16 NOV 2016 LIVE EVERY WEDNESDAY New York London Singapore Hong Kong Tokyo 08:00 13:00 20:00 20:00 21:00 PASSWORD The BNP Paribas Markets Call All the dial-in details are available at the back of this document ROBERT MCADIE Global Markets Head of Research and Strategy Non Independent Research Marketing Communication www.globalmarkets.bnpparibas.com Please refer to important information at the end of the report. This document is classified as non-objective research.
Higher yields and steeper will lead to a repricing of risk premium across most asset classes prices are not reflecting this new environment Overview: Post US election we see even more pressure for higher yields and steeper curves. We also look for more political risk premium to reappear in Europe. This is happening on the back of economic data (such as PMIs) that have steadily been improving and support the case for a Fed rate hike in December and a more hawkish profile for 2017. With risk-free bonds in ever deeper correction, investors that are still up YTD will hesitate to buy in a falling price environment. This backdrop is unsupportive for core bonds and risky assets. Higher rates and a steeper curve will diminish the appeal of carry trades. In the US investors should position for growth now, not carry. EM and HY are the most at risk, since they have been used as a coupon clipping alternative. After a calm period, EM FX is showing the first sign of a correction and will drop more on a stronger USD and higher real rates. A reflationary environment will drive sector differentiation in equities but beware of rising real rates..overall position: Inflation breakevens to rise a lot further. Nominal and real yields to continue to rise, with volatility rising. Long end of curves to steepen. Risk assets to correct, especially the more risky ones that had been the recipients of carry trades (like EM). 15/11/2016 LDN close 1 Month prognosis Current vs prognosis EURUSD 1.073 1.060-1.22 % GBPUSD 1.244 1.250 0.49 % USDJPY 108.86 111.00 1.97 % 10yr Gilts 138 bp 145 7 bp 10yr Bunds 30.8 bp 40 9.2 bp 10 Tsys 2.22% 2.40% 0.18 % 10yr JGBs 1 bp 0-1 bp S&P 2,169 2,025-6.62 % SX5E 3,050 2,850-6.55 % SX7E 107.9 100.0-7.34 % FTSE 100 6,793 6,750-0.63 % Nikkei 225 17,668 17,000-3.78 % GOLD 1,227 1,175-4.2 % Oil (CL1) 45 48 5.94 % Itraxx Main S26 78bp 83 5 bp Itraxx Xover S26 342bp 355 13bp CDX IG S27 77bp 81 4 bp Source: Bloomberg, BNP Paribas Note: Targets have been updated as most have been reached 2
Market picture after the US election: lower bond prices, higher volatility. This could adjust further duration is not your friend. Asset class YTD perf Past mth perf Realised Vol (3m) Current OAS OAS one mth ago Yield one Yield today mth ago Duration Rating Germany 10y 3.09% -1.97% 3.97% 0.30 0.06 9.74 AAA US 10y 2.36% -3.09% 5.23% 2.19 1.77 9.04 AAA EUR HG corp 4.10% -1.23% 2.00% 93 89 0.74 0.53 5.29 A- EUR HY corp 6.59% -0.67% 2.12% 370 371 3.56 3.30 3.57 BB- USD HG corp 5.73% -2.47% 4.39% 138 138 3.25 2.89 7.17 A- USD HY corp 13.67% -2.19% 3.55% 516 481 6.95 6.25 4.28 B+ EM SOV 7.28% -5.56% 8.06% 318 284 5.17 4.41 7.21 BB+ EM corp 6.63% -3.61% 5.02% 233 212 4.13 3.57 6.17 BBB+ EM Sov HY 10.98% -5.18% 8.03% 459 411 6.49 5.63 6.31 B+ S&P 500 (*) 7.93 1.66% 10.84% 5.49 5.56 ESTX 600 (*) -4.32-0.28% 12.10% 6.35 6.28 (*) for equity indices, we look at the earning yield Chart 1: Realised PX volatility (risk free bonds more volatile than HG bonds) Chart 2: EM volatility surges, led by government bonds 7.00% 6.00% 6.00% 5.00% German gvt 5.00% EM corportates 4.00% 4.00% 3.00% 3.00% 2.00% 1.00% EUR HG 2.00% Source: Bloomberg, BNP Paribas 3
Term premium to rise a lot further, pushing nominal and real yields higher Chart 1: German and US rates are moving in close sync (%) 0.50 2.5 Chart 2: Long-term (10y) real yields are rising fast (%) 0.75 10y German bund (lhs) 10y US Tnote (rhs) 2.25 0.50 0.25 2 0.25 US 0.00 May-16 Jun-16 Jul-16 Aug-16 Sep-16 Oct-16 1.75 1.5 0.00-0.25 EZ -0.25 Chart 3: Fed s ACM term premium is rising (%) 1.25-0.50 Jan-16 Apr-16 Jul-16 Oct-16 Chart 4: MOVE index reflects heightened interest rate volatility ACMTP10 0.00 May-16 Jun-16 Jul-16 Aug-16 Sep-16 Oct-16 90 80-0.25 70-0.50 60-0.75 50 May-16 Jun-16 Jul-16 Aug-16 Sep-16 Oct-16 Source: US Federal Reserve, Bloomberg, BNP Paribas 4
New US economic policy to see higher inflation and less central bank stimulus Chart 1: Fed s ACM risk neutral rate to rise on stronger inflation and growth (%) Chart 2: 10y breakevens to climb further (%) 2.3 ACMRNY10 2.5 2.25 2 US 10y B/E 2.2 1.75 1.5 1.25 2.1 1 2.0 May-16 Jun-16 Jul-16 Aug-16 Sep-16 Oct-16 0.75 EZ 10y B/E 0.5 Nov-13 May-14 Nov-14 May-15 Nov-15 May-16 Nov-16 Chart 3: Even after recent drop in oil price, large base effect impact expected on headline CPI 5.00 4.00 CPI yoy (lhs in %) Oil price yoy (rhs in %) 60 40 Chart 4: Economic activity (measured by PMIs) is improving everywhere without fiscal stimulus 65 60 US 3.00 20 2.00 0 55 World EZ 1.00-20 50 0.00-40 Jan-11 Jan-12 Jan-13 Jan-14 Jan-15 Jan-16 Jan-17-1.00-60 CHINA 45 Dec-13 Jun-14 Dec-14 Jun-15 Dec-15 Jun-16 Source: US Federal Reserve,Bloomberg, BNP Paribas 5
The USD bull trend to continue Chart 1: The USD is expensive, but could strengthen further Chart 2: The FX market is only holding light USD positions? BNPP FEER (Fundamental Equilibrium Exchange Rate) is the value of a currency if all economies were operating at full capacity with sustainable current account balances. Chart 3: STEER highlights scope for USDJPY to rise Chart 4: US net portfolio and FDI flows should support the USD US residents foreign portfolio holdings likely to be repatriated +ve BoP Current account? Widening: more imports from infrastructure spending & consumption growth Narrowing: Protectionist policies (i.e. tariffs) Net FDI to improve as investment abroad slows BNPP STEER is a regression based modelled which calculated the fair-value based on an exchange rates relationships with rates, equities, commodities and credit. Source: Bloomberg, BNP Paribas 6
Emerging markets remain particularly exposed Chart 1: FX is the first indicator of weakness in EM Chart 2: S&P rally is not helping EM as correlation is breaking down 130 USD vs an EM basket made of 16 local currencies EM FX weak (dollar up) 120 110 S&P Index (rebased at 100 in 2014) 120 100 110 90 EM FX strong (dollar down) 80 MSCI EMs in $ (rebased at 100 in 2014) 100 Nov-14 May-15 Nov-15 May-16 Nov-16 70 Nov-14 May-15 Nov-15 May-16 Chart 3: EM stocks are expensive relative to EM sovereign yields Chart 4: Higher real yields in USD will push EM spreads wider 7.00 6.00 Risk premium in % 1.00 0.75 US 10y real yld (lhs) EM OAS spread (rhs) 400 5.00 EM Stocks cheap vs EM sov yield 0.50 350 4.00 0.25 300 3.00 EM Stocks expensive vs EM sov yield 2.00 Nov-11 Nov-12 Nov-13 Nov-14 Nov-15 0.00-0.25 250 Aug-14 Feb-15 Aug-15 Feb-16 Aug-16 Source: Bloomberg, BNP Paribas 7
Dispersion on the rise: More differentiation between assets and equity sectors Chart 1: 1y correlation of weekly returns between S&P sectors 95% Chart 2: 1y correlation of weekly returns between commodity index and certain sub components 50% 90% 85% 80% 75% 70% 45% 40% 35% 30% 65% Jan-03 Jan-06 Jan-09 Jan-12 Jan-15 25% Jan-13 Jul-13 Jan-14 Jul-14 Jan-15 Jul-15 Jan-16 Jul-16 Chart 3: Carry trades are unwound and sector dispersion increases (rebased) 130 Chart 4: High dispersion in commodity prices 150 120 Utilities 140 130 Commodity prices (rebased at 100 6 mths ago) iron Ore 110 Staples 120 Copper 100 110 90 Discretionary Fin 80 Nov-15 Feb-16 May-16 Aug-16 100 90 Oil Gold 80 May-16 Jun-16 Jul-16 Aug-16 Sep-16 Oct-16 Source: Bloomberg, BNP Paribas 8
Trump card driving a cyclical rotation within US equities Financials (+ve long term): Steepening yield curve, higher rates, and higher growth (better asset quality) should help banks. Expectations of a smaller regulatory burden should boost profitability, although reduced regulation will probably pull banks away from the utility model, making them riskier entities. Industrials(+velongterm):Higher government spending on areas including Infrastructure and Security, as per campaign promises, is likely to benefit this sector in the long term. Materials: Higher infrastructure spending is likely to boost demand for building materials. Domestic Consumer discretionary (+ve long term): Stronger domestic growth will boost domestically-focused stocks; we expect wages to pick up sharply in the US. Health Care (+ve short term): Large cash balances could be repatriated at a one-time 10% tax assessment, which would boost for the sector. The repeal of Obamacare could be positive for credit insurers and pharma manufacturers, but negative for hospitals due to uncertainty regarding insurance coverage, eligibility and a possible increase in bad debt if the number of uninsured were to rise significantly. Scrutiny of drug prices, while not disappearing altogether, is less likely to be the focus of the new administration. The US Department of Justice generic probe could be scaled back. Technology (Neutral): Positive for large-cap tech due to potential corporate tax reform and one-time off-shore cash repatriation at a low tax rate. From an operating perspective, uncertainty regarding a more restrictive trade policy and heightened geopolitical risk is a negative since (1) the vast majority of tech manufacturing takes place in Asia and (2) over 50% of revenues are generated internationally. Energy (Neutral): The new government will probably reduce environmental regulation, lower taxes, and could also open up more federal land + offshore areas for drilling activity, which is a positive. Trump remains focused on infrastructure, and is less environmentally-concerned than the current administration, which could be more accommodating for pipeline projects. Lower regulation could spur greater re-investment in US shale oil & gas, which is positive for this sector but negative for global crude oil prices. The positives from deregulation could be offset by the negatives from excess supply. Utilities Real estate & Telecom (-ve long term): We expect bond-like equities to suffer as investors reallocate from high yielding equities to growth-linked equities. Utilities, real estate and telecoms are the top three US sectors in terms of dividend yield with an average of 4.4%, which is twice the S&P dividend yield. These sectors have outperformed significantly in the bond bull market and we expect these to be the worst performing sectors in the bond sell-off. If the US 10y yield climbs to 3%, in line with our rates strategy view, these sectors could see the biggest outflows. Consumer Staples (-ve long term): These stocks also tick the box of bond-like equities with the additional downside of low margins and high labour intensity, especially for food retailers. A rise in wages is likely to hurt the sector s margins. International Consumer discretionary (-ve long term): The strong USD is likely to hurt the sector s margins. Additionally, a rise in bond yields is likely to make share buybacks look less attractive from a capital arbitrage standpoint. US consumer discretionary and technology stocks are the biggest drivers of buybacks in the US. 9
Real yields are rising: a reflation story for the US, a credit story for Europe Chart 1: Extent of global bond sell-off Chart 2: Eurozone spreads are widening 10y Bonds GBP USD EUR JPY AUD Last 1.38 2.19 0.30-0.01 2.66 vs 1 month 0.26 0.42 0.24 0.04 0.35 vs 3 month 0.85 0.63 0.37 0.07 0.79 10y swap GBP USD EUR JPY AUD Last 1.33 2.06 0.68 0.14 2.77 vs 1 month 0.25 0.46 0.26 0.07 0.40 vs 3 month 0.64 0.62 0.39 0.06 0.67 10y inflation GBP USD EUR JPY AUD Last 3.04 1.87 1.11 0.49 1.90 vs 1 month 0.12 0.18 0.09 0.12 0.16 vs 3 month 0.59 0.41 0.23 0.18 0.23 10y real yield GBP USD EUR JPY AUD Last -1.66 0.32-0.81-0.50 0.76 vs 1 month 0.14 0.25 0.15-0.07 0.19 vs 3 month 0.26 0.22 0.14-0.10 0.56 Chart 3: Low yields have suppressed debt sustainability concerns Chart 4: but financials CDS spreads have not yet been impacted 140 120 Fin CDS FR, IT and Sp 10y spread vs Germany 100 80 60 Nov-15 Feb-16 May-16 Aug-16 Source: Bloomberg, BNP Paribas 10
BNP Paribas MarFA : US 10y term premium is key driver of asset performance Chart 1: US 10y term premium identified as the 1st Market Factor Chart 2: Impact of a 10bp rise of US term premium on selected assets 19 14 9 4 1 6 MarFa identifies market drivers as: 1. Rising US 10y term premium 2. Falling implied equity vol 3. Rising implied FX vol 11 Aug 16 Sep 16 Oct 16 1st Market Factor (lhs) ACM 10yr term premium 0.05 0.05 0.15 0.25 0.35 0.45 0.55 0.65 0.75 Chart 3: Global equities appear overvalued on a 1-2 week view UK 10yr yield USDTRY US 10yr yield Australia 10yr yield Germany 10yr yield USDCAD USDJPY USDKRW MSCI Emerging Markets SP500 EM credit total returns MSCI India MSCI World Plantinum GBPUSD MSCI Switzerland Gold EURUSD US IG total returns MSCI South Africa MSCI New Zealand Standard deviation move in asset in response to 10bp rise in term premium Impact of a rising term premium: - Push global yields higher and steepen curves - Positive for the USD, especially vs EUR, JPY, CAD, KRW & TRY - Negative for global equity markets - Negative for major credit indices - Negative for gold and platinum 0.8 0.6 0.4 0.2 0.0 0.2 0.4 0.6 0.8 BNPP MarFA monitors the performance and correlations of 75 assets to identify the main factors driving assets and fair-values based on these factors. See Introducing MarFA : BNP Paribas Market Factor Analysis for further details. Source: Bloomberg, BNP Paribas 11
BNP Paribas MarFA : Most assets moving in line with the Market Factors Chart 1: US 10y TSY rising in line with market factors (%) Chart 2: US IG credit moving in line with higher term premium MarFa identifies as the important market drivers: 1. Rising US 10y term premium 2. Falling implied equity vol 3. Rising implied FX vol Chart 3: Gold reacting to rising US term premium Chart 4: Rising US term premium negative for EM equities Source: Bloomberg, BNP Paribas 12
TRADE OF THE WEEK: US SMALL CAPS VS LARGE CAPS Wall of worry lifted for small caps? US small/large cap price ratio underperformance After lagging since 2013, US small caps (Russell 2000 Index - RTY) may face more favourable fundamental trends than their larger peers. The NFIB s monthly survey cites health insurance, regulation and federal taxes as the top three concerns for US small businesses all of which have been highlighted by President-elect Trump. Sector & geographic mix bias both RTY positive The RTY has an overweight concentration in financials a sector which has been historically correlated with higher inflation expectations. Additionally, RTY sales are biased toward a domestic revenue mix. On balance, US financials outperformed broader equities post-election. Regarding foreign/domestic revenue exposure, companies with a higher concentration of domestic sales outperformed election+1. Within the S&P 100 index (OEX), the 15 companies with highest attributable foreign revenue exposure underperformed the top 15 domestically exposed companies by 1% as the dollar rallied. This impact was also seen in Nasdaq 100 Index (NDX) / S&P 500 (SPX) ratio, which underperformed by 0.7%. RTY and SPX sector weightings Source: BNP Paribas Trade Idea: Investors anticipating the emergence of positive fundamental trends for RTY relative to SPX may consider the following: RTY/SPX Jun17 ATM outperformance call - Indicative offer: 3.25% RTY/NDX Jun17 ATM outperformance call - Indicative offer: 3.15% Risks: The first underlying is the one that must outperform above the strike level to have a call at maturity. The risk of buying an outperformance call is limited to the premium paid. The option will expire worthless if the performance of the outperformance above the strike is below 0%. 13
DIAL IN NUMBERS LIVE EVERY WEDNESDAY New York London Singapore Hong Kong Tokyo 08:00 13:00 20:00 20:00 21:00 PASSWORD The BNP Paribas Markets Call Country Number Argentina Toll Free 0800 666 2709 Austria Local +43 (0) 2 68220 56552 Austria Toll Free 0800 005384 Bahrain Toll Free 800 04590 Belgium Toll Free Stavelot 0800 746 68 Brazil Toll Free 0800 891 4709 Bulgaria Toll Free 00800 116 1131 Canada Toll Free 1 800 608 0547 Chile Toll Free 123 0 020 9636 China Toll Free 4001 200558 Croatia Toll Free 0800 222 820 Cyprus Toll Free 8009 6516 Czech Republic Toll Free 800 900 226 Delhi +91 (0) 11 6641 1598 Denmark Toll Free 8088 8649 Finland Toll Free 0800 914672 France Toll Free 0805 630061 Germany Toll Free 0800 673 7932 Greece Toll Free 00800 1273 78 Hong Kong Local +852 5808 3370 Country Number Hungary Toll Free 06 800 13360 Iceland Toll Free 800 8480 Ireland Toll Free 1 800 930 488 Israel Toll Free 1 809 216213 Italy Toll Free 800 986 477 Japan Toll Free 006633132499 Lima +51 (0) 1 705 7257 Lithuania Toll Free 8 800 30393 Luxembourg Toll Free 800 2 6438 Malaysia Toll Free 1 800 813 207 Mexico Toll Free 00 1 866 966 8830 Mumbai +91 (0) 22 6150 2370 Netherlands Toll Free 0 800 022 9132 New Zealand Toll Free 0800 450186 Norway Toll Free 800 19 457 Panama Toll Free 00 800 2263853 Paraguay Toll Free 009 800 54 10036 Poland Toll Free 0 0 800 121 2695 Portugal Toll Free 800 814 155 Romania Toll Free 0800 895532 (RomTelecom only) Country Number Russia Toll Free 8 10 8002 4902044 Singapore Toll Free 800 120 4789 Slovakia Toll Free 0800 606371 Slovenia Toll Free 0800 80554 South Africa Toll Free 0 800 980 512 South Korea Toll Free 00 308 13 1807 Spain Toll Free 800 300206 Standard International Access +44 (0) 20 3003 2666 Sweden Toll Free 020 089 6377 Switzerland Toll Free 0800 800 038 Taiwan Toll Free 00801 126875 Thailand Toll Free 001 800 44 2132 Turkey Toll Free 00800 4488 29067 UAE Toll Free 800 0357 03128 UK Toll Free 0808 109 0700 Ukraine Toll Free 0 800 50 2059 Uruguay Toll Free 000 413 598 3402 USA Toll Free 1 866 966 5335 14
REPLAY NUMBERS PIN 1101016# The replay is available for 5 days following the call Country Number 0844 +44 (0) 20 8196 1595 0844 0844 584 0220 Argentina Toll Free 0800 444 3032 Australia Local Canberra +61 (0) 2 6108 4632 Australia Local Sydney +61 (0) 2 8014 9377 Australia Local Melbourne +61 (0) 3 9001 6671 Australia Local Perth +61 (0) 8 6365 4912 Australia Toll Free 1 800 268 910 Austria Local Vienna (Wien) +43 (0) 1 928 7851 Austria Toll Free 0800 295250 Bahrain Toll Free 800 04591 Belgium Local Brussel/Bruxelles "Brussels" +32 (0) 2 401 9530 Belgium Toll Free Stavelot 0800 730 10 Brazil Local Sao Paulo +55 11 4700 3775 Bulgaria Toll Free 00800 116 1129 Canada Toll Free 1 888 889 0604 Chile Toll Free 123 0 020 7830 China Toll Free 4001 200583 Cyprus Toll Free 8009 6517 Czech Republic Local Prague +420 2 2888 0866 Czech Republic Toll Free 800 143 058 Denmark Toll Free 8088 7109 Finland Toll Free 0800 914468 France Local Paris +33 (0)1 78 40 15 17 France Toll Free 0800 900228 Germany Local Berlin +49 (0) 30 7675 7449 Germany Local Frankfurt +49 (0) 69 2222 7258 Germany Toll Free 0800 181 6174 Country Number Greece Toll Free 00800 4413 1510 Hong Kong Toll Free 800 901 878 Hungary Local Budapest +36 (06) 1 700 8143 Hungary Toll Free 06 800 16323 Iceland Toll Free 800 8491 India Local Mumbai +91 (0) 22 6150 2371 Indonesia Toll Free 001 803 044 11227 Ireland Local Dublin 014864035 Ireland Toll Free 1 800 625 161 Israel Toll Free 1 809 216310 Italy Local Milan +39 02 36008100 Italy Toll Free 800 870 069 Japan Toll Free 0053 1780199 Korea, South Toll Free 00 308 442 0129 Luxembourg Toll Free 800 2 5325 Mexico Toll Free 01 800 123 8776 Netherlands Local 0207084179 Netherlands Toll Free 0 800 022 0532 New Zealand Local Auckland +64 (0) 9 929 1810 New Zealand Toll Free 0800 450232 Nicaragua Toll Free 00 1 800 220 2002 Norway Toll Free 800 19 101 Peru Local +51 (0) 1 705 7258 Poland Local Warsaw +48 22 397 9054 Poland Toll Free 0 0 800 441 2416 Portugal Toll Free 800 880 466 Russia - Moscow Local +7 (8) 495 249 9840 Country Number Russia Toll Free 8 10 8002 4832044 Singapore Toll Free 800 441 1300 Slovakia Local Bratislava +421 (0) 2 3321 5527 Slovenia Toll Free 0800 80550 South Africa Toll Free 0 800 981 236 Spain Local Madrid +34 91 414 1967 Spain Toll Free 900 997171 Standard International Access +44 (0) 20 3451 9993 Standard International Access +44 (0) 20 3451 9994 Standard International Access +44 (0) 20 3451 9995 Standard International Access +44 (0) 20 8196 1998 Sweden Local +46 (0) 752400512 Sweden Local Stockholm +46 (0) 8 50520422 Sweden Toll Free 020 797 147 Switzerland Local Geneva +41 (0) 22 580 3314 Switzerland Toll Free 0800 561 052 Taiwan Toll Free 00801 044241 Thailand Toll Free 001 800 44 2114 Turkey Toll Free 00800 4488 29068 UK Local +44 (0) 20 8196 1480 UK Toll Free 0800 633 8453 USA Toll Free 1 866 583 1035 USA Toll Free 1 866 583 1039 USA Toll Free 1 866 595 5357 Venezuela Toll Free 0800 102 9671 15
Disclaimers This document has been written by our strategy teams. It does not purport to be an exhaustive analysis, and may be subject to conflicts of interest resulting from their interaction with sales and trading which could affect the objectivity of this report. This document is a non-independent research for the purpose of FCA rules. By way of comparison with MiFID, for the purposes of MiFID non-independent research constitutes a marketing communication. This document is not investment research for the purposes of MiFID. It has not been prepared in accordance with legal requirements designed to provide the independence of investment research, and is not subject to any prohibition on dealing ahead of the dissemination of investment research. STEER is a trade mark of BNP Paribas. 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BNP Paribas Niederlassung Deutschland is authorized and lead supervised by the European Central Bank (ECB) and by Autorité de Contrôle Prudentiel et de Résolution (ACPR) and is subject to limited supervision and regulation by Bundesanstalt für Finanzdienstleistungsaufsicht (BaFin) in respect of supervisions for which the competence remains at national level, in terms of Council Regulation n 2013/1024 of 15 October 2013 conferring specific tasks on the ECB concerning policies relating to the prudential supervision of credit institutions as well as Council Directive n 2013/36/EU of 26 June, 2013 and Section 53b German Banking Act (Kreditwesengesetz - KWG) providing for the principles of shared supervision between the national competent authorities in case of branches and applicable national rules and regulations. BNP Paribas Niederlassung Deutschland is registered with locations at Europa Allee 12, 60327 Frankfurt (commercial register HRB Frankfurt am Main 40950) and Bahnhofstrasse 55, 90429 Nuremberg (commercial register Nuremberg HRB Nürnberg 31129). Belgium: BNP Paribas Fortis SA/NV is authorized and supervised by European Central Bank (ECB) and by the National Bank of Belgium, boulevard de Berlaimont 14, 1000 Brussels, and is also under the supervision on investor and consumer protection of the Financial Services and Markets Authority (FSMA), rue du congrès 12-14, 1000 Brussels and is authorized as insurance agent under FSMA number 25789 A Ireland: This report is being distributed in Ireland by BNP Paribas S.A., Dublin Branch. BNP Paribas is incorporated in France as a Société Anonyme and regulated in France by the European Central Bank and by the Autorité de Contrôle Prudentiel et de Résolution. Netherlands: This report is being distributed in the Netherlands by BNP Paribas Fortis SA/NV, Netherlands Branch, a branch of BNP Paribas SA/NV whose head office is in Brussels, Belgium. BNP Paribas Fortis SA/NV, Netherlands Branch, Herengracht 595, 1017 CE Amsterdam, is authorised and supervised by the European Central Bank (ECB) and the National Bank of Belgium and is also supervised by the Belgian Financial Services and Markets Authority (FSMA) and it is subject to limited regulation by the Netherlands Authority for the Financial Markets (AFM) and the Dutch Central Bank (De Nederlandsche Bank). Portugal: BNP Paribas Sucursal em Portugal Avenida 5 de Outubro, 206, 1050-065 Lisboa, Portugal. www.bnpparibas.com. Incorporated in France with Limited Liability. Registered Office: 16 boulevard des Italiens, 75009 Paris, France. 662 042 449 RCS Paris. BNP Paribas Sucursal em Portugal is lead supervised by the European Central Bank (ECB) and the Autorité de Contrôle Prudentiel et de Résolution (ACPR). BNP Paribas - Sucursal em Portugal is authorized by the ECB, the ACPR and Resolution and it is authorized and subject to limited regulation by Banco de Portugal and Comissão do Mercado de Valores Mobiliários. BNP Paribas - Sucursal em Portugal is registered in C.R.C. of Lisbon under no. NIPC 980000416. VAT Number PT 980 000 416. Spain: This report is being distributed in Spain by BNP Paribas S.A., S.E., a branch of BNP Paribas S.A. whose head office is in Paris, France (Registered Office: 16 boulevard des Italiens, 75009 Paris, France). BNP Paribas S.A., S.E., C/Ribera de Loira 28, Madrid 28042 is authorised and supervised by the European Central Bank (ECB) and the Autorité de Contrôle Prudentiel et de Résolution (ACPR) and subject to limited regulation by the Bank of Spain. United States: This report may be distributed (i) by BNP Paribas Securities Corp. to U.S. persons who qualify as an institutional investor under FINRA Rule 2210(a) (4), or (ii) by a subsidiary or affiliate of BNP Paribas that is not registered as a US broker-dealer only to U.S. persons who are considered major U.S. institutional investors (as such term is defined in Rule 15a-6 under the Securities Exchange Act of 1934, as amended). U.S. persons who wish to effect transactions in securities discussed herein must contact a BNP Paribas Securities Corp. representative unless otherwise authorized by law to contact a non-us affiliate of BNP Paribas. BNP Paribas Securities Corp. is a broker dealer registered with the Securities and Exchange Commission ( SEC ) and the Commodity Futures Trading Commission ( CFTC ) and member of FINRA, SIPC, NFA, NYSE and other principal exchanges. Brazil: This report was prepared by Banco BNP Paribas Brasil S.A. or by its subsidiaries, affiliates and controlled companies, together referred to as "BNP Paribas", for information purposes only and do not represent an offer or request for investment or divestment of assets. Banco BNP Paribas Brasil S.A. is a financial institution duly incorporated in Brazil and duly authorized by the Central Bank of Brazil and by the Brazilian Securities Commission to manage investment funds. Notwithstanding the caution to obtain and manage the information herein presented, BNP Paribas shall not be responsible for the accidental publication of incorrect information, nor for investment decisions taken based on the information contained herein, which can be modified without prior notice. Banco BNP Paribas Brasil S.A. shall not be responsible to update or revise any information contained herein. Banco BNP Paribas Brasil S.A. shall not be responsible for any loss caused by the use of any information contained herein. Israel: BNP Paribas does not hold a licence under the Investment Advice and Marketing Law of Israel, to offer investment advice of any type, including, but not limited to, investment advice relating to any financial products. 17
Disclaimers Bahrain: This document is being distributed in Bahrain by BNP Paribas Wholesale Bank Bahrain, a branch of BNP Paribas S.A. whose head office is in Paris, France (Registered Office: 16 boulevard des Italiens, 75009 Paris, France). BNP Paribas Wholesale Bank Bahrain is licensed and regulated as a Registered Institution by the Central Bank of Bahrain CBB. This document does not, nor is it intended to, constitute an offer to issue, sell or acquire, or solicit an offer to sell or acquire any securities or to enter into any transaction. South Africa: BNP Paribas Securities South Africa (Pty) Ltd (Registration number 1996/009716/07) is a licensed member of the Johannesburg Stock Exchange and an authorised Financial Services Provider (FSP 29451) in terms of the Financial Advisory and Intermediary Services Act, 37 of 2002. Any view or opinion expressed in this report does not constitute advice and the recipient should obtain their own advice prior to making any decision or taking any action whatsoever based hereon. Japan: This report is being distributed to Japanese based firms by BNP Paribas Securities (Japan) Limited or by a subsidiary or affiliate of BNP Paribas not registered as a financial instruments firm in Japan, to certain financial institutions defined by article 17-3, item 1 of the Financial Instruments and Exchange Law Enforcement Order. BNP Paribas Securities (Japan) Limited is a financial instruments firm registered according to the Financial Instruments and Exchange Law of Japan and a member of the Japan Securities Dealers Association and the Financial Futures Association of Japan. BNP Paribas Securities (Japan) Limited accepts responsibility for the content of a report prepared by another non-japan affiliate only when distributed to Japanese based firms by BNP Paribas Securities (Japan) Limited. Some of the foreign securities stated on this report are not disclosed according to the Financial Instruments and Exchange Law of Japan. Hong Kong: This report is being distributed in Hong Kong by BNP Paribas Hong Kong Branch, a branch of BNP Paribas whose head office is in Paris, France. BNP Paribas Hong Kong Branch is registered as a Licensed Bank under the Banking Ordinance and regulated by the Hong Kong Monetary Authority. BNP Paribas Hong Kong Branch is also a Registered Institution regulated by the Securities and Futures Commission for the conduct of Regulated Activity Types 1, 4 and 6 under the Securities and Futures Ordinance. Singapore: BNP Paribas Singapore Branch is regulated in Singapore by the Monetary Authority of Singapore under the Banking Act, the Securities and Futures Act and the Financial Advisers Act. This report may not be circulated or distributed, whether directly or indirectly, to any person in Singapore other than (i) to an institutional investor pursuant to Section 274 of the Securities and Futures Act, Chapter 289 of Singapore ("SFA"), (ii) to an accredited investor or other relevant person, or any person under Section 275(1A) of the SFA, pursuant to and in accordance with the conditions specified in Section 275 of the SFA or (iii) otherwise pursuant to, and in accordance with the conditions of, any other applicable provisions of the SFA. South Korea: Branch: BNP Paribas Seoul Branch is regulated by the Financial Services Commission and Financial Supervisory Service for the conduct of its financial investment business in the Republic of Korea. This report does not constitute an offer to sell to or the solicitation of an offer to buy from any person any financial products where it is unlawful to make the offer or solicitation in South Korea. Securities: BNP Paribas Securities Korea is registered as a Licensed Financial Investment Business Entity under the FINANCIAL INVESTMENT SERVICES AND CAPITAL MARKETS ACT and regulated by the Financial Supervisory Service and Financial Services Commission. This report does not constitute an offer to sell to or the solicitation of an offer to buy from any person any financial products where it is unlawful to make the offer or solicitation in South Korea. Taiwan: BNP Paribas Taipei Branch is registered as a licensed bank under the Banking Act and regulated by the Financial Supervisory Commission, R.O.C. This report is directed only at Taiwanese counterparties who are licensed or who have the capacities to purchase or transact in such products. This report does not constitute an offer to sell to or the solicitation of an offer to buy from any person any financial products where it is unlawful to make the offer or solicitation in Taiwan. Australia: This material, and any information in related marketing presentations (the Material), is being distributed in Australia by BNP Paribas ABN 23 000 000 117, a branch of BNP Paribas 662 042 449 R.C.S., a licensed bank whose head office is in Paris, France. BNP Paribas is licensed in Australia as a Foreign Approved Deposit-taking Institution by the Australian Prudential Regulation Authority (APRA) and delivers financial services to Wholesale clients under its Australian Financial Services Licence (AFSL) No. 238043 which is regulated by the Australian Securities & Investments Commission (ASIC).The Material is directed to Wholesale clients only and is not intended for Retail clients (as both terms are defined by the Corporations Act 2001, sections 761G and 761GA). The Material is subject to change without notice and BNP Paribas is under no obligation to update the information or correct any inaccuracy that may appear at a later date. Some or all of the information contained in this document may already have been published on https://globalmarkets.bnpparibas.com BNP Paribas (2016). All rights reserved. IMPORTANT DISCLOSURES by producers and disseminators of investment recommendations for the purposes of the Market Abuse Regulation: Although the disclosures provided herein have been prepared on the basis of information we believe to be accurate, we do not guarantee the accuracy, completeness or reasonableness of any such disclosures. The disclosures provided herein have been prepared in good faith and are based on internal calculations, which may include, without limitation, rounding and approximations. BNP Paribas and/or its affiliates may be [are] a market maker or liquidity provider in financial instruments of the issuer mentioned in the recommendation. BNP Paribas and/or its affiliates may provide such services as described in Sections A and B of Annex I of MiFID II (Directive 2014/65/EU), to the Issuer to which this investment recommendation relates. However, BNP Paribas is unable to disclose specific relationships/agreements due to client confidentiality obligations. Section A and B services include A. Investment services and activities: (1) Reception and transmission of orders in relation to one or more financial instruments; (2) Execution of orders on behalf of clients; (3) Dealing on own account; (4) Portfolio management; (5) Investment advice; (6) Underwriting of financial instruments and/or placing of financial instruments on a firm commitment basis; (7) Placing of financial instruments without a firm commitment basis; (8) Operation of an MTF; and (9) Operation of an OTF. B. Ancillary services: (1) Safekeeping and administration of financial instruments for the account of clients, including custodianship and related services such as cash/collateral management and excluding maintaining securities accounts at the top tier level; (2) Granting credits or loans to an investor to allow him to carry out a transaction in one or more financial instruments, where the firm granting the credit or loan is involved in the transaction; (3) Advice to 18
Disclaimers undertakings on capital structure, industrial strategy and related matters and advice and services relating to mergers and the purchase of undertakings; (4) Foreign exchange services where these are connected to the provision of investment services; (5) Investment research and financial analysis or other forms of general recommendation relating to transactions in financial instruments; (6) Services related to underwriting; and (7) Investment services and activities as well as ancillary services of the type included under Section A or B of Annex 1 related to the underlying of the derivatives included under points (5), (6), (7) and (10) of Section C (detailing the MiFID II Financial Instruments) where these are connected to the provision of investment or ancillary services. BNP Paribas and/or its affiliates do not, as a matter of policy, permit pre-arrangements with issuers to produce recommendations. BNP Paribas and/or its affiliates as a matter of policy do not permit issuers to review or see unpublished recommendations. BNP Paribas and/or its affiliates acknowledge the importance of conflicts of interest prevention and have established robust policies and procedures and maintain effective organisational structure to prevent and avoid conflicts of interest that could impair the objectivity of this recommendation including, but not limited to, information barriers, personal account dealing restrictions and management of inside information. BNP Paribas and/or its affiliates understand the importance of protecting confidential information and maintain a need to know approach when dealing with any confidential information. Information barriers are a key arrangement we have in place in this regard. Such arrangements, along with embedded policies and procedures, provide that information held in the course of carrying on one part of its business to be withheld from and not to be used in the course of carrying on another part of its business. It is a way of managing conflicts of interest whereby the business of the bank is separated by physical and non-physical information barriers. The Control Room manages this information flow between different areas of the bank where confidential information including inside information and proprietary information is safeguarded. There is also a conflict clearance process before getting involved in a deal or transaction. In addition, there is a mitigation measure to manage conflicts of interest for each transaction with controls put in place to restrict the information flow, involvement of personnel and handling of client relations between each transaction in such a way that the different interests are appropriately protected. Gifts and Entertainment policy is to monitor physical gifts, benefits and invitation to events that is in line with the firm policy and Anti-Bribery regulations. BNP Paribas maintains several policies with respect to conflicts of interest including our Personal Account Dealing and Outside Business Interests policies which sit alongside our general Conflicts of Interest Policy, along with several policies that the firm has in place to prevent and avoid conflicts of interest. The BNP Paribas disseminator of the investment recommendation is identified above including information regarding the relevant competent authorities which regulate the disseminator. The name of the individual producer within BNP Paribas or an affiliate and the legal entity the individual producer is associated with are identified above in this document, The date and time of the first dissemination of this investment recommendation by BNP Paribas or an affiliate is addressed above. Where this investment recommendation is communicated by Bloomberg chat or by email by an individual within BNP Paribas or an affiliate, the date and time of the dissemination by the relevant individual is contained in the communication by that individual disseminator. The disseminator and producer of the investment recommendations are part of the same group, i.e. the BNP Paribas group. The relevant Market Abuse Regulation disclosures required to be made by producers and disseminators of investment recommendations are provided by the producer for and on behalf of the BNP Paribas Group legal entities disseminating those recommendations and the same disclosures also apply to the disseminator. If an investment recommendation is disseminated by an individual within BNP Paribas or an affiliate via Bloomberg chat or email, the disseminator s job title is available in their Bloomberg profile or bio. If an investment recommendation is disseminated by an individual within BNP Paribas or an affiliate via email, the individual disseminator s job title is available in their email signature. For further details on the basis of recommendation specific disclosures available at this link (e.g. valuations or methodologies, and the underlying assumptions, used to evaluate financial instruments or issuers, interests or conflicts that could impair objectivity recommendations or to 12 month history of recommendations history) are available at https://globalmarkets.bnpparibas.com/gmportal/private/globaltradeidea. If you are unable to access the website please contact your BNP Paribas representative for a copy of this document. The remuneration of the individual producer of the investment recommendation may be linked to trading or any other fees in relation to their global business line received by BNP Paribas and/or affiliates. IMPORTANT DISCLOSURES by disseminators of investment recommendations for the purposes of the Market Abuse Regulation: 19