MARKET INSIGHTS. Guide to the Markets. Australia 4Q September 2017

MARKET INSIGHTS Guide to the Markets Australia 4Q 2017 30 September 2017

Global Market Insights Strategy Team Dr. David Kelly, CFA New York Samantha Azzarello New York Alex Dryden, CFA New York David Lebovitz New York Gabriela Santos New York Jordan Jackson New York John Manley New York Michael Bell, CFA London Nandini Ramakrishnan London Ambrose Crofton London Jai Malhi London Manuel Arroyo Ozores, CFA Madrid Lucia Gutierrez Mellado Madrid Tilmann Galler, CFA Frankfurt Maria Paola Toschi Milan Vincent Juvyns Luxembourg Tai Hui Hong Kong Marcella Chow Hong Kong Ian Hui Hong Kong Hannah Anderson Hong Kong Chaoping Zhu, CFA Shanghai Yoshinori Shigemi Tokyo Shogo Maekawa Tokyo Tyler Voigt New York Abigail Yoder, CFA New York Julio Callegari São Paulo Dr. Jasslyn Yeo, CFA Singapore Kerry Craig, CFA Melbourne

Page reference GTM Australia 3 Australian economy 4. Economic growth and the composition of GDP 5. Growth indicators 6. Inflation 7. Labour market 8. Consumer finances 9. Residential real estate 10. Trade 11. Government finances Global economy 12. Global growth 13. Global Purchasing Managers Index (PMI) for manufacturing 14. Global inflation dynamics 15. Globalisation and trade 16. U.S.: GDP and inflation 17. U.S.: Growth indicators 18. U.S.: Labour market 19. U.S.: Fiscal policies 20. U.S.: Long-run economic growth 21. Eurozone economy 22. Eurozone: Inflation and lending 23. Japan: GDP and inflation 24. Japan: Growth indicators 25. Japan: Policies, currencies and governance 26. China: GDP and inflation 27. China: Growth indicators 28. China: Financial dynamics 29. China: Credit and leverage Equities 30. World equity market returns 31. Global equity earnings and valuations 32. Australia ASX 200 at inflection points 33. Australia ASX 200 valuation measures 34. Australia ASX 200 earnings 35. Australia sector returns 36. Market volatility 37. Correlation and market moves 38. Global investing 39. U.S;. S&P 500 at inflection points 40. U.S. S&P 500 earnings and valuations 41. Bear markets and subsequent bull runs 42. Interest rates and equities 43. Europe: Earnings and valuation 44. Emerging markets valuations and returns 45. Emerging markets equities: Relative performance 46. Emerging markets: Earnings snapshot 47. China A vs. H shares: Earnings and valuations 48. Global equity: Performance cycles Fixed income 49. Fixed income sector returns 50. Policy rates and market expectations 51. Central bank balance sheets 52. G3 bond yields 53. Australian interest rates and inflation 54. The Australian yield curve 55. The U.S. Federal Reserve outlook 56. Historical impact of U.S. Federal Reserve tightening 57. Fixed income interest rate risk 58. Global investment-grade bonds 59. U.S. high yield bonds 60. Emerging market debt 61. China fixed income market Other asset classes 62. Oil consumption and production 63. Commodities 64. Australian dollar 65. Global currencies 66. Emerging markets currencies Investing principles 67. Asset class returns (AUD) 68. Cash accounts 69. Annual returns and intra-year declines 70. Impact of being out of the market 71. The power of compounding 72. Life expectancy and pension shortfall 73. Time, diversification and the volatility of returns 3

Economic growth and the composition of GDP GTM Australia 4 Australian economy Real GDP Year-over-year change Avg 1965 2Q17 Real GDP 3.4% 1.8% Components of GDP Nominal GDP, sum of last four quarters, AUD billions* $1,800 0.7% Net exports 7.5% Housing $1,600 11.9% Investment ex-housing $1,400 $1,200 23.6% Gov t spending $1,000 $800 $600 $400 56.2% Consumption $200 $0 Source: Australian Bureau of Statistics, FactSet, J.P. Morgan Asset Management. *Values may not sum to 100% due to rounding. 4

Growth indicators GTM Australia 5 Australian economy Consumer confidence and business conditions Index, 3-month moving average Business confidence Consumer confidence New capital expenditures % of GDP Residential Resources Non-residential Public engineering Consumer confidence and retail sales Year-over-year change 3-month moving average Business credit growth Year-over-year change Consumer confidence Aug 2017: 4.5% Retail sales growth Source: FactSet, J.P. Morgan Asset Management; (Top left and right) Westpac; (Top left) National Australia Bank; (Bottom left and top right) ABS. 5

Australian economy Inflation CPI and core CPI Year-over-year change GTM Australia 6 Average 2Q17 Headline CPI* 3.8% 1.9% Core CPI 3.8% 1.8% Tradables 2.9% 0.4% Non-tradables 4.2% 2.7% Source: Australian Bureau of Statistics, FactSet, J.P. Morgan Asset Management. *CPI is the Consumer Price Index, core CPI is the average of the trimmed mean and weighted median measures of inflation. Tradables represent approximately 35% of the CPI basket and non-tradables 65%. 6

Australian economy Labour market Unemployment and underemployment rates Seasonally adjusted Unemployment rate Underemployment rate 2Q17: 8.8% GTM Australia 7 Employment change Monthly change in trend series, thousands Part time 50 Full time 40 30 20 10 0-10 -20 '07 '08 '09 '10 '11 '12 '13 '14 '15 '16 Aug 2017: 5.6% Wage growth Year-over-year change, excluding bonuses Average: 3.3% 2Q17: 1.8% Source: Australian Bureau of Statistics, FactSet, J.P. Morgan Asset Management. 7

Consumer finances GTM Australia 8 Australian economy Consumer balance sheet 2Q17, AUD trillions of dollars outstanding, not seasonally adjusted* $12 Total assets: $11.6tn $11 $10 Other financial: 13% Household debt and savings ratio Percent of annualised household disposable income Household debt $9 Pension funds: 20% $8 $7 $6 $5 $4 $3 $2 Deposits: 9% Other tangible: 3% Homes: 55% Securities other than shares: 1% Other accounts payable: 10% Total liabilities: $2.4tn Household debt service ratio Interest payments to household disposable income, seasonally adjusted 3Q08: 13.2% Savings rate 2Q17: 8.7% $1 Loans: 90% $0 Assets Liabilities Source: Australian Bureau of Statistics, FactSet, RBA, J.P. Morgan Asset Management. *Values may not sum to 100% due to rounding. 8

Australian economy Residential real estate Capital cities house prices Year-over-year change, 3-month moving average 25% 20% 15% 10% 5% 0% -5% -10% Sydney Melbourne Canberra Adelaide Brisbane Perth -15% '07 '08 '09 '10 '11 '12 '13 '14 '15 '16 Mortgage lending 3-month annualised rate 12% 10% 8% 6% APRA threshold GTM Australia 9 4% 2% Investor Owner-occupier 0% '07 '08 '09 '10 '11 '12 '13 '14 '15 '16 Auction clearance rate and house prices 3-month moving average Year-over-year 85% Auction clearance rate Dwelling prices* 20% (adv. 5 months) 75% 15% 65% 55% 45% 35% '09 '10 '11 '12 '13 '14 '15 '16 '17 10% 5% 0% -5% -10% Source: J.P. Morgan Asset Management; (Left and bottom right) RPD CoreLogic; (Top right) Australian Bureau of Statistics, FactSet. *Dwelling price is the year-over-year change in the hedonic index for eight capital cities. 9

Trade GTM Australia 10 Australian economy Terms of trade and commodity prices Export / import prices RBA commodity price index Terms of trade Commodity prices Current account % of nominal GDP 4% 2% 0% Trade Income -2% -4% -6% -8% '06 '07 '08 '09 '10 '11 '12 '13 '14 '15 '16 Exports by type % of total exports, six-month moving average Iron ore Coal Tourism Natural gas Source: Australian Bureau of Statistics, FactSet, J.P. Morgan Asset Management; (Left) RBA. 10

Government finances GTM Australia 11 Australian economy 2016 Commonwealth budget Budget, AUD billions* $500 Total spending: $464bn Borrowing: $20bn (4%) $450 Other: $48bn (10%) $400 Defence: $30bn (6%) Other: $50bn (11%) $350 Health: Excise: $37bn (8%) $75bn (16%) Sales: $300 $67bn (14%) $250 $200 $150 $100 $50 Non-defence: $147bn (32%) Social security: $164bn (35%) $0 Government spending Budget assumptions Corp: $80bn (17%) Income: $210bn (45%) Sources of revenue 2017-18 2018-19 2019-20 2020-21 Real GDP growth 2.75% 3.00% 3.00% 3.00% Unemployment 5.75% 5.50% 5.50% 5.25% Inflation (CPI) 2.00% 2.25% 2.50% 2.50% Source: Australian Treasury, J.P. Morgan Asset Management. *Figures may not sum due to rounding. Commonwealth budget surplus/deficit % of GDP, 2017-18 budget, end of fiscal year 3% 2% 1% 0% -1% -2% -3% -4% -5% '71 '74 '77 '80 '83 '86 '89 '92 '95 '98 '01 '04 '07 '10 '13 '16 '19 Commonwealth gross debt 2017-18 budget, end of fiscal year $700 Total debt (bn) $600 $500 $400 $300 $200 $100 2017-18: -1.6% Forecast Forecast 35% % of GDP 30% 25% 20% 15% 10% $0 0% '71 '76 '81 '86 '91 '96 '01 '06 '11 '16 '21 5% 11

Global growth GTM Australia 12 Global economy Real GDP growth Year-over-year change 10% EM GDP growth DM GDP growth 8% EM less DM growth 6% 4% EM growth outperforms DM Forecast* 2% 0% -2% -4% DM growth outperforms EM -6% '80 '82 '84 '86 '88 '90 '92 '94 '96 '98 '00 '02 '04 '06 '08 '10 '12 '14 '16 '18 '20 Source: IMF, J.P. Morgan Asset Management. *Forecasts are from the IMF s World Economic Outlook October 2017 edition. 12

Global Purchasing Managers Index (PMI) for manufacturing GTM Australia 13 2015 2016 2017 Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Global 51.0 51.0 50.7 50.9 50.0 50.6 50.2 50.1 50.4 51.0 50.8 51.1 52.0 52.1 52.7 52.8 53.0 53.0 52.7 52.6 52.6 52.7 53.2 53.2 Developed 52.5 52.3 52.0 52.1 50.8 50.9 50.5 50.4 51.2 51.5 51.2 51.5 52.6 53.0 53.8 54.2 54.1 53.9 54.1 54.1 53.9 54.0 54.2 54.6 Global economy Emerging 49.0 49.2 49.0 49.4 48.9 50.2 49.6 49.5 49.3 50.3 50.1 50.3 51.0 50.8 51.1 50.8 51.3 51.6 50.9 50.6 50.8 50.9 51.7 51.3 Australia 50.2 52.5 51.9 51.5 53.5 58.1 53.4 51.0 51.8 56.4 46.9 49.8 50.9 54.2 55.4 51.2 59.3 57.5 59.2 54.8 55.0 56.0 59.8 54.2 U.S. 54.1 52.8 51.2 52.4 51.3 51.5 50.8 50.7 51.3 52.9 52.0 51.5 53.4 54.1 54.3 55.0 54.2 53.3 52.8 52.7 52.0 53.3 52.8 53.1 Canada 48.0 48.6 47.5 49.3 49.4 51.5 52.2 52.1 51.8 51.9 51.1 50.3 51.1 51.5 51.8 53.5 54.7 55.5 55.9 55.1 54.7 55.5 54.6 55.0 UK 54.5 52.4 51.2 52.2 50.9 51.3 49.6 50.5 53.1 48.4 53.0 55.6 54.2 53.4 55.8 55.4 54.6 54.3 57.2 56.4 54.2 55.2 56.7 55.9 Japan 52.4 52.6 52.6 52.3 50.1 49.1 48.2 47.7 48.1 49.3 49.5 50.4 51.4 51.3 52.4 52.7 53.3 52.4 52.7 53.1 52.4 52.1 52.2 52.9 Eurozone 52.3 52.8 53.2 52.3 51.2 51.6 51.7 51.5 52.8 52.0 51.7 52.6 53.5 53.7 54.9 55.2 55.4 56.2 56.7 57.0 57.4 56.6 57.4 58.1 Germany 52.1 52.9 53.2 52.3 50.5 50.7 51.8 52.1 54.5 53.8 53.6 54.3 55.0 54.3 55.6 56.4 56.8 58.3 58.2 59.5 59.6 58.1 59.3 60.6 France 50.6 50.6 51.4 50.0 50.2 49.6 48.0 48.4 48.3 48.6 48.3 49.7 51.8 51.7 53.5 53.6 52.2 53.3 55.1 53.8 54.8 54.9 55.8 56.1 Italy 54.1 54.9 55.6 53.2 52.2 53.5 53.9 52.4 53.5 51.2 49.8 51.0 50.9 52.2 53.2 53.0 55.0 55.7 56.2 55.1 55.2 55.1 56.3 56.3 Spain 51.3 53.1 53.0 55.4 54.1 53.4 53.5 51.8 52.2 51.0 51.0 52.3 53.3 54.5 55.3 55.6 54.8 53.9 54.5 55.4 54.7 54.0 52.4 54.3 Ireland 53.6 53.3 54.2 54.3 52.9 54.9 52.6 51.5 53.0 50.2 51.7 51.3 52.1 53.7 55.7 55.5 53.8 53.6 55.0 55.9 56.0 54.6 56.1 55.4 Greece 47.3 48.1 50.2 50.0 48.4 49.0 49.7 48.4 50.4 48.7 50.4 49.2 48.6 48.3 49.3 46.6 47.7 46.7 48.2 49.6 50.5 50.5 52.2 52.8 China 48.3 48.6 48.2 48.4 48.0 49.7 49.4 49.2 48.6 50.6 50.0 50.1 51.2 50.9 51.9 51.0 51.7 51.2 50.3 49.6 50.4 51.1 51.6 51.0 Indonesia 47.8 46.9 47.8 48.9 48.7 50.6 50.9 50.6 51.9 48.4 50.4 50.9 48.7 49.7 49.0 50.4 49.3 50.5 51.2 50.6 49.5 48.6 50.7 50.4 Korea 49.1 49.1 50.7 49.5 48.7 49.5 50.0 50.1 50.5 50.1 48.6 47.6 48.0 48.0 49.4 49.0 49.2 48.4 49.4 49.2 50.1 49.1 49.9 50.6 Taiwan 47.8 49.5 51.7 50.6 49.4 51.1 49.7 48.5 50.5 51.0 51.8 52.2 52.7 54.7 56.2 55.6 54.5 56.2 54.4 53.1 53.3 53.6 54.3 54.2 India 50.7 50.3 49.1 51.1 51.1 52.4 50.5 50.7 51.7 51.8 52.6 52.1 54.4 52.3 49.6 50.4 50.7 52.5 52.5 51.6 50.9 47.9 51.2 51.2 Brazil 44.1 43.8 45.6 47.4 44.5 46.0 42.6 41.6 43.2 46.0 45.7 46.0 46.3 46.2 45.2 44.0 46.9 49.6 50.1 52.0 50.5 50.0 50.9 50.9 Mexico 53.0 53.0 52.4 52.2 53.1 53.2 52.4 53.6 51.1 50.6 50.9 51.9 51.8 51.1 50.2 50.8 50.6 51.5 50.7 51.2 52.3 51.2 52.2 52.8 Russia 50.2 50.1 48.7 49.8 49.3 48.3 48.0 49.6 51.5 49.5 50.8 51.1 52.4 53.6 53.7 54.7 52.5 52.4 50.8 52.4 50.3 52.7 51.6 51.9 Source: AIG, FactSet, Markit, J.P. Morgan Asset Management. The Global Purchasing Managers Index (PMI) assesses the economic health of the manufacturing sector by surveying output and employment intentions. Global PMI is a GDP-weighted calculation. Heatmap colours are based on PMI relative to 50 and across all countries shown. 13

Global inflation dynamics GTM Australia 14 Developed market inflation and global growth 70 Core CPI (3-month lag) 2.5% Inflation and productivity Year-over-year change 5% Global headline CPI (6-month lag) 65 4% Global economy 60 55 2.0% 3% 2% 1% 50 1.5% 0% 45 40 1.0% -1% -2% Global productivity growth 35-3% Composite PMI 30 '00 '02 '04 '06 '08 '10 '12 '14 '16 0.5% -4% '98 '00 '02 '04 '06 '08 '10 '12 '14 '16 Source: J.P. Morgan Economic Research, J.P. Morgan Asset Management; (Left) Markit; (Right) National statistics agencies. 14

Globalisation and trade GTM Australia 15 Exports as a % of GDP Goods exported, 2016 Brazil India China Russia U.S. Eurozone China EM ex-china Other Global export volumes Year-over-year change, three-month moving average 8% 7% 6% EM World DM Mexico 5% S. Korea 4% U.S. 3% Japan 2% Australia UK 1% Eurozone 0% Canada Germany 0% 5% 10% 15% 20% 25% 30% 35% 40% -1% -2% '12 '13 '14 '15 '16 '17 Source: FactSet, J.P. Morgan Asset Management; (Left) IMF Direction of Trade Statistics; (Right) Netherlands Bureau for Economic Policy Analysis World Trade Monitor. 15

U.S.: GDP and inflation GTM Australia 16 Global economy Real GDP Year-over-year change Avg 1969 2Q 2017 Real GDP 2.8% 2.2% Inflation Year-over-year change Avg 1964 Avg 1999 Aug 2017 Headline CPI* 4.0% 2.2% 1.9% Core CPI 4.0% 2.0% 1.7% PCE 3.5% 1.8% 1.4 % Core PCE 3.5% 1.7% 1.3% Components of GDP 2Q17 Consumption 69.1% Government spending 17.3% Investment ex-housing 12.7% Housing 3.8% Net exports -2.9% Source: FactSet, J.P. Morgan Asset Management; (Left) BEA; (Right) BLS. Components of GDP percentages may not sum to 100% due to rounding. *CPI is the Consumer Price Index. Core CPI is CPI excluding food and energy. PCE is the Personal Consumption Expenditure deflator and employs an evolving chain-weighted basket of consumer expenditures instead of the fixed-weight basket used in CPI calculations. 16

U.S.: Growth indicators GTM Australia 17 Light vehicle sales Millions, seasonally adjusted annualised rate Manufacturing and trade inventories Days of sales, seasonally adjusted Global economy Average: 15.6 Aug 2017: 16.0 Jul 2017: 42.0 Housing starts Thousands, seasonally adjusted annualised rate Private investment and capex intentions Advanced 3 months Year-over-year Private capex Average: 1,307 Aug 2017: 1,180 Capex, future plans Source: FactSet, J.P. Morgan Asset Management; (Top left and bottom right) BEA; (Top and bottom left) U.S. Census Bureau; (Bottom right) Federal Reserve Bank of Philadelphia. 17

Global economy U.S.: Labour market Unemployment rate and wage growth Wages of production and non-supervisory workers, SA Unemployment rate Average: 6.2% Oct 2009: 10.0% NFIB survey vs. Employment Cost Index Net percentage Companies planning to increase workers salaries Total private job openings and quits Thousands, seasonally adjusted Job openings GTM Australia 18 ECI (3-month lag) Year-over-year Quits Average: 4.2% Aug 2017: 4.4% Wage growth Aug 2017: 2.3% Source: BLS, FactSet, J.P. Morgan Asset Management; (Top right) National Federation of Independent Business. 18

U.S.: Fiscal policies GTM Australia 19 Global economy Federal budget surplus/deficit % of GDP, 1990-2026, 2016 CBO Baseline 4% 2% 0% -2% -4% -6% CBO Forecast U.S. federal net debt (accumulated deficits) % of GDP, 1940-2027, 2017 CBO Baseline, end of fiscal year 120% 2017: 100% -3.6% 80% 2017: 76.7% 60% 40% 20% '40 '48 '56 '64 '72 '80 '88 '96 '04 '12 '20 Market reaction to budget concerns Difference between 3-month and 1-month T-bills yields, basis points 2027: 91.2% CBO Forecast -8% -10% -12% '91 '96 '01 '06 '11 '16 '21 '26 2013 debt ceiling/gov. shutdown 2015 debt ceiling 2016 gov. funding 2017 debt ceiling Source: FactSet, J.P. Morgan Asset Management; (Left and top right) BEA, Treasury Department. 2017 Federal Budget is based on the Congressional Budget Office (CBO) June 2017 Baseline Budget Forecast. Years shown are fiscal years (1 Oct through 30 Sep). 19

U.S.: Long-run economic growth GTM Australia 20 Global economy Drivers of U.S. GDP growth Average year-over-year change 4.5% 4.2% Growth in workers + Growth in real output per worker 4.0% Growth in real GDP 3.5% 3.0% 2.5% 2.0% 1.4% 3.0% 2.0% 3.3% 2.1% 3.1% 1.5% 3.2% 1.3% Length of economic expansions and recessions 125 100 75 50 Average length (months): Expansions: 47 months Recessions: 15 months 99 months* 1.5% 2.8% 1.3% 1.0% 0.5% 1.0% 1.2% 1.6% 1.9% 0.4% 0.9% 25 0.0% '57-'66 '67-'76 '77-'86 '87-'96 '97-'06 '07-'16 0 1900 1912 1921 1933 1949 1961 1980 2001 Source: BEA, J.P. Morgan Asset Management; (Left) BLS; (Right) NBER. *Current expansion began in July 2009 and continued through June 2017. Data for length of recovery and recessions obtained from the National Bureau of Economic Research (NBER). GDP drivers are calculated as the average annualised growth between 4Q of the first and last year. 20

Eurozone economy GTM Australia 21 Contribution to eurozone GDP growth Year-over-year change 6% Change in inventories Retail sales and consumer confidence Year-over-year change, 6MMA Level 5% Exports Global economy 4% 3% 2% Investment Consumption Imports GDP Retail sales Consumer confidence 1% 0% Eurozone unemployment rate Harmonised rates, seasonally adjusted -1% -2% -3% -4% '12 '13 '14 '15 '16 '17 Aug 2017: 9.1% Source: Eurostat, FactSet, J.P. Morgan Asset Management. (Top right) European Commission. 21

Eurozone: Inflation and lending GTM Australia 22 Eurozone CPI inflation Contribution to headline inflation, year-over-year change 3.0% 2.5% Eurozone bank lending Year-over-year change Corporate Global economy 2.0% 1.5% 1.0% ECB inflation target: 2% Household 0.5% Corporate lending rates to smaller companies Non-financial corporations, new business lending, 1-5 years, <EUR 1 million 0.0% -0.5% -1.0% Food, alcohol, tobacco Core rate* Energy CPI -1.5% '12 '13 '14 '15 '16 '17 Spain Germany Italy France Source: ECB, Eurostat, FactSet, J.P. Morgan Asset Management. *Core inflation is CPI inflation excluding energy, food, alcohol and tobacco. 22

Japan: GDP and inflation GTM Australia 23 Global economy Real GDP Year-over-year change Avg 1999 2Q 2017 Real GDP 0.9% 1.6% Average Inflation Year-over-year change 5% 4% 3% 2% Avg 1999 Jul 2017 Headline CPI* 0.1% 0.5% Core CPI -0.3% -0.1% 1% 0% -1% -2% -3% '99 '01 '03 '05 '07 '09 '11 '13 '15 Source: FactSet, J.P. Morgan Asset Management; (Left) Japanese Cabinet Office; (Right) Ministry of Internal Affairs and Communication. *CPI is the consumer price index. Core CPI excludes food and energy prices. 23

Japan: Growth indicators Private consumption and sentiment indicator Diffusion index GTM Australia 24 Year-over-year change, 3MMA Global economy Household sentiment* Private consumption Unemployment and wage growth Seasonally adjusted Wage growth (6MMA) Unemployment rate (inverted) Operating profits Year-over-year change Manufacturing Non-manufacturing Source: FactSet, J.P. Morgan Asset Management; (Top) Japanese Cabinet Office; (Bottom left) Japanese Statistics Bureau and Statistics Centre, Ministry of Health, Labour and Welfare; (Bottom right) Ministry of Finance. *Household sentiment is based on the Economy Watchers Survey Household index. 24

Japan: Policies, currencies and governance Real interest rate differential and Japanese yen 2-year U.S. / Japan treasury bond spread (inflation adjusted) Japanese yen and the stock market GTM Australia 25 Nikkei 225 Index Japanese per U.S. $ Global economy Real interest rate differential Japanese per U.S. $ Appointment of outside directors as TSE1 companies Percentage of total 120 100 80 60 40 20 0 >1 external director, no independents >1 independent external >2 independent external 2010 2011 2012 2013 2014 2015 2016 Source: FactSet, J.P. Morgan Asset Management; (Top left) Tullett Prebon; (Bottom left) Goldman Sachs, Tokyo Stock Exchange; (Right) Nikkei. 25

Global economy China: GDP and inflation Real GDP Year-over-year change 21% 18% 15% 12% 9% GDP growth Inflation Year-over-year change GTM Australia 26 Investment Consumption PPI Net exports Aug 2017: 6.3% CPI* 6% 3% 0% -3% -6% '90 '92 '94 '96 '98 '00 '02 '04 '06 '08 '10 '12 '14 '16 Aug 2017: 1.8% Source: FactSet, NBS China, J.P. Morgan Asset Management. Latest Chinese GDP growth figure is 2Q 2017. *CPI is the Consumer Price Index. PPI is the Producer Price Index. 26

China: Growth indicators GTM Australia 27 Retail sales and industrial production Year-over-year change, 3-month moving average China home prices Year-over-year change Global economy Retail sales Industrial production Aug 2017: 6.7% Aug 2017: 10.5% Tier 1 Tier 2 Tier 3 Central government fiscal deficit % of GDP 2% 1% 0% -1% -2% -3% -4% Source: CEIC, FactSet, NBS China, J.P. Morgan Asset Management. 2Q17: -3.9% -5% '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17 Fixed asset investment (FAI) Year-over-year change, year to date State-owned enterprises Local government Private 27

China: Financial dynamics GTM Australia 28 Foreign exchange reserves USD trillions Aug 2017: $3.1tn Key policy rates Per annum Global economy Lending rate (1-year) SLF (7-day) Chinese yuan Rebased index CNY per USD CFETS RMB Index Interbank repo rate (7-day) Deposit rate (1-year) Interest on excess reserves Source: FactSet, J.P. Morgan Asset Management. (Top left) People s Bank of China; (Bottom left) J.P. Morgan Economics Research; (Right) CEIC, People s Bank of China. 28

China: Credit and leverage GTM Australia 29 Global economy Credit to GDP growth Broad credit measure, ratio, year-over-year growth, 3-month moving average 4x Rapid rebound in inflation 3x 2x 1x Loosening financial conditions Global Financial Crisis Tightening financial conditions Interbank liquidity crunch Rate cut A-share market crash Shadow banking concerns Wenzhou SME crisis 0x '07 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17 Credit growth Year-over-year change 60% 50% 40% 30% RMB bank lending Total social financing Augmented credit New bank credit breakdown by borrowers % of total credit extended Government NBFI* 100% 80% 60% Corporations Households 20% 40% 10% 0% '07 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17 20% 0% '07 '08 '09 '10 '11 '12 '13 '14 '15 '16 YTD 29 Source: People s Bank of China, J.P. Morgan Asset Management; (Top and bottom left) CEIC; (Bottom right) BIS. Credit growth to GDP growth ratio utilizes rolling 12-month nominal GDP and augmented credit. The augmented credit measure consists of all reported bank claims on the domestic economy, plus bankers acceptances, entrusted loans, trust loans, new net corporate bond and non-financial equity financing, issuance of asset-backed securities and interbank loans. Wenzhou SME crisis refers to the wave of bankruptcies and funding problems faced by a large number of small and medium enterprises (SMEs) in Wenzhou in 2011. *NFBIs are non-financial banking institutions.

World equity market returns GTM Australia 30 AUD Local 10-years '07 - '16 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 YTD 3Q17 Ann. Vol. 25.5% EM 33.6% -7.8% Japan -40.6% 57.4% Small Cap 57.4% 13.1% Small Cap 13.1% 2.1% U.S. 2.1% 20.3% Australia 20.3% 53.6% U.S. 32.4% 24.3% U.S. 13.7% 25.6% Japan 12.1% 13.2% Small Cap 13.2% 18.3% EM 23.9% 5.6% EM 7.7% 7.9% U.S. 6.9% Small Cap 19.6% 17.1% Small Cap 17.1% -20.7% U.S. -37.0% 38.8% EM 62.8% 4.6% EM 14.4% -10.4% Portfolio -9.8% 18.4% Eur ope 16.4% 47.4% Japan 54.4% 8.3% Portfolio 6.7% 14.0% U.S. 1.4% 12.5% U.S. 12.0% 13.9% Europe 12.2% 4.4% Small Cap 4.4% 4.5% Australia 4.5% Japan 19.4% 16.1% Australia 16.1% -32.1% Eur ope -38.5% 37.0% Australia 37.0% 1.7% Japan 1.0% -10.5% Europe -8.8% 17.1% EM 17.4% 46.2% Europe 22.3% 7.3% EM 5.6% 10.2% Small Cap 10.2% 12.1% EM 10.1% 8.4% Portfolio 11.2% 4.1% Eur ope 3.5% 4.5% Portfolio 4.4% EM 17.4% Equities 8.2% Portfolio 12.5% -32.7% Portfolio -41.0% 21.3% Portfolio 36.6% 1.6% Portfolio 8.2% -10.5% Australia -10.5% 15.6% Portfolio 17.1% 30.4% Portfolio 21.8% 5.7% Japan 10.3% 9.8% Europe 5.4% 11.8% Australia 11.8% 7.5% Japan 12.5% 2.7% Portfolio 3.7% 3.0% EM 4.7% Portfolio 16.1% 2.7% Europe 6.5% -38.4% Australia -38.4% 6.1% Europe 28.6% 1.6% Australia 1.6% -12.5% Japan -17.0% 14.6% U.S. 16.0% 20.2% Australia 20.2% 5.6% Australia 5.6% 8.0% Portfolio 3.3% 9.7% Portfolio 10.0% 5.6% Small Cap 5.6% 2.2% Japan 4.7% 2.0% Japan 1.0% U.S. 15.2% -5.3% U.S. 5.5% -41.0% EM -45.7% -2.0% U.S. 26.5% 1.0% U.S. 15.1% -18.2% EM -12.5% 6.6% Small Cap 6.6% 13.4% EM 3.8% 3.1% Eur ope 5.2% 2.6% Australia 2.6% 4.0% Japan 0.3% 5.4% U.S. 14.2% 2.1% U.S. 4.5% 1.8% Eur ope 3.5% Europe 15.2% -14.9% Japan -11.1% -53.2% Small Cap -53.2% -18.8% Japan 7.6% -8.3% Eur ope 7.5% -21.4% Small Cap -21.4% 6.2% Japan 20.9% -0.8% Small Cap -0.8% -3.8% Small Cap -3.8% -3.9% EM -5.4% 0.7% Eur ope 7.9% 3.9% Australia 3.9% 0.7% Australia 0.7% -0.3% Small Cap -0.3% Australia 14.3% 30 Source: FactSet, MSCI, Standard & Poor s, TOPIX, J.P. Morgan Asset Management. Annualised return (Ann.) and volatility (Vol.) covers the period 2007 to 2016. Volatility is based on local currency returns. Small Cap: S&P ASX Small Ordinaries; EM: MSCI EM Index; Europe: MSCI Europe Index; Japan: TOPIX first section; Australia: ASX 200 Index; U.S.: S&P 500 Index. Hypothetical portfolio (for illustrative purposes only and should not be taken as a recommendation): 20% U.S.; 30% Australia; 15% EM; 15% Europe; 10% Japan; 10% small cap. All indices are total returns.

Global equity earnings and valuations GTM Australia 31 Forward earnings per share USD, rebased to 100 U.S. Global valuations Current and 20-year historical valuations* 40x Current 20-year range 35x 20-year average Axis 5.2x 4.8x 4.4x Japan 30x 4.0x Equities EM Australia Europe Price-to-earnings 25x 20x 15x 17.8 16.6 15.4 15.1 14.1 3.6x 3.2x 2.8x 2.4x 2.0x Price-to-book 10x 5x 0x 1.7 U.S. World Australia Europe Japan EM 1.6x 1.2x 0.8x 0.4x 0.0x Source: Bloomberg Finance L.P., FactSet, MSCI, Standard & Poor s, J.P. Morgan Asset Management. *Valuations refer to NTMA P/E for Europe, U.S., Japan, Australia and developed markets (world) and P/B for emerging markets. Valuation and earnings charts use MSCI indices for all regions/countries, except for the U.S. and Australia, which are the S&P 500 and ASX 200, respectively. Valuations for Australia start in 1999. 31

Australia ASX 200 at inflection points GTM Australia 32 ASX 200 Index 7,000 6,500 6,000 Characteristic Mar 2002 Nov 2007 Sep 2017 Index level 3,498 6,829 5,682 P/E ratio (fwd) 16.2x 16.4x 15.4x Dividend yield 3.0% 3.7% 4.4% 10-year Tsy 6.3% 6.3% 2.8% 01 Nov 2007: P/E = 16.4x 6,829 30 Sep 2017: P/E = 15.4x 5,682 5,500 5,000 +207% -50% Equities 4,500 4,000 3,500 Total return: +77% 7 Mar 2002: P/E = 16.2x 3,498-20% +160% 3,000 31 Dec 1996: 2,425 10 Mar 2009: P/E = 15.7x 3,185 2,500 13 Mar 2003: P/E = 12.6x 2,700 2,000 '96 '97 '98 '99 '00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15 '16 Source: FactSet, Standard & Poor s, J.P. Morgan Asset Management. Local currency returns. P/E ratios are forward P/E ratios. Forward P/E ratio is a bottom-up calculation based on the most recent price data divided by the mean consensus estimates for earnings in the next 12 months and is provided by FactSet Market Aggregates. Dividend yield is based on current data. Return calculations shown in green are based on the total return index. 32

Australia ASX 200 valuation measures GTM Australia 33 ASX 200 Index: Forward P/E ratio 18x 30 Sep 2017: 15.4x 16x Equities 14x Average: 14.0x 12x 10x Valuation 30 Sep measure Description 2017 Avg* P/E Forward P/E 15.4x 14.0x Div. Yield Dividend yield 4.4% 4.6% P/B Price-to-book 1.9x 2.0x P/CF Price-to-cash flow 11.0x 9.4x EY Spread EY minus corp bond yield 2.9% 1.5% 8x '99 '01 '03 '05 '07 '09 '11 '13 '15 33 Source: FactSet, Standard & Poor s, J.P. Morgan Asset Management. Price to earnings is price divided by consensus analyst estimates of earnings per share for the next 12 months. Dividend yield is calculated as the next 12-month consensus dividend divided by most recent price. Price-to-book ratio is the price divided by book value per share. Price-to-cash flow is price divided by NTM cash flow. EY minus corporate bond yield is the forward earnings yield (consensus analyst estimates of EPS over the next 12 months divided by price) less the yield on the AusBond Credit (5-10y) Index. *Average dates vary due to data availability, start date is 31 December 1999 except for P/B, which is January 2001, and EY spread, which is October 2003.

Australia ASX 200 earnings GTM Australia 34 ASX 200 earnings and performance Index level, analyst estimates of the next 12 months of earnings ASX 200 EPS ASX 200 index level Annual earnings estimates Monthly earnings per share consensus estimate $420 '13 '15 $400 '14 '16 $380 $360 '17 '18 $340 $320 Equities $300 '11 '12 '13 '14 '15 '16 Earnings revisions by sector Materials Three-month earnings revisions* 40 Financials ex-reits 20 0-20 -40-60 -80-100 '07 '08 '09 '10 '11 '12 '13 '14 '15 '16 Source: FactSet, Standard & Poor s, J.P. Morgan Asset Management. *Revisions is the difference between the number of companies seeing upward and downward revisions to earnings estimates for the coming year. 34

Australia sector returns GTM Australia 35 Financials Materials Real Estate Health Care Industrials Cons. Staples Cons. Discr. Energy Telecom Utilities Tech Australia ASX 200 weight Growth Value 37.4% 16.9% 8.2% 7.1% 7.3% 7.2% 4.8% 4.4% 3.1% 2.2% 1.4% 100% 16.7% 22.1% 4.7% 14.2% 11.0% 12.7% 4.1% 0.3% 9.3% 3.9% 1.1% 100% 68.9% 11.7% 12.4% 0.0% 0.0% 2.2% 1.5% 2.3% 0.5% 0.5% 0.0% 100% Weights 3Q17 0.1 6.5 2.2-5.2 0.1 4.4-2.4 7.3-15.4-5.9 1.4 0.7 Equities Since Market Peak (November 2007) Since Market Low (March 2009) YTD 1.4 8.7-0.3 16.8 12.4 9.2 2.2 4.5-26.0 5.5 8.9 3.9 51.2-14.9-2.7 204.3 14.0 62.5 13.8-23.8 47.4 108.4 122.9 30.3 269.2 60.5 281.6 240.9 252.5 132.2 210.8-5.0 105.2 267.4 165.3 160.3 Return (%) Forward P/E Ratio 13.2x 15.4x 14.8x 24.9x 22.1x 18.0x 17.6x 17.2x 10.7x 21.2x 21.9x 15.4x 15-yr avg. 12.5x 13.3x 12.6x 20.4x 17.3x 16.2x 14.0x 18.1x 13.2x 18.3x 17.5x 13.7x Trailing P/E Ratio 13.9x 16.2x 15.5x 27.0x 22.9x 19.2x 19.1x 19.8x 11.8x 25.3x 24.0x 16.3x 15-yr avg. 13.3x 15.1x 14.3x 23.4x 20.2x 17.6x 15.0x 20.1x 13.6x 20.0x 20.0x 14.9x P/E Dividend Yield 5.5% 3.4% 4.9% 1.9% 3.8% 4.0% 3.9% 2.2% 6.8% 4.7% 2.4% 4.4% 15-yr avg. 5.9% 2.9% 7.2% 2.3% 4.4% 4.3% 4.6% 2.9% 6.9% 5.6% 2.9% 4.6% Div Source: FactSet, Standard & Poor s, J.P. Morgan Asset Management. All calculations are total returns in local currency not annualised. Growth and value indices are sub-sets of the ASX 200 Index. Since market peak represents period 1 November 2007 to the end of the last quarter. Since market low is the period 10 March 2009 to the end of the last quarter. 35

Market volatility GTM Australia 36 Equities Equity, fixed income and dollar realised volatility Three-month rolling standard deviation of daily % change* 3% Equity 2% 1% 0% '09 '10 '11 '12 '13 '14 '15 '16 VIX index** S&P 500 Index 50 40 30 20 10 Jul 10: BP oil spill, eurozone crisis, Greek default Sep 11: Eurozone crisis Jun 12: Euro double dip VIX Level '08 peak 66.7 Average 20.4 Latest 9.5 Jun 13: Taper Tantrum Oct 14: Global slowdown fears Aug 15: Global slowdown fears, China, Fed uncertainty 0 '09 '10 '11 '12 '13 '14 '15 '16 Source: FactSet, J.P. Morgan Asset Management; (Top) Bloomberg Finance L.P. *Equities are represented by the S&P 500 index, fixed income by the Bloomberg Barclays U.S. Aggregate Bond index, and the dollar by the DXY index. **The VIX-CBOE Volatility Index measures market expectations of near-term volatility conveyed by S&P 500 Index option prices. U.S. dollar Fixed income Feb 16: Oil, U.S. recession fears, China 0.8% 0.7% 0.6% 0.5% 0.4% 0.3% 0.2% 0.1% 0.0% 36

Correlation and market moves GTM Australia 37 Equities Cross country equity index correlation %, rolling six-month average pairwise correlations 0.9 0.8 0.7 0.6 0.5 0.4 0.3 Sep 2017: 0.38 0.2 '98 '99 '00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17 Number of +/- 1% days for the ASX 200 160 140 120 100 80 60 40 20 0 Pre-crisis average: 0.58 Average: 57 Post-crisis average: 0.65 YTD: 17 days '00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17 Source: FactSet, J.P. Morgan Asset Management; (Top) MSCI; (Bottom) Standard & Poor s. 37

Global investing GTM Australia 38 Equities Share of global GDP Based on purchasing power parity EM, 58.7% EU, 16.5% U.S., 15.3% Sector exposure % of MSCI World Index and MSCI Australia Index 50% 43% 40% Share of global equity market MSCI AC World Index Japan, 4.3% Canada, 1.4% Other DM, 2.9% U.S., 52.1% Australia, 1.0% Europe ex-uk, 15.6% EM, 13.3% World Australia Canada, 3.1% Japan, 7.6% UK, 5.9% Australia, 2.3% 30% 20% 10% 0% 18% 16% 1% 12% 12% 12% 7% 6% 3% Financials I.T. Health Care Consumer Disc. Industrials 9% 8% Consumer Staples 6% 5% 5% Source: FactSet, J.P. Morgan Asset Management; (Top left) IMF; (Top right and bottom) MSCI. Share of global market capitalisation is based on float-adjusted MSCI data. Share of global GDP based on purchasing power parity (PPP) estimates for 2017. Percentages may not sum to 100% due to rounding. Guide the Markets Australia. Data as of 30 September 2017. 17% 9% 3% 2% 3% 1% 3% Energy Materials Utilities Telecoms Real Estate 38

U.S. S&P 500 at inflection points GTM Australia 39 S&P 500 Index 2,600 2,400 2,200 Characteristic Mar 2000 Oct 2007 Sep 2017 Index level 1,527 1,565 2,519 P/E ratio (fwd) 24.4x 14.8x 17.8x Dividend yield 1.1% 1.7% 1.9% 10-year Tsy 6.2% 4.6% 2.3% 30 Sep 2017: P/E = 17.8x 2,519 2,000 Equities 1,800 1,600 1,400 Total return: +116% 24 Mar 2000: P/E = 24.4x 1,527-47% +121% 9 Oct 2007: P/E = 14.8x 1,565 +327% 1,200-55% 1,000 800 31 Dec 1996: 9 Oct 2002: 9 Mar 2009: P/E = 16.0x P/E = 14.1x P/E = 10.3x 600 741 777 677 '96 '97 '98 '99 '00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15 '16 Source: Compustat, FactSet, Standard & Poor s, J.P. Morgan Asset Management. Forward price-to-earnings ratio is a bottom-up calculation based on the most recent S&P 500 Index price, divided by consensus estimates for earnings in the next 12 months, and is provided by FactSet Market Aggregates. Returns calculations shown in green are based on total return index. 39

U.S. S&P 500 earnings and valuations GTM Australia 40 S&P 500 earnings and performance Index level, analyst estimates of the next 12 months of earnings S&P 500 EPS S&P 500 index level S&P 500 forward P/E ratio 26x 22x 18x 31 Jan 1999: 24.3x 30 Sep 2017: 17.8x 14x Average: 15.7x Equities 10x '89 '91 '93 '95 '97 '99 '01 '03 '05 '07 '09 '11 '13 '15 U.S. dollar Year-over-year change, quarterly, USD major currencies index 20% Forecast* S&P 500 revenues 15% U.S. 57% 3Q17: 10% International 43% -2.2% 5% 0% -5% -10% '12 '13 '14 '15 '16 '17 '18 Source: FactSet, J.P. Morgan Asset Management; (Left and top right) Standard & Poor s; (Bottom right) U.S. Federal Reserve, S&P 500 individual company 10k filings. *Forecast assumes no change in the U.S. dollar from its 30 September 2017 level. 40

Bear markets and subsequent bull runs GTM Australia 41 S&P 500 Composite declines from all-time highs 0% -20% -40% 4 5 7 8 20% market decline* -60% 3 6 9 10 Equities 41-80% 1 2-100% 1926 1931 1936 1941 1946 1951 1956 1961 1966 1971 1976 1981 1986 1991 1996 2001 2006 2011 2016 Characteristics of bull and bear markets Mkt. Peak Recession Bear markets Macro environment Bull markets Bear return Duration Recession (months) Commodity spike Aggressive Fed Extreme valuations Bull begin date Market corrections 1 Crash of 1929 - excessive leverage, irrational exuberance Sep 1929-86% 32 Jul 1926 152% 37 2 1937 Fed tightening - premature monetary tightening Mar 1937-60 61 Mar 1935 129 23 3 Post WWII crash - post-war demobilisation, recession fears May 1946-30 36 Apr 1942 158 49 4 Flash crash of 1962 - flash crash, Cuban Missile Crisis Dec 1961-28 6 Oct 1960 39 13 5 Tech crash of 1970 - economic overheating, civil unrest Nov 1968-36 17 Oct 1962 103 73 6 Stagflation - OPEC oil embargo Jan 1973-48 20 May 1970 74 31 7 Volcker tightening - whip inflation now Nov 1980-27 20 Mar 1978 62 32 8 1987 crash - programme trading, overheating markets Aug 1987-34 3 Aug 1982 229 60 9 Tech bubble - extreme valuations, dotcom boom/bust Mar 2000-49 30 Oct 1990 417 113 10 Global financial crisis - leverage/housing, Lehman collapse Oct 2007-57 17 Oct 2002 101 60 Current cycle Mar 2009 272 102 Averages - -45% 24-158% 54 Source: FactSet, NBER, Robert Shiller, Standard & Poor s, J.P. Morgan Asset Management. *A bear market represents a 20% or more decline from the previous market high using a monthly frequency. Periods of recession are defined using the NBER s business cycle dates. Commodity spike is defined by a significant upward movement in oil prices. Periods of extreme valuation are defined as periods where the forward P/E multiple on the S&P 500 were approximately two standard deviations above the long-run average. Aggressive Fed tightening is defined as Federal Reserve monetary tightening that was unexpected and/or significant in magnitude. Bull return Duration (months)

Interest rates and equities GTM Australia 42 Correlations between weekly equity returns and interest rate movements Rolling two-year correlation of weekly returns on the S&P 500 and the ASX 200 and the 10-year Treasury yield, 1972-2017 0.8 0.6 0.4 S&P 500 ASX 200 Positive relationship between yield movements and equity returns Equities Correlation 0.2 0.0-0.2-0.4-0.6 Negative relationship between yield movements and equity returns -0.8 0% 2% 4% 6% 8% 10% 12% 14% 16% 18% 10-year Treasury yield Source: FactSet, Standard & Poor s, J.P. Morgan Asset Management. Returns are based on price index only and do not include dividends. 42

Eurozone: Earnings and valuation GTM Australia 43 Equities Stoxx 50 yearly earnings trend EPS rebased to 100 in January 108 106 104 102 100 98 Currency and market correlations Correlation between currency and equity markets**, 6MMA 1.0 Currency and equity 0.8 market move together 0.5 0.3 0.0-0.3-0.5-0.8 Currency and equity -1.0 market move apart '08 '09 '10 '11 '12 '13 '14 '15 '16 '17 MSCI eurozone forward P/E Eurozone Japan 96 94 92 2017 2016 2015 2014 2013 90 Jan Feb Mar Mar Apr May Jun Jul Aug Sep Oct Nov Dec Source: FactSet, J.P. Morgan Asset Management; (Left) STOXX; (Top and bottom right) MSCI. Average: 13.4x 30 Sep 2017: 14.3x 43

Emerging markets valuations and returns MSCI Emerging Markets Index: Price-to-book ratio +2.0 Std dev GTM Australia 44 MSCI Emerging Markets: Price to book and returns Price-to-book ratio and next five-year annualised % total return 50% 40% Current level 30% Equities 30 Sep 2017: 1.74x 20% 10% Average: 1.77x 0% -10% -2.0 Std dev -20% 0.75x 1.00x 1.25x 1.50x 1.75x 2.00x 2.25x 2.50x 2.75x 3.00x Source: FactSet, MSCI, J.P. Morgan Asset Management. 44

Emerging markets equities: Relative performance GTM Australia 45 EM vs. DM growth and equity performance Monthly, consensus expectations for GDP growth in 12 months 5% EM less DM GDP growth 4% EM growth & equity outperformance 160 140 EM equity relative performance and commodity prices Rebased 2003 = 100 240 200 160 MSCI EM / MSCI DM 600 500 400 Equities 3% 2% 1% 120 100 80 60 120 80 Bloomberg commodity index '03 '05 '07 '09 '11 '13 '15 EM equity relative performance and the USD Rebased to 100 in 1993 MSCI EM / MSCI DM 300 200 100 EM growth & equity underperformance 40 0% MSCI EM / MSCI DM -1% '95 '97 '99 '01 '03 '05 '07 '09 '11 '13 '15 20 0 USD REER (inverted)* Source: FactSet, MSCI, J.P. Morgan Asset Management; (Left) J.P. Morgan Economic Research; (Top right) Bloomberg Finance L.P. *REER is the real effective exchange rate. 45

Emerging markets: Earnings snapshot GTM Australia 46 EM earnings expectations by sector EM earnings expectations by region Consensus EPS for next 12 months, USD, rebased to 100 in 2010 Consensus EPS for next 12 months, USD, rebased to 100 in 2006 I.T. EM Asia Equities Health Care Financials Staples Discr. Utilities Industrials Energy Telecoms Materials EM Europe EM Latin America Source: FactSet, MSCI, J.P. Morgan Asset Management. 46

China A- vs. H- shares: Earnings and valuations GTM Australia 47 Earnings January 2011 = 100 A- vs. H-share premium Index*, price disparity between shares listed as A vs. H A-shares more expensive CSI 300 (A-share) Average: 112 H-shares more expensive Equities Relative sector weights: A-share H-share Cyclicals 43.8% 61.0% Defensives 16.3% 11.7% Financials** 39.9% 27.3% MSCI China (H-share) Chinese index valuations Forward P/E ratio Shanghai Comp. (A) MSCI China (H) 45x Shenzhen Comp. (A) Hang Seng China (H) 40x 35x 30x 25x 20x 15x 10x 5x '06 '07 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17 47 Source: J.P. Morgan Asset Management. (Left) FactSet, MSCI; (Top right) FactSet, HSI Services Limited; (Bottom right) Bloomberg. *The Hang Seng Stock Connect China AH Premium Index ( HSAHP ) tracks the average price difference of A-shares over H-shares for the most liquid Chinese companies with both A-share and H- share listings ( AH Companies ), which are eligible for Northbound and Southbound trading under the Stock Connect Scheme. **Financials includes financials and real estate sectors.

Global equities: Performance cycles GTM Australia 48 Periods of DM ex-u.s and U.S. outperformance Cumulative outperformance, MSCI World ex-u.s. and MSCI USA 300% 280% 260% DM ex-u.s. outperforms U.S. 240% 220% 200% U.S. outperforms DM-ex U.S. 180% Equities 160% 140% 120% 100% 80% 60% 40% 20% 0% -20% '71 '76 '81 '86 '91 '96 '01 '06 '11 '16 Source: FactSet, MSCI, J.P. Morgan Asset Management. Performance based on MSCI World ex-u.s. and MSCI USA based on total returns. 48

Fixed income sector returns GTM Australia 49 EM Debt Correl to Treasuries Yield Duration U.S. Australia 5.55% 7.5 Yrs 0.26 0.04 Fixed income sector returns AUD LCL 2012 2013 2014 2015 2016 YTD 3Q17 Ten-yr Ann. 17.8% Global HY 18.8% 25.3% Global HY 7.1% 16.0% EM Debt 6.2% 14.5% EM Debt 1.8% 15.3% Global HY 15.9% 3.5% Aus IG 3.5% 0.7% Aus IG 0.7% 7.1% Global HY 7.3% Global HY 5.54 4.5-0.24-0.34 16.6% EM Debt 18.0% 16.4% Global IG 0.3% 14.8% US Treas. 5.1% 13.4% US Treas. 0.8% 10.1% EM Debt 9.6% 1.9% Aus Gov 1.9% 0.5% Global HY 2.1% 6.8% EM Debt 6.7% Portfolio 3.06 9.9% Aus IG 9.9% 12.9% US Treas. -2.7% 13.3% US TIPS 3.6% 10.9% US TIPS -1.4% 5.7% Portfolio 5.6% 0.9% Global HY 7.1% -0.0% Global IG 2.2% 6.5% Aus IG 6.5% Australia IG 3.06 3.4 0.38 0.68 9.8% Global IG 11.2% 9.3% Portfolio -0.3% 12.8% Global IG 3.1% 8.5% Global IG -3.6% 5.2% US TIPS 4.7% 0.3% EM Debt 8.6% -0.1% EM Debt 2.2% 5.9% Portfolio 6.0% Fixed income Global IG Australia Gov U.S. Treasuries 2.51 6.7 0.24-0.06 2.50 5.9 0.72 0.99 1.95 6.2 0.99 0.73 8.8% Portfolio 9.6% 5.6% US TIPS 7.0% 5.5% Aus Gov 5.5% 6.4% EM Debt -8.3% 6.1% US TIPS -8.6% 4.3% Aus IG 4.3% 11.6% Portfolio 6.2% 10.3% Aus Gov 10.3% 9.2% Global HY 2.5% 7.8% Global HY -2.1% 7.6% Portfolio 0.5% 3.0% Aus IG 3.0% 4.8% Global IG 4.3% 3.8% Aus IG 3.8% 2.5% Aus Gov 2.5% -0.4% Portfolio 4.2% -0.8% Global IG 7.5% -5.6% US Treas. 2.3% -0.4% Portfolio 0.9% -0.4% Aus Gov -0.4% -1.4% US TIPS 0.9% 5.9% Aus Gov 5.9% 4.4% Global IG 4.3% 4.2% US Treas. 4.2% U.S. TIPS 0.49 6.0 0.57 0.29 0.7% US Treas. 2.0% 0.3% Aus Gov 0.3% 8.1% Aus IG 8.1% 2.3% Aus Gov 2.3% 1.5% US Treas. 1.0% -6.1% US TIPS 1.7% -1.9% US Treas. 0.4% 4.0% US TIPS 3.9% 49 Source: Barclays, Bloomberg Finance L.P., BoA/ML, FactSet, J.P. Morgan Asset Management. Aus Gov: AusBond Treasury (0+Y); U.S. Treas.: Barclays US Aggregate Government Treasury; Global IG: Barclays Global Aggregate Corporate Investment Grade; Aus IG: Bloomberg AusBond Credit (0+Y); Global HY: BoA/ML Global High Yield; EM Debt: J.P. Morgan EMBI+; U.S. TIPS: Bloomberg Barclays US Treasury Inflation Protected (TIPS). Hypothetical portfolio (for illustrative purposes only and should not be taken as a recommendation): 25% Aus Gov, 15% Aus IG, 10% Global IG, 15% Global HY; EM Debt 10%, US Treas. 15%, US TIPS 10%. Correlation to U.S. Treasuries and Australian Treasuries are to the Barclays US Treasury (10Y) and Bloomberg AusBond Treasury (7-10Y), respectively, for the past 10 years.

Policy rates and market expectations GTM Australia 50 Central bank key policy rates Target rates Policy rate Deposit rate RBA 1.50% 1.50% U.S. Fed 1.25% 1.25% ECB 0.00% -0.40% BoJ -0.10% -0.10% Market expectations for target policy rate Futures market implied policy rate* 2.1% 1.74% 1.8% 1.63% 1.5% 1.32% U.S. 1.87% 1.2% 0.9% 0.78% 0.92% UK 1.03% Fixed income 0.6% 0.3% 0.0% -0.3% -0.6% 0.45% Eurozone -0.06% -0.05% -0.02% 0.25% 0.03% -0.06% Japan -0.28% -0.36% Dec '17 Dec '18 Dec '19 Dec '20 Source: J.P. Morgan Asset Management; (Left) Bank of Japan, European Central Bank, FactSet, RBA, U.S. Federal Reserve; (Right) Bloomberg Finance L.P. *Market implied policy rates are derived from the Overnight Swaps Market. 50

Central bank balance sheets GTM Australia 51 Fixed income Central bank balance sheets % of domestic government bonds owned by G4 central banks 45% 40% Bank of Japan Bank of England 35% European Central Bank 30% 25% U.S. Federal Reserve 20% 15% 10% 5% 0% '07 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17 European debt and PSPP levels** EUR billions 2,000 1,600 1,200 800 400 0 Total outstanding debt PSPP purchases** 33% limit Italy France Germany Spain Belgium N'lands Central bank asset purchases 12-month rolling bond purchases by G4 central banks*, USD billions $2,000 $1,500 $1,000 $500 $0 -$500 U.S. Eurozone UK Japan Projection Net -$1,000 '16 '17 '18 '19 51 Source: J.P. Morgan Asset Management (Top left and right) Bloomberg Finance L.P; (Bottom left) ECB. *New purchases of assets are based on monthly holdings as reported by each respective G4 central bank (the U.S. Federal Reserve (Fed), the European Central Bank (ECB), the Bank of Japan (BoJ) and the Bank of England (BoE)), announced purchase plans for the Fed, the ECB, the BoE and the BoJ, and J.P. Morgan Asset Management projections. **PSPP is the Private Sector Purchase Programme which is the ECB s government bond buying scheme.

G3 bond yields GTM Australia 52 10-year bond yields Black Friday 1987 Fall of Berlin Wall 1989 Britain leaves ERM 1992 U.S. UK Eurozone Oil shock 1981 Asian currency crisis 1997 Dot com bubble Feb 2000 Fed QE2 2010 U.S. election 2016 Fixed income 9/11 attacks 2001 Fed QE 2008 Fed QE3 2012 ECB QE 2015 Source: FactSet, Tullett Prebon, J.P. Morgan Asset Management. 52

Australian interest rates and inflation GTM Australia 53 Nominal and real 10-year Treasury yields 30 Jun 1982: 16.40% Nominal 10-year Treasury yield Avg. 1970-2017 30 Sep 2017 Nominal yield 8.30% 2.84% Real yield* 2.83% 0.94% 30 Sep 2017: 2.84% Fixed income Real 10-year Treasury yield 30 Sep 2017: 0.94% Source: Australian Bureau of Statistics, FactSet, Tullett Prebon, J.P. Morgan Asset Management. *December real yield calculated using 2Q17 inflation. 53

The Australian yield curve GTM Australia 54 Yield curve 4.0% 3.6% 3.2% 2.8% 2.4% 2.0% 1.6% 1.2% 2.1% 1.7% 2.0% 1.8% 1.5% 1.6% 1.5% 2.4% 1.6% 3m 1y 2y 3y 5y 2.6% 1.8% 7y 2.8% 1.9% 10y 30 Sep 2017 30 Sep 2016 3.9% 2.4% 30y Fixed income Yield curve steepness 10-year minus 2-year Australian Treasuries, basis points Average: 60bps 30 Sep 2017: 88bps Correlation of government bonds* Correlation between U.S. and Australian Treasury yields 0.8 0.7 10-year bonds 0.6 0.5 0.4 0.3 0.2 2-year bonds 0.1 '11 '12 '13 '14 '15 '16 '17 Source: FactSet, Tullett Prebon, J.P. Morgan Asset Management. *52-week rolling correlations of the weekly change in bond yields. 54

The U.S. Federal Reserve outlook GTM Australia 55 Federal funds rate expectations FOMC and market expectations for the fed funds rate 7% Federal funds rate FOMC year-end estimates Market expectations on 30 Sep 2017 6% FOMC long-run projection Federal Reserve balance sheet USD trillions $5 $4 Jan 2014: Tapering of purchases begins Other Projection* 5% 4% $3 Sep 2011: Operation Twist Nov 2010: QE2 Sep 2012: QE3 MBS Fixed income 3% 2% 1% 2.10% 1.40% 2.70% 2.90% 1.59% 1.25% 2.80% 1.75% $2 $1 Dec 2008: QE1 Treasuries 55 0% Long '99 '01 '03 '05 '07 '09 '11 '13 '15 '17 '19 '21run $0 '05 '07 '09 '11 '13 '15 '17 '19 '21 Source: FactSet, U.S. Federal Reserve, J.P. Morgan Asset Management. *Balance sheet reduction based on October 2017 start date and lasting four years, concluding on October 2021. Reduction of Treasuries and MBS is per FOMC guidelines from the June 2017 meeting minutes: Treasury securities will be reduced $6 billion per month initially and reduction rate will increase in $6 billion increments at three-month intervals until reaching $30 billion per month; MBS will be reduced by $4 billion per month initially and reduction rate will increase in $4 billion increments at three-month intervals until reaching $20 billion per month; Other assets are reduced in proportion.

Historical impact of U.S. Federal Reserve tightening GTM Australia 56 Federal funds rate Target rate*, highlighted areas denote periods of rate hikes 7 hikes 14 months 10 hikes 11 months 7 hikes 12 months 6 hikes 11 months 17 hikes 24 months 4 hikes 19 months 5-cycle average: 9 hikes, 14 months Fixed income 56 Market reaction during previous rate hiking cycles May 1983 July 1984 March 1988 February 1989 February 1994 February 1995 June 1999 May 2000 June 2004 June 2006 Average of past five rate hiking cycles Source: FactSet, Standard & Poor s, U.S. Federal Reserve, J.P. Morgan Asset Management. S&P 500 returns are price returns and do not include reinvestment of dividends. Averages do not include the current cycle. *Between 1979 and 1982, the FOMC changed its approach to monetary policy, focusing on the money supply, rather than the federal funds rate. In autumn of 1982, however, the U.S. Federal Reserve shifted back to its approach of targeting the price rather the quantity of money. Because the federal funds rate was not the FOMC s key policy tool, we exclude increases in the federal funds rate between 1979 and 1982 in our analysis of rate hike cycles. Cycle beginning December 2015 Yield change (bps) Federal funds rate 313 325 300 175 425 308 100 2-year Treasury 311 227 305 121 238 240 45 10-year Treasury 274 91 185 50 52 130 3 S&P 500 return -9.6% 6.8% -2.1% 8.5% 12.0% 3.1% 21.5% U.S. dollar 10.4% 1.7% -4.7% 3.4% -5.8% 1.0% -7.3%