EFTA01170770.pdf

J.PMorgan Global Asset Allocation J.P.Morgan Chase Bank NA, J.P. Morgan Securities Ltd. Oct 28, 2011 he J.P. Morgan View Did markets overreact? Jan Loeys' • Economics — We raise US Q4 GDP from 1.0% to 2.5%, after having done the same to Q3 over the past month. • Portfolio strategy — Equities and credit may have overreacted to an EU John Normand Summit that was short on details, but we stay long risk assets as the EU is heading in the right direction, and we should get support from reduced US recession risks. Nikolaos Panigirtzoglou • Fixed Income — We remain defensive on Euro area peripherals, despite EU leaders' statement of intent. • Equities — We close our underweight in China and move BRICs to an over- Seamus Mac Gorain weight within EM, i.e long MSCI BRICs vs MSCI EM. • Credit — All-time record US HY inflows signal further spread narrowing. Matthew Lehmann • Foreign exchange — European bank recapitalization could lead to repatria- tion on foreign holdings, but the impact on EUR will likely be small. • Commodities —We expect the Brent-WTI spread to narrow further to $101 bbl by the end of next year. • Risk markets all rallied hard this week following the Euro Summit statement on YTD returns through Oct 27 Thursday morning that suggested a more determined commitment by EU %. equities are in lighter colour. heads of state to address the root causes of their debt crisis. We retain a long risk position — overweight riskier asset classes against defensive ones — on Gold a judgement that Europe is finally recognizing what it must do to contain the EMBIG crisis; that it is showing an increased willingness to implement such measures; US High Grade that global investors remain broadly defensively positioned; and that you get US Food Income badly penalised — through record low yields — if you choose to stay in safe US High Yield assets. EM Local Bonds" ■ ° This week's violent lurch up inequity prices took many market participants Global Gov Bonds" ■ by surprise, as they did not consider the EU Summit that impressive. In EM S Corp. ■ addition, the largest eurobond markets at the core of the crisis — Italy — S&P500 O ended down on the week as it saw weak demand at bond auctions today. If the Summit did not move us towards an eventual resolution of the EMU debt GSCI TR crisis, then surely equity and credit market overreacted and are due to fall back Europe Fixed Income' as fundamental disagreements emerge on the implementation of the Summit US cash measures. EM FX • We do not think so and remain long risk. Much has been written about how MSCI AC Work' O the EU Summit Statement is full of vague promises and short of concrete MSCI Europe' O details, while glossing over still large disagreements between major MSCI EM O stakeholders. We do not disagree (see Barr and Mai, EU sununit leaves plenty Toper' I ofgaps in €!tn of 'firepower" in today's GDW). The next few weeks and -IS .5 5 IS 25 months will likely see a seesaw in perceptions of whether this new plan will do SCUMS: AP. Mint Etnlescg. Pans n LSD. 'Leal the job. At the same time, we are sufficiently impressed that the heads of °mercy. —Hedged No USD. Ewe Fixed tin is Wu oeccs states are committing to the main elements of resolution — Greek debt reduc- Index. US HG. WING ad EPA $ Cap are Ai Six: EU Ris ELI% $. The certifying analyst is indicated by an AC. See page 7 for analyst certification and important legal and regulatory disclosures. EFTA01170770 Global Asset Allocation The J.P. Morgan View J.P.Morgan lion, bank recapitalization, wider liquidity and funding support for Euro 2012 JPMorgan global GDP growth forecast vs. members, and stronger coordination and constraints on future deficits and Global equities debt. 3.9 2012 JPM global GDP growth forecast 360 • We thus see reason to repeat what we said last week: This summits defines the start of the end of the sovereign debt crisis, but that this process will be 3.4 335 drawn out (likely in years), will have reversals, will not be obvious for some time, and will not prevent Europe from falling into recession again, as banks 2.9 310 delever and austerity bites hard. 2.4 285 • If the EU Summit were the only reason to be long risk assets, then we accept that we may be on thin ice. But there is more. US economic activity data 1.9 260 continue to come in stronger — or, better, not as weak — as we had foreseen. Jan.11 Mar.11 May-II Jul.11 Sep-11 Over the past month, we raised our Q3 US GDP forecast from I% to 2.5%. Scum JP. lAsegsn Consensus Eccrocrict Consensus Emecnics Today we did the same for Q4. Forward-looking PMIs and confidence data had fiscecasIs ae let mans and =Mug Pal .e avenged using the made us anticipate weaker spending growth, but consumption is coming in sync Spur wing USD GOP %tips that se um bf COI wen OW growth forecast. much stronger than these signals suggested. In Europe, the fall in PMIs is consistent with our call that a recession has just started. But in emerging economies, the fall in inflation and growth are inducing a switch from mon- 2011 global GDP growth forecasts: JPMorgan and etary tightening to easing. This includes China, and is bringing about a strong Consensus rebound in EM equities, motivating us to move to OW EM equities and BRICs within EM (see below). 4.0 Fixed income 3.6 • Bonds sold off as the summit ofEuropean leaders delivered more than many investors feared. Government yields have reversed around two fifths of their 3.2 summer decline, significantly less than the retracement in equity markets (see Chart). In part that reflects flattish positioning in bonds, whereas equity investors have had significant shorts to cover. But it is also down to the 2.8 reopening of the monetary policy spigot, with the Federal Reserve, Bank of England, and Bank of Japan all having eased to varying degrees, and the ECB 2.4 to follow by year end on our forecast. The path of least resistance for yields is Jan-IC Way-10 Sep-10 Jan-11 May•II Sep-11 slightly higher, and we are underweight duration in the US, where activity Sturm. JP. lAsegsrk Consensus Eccrocria Consensus Emecnim data have been strongest. tonscasIs ae let mesas and =Mug Poi .e swaged using the sane Slew ruing USD GOP %eights that.e use iX cur wen cfotal groat!, broom:. • Peripheral spreads tightened in the face ofEU leaders' statement of intent. with only Italy lagging. The question is how long-lasting this improvement will be, in the face of several months of filling in the blanks from the statement, not all of which will run smoothly. Our view is that private demand for peripheral bonds will remain weak. The reduced liquidity and increased volatility of More details in ... Spanish and Italian bonds since the summer is a clear negative, while the Euro Global Data Watch. Bruce Kasman and David Hensley area's slide towards probable recession makes fiscal targets all the harder to hit. That underlines the importance of official support, from the ECB in the first Global Markets Outlook and Strategy. Jan Loeys. Bruce instance, to keep yields in check. We remain defensive on peripherals, and Kasman. el al. add back the Spain underweight we closed last week. US Fixed Income Markets. Terry Belton and Stini Ramaswamy • Please help us to gauge prospects for inflation by completing our Inflation Global Fixed Income Markets. Pavan Wadbwa and Fabio Expectations Survey on: Bassi Equities Emerging Markets Outlook and Strategy. Joyce Chang Key trades and risk: Emermng Market Equity Strategy. • US equities continued to rally for a fourth straight week fuelled by this Adrian Momal et al. week's EU summit, better than expected earnings news, and still positive US economic surprises. Rows and Liquidity Nikos Panigiruoglou el al. Oct 28, 2011 2 EFTA01170771 Global Asset Allocation The J.P. Morgan View J.P,Morgan Retracement in government bond and equity • 296 companies of the S&P500 have reported so far and 65% have beaten markets Change from recent lows. as a proportion of fall from expectations. The S&P500 EPS is tracking a $25.2 level for Q3, 3% above the highest level in July. bottom-up expectation at the beginning of month. More importantly, profit margins appear to have expanded over the past year. The S&P500 EPS is set to 80% grow 17% YoY in Q3, vs 11% for Sales-per-Share. 60% • We stay with a positive stance as we believe that there are still plenty of shorts to be covered. As we highlighted in this week's Flows & Liquidity, 40% around a quarter of the position retrenchment of the previous months has been reversed in October. Macro HFs have moved to neutral, after spending 20% most of September/October being modestly short equities. Their inclination is to go long equities, as this is their best hope to boost performance into year- end. 0% US Germany Japan UK sauce: JP Ikegan. Bkanterg • Last week we opened an overweight in EM vs. DM equities as EM policy makers have started focusing on stimulating their economics. Just as in US EASI Index November 2008, EM policy priorities are shifting from inflation to growth. This Balance ol positive minus negative US economic shift is more pronounced in BRICs, including China. As a result, we close our surprises. underweight in China (i.e. short MSCI China vs MSCI South East Asia) and 35 move BRICs to an overweight withinEM (longMSCI BRICs vs MSCI EM). 25 BRICs have been underperforming steadily since the end of 2009, mostly due to overheating and tightening fears. These fears are gradually fading. See 15 Adrian Mowat, EM Equity Strategy for more details. 5 .5 • Across regions we remain OW in Euro area (MSCI EMU) vs US equities (S&P500) as investor underweights are still more prevalent in the Euro area. -15 •25 Credit • With announcements from Europe having beaten expectations, seventeen .45 straight days of gains have been registered in both the US HG and HY indices. Jan-09 Oct-09 Jul-10 411 The move into high-yield accelerated as HY mutual funds/ETFs saw an all- Seca. J.P. tActgan time-record $4.2bn of inflows, surpassing last week's two-year record of $2.3bn. HY spreads have tightened after each of the four past times that HY saw weekly inflows over $2bn (See last week's Flows & Liquidity). • Yesterday, European CDS indices saw the biggest one-day tightening since May 2010 when the original Greek rescue package was announced. Our credit sales and trading force estimates that some 80% of recent flows constituted short covering, while the rest was real buying (see Stephen Dulake, This Time it CouldBe Different). Today, our EM strategists trimmed some of their defensive positions as tail risks retrace in Europe, and they lowered their year- end EMBIG forecast from 425bp to 400bp, compared with 371bp today. Foreign Exchange More details in ... • Now that Europe's latest summit agreement moves into implementation mode. EM Corporate Outlook and Strategy. Warren Mar el al. the most opaque issue for currencies will be the impact of bank US Crack Markets Outlook and Strategy, Eric Beinstein et al. recapitalization. There is no question that a leveraged EFSF or IMF credit lines would prove euro-positive by diffusing credit risk without resorting to Mph Vitt, Credo Markets Weekty, Peter Acciavani et al. debt monetisation. Bank recapitalization's FX impact is much murkier given the European Crack Outlook & Strategy. Steven Dulake et al. variables involved, such as the reliance on government capital injections Emerging Markets Cross Product Strategy Weekly, Eric versus asset sales; the split between domestic and foreign asset sales; the Beinstein el al. currency mismatch between overseas assets and liabilities; and the country's position as a net international creditor or debtor. Oct23,2011 3 EFTA01170772 Global Asset Allocation J.P.Morgan The J.P. Morgan View MSCI EM vs. World • Japanese bank deleveraging in the late 1990s coincided with massive yen Relative total return it based on MSCI VVodd$ sector indices strength, but investor deleveraging post LTCM drove most of this move in 260 1998, while foreign buying of the Nikkei drove the last leg in 1999. At first blush European bank recapitalization looks quite euro-positive, since the MSCI EMS vs Wodd$ region's banks are three times more extended overseas than Japanese banks, 220 but the currency mismatch isn't huge. This issue has significant impacts for certain regions like CEEMEA, but in aggregate, shouldn't drive the euro 180 broadly over the next year. We are sticking with 1.38 as the baseline for the next two quarters. 140 • Adjustments to our portfolio are minor: take part profits on JPY longs, rotate USD shorts and continue earnings options premia where recession risks are 100 overpriced. Add a short in USD/MYR, rotating out of USD/SGD. In options, 2006 2006 2007 2008 2009 2010 2011 we have been long the yen versus some combination of USD, EUR and GBP Same. Odastrearn. J. P. 0.1:fgan since August, and then yen is finally edging higher now that this week's trade data confirm the return of Japan's trade surplus. Take profits on short USD/ FX weekly change vs USD 4% JPY to minimize concentration risk if the Bank of Japan intervenes, but stay long vs EUR and GBP. Also stay short USD calls vs CAD and NZD and EUR 3% - calls vs EUR. Option markets continue to price more recession risks than cash markets do, judging from how little skews in commodity currencies and EM FX 2% - have retraced relative to spot. 1% - Commodities • Commodities rallied nearly 4% this week, once again led by base metals with 0% copper up almost 14%. Indicators of physical demand for copper are strong, especially in China where inventories are at multi-year lows. Recent better- than-expected US economic data show that the probability of a recession is •2% much lower than had been priced into base metals until recently. The better USD EUR GBP JPY CHF CAD AUD Chinese PMI also points to continued strong commodity demand. We remain positive on base metals. Settee: J.P. Morn • Oil is up 4% this week, but this masks a considerable divergence between the two main oil benchmarks: Brent was flat and WTI rallied nearly 7% —a complete reversal of the trend we have seen all year. As a result, the gap between the two has narrowed from almost S28/bbl two weeks ago to only $17/bbl now. The WTI futures curve also moved into backwardation (down- ward sloping), as inventories at Cushing, where WTI is priced, fell sharply. • Until mid 2010, WTI had traded at a slight premium to Brent,but the in- crease in Canadian production last year caused a build up of inventories at the landlocked WTI pricing point in Oklahoma. The flow of oil into Cushing far exceeded the amount that could physically flow out, depressing WTI prices relative to Brent. Our oil analysts estimate that a spread of around $25/bbl is More details in ... sufficient to make it profitable to move oil out of Cushing by unconventional means. We started to see this over the summer. This spread should continue to FX Markets Weekly. John Normand et al. narrow and reach $10/bbl by the end of next year, as more oil is moved out of Commodity Markets Outlook 8 Strategy Cohn Cushing. This may happen sooner should a planned pipeline between the mid Fenton et al. west and the gulf coast be approved shortly. Oil Markets Monthly. Lawrence Eagles et al. Metals Review and Outlook Michael Jansen Global Metals Ouarteny, Michael Jansen Oct 2/I, 2011 4 EFTA01170773 Global Asset Allocation The J.P. Morgan View J.P.Morgan Interest rates Current Dec-11 Mar-12 Jun-12 Sep-12 YTD Return' United States Fed funds rate 0.125 0.125 0.125 0.125 0.125 10 year yietds 2.32 2.25 2.60 2.80 2.80 62% Euro area Refi rate 1.50 1.00 1.00 1.00 1.00 lOiyear yietds 2.18 1.55 1.60 1.8/) 2.00 6.0% United Kingdom Repo rate 0.50 0.50 0.50 0.50 0.50 10 year yietds 2.61 2.10 2.10 2.10 2.10 10.7% Japan Overnight call rate 0.10 0.05 0.05 0.05 0.05 10 year yietds 1.04 0.85 1.00 1.10 1.10 1.8% GBI.EM hedged in S Yield Global Diversified 6.39 6.90 4.9% Credit Markets Current Index YTD Return' US high grade Mp over USTI 206 JP1Aorgan JULI Podolio Spread to Treasury 6.6% Euro high grade (bp over Euro gov) 269 iEfixer Euro Corp:tale Index 2.3% USO high red (bp vs. UST) 684 JPMorgan Global High Yield Index STW 5.7% Euro high yield ftp over Euro gov) 783 iBoxic Euro HY Index 1.1% EMBIG (bp vs. UST) 370 EMBI Global 7.9% EM Corporates (bp vs. UST) 404 JPM EM Corporates (CEMBI) 3.9% Quarterly Avenges Commodities Current 1104 1201 1202 1203 GSCI Index YTD Return' Brent ($/bbff 110.1 115.0 120.0 120.0 125.0 Energy 5.1% Gold (S'oz) 1745 2159 1925 1875 1850 Precious Male's 22.5% Copper ($/metric ton) 8143 7250 8250 8500 9250 Industrial Metals -15.7% Com (SiBu) 6.56 6.40 6.70 7.00 6.80 Agncullure -1O9% 3m cash TTD Return' Foreign Exchange Current Dec-11 Mar-12 Jun-12 Sep-12 Index In USD EURUSD 1.42 1.38 1.38 1.40 1.42 EUR 6.8% USEUPY 75.7 75 74 73 72 JPY 7.2% GBPIUSD 1.61 1.59 1.58 1.58 1.60 GBP 3.6% USOBRL 1.68 150 LEIO 1.80 1.80 BRL 3.3% USD/CNY 6.36 6.30 6.20 6.10 6.00 CNY 2.3% USOKRW 1105 1070 1050 1020 1010 KRW 3.6% USD/TRY 1.74 1.65 1.65 1.65 1.65 TRY -8.0% YTD Return US Europe Japan EM Equities Current (local ccy) Sector Allocation • YTD YTD YTD YTD (5) S8P 1284 3.8% Energy 8.0% 4.5% 4.6% 4.5% Nasdaq 2733 3.8% Materials 4.6% 16.0% •16.8% 16.2% Topix 771 -12.2% Industrials -02% -12.3% -11.3% -20.5% FTSE 100 5702 .0.5% 0 soriatonaiy 7.8% .4.4% •18.5% 1.5% MSCI Eurozone' 140 -8.6% Staples 9.7% 2.3% 2.1% 2.1% MSCI Europe' 1066 -5.7% Healthcare 10.2% 5.2% .53% -16.0% IASCI EM 994 -11.4% Financials -10.8% -14.8% -19.6% -16.3% Brazil Bovespa 59361 .14.3% Information Tech. 6.7% -1.7% .21.5% -12S% Hang Seng 20019 -7.6% Telecommunications 2.7% 1.9% -0.7% 4.01% Shanghai SE 2473 -7.4% UlilAles 162% 6.6% .45.9% -10.4% levels/returns as of Oa 27.2011 Overall 3.8% -5.7% -12.2% -11.4% Local amency except MSC1EM Sarin: Bkverberg Dllastearn KBES Studard a Potts J.P LIcegan entroles Oct 28, 2011 EFTA01170774  Global Asset Allocation The J.P. Morgan View J. P Morgan Global Economic Outlook Summary Real GDP Real GDP Consumer prices % Over a year ago % Over [Menus penal saat over a year ago 2010 2011 2012 1011 2011 3011 4011 1012 2012 3012 4010 2011 4011 2012 The Americas United Slates 3.0 1.8 1 1.7 1. 0.4 1.3 211 2.5 .1 0.5 1.5 2.5 12 3.3 3.2 1.3 Canada 3.2 2.2 2.2 3.6 -0.4 1.8 2.4 2.6 2.6 2.4 2.3 3.4 2.6 1.6 Latin America 6.0 4.2 3.2 5.6 4.1 3.1 2.5 1.6 4.4 4.7 6.7 6.7 7.2 6.9 Argentina 9.2 7.5 3.0 13.1 102 4.0 2.0 0.0 6.0 4.0 11.0 9.7 11.0 10.0 Brazil 7.5 3.3 3.4 5.0 3.1 a 2.7 3.3 4.2 4.2 5.6 6.6 6.7 5.3 Chile 5.2 6.5 4.0 6.4 5.7 3.5 2.5 3.5 4.5 5.0 2.5 3.3 3.6 3.6 Colombia 4.3 5.3 3.7 2.9 8.5 3.5 1.5 3.0 4.0 5.0 2.7 3.0 3.9 3.0 Ecuador 3.6 6.0 3.0 7.3 3.0 2.0 1.0 2.0 3.5 4.0 3.4 4.1 3.9 3.6 Mexico 5.4 4.0 2.5 2.4 4.5 5.7 2.6 -1.7 4.1 4.8 42 3.3 3.2 3.5 Pew 8.8 6.3 4.5 6.9 4.5 ,2,5 3.0 4.5 5.0 6.2 2.1 3.1 4.0 3.6 Venezuela -1.5 3.5 3.0 14.7 -32 -1.5 3.0 3.0 5.0 6.5 27.3 24.6 29.0 33.6 AsialPacific Japan 4.0 -0.6 1.9 -3.7 -2.1 545 2.0 1.8 1.5 1.3 -0.3 -0.4 -0.1 -01 Australia 2.7 1.4 3.5 -3.4 4.8 2.1 2.2 4.1 3.4 4.8 2.7 3.6 3.8 3.2 New Zealand 1.7 2.0 3.8 3.5 0.4 a 4.1 3.9 3.9 5.6 4.0 5.3 3.2 2.4 Asia ex Japan 9.1 7.1 1 6.6 9.0 5.7 5.91 5.8 7.0 6.8 7.31 4.9 5.7 5.1 4.3 China 10.4 9.0 8.3 9.0 7.9 7.9 8.0 8.2 8.2 8.9 4.7 5.7 4.9 3.8 Hong Kong 7.0 5.01 3.61 13.0 -2.0 3.4 1 2.51 4.01 5.5 1 5.5 1 2.7 5.2 5.2 1 4.3 India 8.5 7.6 8.5 8.3 7.6 7.5 7.1 8.6 9.0 9.5 92 9.1 8.7 7.8 Indonesia 6.1 6.3 5.2 6.8 5.4 52 5.5 5.0 4.5 5.0 6.3 5.9 4.5 5.6 Korea 6.2 3.81 4.0 5.4 3.6 3.0 1 4.2 4.0 4.0 4.0 3.6 4.2 3.7 3.1 Malaysia 7.2 4.0 1.5 5.5 32 LQ 1.0 1.5 1.5 1.5 2.0 3.3 2.8 2.4 Phi:fines 7.6 4.1 4.0 7.8 2.4 4.1 2.4 2.4 7.4 5.3 3.5 5.0 4.6 3.3 Singapore 14.5 4.9 1.5 27.2 -6.5 1.6 -3.9 2.0 6.1 6.1 4.0 4.7 5.6 4.0 Taiwan 10.9 4.61 3.0 14.6 0.9 1 2.5 ? 3.5 4.0 1. 4.6 1.1 1.6 2.2 2.0 Thailand 7.8 2.5 2.6 8.1 -0.8 1.8 -6.0 15.0 -1.0 1.3 2.9 4.1 3.7 3.6 AfrIcaiddle East Israel 4.8 4.3 2.9 4.8 3.7 24 1.2 0.8 3.2 6.1 2.5 4.1 2.8 2.3 South Africa 2.8 3.1 2.5 4.5 1.3 1.0 3.9 2.3 2.6 2.8 3.5 4.6 6.2 6.4 Europe Euro area 1.8 1.7 -0.3 3.1 0.7 Lk -0.5 -1.0 -1.5 0.0 2.0 2.8 2.8 1.6 Germany 3.6 3.0 0.3 5.5 0.5 3.0 -0.5 0.0 -0.5 0.5 1.6 2.5 2.6 1.6 France 1.4 1.7 0.0 3.7 0.0 21 -0.5 -0.5 -1.0 0.5 1.9 2.2 2.3 1.3 Italy 1.2 0.6 -1.1 0.5 12 0.0 -1.5 -1.5 -2.5 -0.5 2.0 2.9 3.7 2.6 Norway 2.1 2.2 0.7 1.9 4.1 1.5 0.5 0.0 0.0 1.0 22 1.4 1.1 1.2 Sweden 5.4 4.1 0.4 3.1 3.6 LQ 0.0 -0.5 -0.5 0.5 1.9 2.9 2.5 1.1 United Kingdom 1.8 0.9 0.7 1.6 0.4 1.5 1.0 0.5 -1.0 2.5 3.4 4.4 4.9 2.8 Emerging Europe 4.5 3.91 2.5 3.6 12 22 1 1.3 3.1 3.0 3.8 6.6 7.1 6.0 = 5.4 1 Bulgaria 0.2 2.8 2.4 Czech Reputific 2.3 2.0 1.0 3.5 0.3 0.5 -0.3 0.3 1.3 2.5 2.1 1.8 1.8 2.5 Hungary 1.2 1.4 0.5 1.2 -02 Q._3 0.0 0.0 1.0 1.5 4.4 4.0 3.7 4.4 Poland 3.8 4.0 2.7 4.5 4.5 3.5 2.0 2.0 2.5 3.0 2.9 4.6 3.9 2.5 Romania -1.3 1.2 0.8 7.9 8.2 4.0 3.5 Russia 4.0 3.61 3.0 3.7 0.4 231 1.0 4.0 3.5 4.5 8.2 9.6 7.0 621 Turkey 9.0 6.3 2.7 7.4 5.9 7.6 7.2 Global 3.9 2.6 2.1 1 2.6 12 3.01 2.11 1.5 1.7 2.7 2.7 3.7 3.6 2.4 Developed markets 2.7 1.4 1.0 1 0.9 0.7 2.4 1 1.31 0.3 0.4 1.5 1.5 2.7 2.7 1.3 Emerging markets 7.3 5.7 4.9 7.2 4,5 4.6 4.2 4.61 5.4 6.0 5.6 6.2 5.8 5.11 Spurt, JP. Morgr Oct 28.2011 8 EFTA01170775 Global Asset Allocation The J.P. Morgan View J.P.Morgan Analyst Certification: The research analyst(s) denoted by an "AC" on the cover of this report certifies (or, where multiple research analysts are primarily responsible for this report, the research analyst denoted by an "AC" on the cover or within the document indi- vidually certifies, with respect to each security or issuer that the research analyst covers in this research) that: (I) all of the views expressed in this report accurately reflect his or her personal views about any and all of the subject securities or issuers.. and (2) no part of any of the research analyst's compensation was, is. or will be directly or indirectly related to the specific recommendations or views expressed by the research analyst(s) in this report. Other Disclosures J.P. Morgan ("JPM") is the global brand name for J.P. Morgan Securities LLC ("JPMS") and its affiliates worldwide. J.P. Morgan Cazenove is a marketing name for the U.K. investment banking businesses and EMEA cash equities and equity research businesses of JPMorgan Chase & Co. and its subsidiaries. Options related research: If the information contained herein regards options related research, such information is available only to persons who have received the proper option risk disclosure documents. For a copy of the Option Clearing Cor ration's Characteristics and Risks of Standardized Options. please contact your J.P. Morgan Representative or visit the OCC's website a publirations/riskstriskstoc pdf Legal Entities Disclosures U.S.: JPMS is a member of NYSE. FINRA. SIPC and the NFA. JPMorgan Chase Bank. N.A. is a member of FDIC and is authorized and regulated in the UK by the Financial Services Authority. U.K.: J.P. Morgan Securities Ltd. (JPMSL) is a member of the London Stock Exchange and is authorized and regulated by the Financial Services Authority. Registered in England & Wales No. 2711006. Registered Office 125 London Wall. London EC2Y 5AJ. South Africa: J.P. Morgan Equities Limited is a member of the Johannesburg Securities Exchange and is regulated by the FSB. Hong Kong: J.P. Morgan Securities (Asia Pacific) Limited (CE number AAJ321) is regulated by the Hong Kong Monetary Authority and the Securities and Futures Commission in Hong Kong. Korea: J.P. Morgan Securities (Far East) Ltd. Seoul Branch, is regulated by the Korea Financial Supervisory Service. Australia: J.P. Morgan Australia Limited (ABN 52 002 888 011/AFS Licence No: 238188) is regulated by ASIC and J.P. Morgan Securities Australia Limited (ABN 61 003 245 234/AFS Licence No: 238066) is a Market Participant with the ASX and regulated by ASIC. Taiwan: J.P.Morgan Securities (Taiwan) Limited is a participant of the Taiwan Stock Exchange (company-type) and regulated by the Taiwan Securities and Futures Bureau. India: J.P. Morgan India Private Limited, having its registered office at J.P. Morgan Tower. Off. C.S.T. Road. Kalina. Santacruz East. Mumbai - 400098. is a member of the National Stock Exchange of India Limited (SEBI Registration Number - INB 230675231/INF 230675231/INE 230675231) and Bombay Stock Exchange Limited (SEBI Registration Number - INB 010675237/IKE 010675237) and is regulated by Securities and Exchange Board of India. Thailand: JPMorgan Securities (Thailand) Limited is a member of the Stock Exchange of Thailand and is regulated by the Ministry of Finance and the Securities and Exchange Commission. Indonesia: PT J.P. Morgan Securities Indonesia is a member of the Indonesia Stock Exchange and is regulated by the BAPEPAM LK. Philippines: J.P. Morgan Securities Philippines Inc. is a member of the Philippine Stock Exchange and is regulated by the Securities and Exchange Commission. Brazil: Banco J.P. Morgan S.A. is regulated by the Comissao de Valores Mobiliarios (CVM) and by the Central Bank of Brazil. Mexico: J.P. Morgan Casa de Bolsa. S.A. de C.V.. J.P. Morgan Gmpo Financiero is a member of the Mexican Stock Exchange and authorized to act as a broker dealer by the National Banking and Securities Exchange Commission. Singapore: This material is issued and distributed in Singapore by J.P. Morgan Securities Singapore Private Limited (JPMSS) [MICA (12) 025/01/2011 and Co. Reg. No.: 199405335RJ which is a member of the Singapore Exchange Securities Trading Limited and is regulated by the Monetary Authority of Singapore (MAS) and/or JPMorgan Chase Bank. N.A.. Singapore branch (JPMCB Singapore) which is regulated by the MM. Malaysia: This material is issued and distributed in Malaysia by JPMorgan Securities (Malaysia) Sdn Bhd (18146-X) which is a Participating Organization of Bursa Malaysia Berhad and a holder of Capital Markets Services License issued by the Securities Commission in Malaysia. Pakistan: J. P. Morgan Pakistan Broking (Pvt.) Ltd is a member of the Karachi Stock Exchange and regulated by the Securities and Exchange Commission of Pakistan. Saudi Arabia: J.P. Morgan Saudi Arabia Ltd. is authorized by the Capital Markel Authority of the Kingdom of Saudi Arabia (CMA) to carry out dealing as an agent. arranging. advising and custody, with respect to securities business under licence number 35-07079 and its registered address is at 8th Floor. Al-Faisaliyah Tower. King Fahad Road. P.O. Box 51907. Riyadh 11553. Kingdom of Saudi Arabia. Dubai: JPMorgan Chase Bank. N.A.. Dubai Branch is regulated by the Dubai Financial Services Authority (DFSA) and its registered address is Dubai International Financial Centre - Building 3. Level 7. PO Box 506551. Dubai. UAE. Country and Region Specific Disclosures U.K. and European Economic Area (EEA): Unless specified to the contrary, issued and approved for distribution in the U.K. and the EEA by JPMSL. Investment research issued by JPMSL has been prepared in accordance with JPMSL's policies for managing conflicts of interest arising as a result of publication and distribution of investment research. Many European regulators require a firm to establish, implement and maintain such a policy. This report has been issued in the U.K. only to persons of a kind described in Article 19 (5). 38. 47 and 49 of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005 (all such persons being referred to as "relevant persons"). This document must not be acted on or relied on.by persons who are not relevant persons. Any investment or investment activity to which this document relates is only available to relevant persons and will be engaged in only with relevant persons. In other EEA countries, the report has been issued to persons regarded as professional investors (or equivalent) in their home jurisdiction. Australia: This material is issued and distributed by JPMSAL in Australia to "wholesale clients" only. JPMSAL does not issue or distribute this material to "retail clients". The recipient of this material must not distribute it to any third party or outside Australia without the prior written consent of JPMSAL. For the purposes of this paragraph the terms "wholesale client" and "retail client" have the meanings given to them in section 7610 of the Corpora- tions Act 2001. Germany: This material is distributed in Germany by J.P. Morgan Securities Ltd.. Frankfurt Branch and J.P.Morgan Chase Bank. N.A., Frankfurt Branch which are regulated by the Bundcsanstalt fur Finanzdienstleistungsaufsicht. Hong Kong: The 1% EFTA01170776 Global Asset Allocation The J.P. Morgan View J.P.Morgan ownership disclosure as of the previous month end satisfies the requirements under Paragraph 16.5(a) of the Hong Kong Code of Conduct for Persons Licensed by or Registered with the Securities and Futures Commission. (For research published within the first ten days of the month. the disclosure may be based on the month end data from two months prior.) J.P. Morgan Braking (Hong Kong) Limited is the liquidity provider/market maker for derivative warrants, callable bull bear contracts and stock options listed on the Stock Exchange of Hong Kong Limited. An updated list can be found on HKEx websitc: http://www.hkex.com.hk. Japan: There is a risk that a loss may occur due to a change in the price of the shares in the cast of share trading. and that a loss may occur due to the exchange rate in the case of foreign share trading. In the case of share trading. JPMorgan Securities Japan Co.. Ltd.. will be receiving a brokerage fee and consumption tax (shouhizei) calculated by multiplying the executed price by the commission rate which was individually agreed between JPMorgan Securities Japan Co.. Ltd.. and the customer in advance. Financial Instruments Firms: JPMorgan Securities Japan Co.. Ltd.. Kanto Local Finance Bureau (kinsho) No. 82 Participating Association / Japan Securities Dealers Association. The Financial Futures Association of Japan. Type II Financial Instruments Finns Association and Japan Securities Investment Advisers Association. Korea: This report may have been edited or contributed to from time to lime by affiliates of J.P. Morgan Securities (Far East) Ltd. Seoul Branch. Singapore: JPMSS and/or its affiliates may have a holding in any of the securities discussed in this report: for securities where the holding is 1% or greater. the specific holding is disclosed in the Important Disclosures section above. India: For private circulation only. not for sale. Pakistan: For private circulation only. not for sale. New Zealand: This material is issued and distributed by JPMSAL in New Zealand only to persons whose principal business is the investment of money or who. in the course of and for the purposes of their business. habitually invest money. JPMSAL does not issue or distribute this material to members of "the public- as determined in accordance with section 3 of the Securities Act 1978. The recipient of this material must not distribute it to any third party or outside New Zealand without the prior written consent of JPMSAL. Canada: The information contained herein is not, and under no circumstances is to be construed as. a prospectus. an advertisement. a public offering, an offer to sell securities described herein, or solicitation of an offer to buy securities described herein, in Canada or any province or territory thereof. Any offer or sale of the securities described herein in Canada will be made only under an exemption from the requirements to file a prospectus with the relevant Canadian securities regulators and only by a dealer properly registered under applicable securities laws or. alternatively.