US Equities remain top destination for ETF flows post US election (Update 1)

Transcription

1 Deutsche Bank Markets Research North America United States Synthetic Equity & Index Strategy Date 18 November 2016 US Equities remain top destination for ETF flows post US election (Update 1) US Equity ETFs received largest 7day inflows on record (~$40bn) after the US election ETF investors have poured $39.4bn inflows into US equity vehicles following the US election, this is not just a large number but it is also its largest 7day inflow run on record in absolute terms. In the meantime, EM equity ETF flows continued in reversal mode with outflows reaching $2.1bn since the election. On the other hand, ETF flows in other DM outside the US began to shift directions with Japan ($0.7bn) and DM Intl ($0.7bn) receiving inflows, and European outflows flattening. Sebastian Mercado, CFA Strategist In the US, Large Cap ($26.2bn), Small Cap ($6.9bn), Financials ($6.9bn), Health Care ($3.1bn), and Industrials ($3.1bn) remain top inflow destinations This week, Large Cap ETFs continued receiving strong inflows totaling $26.2bn since the election, while Small Cap ETFs slowed down their asset gathering capabilities this week adding only $1.0bn since last Friday for a total of $6.9bn since Nov 8. Among US sector ETFs, Financials ($6.9bn), and Industrials ($3.1bn) continued receiving large new allocations both in absolute and relative to assets terms, however Health Care flows have remained flat since last Friday; Financials and Industrials have been the best performing sectors since the election advancing 10.9%, and 5.3%, respectively. Within Financials, and Health Care, we highlight Banks which continued to add inflows (+$1.2bn flow, +15.0% returns) and Biotechnology which remained mostly flat since last Friday (+$1.4bn flow, +10.3% returns), respectively. On the flip side, bond substitutes (Dividend, Real Estate, Utilities, Cons. Staples) which initially experienced outflows began to reverse that trend and received inflows this week. Lastly, Low Risk ETF flows continued on the weak side totaling outflows of almost $0.5bn. Outflows among EM Debt, and Gold ETFs continued this week outside equities Since last Friday, EM Debt and Gold ETF outflows continued this week adding to a total of $1.0bn and $2.0bn since the election, respectively. Meanwhile Corporate HY ETF flows turned negative, and Corporate IG ETF flows flattened. Furthermore, the flow trend for Inflation ETFs still continues on its preelection path, and totaled inflows of $0.4bn since the election. On the other hand, Rates seem to have begun to experienced weakness across the board with flows turning negative across all terms since the election. Distributed on: 18/11/ :12:11 GMT Deutsche Bank does and seeks to do business with companies covered in its research reports. Thus, investors should be aware that the firm may have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as only a single factor in making their investment decision. DISCLOSURES AND ANALYST CERTIFICATIONS ARE LOCATED IN APPENDIX 1.MCI (P) 057/04/2016.

2 ETF flows, returns, and volume Figure 1: Summary of ETF flows, returns, and volume activity Post Election Flow & Perf PreElection ADV $MM Post Election ADV Asset Class 7Day CF 7Day CF 7Day 7Day 7D chg 7D chg 20Day 7Day $MM % AUM Tot. Ret $MM vs. 20D vs. 7D US Equities Broad Sector US (VTI) 39, % 3.1% 44,219 52,049 75,479 71% 45% US Large Cap (SPY) 26, % 2.3% 33,687 39,466 52,348 55% 33% US Small Cap (IWM) 6, % 9.6% 3,841 4,479 10, % 124% US Dividend (DVY) (347) 0.3% 2.8% % 42% US Low Risk (USMV) (430) 1.7% 0.1% % 30% Sectors Cons. Staples (XLU) (112) 0.7% 5.6% ,615 93% 85% Cons. Discr. (XLY) (707) 4.1% 3.3% 966 1,478 1,725 79% 17% Energy (XLE) % 2.2% 2,248 2,496 2,669 19% 7% Financials (XLF) 6, % 10.9% 1,605 1,832 5, % 209% Health Care (XLV) 3, % 3.0% 2,218 2,917 4,058 83% 39% Industrials (XLI) 3, % 5.3% 819 1,109 1, % 66% Materials (XLB) % 2.4% % 38% Technology (XLK) % 0.0% 955 1,111 2, % 84% Telecom (VOX) (63) 3.2% 1.9% % 14% Real Estate (IYR) (25) 0.1% 2.9% 1,351 1,750 2,167 60% 24% Utilities (XLU) (239) 1.9% 5.6% 947 1,085 1,613 70% 49% Industries Biotech (IBB) 1, % 10.3% 930 1,051 2, % 93% Banks (KBE) 1, % 15.0% , % 193% Global ex US Equities DM Intl (EFA) % 1.2% 3,374 3,901 5,283 57% 35% Europe (VGK) (62) 0.1% 1.8% ,100 46% 31% Japan (EWJ) % 0.7% , % 79% EM (EEM) (2,131) 1.5% 7.3% 6,609 8,737 12,208 85% 40% Latin America (ILF) % 13.5% 1,280 1,643 2,250 76% 37% China (FXI) (155) 2.0% 4.4% 847 1,009 1,361 61% 35% Fixed Income Rates (US Treasuries) Very Short (SHV) (327) 5.9% 0.0% % 67% Short (SHY) (605) 4.3% 0.3% % 30% Intermediate (IEI) (75) 0.4% 1.7% % 41% Long (TLT) (106) 1.2% 6.8% 1,142 1,161 2, % 97% Inflation Inflation TIPs (TIP) % 1.9% % 21% Credit Corp. IG (LQD) (786) 0.8% 2.7% 1,183 1,273 1,564 32% 23% Corp. HY (HYG) (162) 0.4% 1.6% 2,024 2,908 2,914 44% 0% EM Debt (EMB) (969) 5.2% 4.8% % 102% Sr. Loans (BKLN) % 0.2% % 8% Commodities Gold (GLD) (2,037) 4.1% 4.5% 1,275 1,909 2,256 77% 18% Crude Oil (USO) % 0.3% % 8% Source: Deutsche Bank, Bloomberg Finance LP, FactSet. Data as of Thu Nov 17, Returns correspond to the referenced ETP, but flows and volume correspond to all nonlevered long ETPs in the asset class. Page 2

3 ETF flow trends 1 Figure 2: Cumulative ETF flow trend Q3 US Equities 60,000 US 50,000 40,000 30,000 20,000 10,000 (10,000) 30Sep 10Oct 20Oct 30Oct 9Nov Figure 3: Cumulative ETF flow trend Q3 US Large & Small Cap 40,000 35,000 30,000 25,000 20,000 15,000 10,000 5,000 US Small Cap US Large Cap (5,000) 30Sep 10Oct 20Oct 30Oct 9Nov Figure 4: Cumulative ETF flow trend Q3 US Dividend & Low Risk Figure 5: Cumulative ETF flow trend Q3 US Sectors (bond substitutes) () () (1,) (2,000) US Dividend (2,) US Low Risk 30Sep 10Oct 20Oct 30Oct 9Nov () () (1,) (2,000) (2,) Cons. Staples (3,000) Telecom Real Estate Utilities (3,) 30Sep 10Oct 20Oct 30Oct 9Nov Figure 6: Cumulative ETF flow trend Q3 US Cyclicals 3, Cons. Discr. 3,000 2, Energy Materials 2,000 Industrials Technology 1, () () (1,) 30Sep 10Oct 20Oct 30Oct 9Nov Figure 7: Cumulative ETF flow trend Q3 US Financials & Health Care 10,000 8,000 6,000 4,000 2,000 Biotech Health Care Financials Banks (2,000) 30Sep 10Oct 20Oct 30Oct 9Nov 1 Data as of Thu Nov 17, Flow figures only include nonlevered long ETPs. Page 3

4 Figure 8: Cumulative ETF flow trend Q3 DM Intl Equities 1, DM Intl Europe Japan () () (1,) (2,000) 30Sep 10Oct 20Oct 30Oct 9Nov Figure 9: Cumulative ETF flow trend Q3 EM Equities* 3, 3,000 2, 2,000 1, EM Latin America China 30Sep 10Oct 20Oct 30Oct 9Nov *Post election inflows to Latin America are driven mostly by inflows into the ishares MSCI Mexico ETF (EWW), however we believe the trend is misleading given the inconsistency of the inflows relative to negative performance, and the fact that borrow rates on EWW almost doubled following Nov 8th (borrow data from S3 via Bloomberg Finance LP) Figure 10: Cumulative ETF flow trend Q3 Rates (US Treasuries) (200) (400) (600) (800) Short Long Very Short Intermediate () 30Sep 10Oct 20Oct 30Oct 9Nov Figure 11: Cumulative ETF flow trend Q3 Credit 4,000 3,000 2,000 () (2,000) Corp. IG (3,000) Corp. HY EM Debt Sr. Loans (4,000) 30Sep 10Oct 20Oct 30Oct 9Nov Figure 12: Cumulative ETF flow trend Q3 Inflation 3, Inflation 3,000 2, 2,000 1, 30Sep 10Oct 20Oct 30Oct 9Nov Source: Deutsche Bank, Bloomberg Finance LP Figure 13: Cumulative ETF flow trend Q3 Commodities 1, () () (1,) Gold Crude Oil (2,000) 30Sep 10Oct 20Oct 30Oct 9Nov Page 4

5 ETFs for trading in a postelection environment Figure 14: Select list of liquid ETFs for tactical trading Investment Focus Ticker ETF Name Listing Date US Equities Broad Sector Large Cap SPY SPDR S&P ETF 29Jan % 211,608 22,095 8,779 30, , ,337 Small Cap IWM ishares Russell 2000 ETF 22May % 35,353 4, , ,180 80,248 Low Risk USMV ishares MSCI USA Minimum Volatility ETF 20Oct % 12, Dividend SDY SPDR S&P Dividend ETF 15Nov % 14, Dividend DVY ishares Select Dividend ETF 7Nov % 16, Sectors Cons. Staples XLP Consumer Staples Select Sector SPDR Fund 22Dec % 7, ,454 2, ,716 Cons. Discr. XLY Consumer Discretionary Select Sector SPDR Fund 22Dec % 9, ,663 3, ,788 Energy XLE Energy Select Sector SPDR Fund 22Dec % 15,822 1,131 1,328 2, ,730 Financials XLF Financial Select Sector SPDR Fund 22Dec % 19,939 1,942 1,273 3, ,592 Health Care XLV Health Care Select Sector SPDR Fund 22Dec % 13,295 1,079 1,832 2, ,208 Industrials XLI Industrial Select Sector SPDR Fund 22Dec % 9, ,736 2, ,586 Materials XLB Materials Select Sector SPDR Fund 22Dec % 3, ,400 Technology XLK Technology Select Sector SPDR Fund 22Dec % 12, ,031 4, ,222 Telecom VOX Vanguard Telecommunication Services ETF 29Sep % 1, Real Estate IYR ishares U.S. Real Estate ETF 19Jun % 3, , ,024 Utilities XLU Utilities Select Sector SPDR Fund 22Dec % 6,697 1, , ,215 Industries Biotech IBB ishares Nasdaq Biotechnology ETF 5Feb % 8, ,701 Biotech XBI SPDR S&P Biotech ETF 2Feb % 3, ,739 Banks KBE SPDR S&P Bank ETF 15Nov % 3, Banks KRE SPDR S&P Regional Banking ETF 22Jun % 3, ,586 Global ex US Equities DM Intl EFA ishares MSCI EAFE ETF 14Aug % 56,668 1,008 2,154 3, ,766 Europe VGK Vanguard FTSE Europe ETF 3Mar % 10, Japan EWJ ishares MSCI Japan ETF 12Mar % 14, ,177 1, ,563 EM EEM ishares MSCI Emerging Markets ETF 7Apr % 25,867 3, , ,456 36,487 Latin America ILF ishares Latin America 40 ETF 26Oct % 1, China FXI ishares China LargeCap ETF 8Oct % 3, ,373 Fixed Income Rates (US Treasuries) Very Short SHV ishares Short Treasury Bond ETF 12Jan % 3, n.a. n.a Short SHY ishares 13 Year Treasury Bond ETF 26Jul % 10, n.a. n.a Intermediate IEI ishares 37 Year Treasury Bond ETF 12Jan % 5, n.a. n.a Long TLT ishares 20+ Year Treasury Bond ETF 26Jul % 6,396 1,351 n.a. n.a ,203 20,351 Inflation Inflation TIPs TIP ishares TIPS Bond ETF 12Apr % 20, n.a. n.a Credit Corp. IG LQD ishares iboxx $ Investment Grade Corporate Bond ETF 26Jul % 29, n.a. n.a ,769 Corp. HY HYG ishares iboxx $ High Yield Corporate Bond ETF 10Apr % 15,965 1,449 n.a. n.a ,720 EM Debt EMB ishares J.P. Morgan USD Emerging Markets Bond ETF 12Dec % 8, n.a. n.a Sr. Loans BKLN PowerShares Senior Loan Portfolio 3Mar % 6, n.a. n.a Commodities Gold GLD SPDR Gold Shares 18Nov % 36,599 1,305 n.a. n.a ,357 56,701 Crude Oil USO United States Oil Fund LP 3Apr % 3, n.a. n.a ,757 TER 20D ADV AUM $M $M Data as of Fri Nov 17, 2016, except for Options data as of Fri Nov 11, Implied Total Liq. Liq. $M $ Avg. Bid/Ask Avg. Options 5Day 5Day Notional Value $ bps Traded $MM Options Open Interest $MM Page 5

6 Appendix 1 Important Disclosures *Other information available upon request *Prices are current as of the end of the previous trading session unless otherwise indicated and are sourced from local exchanges via Reuters, Bloomberg, and other vendors. Other information is sourced from Deutsche Bank, subject companies, and other sources. 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 lookup 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. Sebastian Mercado Hypothetical Disclaimer Backtested, hypothetical or simulated performance results have inherent limitations. Unlike an actual performance record based on trading actual client portfolios, simulated results are achieved by means of the retroactive application of a backtested model itself designed with the benefit of hindsight. Taking into account historical events the backtesting of performance also differs from actual account performance because an actual investment strategy may be adjusted any time, for any reason, including a response to material, economic or market factors. The backtested performance includes hypothetical results that do not reflect the reinvestment of dividends and other earnings or the deduction of advisory fees, brokerage or other commissions, and any other expenses that a client would have paid or actually paid. No representation is made that any trading strategy or account will or is likely to achieve profits or losses similar to those shown. Alternative modeling techniques or assumptions might produce significantly different results and prove to be more appropriate. Past hypothetical backtest results are neither an indicator nor guarantee of future returns. Actual results will vary, perhaps materially, from the analysis. Equity rating key Buy: Based on a current 12 month view of total shareholder return (TSR = percentage change in share price from current price to projected target price plus projected dividend yield ), we recommend that investors buy the stock. Sell: Based on a current 12month view of total shareholder return, we recommend that investors sell the stock Hold: We take a neutral view on the stock 12months out and, based on this time horizon, do not recommend either a Buy or Sell. Newly issued research recommendations and target prices supersede previously published research. Equity rating dispersion and banking relationships Regulatory Disclosures 1.Additional Information Page 6

7 Information on ETFs is provided strictly for illustrative purposes and should not be deemed an offer to sell or a solicitation of an offer to buy shares of any fund that is described in this document. Consider carefully any fund's investment objectives, risk factors, and charges and expenses before investing. This and other information can be found in the fund's prospectus. Prospectuses about db Xtrackers funds and Powershares DB funds can be obtained by calling or by visiting Read prospectuses carefully before investing. Past performance is not necessarily indicative of future results. Investing involves risk, including possible loss of principal. To better understand the similarities and differences between investments, including investment objectives, risks, fees and expenses, it is important to read the products' prospectuses. Shares of ETFs may be sold throughout the day on an exchange through any brokerage account. However, shares may only be redeemed directly from an ETF by authorized participants, in very large creation/redemption units. Transactions in shares of ETFs will result in brokerage commissions and will generate tax consequences. ETFs are obliged to distribute portfolio gains to shareholders. Deutsche Bank may be an issuer, advisor, manager, distributor or administrator of, or provide other services to, an ETF included in this report, for which it receives compensation. db Xtrackers and Powershares DB funds are distributed by ALPS Distributors, Inc. The opinions expressed are those of the authors and do not necessarily reflect the views of DB, ALPS or their affiliates. 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. Page 7

8 Additional Information The information and opinions in this report were prepared by Deutsche Bank AG or one of its affiliates (collectively "Deutsche Bank"). Though 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 its accuracy or completeness. If you use the services of Deutsche Bank in connection with a purchase or sale of a security that is discussed in this report, or is included or discussed in another communication (oral or written) from a Deutsche Bank analyst, Deutsche Bank may act as principal for its own account or as agent for another person. Deutsche Bank may consider this report in deciding to trade as principal. It may also engage in transactions, for its own account or with customers, in a manner inconsistent with the views taken in this research report. Others within Deutsche Bank, including strategists, sales staff and other analysts, may take views that are inconsistent with those taken in this research report. Deutsche Bank issues a variety of research products, including fundamental analysis, equitylinked analysis, quantitative analysis and trade ideas. Recommendations contained in one type of communication may differ from recommendations contained in others, whether as a result of differing time horizons, methodologies or otherwise. Deutsche Bank and/or its affiliates may also be holding debt or equity securities of the issuers it writes on. Analysts are paid in part based on the profitability of Deutsche Bank AG and its affiliates, which includes investment banking, trading and principal trading revenues. Opinions, estimates and projections constitute the current judgment 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 provides liquidity for buyers and sellers of securities issued by the companies it covers. Deutsche Bank research analysts sometimes have shorterterm trade ideas that are consistent or inconsistent with Deutsche Bank's existing longer term ratings. Trade ideas for equities can be found at the SOLAR link at A SOLAR idea represents a high conviction belief by an analyst that a stock will outperform or underperform the market and/or sector delineated over a time frame of no less than two weeks. In addition to SOLAR ideas, the analysts named in this report may from time to time discuss with our clients, Deutsche Bank salespersons and Deutsche Bank traders, trading strategies or ideas that reference catalysts or events that may have a nearterm or mediumterm impact on the market price of the securities discussed in this report, which impact may be directionally counter to the analysts' current 12month view of total return or investment return as described herein. Deutsche Bank has no obligation to update, modify or amend this report or to otherwise notify a recipient thereof if any opinion, forecast or estimate contained herein changes or subsequently becomes inaccurate. Coverage and the frequency of changes in market conditions and in both general and company specific economic prospects make it difficult to update research at defined intervals. Updates are at the sole discretion of the coverage analyst concerned or of the Research Department Management and as such the majority of reports are published at irregular intervals. This report is provided for informational purposes only and does not take into account the particular investment objectives, financial situations, or needs of individual clients. 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 s judgment. The financial instruments discussed in this report may not be suitable for all investors and investors must make their own informed investment decisions. Prices and availability of financial instruments are subject to change without notice and investment 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. Unless otherwise indicated, prices are current as of the end of the previous trading session, and are sourced from local exchanges via Reuters, Bloomberg and other vendors. Data is sourced from Deutsche Bank, subject companies, and in some cases, other parties. The Deutsche Bank Research Department is independent of other business areas divisions of the Bank. Details regarding our organizational arrangements and information barriers we have to prevent and avoid conflicts of interest with respect to our research is available on our website under Disclaimer found on the Legal tab. 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 who 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. Page 8

9 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 mismeasure 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 shortdated 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 coupons 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. 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. 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. 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 your Deutsche Bank representative for a copy of this important document. Participants in foreign exchange transactions may incur risks arising from several factors, including the following: ( i) exchange rates can be volatile and are subject to large fluctuations; ( ii) the value of currencies may be affected by numerous market factors, including world and national economic, political and regulatory events, events in equity and debt markets and changes in interest rates; and (iii) currencies may be subject to devaluation or government imposed exchange controls which could affect the value of the currency. Investors in securities such as ADRs, whose values are affected by the currency of an underlying security, effectively assume currency risk. Unless governing law provides otherwise, all transactions should be executed through the Deutsche Bank entity in the investor's home jurisdiction. Aside from within this report, important conflict disclosures can also be found at gm.db.com/equities under the "Disclosures Lookup" and "Legal" tabs. Investors are strongly encouraged to review this information before investing. United States: Approved and/or distributed by Deutsche Bank Securities Incorporated, a member of FINRA, NFA and SIPC. Analysts located outside of the United States are employed by nonus affiliates that are not subject to FINRA regulations. Germany: Approved and/or distributed by Deutsche Bank AG, a joint stock corporation with limited liability incorporated in the Federal Republic of Germany with its principal office in Frankfurt am Main. Deutsche Bank AG is authorized under German Banking Law and is subject to supervision by the European Central Bank and by BaFin, Germany s Federal Financial Supervisory Authority. United Kingdom: Approved and/or distributed by Deutsche Bank AG acting through its London Branch at Winchester House, 1 Great Winchester Street, London EC2N 2DB. Deutsche Bank AG in the United Kingdom is authorised by the Prudential Regulation Authority and is subject to limited regulation by the Prudential Regulation Authority and Financial Conduct Authority. Details about the extent of our authorisation and regulation are available on request. Hong Kong: Distributed by Deutsche Bank AG, Hong Kong Branch. Page 9

10 India: Prepared by Deutsche Equities India Pvt Ltd, which is registered by the Securities and Exchange Board of India (SEBI) as a stock broker. Research Analyst SEBI Registration Number is INH DEIPL may have received administrative warnings from the SEBI for breaches of Indian regulations. Japan: Approved and/or distributed by Deutsche Securities Inc.(DSI). 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 and The Financial Futures Association of Japan. Commissions and risks involved in stock transactions for stock transactions, we charge stock commissions and consumption tax by multiplying the transaction amount by the commission rate agreed with each customer. Stock transactions can lead to losses as a result of share price fluctuations and other factors. Transactions in foreign stocks can lead to additional losses stemming from foreign exchange fluctuations. We may also 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. Reports on Japanese listed companies not written by analysts of DSI are written by Deutsche Bank Group's analysts with the coverage companies specified by DSI. Some of the foreign securities stated on this report are not disclosed according to the Financial Instruments and Exchange Law of Japan. Target prices set by Deutsche Bank's equity analysts are based on a 12month forecast period. Korea: Distributed by Deutsche Securities Korea Co. South Africa: Deutsche Bank AG Johannesburg is incorporated in the Federal Republic of Germany (Branch Register Number in South Africa: 1998/003298/10). Singapore: by Deutsche Bank AG, Singapore Branch or Deutsche Securities Asia Limited, Singapore Branch (One Raffles Quay #1800 South Tower Singapore , ), which may be contacted 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), they accept legal responsibility to such person for its contents. Taiwan: Information on securities/investments that trade in Taiwan is for your reference only. Readers should independently evaluate investment risks and are solely responsible for their investment decisions. Deutsche Bank research may not be distributed to the Taiwan public media or quoted or used by the Taiwan public media without written consent. Information on securities/instruments that do not trade in Taiwan is for informational purposes only and is not to be construed as a recommendation to trade in such securities/instruments. Deutsche Securities Asia Limited, Taipei Branch may not execute transactions for clients in these securities/instruments. 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. Page 10

11 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. 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. Please refer to Australian specific research disclosures and related information at researchinformation.html Australia and New Zealand: This research is intended only for "wholesale clients" within the meaning of the Australian Corporations Act and New Zealand Financial Advisors Act respectively. 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 without Deutsche Bank's prior written consent. Copyright 2016 Deutsche Bank AG Page 11

12 David FolkertsLandau Group Chief Economist and Global Head of Research Raj Hindocha Global Chief Operating Officer Research Michael Spencer Head of APAC Research Global Head of Economics Steve Pollard Head of Americas Research Global Head of Equity Research Anthony Klarman Global Head of Debt Research Paul Reynolds Head of EMEA Equity Research Dave Clark Head of APAC Equity Research Pam Finelli Global Head of Equity Derivatives Research Andreas Neubauer Head of Research Germany Stuart Kirk Head of Thematic 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 Chiyodaku, Tokyo Japan Tel: (81) Deutsche Bank AG London 1 Great Winchester Street London EC2N 2EQ United Kingdom Tel: (44) Wall Street New York, NY United States of America Tel: (1)