WORLD IN PERSPECTIVE PG 2

POTENTIAL RISKS PG 2

US UPDATE PG 3

IN T

HIS

ISSU

E

During a crisis, investors will take their eyes away from the fundamentals and focus on the crisis instead. Once the crisis is over, the focus will return to the fundamentals. While geopolitical risks in Ukraine- Crimea and Russia persist, it is safe to say that the chances of the crisis degenerating into a full blown Russia-NATO confrontation have declined to a large extent. Germany has rejected calls to permanently expel Russia from the G8. Note that Germany relies heavily on Russian energy supplies and France is still proceeding with the US$1.6 billion sale of two Mistral-class assault vessels to Russia. In the end, it is still all about business and economics.

As for the global economy, there is clear evidence of resynchronized growth among most developed nations. The US economy remains on a path of economic growth with the strengthening of the job market. The situation in the Eurozone is slowly improving, as evidenced by the upswing recorded in the Purchasing Managers Index.

China is going through the process of creative destruction where the government will allow companies that are badly run to be pushed out of the market. At the same time, the government will support

companies that serve a real need to prosper. While the financial community has turned bearish on Chinese growth, it is important to note that China has ample fiscal and monetary flexibility with their substantial foreign reserves and large current account surplus to steer the economy in any direction. However, any hope of long-term gains should be tempered with the expectation of short-term pain.

In Japan, we are concerned about the impact of the increase in sales tax from 5% to 8% which is scheduled for the first of April. While we expect to see a boost in consumer spending just before the tax increase is implemented, we are concerned that this may affect consumer expenditure in the long term. This may have a negative impact on the effectiveness of the third arrow of Abenomics, namely structural reform in Japan.

Overall, we maintain a positive outlook on the long term prospects of the global economy.

UK & EUROPE UPDATE PG 4

ASIA AND EMERGING MARKETS UPDATE PG 5

ISSUE 64 | APR 2014

Albert LamInvestment DirectorIPP Financial Advisers Pte Ltd

Important Notice: This publication is for information, without any regard to your specific investment objectives, financial situation or particular needs. You should read the prospectuses, annual reports and factsheets that are available from respective product providers or its distributors, before deciding whether to subscribe or purchase units of the Fund. The value of units in the Fund and the income accruing to the units, if any, may fall or rise dramatically. Past performance of the Fund and any economic or market predictions, projections or forecasts are not necessarily indicative of future or likely performance. Any opinion or view presented here is subject to change without notice. IPP Financial Advisers shall not be liable for any losses or damages of any kind howsoever arising from you acting on any information herein. You may wish to seek advice from a financial adviser before making a commitment to purchase the Fund. In the event that you choose not to seek advice from a financial adviser, you should consider whether the Fund is suitable for you. This publication is the property of IPP Financial Advisers, and no reproduction and / or circulation of this publication, whether in parts of in its entirety is allowed.

With the formal annexation of Crimea by Russia, the question in every mind is how the West will respond. The primary concern is that Russia will proceed by moving into East Ukraine, triggering a fresh round of conflict and the possibility that the world may witness another Cold War.

Until some certainty is achieved in this issue, investors will be watching developments in the region very closely.

POTENTIAL RISKS

APR 20142

WORLD IN PERSPECTIVE

RUSSIA - UKRAINE: WHAT'S NEXT?

FACEBOOK ACQUIRES OCULUS FOR $2BIL

Facebook announced on 26 March that it would be acquiring Oculus VR for US$2Bil. Oculus is a leader in the field of virtual technology and successfully developed the Oculus Rift gaming headset. The terms of the deal include $400 million in cash and 23.1 million shares of Facebook stock. Facebook CEO Mark Zuckerberg has termed the Oculus acquisition as a “long-term bet that immersive VR is the future.”

IPPFA'S OUTLOOK.

• Economic growth in the US and Europe might be more sluggish than initially expected. Non-Farm payrolls data released on 7 February came in at 129k, versus the consen-sus estimate of 185k. The unemployment rate released in March came in at 6.7%, higher than the consensus forecast of 6.6%. In addition, the European Central Bank opted in March to maintain its benchmark rate at 0.25%, signalling that the economy may not be ready for the withdrawal of liquidity from the system. It is possible that a slow recovery in the US and in Europe may weigh on global equities.

• Capital flight from Emerging Markets: As the Fed pur-sues its policy of withdrawing monetary stimulus from the system; investors remain concerned about the associated risks of capital flight from Emerging markets such as Brazil and China. The Brazilian stock market reached its eighth-month low in mid-March, with the Bovespa reaching a low of 45,632.17. The index has tumbled 19% from its high attained in October last year. Downside risks remain for EM equities and investors should brace themselves for significant volatility in the near-term.

• The crisis in Ukraine shows no signs of abating. Ever since Russian forces entered the region of Crimea in Ukraine last month, Russia and Ukraine have been locked in a bitter standoff. The autonomous region has seen a new pro-Rus-sian authority take power, and a referendum for residents to vote on joining Russia was scheduled on 16 March. Western nations have imposed wide ranging sanctions, which include asset freezes and travel bans on key individuals. During this period, the Russian state-linked gas company Gazprom has threatened to end the natural gas discounts currently ac-corded to Ukraine, which resells a portion of the gas to vari-ous European nations. If tensions escalate futher, there is a risk to economic growth and social stability in the region. In addition, there is a remote risk of armed conflict between the West and Russia which will be unsettling for the markets.

• Venezuela has witnessed a wave of violence and protests linked to the deteriorating economic situation in the country. So far, the government has been unable to stem rapid infla-tion and the rampant shortage of basic goods largely due to the lack of dollars in the economy. Even though the govern-ment has announced $5 billion in financing from China and a potential $2 billion from Russia, these are stop-gap measures that may just give Venezuela temporary respite. A financial meltdown in Venezuela will have contagion effects similar to those witnessed during the Asian Financial Crisis in the 1990s.

Year-to-date, equities in the developed markets space have posted mixed returns with the Dow Jones Industrial Average Index registering a negative 1% performance while on the other hand, the S&P gained 1% during the same period. Similarly in Europe, the major markets registered returns of between -2% and 1%. Asia under-performed with the Nikkei falling 11% and the rest of Asia trading in the red. The divergence in performance is interesting. In the developed markets, the positive factors of improving economic data and liquidity were largely cancelled out by the negative factors of overbought conditions and disappointment of rosy economic expectations. In Asia, domestic issues dominated market sentiments. Nikkei fell because of fraying confidence in Abenomics and in the impending sales tax hike. In China and Hong Kong, banking and economic worries acted as a drag on the markets. Over the coming weeks, we expect overbought conditions to continue to provide a ceiling to the developed markets while reasonable valuations and hope of government intervention will provide a floor to the Asian markets. It will be prudent to take risk off as we approach the end of Q1 earnings season and enter into a traditionally weak Q2 period.

APR 20143

Non-Farm payrolls beat esti-mates by 26kThe Fed maintains its bench-mark interest rate at 0.25%Retail Sales come in largely in line with estimates

MARCH 2014

• The US ISM Manufacturing PMI came in at 53.2, above the consensus estimate of 52.0. Non-Farm payrolls came in at 175k, which beat the consensus estimate of 149k by a wide margin. This suggest that the economic recovery in the US is picking up steam.

• The Fed decided to maintain its benchmark interest rate at 0.25%, signaling its adherence to its policy of maintaining a low-interest rate environment. However, investors should expect interest rates to rise sooner rather than later. In a policy briefing in mid-March, Fed chairperson Janet Yellen indicated that the Fed may hike interest rates six months after the conclusion of Quantitative Easing.

• The U.S registered an unemployment rate of 6.7%, marginally higher than the consensus estimate of 6.6%.

• The trade balance was largely in line with expectations, coming in at $-39.10B compared to the consensus forecast of $-39.00B.

US ISM Manufacturing PMI (Feb) 53.2 52.0

US ISM Non-Manufacturing PMI (Feb) 51.6 53.5

US Nonfarm Payrolls (Feb) 175K 149K

US Unemployment Rate (Feb) 6.7% 6.6%

US Retail Sales (MoM) (Feb) 0.3% 0.2%

US Reuters/Michigan Consumer Sentiment Index (Mar) 79.9 82.0

US Consumer Price Index (YoY) (Feb) 1.1% 1.2%

US Consumer Price Index Ex Food & Energy (YoY) (Feb) 1.6% 1.6%

US Fed Interest Rate Decision 0.25% 0.25%

US Personal Income (MoM) (Jan) 0.3% 0.2%

US ADP Employment Change (Feb) 139K 160K

US Trade Balance (Jan) $-39.10B $-39.00B

Our opinion on the US: Valuations remain reasonable however the huge run up since 2012 has surpressed the chances of supernormal gains going forward

Data source: FXStreet Economic Calendar

USECONOMICSNAPSHOT

March YTD

S&P 500 0.84% 0.88%

Dow Jones 0.93% -0.94%

NASDAQ -2.45% -0.02%

KEY ECONOMIC DATA POINTS ACTUAL EXPECTED

BoE maintains its bench-mark interest rate at 0.5%UK CPI comes in line with consensus forecastEMU retail sales beat estimates

MARCH 2014

• The Bank of England decided to maintain its benchmark interest at the existing level of 0.5%. In addition, BoE governor Mark Carney announced the appointment of two new deputy governors.

• The UK Consumer Price Index for February came in at 1.7%, in line with the consensus forecast of the same figure.

• EMU retail sales grew by 1.3% in January on a year-on-year basis, beating the consensus estimate of -0.4%.

UK BoE Interest Rate Decision 0.5% 0.5%

UK BoE Asset Purchase Facility (Mar) £375B £375B

UK Core Consumer Price Index (YoY) (Feb) 1.7% 1.6%

UK Consumer Price Index (YoY) (Feb) 1.7% 1.7%

UK Markit Manufacturing PMI (Feb) 56.9 56.5

UK Consumer Credit (Jan) £0.660B £0.700B

UK Mortgage Approvals (Jan) 76.947K 73.500K

EMU ECB Interest Rate Decision (Mar 6) 0.25% 0.25%

EMU Consumer Price Index (YoY) (Feb) 0.7% 0.8%

EMU Consumer Price Index (MoM) (Feb) 0.3% 0.4%

EMU Markit Manufacturing PMI (Feb) 53.2 53.0

EMU Retail Sales (YoY) (Jan) 1.3% -0.4%

Our opinion on the UK & EMU: The possibility of supernormal gains going forward is remote due to the huge gains achieved so far

Data source: FXStreet Economic Calendar

UK & EMUECONOMICSNAPSHOT

APR 20144

March YTD

FTSE 100 -2.57% -2.00%

EURO STOXX 50

0.53% 1.70%

DAX -1.40% 0.04%

CAC 40 -0.23% 2.20%

KEY ECONOMIC DATA POINTS ACTUAL EXPECTED

China NBS PMI falls below expectationsInflation in Brazil comes in lower than expectedRussian PMI: In line with consensus

MARCH 2014

• The February figure for China's NBS manufacturing PMI failed to meet expectations, with the metric coming in at 50.2, versus the consensus forecast of 50.5.

• The Brazil FIPE IPC inflation rate came in at 0.52%, versus the expected figure of 0.94%. This suggests that economic growth in Brazil may be more sluggish than expected.

• The Russian HSBC Manufacturing PMI came in at 48.5, largely in line with the consensus forecast of 48.0.

China NBS Manufacturing PMI (Feb) 50.2 50.5

China Non-manufacturing PMI (Feb) 55.0 53.4

China HSBC China Services PMI (Feb) 51.0 50.7

China Trade Balance (Feb) $-22.98B $31.86B

China Consumer Price Index (YoY) (Feb) 2.0% 2.5%

China New Loans (Feb) ¥644.5B ¥1,320.0B

China M2 Money Supply (YoY) (Feb) 13.3% 13.2%

Brazil Trade Balance (Feb) -2.125B -4.057B

Brazil Fipe's IPC Inflation (Feb) 0.52% 0.94%

Brazil Industrial Output (MoM) (Jan) 2.9% -3.7%

India FX Reserves, USD $294.36B $293.41B

India WPI Inflation (Feb) 4.68% 5.05%

Russia HSBC Manufacturing PMI 48.5 48.0

Our opinion on Asia & the Emerging Markets: Expect short term pressure in China due to the rebalancing of the economy; Long term prospects of the EM space remain bright

Data source: Bloomberg

ASIA & EMERGING MARKETS

ECONOMICSNAPSHOT

APR 20145

March YTD

MSCI Asia Pacificex Japan

1.82% 0.38%

MSCI Emerg-ing Markets

3.08% -1.27%

Nikkei 225 1.19% -9.17%

Hang Seng -2.64% -5.07%

Shanghai SE Composite

-1.12% -2.83%

Straits Times 2.72% 0.71%

KEY ECONOMIC DATA POINTS ACTUAL PREVIOUS