EFTA01458588

Macro outlook Devaluation fuels fears At the same time, this step increased fears that further devaluations would be used by the government to restore China's competitiveness. This might enable China to regain economic strength via its export sector, but it would, at the same time, hurt competing companies in other economies. Many of these companies are headquartered in emerging markets. This is likely to have contributed to the strong setback of the MSCI Emerging Markets Index. In mid-August, China's central bank allowed some days of greater intraday volatility inside the daily fixing band against the U.S. dollar before resuming to manage the currency valuation and volatility again. China's government was surprised by the sharpness of the market reaction to this change. Premier Li Kegiang tried to reassure markets that China's transformation from an export-oriented economy towards a more domestic-consumption-based economic model would continue. Strikingly, the MSCI Emerging Markets Index was hit harder by the renminbi devaluation than the MSCI World Index. This suggests that China's transformation might have a greater ettect or. EM corporations than on industrial economies' firms. China's devaluation could thus increase the pressure on other Asian centra€ banks to depreciate their currencies. Development of the MSCI Indices 130 iodated. Jury 2011 . pooms 170 110 100 90 to 70 ei MSC! Wort, hear • MSC' Emerging Markets te.dez ..rte✓ Industrialized countries versus emerging markets MSCI Emerging Markets Index buoyancy started to wane from mid-2011, while the MSCI World Index, comprising stocks from developed economies, continued to trend upwards. This emerging-markets downturn was worsened by slow progress on reforms and inefficiently-allocated investment in many countries. Seine 127011 0:2012 b01.013 S•7014 .9201h countries such as China, India and Mexico have already started to SCASCO, Th01111.0^ ROOMS nala itt9Z411. 11:01010 Oreclktainve!aciaresid !ht U.S. i baton. as isf Sepreenber XIS implement reforms. 11C hdead 2011 • 100 pe.h. BO 7C • M$Clitiorld Misr • MCCI arnr.oirk3 Mar'i'an!:_ 0,2011 0:2017 Sle 1e 01201$ Dowciet Clemson Reuters °warmish% 132.5.r.kr.switur ortiimaert Sof she GQ.Y401 VAX. estimated earnmas 4i:busted tor U S inflation. es of September 2015 A glance at earnings From 2011 onwards, corporate earnings developed in quite a similar way as stock-market indices, Emerging-market corporations' earnings started to come under pressure at the end of 2011. Industrialized-countries corporations, which are represented in the MSCI World Index, maintained and even increased their earnings after mid- 2011. Past performance is not indicative of future returns. No assurance can be given that any forecast, investment objectives and/or expected returns will be achieved. Allocations are subject to change without notice. Forecasts are based on assumptions, estimates, opinions and hypothetical models that may prove to be incorrect. Mum .5:rrodk Amcr.155 tdraza I Octabar 1015 rnr ast 0 0 CONFIDENTIAL — PURSUANT TO FED. R. GRIM. P. 6(e) DB-SDNY-0118567 CONFIDENTIAL SDNY_GM_00264751 EFTA01458588