Market Snapshot. Fed Expected to Keep Policies Steady, Sending Stocks Up. Wednesday, 30 October 2013

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1 Market Snapshot Wednesday, 30 October 2013 Fed Expected to Keep Policies Steady, Sending Stocks Up WHAT S NEWS US equities rose as sombre data boosted expectations the Fed will keep its stimulus programme intact. Japan reported growth in retail sales and factory output. The Reserve Bank of India hiked its policy rate to 7.75% - a widely expected outcome. THE DAY AHEAD The US Federal Reserve concludes its first two-day policy meeting, after a 16-day partial government shutdown. Consensus expects monetary stimulus to remain intact. Focus will also be on the US ADP labour data for October, and consumer inflation for September. In Asia, the Bank of Japan is scheduled to comment on its money policies. Also on tap: South Korea s factory output. DEVELOPED MARKET EQUITIES Stocks Up on Hopes the Fed Will Keep QE Intact US equities jumped, with the S&P 500 touching another record high, as sombre data releases cemented expectations the Fed will keep its monetary stimulus intact for now. The Dow tacked on 0.7%, the S&P 500 rose 0.6% while the Nasdaq was 0.3% up. Adding to a recent string of lacklustre numbers, retail sales dipped in September, the first in six months, dragged by a sharp dive in auto sales. Consumer confidence declined notably in October as a result of a 16-day government shutdown while producer prices unexpectedly fell in September. The housing market was a bright spot for the day, as the S&P/Case Shiller index showed home prices rose more-thanexpected in August, and increased for 19 straight months. In corporate news, IBM added to Tuesday s gains after authorising a USD 15 billion share buyback. Drug maker Pfizer said its latest quarterly results topped estimates. According to Thomson Reuters, of the 281 companies in the S&P 500 that have released earnings figures, 68.7% have beaten forecasts, above the long term average of 63%. Europe shares ticked higher as investors cheered upbeat earnings from heavyweights in the oil sector. Adding to positive results from BP and Saipem, Finnish phone maker Nokia said it is expecting more profits from its network equipment in future. EQUITY MARKETS S&P 500 DJ Euro Stoxx 600 Nikkei-225 MSCI Asia ex-japan MSCI Emerging Markets -0.5% Shown in local currency terms, as of the last business day. US TREASURY YIELD CURVE 0.2% 0.2% 0.6% 0.4% 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% 2.0% 3.0% 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 SK Industrial Production (YoY) Sep 1.70% 3.30% JP Industrial Production (MoM) Sep 1.80% -0.90% US ADP Employment Change Oct 150K 166K US CPI (YoY) Sep 1.20% 1.50% Source: Bloomberg, DBS Group Research

2 Market Snapshot 30 October Japan equities were 0.5% down on profit-taking. Retail sales gained 1.1% on-year in August, a sign consumer spending is gaining some traction. Early this morning, the government reported factory output expanded 1.5% on-month in September, rebounding from a 0.9% decline in August. Transport equipments and electronic components contributed the most to the gains. ASIA EQUITIES Asia Stocks End Mixed in Anticipation of the Fed s Decision China stocks fell 1.1% as investors took profit ahead of the Fed s decision today. Liquidity concerns eased slightly after the People s Bank of China injected liquidity for the first time in days. This sent financial tickers higher, limiting losses. Hong Kong equities rose 0.2%, supported by a broad rally in Chinese financial names after the central bank injected some liquidity into the money markets. Southeast Asia stocks mostly lower on profit taking. Singapore's STI was flat, Malaysia's KLCI closed 0.2% down and Indonesia s JCI ticked 0.6% lower. India equities jumped 1.7% after the Reserve Bank of India hiked benchmark rate as widely expected. The benchmark rate now stands at 7.75%, up from 7.50%, as the central bank continues its battle against inflation. The RBI also reduced its Marginal Standing Facility (MSF) rate, to help ease liquidity in the banking system by reducing the cost of borrowing. DBS believes the move was a follow-through of hawkish September policy guidance, as high and persistent inflation is seen as an impediment to the medium-term growth outlook. FIXED INCOME US Treasuries ended mixed as investors remained divided on the near term outlook after a series of lacklustre data on Tuesday. Benchmark 10-year notes rose 2/32 to yield 2.507% while the 30-year bonds fell 9/32, yielding 3.620%. COMMODITIES Crude oil fell after reports of a stock build-up in the US. The American Petroleum Institute said inventories rose by 5.9 million barrels last week. Today, focus will be on the government s stockpile data. Consensus expects the data to show a 2.2 million barrels increase in the latest week. Gold futures fell as investors refused to make fresh bets ahead of key announcements due today. Elsewhere, physical gold prices in China closed lower than the global prices for the first time this year as liquidity crunch fears prompted investors to sell bullion for cash. 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 % 19.66% S&P % 24.24% NASDAQ % 30.89% Europe Euro Stoxx % 14.69% Germany DAX % 18.52% France CAC % 17.50% UK FTSE % 14.87% Asia MSCI AxJ % 1.27% Japan Nikkei % 37.81% China SHCOMP % -6.18% Hong Kong Hang Seng % 0.84% Taiwan TWSE % 9.37% South Korea Kospi % 2.74% Indonesia JCI % 5.70% Malaysia KLCI % 7.50% Singapore STI % 1.32% India Sensex % 7.73% Emerg. Mkt MSCI EM % -1.75% Government Bonds Benchmark yields of major 10-year government bonds. Latest yield Previous yield Change (bps) US 2.50% 2.52% Germany 1.74% 1.75% Japan 0.61% 0.62% China 4.21% 4.21% 0.00 Taiwan 1.71% 1.70% 1.30 South Korea 3.36% 3.36% 0.00 Indonesia 7.10% 6.99% Singapore 2.14% 2.12% 2.00 India 8.56% 8.66% 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 30 October CURRENCIES The aussie ended lower after Reserve Bank of Australia Governor Glenn Stevens said the currency was overvalued and likely to weaken over time, in tandem with falling commodity prices. He also played down fears of a property bubble in the country. Home prices jumped at its fastest pace in three years in 2Q-13 as interest rates stayed at a record low. Meanwhile, house prices in the capital cities of Australia s states and territories climbed to a record high in September. The dollar gained against a basket of currencies as recent lacklustre data supported views the Fed will keep its monetary policies in place. Retail sales dipped in September, while consumer confidence declined notably in October as a result of a partial government shutdown. 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 Bullish 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 30 October Asian Insights Feature Malaysia: Hard Budget for the Long Term Malaysia announced its fiscal budget for 2014 last week. Bold measures were announced to instil fiscal prudence and to achieve longer term fiscal sustainability. The government expects overall fiscal position for FY2013 at a 4% deficit of nominal GDP, in line with its target. GDP growth is projected to register % (DBS forecasts 4.3%) for 2013 and % (the DBS forecast is 5.2%) in For 2014, the official fiscal deficit target has been lowered to 3.5%, which essentially will reaffirm the government s commitment to lower the deficit to 3.0% of GDP by The government has also reiterated its commitment to keep total government debt below 55% of GDP. The much-anticipated Goods and Services Tax has finally been announced and will be implemented on 1 April The GST rate will be set at 6%, higher than what most had predicted but basic food items and essential services will be exempted. To help the mid and lower income households cope with higher cost burden of the GST and the cuts in subsidies, the government has announced more cash handouts on top of the earlier handouts, with lower income earners getting more. In addition, middle income families will receive a special tax relief of MYR2,000 to help them cope with the higher cost of living. To complement the introduction of the GST and to steer the tax regime towards indirect taxation instead of direct taxation, the personal income tax and corporate tax rates will be lowered. Personal income tax rate will be reduced by 1-3% pts following the GST implementation with the top individual tax rate to be reduced to 24% by 2015 from the current 26%. Beyond tax restructuring, the Real Property Gains Tax (RPGT) will be raised further to cool the buoyant property market. The RPGT will be raised to 30% for sale within 3 years, up from previously 15% for disposal less than 2 years. In addition, the RPGT will be set at 20% for sale on the fourth year and 15% for the fifth year. For foreigners, the RPGT will be 30% for sale within 5 years of purchase and 5% thereafter. To further distinguish between local and foreign property buyers, and to ensure properties remain affordable to the general public, the minimum property purchase price for foreigners will be doubled to MYR1 million. The budget also focuses on accelerating investment; promoting growth in the services sector, enhancing human capital development; intensifying rural-urban development as well as enhancing the wellbeing of the people. Budget 2014 has struck the right note in the sense that the government has been more forceful in tackling the key challenges of the fiscal deficit and the federal debt. This is a well-balanced and prudent budget, although there are measures that may not go down well with the public. Subsidy Expenditure Driving Debt Level Source: Group Research Source report: DBS Group Research. Daily Breakfast Spread. 28 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 Information updated as of 25 October Moody's upgraded the paper credit rating from B2 to Ba2

5 Market Snapshot 30 October Disclaimers and Important Notice The information herein is published by DBS Bank Ltd. ( DBS Bank ) and is for information only. This publication is intended for DBS Bank and its clients to whom it has been delivered and may not be reproduced, transmitted or communicated to any other person without the prior written permission of DBS Bank. This publication is not and does not constitute or form part of any offer, recommendation, invitation or solicitation to subscribe to or to enter into any transaction; nor is it calculated to invite, nor does it permit the making of offers to the public to subscribe to or enter into, for cash or other consideration, any transaction, and should not be viewed as such. This publication is not intended to provide, and should not be relied upon for accounting, legal or tax advice or investment recommendations and is not to be taken in substitution for the exercise of judgment by the reader, who should obtain separate legal or financial advice. DBS Bank does not act as an adviser and assumes no fiduciary responsibility or liability for any consequences financial or otherwise. The information and opinions contained in this publication has been obtained from sources believed to be reliable but neither DBS Bank nor any of its related companies or affiliates (collectively DBS ) makes any representation or warranty as to its adequacy, completeness, accuracy or timeliness for any particular purpose. Opinions and estimates are subject to change without notice. Any past performance, projection, forecast or simulation of results is not necessarily indicative of the future or likely performance of any investment. DBS accepts no liability whatsoever for any direct indirect or consequential losses or damages arising from or in connection with the use or reliance of this publication or its contents. The information herein is not intended for distribution to, or use by, any person or entity in any jurisdiction or country where such distribution or use would be contrary to law or regulation. If this publication has been distributed by electronic transmission, such as , then such transmission cannot be guaranteed to be secure or error-free as information could be intercepted, corrupted, lost, destroyed, arrive late or incomplete, or contain viruses. The sender therefore does not accept liability for any errors or omissions in the contents of this publication, which may arise as a result of electronic transmission. If verification is required, please request for a hard-copy version. Country Specific Disclaimer China: This report is distributed in China by DBS Bank (China) Ltd. Indonesia: This report is made available in Indonesia through PT DBS Indonesia. PT DBS Indonesia is regulated by Bank Indonesia. Singapore: This report is distributed in Singapore by DBS Bank Ltd. DBS Bank Ltd Co. Reg. No.: