Market Snapshot. Global Stocks Rally as Yellen Defends Easy Money Policies. Friday, 15 November 2013

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1 Market Snapshot Friday, 15 November 2013 Global Stocks Rally as Yellen Defends Easy Money Policies WHAT S NEWS EQUITY MARKETS Fed nominee Janet Yellen defends monetary policy and does not give timeline for taper S&P % US jobless claims fall, but are above analyst estimates Euro area GDP increases for 2 nd straight quarter after 18 months of consecutively negative GDP numbers DJ Euro Stoxx 600 Nikkei % 2.1% THE DAY AHEAD Singapore unveils GDP numbers for 3Q US data on tap Empire State manufacturing, inventories, industrial production MSCI Asia ex-japan MSCI Emerging Markets 0.9% 1.2% DEVELOPED MARKET EQUITIES Fresh Highs on Wall Street as Yellen Defends Fed Policy US stocks rallied and sent the S&P 500 and the Dow Jones Industrial Average to fresh records for the second straight day, after Federal Reserve nominee Janet Yellen indicated she would not alter the easy money course set by predecessor and current chairman Ben Bernanke. Apart from stocks, Treasury bonds rallied, gold rose and the dollar fell. Ms. Yellen, in testimony to Congress, said she saw no equity bubble (all three major US stock indices are up more than 20% year-to-date). She defended the USD85 billion a month programme, known as quantitative easing. She did not say when the Fed plans to reduce the amount, but said it would not continue indefinitely. (*more below in Currencies) It s important not to remove support, especially when the recovery is fragile and the tools available to monetary policy, should the economy falter, are limited, given that short-term interest rates are at zero, Ms. Yellen said, according to Bloomberg News. In data news, weekly jobless fell 2,000 to 339,000 from a revised 341,000 the week before. A survey of analysts by Bloomberg News called for a drop to 330,000. Also, the Commerce Department said the September trade deficit widened 8% on-month to USD41.8 billion. Europe equities advanced as traders bet monetary stimulus measures would continue in the US. Also helping was Euro area GDP numbers, which showed growth, but at a glacial pace. 3Q GDP ticked up 0.1%, in line with estimates, after 0.3% growth a quarter earlier and six straight quarters of contraction in the 17-nation economic bloc. The DJ Stoxx 600 added 0.8% while the UK FTSE 100 bounced 0.5%. Japan stocks finished the day up as hedge funds ploughed back into the Japanese market on speculation of a weaker yen. Strong futures buying sent heavily indexed shares like Fast Retailing, Fanuc and KDDI up. Exporters like Tokyo Electron (+2.4%) and Kyocera (+2.3%) also benefitted from a strong dollar during the Asian trading day on Thursday. Shown in local currency terms, as of the last business day. US TREASURY YIELD CURVE 1M 3M 6M 1YR 2YR 3YR 5YR 7YR 10YR 30YR 1M 3M 6M 1YR 2YR 3YR 5YR 7YR 10YR 30YR The curve shows the yield to maturity of current US bills, notes and bonds. All data is as of the close of the last business day. CALENDAR One year ago Event Period Survey Prior IN Wholesale Prices (YoY) Oct 6.90% 6.46% US Empire Manufacturing Nov US Industrial Production (MoM) Oct 0.10% 0.60% US Wholesale Inventories (MoM) Sep 0.40% 0.50% SI GDP (YoY) 3Q F 5.10% 5.10% Source: Bloomberg, DBS Group Research Last Close 4.0% 5.0% 3.0% 4.0% 3.0% 2.0% 2.0% 1.0% 1.0% 0.0% 0.0%

2 Market Snapshot 15 November ASIA EQUITIES Asia Bourses Rejoice on China, Fed Expectations China equities staged a rally, led by healthcare and publishing-related stocks. The SHCOMP closed 0.6% up on promises of reform from China s top leaders at the end of their four-day policymaking meeting. There was no specific mention of how these industries would get its boost but local media are speculating these, along with the defence sector, will get policy boosts. Banking stocks went the opposite way, with the statement appearing to indicate the government s continued involvement in economic reform. Hong Kong equities joined Shanghai higher as investors jumped back in looking for profit and on expectations of more of the same from the US Federal Reserve following the release of prepared testimony from Janet Yellen. The Hang Seng Index ended 0.8% up, a day after falling to a 10- week low. China Internet giant Tencent was the biggest gainer on the HSI, rising 4.6%. Singapore s STI gained 0.8% as prepared remarks from likely Fed chair Janet Yellen gave the index the push it needed. Commodity supplier Olam International, once the target of short-seller Muddy Waters, gained 1.7% after it said net income gained 5.7% for the first quarter of its financial year. Indonesia s JCI led Asian gainers following Yellen s prepared remarks. Indonesian markets have whipsawed over when and by how much the US Federal Reserve will reduce its asset-purchase programme by. Emerging markets stand to benefit from trickle-down flows from the bond-buying programme. The JCI ended 1.5% higher after four straight days of losses. India stocks rose 1% joining its Asian counterparts in toasting testimony from Janet Yellen, the likely successor to Fed chairman Ben Bernanke. Also helping were comments from Reserve Bank of India governor Raghuram Rajan who said New Delhi was now better prepared to handle a trimming of the Fed s easy money policies when it decides it is time to do so. Mr. Rajan also said India s current account deficit would narrow to 3% this year from 5% in FIXED INCOME US Treasuries leapt after Janet Yellen, the anointed successor to outgoing Federal Reserve chairman Ben Bernanke, said there was no reason to be in a hurry to withdraw its easy money programme. COMMODITIES Oil closed slightly lower after weekly inventory numbers from the US showed a larger-than-expected increase in crude stockpiles. Inventories rose by 2.6 million barrels last week, the US Energy Information Administration said. Analysts surveyed by The Wall Street Journal were expected a 1 million barrel increase. In other news, the Paris-based International Energy Agency warned a seasonal demand upswing could put near-term pressure on prices. Still, it said the world was reasonably well supplied from surging production in the US. US oil output beat imports for the first time in nearly two decades. It also lowered oil demand expectations from both the US and China the two largest consumers of crude. Gold pushed higher after Janet Yellen s testimony appeared to indicate the Fed was prepared to keep its loose monetary policy in its current shape for the time being. Source: Bloomberg, DBS Group Research and Vickers (DBS), Dow Jones Newswires, Reuters, Agence France-Presse Equity Markets Returns of equity indexes around the world, in local currency terms. Index Close Overnight YTD US DJIA % 21.15% S&P % 25.55% NASDAQ % 31.57% Europe Euro Stoxx % 15.29% Germany DAX % 20.19% France CAC % 17.66% UK FTSE % 13.03% Asia MSCI AxJ % -1.75% Japan Nikkei % 43.11% China SHCOMP % -7.43% Hong Kong Hang Seng % -0.03% Taiwan TWSE % 5.66% South Korea Kospi % -1.48% Indonesia JCI % 1.17% Malaysia KLCI % 5.64% Singapore STI % 0.76% India Sensex % 5.01% Emerg. Mkt MSCI EM % -6.01% Government Bonds Benchmark yields of major 10-year government bonds. Latest yield Previous yield Change (bps) US 2.69% 2.70% Germany 1.70% 1.74% Japan 0.60% 0.60% 0.10 China 4.47% 4.42% 5.00 Taiwan 1.72% 1.72% 0.20 South Korea 3.58% 3.56% 2.00 Indonesia 8.42% 8.59% Singapore 2.29% 2.30% India 9.02% 8.92% 9.70 Commodity futures Prices of one-month futures contracts, grouped by commodity type. Close 1-day change 1-yr high 1-yr low WTI crude ($/bbl) % Gold ($/oz.) % Copper ($/ton) % Corn (cents/bu.) % Soybean (cents/bu.) % Wheat (cents/bu.) % Coffee (cents/lb) % Sugar (cents/lb) % Source: Bloomberg, as at the close of the last business day. O/N refers to overnight. YTD refers to year-to-date returns.

3 Market Snapshot 15 November CURRENCIES The USD was off lows in early Asian trade Friday morning as Fed nominee Janet Yellen said the bond-buying programme, known as Quantitative Easing, would not continue indefinitely. Yellen also said the Fed plans to keep interest rates near zero even if they decide to reduce the amount from the USD85 billion currently. The Federal Reserve s bond-buying programme is typically bad for the dollar. The yen slipped after the government said 3Q GDP growth slowed to an annualised 1.9% in 3Q from 3.8% the previous quarter. Next up for the JPY: the two-day Bank of Japan policy meeting next week and weak GDP data suggests some move from the central bank. Source: Bloomberg, DBS Group Research and Vickers (DBS), Dow Jones Newswires, Reuters, Agence France-Presse FX Round-up Currencies as of New York close. Last Overnight change Day high Day low EUR/USD % GBP/USD % USD/JPY % AUD/USD % NZD/USD % USD/CAD % USD/SGD % AUD/SGD % NZD/SGD % GBP/SGD % EUR/SGD % EUR/AUD % AUD/NZD % XAU/USD % Source: Bloomberg. SGD Against Major Currencies USD/SGD AUD/SGD NZD/SGD GBP/SGD EUR/SGD 86 May-13 Jun-13 Jul-13 Aug-13 Sep-13 Oct-13 Nov-13 USD Against Major Currencies EUR/USD GBP/USD USD/JPY AUD/USD NZD/USD 86 May-13 Jun-13 Jul-13 Aug-13 Sep-13 Oct-13 Nov-13 Source: Bloomberg. Technical Summary Short-term technical readings with a two-week horizon. All figures are as of the last business day. Currency Short term Direction Support 1 Support 2 Resistance 1 Resistance 2 EUR/USD Range GBP/USD Range USD/JPY Range AUD/USD Range NZD/USD Range USD/CAD Range USD/SGD Range AUD/SGD Range NZD/SGD Range GBP/SGD Range EUR/SGD Bearish EUR/AUD Range AUD/NZD Range XAU/USD Bearish Source: DBS CIO Office. Note: These are short-term technical readings with a two-week horizon. All figures are as of last business day.

4 Market Snapshot 15 November Insights Feature Japan: Sticking to Growth Forecasts Japan s 3Q GDP came in slightly better-than-expected at 1.9% onquarter seasonally adjusted annual rate basis, beating estimates for a 1.7% increase. Compared to the 3.8% growth in 2Q and 4.3% in 1Q, this is still a notable slowdown. Private consumption growth fell significantly to 0.4% from 2.3% in the previous quarter. Exports growth also dropped sharply to -2.4% from 12.2%. The bright spot in 3Q GDP was mainly private residential investment, which jumped to 11.3% from 1.6% in the preceding quarter. Public investment also remains strong at 28.7%. As the 3Q slowdown is roughly in line with expectations, we maintain full-year GDP forecasts at 1.8% for 2013 and 1.4% for This implies a temporary growth rise to 3% in 4Q13-1Q14 (as consumers bring forward spending ahead of next April s tax hike), a 3% contraction in 2Q14 and a moderate 1% growth in 2H14. Japan GDP Growth & Contributions The 3Q slowdown corroborates our view that the effects of monetary policy easing are waning. The Nikkei and the JPY have been moving sideways over the last six months. The dissipation of wealth effects and the falling support of currency depreciation explained why private consumption and export growth both lost momentum in 3Q. The strong rise in final demand (consumption and exports) in 1H-13 helped to boost private investment in recent months. As a slowdown in final demand has surfaced, the cyclical support to private investment is also expected to decrease in the next few quarters. Whether private investment can sustain strong growth would largely depend on structural factors, particularly the government s plans of constructing special economic zones and relaxing investment access. Source report: DBS Group Research. Daily Breakfast Spread. 14 November Summarised by DBS Group Wealth Management /CIO Office. Bond risk rating changes Effective Bond Name Issuer New Risk rating Existing Reason Information updated as of 14 November 2013.

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