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    Db investigator strategy 121017 Db investigator strategy 121017 Document Transcript

    • Deutsche BankMarkets ResearchAsia Strategy Date 17 October 2012 The Investigator Strategy Update Ajay Kapur, CFAPolicy Uncertainty – The Financial Strategist (+852) 2203 6196Worlds Dominator ajay.kapur@db.com Ritesh Samadhiya, CFAElevated Economic Policy Uncertainty – about to drop?We might be at an important inflection point in the financial markets. The elevation of StrategistEconomic Policy Uncertainty, since 2008, to twice the level of the previous 23 years has (+852) 2203 6251increased the equity risk premium, diminished the opportunity set for stock-picking, and ritesh.samadhiya@db.comfavored defensive stocks over cyclicals. Finance professionals and investors may havewrongly concluded that this state of affairs will be prolonged and enduring. We think this Absolute Return Driversstatus quo view is wrong, and that we could be at a turning point, and that economic Current Account Balance/GDPpolicy uncertainty has probably peaked. Let the profitable boredom begin!US Political Polarization at 130-year high Sentiment (Risk-Love)Political polarization might just recede with this coming US election. Financial Total Score (current) Real Exchange Ratederegulation – a key driver of complexity, the consequent compensation premium in the Total Score (last)financial sector, the rise in the ratio of bank fee income to total income, and incomeinequality, all likely peaked together in 2008. Any potential reduction in political Technicals Valuationpolarization will likely involve compromise, less policy uncertainty, and a lower likelihood Liquidity Growthof policies being overturned with every election. PolicyEconomic Policy Uncertainty highly correlated with poor stock-picking efficacyEconomic Policy Uncertainty is a function of media mentions of the issue, laws dropping China 8 -2off the books, and economic forecast dispersion. The correlation coefficient between Hong Kong -2 -2Economic Policy Uncertainty and stock-picking efficacy was only 0.09 between 1985 and Indonesia 1 02007. Since then it has jumped to 0.74. As a stock-picker, you want Economic Policy India 4 3Uncertainty to fall. Adjusted for portfolio volatility, the stock-picking opportunity will Korea 6 -3become much wider if uncertainty drops. Malaysia 2 3Economic Policy Uncertainty is highly correlated with equity risk premium and Philippines 5 0defensives over cyclicals Singapore -2 4From 1985 to 2007, there was NO relationship between the two, a correlation coefficient Thailand 4 6of -0.07. Since 2008, however, the correlation coefficient between policy uncertainty and Taiwan 1 0equity risk premium has shot up to 0.67! Presumably, stocks are “cheap” compared with Asia ex-Japan 4 -2bonds, since policy is uncertain, the impact on cash flows is uncertain and, as the most Japan 2 -4junior entity in the capital structure, stocks need to be cheap to compensate for thispolicy uncertainty.Economic Policy Uncertainty probably peaking out globally: huge implications Our model portfolio is available as a DBIn the US, a 130-year peak in political polarization and an important election on what todo about this polarization should help resolve things one way or another. Whatever the thematic basket (DBHKASTR).outcome of the election, another four years of peak political polarization is not what theelectorate is voting for. In Europe, there is still a long way to go on reducing policyuncertainty on the part of governments, north and southern Europe, and within provincesin countries, but the ECB’s views are quite clear, agree or disagree with them. In China,the important political transition that occurs once in a decade will soon be over.Governance and policy – the work of government – can then get renewed attention. InIndia, after a period of lethargy, the government has recently been invigorated and policyhas come unstuck. Of course, this is all speculation and could be wrong, but not having aview on the direction of Policy Uncertainty is NOT an option for financial professionals,given its salience.We are adding Top Glove Corp Bhd, Korea Zinc Co Ltd., Ace Hardware and ShreeCement Ltd to the model portfolio. The model portfolio is up 23.1% YTD vs. 13.3% forMSCI AXJ.________________________________________________________________________________________________________________Deutsche Bank AG/Hong KongAll prices are those current at the end of the previous trading session unless otherwise indicated. Prices are sourcedfrom local exchanges via Reuters, Bloomberg and other vendors. Data is sourced from Deutsche Bank and subjectcompanies. Deutsche Bank does and seeks to do business with companies covered in its research reports. Thus,investors should be aware that the firm may have a conflict of interest that could affect the objectivity of this report.Investors should consider this report as only a single factor in making their investment decision. DISCLOSURES ANDANALYST CERTIFICATIONS ARE LOCATED IN APPENDIX 1. MICA(P) 072/04/2012.
    • 17 October 2012The InvestigatorTable Of ContentsPolicy Uncertainty – The Financial World’s Dominator ..................................................... 3 Asia Model Portfolio update ............................................................................................... 8 Country selection .............................................................................................................. 15 Country-sector selection .................................................................................................. 16 Asia Model Portfolio ......................................................................................................... 20 Global – valuation ............................................................................................................. 21 Global metrics ................................................................................................................... 22 Global metrics (continued) ............................................................................................... 23 Global – market intelligence ............................................................................................. 24 Global – market intelligence (continued) .......................................................................... 25 Asia – valuation ................................................................................................................ 26 Asia – investor sentiment ................................................................................................. 27 Asia – technicals ............................................................................................................... 28 Asia – growth and earnings.............................................................................................. 29 Asia – liquidity .................................................................................................................. 30 Asia – factor performance ................................................................................................ 31 Asia – market intelligence ................................................................................................ 33 Japan – valuations ............................................................................................................ 34 Japan – investor sentiment .............................................................................................. 35 Japan – technicals ............................................................................................................ 36 Japan – growth and earnings ........................................................................................... 37 Japan – liquidity ................................................................................................................ 38 Japan – factor performance ............................................................................................. 39 Japan – market intelligence.............................................................................................. 40 Companies Mentioned ..................................................................................................... 41 Appendix A ................................................................................... 42 Page 2 Deutsche Bank AG/Hong Kong
    • 17 October 2012The InvestigatorPolicy Uncertainty – The Financial World’s DominatorThe only thing that matters – policy uncertainty and polarizationWe contend that the main driver of the level of equity markets, the relative performanceof risk assets versus “safe” assets, and the potential opportunity for stock-pricing –pretty much what defines a finance professional’s life – are increasingly determined byjust one primary factor. The rest of it – all those company meetings, the travel,spreadsheets, conferences and broker research reports – are less salient compared tothis one factor. This is a bold claim. So what is this salient, primary factor? And can weprove our contention? It is, in our view, Policy Uncertainty.A few academics have quantified this for the US and Europe, and we will try to proveour point regarding its link with changes in the equity risk premium, the relativeperformance of risky versus “safe assets” and the stock-picking opportunity set. Wewill also speculate that Policy Uncertainty in the world is about to downshift remarkablyfrom current ungainly elevated levels. If we are right, this will have hugely positiveimplications for equities, risk assets and the opportunities for stock-picking. So far,since the financial crisis broke out, Policy Uncertainty has been at twice the level of theprevious 23 years, keeping the equity risk premium high, challenging risky assets versus“safe assets”, and rendering stock-picking opportunities exceptionally tough. All thatmight be about to change.But first a quick point on political polarization in the USA, where we have the data. AsFigure 1 shows, political polarization in the USA, proxied by how often Republicans votesimilarly to one another, as do Democrats, is at a record high since 1880! It is like twosullen adults sitting at opposite ends of a see-saw, looking away from each other. Withthat degree of entrenched polarization, it is tough to get policies passed, and amalodorous air of policy inaction and uncertainty hangs heavy in the land. Note inFigure 1 how policy polarization correlates well with income inequality (or plutonomy).(Interested readers in the concept of political polarization should go tohttp://www.slate.com/articles/life/do_the_math/2001/12/growing_apart.single.html, TheMathematical Evidence for Congress’ Growing Polarization by Jordan Ellenberg1.) Ourhumble contention is that time-series that are at 130-year extremes are most likely tomean revert, however fanciful that might seem at the time of the extreme. In otherwords, political polarization might just recede with this coming US election. Financialderegulation – a key driver of complexity, the consequent compensation premium in thefinancial sector, the rise in the ratio of bank fee income to total income, and incomeinequality, all likely peaked together in 2008. Any potential reduction in politicalpolarization will likely involve compromise, less policy uncertainty, and less of alikelihood of policies being overturned with every election. As Figure 2 shows, morepolicy certainty would diminish one key headache for business.Economic Policy UncertaintyScott Baker, Nick Bloom and Steven Davis at Stanford have constructed EconomicPolicy Uncertainty indices for the US, Europe and Canada. For the US, in their words:To measure policy-related economic uncertainty, we construct an index from three types of underlyingcomponents. One component quantifies newspaper coverage of policy-related economic uncertainty. A secondcomponent reflects the number of federal tax code provisions set to expire in future years. The third componentuses disagreement among economic forecasters as a proxy for uncertainty.The first component is an index of search results from 10 large newspapers. The newspapers included in ourindex are USA Today, the Miami Herald, the Chicago Tribune, the Washington Post, the Los Angeles Times,1 Also see the original authors’ work at http://voteview.com/Polarized_America.htm#MPRBOOKDeutsche Bank AG/Hong Kong Page 3
    • 17 October 2012The Investigatorthe Boston Globe, the San Francisco Chronicle, the Dallas Morning News, the New York Times, and the WallStreet Journal. From these papers, we construct a normalized index of the volume of news articles discussingeconomic policy uncertainty of some type. The second component of our index draws on reports by theCongressional Budget Office (CBO) that compile lists of temporary federal tax code provisions. We createannual discounted numbers of tax code provisions scheduled to expire for each year, giving a measure of thelevel of uncertainty regarding the path that the federal tax code will take in the future. The third component ofour policy-related uncertainty index draws on the Federal Reserve Bank of Philadelphias Survey ofProfessional Forecasters. Here, we utilize the dispersion between individual forecasters predictions aboutfuture levels of the Consumer Price Index, Federal Expenditures, and State and Local Expenditures toconstruct indices of uncertainty about policy-related macroeconomic variables. (From their website,www.policyuncertainty.com)Figure 1: US: record political polarization and income inequality – about to reverse? 1.2 20 Higher 1.1 18 Polarization 1.0 16 0.9 14 0.8 12 0.7 10 0.6 8 0.5 0.4 6 House Polarization, LS 0.3 Senate Polarization, LS 4 Income share of the top 1% (excluding capital gains), RS 0.2 2 1879 1899 1919 1939 1959 1979 1999Source: Deutsche Bank. Polarization is measured as difference in party means - first dimension. http://voteview.com/Polarized_America.htmFigure 2: US: Economic Uncertainty a huge problemSource: NFIBFigure 3 shows the US, European and Canadian Economic Policy uncertainty indices.We will use the US version for our arguments here. Figure 4 shows the US EconomicPage 4 Deutsche Bank AG/Hong Kong
    • 17 October 2012The InvestigatorPolicy Uncertainty Index alongside the average US stock performance correlations withthe MSCI USA benchmark (a proxy for the potential efficacy of stock picking. If stocksall move in the same direction with the benchmark, it reduces the efficacy of stock-picking, once we adjust for portfolio volatility). A few things stand out. As the inventorsof the index note, US Economic Policy Uncertainty since 2007 has been at twice thelevel of the prior 23 years. As Figure 4 also shows, the relationship between EconomicPolicy Uncertainty and the stock-picking opportunity set has increased markedly since2008. The correlation coefficient between Economic Policy Uncertainty and stock-picking efficacy was only 0.09 between 1985 and 2007. Since then, it has jumped to0.74. If you are a stock-picker, you want Economic Policy Uncertainty to subside, bigtime. Adjusted for portfolio volatility, the stock picking opportunity will become muchwider, and life presumably a bit less stressful. Having a view on Economic PolicyUncertainty is critical.Figure 3: Economic Policy Uncertainty has been elevated since 2008, about to drop?300 300 US Economic Policy Uncertainty Index250 European Economic Policy Uncertainty Index High policy 250 uncertainty Canadian Economic Policy Uncertainty Index200 200150 150100 100 50 50 0 0 1/85 1/88 1/91 1/94 1/97 1/00 1/03 1/06 1/09 1/12Source: Deutsche Bank, Scott Baker, Nick Bloom and Steven Davis (www.policyuncertainty.com)Figure 4: Economic Policy Uncertainty and stock correlations with the benchmark movetogether. Stock-picking to become more potent as Policy Uncertainty drops 0.9 Average US stock performance (60 trading days) EU credit crisis 300 correlations with MSCI USA, LS Lehman Failure 0.8 87 crash US Economic Policy Uncertainty measure, RS 250 0.7 Worldcom Scandal High High policy economic uncertainty 0.6 LTCM 200 policy US recession uncertainty Asian 0.5 Crisis 150 0.4 0.3 100 Macro-driven market, 0.2 correlation 0.74 50 0.1 Stock-pickers market, correlation 0.09 0.0 0 1/86 1/88 1/90 1/92 1/94 1/96 1/98 1/00 1/02 1/04 1/06 1/08 1/10 1/12Source: Deutsche Bank, Stock correlations with MSCI USA based on rolling 60-day daily returns on a broad universe of stocks covering the top 95% of totalmarket capitalization (i.e.1,053 to 2,684 stocks from 1985 to 2012). For more on the “Economic Policy Uncertainty Index”, go to the websitehttp://policyuncertainty.com. According to the authors, “To measure policy-related economic uncertainty, we construct an index from three types of underlyingcomponents. One component quantifies newspaper coverage of policy-related economic uncertainty. A second component reflects the number of federal taxcode provisions set to expire in future years. The third component uses disagreement among economic forecasters as a proxy for uncertainty.”Figure 5 shows the relationship between the US Economic Policy Uncertainty index andthe equity risk premium (the higher it is, the “cheaper” stocks are versus bonds). From1985 to 2007, there was NO relationship between the two, a correlation coefficient of -0.07. Since 2008, however, the correlation coefficient between policy uncertainty andDeutsche Bank AG/Hong Kong Page 5
    • 17 October 2012The Investigatorthe equity risk premium has shot up to 0.67! Presumably, stocks are “cheap” comparedwith bonds, since policy is uncertain, the impact on cash flows is uncertain and, as themost junior entity in the capital structure, stocks need to be cheap to compensate forthis policy uncertainty. Logically, if the correlation holds and there is a substantialdecline in policy uncertainty, the equity risk premium could decline in tandem – stockswould beat bonds massively. Having a view on Economic Policy Uncertainty is critical.How about defensive sectors versus cyclicals? Does US Economic Policy Uncertaintyhave any role here? Yes. As Figure 6 shows, changes in US Economic PolicyUncertainty relate well with changes in the relative performance of defensives versuscyclicals. The correlation coefficient has doubled from 0.33 between 1985-2007 and2008 now. As policy uncertainty rises, there is an unsurprising rush to defensives, andvice versa. Again, this relationship has been a lot more salient since 2008. Having aview on Economic Policy Uncertainty is critical.Figure 5: Equity Risk Premium and Economic Policy Uncertainty have moved in lock-step since 2008. Unlocking equity risk premium if Policy Uncertainty drops250 8% High policy230 US Economic Policy Uncertainty Index, uncertainty 3mma, LS 6%210 Equity Risk Premium (S&P500 earnings 4%190 yield less 10yr bond yield), RS170 2%150 0%130110 -2% Correlation 0.67 90 Correlation -0.07 -4% 70 50 -6% 1/85 1/87 1/89 1/91 1/93 1/95 1/97 1/99 1/01 1/03 1/05 1/07 1/09 1/11 1/13Source: Deutsche BankFigure 6: Defensives versus Cyclicals ( or risk-off versus risk-on) moves with changes inEconomic Policy Uncertainty 80% Economic Policy Uncertainty, 6m change, LS 80% 60% US defensive sectors / cyclical sectors, 6 month change, RS 60% 40% 40% 20% 20% 0% 0% 1/85 1/87 1/89 1/91 1/93 1/95 1/97 1/99 1/01 1/03 1/05 1/07 1/09 1/11 1/13-20% -20%-40% Correlation 0.33 Correlation 0.68 -40%-60% Defensive sectors are Consumer staples, -60% healthcare, utilities and telecom.-80% -80%Source: Deutsche Bank. Defensive sector price index is from Datastream while MSCI CYC Index is used for cyclicals.So what is our view on Policy Uncertainty globally? We can only speculate on this, butit is important to do so. In the US, a 130-year peak in political polarization and animportant election on what to do about this polarization should help resolve things oneway or another. Whatever the outcome of the election, we think it’s safe to say thatanother four years of peak political polarization is not what the electorate is hoping for.The party that loses is unlikely to find recalcitrance and obstructionism a future vote-gathering strategy, in our view. Of course, we could be wrong and the logjam, thePage 6 Deutsche Bank AG/Hong Kong
    • 17 October 2012The Investigatorpolarization, the policy uncertainty could go on for longer. In Europe, the ECB approvedits aggressive bond-buying plan with just one dissenter. While there is still a long wayto go on reducing policy uncertainty on the part of governments, north and southernEurope, and within provinces in countries, the ECB’s views are quite clear, agree ordisagree with them. In China, the important political transition that occurs once in adecade will soon be over. A renewed focus on governance and policy – the work ofgovernment – can then begin. In India, after a period of lethargy, the government hasrecently been invigorated and policy has come unstuck.With the passage of time since the outbreak of the financial crisis, there is earlyempirical evidence in the "austerity versus fiscal spending" debate. 2 As more timeelapses and more empirical results reveal themselves, we believe policy uncertainty willlikely diminish. Policymakers and voters will be better informed about the consequencesof opposing policy choices. Thus, the menu of successful policy options will likely shrink– there should be less uncertainty about the "right" policy course.Our simple read is that the substantial elevation of policy uncertainty around the worldis probably coming to an end. The confusion of policymakers in facing the rather uniquechallenges of a once-in-seventy-years potential debt deflation was understandable. It isby no means all blue skies from here, but policymakers and politicians are both learningwhat is “working”, and what is not. Electorates are making choices about the directionthey want to go in, rather than the logjam of the past five years. Debtors and creditorsalways fight about loss allocation in a debt crisis – time is the only healer that can bringthem together, however reluctantly. That time seems to be approaching. Again, this issimple expectation on our part, and we could be plain wrong. But we stress that nothaving a view on the direction of Policy Uncertainty is NOT an option for financialprofessionals.In sum, we might be at an important inflection point in financial markets. The elevationof Economic Policy Uncertainty since 2008 has elevated the equity risk premium,diminished the opportunity set for stock-picking, and favored defensive stocks overcyclicals. The mindset of finance professionals and investors might have wronglyconcluded that this state of affairs is going to be prolonged and enduring – that bondsare better than stocks, that stock-picking is ruinously counter-productive in this “macro-driven” market, and that defensives are superior investments to cyclicals. This viewimplies a continued elevated level of global Economic Policy Uncertainty. We think thisstatus quo view is wrong, and that we could be at a turning point, and that economicpolicy uncertainty has probably peaked. Let the profitable boredom begin!2 See the latest IMF World Economic Outlook, Coping with High Debt and Sluggish Growth and Fiscal Policy in aDepressed Economy by Lawrence H. Summers and J. Bradford DeLong.(www.brookings.edu/~/.../2012_spring_BPEA_delongsummers.pdf)Deutsche Bank AG/Hong Kong Page 7
    • 17 October 2012The InvestigatorAsia Model Portfolio updateWe are removing Hyundai Motor Co, Hyundai Mobis, Simplo Technology Co Ltd andStarhub Ltd. Hyundai Motor and Hyundai Mobis have dropped to the fourth and thirdquintile respectively in our multifactor stock ranking model. Hyundai Motor looksweaker (relative to the region) on profitability, growth and earnings momentum.Hyundai Mobis is now looking expensive and has lower earnings momentum. SimploTechnology faded on price momentum, earnings momentum and consensus ratingmetrics. We are cutting Singapore on poor earnings revisions and dropping Starhubfrom the model portfolio.We are adding Top Glove Corp Bhd, Korea Zinc Co Ltd, Ace Hardware and ShreeCement Ltd. Top Glove ranks highly on valuation, earnings and price momentum. KoreaZinc looks better on profitability, earnings, price momentum and earnings quality. Acehardware, though looking expensive, scores well on profitability, growth, earnings andprice momentum. Shree Cement looks good on profitability, earnings, price momentumand consensus analyst rating. For factor description, see appendix A.Top Glove Corp Bhd (TOPG MK)Outlook remains positive; reiterating Buy. Disciplined capacity expansion plans,expectations of leveling raw material prices as a result of higher rubber production inASEAN and slower consumption growth globally, as well as resilient demand for rubbergloves for medical and hygiene purposes should drive multi-year growth for the sectorand allow Top Glove to generate two-year (FY13-15E) net profit CAGR of 14%, in ourview. We reiterate our Buy recommendation with a price target of RM6.05/share,implying a total return of 21%. (Michelle Foong, 12 October 2012)Korea Zinc Co Ltd (010130 KS)Gold/silver price forecast upgrades affect Zijin/Zhaojin/Korea Zinc. Deutsche Bank’sglobal commodity team has upgraded its gold/silver price forecasts by 2.4% for 2013and 11.1% for 2014 in light of further central bank action to expand monetaryconditions. The most relevant stocks in Asia ex-Japan are Zijin, Zhaojin and Korea Zinc(50% revenue exposure). We raise Zijin/Zhaojin/Korea Zinc’s 2013E earnings by2.4%/5.1%/1.5%, respectively. Our DCF valuation method differentiates Zijin (Buy) fromZhaojin (downgrade from Buy to Hold), with target price upgrades at 5.6% and 8.3%,respectively. We believe the bullishness on the gold price has been factored intoZhaojin’s share price, after a 36% rally in the past month. We roll over Korea Zinc’starget price to 2013-based and raise it by 24%. Overall, Zijin and Korea Zinc stand outafter the upgrades, with their target prices now implying 20% and 27% upside potential.(Chanwook Park, 4 October, 2012)Ace Hardware (ACES IJ)Consistently delivering strong growth and aggressive expansion. We believe that AceHardware Indonesia will continue to deliver strong growth as it is one of the bestproxies for the expanding middle class, enjoying a forecast earnings CAGR of 22% overthe next three years. Management has a strong operational and financial track record,delivering a sales CAGR of 32% on expansion of 21% over the past three years. Webelieve the company is on track to have 100 stores in the next three years, which is a43% increase. Maintaining Buy with new DCF-based target price of Rp8,000 (fromRp5,000). (Reggy Susanto, 28 September, 2012)Shree Cement (SRCM IN)A high FCF yield of over 9% in FY13e, EBITDA CAGR of 27% over FY12-FY14e, drivenby improving realizations and attractive valuations of 6.6x FY13e EV/EBITA, and a ~30%discount to large cap peers makes us confident of continued outperformance from thestock despite a 37% rise in the stock price over the past three months. (Harshad Katkar,16 October, 2012)Page 8 Deutsche Bank AG/Hong Kong
    • 17 October 2012The InvestigatorSummaryGlobalHigh policy uncertainty, and the attendant flight from junior tranches of the capitalstructure, along with a dismal prior decade of equity returns keeps them “cheap”.Reduced policy uncertainty and losses from bond portfolios are likely to be required ascatalysts to unlock value in equities. Despite all the despair about global growth, ourown mother of all leading indicators (MOMLI) is looking up, as are asset-price-basedopinions on global growth. Meanwhile, analysts have lost confidence and are lookingfor just 5% EPS growth globally in 2012, and 12% for 2013. Global Risk-Love(sentiment) has now entered euphoria, a slight concern. The global Tape is very strong,and the Marshallian K is rising.AsiaAsian valuations are moderately below historical averages. The problem is margins – inChina they seem to be in a secular decline, while in India they seem to be at a cyclicallow. The region cannot rely on asset turns and leverage – both at global levels – toboost relative ROEs compared with the world. It is probably going to have to be EBITmargin expansion that gets the PB up. We don’t see any substantial decline in the costof equity to boost PB multiples. Risk-love in Asia is at neutral. Technicals are improving– new highs are rising, and new lows have almost vanished. Asia’s leading economicindicators are bottoming, and policy is no longer being tightened. Analysts have takenthe knife to this year’s EPS growth forecasts from around 13% at the start of the year to5% now. We think that EPS revisions and economic surprises are about bottoming now.New issuance and secondaries have been paltry – a good positive contrarian indicator.Foreign fund flows have resumed in earnest as markets have rallied. Value strategiesand high profitability have done well this year, while high projected growth stocks havebeen punished.JapanJapanese stocks continue to look undervalued versus history. A return to credibleinflation and higher nominal GDP growth globally is required to unlock value. Recenttensions with China are unhelpful for risk assets in Japan. Sentiment is at neutral levels.Technicals are mixed. Economic surprises are nasty and mean-reverting. They areprobably going to get less bad. EPS revisions continue to slide. Fund flows are weakand the market continues to underperform the world as US 10-year bond yields remainsuppressed. Value remains the long-term winner.China (neutral)China’s valuations look “cheap” compared with history and are at fair value on our PBROE less COE model. However, on prospective ROEs of around 7% in three years’ timeand COE of around 10%, the current PB of 1.4 is substantially overvalued. Monetaryreflation could lift the current multiple, but the long-term deterioration in EBIT marginsis the key challenge to a re-rating. Sentiment is at neutral. Worryingly, turnover/marketcap is plumbing new depths. Once the political transition is done, and policy making,reflation and market-supportive steps are likely taken, sentiment and pathetic turnovermight perk up. Technicals are weak. Policy is tightening via the currency, and weakmonetary growth. Real interest rates for corporates are rising with the corporate pricedeflator contracting yoy. EPS revisions keep dropping as do EPS growth forecasts for2012 and 2013. We are watching carefully for EPS revisions to hook up. The good newsis that the credit multiplier is rising yoy, and the market is responsive to this indicator.The bad news is that the gap between M1 and M2 growth is still weak and correlateswith the PB multiple. We need to see a more credible reflation to see the market makeDeutsche Bank AG/Hong Kong Page 9
    • 17 October 2012The Investigatorstrong upward moves. Earnings revisions and momentum, together with analystopinions are being rewarded this year, while value investing has been patchy.Hong Kong (neutral)Hong Kong equities are at fair value compared with history, and about in the middle ofthe pack compared with the other Asian markets. Sentiment has rebounded from thepanic levels earlier this year. Turnover to market capitalization is still anemic, but we areencouraged by the rise in the gap between M1 and M2 growth. Technicals haveimproved since the summer. Policy seems to be tightening (even as real interest ratesare quite negative), and EPS revisions are still quite weak. The EPS growth forecast for2012 has collapsed – the sign changed from an expected +12% earlier this year to -12%growth expected now! For next year, EPS growth is expected at 10%. Inflation ismaking the real effective exchange rate less competitive, and the yield curve is flat. Agood dose of monetary reflation in China is required to turn liquidity up. Negative realinterest rates are here to stay in HK for longer than anyone recognizes. Value and lowrisk styles have been exceptional performers this year.India (overweight)Despite the recent run-up, the market is still undervalued on EV/Sales, EV/EBITDA andPB compared with history. On other metrics, like trailing PE and dividend yield, it is atlong-term averages. On our PB versus ROE less COE model it is at fair value, and needsfor ROEs to rise and/or COEs to fall – likely if the RBI cuts rates as the Rupeestrengthens. Risk-love has perked up from panic in May to neutral now. Meeting withscores of clients around the world, however, we think there is still considerableskepticism about the market. With the recent rally, technicals have improved. Thedowngrade to GDP growth by the IMF is unfathomable to us simpletons. The leadingindicator from the OECD has been rising for months, and the EPS revisions trajectoryhas also been improving for months. Our policy indicator has curled up with theweakness in the Rupee. Looking ahead, we expect the monetary base to start growingfrom its paltry 4% yoy rate, as net foreign asset growth resumes on the back of reformsand confidence. EPS growth projections for next year, at 12-14%, are reasonable. Themonetary base growth at 4.4% is anemic. The lack of net foreign asset growth is beingcompensated by a substantial increase in net RBI lending to government. This is avicious cycle that needs to be broken, and probably will be, if reform momentum ismaintained. The yield curve is no longer negative, but is still flat as a chapatti. Value andEPS momentum have been rewarded well this year. Stick with them.Indonesia (neutral)Valuations are at fair levels compared with history. We are a bit concerned about thedecline in Indonesia’s EBIT margins. Maintaining premium valuations to the regionrequires maintaining premium ROEs to the region. Having almost doubled capex/GDP inthe past few years, and as it is exposed to any slowdown in nominal GDP growth inChina, keep an eye on declining margins in Indonesia. Indonesia has gone from theposter child of solid macro policy last year to one that is perceived as having less thanoptimal policies – interest rates cut “too soon”, etc. We didn’t understand eitherposition. Indeed, it seems that other EM central banks are now following BI in cuttinginterest rates to combat slower growth. Maybe BI is a lot smarter than the gallery ofcritics assumes. We think policy easing makes sense (unlike consensus) – real economydata is coming in really weak, EPS revisions are negative (but recovering), and EPSgrowth expectations have collapsed from 17% a few months ago to just 8% now forcalendar 2012. Inflation, a lagging indicator, is stable at the 4%-ish level. The currency ismore competitive in real effective terms, free liquidity is booming and the yield curve isflat-ish. Value and EPS mo are king here. The rest are not really adding alpha this year.Page 10 Deutsche Bank AG/Hong Kong
    • 17 October 2012The InvestigatorKorea (underweight)The market is at fair value compared with its history, but cheap compared with othermarkets on a snapshot basis. This is a low ROE, low EBIT margin market, and is likely toremain a low PB market unless ROEs rise sharply. Interestingly, unlike China, Taiwanand Singapore, where margins have been in secular decline, and ROEs have beengoosed by rising asset turns and leverage (this has also been happening in Malaysia andIndonesia recently), in Korea this is not happening. EBIT margins and ROEs movetogether – albeit at low levels. We think this deserves a higher multiple than currentlyobtained. We think investors in the other markets might be suffering from “ROEillusion”, implying very strong nominal GDP growth and more leverage – both unlikely.Sentiment is just shy of neutral. Technicals are a lot stronger than overall marketperformance suggests. Close to a record percentage of stocks are making 52-weekhighs. The leading economic indicator has been rising persistently for many monthsnow, but EPS revisions are still in the doldrums. Implication: margins are undercontinued pressure. The terms of trade are improving and we expect this to feedthrough to improving margins and EPS revisions soon. The yield curve is flat, andflattening. Value has made a massive comeback in the past six months. Price and EPSmo have been disasters this year. Stock-picking in Korea based on style is very trickybecause the factors go in and out of style with a head-spinning intensity.Malaysia (neutral)Malaysian equities are undervalued versus history but quite expensive versus the othermarkets on a relative basis. As in Indonesia, we are concerned about the sharp drop inEBIT margins, even as ROEs remain stable. Risk-Love is quite high, just shy of euphoria.Technicals are neutral. The EPS revisions index has collapsed and EPS growth numbersare being taken down for 2012. Price and EPS mo, along with ROE have been rewardedthis year. But value has been tepid.Philippines (neutral)The market is expensive compared with its history and versus other markets in theregion. We like that the EBITs and ROEs move together, so there is no leverage or assetturnover-driven “ROE illusion”. Also, years of under-investment imply many years ofstrong EBIT margins (unlike say in China, or maybe even Indonesia). Sentiment hascome off from the euphoria of the summer to neutral now. The leading economicindicator is rising, and we expect EPS revisions to do the same. This is a requirement inorder to maintain its premium valuations. Value, a perennial king in Philippine alphageneration, continues to do well, as do EPS revision strategies.Singapore (neutral)The market is cheap compared with history, but fairly valued compared with otherregional markets. EBIT margins are in secular decline, and maintaining ROEs will rely oncontinued improvements in asset turnover and leverage. Sentiment is in mild euphoria.Technicals are super-strong, with close to a record percentage of stocks making 52-week highs. EPS growth projections for both 2012 and 2013 remain lackluster. Earningsrevisions also look weak. The good news is that the terms of trade are now picking upnicely, so margins are likely to get a boost. Only stability and low risk factors aregenerating alpha. Value strategies are mixed, but momentum strategies have destroyedalpha this year.Taiwan (underweight)The market is a serial underperformer versus the region. EBIT margins are in seculardecline, and the high asset turnover is running into gravity now. Risk-love is in the tank.EPS revisions are worsening, but there is hope. The terms of trade have gone verticaland project rising EPS momentum. Given poor sentiment, and an impendingimprovement in EPS growth projections, we need to keep an eye on the underweightedDeutsche Bank AG/Hong Kong Page 11
    • 17 October 2012The Investigatormarket. This tech-heavy market is respecting price momentum and stocks supported byanalysts.Thailand (overweight)The market is fairly valued versus history and the region. The exception is PB – wherethe market is at record premiums to the region. Could that be a reward for the solidROEs (driven not by EBIT margins but asset turns)? Sentiment is neutral. Technicals aresuper-strong. About a quarter are making 52-week highs. Growth-leading indicators arestill strong, even as incoming data have been weak. Analysts have dropped projected2012 EPS growth forecasts from 23% earlier his year to about 15% now. Also, we arecomforted with the rise in the terms of trade that should be supportive of margins andEPS growth going forward. Value has been a disaster this year, while price and EPSmomentum strategies have been huge winners.Page 12 Deutsche Bank AG/Hong Kong
    • 17 October 2012The InvestigatorFigure 7: Model portfolio performance since inception (13 September 2010) 22 Model portfolio absolute returns (After T/C): 19.0% 1-week relative returns 0.1% 22 20 MSCI Asia ex Japan absolute returns: 4.8% 1-month relative returns 2.5% 20 18 Model portfolio relative returns (After T/C): 14.2% YTD relative returns 9.8% 18 16 12-month relative returns 12.1% 16 14 After Transaction Cost 14 12 12 10 10 8 8 6 6 4 4 2 2 0 0 -2 -2 9/10 11/10 1/11 3/11 5/11 7/11 9/11 11/11 1/12 3/12 5/12 7/12 9/12Source: Deutsche Bank, MSCI, FactSetNote: Performance is measured in local currency. Stock changes are effective as of close one day after they are officially published (i.e. Changes published on 4th May 2011 will be effective as of close 5th May 2011).*New additions. Assume 50bps on both buying and selling as proxy for transaction cost. Note: Past performance does not guarantee future resultsFigure 8: Model portfolio country and sector overweights/underweights -12% -9% -6% -3% 0% 3% 6% 9% 12% Sector (MSCI Wgt) -12% -9% -6% -3% 0% 3% 6% 9% 12% Country (MSCI Wgt) Retailing (1.5%) THAILAND (3.0%) Materials (7.0%) Energy (7.2%) INDIA (9.5%) Telecom (6.7%) Cons Svc (1.7%) Div Financials (2.4%) INDONESIA (3.7%) Cap Gds (7.6%) Health Care Equip (0.3%) PHILIPPINES (1.2%) Media (0.3%) Real Estate (7.0%) CHINA (23.9%) Comm Svc (0.0%) Pharma/Biotech (0.7%) Underweight Neutral Overweight Overweight Software (3.2%) Underweight SINGAPORE (7.3%) Cons Dur/App (0.8%) Food/Staples Retail (0.8%) MALAYSIA (4.9%) Food Beverages (3.6%) Hhold Products (1.2%) Utilities (3.9%) HONG KONG (11.9%) Insurance (4.3%) Transport (1.9%) TAIWAN (14.4%) Current O/U wgt Tech Hardware (4.5%) Current O/U wgt (17 October 2012) (17 October 2012) Autos (5.0%) Previous O/U wgt Previous O/U wgt Semis (10.1%) SOUTH KOREA (20.1%) (07 August 2012) (07 August 2012) Banks (18.1%) -12% -9% -6% -3% 0% 3% 6% 9% 12% -12% -9% -6% -3% 0% 3% 6% 9% 12%Source: Deutsche Bank, MSCI.Note: Numbers in parenthesis are sector and country weights in MSCI AC Asia ex Japan index. The model portfolio is equal weighted; each stock has weighting of 2.5%.Deutsche Bank AG/Hong Kong Page 13
    • 17 October 2012The InvestigatorFigure 9: Asia Model Portfolio Profitability FY 13 Cons Rec Valuation Price Mo Earnings Earnings Stability Growth Quality DB Date Close YTD Rtn Hldg Per Mcap 20D ADT PE (DB Risk Mo BB Ticker Mkt Rec Added 16Oct12 (%) Rtn (%) Beta (U$bn) (U$ m) est)Energy - MSCI wgt: 7.2%, portfolio wgt: 12.5%CNOOC Ltd. 883 HK CN H 11Dec10 15.94 20.5 -6.7 1.40 91.8 111.5 8.9 o + ++ o o ++ o o oOil & Natural Gas Corp. Ltd. ONGC IN IN B 14Sep10 278.95 12.4 -14.7 0.65 45.2 20.3 8.7 ++ ++ + o o ++ o o oOil India Ltd. OINL IN IN B 30Sep11 485.85 5.9 -6.2 0.29 5.5 1.7 9.1 ++ + + o + ++ o o oPTT PCL PTT TB TH NR 14Sep10 311.00 1.6 1.27 29.0 38.7SK Innovation Co. Ltd. 096770 KS KR B 7Aug12 154000 8.5 -6.9 1.47 13.5 55.8 6.6 ++ ++ + o - - ++ - - o oMaterials - MSCI wgt: 7.0%, portfolio wgt: 12.5%Grasim Industries Ltd. GRASIM IN IN B 27Jun12 3464.85 39.0 36.1 0.75 6.0 6.0 11.0 + + ++ ++ ++ o o + oShree Cement Ltd. SRCM IN IN B 17Oct12 4048.80 87.7 NA 0.70 2.7 6.3 17.7 - ++ ++ ++ o - -- o ++Indocement Tunggal Prakarsa INTP IJ ID B 14Sep10 21450 27.5 19.6 1.34 8.2 5.5 15.9 - ++ ++ ++ ++ ++ o o oKorea Zinc Co. Ltd. 010130 KS KR B 17Oct12 461000 51.6 NA 1.13 7.9 31.9 8.2 o ++ ++ ++ - + o + oLG Chem Ltd. 051910 KS KR B 14Sep10 316500 -0.3 -5.3 1.53 19.3 73.6 11.9 o ++ + o o ++ o o --Capital Goods - MSCI wgt: 7.6%, portfolio wgt: 10.0%China Communications Construction Co. Ltd. 1800 HK CN B 5May11 6.94 18.0 5.5 1.41 12.1 19.3 7.0 + + o ++ o o o o ++Sino-Thai Engineering & Construction PCL STEC TB TH B 7Aug12 20.70 72.8 36.2 0.82 0.8 3.9 19.3 o + ++ ++ o ++ o o ++SembCorp Industries Ltd. SCI SP SG B 14Sep10 5.47 39.3 30.0 1.36 8.0 9.3 11.4 o ++ o ++ o + o o +SembCorp Marine Ltd. SMM SP SG B 11Dec10 4.92 35.3 8.0 1.66 8.4 14.5 13.2 o ++ o + o ++ - - o +Commercial Services & Supplies - MSCI wgt: 0.0%, portfolio wgt: 0.0%Transportation - MSCI wgt: 1.9%, portfolio wgt: 0.0%Automobiles & Components - MSCI wgt: 5.0%, portfolio wgt: 0.0%Consumer Durables & Apparel - MSCI wgt: 0.8%, portfolio wgt: 0.0%Consumer Services - MSCI wgt: 1.7%, portfolio wgt: 5.0%SJM Holdings Ltd. 880 HK HK B 9Mar12 16.30 34.5 10.1 1.34 11.7 9.7 12.7 + ++ ++ ++ o ++ ++ oMinor International PCL MINT TB TH B 27Jun12 17.80 76.2 26.2 1.06 2.1 6.5 20.4 o ++ ++ ++ o - - ++ oMedia - MSCI wgt: 0.3%, portfolio wgt: 2.5%BEC World PCL BEC TB TH H 11Nov11 57.25 31.7 59.1 0.73 3.7 3.4 20.8 - ++ ++ o o ++ o o --Retailing - MSCI wgt: 1.5%, portfolio wgt: 7.5%Belle International Holdings Ltd. 1880 HK CN B 5May11 13.62 2.0 -6.9 0.93 14.8 25.5 15.7 - ++ ++ ++ o ++ ++ oGiordano International Ltd. 709 HK HK H 14Sep10 6.40 20.4 61.0 0.88 1.3 2.5 12.3 + ++ + + o ++ ++ ++Ace Hardware Indonesia ACES IJ ID B 17Oct12 6650.00 62.8 NA 0.41 1.2 0.6 23.7 - - + ++ ++ o + ++ oFood & Staples Retailing - MSCI wgt: 0.8%, portfolio wgt: 0.0%Food Beverage & Tobacco - MSCI wgt: 3.6%, portfolio wgt: 2.5%Uni-President Enterprises Corp. 1216 TT TW B 7Aug12 52.00 28.0 4.7 0.63 8.7 14.3 19.9 - + ++ ++ - + o oHousehold & Personal Products - MSCI wgt: 1.2%, portfolio wgt: 0.0%Health Care Equipment & Services - MSCI wgt: 0.3%, portfolio wgt: 2.5%Top Glove Corp. Bhd TOPG MK MY B 17Oct12 5.31 8.8 NA 0.99 1.1 2.2 14.1 ++ o + ++ o ++ - - o oPharmaceuticals & Biotechnology - MSCI wgt: 0.7%, portfolio wgt: 0.0%Banks - MSCI wgt: 18.1%, portfolio wgt: 7.5%ICICI Bank Ltd. ICICIBC IN IN B 7Aug12 1042.05 54.6 7.0 1.44 22.7 78.4 12.7 - - o o o o -- o o ++BOC Hong Kong (Holdings) Ltd. 2388 HK HK B 5May11 24.10 37.0 9.3 1.02 32.9 32.2 11.7 ++ o o + o o o o +Industrial & Commercial Bank of China Ltd. 1398 HK CN B 5May11 4.88 11.2 -16.7 1.41 214.7 165.4 6.2 ++ ++ o -- o o o o ++Diversified Financials - MSCI wgt: 2.4%, portfolio wgt: 5.0%IDFC Ltd. IDFC IN IN B 15May12 149.90 65.9 30.7 1.58 4.3 24.5 10.2 - ++ o o ++ o oHaitong Securities Co. Ltd-H share 6837 HK CN B 27Jun12 10.70 NA -0.2 NA 14.5 7.0 15.0 + + + + o o ++Insurance - MSCI wgt: 4.3%, portfolio wgt: 2.5%Dongbu Insurance Co. Ltd. 005830 KS KR NR 9Mar12 49550 -5.0 5.7 0.53 3.2 5.5 NA + ++ o o - oReal Estate - MSCI wgt: 7.0%, portfolio wgt: 7.5%Sun Hung Kai Properties Ltd. 16 HK HK B 11Dec10 109.00 12.9 -12.7 1.08 36.8 82.2 13.1 + o ++ o o o o o --Keppel Land Ltd. KPLD SP SG B 15May12 3.47 65.3 18.0 1.69 4.4 5.3 13.3 + ++ ++ - - - ++ -- oMegaworld Corp. MEG PM PH B 7Aug12 2.40 43.1 7.1 1.28 1.5 4.4 9.1 ++ o ++ o + o o o oSoftware & Services - MSCI wgt: 3.2%, portfolio wgt: 2.5%SouFun Holdings Ltd. ADS SFUN US CN B 30Aug11 17.71 28.0 10.5 1.64 1.4 3.8 8.0 ++ ++ ++ ++ -- -- + o oTechnology Hardware & Equipment - MSCI wgt: 4.5%, portfolio wgt: 0.0%Semiconductors & Semiconductor Equipment - MSCI wgt: 10.1%, portfolio wgt: 5.0%Samsung Electronics Co. Ltd. 005930 KS KR B 7Aug12 1330000 25.8 2.8 1.14 178.8 337.8 8.6 + ++ o o + + o o ++Novatek Microelectronics Corp. 3034 TT TW B 28Jan11 104.50 43.7 18.9 1.23 2.2 18.6 12.6 o ++ o o ++ + o o ++Telecommunication Services - MSCI wgt: 6.7%, portfolio wgt: 10.0%China Mobile Ltd. 941 HK CN H 14Sep10 83.70 14.7 15.9 0.46 217.0 196.8 10.8 ++ ++ + -- + ++ o o oChina Communications Services Corp. Ltd. 552 HK CN B 30Sep11 4.39 32.6 28.9 0.63 3.9 2.7 9.2 ++ o ++ ++ ++ ++ o -- ++Far EasTone Telecommunications Co. Ltd. 4904 TT TW B 30Sep11 72.40 32.5 65.7 0.12 8.1 13.9 17.4 - + ++ ++ - - ++ o o ++Telekom Malaysia Bhd T MK MY H 15May12 6.23 35.6 23.6 0.76 7.3 16.6 26.3 o o ++ ++ ++ - -- o oUtilities - MSCI wgt: 3.9%, portfolio wgt: 2.5%Guangdong Investment Ltd. 270 HK CN B 30Sep11 6.20 35.5 32.4 0.38 5.0 4.5 12.6 o o o o o o oDb X-Trackers Csi300 Trn Index Et 3049 HK CN 15May12 5.62 -7.2 -11.1 1.00 0.3 3.7Asia Model Portfolio (eq-wgt)** 23.1 19.0 1.03 26.6 36.7 13.1MSCI Asia ex-Japan, LC 13.3 4.8Source: Deutsche Bank, FactSet, Bloomberg Finance LP. Note: Stocks are sorted by names in alphabetical order within each sector. Factor scores are given on a country and sector relative basis. Very Favorable (++),Favorable (+), Neutral (0), Unfavorable (-), Very Unfavorable (--), Not Applicable (Blank). For a detailed explanation please see appendix A. Performance is measured in local currency. Stock changes are effective as of closeone day after they are officially published (i.e. Changes published on 4th May 2011 will be effective as of close 5th May 2011). *New additions. **Assume 50bps on both buying and selling as proxy for transaction cost.Page 14 Deutsche Bank AG/Hong Kong
    • 17 October 2012The InvestigatorCountry selectionFigure 10: Equity markets and their key drivers Current Account Balance/GDP Sentiment (Risk-Love) Real Exchange Rate Total Score Technicals Valuation Liquidity Growth Policy China (Latest) 8 China (Last) -2 Hong Kong (Latest) -2 Hong Kong (Last) -2 Indonesia (Latest) 1 Indonesia (Last) 0 India (Latest) 4 India (Last) 3 Korea (Latest) 6 Korea (Last) -3 Malaysia (Latest) 2 Malaysia (Last) 3 Philippines (Latest) 5 Philippines (Last) 0 Singapore (Latest) -2 Singapore (Last) 4 Thailand (Latest) 4 Thailand (Last) 6 Taiwan (Latest) 1 Taiwan (Last) 0 Asia ex-Japan (Latest 4 Asia ex-Japan (Last) -2 Japan (Latest) 2 Japan (Last) -4Source: Deutsche Bank.Blank cell represents factor not used in the model for that country. Most Favorable, Favorable, O Neutral, Less Favorable and Least Favorable.Liquidity is based on yoy change in M2/Market Cap ratio, valuation is based on composite valuation index (based on trailing P/E, 12m fwd P/E, P/cash earnings,P/book, dividend yield, EV/EBIDTA and EV/Sales), sentiment is based on Risk-Love indicator, technicals are based on several price based indicators like percentageof stocks above 200-d moving average, number of 52-Weeks new lows and new highs, indices above/below their 200-d moving average etc., growth is based onleading economic indicators and earnings revision index, current account balance/GDP is based on deviation from 3-year moving average trend, real exchange rateis based on deviation from 2-year moving average trend and policy is based on policy indicator.Deutsche Bank AG/Hong Kong Page 15
    • 17 October 2012The InvestigatorCountry-sector selectionFigure 11: We prefer sectors with value, high earnings and price momentum, and better profitability 0.90 JP Banks HK Real Estate JP Telecom 0.80 KO Autos ID Hhold Products 0.70 TH Banks ID Banks Most preferred sectors CH Banks TH Food Bev 0.60 TH Telecom JP Energy IN Software 0.50 High earnings revisions & IN Hhold Products JP HCare Equip/Svc price momentum, better MY Utilities MY Telecom CH Real Estate 0.40 KO Insurance profitability KO Tech Hard/Equip IN Div Fin SG Banks CH Utilities 0.30 JP Autos TA Banks PH Real Estate TH Energy SG Real Estate SG Retailing JP Transport ID Utilities JP Div Fin ID Autos HK Telecom JP Food Bev KO Utilities JP Fd/Staples Retail 0.20 ID Pharma/ Biotech JP Comm Svc IN Energy HK Utilities PH Div Fin PH Cap Gds MY Energy JP Pharma/ Biotech HK Banks Software JP HK Cons Svc IN Banks ID Food Bev 0.10 TH Media IN Pharma/ Biotech JP Materials MY Banks MY Food Bev ID Telecom HK Cap Gds CH Telecom Materials ID CH Software TA Real Estate CH Transport SG Media Materials IN Autos JP Real Estate TH Materials KO TA Div Fin 0.00 TA Telecom JP Cap Gds CH Cap GdsJP Insurance TA Cons Durables SG Div Fin KO Retailing KO Cap Gds Transport JP Tech Hard/Equip HK KO Cons Svc KO Telecom KO Energy JP Hhold Products KO Food Bev JP Retailing JP Media KO Hhold Products IN Materials SG Food Bev -0.10 MY Autos CH Tech Hard/Equip CH HCare Equip/Svc HK Semis KO Transport CH Energy TA Materials -0.20 TA Semis PH Fd/Staples Retail HK Tech Hard/Equip JP Semis SG Cap Gds TA Retailing TA Cap Gds TA Insurance HK Retailing CH Autos KO Fd/Staples Retail -0.30 IN Food Bev MY Materials HK Cons Durables SG Cons Svc SG Fd/Staples Retail CH Materials KO Cons Durables Cheaper JP Cons Svc TA Tech Hard/Equip MY Cons Svc ID Energy MY Transport MY Cap Gds PH Telecom CH Retailing -0.40 CH Insurance MY Div Fin SG Telecom TA Fd/Staples Retail CH Food Bev IN Cap Gds IN Utilities IN Telecom IN Real Estate TA Transport Least preferred sectors IN Media HK Div Fin KO Pharma/ Biotech KO Div Fin Cap Gds ID -0.50 TA Autos KO Semis SG Transport CH Fd/Staples Retail KO Software -0.60 JP Utilities -0.70 -0.40 -0.30 -0.20 -0.10 0.00 0.10 0.20 0.30 0.40 0.50 0.60 0.70Source: Deutsche Bank, FactSetPage 16 Deutsche Bank AG/Hong Kong
    • 17 October 2012The InvestigatorFigure 12: Our most-preferred 20 country-sectors; most-preferred have cheaper valuations, better EPS momentum,higher ROE and better technicals (all metrics refer to MEDIAN data) Earnings Valuation Revisions Profitability Technicals Earnings Revisions FY1 EPS Revisions FY2 EPS Revisions (U$ bn) 12m fwd P/E Profitability Technicals Valuation ROE (%) Mkt Cap EV/EBIT P/B RSI Country Sector1 Philippines Utilities 3,637 2.9 11.6 11.7 1.0 1.0 22.5 1.10 O ++ ++ ++2 Thailand Telecommunication Services 5,930 4.9 16.6 18.6 0.9 0.5 21.4 1.22 -- ++ ++ ++3 Thailand Banks 32,450 1.7 10.6 0.6 0.5 12.4 1.11 O ++ O ++4 Indonesia Banks 31,482 2.0 9.7 0.7 0.5 18.8 1.01 + ++ + O5 Thailand Food & Staples Retailing 5,559 12.2 25.5 22.4 0.6 0.8 38.7 1.13 -- ++ ++ ++6 India Software & Services 37,853 3.2 12.7 11.0 0.6 0.6 21.7 1.10 - ++ ++ ++7 China Utilities 17,175 1.2 9.5 18.1 0.5 0.6 5.6 1.10 + ++ -- ++8 China Real estate 34,144 0.9 5.7 5.9 0.0 -0.2 14.4 1.06 ++ + + +9 Hong Kong Real estate 112,266 0.6 12.6 7.2 0.3 0.2 8.8 1.06 ++ ++ - +10 Malaysia Utilities 13,877 1.3 12.7 12.5 0.4 0.4 9.9 1.10 O ++ O ++11 India Banks 60,156 0.8 5.2 -0.4 -0.4 18.3 0.97 ++ O + -12 Korea Insurance 17,335 1.4 6.5 -0.2 -0.1 15.1 0.99 ++ + + -13 Korea Banks 43,648 0.6 5.8 -0.7 -0.7 12.8 0.96 ++ - O -14 Singapore Retailing 4,270 3.2 11.6 8.8 0.1 0.1 24.8 1.09 O ++ ++ ++15 Korea Automobiles & Components 76,862 1.2 6.4 6.6 -0.2 -0.2 16.5 0.98 ++ O + -16 Singapore Banks 60,279 1.4 11.4 0.2 -0.2 11.3 1.07 + + O +17 India Household & Personal Products 11,909 11.6 27.0 29.1 0.4 0.3 35.0 1.14 -- ++ ++ ++18 India Diversified Financials 11,120 1.7 10.9 -0.1 0.0 18.6 1.07 + + + +19 Malaysia Telecommunication Services 18,375 2.9 22.2 18.1 0.2 0.0 20.8 1.14 -- + ++ ++20 Korea Technology Hardware & Equipment 15,766 1.4 10.0 13.0 0.1 -0.1 10.8 1.04 O + O + Median 17,855 1.6 11.2 12.5 0.29 0.16 17.4 1.08 Average 30,705 2.9 12.2 14.1 0.25 0.19 17.9 1.07Source: Deutsche Bank, DataStream. FactSet. EPS revisions is calculated for each stock as the number of analysts revising up the FY1 EPS estimate less number of analysts revisingdown the FY1 EPS estimate divided by total number of changes in the past three months. We then take the median of these EPS revisions scores for all individual stocks in the country-sector. RSI is the ratio of 65-day to 260-day moving average in stock price. All the metrics shown above except market cap are median data for the sector.Changes: Removed Thailand energy, Hong Kong telecommunications and utilities and Singapore capital goods and have added India Household & Personal Products, Malaysia telecommunications, Indonesia banks andKorea tech hardware.Deutsche Bank AG/Hong Kong Page 17
    • 17 October 2012The InvestigatorFigure 13: Our least-preferred 20 country-sectors; least-preferred have expensive valuations, poor EPS momentum,higher ROE and bad technicals (all metrics refer to MEDIAN data) Earnings Valuation Revisions Profitability Technicals Earnings Revisions FY1 EPS Revisions FY2 EPS Revisions (U$ bn) 12m fwd P/E Profitability Technicals Valuation ROE (%) Mkt Cap EV/EBIT P/B RSI Country Sector1 China Household & Personal Products 6,925 2.4 39.2 (4.8) -1.0 -1.0 (22.3) 0.88 -- -- -- --2 China Food & Staples Retailing 7,180 2.3 12.1 13.3 -1.0 -1.0 18.1 0.86 - -- + --3 Singapore Hotels Restaurants & Leisure 6,535 0.9 19.6 21.9 -0.9 -1.0 6.6 1.01 - -- - O4 Korea Software & Services 15,154 2.7 12.9 17.6 -0.9 -0.4 11.4 0.89 -- - O --5 Taiwan Materials 50,916 1.4 14.2 16.2 -1.0 -1.0 7.1 1.00 O -- - -6 China Retailing 15,723 1.4 12.6 8.2 -0.9 -0.9 13.4 0.83 O -- O --7 China Food Beverage & Tobacco 22,286 1.5 14.2 17.6 -0.7 -0.9 9.3 0.97 - - - -8 Taiwan Capital Goods 9,400 1.5 12.6 11.1 -1.0 -1.0 10.3 0.97 O -- O -9 India Telecommunication Services 4,516 2.0 18.0 21.4 -0.6 -0.6 4.1 0.87 - - -- --10 Taiwan Automobiles & Components 7,681 1.4 14.2 21.1 -0.7 -1.0 7.1 1.04 - -- - +11 China Materials 29,268 0.9 7.7 11.7 -1.0 -1.0 8.9 0.87 ++ -- - --12 Korea Semiconductors & Semiconductor Equipment 153,775 1.6 10.5 11.8 -0.9 -0.6 8.3 0.91 O - - --13 Korea Diversified Financials 10,246 0.7 10.7 -0.7 -1.0 4.5 0.95 O -- -- -14 Indonesia Materials 8,406 3.2 13.1 14.4 -0.7 -0.5 10.4 1.00 - - O O15 Korea Household & Personal Products 10,032 3.9 23.4 19.0 -0.8 -0.3 8.4 1.05 -- - - +16 India Capital Goods 13,851 2.5 13.4 11.9 -0.6 -0.6 13.4 0.99 O - O -17 Taiwan Technology Hardware & Equipment 97,160 1.4 10.7 11.4 -0.5 -0.7 10.7 0.97 + - O -18 India Real Estate 2,388 0.9 13.0 16.0 -0.5 0.0 3.5 0.95 O O -- -19 Malaysia Transportation 3,823 1.7 17.1 14.9 -0.3 -0.2 11.8 0.97 - O O -20 Singapore Transportation 12,117 1.7 15.7 16.4 -0.3 -0.3 10.7 1.03 - O O O Median 10,139 1.6 13.3 14.9 -0.73 -0.79 9.1 0.97 Average 24,369 1.8 15.2 14.3 -0.75 -0.70 7.8 0.95Source: Deutsche Bank, DataStream. FactSet. EPS revisions is calculated for each stock as the number of analysts revising up the FY1 EPS less number of analysts revising down the FY1 divided by total number ofchanges in the past three months. We then take the median of these EPS revisions scores for all individual stocks in the country-sector. RSI is the ratio of 65-day to 260-day moving average in stock price. All the metricsshown above except market cap are median data for the sector.Changes: Removed India utilities and food beverage & tobacco, Indonesia telecommunications and Taiwan semis and added Taiwan capital goods, Korea diversified financials, China materials and Indonesia materialsPage 18 Deutsche Bank AG/Hong Kong
    • 17 October 2012The InvestigatorFigure 14: Asian country sector heat-map for all covered sectors Hong Kong Philippines Singapore Indonesia Malaysia Thailand Taiwan Japan Korea China IndiaEnergy 102 -10 40 124 51 95 -10 -10 104 -10 72Materials 134 -10 62 128 83 92 -10 -10 109 143 85Capital Goods 115 116 117 111 78 66 87 71 -10 137 63Commercial Services & Supplies -10 -10 -10 -10 -10 -10 -10 -10 -10 -10 29Transportation 125 100 -10 -10 91 90 -10 79 -10 140 48Automobiles & Components 122 -10 82 58 32 38 -10 -10 -10 135 43Consumer Durables & Apparel -10 77 -10 -10 107 -10 -10 -10 -10 41 45Hotels Restaurants & Leisure -10 97 -10 -10 37 61 -10 145 -10 -10 126Media -10 -10 98 -10 -10 -10 -10 88 75 -10 20Retailing 141 123 -10 -10 114 -10 -10 31 -10 139 17Food & Staples Retailing 146 -10 -10 -10 120 -10 47 113 10 119 21Food Beverage & Tobacco 138 -10 73 53 67 81 -10 130 129 -10 54Household & Personal Products 147 -10 39 9 127 -10 -10 -10 -10 -10 86Health Care Equipment & Services 93 -10 -10 -10 -10 -10 -10 -10 -10 -10 23Pharmaceuticals & Biotechnology -10 -10 55 14 106 -10 -10 -10 -10 -10 26Banks 19 36 22 8 25 30 7 33 6 46 2Diversified Financials -10 105 42 -10 132 49 16 84 -10 89 28Insurance 110 -10 -10 -10 24 -10 -10 -10 -10 59 68Real Estate 13 15 96 -10 -10 -10 34 27 -10 131 60Software & Services 57 -10 11 -10 144 -10 -10 -10 -10 -10 35Technology Hardware & Equipment 108 70 -10 -10 52 -10 -10 -10 -10 103 101Semiconductors & Semiconductor Equipment -10 118 -10 -10 133 -10 -10 -10 -10 74 142Telecommunication Services 64 76 136 56 112 50 80 99 3 65 5Utilities 12 94 69 4 44 18 1 -10 -10 -10 121O ver a ll (bot t om -up r a nking) - Cur r ent 7 9 3 2 10 4 5 8 1 11 6Overall (bottom-up ranking) - Previous 8 3 6 7 9 10 1 5 2 11 4Overall (bottom-up ranking) - Avg of above 8 6 5 5 10 7 3 7 2 11 5V a lua t ion - Cur r ent 1 5 2 10 3 8 11 7 9 6 4Valuation - Previous 1 5 4 9 3 10 11 8 6 7 2E a r nings Revis ions - Cur r ent 11 6 5 2 10 3 1 7 4 9 8Earnings Revisions - Previous 11 6 8 4 9 7 1 3 2 10 5P r of it a bilit y - Cur r ent 4 8 2 1 9 5 3 7 6 10 11Profitability - Previous 4 8 2 1 9 6 5 7 3 10 11Tec hnic a ls - Cur r ent 10 6 5 8 11 4 1 2 3 7 9Technicals - Previous 10 6 5 9 11 3 1 4 2 7 8Source: Deutsche Bank. Numbers are ranks, smaller is better. Green color = Most attractive country sectors, Red color=Least attractive country sectors. Yellowcolor = Neutral country sectors. White space = sector market cap too low or data unavailable.Figure 15: Bottom-up sector model backtest16,384 16,384 512 512 2,048 Most attractive sectors 2,048 Most attractive sectors Least attractive sectors (bottom quintile) vs least attractive sectors (top quintile) 1,024 1,024 4,096 4,096 relative performance 256 256 512 512 1,024 1,024 256 256 128 128 256 256 128 128 Backtest Backtest Backtest 64 64 64 64 64 64 01/92 01/97 01/02 01/07 01/12 01/92 01/97 01/02 01/07 01/12 01/92 01/97 01/02 01/07 01/12Source: Deutsche Bank, Real time is from 30 September 2010. Note: Past performance does not guarantee future results. Last updated in May 2012Deutsche Bank AG/Hong Kong Page 19
    • 17 October 2012The InvestigatorAsia Model PortfolioFigure 16: Deletions from model portfolio since inception (13 September 2010) Date Date DB Close Date Date CloseCompany BB Ticker Added Removed Rec 16Oct12 Company BB Ticker Added Removed DB Rec 16Oct12Deletions as of 2 Nov 2010 Deletions as of 30 Sep 2011Agri. Bank of China 1288 HK 13Sep10 2Nov10 H 3.18 DSME 042660 KS 22Jul11 30Sep11 H 23600Anta Sports 2020 HK 13Sep10 2Nov10 H 6.90 OCI Company 010060 KS 14Sep10 30Sep11 NR 161500Fraser & Neave FNN SP 13Sep10 2Nov10 B 8.90 BRI BBRI IJ 30Aug11 30Sep11 B 7550.00Deletions as of 10Dec2010 Samsung Eng. 028050 KS 14Sep10 30Sep11 H 170000China Shineway 2877 HK 13Sep10 10Dec10 H 10.86 Siam Cement SCC TB 22Jul11 30Sep11 B 355.00Chunghwa Tel 2412 TT 13Sep10 10Dec10 H 92.30 KWG Property 1813 HK 11Dec10 30Sep11 B 4.50Far EasTone Telecom 4904 TT 13Sep10 10Dec10 B 72.40 SOHO China 410 HK 3Nov10 30Sep11 B 5.16First Philippine Hldgs FPH PM 13Sep10 10Dec10 B 80.70 Deletions as of 11 Nov 2011LIG Insurance 002550 KS 13Sep10 10Dec10 NR 26500 Hyundai Dept Store 069960 KS 14Sep10 11Nov11 B 144000Perusahaan Gas Negara PGAS IJ 13Sep10 10Dec10 B 4325.00 SJM 880 HK 14Sep10 11Nov11 B 16.30PLUS Expressways PLUS MK 13Sep10 10Dec10 NR NA Taiwan Cement 1101 TT 30Aug11 11Nov11 H 36.65SATS SATS SP 13Sep10 10Dec10 B 2.75 Deletions as of 19 Jan 2012Top Glove TOPG MK 13Sep10 10Dec10 B 5.31 Powertech Technology 6239 TT 5May11 19Jan12 S 51.80Wynn Macau 1128 HK 13Sep10 10Dec10 B 20.55 Deletions as of 9 March 2012Deletions as of 24 Jan 2011 Amorepacific Corp. 090430 KS 30Sep11 9Mar12 H 1231000Dongfeng Motor 489 HK 2Nov10 24Jan11 B 9.90 Hong Leong Bank Bhd. HLBK MK 11Nov11 9Mar12 H 13.98Hang Lung Properties 101 HK 13Sep10 24Jan11 B 26.50 Industrial Bank of Korea 024110 KS 22Jul11 9Mar12 H 11800Deletions as of 4 May 2011 KT&G Corp. 033780 KS 14Oct10 9Mar12 H 92000Delta Electronics 2308 TT 13Sep10 4May11 B 105.00 Deletions as of 15 May 2012Franshion 817 HK 10Dec10 4May11 B 2.39 Aboitiz Power Corp. AP PM 14Sep10 15May12 H 33.45Genting Bhd GENT MK 10Dec10 4May11 H 8.81 Krung Thai Bank Public Co., Ltd. KTB TB 12Dec10 15May12 B 18.60Kasikornbank KBANK TB 10Dec10 4May11 B 176.00 PT Charoen Pokphand Indonesia Tbk CPIN IJ 11Nov11 15May12 B 3050.00Nexen Tire 002350 KS 13Sep10 4May11 H 18100 PT Perusahaan Gas Negara (Persero) Tbk PGAS IJ 8Mar12 15May12 B 4325.00Orise Technology 3545 TT 27Jan11 4May11 B 34.90 Yangzijiang Shipbuilding (Holdings) Ltd. YZJ SP 14Sep10 15May12 H 0.94Shanghai Electric 2727 HK 13Sep10 4May11 B 3.09 Deletions as of 26 June 2012Deletions as of 6 Jun 2011 Formosa Chemicals & Fibre 1326 TT 14Sep10 26Jun12 H 74.20DiGi.Com DIGI MK 13Sep10 6Jun11 H 5.44 China Construction Bank-H 939 HK 14Sep10 26Jun12 H 5.68Bank of Baroda BOB IN 10Dec10 6Jun11 B 766.80 Wharf Holdings ltd 4 HK 14Sep10 26Jun12 H 51.90Deletions as of 21 Jul 2011 Deletions as of 7 August 2012China CITIC 998 HK 4May11 21Jul11 H 4.05 Wipro Ltd WPRO IN 20Jan12 6Aug12 B 352.10Asian Paints APNT IN 13Sep10 21Jul11 H 3882.15 United Tractors Tbk Pt UNTR IJ 9Mar12 6Aug12 B 19600Hyundai Heavy 009540 KS 10Dec10 21Jul11 B 235000 Public Bank PBKF MK 15May12 6Aug12 H 14.56Korean Reinsurance 003690 KS 2Nov10 21Jul11 NR 11600 Mstar Semiconductor Inc 3697 TT 30Sep12 6Aug12 B 244.50Deletions as of 29 Aug 2011 Bank of China Ltd-H 3988 HK 14Sep10 6Aug12 B 3.07Sinopec-H 386 HK 11Dec10 29Aug11 B 7.82 Hyundai Marine & Fire Ins Co 001450 KS 22Jul11 6Aug12 NR 37000Cathay Pacific 293 HK 14Sep10 29Aug11 S 13.46 Deletions as of 17 October 2012Maanshan-H 323 HK 7Jun11 29Aug11 S 1.94 HYUNDAI MOTOR CO 005380 KS 14Sep10 17Oct12 B 227500Siliconware Precision 2325 TT 7Jun11 29Aug11 H 32.40 HYUNDAI MOBIS 012330 KS 31Aug11 17Oct12 B 300000 SIMPLO TECHNOLOGY CO LTD 6121 TT 5May11 17Oct12 B 177.00 STARHUB LTD STH SP 30Sep11 17Oct12 H 3.66Source: Deutsche Bank, FactSet, Bloomberg Finance LPPage 20 Deutsche Bank AG/Hong Kong
    • 17 October 2012The InvestigatorGlobal – valuationHigh policy uncertainty, and the attendant flight from junior tranches of the capitalstructure, along with a dismal prior decade of equity returns keeps them “cheap”.Reduced policy uncertainty and losses from bond portfolios are likely to be required ascatalysts to unlock value in equities.Figure 17: Composite valuation index Figure 18: Price-to-book value 3.0 MSCI AC World 12m fd rtn (RS) 60% 4.5 4.5 World P/BV World Composite Valuation Index (S.D., LS) 4.0 4.0 2.0 40% Expensive 3.5 3.5 1.0 20% 3.0 3.0 0.0 0% 2.5 2.5 2.0 2.0 -1.0 -20% 1.5 1.5 -2.0 Cheap -40% 1.0 1.0 -3.0 -60% 0.5 0.5 1/75 1/80 1/85 1/90 1/95 1/00 1/05 1/10 1/75 1/80 1/85 1/90 1/95 1/00 1/05 1/10Source: Deutsche Bank, IBES, MSCI. Note: Composite valuation index is the average of trailing P/E, 12m Source: Deutsche Bank, MSCI, DataStreamforward P/E, P/Cash Earnings, P/BV, Dividend Yield, EV/EBITDA and EV/Sales, normalized over entirehistoryFigure 19: 12m forward P/E Figure 20: 12m trailing P/E 25 25 40 40 World 12m Forward P/E World Trailing P/E 23 23 35 35 21 21 19 19 30 30 17 17 25 25 15 15 13 13 20 20 11 11 15 15 9 9 10 10 7 7 5 5 5 5 1/87 1/90 1/93 1/96 1/99 1/02 1/05 1/08 1/11 1/73 1/78 1/83 1/88 1/93 1/98 1/03 1/08 1/13Source: Deutsche Bank, MSCI, I/B/E/S Source: Deutsche Bank, MSCI, DataStreamFigure 21: EV multiples Figure 22: ROE and EBIT margin 16 World EV/EBITDA (LS) 2.5 18% World ROE (LS) World EBIT/Sales (RS) 14% World EV/SALES (RS) 2.3 16% 13% 14 2.1 14% 12% 12 1.9 12% 1.7 11% 10% 10 1.5 10% 8% 1.3 9% 8 1.1 6% 4% 8% 6 0.9 0.7 2% 7% 4 0.5 0% 6% 1/87 1/90 1/93 1/96 1/99 1/02 1/05 1/08 1/11 1/73 1/78 1/83 1/88 1/93 1/98 1/03 1/08 1/13Source: Deutsche Bank, MSCI, FactSet Source: Deutsche Bank, MSCI, FactSetDeutsche Bank AG/Hong Kong Page 21
    • 17 October 2012The InvestigatorGlobal metricsDespite all the despair about global growth, our own mother of all leading indicators(MOMLI) is looking up, as are asset-price-based opinions on global growth. Meanwhile,analysts have lost confidence and are looking for just 5% EPS growth globally in 2012,and 12% for 2013. Global Risk-Love (sentiment) has now entered euphoria, a slightconcern. The global Tape is very strong, and the Marshallian K is rising.Figure 23: Market – implied global growth leading Figure 24: Global long leading indicator (MOMLI)indicators 120 Global long leading indicator (pushed 12% % S.D. S.D. fwd by 5m, LS) 3 3 80 OECD G7 composite leading indicator 8% Style-Based Leading Economic Indicator, LS (YoY%, RS) 2 Asset-Price-Based Global Growth Indicator, RS 2 40 4% 1 1 0 0% 0 0 -40 -4%-1 -1 -80 -8%-2 -2 -120 OECD Composite Leading Indicator as of June2012 -12% 1/89 1/95 1/01 1/07 1/13-3 -3 1/89 1/92 1/95 1/98 1/01 1/04 1/07 1/10 1/13Source: Deutsche Bank Source: Deutsche Bank, OECDFigure 25: Earnings growth forecast (%) Figure 26: Global equity Risk-Love indicator 25 12/2011F 25 1.2 MSCI AC World 6m fd rtn (RS) 40% 23 12/2012F 23 Global Risk-Love, SD (LS) 21 21 0.8 12/2013F Euphoria 20% 19 19 0.4 17 17 15 15 0.0 0% 13 13 11 11 -0.4 9 9 -20% 7 MSCI AC World 7 -0.8 Panic 5 5 -1.2 -40% 1/09 7/09 1/10 7/10 1/11 7/11 1/12 7/12 1/00 1/02 1/04 1/06 1/08 1/10 1/12Source: Deutsche Bank, I/B/E/S, MSCI Source: Deutsche Bank, MSCIPage 22 Deutsche Bank AG/Hong Kong
    • 17 October 2012The InvestigatorGlobal metrics (continued)Figure 27: Percentage of countries above their 10-WMA Figure 28: Global free liquidity120% % of countries trading above 10- 120% 15 % 15 % Global Free Liquidity100% week moving average 100% 10 10 80% 80% 5 5 60% 60% 40% 40% 0 0 20% 20% -5 G7 M2 Growth (MZM for US, M4 for UK) less G7 -5 0% 0% Consumer Price Inflation less G7 Leading Economic Indicator Growth 1/09 1/10 1/11 1/12 1/13 -10 -10 1/85 1/88 1/91 1/94 1/97 1/00 1/03 1/06 1/09 1/12Source: Deutsche Bank. Includes 49 Markets. Source: Deutsche BankFigure 29: Commodity Risk-Love indicator Figure 30: Energy Risk-Love indicator 2.0 Energy Risk-Love (S.D.) 2.0 3 Commodities Risk-Love 3 1.5 Euphoria (S.D.) 2 2 1.0 Euphoria 1.0 1 1 0.5 0.0 0.0 0 0 -0.5 -1 -1 -1.0 -1.0 -2 Panic -2 Panic -1.5 -3 -3 -2.0 -2.0 1/00 1/02 1/04 1/06 1/08 1/10 1/12 1/00 1/02 1/04 1/06 1/08 1/10 1/12Source: Deutsche Bank Source: Deutsche BankFigure 31: 6m total equity offerings* as percentage of Figure 32: Composite policy indicatortotal market cap 1.6% 1.6% 2.5 S.D. S.D. 2.5 6m total IPOs & addl offerings as of Sep 2012: 1.4% US=U$128.8bn, EU=U$23.5bn, JP=U$15.5bn 1.4% 2.0 2.0 Easy Monetary/Fiscal Policy 1.2% 1.2% 1.5 1.5 1.0% 1.0% 1.0 1.0 0.8% 0.8% 0.5 0.5 0.6% 0.6% 0.0 0.0 0.4% 0.4% -0.5 -0.5 0.2% 0.2% -1.0 Tight Monetary/Fiscal Policy -1.0 US Japan Europe 0.0% 0.0% -1.5 Europe US Japan -1.5 1/99 1/01 1/03 1/05 1/07 1/09 1/11 1/81 1/85 1/89 1/93 1/97 1/01 1/05 1/09 1/13Source: Deutsche Bank, Bloomberg Finance LP, DataStream Source: Deutsche Bank, DataStream, CEIC, IMF. Note: Composite policy indicator is an equal weightedNote: *Equity offerings include IPO and additional equity offerings of primary and secondary shares. index of real effective exchange rate yoy growth, real broad money (M2) yoy growth, yield curve (longData as of close 25 Aug, 2011. minus short term interest rate) and government fiscal deficit/surplus as % of GDP.Deutsche Bank AG/Hong Kong Page 23
    • 17 October 2012The InvestigatorGlobal – market intelligenceFigure 33: Market intelligence by country11Oct12 Mcap LC Perf P/E (x) P/B (x) Div Yld (%) EPSg (%) ROE (%)Region/Country (#Co) U$m 1m YTD CY11 CY12 CY13 CY11 CY12 CY13 CY11 CY12 CY13 CY11 CY12 CY13 CY11 CY12 CY13North America (704) 14,701,320 -0.1 12.9 15.0 14.1 12.6 2.2 2.0 1.8 1.9 2.2 2.4 16.4 5.7 11.4 14.7 14.3 14.6Canada (101) 1,255,992 0.1 2.4 14.2 14.1 12.4 1.8 1.6 1.5 2.6 2.9 3.1 18.8 -1.0 12.2 13.0 11.5 12.5US (603) 13,445,328 -0.1 13.9 15.0 14.1 12.6 2.3 2.0 1.9 1.9 2.1 2.3 16.2 6.3 11.3 14.9 14.7 14.9Europe (447) 6,791,499 -0.3 8.2 11.5 11.8 10.6 1.5 1.5 1.4 3.7 3.8 4.1 0.8 -3.5 12.7 13.0 12.2 12.6Austria (9) 28,469 2.1 8.8 12.8 10.5 9.0 0.9 0.9 0.8 3.0 3.5 4.0 -24.7 22.0 16.5 7.0 8.3 9.2Belgium (12) 120,098 0.5 30.7 19.1 14.7 14.1 1.8 1.7 1.6 2.4 2.7 3.0 -6.6 30.5 10.8 9.7 11.6 12.0Denmark (11) 123,858 0.2 28.0 24.4 19.3 15.6 2.7 2.6 2.4 1.3 1.6 2.1 -7.0 26.6 23.4 11.1 13.4 15.3Finland (14) 78,085 -0.5 -0.3 11.8 12.6 11.7 1.3 1.4 1.4 5.0 4.8 5.1 -19.3 -41.3 46.3 11.3 12.1 12.3France (73) 963,374 -2.9 9.1 11.0 11.1 10.1 1.2 1.2 1.1 3.7 4.0 4.3 -0.6 -4.4 11.4 11.0 10.5 10.6Germany (52) 893,699 0.0 19.5 12.2 11.2 10.3 1.5 1.4 1.3 3.5 3.6 3.8 -8.4 8.9 9.9 12.2 12.1 12.4Greece (2) 5,309 -2.9 -16.1 17.2 18.9 11.3 1.9 1.7 1.6 0.0 1.5 2.3 -15.1 -14.4 -24.2 25.3 19.8 14.3Ireland (4) 27,673 -1.6 -0.9 16.8 17.1 15.3 1.3 1.3 1.3 3.1 3.1 3.1 11.7 -1.8 na 8.0 7.4 8.2Italy (27) 235,169 -3.6 3.7 9.4 9.9 8.7 1.0 0.9 0.9 4.2 4.2 4.7 -14.9 8.4 13.1 9.2 7.7 8.2Netherlands (22) 259,827 -1.0 10.4 12.4 11.8 10.4 1.4 1.4 1.3 2.6 3.1 3.6 -7.2 7.5 12.5 11.7 12.0 12.7Norway (10) 101,921 0.3 9.4 11.4 10.7 9.9 1.6 1.5 1.4 4.3 4.7 4.4 21.4 6.8 7.5 14.3 13.9 13.8Portugal (5) 17,942 -0.3 -6.0 12.1 12.4 11.6 1.7 1.5 1.4 4.1 4.3 4.6 -22.3 -2.7 7.2 9.5 9.3 9.6Spain (24) 298,942 -3.3 -9.8 8.5 12.4 9.4 1.0 1.1 1.0 6.7 5.0 5.9 -10.2 -40.7 50.7 11.4 8.5 10.6Sweden (35) 323,474 -0.8 7.5 13.6 13.5 12.0 1.9 1.8 1.6 3.8 4.0 4.3 -5.2 0.7 11.8 14.0 14.0 13.7Switzerland (40) 909,221 2.1 11.7 14.9 13.9 12.3 2.2 2.1 1.9 3.3 3.5 3.8 -9.5 7.2 12.7 12.9 14.8 15.7UK (107) 2,404,439 0.5 4.6 10.4 11.3 10.3 1.7 1.6 1.5 3.8 4.0 4.3 15.3 -7.7 9.9 16.1 13.9 14.1Japan (316) 1,944,263 -2.6 -1.8 13.2 12.2 10.4 0.9 0.9 0.8 2.6 2.8 3.0 -15.9 33.7 29.6 6.8 7.4 8.2Asia Pac ex Japan (690) 3,608,175 3.0 10.2 13.1 12.5 11.3 1.7 1.6 1.4 3.1 3.2 3.5 0.2 6.8 11.5 12.6 12.8 13.0Asia ex Japan (616) 2,671,032 2.8 9.9 13.1 12.2 10.9 1.7 1.5 1.4 2.6 2.7 2.9 -1.4 9.7 13.0 12.4 12.8 12.9Australia (69) 924,116 3.7 10.8 13.2 13.3 12.4 1.7 1.7 1.6 4.6 4.8 5.1 5.0 -1.1 6.9 13.3 12.8 13.2China (141) 639,567 6.7 7.4 10.1 9.9 9.1 1.6 1.5 1.3 3.3 3.3 3.5 10.2 2.5 9.1 16.5 15.2 14.7Hong Kong (42) 319,157 3.9 16.9 13.9 15.7 14.3 1.4 1.4 1.2 3.0 2.9 3.1 19.9 -11.4 10.2 10.1 8.3 8.4India (73) 253,910 5.8 22.7 16.6 15.4 13.6 2.8 2.5 2.0 1.3 1.5 1.7 11.0 9.8 12.8 16.4 16.1 15.6Indonesia (25) 98,073 4.1 9.2 16.2 15.1 13.4 3.8 3.3 2.8 2.0 2.7 2.9 18.8 7.3 12.7 24.2 22.3 21.7Korea (105) 537,727 -0.1 6.5 12.6 9.8 8.3 1.3 1.2 1.1 1.1 1.2 1.4 -16.3 34.7 17.5 8.6 12.4 12.9Malaysia (44) 131,170 2.6 5.0 16.4 15.4 14.0 2.1 2.0 1.8 2.8 3.3 3.5 8.4 9.4 10.2 13.1 13.1 13.3New Zealand (5) 13,027 1.2 11.5 16.1 16.3 14.4 1.6 1.7 1.6 5.5 5.4 5.5 -3.5 -1.5 13.0 10.1 10.2 11.4Philippines (19) 32,409 4.0 23.0 19.7 17.6 15.7 3.0 2.7 2.4 2.3 2.3 2.5 5.4 11.9 12.4 15.4 15.4 15.5Singapore (32) 193,776 -0.2 14.9 14.3 13.9 13.0 1.5 1.4 1.4 3.6 3.6 3.8 -3.4 7.4 5.6 10.8 10.5 10.5Taiwan (114) 385,794 -0.5 4.1 16.1 15.1 13.1 1.7 1.7 1.6 3.3 3.2 3.7 -29.1 9.3 21.5 12.5 11.4 12.5Thailand (21) 79,447 2.0 18.5 14.5 12.6 10.6 2.6 2.2 1.9 3.1 3.6 4.2 16.2 13.7 18.7 17.9 16.4 17.4EM EU/M East/Africa (139) 645,810 0.4 11.1 11.0 11.1 9.9 1.4 1.3 1.2 3.2 3.6 4.0 26.1 -3.7 6.5 16.6 13.6 13.1Czech Republic (3) 11,756 2.0 2.5 10.9 10.7 10.9 1.8 1.7 1.7 6.3 6.0 6.1 -12.4 1.4 -1.4 16.8 16.3 15.4Egypt (8) 13,176 0.5 61.0 10.6 12.0 9.8 1.1 1.8 1.8 2.3 3.4 4.0 20.9 45.9 9.2 7.3 11.4 11.4Hungary (4) 11,383 3.6 14.4 8.2 9.8 8.0 1.0 0.9 0.9 1.3 3.1 3.9 13.9 -16.3 21.6 12.4 9.6 10.8Israel (10) 62,534 0.1 -1.3 8.4 8.5 7.9 1.6 1.4 1.2 2.5 2.3 2.9 12.4 1.1 7.6 20.2 16.6 16.2Morocco (3) 2,981 -8.0 -19.9 11.6 10.6 9.6 2.6 2.6 2.4 4.9 4.7 3.4 -1.4 9.3 10.7 22.0 24.6 25.5Poland (21) 54,896 1.4 11.2 11.8 10.5 10.9 1.3 1.2 1.2 4.1 4.0 4.6 25.5 -13.1 -3.0 14.3 11.9 10.9Russia (26) 219,329 -2.2 4.9 7.2 8.5 7.9 0.8 0.8 0.7 2.1 3.7 3.8 37.2 -11.8 1.2 17.8 12.7 11.6South Africa (50) 268,550 1.6 11.2 14.9 12.9 11.1 2.4 2.2 2.0 3.4 3.7 4.1 19.1 14.9 16.9 15.7 16.9 17.4Turkey (24) 63,739 3.0 36.0 12.4 11.4 10.1 1.9 1.7 1.5 na 2.7 2.9 -6.7 9.3 12.6 15.4 15.0 15.0Latin America (137) 777,498 1.3 5.7 14.7 14.2 11.7 1.7 1.7 1.6 3.5 2.9 3.1 -1.4 -1.7 17.9 12.3 12.4 13.7Brazil (78) 463,391 0.0 3.6 12.9 12.4 10.3 1.4 1.4 1.3 3.8 3.4 3.6 -2.8 -9.0 18.5 12.2 11.8 12.7Chile (20) 68,354 0.7 -2.9 17.4 17.0 15.0 2.1 2.0 1.9 3.5 3.1 3.2 -8.4 2.0 13.8 11.8 12.1 12.8Colombia (14) 44,576 2.3 10.4 18.2 16.0 13.1 1.6 1.3 1.2 2.2 3.1 3.4 36.6 22.6 22.1 8.0 7.4 7.9Mexico (21) 177,223 4.3 13.2 20.3 19.5 15.3 3.0 2.9 2.6 3.3 1.8 1.9 -2.2 34.1 17.7 11.6 14.7 19.6Peru (4) 23,953 3.2 9.0 12.4 12.8 11.6 3.6 3.0 2.6 2.3 2.7 2.7 31.0 -3.1 10.2 28.2 23.7 21.7Developed Markets (1625) 24,949,691 -0.2 10.2 13.6 13.2 11.8 1.8 1.6 1.5 2.6 2.8 3.0 8.0 3.8 12.9 12.8 12.5 12.9Emerging Markets (818) 3,581,406 2.1 8.3 12.8 12.0 10.5 1.6 1.5 1.4 2.8 2.8 3.1 3.2 5.7 12.8 13.6 13.5 13.7World (2443) 28,531,097 0.1 9.9 13.5 13.1 11.6 1.7 1.6 1.5 2.6 2.8 3.0 7.3 4.0 12.9 12.9 12.6 13.0Source: Deutsche Bank, I/B/E/S, MSCI. Note: Data in the table are compiled based on MSCI AC World index universe. P/E, P/B, dividend yield, EPS growth and ROE are aggregated using I/B/E/S consensus estimates(calendarized to December year end) with current prices. All numbers are free-float adjusted.Page 24 Deutsche Bank AG/Hong Kong
    • 17 October 2012The InvestigatorGlobal – market intelligence (continued)Figure 34: Market intelligence by sector11Oct12 Mcap LC Perf P/E (x) P/B (x) Div Yld (%) EPSg (%) ROE (%)Sector (#Co) U$m 1m YTD CY11 CY12 CY13 CY11 CY12 CY13 CY11 CY12 CY13 CY11 CY12 CY13 CY11 CY12 CY13Energy (172) 3,186,599 -0.7 1.3 10.3 11.3 10.4 1.6 1.4 1.3 2.8 3.0 3.1 26.6 -9.6 7.9 16.2 12.9 12.8Materials (272) 2,137,281 0.5 2.1 11.9 13.4 11.0 1.5 1.5 1.4 2.6 2.6 2.8 14.6 -15.1 21.4 13.2 11.1 13.0Capital Goods (247) 2,116,557 -0.4 7.2 12.6 12.7 11.3 2.0 1.8 1.6 2.6 2.9 3.1 15.6 5.9 11.3 15.1 14.6 14.9Comm Svc (36) 209,582 -0.8 8.6 18.6 17.1 15.1 2.7 2.9 2.4 2.4 2.6 2.7 5.0 8.8 13.2 12.9 13.3 14.2Transportation (97) 544,596 -1.0 5.8 18.0 16.2 13.6 2.0 1.8 1.7 2.1 2.3 2.6 -15.1 19.2 21.5 10.1 10.8 12.3Autos (72) 678,531 -2.8 8.6 11.0 9.0 7.7 1.2 1.1 1.0 2.0 2.4 2.8 4 25 20.6 11.1 12.6 13.0Cons Durables (59) 382,697 -2.4 6.9 18.7 15.3 13.4 1.9 1.8 1.7 1.8 2.0 2.2 -78.6 415.4 68.3 8.7 11.7 12.4Cons Svc (48) 411,077 -0.5 3.9 19.3 18.3 15.9 3.5 3.3 3.0 2.2 2.4 2.6 17.2 4.7 12.1 18.4 17.9 19.2Media (56) 690,559 1.5 26.9 18.0 15.3 13.6 2.4 2.3 2.1 1.7 2.0 2.1 17.5 21.0 8.7 13.1 14.8 14.8Retailing (84) 787,901 -0.8 18.5 21.0 18.7 16.0 3.5 3.2 3.0 1.5 1.6 1.8 10.6 11.8 15.0 16.1 16.8 18.2Food/Staples Retail (52) 657,452 -0.2 9.2 16.1 14.9 13.5 2.2 2.1 1.9 2.4 2.6 2.9 7.3 8.0 10.4 13.9 14.0 14.4Food Beverage (114) 1,853,657 1.5 11.4 18.1 17.2 15.5 3.4 3.2 2.9 2.8 3.0 3.3 8.0 5.2 10.8 18.3 17.6 18.1Household Products (29) 500,048 0.9 10.4 19.2 18.6 17.2 3.4 3.2 3.1 2.7 2.9 3.0 1.0 3.1 7.8 18.3 18.2 18.3Health Care Equip/Svc (64) 657,781 2.9 15.4 15.5 14.2 12.8 2.6 2.2 2.0 1.1 1.2 1.4 9.8 9.6 11.0 17.2 15.7 15.4Pharma & Biotech (71) 2,071,230 1.7 14.9 13.6 13.5 12.6 3.0 2.8 2.6 2.8 3.0 3.2 3.6 0.8 6.7 21.5 20.8 19.3Banks (189) 2,617,624 1.9 13.9 10.0 10.0 9.1 1.1 1.1 1.0 3.7 3.9 4.1 11.8 -1.3 10.8 11.1 10.6 10.8Div Financials (106) 1,202,940 2.9 21.6 13.3 11.8 9.6 0.9 0.8 0.8 1.8 2.0 2.5 -17.4 14.6 21.8 6.6 7.2 8.3Insurance (98) 1,120,007 1.9 16.5 15.4 10.6 9.8 1.1 1.0 0.9 3.0 3.3 3.5 1.3 47.5 8.0 6.7 9.3 9.4Real Estate (126) 839,462 0.3 19.9 19.8 20.8 18.8 1.5 1.3 1.2 3.1 3.2 3.4 4.0 -2.6 8.5 7.5 6.3 6.7Software (79) 1,575,178 0.1 17.3 17.2 15.4 13.6 4.3 3.7 3.2 1.1 1.2 1.3 14.3 11.7 12.6 21.7 23.8 23.3Tech Hard/Equip (94) 1,378,568 -5.2 12.2 14.6 12.9 11.0 2.2 2.0 1.8 1.1 1.5 2.2 12.0 10.5 17.1 16.4 16.8 17.1Semis (52) 602,030 -3.1 2.7 13.2 12.6 11.0 2.2 2.1 1.8 2.1 2.3 2.4 -12.2 3.3 18.5 16.6 16.5 16.3Telecom (89) 1,285,795 -1.3 5.7 12.8 12.7 11.8 1.9 1.8 1.7 4.9 4.6 5.1 -0.8 -0.1 9.2 14.3 13.8 14.3Utilities (137) 1,023,944 0.6 0.0 13.5 13.2 12.8 1.3 1.3 1.3 4.6 4.5 4.6 -21.7 8.3 15.7 9.0 9.3 9.9World (2443) 28,531,097 0.1 9.9 13.5 13.1 11.6 1.7 1.6 1.5 2.6 2.8 3.0 7.3 4.0 12.9 12.9 12.6 13.0Source: Deutsche Bank, I/B/E/S, MSCI. Note: Data in the table are compiled based on MSCI AC World index universe. P/E, P/B, dividend yield, EPS growth and ROE are aggregated using I/B/E/S consensus estimates(calendarized to December year end) with current prices. All numbers are free-float adjusted.Figure 35: Equity market performance 450 450 500 500 MSCI AC World LC Index (LS) 400 MSCI AC World LC Index (LS) 400 450 450 350 350 400 400 300 300 350 350 250 250 300 300 200 200 150 150 250 250 100 100 200 200 50 50 150 150 0 0 100 100 1/73 1/76 1/79 1/82 1/85 1/88 1/91 1/94 1/97 1/00 1/02 1/04 1/06 1/08 1/10 1/12Source: Deutsche Bank, MSCIDeutsche Bank AG/Hong Kong Page 25
    • 17 October 2012The InvestigatorAsia – valuationAsian valuations are moderately below historical averages. The problem is margins – inChina they seem to be in a secular decline, while in India they seem to be at a cyclicallow. The region cannot rely on asset turns and leverage – both at global levels – toboost relative ROEs compared with the world. It is probably going to have to be EBITmargin expansion that gets the PB up. We don’t see any substantial decline in the costof equity to boost PB multiples.Figure 36: Composite valuation index Figure 37: Price-to-book value 3 80% 4.0 3.0 Asia ex Japan P/BV (LS) 60% 3.5 2 Rel to World (RS) 2.5 Expensive 40% 3.0 1 2.0 20% 2.5 0 0% 1.5 2.0 Cheap -20% -1 1.0 MSCI Asia ex Japan 12m fd rtn (RS) -40% 1.5 -2 1.0 0.5 Asia ex Japan Composite Valuation Index -60% -3 (S.D., LS) -80% 0.5 0.0 1/73 1/78 1/83 1/88 1/93 1/98 1/03 1/08 1/13 1/73 1/78 1/83 1/88 1/93 1/98 1/03 1/08 1/13Source: Deutsche Bank, IBES, MSCI. Note: Composite valuation index is the average of trailing P/E, 12m Source: Deutsche Bank, MSCI, DataStreamforward P/E, P/Cash Earnings, P/BV, Dividend Yield, EV/EBITDA and EV/Sales, normalized over entirehistoryFigure 38: 12m forward P/E Figure 39: 12m trailing P/E 25 1.6 40 2.0 Asia ex Japan 12m Forward P/E (LS) Asia ex Japan Trailing P/E (LS) 23 1.8 Rel to World (RS) 1.4 35 Rel to World (RS) 21 30 1.6 19 1.2 17 1.4 25 15 1.0 1.2 13 20 1.0 11 0.8 15 0.8 9 0.6 10 0.6 7 5 0.4 5 0.4 1/87 1/92 1/97 1/02 1/07 1/12 1/73 1/78 1/83 1/88 1/93 1/98 1/03 1/08 1/13Source: Deutsche Bank, MSCI, I/B/E/S Source: Deutsche Bank, MSCI, DataStreamFigure 40: EV multiples Figure 41: ROE and EBIT margin 18 3.5 20% 16% Asia ex Japan EV/EBITDA (LS) 18% 15% 16 Asia ex Japan EV/SALES (RS) 3.0 16% 14% 14 14% 13% 2.5 12 12% 12% 2.0 10% 11% 10 8% 10% 1.5 6% 9% 8 4% Asia ex Japan ROE (LS) 8% 6 1.0 2% Asia ex Japan EBIT/Sales (RS) 7% 4 0.5 0% 6% 1/87 1/92 1/97 1/02 1/07 1/12 1/73 1/78 1/83 1/88 1/93 1/98 1/03 1/08 1/13Source: Deutsche Bank, MSCI, FactSet Source: Deutsche Bank, MSCI, FactSetPage 26 Deutsche Bank AG/Hong Kong
    • 17 October 2012The InvestigatorAsia – investor sentimentRisk-love in Asia is at neutral.Figure 42: Asia Risk-Love indicator Figure 43: China and Hong Kong Risk-Love indicator 3.0 100% 3.0 3.0 MSCI AC Asia ex Jp 12m fd rtn (RS) China Risk-Love (SD) 80% 2.0 Asia ex Japan Risk-Love, SD 2.0 Hong Kong Risk-Love (SD) 2.0 Euphoria 60% Euphoria 1.0 40% 1.0 1.0 20% 0.0 0% 0.0 0.0 -20% -1.0 -40% -1.0 -1.0 -2.0 -60% -2.0 -2.0 Panic -80% -3.0 -100% -3.0 Panic -3.0 1/921/941/961/981/001/021/041/061/081/101/12 1/00 1/02 1/04 1/06 1/08 1/10 1/12Source: Deutsche Bank Source: Deutsche BankFigure 44: India and Indonesia Risk-Love indicator Figure 45: Korea and Malaysia Risk-Love indicator 3.0 3.0 3.0 3.0 Indonesia Risk-Love (SD ) Korea Risk-Love (SD) 2.0 India Risk-Love (SD) 2.0 2.0 Malaysia Risk-Love (SD) 2.0 Euphoria Euphoria 1.0 1.0 1.0 1.0 0.0 0.0 0.0 0.0 -1.0 -1.0 -1.0 -1.0 -2.0 -2.0 -2.0 -2.0 -3.0 Panic -3.0 -3.0 Panic -3.0 1/00 1/02 1/04 1/06 1/08 1/10 1/12 1/00 1/02 1/04 1/06 1/08 1/10 1/12Source: Deutsche Bank Source: Deutsche BankFigure 46: Philippines and Singapore Risk-Love indicator Figure 47: Taiwan and Thailand Risk-Love indicator 3.0 3.0 3.0 3.0 Singapore Risk-Love (SD) Taiwan Risk-Love (SD) 2.0 Philippines Risk-Love (SD) 2.0 2.0 Thailand Risk-Love (SD) 2.0 Euphoria Euphoria 1.0 1.0 1.0 1.0 0.0 0.0 0.0 0.0 -1.0 -1.0 -1.0 -1.0 -2.0 -2.0 -2.0 -2.0 Panic -3.0 Panic -3.0 -3.0 -3.0 1/00 1/02 1/04 1/06 1/08 1/10 1/12 1/00 1/02 1/04 1/06 1/08 1/10 1/12Source: Deutsche Bank Source: Deutsche BankDeutsche Bank AG/Hong Kong Page 27
    • 17 October 2012The InvestigatorAsia – technicalsTechnicals are improving – new highs are rising, and new lows have almost vanished.Figure 48: Advance/decline ratio Figure 49: Percentage of stocks above their 200DMA 2.0 2.0 100% 100% 50dma 1.8 1.8 % of stocks above their 200DMA 1.6 Bullish 1.6 80% 80% 1.4 1.4 1.2 1.2 60% 60% 1.0 1.0 0.8 0.8 40% 40% 0.6 10d Advancing 0.6 Issues/Declining Issues 0.4 0.4 20% 20% Bearish 25d Advancing 0.2 Issues/Declining Issues 0.2 0.0 0.0 0% 0% 1/06 1/07 1/08 1/09 1/10 1/11 1/12 1/06 1/07 1/08 1/09 1/10 1/11 1/12Source: Deutsche Bank, DataStream, FactSet Source: Deutsche Bank, DataStream, FactSetFigure 50: Relative Strength Index Figure 51: Market breadth 40 40 100% 100% 22-day RSI 30 Bullish 30 20 20 50% 50% 10 10 0% 0% 0 0 1/06 1/07 1/08 1/09 1/10 1/11 1/12 -10 -10 -50% -50% -20 -20 Bearish Market breadth -30 -30 Asia ex-Japan -100% -100% 1/06 1/08 1/10 1/12 -40 -40Source: Deutsche Bank, DataStream, FactSet Source: Deutsche Bank, DataStream, FactSet. Market breadth is defined as (# of sub-sectors up on 6 months basis minus # of sub-sectors down on 6 months basis) / total sub-sectors available.Figure 52: Percentage of stocks at 52w Highs Figure 53: Percentage of stocks at 52w Lows30% 30% 50% 50% % of stocks at 52W Highs % of stocks at 52W Lows25% 25% 40% 40%20% 20% 30% 30%15% 15% Bearish 20% Bearish 20%10% 10% 5% 5% 10% 10% 0% 0% 0% 0% 1/06 1/07 1/08 1/09 1/10 1/11 1/12 1/06 1/07 1/08 1/09 1/10 1/11 1/12Source: Deutsche Bank, DataStream, FactSet Source: Deutsche Bank, DataStream, FactSetPage 28 Deutsche Bank AG/Hong Kong
    • 17 October 2012The InvestigatorAsia – growth and earningsAsia’s leading economic indicators are bottoming, and policy is no longer beingtightened. Analysts have taken the knife to this year’s EPS growth forecasts fromaround 13% at the start of the year to 5% now. We think that EPS revisions andeconomic surprises are about bottoming now.Figure 54: Leading economic and composite policy Figure 55: Economic surprisesindicators 30% S.D. 1.2 40% Asia ex-Japan Easy Monetary/Fiscal 60 25% Policy 0.8 30% 45 20% 20% 30 0.4 10% 15 15% 0 0% 0 10% -15 -0.4 -10% 5% -20% -30 Tight Monetary/ -0.8 -45 0% Fiscal Policy -30% -60 -5% Asia Composite Leading Indicator* YoY% (LS) -1.2 -40% -75 Asia Composite Policy Indicator** (S.D., RS) 12m forward earnings revisions index, LS -10% -1.6 -50% -90 Economic Surprise Index, RS 1/70 1/75 1/80 1/85 1/90 1/95 1/00 1/05 1/10 -60% -105 1/03 1/04 1/05 1/06 1/07 1/08 1/09 1/10 1/11 1/12Source: Deutsche Bank, CEIC, DataStream, Bloomberg Finance LP. Note: *Market cap weighted Source: Deutsche Bank, Citigroup, Bloomberg Finance LPaverage of composite leading economic indicators growth for China, India, Korea and Taiwan. **GDPweighed average of composite policy indicators for China, HK, India, Indonesia, Korea, Malaysia,Philippines, Spore, Taiwan & Thailand.Figure 56: Earnings growth forecast (%) Figure 57: 12m forward growth forecast by sector 25 25 30 12m fwd EPS growth (%) 30 12/2011F 23 12/2012F 23 Latest 1m Ago 24 24 21 12/2013F 21 19 19 18 18 17 17 12 12 15 15 6 6 13 13 11 11 0 0 Materials Health Care Cons Staples Financials Telecom Industrials Energy Info Tech Asia ex Jp Utilities Cons Disc 9 9 7 MSCI AC World 7 5 5 1/09 7/09 1/10 7/10 1/11 7/11 1/12 7/12Source: Deutsche Bank, I/B/E/S, MSCI Source: Deutsche Bank, I/B/E/S, MSCIFigure 58: 12m forward EPS revisions by sector Figure 59: 12m forward EPS revisions by country 30 30 0 0 15 15 0 0 -20 -20 -15 -15 -30 -30 -40 -40 -45 -45 1m EPS revisions (%) -60 1m EPS revisions (%) -60 -60 -60 -75 -75 -90 -90 -80 -80 Taiwan Singapore Materials Malaysia Asia Ex Jp Telecom Thailand Health Care Financials Cons Staples Indonesia Industrials Info Tech Asia ex Jp Energy India China Utilities Korea Philippines Cons Disc Hong KongSource: Deutsche Bank, I/B/E/S, MSCI Source: Deutsche Bank, I/B/E/S, MSCIDeutsche Bank AG/Hong Kong Page 29
    • 17 October 2012The InvestigatorAsia – liquidityNew issuance and secondaries have been paltry – a good positive contrarian indicator.Foreign fund flows have resumed in earnest as markets have rallied.Figure 60: M2/market cap Figure 61: Free liquidity 145% 145% 20% 20% Asia ex-Japan 120% 120% 95% 95% 10% 10% 70% 70% 0% 0% 45% 45% 20% 20% -10% -10% -5% -5% Aggregate Asia ex Japan (China, India, -30% -30% Korea & Taiwan) Narrow Money -20% -20% Growth less CPI Inflation less Leading -55% M2 / Market Cap, YoY% -55% Economic Indicator Growth -80% -80% -30% -30% 1/87 1/90 1/93 1/96 1/99 1/02 1/05 1/08 1/11 1/14 1/96 1/98 1/00 1/02 1/04 1/06 1/08 1/10 1/12Source: Deutsche Bank, DataStream, Bloomberg Finance LP Source: Deutsche Bank, DataStream, Bloomberg Finance LPFigure 62: Asia-focused hedge fund exposure estimates Figure 63: 6m total equity offerings* as percentage of total market cap in Asia ex Japan 100% 100% 1.0% 6m total IPOs & addl offerings as of Sep 2012 2.5% Asia ex Japan Long Short Equities 0.9% = U$38.6bn (excl China A); U$47.9bn (incl Hedge Fund Exposure Proxy 0.8% China A) 2.0% 80% 80% 0.7% 61% 0.6% 1.5% 60% 60% 0.5% 0.4% 6m total IPOs & additional offerings as 1.0% 40% 40% 0.3% % of M2 (excl A shs), LS 0.2% 0.5% 6m total IPOs & addl offerings as % of 20% 20% 0.1% market cap (excl A shs), RS Based on 6 month rolling beta on MSCI AXJ returns 0.0% 0.0% 0% 0% 1/99 1/01 1/03 1/05 1/07 1/09 1/11 1/00 1/02 1/04 1/06 1/08 1/10 1/12Source: Deutsche Bank, Bloomberg Finance LP Source: Deutsche Bank, Bloomberg Finance LP, DataStream. Note: *Equity offerings includes IPO and additional equity offerings of primary and secondary shares.Figure 64: Foreign fund flows Figure 65: Foreign fund flows 4 4 4 Korea Taiwan Philippines 4 Indonesia 3 India 3 2 Thailand 2 2 2 1 1 0 0 0 0 -1 -1 -2 -2 -3 Deviation from 3-yr average -3 -2 -2 3m net inflows (S.D.) -4 3m net inflows (S.D.) -4 Deviation from 3-yr average -5 -5 -4 -4 1/05 1/07 1/09 1/11 1/05 1/07 1/09 1/11Source: Deutsche Bank, Bloomberg Finance LP Source: Deutsche Bank, Bloomberg Finance LPPage 30 Deutsche Bank AG/Hong Kong
    • 17 October 2012The InvestigatorAsia – factor performanceValue strategies and high profitability have done well this year, while high projectedgrowth stocks have been punished.Figure 66: Best- and worst-performing factors (1-mth) Figure 67: Best- and worst-performing factors (YTD) 2.5 % 8 % 2.0 1.5 4 1.0 0.5 0 0.0 -0.5 Best quintile vs market Best quintile vs market -1.0 -4 1-mth performance spread YTD performance spread -1.5 -2.0 -8 Low P/Op Inc High FY1 EPS Rev Low P/BV Low Price/Sales High 6m Price Low FY2 EPS Disp Low P/FCF Low 12m Fd P/E High Price Up/Dn High LT Gth Est Low P/Op Inc Low EV/Sales Low Capex/Sales Low Price/Sales High 5yr Sales Gth High 6m Price High Cash ROC, High 3m chg in High 5yr EPS Gth High FY2 Gth Est Price Mom yoy chg Mom Mom Days AXJ AXJSource: Deutsche Bank Source: Deutsche BankDeutsche Bank AG/Hong Kong Page 31
    • 17 October 2012The InvestigatorFigure 68: Factor performance (sector neutral**) Bes t quint ile vs m a r ket r ela t ive per f or m a nc e (%)As ia ex J a pa n Returns Ann. Rtn. Returns Ann. Rtn.S ep 30, 12 YTD 1m 3m 6m 12m 5y 10y 15y YTD 1m 3m 6m 12m 5y 10y 15y Valuation ProfitabilityLow 12m Fd P/E 1.2 2.1 -0.1 -0.4 3.3 5.6 7.8 5.7 High Cash ROC 3.2 -0.5 -0.1 0.3 3.7 6.0 4.4 6.8Low Trailing P/E 3.6 1.3 0.4 0.2 4.0 8.6 8.4 7.8 High Cash ROC, yoy chg 4.6 -0.5 -0.2 2.1 6.4 3.5 3.3 3.6Low P/Op Inc 4.4 1.6 -0.2 1.8 6.3 7.6 8.0 6.8 High ROE 4.1 -0.3 1.3 2.5 4.7 3.2 3.3 3.7Low P/BV -1.4 2.2 0.0 -1.9 -0.7 3.0 3.6 1.1 High ROE, yoy chg 3.1 -0.3 0.8 1.5 4.6 3.8 3.5 3.5Low Price/Sales 5.5 2.1 2.2 4.2 4.6 2.1 3.7 1.9 Aver a ge 3.8 -0.4 0.5 1.6 4.8 4.1 3.6 4.4Low P/FCF 1.5 -1.2 0.4 2.8 1.7 3.9 3.0 5.3 GrowthLow EV/EBIT 4.3 -0.8 0.9 3.4 6.3 8.4 7.4 7.8 High 3yr Sales Gth -2.0 0.5 -1.0 -1.8 -0.2 -2.5 -1.7 -3.4Low EV/EBITDA 1.1 -0.1 0.9 1.4 3.0 7.0 6.3 7.6 High 5yr Sales Gth -2.5 0.6 -2.3 -4.0 0.1 -2.7 -0.9 -1.6Low EV/Cap Emp 0.3 1.2 2.0 0.7 2.6 3.5 3.3 2.3 High 3yr EPS Gth 2.7 -0.8 0.4 1.5 3.5 -0.7 0.8 -1.2Low EV/Sales 5.5 0.6 1.3 3.6 6.7 6.0 5.5 5.9 High 5yr EPS Gth -3.7 -0.6 -1.5 -4.2 -2.9 -2.3 -0.6 -0.1Low EV/Op CF 2.4 -0.2 1.1 2.3 2.8 6.6 6.2 8.8 High LT Gth Est 0.3 1.9 -0.3 -1.5 -0.2 -2.4 1.8 1.0Low EV/FCF 2.5 -0.9 0.8 2.6 2.9 4.5 3.5 6.3 High FY1 Gth Est -2.2 0.5 -0.5 -3.1 -0.3 -1.6 1.0 -1.2High Dividend Yield 3.4 1.1 2.0 3.4 2.4 8.2 7.4 10.0 High FY2 Gth Est -2.6 1.6 -2.1 -5.3 -1.0 -4.1 -0.1 -1.7Aver a ge 2.6 0.7 0.9 1.9 3.5 5.8 5.7 6.0 Aver a ge -1.4 0.5 -1.1 -2.6 -0.2 -2.3 0.0 -1.2 Price Momentum StabilityHigh 6m Price Mom -4.2 -1.3 -1.0 0.4 -8.5 -4.7 -0.3 -0.5 Low EPS Vola 1.8 0.1 0.9 3.9 0.1 2.2 0.6 2.3High 9m Price Mom 0.3 -0.3 0.2 3.0 -3.0 -5.2 1.1 1.5 Low Op Inc Vola 3.7 0.0 0.2 4.2 3.6 2.9 1.5 3.1High 12m Price Mom 1.9 -0.8 0.6 3.6 -1.1 -4.3 1.2 1.1 Low Book Value Vola 0.4 -0.9 -0.1 0.7 0.7 0.3 0.7 0.6High Price Rel Strg -0.4 -0.8 0.9 2.7 -2.0 -4.1 1.1 2.4 Low Sales Vola 0.7 -0.7 0.1 0.8 -1.7 -0.8 -0.9 1.5High 3m chg in Price Mom -2.8 -0.4 -2.1 -1.9 -7.3 -4.0 0.0 -1.3 Low EPS Est Vola 3.6 -0.1 1.3 4.2 1.6 2.6 -1.8 0.7High Price Up/Dn Days -0.1 -1.5 -0.2 2.1 -2.0 0.7 1.8 1.7 Aver a ge 2.1 -0.3 0.5 2.7 0.9 1.4 0.0 1.6Aver a ge -0.9 -0.8 -0.3 1.7 -4.0 -3.6 0.8 0.8 Risk Earnings Momentum Low FY1 EPS Disp 1.1 0.0 1.6 3.3 -2.7 1.1 0.9 4.5High FY1 EPS Mom -0.6 -0.5 -1.5 0.1 0.0 -0.1 3.0 1.4 Low FY2 EPS Disp 2.8 -1.4 1.3 4.2 -0.6 0.7 0.5 3.3High FY2 EPS Mom 1.0 0.3 1.1 2.1 1.2 0.8 4.9 4.8 High EBIT/Int Exp 3.2 -1.0 0.4 2.7 1.9 3.7 2.7 5.2High 12m Fd EPS Mom -0.7 -0.7 0.2 0.5 0.0 -0.4 4.6 3.9 Low Debt/Equity 0.8 -0.6 1.4 2.1 0.7 3.1 1.1 2.6High FY1 EPS Rev 2.3 -1.5 1.6 3.2 0.5 0.2 4.5 3.9 High Altman Z Score 0.6 -0.8 1.2 1.5 -3.3 -1.0 -1.6 -0.7High FY2 EPS Rev 1.4 -0.8 2.0 3.2 -1.2 0.2 4.7 3.5 High Market Cap -2.3 -0.4 -0.9 -0.3 -0.3 -0.5 0.6 1.7Aver a ge 0.7 -0.7 0.7 1.8 0.1 0.1 4.3 3.5 Aver a ge 1.0 -0.7 0.8 2.3 -0.7 1.2 0.7 2.8 Capex Deployment & Earnings Accruals Consensus RatingsLow Capex/Depr 3.4 -0.7 0.7 2.1 3.9 0.4 -1.5 -1.7 High Analyst Rec 1.3 -0.2 0.0 0.9 2.3 2.7 3.3 6.9Low Capex/Sales 6.0 -0.3 3.5 5.9 5.0 4.3 2.1 1.8 High Analyst Rec 1m chg 2.2 -0.4 0.5 0.0 3.4 3.3 4.8 4.7Low Capex/FA 1.5 0.5 1.7 2.7 3.5 -2.7 -2.8 -3.7 Aver a ge 1.7 -0.3 0.2 0.4 2.8 3.0 4.1 5.8High Receivables yoy chg 0.9 -0.3 0.1 0.1 1.4 0.4 0.1 1.1Low Inventory yoy chg -1.0 -0.4 -0.6 0.6 -0.8 -0.7 0.6 1.9Low Payables yoy chg -2.0 0.4 0.5 -2.1 -1.4 -2.3 -1.9 -0.7Aver a ge 1.5 -0.1 1.0 1.6 1.9 -0.1 -0.6 -0.2Source: Deutsche Bank, FactSet, I/B/E/S. Note: *1m, 3m, 6m, 12m, 5yr, 10yr and 15yr returns are as of month ended Sep 2012. **Quintile baskets are formed on a regional sector relative basis.Relative performance is based on equal weighted average returns of the best quintile basket and the market. For description on factors please see appendix A.Page 32 Deutsche Bank AG/Hong Kong
    • 17 October 2012The InvestigatorAsia – market intelligenceFigure 69: Equity market performance 500 220 800 170 MSCI Asia ex Japan LC Index (LS) MSCI Asia ex Japan LC Index (LS) 450 200 Rel to World (RS) 700 Rel to World (RS) 150 400 180 350 160 600 130 300 140 250 500 110 120 200 100 400 90 150 100 80 300 70 50 60 0 40 200 50 1/73 1/78 1/83 1/88 1/93 1/98 1/00 1/02 1/04 1/06 1/08 1/10 1/12Source: Deutsche Bank, MSCI.Figure 70: Market intelligence by sector11Oct12 Mcap LC Perf P/E (x) P/B (x) Div Yld (%) EPSg (%) ROE (%)Sector (#Co) U$m 1m YTD CY11 CY12 CY13 CY11 CY12 CY13 CY11 CY12 CY13 CY11 CY12 CY13 CY11 CY12 CY13Energy (30) 193,608 4.5 4.1 9.4 10.3 9.4 1.6 1.5 1.4 3.3 3.1 3.3 18.7 -8.0 10.1 17.6 14.4 14.5Materials (69) 186,673 2.5 0.3 11.4 13.1 10.9 1.4 1.3 1.2 2.9 2.3 2.7 -10.3 -17.2 24.5 11.8 10.3 11.6Capital Goods (79) 203,519 1.3 8.3 11.2 11.8 10.5 1.4 1.3 1.2 2.4 2.5 2.6 9.2 -5.8 11.5 13.2 11.1 11.4Comm Svc (1) 1,039 2.6 16.9 19.5 18.2 16.3 3.2 3.2 3.2 1.8 1.9 2.0 7.1 7.1 11.4 16.4 17.5 19.8Transportation (32) 51,603 3.6 5.5 17.5 19.1 14.2 1.3 1.2 1.1 2.7 2.6 2.9 nm 51.0 48.1 7.6 6.0 7.7Autos (25) 133,869 2.8 10.3 12.7 8.7 7.8 2.2 1.8 1.5 1.0 1.4 1.5 -1.4 53.7 10.3 16.5 20.8 19.1Cons Durables (12) 20,901 0.8 4.5 31.9 12.9 10.6 2.7 1.5 1.3 2.1 2.6 2.9 -61.7 147.9 21.7 0.6 11.0 12.7Cons Svc (13) 45,955 -0.4 5.2 17.6 16.4 14.3 3.0 2.6 2.3 2.5 2.4 2.7 22.1 7.1 15.1 15.6 14.7 14.9Media (3) 8,871 4.8 20.6 20.7 19.4 18.1 3.9 3.8 3.7 4.4 4.5 4.8 -11.7 6.6 7.1 19.0 19.7 20.6Retailing (18) 39,949 -0.1 -10.4 15.7 14.9 12.5 2.1 1.9 1.7 2.7 2.5 2.9 -16.2 5.2 19.5 13.0 12.6 13.6Food/Staples Retail (7) 22,630 2.5 0.6 25.1 19.3 17.1 3.4 2.3 2.1 2.0 1.9 2.2 11.5 12.3 12.9 13.6 11.7 12.2Food Beverage (29) 95,862 3.6 7.9 20.1 19.6 16.6 2.8 2.5 2.3 2.1 2.2 2.5 -4.8 2.3 18.3 14.5 12.9 14.1Household Products (8) 32,998 2.0 26.8 40.8 31.3 26.4 6.6 5.1 4.6 1.3 1.5 1.8 12.9 30.4 18.5 23.4 26.8 21.4Health Care Equip/Svc (4) 8,037 10.1 37.0 30.4 27.9 23.1 2.8 2.3 2.1 0.9 0.7 0.9 21.5 22.1 20.8 9.2 8.1 9.0Pharma & Biotech (10) 18,318 -0.7 22.1 25.7 21.6 18.2 3.2 2.9 2.8 1.1 0.9 0.9 14.8 19.3 14.0 13.0 13.9 17.7Banks (66) 483,438 5.1 11.7 9.3 8.9 8.4 1.4 1.3 1.1 3.4 3.7 3.9 23.9 8.4 3.3 15.3 14.8 13.8Div Financials (24) 63,029 6.2 7.8 14.6 15.2 14.1 1.7 1.7 1.5 2.8 2.7 2.9 2.5 -4.1 8.9 11.5 10.6 10.9Insurance (14) 114,962 6.0 14.3 20.0 16.1 14.0 2.0 1.8 1.6 1.3 1.4 1.7 -10.3 24.4 14.8 10.1 11.2 11.5Real Estate (45) 187,422 3.7 29.6 12.9 13.6 12.5 1.0 0.9 0.9 3.0 2.8 3.0 15.5 -4.9 9.1 8.0 7.1 7.1Software (9) 86,665 0.0 19.0 24.6 20.7 17.4 6.7 5.4 4.3 0.9 1.0 1.1 21.9 18.8 18.8 27.3 26.0 24.7Tech Hard/Equip (39) 121,519 -3.5 0.3 16.2 13.2 10.8 1.4 1.4 1.3 2.7 2.8 3.4 -46.7 35.8 41.0 12.0 11.3 13.0Semis (24) 268,958 1.7 15.7 16.4 11.6 9.6 2.0 2.0 1.7 1.8 1.9 2.0 -30.2 41.3 21.5 12.5 16.9 17.6Telecom (26) 178,368 2.0 10.1 14.8 14.4 13.3 2.2 2.0 1.9 3.9 4.1 4.3 1.2 2.7 8.1 14.7 13.8 13.9Utilities (29) 102,839 4.0 14.3 17.8 15.2 13.9 2.1 1.9 1.7 2.3 2.6 2.9 -21.4 43.9 26.3 5.6 8.2 9.9Asia ex Japan (616) 2,671,032 2.8 9.9 13.1 12.2 10.9 1.7 1.5 1.4 2.6 2.7 2.9 -1.4 9.7 13.0 12.4 12.8 12.9Source: Deutsche Bank, I/B/E/S, MSCI. Note: Data in the table are compiled based on MSCI AC Asia ex Japan index universe. P/E, P/B, dividend yield, EPS growth and ROE are aggregated using I/B/E/S consensusestimates (calendarized to December year end) with current prices. All numbers are free-float adjusted.Figure 71: Market Expected Return Indicator for Asia ex-Japan 8 Market Expected Return Indicator, LS 800 6 Asia ex-Japan MSCI AXJ , RS 700 4 600 2 Bullish 500 0 400 -2 -4 300 -6 Bearish 200 -8 100 1/92 1/93 1/94 1/95 1/96 1/97 1/98 1/99 1/00 1/01 1/02 1/03 1/04 1/05 1/06 1/07 1/08 1/09 1/10 1/11 1/12Source: Deutsche Bank, MSCI, Bloomberg Finance LPDeutsche Bank AG/Hong Kong Page 33
    • 17 October 2012The Investigator Japan – valuationsJapanese stocks continue to look undervalued versus history. A return to credibleinflation and higher nominal GDP growth globally is required to unlock value. Recenttensions with China are unhelpful for risk assets in Japan.Figure 72: Composite valuation index Figure 73: Price-to-book value 3 60% 6.0 2.5 MSCI Japan 12m fd rtn (RS) Japan P/BV (LS) 2 Japan Composite Valuation Index (S.D., LS) 40% 5.0 Rel to World (RS) 2.0 Expensive 1 20% 4.0 1.5 0 0% 3.0 1.0 -1 -20% 2.0 Cheap 0.5 -2 -40% 1.0 -3 -60% 0.0 0.0 1/73 1/79 1/85 1/91 1/97 1/03 1/09 1/73 1/78 1/83 1/88 1/93 1/98 1/03 1/08 1/13Source: Deutsche Bank, IBES, MSCI. Note: Composite valuation index is the average of trailing P/E, 12m Source: Deutsche Bank, MSCI, DataStream. Note: Market relative = relative to MSCI AC Asia ex Japan.forward P/E, P/Cash Earnings, P/BV, Dividend Yield, EV/EBITDA and EV/Sales, normalized over entirehistory.Figure 74: 12m forward P/E Figure 75: 12m trailing earnings yield 85 4.1 10 1.2 Japan 12m Forward P/E (LS) Japan Trailing Earnings Yield (LS, %) 75 9 Rel to World (RS) 3.6 Rel to World (RS) 1.0 8 65 3.1 7 0.8 55 6 2.6 45 5 0.6 2.1 4 35 3 0.4 25 1.6 2 0.2 15 1.1 1 5 0.6 0 0.0 1/87 1/92 1/97 1/02 1/07 1/12 1/73 1/78 1/83 1/88 1/93 1/98 1/03 1/08 1/13Source: Deutsche Bank, MSCI, I/B/E/S. Note: Market relative = relative to MSCI AC Asia ex Japan. Source: Deutsche Bank, MSCI, DataStream. Note: Market relative = relative to MSCI AC Asia ex Japan.Figure 76: EV multiples Figure 77: ROE and EBIT margin 1.7 14% 9% 19 Japan EV/EBITDA (LS) 12% 8% Japan EV/SALES (RS) 1.5 17 10% 7% 15 1.3 8% 6% 6% 13 5% 1.1 4% 4% 11 2% 0.9 0% 3% 9 -2% Japan ROE (LS) 2% 7 0.7 -4% Japan EBIT/Sales (RS) 1% 5 0.5 -6% 0% 1/87 1/92 1/97 1/02 1/07 1/12 1/73 1/78 1/83 1/88 1/93 1/98 1/03 1/08 1/13Source: Deutsche Bank, MSCI, FactSet Source: Deutsche Bank, MSCI, FactSetPage 34 Deutsche Bank AG/Hong Kong
    • 17 October 2012The InvestigatorJapan – investor sentimentSentiment is at neutral levels.Figure 78: Equity Risk-Love indicator Figure 79: Market volatility (inverted scale) 1.5 TOPIX 6m fwd rtn (RS) 30% 0.6 0.6 Nikkei 225 Options Put/Call Volume Ratio JP Risk-Love, SD (LS) (4w Rolling, Inverted Scale) 1.0 20% 0.8 0.8 Euphoria 0.5 10% 1 Euphoria 1 0.0 0% 1.2 1.2 -0.5 -10% 1.4 1.4 Panic -1.0 -20% 1.6 1.6 Panic -1.5 -30% 1.8 1.8 1/00 1/02 1/04 1/06 1/08 1/10 1/12 1/04 1/05 1/06 1/07 1/08 1/09 1/10 1/11 1/12 1/13Source: Deutsche Bank, Bloomberg Finance LP Source: Deutsche Bank, DataStreamFigure 80: Asset allocation to stocks for publicly offered Figure 81: Percentage premium to NAV of closed-endinvestment trusts of contractual type equity funds 35 % of assets in stocks for publicly offered 35 20 30 % premium to NAV of closed-end equity funds investment trusts of contractual type (%) 15 25 30 12m mov avg 30 20 10 15 5 Euphoria 25 25 10 Euphoria 0 5 20 20 -5 0 -5 -10 Panic 15 15 -10 Panic -15 Japan Equity Fund (RS) -15 10 10 -20 Japan Smaller Capitalization Fund (LS) -20 1/95 1/97 1/99 1/01 1/03 1/05 1/07 1/09 1/11 1/13 1/04 1/05 1/06 1/07 1/08 1/09 1/10 1/11 1/12 1/13Source: Deutsche Bank, SENTIX Capital Markets Survey. Source: Deutsche Bank, Cabinet Office, Shoko Chukin Bank.Figure 82: Market volatility Figure 83: Margin ratio 8.0 8.0 0 0 Tokyo Stock Exchange Long/Short Margin S.D. Euphoria S.D. 7.0 7.0 0.5 0.5 Ratio 1 1 6.0 6.0 1.5 1.5 5.0 Euphoria 5.0 2 2 4.0 4.0 2.5 2.5 3.0 3.0 3 3 2.0 2.0 Panic 3.5 3.5 Nikkei 225 100-Day Price Volatility 1.0 Panic 1.0 4 4 (Inverted Scale) 0.0 0.0 4.5 4.5 1/95 1/98 1/01 1/04 1/07 1/10 1/13 1/95 1/97 1/99 1/01 1/03 1/05 1/07 1/09 1/11 1/13Source: Deutsche Bank, DataStream Source: Deutsche Bank, Tokyo Stock Exchange.Deutsche Bank AG/Hong Kong Page 35
    • 17 October 2012The InvestigatorJapan – technicalsTechnicals are mixed.Figure 84: Advance/decline ratio Figure 85: Percentage of stocks above their 200dma2.0 2.0 100% 100% 10d Advancing Issues/Declining Issues % of stocks above their 200dma1.8 1.81.6 25d Advancing Issues/Declining Issues 1.6 80% 80%1.4 Bullish 1.41.2 1.2 60% 60%1.0 1.00.8 0.8 40% 40%0.6 0.60.4 0.4 20% 20%0.2 Bearish 0.20.0 0.0 0% 0% 1/06 1/07 1/08 1/09 1/10 1/11 1/12 1/06 1/07 1/08 1/09 1/10 1/11 1/12Source: Deutsche Bank, DataStream, FactSet Source: Deutsche Bank, DataStream, FactSetFigure 86: Relative Strength Index Figure 87: Market breadth 40 40 100% 100% 22-day RSI Japan 30 30 75% 75% Bullish 20 20 50% 50% 10 10 25% 25% 0% 0% 0 0 1/06 1/07 1/08 1/09 1/10 1/11 1/12 -25% -25%-10 -10 -50% -50%-20 -20 -75% -75%-30 Bearish -30 Market breadth -100% -100% 1/06 1/07 1/08 1/09 1/10 1/11 1/12 1/13-40 -40Source: Deutsche Bank, DataStream, FactSet Source: Deutsche Bank, DataStream, FactSet. Market breadth is defined as (# of sub-sectors up on 6 months basis minus # of sub-sectors down on 6 months basis) / total sub-sectors available.Figure 88: Percentage of stocks at 52w Highs Figure 89: Percentage of stocks at 52w Lows 30% 30% 14% % of stocks at their 52W Highs 14% 25% % of stocks at their 52W Lows 25% 12% 12% 10% 10% 20% 20% 8% 8% 15% 15% 6% Bearish 6% 10% 10% 4% 4% 2% 2% 5% 5% 0% 0% 0% 0% 1/06 1/07 1/08 1/09 1/10 1/11 1/12 1/13 1/06 1/07 1/08 1/09 1/10 1/11 1/12 1/13Source: Deutsche Bank, DataStream, FactSet Source: Deutsche Bank, DataStream, FactSetPage 36 Deutsche Bank AG/Hong Kong
    • 17 October 2012The InvestigatorJapan – growth and earningsEconomic surprises are nasty and mean-reverting. They are probably going to get lessbad. EPS revisions continue to slide.Figure 90: Leading economic indicators Figure 91: Earnings revisions and economic surprises 15% 55 40% Japan 100 10% 50 20% 50 5% 45 0% 0 0% 40 -20% -50 -5% 35 -40% OECD Japan Leading Economic Indicator-10% (LS, YoY%) - Aug 2012 30 12m forward earnings revisions index, LS -100 -60% Small & Med Enterprise Survey Expectation Economic surprise index, RS-15% Index (RS) - Sep 2012 25 -80% -150 1/90 1/93 1/96 1/99 1/02 1/05 1/08 1/11 1/03 1/04 1/05 1/06 1/07 1/08 1/09 1/10 1/11 1/12 1/13Source: Deutsche Bank, OECD, DataStream Source: Citigroup, I/B/E/S, FactsetFigure 92: Composite policy indicator Figure 93: Earnings growth forecast (%) 100 100 1.0 S.D. S.D. 1.0 Easy Monetary/Fiscal Policy 80 80 0.5 0.5 60 60 0.0 0.0 40 03/2012F 40 03/2013F 20 20 -0.5 -0.5 03/2014F 0 0 -1.0 -1.0 -20 -20 Tight Monetary/Fiscal Policy Japan MSCI Japan -1.5 -1.5 -40 -40 1/81 1/85 1/89 1/93 1/97 1/01 1/05 1/09 1/13 1/09 7/09 1/10 7/10 1/11 7/11 1/12 7/12Source: Deutsche Bank, CEIC, DataStream, Bloomberg Finance LP, IMF. Note: Composite policy indicator Source: Deutsche Bank, MSCI, I/B/E/Sis a normalized average of real effective exchange rate yoy growth, real broad money (M2) y-o-y growth,short term real interest rate and government fiscal deficit/surplus as a % of GDP.Figure 94: 12m forward EPS revisions by sector Figure 95: 12m forward EPS growth forecast by sector 40 40 180 12m fwd EPS growth (%) 180 20 1m EPS revisions (%) 20 150 Latest 150 0 0 120 1m Ago 120 90 90 -20 -20 60 60 -40 -40 30 30 -60 -60 0 0 -80 -80 -30 -30 Japan Japan Materials Materials Financials Cons Staples Health Care Telecom Health Care Telecom Industrials Cons Staples Financials Industrials Info Tech Energy Info Tech Energy Utilities Cons Disc Cons DiscSource: Deutsche Bank, MSCI, I/B/E/S. Note: EPS revisions = number of upward less downward revisions Source: Deutsche Bank, MSCI, I/B/E/Sas % of total number of revisions in one month.Deutsche Bank AG/Hong Kong Page 37
    • 17 October 2012The InvestigatorJapan – liquidityFund flows are weak and the market continues to underperform the world as US 10-year bond yields remain suppressed.Figure 96: M2/market cap Figure 97: Free liquidity 100% 100% 40% 40% Japan Japan Narrow Money Growth less CPI 80% 80% 35% Inflation less Leading Economic Indicator 35% 60% 60% 30% 30% 40% 40% 25% 25% 20% 20% 20% 20% 0% 0% 15% 15% -20% -20% 10% 10% -40% -40% 5% 5% -60% -60% 0% 0% M2 / Market Cap, YoY% -5% -5% -80% -80% 1/73 1/78 1/83 1/88 1/93 1/98 1/03 1/08 1/13 -10% -10% 1/85 1/89 1/93 1/97 1/01 1/05 1/09 1/13Source: Deutsche Bank, DataStream Source: Deutsche Bank, DataStreamFigure 98: Foreign fund flows into equities Figure 99: IPOs and additional equity offerings (6m rolling) as % of total market cap 4 4 1.8% 1.8% 3m net inflows (S.D.) 6m total IPOs & addl offerings as of Jul 12* = 3 3 1.6% U$9.5bn 1.6% 1.4% 1.4% 2 2 6m total IPOs & addl offerings as % of 1.2% 1.2% 1 1 total market cap, Japan 1.0% 1.0% 0 0 0.8% 0.8% 1/03 1/05 1/07 1/09 1/11 0.6% 0.6% -1 -1 0.4% 0.4% -2 -2 0.2% 0.2% -3 Japan -3 0.0% 0.0% Deviation from 1-yr average 1/99 1/01 1/03 1/05 1/07 1/09 1/11 -4 -4Source: Deutsche Bank, Bloomberg Finance LP Source: Deutsche Bank, Bloomberg Finance LP, DataStream. Note: *Equity offerings includes IPO and additional equity offerings of primary and secondary shares.Figure 100: US 10-year bond yield and Nikkei 225 Figure 101: Japan yield curve10.2 % US 10Yr Bond Yield, LS 35000 3.5 110 Japan yield curve (10yr yield 100 9.2 Nikkei 225, RS 30000 3.0 less 3m yield), LS 8.2 90 7.2 25000 2.5 Topix banks/ Topix Index, RS 80 6.2 70 20000 2.0 5.2 60 4.2 15000 1.5 50 3.2 40 10000 1.0 2.2 30 1.2 5000 0.5 20 1/90 1/93 1/96 1/99 1/02 1/05 1/08 1/11 1/94 1/98 1/02 1/06 1/10Source: Deutsche Bank, DataStream Source: Deutsche Bank, DataStreamPage 38 Deutsche Bank AG/Hong Kong
    • 17 October 2012The InvestigatorJapan – factor performanceValue remains the long-term winner.Figure 102: Best- and worst-performing factors (1-mth) Figure 103: Best- and worst-performing factors (YTD) 2.0 % Best quintile vs market 12 % Best quintile vs market 1.5 1-mth performance spread 8 YTD performance spread 1.0 4 0.5 0.0 0 -0.5 -4 -1.0 -8 -1.5 -12 Low Capex/Depr High FY2 EPS Rev High 5yr Sales Gth Low Capex/Sales Low P/BV Low Price/Sales Low EV/Cap Emp High Cash ROC High FY2 EPS High Price Up/Dn High 12m Price Low Capex/Depr Low Capex/FA High 5yr EPS Gth Low Price/Sales High Receivables Low EPS Est Vola High Altman Z High FY2 EPS High FY2 Gth Est Mom Mom Score yoy chg Mom JP Days JPSource: Deutsche Bank Source: Deutsche BankFigure 104: Factor performance (sector neutral**) Bes t quint ile vs m a r ket r ela t ive per f or m a nc e (%)J a pa n Returns Ann. Rtn. Returns Ann. Rtn.S ep 30, 12 YTD 1m 3m 6m 12m 5y 10y 15y YTD 1m 3m 6m 12m 5y 10y 15y Valuation ProfitabilityLow 12m Fd P/E -1.9 -0.5 -2.2 -3.1 -1.0 -1.6 3.0 5.5 High Cash ROC 3.9 -0.8 2.1 6.3 5.4 1.3 1.9 2.5Low Trailing P/E 0.8 0.2 1.0 0.7 2.4 2.5 4.4 7.4 High Cash ROC, yoy chg 3.1 0.1 0.5 3.3 6.3 2.1 3.1 2.4Low P/Op Inc -1.2 0.4 -1.7 -2.2 0.3 4.1 6.4 6.4 High ROE 6.3 -0.4 4.1 7.1 7.9 -1.1 0.2 1.7Low P/BV -3.2 1.0 -1.7 -4.5 -2.7 6.7 4.9 6.2 High ROE, yoy chg 2.9 -0.1 1.0 2.2 6.1 -1.5 0.9 2.0Low Price/Sales -7.5 -1.1 -9.1 -8.0 -5.7 2.3 2.5 3.6 Aver a ge 4.1 ### 1.9 4.7 6.4 0.2 1.5 2.2Low P/FCF 2.1 0.3 -1.1 1.1 3.8 5.1 5.9 7.2 GrowthLow EV/EBIT 6.4 0.4 6.3 6.6 5.4 3.3 4.3 6.1 High 3yr Sales Gth -0.3 -0.4 3.9 3.5 -2.2 -3.5 -0.3 -0.6Low EV/EBITDA 6.9 0.5 4.6 5.6 5.9 6.0 6.0 5.2 High 5yr Sales Gth 1.6 1.1 5.2 4.7 0.9 -2.0 -0.4 0.1Low EV/Cap Emp 0.7 1.0 1.5 -0.7 0.8 6.2 4.1 5.5 High 3yr EPS Gth -2.7 -0.5 -2.1 0.1 -4.0 -2.6 0.3 1.2Low EV/Sales 4.7 0.0 0.8 3.4 3.9 5.5 3.5 4.1 High 5yr EPS Gth -3.3 -0.4 -0.4 -1.1 -4.1 -1.4 -0.1 0.6Low EV/Op CF 4.4 0.6 4.2 4.0 4.5 7.4 6.4 7.0 High LT Gth Est 1.8 -0.8 -0.4 1.0 1.1 0.3 1.0 0.2Low EV/FCF 4.6 -0.4 3.5 3.7 5.0 4.5 5.1 6.2 High FY1 Gth Est -0.2 -0.2 -1.8 0.9 0.4 -3.6 -0.2 0.0High Dividend Yield -0.9 0.2 -1.3 -2.4 -1.0 6.2 6.5 7.7 High FY2 Gth Est -5.6 0.1 -7.3 -6.9 -5.2 -0.8 1.4 0.6Aver a ge 1.2 0.2 0.4 0.3 1.7 4.5 4.8 6.0 Aver a ge -1.2 ### -0.4 0.3 -1.9 -2.0 0.2 0.3 Price Momentum StabilityHigh 6m Price Mom 5.1 -0.6 2.9 6.9 1.9 -6.0 -1.8 -1.2 Low EPS Vola 1.2 0.1 3.0 4.2 0.6 0.8 -0.4 -0.9High 9m Price Mom 7.0 0.5 5.1 9.3 4.0 -5.8 -1.8 -0.8 Low Op Inc Vola 4.8 1.0 5.5 6.8 4.7 2.7 -0.4 0.8High 12m Price Mom 8.1 0.3 6.2 10.8 6.6 -4.4 0.0 -0.1 Low Book Value Vola 3.8 0.9 3.6 3.3 2.7 3.7 0.3 -0.1High Price Rel Strg 6.8 0.4 4.7 9.2 4.3 -6.0 -0.9 0.4 Low Sales Vola -2.1 -0.3 -1.2 -0.1 -3.9 0.4 -1.6 -0.6High 3m chg in Price Mom 7.1 0.0 3.4 6.4 4.1 -1.2 0.8 1.0 Low EPS Est Vola 7.3 0.8 6.3 9.3 4.9 1.0 -0.5 0.5High Price Up/Dn Days -1.3 -0.9 -0.1 0.3 -2.4 -3.4 -1.1 -0.9 Aver a ge 3.0 0.5 3.4 4.7 1.8 1.7 -0.5 -0.1Aver a ge 5.5 -0.1 3.7 7.2 3.1 -4.5 -0.8 -0.2 Risk Earnings Momentum Low FY1 EPS Disp 1.9 0.9 3.7 4.4 -0.1 -0.3 -0.9 -0.2High FY1 EPS Mom 1.1 0.5 0.4 1.0 0.0 -4.6 -0.7 1.8 Low FY2 EPS Disp -0.9 0.2 2.8 2.1 -3.4 -2.9 -2.9 -0.7High FY2 EPS Mom -4.6 -0.9 -5.7 -4.3 -6.5 -5.4 -0.4 -0.1 High EBIT/Int Exp 6.9 0.6 6.8 8.1 5.7 1.5 -0.6 0.5High 12m Fd EPS Mom 1.1 0.3 0.3 1.3 0.5 -3.5 0.4 2.2 Low Debt/Equity 5.7 0.6 7.6 7.4 4.0 2.7 -0.7 1.5High FY1 EPS Rev 4.2 -0.3 3.9 6.1 1.6 -3.9 0.7 3.5 High Altman Z Score 7.9 0.4 8.0 9.4 5.6 0.3 -1.0 -1.0High FY2 EPS Rev 4.4 1.2 2.6 6.6 1.0 -3.8 2.5 2.6 High Market Cap 3.6 0.2 2.5 2.5 5.4 -2.5 -1.7 -2.2Aver a ge 1.2 0.2 0.3 2.1 -0.7 -4.2 0.5 2.0 Aver a ge 4.2 0.5 5.2 5.7 2.9 -0.2 -1.3 -0.4 Capex Deployment & Earnings Accruals Consensus RatingsLow Capex/Depr 7.6 1.6 2.5 4.8 8.2 4.6 3.7 2.8 High Analyst Rec 5.3 0.1 3.5 5.9 4.2 -3.7 -1.8 0.3Low Capex/Sales 7.2 -0.9 3.3 5.7 7.1 2.8 1.8 1.8 High Analyst Rec 1m chg 0.2 -0.1 -0.9 -0.3 0.7 -0.7 0.1 2.3Low Capex/FA -3.3 -0.1 -3.1 -3.6 -2.8 0.5 0.7 0.9 Aver a ge 2.7 0.0 1.3 2.8 2.4 -2.2 -0.8 1.3High Receivables yoy chg 8.4 0.4 3.7 7.7 10.5 3.5 3.5 2.7Low Inventory yoy chg 2.3 0.5 2.5 2.8 2.1 0.1 -0.3 -1.3Low Payables yoy chg 1.0 -0.5 0.8 1.7 0.9 0.4 -0.9 -0.9Aver a ge 3.9 0.2 1.6 3.2 4.3 2.0 1.4 1.0Source: Deutsche Bank, FactSet, I/B/E/S. Note: *1m, 3m, 6m, 12m, 5yr, 10yr and 15yr returns are as of month ended September 2012. **Quintile baskets are formed on a regional sector relative basis.Relative performance is based on equal weighted average returns of the best quintile basket and the market. For description on factors please see appendix A.Deutsche Bank AG/Hong Kong Page 39
    • 17 October 2012The InvestigatorJapan – market intelligenceFigure 105: Equity market performance 1800 250 1200 50 MSCI Japan LC Index (LS) MSCI Japan LC Index (LS) 1600 1100 Rel to World (RS) Rel to World (RS) 45 1400 200 1000 1200 40 150 900 1000 800 35 800 100 700 600 30 400 600 50 25 200 500 0 0 400 20 1/73 1/78 1/83 1/88 1/93 1/98 1/00 1/02 1/04 1/06 1/08 1/10 1/12Source: Deutsche Bank, Bloomberg Finance LP, DataStream.Figure 106: Market intelligence by sector11Oct12 Mcap LC Perf P/E (x) P/B (x) Div Yld (%) EPSg (%) ROE (%)Sector (#Co) U$m 1m YTD CY11 CY12 CY13 CY11 CY12 CY13 CY11 CY12 CY13 CY11 CY12 CY13 CY11 CY12 CY13Energy (7) 33,124 6.8 -7.9 7.2 9.8 9.2 0.7 0.6 0.6 2.9 2.9 2.9 39.1 -40.4 14.1 10.8 6.2 6.8Materials (36) 126,581 -2.7 -14.3 14.1 14.6 10.2 0.8 0.8 0.8 2.7 2.7 2.9 -11.2 -4.6 50.9 5.1 5.1 7.0Capital Goods (46) 280,126 -3.3 -6.7 9.1 11.1 9.2 1.0 0.9 0.8 3.0 3.2 3.3 20.7 7.0 8.6 10.7 10.7 10.7Comm Svc (3) 16,960 -4.4 -9.8 33.6 19.2 13.5 0.8 1.3 0.8 3.5 3.6 3.7 -54.5 74.4 42.5 2.0 3.4 4.7Transportation (19) 92,059 -0.2 0.3 22.6 17.7 13.7 1.1 1.1 1.0 1.8 1.8 2.0 -31.8 60.3 33.7 3.4 5.3 6.8Autos (22) 251,250 -8.2 3.5 15.8 10.3 8.2 0.9 0.9 0.8 1.9 2.5 3.0 nm 69.7 30.6 5.8 8.4 9.8Cons Durables (14) 64,251 -6.8 -19.3 16.3 12.9 11.7 0.7 0.7 0.7 2.4 2.4 2.5 na na na 6.3 2.6 6.2Cons Svc (3) 11,560 -1.1 13.9 24.9 19.2 16.6 2.1 1.9 1.8 1.5 1.5 1.6 14.9 29.6 15.9 8.3 10.0 10.7Media (4) 9,546 -4.0 -11.4 17.8 15.2 13.9 1.0 0.9 0.9 1.8 2.0 2.2 11.8 17.0 9.6 5.5 6.1 6.3Retailing (12) 41,943 -4.6 -2.4 15.6 13.4 12.9 1.4 1.3 1.2 1.4 1.6 1.6 34.9 15.9 3.9 9.1 9.5 9.1Food/Staples Retail (4) 35,562 -2.5 2.6 15.1 13.1 11.7 1.1 1.1 1.0 2.7 2.9 3.1 20.6 15.2 12.3 7.5 8.0 8.5Food Beverage (13) 76,356 1.6 16.5 20.5 15.7 14.2 1.4 1.4 1.3 1.9 2.2 2.5 28.7 30.6 10.6 7.1 8.7 9.1Household Products (3) 25,719 -5.8 -1.4 28.0 23.1 19.9 2.1 2.1 2.0 2.6 2.6 2.6 -14.2 20.8 16.5 7.6 8.9 9.9Health Care Equip/Svc (7) 22,012 -3.3 13.3 58.8 23.4 16.2 1.5 1.5 1.4 1.4 1.3 1.5 -60.8 151.7 44.1 5.5 7.1 8.6Pharma & Biotech (15) 122,063 -2.2 5.8 19.0 17.2 15.5 1.4 1.3 1.3 3.8 3.9 4.0 -23.2 10.7 10.4 7.3 7.8 8.2Banks (21) 193,115 -2.6 6.9 6.8 7.1 7.7 0.6 0.6 0.5 3.6 3.6 3.7 25.8 -7.5 -8.2 9.3 8.1 7.1Div Financials (7) 36,324 -1.1 17.7 31.3 14.9 10.4 0.6 0.6 0.6 1.9 1.9 2.1 -21.4 110.7 42.7 1.9 3.8 5.4Insurance (6) 52,325 0.5 8.7 374.0 26.6 14.4 0.8 0.8 0.7 3.0 3.1 3.1 nm na 84.5 -1.7 2.9 5.2Real Estate (15) 92,102 5.3 32.2 22.3 20.2 18.1 1.5 1.4 1.4 1.4 1.5 1.6 -12.8 47.3 11.7 6.7 7.1 7.5Software (13) 41,854 4.5 -3.9 24.1 19.3 14.4 1.5 1.4 1.3 2.0 1.8 2.2 -41.0 24.4 34.1 6.3 7.4 9.3Tech Hard/Equip (25) 169,808 -4.4 -14.3 12.2 12.6 10.3 1.0 0.9 0.9 2.9 3.0 3.2 -1.8 8.0 22.7 6.7 6.9 8.1Semis (4) 12,854 -7.2 -15.4 27.8 43.7 18.5 0.8 0.8 0.8 2.4 1.9 2.1 nm na 136.6 2.7 1.8 4.1Telecom (4) 77,770 -5.1 3.4 10.8 9.3 8.6 1.1 1.1 1.0 2.8 3.1 3.4 16.6 15.6 8.6 10.6 11.3 11.2Utilities (13) 58,998 8.4 -22.5 43.4 14.6 12.9 0.7 0.7 0.7 4.0 2.8 2.4 na na na -0.9 2.1 7.5Japan (316) 1,944,263 -2.6 -1.8 13.2 12.2 10.4 0.9 0.9 0.8 2.6 2.8 3.0 -15.9 33.7 29.6 6.8 7.4 8.2Source: Deutsche Bank, I/B/E/S, MSCI. Note: Data in the table are compiled based on MSCI country index universe. P/E, P/B, dividend yield, EPS growth and ROE are aggregated using I/B/E/S consensus estimates(calendarized to December year end) with current prices. All numbers are free-float adjusted.Figure 107: Market Expected Return Indicator for Japan 10 Market Expected Return Indicator, LS 1,300 Japan Bullish MSCI JAPAN, RS 1,100 5 900 0 700 -5 500 -10 300 Bearish -15 100 1/93 1/94 1/95 1/96 1/97 1/98 1/99 1/00 1/01 1/02 1/03 1/04 1/05 1/06 1/07 1/08 1/09 1/10 1/11 1/12Source: Deutsche Bank, MSCI, Bloomberg Finance LPPage 40 Deutsche Bank AG/Hong Kong
    • 17 October 2012The InvestigatorCompanies MentionedFigure 108: Companies Mentioned DB  Bloomberg  Price        DB  Bloomberg  Price       S.No Country Company Rating Ticker (15 Oct) S.No Country Company Rating Ticker (15 Oct) 1 CN Belle Intl Holding Buy 1880 HK 13.5 54 CN Dongfeng Motor Buy 489 HK 9.9 2 CN China Comm Services Buy 552 HK 4.5 55 HK Hang Lung Properties Buy 101 HK 26.2 3 CN China Comms Construct Buy 1800 HK 7.0 56 TW Delta Electronics Buy 2308 TT 101.0 4 CN Haitong Securities Buy 6837 HK 10.6 57 CN Franshion Buy 817 HK 2.4 5 CN China Mobile Hold 941 HK 84.1 58 MY Genting Bhd Hold GENT MK 8.8 6 CN CNOOC Ltd Hold 883 HK 15.8 59 TH Kasikornbank Buy KBANK TB 176.5 7 CN Guangdong Investment Buy 270 HK 6.1 60 KR Nexen Tire Hold 002350 KS 18800.0 8 CN ICBC Buy 1398 HK 4.9 61 TW Orise Technology Buy 3545 TT 34.9 9 CN SouFun Buy SFUN US 17.9 62 CN Shanghai Electric Buy 2727 HK 3.0 10 CN Db X-Trackers Csi300 Trn Index Et NA 3049 HK NA 63 MY DiGi.Com NA DIGI MK NA 11 HK SJM Buy 880 HK 16.4 64 IN Bank of Baroda Buy BOB IN 779.8 12 HK BOC Hong Kong Holdings Buy 2388 HK 24.1 65 CN China CITIC Hold 998 HK 4.1 13 HK Giordano Hold 709 HK 6.3 66 IN Asian Paints Hold APNT IN 3865.8 14 HK SHK Properties Ltd Buy 16 HK 109.0 67 KR Hyundai Heavy Buy 009540 KS 236000.0 15 ID Indocement Buy INTP IJ 21150.0 68 KR Korean Reinsurance NA 003690 KS 11750.0 16 ID Ace Hardware Indonesia Buy ACES IJ 6600.0 69 CN Sinopec-H Buy 386 HK 7.9 17 IN ICICI Bank Buy ICICIBC IN 1053.1 70 HK Cathay Pacific Sell 293 HK 13.4 18 IN Oil India Limited Buy OINL IN 489.3 71 CN Maanshan-H Sell 323 HK 1.9 19 IN ONGC Buy ONGC IN 279.9 72 TW Siliconware Precision Hold 2325 TT 31.6 20 IN IDFC Buy IDFC IN 150.6 73 KR DSME Hold 042660 KS 23900.0 21 IN Shree Cement Buy SRCM IN 4080.2 74 KR OCI Company NA 010060 KS 159500.0 22 IN Grasim Buy GRASIM IN 3422.1 75 ID BRI Buy BBRI IJ 7650.0 23 KR Korea Zinc Buy 010130 KS 445000.0 76 KR Samsung Eng. Hold 028050 KS 163500.0 24 KR Dongbu Insurance Co. Ltd. NR 005830 KS 51300.0 77 TH Siam Cement Buy SCC TB 349.0 25 KR SEC Buy 005930 KS 1300000.0 78 CN KWG Property Buy 1813 HK 4.2 26 KR SK Innovation Buy 096770 KS 151000.0 79 CN SOHO China Buy 410 HK 5.1 27 KR LG Chem Buy 051910 KS 314000.0 80 KR Hyundai Dept Store Buy 069960 KS 148500.0 28 MY Top Glove Buy TOPG MK 5.3 81 HK SJM Buy 880 HK 16.4 29 MY Telekom Malaysia Hold T MK 6.3 82 TW Taiwan Cement Hold 1101 TT 36.2 30 PH Megaworld Buy MEG PM 2.4 83 TW Powertech Technology Sell 6239 TT 51.0 31 SG Keppel Land Buy KPLD SP 3.5 84 KR Amorepacific Corp. Hold 090430 KS 1249000.0 32 SG Sembcorp Industries Ltd Buy SCI SP 5.5 85 MY Hong Leong Bank Bhd. Hold HLBK MK 14.0 33 SG Sembcorp Marine Buy SMM SP 4.9 86 KR Industrial Bank of Korea Hold 024110 KS 11700.0 34 TH BEC World PLC Hold BEC TB 57.3 87 KR KT&G Corp. Hold 033780 KS 91200.0 35 TH Minor International PLC Buy MINT TB 18.2 88 PH Aboitiz Power Corp. Hold AP PM 33.4 36 TH Sino-Thai Engineering Buy STEC TB 21.2 89 TH Krung Thai Bank Public Co., Ltd Buy KTB TB 18.2 37 TH PTT PCL Hold PTT TB 313.0 90 ID PT Charoen Pokphand Indones Buy CPIN IJ 3100.0 38 TW Uni-President Buy 1216 TT 51.8 91 ID PT Perusahaan Gas Negara (P Buy PGAS IJ 4325.0 39 TW Far EasTone Telecom Buy 4904 TT 72.8 92 SG Yangzijiang Shipbuilding (Holdin Hold YZJ SP 0.9 40 TW Novatek Microelectronics Buy 3034 TT 104.0 93 TW Formosa Chemicals & Fibre Hold 1326 TT 75.3 41 CN Agri. Bank of China Hold 1288 HK 3.2 94 CN China Construction Bank-H Hold 939 HK 5.8 42 CN Anta Sports Hold 2020 HK 6.6 95 HK Wharf Holdings ltd Hold 4 HK 51.4 43 SG Fraser & Neave Buy FNN SP 8.9 96 IN Wipro Ltd Buy WPRO IN 353.0 44 CN China Shineway Hold 2877 HK 10.8 97 ID United Tractors Tbk Pt Buy UNTR IJ 19700.0 45 TW Chunghwa Tel Hold 2412 TT 92.1 98 MY Public Bank Hold PBKF MK 14.5 46 TW Far EasTone Telecom Buy 4904 TT 72.8 99 TW Mstar Semiconductor Inc Buy 3697 TT 240.0 47 PH First Philippine Hldgs Buy FPH PM 80.0 100 CN Bank of China Ltd-H Buy 3988 HK 3.1 48 KR LIG Insurance NA 002550 KS 26150.0 101 KR Hyundai Marine & Fire Ins Co NA 001450 KS 36200.0 49 ID Perusahaan Gas Negara Buy PGAS IJ 4325.0 102 KR HYUNDAI MOTOR CO Buy 005380 KS 225500.0 50 MY PLUS Expressways NA PLUS MK NA 103 KR HYUNDAI MOBIS Buy 012330 KS 297000.0 51 SG SATS NA SATS SP NA 104 TW SIMPLO TECHNOLOGY CO LT Buy 6121 TT 178.0 52 MY Top Glove Buy TOPG MK 5.3 105 SG STARHUB LTD Hold STH SP 3.7 53 HK Wynn Macau Buy 1128 HK 20.4 106Deutsche Bank AG/Hong Kong Page 41
    • 17 October 2012The InvestigatorAppendix AIn the stock ranking model, optimized weights based on back-tests are given to variousfactors (see Figure 109) to form an aggregate score for each stock. Scores are given ona sector- and country-relative basis, and the weight matrix used in each industry groupvaries depending on back-test results.Figure 109: Definition of factorsV a lua t ion Fa c t or s12m Fd P/E: price to 12-month forward EPSTrailing P/E: price to 12m trailing EPSDividend Yield: 12m trailing dividend yieldP/Op Inc: Price to operating incomeP/BV: Price to book valuePrice/Sales: Price to salesP/FCF: Price to free cash flowEV/EBIT: Enterprise value to EBITEV/EBITDA: Enterprise value to EBITDAEV/Cap Emp: Enterprise value to capital employedEV/Sales: Enterprise value to salesEV/Op CF: Enterprise value to operating cash flowEV/FCF: Enterprise value to free cash flowP r ic e Mom ent um Fa c t or s6m Price Mom: 6-month price momentum9m Price Mom: 9-month price momentum12m Price Mom: 12-month price momentumPrice Rel Strength: 65-day to 260-day moving average in stock pricePrice Mom, 3mΔ: 3-month change in 12-month price momentumPrice ↑ / ↓ Days: Number of up less down days in stock price in 130 daysE a r nings Mom ent um Fa c t or sFY1 EPS Mom: Weighted average on 1-, 2- and 3-month change in FY1 eps mean estimateFY2 EPS Mom: Weighted average on 1-, 2- and 3-month change in FY2 eps mean estimate12m Fd EPS Mom: Weighted average on 1-, 2- and 3-month change in 12-month forward eps mean estimateFY1 EPS Rev: % of upward less downward revisions in FY1 eps estimates in 3 monthsFY2 EPS Rev: % of upward less downward revisions in FY2 eps estimates in 3 monthsE a r nings Q ua lit y (E a r nings Ac c r ua ls a nd Ca pex Deploy m ent Fa c t or s )Capex/Depr: Capital expenditure to depreciation expenseCapex/Sales: Capital expenditure to salesCapex/FA: Capital expenditure to fixed assetsReceivables/Ttl Assets, YoYΔ: YoY change in account receivables to total assets ratioInventory/Ttl Assets, YoYΔ: YoY change in inventory to total assets ratioPayables/Ttl Assets, YoYΔ: YoY change in account payable to total assets ratioP r of it a bilit y Fa c t or sRtn of Capital Employed: Cash return on capital employedRtn of Capital Employed, YoYΔ: YoY change in cash return on capital employedROE: Return on equityROE, YoYΔ: YoY change in return on equityGr owt h Fa c t or s3yr Sales Gth: 3-year growth in sales (actual)5yr Sales Gth: 5-year growth in sales (actual)3yr EPS Gth: 3-year growth in eps (actual)5yr EPS Gth: 5-year growth in eps (actual)LT Gth Est: Consensus estimate on long term eps growthFY1 Gth Est: Consensus estimate on FY1 eps growthFY2 Gth Est: Consensus estimate on FY2 eps growthS t a bilit y Fa c t or sEPS Vola: 3-year volatility in trailing epsOp Inc Vola: 3-year volatility in trailing operating income per shareBook Value Vola: 3-year volatility in historical book value per shareSales Vola: 3-year volatility in trailing sales per shareEPS Est Vola: 3-year volatility in 12-month forward eps estimateRis k Fa c t or sFY1 EPS Dispersion: Dispersion of FY1 eps estimatesFY2 EPS Dispersion: Dispersion of all the FY2 eps estimatesEBIT/Int Exp: EBIT to interest expenseDebt/Equity: Debt to equityAltman Z Score: (1.2 x working capital + 1.4 x retained earnings + 3.3 x EBIT + sales) / total assets + 0.6 x market value of equity / total liabilitiesMarket Cap: Company market capitalisationCons ens us Ra t ing Fa c t or sAnalyst Rating: Consensus ratingAnalyst Rating, 1mΔ: 1-month change on consensus ratingSource: Deutsche BankPage 42 Deutsche Bank AG/Hong Kong
    • 17 October 2012The InvestigatorFigure 110: Bottom-up sector ranking (Rank 1 = Best) 12 month Forward EPS FY1 EPS Revisions FY2 EPS Revisions Earnings Revisions Mkt Cap (U$ mn) 12m fwd P/E expectation Profitability Technicals Valuation ROE (%) EV/EBIT P/B RSIRank Country Sector 1 Philippines Utilities 3,637 2.9 11.6 11.7 1.00 1.00 22.5 1.10 22% O ++ ++ ++ 2 Japan Banks 193,115 0.5 9.5 0.23 -0.15 4.5 0.98 -2% ++ + -- - 3 Thailand Telecommunication Services 5,930 4.9 16.6 18.6 0.89 0.51 21.4 1.22 15% -- ++ ++ ++ 4 Indonesia Utilities 4,952 6.5 13.8 12.0 0.75 0.43 48.5 1.09 12% - ++ ++ ++ 5 Japan Telecommunication Services 77,770 1.0 8.7 7.5 0.18 0.19 9.9 1.03 12% ++ ++ - O 6 Thailand Banks 32,450 1.7 10.6 0.65 0.50 12.4 1.11 18% O ++ O ++ 7 Philippines Banks 3,961 1.7 11.9 0.60 0.67 14.8 1.11 10% O ++ + ++ 8 Indonesia Banks 31,482 2.0 9.7 0.65 0.50 18.8 1.01 14% + ++ + O 9 Indonesia Household & Personal Products 4,133 52.7 37.2 33.0 0.43 0.71 122.3 1.22 16% -- ++ ++ ++ 10 Thailand Food & Staples Retailing 5,559 12.2 25.5 22.4 0.63 0.83 38.7 1.13 23% -- ++ ++ ++ 11 India Software & Services 37,853 3.2 12.7 11.0 0.58 0.63 21.7 1.10 15% - ++ ++ ++ 12 China Utilities 17,175 1.2 9.5 18.1 0.50 0.64 5.6 1.10 27% + ++ - - ++ 13 China Real Estate 34,144 0.9 5.7 5.9 0.00 -0.17 14.4 1.06 13% ++ + + + 14 Indonesia Pharmaceuticals & Biotechnology 467 5.3 18.7 16.2 0.71 0.71 24.5 1.08 20% -- ++ ++ ++ 15 Hong Kong Real Estate 112,266 0.6 12.6 7.2 0.33 0.20 8.8 1.06 3% ++ ++ - + 16 Philippines Diversified Financials 1,773 2.1 15.7 0.83 0.80 9.1 1.10 20% -- ++ - ++ 17 Japan Retailing 41,943 0.9 11.1 6.5 0.17 0.06 10.2 1.00 9% ++ ++ O O 18 Malaysia Utilities 13,877 1.3 12.7 12.5 0.35 0.43 9.9 1.10 5% O ++ O ++ 19 China Banks 153,529 1.0 5.5 -0.25 -0.52 21.3 0.92 1% ++ O ++ - - 20 Japan Media 9,546 0.8 12.6 5.6 0.00 0.20 6.2 0.98 10% ++ ++ -- - 21 Japan Food & Staples Retailing 35,562 1.3 11.4 6.5 0.05 -0.08 10.6 1.09 12% ++ + O ++ 22 India Banks 60,156 0.8 5.2 -0.37 -0.35 18.3 0.97 16% ++ O + - 23 Japan Health Care Equipment & Services 22,012 0.9 13.2 7.1 -0.20 0.27 6.6 1.11 17% ++ + - ++ 24 Korea Insurance 17,335 1.4 6.5 -0.22 -0.09 15.1 0.99 14% ++ + + - 25 Korea Banks 43,648 0.6 5.8 -0.67 -0.71 12.8 0.96 0% ++ - O - 26 Japan Pharmaceuticals & Biotechnology 122,063 1.5 14.7 9.5 0.50 0.14 8.7 1.06 8% O ++ - + 27 Singapore Real Estate 29,308 0.9 15.9 13.6 0.49 0.20 10.2 1.12 4% - ++ O ++ 28 Japan Diversified Financials 36,324 0.7 11.1 -0.17 0.42 3.8 1.01 19% ++ ++ -- O 29 Japan Commercial Services & Supplies 16,960 0.9 13.7 7.1 0.00 0.00 5.3 1.04 17% ++ + -- + 30 Malaysia Banks 33,575 1.9 12.2 0.32 0.00 16.5 1.05 10% + ++ + + 31 Singapore Retailing 4,270 3.2 11.6 8.8 0.14 0.11 24.8 1.09 16% O ++ ++ ++ 32 Korea Automobiles & Components 76,862 1.2 6.4 6.6 -0.20 -0.20 16.5 0.98 17% ++ O + - 33 Singapore Banks 60,279 1.4 11.4 0.24 -0.17 11.3 1.07 5% + + O + 34 Philippines Real Estate 5,457 1.6 10.7 16.4 0.67 0.10 8.6 1.09 15% - ++ - ++ 35 Japan Software & Services 41,854 1.2 11.4 7.0 0.00 0.17 8.9 1.01 18% ++ + - O 36 Hong Kong Banks 29,986 1.1 12.0 0.45 -0.17 9.2 1.00 4% + ++ - OSource: Deutsche Bank, EPS momentum is the number of upward less downward revisions in respective financial year EPS estimate in last 3 months. RSI is the ratio of 65-day to 260-day moving average in stock price. Allthe metrics shown above except market cap are median data for the sector. ++ Very favorable, + Favorable, O Neutral, - Unfavorable, Very unfavorableDeutsche Bank AG/Hong Kong Page 43
    • 17 October 2012The InvestigatorFigure 110: Bottom-up sector ranking (Rank 1 = Best), continued 12 month Forward EPS FY1 EPS Revisions FY2 EPS Revisions Earnings Revisions Mkt Cap (U$ mn) 12m fwd P/E expectation Profitability Technicals Valuation ROE (%) EV/EBIT P/B RSIRank Country Sector 37 Korea Hotels Restaurants & Leisure 2,095 2.8 12.9 12.0 0.55 0.00 17.6 1.13 27% - ++ + ++ 38 Malaysia Automobiles & Components 1,718 1.1 10.5 7.9 0.00 0.00 14.9 1.06 18% + + + + 39 India Household & Personal Products 11,909 11.6 27.0 29.1 0.35 0.34 35.0 1.14 19% -- ++ ++ ++ 40 India Energy 30,512 1.4 8.6 10.2 -0.08 0.00 12.2 1.01 12% + + O O 41 Taiwan Consumer Durables & Apparel 5,653 2.3 13.8 15.3 0.17 0.33 14.0 1.05 12% - ++ O + 42 India Diversified Financials 11,120 1.7 10.9 -0.14 0.00 18.6 1.07 18% + + + + 43 Japan Automobiles & Components 251,250 0.9 7.5 5.8 -0.48 -0.44 8.2 0.94 25% ++ O - -- 44 Korea Utilities 7,708 0.3 17.5 11.0 -0.60 -0.14 2.8 1.05 11% ++ O -- + 45 Japan Consumer Durables & Apparel 64,251 0.7 11.0 9.8 -0.33 0.02 4.3 0.97 15% ++ + -- - 46 Taiwan Banks 34,373 1.0 11.3 -0.16 -0.07 8.2 1.03 7% + + - O 47 Philippines Food & Staples Retailing 0 2.0 12.3 9.9 0.00 0.00 12.7 1.06 11% O + O + 48 Japan Transportation 92,059 0.9 11.5 18.1 -0.12 -0.07 5.7 1.00 14% ++ + -- O 49 Malaysia Diversified Financials 3,438 1.1 12.2 0.08 -0.07 8.9 0.97 9% + + - - 50 Malaysia Telecommunication Services 18,375 2.9 22.2 18.1 0.16 0.00 20.8 1.14 12% -- + ++ ++ 51 Korea Energy 15,613 1.0 7.6 10.9 -0.64 -0.17 12.4 1.02 15% ++ O O O 52 Korea Technology Hardware & Equipment 15,766 1.4 10.0 13.0 0.05 -0.12 10.8 1.04 25% O + O + 53 Indonesia Food Beverage & Tobacco 8,432 2.7 12.8 13.0 -0.41 0.33 21.7 1.04 16% - + ++ + 54 Japan Food Beverage & Tobacco 76,356 1.0 14.5 12.7 -0.20 -0.33 5.2 1.01 13% + O -- O 55 India Pharmaceuticals & Biotechnology 13,343 4.7 18.2 19.4 0.00 0.11 20.4 1.06 18% -- + ++ + 56 Indonesia Telecommunication Services 12,307 1.8 18.1 27.1 -0.06 0.24 0.1 1.03 15% - ++ -- O 57 China Software & Services 33,658 2.3 11.0 7.3 -0.33 -0.13 18.7 0.97 17% O O + - 58 Indonesia Automobiles & Components 16,899 2.1 13.8 13.8 -0.08 0.00 21.2 0.96 15% - + ++ - 59 Taiwan Insurance 10,968 1.3 13.3 -0.69 0.00 7.0 1.00 11% + O - O 60 Japan Real Estate 92,102 1.0 12.5 -0.13 -0.50 5.0 1.06 10% + O -- + 61 Malaysia Hotels Restaurants & Leisure 10,261 1.6 13.0 9.2 -0.41 -0.10 11.3 1.02 10% O O O O 62 India Materials 21,862 2.2 9.3 10.9 -0.27 -0.29 14.2 1.01 14% O O + O 63 Japan Capital Goods 280,126 0.8 10.8 8.8 -0.55 -0.50 6.3 0.96 15% ++ - -- - 64 China Telecommunication Services 83,466 1.3 12.9 6.3 -0.48 -0.53 12.8 1.05 17% ++ - O + 65 Taiwan Telecommunication Services 22,664 3.6 18.8 18.3 -0.23 0.00 14.9 1.10 13% -- + + ++ 66 Malaysia Capital Goods 14,418 1.3 12.6 11.8 -0.23 -0.23 11.8 1.01 17% O O O O 67 Korea Food Beverage & Tobacco 15,228 1.3 10.8 12.6 -0.65 -0.10 9.3 1.07 15% + O - + 68 Japan Insurance 52,325 1.2 13.2 -0.08 -0.41 2.5 1.00 25% + O -- O 69 India Utilities 11,075 1.8 11.1 12.0 -0.36 -0.14 11.7 0.97 8% O O O - 70 Hong Kong Technology Hardware & Equipment 860 1.2 10.6 13.1 0.00 -0.20 6.0 0.86 21% + + -- -- 71 Singapore Capital Goods 38,292 1.2 11.8 12.3 -0.66 0.00 9.0 1.07 18% O O - + 72 Japan Energy 33,124 0.7 13.0 16.0 -0.56 -0.33 1.9 0.89 -6% ++ O -- --Source: Deutsche Bank, EPS momentum is the number of upward less downward revisions in respective financial year EPS estimate in last 3 months. RSI is the ratio of 65-day to 260-day moving average in stock price. Allthe metrics shown above except market cap are median data for the sector. ++ Very favorable, + Favorable, O Neutral, - Unfavorable, Very unfavorablePage 44 Deutsche Bank AG/Hong Kong
    • 17 October 2012The InvestigatorFigure 110: Bottom-up sector ranking (Rank 1 = Best), continued 12 month Forward EPS FY1 EPS Revisions FY2 EPS Revisions Earnings Revisions Mkt Cap (U$ mn) 12m fwd P/E expectation Profitability Technicals Valuation ROE (%) EV/EBIT P/B RSIRank Country Sector 73 India Food Beverage & Tobacco 13,829 3.6 21.2 17.8 -0.25 0.00 19.2 1.05 20% -- + ++ + 74 Taiwan Semiconductors & Semiconductor Equipment 111,700 1.5 14.0 18.3 -0.20 -0.05 8.5 0.98 19% - + - - 75 Thailand Media 1,820 3.2 18.1 19.7 -0.25 -0.10 12.5 1.10 17% -- O O ++ 76 Hong Kong Telecommunication Services 1,584 1.5 11.8 11.5 -0.86 -0.28 15.7 1.06 6% + - + + 77 Hong Kong Consumer Durables & Apparel 2,556 1.2 8.1 6.5 -0.50 -0.89 13.8 0.93 10% ++ - O -- 78 Korea Capital Goods 62,600 1.0 9.7 14.3 -0.33 -0.33 7.0 0.95 26% + O - - 79 Singapore Transportation 12,117 1.7 15.7 16.4 -0.30 -0.26 10.7 1.03 7% - O O O 80 Philippines Telecommunication Services 3,698 3.5 14.2 14.0 -0.26 -0.55 21.8 1.04 3% - O ++ + 81 Malaysia Food Beverage & Tobacco 15,148 2.1 14.3 13.9 -0.50 -0.07 16.8 1.05 13% - O + + 82 India Automobiles & Components 17,730 2.9 13.3 12.0 -0.50 -0.33 21.6 1.05 20% O O ++ + 83 Korea Materials 59,183 0.9 8.9 11.1 -0.49 -0.52 7.8 0.90 16% ++ - - -- 84 Singapore Diversified Financials 4,742 1.9 15.5 -0.20 -0.39 7.3 1.04 6% - O - + 85 Japan Materials 126,581 0.7 9.5 10.6 -0.73 -0.58 5.0 0.89 17% ++ - -- -- 86 Japan Household & Personal Products 25,719 1.4 15.6 8.8 -0.71 -0.17 8.6 1.00 17% + O - O 87 Philippines Capital Goods 10,086 3.1 12.0 14.2 -0.50 -0.47 21.3 1.12 14% - - ++ ++ 88 Singapore Media 5,319 3.1 16.3 15.5 -0.43 -0.20 17.2 1.04 2% - O + + 89 Taiwan Diversified Financials 10,772 0.9 17.2 0.01 -0.56 3.2 0.98 -1% - O -- - 90 Malaysia Transportation 3,823 1.7 17.1 14.9 -0.32 -0.20 11.8 0.97 4% - O O - 91 Korea Transportation 5,194 1.3 18.1 #### 0.00 0.14 -15.9 1.02 21% -- + -- O 92 Malaysia Materials 7,080 1.4 9.6 14.4 -0.60 -0.33 10.9 1.00 15% O O O O 93 China Health Care Equipment & Services 5,936 4.4 26.5 10.4 -0.67 -0.50 51.3 1.11 26% -- - ++ ++ 94 Hong Kong Utilities 43,255 1.7 14.4 22.2 -0.06 -0.82 9.8 1.06 8% - O - + 95 Malaysia Energy 4,970 1.5 13.4 33.6 -0.17 -0.16 4.2 0.94 16% - + -- - 96 India Real Estate 2,388 0.9 13.0 16.0 -0.47 0.00 3.5 0.95 27% O O -- - 97 Hong Kong Hotels Restaurants & Leisure 25,672 1.0 14.1 14.8 -0.50 -0.45 14.9 1.02 15% O - + O 98 India Media 1,731 5.3 16.9 12.9 -0.33 -0.45 18.0 1.05 17% - O + + 99 Singapore Telecommunication Services 22,195 5.9 14.1 15.5 -0.67 -0.29 21.4 1.05 7% - - ++ + 100 Hong Kong Transportation 8,726 1.0 15.6 27.7 -0.04 -0.60 5.4 0.98 8% - O -- - 101 Japan Technology Hardware & Equipment 169,808 0.9 11.3 9.8 -0.65 -0.70 4.9 0.93 24% ++ - -- -- 102 China Energy 113,603 1.5 8.7 8.9 -0.67 -0.71 15.4 0.94 10% + - + -- 103 Taiwan Technology Hardware & Equipment 97,160 1.4 10.7 11.4 -0.50 -0.71 10.7 0.97 13% + - O - 104 Thailand Energy 19,189 1.6 8.8 15.2 -0.80 -0.54 8.2 0.99 13% + - - - 105 Hong Kong Diversified Financials 17,866 0.8 9.8 -0.66 -0.77 6.5 0.97 13% + - - - 106 Korea Pharmaceuticals & Biotechnology 3,823 2.4 20.1 78.4 -0.20 0.00 5.6 1.04 21% -- + -- + 107 Korea Consumer Durables & Apparel 8,108 1.5 9.6 12.1 -0.69 -0.69 11.2 0.97 19% + - O - 108 China Technology Hardware & Equipment 7,733 1.1 7.4 7.5 -0.83 -0.65 8.0 0.89 17% ++ - - --Source: Deutsche Bank, EPS momentum is the number of upward less downward revisions in respective financial year EPS estimate in last 3 months. RSI is the ratio of 65-day to 260-day moving average in stock price. Allthe metrics shown above except market cap are median data for the sector. ++ Very favorable, + Favorable, O Neutral, - Unfavorable, Very unfavorableDeutsche Bank AG/Hong Kong Page 45
    • 17 October 2012The InvestigatorFigure 110: Bottom-up sector ranking (Rank 1 = Best), continued 12 month Forward EPS FY1 EPS Revisions FY2 EPS Revisions Earnings Revisions Mkt Cap (U$ mn) 12m fwd P/E expectation Profitability Technicals Valuation ROE (%) EV/EBIT P/B RSIRank Country Sector 109 Thailand Materials 9,958 1.4 10.3 11.1 -0.76 -0.63 13.0 1.01 15% + - O O 110 China Insurance 47,571 2.3 13.6 -0.71 -0.56 10.6 0.99 31% + - O - 111 Indonesia Capital Goods 3,416 3.2 15.6 9.1 -1.00 -0.50 19.1 1.01 10% O - ++ O 112 Korea Telecommunication Services 3,634 0.8 8.6 15.0 -1.00 -0.80 3.8 1.03 37% ++ -- -- O 113 Singapore Food & Staples Retailing 2,477 2.5 15.0 16.3 -1.00 -0.40 34.9 0.99 18% O - ++ - 114 Korea Retailing 6,249 1.2 8.4 8.1 -0.90 -0.70 10.2 0.94 16% ++ -- O -- 115 China Capital Goods 26,477 0.9 8.8 10.0 -0.75 -1.00 10.8 0.93 10% ++ -- O -- 116 Hong Kong Capital Goods 24,979 0.8 10.6 8.0 -1.00 -0.80 8.1 0.96 7% ++ -- - - 117 India Capital Goods 13,851 2.5 13.4 11.9 -0.60 -0.57 13.4 0.99 15% O - O - 118 Hong Kong Semiconductors & Semiconductor Equipment 2,285 2.0 7.8 6.9 -1.00 -1.00 28.0 0.93 21% ++ -- ++ - - 119 Taiwan Food & Staples Retailing 2,977 1.6 22.6 21.7 -0.40 -0.56 17.8 1.02 8% -- - + O 120 Korea Food & Staples Retailing 4,437 1.0 10.2 10.6 -0.60 -0.80 8.9 0.88 22% + - - -- 121 Japan Utilities 58,998 0.5 -15.1 53.9 0.07 -0.42 -0.4 0.76 30% O O -- -- 122 China Automobiles & Components 12,980 1.3 6.8 10.5 -0.83 -0.81 15.2 0.91 17% + -- + -- 123 Hong Kong Retailing 10,035 1.8 11.2 9.4 -0.64 -0.84 16.9 0.94 16% O - + -- 124 Indonesia Energy 6,341 2.4 9.2 10.0 -0.78 -0.94 20.2 0.84 -8% + -- ++ - - 125 China Transportation 13,464 0.8 9.1 10.0 -0.84 -0.94 8.7 0.91 8% ++ -- - -- 126 Japan Hotels Restaurants & Leisure 11,560 1.2 10.5 11.4 -1.00 -1.00 9.6 1.02 14% ++ -- - O 127 Korea Household & Personal Products 10,032 3.9 23.4 19.0 -0.75 -0.33 8.4 1.05 19% -- - - + 128 Indonesia Materials 8,406 3.2 13.1 14.4 -0.70 -0.50 10.4 1.00 12% - - O O 129 Thailand Food Beverage & Tobacco 3,381 2.6 12.6 17.2 -0.79 -1.00 16.7 1.17 14% - -- + ++ 130 Singapore Food Beverage & Tobacco 8,242 2.4 14.4 12.1 -0.95 -0.89 15.3 1.07 12% O -- + + 131 Taiwan Real Estate 2,399 1.3 10.9 33.2 -1.00 -0.57 11.8 1.04 4% - -- O + 132 Korea Diversified Financials 10,246 0.7 10.7 -0.68 -1.00 4.5 0.95 10% O -- -- - 133 Korea Semiconductors & Semiconductor Equipment 153,775 1.6 10.5 11.8 -0.94 -0.56 8.3 0.91 30% O - - -- 134 China Materials 29,268 0.9 7.7 11.7 -1.00 -1.00 8.9 0.87 16% ++ -- - -- 135 Taiwan Automobiles & Components 7,681 1.4 14.2 21.1 -0.67 -1.00 7.1 1.04 16% - -- - + 136 India Telecommunication Services 4,516 2.0 18.0 21.4 -0.60 -0.58 4.1 0.87 25% - - -- -- 137 Taiwan Capital Goods 9,400 1.5 12.6 11.1 -1.00 -1.00 10.3 0.97 10% O -- O - 138 China Food Beverage & Tobacco 22,286 1.5 14.2 17.6 -0.67 -0.88 9.3 0.97 21% - - - - 139 Taiwan Retailing 2,746 2.3 15.0 19.0 -1.00 -1.00 14.4 1.01 17% O -- + O 140 Taiwan Transportation 4,751 1.2 12.5 22.1 -0.33 -0.80 3.9 0.96 69% - - -- - 141 China Retailing 15,723 1.4 12.6 8.2 -0.92 -0.92 13.4 0.83 15% O -- O -- 142 Japan Semiconductors & Semiconductor Equipment 12,854 0.8 13.2 95.6 -0.43 -0.43 -2.2 0.83 82% O O -- -- 143 Taiwan Materials 50,916 1.4 14.2 16.2 -1.00 -1.00 7.1 1.00 19% O -- - - 144 Korea Software & Services 15,154 2.7 12.9 17.6 -0.93 -0.43 11.4 0.89 24% -- - O -- 145 Singapore Hotels Restaurants & Leisure 6,535 0.9 19.6 21.9 -0.87 -1.00 6.6 1.01 19% - -- - O 146 China Food & Staples Retailing 7,180 2.3 12.1 13.3 -1.00 -1.00 18.1 0.86 11% - -- + -- 147 China Household & Personal Products 6,925 2.4 39.2 (4.8) -1.00 -1.00 -22.3 0.88 31% -- -- -- --Source: Deutsche Bank, EPS momentum is the number of upward less downward revisions in respective financial year EPS estimate in last 3 months. RSI is the ratio of 65-day to 260-day moving average in stock price. Allthe metrics shown above except market cap are median data for the sector. ++ Very favorable, + Favorable, O Neutral, - Unfavorable, Very unfavorablePage 46 Deutsche Bank AG/Hong Kong
    • 17 October 2012The InvestigatorAppendix 1Important DisclosuresAdditional information available upon requestFor disclosures pertaining to recommendations or estimates made on securities other than the primary subject of thisresearch, please see the most recently published company report or visit our global disclosure look-up page on ourwebsite at http://gm.db.com/ger/disclosure/DisclosureDirectory.eqsrAnalyst CertificationThe views expressed in this report accurately reflect the personal views of the undersigned lead analyst(s). In addition,the undersigned lead analyst(s) has not and will not receive any compensation for providing a specific recommendationor view in this report. Ajay Kapur/Ritesh SamadhiyaEquity rating key Equity rating dispersion and banking relationshipsBuy: Based on a current 12- month view of total share- 450holder return (TSR = percentage change in share price 400 56 %from current price to projected target price plus pro- 350jected dividend yield ) , we recommend that investors 300 38 % 250buy the stock. 200Sell: Based on a current 12-month view of total share- 150holder return, we recommend that investors sell the 100 11 % 16 % 5% 50 10 %stock 0Hold: We take a neutral view on the stock 12-months Buy Hold Sellout and, based on this time horizon, do notrecommend either a Buy or Sell. Companies Covered Cos. w/ Banking RelationshipNotes: Asia-Pacific Universe1. Newly issued research recommendations and targetprices always supersede previously publishedresearch.2. Ratings definitions prior to 27 January, 2007 were: Buy: Expected total return (including dividends) of 10% or more over a 12-month period Hold: Expected total return (including dividends) between -10% and 10% over a 12- month period Sell: Expected total return (including dividends) of -10% or worse over a 12-month periodDeutsche Bank AG/Hong Kong Page47
    • 17 October 2012The InvestigatorRegulatory Disclosures1. Important Additional Conflict DisclosuresAside from within this report, important conflict disclosures can also be found at https://gm.db.com/equities under the"Disclosures Lookup" and "Legal" tabs. Investors are strongly encouraged to review this information before investing.2. Short-Term Trade IdeasDeutsche Bank equity research analysts sometimes have shorter-term trade ideas (known as SOLAR ideas) that areconsistent or inconsistent with Deutsche Banks existing longer term ratings. These trade ideas can be found at theSOLAR link at http://gm.db.com.3. Country-Specific DisclosuresAustralia and New Zealand: This research, and any access to it, is intended only for "wholesale clients" within themeaning of the Australian Corporations Act and New Zealand Financial Advisors Act respectively.Brazil: The views expressed above accurately reflect personal views of the authors about the subject company(ies) andits(their) securities, including in relation to Deutsche Bank. The compensation of the equity research analyst(s) isindirectly affected by revenues deriving from the business and financial transactions of Deutsche Bank. In cases whereat least one Brazil based analyst (identified by a phone number starting with +55 country code) has taken part in thepreparation of this research report, the Brazil based analyst whose name appears first assumes primary responsibility forits content from a Brazilian regulatory perspective and for its compliance with CVM Instruction # 483.EU countries: Disclosures relating to our obligations under MiFiD can be found athttp://www.globalmarkets.db.com/riskdisclosures.Japan: Disclosures under the Financial Instruments and Exchange Law: Company name - Deutsche Securities Inc.Registration number - Registered as a financial instruments dealer by the Head of the Kanto Local Finance Bureau(Kinsho) No. 117. Member of associations: JSDA, Type II Financial Instruments Firms Association, The Financial FuturesAssociation of Japan, Japan Investment Advisers Association. Commissions and risks involved in stock transactions - forstock transactions, we charge stock commissions and consumption tax by multiplying the transaction amount by thecommission rate agreed with each customer. Stock transactions can lead to losses as a result of share price fluctuationsand other factors. Transactions in foreign stocks can lead to additional losses stemming from foreign exchangefluctuations. "Moodys", "Standard & Poors", and "Fitch" mentioned in this report are not registered credit ratingagencies in Japan unless “Japan” or "Nippon" is specifically designated in the name of the entity.Russia: This information, interpretation and opinions submitted herein are not in the context of, and do not constitute,any appraisal or evaluation activity requiring a license in the Russian Federation.Page48 Deutsche Bank AG/Hong Kong
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