Market Snapshot. Upbeat US Data Stokes Taper Fears, Scares Equities Lower. Friday, 01 November 2013

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1 Market Snapshot Friday, 01 November 2013 Upbeat US Data Stokes Taper Fears, Scares Equities Lower WHAT S NEWS Upbeat US data add to speculation the Fed may pull back its stimulus efforts earlier. Euro-zone inflation slower, stoking growth fears. EQUITY MARKETS S&P 500 DJ Euro Stoxx % 0.5% THE DAY AHEAD US ISM manufacturing survey may see some weakness due to the partial US government shutdown in October. China releases final manufacturing PMI numbers, the last one before a meeting of top policymakers and politicians. Nikkei-225 MSCI Asia ex-japan MSCI Emerging Markets -1.2% -0.6% -0.8% DEVELOPED MARKET EQUITIES Stocks Jittery as Fed-Speak, Data Stoke Taper Fears US equities fell as investors weighed the odds of the Federal Reserve paring its stimulus efforts against upbeat corporate earnings. The Fed left policy rates unchanged at 0.25%, and kept its USD85 billion a month stimulus injections going. The Fed s latest meeting statement also said nothing about tighter financial conditions, the debt ceiling fight, or higher mortgage rates. Data was upbeat, with fewer Americans filed for jobless benefits last week, the Labor Department s numbers falling to 340,000. The Chicago Purchasing Managers Index came in at 65.9 in October, far ahead of the 55 reading expected by a Bloomberg News poll of economists. US equities closed October on a positive note, the S&P 500 notching gains of 4.5% despite the 16-day partial government shutdown. In corporate news, Exxon Mobil rose despite weaker refining margins, as its results beat analyst estimates. MasterCard reported a 14% profit increase as more people are using plastic over cash, but still ended 1.2% down. Avon tumbled 21% after the SEC proposed a significantly greater settlement for a multi-year bribery probe. Later today, Chevron, Washington Post and CBOE Holdings report. Europe shares rose as upbeat earnings outweighed fears the Fed may reduce its stimulus efforts earlier than expected. BNP Paribas rose 3.4% after posting an unexpected increase in net income. Alcatel-Lucent surged 19% after it announced a smaller-thanexpected 3Q net loss. Royal Dutch Shell fell 4.9% as shrinking refining margins and disrupted Nigerian operations saw it post a 32% profit slump. 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 One year ago Last Close 4.0% 5.0% 3.0% 4.0% 3.0% 2.0% 2.0% 1.0% 1.0% 0.0% 0.0% 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 Event Period Survey Prior CH Manufacturing PMI Oct CH HSBC Manufacturing PMI Oct US ISM Manufacturing Oct SK Exports (YoY) Oct 3.00% -- Source: Bloomberg, DBS Group Research

2 Market Snapshot 1 November Japan equities fell 1.2% as the USD lost steam, and companies announced disappointing earnings. Honda Motor and Toshiba fell despite largely meeting analyst estimates. ANA Holdings fell 4.7% as higher fuel costs saw a lower forecast for full-year net profits, and as it cut year-end dividends to JPY3 from JPY4. Fujifilm Holdings rose 3.2% after its net profit beat estimates handily, and it unveiled a onetime dividend of JPY10. ASIA EQUITIES Asia Stocks Slide; China, HK Spooked By Banks China stocks slipped 0.9% as environment-sector and bank stocks posted losses. Investors hope that Beijing s November meeting will shed more light on national efforts to tackle air pollution. Banks fell as the industry readies itself for reforms that could squeeze profits down the road. State-owned Bank of China and Agricultural Bank of China reported double-digit earnings growth. Hong Kong equities fell with fears of rising bad debt on the books of Chinese banks. Industrial & Commercial Bank of China fell 0.7%, while Bank of Communications fell 1.1%. Southeast Asia stocks fell on fears the US Fed may reduce its stimulus efforts earlier than expected. Singapore's STI fell 0.6%, Malaysia's KLCI slipped 0.6%, and Indonesia s JCI slid 1.4%. India s Sensex rose 0.6% to another record closing high, as hopes of stabilising asset quality and attractive valuations sent state-run banks up. State Bank of India rose 4.4%, Bank of India surged 21.5%, Bank of Baroda climbed 10.6%, and Canara Bank gained 10.8%. FIXED INCOME US Treasuries fell as a positive Chicago PMI read and initial jobless claims number fuelled speculation that the Fed may taper soon. The Fed s USD85 billion a month stimulus has provided much support to UST prices in the last year. The benchmark 10-year yield rose 2 basis points to 2.55%, the highest in over a week. COMMODITIES Crude oil fell a third day as US stockpiles continue to build, the USD strengthened against the Euro, and Libyan output looks set to come back online. The US Energy Information Administration said crude oil stocks rose to million last week, the highest since June. Rising stockpiles means less fuel use, and is a bane for prices. The Euro fell as inflation in the common currency bloc fell to the slowest in nearly four years. Libya s oil and gas ministry said the Sharara field may be able to restart within 10 days. Gold and silver tumbled as the Fed s relatively hawkish tone and upbeat US data fuelled speculation that the Fed may pull back on its stimulus efforts earlier than expected. 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 % 18.63% S&P % 23.16% NASDAQ % 29.81% Europe Euro Stoxx % 15.26% Germany DAX % 18.67% France CAC % 18.09% UK FTSE % 14.13% Asia MSCI AxJ % 1.73% Japan Nikkei % 37.83% China SHCOMP % -5.62% Hong Kong Hang Seng % 2.43% Taiwan TWSE % 9.75% South Korea Kospi % 1.65% Indonesia JCI % 4.49% Malaysia KLCI % 6.98% Singapore STI % 1.38% India Sensex % 8.95% Emerg. Mkt MSCI EM % -1.97% Government Bonds Benchmark yields of major 10-year government bonds. Latest yield Previous yield Change (bps) US 2.55% 2.54% 1.64 Germany 1.67% 1.69% Japan 0.60% 0.59% 0.70 China 4.22% 4.22% 0.00 Taiwan 1.71% 1.70% 1.30 South Korea 3.36% 3.36% 0.00 Indonesia 7.47% 7.64% Singapore 2.15% 2.11% 4.00 India 8.63% 8.57% 5.40 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 1 November CURRENCIES The Euro slid against the USD as inflation in the 17-nation common currency bloc slowed to 0.7%, the slowest in four years. Weaker inflation could be a sign that economic activity remains lacklustre, increasing the bandwidth for the European Central Bank to cut rates. A rate cut would make the euro less attractive to yieldhungry investors. The ECB next meets 7 November. The Aussie tripped against the USD as the US released positive Chicago PMI and initial jobless claims reads. The AUD earlier went higher as building approvals jumped 14.4%, a 16-month high, and a boon for the Australia construction industry. The yen held steady against the USD as central bankers in both countries kept their easy monetary policies unchanged. 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 Apr-13 Jun-13 Aug-13 Oct-13 USD Against Major Currencies EUR/USD GBP/USD USD/JPY AUD/USD NZD/USD 86 Apr-13 Jun-13 Aug-13 Oct-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 Bullish USD/JPY Range AUD/USD Bullish NZD/USD Range USD/CAD Range USD/SGD Bearish AUD/SGD Range NZD/SGD Range GBP/SGD Range EUR/SGD Range EUR/AUD Range AUD/NZD Bullish XAU/USD Range 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 1 November Insights Feature US: Data Points to More Weakness The US Federal Reserve, as widely expected, chose not to move interest rates at its two-day policy meeting in the middle of this week. The world s most powerful central bank said the housing sector had slowed and financial conditions had improved, meaning that longerterm interest rates had fallen. It reiterated what it said in September: that it wants to see more evidence that [economic] progress will be sustained before adjusting the pace of (asset) purchases now at USD85 billion a month. The data continues to move away from the Fed, not toward it. Housing, as the Fed acknowledged yesterday, has slowed. New home sales are down 7% from June; pending home sales are down by 9%. Mortgage applications for purchases are down by 17% since May. That s not good news but it s nothing compared to what s going on with consumption. Retail sales fell in September and the fact that autos were behind it doesn t alter the bigger picture. Personal consumption whether total or core (services + nondurables) is now growing at its slowest rate in 3.5 years. It s a not sudden drop, it s a long, steady decline. It s not government sequestered expenditure but private consumption comprising 70% of GDP and it s the final demand that drives everything else, most importantly investment and the demand for The midweek October ADP report was 30,000 below a consensus estimate of analysts at 130,000 and September payrolls were revised down to 145,000. ADP and nonfarm payrolls are both running around 143,000 now and is between 80,000-90,000 under the rolling three-month average since the first quarter of Inflation risks? They go lower and lower. Yesterday s CPI report showed September core prices rising a mere 0.1% on-month seasonally adjusted. That lowered on-year core inflation to 1.7% onyear. Headline CPI inflation dropped to 1.2% on-year, right where core personal consumption expenditure (PCE) inflation the Fed s favoured gauge has been for several months. Core inflation, whether measured by CPI or PCE, has fallen significantly from September 2012 levels while consumption growth has fallen to a 3.5 year low. ADP and nonfarm payrolls have fallen by 80k-90k since the start of the year. Inflation continues to drift lower. The Fed wants to see sustained progress but it s going the wrong way. US Real Personal Consumption Expenditure Source: Group Research Source report: DBS Group Research. Daily Breakfast Spread. 31 October Summarised by DBS Group Wealth Management /CIO Office. Bond risk rating changes Effective Bond Name Issuer New Risk rating Existing 23/10/2013 OASCBZ 8 1/4 10/19/19 OAS INVESTMENTS GMBH 5 4 Reason Re-rated based on Moody's paper rating of B1. Previously rated based on S&P paper rating of BB-. 23/10/2013 NBADUH 3 08/13/19 NATIONAL BK OF ABU DHABI 2 3 S&P upgraded the paper credit rating from A+ to AA- 23/10/2013 SHAEFF 8 3/4 02/15/19 SCHAEFFLER FINANCE BV 4 5 S&P upgraded the paper credit rating from B+ to BB- 23/10/2013 ISCTR 3 3/4 10/10/18 TURKIYE IS BANKASI A.S 3 4 Tenor reduction 23/10/2013 PHILIP 6 1/4 01/14/36 REPUBLIC OF PHILIPPINES /10/2013 PHILIP 9 3/8 01/18/17 REPUBLIC OF PHILIPPINES /10/2013 PHILIP 8 3/4 10/07/16 REPUBLIC OF PHILIPPINES /10/2013 SPSP /22/18 SP POWERASSETS LTD 1 2 Tenor reduction 24/10/2013 PHILIP 9 1/2 02/02/30 REPUBLIC OF PHILIPPINES /10/2013 PHILIP 8 7/8 03/17/15 REPUBLIC OF PHILIPPINES /10/2013 ALDAR 10 3/4 05/27/14 ATLANTIC FINANCE LTD 4 5 Moody's upgraded the paper credit rating from B2 to Ba2 28/10/2013 UNBKIN 3 5/8 10/25/18 UNION BANK OF INDIA HK 3 4 Tenor reduction Information updated as of 29 October 2013.

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