Introducing the DBFX Commodity Indices

Transcription

1 Deutsche Bank Markets Research Global Commodities Special Report Date 25 September 2014 Introducing the DBFX Commodity Indices This report launches the Deutsche Bank FX Commodity Indices (DBFXCIs). These indices will track the average price of commodity exports for Australia, New Zealand and Canada. George Saravelos Strategist (+44) Arup Pal Tim Jordan Strategist Strategist (+91) (+61) arup.pal@db.com tim.jordan@db.com Our indices are daily, with the intent of offering a live insight into the terms of trade for each economy. The DBFXCIs closely track the respective central bank indices. The tickers are DBFXAUCI Index, DBFXNZCI Index, DBFXCACI Index for Australia, New Zealand and Canada respectively. To our knowledge our indices are unique for a number of reasons. First, our construction methodology is consistent across all currencies: we use relative export shares of each country s export basket. This makes the indices comparable between them. Second, our index frequency is daily, which provides a substantial advantage over the lower-frequency central bank or other privatesector equivalents. Finally, our indices go beyond futures-based commodities to include non-exchange traded prices. As a result, they provide a more accurate representation of trends in these countries export baskets. The table below provides details on our indices, and the rest of the report describes our construction methodology. The Deutsche Bank Commodity Currency Indices Deutsche Bank Central Bank Deutsche Bank Central Bank Deutsche Bank Central Bank Bloomberg Ticker DBFXCACI Index BCCINTOT Index DBFXAUCI Index AURBUS$ Index DBFXNZCI Index n/a No. of Commodities 21 9* Frequency Daily Weekly Daily Monthly Daily Correlation with FX, since '10 64% 44% 22% 16% 41% Correlation with central bank index Canada Australia New Zealand 91% 94% 85%** Source: Deutsche Bank * There are 9 major chapters listed under the BCPI components information. Total number of commodities used in the Index is not disclosed by the BoC ** Correlation with the ANZ index Note: The correlations with FX are on changes and between the indices are on levels DISCLOSURES AND ANALYST CERTIFICATIONS ARE LOCATED IN APPENDIX 1. MCI (P) 148/04/2014.

2 Introduction In this report we introduce our proprietary Deutsche Bank FX Commodity Indices (DBFXCIs). Our motivation is simple: to provide market participants with daily indices that track the average price of commodity exports for major commodity-exporting economies. Our indices cover the $block currencies to start with AUD, NZD and CAD but we plan to expand to others. Last April we investigated the relationship between commodity prices and exchange rates. 1 We found evidence of causality from commodities to FX, but the relationships were restricted to a narrow list of commodities rather than broad commodity indices. Taking this into account, our aim here is not to provide near-term forecasting power for FX. Instead, we want to offer a live insight into the overall direction of the relative terms of trade for the commodity economies. Given the interaction between commodity prices, central bank reaction functions as well as trade accounts, commodity trends matter. To our knowledge the DBFXCIs are unique for a number of reasons. First, our construction methodology is consistent across all currencies: we use relative export shares of each country s export basket. Second, our index frequency is daily, which provides a substantial advantage over the lower-frequency central bank or other private-sector equivalents. Finally, our indices go beyond futures-based commodities to include non-exchange traded prices. As a result, they provide a more accurate representation of trends in these countries export baskets. The table below provides details on our indices, and the rest of the report describes our construction methodology. The DB Commodity Currency Indices Canada Australia New Zealand Deutsche Bank Central Bank Deutsche Bank Central Bank Deutsche Bank Central Bank Bloomberg Ticker DBFXCACI Index BCCINTOT Index DBFXAUCI Index AURBUS$ Index DBFXNZCI Index n/a No. of Commodities 21 9* Frequency Daily Weekly Daily Monthly Daily Correlation with FX, since 10 Correlation with central bank index 64% 44% 22% 16% 41% 91% 94% 85%** Source: Deutsche Bank * There are 9 major chapters listed under the BCPI components information. Total number of commodities used in the Index is not disclosed by the BoC ** Correlation with the ANZ index Note: The correlations with FX are on changes and between the indices are on levels 1 Arup Pal and George Saravelos, Can commodities predict currencies?, FX Special Report, April 2014 Page 2

3 Index Construction Any index requires the following to be decided prior to its construction: Granularity Component weights Data sources Formula to calculate the index value Index rebasing and/or reweighting Index Granularity We pick daily data granularity. For those price series where daily values aren t available, we update at the relevant frequency. Our motivation is driven by a desire to provide as live an index as possible. Index weights We weight our commodities by their share in a country s commodity export basket. This is a similar approach to the RBA commodity price index, but different from the Bank of Canada production-based index. We opt for the export-based approach as it is a better representation of a country s terms of trade, which in turn is the better way to measure the impact of commodity prices on a country s trade accounts and business cycle via income effects. The RBA provides sufficient granularity on the individual commodity weights of its index, allowing us to use these as our baseline weights. In contrast, no such equivalent exists for the Bank of Canada or the Reserve Bank of New Zealand. Here, we rely on disaggregated export data from national statistical authorities. We take yearly export data broken down into the most rudimentary level using 6 digit NAICS 2 codes and aggregate up into commodity-specific constituents. For example, export data for New Zealand include 21-subcategories of wood exports. We aggregate all of these into a single category. The component weights for our index are simply the fraction of $ notional of exports of the constituents over the $ value of total commodity exports. Employing this technique we come up with 21 components for Canada and Australia and 16 for New Zealand. The major commodities and indices are shown in Figures 2 through 6. Data sources Most of the prices have been sourced from Bloomberg or Reuters. We pick the commodity prices that we believe most accurately represent the underlying commodities in consultation with our economists and commodity experts. All prices are in US dollars. Information about the exact tickers and weights used are present in Appendix 1. Index formula The two most frequently used index approaches are the Paasche and Laspeyres methods. By construction, the former imparts an upward bias to the true evolution of prices whereas the later imparts a downward bias. To cover for these deviations there is a third Fisher 2 NAICS: North American Industry Classification System Page 3

4 index which is the geometric mean of the above two. The RBA uses the Laspeyres index which is also easier to maintain when component weightings change, so we opt for this. To account for the changing composition of the commodity export basket we re-calculate our weights and re-balance our index every 4 years. All our indices start from January 2010 based on 2009 export weights, and have been reweighted once based on 2013 export weights. Figure 1: DBFXCACI Index v/s USDCAD, inverted Figure 2: Constituent weights used in DBFXCACI Index 1.2 Canada Commodity Index 0.85 Coal 3% Others 8% USDCAD; rhs, inverted Potatoes 3% Potash 3% Wheat 3% Brent 4% WTI 26% % Jan 10 Jul 10 Jan 11 Jul 11 Jan 12 Jul 12 Jan 13 Jul 13 Jan 14 Jul Lumber 6% Nat gas 7% Pulp & Paper 8% Gold 8% WCC 18% Source: Deutsche Bank, Bloomberg Finance LP Source: Deutsche Bank, Bloomberg Finance LP Figure 3: DBFXAUCI Index v/s AUDUSD 1.3 Australia Commodity Index 1.2 AUDUSD, rhs Jan 10 Jul 10 Jan 11 Jul 11 Jan 12 Jul 12 Jan 13 Jul 13 Jan 14 Jul Figure 4: Constituent weights used in DBFXAUCI Index 2% Others 7% Beef and veal Copper 2% 3% Copper ore 3% Alumina 3% Wheat 3% Crude oil 6% LNG(e) 6% Gold 8% Thermal coal 8% Iron ore 33% Metallurgical coal 16% Source: Deutsche Bank, Bloomberg Finance LP, Thomson Reuters Source: Deutsche Bank, Bloomberg Finance LP, Thomson Reuters Page 4

5 Figure 5: DBFXNZCI Index v/s NZDUSD Figure 6: Constituent weights used in DBFXNZCI Index % Fats and oils 4% Butter 5% Others 15% Whole Milk 27% NZ Commodity Index 0.9 NZDUSD, rhs 0.8 Jan 10 Jul 10 Jan 11 Jul 11 Jan 12 Jul 12 Jan 13 Jul 13 Jan 14 Jul Cheese 6% Petro oils 6% Beef 8% Sheep 11% Wood 15% Source: Deutsche Bank, Bloomberg Finance LP Source: Deutsche Bank, Bloomberg Finance LP Recent Index Moves Residuals from the regression of our daily commodity indices against the relevant local currency show mean reversion around zero 3 confirming that we can use our indices to create a valuation model for the currency. Figure 7 shows that as per commodity price levels the Canadian dollar is undervalued at present while the aussie and the kiwi are more or less close to fair value versus their commodity price indices. Figure 7: Currency valuation using the local commodity prices overvaluation CAD AUD NZD Jan 10 undervaluation Apr 10 Jul 10 Oct 10 Jan 11 Apr 11 Jul 11 Source: Deutsche Bank, Bloomberg Finance LP, Thomson Reuters, RBA, Statistics Canada, Statistics New Zealand Oct 11 Jan 12 Apr 12 Jul 12 Oct 12 Jan 13 Apr 13 Jul 13 Oct 13 Jan 14 Apr 14 Jul 14 3 Verifying white noise like behavior Page 5

6 LNG(e) Beef and veal Copper ore Alumina Zinc Lead Nickel Lamb and mutton Copper Barley Wool Metallurgical coal Sugar Canola Cotton Wheat Thermal coal Gold Crude oil Iron ore Wool Zinc Gold Barley Alumina Sugar Canola Lead Iron ore Lamb and mutton Wheat LNG(e) Crude oil Copper Nickel Beef and veal Copper ore Metallurgical coal Cotton Thermal coal Potatoes Cattle Lumber Potash Nickel Lead Hogs Coal Copper Barley Corn Pulp & Paper Iron Canola Brent Gold Wheat Nat gas WCC WTI Canola Barley WTI Brent Gold Copper Pulp & Paper Cattle Nickel WCC Corn Hogs Nat gas Lead Potash Wheat Iron Potatoes Lumber Coal 25 September 2014 We next look at recent commodity moves and the impact on the indices. Oil prices, iron ore, and milk have accounted for the biggest drops in the Canadian, Australian and New Zealand commodity prices over the last three months. Canola has had the highest near-term correlation to CAD and wool for NZD and AUD. Finally we produce granger causality charts for each country [Figures 14 to 16] to distinguish causality from correlation. The granger causality statistic is calculated on the whole sample starting from Appendix A contains tables enlisting each constituent along with their index weights and data sources. Figure 8: Changes in individual commodity prices of Canada in the past 3 months 1.0% 0.5% 0.0% -0.5% -1.0% -1.5% -2.0% -2.5% -3.0% -3.5% -4.0% weighted 3m change in DBFXCACI constituents Figure 9: Correlation 4 between CAD and prices of Canada s major commodity exports 80% 60% 40% 20% 0% -20% -40% Correlation v/s CADUSD Last 3 months Last 1 year Source: Deutsche Bank, Bloomberg Finance LP, Statistics Canada Source: Deutsche Bank, Bloomberg Finance LP, Statistics Canada Figure 10: Changes in individual commodity prices of Australia in the past 3 months 2.0% 1.0% 0.0% -1.0% -2.0% -3.0% -4.0% -5.0% -6.0% weighted 3m change in DBFXAUCI constituents Figure 11: Correlation between AUD and prices of Australia s major commodity exports 100% Correlation v/s AUDUSD Last 3 months Last 1 year 80% 60% 40% 20% 0% -20% -40% Source: Deutsche Bank, Bloomberg Finance LP, Reserve Bank of Australia, Thomson Reuters Source: Deutsche Bank, Bloomberg Finance LP, Reserve Bank of Australia, Thomson Reuterss 4 Correlations are on weekly changes, so the 3 month window uses 13 points and the 1 year window uses 52 points Page 6

7 Beef Cheese Kiwi Fats & Oils WoodPulp Apple Wool Iron & non-alloy Milk Wood Rubber Butter Sheepmeat Dubai crude Whole Milk Wool Milk Dubai crude Apple Butter Sheepmeat Fats & Oils WMP Rubber WoodPulp Iron & non-alloy Beef Cheese Wood Kiwi 25 September 2014 Figure 12: Changes in individual commodity prices of New Zealand in the past 3 months 4.00% 3.00% 2.00% 1.00% 0.00% -1.00% -2.00% -3.00% -4.00% -5.00% -6.00% weighted 3m change in DBFXNZCI constituents Figure 13: Correlation between NZD and prices of New Zealand s major commodity exports 80% Correlation v/s NZDUSD Last 3 months Last 1 year 60% 40% 20% 0% -20% -40% Source: Deutsche Bank, Bloomberg Finance LP, Statistics New Zealand Source: Deutsche Bank, Bloomberg Finance LP, Statistics New Zealand Figure 14: Granger causality directions between the CAD and Canada s major commodities Figure 15: Granger causality directions between the AUD and Australia s major commodities Figure 16: Granger causality directions between the NZD and New Zealand s major commodities Decreasing weights from top in clockwise Nickel direction Lead Hogs WTI WCC Gold Pulp & Paper Decreasing weights from top in clockwise Nickel direction Zinc Lead Iron ore Metallurgical coal Thermal coal Gold Decreasing weights from top in clockwise Milk direction Rubber WMP Wood Sheepmeat Corn Barley Cattle Copper CADUSD Nat gas Lumber Brent Canola Sugar Barley Lamb and mutton AUDUSD LNG(e) Crude oil Wheat Alumina Apple Iron & non-alloy WoodPulp NZDUSD Beef Dubai crude Cheese Iron Canola Coal Potash Potatoes Wheat Cotton Wool Copper Copper ore Beef and veal Kiwi Wool Butter Fats & Oils Source: Deutsche Bank, Bloomberg Finance LP, Statistics Canada Note: Arrow from A to B implies A granger causes Band viceversa. Double arrow implies causality runs both ways and No arrow implies no significant causality in either direction Source: Deutsche Bank, Bloomberg Finance LP, Reserve Bank of Australia Note: Arrow from A to B implies A granger causes Band viceversa. Double arrow implies causality runs both ways and No arrow implies no significant causality in either direction Source: Deutsche Bank, Bloomberg Finance LP, Statistics New Zealand Note: Arrow from A to B implies A granger causes Band viceversa. Double arrow implies causality runs both ways and No arrow implies no significant causality in either direction Page 7

8 Appendix A Figure 17: Constituent weights and sources for the Canada Commodity Index Commodity Source (Bloomberg Ticker) Current Weight in Index WTI CL1 Comdty 25.82% WCC USCRWCAS Index 17.52% Gold GOLDS Comdty 8.17% Pulp & Paper FOEXBHKP Index 8.16% Nat gas NG1 COMB Comdty 6.64% Lumber LB1 Comdty 6.01% LMAHDS03 Comdty 3.74% Brent CO1 Comdty 3.69% Wheat W 1 Index 3.41% Potash WBPCMHPR Index 2.95% Potatoes KH1 Comdty 2.95% Coal ENPBDQUE Index 2.80% Canola RS1 Comdty 2.49% Iron TSIPIO62 Index 2.31% Copper LMCADS03 Index 1.52% Cattle CATLLSPT Index 0.69% Barley WA1 Comdty 0.53% Corn C 1 Comdty 0.30% Hogs HOGSCC51 Index 0.18% Lead LMPBDS03 Index 0.13% Nickel LMNIDS03 Index 0.00% Source: Deutsche Bank, Bloomberg Finance LP, Statistics Canada Figure 18: Constituent weights and sources for the Australia Commodity Index Commodity Source (Bloomberg unless mentioned) Current Weight in Index Iron ore TSIPIO62 Index 32.7% Metallurgical coal ENPBDQUE Index 16.4% Thermal coal CLSPAUNE Index 8.4% Gold XAU Curncy 8.0% LNG(e) LNG-AS* (Reuters) 6.0% Crude oil CO1 Comdty 6.0% Wheat IGCSEPWU Index 3.2% Alumina MBALAL02 Index 2.9% Copper ore CNMDCOAU Index 2.8% Beef and veal BOXBIMIT Index 2.5% LMAHDS03 Comdty 2.4% Copper LMCADS03 Index 2.1% Wool AWOLRIE Index 1.4% Cotton COTLOOKA Index 1.1% Lamb and mutton ISMWSHME Index 0.8% Barley BRL1 Comdty 0.7% Sugar SB1 index 0.7% Canola RS1 Comdty 0.6% Lead LMPBDS03 Index 0.5% Zinc LMZSDS03 index 0.5% Nickel LMNIDS03 index 0.3% Source: Deutsche Bank, Bloomberg Finance LP, Thomson Reuters, Reserve Bank of Australia Page 8

9 Figure 19: Constituent weights and sources for the New Zealand Commodity Index Commodity Source (Bloomberg Ticker) Current Weight in Index Whole Milk Powder MMR1 Comdty 26.52% Wood SPGTTF Index 15.22% Meat; of sheep, lamb ISMWSHME Index 10.76% Meat; of bovine animals BOXBIMBT Index 8.28% Petro oils PGCRDUBA Index 5.65% Cheese CHECBLCK Index 5.55% Butter ISDWBUTR Index 4.83% Fats and oils CRB FTOL Index 3.90% LMAHDY LME Comdty 3.84% Wool AWOLRIX Index 3.43% Kiwi Fruit IMFRKIWI Index 3.22% Wood pulp FOEXBHKP Index 2.45% Iron and Non-alloy steel TSIPIO62 Index 2.24% Apples ISFWTBAP Index 1.99% Rubber RG1 Comdty 1.07% Milk and Cream LE1 Comdty 1.05% Source: Deutsche Bank, Bloomberg Finance LP and Statistics New Zealand Note: Average of AWOLRIE, AWOLRIW, AWOLRIN and AWOLRIS indices Page 9

10 Appendix 1 Important Disclosures Additional information available upon request For disclosures pertaining to recommendations or estimates made on securities other than the primary subject of this research, please see the most recently published company report or visit our global disclosure look-up page on our website at Analyst Certification The views expressed in this report accurately reflect the personal views of the undersigned lead analyst(s). In addition, the undersigned lead analyst(s) has not and will not receive any compensation for providing a specific recommendation or view in this report. George Saravelos Page 10

11 Regulatory Disclosures 1. Important Additional Conflict Disclosures Aside from within this report, important conflict disclosures can also be found at under the "Disclosures Lookup" and "Legal" tabs. Investors are strongly encouraged to review this information before investing. 2. Short-Term Trade Ideas Deutsche Bank equity research analysts sometimes have shorter-term trade ideas (known as SOLAR ideas) that are consistent or inconsistent with Deutsche Bank's existing longer term ratings. These trade ideas can be found at the SOLAR link at 3. Country-Specific Disclosures Australia and New Zealand: This research, and any access to it, is intended only for "wholesale clients" within the meaning of the Australian Corporations Act and New Zealand Financial Advisors Act respectively. Brazil: The views expressed above accurately reflect personal views of the authors about the subject company(ies) and its(their) securities, including in relation to Deutsche Bank. The compensation of the equity research analyst(s) is indirectly affected by revenues deriving from the business and financial transactions of Deutsche Bank. In cases where at least one Brazil based analyst (identified by a phone number starting with +55 country code) has taken part in the preparation of this research report, the Brazil based analyst whose name appears first assumes primary responsibility for its content from a Brazilian regulatory perspective and for its compliance with CVM Instruction # 483. EU countries: Disclosures relating to our obligations under MiFiD can be found at Japan: Disclosures under the Financial Instruments and Exchange Law: Company name - Deutsche Securities Inc. Registration number - Registered as a financial instruments dealer by the Head of the Kanto Local Finance Bureau (Kinsho) No Member of associations: JSDA, Type II Financial Instruments Firms Association, The Financial Futures Association of Japan, Japan Investment Advisers Association. This report is not meant to solicit the purchase of specific financial instruments or related services. We may charge commissions and fees for certain categories of investment advice, products and services. Recommended investment strategies, products and services carry the risk of losses to principal and other losses as a result of changes in market and/or economic trends, and/or fluctuations in market value. Before deciding on the purchase of financial products and/or services, customers should carefully read the relevant disclosures, prospectuses and other documentation. "Moody's", "Standard & Poor's", and "Fitch" mentioned in this report are not registered credit rating agencies in Japan unless "Japan" or "Nippon" is specifically designated in the name of the entity. Malaysia: Deutsche Bank AG and/or its affiliate(s) may maintain positions in the securities referred to herein and may from time to time offer those securities for purchase or may have an interest to purchase such securities. Deutsche Bank may engage in transactions in a manner inconsistent with the views discussed herein. Qatar: Deutsche Bank AG in the Qatar Financial Centre (registered no ) is regulated by the Qatar Financial Centre Regulatory Authority. Deutsche Bank AG - QFC Branch may only undertake the financial services activities that fall within the scope of its existing QFCRA license. Principal place of business in the QFC: Qatar Financial Centre, Tower, West Bay, Level 5, PO Box 14928, Doha, Qatar. This information has been distributed by Deutsche Bank AG. Related financial products or services are only available to Business Customers, as defined by the Qatar Financial Centre Regulatory Authority. Russia: This information, interpretation and opinions submitted herein are not in the context of, and do not constitute, any appraisal or evaluation activity requiring a license in the Russian Federation. Kingdom of Saudi Arabia: Deutsche Securities Saudi Arabia LLC Company, (registered no ) is regulated by the Capital Market Authority. Deutsche Securities Saudi Arabia may only undertake the financial services activities that fall within the scope of its existing CMA license. Principal place of business in Saudi Arabia: King Fahad Road, Al Olaya District, P.O. Box , Faisaliah Tower - 17th Floor, Riyadh, Saudi Arabia. United Arab Emirates: Deutsche Bank AG in the Dubai International Financial Centre (registered no ) is regulated by the Dubai Financial Services Authority. Deutsche Bank AG - DIFC Branch may only undertake the financial services activities that fall within the scope of its existing DFSA license. Principal place of business in the DIFC: Dubai International Financial Centre, The Gate Village, Building 5, PO Box , Dubai, U.A.E. This information has been distributed by Deutsche Bank AG. Related financial products or services are only available to Professional Clients, as defined by the Dubai Financial Services Authority. Page 11

12 Risks to Fixed Income Positions Macroeconomic fluctuations often account for most of the risks associated with exposures to instruments that promise to pay fixed or variable interest rates. For an investor that is long fixed rate instruments (thus receiving these cash flows), increases in interest rates naturally lift the discount factors applied to the expected cash flows and thus cause a loss. The longer the maturity of a certain cash flow and the higher the move in the discount factor, the higher will be the loss. Upside surprises in inflation, fiscal funding needs, and FX depreciation rates are among the most common adverse macroeconomic shocks to receivers. But counterparty exposure, issuer creditworthiness, client segmentation, regulation (including changes in assets holding limits for different types of investors), changes in tax policies, currency convertibility (which may constrain currency conversion, repatriation of profits and/or the liquidation of positions), and settlement issues related to local clearing houses are also important risk factors to be considered. The sensitivity of fixed income instruments to macroeconomic shocks may be mitigated by indexing the contracted cash flows to inflation, to FX depreciation, or to specified interest rates - these are common in emerging markets. It is important to note that the index fixings may -- by construction -- lag or mis-measure the actual move in the underlying variables they are intended to track. The choice of the proper fixing (or metric) is particularly important in swaps markets, where floating coupon rates (i.e., coupons indexed to a typically short-dated interest rate reference index) are exchanged for fixed coupons. It is also important to acknowledge that funding in a currency that differs from the currency in which the coupons to be received are denominated carries FX risk. Naturally, options on swaps (swaptions) also bear the risks typical to options in addition to the risks related to rates movements. Page 12

13 David Folkerts-Landau Group Chief Economist Member of the Group Executive Committee Guy Ashton Global Chief Operating Officer Research Marcel Cassard Global Head FICC Research & Global Macro Economics Richard Smith and Steve Pollard Co-Global Heads Equity Research Michael Spencer Regional Head Asia Pacific Research Ralf Hoffmann Regional Head Deutsche Bank Research, Germany Andreas Neubauer Regional Head Equity Research, Germany Steve Pollard Regional Head Americas Research International Locations Deutsche Bank AG Deutsche Bank Place Level 16 Corner of Hunter & Phillip Streets Sydney, NSW 2000 Australia Tel: (61) Deutsche Bank AG Große Gallusstraße Frankfurt am Main Germany Tel: (49) Deutsche Bank AG Filiale Hongkong International Commerce Centre, 1 Austin Road West,Kowloon, Hong Kong Tel: (852) Deutsche Securities Inc Nagatacho Sanno Park Tower Chiyoda-ku, Tokyo Japan Tel: (81) Deutsche Bank AG London 1 Great Winchester Street London EC2N 2EQ United Kingdom Tel: (44) Deutsche Bank Securities Inc. 60 Wall Street New York, NY United States of America Tel: (1) Global Disclaimer The information and opinions in this report were prepared by Deutsche Bank AG or one of its affiliates (collectively "Deutsche Bank"). The information herein is believed to be reliable and has been obtained from public sources believed to be reliable. Deutsche Bank makes no representation as to the accuracy or completeness of such information. Deutsche Bank may engage in securities transactions, on a proprietary basis or otherwise, in a manner inconsistent with the view taken in this research report. In addition, others within Deutsche Bank, including strategists and sales staff, may take a view that is inconsistent with that taken in this research report. Opinions, estimates and projections in this report constitute the current judgement of the author as of the date of this report. They do not necessarily reflect the opinions of Deutsche Bank and are subject to change without notice. Deutsche Bank has no obligation to update, modify or amend this report or to otherwise notify a recipient thereof in the event that any opinion, forecast or estimate set forth herein, changes or subsequently becomes inaccurate. Prices and availability of financial instruments are subject to change without notice. This report is provided for informational purposes only. It is not an offer or a solicitation of an offer to buy or sell any financial instruments or to participate in any particular trading strategy. Target prices are inherently imprecise and a product of the analyst judgement. The financial instruments discussed in this report may not be suitable for all investors and investors must make their own informed investment decisions. Stock transactions can lead to losses as a result of price fluctuations and other factors. If a financial instrument is denominated in a currency other than an investor's currency, a change in exchange rates may adversely affect the investment. Past performance is not necessarily indicative of future results. Deutsche Bank may with respect to securities covered by this report, sell to or buy from customers on a principal basis, and consider this report in deciding to trade on a proprietary basis. Derivative transactions involve numerous risks including, among others, market, counterparty default and illiquidity risk. The appropriateness or otherwise of these products for use by investors is dependent on the investors' own circumstances including their tax position, their regulatory environment and the nature of their other assets and liabilities and as such investors should take expert legal and financial advice before entering into any transaction similar to or inspired by the contents of this publication. Trading in options involves risk and is not suitable for all investors. Prior to buying or selling an option investors must review the "Characteristics and Risks of Standardized Options," at If you are unable to access the website please contact Deutsche Bank AG at +1 (212) , for a copy of this important document. The risk of loss in futures trading and options, foreign or domestic, can be substantial. As a result of the high degree of leverage obtainable in futures and options trading losses may be incurred that are greater than the amount of funds initially deposited. Unless governing law provides otherwise, all transactions should be executed through the Deutsche Bank entity in the investor's home jurisdiction. In the U.S. this report is approved and/or distributed by Deutsche Bank Securities Inc., a member of the NYSE, the NASD, NFA and SIPC. In Germany this report is approved and/or communicated by Deutsche Bank AG Frankfurt authorized by the BaFin. In the United Kingdom this report is approved and/or communicated by Deutsche Bank AG London, a member of the London Stock Exchange and regulated by the Financial Conduct Authority for the conduct of investment business in the UK and authorized by the BaFin. This report is distributed in Hong Kong by Deutsche Bank AG, Hong Kong Branch, in Korea by Deutsche Securities Korea Co. This report is distributed in Singapore by Deutsche Bank AG, Singapore Branch or Deutsche Securities Asia Limited, Singapore Branch (One Raffles Quay #18-00 South Tower Singapore , ), and recipients in Singapore of this report are to contact Deutsche Bank AG, Singapore Branch or Deutsche Securities Asia Limited, Singapore Branch in respect of any matters arising from, or in connection with, this report. Where this report is issued or promulgated in Singapore to a person who is not an accredited investor, expert investor or institutional investor (as defined in the applicable Singapore laws and regulations), Deutsche Bank AG, Singapore Branch or Deutsche Securities Asia Limited, Singapore Branch accepts legal responsibility to such person for the contents of this report. In Japan this report is approved and/or distributed by Deutsche Securities Inc. The information contained in this report does not constitute the provision of investment advice. In Australia, retail clients should obtain a copy of a Product Disclosure Statement (PDS) relating to any financial product referred to in this report and consider the PDS before making any decision about whether to acquire the product. Deutsche Bank AG Johannesburg is incorporated in the Federal Republic of Germany (Branch Register Number in South Africa: 1998/003298/10). Additional information relative to securities, other financial products or issuers discussed in this report is available upon request. This report may not be reproduced, distributed or published by any person for any purpose without Deutsche Bank's prior written consent. Please cite source when quoting. Copyright 2014 Deutsche Bank AG