Db investigator strategy 121017

Deutsche Bank
Markets Research

Asia Strategy Date
17 October 2012
The Investigator
Strategy Update

Ajay Kapur, CFA

Policy Uncertainty – The Financial Strategist
(+852) 2203 6196

World's Dominator ajay.kapur@db.com

Ritesh Samadhiya, CFA
Elevated Economic Policy Uncertainty – about to drop?
We might be at an important inflection point in the financial markets. The elevation of Strategist
Economic Policy Uncertainty, since 2008, to twice the level of the previous 23 years has (+852) 2203 6251
increased the equity risk premium, diminished the opportunity set for stock-picking, and ritesh.samadhiya@db.com
favored defensive stocks over cyclicals. Finance professionals and investors may have
wrongly concluded that this state of affairs will be prolonged and enduring. We think this Absolute Return Drivers
status quo view is wrong, and that we could be at a turning point, and that economic

Current Account Balance/GDP
policy 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 Rate
deregulation – 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 income
inequality, all likely peaked together in 2008. Any potential reduction in political

Technicals
Valuation
polarization will likely involve compromise, less policy uncertainty, and a lower likelihood

Liquidity

Growth
of policies being overturned with every election.

Policy
Economic Policy Uncertainty highly correlated with poor stock-picking efficacy
Economic Policy Uncertainty is a function of media mentions of the issue, laws dropping China 8 -2
off the books, and economic forecast dispersion. The correlation coefficient between Hong Kong -2 -2
Economic Policy Uncertainty and stock-picking efficacy was only 0.09 between 1985 and Indonesia 1 0
2007. Since then it has jumped to 0.74. As a stock-picker, you want Economic Policy India 4 3
Uncertainty to fall. Adjusted for portfolio volatility, the stock-picking opportunity will Korea 6 -3
become much wider if uncertainty drops. Malaysia 2 3
Economic Policy Uncertainty is highly correlated with equity risk premium and Philippines 5 0
defensives over cyclicals Singapore -2 4
From 1985 to 2007, there was NO relationship between the two, a correlation coefficient Thailand 4 6
of -0.07. Since 2008, however, the correlation coefficient between policy uncertainty and
Taiwan 1 0
equity risk premium has shot up to 0.67! Presumably, stocks are “cheap” compared with
Asia ex-Japan 4 -2
bonds, since policy is uncertain, the impact on cash flows is uncertain and, as the most
Japan 2 -4
junior entity in the capital structure, stocks need to be cheap to compensate for this
policy uncertainty.
Economic Policy Uncertainty probably peaking out globally: huge implications
Our model portfolio is available as a DB
In the US, a 130-year peak in political polarization and an important election on what to
do 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 the
electorate is voting for. In Europe, there is still a long way to go on reducing policy
uncertainty on the part of governments, north and southern Europe, and within provinces
in 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. In
India, after a period of lethargy, the government has recently been invigorated and policy
has come unstuck. Of course, this is all speculation and could be wrong, but not having a
view 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 Shree
Cement Ltd to the model portfolio. The model portfolio is up 23.1% YTD vs. 13.3% for
MSCI AXJ.
________________________________________________________________________________________________________________
Deutsche Bank AG/Hong Kong
All prices are those current at the end of the previous trading session unless otherwise indicated. Prices are sourced
from local exchanges via Reuters, Bloomberg and other vendors. Data is sourced from Deutsche Bank and subject
companies. 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 AND
ANALYST CERTIFICATIONS ARE LOCATED IN APPENDIX 1. MICA(P) 072/04/2012.

17 October 2012
The Investigator

Table Of Contents
Policy 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 2012
The Investigator

Policy Uncertainty – The Financial World’s Dominator

The only thing that matters – policy uncertainty and polarization
We contend that the main driver of the level of equity markets, the relative performance
of risk assets versus “safe” assets, and the potential opportunity for stock-pricing –
pretty much what defines a finance professional’s life – are increasingly determined by
just one primary factor. The rest of it – all those company meetings, the travel,
spreadsheets, conferences and broker research reports – are less salient compared to
this one factor. This is a bold claim. So what is this salient, primary factor? And can we
prove 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 prove
our point regarding its link with changes in the equity risk premium, the relative
performance of risky versus “safe assets” and the stock-picking opportunity set. We
will also speculate that Policy Uncertainty in the world is about to downshift remarkably
from current ungainly elevated levels. If we are right, this will have hugely positive
implications 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 the
previous 23 years, keeping the equity risk premium high, challenging risky assets versus
“safe assets”, and rendering stock-picking opportunities exceptionally tough. All that
might be about to change.

But first a quick point on political polarization in the USA, where we have the data. As
Figure 1 shows, political polarization in the USA, proxied by how often Republicans vote
similarly to one another, as do Democrats, is at a record high since 1880! It is like two
sullen adults sitting at opposite ends of a see-saw, looking away from each other. With
that degree of entrenched polarization, it is tough to get policies passed, and a
malodorous air of policy inaction and uncertainty hangs heavy in the land. Note in
Figure 1 how policy polarization correlates well with income inequality (or plutonomy).
(Interested readers in the concept of political polarization should go to
http://www.slate.com/articles/life/do_the_math/2001/12/growing_apart.single.html, The
Mathematical Evidence for Congress’ Growing Polarization by Jordan Ellenberg1.) Our
humble contention is that time-series that are at 130-year extremes are most likely to
mean revert, however fanciful that might seem at the time of the extreme. In other
words, political polarization might just recede with this coming US election. Financial
deregulation – a key driver of complexity, the consequent compensation premium in the
financial sector, the rise in the ratio of bank fee income to total income, and income
inequality, all likely peaked together in 2008. Any potential reduction in political
polarization will likely involve compromise, less policy uncertainty, and less of a
likelihood of policies being overturned with every election. As Figure 2 shows, more
policy certainty would diminish one key headache for business.

Economic Policy Uncertainty
Scott Baker, Nick Bloom and Steven Davis at Stanford have constructed Economic
Policy 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 underlying
components. One component quantifies newspaper coverage of policy-related economic uncertainty. A second
component reflects the number of federal tax code provisions set to expire in future years. The third component
uses 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 our
index 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#MPRBOOK

Deutsche Bank AG/Hong Kong Page 3

17 October 2012
The Investigator

the Boston Globe, the San Francisco Chronicle, the Dallas Morning News, the New York Times, and the Wall
Street Journal. From these papers, we construct a normalized index of the volume of news articles discussing
economic policy uncertainty of some type. The second component of our index draws on reports by the
Congressional Budget Office (CBO) that compile lists of temporary federal tax code provisions. We create
annual discounted numbers of tax code provisions scheduled to expire for each year, giving a measure of the
level of uncertainty regarding the path that the federal tax code will take in the future. The third component of
our policy-related uncertainty index draws on the Federal Reserve Bank of Philadelphia's Survey of
Professional Forecasters. Here, we utilize the dispersion between individual forecasters' predictions about
future levels of the Consumer Price Index, Federal Expenditures, and State and Local Expenditures to
construct 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 1999
Source: Deutsche Bank. Polarization is measured as difference in party means - first dimension. http://voteview.com/Polarized_America.htm

Figure 2: US: Economic Uncertainty a huge problem

Source: NFIB

Figure 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 Economic


17 October 2012
The Investigator

Policy Uncertainty Index alongside the average US stock performance correlations with
the MSCI USA benchmark (a proxy for the potential efficacy of stock picking. If stocks
all 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 inventors
of the index note, US Economic Policy Uncertainty since 2007 has been at twice the
level of the prior 23 years. As Figure 4 also shows, the relationship between Economic
Policy Uncertainty and the stock-picking opportunity set has increased markedly since
2008. The correlation coefficient between Economic Policy Uncertainty and stock-
picking efficacy was only 0.09 between 1985 and 2007. Since then, it has jumped to
0.74. If you are a stock-picker, you want Economic Policy Uncertainty to subside, big
time. Adjusted for portfolio volatility, the stock picking opportunity will become much
wider, and life presumably a bit less stressful. Having a view on Economic Policy
Uncertainty is critical.

Figure 3: Economic Policy Uncertainty has been elevated since 2008, about to drop?
300 300
US Economic Policy Uncertainty Index

250 European Economic Policy Uncertainty Index High policy 250
uncertainty
Canadian Economic Policy Uncertainty Index
200 200

150 150

100 100

50 50

0 0
1/85 1/88 1/91 1/94 1/97 1/00 1/03 1/06 1/09 1/12
Source: Deutsche Bank, Scott Baker, Nick Bloom and Steven Davis (www.policyuncertainty.com)

Figure 4: Economic Policy Uncertainty and stock correlations with the benchmark move
together. 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 1/12
Source: 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 total
market capitalization (i.e.1,053 to 2,684 stocks from 1985 to 2012). For more on the “Economic Policy Uncertainty Index”, go to the website
http://policyuncertainty.com. According to the authors, “To measure policy-related economic uncertainty, we construct an index from three types of underlying
components. One component quantifies newspaper coverage of policy-related economic uncertainty. A second component reflects the number of federal tax
code 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 and
the equity risk premium (the higher it is, the “cheaper” stocks are versus bonds). From
1985 to 2007, there was NO relationship between the two, a correlation coefficient of -
0.07. Since 2008, however, the correlation coefficient between policy uncertainty and


17 October 2012
The Investigator

the equity risk premium has shot up to 0.67! Presumably, stocks are “cheap” compared
with bonds, since policy is uncertain, the impact on cash flows is uncertain and, as the
most junior entity in the capital structure, stocks need to be cheap to compensate for
this policy uncertainty. Logically, if the correlation holds and there is a substantial
decline in policy uncertainty, the equity risk premium could decline in tandem – stocks
would beat bonds massively. Having a view on Economic Policy Uncertainty is critical.
How about defensive sectors versus cyclicals? Does US Economic Policy Uncertainty
have any role here? Yes. As Figure 6 shows, changes in US Economic Policy
Uncertainty relate well with changes in the relative performance of defensives versus
cyclicals. The correlation coefficient has doubled from 0.33 between 1985-2007 and
2008 now. As policy uncertainty rises, there is an unsurprising rush to defensives, and
vice versa. Again, this relationship has been a lot more salient since 2008. Having a
view 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 drops
250 8%
High policy
230 US Economic Policy Uncertainty Index, uncertainty
3mma, LS 6%
210
Equity Risk Premium (S&P500 earnings 4%
190
yield less 10yr bond yield), RS
170
2%
150
0%
130
110 -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 1/13
Source: Deutsche Bank

Figure 6: Defensives versus Cyclicals ( or risk-off versus risk-on) moves with changes in
Economic 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, but
it is important to do so. In the US, a 130-year peak in political polarization and an
important election on what to do about this polarization should help resolve things one
way or another. Whatever the outcome of the election, we think it’s safe to say that
another 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, the


17 October 2012
The Investigator

polarization, the policy uncertainty could go on for longer. In Europe, the ECB approved
its aggressive bond-buying plan with just one dissenter. While there is still a long way
to go on reducing policy uncertainty on the part of governments, north and southern
Europe, and within provinces in countries, 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. A renewed focus on governance and policy – the work of
government – can then begin. In India, after a period of lethargy, the government has
recently been invigorated and policy has come unstuck.

With the passage of time since the outbreak of the financial crisis, there is early
empirical evidence in the "austerity versus fiscal spending" debate. 2 As more time
elapses and more empirical results reveal themselves, we believe policy uncertainty will
likely diminish. Policymakers and voters will be better informed about the consequences
of 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 world
is probably coming to an end. The confusion of policymakers in facing the rather unique
challenges of a once-in-seventy-years potential debt deflation was understandable. It is
by no means all blue skies from here, but policymakers and politicians are both learning
what is “working”, and what is not. Electorates are making choices about the direction
they want to go in, rather than the logjam of the past five years. Debtors and creditors
always fight about loss allocation in a debt crisis – time is the only healer that can bring
them together, however reluctantly. That time seems to be approaching. Again, this is
simple expectation on our part, and we could be plain wrong. But we stress that not
having a view on the direction of Policy Uncertainty is NOT an option for financial
professionals.

In sum, we might be at an important inflection point in financial markets. The elevation
of Economic Policy Uncertainty since 2008 has elevated the equity risk premium,
diminished the opportunity set for stock-picking, and favored defensive stocks over
cyclicals. The mindset of finance professionals and investors might have wrongly
concluded that this state of affairs is going to be prolonged and enduring – that bonds
are better than stocks, that stock-picking is ruinously counter-productive in this “macro-
driven” market, and that defensives are superior investments to cyclicals. This view
implies a continued elevated level of global Economic Policy Uncertainty. We think this
status quo view is wrong, and that we could be at a turning point, and that economic
policy 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 a
Depressed Economy by Lawrence H. Summers and J. Bradford DeLong.
(www.brookings.edu/~/.../2012_spring_BPEA_delongsummers.pdf)


17 October 2012
The Investigator

Asia Model Portfolio update
We are removing Hyundai Motor Co, Hyundai Mobis, Simplo Technology Co Ltd and
Starhub Ltd. Hyundai Motor and Hyundai Mobis have dropped to the fourth and third
quintile respectively in our multifactor stock ranking model. Hyundai Motor looks
weaker (relative to the region) on profitability, growth and earnings momentum.
Hyundai Mobis is now looking expensive and has lower earnings momentum. Simplo
Technology faded on price momentum, earnings momentum and consensus rating
metrics. We are cutting Singapore on poor earnings revisions and dropping Starhub
from the model portfolio.

We are adding Top Glove Corp Bhd, Korea Zinc Co Ltd, Ace Hardware and Shree
Cement Ltd. Top Glove ranks highly on valuation, earnings and price momentum. Korea
Zinc looks better on profitability, earnings, price momentum and earnings quality. Ace
hardware, though looking expensive, scores well on profitability, growth, earnings and
price momentum. Shree Cement looks good on profitability, earnings, price momentum
and 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 in
ASEAN and slower consumption growth globally, as well as resilient demand for rubber
gloves for medical and hygiene purposes should drive multi-year growth for the sector
and allow Top Glove to generate two-year (FY13-15E) net profit CAGR of 14%, in our
view. 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’s
global commodity team has upgraded its gold/silver price forecasts by 2.4% for 2013
and 11.1% for 2014 in light of further central bank action to expand monetary
conditions. 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 by
2.4%/5.1%/1.5%, respectively. Our DCF valuation method differentiates Zijin (Buy) from
Zhaojin (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 into
Zhaojin’s share price, after a 36% rally in the past month. We roll over Korea Zinc’s
target price to 2013-based and raise it by 24%. Overall, Zijin and Korea Zinc stand out
after 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 Ace
Hardware Indonesia will continue to deliver strong growth as it is one of the best
proxies for the expanding middle class, enjoying a forecast earnings CAGR of 22% over
the 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. We
believe the company is on track to have 100 stores in the next three years, which is a
43% increase. Maintaining Buy with new DCF-based target price of Rp8,000 (from
Rp5,000). (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, driven
by 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 the
stock despite a 37% rise in the stock price over the past three months. (Harshad Katkar,
16 October, 2012)


17 October 2012
The Investigator

Summary

Global
High policy uncertainty, and the attendant flight from junior tranches of the capital
structure, 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 as
catalysts to unlock value in equities. Despite 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 slight concern. The global Tape is very strong,
and the Marshallian K is rising.

Asia
Asian valuations are moderately below historical averages. The problem is margins – in
China they seem to be in a secular decline, while in India they seem to be at a cyclical
low. The region cannot rely on asset turns and leverage – both at global levels – to
boost relative ROEs compared with the world. It is probably going to have to be EBIT
margin expansion that gets the PB up. We don’t see any substantial decline in the cost
of 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 economic
indicators are bottoming, and policy is no longer being tightened. Analysts have taken
the knife to this year’s EPS growth forecasts from around 13% at the start of the year to
5% 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 strategies
and high profitability have done well this year, while high projected growth stocks have
been punished.

Japan
Japanese stocks continue to look undervalued versus history. A return to credible
inflation and higher nominal GDP growth globally is required to unlock value. Recent
tensions 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 are
probably going to get less bad. EPS revisions continue to slide. Fund flows are weak
and the market continues to underperform the world as US 10-year bond yields remain
suppressed. Value remains the long-term winner.

China (neutral)
China’s valuations look “cheap” compared with history and are at fair value on our PB
ROE less COE model. However, on prospective ROEs of around 7% in three years’ time
and COE of around 10%, the current PB of 1.4 is substantially overvalued. Monetary
reflation could lift the current multiple, but the long-term deterioration in EBIT margins
is the key challenge to a re-rating. Sentiment is at neutral. Worryingly, turnover/market
cap is plumbing new depths. Once the political transition is done, and policy making,
reflation and market-supportive steps are likely taken, sentiment and pathetic turnover
might perk up. Technicals are weak. Policy is tightening via the currency, and weak
monetary growth. Real interest rates for corporates are rising with the corporate price
deflator contracting yoy. EPS revisions keep dropping as do EPS growth forecasts for
2012 and 2013. We are watching carefully for EPS revisions to hook up. The good news
is 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 correlates
with the PB multiple. We need to see a more credible reflation to see the market make


17 October 2012
The Investigator

strong upward moves. Earnings revisions and momentum, together with analyst
opinions 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 of
the pack compared with the other Asian markets. Sentiment has rebounded from the
panic levels earlier this year. Turnover to market capitalization is still anemic, but we are
encouraged by the rise in the gap between M1 and M2 growth. Technicals have
improved since the summer. Policy seems to be tightening (even as real interest rates
are quite negative), and EPS revisions are still quite weak. The EPS growth forecast for
2012 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 is
making the real effective exchange rate less competitive, and the yield curve is flat. A
good dose of monetary reflation in China is required to turn liquidity up. Negative real
interest rates are here to stay in HK for longer than anyone recognizes. Value and low
risk styles have been exceptional performers this year.

India (overweight)
Despite the recent run-up, the market is still undervalued on EV/Sales, EV/EBITDA and
PB compared with history. On other metrics, like trailing PE and dividend yield, it is at
long-term averages. On our PB versus ROE less COE model it is at fair value, and needs
for ROEs to rise and/or COEs to fall – likely if the RBI cuts rates as the Rupee
strengthens. Risk-love has perked up from panic in May to neutral now. Meeting with
scores of clients around the world, however, we think there is still considerable
skepticism about the market. With the recent rally, technicals have improved. The
downgrade to GDP growth by the IMF is unfathomable to us simpletons. The leading
indicator from the OECD has been rising for months, and the EPS revisions trajectory
has also been improving for months. Our policy indicator has curled up with the
weakness in the Rupee. Looking ahead, we expect the monetary base to start growing
from its paltry 4% yoy rate, as net foreign asset growth resumes on the back of reforms
and confidence. EPS growth projections for next year, at 12-14%, are reasonable. The
monetary base growth at 4.4% is anemic. The lack of net foreign asset growth is being
compensated by a substantial increase in net RBI lending to government. This is a
vicious cycle that needs to be broken, and probably will be, if reform momentum is
maintained. The yield curve is no longer negative, but is still flat as a chapatti. Value and
EPS 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 the
decline in Indonesia’s EBIT margins. Maintaining premium valuations to the region
requires maintaining premium ROEs to the region. Having almost doubled capex/GDP in
the past few years, and as it is exposed to any slowdown in nominal GDP growth in
China, keep an eye on declining margins in Indonesia. Indonesia has gone from the
poster child of solid macro policy last year to one that is perceived as having less than
optimal policies – interest rates cut “too soon”, etc. We didn’t understand either
position. Indeed, it seems that other EM central banks are now following BI in cutting
interest rates to combat slower growth. Maybe BI is a lot smarter than the gallery of
critics assumes. We think policy easing makes sense (unlike consensus) – real economy
data is coming in really weak, EPS revisions are negative (but recovering), and EPS
growth expectations have collapsed from 17% a few months ago to just 8% now for
calendar 2012. Inflation, a lagging indicator, is stable at the 4%-ish level. The currency is
more competitive in real effective terms, free liquidity is booming and the yield curve is
flat-ish. Value and EPS mo are king here. The rest are not really adding alpha this year.


17 October 2012
The Investigator

Korea (underweight)
The market is at fair value compared with its history, but cheap compared with other
markets on a snapshot basis. This is a low ROE, low EBIT margin market, and is likely to
remain a low PB market unless ROEs rise sharply. Interestingly, unlike China, Taiwan
and Singapore, where margins have been in secular decline, and ROEs have been
goosed by rising asset turns and leverage (this has also been happening in Malaysia and
Indonesia recently), in Korea this is not happening. EBIT margins and ROEs move
together – albeit at low levels. We think this deserves a higher multiple than currently
obtained. We think investors in the other markets might be suffering from “ROE
illusion”, implying very strong nominal GDP growth and more leverage – both unlikely.
Sentiment is just shy of neutral. Technicals are a lot stronger than overall market
performance suggests. Close to a record percentage of stocks are making 52-week
highs. The leading economic indicator has been rising persistently for many months
now, but EPS revisions are still in the doldrums. Implication: margins are under
continued pressure. The terms of trade are improving and we expect this to feed
through to improving margins and EPS revisions soon. The yield curve is flat, and
flattening. Value has made a massive comeback in the past six months. Price and EPS
mo have been disasters this year. Stock-picking in Korea based on style is very tricky
because 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 other
markets on a relative basis. As in Indonesia, we are concerned about the sharp drop in
EBIT 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 numbers
are being taken down for 2012. Price and EPS mo, along with ROE have been rewarded
this year. But value has been tepid.

Philippines (neutral)
The market is expensive compared with its history and versus other markets in the
region. We like that the EBITs and ROEs move together, so there is no leverage or asset
turnover-driven “ROE illusion”. Also, years of under-investment imply many years of
strong EBIT margins (unlike say in China, or maybe even Indonesia). Sentiment has
come off from the euphoria of the summer to neutral now. The leading economic
indicator is rising, and we expect EPS revisions to do the same. This is a requirement in
order to maintain its premium valuations. Value, a perennial king in Philippine alpha
generation, continues to do well, as do EPS revision strategies.

Singapore (neutral)
The market is cheap compared with history, but fairly valued compared with other
regional markets. EBIT margins are in secular decline, and maintaining ROEs will rely on
continued 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. Earnings
revisions also look weak. The good news is that the terms of trade are now picking up
nicely, so margins are likely to get a boost. Only stability and low risk factors are
generating alpha. Value strategies are mixed, but momentum strategies have destroyed
alpha this year.

Taiwan (underweight)
The market is a serial underperformer versus the region. EBIT margins are in secular
decline, 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 vertical
and project rising EPS momentum. Given poor sentiment, and an impending
improvement in EPS growth projections, we need to keep an eye on the underweighted


17 October 2012
The Investigator

market. This tech-heavy market is respecting price momentum and stocks supported by
analysts.

Thailand (overweight)
The market is fairly valued versus history and the region. The exception is PB – where
the market is at record premiums to the region. Could that be a reward for the solid
ROEs (driven not by EBIT margins but asset turns)? Sentiment is neutral. Technicals are
super-strong. About a quarter are making 52-week highs. Growth-leading indicators are
still strong, even as incoming data have been weak. Analysts have dropped projected
2012 EPS growth forecasts from 23% earlier his year to about 15% now. Also, we are
comforted with the rise in the terms of trade that should be supportive of margins and
EPS growth going forward. Value has been a disaster this year, while price and EPS
momentum strategies have been huge winners.


17 October 2012
The Investigator

Figure 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 9/12
Source: Deutsche Bank, MSCI, FactSet
Note: 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 results

Figure 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%.


17 October 2012
The Investigator

Figure 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 o
Oil & 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 o
Oil India Ltd. OINL IN IN B 30Sep11 485.85 5.9 -6.2 0.29 5.5 1.7 9.1 ++ + + o + ++ o o o
PTT PCL PTT TB TH NR 14Sep10 311.00 1.6 1.27 29.0 38.7
SK Innovation Co. Ltd. 096770 KS KR B 7Aug12 154000 8.5 -6.9 1.47 13.5 55.8 6.6 ++ ++ + o - - ++ - - o o
Materials - 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 + o
Shree 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 o
Korea Zinc Co. Ltd. 010130 KS KR B 17Oct12 461000 51.6 NA 1.13 7.9 31.9 8.2 o ++ ++ ++ - + o + o
LG 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 ++ ++ o
Minor International PCL MINT TB TH B 27Jun12 17.80 76.2 26.2 1.06 2.1 6.5 20.4 o ++ ++ ++ o - - ++ o
Media - 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 ++ ++ o
Giordano 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 + ++ o
Food & 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 o
Household & 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 o
Pharmaceuticals & 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 o
Haitong 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 - o
Real 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 + ++ ++ - - - ++ -- o
Megaworld 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 o
Software & 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 o
Technology 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 o
China 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 o
Utilities - 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 o
Db X-Trackers Csi300 Trn Index Et 3049 HK CN 15May12 5.62 -7.2 -11.1 1.00 0.3 3.7
Asia Model Portfolio (eq-wgt)** 23.1 19.0 1.03 26.6 36.7 13.1
MSCI Asia ex-Japan, LC 13.3 4.8
Source: 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 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.


17 October 2012
The Investigator

Country selection

Figure 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) -4
Source: 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 percentage
of 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 on
leading economic indicators and earnings revision index, current account balance/GDP is based on deviation from 3-year moving average trend, real exchange rate
is based on deviation from 2-year moving average trend and policy is based on policy indicator.


17 October 2012
The Investigator

Country-sector selection

Figure 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 0.70
Source: Deutsche Bank, FactSet


17 October 2012
The Investigator

Figure 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 Sector
1 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 + ++ + O
5 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 1.07

Source: 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 revising
down 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 and
Korea tech hardware.


17 October 2012
The Investigator

Figure 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 Sector
1 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 - -- - O
4 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 O
15 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 0.95
Source: 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 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 India utilities and food beverage & tobacco, Indonesia telecommunications and Taiwan semis and added Taiwan capital goods, Korea diversified financials, China materials and Indonesia materials


17 October 2012
The Investigator

Figure 14: Asian country sector heat-map for all covered sectors

Hong Kong

Philippines

Singapore
Indonesia

Malaysia

Thailand

Taiwan

Japan
Korea
China

India
Energy 102 -10 40 124 51 95 -10 -10 104 -10 72
Materials 134 -10 62 128 83 92 -10 -10 109 143 85
Capital Goods 115 116 117 111 78 66 87 71 -10 137 63
Commercial Services & Supplies -10 -10 -10 -10 -10 -10 -10 -10 -10 -10 29
Transportation 125 100 -10 -10 91 90 -10 79 -10 140 48
Automobiles & Components 122 -10 82 58 32 38 -10 -10 -10 135 43
Consumer Durables & Apparel -10 77 -10 -10 107 -10 -10 -10 -10 41 45
Hotels Restaurants & Leisure -10 97 -10 -10 37 61 -10 145 -10 -10 126
Media -10 -10 98 -10 -10 -10 -10 88 75 -10 20
Retailing 141 123 -10 -10 114 -10 -10 31 -10 139 17
Food & Staples Retailing 146 -10 -10 -10 120 -10 47 113 10 119 21
Food Beverage & Tobacco 138 -10 73 53 67 81 -10 130 129 -10 54
Household & Personal Products 147 -10 39 9 127 -10 -10 -10 -10 -10 86
Health Care Equipment & Services 93 -10 -10 -10 -10 -10 -10 -10 -10 -10 23
Pharmaceuticals & Biotechnology -10 -10 55 14 106 -10 -10 -10 -10 -10 26
Banks 19 36 22 8 25 30 7 33 6 46 2
Diversified Financials -10 105 42 -10 132 49 16 84 -10 89 28
Insurance 110 -10 -10 -10 24 -10 -10 -10 -10 59 68
Real Estate 13 15 96 -10 -10 -10 34 27 -10 131 60
Software & Services 57 -10 11 -10 144 -10 -10 -10 -10 -10 35
Technology Hardware & Equipment 108 70 -10 -10 52 -10 -10 -10 -10 103 101
Semiconductors & Semiconductor Equipment -10 118 -10 -10 133 -10 -10 -10 -10 74 142
Telecommunication Services 64 76 136 56 112 50 80 99 3 65 5
Utilities 12 94 69 4 44 18 1 -10 -10 -10 121

O ver a ll (bot t om -up r a nking) - Cur r ent 7 9 3 2 10 4 5 8 1 11 6

Overall (bottom-up ranking) - Previous 8 3 6 7 9 10 1 5 2 11 4
Overall (bottom-up ranking) - Avg of above 8 6 5 5 10 7 3 7 2 11 5

V a lua t ion - Cur r ent 1 5 2 10 3 8 11 7 9 6 4
Valuation - Previous 1 5 4 9 3 10 11 8 6 7 2
E a r nings Revis ions - Cur r ent 11 6 5 2 10 3 1 7 4 9 8
Earnings Revisions - Previous 11 6 8 4 9 7 1 3 2 10 5
P r of it a bilit y - Cur r ent 4 8 2 1 9 5 3 7 6 10 11
Profitability - Previous 4 8 2 1 9 6 5 7 3 10 11
Tec hnic a ls - Cur r ent 10 6 5 8 11 4 1 2 3 7 9
Technicals - Previous 10 6 5 9 11 3 1 4 2 7 8
Source: Deutsche Bank. Numbers are ranks, smaller is better. Green color = Most attractive country sectors, Red color=Least attractive country sectors. Yellow
color = Neutral country sectors. White space = sector market cap too low or data unavailable.

Figure 15: Bottom-up sector model backtest
16,384 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 01/12

Source: Deutsche Bank, Real time is from 30 September 2010. Note: Past performance does not guarantee future results. Last updated in May 2012


17 October 2012
The Investigator

Asia Model Portfolio

Figure 16: Deletions from model portfolio since inception (13 September 2010)
Date Date DB Close Date Date Close
Company BB Ticker Added Removed Rec 16Oct12 Company BB Ticker Added Removed DB Rec 16Oct12
Deletions as of 2 Nov 2010 Deletions as of 30 Sep 2011
Agri. Bank of China 1288 HK 13Sep10 2Nov10 H 3.18 DSME 042660 KS 22Jul11 30Sep11 H 23600
Anta Sports 2020 HK 13Sep10 2Nov10 H 6.90 OCI Company 010060 KS 14Sep10 30Sep11 NR 161500
Fraser & Neave FNN SP 13Sep10 2Nov10 B 8.90 BRI BBRI IJ 30Aug11 30Sep11 B 7550.00
Deletions as of 10Dec2010 Samsung Eng. 028050 KS 14Sep10 30Sep11 H 170000
China Shineway 2877 HK 13Sep10 10Dec10 H 10.86 Siam Cement SCC TB 22Jul11 30Sep11 B 355.00
Chunghwa Tel 2412 TT 13Sep10 10Dec10 H 92.30 KWG Property 1813 HK 11Dec10 30Sep11 B 4.50
Far EasTone Telecom 4904 TT 13Sep10 10Dec10 B 72.40 SOHO China 410 HK 3Nov10 30Sep11 B 5.16
First Philippine Hldgs FPH PM 13Sep10 10Dec10 B 80.70 Deletions as of 11 Nov 2011
LIG Insurance 002550 KS 13Sep10 10Dec10 NR 26500 Hyundai Dept Store 069960 KS 14Sep10 11Nov11 B 144000
Perusahaan Gas Negara PGAS IJ 13Sep10 10Dec10 B 4325.00 SJM 880 HK 14Sep10 11Nov11 B 16.30
PLUS Expressways PLUS MK 13Sep10 10Dec10 NR NA Taiwan Cement 1101 TT 30Aug11 11Nov11 H 36.65
SATS SATS SP 13Sep10 10Dec10 B 2.75 Deletions as of 19 Jan 2012
Top Glove TOPG MK 13Sep10 10Dec10 B 5.31 Powertech Technology 6239 TT 5May11 19Jan12 S 51.80
Wynn Macau 1128 HK 13Sep10 10Dec10 B 20.55 Deletions as of 9 March 2012
Deletions as of 24 Jan 2011 Amorepacific Corp. 090430 KS 30Sep11 9Mar12 H 1231000
Dongfeng Motor 489 HK 2Nov10 24Jan11 B 9.90 Hong Leong Bank Bhd. HLBK MK 11Nov11 9Mar12 H 13.98
Hang Lung Properties 101 HK 13Sep10 24Jan11 B 26.50 Industrial Bank of Korea 024110 KS 22Jul11 9Mar12 H 11800
Deletions as of 4 May 2011 KT&G Corp. 033780 KS 14Oct10 9Mar12 H 92000
Delta Electronics 2308 TT 13Sep10 4May11 B 105.00 Deletions as of 15 May 2012
Franshion 817 HK 10Dec10 4May11 B 2.39 Aboitiz Power Corp. AP PM 14Sep10 15May12 H 33.45
Genting Bhd GENT MK 10Dec10 4May11 H 8.81 Krung Thai Bank Public Co., Ltd. KTB TB 12Dec10 15May12 B 18.60
Kasikornbank KBANK TB 10Dec10 4May11 B 176.00 PT Charoen Pokphand Indonesia Tbk CPIN IJ 11Nov11 15May12 B 3050.00
Nexen Tire 002350 KS 13Sep10 4May11 H 18100 PT Perusahaan Gas Negara (Persero) Tbk PGAS IJ 8Mar12 15May12 B 4325.00
Orise Technology 3545 TT 27Jan11 4May11 B 34.90 Yangzijiang Shipbuilding (Holdings) Ltd. YZJ SP 14Sep10 15May12 H 0.94
Shanghai Electric 2727 HK 13Sep10 4May11 B 3.09 Deletions as of 26 June 2012
Deletions as of 6 Jun 2011 Formosa Chemicals & Fibre 1326 TT 14Sep10 26Jun12 H 74.20
DiGi.Com DIGI MK 13Sep10 6Jun11 H 5.44 China Construction Bank-H 939 HK 14Sep10 26Jun12 H 5.68
Bank of Baroda BOB IN 10Dec10 6Jun11 B 766.80 Wharf Holdings ltd 4 HK 14Sep10 26Jun12 H 51.90
Deletions as of 21 Jul 2011 Deletions as of 7 August 2012
China CITIC 998 HK 4May11 21Jul11 H 4.05 Wipro Ltd WPRO IN 20Jan12 6Aug12 B 352.10
Asian Paints APNT IN 13Sep10 21Jul11 H 3882.15 United Tractors Tbk Pt UNTR IJ 9Mar12 6Aug12 B 19600
Hyundai Heavy 009540 KS 10Dec10 21Jul11 B 235000 Public Bank PBKF MK 15May12 6Aug12 H 14.56
Korean Reinsurance 003690 KS 2Nov10 21Jul11 NR 11600 Mstar Semiconductor Inc 3697 TT 30Sep12 6Aug12 B 244.50
Deletions as of 29 Aug 2011 Bank of China Ltd-H 3988 HK 14Sep10 6Aug12 B 3.07
Sinopec-H 386 HK 11Dec10 29Aug11 B 7.82 Hyundai Marine & Fire Ins Co 001450 KS 22Jul11 6Aug12 NR 37000
Cathay Pacific 293 HK 14Sep10 29Aug11 S 13.46 Deletions as of 17 October 2012
Maanshan-H 323 HK 7Jun11 29Aug11 S 1.94 HYUNDAI MOTOR CO 005380 KS 14Sep10 17Oct12 B 227500
Siliconware 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 3.66
Source: Deutsche Bank, FactSet, Bloomberg Finance LP


17 October 2012
The Investigator

Global – valuation
High policy uncertainty, and the attendant flight from junior tranches of the capital
structure, 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 as
catalysts 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 1/10

Source: Deutsche Bank, IBES, MSCI. Note: Composite valuation index is the average of trailing P/E, 12m Source: Deutsche Bank, MSCI, DataStream
forward P/E, P/Cash Earnings, P/BV, Dividend Yield, EV/EBITDA and EV/Sales, normalized over entire
history

Figure 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 1/13

Source: Deutsche Bank, MSCI, I/B/E/S Source: Deutsche Bank, MSCI, DataStream

Figure 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 1/13

Source: Deutsche Bank, MSCI, FactSet Source: Deutsche Bank, MSCI, FactSet


17 October 2012
The Investigator

Global metrics

Despite 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 slight
concern. 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 1/13

Source: Deutsche Bank Source: Deutsche Bank, OECD

Figure 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 1/12
Source: Deutsche Bank, I/B/E/S, MSCI Source: Deutsche Bank, MSCI


17 October 2012
The Investigator

Global metrics (continued)

Figure 27: Percentage of countries above their 10-WMA Figure 28: Global free liquidity

120% % of countries trading above 10- 120% 15 % 15
% Global Free Liquidity
100% 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 1/12
Source: Deutsche Bank. Includes 49 Markets. Source: Deutsche Bank

Figure 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 1/12
Source: Deutsche Bank Source: Deutsche Bank

Figure 31: 6m total equity offerings* as percentage of Figure 32: Composite policy indicator
total 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 1/13

Source: Deutsche Bank, Bloomberg Finance LP, DataStream Source: Deutsche Bank, DataStream, CEIC, IMF. Note: Composite policy indicator is an equal weighted
Note: *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 (long
Data as of close 25 Aug, 2011. minus short term interest rate) and government fiscal deficit/surplus as % of GDP.


17 October 2012
The Investigator

Global – market intelligence

Figure 33: Market intelligence by country
11Oct12 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 CY13
North 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 14.6
Canada (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 12.5
US (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 14.9
Europe (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 12.6
Austria (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 9.2
Belgium (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 12.0
Denmark (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 15.3
Finland (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 12.3
France (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 10.6
Germany (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 12.4
Greece (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 14.3
Ireland (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 8.2
Italy (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 8.2
Netherlands (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 12.7
Norway (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 13.8
Portugal (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 9.6
Spain (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 10.6
Sweden (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 13.7
Switzerland (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 15.7
UK (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 14.1
Japan (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 8.2
Asia 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 13.0
Asia 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 12.9
Australia (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 13.2
China (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 14.7
Hong 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 8.4
India (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 15.6
Indonesia (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 21.7
Korea (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 12.9
Malaysia (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 13.3
New 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 11.4
Philippines (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 15.5
Singapore (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 10.5
Taiwan (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 12.5
Thailand (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 17.4
EM 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 13.1
Czech 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 15.4
Egypt (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 11.4
Hungary (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 10.8
Israel (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 16.2
Morocco (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 25.5
Poland (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 10.9
Russia (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 11.6
South 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 17.4
Turkey (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 15.0
Latin 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 13.7
Brazil (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 12.7
Chile (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 12.8
Colombia (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 7.9
Mexico (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 19.6
Peru (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 21.7
Developed 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 12.9
Emerging 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 13.7
World (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 13.0
Source: 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.


17 October 2012
The Investigator

Global – market intelligence (continued)

Figure 34: Market intelligence by sector
Sector (#Co) U$m 1m YTD CY11 CY12 CY13 CY11 CY12 CY13 CY11 CY12 CY13 CY11 CY12 CY13 CY11 CY12 CY13
Energy (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 12.8
Materials (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 13.0
Capital 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 14.9
Comm 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 14.2
Transportation (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 12.3
Autos (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 13.0
Cons 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 12.4
Cons 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 19.2
Media (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 14.8
Retailing (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 18.2
Food/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 14.4
Food 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 18.1
Household 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 18.3
Health 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 15.4
Pharma & 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 19.3
Banks (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 10.8
Div 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 8.3
Insurance (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 9.4
Real 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 6.7
Software (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 23.3
Tech 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 17.1
Semis (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 16.3
Telecom (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 14.3
Utilities (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 9.9
World (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 13.0
Source: 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

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 1/12

Source: Deutsche Bank, MSCI


17 October 2012
The Investigator

Asia – valuation
Asian valuations are moderately below historical averages. The problem is margins – in
China they seem to be in a secular decline, while in India they seem to be at a cyclical
low. The region cannot rely on asset turns and leverage – both at global levels – to
boost relative ROEs compared with the world. It is probably going to have to be EBIT
margin expansion that gets the PB up. We don’t see any substantial decline in the cost
of equity to boost PB multiples.

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 1/13

Source: Deutsche Bank, IBES, MSCI. Note: Composite valuation index is the average of trailing P/E, 12m Source: Deutsche Bank, MSCI, DataStream
history

Figure 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 1/13

Source: Deutsche Bank, MSCI, I/B/E/S Source: Deutsche Bank, MSCI, DataStream

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 1/13



17 October 2012
The Investigator

Asia – investor sentiment

Risk-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 1/12


Figure 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 1/12


Figure 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 1/12



17 October 2012
The Investigator

Asia – technicals

Technicals 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 1/12
Source: Deutsche Bank, DataStream, FactSet Source: Deutsche Bank, DataStream, FactSet

Figure 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 -40
Source: 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 Lows

30% 30% 50% 50%
% of stocks at 52W Highs % of stocks at 52W Lows
25% 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 1/12


17 October 2012
The Investigator

Asia – growth and earnings
Asia’s leading economic indicators are bottoming, and policy is no longer being
tightened. Analysts have taken the knife to this year’s EPS growth forecasts from
around 13% at the start of the year to 5% now. We think that EPS revisions and
economic surprises are about bottoming now.

Figure 54: Leading economic and composite policy Figure 55: Economic surprises
indicators
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 1/12
Source: Deutsche Bank, CEIC, DataStream, Bloomberg Finance LP. Note: *Market cap weighted Source: Deutsche Bank, Citigroup, Bloomberg Finance LP
average of composite leading economic indicators growth for China, India, Korea and Taiwan. **GDP
weighed 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 7/12

Source: Deutsche Bank, I/B/E/S, MSCI Source: Deutsche Bank, I/B/E/S, MSCI

Figure 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 Kong

Source: Deutsche Bank, I/B/E/S, MSCI Source: Deutsche Bank, I/B/E/S, MSCI


17 October 2012
The Investigator

Asia – liquidity
New 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 1/12
Source: Deutsche Bank, DataStream, Bloomberg Finance LP Source: Deutsche Bank, DataStream, Bloomberg Finance LP

Figure 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 1/12
Source: 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 1/11
Source: Deutsche Bank, Bloomberg Finance LP Source: Deutsche Bank, Bloomberg Finance LP


17 October 2012
The Investigator

Asia – factor performance
Value strategies and high profitability have done well this year, while high projected
growth 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 AXJ



17 October 2012
The Investigator

Figure 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 Profitability
Low 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 6.8
Low 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 3.6
Low 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 3.7
Low 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 3.5
Low 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 4.4
Low P/FCF 1.5 -1.2 0.4 2.8 1.7 3.9 3.0 5.3 Growth
Low 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 -3.4
Low 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 -1.6
Low 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 -1.2
Low 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 -0.1
Low 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 1.0
Low 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 -1.2
High 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 -1.7
Aver 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 Stability
High 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 2.3
High 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 3.1
High 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 0.6
High 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 1.5
High 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 0.7
High 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 1.6
Aver 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 4.5
High 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 3.3
High 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 5.2
High 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 2.6
High 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 -0.7
High 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 1.7
Aver 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 Ratings
Low 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 6.9
Low 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 4.7
Low 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 5.8
High Receivables yoy chg 0.9 -0.3 0.1 0.1 1.4 0.4 0.1 1.1
Low Inventory yoy chg -1.0 -0.4 -0.6 0.6 -0.8 -0.7 0.6 1.9
Low Payables yoy chg -2.0 0.4 0.5 -2.1 -1.4 -2.3 -1.9 -0.7
Aver a ge 1.5 -0.1 1.0 1.6 1.9 -0.1 -0.6 -0.2
Source: 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.


17 October 2012
The Investigator

Asia – market intelligence

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 1/12

Source: Deutsche Bank, MSCI.

Energy (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 14.5
Materials (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 11.6
Capital 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 11.4
Comm 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 19.8
Transportation (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 7.7
Autos (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 19.1
Cons 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 12.7
Cons 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 14.9
Media (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 20.6
Retailing (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 13.6
Food/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 12.2
Food 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 14.1
Household 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 21.4
Health 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 9.0
Pharma & 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 17.7
Banks (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 13.8
Div 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 10.9
Insurance (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 11.5
Real 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 7.1
Software (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 24.7
Tech 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 13.0
Semis (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 17.6
Telecom (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 13.9
Utilities (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 9.9
Asia 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 12.9
Source: 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 consensus
estimates (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 1/12
Source: Deutsche Bank, MSCI, Bloomberg Finance LP


17 October 2012
The Investigator

Japan – valuations
Japanese stocks continue to look undervalued versus history. A return to credible
inflation and higher nominal GDP growth globally is required to unlock value. Recent
tensions with China are unhelpful for risk assets in Japan.


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 1/13

Source: 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.
history.

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 1/13

Source: 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.


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 1/13



17 October 2012
The Investigator

Japan – investor sentiment

Sentiment 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 1/13

Source: Deutsche Bank, Bloomberg Finance LP Source: Deutsche Bank, DataStream

Figure 80: Asset allocation to stocks for publicly offered Figure 81: Percentage premium to NAV of closed-end
investment 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 1/13

Source: 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 1/13

Source: Deutsche Bank, DataStream Source: Deutsche Bank, Tokyo Stock Exchange.


17 October 2012
The Investigator

Japan – technicals

Technicals are mixed.

Figure 84: Advance/decline ratio Figure 85: Percentage of stocks above their 200dma

2.0 2.0 100% 100%
10d Advancing Issues/Declining Issues % of stocks above their 200dma
1.8 1.8
1.6 25d Advancing Issues/Declining Issues 1.6 80% 80%
1.4 Bullish 1.4
1.2 1.2 60% 60%
1.0 1.0
0.8 0.8 40% 40%
0.6 0.6
0.4 0.4 20% 20%
0.2 Bearish 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 1/12

Figure 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 -40
Source: 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 1/13


17 October 2012
The Investigator

Japan – growth and earnings

Economic surprises are nasty and mean-reverting. They are probably going to get less
bad. 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 1/13
Source: Deutsche Bank, OECD, DataStream Source: Citigroup, I/B/E/S, Factset

Figure 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 7/12

Source: Deutsche Bank, CEIC, DataStream, Bloomberg Finance LP, IMF. Note: Composite policy indicator Source: Deutsche Bank, MSCI, I/B/E/S
is 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 Disc

Source: Deutsche Bank, MSCI, I/B/E/S. Note: EPS revisions = number of upward less downward revisions Source: Deutsche Bank, MSCI, I/B/E/S
as % of total number of revisions in one month.


17 October 2012
The Investigator

Japan – liquidity
Fund 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 1/13
Source: Deutsche Bank, DataStream Source: Deutsche Bank, DataStream

Figure 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 -4

Source: 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 curve

10.2 % 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 1/10
Source: Deutsche Bank, DataStream Source: Deutsche Bank, DataStream


17 October 2012
The Investigator

Japan – factor performance
Value 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 JP


Figure 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 Profitability
Low 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 2.5
Low 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 2.4
Low 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 1.7
Low 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 2.0
Low 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 2.2
Low P/FCF 2.1 0.3 -1.1 1.1 3.8 5.1 5.9 7.2 Growth
Low 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 -0.6
Low 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 0.1
Low 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 1.2
Low 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 0.6
Low 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 0.2
Low 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 0.0
High 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 0.6
Aver 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 Stability
High 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 -0.9
High 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 0.8
High 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 -0.1
High 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 -0.6
High 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 0.5
High 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 -0.1
Aver 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 -0.2
High 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 -0.7
High 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 0.5
High 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 1.5
High 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 -1.0
High 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 -2.2
Aver 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 Ratings
Low 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 0.3
Low 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 2.3
Low 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 1.3
High Receivables yoy chg 8.4 0.4 3.7 7.7 10.5 3.5 3.5 2.7
Low Inventory yoy chg 2.3 0.5 2.5 2.8 2.1 0.1 -0.3 -1.3
Low Payables yoy chg 1.0 -0.5 0.8 1.7 0.9 0.4 -0.9 -0.9
Aver a ge 3.9 0.2 1.6 3.2 4.3 2.0 1.4 1.0
Source: 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.


17 October 2012
The Investigator

Japan – market intelligence

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 1/12

Source: Deutsche Bank, Bloomberg Finance LP, DataStream.

Energy (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 6.8
Materials (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 7.0
Capital 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 10.7
Comm 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 4.7
Transportation (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 6.8
Autos (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 9.8
Cons 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 6.2
Cons 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 10.7
Media (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 6.3
Retailing (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 9.1
Food/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 8.5
Food 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 9.1
Household 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 9.9
Health 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 8.6
Pharma & 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 8.2
Banks (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 7.1
Div 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 5.4
Insurance (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 5.2
Real 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 7.5
Software (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 9.3
Tech 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 8.1
Semis (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 4.1
Telecom (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 11.2
Utilities (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 7.5
Japan (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 8.2
Source: 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

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 1/12
Source: Deutsche Bank, MSCI, Bloomberg Finance LP


17 October 2012
The Investigator

Companies Mentioned

Figure 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 Int'l 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 20.4 106


17 October 2012
The Investigator

Appendix A
In the stock ranking model, optimized weights based on back-tests are given to various
factors (see Figure 109) to form an aggregate score for each stock. Scores are given on
a sector- and country-relative basis, and the weight matrix used in each industry group
varies depending on back-test results.

Figure 109: Definition of factors
V a lua t ion Fa c t or s
12m Fd P/E: price to 12-month forward EPS
Trailing P/E: price to 12m trailing EPS
Dividend Yield: 12m trailing dividend yield
P/Op Inc: Price to operating income
P/BV: Price to book value
Price/Sales: Price to sales
P/FCF: Price to free cash flow
EV/EBIT: Enterprise value to EBIT
EV/EBITDA: Enterprise value to EBITDA
EV/Cap Emp: Enterprise value to capital employed
EV/Sales: Enterprise value to sales
EV/Op CF: Enterprise value to operating cash flow
EV/FCF: Enterprise value to free cash flow
P r ic e Mom ent um Fa c t or s
6m Price Mom: 6-month price momentum
Price Rel Strength: 65-day to 260-day moving average in stock price
Price Mom, 3mΔ: 3-month change in 12-month price momentum
Price ↑ / ↓ Days: Number of up less down days in stock price in 130 days
E a r nings Mom ent um Fa c t or s
FY1 EPS Mom: Weighted average on 1-, 2- and 3-month change in FY1 eps mean estimate
FY2 EPS Mom: Weighted average on 1-, 2- and 3-month change in FY2 eps mean estimate
12m Fd EPS Mom: Weighted average on 1-, 2- and 3-month change in 12-month forward eps mean estimate
FY1 EPS Rev: % of upward less downward revisions in FY1 eps estimates in 3 months
FY2 EPS Rev: % of upward less downward revisions in FY2 eps estimates in 3 months
E 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 expense
Capex/Sales: Capital expenditure to sales
Capex/FA: Capital expenditure to fixed assets
Receivables/Ttl Assets, YoYΔ: YoY change in account receivables to total assets ratio
Inventory/Ttl Assets, YoYΔ: YoY change in inventory to total assets ratio
Payables/Ttl Assets, YoYΔ: YoY change in account payable to total assets ratio
P r of it a bilit y Fa c t or s
Rtn of Capital Employed: Cash return on capital employed
Rtn of Capital Employed, YoYΔ: YoY change in cash return on capital employed
ROE: Return on equity
ROE, YoYΔ: YoY change in return on equity
Gr owt h Fa c t or s
3yr 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 growth
FY1 Gth Est: Consensus estimate on FY1 eps growth
FY2 Gth Est: Consensus estimate on FY2 eps growth
S t a bilit y Fa c t or s
EPS Vola: 3-year volatility in trailing eps
Op Inc Vola: 3-year volatility in trailing operating income per share
Book Value Vola: 3-year volatility in historical book value per share
Sales Vola: 3-year volatility in trailing sales per share
EPS Est Vola: 3-year volatility in 12-month forward eps estimate
Ris k Fa c t or s
FY1 EPS Dispersion: Dispersion of FY1 eps estimates
FY2 EPS Dispersion: Dispersion of all the FY2 eps estimates
EBIT/Int Exp: EBIT to interest expense
Debt/Equity: Debt to equity
Altman 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 liabilities
Market Cap: Company market capitalisation
Cons ens us Ra t ing Fa c t or s
Analyst Rating: Consensus rating
Analyst Rating, 1mΔ: 1-month change on consensus rating
Source: Deutsche Bank


17 October 2012
The Investigator

Figure 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

RSI
Rank 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% + ++ - 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. All
the metrics shown above except market cap are median data for the sector. ++ Very favorable, + Favorable, O Neutral, - Unfavorable, Very unfavorable


17 October 2012
The Investigator

Figure 110: Bottom-up sector ranking (Rank 1 = Best), continued

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

RSI
Rank 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 -- --


17 October 2012
The Investigator


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

RSI
Rank 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% ++ - - --


17 October 2012
The Investigator


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

RSI
Rank 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% -- -- -- --


17 October 2012
The Investigator

Appendix 1
Important Disclosures
Additional information available upon request

For disclosures pertaining to recommendations or estimates made on securities other than the primary subject of this
research, please see the most recently published company report or visit our global disclosure look-up page on our
website at http://gm.db.com/ger/disclosure/DisclosureDirectory.eqsr

Analyst Certification
The 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 recommendation
or view in this report. Ajay Kapur/Ritesh Samadhiya

Equity rating key Equity rating dispersion and banking relationships

Buy: Based on a current 12- month view of total share- 450
holder return (TSR = percentage change in share price 400
56 %
from current price to projected target price plus pro- 350
jected dividend yield ) , we recommend that investors 300 38 %
250
buy the stock. 200
Sell: Based on a current 12-month view of total share- 150
holder return, we recommend that investors sell the 100 11 % 16 % 5%
50 10 %
stock 0
Hold: We take a neutral view on the stock 12-months Buy Hold Sell
out and, based on this time horizon, do not
recommend either a Buy or Sell.
Companies Covered Cos. w/ Banking Relationship
Notes:
Asia-Pacific Universe
1. Newly issued research recommendations and target
prices always supersede previously published
research.
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 period

Deutsche Bank AG/Hong Kong Page47

17 October 2012
The Investigator

Regulatory Disclosures
1. Important Additional Conflict Disclosures
Aside 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 Ideas
Deutsche Bank equity research analysts sometimes have shorter-term trade ideas (known as SOLAR ideas) that are
consistent or inconsistent with Deutsche Bank's existing longer term ratings. These trade ideas can be found at the
SOLAR link at http://gm.db.com.

3. Country-Specific Disclosures
Australia and New Zealand: This research, and any access to it, is intended only for "wholesale clients" within the
meaning 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) and
its(their) securities, including in relation to Deutsche Bank. The compensation of the equity research analyst(s) is
indirectly affected by revenues deriving from the business and financial transactions of Deutsche Bank. In cases where
at least one Brazil based analyst (identified by a phone number starting with +55 country code) has taken part in the
preparation of this research report, the Brazil based analyst whose name appears first assumes primary responsibility for
its 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 at
http://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 Futures
Association of Japan, Japan Investment Advisers Association. Commissions and risks involved in stock transactions - for
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any appraisal or evaluation activity requiring a license in the Russian Federation.

Page48 Deutsche Bank AG/Hong Kong

Deutsche Bank AG/Hong Kong
Asia-Pacific locations
Deutsche Bank AG Deutsche Bank AG Deutsche Equities India Pte Ltd Deutsche Securities Inc.
Deutsche Bank Place Filiale Hongkong 3rd Floor, Kodak House 2-11-1 Nagatacho
Level 16 International Commerce Centre, 222, Dr D.N. Road Sanno Park Tower
Corner of Hunter & Phillip Streets 1 Austin Road West,Kowloon, Fort, Mumbai 400 001 Chiyoda-ku, Tokyo 100-6171
Sydney, NSW 2000 Hong Kong SEBI Nos: INB231196834 Japan
Australia tel: (852) 2203 8888 INB011196830, INF231196834 Tel: (81) 3 5156 6770
Tel: (61) 2 8258 1234 Tel: (91) 22 6658 4600

Deutsche Bank (Malaysia) In association with Deutsche Securities Korea Co. Deutsche Bank AG
Berhad Deutsche Regis Partners, Inc. 17th Floor, YoungPoong Bldg., Singapore
Level 18-20 Level 23, Tower One 33 SeoRin-Dong, One Raffles Quay
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Kuala Lumpur 50250 Tel: (63) 2 894 6600 Tel: (82) 2 316 8888 Tel: (65) 6423 8001
Malaysia
Tel: (60) 3 2053 6760
Deutsche Securities Asia Ltd In association with In association with
Taiwan Branch TISCO Securities Co., Ltd PT Deutsche Verdhana Indonesia
Level 6 TISCO Tower Deutsche Bank Building,
296 Jen-Ai Road, Sec 4 48/8 North Sathorn Road 6th Floor, Jl. Imam Bonjol No.80,
Taipei 106 Bangkok 10500 Central Jakarta,
Taiwan Thailand Indonesia
Tel: (886) 2 2192 2888 Tel: (66) 2 633 6470 Tel: (62 21) 318 9541

International locations
Deutsche Bank Securities Inc. Deutsche Bank AG London Deutsche Bank AG Deutsche Bank AG
60 Wall Street 1 Great Winchester Street Große Gallusstraße 10-14 Deutsche Bank Place
New York, NY 10005 London EC2N 2EQ 60272 Frankfurt am Main Level 16
United States of America United Kingdom Germany Corner of Hunter & Phillip Streets
Tel: (1) 212 250 2500 Tel: (44) 20 7545 8000 Tel: (49) 69 910 00 Sydney, NSW 2000
Australia
Tel: (61) 2 8258 1234
Deutsche Bank AG Deutsche Securities Inc.
Filiale Hongkong 2-11-1 Nagatacho
International Commerce Centre, Sanno Park Tower
1 Austin Road West,Kowloon, Chiyoda-ku, Tokyo 100-6171
Hong Kong Japan
Tel: (852) 2203 8888 Tel: (81) 3 5156 6770

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