ASEAN REVIEW. Monthly Report. Market Commentary. Corporate News

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1 Market Commentary Regional markets opened on a high note in November following better-than-expected US growth data. However, gains were slightly tempered by corporate earnings concerns and investors were also somewhat cautious earlier in the month as they waited for the Bank of Japan policy meeting, the release of US jobs data and a series of talks in Europe on Greece's debt. Markets were temporarily restored as a Greek debt sale eased fears over the country's future and as dealers picked up bargains after a recent sell-off fuelled by concerns over the US "fiscal cliff". A successful bond auction by Greece helped ease concern about its ability to repay maturing debt. However, gains were short-lived after Barack Obama challenged Republicans to accept tax hikes for the rich as part of a deal to avert a fiscal cliff. Obama laid out his terms for a deal due on January 1 and could tip the US back into recession. Markets continued to decline thereafter on uncertainty over the US fiscal row and the euro zone debt crisis, where global lenders stopped short of giving further aid to debt-stricken Greece. Moreover, the Euro took a hit as France lost its top-notch credit rating. The decision by Moody s to downgrade the French debt staunched the single currency s rise, which had been strengthen by hopes that Eurozone leaders will agree to hand Greece its latest batch of bailout cash. Fortunately, markets rebounded as Chinese manufacturing data indicated the economy continues to pick up. The expansion in manufacturing was taken as further confirmation that economic recovery is back on track. Markets continued to rise on optimism over a pair of positive US economic reports and growing expectations that Washington will resolve a budget impasse before the end of the year. To add to that, investors were also hopeful that the eurozone finance ministers will agree on a bailout package for Greece. Markets were further lifted after talks over Greece's financial crisis ended with an agreement on how to reduce its debt load, paving the way for the cash-strapped country to receive the next installment of a bailout loan. As the month came to an end, regional markets remained optimistic on signs that US political leaders may be closing in on a budget deal to avoid the so-called "fiscal cliff". Markets climbed higher after data showed the US economy grew more than first expected in the third quarter while traders remain upbeat that a deal will be made on averting the fiscal cliff. The Asean40 remained broadly flat for the month and closed at 10, points as compared to closing 10, a month earlier. Regional bourses closed in mixed territory, with PCOMP being the best performing market, up 4.9% m- m and KLCI being the worst, down 3.5% m-m (in USD terms). Major gainers were Advanced Info Service (+11.4%), Capitaland (+8.) and Gudang Garam (7.5%), while major losers were United Tractors (-19.2%), Astra International (-9.9%) and United Axiata Group (-9.3%). Corporate News Indonesia The prices of Toyota, Daihatsu and BMW are set to jump next year after their Indonesian distributor Astra International said it would pass on rising production and labor costs. The price increase would not greatly affect the company s plan to sell its low-cost Astra Toyota Agya and Daihatsu Ayla models. To deepen market penetration, Toyota was spending IDR950 bn to build 10 showrooms this year. Unilever Indonesia will invest up to IDR450 bn to increase production capacity and strengthening the product distribution. The company showed a growth in investment trend since 2010 to more than IDR1 tn compared with the prior year 2010 with capital expenditures ranging from IDR bn. This year capex reached IDR1.2 tn. In relation with Unilever plans through Unilever Oleochemical Indonesia to build oleochemical plant in Indonesia, the construction of the plants worth of IDR1.45 tn is only to wait for the change of land status. Bank Rakyat Indonesia decided to cancel the acquisition of the two securities firms that have been planned earlier. Furthermore, next year the company will look for other securities firms that can be acquired. Previously the company was eyeing Bahana Securities and Samuel Securities Indonesia. Malaysia CIMB Group Holdings has launched its investment banking operations in Hong Kong, following the completion of its acquisition of the Royal Bank of Scotland's investment banking business in Hong Kong and their integration into CIMB's existing investment banking franchise. Group chief executive Dato Sri Nazir Razak is optimistic about the bank's prospects because the new combined team has a strong onshore track record in Hong Kong and the differentiating proposition of a huge Asean-based network Page 1

2 ASEAN REVIEW Corporate News Tenaga Nasional (TNB) has accepted the Letter of Award issued by the Energy Commission on the development of a 1,000-1,400MW Combined Cycle Gas Turbine Power Plant at Prai, Pulau Pinang. The estimated cost of the project is MYR2.47 bn and the construction period is 32 months. TNB will fund the total project cost using a combination of senior Islamic project bonds and equity which will potentially increase its gearing ratio by 1.7% pt to 40.5%. Sime Darby is on track in achieving its target net profit of MYR3.2 bn, which translates to a return on average shareholder funds of 12% for FY6/13. Over the next six months, Sime Darby expects crude palm oil prices to gradually move between MYR2,500 and MYR3,000 per tonne mostly due to lower production, given existing stockpiles. Malayan Banking Bhd (Maybank) will decide over the next six months whether it wants to locally incorporate its Singapore retail banking operations, a move that may enable it to double the number of outlets there. If they do incorporate, then they can increase the branch network to double. But pros and cons need to be weighed before such a move and currently everything is being discussed at the Maybank exco level. Singapore United Overseas Bank (UOB) will buy ING Group's Thailand asset management unit for EUR10 mn (SGD15.6 mn). UOB had entered into an agreement to acquire all the shares in ING Funds (Thailand) Co Ltd, through its wholly owned unit, UOB Asset Management Ltd (UOBAM). The completion of the acquisition is conditional on regulatory approval being obtained in Europe, Thailand and Singapore. Once the deal is complete, ING Funds (Thailand) will become a subsidiary of UOBAM. Jardine Cycle & Carriage reported a 12% growth in third quarter profits to USD323 mn from a year ago. Earnings per share of the three-month period ended Sept 30 rose to US cents, from cents previously. The growth came despite a year-on-year 2% decline in revenue to USD5.33 bn and a relatively flat performance from Indonesian majority-owned subsidiary Astra International in the first nine months of the financial year. In spite of the 9% increase in profit attributable to owners of the parent to IDR14.67 tn (SGD1.87 bn) from a year earlier, growth in Astra's car businesses were eroded by lower profit contributions from its agribusiness and motorcycle operations. Keppel Corporation's Keppel Shipyard will carry out conversion works for a floating liquefied natural gas (FLNG) vessel (an offshore LNG production plant) in a "breakthrough" deal worth an estimated USD600 mn. Keppel Shipyard will start an engineering study in November, with conversion work to begin on an existing LNG tanker mid The first unit will be capable of producing up to 2 million tonnes of LNG annually when it is ready for production by Q Thailand PTT Exploration and Production (PTTEP) will sell shares in a range of THB135-THB145 each to raise about USD3.1bn (THB95bn) in Thailand's biggest equity offering. The final price will be announced today, the terms show. PTTEP will sell 650 million shares to its parent PTT and other existing investors, it said when announcing the rights offer in July. PTT Plc (PTT), the national oil conglomerate, expects liquefied natural gas (LNG) imports to more than treble over the next few years as domestic demand increases. LNG imports will top 2.4 million tonnes next year and 3.5 million tonnes in 2014, up from an estimated 1 million tonnes this year. Siam Commercial Bank (SCB) plans to establish its financial services network in Asia within three years. In the next three years, the bank is gearing up towards the establishment of SCB networks in two key areas of Asia: the first one is the route connecting Asean and Indochina, while the second one links Asean with East Asia. Bangkok Bank(BBL) is urging the government to put the negotiations for a Thai-European Union free trade agreement on the fast track in case the EU ends its tax cuts for imports from Thailand. Page 2

3 Economic News Indonesia Indonesia's foreign debt ratio to GDP in 3Q12 reached 27.8%, higher than 27.1% in 2Q12. Debt-to-exports ratio reached 108%, higher than the second quarter s figure of 102.7%. Repayments and principal debt service ratio reached 34.7%, an increase from the second quarter s 34.1%. Consumer prices in Indonesia climbed 4.61% year-on-year in October, after rising 4.31% in September. The median estimate was for a 4.59% gain. Exports from Indonesia fell 9.4% year-on-year in September (-24.7% in August), the sixth month of declines. Imports rose 1.2% year-on-year (-8.4% in August). The trade surplus stood at USD553 mn (USD233 mn in August). Indonesia s economy grew 6.2% year-on-year in the third quarter (6.4% in 2Q12), in line with forecasts. Indonesia s retail sales index rose 22% year-on-year in September, having risen by a revised 10.6% in August. Malaysia Inflation held steady at 1.3% year-on-year in October for the second month, matching economists expectations. On a month-on-month basis, the consumer price index (CPI) rose 0.2% (0.2% in September). From January to October, the CPI increased by 1.7%. Malaysia's economy expanded by a smaller 5.2% year-on-year in 3Q12 (5.6% in 2Q12) as affected by slower external demand which resulted in a further decline in net real export of goods and services. Domestic demand (+11.4% vs. +14% in 2Q12), however, continued to provide support to growth, as reflected by the favourable performance of private consumption and investment activity by both the public and private sectors. Economists had projected for a 4.8% GDP growth in 3Q12. The leading index (LI) rose by a modest 1.4% year-on-year in September (2% in August). The coincident index (CI) grew 2.5% year-on-year (2.1% in August) while the lagging index increased 3.2% (3.3% in August). The level of Diffusion Index of LI remains below 5 since Aug Taken together the current behavior of the composite indexes, this indicates that the economy will continue to expand in the months ahead, although the pace of growth is likely to be slow. Gross exports rose 2.6% year-on-year in September, compared to a 4.5% contraction in August. Imports increased by 9.6% year-on-year (2.8% in August), leaving a trade surplus of MYR7.1 bn in September (MYR6.5bn in August). Economists had projected for a 2.7% year-on-year decline in exports in September. 9M12 exports and imports increased by 1.7% and 7.6% respectively, resulting in a cumulative trade surplus of MYR68.3 bn. Producer price index (PPI) declined 1.2% month-on-month in September (+0.1% month-on-month in August). This was due to the decrease in the PPI for local production by 1.7% month-on-month (+0.2% in August) and the import price index by 0.1% month-on-month (-0.4% in August). On year-on-year comparison, PPI for domestic economy declined by 1.3% (+0.5% in August) and the local production index dropped by 2% (-0.9% in August) while the import price index rose by 0.4% (+0.9% in August). Philippines The Philippines total imports rose 3.6% year-on-year in September (-0.4% in August) to USD5.27 bn. The trade deficit narrowed to USD0.48 bn from USD1.26 bn the previous month. In the Philippines, the business confidence index for the fourth quarter stood at 49.5%, better than the 38.7% reported in the same period last year, and the 42.5% seen in the third quarter of Page 3

4 Economic News Consumer price inflation in the Philippines slowed to a four-month low of 3.1% year-on-year in October from 3.6% in September. Singapore Singapore s industrial output fell 2.1% year-on-year in October (-2.8% in September), led by declines of 6% and 11.7% respectively in the electronics and biomedical sectors. Singapore's inflation rate eased to 4% year-on-year in October from 4.7% the previous month due to smaller gains in transportation and housing costs. The Singapore economy shrank a seasonally adjusted annualized 5.9% quarter-on-quarter in the third quarter, more than the 1.5% previously estimated. The government warned that economic growth for 2012 will come in at just 1.5%, the low end of its % estimate, as inflation reduces the central bank's flexibility in providing more support. The forecast for next is 1% to 3%. Singapore s unemployment rate fell to 1.9% in 3Q from 2% in the previous quarter, and better than expectations of 2%. Preliminary estimates showed that total employment grew by 24,900, down from the increase of 31,900 in the same period last year, and 31,700 in 2Q12. Singapore s manufacturing PMI was 48.3 points in October, compared with 48.7 in September due to further declines in new orders, new export orders and production output. The electronics index registered a 2.5 point drop over the previous month to reach Thailand Thailand s manufacturing production index rose 36.1% year-on-year in October, up from a 15.9% fall in September and above the analysts expectations of 29.8%. Thai exports rose 15.6% year-on-year in October (0.2% in September), lower than the 2 gain anticipated by economists. Imports grew 21.6% in October (-7.7% in September), ahead of the 9.6% predicted. As a result the trade balance fell to a deficit of USD2.47 bn (+USD1.15 bn in September), against expectations of a USD0.2 bn surplus. Thailand's economy grew 1.2% quarter-on-quarter in the third quarter, slower than 2Q12 s revised 2.8% gain, but higher than expectations of a 0.9% print, as the weakening global economy hit exports and factory production. GDP expanded 3. year-on-year, almost matching the 3.1% forecast by economists. Thailand s business sentiment index declined to 49.9 in September (50.2 in August). Thailand s consumer confidence index climbed to 77.8 in October (77 in September). Page 4

5 Mean returns ASEAN REVIEW Economic News 30 YTD (USD) % M-M (USD) % INDU Index 13, % -0.5% MXAPJ Index % 2.1% Asean40 Index 10, % -0.9% Hang Seng Index 22, % 1.8% HSCEI Index 10, % 0.4% JCI Index 4, % -1.6% KLCI Index 1, % -3.5% KOSPI Index 1, % 1.8% PSEi Index 5, % 4.9% SENSEX Index 19, % 3.4% SET Index 1, % 1.9% STI Index 3, % 0.9% TWSE Index 7, % 6.2% Risk Reward Trade-off Charts: 6 Months Risk vs Returns The Asean40 Index has a superior risk return profile over a 6-month period compared to other major indices. The Asean40 Index clearly lies above the Efficient frontier as shown in the charts below except for comparisons to ASEAN country indices as it falls slightly lower from the Efficient frontier. 12% 1 JCI 8% 6% PSEi 4% KLCI SET 2% STI 5% 1 15% 2 25% Std dev of returns Asean40 Index Other Indices Figure 1: Asean40 Index compared to ASEAN country indices of KLCI, FSSTI, JCI, SET and PSEi Page 5

6 Mean returns Mean returns ASEAN REVIEW Risk Reward Trade-off Charts: 6 Months Risk vs Returns 7% 6% MXLA 5% 4% MXFE XEF 3% MXMU 2% 1% ISDUW 5% 1 15% 2 25% 3 Std dev of returns Asean40 Index Other Indices Figure 2: Asean40 Index compared to MSCI country and global indices 12% 1 8% 6% 4% 2% -2% 5% 1 15% 2 25% 3-4% -6% -8% Std dev of returns Asean40 Index Other Indices Figure 3: Asean40 Index compared to MSCI country, regional and global indices Page 6

7 Disclaimer This document is prepared by CIMB-Principal Asset Management (S) Pte. Ltd. and the opinions expressed herein are subject to change without notice and may involve a number of assumptions, which may not be valid. Although the information contained herein has been taken from sources that are believed to be accurate, no warranty or representation is made as to its correctness, completeness or accuracy. CIMB-Principal Asset Management (S) Pte. Ltd. accept no liability whatsoever for any direct, indirect or consequential loss arising from any use or reliance of the information herein. FTSE Disclaimer FTSE, FT-SE and Footsie are trade marks jointly owned by the London Stock Exchange Plc and The Financial Times Limited and are used by FTSE International Limited ( FTSE ) under licence. The FTSE/ASEAN 40 Index is calculated by FTSE in conjunction with PT Bursa Efek Jakarta (Jakarta Stock Exchange), Bursa Malaysia Berhad, The Philippine Stock Exchange, Inc., Singapore Exchange Securities Trading Limited and The Stock Exchange of Thailand ( Exchanges ). All rights in the Index vest in FTSE and the Exchanges. Neither FTSE nor the Exchanges nor their licensors shall be liable (including in negligence) for any loss arising out of the use of the Index by any person. FTSE does not sponsor, endorse or promote this Fund and is not in any way connected to it and does not accept any liability in relation to its issue, operation and trading. Page 7