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TRANSCRIPT
Guide to the Markets
MARKET INSIGHTS
Asia | 3Q 2017 | As of June 30, 2017
Americas Europe Asia
Dr. David P. Kelly, CFANew York
Stephanie H. FlandersLondon
Tai HuiHong Kong
Julio C. CallegariSão Paulo
Manuel Arroyo Ozores, CFAMadrid
Kerry Craig, CFAMelbourne
Samantha M. AzzarelloNew York
Tilmann Galler, CFAFrankfurt
Yoshinori ShigemiTokyo
David M. LebovitzNew York
Lucia Gutierrez-MelladoMadrid
Marcella ChowHong Kong
Gabriela D. SantosNew York
Vincent JuvynsLuxembourg
Akira KunikyoTokyo
Alexander W. Dryden, CFALondon
Dr. David StubbsLondon
Dr. Jasslyn Yeo, CFASingapore
Abigail B. Dwyer, CFANew York
Maria Paola ToschiMilan
Hannah J. AndersonHong Kong
John C. ManleyNew York
Michael J. Bell, CFALondon
Ian HuiHong Kong
Jordan K. JacksonNew York
Jai MalhiLondon
Shogo MaekawaTokyo
Tyler J. VoigtNew York
Nandini RamakrishnanLondon
Global Market Insights Strategy Team
3
| 3GTM – Asia
Fixed income42. Global fixed income: Yields and returns43. Global fixed income: Interest rate risk44. Global fixed income: Valuations45. Global fixed income: Return composition and relative valuations46. Global investment grade bonds47. U.S. high yield bonds48. Emerging markets debt: Fundamentals49. Asian fixed income
Other asset classes50. Asset class returns51. Asset class correlations52. Volatility53. Treasury yield and asset class performance54. Currencies55. Current account balance and EM flows56. Commodities57. Oil: Short-term market dynamics58. Gold59. Alternative sources of income
Investing principles60. Real return on cash and yields61. Global households’ financial asset allocation by region62. Investors’ market timing63. Annual returns and intra-year declines64. The compounding effect65. Portfolio construction, asset class returns and volatility66. The benefits of diversification and long-term investing67. The benefits of saving and investing early
Regional and local economy4. Asia: Economic snapshot5. ASEAN: Economic snapshot6. China: Economic snapshot7. China: Cyclical indicators8. China: Monetary policy9. China: Credit and leverage10. China: Fiscal policy11. China: Exchange rate and foreign reserves12. India: Economic snapshot13. Japan: Economic snapshot
Global economy14. Global growth15. Global Purchasing Managers’ Index (PMI): Manufacturing 16. Inflation expectations17. Inflation and policy rates18. G4 policy rates and market expectations19. Central bank balance sheets 20. Global debt dynamics21. Global trade22. United States: Economic growth and the composition of GDP23. United States: Growth drivers24. United States: Policy change and uncertainty25. United States: Labor market and inflation26. United States: Monetary policy27. Eurozone: Economic snapshot28. Eurozone: Inflation and lending29. Eurozone: Politics
Equities30. Global and Asia equity market returns31. Global equities: Earnings momentum32. Global equities: Valuations33. Global equities: High dividend34. Global equities: Cyclicals versus defensives35. Global equities: Sector returns and valuations36. United States: Earnings and valuations37. Europe: Earnings and valuations38. Japan: Policies, currency and equities39. Emerging markets: Valuation analysis40. APAC ex-Japan: Valuation analysis41. APAC ex-Japan: Earnings snapshot
Page reference
|GTM – Asia 4
4
Regi
onal
and
loca
l eco
nom
y
-1%
1%
3%
5%
'12 '13 '14 '15 '16 '17
-2%
0%
2%
4%
6%
8%
10%
12%
14%
'12 '13 '14 '15 '16 '17
Asia: Economic snapshot
Investment and exportsEM Asia* nominal fixed capital formation & export volumes, y/y %, 3MMA
Industrial productionYear-over-year change, 3-month moving average
Real GDP growthEM Asia*, contribution to year-over-year growth
Source: J.P. Morgan Economic Research, National Statistics Agencies, J.P. Morgan Asset Management; (Top left) CEIC; (Bottom left) National Bureau of Statistics China; (Right) Netherlands Bureau of Policy Analysis.*EM Asia includes China, Hong Kong, India, Indonesia, Korea, Malaysia, Philippines, Singapore, Taiwan and Thailand. **Consumption includes both private/household and public/government consumption.Guide to the Markets – Asia 3Q 2017. Data reflect most recently available as of 30/6/17.
China
EM Asia* ex-China
Investment
Export volumes
InvestmentConsumption**
Net exportsGDP
-20%
-15%
-10%
-5%
0%
5%
10%
15%
20%
25%
30%
'01 '03 '05 '07 '09 '11 '13 '15 '17
|GTM – Asia 5
5
Regi
onal
and
loca
l eco
nom
y
-20%
-15%
-10%
-5%
0%
5%
10%
15%
20%
25%
'12 '13 '14 '15 '16 '17
-3%
0%
3%
6%
9%
12%
15%
18%
'12 '13 '14 '15 '16 '17
ASEAN: Economic snapshot
ExportsYear-over-year change, 3-month moving average
Consumption growthYear-over-year change
Infrastructure spending as % of GDP
Source: J.P. Morgan Asset Management; (Left) FactSet, National Statistics Agencies; (Top right) CEIC; (Bottom right) HSBC, National Statistics Agencies.Guide to the Markets – Asia 3Q 2017. Data reflect most recently available as of 30/6/17.
Singapore
Thailand
IndonesiaPhilippines
Malaysia Thailand
Indonesia
Philippines
Malaysia
Singapore
0%
1%
2%
3%
4%
Indonesia Malaysia Philippines Singapore Thailand
2016
2010
|GTM – Asia 6
6
Regi
onal
and
loca
l eco
nom
y
46
48
50
52
54
56
'11 '12 '13 '14 '15 '16 '17
-8%
-4%
0%
4%
8%
12%
16%
20%
'80 '85 '90 '95 '00 '05 '10 '15-3%
0%
3%
6%
9%
12%
15%
18%
'11 '12 '13 '14 '15 '16 '17
China: Economic snapshot
Contribution to real GDP growthYear-over-year change
Caixin/Markit Purchasing Managers’ IndicesLevel
Electricity consumptionYear-over-year change, year-to-date
Source: FactSet, J.P. Morgan Asset Management; (Left and bottom right) National Bureau of Statistics of China; (Top right) Caixin/Markit; (Bottom right) CEIC.Guide to the Markets – Asia 3Q 2017.Data reflect most recently available as of 30/6/17.
Manufacturing
Services
Net exports
Gross capital formation (investment) Consumption
GDP
Secondary
Tertiary
2016: 6.7%6/2017: 50.4
5/2017: 52.8
5/2017: 9.0%
5/2017: 6.3%
|GTM – Asia 7
7
Regi
onal
and
loca
l eco
nom
y
|
-6%
-3%
0%
3%
6%
9%
-10%
0%
10%
20%
30%
40%
'11 '12 '13 '14 '15 '16 '17
-10%
-5%
0%
5%
10%
15%
20%
25%
30%
5%
10%
15%
20%
25%
'11 '12 '13 '14 '15 '16 '17
China: Cyclical indicators
China home pricesYear-over-year change
Retail and auto salesYear-over-year change, 3-month moving average
Industrial profits and PPI inflationYear-over-year change
Residential floor space sold and completedYear-over-year change, 3-month moving average
Source: CEIC, FactSet, National Bureau of Statistics of China, J.P. Morgan Asset Management; (Top left) J.P. Morgan Economic Research. Guide to the Markets – Asia 3Q 2017. Data reflect most recently available as of 30/6/17.
Tier-2 cities
Tier-1 cities
Tier-3 cities
Retail sales Auto sales
SoldCompleted
Industrial profits PPI inflation
-10%
0%
10%
20%
30%
'11 '12 '13 '14 '15 '16 '17
-20%
0%
20%
40%
60%
'11 '12 '13 '14 '15 '16 '17
|GTM – Asia 8
8
Regi
onal
and
loca
l eco
nom
y
1%
2%
3%
4%
5%
6%
'15 '16 '17
China: Monetary policy
Key policy ratesPer annum
Chinese government bond yieldsAnnual yield
Source: FactSet, People’s Bank of China, J.P. Morgan Asset Management; (Left) CEIC.Guide to the Markets – Asia 3Q 2017. Data reflect most recently available as of 30/6/17.
Lending rate (1-year)
SHIBOR (7-day)
Short-term lending facility (7-day)Medium-term lendingfacility (6-month)
Deposit rate (1-year)
10-year
2-year
5-year
|GTM – Asia 9
9
Regi
onal
and
loca
l eco
nom
y
0%
20%
40%
60%
80%
100%
'07 '08 '09 '10 '11 '12 '13 '14 '15 '16 YTD
0.0x
0.5x
1.0x
1.5x
2.0x
2.5x
3.0x
3.5x
4.0x
'07 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17
0%
10%
20%
30%
40%
50%
60%
'07 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17
China: Credit and leverage
Credit growthYear-over-year change
New bank credit breakdown by borrowers% of total credit extended
Source: People’s Bank of China, J.P. Morgan Asset Management; (Top and bottom left) CEIC; (Bottom right) BIS. Credit growth to GDP growth ratio utilizes rolling 12-month nominal GDP and augmented credit. Wenzhou SME crisis refers to the wave of bankruptcies and funding problems faced by a large number of small and medium enterprises (SMEs) in Wenzhou in 2011. LGFV refers to local government financing vehicle. The broad credit measure consists of all reported bank claims on the domestic economy, plus bankers’ acceptances, entrusted loans, trust loans, new net corporate bond and non-financial equity financing, issuance of asset-backed securities and interbank loans. *NBFI stands for Non-Bank Financial Institutions. YTD new bank credit breakdown by borrowers is as of 31/5/2017.Guide to the Markets – Asia 3Q 2017. Data reflect most recently available as of 30/6/17.
Total social financing
Augmented credit
RMB bank lending
Credit growth to GDP growthBroad credit measure, ratio, year-over-year growth, 3-month moving average
Global Financial Crisis
Loosening: 216bp rate cuts, 4tn stimulus
Tightening: 125bp rate hikes, BASEL III adoption
Wenzhou SME crisis
Interbank liquidity crunch
Loosening: 56bp rate cuts, trust boom
Tightening: shadow banking tightening
Loosening: 165bp rate cuts, LGFV debt swap
A-share market crash
Tightening
Rate cut
Rapid rebound in CPI/PPI
Households NBFI*Corporations Government
|GTM – Asia 10
10
Regi
onal
and
loca
l eco
nom
y
0%
10%
20%
30%
40%
'11 '12 '13 '14 '15 '16 '17
-5%
-4%
-3%
-2%
-1%
0%
1%
2%
'06 '08 '10 '12 '14 '16
40.6 40.8 49.3
96.9 101.9 112.1
0
20
40
60
80
100
120
2014 2015 2016
China: Fiscal policy
Fixed asset investment Year-over-year change, year-to-date
Fiscal balance* Share of GDP
Public project planned investmentRMB trillions
Source: CEIC, FactSet, National Bureau of Statistics, J.P. Morgan Asset Management. *Fiscal balance is the difference between reported total government revenue and government expenditure. Guide to the Markets – Asia 3Q 2017. Data reflect most recently available as of 30/6/17.
1Q 2017: -4.0%
Private
Local government
State-owned enterprises
Newly started projectsProjects under construction
|GTM – Asia 11
11
Regi
onal
and
loca
l eco
nom
y
China: Exchange rate and foreign reserves
Chinese yuan exchange rate: NEER* vs. USDIndex, rebased 2013 = 100
USD / CNY and change in FX reserves
Source: FactSet, J.P. Morgan Asset Management; (Left) J.P. Morgan Economic Research; (Right) People’s Bank of China.*NEER stands for nominal effective exchange rate.Guide to the Markets – Asia 3Q 2017. Data reflect most recently available as of 30/6/17.
NEER
Weaker yuan
Stronger yuan
USD / CNY
Change in monthly FX reserves (USD billions)
USD / CNY (inverted)
|GTM – Asia 12
12
Regi
onal
and
loca
l eco
nom
y
|
0%
2%
4%
6%
8%
10%
12%
14%
'05 '07 '09 '11 '13 '15
-6%
-2%
2%
6%
10%
14%
18%
'05 '07 '09 '11 '13 '15 '17
India: Economic snapshot
Real GDP growth Year-over-year change
Inflation and repo rateYear-over-year change, % per annum
Credit and deposit growthYear-over-year change
Source: J.P. Morgan Asset Management; (Top left) J.P. Morgan Economic Research, Ministry of Statistics and Programme Implementation; (Top right) Society of Indian Automobile Manufacturers; (Bottom left and bottom right) Reserve Bank of India; (Bottom right) Reuters. *Consumer Price Index (CPI) series starts in January 2012 and value shown is year-over-year change.**Wholesale Price Index (WPI) value shown is year-over-year change. Guide to the Markets – Asia 3Q 2017. Data reflect most recently available as of 30/6/17.
10-yr avg. 1Q17Real GDP growth 7.4% 6.1%
Repo rate
WPI**
CPI*
LatestWPI 2.0%Repo rate 6.3%CPI 2.1%
Domestic credit
Deposits
Average: 169.7
Apr. 2017: 250.0
Vehicle salesNumber of passenger vehicles, thousands
|GTM – Asia 13
13
Regi
onal
and
loca
l eco
nom
y
|
-40%
-20%
0%
20%
40%
60%
80%
'11 '12 '13 '14 '15 '16 '17
0.5%
1.0%
1.5%
2.0%
'14 '15 '16 '17
Japan: Economic snapshot
Corporate inflation expectations*Tankan business conditionsDiffusion Index, all enterprises
Operating profitsYear-over-year change
Real wage growth and labor marketYear-over-year change, 6-month moving average Inverted scale
Source: J.P. Morgan Asset Management; (Top left and top right) Bank of Japan; (Bottom left and bottom right) FactSet; (Bottom left) Ministry of Finance; (Bottom right) Japanese Statistics Bureau and Statistics Center, Ministry of Health, Labor and Welfare.*Inflation expectations are calculated from the responses to the Bank of Japan’s all firm survey of business expectations and are for inflation expectations 1, 3 and 5 years from each point in time.Guide to the Markets – Asia 3Q 2017. Data reflect most recently available as of 30/6/17.
Non-manufacturingManufacturing
Non-manufacturing
Manufacturing
3 years ahead
1 year ahead5 years ahead
Latest5 years ahead 1.1%3 years ahead 1.0%1 year ahead 0.7%
Total real cash earnings Unemployment rate
-60%
-40%
-20%
0%
20%
40%
60%
'85 '90 '95 '00 '05 '10 '15
|GTM – Asia 14
14
Glob
al e
cono
my
-6%
-4%
-2%
0%
2%
4%
6%
8%
10%
'80 '85 '90 '95 '00 '05 '10 '15 '20
Global growth
Source: IMF, J.P. Morgan Asset Management.*Forecasts are from the IMF’s April 2017 World Economic Outlook. Guide to the Markets – Asia 3Q 2017. Data reflect most recently available as of 30/6/17.
Real GDP growthYear-over-year change
DM growth outperforms EM
EM growth outperforms DM
Forecast*
Developed market (DM) GDP growthEmerging market (EM) GDP growth
EM less DM growth
|GTM – Asia 15
15
Glob
al e
cono
my
Jul'1
5
Aug
'15
Sep'
15
Oct
'15
Nov
'15
Dec
'15
Jan'
16
Feb'
16
Mar
'16
Apr
'16
May
'16
Jun'
16
Jul'1
6
Aug
'16
Sep'
16
Oct
'16
Nov
'16
Dec
'16
Jan'
17
Feb'
17
Mar
'17
Apr
'17
May
'17
Jun'
17
Global 50.8 50.5 50.4 51.0 51.0 50.7 50.9 50.0 50.6 50.2 50.1 50.4 51.0 50.8 51.1 52.0 52.1 52.7 52.8 53.0 53.0 52.7 52.6 52.6DM 52.1 51.9 51.7 52.5 52.3 52.0 52.1 50.8 50.9 50.5 50.4 51.2 51.5 51.3 51.5 52.6 53.0 53.8 54.2 54.1 53.9 54.1 54.1 53.9EM 49.1 48.6 48.4 49.0 49.2 49.0 49.4 48.9 50.2 49.5 49.5 49.3 50.3 50.1 50.3 51.0 50.8 51.1 50.8 51.3 51.6 50.8 50.5 50.8U.S. 53.8 53.0 53.1 54.1 52.8 51.2 52.4 51.3 51.5 50.8 50.7 51.3 52.9 52.0 51.5 53.4 54.1 54.3 55.0 54.2 53.3 52.8 52.7 52.0Euro area 52.4 52.3 52.0 52.3 52.8 53.2 52.3 51.2 51.6 51.7 51.5 52.8 52.0 51.7 52.6 53.5 53.7 54.9 55.2 55.4 56.2 56.7 57.0 57.4Germany 51.8 53.3 52.3 52.1 52.9 53.2 52.3 50.5 50.7 51.8 52.1 54.5 53.8 53.6 54.3 55.0 54.3 55.6 56.4 56.8 58.3 58.2 59.5 59.6France 49.6 48.3 50.6 50.6 50.6 51.4 50.0 50.2 49.6 48.0 48.4 48.3 48.6 48.3 49.7 51.8 51.7 53.5 53.6 52.2 53.3 55.1 53.8 54.8Italy 55.3 53.8 52.7 54.1 54.9 55.6 53.2 52.2 53.5 53.9 52.4 53.5 51.2 49.8 51.0 50.9 52.2 53.2 53.0 55.0 55.7 56.2 55.1 55.2Spain 53.6 53.2 51.7 51.3 53.1 53.0 55.4 54.1 53.4 53.5 51.8 52.2 51.0 51.0 52.3 53.3 54.5 55.3 55.6 54.8 53.9 54.5 55.4 54.7Greece 30.2 39.1 43.3 47.3 48.1 50.2 50.0 48.4 49.0 49.7 48.4 50.4 48.7 50.4 49.2 48.6 48.3 49.3 46.6 47.7 46.7 48.2 49.6 50.5UK 52.3 51.8 51.5 54.5 52.5 51.2 52.5 50.9 51.1 49.5 50.4 53.1 48.3 53.5 55.3 54.2 53.5 55.9 55.6 54.6 54.0 57.0 56.3 54.3Australia 50.4 51.7 52.1 50.2 52.5 51.9 51.5 53.5 58.1 53.4 51.0 51.8 56.4 46.9 49.8 50.9 54.2 55.4 51.2 59.3 57.5 59.2 54.8 55.0Japan 51.2 51.7 51.0 52.4 52.6 52.6 52.3 50.1 49.1 48.2 47.7 48.1 49.3 49.5 50.4 51.4 51.3 52.4 52.7 53.3 52.4 52.7 53.1 52.4China 47.8 47.3 47.2 48.3 48.6 48.2 48.4 48.0 49.7 49.4 49.2 48.6 50.6 50.0 50.1 51.2 50.9 51.9 51.0 51.7 51.2 50.3 49.6 50.4China (NBS) 50.0 49.7 49.8 49.8 49.6 49.7 49.4 49.0 50.2 50.1 50.1 50.0 49.9 50.4 50.4 51.2 51.7 51.4 51.3 51.6 51.8 51.2 51.2 51.7Korea 47.6 47.9 49.2 49.1 49.1 50.7 49.5 48.7 49.5 50.0 50.1 50.5 50.1 48.6 47.6 48.0 48.0 49.4 49.0 49.2 48.4 49.4 49.2 50.1Taiwan 47.1 46.1 46.9 47.8 49.5 51.7 50.6 49.4 51.1 49.7 48.5 50.5 51.0 51.8 52.2 52.7 54.7 56.2 55.6 54.5 56.2 54.4 53.1 53.3Indonesia 47.3 48.4 47.4 47.8 46.9 47.8 48.9 48.7 50.6 50.9 50.6 51.9 48.4 50.4 50.9 48.7 49.7 49.0 50.4 49.3 50.5 51.2 50.6 49.5India 52.7 52.3 51.2 50.7 50.3 49.1 51.1 51.1 52.4 50.5 50.7 51.7 51.8 52.6 52.1 54.4 52.3 49.6 50.4 50.7 52.5 52.5 51.6 50.9Russia 48.3 47.9 49.1 50.2 50.1 48.7 49.8 49.3 48.3 48.0 49.6 51.5 49.5 50.8 51.1 52.4 53.6 53.7 54.7 52.5 52.4 50.8 52.4 50.3Brazil 47.2 45.8 47.0 44.1 43.8 45.6 47.4 44.5 46.0 42.6 41.6 43.2 46.0 45.7 46.0 46.3 46.2 45.2 44.0 46.9 49.6 50.1 52.0 50.5Mexico 52.9 52.4 52.1 53.0 53.0 52.4 52.2 53.1 53.2 52.4 53.6 51.1 50.6 50.9 51.9 51.8 51.1 50.2 50.8 50.6 51.5 50.7 51.2 52.3# countries above 50* 9 9 10 11 11 12 10 10 10 9 10 13 10 10 12 13 13 12 14 13 14 15 14 16
Global Purchasing Managers’ Index (PMI): Manufacturing
Source: Australian Industry Group, J.P. Morgan Economic Research, Markit, National Bureau of Statistics of China (NBS), J.P. Morgan Asset Management.Heatmap colors are based on PMI relative to 50, which indicates contraction (below 50) or expansion (above 50) of the sector. *Number of countries displayed in the above heatmap, excluding regional aggregates (Global, DM, EM and euro area), which are in expansionary territory. Markit PMI, not NBS PMI, is counted for China.Guide to the Markets – Asia 3Q 2017. Data reflect most recently available as of 30/6/17.
Global Purchasing Managers’ Index for manufacturing
|GTM – Asia 16
16
Glob
al e
cono
my
-0.5%
0.0%
0.5%
1.0%
1.5%
2.0%
2.5%
3.0%
3.5%
4.0%
'13 '14 '15 '16 '17-1%
0%
1%
2%
3%
4%
'13 '14 '15 '16 '17 '18
Inflation expectations
Source: Bloomberg Finance L.P., J.P. Morgan Asset Management; (Right) Bank of England, Bank of Japan, European Central Bank, U.S. Federal Reserve. *Projections based on Bloomberg consensus estimates.Guide to the Markets – Asia 3Q 2017. Data reflect most recently available as of 30/6/17.
Medium-term inflation expectations5-year/5-year break-even inflation expectations
Developed economy inflation Year-over-year change
U.S.Eurozone
UK
Japan
Projection*
Policy target
UK
Eurozone
U.S.
Japan
|GTM – Asia 17
17
Glob
al e
cono
my
May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May2016 2016 2016 2016 2016 2016 2016 2016 2017 2017 2017 2017 2017
China 2.0 1.9 1.8 1.3 1.9 2.1 2.3 2.1 2.5 0.8 0.9 1.2 1.5 3.0 4.35 ( 10/2015)
India 5.8 5.8 6.1 5.1 4.4 4.2 3.6 3.4 3.2 3.7 3.9 3.0 2.2 2.0 – 6.0 6.25 ( 10/2016)
Indonesia 3.3 3.5 3.2 2.8 3.1 3.3 3.6 3.0 3.5 3.8 3.6 4.2 4.3 3.0 – 5.0 4.75 ( 10/2016)
Japan -0.5 -0.4 -0.4 -0.5 -0.5 0.1 0.5 0.3 0.4 0.3 0.2 0.4 0.4 2.0 -0.1–0.0 ( 2/2016)
Korea 0.8 0.7 0.4 0.5 1.3 1.5 1.5 1.3 2.0 1.9 2.2 1.9 2.0 2.0 1.25 ( 6/2016)
Malaysia 2.0 1.6 1.1 1.5 1.5 1.4 1.8 1.8 3.2 4.5 5.1 4.4 3.9 2.0 – 3.0 3.00 ( 7/2016)
Taiwan 1.2 0.9 1.2 0.6 0.3 1.7 2.0 1.7 2.2 -0.1 0.2 0.1 0.6 2.0 1.375 ( 6/2016)
Thailand 0.5 0.4 0.1 0.3 0.4 0.3 0.6 1.1 1.6 1.4 0.8 0.4 0.0 1.0 – 4.0 1.5 ( 4/2015)
U.S. 1.0 1.0 0.8 1.1 1.5 1.6 1.7 2.1 2.5 2.7 2.4 2.2 1.9 2.0 1.00–1.25 ( 6/2017)
Eurozone -0.1 0.1 0.2 0.2 0.4 0.5 0.6 1.1 1.8 2.0 1.5 1.9 1.4 2.0 0.00 ( 3/2016)
UK 0.3 0.5 0.6 0.6 1.0 0.9 1.2 1.6 1.8 2.3 2.3 2.7 2.9 2.0 0.25 ( 8/2016)
Central bank target ( easing, tightening)
Key policy rate*Country
Inflation and policy rates
Source: Various central banks, FactSet, J.P. Morgan Economic Research, J.P. Morgan Asset Management.All inflation numbers refer to headline CPI inflation. *Arrows and dates indicate the direction and date of last change, respectively. The central bank’s policy rates used are: the one-year benchmark lending rate (China), RBI policy repo rate (India), BI 7-day reverse repo rate (Indonesia), the BoJ’s policy rate on the aggregate balance of all financial institutions’ current accounts at the BoJ (Japan), BoK base rate (Korea), overnight policy rate (Malaysia), discount rate (Taiwan), one-day repurchase rate (Thailand), fed funds rate (U.S.), eurozone main refinancing operations rate (eurozone) and BoE official bank rate (UK).Guide to the Markets – Asia 3Q 2017. Data reflect most recently available as of 30/6/17.
Monthly inflation trendYear-over-year change Below target or below range
by more than 0.5%Within +/- 0.5% of target or within range
Above target or above rangeby more than 0.5%
|GTM – Asia 18
18
Glob
al e
cono
my
-0.35%
-0.16%
0.10%
0.33%
-0.05% -0.04%
-0.03% -0.06%
0.38%
0.61%0.75%
0.98%
1.29%
1.55%
1.76%
1.92%
-0.6%
-0.3%
0.0%
0.3%
0.6%
0.9%
1.2%
1.5%
1.8%
2.1%
12/17 12/18 12/19 12/20
Japan
G4 policy rates and market expectations
Source: Bloomberg Finance L.P., J.P. Morgan Asset Management; (Left) FactSet. *Key deposit rates that central banks charge commercial banks on their excess reserves. **The BoJ is adopting a three-tier system in which a negative interest rate of -0.1% will be applied to the policy rate balance of the aggregate amount of all financial institutions that have current accounts at the BoJ. ***Market implied policy rates are derived from the Overnight Index Swaps market. Guide to the Markets – Asia 3Q 2017. Data reflect most recently available as of 30/6/17.
Central bank key policy rates Market expectations for policy ratesFutures market implied policy rates***Policy rate Deposit
rate*Eurozone 0.0% -0.4%Japan -0.1 to 0.0% -0.1%UK 0.25% 0.0%U.S. 1.0 to 1.25% 1.25%
Federal funds rate (Fed)
BoE official bank rate (BoE)
Eurozone main refinancing operationsrate (ECB)
BoJ uncollateralized overnight call rate** (BoJ)
U.S.
Eurozone
UK
|GTM – Asia 19
19
Glob
al e
cono
my
-100
0
100
200
300
400
500
600
700
'07 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17 '18
Central bank balance sheets
Source: Bloomberg Finance L.P., J.P. Morgan Asset Management.*New purchases of assets are based on monthly holdings as reported by each respective G4 central bank (the U.S. Federal Reserve (Fed), the European Central Bank (ECB), the Bank of Japan (BoJ) and the Bank of England (BoE)) and announced purchase plans for the next 12 months for the Fed, the ECB and the BoE, as well as J.P. Morgan Asset Management projections for the BoJ. Guide to the Markets – Asia 3Q 2017. Data reflect most recently available as of 30/6/17.
Central bank asset holdingsShare of domestic government bonds owned by G4 central banks
Central bank asset purchases 3-month rolling bond purchases by G4 central banks*, USD billions
Projections
UK
Eurozone
U.S.
Japan
0%
5%
10%
15%
20%
25%
30%
35%
40%
45%
'07 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17
|GTM – Asia 20
20
Glob
al e
cono
my
50%
80%
110%
140%
170%
200%
230%
'00 '02 '04 '06 '08 '10 '12 '14 '16 0% 100% 200% 300% 400%
Indonesia
Mexico
Russia
Turkey
South Africa
India
Brazil
Thailand
Malaysia
Korea
U.S.
UK
Euro area
China
Japan
Global debt dynamics
Source: BIS, J.P. Morgan Economic Research, J.P. Morgan Asset Management.*Private credit includes non-financial corporates and households, and bank lending, corporate bonds and shadow banking. Aggregated from BIS underlying data.Guide to the Markets – Asia 3Q 2017. Data reflect most recently available as of 30/6/17.
Private sector debtPrivate credit*, share of GDP
Total non-financial sector debt by countryShare of GDP, 2016 average
Developed markets
China
EM ex-China
357%
HouseholdCorporateGovernment
254%
254%
253%
250%
234%
191%
151%
142%
127%
126%
109%
84%
80%
68%
|GTM – Asia 21
21
Glob
al e
cono
my
Developed markets
Emerging markets
United States
Hong Kong
Saudi Arabia
France
India
Australia
Indonesia
Germany
Sweden
Thailand
Norway
UAE
UK
Malaysia
DenmarkSingapore
Philippines
Finland
Vietnam
30%
40%
50%
60%
70%
80%
90%
100%
-5% 0% 5% 10% 15% 20% 25% 30% 35%
Global trade
Source: FactSet, IMF, J.P. Morgan Asset Management; (Left) Economist/YouGov, World Bank.*EU exports as a % of GDP excludes Intra EU trade as the European Union is considered one regional economy.Change in GDP per capita at purchasing power parity is based on World Bank data.Guide to the Markets – Asia 3Q 2017. Data reflect most recently available as of 30/6/17.
Exports as a share of GDP – 2016Goods exports*
U.S.EU
ChinaOther
Japan
Globalization sentiment and GDP per capita growthAttitudes toward globalization and % change in GDP per person
Growth of GDP per capita at purchasing power parity, 2011—2015
% a
gree
ing:
“G
loba
lizat
ion
is a
forc
e fo
r goo
d”
7.8%
11.8%
13.1%
25.5%
10.3%
11.6%
19.0%
22.3%
35.7%
15.2%
35.1%
45.1%
52.9%
0% 10% 20% 30% 40% 50% 60%
U.S.
EU*
Japan
Canada
Brazil
India
China
Russia
Mexico
Australia
Korea
ASEAN
Taiwan
|GTM – Asia 22
22
Glob
al e
cono
my
-1
1
3
5
7
9
11
13
15
17
19
21
-6%
-4%
-2%
0%
2%
4%
6%
8%
10%
'17'12'07'02'97'92'87'82'77'72
United States: Economic growth and the composition of GDP
Source: Bureau of Economic Analysis, FactSet, J.P. Morgan Asset Management. Guide to the Markets – Asia 3Q 2017. Data reflect most recently available as of 30/6/17.
Real GDPYear-over-year change
Components of GDP1Q17 nominal GDP, USD trillions
12.6% Investment ex-housing
68.9% Consumption
17.5% Gov’t spending
4.0% Housing
-2.9% Net exports
Average: 2.9% Average post-GFC: 2.1%
Year-over-year change: 2.0%
Real GDP 1Q17
Quarter-over-quarter SAAR change: 1.2%
|GTM – Asia 23
23
Glob
al e
cono
my
8
10
12
14
16
18
20
22
24
'97 '99 '01 '03 '05 '07 '09 '11 '13 '15 '17
United States: Growth drivers
Source: J.P. Morgan Asset Management; (Top left and top right) FactSet, U.S. Bureau of Economic Analysis; (Bottom left and right) Census Bureau, FactSet.Guide to the Markets – Asia 3Q 2017. Data reflect most recently available as of 30/6/17.
U.S. capital expenditures & CEO economic outlookYear-over-year change Index
Light vehicle salesMillions, seasonally adjusted annualized rate
Housing starts Thousands, seasonally adjusted annualized rate
Retail sales Year-over-year change, 3MMA
5/2017: 16.6
Average: 15.6
5/2017: 1,092
Average: 1,327
Average: 2.6%
6/2017: 2.0%
Real private nonresidential fixed investment
CEO economic outlook
|GTM – Asia 24
24
Glob
al e
cono
my
-12%
-10%
-8%
-6%
-4%
-2%
0%
2%
4%
'90 '95 '00 '05 '10 '15 '20 '25
23%
35%
23% 22% 20%16% 15%
25%
35%
30%
25%
30%26%
22%
0%
10%
20%
30%
40%
Average* U.S. Japan Korea UK Germany Canada
Foreign content in domestic sales
OECD corporate income tax rate by country
United States: Policy change and uncertainty
Source: J.P. Morgan Asset Management; (Top left) OECD; (Bottom left) U.S. Department of Commerce; (Top right) CBO; (Bottom right) Policy Uncertainty. 2017 federal deficit is based on the Congressional Budget Office (CBO) June 2017 Baseline Budget Forecast.*Average based on OECD’s 35 countries in simple average terms. **The economic policy uncertainty index is a joint effort by Professors Scott R. Baker of Northwestern University, Nick Bloom of Stanford University and Steven J. Davis of University of Chicago, and is based on news coverage of policy uncertainty, expiring provisions in the U.S. tax code and forecast disagreement among economists.Guide to the Markets – Asia 3Q 2017. Data reflect most recently available as of 30/6/17.
U.S. federal budget surplus / deficit Share of nominal GDP, 1990 – 2027, 2016 CBO baseline
U.S. economic policy uncertainty**Index
20062016
Forecast
2017: -3.6%
0%
20%
40%
60%
80%
100%
Clothing Tech Autos Energy Staples0
50
100
150
200
250
300
'85 '90 '95 '00 '05 '10 '15
|GTM – Asia 25
25
Glob
al e
cono
my
'85 '90 '95 '00 '05 '10 '15-3%
-2%
-1%
0%
1%
2%
3%
4%
5%
6%
7%
'85 '90 '95 '00 '05 '10 '150%
2%
4%
6%
8%
10%
12%
United States: Labor market and inflation
Source: FactSet, U.S. Bureau of Labor Statistics, J.P. Morgan Asset Management; (Right) U.S. Bureau of Economic Analysis.*Average hourly earnings are calculated from the wages of production and non-supervisory workers. **PCE and core PCE are the Personal Consumption Expenditure (PCE) deflator. Guide to the Markets – Asia 3Q 2017. Data reflect most recently available as of 30/6/17.
Unemployment rate and average hourly earnings* InflationYear-over-year change, seasonally adjusted
Average hourly earnings(% y/y)
Unemployment rate
U.S. recession period
5/2017: 4.3%
5/2017: 2.4%
Avg. since 1985
Avg. since 2000 5/2017
Headline CPI 2.7% 2.2% 1.9%
PCE** 2.2% 1.9% 1.4%
Core PCE** 2.2% 1.7% 1.4%
|GTM – Asia 26
26
Glob
al e
cono
my
1.26%1.55%
1.75%1.40%
2.10%
2.90%
0%
1%
2%
3%
4%
5%
6%
'05 '07 '09 '11 '13 '15 '17 '19 '21
3.00%
0
1
2
3
4
5
'05 '07 '09 '11 '13 '15 '17 '19 '21
Oct. 2014:End of QE3; balance sheet stands at $4.5T
Nov. 2010:QE2 begins
United States: Monetary policy
Source: FactSet, Federal Reserve, J.P. Morgan Asset Management.*Balance sheet reduction from the current level is assumed to begin in October 2017 and conclude in October 2021. Reductions of Treasuries and Mortgage Backed Securities (MBS) are assumed to follow the pace set forth in the FOMC guidelines published June 2017. Reinvestment of principal in Treasury securities will be reduced by $6 billion each month initially and will increase in $6 billion increments every three months thereafter. Reinvestments from MBS will be reduced $4 billion per month initially and will increase in steps of $4 billion in tandem with the reduction in Treasury securities reinvestments. The Fed aims to reduce the pace of rolling over reinvestments of proceeds from its balance sheet to $30 billion per month and $20 billion per month for Treasuries and MBS, respectively. Reinvestments from other assets are assumed to wind down at the same pace.Guide to the Markets – Asia 3Q 2017. Data reflect most recently available as of 30/6/17.
Federal funds rate expectations*FOMC and market expectations for the fed funds rate
Federal Reserve balance sheetUSD trillions
Federal funds rate
Long run
Treasuries
MBS
Other
Dec. 2008:QE1 begins
Sep. 2012:QE3 begins
Jan. 2014:Tapering of
purchases begins
Forecasted reduction*
Sep. 2011:Operation
Twist
Market expectations (as of 30/6/17)
FOMC median projections (as of 14/6/17)
FOMC long-run projection (as of 14/6/17)
|GTM – Asia 27
27
Glob
al e
cono
my
-2%
-1%
0%
1%
2%
3%
4%
5%
'12 '13 '14 '15 '16
Eurozone: Economic snapshot
Source: Eurostat, FactSet, J.P. Morgan Asset Management; (Top right and bottom left) European Commission.*Eurozone consumer confidence as reported by the European Commission, which measures the level of optimism that consumers have about the economy. Core euro area countries are: Austria, Belgium, Germany, Finland, France, Luxembourg, the Netherlands; Periphery countries are: Cyprus, Estonia, Greece, Ireland, Italy, Latvia, Lithuania, Malta, Portugal, Slovakia, Slovenia, and Spain.Guide to the Markets – Asia 3Q 2017. Data reflect most recently available as of 30/6/17.
Consumer confidence* and retail salesYear-over-year change, 3-month moving average Index
Economic growthReal GDP growth, q/q seasonally adjusted
Businesses and investmentBusiness confidence, y/y change fixed asset investment lagged 1Q
Unemployment rateShare of active population
5/2017: 9.3%
Core Periphery
Euro area business confidence
Fixed investment
Retail sales
Consumer confidence
|GTM – Asia 28
28
Glob
al e
cono
my
-1.5%
-1.0%
-0.5%
0.0%
0.5%
1.0%
1.5%
2.0%
2.5%
3.0%
'12 '13 '14 '15 '16 '17
Eurozone bank lendingYear-over-year change
Eurozone: Inflation and lending
Source: ECB, FactSet, J.P. Morgan Asset Management; (Left) Eurostat.*Core rate is CPI inflation (HICP) excluding energy, food, alcohol and tobacco.**Interest on new business lending up to €1 million, on a 1-5 year maturity.Guide to the Markets – Asia 3Q 2017. Data reflect most recently available as of 30/6/17.
Eurozone CPI inflationContribution to headline inflation, year-over-year change
Corporate lending rates to smaller companiesInterest rate**, non-financial corporations
Household
Corporate
Food, alcohol, tobaccoCore rate*EnergyCPI
ECB inflation target: 2%
Italy
Germany
Spain
France
|GTM – Asia 29
29
Glob
al e
cono
my
Eurozone: Politics
Source: J.P. Morgan Asset Management; (Bottom left) FactSet, Tullett Prebon; (Bottom right) IFOP. Guide to the Markets – Asia 3Q 2017. Data reflect most recently available as of 30/6/17.
Government debt2-year government bond yields over 2-year German bunds, basis points
Survey results: Do you support the euro?% answering “yes” as of November 2016
Europe 2017 political timeline
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
Italy France Spain Belgium N'lands Germany
French spreads
Italian spreads
Jan Feb Mar Apr May Jun Jul Aug Sep Oct
15 MarchNetherlandsGeneral election
23 April FranceFirst round of the presidential election
25 January ItalyCourt decision on “Italicum” electoral reform
11-18 June FranceLegislative election
22-29 January France Socialist presidential primaries
7 May FranceSecond round of the presidential election
September SpainPossible Catalonia independence referendum
29 March UKArticle 50 invoked
24 September GermanyFederal election
8 June UKGeneral election
|GTM – Asia 30
30
Equi
ties
Global and Asia equity market returns
Source: FactSet, MSCI, J.P. Morgan Asset Management.Returns are total returns based on MSCI indices in U.S. dollar terms. 10-yr total (net) return data is used to calculate annualized returns (Ann. Ret.) and 10-yr price return data is used to calculate annualized volatility (Ann. Vol.) and reflect the period 31/12/06 – 31/12/16. Guide to the Markets – Asia 3Q 2017. Data reflect most recently available as of 30/6/17.
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2Q '17 YTD '17 Ann. Ret. Ann. Vol.
India Ja pa n India ASEAN U.S . HK U.S . India Ja pa n Ta iwa n China Kore a U.S . India
7 3 .1% - 29 .1% 10 2 .8 % 3 2 .4 % 2.0 % 2 8 .3 % 3 2 .6 % 2 3 .9 % 9 .9 % 19 .6 % 10 .7 % 2 8 .9 % 7 .6 % 3 1.6 %
China U.S . Ta iwa n Kore a ASEAN India Ja pa n U.S . U.S . U.S . Kore a China HK China
6 6 .2 % - 37 .1% 8 0 .2 % 2 7 .2 % - 6 .1% 2 6 .0 % 2 7 .3 % 13 .4 % 1.3 % 11.6 % 10 .3 % 2 5 .0 % 7 .0 % 2 7 .6 %
HK Ta iwa n ASEAN HK Europe China Europe Ta iwa n HK Kore a Ta iwa n Asia e x-JP Ta iwa n Kore a
4 1.2 % - 45 .9% 7 5 .0 % 2 3 .2 % - 10 .5 % 2 3 .1% 2 6 .0 % 10 .1% - 0 .5% 9 .2 % 9.0 % 2 2 .9 % 6 .2 % 2 5 .4 %Asia e x-
JPEurope Asia e x-
JPTa iwa n Kore a ASEAN HK China Europe ASEAN Asia ex-
JPTa iwa n ASEAN HK
4 0 .5 % - 46 .1% 7 2 .5 % 2 2 .7 % - 11.8 % 2 2 .8 % 11.1% 8.3 % - 2 .3% 6 .2 % 8.4 % 2 1.8 % 5 .6 % 2 3 .6 %
ASEAN ASEAN Kore a India Ja pa n Asia e x-JP
Ta iwa n ASEAN India Asia e x-JP
Europe HK China ASEAN
3 9 .2 % - 47 .6% 7 2 .1% 2 0 .9 % - 14 .2 % 2 2 .7 % 9 .8 % 6.4 % - 6 .1% 5 .8 % 7.7 % 2 1.6 % 5 .5 % 2 3 .2 %
Korea China China Asia e x-JP
HK Kore a Kore a Asia ex-JP
Kore a Ja pa n HK India Asia e x-JP
Asia ex-JP
3 2 .6 % - 50 .8% 6 2 .6 % 19 .9 % - 16 .0 % 2 1.5% 4 .2 % 5 .1% - 6 .3% 2 .7 % 7.2 % 2 0 .5 % 5 .2 % 2 3 .0 %
Europe HK HK Ja pa n Asia ex-JP
Europe China HK China HK ASEAN Europe India Ta iwa n
14 .4 % - 51.2 % 6 0 .2 % 15 .6 % - 17 .1% 19 .9% 4 .0 % 5 .1% - 7 .6% 2 .3 % 5.6 % 15 .9 % 4 .7 % 2 2 .7 %
Ta iwa n Asia ex-JP Europe U.S . China Ta iwan Asia e x-
JP Ja pa n Asia e x-JP China Ja pa n ASEAN Kore a Europe
9 .1% - 52 .2% 3 6 .8 % 15 .4 % - 18 .2 % 17 .7% 3 .3 % - 3 .7 % - 8 .9% 1.1% 5.2 % 15 .7 % 4 .2 % 2 1.5 %
U.S . Kore a U.S . China Ta iwa n U.S. India Europe Ta iwan Europe U.S . Ja pa n Europe Ja pa n
6 .0% - 55 .1% 2 7 .1% 4 .8 % - 20 .2% 16 .1% - 3 .8 % - 5 .7 % - 11.0 % 0 .2 % 3 .1% 10 .1% 1.3% 16 .8 %
Ja pan India Ja pa n Europe India Ja pa n ASEAN Kore a ASEAN India India U.S . Ja pa n U.S .
- 4 .1% - 64 .6% 6 .4 % 4 .5 % - 37 .2% 8 .4 % - 4 .5 % - 10 .7 % - 18 .4 % - 1.4 % 2 .9 % 9 .5 % 0 .8 % 16 .5 %
10-yrs ('07 - '16)
|GTM – Asia 31
31
Equi
ties -0.4
-0.3
-0.2
-0.1
0.0
0.1
0.2
0.3
'14 '15 '16 '17
-0.4
-0.3
-0.2
-0.1
0.0
0.1
0.2
'14 '15 '16 '17'08 '09 '10 '11 '12 '13 '14 '15 '16 '1720
40
60
80
100
120
140
160
Developed market equities earnings momentumEarnings revision*, 3MMA
Global equities: Earnings momentum
Source: MSCI, J.P. Morgan Asset Management; (Left) Bloomberg Finance L.P.; (Right) Standard & Poor’s. *Earnings revision is calculated by taking the difference between the number of analyst upgrades and analyst downgrades, divided by the total number of analyst revisions on a monthly basis. Earnings revision above zero would mean that there were more upgrade revisions than downgrade revisions. Guide to the Markets – Asia 3Q 2017. Data reflect most recently available as of 30/6/17.
Forward earnings per shareIndex, U.S. dollar, rebased to 100
Emerging market equities earnings momentumEarnings revision*, 3MMA
Asia Pacific ex-Japan
Europe
Japan
U.S.
EM
EM Asia
Europe
Japan
U.S.
EM EMEA
EM Latin America
|GTM – Asia 32
32
Equi
ties
Global equities: Valuations
Source: China Securities Index, FactSet, MSCI, Standard & Poor’s, J.P. Morgan Asset Management.P/E and P/B ratios are in local currency terms. China A valuations based on the CSI300 Index and use 10 years of data due to availability. China H valuations based on the MSCI China. 15-year range for P/E and P/B ratios are cut off to maintain a more reasonable scale. Guide to the Markets – Asia 3Q 2017. Data reflect most recently available as of 30/6/17.
Equity market valuations – Price to bookTrailing P/B ratios
Equity market valuations – Price to earningsForward P/E ratios
15-yr. averageLatest
15-yr. range38.3 35.841.7
15-yr. averageLatest
15-yr. range7.3 5.2
2.6
1.71.9 1.7
1.8 2.0 2.22.5
2.1
1.4
3.0
1.4 1.31.9
1.1
2.6
1.7 1.7
3.0
1.8
1.6 1.51.6 1.7 1.9 1.9
1.71.2
3.0
1.3 1.11.8
0.7
2.3
1.6 1.3
0x
1x
2x
3x
4x
5x
S&P 500 Europeex-UK
Asia Pacex-Japan
AsiaPacific
Emergingmarkets
ASEAN Australia China A(CSI 300)
China HongKong
India Japan Korea Taiwan Russia Mexico Brazil Turkey
14.612.7 12.4
14.0
10.913.2 13.7
15.3
11.5
15.3 15.216.6
9.2
14.0
7.3
14.5
9.8 9.7
17.515.0
13.413.8
12.415.1 15.5
14.2 13.0 14.9
17.914.5
9.313.9
6.0
17.4
11.6
8.5
0x
10x
20x
30x
S&P 500 Europeex-UK
Asia Pacex-Japan
AsiaPacific
Emergingmarkets
ASEAN Australia China A(CSI 300)
China HongKong
India Japan Korea Taiwan Russia Mexico Brazil Turkey
|GTM – Asia 33
33
Equi
ties
Global equities: High dividend
Source: FactSet, MSCI, J.P. Morgan Asset Management; (Top) CLSA.*Total returns based on MSCI indices in U.S. dollar terms. Positive yield does not imply positive return. Guide to the Markets – Asia 3Q 2017. Data reflect most recently available as of 30/6/17.
Composition of MSCI High Dividend Equity Indices Number of companies yielding greater than 3% by regionConstituents of MSCI AC World Index
MSCI AC Asia Pacific ex-Japan: Performance by dividend yield*USD cumulative total return of tertiles with quarterly rebalancing (Jan. 2000 base = 100)
Top tertile2nd tertileBottom tertileAll stocks
Defensives Cyclicals Financials
MSCI AC World 46.3% 38.7% 15.1%
MSCI World (DM) 51.5% 38.2% 10.4%
MSCI EM 20.6% 37.5% 41.6%
MSCI AC AsiaPacific ex-Japan 29.4% 32.9% 37.6%
0
100
200
300
400
500
600
700
800
'00 '02 '04 '06 '08 '10 '12 '14 '16
241
194
11885
48
0
100
200
300
Asia Pac.ex-Japan
Europe EM ex-Asia U.S. Japan
|GTM – Asia 34
34
Equi
ties
-2
-1
0
1
2
3
4
'98 '00 '02 '04 '06 '08 '10 '12 '14 '16 '07 '08 '09 '10 '11 '12 '13 '14 '15 '16 '1755
60
65
70
75
80
85
90
95
100
105
1.0%
1.5%
2.0%
2.5%
3.0%
3.5%
4.0%
4.5%
5.0%
5.5%
Global equities: Cyclicals versus defensives
Source: FactSet, MSCI, J.P. Morgan Asset Management.*Cyclical sectors include Consumer Discretionary, Information Technology, Industrials, Financials and Materials. REITs are excluded from this analysis. It is more appropriate to value a REIT by looking at its price relative to its funds from operations (FFO), an income measure that excludes depreciation. P/E ratios look at price relative to net income, a measure that includes depreciation, making the comparison of valuations across sectors inappropriate. Defensive sectors include Telecommunications, Health Care, Utilities and Consumer Staples. Sector valuations are equal weighted. **Cyclicals represent the MSCI World Cyclical Sector index and defensives represent the MSCI World Defensive Sector index.Guide to the Markets – Asia 3Q 2017. Data reflect most recently available as of 30/6/17.
Cyclicals ex-energy vs. defensive valuations*MSCI World cyclicals ex-energy / defensives fwd. P/E ratio, z-score
Cyclicals vs. defensives relative performance and rates**MSCI World cyclical / defensive performance 10-year U.S. Treasury yield
Cyclicals vs. defensives 10-year UST
Current: -0.25
Cyclicals expensive relative to defensives
Cyclicals cheap relative to defensives
|GTM – Asia 35
35
Equi
ties
Global equities: Sector returns and valuations
Source: FactSet, MSCI, J.P. Morgan Asset Management. *“Correlation to interest rates” is calculated using daily sector returns and daily 10-year U.S. Treasury yield over the last 10 years. Returns are total (gross) returns in U.S. dollar terms.Guide to the Markets – Asia 3Q 2017. Data reflect most recently available as of 30/6/17.
Finan
cials
Real E
state
Health
Care
Cons. S
taples
Cons.
Discr.
Industr
ials
Materia
ls
Energy
Telec
om
Utilitie
s
Techno
logy
AC World
AC World Weights 18.8% 3.1% 11.4% 9.3% 12.1% 10.9% 5.2% 6.2% 3.2% 3.1% 16.7% 100%
Wei
ghts
YTD return 11.2 9.5 16.2 11.9 12.5 13.5 10.4 -8.3 2.3 11.1 20.7 11.8
2016 return 13.1 3.2 -6.3 2.1 3.4 12.6 24.2 28.6 5.8 6.6 12.7 8.5
From peak (October 2007) -2.8 12.3 137.2 112.8 94.9 43.3 -10.7 -18.6 19.9 11.0 111.1 41.2
From trough (March 2009)
293.6 280.7 275.2 243.0 367.5 290.3 135.9 65.2 141.8 104.5 375.1 236.6
Beta to AC World 1.25x 0.47x 0.73x 0.63x 0.99x 1.06x 1.12x 1.22x 0.76x 0.71x 1.01x 1.00x β
Correl to int rates* 0.14 -0.21 0.08 0.10 0.39 0.40 0.33 0.39 0.29 0.22 0.39 0.41 ρ
Forward P/E Ratio 12.2x 15.6x 16.9x 20.0x 16.5x 17.0x 15.0x 17.5x 14.4x 15.4x 17.4x 15.8x
10-yr avg. 11.1x 14.9x 14.0x 16.3x 15.1x 14.1x 13.2x 13.4x 13.0x 13.8x 14.6x 13.3x
Trailing P/B Ratio 1.2x 1.5x 3.6x 4.0x 2.7x 2.8x 1.9x 1.4x 2.1x 1.6x 3.7x 2.2x
10-yr avg. 1.2x 1.3x 3.1x 3.2x 2.2x 2.2x 1.8x 1.6x 2.0x 1.4x 2.9x 1.9x
Dividend Yield 3.0% 3.4% 1.9% 2.6% 1.8% 2.2% 2.3% 3.9% 4.2% 3.7% 1.4% 2.4%
10-yr avg. 3.3% 3.6% 2.3% 2.7% 1.9% 2.4% 2.5% 3.1% 4.6% 4.1% 1.5% 2.7%
Ret
urn
Div
P/E
P/B
|GTM – Asia 36
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-1
3
7
11
15
19
23
27
31
35
'05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17 '180x
5x
10x
15x
20x
25x
30x
35x
40x
45x
50x
'20 '30 '40 '50 '60 '70 '80 '90 '00 '10
ForecastGeographical sources of revenue
United States: Earnings and valuations
Source: FactSet, Standard & Poor’s, J.P. Morgan Asset Management; (Left) Compustat; (Bottom right) Yale University Department of Economics.EPS levels are based on operating earnings per share.*1Q earnings estimates are Standard & Poor’s consensus analyst expectations, based on actual earnings for the 99% of Standard & Poor’s companies that have reported and earnings estimates for the remaining 1% of companies. **Shiller P/E is a valuation measure applied to the U.S. S&P 500 equity market, which is based on the average inflation-adjusted earnings from the previous 10 years. Guide to the Markets – Asia 3Q 2017. Data reflect most recently available as of 30/6/17.
S&P 500 earnings per shareQuarterly operating earnings (USD)
Case Shiller S&P 500 price earnings (P/E) ratio**
S&P consensus analyst estimates*1Q 2017* USD28.812Q 2017 USD30.993Q 2017 USD33.384Q 2017 USD35.031Q 2018 USD33.70
Others
EuropeU.S.
Asia Pacific
-1 SD: 9.8x
+1 SD: 24.7x
Avg.: 17.2x
6/2017: 30.1x
71%81%
11%7%11% 7%
8% 5%
0%
20%
40%
60%
80%
100%
S&P 500 S&P Small Cap 600
|GTM – Asia 37
37
Equi
ties
Relative equity premiumEarnings yield minus regional BAA corporate bond yield*
Europe: Earnings and valuations
Source: FactSet, MSCI, J.P. Morgan Asset Management; (Left) Oxford Economics.*All data represent price return in local currency terms with data since January 1997. Guide to the Markets – Asia 3Q 2017. Data reflect most recently available as of 30/6/17.
Equity performance and real GDP growth differentialIndex, rebased 1997 = 100 Real GDP growth differential
Europe versus U.S. valuationsRelative P/B ratio
+1 SD: 0.81x
-1 SD: 0.67x
Average: 0.74x
MSCI Europe
S&P 500
Europe outperforms
Europe underperforms
MSCI Europe / MSCI AC World*
Europe – Global ex-Europe
6/2017: 0.63x
|GTM – Asia 38
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ties
0.0%
0.5%
1.0%
1.5%
2.0%
2.5%
3.0%
3.5%
4.0%
'01 '03 '05 '07 '09 '11 '13 '15 '17
Japan: Policies, currency and equities
Source: FactSet, J.P. Morgan Asset Management; (Top left) Bank of Japan, Federal Reserve; (Right) Nikkei; (Bottom left) Bloomberg Finance L.P., Standard and Poor’s.*Correlation based on the daily change between the currency and the Nikkei 225 index. Guide to the Markets – Asia 3Q 2017. Data reflect most recently available as of 30/6/17.
Nikkei 225 and Japanese yen Index USD / JPY
Comparative dividend yield12-month trailing dividend yield
Real interest rate differential and Japanese yen2-year U.S. / Japan treasury bond spread (inflation adjusted) USD / JPY
Real interest rate differential
USD / JPY
Weaker yen
Stronger yen
1/15 - 6/17
Correlation*: 0.68
Nikkei 225 USD / JPY
S&P 500
Nikkei 225
|GTM – Asia 39
39
Equi
ties -90%
-60%
-30%
0%
30%
60%
90%
0.8x 1.2x 1.6x 2.0x 2.4x 2.8x
MSCI emerging markets: Price-to-book and returnsPrice-to-book ratio and next 12 months’ price returns
Emerging markets: Valuation analysis
Source: FactSet, MSCI, J.P. Morgan Asset Management; (Left) Consensus Economics. *All data represent price return in local currency terms with data since January 1997. Guide to the Markets – Asia 3Q 2017. Data reflect most recently available as of 30/6/17.
EM vs. DM growth and equity performanceConsensus expectations for GDP growth in 12 months
MSCI emerging markets P/B ratio Trailing P/B ratio
6/2017: 1.6x
+1 SD: 2.2x
-1 SD: 1.4x
Average: 1.8x
EM growth & equity outperformance
EM growth & equity underperformance
Current levelEM minus DM GDP growth
MSCI EM relative to MSCI DM*
0
20
40
60
80
100
120
140
160
-1%
0%
1%
2%
3%
4%
5%
'96 '98 '00 '02 '04 '06 '08 '10 '12 '14 '16
|GTM – Asia 40
40
Equi
ties
-60%
-30%
0%
30%
60%
90%
0.8x 1.2x 1.6x 2.0x 2.4x 2.8x 3.2x
MSCI APAC ex-JP Index: Price-to-book and returnsPrice-to-book ratio and next 12 months’ price returns
APAC ex-Japan: Valuation analysis
Source: FactSet, MSCI, J.P. Morgan Asset Management.*All data represent price return in local currency terms with data since January 1997. MSCI AC APxJ is the MSCI All Country Asia Pacific ex-Japan index. DM is represented by the MSCI The World index. REER stands for real effective exchange rate. Guide to the Markets – Asia 3Q 2017. Data reflect most recently available as of 30/6/17.
Relative APxJ / DM equity performance and USD REERIndex, rebased 1995 = 100 Index, inverted scale
MSCI AC Asia Pacific ex-Japan P/B ratioTrailing P/B ratio
6/2017: 1.6x
+1 SD: 2.1x
-1 SD: 1.5x
Average: 1.8x
USD depreciation and Asian equity outperformance
USD appreciation and Asian equity
underperformance
MSCI AC APxJ / MSCI DM* USD REERCurrent level
|GTM – Asia 41
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-0.3
-0.2
-0.1
0.0
0.1
'14 '15 '16 '17
'11 '12 '13 '14 '15 '16 '1720
40
60
80
100
120
140
160
180
-60%
-40%
-20%
0%
20%
40%
60%
80%
'01 '03 '05 '07 '09 '11 '13 '15 '17
Earnings by sectorEPS for next 12-month consensus, USD, rebased to Jan 2011 = 100
Materials
Energy
Industrials
TelecomStaples
Discr.
Financials
Tech
Earnings momentumEarnings revision, 3-month moving average
APAC ex-Japan: Earnings snapshot
Source: FactSet, MSCI, J.P. Morgan Asset Management; (Bottom right) CEIC, national statistics agencies. Cyclicals include consumer discretionary, industrials, energy, materials and technology. Defensives include consumer staples, health care, telecom and utilities.Earnings per share (EPS) used is next 12 months’ aggregate estimate. *EM Asia ex-China includes Hong Kong, Malaysia, Singapore, South Korea, Taiwan, Thailand and Vietnam. Overall exports aggregate is GDP-weighted. Guide to the Markets – Asia 3Q 2017. Data reflect most recently available as of 30/6/17.
Growth in nominal exports and earnings per shareUSD, year-over-year change
CyclicalsFinancials
DefensivesUtilities
Health care
MSCI AC Asia Pacific ex-JP EPS
EM Asia ex-China exports*
|GTM – Asia 42
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Global fixed income: Yields and returns
Source: Bloomberg Finance L.P., FactSet, J.P. Morgan Economic Research, J.P. Morgan Asset Management. Based on Bloomberg Barclays U.S. Aggregate Credit - Corporate High Yield Index (U.S. Corporate HY), Bloomberg Barclays U.S. Aggregate Credit – Corporate Investment Grade Index (U.S. Corporate IG), J.P. Morgan Government Bond Index – EM Global (GBI-EM) (Local CCY EMD), J.P. Morgan Emerging Market Bond Index Global (EMBIG) (USD EMD), J.P. Morgan Asia Credit Index (JACI) (USD Asian), Bloomberg Barclays Pan European High Yield (Europe HY), J.P. Morgan Government Bond Index – Global Traded (DM Gov’t), J.P. Morgan Asia Credit Index – Non-investment Grade Corporate (Asia Corporate HY), Bloomberg Barclays Global U.S. Treasury – Bills (3-5 years) (U.S. Treasury) and Bloomberg Barclays U.S. Treasury – Bills (1-3 months) (Cash). 5-year data is used to calculate annualized returns (Ann. Ret.). Returns are in USD and reflect the period from 31/12/11 – 31/12/16. Duration is a measure of the sensitivity of the price (the value of the principal) of a fixed-income investment to a change in interest rates. *Duration is expressed as number of years. Rising interest rates mean falling bond prices, while declining interest rates mean rising bond prices. 10-year data is used to calculate the correlation to the 10-year UST. Positive yield does not imply positive return. Guide to the Markets – Asia 3Q 2017. Data reflect most recently available as of 30/6/17.
USD EMD
Global bond opportunities
Local CCY EMD
U.S. Corporate IG
USD Asian Bond
DM Government Bond
Asia Corporate HY
U.S. Treasury
Cash
Fixed income sector returns
U.S. Corporate HY
Europe HY
5-yrs('12 - '16)
2012 2013 2014 2015 2016 2Q '17 YTD '17 Ann. Ret.Europe
HYEurope
HYUSD
Asian Asia HY U.S. HY Europe HY
Europe HY Asia HY
30 .5% 14 .9% 8 .3 % 5 .8 % 17 .1% 8 .6 % 12 .3% 10 .2 %
Asia HY U.S . HY U.S . IG USD Asian
Loc a l EMD
Loc a l EMD
Loca l EMD U.S. HY
25 .4% 7 .4% 7 .5 % 2 .8 % 11.4 % 3 .4 % 11.1% 7 .4%Loca l EMD Asia HY Asia HY USD
EMD Asia HY DM Gov't USDEMD
Europe HY
19 .9% 4 .3% 5 .5 % 1.2 % 11.4 % 2 .6 % 6 .2% 6 .1%USDEMD Ca sh USD
EMDU.S .
Tre asUSDEMD U.S. IG U.S . HY USD
Asia n18 .5% 0 .0% 5 .5 % 0 .8 % 10 .2 % 2 .5 % 4 .9% 5 .8%
U.S . HY USD Asian
U.S .Tre as Ca sh U.S . IG USD
EMD DM Gov't USDEMD
15 .8% - 1.4% 5 .1% 0 .0 % 6 .1% 2 .2 % 4 .1% 5 .4%USD
AsianU.S . IG U.S . HY U.S . IG USD
Asia nU.S . HY USD
Asia nU.S . IG
14 .3% - 1.5% 2 .5 % - 0 .7 % 5 .8 % 2 .2 % 3 .8% 4 .1%
U.S . IG U.S .Tre as
DM Gov't DM Gov't Europe HY
USD Asia n
U.S . IG U.S .Trea s
9 .8% - 2 .7% 0 .7 % - 2 .6 % 3 .4 % 1.2% 3 .8% 1.2%U.S.
TreasDM Gov't Ca sh U.S . HY DM Gov't U.S .
Trea sAsia HY Cash
2 .0% - 4 .5% 0 .0 % - 4 .5 % 1.6 % 1.2% 3 .2% 0 .1%
DM Gov't Loca l EMD
Europe HY
Europe HY
U.S .Trea s Cash U.S .
Trea sLoc a l EMD
1.3% - 5 .5% - 6 .0% - 7 .6 % 1.0 % 0 .2 % 1.9% - 0 .6 %
Ca sh USDEMD
Loc a l EMD
Loc a l EMD Cash Asia HY Cash DM Gov't
0 .1% - 6 .6% - 6 .1% - 18 .0% 0 .3 % - 0 .2 % 0 .3% - 0 .7 %
YTM Duration* (years)
Correl. to 10-year
UST
6.9% 4.6 0.08
6.9% 4.7 -0.09
6.1% 3.9 -0.25
5.6% 6.7 0.21
4.5% 5.4 0.24
3.4% 3.5 -0.25
3.2% 7.5 0.44
1.9% 6.2 0.99
1.4% 7.8 0.65
0.9% 0.2 0.18
|GTM – Asia 43
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Global fixed income: Interest rate risk
Source: Barclays, Bloomberg Finance L.P., FactSet, J.P. Morgan Economic Research, J.P. Morgan Asset Management.Based on Bloomberg Barclays US Treasury indices (US Treasury, 1-3 years, 5-7 years, 7-20 years), J.P. Morgan Asia Credit Index (JACI) (USD Asia Credit), Barclays Global Aggregate – Corporates (Global Investment-grade credit), Barclays Global High Yield (Global High Yield), Barclays Emerging Markets – Sovereign (EMD USD sovereign), Barclays Emerging Markets – Corporate (EMD USD corporate), Barclays Emerging Markets Local Currency Government (EMD local cur. sovereign). For illustrative purposes only. Change in bond price is calculated using both duration and convexity.Guide to the Markets – Asia 3Q 2017. Data reflect most recently available as of 30/6/17.
Illustration of the impact a 1% rise in interest rates may have on selected indices Assumes a parallel shift in the yield curve and spreads are maintained
Price return + couponPrice return
-12%
-8%
-4%
0%
4%
EMD local cur.sovereign
EMD USDcorporate
EMD USDsovereign
Global highyield
Globalinvestmentgrade credit
USD Asiancredit
7-20 years5-7 years1-3 yearsU.S. Treasury
|GTM – Asia 44
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d in
com
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662
203
660
137
278
454
343390
499441
135
349
68
174
374334
261
506
0
500
1,000
1,500
U.S. highyield
U.S.investment
grade
Euro highyield
Euroinvestment
grade
USDAsiancredit
USD Asianhigh yield
EMD USDsovereign
EMD USDcorporate
EMD local cur.sovereign
Global fixed income: Valuations
Source: BofA/Merrill Lynch, iBoxx, J.P. Morgan Economic Research, J.P. Morgan Asset Management.Based on J.P. Morgan Domestic High Yield Index (U.S. High Yield), J.P. Morgan U.S. Liquid Index (JULI) (U.S. Investment Grade), BofA/Merrill Lynch Euro Non-Financial High Yield Constrained (Euro High Yield), iBoxx EUR corporates (Euro Investment Grade), J.P. Morgan Asia Credit Index (JACI) (USD Asian Credit), J.P. Morgan Asia Credit High Yield Index (USD Asian High Yield), J.P. Morgan EMBI+ (EMD USD Sovereign), J.P. Morgan Corporate Emerging Markets Bond Index – CEMBI (EMD USD Corporate), J.P. Morgan GBI-EM (EMD Local Cur. Sovereign). Positive yield does not imply positive return.Guide to the Markets – Asia 3Q 2017. Data reflect most recently available as of 30/6/17.
Spread to worst across fixed income sub-sectorsBasis points
10-yr. averageLatest
10-yr. range2,200
325
112
223
33125
180 167 147 171
|GTM – Asia 45
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-1%
0%
1%
2%
3%
4%
5%
6%
7%
8%
EMD localcur.
sovereigns
EMD USDsovereigns
DM localcur.
sovereigns
EMD USDcorporates
DM USDhigh yield
USD Asiancorporates
USD Asianhigh yield
3.0%
3.5%
4.0%
4.5%
5.0%
5.5%
6.0%
'10 '11 '12 '13 '14 '15 '16 '17
4.0%
4.5%
5.0%
5.5%
6.0%
6.5%
7.0%
7.5%
'10 '11 '12 '13 '14 '15 '16 '17
Relative corporate debt yieldsCEMBI Broad yield-to-worst – DM High Yield yield-to-worst, nominal
Relative government bond yieldsGBI EM Diversified yield – GBI Diversified DM yield, nominal
Global fixed income: Return composition and relative valuations
Source: J.P. Morgan Economic Research, J.P. Morgan Asset Management.Based on J.P. Morgan Developed Market HY (DM USD high yield), J.P. Morgan EMBI+ (EMD USD sovereigns), J.P. Morgan CEMBI (EMD USD corporates), JACI Asia HY (Asian USD high yield), J.P. Morgan GBI-EM (EMD local cur. sovereigns), JACI Asia Credit (Asian USD corporates), J.P. Morgan GBI-DM (DM local cur. sovereigns). Guide to the Markets – Asia 3Q 2017. Data reflect most recently available as of 30/6/17.
Debt return compositionYear-to-date
6/2017: 4.7%Average: 4.5%
Income returnPrice returnCurrency return
Total return
6/2017: 4.7%
Average: 5.4%
|GTM – Asia 46
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0%
1%
2%
3%
4%
5%
6%
7%
8%
9%
10%
'06 '08 '10 '12 '14 '16
U.S. corporates: EBITDA* growthYear-over-year change
Global investment grade bonds
Source: J.P. Morgan Economic Research, J.P. Morgan Asset Management.Based on J.P. Morgan U.S. Liquid Index (JULI) (U.S. Investment Grade), iBoxx EUR corporates (Euro Investment Grade), J.P. Morgan GBP Credit Corporates Bond Index (UK Investment Grade).*EBITDA stands for earnings before interest, tax, depreciation and amortization. **Interest coverage ratio is EBITDA over interest expense. Positive yield does not imply positive return. Guide to the Markets – Asia 3Q 2017. Data reflect most recently available as of 30/6/17.
Investment grade corporate bond yields across regionsYield-to-maturity
U.S. corporates: Interest coverage ratio**U.S.
UK
Eurozone
Last 12-month EBITDA Last 12-month EBITDA (ex-energy, metals/mining)
EBITDA / Interest expense
EBITDA / Interest expense (ex-energy, metals/mining)
-20%
-10%
0%
10%
20%
'06 '09 '12 '15
6x
8x
10x
12x
14x
16x
'06 '08 '10 '12 '14 '16
|GTM – Asia 47
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0
400
800
1,200
1,600
2,000
0%
4%
8%
12%
16%
20%
'90 '95 '00 '05 '10 '15
U.S. high yield bonds
Source: J.P. Morgan Economic Research, J.P. Morgan Asset Management. *Default rate is defined as the par value percentage of the total market trading at or below 50% of par value and includes any Chapter 11 filing, prepackaged filing or missed interest payments. Spreads indicated are benchmark yield-to-worst less comparable maturity Treasury yields. **Net leverage is net debt divided by adjusted earnings before interest, tax, depreciation and amortization (EBITDA). ***Interest coverage ratio is EBITDA over interest expense. U.S. corporate high yield is represented by the J.P. Morgan Domestic High Yield Index. Europe corporate high yield is represented by J.P. Morgan Euro High Yield Index. EM corporate high yield is represented by J.P. Morgan CEMBI NON-IG Index. TMT represents Telecommunications & Technology. Positive yield does not imply positive return.Guide to the Markets – Asia 3Q 2017. Data reflect most recently available as of 30/6/17.
U.S. high yield leverage measuresNet leverage** and interest coverage ratio***
Sector breakdown across high yield indices
U.S. high yield spread and default rate*10-yr average Latest
HY spread to worst 663bps 441bpsHY spread to worst (ex-energy) 662bps 417bpsHY spread to worst (energy) 660bps 581bps
HY default rate 2.6% 1.3%
Net leverageInterest coverage ratio
Default rate Spread to worst
25% 31%
8%
7%11%
31%
12%9%4%6%
7%4%
3%
5%
19% 9% 23%
22% 18% 13%
7% 12% 13%
0%
20%
40%
60%
80%
100%
U.S. Europe EM3.0x
3.5x
4.0x
4.5x
5.0x
'12 '13 '14 '15 '16
Commodities
OtherTMT
Health careIndustrialReal estate
ConsumerFinancial
|GTM – Asia 48
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4%
5%
6%
7%
8%
9%
10%
11%
12%
13%
14%
'06 '08 '10 '12 '14 '16-8%
-7%
-6%
-5%
-4%
-3%
-2%
-1%
0%
'06 '08 '10 '12 '14 '16 '18 '20
InflationYear-over-year change
Emerging markets debt: Fundamentals
Source: J.P. Morgan Asset Management; (Left and top right) J.P. Morgan Economic Research; (Bottom right) IMF.*Latin America index excludes Argentina, Ecuador and Venezuela. Positive yield does not imply positive return. Based on J.P. Morgan GBI-EM (EMD local cur. sovereign), J.P. Morgan EMBI+ (EMD USD sovereign), J.P. Morgan CEMBI (EMD USD corporate). Yield to worst is shown for EM sovereign (USD) and EM corporate (USD) indexes. Forecasts are from the IMF World Economic Outlook.Guide to the Markets – Asia 3Q 2017. Data reflect most recently available as of 30/6/17.
Emerging market debt yields
Fiscal positionsNominal deficit, % of GDP
Average 6/2017Local cur. sovereigns 6.8% 6.2%USD sovereigns 6.2% 5.7%USD corporates 6.1% 4.7%
Forecast
EM AsiaEM EuropeEM Latin America
Latin America*EM Asia
Russia
0%
2%
4%
6%
8%
10%
12%
14%
16%
18%
'06 '08 '10 '12 '14 '16
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0
100
200
300
400
500
600
700
800
'06 '07 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17
Spread on Asian credit investmentsJACI yield-to-worst spread over 10-year U.S. Treasury, basis points
Asian fixed income
Investment grade
Sovereign
High yield
Source: J.P. Morgan Economic Research, J.P. Morgan Asset Management.Based on J.P. Morgan Asia Corporate Credit Index (JACI-Investment Grade), J.P. Morgan Asia Corporate Credit High Yield Index (JACI-High Yield), J.P. Morgan Asia Sovereign Credit Index (JACI-Sovereign). JACI-High Yield index is adjusted for 2008 to maintain chart scale. Positive yield does not imply positive return.Guide to the Markets – Asia 3Q 2017. Data reflect most recently available as of 30/6/17.
Asian high yield corporate default rate
Net supply trend of Asian USD bondsUSD billions
-20
-10
0
10
20
30
40
01/16 04/16 07/16 10/16 01/17 04/17
1.7%
0.0%
2.7%
1.2%1.5%
3.1%
1.0%
2.0%
0%
1%
2%
3%
4%
2010 2011 2012 2013 2014 2015 2016 2017F
Forecast
MaturingCouponGross supplyNet supply
|GTM – Asia 50
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Oth
er
asse
t cla
sses
Asset class returns
Source: Bloomberg Finance L.P., Dow Jones, FactSet, J.P. Morgan Economic Research, MSCI, J.P. Morgan Asset Management. The “Diversified” portfolio assumes the following weights: 20% in the MSCI The World Index (DM Equities), 20% in the MSCI AC Asia ex-Japan (Asia ex-Japan), 5% in the average of the MSCI EM Latin America and MSCI EM EMEA Indices (EM ex-Asia), 10% in the J.P. Morgan EMBIG Index (EMD), 10% in the Bloomberg Barclays Aggregate (Global Bonds), 10% in the Bloomberg Barclays Global Corporate High Yield Index (Global Corporate High Yield), 15% in J.P. Morgan Asia Credit Index (Asian Bonds), 5% in MSCI U.S. REITs Index (U.S. REITs) and 5% in Bloomberg Barclays U.S. Treasury – Bills (1-3 months) (Cash). Diversified portfolio assumes annual rebalancing. All data represent total return in U.S. dollar terms for the stated period. 10-year total return data is used to calculate annualized returns (Ann. Ret.) and 10-year price return data is used to calculate annualized volatility (Ann. Vol.) and reflects the period 31/12/06 – 31/12/16. Please see disclosure page at end for index definitions. Guide to the Markets – Asia 3Q 2017. Data reflect most recently available as of 30/6/17.
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2Q '17 YTD '17 Ann. Ret. Ann. Vol.EM ex-
AsiaGloba l Bonds
EM ex-Asia U.S. REITs U.S. REITs
Asia ex-Ja pa n
DM Equities U.S. REITs
Asia n Bonds
EM ex-Asia
Asia e x-Ja pa n
Asia e x-Ja pa n
Globa l Corp HY
EM e x-Asia
4 1.1% 4 .8 % 91.3% 28 .5% 8 .7 % 22 .7% 27 .4% 30 .4% 2 .8% 27 .1% 8 .4% 22 .9% 7 .1% 2 7 .0 %Asia ex-
Ja pa n Ca sh Asia ex-Ja pa n
Asia ex-Ja pa n EMD Globa l
Corp HYGloba l
Corp HYAsia n Bonds U.S. REITs Globa l
Corp HYDM
EquitiesDM
Equities EMD U.S . REITs
40 .5% 1.8% 72 .5% 19 .9% 8 .5 % 18 .9% 8 .4 % 8 .3% 2 .5% 14 .0% 4 .2% 11.0 % 6 .8 % 2 6 .1%
Diversifie dAsia n Bonds
Globa l Corp HY
EM ex-Asia
Globa l Bonds EMD Diversifie d EMD EMD EMD Diversifie d Dive rsifie d
Asian Bonds
Asia e x-Japan
14 .1% - 9 .8% 63 .9% 16 .6% 5 .6 % 18 .5% 5 .6 % 5 .5% 1.2% 10 .2% 3 .6% 9 .5% 6 .4 % 2 2 .6 %DM
Equities EMD Diversifie d Globa l Corp HY
Asia n Bonds U.S. REITs Asia ex-
Ja pa nDM
Equities Ca sh U.S. REITs Globa l Corp HY
EM ex-Asia U.S . REITs DM
Equitie s9 .6 % - 10 .9 % 40 .8% 13 .8% 4 .1% 17 .8% 3 .3 % 5 .5% 0 .0% 8 .6% 3 .4% 6 .6% 5 .0 % 16 .5 %
Globa l Bonds
Globa l Corp HY
DM Equities Dive rsifie d
Globa l Corp HY
EM ex-Asia U.S. REITs
Asia ex-Ja pa n
DM Equities
DM Equities
Globa l Bonds
Globa l Corp HY Dive rsified Dive rsified
9 .5 % - 2 7 .9 % 30 .8% 13 .4% 2 .6 % 17 .0% 2 .5 % 5 .1% - 0 .3% 8 .2% 2 .6% 6 .4% 4 .8 % 12 .2 %
EMD Diversifie d U.S. REITs DM Equities Ca sh DM
Equities Ca sh Diversifie d Dive rsifie d Dive rsifie d EMD EMD DM Equitie s
Globa l Corp HY
6 .3 % - 28 .1% 28 .6% 12 .3% 0 .1% 16 .5% 0 .0 % 4 .5% - 3 .1% 8 .1% 2 .2% 6 .2% 4 .4 % 11.3 %Asia n Bonds U.S. REITs
Asia n Bonds EMD Diversifie d Dive rsifie d
Asia n Bonds
Globa l Bonds
Globa l Bonds
Asia n Bonds U.S. REITs
Globa l Bonds
Asia e x-Japan EMD
5 .4 % - 3 8 .0 % 28 .3% 12 .0% - 2 .8% 15 .9% - 1.4 % 0 .6% - 3 .2% 5 .8% 1.7% 4 .4% 4 .0 % 8 .9 %
Ca sh DM Equities EMD Asia n
BondsDM
EquitiesAsia n Bonds
Globa l Bonds
Globa l Corp HY
Globa l Corp HY
Asia ex-Ja pa n
Asia n Bonds
Asia n Bonds
Globa l Bonds
Asian Bonds
4 .8 % - 4 0 .3 % 28 .2% 10 .6% - 5 .0% 14 .3% - 2 .6% 0 .2% - 4 .9% 5 .8% 1.2% 3 .8% 3 .3 % 7 .4 %Globa l
Corp HYAsia ex-
Ja pa nGloba l Bonds
Globa l Bonds
Asia ex-Ja pa n
Globa l Bonds EMD Ca sh
Asia ex-Ja pa n
Globa l Bonds Ca sh U.S. REITs Cash
Globa l Bonds
2 .6 % - 5 2 .2 % 6 .9 % 5 .5 % - 17 .1% 4 .3 % - 6 .6% 0 .0% - 8 .9% 2 .1% 0 .2% 2 .7% 0 .7 % 2 .8 %
U.S. REITs EM ex-Asia Ca sh Ca sh EM ex-
Asia Ca sh EM ex-Asia
EM ex-Asia
EM ex-Asia Ca sh EM ex-
Asia Ca sh EM e x-Asia Cash
- 16 .8 % - 5 7 .2 % 0 .1% 0 .1% - 21.2 % 0 .1% - 8 .5% - 2 0 .2 % - 2 2 .7 % 0 .3% - 0 .2% 0 .3% - 1.3 % 0 .1%
10-yrs ('07 - '16)
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Asset class correlations
Source: Bloomberg Finance L.P., DJ UBS, FactSet, J.P. Morgan Economic Research, MSCI, Standard & Poor’s, J.P. Morgan Asset Management.Correlations based on MSCI AC Asia ex-Japan Index (MSCI Asia ex Japan), MSCI Emerging Market Index (EME), S&P 500 Index (S&P 500), J.P. Morgan Asia Credit Index (JACI) (Asian USD Bond), J.P. Morgan Emerging Market Bond Index Global (EMBIG) (USD EMD), J.P. Morgan Corporate Emerging Market Bond Index (CEMBI) (EM Corp), Bloomberg Barclays Pan European High Yield Index (European High Yield), Bloomberg Barclays U.S. Corporate High Yield Index (U.S. High Yield), Bloomberg Barclays U.S. Capital Aggregate (U.S. Agg), U.S. Dollar DXY Index (U.S. Dollar (DXY)), Brent Crude Oil Price (USD/bbl) (Brent Crude Oil), London Gold PM Price Fixing (USD/oz) (Gold) and FTSE EPRA/NAREIT Developed REITs Index (REITs). 10-year correlations are based on monthly returns from 30/6/07 – 30/6/17, and 3-year correlations from 30/6/14 – 30/6/17. Guide to the Markets – Asia 3Q 2017. Data reflect most recently available as of 30/6/17.
10-year correlations
3-year correlations
MSCI Asia ex Japan EME S&P500 Asian USD
Bond USD EMD EM Corp European High Yield
U.S. High Yield U.S. Agg U.S. Dollar
(DXY)Brent Crude
Oil Gold REITs
MSCI Asia ex Japan 1.00 0.98 0.75 0.67 0.68 0.70 0.69 0.74 0.17 -0.54 0.39 0.20 0.66
EME 0.97 1.00 0.78 0.67 0.70 0.72 0.70 0.76 0.16 -0.57 0.44 0.22 0.68
S&P500 0.61 0.64 1.00 0.55 0.59 0.61 0.64 0.73 0.03 -0.51 0.38 0.03 0.81
Asian USD Bond 0.60 0.62 0.35 1.00 0.93 0.95 0.64 0.73 0.62 -0.50 0.25 0.43 0.65
USD EMD 0.60 0.67 0.45 0.85 1.00 0.91 0.62 0.76 0.60 -0.57 0.31 0.38 0.69
EM Corp 0.67 0.76 0.60 0.76 0.91 1.00 0.72 0.79 0.51 -0.50 0.41 0.37 0.63
European High Yield 0.51 0.56 0.69 0.38 0.45 0.60 1.00 0.87 0.09 -0.32 0.48 0.10 0.62
U.S. High Yield 0.63 0.73 0.67 0.57 0.74 0.87 0.75 1.00 0.23 -0.47 0.45 0.16 0.77
U.S. Agg 0.17 0.18 -0.07 0.79 0.56 0.37 0.06 0.22 1.00 -0.26 -0.15 0.40 0.30
U.S. Dollar (DXY) -0.33 -0.41 -0.13 -0.21 -0.43 -0.37 0.04 -0.35 -0.05 1.00 -0.35 -0.40 -0.51
Brent Crude Oil 0.29 0.39 0.38 0.03 0.40 0.52 0.37 0.57 -0.28 -0.34 1.00 0.19 0.19
Gold 0.14 0.17 -0.13 0.51 0.45 0.31 -0.14 0.24 0.56 -0.38 -0.08 1.00 0.12
REITs 0.49 0.48 0.54 0.69 0.55 0.46 0.39 0.45 0.61 -0.07 -0.11 0.19 1.00
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0.0%
0.2%
0.4%
0.6%
0.8%
1.0%
1.2%
0%
1%
2%
3%
4%
5%
'07 '08 '09 '10 '11 '12 '13 '14 '15 '16
0
20
40
60
80
100
120
< -2% < -1% < -0.5% < 0% < 0.5% < 1% < 2% < 4% > 4%
Equity* Fixed income*
Volatility
Source: FactSet, J.P. Morgan Asset Management; (Top) Bloomberg Finance L.P.*Realized volatility is measured by the rolling 3-month standard deviation of daily returns. Equities are represented by the S&P 500 Index, fixed income by the Bloomberg Barclays U.S. Aggregate Bond index and the dollar by the DXY index. **Low VIX is defined as more than one standard deviation below the mean. Returns analysis encompasses 20 years of daily data. ***The VIX-CBOE Volatility Index measures market expectations of near-term volatility conveyed by S&P 500 Index (SPX) option prices. Guide to the Markets – Asia 3Q 2017. Data reflect most recently available as of 30/6/17.
U.S. equity market returns in low volatility periodsDistribution of 1-month price returns when VIX is low**
VIX index***
Equity, fixed income and dollar realized volatilityStandard deviation of rolling 3-month daily % change
U.S. dollar*
Negative return
Positive return
0
10
20
30
40
50
60
70
80
90
'07 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17
Average return: 0.3%% of return positive: 64.2%
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USD rising and U.S. 10-year yield rising*
Treasury yield and asset class performance
Source: Barclays, Bloomberg Finance L.P., FactSet, MSCI, J.P. Morgan Asset Management. Based on MSCI World Index (DM Equity), MSCI Emerging Market Index (EM Equity), Bloomberg Barclays US Aggregate Index (US Agg.), Bloomberg Barclays U.S. Aggregate Credit High Yield Corporate Index (U.S. HY), Gold NYM $/ozt (Gold). *Trigger to count returns is if the dollar rose more than 2% in prior 12 months. Trigger to count returns is if the 10-year yield rose more than 50bps in prior 12 months. Returns based on monthly returns from 31/1/94 – 30/6/17.Guide to the Markets – Asia 3Q 2017. Data reflect most recently available as of 30/6/17.
USD flat/falling and U.S. 10-year yield rising*
12-month rolling return3-month rolling return annualized
12-month rolling return3-month rolling return annualized
0%
5%
10%
15%
20%
25%
30%
35%
DM Equity EM Equity US Agg U.S. HY Gold-15%
-10%
-5%
0%
5%
10%
15%
20%
25%
30%
35%
DM Equity EM Equity US Agg U.S. HY Gold
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70
80
90
100
110
120
130
'73 '77 '81 '85 '89 '93 '97 '01 '05 '09 '13 '17
Currencies
Source: FactSet, J.P. Morgan Asset Management; (Top) Bloomberg Finance L.P., U.S. Federal Reserve; (Bottom) J.P. Morgan Economic Research.*The real trade-weighted exchange rate index is the weighted average of a country’s currency relative to a basket of other major currencies adjusted for the effects of inflation. The weights are determined by comparing the relative trade balances, in terms of one country’s currency, with other countries within the basket. **The Dollar Index is a trade-weighted index calculated using 7 major U.S. trade partners’ currencies – Australian dollar, British pound, Canadian dollar, euro, Japanese yen, Swedish kroner and Swiss franc. ***Data as of 30/4/13 has been used for pre-Taper Tantrum period. Guide to the Markets – Asia 3Q 2017. Data reflect most recently available as of 30/6/17.
Currency deviation from 10-year average in real effective exchange rate* termsNumber of standard deviations away from average
U.S. dollar performance
6 years: +52.7%
7 years: +34.2%
Average: 91.4
Average: 95.8
U.S. Dollar Index (DXY)**Real trade-weighted exchange rate index (REER)*
5 years: +28.1%
6/2017: 95.6 5/2017: 99.3
FX above long-term average
FX belowlong-term average
Current valuation
Max
Min
Pre-Taper Tantrum***
-1.9 -1.8 -1.5 -1.3 -1.1-0.9 -0.9 -0.9 -0.5 -0.4 -0.3
0.1 0.5 0.6 0.7 0.8 0.9 0.9 1.51.8 1.9
-4
-2
0
2
4
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-60
-40
-20
0
20
40
60
'05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17
Current account balance and EM flows
Source: J.P. Morgan Asset Management; (Top) IMF; (Bottom) Institute of International Finance.*Forecast provided by IMF World Economic Outlook April 2017. Guide to the Markets – Asia 3Q 2017. Data reflect most recently available as of 30/6/17.
Portfolio debt and equity inflows into emerging marketsUSD billions, monthly
Current account balanceShare of GDP 2012
2017*
EM debt
EM equitiesTotal flows
-8%
-4%
0%
4%
8%
12%
16%
20%
Singapore Taiwan Thailand Korea Russia China Malaysia Philippines Brazil India Indonesia Mexico SouthAfrica
Turkey
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-3 -2 -1 0 1 2 3 4
BloombergCommodity
Index
Agriculture
Oil
Precious Metals
Gold
Industrial Metals
Livestock
Natural Gas
Example
Commodities
Source: Bloomberg Finance L.P., FactSet, J.P. Morgan Asset Management; (Left) CME; (Right) Barclays, J.P. Morgan Economic Research, MSCI. Commodity prices are represented by the appropriate Bloomberg Commodity sub-index in USD. Crude oil shown is Brent crude. Other commodity prices are represented by futures contracts. Z-scores are calculated using daily prices over the past 5 years. Based on Bloomberg Commodity Index (Comdty.); MSCI ACWI Select – Energy Producers IMI, Metals & Mining Producers ex Gold & Silver IMI, Gold Miners IMI, Agriculture Producers IMI (Energy (E), M&M (E), Gold (E), Agri. (E)); Bloomberg Barclays Global Aggregate Credit – Corporate Energy Index (Energy (FI)); Bloomberg Barclays U.S. Aggregate Credit – Corporate High Yield Metals & Mining Index (U.S. M&M (FI)); Bloomberg Barclays Euro Aggregate Credit – Corporate Metals & Mining Index (Euro M&M (FI)); J.P. Morgan Emerging Market Corporate Credit – Corporate Metals & Mining Index (EM M&M (FI)). 5-year total return data is used to calculate annualized returns (Ann. Ret.) and 5-year price return data is used to calculate annualized volatility (Ann. Vol.) and reflects the period 31/12/11 – 31/12/16. Guide to the Markets – Asia 3Q 2017. Data reflect most recently available as of 30/6/17.
Commodity pricesCommodity price z-scores
Returns
High levelCurrent
Low level
$46.0
$51.9
$32.1
$3.1
$26.2 $110.5
$97.4
$41.6
$6.1$1.6
$23.0
$49.2
$278.1$143.8$167.7
$1796.5$1049.6$1242.3
$162.7$84.2$114.5
$152.0$72.9$82.6
2012 2013 2014 2015 2016 2Q '17 YTD '17 Ann. Ret. Ann. Vol.EM M&M
(FI)Ene rgy
(E)Euro
M&M (FI)Ene rgy
(FI)Gold (E) Agri. (E) Agri. (E) EM M&M
(FI)Gold (E)
18 .8 % 13 .8 % 8 .6 % - 7 .3 % 6 2 .9 % 3 .5 % 7 .7 % 6 .0 % 3 7 .2 %
Agri. (E) US M&M (FI)
Ene rgy (FI)
EM M&M (FI)
M&M (E) Ene rgy (FI)
EM M&M (FI)
US M&M (FI)
M&M (E)
18 .7 % 7 .5 % 2 .1% - 10 .9 % 5 7 .8 % 2 .9 % 6 .8 % 4 .6 % 2 6 .7 %
Euro M&M (FI)
Agri. (E) Agri. (E) Agri. (E) US M&M (FI)
US M&M (FI)
M&M (E) Agri. (E) Ene rgy (E)
10 .7 % 5 .1% - 0 .2 % - 13 .7 % 4 5 .5 % 1.7 % 5 .0 % 4 .5 % 17 .9 %
US M&M (FI)
Euro M&M (FI)
EM M&M (FI)
Euro M&M (FI)
EM M&M (FI)
EM M&M (FI)
US M&M (FI)
Euro M&M (FI)
Comdty.
9 .4 % 1.1% - 0 .8 % - 16 .1% 3 2 .4 % 1.3 % 4 .7 % 4 .4 % 14 .6 %
Ene rgy (FI)
Ene rgy (FI)
US M&M (FI)
Ene rgy (E)
Ene rgy (E)
Euro M&M (FI)
Ene rgy (FI)
Ene rgy (FI)
Agri. (E)
9 .3 % - 1.0 % - 4 .4 % - 2 0 .6 % 2 9 .2 % - 0 .1% 4 .4 % 2 .6 % 13 .8 %
M&M (E) EM M&M (FI)
Ene rgy (E)
US M&M (FI)
Euro M&M (FI)
M&M (E) Gold (E) Ene rgy (E)
US M&M (FI)
5 .4 % - 3 .5 % - 15 .1% - 2 3 .7 % 2 1.9 % - 2 .4 % 2 .2 % 0 .2 % 12 .9 %
Ene rgy (E)
M&M (E) Gold (E) Comdty. Agri. (E) Comdty. Euro M&M (FI)
M&M (E) EM M&M (FI)
1.8 % - 7 .3 % - 16 .4 % - 2 4 .7 % 15 .7 % - 3 .0 % 1.0 % - 5 .6 % 11.3 %
Comdty. Comdty. Comdty. Gold (E) Comdty. Ene rgy (E)
Comdty. Comdty. Euro M&M (FI)
- 1.1% - 9 .5 % - 17 .0 % - 2 6 .3 % 11.8 % - 4 .7 % - 5 .3 % - 9 .0 % 8 .1%
Gold (E) Gold (E) M&M (E) M&M (E) Ene rgy (FI)
Gold (E) Ene rgy (E)
Gold (E) Ene rgy (FI)
- 13 .9 % - 5 2 .0 % - 19 .0 % - 4 0 .1% 11.1% - 5 .9 % - 9 .3 % - 16 .1% 5 .2 %
2012 - 2016
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-1.0
-0.5
0.0
0.5
1.0
1.5
2.0
2.5
'15 '16 '17 '18
U.S. oil inventory and rig count* Number of rigs Billion barrels
Oil: Short-term market dynamics
Source: FactSet, J.P. Morgan Asset Management; (Top right) Baker Hughes, U.S. Department of Energy; (Bottom right) U.S. Energy Information Administration.*Weekly U.S. crude oil and petroleum ending inventory includes strategic petroleum reserve, and active rig count represents both natural gas and oil rigs.Guide to the Markets – Asia 3Q 2017. Data reflect most recently available as of 30/6/17.
Brent crude and dollar exchange rateUSD / bbl USD real effective exchange rate
Crude oil production growthYear-over-year change, million barrels per day
USD depreciation
USD appreciation
Brent crude oil USD REER (inverted )Rig count U.S. oil inventory
ForecastOPEC + RussiaU.S.
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Gold price TIPS yield (inverted)
-500
0
500
1,000
1,500
2,000
2,500
Jewellery Total bar & coindemand
ETFs & similarproducts
Central banks &other inst.
Technology
Gold and real rates USD / Troy oz U.S. 10-year Treasury inflation-protected security
Global gold demand by sector*Tonnes
Gold
Source: J.P. Morgan Asset Management; (Left) FactSet, U.S. Federal Reserve; (Top right and bottom right) World Gold Council; (Bottom right) Bloomberg Finance L.P. *Gold demand is calculated by World Gold Council. **Average Net Asset Value (NAV) is calculated from daily reported NAV of the current top three gold-focused exchange traded funds (ETFs) by gold assets under management, weighted by their physical gold ownership.Guide to the Markets – Asia 3Q 2017. Data reflect most recently available as of 30/6/17.
Net asset value of gold ETFsAverage NAV**, USD per share
20162015
60
80
100
120
140
160
180
'08 '09 '10 '11 '12 '13 '14 '15 '16 '17
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Alternative sources of income
Source: Alerian, Bank of America, Bloomberg Finance L.P., Clarkson, Drewry Maritime Consultants, FactSet, Federal Reserve, FTSE, MSCI, NCREIF, Standard & Poor’s, J.P. Morgan Asset Management. Maritime = Unlevered yields for maritime assets are calculated as the difference between charter rates (rental income) and operating expenses as a percentage of current asset value. Yields for each of the sub-vessel types above are calculated and the respective weightings are applied to arrive at the current sub-sector specific yields, which are then weighted to arrive at the current indicative yield for the World Maritime Fleet. Asset classes are based on NCREIF ODCE (Private Real Estate), FTSE NAREIT Global/USA REITs (Global/U.S. REITs), MSCI Global Infrastructure Asset Index (Infrastructure Assets), Bloomberg Barclays U.S Convertibles Composite (Convertibles), J.P. Morgan Government Bond Index EM Global (GBI-EM) (Local EMD), J.P. Morgan Emerging Market Bond Index Global (EMBIG) (USD EMD), J.P. Morgan Asia Credit Index Non-investment Grade Corporate (Asia HY bonds), MSCI Emerging Markets (EM Equity), MSCI The World Index (DM Equity), MSCI Emerging Markets High Dividend Yield Index (EM High Div. Equity), MSCI The World High Dividend Yield Index (DM High Div. Equity), MSCI Europe (Eur. Equity), MSCI USA (U.S. Equity). Maritime yield is as of (31/12/16), Infrastructure (31/3/17), EM High Div. Equity and DM High Div. Equity (31/5/17).Guide to the Markets – Asia 3Q 2017. Data reflect most recently available as of 30/6/17.
Asset class yields
EquityFixed IncomeAlternatives
6.9% 6.9%
6.3%
5.6%
5.1%
4.6%
4.2%4.0% 3.9%
3.7% 3.6%3.3%
2.4% 2.4% 2.3%2.0%
0%
2%
4%
6%
8%
Local cur.EMD
Asia HYbonds
Maritime USDEMD
InfrastructureAssets
EM HighDiv. Equity
GlobalREITs
U.S.REITs
Private RealEstate
DM HighDiv. Equity
Convertibles Eur.Equity
EMEquity
DMEquity
U.S.10-year
U.S.Equity
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Inve
stin
g pr
inci
ples
2.4%3.2%
0.8% 0.3%1.3%
0.4%
-0.4%
0.3%
-0.5%
0.7%1.8%
-0.1%
1.7% 1.1%0.3% 0.4% 0.3%
-1.6%
0.2%
-1.1% -0.9%
-3.3%
2.2%
0.3% 0.1%
0.0% -0.4% -0.7% -0.7% -0.9%-1.7%
-2.3% -2.6%
-6%
-3%
0%
3%
6%
India Korea Australia Thailand Taiwan Japan Singapore China Malaysia U.S. Hong Kong
Real return on cash and yields
Source: FactSet, various central banks, J.P. Morgan Asset Management; (Top) IMF.*YTD average annual real deposit rate is as of 31/5/17, expect for Malaysia (30/4/17) and Japan (31/3/17). **Real yield based on the last 12-month average CPI for each respective country. Nominal yields are the 10-year government bond yield for each respective country.Guide to the Markets – Asia 3Q 2017. Data reflect most recently available as of 30/6/17.
Real and nominal yields**
Average annual real deposit rateBased on respective country’s deposit rate less year-over-year inflation
Nominal yieldReal yield
2000 – 20082009 – 20162017 YTD*
0.5% 0.7% 1.3%
0.0%0.1% 0.8% 1.5% 1.8% 2.3% 2.2% 2.6% 2.2%
3.5% 2.5%
6.7% 6.8% 6.8%
10.2%
7.6%
-0.8% -0.7% -0.3%
-0.1%
0.0% 0.1%0.2% 0.3% 0.5% 0.8% 1.1% 1.4%
1.8% 1.9%2.6% 2.8% 3.2% 3.6%
13.3%
-1%
3%
7%
11%
15%
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Global households’ financial asset allocation by region
Source: CEIC, Central Bank of the Republic of China (Taiwan), Goldman Sachs Global Investment Research, Hong Kong Securities and Futures Commission, OECD, Statistics Singapore, J.P. Morgan Asset Management. Eurozone includes Austria, Belgium, Estonia, Finland, France, Germany, Greece, Ireland, Italy, Luxembourg, Netherlands, Portugal, Slovakia, Slovenia and Spain due to data availability. Hong Kong data are based on Stock Investor Survey (2006) by the Hong Kong Securities and Futures Commission, insurance is included in Others and pension is not included due to data availability. Equities and fixed income in total made up of 15% of Singapore households’ financial assets, simple 50/50 is taken for illustration purpose. China data are based on OECD, CEIC and Davies et al. (2009) paper, which was provided by Goldman Sachs Global Investment Research. Total may not sum to 100% due to rounding.Guide to the Markets – Asia 3Q 2017. Data reflect most recently available as of 30/6/17.
Households’ financial asset class breakdown
36%
7%12%7%
28%
11%
TaiwanHong Kong Singapore Korea
JapanUnited States Eurozone AustraliaUnited Kingdom
Cash and deposits Fixed income Equities Mutual funds Insurance and pensions Other
14%
9%
31%11%
32%
3%
29%
1%9%
2%
54%
4%
54%
3%
9%4%
26%
4%
22%
17%
1%
57%
2%
45%
1%
30%
7%
0% 16%
45%
9%
17%
23%
5%
36%
8%8%
5%
44% 42%
21%2%
22%
12%
72%7%
2% 11%7%
China
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ples
400
600
800
1,000
1,200
1,400
1,600
1,800
2,000
2,200
2,400
2,600
-80
-60
-40
-20
0
20
40
60
80
100
120
'95 '97 '99 '01 '03 '05 '07 '09 '11 '13 '15 '17
Investors’ market timing
Source: FactSet, Standard & Poor’s, J.P. Morgan Asset Management; (Left) Investment Company Institute (ICI).*More than 9,000 trading days used to calculate the total cumulative price return of S&P 500 since 1/1/80. Guide to the Markets – Asia 3Q 2017. Data reflect most recently available as of 30/6/17.
Market timing of retail investorsRolling 3-month U.S. equity flows (USD billions) S&P 500 Index
S&P 500 cumulative price return since 1980*Hypothetical investment of $100,000
S&P 500Mutual fund + ETF flows
Under different scenarios
Actual loss from missing daysImplied compounding loss
2,245,1442,012,123
1,375,247
1,083,378
840,170
11,581
45,465
75,781
101,862
221,440
824,433
1,085,985 1,303,113
0
400,000
800,000
1,200,000
1,600,000
2,000,000
2,400,000
Stayinvested
Missed top1 day
Missed top5 days
Missed top10 days
Missed top15 days
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ples
Annual returns and intra-year declines
Source: FactSet, MSCI, J.P. Morgan Asset Management.Returns are price returns based on MSCI AC Asia Pacific ex-Japan Index in U.S. dollar terms. Intra-year decline is the largest peak to trough decline during the respective year. Guide to the Markets – Asia 3Q 2017. Data reflect most recently available as of 30/6/17.
MSCI AC Asia Pacific ex-Japan intra-year declines vs. calendar year returnsDespite average intra-year drops of -20% (median: -17%), annual returns are positive in 19 of 30 years (63%)
Calendar year returnIntra-year decline
26%
17%
-16%
27%
6%
80%
-14%
4%9%
-36%
-7%
47%
-31%
-5% -8%
44%
19% 17%
29%33%
-53%
68%
15%
-18%
19%
0%
0%
-12%
4%
18%
-10% -14%
-24%
-8% -12%-5%
-21%
-12% -11%
-41% -40%
-13%
-34% -34%
-25%
-13%-18%
-9%
-18% -19%
-62%
-21% -19%
-30%
-16% -16% -13%
-27%
-13%
-2%
-80%
-60%
-40%
-20%
0%
20%
40%
60%
80%
100%
'88 '90 '92 '94 '96 '98 '00 '02 '04 '06 '08 '10 '12 '14 '16
YTD
|GTM – Asia 64
64
Inve
stin
g pr
inci
ples
-0.7% -1.8% -0.9% -0.3%
2.0% 1.5% 1.9%3.9% 4.9% 5.5% 5.8%
-8.2% -7.2% -5.1%-3.3%
-1.2% 0.1% -2.4% -0.5% 0.9%
4.9%2.0%
4.0% 3.5% 3.2%1.8% 3.1%
4.4%4.3%
4.5% 4.3%5.5%
1.5% 2.0% 2.3% 2.0% 1.7% 3.2% 3.0% 2.6%3.4%
3.3%
-10%
-5%
0%
5%
10%
15%
Japan Australia Singapore Malaysia Korea China Taiwan HongKong
Philippines Indonesia Thailand Russia Poland Brazil Turkey Mexico SouthAfrica
Europe EM(EmergingMarkets)
AC AsiaPacific
ex-Japan
U.S.(S&P 500)
0
2,000
4,000
6,000
8,000
'70 '75 '80 '85 '90 '95 '00 '05 '10 '15
The compounding effect
Source: FactSet, MSCI, J.P. Morgan Asset Management.*Reinvestment in cash based on the same month U.S. 3-month Treasury bill (secondary market) yield.**Returns are total (gross) returns based on MSCI indices in U.S. dollar terms. Guide to the Markets – Asia 3Q 2017. Data reflect most recently available as of 30/6/17.
Total return**: Dividends vs. capital appreciationAverage annualized returns over 10 years
MSCI World Index: Performance under different scenariosIndex 100 = 1970
Annualized return Total return (dividends received and reinvested back into equities) 9.5%Total return (dividends received and reinvested in cash)* 8.8%Total return (dividends received but not reinvested) 7.2%Price return 6.4%
Capital appreciationDividends with compounding
Asia Pacific Other EM Regions
5,580
7,637
2,742
1,916
|GTM – Asia 65
65
Inve
stin
g pr
inci
ples
Portfolio construction, asset class returns and volatility
Source: Bloomberg Finance L.P., Dow Jones, FactSet, MSCI, Standard & Poor’s, J.P. Morgan Asset Management. Hypothetical portfolios were created to illustrate different risk/return profiles and are not meant to represent actual asset allocation. USD total return calculations are based on MSCI Total Return, Bloomberg Barclays and J.P. Morgan indices. AxJ stands for MSCI AC Asia ex-Japan and APxJ stands for MSCI AC Asia Pacific ex-Japan. *Monthly total returns between 30/6/02 and 30/6/17 used for all asset classes.Past performance is not necessarily indicative of future performance.Guide to the Markets – Asia 3Q 2017. Data reflect most recently available as of 30/6/17.
Annualized returns and volatilityTotal returns in USD*
Annualized volatility
Annu
aliz
ed re
turn
s
EquitiesBonds and cash
Portfolios
High dividend (HD) equities
Alternatives
Hypothetical portfolio constructionConservative Balanced Aggressive
DM equities 10% 30% 20%EM equities 5% 10% 40%U.S. HY 10% 15% 10%U.S. bonds 25% 10% 5%Cash 35% 10% 0%EMD 10% 15% 5%REITs 5% 10% 20%
DM
EM
Europe
AxJ
APxJ
U.S.U.S. HY
U.S. bonds
Cash
Hedge fund - mkt neutral
Hedge fund - macro
Hedge fund - distressed
Hedge fund - rel val
Private real estate
APxJ HD
AxJ HD
DM HD
EM HD
Gold
Commodities
REITs
EMD
Asian bonds
Conservative
Balanced
Aggressive
-2%
0%
2%
4%
6%
8%
10%
12%
14%
0% 5% 10% 15% 20% 25%
|GTM – Asia 66
66
Inve
stin
g pr
inci
ples
406080
100120140160180200220
'06 '07 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17
The benefits of diversification and long-term investing
Source: Bloomberg Finance L.P., FactSet, J.P. Morgan Asset Management; (Top) Robert Shiller, Strategas/Ibbotson, U.S. Federal Reserve; (Bottom) MSCI. Returns shown are based on calendar year returns from 1950 to 2016. Large cap equity represents the S&P 500 Shiller Composite and bonds represents the Strategas/Ibbotson for periods from 1950 to 1980 and the Bloomberg Barclays Aggregate after index inception in 1980.Global equities represented by MSCI AC World Index, global bonds represented by Bloomberg Barclays Aggregate Global Bond Index.Guide to the Markets – Asia 3Q 2017.Data reflect most recently available as of 30/6/17.
Portfolio returns: Global equities, global bonds vs. equity and fixed income blendTotal returns, rebased 2006 = 100
Range of U.S. equity, U.S. bond and blended total returnsAnnual total returns, 1950-2016
-39%
-8%-15%
-3% -2% 1% -1% 1% 2% 7% 1% 5%
47% 43%33% 28%
23% 21% 19% 16% 16% 17%12%
14%
-50%-40%-30%-20%-10%
0%10%20%30%40%50%
Large cap equityBonds50/50 portfolio
1-yr rolling 5-yr rolling 10-yr rolling 20-yr rolling
Portfolio returns since 2006 Annualized return
Annualized volatility
Global equities 6.4% 16.1%Global bonds 3.8% 5.7%50/50 equity & bond mix 5.2% 9.1%
|GTM – Asia 67
67
Inve
stin
g pr
inci
ples
The benefits of saving and investing early
Source: J.P. Morgan Asset Management; (Left) National Development Council of Taiwan (NDC), UN. For illustrative purposes only, assumes a 5% return on investments and a 2% return on cash. Actual investments may incur higher or lower growth rates and charges. *All data from UN except Taiwan from NDC. Guide to the Markets – Asia 3Q 2017. Data reflect most recently available as of 30/6/17.
Aging populationPopulation over 65
Accumulation of investment at 5% growth per yearInvestment return
20252000
2050
0%
5%
10%
15%
20%
25%
30%
35%
40%
Korea Australia China Singapore HongKong
Japan Taiwan*
$1,395,216
$2,536,795
$1,232,200
$0
$500,000
$1,000,000
$1,500,000
$2,000,000
$2,500,000
$3,000,000
25 30 35 40 45 50 55 60 65Age
Blue invests $20,000 annually between the ages of 25 and 65
Orange invests $20,000 annually between the ages of 35 and 65
Green invests $20,000 annually in cash only between the ages of 25 and 65
68
J.P. Morgan Asset Management: Index DefinitionsAll indexes are unmanaged and an individual cannot invest directly in an index. Index returns do not include fees or expenses. The S&P 500 Index is widely regarded as the best single gauge of the U.S. equities market. This world-renowned index includes a representative sample of 500 leading companies in leading industries of the U.S. economy. Although the S&P 500 Index focuses on the large-cap segment of the market, with approximately 75% coverage of U.S. equities, it is also an ideal proxy for the total market. An investor cannot invest directly in an index. The Tokyo Stock Price Index ('TOPIX') is a composite index of all common stocks listed on the First Section of Tokyo Stock Exchange (TSE).The index is basically a measure of the changes in aggregate market value of TSE common stocks. The base for the index is the aggregate market value of its component stocks as of the close on January 4, 1968. The aggregate market value is calculated by multiplying the number of listed shares of each component stock by its price and totaling the products derived there from.The Bombay Exchange Sensitive Index (‘SENSEX), first compiled in 1986, was calculated on a "Market Capitalization-Weighted" methodology of 30 component stocks representing large, well-established and financially sound companies across key sectors. The base year of SENSEX was taken as 1978-79. SENSEX today is widely reported in both domestic and international markets through print as well as electronic media. It is scientifically designed and is based on globally accepted construction and review methodology. Since September 1, 2003, SENSEX is being calculated on a free-float market capitalization methodology.The Korea Composite Stock Price Index (‘KOSPI) is market capitalization based index on all common stocks listed on the Stock Market Division of the Korea Exchange (KRX) and excludes preferred stocks. The stock price index is calculated using the actual price traded on the market and not the “base price” used for market management such as establishment of price change limits. When no market price is available for issues that are not being traded or have halted trading, the latest closing price is used. KOSPI was a assigned a base index of 100 set to January 4, 1980.The China Shenzhen Composite Index is an actual market-cap weighted index that tracks the stock performance of all the A-share and B-share lists on Shenzhen Stock Exchange. The index was developed on April 3, 1991 with a base price of 100. The MSCI® EAFE (Europe, Australia, Far East) Net Index is recognized as the pre-eminent benchmark in the United States to measure international equity performance. It comprises 21 MSCI country indexes, representing the developed markets outside of North America. The MSCI Emerging Markets IndexSM is a free float-adjusted market capitalization index that is designed to measure equity market performance in the global emerging markets. As of June 2007, the MSCI Emerging Markets Index consisted of the following 25 emerging market country indices: Argentina, Brazil, Chile, China, Colombia, Czech Republic, Egypt, Hungary, India, Indonesia, Israel, Jordan, Korea, Malaysia, Mexico, Morocco, Pakistan, Peru, Philippines, Poland, Russia, South Africa, Taiwan, Thailand, and Turkey.The MSCI ACWI (All Country World Index) Index is a free float-adjusted market capitalization weighted index that is designed to measure the equity market performance of developed and emerging markets. As of June 2009 the MSCI ACWI consisted of 45 country indices comprising 23 developed and 22 emerging market country indices.The following MSCI Total Return IndicesSM are calculated with gross dividends:This series approximates the maximum possible dividend reinvestment. The amount reinvested is the dividend distributed to individuals resident in the country of the company, but does not include tax credits.The MSCI Europe IndexSM is a free float-adjusted market capitalization index that is designed to measure developed market equity performance in Europe. As of June 2007, the MSCI Europe Index consisted of the following 16 developed market country indices: Austria, Belgium, Denmark, Finland, France, Germany, Greece, Ireland, Italy, the Netherlands, Norway, Portugal, Spain, Sweden, Switzerland and the United Kingdom. The MSCI Pacific IndexSM is a free float-adjusted market capitalization index that is designed to measure equity market performance in the Pacific region. As of June 2007, the MSCI Pacific Index consisted of the following 5 Developed Market countries: Australia, Hong Kong, Japan, New Zealand, and Singapore.
The MSCI Europe ex UK IndexSM is a free float-adjusted market capitalization weighted index that is designed to measure the equity market performance of the developed markets in Europe, excluding the United Kingdom. The MSCI Europe ex UK Index consists of the following 15 developed market country indices: Austria, Belgium, Denmark, Finland, France, Germany, Greece, Ireland, Italy, the Netherlands, Norway, Portugal, Spain, Sweden, and Switzerland.The MSCI Pacific ex Japan IndexSM is a free float-adjusted market capitalization index that is designed to measure equity market performance in the Pacific region, excluding Japan. As of June 2007, the MSCI Pacific Index consisted of the following 4 Developed Market countries: Australia, Hong Kong, New Zealand, and Singapore. The MSCI USA IndexSM is designed to measure the performance of the large and mid cap segments of the U.S. market. With 586 constituents, the index covers approximately 84% of the free float-adjusted market capitalization in the U.S.. The MSCI USA Index was launched on Dec ember 31, 1969.The MSCI China IndexSM captures large and mid cap representation across China H shares, B shares, Red chips and P chips. With 148 constituents, the index covers about 84% of this China equity universe. The MSCI China Index was launched on December 31, 1992.The MSCI Indonesia IndexSM is designed to measure the performance of the large and mid cap segments of the Indonesian market. With 25 constituents, the index covers about 84% of the Indonesian equity universe. The MSCI Indonesia Index was launched on December 31, 1990.The MSCI Korea IndexSM is designed to measure the performance of the large and mid cap segments of the South Korean market. With 105 constituents, the index covers about 84% of the Korean equity universe. The MSCI Korea Index was launched on December 31, 1989.The MSCI India IndexSM is designed to measure the performance of the large and mid cap segments of the Indian market. With 71 constituents, the index covers about 84% of the Indian equity universe. The MSCI India Index was launched on December 31, 1993.The MSCI Japan IndexSM is designed to measure the performance of the large and mid cap segments of the Japan market. With 315 constituents, the index covers approximately 84% of the free float-adjusted market capitalization in Japan. The MSCI Japan Index was launched on December 31, 1969.The MSCI Hong Kong IndexSM is designed to measure the performance of the large and mid cap segments of the Hong Kong market. With 42 constituents, the index covers approximately 84% of the free float-adjusted market capitalization of the Hong Kong equity universe. The MSCI Hong Kong Index was launched on December 31, 1972.The MSCI Taiwan IndexSM is designed to measure the performance of the large and mid cap segments of the Taiwan market. With 113 constituents, the index covers approximately 84% of the free float-adjusted market capitalization in Taiwan. The MSCI Taiwan Index was launched on December 31, 1989.West Texas Intermediate (WTI) is the underlying commodity for the New York Mercantile Exchange's oil futures contracts. The Bloomberg Commodity Index is calculated on an excess return basis and reflects commodity futures price movements. The index rebalances annually weighted 2/3 by trading volume and 1/3 by world production and weight-caps are applied at the commodity, sector and group level for diversification. Roll period typically occurs from 6th-10th business day based on the roll schedule.The Bloomberg Commodity Subindexes represent commodity groups and sectors, as well as single commodities, that make up the Bloomberg Commodity Index. The subindexes track exchange-traded futures of physical commodities, and the commodity groups and sectors, like in the case of the broad index, are weighted to account for economic significance and market liquidity. The various subindexes include Agriculture, Energy, Livestock, Grains, Industrial Metals, Precious Metals and Softs.
69
The Euro Stoxx 600 Index represents large, mid and small capitalization companies across 18 European countries.The Bloomberg Barclays High Yield Index covers the universe of fixed rate, non-investment grade debt. Pay-in-kind (PIK) bonds, Eurobonds, and debt issues from countries designated as emerging markets (e.g., Argentina, Brazil, Venezuela, etc.) are excluded, but Canadian and global bonds (SEC registered) of issuers in non-EMG countries are included. Original issue zeroes, step-up coupon structures, and 144-As are also included.The Bloomberg Barclays 1-3 Month U.S. Treasury Bill Index includes all publicly issued zero-coupon U.S. Treasury Bills that have a remaining maturity of less than 3 months and more than 1 month, are rated investment grade, and have $250 million or more of outstanding face value. In addition, the securities must be denominated in U.S. dollars and must be fixed rate and non convertible.The Bloomberg Barclays Corporate Bond Index is the Corporate component of the U.S. Credit index.The Bloomberg Barclays TIPS Index consists of Inflation-Protection securities issued by the U.S. Treasury.The J.P. Morgan EMBI Global Index includes U.S. dollar denominated Brady bonds, Eurobonds, traded loans and local market debt instruments issued by sovereign and quasi-sovereign entities.The J.P. Morgan GBI-EM Global Diversified consists of regularly traded, liquid fixed-rate, domestic currency government bonds to which international investors can gain exposure. The weightings among the countries are more evenly distributed within this index.The J.P. Morgan Corporate Emerging Markets Bond Index (CEMBI): The CEMBI tracks total returns of US dollar-denominated debt instruments issued by corporate entities in Emerging Markets countries, and consists of an investable universe of corporate bonds.The J.P. Morgan Domestic High Yield Index is designed to mirror the investable universe of the U.S. dollar domestic high yield corporate debt market.The VIX-CBOE Volatility Index measures market expectations of near-term volatility conveyed by S&P 500 Index (SPX) option prices. The MOVE-Merrill Lynch Option Volatility Index is a blended implied normal volatility for constant one-month at-the-money options on U.S. Treasuries.
Price to forward earnings is a measure of the price-to-earnings ratio (P/E) using forecasted earnings. Price to book value compares a stock's market value to its book value. Price to cash flow is a measure of the market's expectations of a firm's future financial health. Price to dividends is the ratio of the price of a share on a stock exchange to the dividends per share paid in the previous year, used as a measure of a company's potential as an investment.Bonds are subject to interest rate risks. Bond prices generally fall when interest rates rise.The price of equity securities may rise, or fall because of changes in the broad market or changes in a company’s financial condition, sometimes rapidly or unpredictably. These price movements may result from factors affecting individual companies, sectors or industries, or the securities market as a whole, such as changes in economic or political conditions. Equity securities are subject to “stock market risk” meaning that stock prices in general may decline over short or extended periods of time.Small-capitalization investing typically carries more risk than investing in well-established "blue-chip" companies since smaller companies generally have a higher risk of failure. Historically, smaller companies' stock has experienced a greater degree of market volatility than the average stock.Mid-capitalization investing typically carries more risk than investing in well-established "blue-chip" companies. Historically, mid-cap companies' stock has experienced a greater degree of market volatility than the average stock.Real estate investments may be subject to a higher degree of market risk because of concentration in a specific industry, sector or geographical sector. Real estate investments may be subject to risks including, but not limited to, declines in the value of real estate, risks related to general and economic conditions, changes in the value of the underlying property owned by the trust and defaults by borrower.International investing involves a greater degree of risk and increased volatility. Changes in currency exchange rates and differences in accounting and taxation policies can raise or lower returns. Also, some markets may not be as politically and economically stable as other nations. Investments in emerging markets can be more volatile. The normal risks of international investing are heightened when investing in emerging markets. In addition, the small size of securities markets and the low trading volume may lead to a lack of liquidity, which leads to increased volatility. Also, emerging markets may not provide adequate legal protection for private or foreign investment or private property.Investments in commodities may have greater volatility than investments in traditional securities, particularly if the instruments involve leverage. The value of commodity-linked derivative instruments may be affected by changes in overall market movements, commodity index volatility, changes in interest rates, or factors affecting a particular industry or commodity, such as drought, floods, weather, livestock disease, embargoes, tariffs and international economic, political and regulatory developments. Use of leveraged commodity-linked derivatives creates an opportunity for increased return but, at the same time, creates the possibility for greater loss.Derivatives may be riskier than other types of investments because they may be more sensitive to changes in economic or market conditions than other types of investments and could result in losses that significantly exceed the original investment. The use of derivatives may not be successful, resulting in investment losses, and the cost of such strategies may reduce investment returns.There is no guarantee that the use of long and short positions will succeed in limiting an investor's exposure to domestic stock market movements, capitalization, sector swings or other risk factors. Investing using long and short selling strategies may have higher portfolio turnover rates. Short selling involves certain risks, including additional costs associated with covering short positions and a possibility of unlimited loss on certain short sale positions.
J.P. Morgan Asset Management: Index Definitions, Risks and Disclosures
70
J.P. Morgan Asset Management: Risks and DisclosuresThe Market Insights program provides comprehensive data and commentary on global markets without reference to products. Designed as a tool to help clients understand the markets and support investment decision-making, the program explores the implications of current economic data and changing market conditions.
This document is a general communication being provided for informational purposes only. It is educational in nature and not designed to be as advice or a recommendation for any specific investment product, strategy, plan feature or other purpose in any jurisdiction, nor is it a commitment from J.P. Morgan Asset Management or any of its subsidiaries to participate in any of the transactions mentioned herein. Any examples used are generic, hypothetical and for illustration purposes only. This material does not contain sufficient information to support an investment decision and it should not be relied upon by you in evaluating the merits of investing in any securities or products. In addition, users should make an independent assessment of the legal, regulatory, tax, credit, and accounting implications and determine, together with their own professional advisers, if any investment mentioned herein is believed to be suitable to their personal goals. Investors should ensure that they obtain all available relevant information before making any investment. Any forecasts, figures, opinions or investment techniques and strategies set out are for information purposes only, based on certain assumptions and current market conditions and are subject to change without prior notice. All information presented herein is considered to be accurate at the time of production, but no warranty of accuracy is given and no liability in respect of any error or omission is accepted. It should be noted that investment involves risks, the value of investments and the income from them may fluctuate in accordance with market conditions and taxation agreements and investors may not get back the full amount invested. Both past performance and yields is not a reliable indicator of current and future results.
J.P. Morgan Asset Management is the brand for the asset management business of JPMorgan Chase & Co. and its affiliates worldwide. This communication is issued by the following entities: in the United Kingdom by JPMorgan Asset Management (UK) Limited, which is authorized and regulated by the Financial Conduct Authority; in other EEA jurisdictions by JPMorgan Asset Management (Europe) S.à r.l.; in Hong Kong by JF Asset Management Limited, or JPMorgan Funds (Asia) Limited, or JPMorgan Asset Management Real Assets (Asia) Limited; in Singapore by JPMorgan Asset Management (Singapore) Limited (Co. Reg. No. 197601586K), or JPMorgan Asset Management Real Assets (Singapore) Pte Ltd (Co. Reg. No. 201120355E); in Taiwan by JPMorgan Asset Management (Taiwan) Limited; in Japan by JPMorgan Asset Management (Japan) Limited which is a member of the Investment Trusts Association, Japan, the Japan Investment Advisers Association, Type II Financial Instruments Firms Association and the Japan Securities Dealers Association and is regulated by the Financial Services Agency (registration number “Kanto Local Finance Bureau (Financial Instruments Firm) No. 330”); in Korea by JPMorgan Asset Management (Korea) Company Limited; in Australia to wholesale clients only as defined in section 761A and 761G of the Corporations Act 2001 (Cth) by JPMorgan Asset Management (Australia) Limited (ABN 55143832080) (AFSL 376919); in Brazil by Banco J.P. Morgan S.A.; in Canada for institutional clients’ use only by JPMorgan Asset Management (Canada) Inc., and in the United States by JPMorgan Distribution Services Inc. and J.P. Morgan Institutional Investments, Inc., both members of FINRA/SIPC.; and J.P. Morgan Investment Management Inc.
In APAC, distribution is for Hong Kong, Taiwan, Japan and Singapore. For all other countries in APAC, to intended recipients only.
Copyright 2017 JPMorgan Chase & Co. All rights reserved.
Prepared by: David Kelly, Tai Hui, Kerry Craig, Yoshinori Shigemi, Marcella Chow, Akira Kunikyo, Jasslyn Yeo, Hannah Anderson, Ian Hui and Shogo Maekawa.
Unless otherwise stated, all data are as of June 30, 2017 or most recently available.
MI-GTMASIA-E JULY 2017
Material ID: 0903c02a81df5852