an inflation playbook

Journey or destination?An inflation playbook

Wealth Management Chief Investment Office July 2021

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In the latest quarterly FOMC meeting in June, Federal Reserve governors updated their target inflation measure forecasts for calendar years 2021 and 2022 to 3.0% and 2.1% respectively.

The change was particularly large for 2021 only (prev. 2.2%), thus reflecting their view that high inflation will be a temporary phenomenon. Meanwhile, the market’s inflation expectations moderated somewhat from the May high of 2.56%, but remain above long-term averages (c.2%) at time of writing.

While narratives of possible runaway inflation have filled news headlines over the past few months, inflation expectations derived from market data actually show investors believe the Fed will be able to contain inflation. This is illustrated by inflation markets, where long-dated implied inflation levels are lower than short-dated implied inflation levels.

Additionally, it is worth explaining that while Consumer Price Index (CPI) inflation is arguably the more popular inflation gauge (as it is used to adjust social security payments and also used as the reference rate for some financial contracts), the Fed usually focuses on Personal Consumption Expenditures (PCE). There are four distinct differences between the two series, with one key factor explored briefly later in this report.

The Fed has made it clear as part of its new policy that it wants to see, rather than anticipate, the economy achieving “maximum employment” and core inflation above 2% for “some time” before considering tightening its monetary policy.

Statistical base effects have pushed US inflation higher in recent months, but these are likely to fade away as we progress further into H2 2021. Supply disruptions are likely to prove equally transitory as manufacturing supply bottlenecks are gradually

Audrey GohSenior Cross-Asset Strategist

Trang NguyenPortfolio Strategist

Marco IachiniCross-Asset Strategist

Why this topic?After more than a decade of largely below-target inflation, recent numbers have jumped sharply. Ample slack in labour markets lead us to believe inflation will prove transitory. However, a prudent approach warrants a deeper dive into how various asset classes respond to different inflation regimes.

Why does it matter?Markets appear to be questioning the Fed’s view of inflation being transitory and expect a tightening of monetary policy sooner than the Fed.

What does this mean for investors?While our central view is that inflation will likely be transitory, this playbook offers investment options to consider across a range of inflation scenarios.

The case for transitory inflation

3Journey or destination? An inflation playbook | July 2021

resolved. Meanwhile, wage pressures are set to remain subdued amid high unemployment levels in major economies, particularly in the US, as the majority of pandemic unemployment benefits expire in September and workers look to return to work.

While market participants seem to believe in the Fed’s ability to rein in inflation, they appear to instead disagree on the timing around policy interest rate changes. Markets now project the Fed will hike interest rates by the end of 2022 versus the Fed’s own expectations of an initial rate hike only sometime in 2023.

In our assessment, the Fed will likely begin to gradually reduce its asset purchases early next year, thus leaving room for the first rate hike sometime in 2023.

We do not see this as a significant headwind to economic growth as policy conditions are likely to remain highly accommodative. Indeed, the Bank of England’s reduced bond purchases is one example of how any modest Fed tapering could occur without upsetting equity markets. Any equity markets weakness due to tapering concern is likely to be short-lived and a potential buying opportunity, in our view.

In light of this view, we maintain our preference for global equities and USD-denominated Emerging Market/Asia and High Yield bonds, noting they have historically performed well in both rising and falling inflation scenarios amidst an improving growth environment.

Inflation should correct lower once supply disruptions are resolved

Inflation measures versus the 2% level

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Source: Datastream, Standard Chartered; PCE: Personal Consumption Expenditures; Core PCE: PCE excluding food and energy prices


Under Scenario A, financial markets, especially bond markets, may experience a temporary period of volatility. Bond yields would likely increase from current levels and market sentiment would suffer from negative feedback loops generated by inflation fears, impacting risky assets (i.e. equities and corporate bonds) near-term.

A number of factors could cause such a scenario, but differences in how inflation is measured could be a key starting point. Shelter costs have a much larger weight in the CPI (Consumer Price Index) versus PCE (Personal Consumption Expenditures) gauges. As rent and housing costs accelerate from the pandemic trough, they could cause concerningly high CPI prints that investors may struggle to ignore, even in the case of moderate PCE data. Higher energy prices, too, could keep CPI data elevated towards the year-end. These are important because studies show that past inflation tends to influence future inflation expectations, up to four months in the future.

Under Scenario A, the central bank’s resolve toward elevated inflation could be questioned by market participants if inflation runs hotter than expected. This could hurt risky assets were it to translate to a significant move forward in rate hike expectations. Also, perceptions about the Fed losing control of inflation could spark a flight to capital into safe-haven assets (e.g. USD, JPY, Gold). These would be significant risks for risky assets, especially given the high valuation levels in today’s markets.

In our view, however, other items aside from shelter costs will likely normalise to pre-pandemic levels naturally, and, as spending shifts from goods to services and base effects fade away, inflation will gradually revert to historical averages.

What if inflation is higher or longer-lasting than we expect?It is prudent to analyse possible alternative inflationary scenarios to explore ways to position one’s investments should inflation pressures extend longer than we expect.

Scenario AInflation is indeed transitory, although the magnitude and duration of the inflationary backdrop extends beyond the next 2-3 months

Scenario BInflation proves sticky, signalling a pivotal shift towards a new regime of sustainably higher inflation in the mid- to long-term horizon

Scenario A transitory, but more slowly than expected


Equities have done well as long as growth is rising, regardless of rising or falling inflation

Average 12m returns in different economic regimes

Growth rising, inflation falling

Growth rising, inflation rising

Growth falling, inflation falling

Growth falling, inflation rising

20%

15%

10%

5%

0%

-5%

Equities Gold

Source: Bloomberg, Standard Chartered. Economic scenarios identified by BCA Research across business cycles. Oct ‘05-Feb ‘21

Scenario A would likely offer tactical opportunities to add on weakness to our currently preferred asset classes. As long as the global economic engine continues to grow, global equities and Emerging Market and High Yield corporate bonds should perform well even with a backdrop of temporarily high inflation.


Under Scenario B, inflation spirals towards pre-Global Financial Crisis (GFC) levels and remain sustainably elevated (PCE and CPI were 4.1% and 4.7%, on average, respectively from 1970s to GFC). This is a scenario where investors may have to reassess not only their tactical views (usually over a 6-12 month horizon) but also their multi-year expectations of returns from various asset classes.

One possible catalyst for such a scenario to unfold could centre around soaring commodity prices. Firms would eventually start passing on higher input costs to consumers, resulting in a pick-up in correlation between PPI (Producer Price Index) and CPI. Current supply bottlenecks could degenerate into more persistent supply shortages (or inefficiencies); as an example, the weakening of globalisation trends resulting in the re-shoring of global supply chains could lead to higher prices structurally. This is the type of inflation that economist term “cost-push” inflation.

Alternatively, a substantial reduction in economic and labour slack could boost inflationary pressures. A pace of US jobs growth near or above 700k per month could help the Fed reach its target of “maximum employment” by end-2021 and cause wages to start rising. A feedback loop of higher wages causing increased demand for goods and services beyond supply’s capacity could cause “demand-pull” inflation.

These types of inflation alone may not yet be sufficient for inflation to shift to a structurally higher plateau. Learning from the 1970s inflationary period, high capacity utilisation, rising energy prices and wage pressures were all factors that accompanied persistently high inflation.

Scenario B regime shift: inflation moves to a higher plateau

Main drivers of inflation and related impactBallons

$5 $10

Helium$10 $20

Cost-pushPrices of production process inputs increase. Firms pass higher costs onto consumers

Exclusive bags$650 $800

Demand-pullDemand for goods and services in an economy rises more rapidly than an economy’s productive capacity

Policy, money supply The increase in the money supply or increased fiscal support (e.g. tax cuts, higher public spending, government subsidies) pushes demand for goods and services higher while supply cannot react fast enough.

Source: Federal Reserve Bank of San Francisco, Standard Chartered


Inflation roadmap: lessons from the past To construct our inflation roadmap, we believe it makes sense to look at (1) how asset classes might perform in different ‘destination” inflation regime scenarios and (2) how to best navigate this journey as an investor, based on current market and macroeconomic conditions.

For different ‘destination’ scenarios, we segmented US CPI inflation into different regimes and examined the performance of various asset classes in the subsequent 12-month period. We have used data since the Tech bubble of 1999 to better reflect modern inflation dynamics:

Low inflation

High inflation

Moderate inflation

Very high inflation

CPI > 4%CPI < 2% CPI between 3-4%

CPI between

2-3%

1. Different ‘destination’ scenarios


Low inflation regime positive for most risk assets

Global equities, global dividend equities and gold were among the best performers in low inflation regimes. These periods tend to include post-recession recovery phases where interest rates are typically low. Diversified multi-asset income allocations outperformed balanced allocations. On the whole, most assets delivered absolute positive returns historically, particularly risky assets.

US equities were a clear outperformer within Developed Markets (DM) equities. However, their outperformance appeared to diminish as inflation shifted higher. Asia ex-Japan and other Emerging Market (EM) equities have also historically performed well during these periods.

Most sectors delivered positive returns across the US, Euro Area and China markets. That said, IT and Healthcare were distinct outperformers, as were a few cyclical sectors (Industrials and Materials) which also delivered double digit gains. The Real Estate sector was an underperformer, particularly in Developed Markets (DMs), though this is likely due to data around the Global Financial Crisis of 2008-09 which followed the bursting of the US housing bubble.

Low inflationary periods were favourable to riskier segments within fixed income markets. In these periods, most credit components such as DM corporate High Yield (HY) bonds, preferred equities, EM debt and Asia USD bonds showed high positive returns, outperforming DM Investment Grade (IG) and EM local currency government bonds.

Lastly, commodities delivered modestly positive returns. This seems logical, in our view, as low inflation periods would imply lower commodity prices, and hence commodity-linked sectors or producers would decrease capital expenditures as supply likely outweighed demand for goods.

Private real asset, commodities and gold historically outperformed in higher inflation regimesAverage 12m returns in different inflation regimes (since inception to 2021)

Low Moderate High Very high

Cash 1.3% 2.8% 4.0% 4.1%Bonds 4.8% 5.3% 3.4% 4.7%Global Equities 11.3% 9.8% -3.6% -9.3%Global Dividend Equity 9.6% 8.7% 3.8% -6.6%Alternatives 4.2% 4.6% 3.9% -6.3%Private Real Estate 8.6% 9.5% 8.9% 9.5%Commodities 4.6% 10.7% 11.3% 13.8%Gold 8.5% 13.3% 10.0% 9.7%Balanced Allocation 7.21% 7.80% 4.78% -0.63%Income Allocation 8.13% 7.03% 5.18% -1.18%

Source: Bloomberg, Standard Chartered. Top performers are highlighted in bold. Balanced and income allocations are proxied by flagship total return focus balanced and global multi-asset income strategic asset allocations.

Outperformers

Healthcare

Materials

Industrials

IT


Moderate inflation regime leadership shifts to EM

Moderate inflation regimes have historically also been quite favourable for investors. Risky asset returns remained positive, but as the economic cycle progressed in Developed Markets, leadership clearly shifted toward Emerging Market assets.

Gold, broad commodities and equities delivered the best returns as policymakers remained largely accommodative in the early stage of a recovery. Asia ex-Japan and EM equity markets were strong outperformers as they benefited from a pickup in growth and commodity prices.

Within equities sectors, cyclical and value sectors (Energy, Financials, Industrials and Materials) outperformed defensives across the US, EU and China. However, it was the Technology sector that performed best under this regime supported by strong secular growth that helped it stand out relative to other defensive sectors.

Commodities delivered positive and relatively even returns (~10% avg.) across various components during Moderate inflation periods.

In fixed income markets, the magnitude of outperformance of riskier bonds reduced. This can be attributed to opposing forces being at play driving total returns of these assets – higher yields in response to increasing inflation were countered by decreasing room for further spread compression. These factors balanced one another and, hence, caused the performance between riskier and safer bonds to somewhat converge.

EM equity performance supported by commodities prices in higher inflation regimesAverage 12m returns in different inflation regimes (since inception to 2021)


US 13.1% 9.6% 0.8% -10.7%EU 8.8% 9.9% 0.3% -8.5%UK 6.9% 8.1% 3.1% -10.5%Japan 7.2% 9.9% -2.2% -9.7%Asia ex-Japan 12.3% 17.9% 8.8% 0.9%Other EM 9.2% 18.7% 9.7% -7.9%

Source: Bloomberg, Standard Chartered. Top performers are highlighted in bold.

Outperformers

Materials

Industrials

IT

Financials Energy


High/very high inflation regimes positive for real assets and commodities

Asset market performance during high or very high inflationary periods has been mixed. These have occurred rather infrequently in recent decades.

In this scenario, private real estate, commodities and gold delivered some of the best returns. Meanwhile the US Dollar, thanks to its countercyclical nature, benefitted from inflows from riskier currencies. Bonds, counterintuitively, delivered positive returns likely due to a high starting point in yields. Equities were the clear underperformers in these high inflation regimes, particularly DM equities.

Diversification across sectors provided better results within equities during these higher inflation periods. Our historical analysis showed that defensive sectors such as consumer staples and healthcare delivered positive returns while cyclical sectors such as technology, consumer discretionary and communications services showed marginally positive to negative returns.

Bonds outperformed, counterintuitivelyFixed income markets overall significantly outperformed equities when inflation starting levels were high. In the 12 months following high inflation regimes, both corporate and sovereign DM and EM bonds returned mid-single digit total returns.

In very high inflation periods, DM government bonds outperformed thanks to their safe-haven nature as investors likely rotated into this asset class anticipating a downturn in economic activity stemming from tight financial conditions and inflationary pressures. High levels of DM government bond yields observed in periods of high/very high inflation could also help explain their performance.

Credit assets were resilient in the high inflation regimesAverage 12m returns in different inflation regimes (since inception to 2021)


EM Government USD 7.7% 6.6% 8.2% 2.9%Asia USD 7.0% 6.0% 7.2% 3.9%EM Local 4.2% 7.5% 4.1% 5.2%DM Government Bond 2.7% 5.5% 3.8% 5.4%DM Corporate Bond 5.4% 5.7% 4.7% 2.9%DM High Yield 10.4% 6.0% 6.7% -0.3%TIPS 2.6% 3.8% 2.5% 1.1%Leverage Loans 7.2% 3.9% 3.6% -3.6%

Source: Bloomberg, Standard Chartered. Top performers are highlighted in bold.

Outperformers

Staples

Healthcare

Quality

CommunicationValue


Top sector and style performers across inflation regimes

Source: Bloomberg, Standard Chartered

Moderate

Momentum Momentum

Industrials Materials

IT

Low

Healthcare Financials

Materials

Energy Industrials

Energy

High

Quality

Staples

Very high

IT

HealthcareValue

CommunicationValue

Quality

StaplesHealthcare


2. How to position an allocation for the journey to higher inflation from low levels

While insights from history of how different asset classes performed in past inflation regimes are useful in understanding how portfolios may perform based on one’s expected ‘destination’ scenario, we believe the journey to get there is equally important. Against the backdrop of current macroeconomic conditions, should the current bout of high inflation persist, investors may want to consider the following strategies.

Increaseallocation to equity

A higher allocation to equities helps protect against rising inflation when growth is also rising. Historically, an environment of rising growth and higher inflation (our central scenario) is a very supportive backdrop for equity markets, as shown in the chart below.

Strong economic rebound supports the case for higher equity allocation even if inflation rises

Average 12m returns of various asset classes in different economic regimes (2005 to 2021)

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Global growth rising andinflation falling

Global growth falling andinflation rising

Global growth falling andinflation falling

Income Price return

Our central scenario

Global growth rising andinflation rising

Source: Bloomberg, Standard Chartered. Economic scenarios are identified by BCA research data across business cycles. Refer to Explanatory notes related to Contingent Convertibles at the end of this document


Consider a diversified equity exposure not only across regions but also across style and sectors.

• Lessons from the past of potential shift in leadership from DM to EM equities suggest maintaining core exposure to Asia ex-Japan and other EM equities. Within DM equities, we see opportunities in Euro area equities in the next 12 months. An improved macroeconomic backdrop, positive progress on the vaccination front and attractive relative valuations support a tactical preference for Europe equities, in our view.

• Investors can also consider tilting toward value equities as we believe the outperformance of value vs. growth has more room to go.

• Given the dispersion in equity sector performance during periods of high inflation, it is worth considering diversifying allocations between defensive and cyclical sectors.

Global equities and bond yields tend to rise together in periods of rising inflation expectations

12m rolling correlation between global equity prices and US 10y Treasury yield

Source: Bloomberg, Standard Chartered

Equity-bond yield correlation rises when inflation expectations are rising

Consider a diversified equity exposure across regions, style and sectors

Rise in the correlation between the equity market and bond yields (as proxied by the 12-month rolling correlation between global equity prices and US 10-year Treasury yield since 2000 in the chart below) also supports the case for higher exposure to equities. Put differently, during periods of rising inflation expectations, equity market prices tend to rise together with bond yields (meaning lower bond prices). Companies can be benefited from higher margins and profitability from rising prices in the early phase of inflation pickup.

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-0.5

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Feb-00 Oct-06 Jun-13 Feb-20

%

Periods of rising global inflation expectation

12m rolling correlation between Global equity prices & US 10Y Treasury yield


Low yielding assets tend to be more negatively impacted from higher yieldsYield to worst and duration for fixed income asset as of 30 Jun 2021

DM IG Corp

EM USD Govt

DM IG Govt

EM LCY Govt

Asia USD

DM HY

Cocos TIPS

Yield to worst 1.56% 4.89% 0.57% 5.35% 3.36% 4.22% 3.21% 0.59%

Duration 8.65 7.94 7.46 5.30 4.68 4.27 3.89 2.65

Chan

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yie

ld

-1.5% 14.5% 16.8% 11.8% 13.3% 10.4% 10.6% 9.0% 4.6%

-1.0% 10.2% 12.8% 8.0% 10.7% 8.0% 8.5% 7.1% 3.2%

-0.5% 5.9% 8.9% 4.3% 8.0% 5.7% 6.4% 5.2% 1.9%

0.0% 1.6% 4.9% 0.6% 5.4% 3.4% 4.2% 3.2% 0.6%

0.5% -2.8% 0.9% -3.2% 2.7% 1.0% 2.1% 1.3% -0.7%

1.0% -7.1% -3.1% -6.9% 0.1% -1.3% 0.0% -0.7% -2.1%

1.5% -11.4% -7.0% -10.6% -2.6% -3.7% -2.2% -2.6% -3.4%

Source: Bloomberg, Standard Chartered. Simulated returns are calculated assuming a parallel shift across the whole yield curve. Refer to Explanatory notes related to Contingent Convertibles at the end of this document.

Corporate bonds should remain a core part of one’s investment allocations even if inflation rises further (chart on page 12). Today’s low yields on short maturity bonds and Treasury Inflation Protected bonds (TIPS) are unlikely to offer a sufficient buffer against high inflation. Bond yields are likely to rise modestly in a rising inflation scenario, suggesting investors gradually reducing an investment allocation’s ‘duration’ (ie. Sensitivity to changes in bond yields) by moving towards less interest-rate-sensitive assets.

This means tilting a bond allocation towards ‘credit’ (corporate and EM bonds) assets that still offer relatively attractive income with lower duration, such as DM HY bonds and Asia USD bonds. These credit components tend to be sensitive to changes in growth expectations and should do well in an environment of improving growth (table on page 8). Diagram below shows the simulated returns of various fixed income components in the event of a shift in US government bond yields by +/- 50, 100 and 150bps.

Last but not least, having exposure to gold, private real assets and commodities is an important step to help get an investment allocation ‘inflation ready’, in our opinion. History shows these assets consistently outperformed other assets during rising inflation scenarios.

Corporate bonds should remain core allocation


Explanatory notesContingent Convertibles are complex financial instruments and are not a suitable or appropriate investment for all investors. This document is not an offer to sell or an invitation to buy any securities or any beneficial interests therein. Contingent convertible securities are not intended to be sold and should not be sold to retail clients in the European Economic Area (EEA) (each as defined in the Policy Statement on the Restrictions on the Retail Distribution of Regulatory Capital Instruments (Feedback to CP14/23 and Final Rules) (“Policy Statement”), read together with the Product Intervention (Contingent Convertible Instruments and Mutual Society Shares) Instrument 2015 (“Instrument”, and together with the Policy Statement, the “Permanent Marketing Restrictions”), which were published by the United Kingdom’s Financial Conduct Authority in June 2015), other than in circumstances that do not give rise to a contravention of the Permanent Marketing Restrictions

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Standard Chartered Bank does not offer any ‘Investment Advice’ as defined in the Securities and Exchange Board of India (Investment Advisers) Regulations, 2013 or otherwise. Services/products related securities business offered by Standard Charted Bank are not intended for any person, who is a resident of any jurisdiction, the laws of which imposes prohibition on soliciting the securities business in that jurisdiction without going through the registration requirements and/or prohibit the use of any information contained in this document. Indonesia: This document is being distributed in Indonesia by Standard Chartered Bank, Indonesia branch, which is a financial institution licensed, registered and supervised by Otoritas Jasa Keuangan (Financial Service Authority). Jersey: The Jersey Branch of Standard Chartered Bank is regulated by the Jersey Financial Services Commission. Copies of the latest audited accounts of Standard Chartered Bank are available from its principal place of business in Jersey: PO Box 80, 15 Castle Street, St Helier, Jersey JE4 8PT. Standard Chartered Bank is incorporated in England with limited liability by Royal Charter in 1853 Reference Number ZC 18. The Principal Office of the Company is situated in England at 1 Basinghall Avenue, London, EC2V 5DD. Standard Chartered Bank is authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and Prudential Regulation Authority. The Jersey Branch of Standard Chartered Bank is also an authorised financial services provider under license number 44946 issued by the Financial Sector Conduct Authority of the Republic of South Africa. Jersey is not part of the United Kingdom and all business transacted with Standard Chartered Bank, Jersey Branch and other SC Group Entity outside of the United Kingdom, are not subject to some or any of the investor protection and compensation schemes available under United Kingdom law. Kenya: This document is being distributed in Kenya by, and is attributable to Standard Chartered Bank Kenya Limited. Investment Products and Services are distributed by Standard Chartered Investment Services Limited, a wholly owned subsidiary of Standard Chartered Bank Kenya Limited (Standard Chartered Bank/the Bank) that is licensed by the Capital Markets Authority as a Fund Manager. Standard Chartered Bank Kenya Limited is regulated by the Central Bank of Kenya. Malaysia: This document is being distributed in Malaysia by Standard Chartered Bank Malaysia Berhad. Recipients in Malaysia should contact Standard Chartered Bank Malaysia Berhad in relation to any matters arising from, or in connection with, this document. Nigeria: This document is being


distributed in Nigeria by Standard Chartered Bank Nigeria Limited (“the Bank”), a bank duly licensed and regulated by the Central Bank of Nigeria. The Bank accepts no liability for any loss or damage arising directly or indirectly (including special, incidental or consequential loss or damage) from your use of these documents. You should seek advice from a financial adviser on the suitability of an investment for you, taking into account these factors before making a commitment to invest in an investment. To unsubscribe from receiving further updates, please click the link at the bottom of this email or send an email to [email protected] requesting to be removed from our mailing list. Please do not reply to this email. Call our Priority Banking on 01-2772514 for any questions or service queries. The Bank shall not be responsible for any loss or damage arising from your decision to send confidential and/or important information to the Bank via e-mail, as the Bank makes no representations or warranties as to the security or accuracy of any information transmitted via e-mail. Pakistan: This document is being distributed in Pakistan by, and attributable to Standard Chartered Bank (Pakistan) Limited having its registered office at PO Box 5556, I.I Chundrigar Road Karachi, which is a banking company registered with State Bank of Pakistan under Banking Companies Ordinance 1962 and is also having licensed issued by Securities & Exchange Commission of Pakistan for Security Advisors. Standard Chartered Bank (Pakistan) Limited acts as a distributor of mutual funds and referrer of other third-party financial products. Singapore: This document is being distributed in Singapore by, and is attributable to, Standard Chartered Bank (Singapore) Limited (Registration No. 201224747C/ GST Group Registration No. MR-8500053-0, “SCBSL”). Recipients in Singapore should contact SCBSL in relation to any matters arising from, or in connection with, this document. SCBSL is an indirect wholly owned subsidiary of Standard Chartered Bank and is licensed to conduct banking business in Singapore under the Singapore Banking Act, Chapter 19. Standard Chartered Private Bank is the private banking division of SCBSL. IN RELATION TO ANY SECURITY OR SECURITIES-BASED DERIVATIVES CONTRACT REFERRED TO IN THIS DOCUMENT, THIS DOCUMENT, TOGETHER WITH THE ISSUER DOCUMENTATION, SHALL BE DEEMED AN INFORMATION MEMORANDUM (AS DEFINED IN SECTION 275 OF THE SECURITIES AND FUTURES ACT, CHAPTER 289 (“SFA”)). THIS DOCUMENT IS INTENDED FOR DISTRIBUTION TO ACCREDITED INVESTORS, AS DEFINED IN SECTION 4A(1)(a) OF THE SFA, OR ON THE BASIS THAT THE SECURITY OR SECURITIES-BASED DERIVATIVES CONTRACT MAY ONLY BE ACQUIRED AT A CONSIDERATION OF NOT LESS THAN S$200,000 (OR ITS EQUIVALENT IN A FOREIGN CURRENCY) FOR EACH TRANSACTION. Further, in relation to any security or securities-based derivatives contract, neither this document nor the Issuer Documentation has been registered as a prospectus with the Monetary Authority of Singapore under the SFA. Accordingly, this document and any other document or material in connection with the offer or sale, or invitation for subscription or purchase, of the product may not be circulated or distributed, nor may the product be offered or sold, or be made the subject of an invitation for subscription or purchase, whether directly or indirectly, to persons other than a relevant person pursuant to section 275(1) of the SFA, or any person pursuant to section 275(1A) of the SFA, and in accordance with the conditions specified in section 275 of the SFA, or pursuant to, and in accordance with the conditions of, any other applicable provision of the SFA. In relation to any collective investment schemes referred to in this document, this document is for general information purposes only and is not an offering document or prospectus (as defined in the SFA). This document is not, nor is it intended to be (i) an offer or solicitation of an offer to buy or sell any capital markets product; or (ii) an advertisement of an offer or intended offer of any capital markets product. Deposit Insurance Scheme: Singapore dollar deposits of non-bank depositors are insured by the Singapore Deposit Insurance Corporation, for up to S$75,000 in aggregate per depositor per Scheme member by law. Foreign currency deposits, dual currency investments, structured deposits and other investment products are not insured. This advertisement has not been reviewed by the Monetary Authority of Singapore. Taiwan: Standard Chartered Bank (“SCB”) or Standard Chartered Bank (Taiwan) Limited (“SCB (Taiwan)”) may be involved in the financial instruments contained herein or other related financial instruments. The author of this document may have discussed the information contained herein with other employees or agents of SCB or SCB (Taiwan). The author and the above-mentioned employees of SCB or SCB (Taiwan) may have taken related actions in respect of the information involved (including communication with customers of SCB or SCB (Taiwan) as to the information contained herein). The opinions contained in this document may change, or differ from the opinions of employees of SCB or SCB (Taiwan). SCB and SCB (Taiwan) will not provide any notice of any changes to or differences between the above-mentioned opinions. This document may cover companies with which SCB or SCB (Taiwan) seeks to do business at times and issuers of financial instruments. Therefore, investors should understand that the information contained herein may serve as specific purposes as a result of conflict of interests of SCB or SCB (Taiwan). SCB, SCB (Taiwan), the employees (including those who have discussions with the author) or customers of SCB or SCB (Taiwan) may have an interest in the products, related financial instruments or related derivative financial products contained herein; invest in those products at various prices and on different market conditions; have different or conflicting interests in those products. The potential impacts include market makers’ related activities, such as dealing, investment, acting as agents, or performing financial or consulting services in relation to any of the products referred to in this document. UAE: DIFC - Standard Chartered Bank is incorporated in England with limited liability by Royal Charter 1853 Reference Number ZC18.The Principal Office of the Company is situated in England at 1 Basinghall Avenue, London, EC2V 5DD. Standard Chartered Bank is authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and Prudential Regulation Authority. Standard Chartered Bank, Dubai International Financial Centre having its offices at Dubai International Financial Centre, Building 1, Gate Precinct, P.O. Box 999, Dubai, UAE is a branch of Standard Chartered Bank and is regulated by the Dubai


Financial Services Authority (“DFSA”). This document is intended for use only by Professional Clients and is not directed at Retail Clients as defined by the DFSA Rulebook. In the DIFC we are authorised to provide financial services only to clients who qualify as Professional Clients and Market Counterparties and not to Retail Clients. As a Professional Client you will not be given the higher retail client protection and compensation rights and if you use your right to be classified as a Retail Client we will be unable to provide financial services and products to you as we do not hold the required license to undertake such activities. For Islamic transactions, we are acting under the supervision of our Shariah Supervisory Committee. Relevant information on our Shariah Supervisory Committee is currently available on the Standard Chartered Bank website in the Islamic banking section at: https://www .sc. com/en/banking/ islamic-banking/islamic-banking-disclaimers/ UAE: For residents of the UAE – Standard Chartered Bank UAE does not provide financial analysis or consultation services in or into the UAE within the meaning of UAE Securities and Commodities Authority Decision No. 48/r of 2008 concerning financial consultation and financial analysis. Uganda: Our Investment products and services are distributed by Standard Chartered Bank Uganda Limited, which is licensed by the Capital Markets Authority as an investment adviser. United Kingdom: Standard Chartered Bank (trading as Standard Chartered Private Bank) is an authorised financial services provider (license number 45747) in terms of the South African Financial Advisory and Intermediary Services Act, 2002. Vietnam: This document is being distributed in Vietnam by, and is attributable to, Standard Chartered Bank (Vietnam) Limited which is mainly regulated by State Bank of Vietnam (SBV). Recipients in Vietnam should contact Standard Chartered Bank (Vietnam) Limited for any queries regarding any content of this document. Zambia: This document is distributed by Standard Chartered Bank Zambia Plc, a company incorporated in Zambia and registered as a commercial bank and licensed by the Bank of Zambia under the Banking and Financial Services Act Chapter 387 of the Laws of Zambia.

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