MARKET INSIGHTS. Guide to the Markets. Asia 1Q 2016 As of December 31, 2015

Transcription

1 MARKET INSIGHTS Guide to the Markets Asia 1Q 216 As of December 31, 215

2 Global Market Insights Strategy Team Americas Europe Asia Dr. David P. Kelly, CFA New York Andrew D. Goldberg New York Anastasia V. Amoroso, CFA Houston Julio C. Callegari São Paulo James C. Liu, CFA New York Samantha M. Azzarello New York David M. Lebovitz New York Gabriela D. Santos New York Hannah J. Anderson New York Abigail B. Dwyer, CFA New York Ainsley E. Woolridge New York Stephanie H. Flanders London Manuel Arroyo Ozores, CFA Madrid Tilmann Galler, CFA Frankfurt Lucia Gutierrez-Mellado Madrid Vincent Juvyns Luxembourg Dr. David Stubbs London Maria Paola Toschi Milan Michael J. Bell, CFA London Alexander W. Dryden London Nandini Ramakrishnan London Tai Hui Hong Kong Yoshinori Shigemi Tokyo Marcella Chow Hong Kong Kerry Craig, CFA Melbourne Dr. Jasslyn Yeo, CFA Singapore Ian Hui Hong Kong Akira Kunikyo Tokyo Ben Luk Hong Kong Anthony Tsoi, CFA Hong Kong For China, Australia, Vietnam and Canada distribution, please note this communication is for intended recipients only. In Australia for wholesale clients use only and in Canada for institutional clients use only. For further details, please refer to the full disclaimer at the end. Unless otherwise stated, all data is as of December 31, 215 or most recently available.

3 Page reference Regional and local economy 4. Asia: Exports and industrial production 5. Asia: Private sector credit 6. ASEAN-5: GDP and markets 7. ASEAN: Key indicators 8. China: Economic fundamentals 9. China: Cyclical indicators 1. China: Monetary policy 11. China: RMB exchange rate and balance of payments (BoP) 12. India: Economic snapshot 13. India: Investment flows and balance of payments 14. : Economic snapshot 15. : Monetary policy and equity investment 16. : Abenomics and corporate governance Global economy 17. Global growth 18. Global debt dynamics 19. Global Purchasing Managers Index (PMI) 2. Global inflation 21. G4 policy rates and balance sheets 22. DM trade connections to EM 23. United States: Economic snapshot 24. United States: Cyclical indicators 25. United States: The Fed and labor market 26. United States: Earnings and profitability 27. Europe: Economic snapshot 28. Europe: Monetary policy 29. Europe: Earnings and profitability Equities 3. Global and Asia equity markets: Returns 31. Emerging markets: Returns 32. Global earnings momentum 33. Corporate profitability 34. Global equity markets: Valuations 35. APAC ex- and emerging markets: Price-to-book valuations 36. APAC ex- and emerging markets: Valuation analysis 37. Asia and emerging markets: Index composition 38. The compounding effect 39. High dividend equities 4. Asia and emerging markets: Dividend income Fixed income 41. Global fixed income: Yields and returns 42. Global fixed income: Supply and demand dynamics 43. G3 government bond yields 44. Global high yield bonds 45. United States: Sources of bond returns 46. Emerging markets debt: Market size and fundamentals 47. Asia: Sovereign and corporate debt Other assets and investor behavior 48. Asset class returns 49. Asset class returns contribution to diversified portfolio 5. Portfolio construction, asset class returns and volatility 51. Asset class correlations 52. Rate rise impact on different asset classes 53. Interest rates and equities correlation 54. Asset class performance after first rate hike 55. Asset class returns in different inflation environments 56. U.S. dollar trend 57. EM liquidity risk and currency valuations 58. Emerging markets: Current account, oil and currencies 59. Alternatives: Returns 6. Alternatives: REITs and real estate 61. Commodities: Returns 62. Commodities: Oil supply and demand dynamics 63. Commodities: Oil price s impact on emerging markets 64. Global households financial asset allocation by region 65. Investors market timing 66. Volatility and correlation 67. Annual returns and intra-year declines 68. Real return on cash and yields 69. Global and Asian retirement trends 7. Fund flows GTM Asia 3 3

4 Asia: Exports and industrial production GTM Asia 4 Exports Year-over-year % change, 3-month moving average 6 EM Asia ex-china China Korea and Taiwan* Industrial production Year-over-year % change, 3-month moving average 4 China EM Asia ex-china Korea and Taiwan* ' '2 '4 '6 '8 '1 '12 '14-3 ' '2 '4 '6 '8 '1 '12 '14 Source: (All charts) J.P. Morgan Economics, J.P. Morgan Asset Management. *Taiwan and Korea weighted by GDP. 4

5 Asia: Private sector credit GTM Asia 5 ASEAN-5 credit growth* Year-over-year % change 45% 4 35% Indonesia Malaysia Philippines Singapore Thailand North Asia credit growth* Year-over-year % change 45% 4 35% China Hong Kong Korea Taiwan* % 25% % 15% 1 1 5% 5% -5% '8 '9 '1 '11 '12 '13 '14 '15-5% '8 '9 '1 '11 '12 '13 '14 '15 Source: (All charts) BIS, Central Bank of Taiwan, FactSet, IMF, J.P. Morgan Asset Management. *Domestic private bank loans are used as a proxy for private sector credit growth. 5

6 ASEAN-5: GDP and markets GTM Asia 6 Real GDP growth comparison Year-over-year % change 1-yr. range 1-yr. average 2 Latest 15% % % -1 ASEAN-5 Philippines Indonesia Malaysia Thailand Singapore GDP and market share comparison* % 14% 13% 14% 19% 23% 1 33% 18% 15% Share of ASEAN-5 GDP Share of MSCI South East Asia market cap Indonesia Malaysia Philippines Singapore Thailand ASEAN-5 market fundamentals MSCI indices Forward P/E 5-year avg. forward P/E Trailing P/B 5-year avg. trailing P/B Earnings growth expectations 215 Earnings growth expectations 216 Return on equity 5-year avg. trailing ROE Dividend yield Indonesia 14.7x 13.9x 2.8x 3.6x -6.6% 9.9% 16.9% 21.8% 2.4% Malaysia 15.5x 15.x 1.7x 2.1x -3.7% 6.6% 1.3% 12.8% 3. Philippines 17.1x 17.3x 2.6x 2.7x 6.9% 11.4% 13.6% 15.1% 1.9% Singapore 11.6x 13.5x 1.1x 1.5x -3.1% % 1.4% 4.3% Thailand 12.1x 12.x 1.7x 2.2x 5.8% % 15.9% 3.5% 6 Source: (Top left) Bloomberg, J.P. Morgan Economics, J.P. Morgan Asset Management. (Top right) FactSet, MSCI, J.P. Morgan Asset Management. (Bottom) Credit Suisse, FactSet, I/B/E/S, J.P. Morgan Asset Management. *Total may not sum to 1 due to rounding. GDP share as of 3Q 215, market share as of 4Q 215. Positive yield does not imply positive return.

7 ASEAN: Key indicators GTM Asia 7 Malaysia currency and change in reserves MYR per USD USD/MYR Change in foreign reserves 2.5 '6 '8 '1 '12 '14 % y/y 5 25% -25% -5 Thailand tourist arrivals Thousands 3, 2,5 2, 1,5 1, 5 '9 '1 '11 '12 '13 '14 '15 Indonesia government capital expenditure IDR trillions, year-to-date 15 Singapore exports and industrial production Year-over-year % change, 3-month moving average Non-oil domestic exports (NODX) Industrial production Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec -2-4 '6 '7 '8 '9 '1 '11 '12 '13 '14 '15 Source: (Top left) FactSet, Malaysian Department of Statistics, World Bank, J.P. Morgan Asset Management. (Top right) Bank of Thailand, FactSet, J.P. Morgan Asset Management. (Bottom left) Bank Indonesia, FactSet, Statistics Indonesia, J.P. Morgan Asset Management. (Bottom right) FactSet, Statistics Singapore, J.P. Morgan Asset Management. 7

8 China: Economic fundamentals Share of GDP by industry and real GDP growth* Primary Secondary Tertiary % y/y (RHS) 16% 14% 12% 1 Markit Purchasing Managers Indices Level 56 Services GTM Asia 8 2 '92 '94 '96 '98 ' '2 '4 '6 '8 '1 '12 '14 8% 6% 48 Manufacturing 46 '12 '13 '14 '15 Merchandise trade growth Year-over-year % change, 3-month moving average Imports Exports Electricity consumption Year-over-year % change Tertiary -1-2 Secondary '12 '13 '14 '15 8 Source: (Top left, bottom left) FactSet, National Bureau of Statistics of China, J.P. Morgan Asset Management. (Top right, bottom right) CEIC, Markit, National Bureau of Statistics of China, J.P. Morgan Asset Management. *China s latest GDP growth and share of GDP based on 3Q 215. Primary industry produces raw materials and makes use of natural resources, secondary is the manufacturing industry and tertiary is concerned with the framework and foundations of business and the provision of services.

9 6 China: Cyclical indicators Retail and auto sales Year-over-year % change, 3-month moving average 24% 2 16% 12% Retail sales 8% '6 '7 '8 '9 '1 '11 '12 '13 '14 '15 China outbound tourism by destination Visitors, millions * Auto sales Month-over-month % change 2% 1% GTM Asia 9 Top 1 cities property prices and housing inventory Property price -1% '11 '12 '13 '14 ' nd tier cities Fixed asset investment (FAI) Year-over-year % change, 3-month moving average Manufacturing Infrastructure Number of months 1 st tier cities 25 3 rd tier cities Real estate 2 1 Singapore Korea Thailand -1 '6 '7 '8 '9 '1 '11 '12 '13 '14 '15 Source: (All charts) CEIC, FactSet, National Bureau of Statistics of China, J.P. Morgan Asset Management. *First 11 months of the year. 9

10 4 China: Monetary policy Credit and nominal GDP growth Year-over-year % change Reserve requirement ratio (RRR) 22% GTM Asia 1 RRR for large financial institutions: 12/215: 17.5% 18% RRR in 29: 15.5% 3 14% 1 RRR (Average) RRR for small and medium financial institutions: 12/215: 15.5% Total social financing ex-equity financing 6% '4 '5 '6 '7 '8 '9 '1 '11 '12 '13 '14 ' year real lending rate 15% Deflated by PPI 1 1 RMB bank loans Nominal GDP 5% Deflated by CPI '4 '5 '6 '7 '8 '9 '1 '11 '12 '13 '14 '15-5% '97 '99 '1 '3 '5 '7 '9 '11 '13 '15 Source: (All charts) CEIC, FactSet, National Bureau of Statistics of China, People s Bank of China, J.P. Morgan Asset Management. 1

11 China: RMB exchange rate and balance of payments (BoP) GTM Asia 11 RMB onshore (CNY) and offshore (CNH) rate Per USD CNY/CNH spread* (RHS) Quarterly breakdown of BoP USD billions, BoP basis 3 2 q/q change in FX reserves Current account balance Net foreign direct investment Errors and omissions Non-FDI capital flows USD/CNH (LHS, inverted) 6.6 USD/CNY (LHS, inverted) 1/15 4/15 7/15 1/ RMB exchange rate: CFETS RMB** vs. USD Index, rebased 21 = 1 CFETS RMB Stronger RMB USD/RMB 1 Weaker RMB 9 '1 '11 '12 '13 '14 ' '1 '11 '12 '13 '14 '15 11 Source: (Top left) Bloomberg, J.P. Morgan Asset Management. (Bottom left) BIS, FactSet, J.P. Morgan Asset Management. (Right) China State Administration of Foreign Exchange, FactSet, People s Bank of China, J.P. Morgan Asset Management. *Difference of onshore RMB (CNY) over offshore RMB (CNH); negative spreads indicate CNH weaker than CNY. **Currency weightings based on China s Foreign Exchange Trade System s (CFETS) announcement on 11/12/215.

12 India: Economic snapshot Real GDP growth Year-over-year % change 2 15% 1 5% 15-yr avg. 3Q15 Real GDP growth % -5% '98 ' '2 '4 '6 '8 '1 '12 '14 New project announcements INR billions 9, 7,5 6, 4,5 3, 1,5 GTM Asia 12 Private sector Government '2 '4 '6 '8 '1 '12 '14 Latest 2,64bn 1,437bn Inflation and repo rate 18% 14% 1 6% 2% Latest CPI 5.4% Repo rate 6.75% WPI -2. Consumer Price Index (CPI)* Repo rate Auto sales Year-over-year % change, 3-month moving average Commercial vehicle sales -2% Wholesale Price Index (WPI)** -6% '5 '7 '9 '11 '13 ' Passenger vehicle sales '11 '12 '13 '14 '15 12 Source: (Top left) Ministry of Statistics and Programme Implementation, J.P. Morgan Economics, J.P. Morgan Asset Management. (Top Right) Centre for Monitoring Indian Economy, CLSA, J.P. Morgan Asset Management. (Bottom left) Reserve Bank of India, J.P. Morgan Asset Management. (Bottom right) FactSet, Society of Indian Automobile Manufacturers, J.P. Morgan Asset Management. *Consumer Price Index (CPI) series start in January 212, and value shown is year-over-year % change. **Wholesale Price Index (WPI) value shown is year-over-year % change.

13 India: Investment flows and balance of payments GTM Asia 13 Foreign institutional fund flows USD billions Foreign institutional investment (equity) 4 Foreign institutional investment (debt) Current account % of GDP 4% Current account balance 3Q15: -1.1% ' '2 '4 '6 '8 '1 '12 '14 YTD 15 2% -2% -4% -6% '97 '99 '1 '3 '5 '7 '9 '11 '13 '15 Domestic equity fund flows USD billions Domestic institutional investment Domestic mutual fund flows 1/15 3/15 5/15 7/15 9/15 11/15 India currency and change in reserves INR per USD USD/INR 4 Change in foreign reserves 3 '97 '99 '1 '3 '5 '7 '9 '11 '13 '15 % y/y Source: (Top and bottom left) Bloomberg, Securities and Exchange Board of India, J.P. Morgan Asset Management. (Top right) Bloomberg, J.P. Morgan Asset Management. (Bottom right) FactSet, Reserve Bank of India, Reuters, J.P. Morgan Asset Management. 13

14 : Economic snapshot GTM Asia 14 Real GDP breakdown Quarter-over-quarter % change, sa, annualized 6% Real GDP 3% -3% -6% -9% Private consumption Gross fixed capital formation '12 '13 '14 ' Real wage growth and core CPI inflation Year-over-year % change 4% Core CPI (ex-food and energy) 2% -2% Total real cash earnings (6MMA) -4% '95 ' '5 '1 '15 14 Consumer spending and sentiment indicator Year-over-year % change, 3MMA 6% Real consumption spending 3% -3% -6% Economy watcher survey, household -9% '7 '9 '11 '13 '15 Diffusion Index Labor market Ratio of job offers to job applicants 1.5x Job offers/job applicants 1.2x.9x.6x %, inverted scale 2% Unemployment rate 3%.3x '95 ' '5 '1 '15 Source: (Top left) FactSet, ese Cabinet Office, J.P. Morgan Asset Management. (Top right) FactSet, Ministry of Internal Affairs and Communications, Ministry of Health, Labour and Welfare, J.P. Morgan Asset Management. (Bottom left) FactSet, ese Cabinet Office, Ministry of Internal Affairs and Communications, J.P. Morgan Asset Management. (Bottom right) FactSet, ese Statistics Bureau and Statistics Center, Ministry of Health, Labour and Welfare, J.P. Morgan Asset Management. 4% 5% 6%

15 : Monetary policy and equity investment GTM Asia 15 Bank of s asset purchase JPY billions BoJ annual purchases of ETFs, J-REITs and JGBs ETFs J-REITs JGBs BoJ total JGB holdings BoJ total JGB holdings as % of market ,827 58, ,579 67, % Pension fund equity weighting % of pension funds held in equities 35% Corporate pensions 25% FY214: ,272 9, % 213 1, , , % 214 1, ,53 27, % 215* 2, , , % 15% GPIF FY214: 15.2% 5% FY'1 FY'3 FY'5 FY'7 FY'9 FY'11 FY'13 Bank loans and lending rates JPY trillions, seasonally adjusted 48 Bank loans 46 % per annum, 3MMA 2. Lending rates on new long-term bank loans TOPIX and ese yen Index TOPIX JPY per USD % /21 12/214 Correlation:.96 USD/JPY ' '3 '6 '9 '12 '15.5% 1/215 12/215 Correlation: Source: (Top left) Bank of, J.P. Morgan Asset Management. (Top right) Government Pension Investment Fund, Investment Trust Association, Pension Fund Association, J.P. Morgan Asset Management. (Bottom left) Bank of, FactSet, J.P. Morgan Asset Management. (Bottom right) FactSet, J.P. Morgan Asset Management *Data as of November 215.

16 : Abenomics and corporate governance Listed companies cash and cash-equivalent holdings* % of market capitalization, average between 24 and GTM Asia 16 Listed companies dividend payout and share buybacks JPY trillions 16 Dividends Share buybacks** % % 25% 21% 2 18% 15% 4 Germany Italy France UK U.S. Canada '9 '95 ' '5 '1 '15 Capital expenditure (CAPEX) and operating profits JPY trillions (Ministry of Finance Business Survey, ex-financials) Nominal CAPEX Corporate tax rate comparison % in Operating profits 6 (4Q moving average) 4 '95 '97 '99 '1 '3 '5 '7 '9 '11 '13 ' % 32% 3 24% 23% 17% 17% 16 Source: (Top left) IMF, J.P. Morgan Asset Management. (Top right) Nomura, J.P. Morgan Asset Management. (Bottom left) FactSet, Ministry of Finance, Ministry of Internal Affairs & Communications, J.P. Morgan Asset Management. (Bottom right) ese Cabinet Office, KPMG, J.P. Morgan Asset Management. *Cash and cash-equivalent holdings derived from IMF's working paper, "Unstash the Cash! Corporate Governance Reform in," written by Chie Aoyagi and Giovanni Ganelli. **Share buyback data are for repurchases of common stock, excluding repurchases from Resolution and Collection Corp and repurchases of preferred stock. FY14 (215) dividend and share buyback amounts are Nomura estimates.

17 Global growth GTM Asia 17 Real GDP growth Year-over-year % change 1 8% 6% Global GDP growth EM GDP growth DM GDP growth DM less EM growth DM growth outperforms EM Forecast* 4% 2% -2% -4% -6% EM growth outperforms DM -8% '8 '82 '84 '86 '88 '9 '92 '94 '96 '98 ' '2 '4 '6 '8 '1 '12 '14 '16 '18 '2 Source: IMF, J.P. Morgan Asset Management. *Forecasts are from the IMF s October 215 World Economic Outlook. 17

18 Global debt dynamics GTM Asia 18 Total non-financial sector debt by country % of GDP 41 EU 262% China 241% Korea 236% U.S. 234% Australia 23 Malaysia 223% Taiwan 213% Thailand 211% Singapore 195% Hong Kong 181% EM India Brazil Poland South Africa Philippines Turkey Russia Mexico Indonesia 153% 147% 139% 131% 116% 19% 18% 11% 87% 77% Household debt Corporate debt Government debt Change in private sector debt Change in private sector debt since 21 (% of GDP) 6 EM Asia EM China Singapore DM Hong Kong 4 Thailand Turkey Brazil 2 Indonesia France Philippines Poland Malaysia Korea Taiwan Mexico India Australia Canada South Africa Germany U.S. -2 UK -4 25% 5 75% 1 125% % 2 225% Non-financial private sector debt, 214 (% of GDP) Source: (All charts) BIS, CEIC, Haver, UBS, J.P. Morgan Asset Management. 18

19 Global Purchasing Managers Index (PMI) GTM Asia 19 Global Purchasing Managers Index for manufacturing Feb'14 Mar'14 Apr'14 May'14 Jun'14 Jul'14 Aug'14 Sep'14 Oct'14 Nov'14 Dec'14 Jan'15 Feb'15 Mar'15 Apr'15 May'15 Jun'15 Jul'15 Aug'15 Sep'15 Oct'15 Nov'15 Global DM U.S Euro area Germ any France Italy Spain Greece UK Australia EM China China (NBS) Indonesia Korea Taiw an India Brazil Mexico Source: Markit, National Bureau of Statistics of China (NBS), J.P. Morgan Asset Management. Heatmap colors are based on PMI relative to 5, which indicates contraction (below 5) or expansion (above 5) of the sector. 19

20 Global inflation GTM Asia 2 Monthly inflation trend Year-over-year % change Rising inflation Unchanged Falling inflation Country Nov 214 Dec 214 Jan 215 Feb 215 Mar 215 Apr 215 May 215 Jun 215 Jul 215 Aug 215 Sep 215 Oct 215 Nov 215 Central bank target/ forecast Central bank policy rate* China ( 1/215) India ( 9/215) Indonesia ( 2/215) ( 1/21) Korea ( 6/215) Malaysia ( 7/214) Taiwan ( 12/215) Thailand ( 4/215) U.S ( 12/215) Eurozone ( 9/214) UK ( 3/29) 2 Source: FactSet, J.P. Morgan Economics, J.P. Morgan Asset Management. All data shown above are headline CPI inflation. *The arrows and dates in the central bank policy rate column indicate the direction and date of last change, respectively. The central bank s policy rate for each country includes the one-year benchmark lending rate (China), RBI policy repo rate (India), BI benchmark policy rate (Indonesia), BoJ uncollateralized overnight call rate (), BoK base rate (Korea), overnight policy rate (Malaysia), discount rate (Taiwan), one-day repurchase rate (Thailand), fed fund rate (U.S.), eurozone main refinancing operations rate (Eurozone) and BoE official bank rate (UK).

21 G4 policy rates and balance sheets GTM Asia 21 Central bank key policy rates Federal funds rate (Fed) BoE official bank rate (BoE) 31/12/15 BoE.5 Fed.5 BoJ.1 ECB.5% Central bank balance sheets % of nominal GDP Projections* 6 BoJ Eurozone main refinancing operations rate (ECB) ECB Fed BoJ uncollateralized overnight call rate (BoJ) 1 BoE '7 '8 '9 '1 '11 '12 '13 '14 '15 '16 21 Source: (Left) FactSet, J.P. Morgan Asset Management. (Right) Bank of England, Bank of, European Central Bank, FactSet, Federal Reserve System, J.P. Morgan Economics, J.P. Morgan Asset Management. *Balance sheet forecasts are based on central bank s stated economic intentions, i.e. assumptions are that the BoJ will expand its balance sheet at an annual rate of JPY 8 trillion; the ECB will expand its balance sheet at a monthly rate of EUR 6 billion, BoE and Fed both will keep their balance sheets at their current levels. Nominal GDP growth forecasts provided by J.P. Morgan Investment Bank Macro Research.

22 DM trade connections to EM GTM Asia Exports as a % of GDP 214 Goods exports U.S. EU* Brazil India China Australia Korea ASEAN Taiwan 9.3% 9.6% % 16.7% 22.6% 4.4% U.S. EU China Others 5.7% EM exports breakdown** China Hong Kong Czech Republic Korea Hungary Taiwan Philippines Mexico Poland Thailand Turkey Vietnam Singapore India Malaysia Ukraine S. Africa Indonesia Brazil Argentina Colombia Peru Russia Nigeria Chile Saudi Arabia Venezuela Commodity exports as % of merchandise exports 214 Source: (Left) CEIC, IMF, J.P. Morgan Asset Management. (Right) World Trade Organization (WTO), J.P. Morgan Asset Management. *EU exports as a % of GDP excludes intra EU-trade as the European Union is considered one regional economy. **EM exports breakdown based on WTO classifications, which are broken down into three components including: 1. Manufactured goods, 2. Commodities (Agricultural) and 3. Commodities (Fuel and Mining). Total may not sum to 1 due to miscellaneous items not covered by WTO. Manufactured exports as % of merchandise exports 214 Asian countries Other EM countries

23 United States: Economic snapshot GTM Asia 23 Real GDP growth Quarter-over-quarter % change, seasonally adjusted annualized rate 2-yr avg. 3Q15 Real GDP growth 2.4% 2. Inflation Year-over-year % change Avg. since 1965 Avg. since 2 11/215 Headline CPI 4.1% 2.3%.5% Core CPI 4.1% 1.9% 2. Fed s December 215 summary of economic projections** Percent Longer run Change in real GDP September 215 forecast Components of GDP 3Q15 Consumption 68.4% Government spending 17.7% Investment ex-housing 13.4% Housing 3.4% Net exports* -2.9% Unemployment rate September 215 forecast PCE inflation September 215 forecast Federal funds rate September 215 forecast Source: (Left) BEA, FactSet, J.P. Morgan Asset Management. (Top right) FactSet, U.S. Bureau of Labor Statistics, J. P. Morgan Asset Management. (Bottom right) Federal Reserve, J.P. Morgan Asset Management. *Net exports are the difference between a country s total value of exports and imports. Hence, a negative value implies a country is importing more than it exports. **Real GDP, the federal funds rate, unemployment rate and PCE inflation are median projections based on the FOMC s summary of economic projections.

24 United States: Cyclical indicators GTM Asia 24 Light vehicle sales Millions, seasonally adjusted annualized rate Average: 15.4 Housing starts Thousands, seasonally adjusted annualized rate 2,4 11/215: 18.1 U.S. households debt and personal income USD billions 1,5 1, 5-5 Change in total debt (y/y change) Total debt / disposable personal income '4 '6 '8 '1 '12 '14 Real capital goods orders* Non-defense capital goods orders ex-aircraft, USD billions, seasonally adjusted , 1,6 11/215: ,2 8 4 Average: 1,337 11/215: 1,173 Average: 56.7 '94 '96 '98 ' '2 '4 '6 '8 '1 '12 '14 Source: (All charts) Census Bureau, FactSet, Federal Reserve, U.S. Bureau of Economic Analysis, J.P. Morgan Asset Management. *Capital goods orders deflated by producer price index for capital goods. 24

25 United States: The Fed and labor market GTM Asia 25 Federal funds rate expectations* FOMC and market expectations for the fed funds rate 9% Federal funds rate 6% Dec 16 Dec 17 Dec 18 Longer run FOMC median projections (as of 16/12/15) Market expectations (as of 3/9/15).64% 1.11% - - Market expectations (as of 31/12/15).93% 1.47% - - FOMC projection (longer run) 3% '9 '95 ' '5 '1 '15 Unemployment rate and average hourly earnings Longer run U.S. recession period Unemployment rate 11/215: 5. Average hourly earnings (% y/y) 11/215: 2. Source: (All charts) FactSet, Federal Reserve, U.S. Bureau of Labor Statistics, J.P. Morgan Asset Management. *The futures rate is a measure of the market s prediction for the monthly average effective federal funds rate after allowing for the possibility of a nonzero risk premium. In general, the federal funds futures market is used as an indication of when the market anticipates a change in Fed policy. 25

26 S&P 5 quarterly earnings Operating earnings per share, USD United States: Earnings and profitability '11 '12 '13 '14 '15 '16 Employee compensation and profitability % of GDP Corporate profits 3Q 15 Employee compensation (inverted) Forecast* (4Q 15 4Q 16) S&P 5 sector fundamentals Ranked by beta Sector 5-yr beta** 216 EPS growth GTM Asia 26 Forward P/E Trailing P/B Financials % 13.4x 1.4x Energy % 27.7x 1.5x Materials x 3.1x Industrials % 15.4x 3.7x I.T % 15.3x 4.2x Cons. Disc % 17.5x 5.x Health Care % 15.9x 3.9x Telecom % 12.3x 2.7x Cons. Staples % 19.5x 5.x Utilities % 15.4x 1.6x S&P % 16.3x 2.8x 26 Source: (Top left) FactSet, Standard & Poor s, J.P. Morgan Asset Management. (Bottom left) U.S. Bureau of Economic Analysis, J.P. Morgan Asset Management. (Right) Bloomberg, J.P. Morgan Asset Management. *Forecast on operating EPS figures based on Standard & Poor s estimates. **Daily movement against S&P 5 between 1/1/21 and 31/12/215.

27 Europe: Economic snapshot GTM Asia 27 Eurozone real GDP Quarter-over-quarter % change 1. Germany Eurozone Eurozone consumer and business confidence* Index 14.5% France % Portugal, Spain, Italy (equal weighted) -3 Consumer Business 8-1.5% '12 '13 '14 '15-4 '5 '7 '9 '11 '13 '15 6 Eurozone CPI inflation Contribution to headline inflation, year-over-year % change %. Food, alcohol, tobacco Core rate** Energy CPI -1.5% '12 '13 '14 '15 Eurozone new auto registration and retail sales Year-over-year % change, 3-month moving average 2 New auto registration Retail sales '5 '7 '9 '11 '13 '15 4% 2% -2% -4% 27 Source: (Top left, top right and bottom left) Eurostat, FactSet, J.P. Morgan Asset Management. (Bottom right) European Automobile Manufacturers Association, Eurostat, FactSet, J.P. Morgan Asset Management. *Euro area (Eurozone) consumer and business confidence as reported by the European Commission, which measures the level of optimism that consumers and businesses have about the economy. **Core rate is CPI Inflation (HICP) excluding energy, food, alcohol and tobacco.

28 Europe: Monetary policy GTM Asia 28 ECB balance sheet and euro REER EUR trillions Real broad effective exchange rate (REER) ECB balance sheet Weaker euro Stronger euro Euro REER (inverted scale) Forecast '5 '7 '9 '11 '13 '15 ' Eurozone bank lending and real GDP EUR billions, 3-month change Year-over-year % change Households Corporates Real GDP** 5% 4% 3% 2% Sovereign funding costs 1-year benchmark bond yields (%) 31/12/15 31/12/15 Greece* 8.1% Spain 1.8% Portugal 2.5% Italy 1.6% U.S. 2.3% France 1. UK 2. Germany.6% % -1% -15 '5 '7 '9 '11 '13 '15-2% Source: (Top left and right) BIS, ECB, FactSet, J.P. Morgan Asset Management. (Bottom left) FactSet, J.P. Morgan Asset Management. *Greece s 1-year benchmark bond yield reached a peak of 32% in January 212 and is cut off to maintain a more reasonable scale. **Real GDP growth rates for 1Q 29, 2Q 29 and 3Q 29 were -4.9%, -4.7% and -3.8%, respectively. 28

29 Europe: Earnings and profitability MSCI Europe Index: Geographical source of revenue RoW* 11% Asia 1 Americas 25% Europe 54% Margin expansion over the last 12 months Earnings per share / sales per share 1..5%. GTM Asia % Portugal Ireland France Switz. Italy Europe ex-uk Germany Spain UK Economic growth and revenue growth Year-over-year % change Index, adv. 12 months 15% 6 1 U.S. and European operating profit margins Earnings/sales for MSCI Europe and S&P 5 U.S. 5% -5% -1 MSCI Europe revenue growth Eurozone manufacturing PMI -15% '3 '5 '7 '9 '11 '13 ' Europe Source: (Top left) Morgan Stanley, MSCI, J.P. Morgan Asset Management. (Top right) FactSet, MSCI, J.P. Morgan Asset Management. (Bottom left) FactSet, Markit, MSCI, J.P. Morgan Asset Management. (Bottom right) FactSet, MSCI, Standard & Poor s, J.P. Morgan Asset Management. *RoW (Rest of World) denotes revenues coming from the world excluding Europe, Asia and the Americas. 29

30 Global and Asia equity markets: Returns GTM Asia 3 1-yrs ('6 - '15) Q '15 Ann. Ret. Ann. Vol. China India Ja pa n India ASEAN U.S. HK U.S. India China India 82.9% 73.1% -29.2% 12.8% 32.2% 1.4% 28.3% 31.8% 23.9% 9.6% 9.3% 1.1% 31.1% India China U.S. Taiwan Korea ASEAN India U.S. U.S. U.S. ASEAN China % -37.6% 79.2% 26.7% -6.3% % 12.7%.7% 6.6% 8.5% 27.8% ASEAN HK Europe ASEAN HK Europe China Europe Taiwan HK HK HK Korea 42.4% 41.2% -46.4% 74.6% 23.2% -11.1% 22.7% 25.2% 9.4% -.5% % 27.6% Asia ex- Asia ex- Europe Taiwan Taiwan Korea ASEAN HK China Europe ASEAN India Taiwan JP JP 33.7% 4.1% % 72.1% 21.8% % 11.1% % 5.5% 7.2% 23. Asia ex- Asia ex- Asia e x- ASEAN ASEAN Korea India Taiwan ASEAN India Korea U.S. JP JP JP 33.3% % 71.3% 2.9% % 22.4% 9.1% 6.2% - 6.1% 5.4% 6.7% 22.6% Asia ex- Asia e x- HK Korea China China HK Korea Korea HK Korea China HK JP JP 3.4% 31.9% - 5.8% 62.3% 19.6% % 3.9% 5.1% - 6.7% % 21.9% Asia ex- Asia e x- Asia e x- Taiwan Europe HK HK Europe China China Taiwan ASEAN JP JP JP % -51.2% 6.2% 15.4% -17.3% 19.1% 3.6% 4.8% -7.8% 3.8% % Asia ex- Asia ex- Asia e x- U.S. Taiwan Europe U.S. China Taiwan Europe Europe Europe JP JP JP 14.7% 8.4% % 35.8% 14.8% % 16.7% 3.1% % 2.5% 3.4% 2.3% Korea U.S. Korea U.S. China Taiwan U.S. India Europe Taiwan Taiwan Korea 12.6% 5.4% % 26.3% 4.6% - 2.9% 15.3% - 3.8% - 6.2% % 1.2% 2.9% 15.5% India Europe India ASEAN Korea ASEAN India U.S. 6.2% - 4.2% % 6.3% 3.9% % 8.2% - 4.7% % % -.9%.9% 15.1% Source: FactSet, MSCI, J.P. Morgan Asset Management. Returns are total (net) returns based on MSCI indices in U.S. dollar terms. 1-yr total (net) return data is used to calculate annualized returns (Ann. Ret.) and 1-yr price return data is used to calculate annualized volatility (Ann. Vol.) and reflect the period 31/12/5 31/12/15. 3

31 Emerging markets: Returns GTM Asia 31 1-yrs ('6 - '15) Q '15 Ann. Ret. Ann. Vol. China Brazil South Africa Brazil South Africa Indonesia Turkey China Indonesia Russia Indonesia Indonesia Turkey 82.9% 79.6% -37.9% 128.1% 34.2% % 3.6% 26.6% 4.2% 2.8% 11.8% 37.8% Indonesia Turkey Mexico Indonesia Indonesia Mexico Mexico Asia ex- India India China China Russia 73.8% 74.1% -42.9% 126.2% 33.9% -12.1% 29.1% 3.1% 23.9% -6.1% % 35.6% Russia India China Russia Mexico South Africa India Russia Turkey China Asia e x- 55.6% 73.1% -5.8% 14.2% 27.6% -14.4% 26..8% 18.7% -7.8% 3.8% 7.2% 33.1% India China Asia ex- India India Asia ex- China Mexico China Asia e x- Source: FactSet, MSCI, J.P. Morgan Asset Management. Returns are total (net) returns based on MSCI indices in U.S. dollar terms. 1-year total (net) return data are used to calculate annualized returns (Ann. Ret.) and 1-year price return data is used to calculate annualized volatility (Ann. Vol.) and reflect the period 31/12/5 31/12/15. EME India Asia e x- Brazil Indonesia % -52.4% 12.8% 2.9% -17.3% 22.7%.2% %.7% 6.2% 31.7% Brazil Indonesia EME Turkey Turkey China Asia ex- EME South Africa Mexico Turkey Mexico India 45.3% 54.2% -53.3% 97.5% 2.8% -18.4% 22.4% -2.6% 5.2% -14.4% -.3% 4.8% 31.1% Mexico Asia ex- Brazil EME Asia ex- EME South Africa India Asia e x- EME India EME China 41.4% 4.1% -56.2% 78.5% 19.6% -18.4% 18.7% -3.8% 4.8% -14.9% -.9% 3.6% 27.8% Asia ex- EME Indonesia Asia ex- Russia Russia EME South Africa EME Indonesia Mexico 33.3% 39.4% % 72.1% 19.1% % 18.2% - 6.2% - 2.2% % - 1.2% 3.4% 26.1% EME Russia Turkey China EME Brazil Russia Brazil Mexico South Africa Brazil Brazil EME 32.1% 24.5% -62.3% 62.3% 18.9% -21.8% 13.7% % -25.5% -3.3% -.8% 23.6% South Africa South Africa India South Africa South Africa South Africa Brazil Turkey Indonesia Indonesia Brazil Turkey Russia Turkey Mexico 2.5% 18.1% % 57.8% 6.5% % 4.6% % % - 4.1% -.9% 23.1% Turkey Mexico Russia Mexico China India Brazil Turkey Russia Brazil - 7.2% 12.2% % 56.6% 4.6% % % % % - 1.6% - 4.4% 22.6% South Africa Russia Asia e x- 31

32 Global earnings momentum Global equities earnings momentum Earnings revision* (upward revision downward revision / total revision), 3-month moving average.2 GTM Asia 32 Earnings revision since Jan 215 Latest 6 observations S&P 5 TOPIX Europe Asia ex- EM Asian equities earnings momentum Earnings revision* (upward revision downward revision / total revision).4 7/215 12/ China Taiwan Hong Kong Korea India Thailand Indonesia Malaysia Singapore Philippines 32 Source: (All charts) FactSet, MSCI, J.P. Morgan Asset Management. *Earnings revision is calculated by taking the difference between the number of analyst upgrades and analyst downgrades, divided by the total number of analyst revisions on a monthly basis. Earnings revision above zero would mean that there were more upgrade revisions than downgrade revisions.

33 Corporate profitability Forward earnings per share Forward return on equity (%) Index, rebased 25 = GTM Asia 33 U.S. 2 Emerging markets Asia ex- Asia ex- Europe EM U.S. 125 Global net margins (%) 1 Europe EM U.S. 75 Europe Asia ex '5 '7 '9 '11 '13 '15 Source: (All charts) FactSet, MSCI, Standard & Poor s, J.P. Morgan Asset Management. 33

34 Global equity markets: Valuations GTM Asia 34 Equity market valuations Price to earnings Forward P/E ratios 3x yr. range 1-yr. average Latest 2x 1x x S&P 5 Europe ex- UK Asia ex- Emerging markets ASEAN Australia China A (CSI 3) China Hong Kong India Korea Taiwan Brazil Mexico Turkey Equity market valuations Price to book Trailing P/B ratios 5x yr. range 1-yr. average Latest 4x 3x 2x 1x x S&P 5 Europe ex- UK Asia ex- Emerging markets ASEAN Australia China A (CSI 3) China Hong Kong India Korea Taiwan Brazil Mexico Turkey Source: (All charts) China Securities Index, FactSet, MSCI, Standard & Poor s, J.P. Morgan Asset Management. P/E and P/B ratios are in local currency terms. China A valuations based on the CSI3 Index and China valuations based on the MSCI China. 1-year range for P/E and P/B ratios are cut off to maintain a more reasonable scale. 34

35 APAC ex- and emerging markets: Price-to-book valuations GTM Asia 35 MSCI AC Asia Pacific ex- P/B ratio Trailing P/B ratio 3.x 2.5x 2.x 1.5x 1.x '96 '98 ' '2 '4 '6 '8 '1 '12 '14 3.2x 2.6x 2.x 1.4x +1 SD: 2.2x Average: 1.9x -1 SD: 1.6x MSCI Emerging Markets P/B ratio Trailing P/B ratio +1 SD: 2.2x Average: 1.8x -1 SD: 1.4x 12/215: 1.3x 12/215: 1.3x.8x '96 '98 ' '2 '4 '6 '8 '1 '12 '14 Asia Pacific ex-jp vs. developed markets relative P/B Relative MSCI AC APxJ/MSCI World P/B 1.4x 1.x.6x 1.4x 1.x.6x APxJ relatively more expensive compared to DM APxJ relatively cheaper compared to DM 12/215:.59x.2x '96 '98 ' '2 '4 '6 '8 '1 '12 '14 Emerging Markets vs. developed markets relative P/B Relative MSCI EM/MSCI World P/B EM relatively more expensive compared to DM EM relatively cheaper compared to DM 12/215:.57x.2x '96 '98 ' '2 '4 '6 '8 '1 '12 '14 Source: (All charts) FactSet, I/B/E/S, MSCI, J.P. Morgan Economics, J.P. Morgan Asset Management. 35

36 APAC ex- and emerging markets: Valuation analysis GTM Asia 36 MSCI Emerging Markets trailing P/B valuation analysis Subsequent 12-month performance % 64% 29% MSCI Emerging Markets trailing P/B MSCI AC Asia Pacific ex- trailing P/B valuation analysis Subsequent 12-month performance % 49% 49% P/B (12/215): 1.3x 8% 1% 11% 3% P/B (12/215): 1.3x 7% 9% 1% -2% -2% x x x x x x x x x x MSCI AC Asia Pacific ex- trailing P/B Source: (All charts) FactSet, I/B/E/S, MSCI, J.P. Morgan Asset Management. The total sampling size since September 1995, data permitting, included in the valuation analysis is 242 months. 37% 15% Average return Subsequent 12-month returns range.8-1.x x x x x x x x x x 2.8x + -24% Average return Subsequent 12-month returns range -28% -5-47% 36

37 Asia and emerging markets: Index composition GTM Asia 37 Emerging markets Asia ex- China China A Hong Kong South Korea Taiwan India Indonesia Russia Brazil Country Cons. discr. 9.6% 8.2% 4.7% 9.4% % 4.4% 9.3% 16.3% n/a 5.3% Cons. staples 8.7% 5.5% 3.5% 5.3%.8% 8.9% % 15.9% 9.5% 2.7% Ene r gy 7.6% 6.3% 7.8% 2.6% n/a 2.2%.6% 1.3% 1.1% 57.5% 1.6% Financials 28.6% 32.5% 41.3% 39.7% 62.9% 13.4% 18.1% 16.8% 38.9% 18.2% 33.7% Health care 2.8% 1.3% 2.5% 5.2% n/a 2.2% n/a 12.1% 2.4% n/a.7% Industrials 7.3% 8.8% 8.7% 16.4% 12.5% 1.7% 2.2% 6.2% 3.2% n/a 5.7% Technology 18.9% 19.3% 15.2% 5.4%.5% 36.8% 57.9% 21.7% n/a n/a 4.3% Materials 6.3% % 6.3% n/a 7.7% 8.9% 5.6% 5.1% 8.5% 11.1% Telecom 6.9% 6.5% 1.7%.9% 1.6%.9% 4.9% 4.3% 14.7% 5.5% 2.7% Utilities 3.2% 3.8% 4.2% 3.7% 12.8% 2.1% n/a 1.9% 2.5%.8% 5.1% Forw ard P/E 11.x 11.7x 1.2x 13.4x 13.8x 1.1x 11.8x 17.4x 14.7x 5.3x 1.1x Dividend yield 2.9% 2.8% 2.9% % 1.7% 4.1% 1.5% 2.4% 5.4% 4.1% Trailing P/B 1.3x 1.4x 1.4x 2.x 1.1x 1.x 1.6x 3.1x 2.8x.5x 1.x ROE 1.4% 1.9% 12.9% 14.4% 1.2% 8.5% 13.6% 14.2% 16.9% 7.9% 6.6% β β ROE P/B Div P/E Sector weights Source: Bloomberg, FactSet, MSCI, J.P. Morgan Asset Management. Index weights are based on MSCI indices except for China A, which is CSI 3. Beta is calculated against MSCI AC World Index with a 1-year history using monthly data. Please see disclosure page at end for index definitions. Positive yield does not imply positive return. 37

38 The compounding effect MSCI World Index: Performance under different scenarios Index 1 = 197 6, 4, Annualized return Total return (dividends received and reinvested back into equities) 9.4% Total return (dividends received and reinvested in cash)* 8.8% Total return (dividends received but not reinvested) 7.2% Price return 6.3% GTM Asia 38 6,361 4,595 2,416 2, '7 '75 '8 '85 '9 '95 ' '5 '1 '15 1,663 Total return**: Dividends vs. capital appreciation Average annualized returns over 1 years 2 Dividends with compounding Capital appreciation 1 1.9% % 1.8% -.8% 1.6% % 7.8% Asia Pacific Other EM Regions % 4.6% 5.5% 4.8% 12.1% 9.4% 4.1% 7.4% 2.4% 3.1% 4.6% 5.1% 5.2% 1.5% % 3.3% 2.9% 3.7% % 2.9% -6.7% -5.1% -3.1% -4.1%.4%.4% 1.2% 3.3% 5.1% -1 Korea Australia Taiwan Singapore Malaysia Hong Kong China Thailand Indonesia Philippines Russia Poland Turkey Brazil South Africa Mexico Europe EM (Emerging Markets) AC Asia Pacific ex- U.S. (S&P 5) Source: (All charts) FactSet, MSCI, J.P. Morgan Asset Management. *Reinvestment in cash based on the average U.S. 3-month Treasury bill (secondary market) yield since 197, which is 5.1% per annum. **Returns are total (gross) returns based on MSCI indices in U.S. dollar terms. 38

39 High dividend equities GTM Asia 39 MSCI AC Asia Pacific ex-: Performance by dividend yield* USD cumulative total return of tertiles with quarterly rebalancing (Jan. 2 base = 1) Top tertile 2 nd tertile Bottom tertile All stocks ' '3 '6 '9 '12 '15 Risk and return profile: High dividend vs. broad index MSCI indices Asia Pacific ex- EM DM HD Broad HD Broad HD Broad Equity dividend yield by sectors 4.5% 3.5% Asia Pacific ex- DM EM Annualized return** Annualized volatility** Riskadjusted return*** 6.8% % 5.2% 1.2% -.6% 13.6% % 22.8% 13.3% 15.8% % 1.5%.5% 39 Source: (Top) CLSA, FactSet, MSCI, J.P. Morgan Asset Management. (Bottom left and right) FactSet, MSCI, J.P. Morgan Asset Management. *Total returns based on MSCI indices in U.S. dollar terms. **Annualized return and volatility based on total monthly return data (USD) between January 21 and December 215 (15-year). ***Risk-adjusted return is calculated by annualized return over volatility. Positive yield does not imply positive return.

40 Asia and emerging markets: Dividend income GTM Asia 4 Dividend payout ratio and yield* 8 12-month trailing dividend yield (RHS) Dividend payout ratio (LHS) 6 6% 5% Dividend yield and earnings growth** 3-year average 5% 4% Australia Russia Poland Brazil Asia Pacific countries Other EM countries Regions 4 4% 3% 2% Dividend yield 3% Singapore Europe China Malaysia APxJ Hong Kong Turkey Taiwan Thailand South Africa EM Indonesia 2 2% U.S. 1% Philippines Korea Mexico India 1% 5% 1 15% 2 25% Forward earnings growth 4 Source: (All charts) FactSet, MSCI, Standard & Poor s, J.P. Morgan Asset Management. *Dividend yield and dividend payout ratio are trailing (last 12 months). Both yields and payout ratios are from respective MSCI indices, except the U.S, for which the S&P 5 is used. **Dividend yield and EPS growth are average values over the last 3 years from respective MSCI indices. Positive yield does not imply positive return.

41 Global fixed income: Yields and returns GTM Asia 41 Global bond opportunities U.S. Corporate HY Asia Corporate HY Local CCY EMD USD EMD Europe HY USD Asian Bond U.S. Corporate IG U.S. Treasury DM Government Bond Cash YTM 8.9% 7.6% 6.7% 5.2% 3.7% 1.7% 1.6%.1% Duration* (years) Correl. to 1-year UST Fixed income sector returns 5-yrs ('11 - '15) Q '15 Ann. Ret. U.S. Treas Europe HY Europe HY USD Asian Asia HY Asia HY Asia HY 9.8% 3.5% 14.9% 8.3% 5.8% 3.1% 6.6% USD Local USD USD USD U.S. HY U.S. IG EMD EMD Asian EMD Asian 8.5% 19.9% 7.4% 7.5% 2.8% 1.5% 5.5% USD USD USD USD U.S. IG Asia HY Asia HY EMD EMD Asian EMD 8.1% 18.5% 4.3% 5.5% 1.2% 1.3% 5.1% USD U.S. DM Gov't U.S. HY Cash U.S. IG U.S. HY EMD Treas 7.2% 15.8%. 5.5%.8%.7% 5. USD USD U.S. U.S. HY Cash Cash U.S. IG Asian Asian Treas % -1.4% 5.1%.. 4.5% USD Asian Asia HY U.S. IG U.S. HY U.S. IG U.S. Treas Europe HY 4.1% 13.5% -1.5% 2.5% -.7% -.9% 4.2% U.S. U.S. Cash U.S. IG DM Gov't DM Gov't DM Gov't Treas Treas.1% 9.8% -2.7%.7% -2.6% -1.2% 2.9% Europe U.S. Europe DM Gov't Cash U.S. HY DM Gov't HY Treas HY -5.5% %. -4.5% -1.2%.3% Local Europe Europe Local Asia HY Cash Cash EMD HY HY EMD - 5.9%.1% - 5.5% % - 1.2%. Local USD Local Local Local DM Gov't U.S. HY EMD EMD EMD EMD EMD - 6.4% % - 6.1% % Source: (All charts) Barclays, Bloomberg, FactSet, J.P. Morgan Asset Management. Based on Barclays U.S. Aggregate Credit - Corporate High Yield Index (U.S. Corporate HY), Barclays U.S. Aggregate Credit Corporate Investment Grade Index (U.S. Corporate IG), J.P. Morgan Government Bond Index EM Global (GBI-EM) (Local CCY EMD), J.P. Morgan Emerging Market Bond Index Global (EMBIG) (USD EMD), J.P. Morgan Asia Credit Index (JACI) (USD Asian), Barclays Pan European High Yield (Europe HY), J.P. Morgan Government Bond Index Global Traded (DM Gov t), J.P. Morgan Asia Credit Index Non-investment Grade Corporate (Asia HY), Barclays Global U.S. Treasury Bills (3-5 years) (U.S. Treasury) and Barclays U.S. Treasury Bills (1-3 months) (Cash). 5-year data is used to calculate annualized returns (Ann. Ret.). Returns are in USD and reflect the period from 31/12/1 31/12/15. (Left) Duration is a measure of the sensitivity of the price (the value of the principal) of a fixed-income investment to a change in interest rates. *Duration is expressed as number of years. Rising interest rates mean falling bond prices, while declining interest rates mean rising bond prices. 1-year data is used to calculate the correlation to the 1-year UST. Positive yield does not imply positive return.

42 Global fixed income: Supply and demand dynamics GTM Asia 42 Estimated annual global bond demand USD trillions Pension and insurance Retail bond funds G4 commercial banks 5 Foreign officials G4 central banks Total Forecast Estimated annual global bond supply USD trillions 5 Other Government Total Forecast '6 '7 '8 '9 '1 '11 '12 '13 '14 '15 '16-1 '6 '7 '8 '9 '1 '11 '12 '13 '14 '15 '16 Source: (All charts) Bloomberg, FactSet, Investment Company Institute (ICI), IMF, J.P. Morgan Global Asset Allocation Research, J.P. Morgan Asset Management. 42

43 G3 government bond yields GTM Asia 43 1-year bond yields Average since 197* Latest U.S. 6.7% 2.3% Germany 5.9%.6% 2.6%.3% Britain leaves ERM Black Friday Asian currency crisis 1997 Dot com bubble Feb 2 Fed QE 28 BoE QE 29 Fed QE2 21 BoJ QQE 213 Fed QE3 212 BoJ QQE2 214 Fed rate hike, ECB QE, ECB QE2 215 Oil shock Oil crisis Energy crisis 1979 Fall of Berlin Wall /11 attacks 21 Source: FactSet, J.P. Morgan Asset Management. *Average since October 1972 for Germany and February 1986 for due to data availability. Positive yield does not imply positive return. 43

44 Corporate high yield spread comparison Spread to worst, basis points 1, Average Since 213 Dec 214 Mar 215 Jun 215 Sep 215 Dec 215 EM high yield U.S. high yield U.S. HY (ex-energy) U.S. HY energy ,22 1,365 Asian high yield European high yield U.S. high yield spread and default rate* 2 16% Average Latest HY spread to worst 58bps 757bps HY default rate % 12% 8% 4% '9 '95 ' '5 '1 ' '13 '14 '15 '16 Sector breakdown across high yield indices 1 7% 12% 11% 14% 8 19% 7% 19% 21% 1 2% 16% 6 6% 11% 5% 7% 29% 22% 12% 4 17% 12% 8% 12% 7% 13% 2 23% 22% 22% 18% 9% 5% U.S. Europe EM Asia Other TMT Energy Real Estate Industrial Health Care Financial Consumer 44 Source: (All charts) J.P. Morgan, J.P. Morgan Asset Management. (Left) Spreads indicated are benchmark yield-to-worst less comparable maturity Treasury yields. Asia corporate high yield is represented by the J.P. Morgan Asia Credit Corporate High Yield Index. U.S. corporate high yield is represented by the J.P. Morgan Domestic High Yield Index. Europe corporate high yield is represented by J.P. Morgan Euro High Yield Index. EM corporate high yield is represented by J.P. Morgan CEMBI NON-IG Index. Global corporate high yield is represented by J.P. Morgan Global High Yield Index. *Default rate is defined as the par value percentage of the total market trading at or below 5 of par value and includes any Chapter 11 filing, prepackaged filing or missed interest payments. Spreads indicated are benchmark yield-to-worst less comparable maturity Treasury yields. Yield-to-worst is defined as the lowest potential yield that can be received on a bond without the issuer actually defaulting and reflects the possibility of the bond being called at an unfavorable time for the holder. Positive yield does not imply positive return.

45 United States: Sources of bond returns GTM Asia 45 Total return A + B + C Treasury base rate return A Spread to Treasury return B Coupon return C 5-yr. 1-yr. 2.9% 1.7% 1.3%.9% 1.3% 8.2% -.2% -1.2% % 2.6% 1.5% 2.1% 5-yr. 1-yr. 3-yr. 29.4% -3.2% % 2.8% 3-yr. U.S. HY 2.5% -4.5% -3.3% -5.6% -1.1% -5.8% 6.8% 7. U.S. HY EM (USD) 4.8% 1.3%.3% -4.2% -1.2% -.1% 5.6% 5.6% EM (USD) IG Corp. 7.5% -.7% 3.7% -3.2% -.5% -1.6% 4.2% 4.1% IG Corp. U.S. MBS 6.1% 1.5% % -.1% 3.7% 3.5% U.S. MBS U.S. Agg. 6..5% 2.7% -2..1% -.5% 3.2% 3.1% U.S. Agg Source: Barclays, Federal Reserve, J.P. Morgan Asset Management. All returns reflect year-to-date returns. Treasury base, spread and coupon returns based on Barclays and J.P. Morgan Asset Management estimates. The sum of charts A and B equate to price return for each sector and the sum of charts A, B and C do not add up to the total return due to rounding. Indices used include Barclays U.S. Treasury Bellwethers (1Y), Barclays U.S. Aggregate, Barclays U.S. Aggregate Credit Corporate Investment Grade, Barclays U.S. Aggregate Credit Corporate High Yield, Barclays U.S. MBS Index, Barclays Floating Rate Index and Barclays Emerging Markets USD.

46 Size of the global bond market USD trillions * U.S. 1.9 (53%) 23.8 (42%) 36. (39%) DM ex-u.s. 9. (44%) 27.7 (49%) 41.2 (45%) EM.7 (3%) 5. (9%) 14.2 (16%) World EM Sovereign USD credit rating breakdown % of EMBI Global** index Unrated C B BB IG '95-'99 '-'4 '5-'9 '1-'14 ' DM ex-u.s. EM sovereign debt and U.S. Baa corporate bond yields Yield to maturity EM sovereign (USD) '9 '92 '94 '96 '98 ' '2 '4 '6 '8 '1 '12 '14 Source: (Left) BIS, J.P. Morgan Asset Management. Based on an aggregate of the financial accounts of various EM countries. (Top right) J.P. Morgan Economics, J.P. Morgan Asset Management. (Bottom right) FactSet, Moody s, J.P. Morgan Asset Management. *Latest data as of 31/3/215 based on the BIS September 215 Quarterly Review. **The J.P. Morgan EMBI Global (EMBIG) is a USD-denominated external debt index tracking bonds issued by sovereigns and quasi-sovereigns in developing nations. Positive yield does not imply positive return. U.S. U.S. Baa corporate bond (USD)

47 Asia: Sovereign and corporate debt 1-year government bond yields Yield-to-maturity Country (31/12/15) Indonesia 8.9% India 7.8% Malaysia 4.4% Philippines 4.1% China 2.9% Australia 2.8% Thailand 2.5% U.S. 2.3% Korea 2.1% GTM Asia 47 Size of Asian sovereign and corporate bond market* USD trillions, total outstanding bonds Foreign currency Local currency ' '5 '1 '15 YTD J.P. Morgan Asia Credit corporate bond index Spread to worst, basis points S.D year average -1 S.D. '1 '11 '12 '13 '14 '15 47 Source: (Left) FactSet, J.P. Morgan Asset Management. (Top right) Asian Development Bank, J.P. Morgan Asset Management. The size of the bond market is based on the absolute amount of total bonds outstanding, including both corporate and government bonds. (Bottom right) J.P. Morgan Securities, J.P. Morgan Asset Management. *Countries include China, Hong Kong, Indonesia, Korea, Malaysia, Philippines, Singapore, Thailand and Vietnam. YTD data as of 3/9/215 for total outstanding local currency bond and as of 3/6/215 for foreign currency bond. Spreads indicated are benchmark yield-to-worst less comparable maturity Treasury yields. Positive yield does not imply positive return.

48 Asset class returns GTM Asia yrs ('6 - '15) Q '15 Ann. Ret. Ann. Vol. U.S. REITs EM ex- Asia Global Bonds EM ex- Asia U.S. REITs U.S. REITs Asia ex- DM Equities U.S. REITs Asian Bonds U.S. REITs Source: Barclays, Dow Jones, FactSet, J.P. Morgan, MSCI, J.P. Morgan Asset Management. The Diversified portfolio assumes the following weights: 2 in the MSCI The World Index (DM Equities), 2 in the MSCI AC Asia ex- (Asia ex-), 5% in the average of the MSCI EM Latin America and MSCI EM EMEA Indices (EM ex-asia), 1 in the J.P. Morgan EMBIG Index (EMD), 1 in the Barclays Aggregate (U.S. Bonds), 1 in the Barclays Global Corporate High Yield Index (Global Corporate High Yield), 15% in J.P. Morgan Asia Credit Index (Asian Bonds), 5% in MSCI U.S. REITs Index (U.S. REITs) and 5% in Barclays U.S. Treasury Bills (1-3 months) (Cash). Diversified portfolio assumes annual rebalancing. All data represent total return in U.S. dollar terms for the stated period. 1-year total return data is used to calculate annualized returns (Ann. Ret.) and 1-year price return data is used to calculate annualized volatility (Ann. Vol.) and reflects the period 31/12/5 31/12/15. Please see disclosure page at end for index definitions. U.S. REITs 35.9% 41.1% 4.8% 91.3% 28.5% 8.7% 22.7% 27.4% 3.4% 2.8% 7.1% 7.3% 27. EM ex- Asia Asia ex- Cash Asia ex- Asia ex- EMD Global Corp HY Global Corp HY Asian Bonds U.S. REITs DM Equities Global Corp HY EM ex- Asia U.S. REITs 35.1% 4.5% 1.8% 72.5% 19.9% 8.5% 18.9% 8.4% 8.3% 2.5% 5.5% 7.1% 25.9% Asia ex- Asian Global EM ex- Global Asia ex- Asia ex- Diversified EMD Diversified EMD EMD EMD Bonds Corp HY Asia Bonds 33.7% 14.1% -9.8% 63.9% 16.6% 5.6% 18.5% 5.6% 5.5% 1.2% 3.8% 6.7% 22.6% DM DM Global Asian Asia ex- DM Asian DM EMD Diversified U.S. REITs Cash Diversified Equities Equities Corp HY Bonds Equities Bonds Equities 2.7% 9.6% -1.9% 4.8% 13.8% 4.1% 17.8% 3.3% 5.5%. 2.1% 6.6% 16.4% Global Global DM Global EM ex- Asia ex- DM Asia e x- Diversified Diversified U.S. REITs EMD Diversifie d Bonds Corp HY Equities Corp HY Asia Equities 18.8% 9.5% -27.9% 3.8% 13.4% 2.6% % 5.1% -.3% 1.5% 6.5% 12.1% Global DM DM Asian Global EMD Diversified U.S. REITs Cash Cash Diversifie d Dive rsified Diversified Corp HY Equities Equities Bonds Corp HY 13.6% 6.3% -28.1% 28.6% 12.3%.1% 16.5%. 4.5% -3.1% 1.3% 5.7% 11.2% Asian Asian Asian Global Global DM EMD U.S. REITs EMD Dive rsified Diversified Cash EMD Bonds Bonds Bonds Bonds Bonds Equities 9.9% 5.4% % % 15.9% -1.4%.6% -3.2%. 5.6% 8.8% Asian DM Asian DM Asian Global Global Global Global Global Asian Cash EMD Bonds Equities Bonds Equities Bonds Bonds Corp HY Corp HY Bonds Bonds Bonds 7.3% 4.8% -4.3% 28.2% 1.6% % -2.6%.2% -4.9% -.9% 3.7% 7.4% Global Bonds Global Corp HY Asia e x- Global Bonds Global Bonds Asia ex- Global Bonds EMD Cash Asia ex- Global Corp HY 6.6% 2.6% -52.2% 6.9% 5.5% -17.1% 4.3% -6.6%. -8.9% -1.7% 1.2% 2.7% Cash U.S. REITs EM ex- Asia Cash Cash EM ex- Asia Cash 4.8% -16.8% -57.2%.1%.1% -21.2%.1% -8.5% - 2.2% -22.7% -4.4% -.6%.1% EM ex- Asia EM ex- Asia EM ex- Asia EM ex- Asia Cash EM ex- Asia Global Bonds Cash

49 Asset class returns contribution to diversified portfolio GTM Asia 49 Return contribution to diversified portfolio Total returns in USD 2 15% % 15.9% Portfolio Weighting Cash 5% Global bonds 1 Global corporate high yield 1 EMD 1 Asian bonds 15% DM equities 2 U.S. REITs 5% EM ex-asia equities 5% Asia ex-jp equities 2 Diversified portfolio 1 5% 5.6% 4.5% -2.8% -5% -3.1% -1 '1 '11 '12 '13 '14 '15 Source: Barclays, Dow Jones, FactSet, J.P. Morgan, MSCI, J.P. Morgan Asset Management. The diversified portfolio assumes annual rebalancing. All data represent total return in U.S. dollar terms for the stated period. Please see disclosure page at end for index definitions. 49

50 Portfolio construction, asset class returns and volatility GTM Asia 5 Annualized returns and volatility Total returns in USD* 15% High dividend (HD) equities Equities Bonds and cash Alternatives Portfolios Hypothetical portfolio construction Conservative Balanced Aggressive DM equities EM equities 5% 1 4 U.S. HY 1 15% 1 U.S. bonds 25% 1 5% Cash 35% 1 EMD 1 15% 5% REITs 5% % AxJ HD EM HD REITs EMD APxJ HD Annualized returns 9% 6% 3% Cash Asian bonds Hedge fund - distressed Hedge fund - rel val Balanced U.S. HY U.S. bonds Conservative Hedge fund - macro Hedge fund - mkt neutral U.S. Aggressive DM HD DM APxJ Europe AxJ EM 5 5% 1 15% 2 25% Annualized volatility Source: (All charts) Barclays, Dow Jones, FactSet, MSCI, Standard and Poor s, J.P. Morgan Asset Management. Hypothetical portfolios were created to illustrate different risk/return profiles and are not meant to represent actual asset allocation. USD total return calculations are based on MSCI Total Return, Barclays and J.P. Morgan indices. AxJ stands for MSCI AC Asia ex- and APxJ stands for MSCI AC Asia Pacific ex-. *Monthly total returns between December 2 and December 215, except for private equity (between January 25 and December 214) due to data availability.

51 Asset class correlations GTM Asia 51 1-year correlations MSCI Asia ex- EME S&P 5 Asian USD Bond USD EMD EM Corp European High Yield U.S. High Yield U.S. Agg U.S. Dollar (DXY) Brent Crude Oil Gold REITs MSCI Asia ex EME S&P Asian USD Bond USD EMD EM Corp European High Yield U.S. High Yield U.S. Agg U.S. Dollar (DXY) Brent Crude Oil Gold REITs year correlations Source: Barclays, Bloomberg, DJ UBS, FactSet, J.P. Morgan Economics, MSCI, Standard & Poor s, J.P. Morgan Asset Management. Correlations based on MSCI AC Asia ex- (Asia ex-), MSCI Emerging Markets (EM Equities), S&P 5 (U.S. Equities), J.P. Morgan Asia Credit Index (JACI) (USD Asian Bond), J.P. Morgan Emerging Market Bond Index Global (EMBIG) (USD EMD), J.P. Morgan Corporate Emerging Market Bond Index (CEMBI) (EM Corp), Barclays Pan European High Yield Index (European High Yield), Barclays U.S. Corporate High Yield Index (U.S. High Yield), Barclays U.S. Capital Aggregate (U.S. Agg), U.S. Dollar DXY Index (U.S. Dollar), Brent Crude Oil Price (USD/bbl) (Brent Crude Oil), London Gold PM Price Fixing (USD/oz) (Gold) and FTSE EPRA/NAREIT Developed REITs Index (Global REITs). 1-year correlations are based on monthly returns from 31/12/5 31/12/15, except for REITs as data were unavailable prior to April 26 and 3-year correlations from 31/12/12 31/12/15.

52 Rate rise impact on different asset classes Total return impact in a rising yield environment Asset classes, rolling 3-month average total return (USD), * High div. EM equities EM equities High div. Asia Pac. ex-jp equities Asia Pac. ex-jp equities DM equities High div. DM equities Convertible bonds U.S. REITs U.S. high yield Asian bonds (USD) EMD (USD) EMD (LLC) IG corporate U.S. aggregate U.S. 1-year Treasury -3.1% -.7% -.7% 1.3% 1.3%.9% 3.3% 2.5% 4.9% 4.6% 4.1% 7.8% 7.1% -6% -3% 3% 6% 9% 8.8% 8.7% GTM Asia 52 Sectors relative total return impact in a rising rate environment Rolling 3-month average total return (USD) relative to MSCI AC World broad index, I.T. Material Energy Con. Disc. Industrials Financials Telecom Con. Stap. Health Care Utilities Composition of MSCI High Dividend Equity Indices Defensives Cyclicals Financials MSCI AC World 47.9% 37.6% 14.5% MSCI World (DM) 5.9% 38.7% 1.4% MSCI EM 21.1% 41.9% 37. MSCI AC Asia Pacific ex- -3.8% -2.8% -3.1% -1.9% -.4% 1.5% 1.1% 2.1% 2.6% 3.5% 36.4% 33.1% 3.1% -6% -4% -2% 2% 4% 52 Source: (Left) Barclays, FactSet, MSCI, J.P, Morgan Asset Management. (Top and bottom right) MSCI, J.P. Morgan Asset Management. *Periods of rising U.S. yields are defined as rolling 3-month periods when the U.S. 1-year Treasury yields increased more than 25bps from January 1994 to December 215, data permitting. Returns are total returns in U.S. dollar terms. Asset classes shown above include MSCI Emerging Markets High Dividend Index (data since 21), MSCI World High Dividend Index (data since 1995), MSCI AC Asia Pacific ex- High Dividend Index (data since 1999), MSCI World Index, MSCI Emerging Market Index, MSCI AC Asia Pacific ex- Index, MSCI U.S. REIT Index (data since 1996), Barclays U.S. Treasury (1-year) Bellwethers Index, Barclays U.S. Corporate High Yield Index (data since 22), Barclays U.S. Investment Grade Credit Index, Barclays U.S. Aggregate Index, J.P. Morgan EMBI Global Index, J.P. Morgan GBI-EM Broad Composite Index, J.P. Morgan Asia Credit Index (data since 1999) and BofA Merrill Lynch U.S. Convertibles Index.

53 Interest rates and equities correlation GTM Asia 53 Correlations between monthly stock returns and interest rate movements Monthly MSCI AC Asia ex-, MSCI EM, S&P 5 and STOXX 5 returns, change in monthly 1-year U.S. Treasury yield, rolling 2-year correlation.8 Asia ex- (MSCI AC Asia ex-).8 U.S. (S&P 5) Correlation coefficient.4. Positive correlation between yield movements and stock returns Emerging Markets (MSCI EM).4. Europe (STOXX 5) -.4 Negative correlation between yield movements and stock returns -.8 3% 6% 9% % 1 15% 1-year U.S. Treasury yield Source: FactSet, MSCI, Standard & Poor s, U.S. Federal Reserve, J.P. Morgan Asset Management. Returns are based on price index in USD terms only and do not include dividends. Data available since 197 for S&P 5, 1986 for STOXX 5 and 1988 for MSCI AC Asia ex- and MSCI Emerging Markets (MSCI EM). 53

54 Asset class performance after first rate hike GTM Asia 54 Asset class performance after the first fed rate hike Date of first rate hike 4/2/1994 3/6/1999 3/6/24 Average Total return (%) after first rate hike 3-mth 6-mth 1-yr 3-mth 6-mth 1-yr 3-mth 6-mth 1-yr 3-mth 6-mth 1-yr U.S. equity DM equity EM equity Asian equity Total return (%) after first rate hike 3-mth 6-mth 1-yr 3-mth 6-mth 1-yr 3-mth 6-mth 1-yr 3-mth 6-mth 1-yr U.S. 1-yr Treasury U.S. high yield bond DM bond EM bond Asian bond n/a n/a n/a Source: Bloomberg, FactSet, Standard & Poor s, J.P. Morgan Asset Management. Total return in USD and includes dividend/coupon reinvestment. Indices used in representing various asset classes: S&P 5 (U.S. equity), MSCI World (DM equity), MSCI Emerging Markets (EM equity), MSCI AC Asia ex- (Asian equity), U.S. 1-year Treasury, Barclays US Aggregate Credit High Yield (U.S. high yield bond), J.P. Morgan Global Aggregate Bond Index (DM bond), J.P. Morgan Emerging Markets Bond Index Global (EM bond), J.P. Morgan Asia Credit Index (Asian bond).

55 High and rising inflation Occurred in 14 years since % 7% 13% U.S. average inflation: 6.4% 7% Rising inflation scenarios -1% 13% -2% High and falling inflation Occurred in 7 years since % 8% U.S. average inflation: 5.7% -8% 13% Falling inflation scenarios -3% Low and rising inflation Occurred in 7 years since % 2% 1 6% 12% 11% 13% Low and falling inflation Occurred in 15 years since % 4% 3% U.S. average inflation: 2.4% U.S. average inflation: 2.2% 6% 13% 8% 9% U.S. Median Inflation: 3.4% Source: (All charts) Bloomberg, Barclays, Dow Jones, Federal Reserve, NCREIF, Strategas/Ibbotson, J.P. Morgan Asset Management. Period returns are the arithmetic average of the nominal annual returns for the years specified by category. High or low inflation distinction reflects whether U.S. inflation was above or below the median from 1972 to 214. *High yield returns based on the period **Hedge funds based on the period Rising or falling inflation distinction is relative to the previous year. Commodities returns are based on GSCI, equities on the S&P 5 total return index, govt bonds are the Barclays Aggregate US Treasury Index, high yield is the Barclays US Corporate High Yield Index, real estate is based on NCREIF Total Property Index and hedge funds on the Credit Suisse Hedge Fund index.

56 U.S. dollar performance Index 13 7 years: % Real trade-weighted exchange rate index (REER)* U.S. Dollar Index (DXY)** 8 years: +34.2% 4 years: +22.4% Average: 95.7 Average: /215: /215: '73 '76 '79 '82 '85 '88 '91 '94 '97 ' '3 '6 '9 '12 '15 Currency performance vs. USD % since the beginning of the USD uptrend in April % -34% -33% -33% -33% -32% -31% -6-48% -63% -6-57% -8-68% -27% -17% -14% -13% -12% -9% -9% EM Asian countries Other EM countries DM countries 56 Source: (All charts) FactSet, Federal Reserve, Reuters, U.S. Bureau of Economic Analysis, J.P. Morgan Asset Management. *The real trade-weighted exchange rate index is the weighted average of a country s currency relative to a basket of other major currencies adjusted for the effects of inflation. The weights are determined by comparing the relative trade balances, in terms of one country s currency, with other countries within the basket. **The Dollar Index is a trade-weighted index calculated using six major world currencies.

57 EM liquidity risk and currency valuations Liquidity risk per EM country Short-term Debt* as % of FX Reserves, High Liquidity Risk Turkey South Africa Mexico Malaysia Czech Republic Hungary Chile Indonesia 4 Israel Taiwan Colombia Poland Thailand Korea 2 India Philippines Egypt Russia China Low Liquidity Brazil Risk -6% -3% 3% 6% 9% 12% Current account and net FDI (% of GDP), 214 China Hong Kong Philippines India Singapore Korea Thailand Taiwan Indonesia Turkey Australia Poland Hungary Chile Mexico Malaysia South Africa Russia Brazil Colombia GTM Asia 57 EM currency valuations % deviation from 1-year real effective exchange rate average REER Apr. 213 REER Nov. 215 Weaker than 1-year average Stronger than 1-year average Source: (Left) BIS, Haver, IMF, J.P. Morgan Asset Management. (Right) BIS, FactSet, J.P. Morgan Asset Management. *Short-term debt is USD-denominated sovereign and corporate debt with maturity of less than one year. 57

58 Emerging markets: Current account, oil and currencies GTM Asia 58 Current account, oil trade balance and currency performance FX return against USD 215 currency performance (LHS) currency performance (LHS) 213 currency performance (LHS) 6 Net oil exports as % of GDP, 214 IMF estimates (RHS) Rolling last 12M current account balance as % of GDP (RHS) As % of GDP Russia (RUB) Brazil (BRL) South Africa (ZAR) Turkey (TRY) Indonesia (IDR) Malaysia (MYR) Mexico (MXN) India (INR) Thailand (THB) Singapore (SGD) Philippines (PHP) Taiwan (TWD) Korea (KRW) China (CNY) -3 % RUB BRL ZAR TRY IDR MYR MXN INR THB SGD PHP TWD KRW CNY FX return (215) FX return (214) CA as % of GDP* Net oil exports as % of GDP Import coverage ratio** (months) Source: CEIC, FactSet, IMF, J.P. Morgan Economics, Reuters, World Bank, J.P. Morgan Asset Management. *Current account balance and GDP are represented by the latest 12-month rolling data. **Expressed in terms of the number of months of imports a country can pay for with its FX reserves. Data as of December 214.

59 Alternatives: Returns GTM Asia Q '15 Ann. Return Ann. Volatility Real Private Private Glb. Real Global Real Real Global MLPs MLPs MLPs Estate Equity Equity Macro Estate Equity Estate Estate Equity MLPs MLPs 21.4% 29.9% 22.9% 4.7% 76.4% 35.9% % 27.6% 12.5% 6.9% 5.9% 8.7% 2.4% Private Real Eq. Mkt. Global Private Private Global Global Private Eq. Mkt. Global MLPs MLPs Rel. Va l. Equity Estate Ntrl. Equity Equity Equity Equity Equity Equity Ntrl. Equity 21.3% 26.1% % 13.9% 13.1% 26.2% 9.9% 4.6% 2.4% 5.9% 1.2% Global Global Real Private Real Private Private Eq. Mkt. Glb. Global MLPs Mrgr. Arb. Re l. Val. Equity Equity Estate Equity Estate Equity Equity Ntrl. Macro Equity Distrsd. 17.4% % - 6.7% % 7.4% 1.9% 19.8% 7.3% 4.5% 1.6% 5.5% 9.7% Distrsd. Real Estate Glb. Macro Real Estate Distrsd. Rel. Val. Mrgr. Arb. Rel. Val. Distrsd. Glb. Macro Mrgr. Arb. HF Agg. Mrgr. Arb. HF Agg. 1.4% 16.3% 11.4% % 12.5% 2.3% 9.7% 15.1% 5.8% 2.7%.7% 4.6% 7.7% Real Global HF Agg. Distrsd. HF Agg. Rel. Val. HF Agg. Distrsd. Rel. Val. Distrsd. Rel. Va l. Mrgr. Arb. HF Agg. Rel. Val. Estate Equity 9.1% 15.3% % 18.6% 12.2%.8% 8.5% 13.9% 5.3% 1.8% -.1% 4.4% 6.8% Private Global Glb. Glb. MLPs Mrgr. Arb. Rel. Val. HF Agg. Distrsd. MLPs HF Agg. MLPs Re l. Val. Distrsd. Equity Equity Macro Macro 6.3% 14.6% % 15.3% 11.1%. 4.8% 9.6% 4.8%.7% -.4% 4.3% 4.7% Eq. Mkt. Glb. Glb. Eq. Mkt. HF Agg. Mrgr. Arb. Distrsd. Mrgr. Arb. HF Agg. HF Agg. Rel. Val. HF Agg. Rel. Val. Distrsd. Ntrl. Macro Macro Ntrl. 6.1% 13.3% 8.9% % 11.9% 8.5% -.7% 4.4% 7.5% 4.3%.2% -2.6% 3.8% 3.6% Glb. Macro Rel. Va l. Global Equity Private Equity Glb. Macro Mrgr. Arb. Eq. Mkt. Ntrl. 6.1% 12.2% 7.7% % 6.9% 4.6% -1.5% 3.1% 6.4% 3.2%. -2.8% 2.6% 3.6% Eq. Mkt. Ntrl. Eq. Mkt. Ntrl. Eq. Mkt. Ntrl. HF Agg. MLPs 1-yrs ('6 - '15) Eq. Mkt. Ntrl. Mrgr. Arb. Glb. Eq. Mkt. Glb. Real Real Real Mrgr. Arb. Distrsd. MLPs HF Agg. Mrgr. Arb. Mrgr. Arb. Mrgr. Arb. Distrsd. Macro Ntrl. Macro Estate Estate Estate 5.5% 8.2% 6.8% % -1.7% 3.2% % 5.3% 1.9% - 6.8% Eq. Mkt. Eq. Mkt. Global Real Eq. Mkt. Global Glb. Glb. Private Private Private Re l. Val. Distrsd. MLPs Ntrl. Ntrl. Equity Estate Ntrl. Equity Macro Macro Equity Equity Equity 5.3% % % -29.8% 2.5% %.1% 1.2% % Source: Alerian, Cambridge Associates, FactSet, HFRI, MSCI, NAREIT, Standard & Poor s, J.P. Morgan Asset Management. Hedge fund indices include distressed and restructuring (Distrsd.), relative value (Rel. Val.), global macro (Glb. Macro), merger arbitrage (Mrger. Arb.), equity market neutral (Eq. Mkt. Ntrl.) and the aggregate (HF Agg.). MLPs stands for Master Limited Partnerships. 3Q15 private equity data provided by Cambridge Associates (4Q data not available). 4Q15 Real estate returns unavailable and reflect the NFI-ODCE Open End Diversified Core Equity index and global equity returns reflect the MSCI AC World Index. Annualized volatility is calculated from quarterly data between 31/12/5 and 31/12/15.

60 Alternatives: REITs and real estate GTM Asia 6 REITs market composition* Australia & New Zealand 7% 6% Asia ex- 7% Canada 4% RoW 3% Europe 12% U.S. 61% Market cap (USD billions) U.S. 825 Europe 169 Asia ex Australia & New Zealand 89 Canada 56 Rest of World (RoW) 4 U.S. real estate Unlevered property appreciation vs. NOI growth** 12% 1 8% 6% 4% 2% -2% Net operating income growth Property appreciation '11 '12 '13 '14 '15 REIT dividend yield*** 1-year government bond yield Yield spreads across class-a office properties 8% 6% 4% 2% 6.5% 6.6% 4.6% 4.9% % 3.6% 3.8% 3.8% 3.6% 8% 6% 4% 2% 3.5% 3.5% 3.1% 2.7% 3.6% 2.8% 2.6% 2.6% 2.1%.4% Spread 1-year benchmark bond yield 1.1% 1.9% 1.6% 2.3% 1.5% 1.5% 1.1% 2.6% 1.2% 1.6% % 2.3% 1.2% 6 Source: (Top left) EPRA, J.P. Morgan Asset Management. (Top right) NCREIF, J.P. Morgan Asset Management Global Real Assets. (Bottom left) FactSet, MSCI, J.P. Morgan Asset Management. (Bottom right) DataStream, Jones Lang LaSalle, J.P. Morgan Asset Management. *Total may not sum to 1 due to rounding. Data from 214 EPRA REIT report. **NOI growth calculated from JPMAM-GRA and NCREIF, data as of 3/9/15. ***Yields shown are for the appropriate FTSE NAREIT REIT index, which excludes property development companies. Positive yield does not imply positive return.

61 Commodities: Returns GTM Asia 61 1-yrs ('6 - '15) Q '15 Ann. Ret. Metals Crude Oil Gold Copper Iron Ore Gold Gold Energy (E) Gold Gold Gold (E) Gold 53.9% 57.2% 5.8% 14.2% 47.5% 1.1% 7.1% 1.8% -1.4% -1.4% 1.9% 7.5% Copper Metals & Mining (E) Gold (E) Metals Gold (E) Crude Oil Iron Ore Crude Oil Metals Gold (E) Energy (E) % % 97.5% 32.7% 8.2% % - 7.8% % - 1.3%.7% Metals & Mining (E) Energy (E) Cmdty. Metals & Mining (E) Copper Energy (E) Copper Metals Copper Gold (E) Metals Gold Metals % -36.6% 9.2% 3.2% % -7.2% % -4.8% -.9% Gold Gold Energy (E) Crude Oil Gold Cmdty. Copper Iron Ore Copper Energy (E) 23.2% 3.9% -43.4% 77.9% 29.6% -13.4% 4.4% -8.3% -14.4% -24.5% -7.1% -1.8% Energy (E) Gold (E) Metals Iron Ore Metals Iron Ore Metals & Mining (E) Metals Energy (E) Cmdty. Metals Metals & Mining (E) Energy (E) Metals & Mining (E) 18.2% 19.7% -49.2% 76.9% 23.8% -17.1% 2.3% -8.5% -15.7% -24.7% -7.3% -4.2% Gold (E) Cmdty. Crude Oil Gold (E) Metals & Mining (E) Gold (E) Energy (E) Cmdty. Cmdty. Copper Copper Crude Oil 16.6% 11.1% -53.5% 32.5% 22.4% -17.4% -.1% -9.6% % -8.8% -4.9% Crude Oil Copper Copper Energy (E) Cmdty. Copper Cmdty. Meta ls & Mining (E) Metals & Mining (E) Crude Oil Cmdty. Iron Ore. 5.5% % 16.7% -2.8% -1.1% % -3.5% -1.5% -5.7% Cmdty. Metals Metals & Mining (E) Gold Crude Oil Metals Crude Oil Gold Crude Oil Iron Ore Crude Oil Cmdty % - 8.3% % 24.4% 15.1% % - 7.1% % % % % - 7.5% Note: Iron Ore data unavailable prior to 29. Cmdty. Energy (E) Metals & Mining (E) Gold (E) Gold (E) Iron Ore Metals & Mining (E) Iron Ore Gold (E) 18.7% 9.1% % % - 5.8% % % - 7.9% 61 Source: Bloomberg, Dow Jones, MSCI, Standard and Poor s, J.P. Morgan Asset Management. (E) represents equity indices, while the rest represent spot price indices. Based on Crude Spot (WTI Cushing) (Crude Oil), LME Copper 3-Month Futures (Copper), Iron Ore Delivered to Qingdao China 62% Ferrous Content (USD/dry metric ton) (Iron Ore), Gold Spot (Gold), London Metal Exchange (LME) LMEX Metals Index (Metals), MSCI AC Metals and Mining Index (Metals & Mining (E)), MSCI AC Energy (Energy (E)), HSBC Global Mines Gold Mines Index (Gold (E)) and DJ UBS Commodity Index (Cmdty.). 1-yr data are used to calculate annualized returns (Ann. Ret.). These returns reflect the period from 31/12/5 31/12/15, except for Iron Ore where returns reflect the period from 31/5/9 31/12/15 due to data availability.

62 Commodities: Oil supply and demand dynamics GTM Asia 62 Brent crude and WTI prices USD/bbl Brent crude oil Global petroleum and other liquids supply and demand Annual change, million barrels per day 4 EIA forecast 2 WTI crude oil -2-4 World consumption World production Net demand* '9 '1 '11 '12 '13 '14 '15 '16 Global crude breakeven cost curve Production cost 213, USD/bbl Middle East Other conventionals Other offshores Production capacity, million barrels per day Heavy oils Russia North Sea Deepwater Canadian oil sands U.S. shale/ light oil Arctic Source: (Top left) FactSet, J.P. Morgan Asset Management. (Top right) EIA, J.P. Morgan Asset Management. (Bottom) Deloitte MarketPoint, IMF, Reuters, J.P. Morgan Asset Management. *Net demand is world consumption minus world production. 62

63 Commodities: Oil price s impact on emerging markets GTM Asia 63 Oil imports Net imports (imports minus exports) as % of GDP, 214 IMF estimates Thailand Korea Singapore Turkey Taiwan Hong Kong Hungary Philippines India South Africa Indonesia New Zealand China Brazil Australia Mexico Malaysia Vietnam Iran Russia UAE Saudi Arabia -39.7% Asia Pacific Selected EM countries -27.1% % -4.4% -.6% -.9% 3.3% 2.2% 2.2% 1.6%.6% 7.3% 7.2% 6.9% 6.6% 6.4% 5.7% 5.2% % 4.2% Brent crude oil price and EM CPI inflation Year-over-year % change Brent crude oil price EM CPI inflation EM Asia CPI inflation 1-8 '2 '4 '6 '8 '1 '12 '14 '16 8% 6% 4% 2% Source: (All charts) FactSet, IMF, J.P. Morgan Asset Management. 63

64 Global households financial asset allocation by region GTM Asia 64 Households financial asset class breakdown Cash and deposits Fixed income Equities Mutual funds Insurance and pensions Other 3% 4% 4% 2% 32% 11% 14% 11% 22% 36% 29% 9% 26% 28% 54% 54% 57% 17% 31% 9% 1% 4% 9% 12% 7% 7% 2% 3% 1% United States Eurozone United Kingdom Australia 7% 2% 11% 7% 72% China 16% 7% 3 1% 45% 12% 36% 44% 42% 22% 8% 8% 5% Hong Kong Singapore Taiwan Korea 2% 21% 23% 17% 5% 9% 45% 64 Source: CEIC, Central Bank of the Republic of China (Taiwan), Goldman Sachs Global Investment Research, Hong Kong Securities and Futures Commission, OECD, Statistics Singapore, J.P. Morgan Asset Management. Eurozone includes Austria, Belgium, Estonia, Finland, France, Germany, Greece, Ireland, Italy, Luxembourg, Netherlands, Portugal, Slovakia, Slovenia and Spain due to data availability. Hong Kong data are based on Stock Investor Survey (26) by the Hong Kong Securities and Futures Commission, insurance are included in Others and pension are not included due to data availability. Equities and fixed income in total made up of 15% of Singapore households financial assets, simple 5/5 is taken for illustration purpose. China data are based on OECD, CEIC and Davies et al. (29) paper, which was provided by Goldman Sachs Global Investment Research. Total may not sum to 1 due to rounding.

65 Investors market timing Market timing of retail investors Rolling 3-month U.S. equity flows (USD billions) S&P 5 Index 12 2,2 1 Mutual fund + ETF flows S&P 5 2, GTM Asia 65 S&P 5 cumulative price return since 198* Hypothetical investment of $1, Implied compounding loss 2,, Actual loss from missing days 184, ,8 1,6 1,6, 11, ,219 94,69 1,83, ,4 1,2 1,2, 8, 1,893,586 1,697,53 45,465 75,781 11, , 8 4, 1,159,92 913,737 78, '95 '97 '99 '1 '3 '5 '7 '9 '11 '13 ' Stay invested Missed top 1 day Missed top 5 days Under different scenarios Missed top 1 days Missed top 15 days Source: (Left) FactSet, Investment Company Institute (ICI), Standard & Poor s, J.P. Morgan Asset Management. (Right) FactSet, Standard & Poor s, J.P. Morgan Asset Management. *More than 9, trading days used to calculate the total cumulative price return of S&P 5 since 1/1/8. 65

66 Volatility and correlation GTM Asia 66 Equity (VIX)* and Fixed Income (MOVE)** Index 9 VIX Dot com bust Post dot com Global financial crisis QE era MOVE Post QE era '99 '1 '3 '5 '7 '9 '11 '13 '15 Weekly rolling 6-month correlation of equities and sovereign bonds.8 Stocks and bonds moving.5 in the same direction S&P 5 / U.S. 1-year Treasury MSCI World / G4 1-year sovereign bonds*** Stocks and bonds moving -1. in the opposite direction '99 '1 '3 '5 '7 '9 '11 '13 '15 66 Source: (Top) Bloomberg, FactSet, J.P. Morgan Asset Management. (Bottom) FactSet, MSCI, S&P, J.P. Morgan Asset Management. *The VIX-CBOE Volatility Index measures market expectations of near-term volatility conveyed by S&P 5 Index (SPX) option prices. **The MOVE-Merrill Lynch Option Volatility Index is a blended implied normal volatility for constant one-month at-the-money options on U.S. Treasuries. *** G4 1-year sovereign bond yields based on the U.S., UK, Germany and.

67 Annual returns and intra-year declines GTM Asia 67 MSCI AC Asia Pacific ex- intra-year declines vs. calendar year returns Despite average intra-year drops of -18% (median: -13%), annual returns are positive in 17 of 28 years Calendar year return Intra-year decline '88 '89 '9 '91 '92 '93 '94 '95 '96 '97 '98 '99 ' '1 '2 '3 '4 '5 '6 '7 '8 '9 '1 '11 '12 '13 '14 '15 Source: FactSet, MSCI, J.P. Morgan Asset Management. Returns are price returns based on MSCI AC Asia Pacific ex- Index in U.S. dollar terms. Intra-year decline is the largest peak to trough decline during the respective year. 67

68 Real return on cash and yields Average annual real deposit rate Based on respective country s deposit rate less year-over-year inflation* 6% GTM Asia YTD 3% -3% -6% 3.3% 2.5% 2.6% 1.8% 1.6%.9% 1.1% 1..3%.6%.6%.1%..3% -.1% -.4%. -.5% -1.2% -1.4% -2.6% -3.8% Korea Australia Taiwan China Thailand U.S. India Malaysia Singapore Hong Kong Real and nominal yields** 12% 8% 4% -4%.3% -.7% Nominal yield Real yield 1.4%.6% %.4% % 1.3% 1.4% 1.5% 1.5% 1.9% 2.8% 2.1% 2.9% 1.6% % 8.9% 1.9% 2.1% 2.1% 2.3% 1.8% 1.5% 7.7% 2.5% 6.3% 2.5% 2.9% 2.9% 3.3% 3.4% Canada Germany France Taiwan Australia Korea China Italy UK Russia Indonesia U.S. Spain Turkey India Thailand Mexico South Africa 9.8% 5.2% 68 Source: (Top) Bloomberg, FactSet, J.P. Morgan Asset Management. (Bottom) FactSet, J.P. Morgan Asset Management. *Inflation based on the IMF s April 215 World Economic Outlook. **Real yield based on the last 12-month average CPI for each respective country. Nominal yields are the 1-year government bond yield for each respective country.

69 Global and Asian retirement trends GTM Asia 69 Perceived retirement savings shortfall # of years Years of savings expected to last after retirement 25 Years of perceived savings shortfall after retirement Aging population % of population over % % % 1 5% Korea Australia China Singapore Hong Kong Taiwan* 1 Preference on benefit allotment % of respondents 8 Monthly payments Lump sum payment Singapore Hong Kong Korea Taiwan China 69 Source: (Left) Based on HSBC s The Future of Retirement: A New Reality, with respondents from Australia, Brazil, Canada, China, Egypt, France, Hong Kong, India, Malaysia, Mexico, Singapore, Taiwan, UAE, United Kingdom and United States. It is based on the number of years people expect their savings to last after retirement and how many years of perceived savings shortfall is needed after their savings are all consumed. (Top right) National Development Council of Taiwan (NDC), UN, J.P. Morgan Asset Management. *All data from UN except Taiwan from NDC. (Bottom right) Response to the CSIS survey of non-retired respondents on their preference of how the benefit should be paid when they retire. Total does not sum up to 1 as some respondents did not see a change.

70 2, 1,6 Fund flows Cumulative global flows* into stock & bond funds USD billions, includes both mutual funds and ETFs since GTM Asia 7 Monthly global fund flows** USD billions, difference between equity and bond mutual fund flows Equities exceed bonds 11/215: USD -16bn 1,2 Global stocks -5 Bonds -75 exceed -1 equities '9 '1 '11 '12 '13 '14 ' Global bonds Net foreign equity flows*** into Asian stock market USD billions, net foreign equity flow Q '3 '5 '7 '9 '11 '13 '15-6 India Indonesia Philippines Korea Taiwan Thailand 7 Source: (Left and top right) Investment Company Institute (ICI), J.P. Morgan Asset Management. ICI data are subject to periodic revisions. (Bottom right) Bloomberg, J.P. Morgan Asset Management. *Data only incorporates U.S.-domiciled funds, which includes both mutual funds and ETFs as of 3/11/215. **Data only incorporates U.S.-domiciled funds, which includes mutual funds, but excludes ETFs as of 3/11/215. ***Equity flows are defined as net equity purchase (non-derivatives, non-etfs) by foreign investors registered in stock exchange in individual country, except for Taiwan, which includes ETFs.

71 J.P. Morgan Asset Management Index Definitions GTM Asia All indexes are unmanaged and an individual cannot invest directly in an index. Index returns do not include fees or expenses. The S&P 5 Index is widely regarded as the best single gauge of the U.S. equities market. This world-renowned index includes a representative sample of 5 leading companies in leading industries of the U.S. economy. Although the S&P 5 Index focuses on the large-cap segment of the market, with approximately 75% coverage of U.S. equities, it is also an ideal proxy for the total market. An investor cannot invest directly in an index. The Tokyo Stock Price Index ('TOPIX') is a composite index of all common stocks listed on the First Section of Tokyo Stock Exchange (TSE).The index is basically a measure of the changes in aggregate market value of TSE common stocks. The base for the index is the aggregate market value of its component stocks as of the close on January 4, The aggregate market value is calculated by multiplying the number of listed shares of each component stock by its price and totaling the products derived there from. The Bombay Exchange Sensitive Index ( SENSEX), first compiled in 1986, was calculated on a "Market Capitalization-Weighted" methodology of 3 component stocks representing large, well-established and financially sound companies across key sectors. The base year of SENSEX was taken as SENSEX today is widely reported in both domestic and international markets through print as well as electronic media. It is scientifically designed and is based on globally accepted construction and review methodology. Since September 1, 23, SENSEX is being calculated on a free-float market capitalization methodology. The Korea Composite Stock Price Index ( KOSPI) is market capitalization based index on all common stocks listed on the Stock Market Division of the Korea Exchange (KRX) and excludes preferred stocks. The stock price index is calculated using the actual price traded on the market and not the base price used for market management such as establishment of price change limits. When no market price is available for issues that are not being traded or have halted trading, the latest closing price is used. KOSPI was a assigned a base index of 1 set to January 4, 198. The China Shenzhen Composite Index is an actual market-cap weighted index that tracks the stock performance of all the A-share and B-share lists on Shenzhen Stock Exchange. The index was developed on April 3, 1991 with a base price of 1. The MSCI EAFE (Europe, Australia, Far East) Net Index is recognized as the pre-eminent benchmark in the United States to measure international equity performance. It comprises 21 MSCI country indexes, representing the developed markets outside of North America. The MSCI Emerging Markets Index SM is a free float-adjusted market capitalization index that is designed to measure equity market performance in the global emerging markets. As of June 27, the MSCI Emerging Markets Index consisted of the following 25 emerging market country indices: Argentina, Brazil, Chile, China, Colombia, Czech Republic, Egypt, Hungary, India, Indonesia, Israel, Jordan, Korea, Malaysia, Mexico, Morocco, Pakistan, Peru, Philippines, Poland, Russia, South Africa, Taiwan, Thailand, and Turkey. The MSCI ACWI (All Country World Index) Index is a free float-adjusted market capitalization weighted index that is designed to measure the equity market performance of developed and emerging markets. As of June 29 the MSCI ACWI consisted of 45 country indices comprising 23 developed and 22 emerging market country indices. The following MSCI Total Return Indices SM are calculated with gross dividends: This series approximates the maximum possible dividend reinvestment. The amount reinvested is the dividend distributed to individuals resident in the country of the company, but does not include tax credits. The MSCI Europe Index SM is a free float-adjusted market capitalization index that is designed to measure developed market equity performance in Europe. As of June 27, the MSCI Europe Index consisted of the following 16 developed market country indices: Austria, Belgium, Denmark, Finland, France, Germany, Greece, Ireland, Italy, the Netherlands, Norway, Portugal, Spain, Sweden, Switzerland and the United Kingdom. The MSCI Pacific Index SM is a free float-adjusted market capitalization index that is designed to measure equity market performance in the Pacific region. As of June 27, the MSCI Pacific Index consisted of the following 5 Developed Market countries: Australia, Hong Kong,, New Zealand, and Singapore. The MSCI Europe ex UK Index SM is a free float-adjusted market capitalization weighted index that is designed to measure the equity market performance of the developed markets in Europe, excluding the United Kingdom. The MSCI Europe ex UK Index consists of the following 15 developed market country indices: Austria, Belgium, Denmark, Finland, France, Germany, Greece, Ireland, Italy, the Netherlands, Norway, Portugal, Spain, Sweden, and Switzerland. The MSCI Pacific ex Index SM is a free float-adjusted market capitalization index that is designed to measure equity market performance in the Pacific region, excluding. As of June 27, the MSCI Pacific Index consisted of the following 4 Developed Market countries: Australia, Hong Kong, New Zealand, and Singapore. The MSCI USA Index SM is designed to measure the performance of the large and mid cap segments of the U.S. market. With 586 constituents, the index covers approximately 84% of the free float-adjusted market capitalization in the U.S.. The MSCI USA Index was launched on Dec ember 31, The MSCI China Index SM captures large and mid cap representation across China H shares, B shares, Red chips and P chips. With 148 constituents, the index covers about 84% of this China equity universe. The MSCI China Index was launched on December 31, The MSCI Indonesia Index SM is designed to measure the performance of the large and mid cap segments of the Indonesian market. With 25 constituents, the index covers about 84% of the Indonesian equity universe. The MSCI Indonesia Index was launched on December 31, 199. The MSCI Korea Index SM is designed to measure the performance of the large and mid cap segments of the South Korean market. With 15 constituents, the index covers about 84% of the Korean equity universe. The MSCI Korea Index was launched on December 31, The MSCI India Index SM is designed to measure the performance of the large and mid cap segments of the Indian market. With 71 constituents, the index covers about 84% of the Indian equity universe. The MSCI India Index was launched on December 31, The MSCI Index SM is designed to measure the performance of the large and mid cap segments of the market. With 315 constituents, the index covers approximately 84% of the free float-adjusted market capitalization in. The MSCI Index was launched on December 31, The MSCI Hong Kong Index SM is designed to measure the performance of the large and mid cap segments of the Hong Kong market. With 42 constituents, the index covers approximately 84% of the free floatadjusted market capitalization of the Hong Kong equity universe. The MSCI Hong Kong Index was launched on December 31, The MSCI Taiwan Index SM is designed to measure the performance of the large and mid cap segments of the Taiwan market. With 113 constituents, the index covers approximately 84% of the free float-adjusted market capitalization in Taiwan. The MSCI Taiwan Index was launched on December 31, West Texas Intermediate (WTI) is the underlying commodity for the New York Mercantile Exchange's oil futures contracts. The Dow Jones-UBS Commodity Index is composed of futures contracts on physical commodities and represents nineteen separate commodities traded on U.S. exchanges, with the exception of aluminum, nickel, and zinc. The Dow Jones-UBS Commodity Subindexes represent commodity groups and sectors, as well as single commodities, that make up the Dow Jones-UBS Commodity Index. The subindexes track exchange-traded futures of physical commodities, and the commodity groups and sectors, like in the case of the broad index, are weighted to account for economic significance and market liquidity. The different subindexes are Energy, Livestock, Grains, Industrial Metals, and Precious Metals. 71

72 J.P. Morgan Asset Management Index Definitions, Risks and Disclosures GTM Asia The Euro Stoxx 6 Index represents large, mid and small capitalization companies across 18 European countries. The Barclays High Yield Index covers the universe of fixed rate, non-investment grade debt. Pay-in-kind (PIK) bonds, Eurobonds, and debt issues from countries designated as emerging markets (e.g., Argentina, Brazil, Venezuela, etc.) are excluded, but Canadian and global bonds (SEC registered) of issuers in non- EMG countries are included. Original issue zeroes, step-up coupon structures, and 144-As are also included. The Barclays 1-3 Month U.S. Treasury Bill Index includes all publicly issued zero-coupon U.S. Treasury Bills that have a remaining maturity of less than 3 months and more than 1 month, are rated investment grade, and have $25 million or more of outstanding face value. In addition, the securities must be denominated in U.S. dollars and must be fixed rate and non convertible. The Barclays Corporate Bond Index is the Corporate component of the U.S. Credit index. The Barclays TIPS Index consists of Inflation-Protection securities issued by the U.S. Treasury. The J.P. Morgan EMBI Global Index includes U.S. dollar denominated Brady bonds, Eurobonds, traded loans and local market debt instruments issued by sovereign and quasi-sovereign entities. The J.P. Morgan GBI-EM Global Diversified consists of regularly traded, liquid fixed-rate, domestic currency government bonds to which international investors can gain exposure. The weightings among the countries are more evenly distributed within this index. The J.P. Morgan Corporate Emerging Markets Bond Index (CEMBI): The CEMBI tracks total returns of US dollar-denominated debt instruments issued by corporate entities in Emerging Markets countries, and consists of an investable universe of corporate bonds. Both indices are also available in Diversified version. The J.P. Morgan CEMBI Index is a USD denominated external debt index tracking bond issued by sovereigns and quasi-sovereigns in the developing nations. The J.P. Morgan Domestic High Yield Index is designed to mirror the investable universe of the U.S. dollar domestic high yield corporate debt market. The VIX-CBOE Volatility Index measures market expectations of near-term volatility conveyed by S&P 5 Index (SPX) option prices. The MOVE-Merrill Lynch Option Volatility Index is a blended implied normal volatility for constant onemonth at-the-money options on U.S. Treasuries. Price to forward earnings is a measure of the price-to-earnings ratio (P/E) using forecasted earnings. Price to book value compares a stock's market value to its book value. Price to cash flow is a measure of the market's expectations of a firm's future financial health. Price to dividends is the ratio of the price of a share on a stock exchange to the dividends per share paid in the previous year, used as a measure of a company's potential as an investment. Bonds are subject to interest rate risks. Bond prices generally fall when interest rates rise. The price of equity securities may rise, or fall because of changes in the broad market or changes in a company s financial condition, sometimes rapidly or unpredictably. These price movements may result from factors affecting individual companies, sectors or industries, or the securities market as a whole, such as changes in economic or political conditions. Equity securities are subject to stock market risk meaning that stock prices in general may decline over short or extended periods of time. Small-capitalization investing typically carries more risk than investing in well-established "blue-chip" companies since smaller companies generally have a higher risk of failure. Historically, smaller companies' stock has experienced a greater degree of market volatility than the average stock. Mid-capitalization investing typically carries more risk than investing in well-established "blue-chip" companies. Historically, mid-cap companies' stock has experienced a greater degree of market volatility than the average stock. Real estate investments may be subject to a higher degree of market risk because of concentration in a specific industry, sector or geographical sector. Real estate investments may be subject to risks including, but not limited to, declines in the value of real estate, risks related to general and economic conditions, changes in the value of the underlying property owned by the trust and defaults by borrower. International investing involves a greater degree of risk and increased volatility. Changes in currency exchange rates and differences in accounting and taxation policies can raise or lower returns. Also, some markets may not be as politically and economically stable as other nations. Investments in emerging markets can be more volatile. The normal risks of international investing are heightened when investing in emerging markets. In addition, the small size of securities markets and the low trading volume may lead to a lack of liquidity, which leads to increased volatility. Also, emerging markets may not provide adequate legal protection for private or foreign investment or private property. Investments in commodities may have greater volatility than investments in traditional securities, particularly if the instruments involve leverage. The value of commodity-linked derivative instruments may be affected by changes in overall market movements, commodity index volatility, changes in interest rates, or factors affecting a particular industry or commodity, such as drought, floods, weather, livestock disease, embargoes, tariffs and international economic, political and regulatory developments. Use of leveraged commodity-linked derivatives creates an opportunity for increased return but, at the same time, creates the possibility for greater loss. Derivatives may be riskier than other types of investments because they may be more sensitive to changes in economic or market conditions than other types of investments and could result in losses that significantly exceed the original investment. The use of derivatives may not be successful, resulting in investment losses, and the cost of such strategies may reduce investment returns. There is no guarantee that the use of long and short positions will succeed in limiting an investor's exposure to domestic stock market movements, capitalization, sector swings or other risk factors. Investing using long and short selling strategies may have higher portfolio turnover rates. Short selling involves certain risks, including additional costs associated with covering short positions and a possibility of unlimited loss on certain short sale positions. 72

73 J.P. Morgan Asset Management Risks and Disclosures GTM Asia The Market Insights program provides comprehensive data and commentary on global markets without reference to products. It is designed to help investors understand the financial markets and support their investment decision making (or process). The program explores the implications of economic data and changing market conditions for the referenced period and should not be taken as advice or recommendation. The views contained herein are not to be taken as an advice or a recommendation to buy or sell any investment in any jurisdiction, nor is it a commitment from J.P. Morgan Asset Management or any of its subsidiaries to participate in any of the transactions mentioned herein. Any forecasts, figures, opinions or investment techniques and strategies set out are for information purposes only, based on certain assumptions and current market conditions and are subject to change without prior notice. All information presented herein is considered to be accurate at the time of writing, but no warranty of accuracy is given and no liability in respect of any error or omission is accepted. This material does not contain sufficient information to support an investment decision and it should not be relied upon by you in evaluating the merits of investing in any securities or products. In addition, users should make an independent assessment of the legal, regulatory, tax, credit, and accounting implications and determine, together with their own professional advisers, if any investment mentioned herein is believed to be suitable to their personal goals. Investors should ensure that they obtain all available relevant information before making any investment. It should be noted that the value of investments and the income from them may fluctuate in accordance with market conditions and taxation agreements and investors may not get back the full amount invested. Both past performance and yield may not be a reliable guide to future performance. For China, Australia, Vietnam and Canada distribution, please note this communication is for intended recipients only. In Australia for wholesale clients use only and in Canada for institutional clients use only. EMEA Recipients: You should note that if you contact J.P. Morgan Asset Management by telephone those lines may be recorded and monitored for legal, security and training purposes. You should also take note that information and data from communications with you will be collected, stored and processed by J.P. Morgan Asset Management in accordance with the EMEA Privacy Policy which can be accessed through the following website Prepared by: David Kelly, Tai Hui, Yoshinori Shigemi, Marcella Chow, Kerry Craig, Jasslyn Yeo, Ian Hui, Akira Kunikyo, Ben Luk and Anthony Tsoi. MI-GTMASIA-E JANUARY216 Copyright 216 JPMorgan Chase & Co. All rights reserved. Brazilian recipients: It shall be the recipient s sole responsibility to verify his / her eligibility and to comply with all requirements under applicable legal and regulatory regimes in receiving this communication and in making any investment. All case studies shown are for illustrative purposes only and should not be relied upon as advice or interpreted as a recommendation. Results shown are not meant to be representative of actual investment results. J.P. Morgan Asset Management is the brand for the asset management business of JPMorgan Chase & Co. and its affiliates worldwide. This communication is issued by the following entities: in Brazil by Banco J.P. Morgan S.A. (Brazil); in the United Kingdom by JPMorgan Asset Management (UK) Limited; in other EU jurisdictions by JPMorgan Asset Management (Europe) S.à r.l.; in Switzerland by J.P. Morgan (Suisse) SA; in Hong Kong by JF Asset Management Limited, JPMorgan Funds (Asia) Limited or JPMorgan Asset Management Real Assets (Asia) Limited; in India by JPMorgan Asset Management India Private Limited; in Singapore by JPMorgan Asset Management (Singapore) Limited or JPMorgan Asset Management Real Assets (Singapore) Pte. Ltd; in Taiwan by JPMorgan Asset Management (Taiwan) Limited; in by JPMorgan Asset Management () Limited which is a member of the Investment Trusts Association,, the Investment Advisers Association, Type II Financial Instruments Firms Association and the Securities Dealers Association and is regulated by the Financial Services Agency (registration number Kanto Local Finance Bureau (Financial Instruments Firm) No. 33 ); in Korea by JPMorgan Asset Management (Korea) Company Limited; in Australia to wholesale clients only as defined in section 761A and 761G of the Corporations Act 21 (Cth) by JPMorgan Asset Management (Australia) Limited (ABN ) (AFSL ); in Canada by JPMorgan Asset Management (Canada) Inc.; and in the United States by JPMorgan Distribution Services Inc., member FINRA/SIPC.; and J.P. Morgan Investment Management Inc. 73