 366

1 0 (1)

(4) (5) (6)

6 (2) 1

(4) (15) (10)

2 (12) (9)

(2) (3) (5)

2 (5) (3)

2 (5) (3)

Health care

805

1

5

15

8

29

4

11

11

Financials Banks Diversified financials Insurance Real estate

325 266 574 305 192

1 1 1 2 (1)

(2) (1) (1) 1 (5)

4 2 3 11 3

2 0 2 15 (3)

19 15 35 34 14

(2) (2) (3) (1) (5)

(0) (1) 1 4 (0)

(0) (1) 1 4 (0)

382 1,816 196 385

1 1 2 1

2 (0) 3 1

12 16 11 12

4 2 2 10

15 13 25 17

0 (3) 3 (1)

8 11 7 6

8 11 7 6

Telecoms

157

1

(3)

8

0

23

(3)

5

5

Utilities

230

(1)

(2)

2

(4)

9

(3)

(2)

(2)

Technology Software services Tech hardware Semiconductors/equipment

Source: Maybank Kim Eng, Factset, MSCI, data as of 17 March 2015

March 18, 2015

16

Strategy Research Figure 29: Equity performance by MSCI Asia ex Japan sector – relative performance --- Relative performance MSCI Asia ex Japan --Name MSCI Asia ex Japan

Index 575

-1w

-1m

-3m

-6m

-1y

MTD

QTD

YTD

Energy

533

(3)

(5)

(6)

(20)

(20)

(5)

(6)

(6)

Materials

287

(2)

(1)

(2)

(11)

(14)

(2)

(2)

(2)

Industrials Capital goods Transportation

170 156 221

(1) (1) 1

0 0 0

(0) (0) (1)

(3) (6) 8

(8) (13) 9

(1) (1) (1)

0 0 (0)

0 0 (0)

Consumer discretionary Automobiles & Components Retailing

496 835 270

(1) 1 (3)

(2) 3 (1)

(6) (2) (7)

(12) (11) (12)

(25) (18) (16)

(0) 3 (2)

(4) (0) (6)

(4) (0) (6)

Consumer staples Food/staples retail Food/beverage/tobacco

430 109 366

0 (0) (1)

(2) (3) (5)

(0) (8) (5)

(2) (12) (8)

(7) (21) (18)

(0) (1) (2)

0 (7) (5)

0 (7) (5)

Health care

805

0

6

9

10

20

7

9

9

Financials Banks Diversified financials Insurance Real estate

325 266 574 305 192

0 1 0 1 (2)

(0) (0) 1 3 (3)

(2) (3) (3) 5 (2)

5 3 5 17 (0)

10 6 26 25 6

(0) 0 (0) 1 (3)

(2) (4) (1) 2 (2)

(2) (4) (1) 2 (2)

382 1,816 196 385

1 0 2 1

3 1 4 3

7 10 5 6

7 5 5 12

6 5 16 8

2 (0) 5 2

6 9 5 4

6 9 5 4

Telecoms

157

1

(2)

2

3

14

(1)

3

3

Utilities

230

(1)

(0)

(4)

(2)

(0)

(1)

(4)

(4)

Technology Software services Tech hardware Semiconductors/equipment

Source: Maybank Kim Eng, Factset, MSCI, data as of 17 March 2015

March 18, 2015

17

Strategy Research Figure 30: MSCI country valuation Asia-ex-Japan

PER (x) EPS growth YoY (%) 2014F 2015F 2016F 2014F 2015F 2016F 12.3 11.1 9.5 8 11 9

RoE(%) 2014F 2015F 2016F 2014F 12 12 12 1.4

PB (x) 2015F 2016F 1.3 1.1

DY (%) 2014F 2015F 2016F 2.7 2.9 3.5

China Hong Kong Taiwan Korea Singapore Malaysia Thailand Indonesia Philippines India Japan

10.3 15.2 12.7 10.0 13.6 15.6 13.9 15.9 20.2 18.6 15.8

9.0 14.0 12.0 9.3 12.4 14.4 12.1 13.9 17.7 15.8 14.2

7.5 12.5 10.8 8.5 11.2 14.2 10.4 11.4 16.4 13.8 12.7

3 (14) 13 27 1 11 24 10 13 14 12

14 9 6 8 9 8 14 14 14 18 11

11 9 6 7 7 8 12 14 14 14 9

13 8 14 10 10 12 14 19 15 15 9

14 8 14 10 10 12 15 19 15 16 9

14 9 15 9 10 12 15 19 17 14 9

1.4 1.2 1.7 1.0 1.3 1.8 2.0 3.1 3.0 2.9 1.4

1.2 1.1 1.6 0.9 1.2 1.7 1.8 2.7 2.7 2.5 1.3

1.0 1.2 1.6 0.8 1.1 1.7 1.6 2.2 2.7 1.9 1.2

3.1 3.0 3.4 1.5 3.7 3.2 3.2 2.4 2.0 1.5 1.8

3.4 3.2 3.8 1.6 3.9 3.4 3.5 2.6 2.1 1.7 2.0

4.7 3.8 4.0 1.8 4.1 3.8 4.0 3.2 3.0 2.1 2.4

US Europe Asia-ex-Japan

18.3 22.3 12.3

16.6 13.8 11.1

14.8 12.4 9.5

8 3 8

2 7 11

13 12 9

15 7 12

15 9 12

15 9 12

2.8 1.5 1.4

2.5 1.4 1.3

2.3 1.3 1.1

2.0 3.7 2.7

2.1 3.7 2.9

2.2 4.0 3.5

Source: Maybank Kim Eng, Factset, MSCI, Bloomberg data as of 17 March 2015

March 18, 2015

18

Strategy Research Figure 31: MSCI Asia ex-Japan sector valuation PER (x) Asia-ex-Japan

2014F 2015F 12.3 11.1

EPS growth YoY (%)

RoE(%)

PB (x)

2016F 2014F 2015F 2016F 2014F 2015F 2016F 2014F 9.5 8 11 9 12 12 12 1.4

DY (%)

2015F 2016F 2014F 2015F 2016F 1.3 1.1 2.7 2.9 3.5

Energy

13.7

10.3

9.5

(14)

33

7

7

9

9

1.0

0.9

0.8

2.5

3.3

3.7

Materials

13.4

11.5

10.0

37

16

10

8

9

8

1.1

1.0

0.8

2.7

2.9

2.7

Industrials Capital goods Transportation

14.2 13.3

12.5 11.6 16.8

10.7 10.0 15.2

42 37 15.2

14 14 62

9 9 11

9 9 7

9 9 9

9 9 9

1.2 1.1 10

1.2 1.1 1.5

1.0 0.9 1.4

2.3 2.3 1.6

2.5 2.5 2.4

2.9 2.9 2.6

10.8 8.1 13.2

9.6 7.3 10.8

7.7 5.8 21

13 13 15

12 11 13

13 13 9

14 15 10

14 14 10

12 12 1.4

1.5 1.2 1.3

1.4 1.0 1.1

0.9 0.6 1.9

2.4 1.9 2.1

2.6 2.1 1.9

22.2 21.9 19.2

19.2 18.2 16.8

17.5 14.0 14.4

18 24 16

15 20 14

10 12 14

13 8 12

13 9 13

12 11 11

2.8 1.8 2.3

2.6 1.7 2.1

1.9 1.5 1.5

2.0 2.0 2.4

2.3 2.3 2.7

Consumer discretionary Automobiles & Components Retailing

15.1

Consumer staples Food/staples retail Food/beverage/tobacco Health care

26.2

21.9

18.6

17

20

9

15

16

13

3.9

3.5

2.3

0.9

1.0

2.0

Financials Banks Diversified financials Insurance Real estate

10.1 8.2

9.3 7.5 14.9 14.0 10.9

7.1 6.4 13.6 8.6 8.5

6 6 16.0 6 4

9 9 4 14 9

11 9 10 18 18

11 13 7 11 7

11 13 12 12 7

12 13 12 9 9

1.1 1.1 13 1.8 0.8

1.0 1.0 1.8 1.6 0.7

0.9 0.8 1.7 0.8 0.8

3.4 4.1 2.1 1.5 3.3

3.6 4.5 2.7 1.7 3.6

4.9 5.5 3.0 2.5 3.8

Technology Software services Tech hardware Semiconductors/equipment

13.2

11.9 25.7 10.9 11.6

11.2 21.1 9.9 11.0

10 17.9 9.9 9.6

10 23 3 17

5 21 10 6

16 21 (3) 10

15 25 12 21

14 24 12 19

2.1 25 11 18

1.8 6.3 1.4 2.4

1.6 5.1 1.2 2.1

2.0 4.6 1.0 1.8

2.2 0.9 2.2 2.8

2.3 1.0 2.4 3.2

Telecoms

16.9

15.7

14.2

8

8

11

12

13

13

2.1

2.0

1.9

3.4

3.7

4.2

Utilities

10.9

12.4

12.2

(15)

(13)

5

13

11

8

1.4

1.3

1.0

3.1

3.3

3.7

16.0 11.7

Source: Maybank Kim Eng, Factset, MSCI, Bloomberg data as of 17 March 2015

March 18, 2015

19

Strategy Research Research Offices REGIONAL

HONG KONG / CHINA

INDONESIA

WONG Chew Hann, CA Regional Head of Institutional Research (603) 2297 8686 [email protected]

Howard WONG Head of Research (852) 2268 0648 [email protected] • Oil & Gas - Regional

Wilianto IE Head of Research (62) 21 2557 1125 [email protected] • Strategy

ONG Seng Yeow Regional Head of Retail Research (65) 6432 1453 [email protected]

Alexander LATZER (852) 2268 0647 [email protected] • Metals & Mining – Regional

Rahmi MARINA (62) 21 2557 1128 [email protected] • Banking & Finance

Benjamin HO (852) 2268 0632 [email protected] • Consumer & Auto

Aurellia SETIABUDI (62) 21 2953 0785 [email protected] • Property

Alexander GARTHOFF Institutional Product Manager (852) 2268 0638 [email protected]

ECONOMICS Suhaimi ILIAS Chief Economist Singapore | Malaysia (603) 2297 8682 [email protected] Luz LORENZO Philippines (63) 2 849 8836 [email protected] Tim LEELAHAPHAN Thailand (66) 2658 6300 ext 1420 [email protected] JUNIMAN Chief Economist, BII Indonesia (62) 21 29228888 ext 29682 [email protected]

STRATEGY Sadiq CURRIMBHOY Global Strategist (65) 6231 5836 [email protected] Willie CHAN Hong Kong / Regional (852) 2268 0631 [email protected]

MALAYSIA WONG Chew Hann, CA Head of Research (603) 2297 8686 [email protected] • Strategy • Construction & Infrastructure Desmond CH’NG, ACA (603) 2297 8680 [email protected] • Banking & Finance LIAW Thong Jung (603) 2297 8688 [email protected] • Oil & Gas - Regional • Shipping ONG Chee Ting, CA (603) 2297 8678 [email protected] • Plantations - Regional Mohshin AZIZ (603) 2297 8692 [email protected] • Aviation - Regional • Petrochem YIN Shao Yang, CPA (603) 2297 8916 [email protected] • Gaming – Regional • Media

Jacqueline KO, CFA (852) 2268 0633 [email protected] • Consumer Staples & Durables Ka Leong LO, CFA (852) 2268 0630 [email protected] • Consumer Discretionary & Auto Karen KWAN (852) 2268 0640 [email protected] • Property & REITs

Isnaputra ISKANDAR (62) 21 2557 1129 [email protected] • Metals & Mining • Cement Pandu ANUGRAH (62) 21 2557 1137 [email protected] • Infra • Construction • Transport• Telcos

Mitchell KIM (852) 2268 0634 [email protected] • Internet & Telcos

Janni ASMAN (62) 21 2953 0784 [email protected] • Cigarette • Healthcare • Retail

Osbert TANG, CFA (86) 21 5096 8370 [email protected] • Transport & Industrials

Adhi TASMIN (62) 21 2557 1209 [email protected] • Plantations

Ricky WK NG, CFA (852) 2268 0689 [email protected] • Utilities & Renewable Energy

PHILIPPINES

Steven ST CHAN (852) 2268 0645 [email protected] • Banking & Financials - Regional

Luz LORENZO Head of Research (63) 2 849 8836 [email protected] • Strategy • Utilities • Conglomerates • Telcos

Warren LAU (852) 2268 0644 [email protected] • Technology – Regional

Lovell SARREAL (63) 2 849 8841 [email protected] • Consumer • Media • Cement

INDIA

Rommel RODRIGO (63) 2 849 8839 [email protected] • Conglomerates • Property • Gaming • Ports/ Logistics

Jigar SHAH Head of Research (91) 22 6632 2632 [email protected] • Oil & Gas • Automobile • Cement Anubhav GUPTA (91) 22 6623 2605 [email protected] • Metal & Mining • Capital Goods • Property Vishal MODI (91) 22 6623 2607 [email protected] • Banking & Financials Abhijeet Kundu (91) 22 6623 2628 [email protected] • Consumer

SINGAPORE NG Wee Siang Head of Research (65) 6231 5838 [email protected] • Banking & Finance Gregory YAP (65) 6231 5848 [email protected] • SMID Caps – Regional • Technology & Manufacturing • Telcos

TAN Chi Wei, CFA (603) 2297 8690 [email protected] • Power • Telcos

YEAK Chee Keong, CFA (65) 6231 5842 [email protected] • Offshore & Marine

WONG Wei Sum, CFA (603) 2297 8679 [email protected] • Property & REITs

Derrick HENG, CFA (65) 6231 5843 [email protected] • Transport (Land, Shipping & Aviation)

LEE Yen Ling (603) 2297 8691 [email protected] • Building Materials • Glove Producers

WEI Bin (65) 6231 5844 [email protected] • Commodity • Logistics • S-chips

CHAI Li Shin, CFA (603) 2297 8684 [email protected] • Plantation • Construction & Infrastructure

John CHEONG (65) 6231 5845 [email protected] • Small & Mid Caps • Healthcare

Ivan YAP (603) 2297 8612 [email protected] • Automotive

TRUONG Thanh Hang (65) 6231 5847 [email protected] • Small & Mid Caps

Katherine TAN (63) 2 849 8843 [email protected] • Banks • Construction Ramon ADVIENTO (63) 2 849 8845 [email protected] • Mining Michael BENGSON (63) 2 849 8840 [email protected] • Conglomerates Jaclyn JIMENEZ (63) 2 849 8842 [email protected] • Consumer Arabelle MAGHIRANG (63) 2 849 8838 [email protected] • Banks

THAILAND Maria LAPIZ Head of Institutional Research Dir (66) 2257 0250 | (66) 2658 6300 ext 1399 [email protected] • Consumer • Materials • Ind.Estates

Suttatip PEERASUB (66) 2658 6300 ext 1430 [email protected] • Media • Commerce Sutthichai KUMWORACHAI (66) 2658 6300 ext 1400 [email protected] • Energy • Petrochem Termporn TANTIVIVAT (66) 2658 6300 ext 1520 [email protected] • Property Jaroonpan WATTANAWONG (66) 2658 6300 ext 1404 [email protected] • Transportation • Small cap Chatchai JINDARAT (66) 2658 6300 ext 1401 [email protected] • Electronics

VIETNAM LE Hong Lien, ACCA Head of Institutional Research (84) 8 44 555 888 x 8181 [email protected] • Strategy • Consumer • Diversified • Utilities THAI Quang Trung, CFA, Deputy Manager, Institutional Research (84) 8 44 555 888 x 8180 [email protected] • Real Estate • Construction • Materials Le Nguyen Nhat Chuyen (84) 8 44 555 888 x 8082 [email protected] • Oil & Gas NGUYEN Thi Ngan Tuyen, Head of Retail Research (84) 8 44 555 888 x 8081 [email protected] • Food & Beverage • Oil&Gas • Banking TRINH Thi Ngoc Diep (84) 4 44 555 888 x 8208 [email protected] • Technology • Utilities • Construction TRUONG Quang Binh (84) 4 44 555 888 x 8087 [email protected] • Rubber plantation • Tyres and Tubes • Oil&Gas PHAM Nhat Bich (84) 8 44 555 888 x 8083 [email protected] • Consumer • Manufacturing • Fishery NGUYEN Thi Sony Tra Mi (84) 8 44 555 888 x 8084 [email protected] • Port operation • Pharmaceutical • Food & Beverage

Kittisorn PRUITIPAT, CFA, FRM (66) 2658 6300 ext 1395 [email protected] • Real Estate • Telcos Sittichai DUANGRATTANACHAYA (66) 2658 6300 ext 1393 [email protected] • Services Sector • Transport Sukit UDOMSIRIKUL Head of Retail Research (66) 2658 6300 ext 5090 [email protected]

LEE Cheng Hooi Regional Chartist (603) 2297 8694 [email protected]

Mayuree CHOWVIKRAN (66) 2658 6300 ext 1440 [email protected] • Strategy

March 18, 2015

Surachai PRAMUALCHAROENKIT (66) 2658 6300 ext 1470 [email protected] • Auto • Conmat • Contractor • Steel

Jesada TECHAHUSDIN, CFA (66) 2658 6300 ext 1394 [email protected] • Financial Services

Kevin WONG (603) 2082 6824 [email protected] • REITs

Tee Sze Chiah Head of Retail Research (603) 2297 6858 [email protected]

Padon VANNARAT (66) 2658 6300 ext 1450 [email protected] • Strategy

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Strategy Research APPENDIX I: TERMS FOR PROVISION OF REPORT, DISCLAIMERS AND DISCLOSURES DISCLAIMERS This research report is prepared for general circulation and for information purposes only and under no circumstances should it be considered or intended as an offer to sell or a solicitation of an offer to buy the securities referred to herein. Investors should note that values of such securities, if any, may fluctuate and that each security’s price or value may rise or fall. Opinions or recommendations contained herein are in form of technical ratings and fundamental ratings. Technical ratings may differ from fundamental ratings as technical valuations apply different methodologies and are purely based on price and volume-related information extracted from the relevant jurisdiction’s stock exchange in the equity analysis. Accordingly, investors’ returns may be less than the original sum invested. Past performance is not necessarily a guide to future performance. This report is not intended to provide personal investment advice and does not take into account the specific investment objectives, the financial situation and the particular needs of persons who may receive or read this report. Investors should therefore seek financial, legal and other advice regarding the appropriateness of investing in any securities or the investment strategies discussed or recommended in this report. The information contained herein has been obtained from sources believed to be reliable but such sources have not been independently verified by Maybank Investment Bank Berhad, its subsidiary and affiliates (collectively, “MKE”) and consequently no representation is made as to the accuracy or completeness of this report by MKE and it should not be relied upon as such. Accordingly, MKE and its officers, directors, associates, connected parties and/or employees (collectively, “Representatives”) shall not be liable for any direct, indirect or consequential losses or damages that may arise from the use or reliance of this report. Any information, opinions or recommendations contained herein are subject to change at any time, without prior notice. This report may contain forward looking statements which are often but not always identified by the use of words such as “anticipate”, “believe”, “estimate”, “intend”, “plan”, “expect”, “forecast”, “predict” and “project” and statements that an event or result “may”, “will”, “can”, “should”, “could” or “might” occur or be achieved and other similar expressions. Such forward looking statements are based on assumptions made and information currently available to us and are subject to certain risks and uncertainties that could cause the actual results to differ materially from those expressed in any forward looking statements. Readers are cautioned not to place undue relevance on these forward-looking statements. MKE expressly disclaims any obligation to update or revise any such forward looking statements to reflect new information, events or circumstances after the date of this publication or to reflect the occurrence of unanticipated events. MKE and its officers, directors and employees, including persons involved in the preparation or issuance of this report, may, to the extent permitted by law, from time to time participate or invest in financing transactions with the issuer(s) of the securities mentioned in this report, perform services for or solicit business from such issuers, and/or have a position or holding, or other material interest, or effect transactions, in such securities or options thereon, or other investments related thereto. In addition, it may make markets in the securities mentioned in the material presented in this report. MKE may, to the extent permitted by law, act upon or use the information presented herein, or the research or analysis on which they are based, before the material is published. One or more directors, officers and/or employees of MKE may be a director of the issuers of the securities mentioned in this report. This report is prepared for the use of MKE’s clients and may not be reproduced, altered in any way, transmitted to, copied or distributed to any other party in whole or in part in any form or manner without the prior express written consent of MKE and MKE and its Representatives accepts no liability whatsoever for the actions of third parties in this respect. This report is not directed to or intended for distribution to or use by any person or entity who is a citizen or resident of or located in any locality, state, country or other jurisdiction where such distribution, publication, availability or use would be contrary to law or regulation. This report is for distribution only under such circumstances as may be permitted by applicable law. The securities described herein may not be eligible for sale in all jurisdictions or to certain categories of investors. Without prejudice to the foregoing, the reader is to note that additional disclaimers, warnings or qualifications may apply based on geographical location of the person or entity receiving this report. Malaysia Opinions or recommendations contained herein are in the form of technical ratings and fundamental ratings. Technical ratings may differ from fundamental ratings as technical valuations apply different methodologies and are purely based on price and volume-related information extracted from Bursa Malaysia Securities Berhad in the equity analysis. Singapore This report has been produced as of the date hereof and the information herein may be subject to change. Maybank Kim Eng Research Pte. Ltd. (“Maybank KERPL”) in Singapore has no obligation to update such information for any recipient. For distribution in Singapore, recipients of this report are to contact Maybank KERPL in Singapore in respect of any matters arising from, or in connection with, this report. If the recipient of this report is not an accredited investor, expert investor or institutional investor (as defined under Section 4A of the Singapore Securities and Futures Act), Maybank KERPL shall be legally liable for the contents of this report, with such liability being limited to the extent (if any) as permitted by law. Thailand The disclosure of the survey result of the Thai Institute of Directors Association (“IOD”) regarding corporate governance is made pursuant to the policy of the Office of the Securities and Exchange Commission. The survey of the IOD is based on the information of a company listed on the Stock Exchange of Thailand and the market for Alternative Investment disclosed to the public and able to be accessed by a general public investor. The result, therefore, is from the perspective of a third party. It is not an evaluation of operation and is not based on inside information. The survey result is as of the date appearing in the Corporate Governance Report of Thai Listed Companies. As a result, the survey may be changed after that date. Maybank Kim Eng Securities (Thailand) Public Company Limited (“MBKET”) does not confirm nor certify the accuracy of such survey result. Except as specifically permitted, no part of this presentation may be reproduced or distributed in any manner without the prior written permission of MBKET. MBKET accepts no liability whatsoever for the actions of third parties in this respect. US This research report prepared by MKE is distributed in the United States (“US”) to Major US Institutional Investors (as defined in Rule 15a-6 under the Securities Exchange Act of 1934, as amended) only by Maybank Kim Eng Securities USA Inc (“Maybank KESUSA”), a broker-dealer registered in the US (registered under Section 15 of the Securities Exchange Act of 1934, as amended). All responsibility for the distribution of this report by Maybank KESUSA in the US shall be borne by Maybank KESUSA. All resulting transactions by a US person or entity should be effected through a registered broker-dealer in the US. This report is not directed at you if MKE is prohibited or restricted by any legislation or regulation in any jurisdiction from making it available to you. You should satisfy yourself before reading it that Maybank KESUSA is permitted to provide research material concerning investments to you under relevant legislation and regulations. UK This document is being distributed by Maybank Kim Eng Securities (London) Ltd (“Maybank KESL”) which is authorized and regulated, by the Financial Services Authority and is for Informational Purposes only. This document is not intended for distribution to anyone defined as a Retail Client under the Financial Services and Markets Act 2000 within the UK. Any inclusion of a third party link is for the recipients convenience only, and that the firm does not take any responsibility for its comments or accuracy, and that access to such links is at the individuals own risk. Nothing in this report should be considered as constituting legal, accounting or tax advice, and that for accurate guidance recipients should consult with their own independent tax advisers.

March 18, 2015

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Strategy Research DISCLOSURES Legal Entities Disclosures Malaysia: This report is issued and distributed in Malaysia by Maybank Investment Bank Berhad (15938-H) which is a Participating Organization of Bursa Malaysia Berhad and a holder of Capital Markets and Services License issued by the Securities Commission in Malaysia. Singapore: This material is issued and distributed in Singapore by Maybank KERPL (Co. Reg No 197201256N) which is regulated by the Monetary Authority of Singapore. Indonesia: PT Kim Eng Securities (“PTKES”) (Reg. No. KEP-251/PM/1992) is a member of the Indonesia Stock Exchange and is regulated by the BAPEPAM LK. Thailand: MBKET (Reg. No.0107545000314) is a member of the Stock Exchange of Thailand and is regulated by the Ministry of Finance and the Securities and Exchange Commission. Philippines: Maybank ATRKES (Reg. No.01-2004-00019) is a member of the Philippines Stock Exchange and is regulated by the Securities and Exchange Commission. Vietnam: Maybank Kim Eng Securities JSC (License Number: 71/UBCK-GP) is licensed under the State Securities Commission of Vietnam.Hong Kong: KESHK (Central Entity No AAD284) is regulated by the Securities and Futures Commission. India: Kim Eng Securities India Private Limited (“KESI”) is a participant of the National Stock Exchange of India Limited (Reg No: INF/INB 231452435) and the Bombay Stock Exchange (Reg. No. INF/INB 011452431) and is regulated by Securities and Exchange Board of India. KESI is also registered with SEBI as Category 1 Merchant Banker (Reg. No. INM 000011708) US: Maybank KESUSA is a member of/ and is authorized and regulated by the FINRA – Broker ID 27861. UK: Maybank KESL (Reg No 2377538) is authorized and regulated by the Financial Services Authority.

Disclosure of Interest Malaysia: MKE and its Representatives may from time to time have positions or be materially interested in the securities referred to herein and may further act as market maker or may have assumed an underwriting commitment or deal with such securities and may also perform or seek to perform investment banking services, advisory and other services for or relating to those companies. Singapore: As of 18 March 2015, Maybank KERPL and the covering analyst do not have any interest in any companies recommended in this research report. Thailand: MBKET may have a business relationship with or may possibly be an issuer of derivative warrants on the securities /companies mentioned in the research report. Therefore, Investors should exercise their own judgment before making any investment decisions. MBKET, its associates, directors, connected parties and/or employees may from time to time have interests and/or underwriting commitments in the securities mentioned in this report. Hong Kong: KESHK may have financial interests in relation to an issuer or a new listing applicant referred to as defined by 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. As of 18 March 2015, KESHK and the authoring analyst do not have any interest in any companies recommended in this research report. MKE may have, within the last three years, served as manager or co-manager of a public offering of securities for, or currently may make a primary market in issues of, any or all of the entities mentioned in this report or may be providing, or have provided within the previous 12 months, significant advice or investment services in relation to the investment concerned or a related investment and may receive compensation for the services provided from the companies covered in this report.

OTHERS Analyst Certification of Independence The views expressed in this research report accurately reflect the analyst’s personal views about any and all of the subject securities or issuers; and no part of the research analyst’s compensation was, is or will be, directly or indirectly, related to the specific recommendations or views expressed in the report. Reminder Structured securities are complex instruments, typically involve a high degree of risk and are intended for sale only to sophisticated investors who are capable of understanding and assuming the risks involved. The market value of any structured security may be affected by changes in economic, financial and political factors (including, but not limited to, spot and forward interest and exchange rates), time to maturity, market conditions and volatility and the credit quality of any issuer or reference issuer. Any investor interested in purchasing a structured product should conduct its own analysis of the product and consult with its own professional advisers as to the risks involved in making such a purchase. No part of this material may be copied, photocopied or duplicated in any form by any means or redistributed without the prior consent of MKE.

Ong Seng Yeow | Executive Director, Maybank Kim Eng Research

Definition of Ratings Maybank Kim Eng Research uses the following rating system BUY Return is expected to be above 10% in the next 12 months (excluding dividends) HOLD Return is expected to be between - 10% to +10% in the next 12 months (excluding dividends) SELL Return is expected to be below -10% in the next 12 months (excluding dividends)

Applicability of Ratings The respective analyst maintains a coverage universe of stocks, the list of which may be adjusted according to needs. Investment ratings are only applicable to the stocks which form part of the coverage universe. Reports on companies which are not part of the coverage do not carry investment ratings as we do not actively follow developments in these companies.

March 18, 2015

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Strategy Research  Malaysia Maybank Investment Bank Berhad (A Participating Organisation of Bursa Malaysia Securities Berhad) 33rd Floor, Menara Maybank, 100 Jalan Tun Perak, 50050 Kuala Lumpur Tel: (603) 2059 1888; Fax: (603) 2078 4194

Stockbroking Business:

Level 8, Tower C, Dataran Maybank, No.1, Jalan Maarof 59000 Kuala Lumpur Tel: (603) 2297 8888 Fax: (603) 2282 5136

 Philippines Maybank ATR Kim Eng Securities Inc. 17/F, Tower One & Exchange Plaza Ayala Triangle, Ayala Avenue Makati City, Philippines 1200 Tel: (63) 2 849 8888 Fax: (63) 2 848 5738

 Singapore Maybank Kim Eng Securities Pte Ltd Maybank Kim Eng Research Pte Ltd 50 North Canal Road Singapore 059304

Maybank Kim Eng Securities (London) Ltd 5th Floor, Aldermary House 10-15 Queen Street London EC4N 1TX, UK

Tel: (65) 6336 9090 Tel: (44) 20 7332 0221 Fax: (44) 20 7332 0302

 Hong Kong

 Indonesia

 New York Maybank Kim Eng Securities USA Inc 777 Third Avenue, 21st Floor New York, NY 10017, U.S.A. Tel: (212) 688 8886 Fax: (212) 688 3500

 India

Kim Eng Securities (HK) Ltd Level 30, Three Pacific Place, 1 Queen’s Road East, Hong Kong

PT Maybank Kim Eng Securities Plaza Bapindo Citibank Tower 17th Floor Jl Jend. Sudirman Kav. 54-55 Jakarta 12190, Indonesia

Kim Eng Securities India Pvt Ltd 2nd Floor, The International 16, Maharishi Karve Road, Churchgate Station, Mumbai City - 400 020, India

Tel: (852) 2268 0800 Fax: (852) 2877 0104

Tel: (62) 21 2557 1188 Fax: (62) 21 2557 1189

Tel: (91) 22 6623 2600 Fax: (91) 22 6623 2604

 Thailand Maybank Kim Eng Securities (Thailand) Public Company Limited 999/9 The Offices at Central World, 20th - 21st Floor, Rama 1 Road Pathumwan, Bangkok 10330, Thailand Tel: (66) 2 658 6817 (sales) Tel: (66) 2 658 6801 (research)

 South Asia Sales Trading

 London

 Vietnam Maybank Kim Eng Securities Limited 4A-15+16 Floor Vincom Center Dong Khoi, 72 Le Thanh Ton St. District 1 Ho Chi Minh City, Vietnam Tel : (84) 844 555 888 Fax : (84) 8 38 271 030

 Saudi Arabia In association with

Anfaal Capital Villa 47, Tujjar Jeddah Prince Mohammed bin Abdulaziz Street P.O. Box 126575 Jeddah 21352 Tel: (966) 2 6068686 Fax: (966) 26068787

 North Asia Sales Trading

Kevin Foy Regional Head Sales Trading [email protected] Tel: (65) 6336-5157 US Toll Free: 1-866-406-7447

Alex Tsun [email protected] Tel: (852) 2268 0228 US Toll Free: 1 877 837 7635

Malaysia

Thailand

Rommel Jacob [email protected] Tel: (603) 2717 5152

Tanasak Krishnasreni [email protected] Tel: (66)2 658 6820

Indonesia Harianto Liong [email protected] Tel: (62) 21 2557 1177

New York

India

Andrew Dacey [email protected] Tel: (212) 688 2956

Manish Modi [email protected] Tel: (91)-22-6623-2601

Vietnam

Philippines

Tien Nguyen

Keith Roy [email protected] Tel: (63) 2 848-5288

[email protected]

Tel: (84) 44 555 888 x8079

March 18, 2015

www.maybank-ke.com | www.maybank-keresearch.com

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