strategy report march 2019 we reduce risk

STRATEGY REPORTMARCH 2019

WE REDUCE RISK

STRATEGY REPORT. MARCH 2019

WE REDUCE RISK 2

STRATEGIC POSITIONASSET CLASS -2 -1 NEUTRAL +1 +2

LIQUIDITY

BONDS

EQUITIES

ALTERNATIVES

BONDS -2 -1 NEUTRAL +1 +2

SOVEREIGN DEBT

High quality (AAA)

Peripheral

CORPORATE BONDS

Investment grade

High yield

EMERGING DEBT

CONVERTIBLE BONDS

EQUITIES -2 -1 NEUTRAL +1 +2

EUROPE

UNITED STATES

EMERGING

JAPAN

HOW TO POSITION OURSELVES IN THE CURRENT SCENARIO

WE REDUCE RISK

The economic cycle continues to slow …

In the early part of the year, the slowdown in economic growth deepened. The deterioration of financial conditions last December, in addition to the protectionism and normalisation of interest rates in the United States throughout 2018, resulted in downward pressure on global activity at the start of 2019.

…the decline in global trade puts pressure on exporting economies and those with GDPs heavily reliant on the industrial sector.

The primary example of this tapering dynamism is evident in international trade figures. As illustrated in graph 1, trade tensions between the United States and China adversely affected the growth rate of exchanges which, on average, eased in Q4 2018 (advancing +1.5% y-o-y) and registering its first decline in y-o-y terms since 2016 in December (-1.4%). This curtailment of global trade is far from trivial, having prompted a pronounced drop in global industrial production, which grew +1.5% y-o-y in December, compared to a +3.7% spike in late 2017.


WE REDUCE RISK 3

2. BUSINESS CONFIDENCE AMONG MANUFACTURERS Source: Bloomberg, CPB and Banca March

1. TRADE AND GLOBAL INDUSTRIAL PRODUCTION Source: Bloomberg, CPB and Banca March

-20%

-15%

-10%

-5%

0%

5%

10%

15%

20%

04 05 06 07 08 09 10 11 12 13 14 15 16 17 18

53

49.3

49.2

40

45

50

55

60

65

FEB.19SEP.18APR.18NOV.17JUN.17JAN.17AUG.16MAR.16

MANUFACTURING PMI

Year-on-year global trade (volume, 3-month moving average)

Year-on-year global industrial production (3-month moving average)

US

Eurozone

China

Threshold

Intensity varies by region, given the nature of this slowdown, with exporting economies and those with GDPs heavily reliant on the industrial sector suffering disproportionately. In particular, the eurozone and specifically Germany, posted disappointing figures, but the data were also negative in China. In the United States, meanwhile, the deceleration is still relatively mild. This trend is clearly reflected in the business confidence indicators (graph 2), which also suggest that the loss of economic dynamism has yet to hit bottom.

CENTRAL BANKS AND BONDS. Monetary policy shifts bias…

In this context of deteriorating macroeconomics and higher downside risks, the main Central Banks have modified their discourse, becoming more cautious with regard to the pace at which stimulus is withdrawn. This shift in bias was led by the US Federal Reserve, which indicated at its December meeting that there would be a pause in rate hikes. The Fed has also reiterated its position in recent weeks, with Chairman Jerome Powell addressing the possibility of concluding balance sheet reduction measures by the end of this year.

…and patience is the Central Banks’ new mantra.

This is confirmation that the Fed will be cautious to raise rates and we expect that—after implementing nine rate hikes since the start of monetary normalisation in late 2015—it will pause in the first half of the year in order to gauge the depth of the slowdown in activity and obtain more clarity about a potential trade agreement with China.

Likewise, in the second quarter of 2019, the Trump administration will have to negotiate a budget and the pressing need to raise the debt ceiling with Democrats. The possibility of heightened uncertainty about the future development of US fiscal policy will be another factor contributing to an accommodative and patient approach by the Fed in the coming months, a scenario that the market has largely taken into account already, as demonstrated by the sharp decline in the probability of implicit rate hikes on the futures market.


WE REDUCE RISK 4

4. PROBABILITY OF FED RATE HIKES Source: Bloomberg and Banca March

3. PROBABILITY OF FED RATE HIKES Source: Bloomberg and Banca March

0%

25%

50%

75%

100%

AUG.18 SEP.18 OCT.18 NOV.18 DEC.18 JAN.19

IMPLICIT PROBABILITY IN THE MARKET (FED)

0%

25%

50%

75%

100%

AUG.18 SEP.18 OCT.18 NOV.18 DEC.18 JAN.19

IMPLICIT PROBABILITY IN THE MARKET (ECB – DECEMBER 2019)

December ‘19 (rates < 2.5%)

December ‘19 (rates > 2.5%)

Rate hike (OIS cumulative probability)

Although the US economy will not be immune from a global slowdown, employment and spending indicators still suggest that growth remains steady and that wage increases (upward of +3% y-o-y) will boost inflation in the United States. Therefore, after closing 2018 with GDP growth of +2.9% y-o-y, the highest since 2015, we expect the slowdown to become more evident this year, with inflation hovering around Fed target levels.

In this scenario, we maintain our view that the Fed will implement at least two more hikes in the current economic cycle, situating interest rates near 3% and concluding the normalisation of US monetary policy. These rate hikes will be more sporadic, however, and will depend on global financial conditions avoiding deterioration.

The ECB will adopt new stimulus measures focused on providing liquidity to the financial sector…

On this side of the Atlantic, the ECB will also maintain an accommodative monetary policy and new measures are expected to inject liquidity into the financial system generally, and into peripheral banks specifically. As graph 5 illustrates, European banks face the maturity of the ECB’s targeted long-term refinancing operations (TLTRO I and II, liquidity provided to banks in exchange for boosting the amount of credit in the economy), which began in the second half of 2014. There will be important maturities this month (March 2019) that will accelerate notably in 2020.

Therefore, we expect that in upcoming meetings, the European monetary authority will once again announce a window of liquidity in order to sidestep a tightening of credit conditions in the eurozone that would coincide with a more intense cyclical slowdown. This measure is particularly important for peripheral banks, given estimates that more than 50% of ECB liquidity is concentred among Italian and—to a lesser extent—Spanish financial institutions.

5. QUARTERLY MATURITIES ON LIQUIDITY FACILITIES (TLTRO)

Source: Bloomberg, ECB and Banca March

0

50,000

100,000

150,000

200,000

250,000

300,000

350,000

400,000

450,000

1T 2019 2T 2019 3T 2019 4T 2019 1T 2020 2T 2020 3T 2020 4T 2020 1T 2021

TLTRO I AND II MATURITIES (MILLIONS OF EUROS)

TLTRO I maturities

TLTRO II maturities


WE REDUCE RISK 5

…but we do not expect interest rate changes in the coming months.

With regard to interest rates, we do not expect changes this year and the ECB should only implement a symbolic increase in the deposit facility rate, which currently stands at -0.4%. This measure would aim to reduce the penalty on reserves deposited by commercial banks at the ECB, a move that was defended recently by the governor of the Banque de France, reflecting concerns within the monetary authority that keeping rates negative too long will hinder the transmission of monetary policy. Nevertheless, this measure is not expected until the end of the year and—like the Fed—it will invariably be contingent upon that fact that the economic slowdown does not worsen.

Lower economic growth and a less restrictive monetary policy will result in a slackened pace of interest rate hikes.

Our profitability expectations for the main fixed income segments are negative, as we foresee an interest rate hike on government debt both in Europe and in the United States, which will exert downward pressure on bond prices. Therefore, it is essential to maintain short durations to reduce the risk of losses from rebounding interest rates.

We also see little potential in the credit market after a sharp decline in risk premiums in the first two months of the year. Globally, private debt indices appreciated +2.3% for investment-grade and nearly +5.8% for high-yield, buoyed by the narrowing of spreads required for these bonds since hitting a three-year high in late December.

Default rates, meanwhile, are near minimums, thus augmenting the risk that they increase as growth slows and trigger further losses.

With regard to bonds, we only detect high earning potential in emerging debt in foreign currency. These types of bonds still trade with risk premiums above their historical average, similar to high-yield private corporate debt, while the majority of emerging market debt already has an investment-grade rating. In an economic context wherein the dollar curbs its appreciation and the US Federal Reserve remains patient, only raising interest rates very gradually, this type of debt will be favoured.

CURRENCIES. Crossovers continue to be more affected by political news than by interest rate spreads.

On the currency market, political uncertainty continues to affect the evolution of currencies, particularly the euro and the pound sterling. In this environment, the dollar may remain the favourite in the short term on risk aversion, but in the medium term, we expect a reduction in the demand for the greenback as a haven asset. It should also be noted that despite a sharp rebound in risk aversion in December, the already-evident slowdown in eurozone economies, and the still-high political uncertainty in the region, the euro-dollar crossover has remained within a narrow trading range (1.12 – 1.16 EUR/USD) since October, thus partially curtailing the dollar’s appreciation trend.

6. BUSINESS CONFIDENCE AND EUR/USD CROSSOVER SPREAD

Source: Bloomberg and Banca March

1

1.05

1.1

1.15

1.2

1.25

1.3

-6

-4

-2

0

2

4

6

8

DEC.15 APR.16 AUG.16 DEC.16 APR.17 AUG.17 DEC.17 APR.18

EU Manufacturing PMI – US Manufacturing PMI

EUR/USD (right)


WE REDUCE RISK 6

In the medium term, the US government shut-down in December and January will have a negative impact on activity figures for the first half of the year, thereby shrinking the US economy’s positive growth spread in the past year vis-à-vis the rest of the world.

In addition, the growth momentum of Trump’s fiscal stimulus will recede in the coming quarters as we approach the end of the Fed’s rate-hike cycle. The combination of these factors in a context of heightened uncertainty, given the increase of the US deficit, will likely weigh on the price of the dollar.

For its part, although the euro could remain under pressure in the short term due to political uncertainty, if our central scenario is correct—wherein i) a hard Brexit is avoided and ii) the increase of Eurosceptics elected to the European Parliament in the upcoming elections (26 May) is manageable and does not paralyse the process of structural reforms—the euro could appreciate, considering it is currently undervalued against the dollar. In this context, we maintain our expectations of a euro-dollar crossover of 1.15 – 1.20 EUR/USD, trending toward the depreciation of the greenback at the high end of the range.

However, long-term valuation metrics suggest that the dollar will remain pricey while the pound sterling is undervalued against the euro.

With regard to the pound sterling, in the weeks to come we expect to have more clarity about the UK withdrawal process. At the moment, the “Brexit saga” continues, given that “in-extremis” Theresa May again postponed a vote on the exit agreement until 12 March, while she continues to negotiate possible concessions on the main sticking point with the EU, the Irish backstop.

In the event that this revised deal is also rejected, May has agreed to give parliamentarians the last word on whether they approve a UK withdrawal without any kind of agreement (a scenario we consider highly unlikely given that the majority of the British Parliament is against it). Finally, on 14 March, if the previous options are rejected, a vote will be held on whether to allow a cursory extension (until June) of article 50 of the Treaty of Lisbon, in order to delay the withdrawal and continue seeking a solution.

8. EUR/GBP PRICE VS. THEORETICAL VALUE Source: Bloomberg and Banca March

7. EUR/USD PRICE VS. THEORETICAL VALUE Source: Bloomberg and Banca March

-30%

-20%

-10%

0%

10%

20%

30%

40%

-40%03 04 05 07 08 09 11 12 13 15 16 17 19

Overvaluation of the euro

Overvaluation of the dollar

-20%

-10%

0%

10%

20%

30%

-30%03 04 05 07 08 09 11 12 13 15 16 17 19

Overvaluation of the euro

Overvaluation of the pound

Over/Undervaluation (OECD, CPI, and PPI average)

1+ Dev. -1 Dev.

Over/Undervaluation (OECD, CPI, and PPI average)

1+ Dev. -1 Dev.


WE REDUCE RISK 7

Our central scenario remains one in which, as the deadline approaches and before the end of March, the British Parliament will at least be forced to issue a formal request to extend the deadline and thus avoid a disorderly exit. Even in the event of snap elections or a referendum (this second option is less likely), the scenario would provide continuity to the appreciation of the pound sterling. As such, we reaffirm our positive, tactical recommendation of last month on British assets (shares and currency) and we would capitalise on possible declines in the pound—to the range of 0.87 EUR/GBP—to increase positions in the British currency.

EQUITIES. We reduce exposure but remain in emerging markets where Chinese growth will continue to thrive.

Emerging stocks will benefit the most from the Fed’s accommodative policy.

With sharp spikes in equities in the past two months, we believe that valuations benefitted from a positive scenario and we see less bullish potential. However, the situation varies by region: while potential is limited in the United States and Europe has its own problems, emerging countries still lag behind, although they will surely benefit the most from the Fed’s accommodative policy. The indisputable leader of these countries is China, which is undergoing a transformation both economically and in its financial markets, and would be the main beneficiary in a trade agreement with the US.

The Chinese government revises growth expectations to 6% - 6.5%.

The impact of trade tariffs has hit confidence indicators and prompted the Chinese government to announce the lower target growth range of 6% - 6.5% for 2019.

Chinese authorities announce stimulus measures in light of the slowdown.

On the fiscal side, a new reduction of 3% in the upper VAT bracket and of 1% in the second bracket was recently announced. In China, there are three VAT rates (16%, 10% and 6%). There have been tax cuts in two brackets: in May 2018, VAT rates were lowered from 17% to 13% and from 11% to 9%, respectively. In addition, the Chinese government has the capacity to reduce corporate taxes, as it is one of the countries with the highest tax burden on business profits. The fiscal stimulus, however, must be compatible with this year’s deficit target of 2.8%.

10. THEORETICAL M2 MONEY SUPPLY Source: Bloomberg, Banca March

9. TAX BURDEN ON PROFITS Source: World Bank, Banca March

PERCENTAGE ON PROFITS (%)65 65

60

53 52 5249 47 47

44 43

3430

70

60

50

40

30

20

10

0

BRA

ZIL

CHIN

A

FRA

NCE

MEX

ICO

GRE

ECE

AU

STRI

A

GER

MA

NY

SPA

IN

JAPA

N

UN

ITED

STA

TES

EURO

ZON

E

ASI

A P

ACI

FIC

U

NIT

ED K

ING

DO

M

17

15

13

11

9

7

MA

R.13

JUN

.13SE

P.13

DEC

.13M

AR.

14JU

N.14

SEP.

14D

EC.14

MA

R.15

JUN

.15SE

P.15

DEC

.15M

AR.

16JU

N.16

SEP.

16D

EC.16

MA

R.17

JUN

.17SE

P.17

DEC

.17M

AR.

18JU

N.18

SEP.

18D

EC.18

M2 annual growth – China


WE REDUCE RISK 8

In terms of monetary policy, we began to see a rebound of the M2 monetary supply in January 2019, and a reduction in the liquidity coverage ratio of banks.

Short-term stimulus apart, Chinese authorities continue with the strategic plan to transform the economy.

China is opting for a transition from a cheap, labour-intensive production model to an economy that generates products with higher added value that are less dependent on labour costs and more“technified.” There are two components to this shift: i) deriving part of the production from countries like Indonesia, Vietnam and Thailand, where labour is cheaper, and ii) local producers driving the automation of their factories, as illustrated in graph 11.

Another strategic objective for the Chinese government is to become a global technological powerhouse.

Last month, the creation of a technological hub in China’s Greater Bay area was announced, with the aim of integrating Hong Kong and Macao with the province of Guangdong (where the production centres of tech giants like Huawei and Tencent are located) and creating a South China “Silicon Valley.” The plan aims to augment communication infrastructures, standardise legislation, and facilitate foreign investment.

Despite accumulating gains since the start of the year, the valuation of the Chinese market remains attractive.

This Asian market has attractive fundamentals when taking into account the current discount vis-à-vis the 12-month profit projection of the consensus.

11. INDUSTRIAL ROBOTS SOLD BY COUNTRY

Source: IFR Robotics 2018

12. RELATIVE VALUATIONS Source: IBES, DataStream and Banca March

160

140

120

100

80

60

40

20

0CHINA JAPAN SOUTH KOREA GERMANYUNITED STATES

69

87

138

35 3946

38 41 4028 31 33

20 20 21

25

4010-10 0 20-20 30

30

20

15

10

5

-5

-10

-15

-30-40

BRAZIL

INDIA

LATIN AMERICA

INDONESIAPHILIPPINES

MALAYSIAEMERGIN WORLD

DEVELOPED WORLD

EM ASIA

KOREA

CHINA

TAIWAN RUSSIA

EXPE

CTED

12M

EPS

GR

OW

TH (

%)

PERCENTAGE TO REACH AVERAGE 12M P/E RATIO (%)

2015

2016

2017


WE REDUCE RISK 9

SECTORS. We continue to recommend reducing the cyclical component.

From the perspective of sectors, we reiterate our approach of combining cyclicals, like technology, and adopting a more prudent outlook with defensive sectors like energy and healthcare.

In environments of deceleration, like the current one, companies associated with the healthcare industry typically outperform those in more cyclical sectors.

US healthcare companies, more profitable and crisis resistant.

Historically in the US, the S&P Healthcare Sector Index has managed to outperform the S&P 500 with very similar levels of volatility and with particularly positive behaviour during periods of crisis. Moreover, in the past this sector has had fewer drawdowns (or declines from max. to min.) than the general index. As shown in the graph, the relative valuation of the healthcare industry, measured in terms of P/E ratio, is favourable. It also trades at a slight discount compared to its historical multiples: current 12m P/E ratio of 15.8x vs. 17.7x on average over 20 years.

There are also positive reasons to invest in the European healthcare sector.

Given that the casuistry of European healthcare companies is broader, in the past year we highlighted the more defensive performance of British and Swiss companies relative to their eurozone counterparts, a circumstance attributable to the intrinsic factors of certain companies (ie: Bayer and the demand associated with glyphosate). Overall, the companies in the sector offer consistent growth forecasts, high returns on invested capital, interesting exposure to emerging economies, and attractive dividends. Within the sector, we prefer pharmaceutical companies, for which the consensus maintains favourable profit expectations associated with future pipeline growth and potential cost improvements. In terms of valuation, the sector as a whole trades near its historical average, so the expectation of continued cash generation, higher dividends, and a reactivation of corporate activity is relevant.

Joan Bonet MajóPedro SastreLuis CoelloPaulo Gonçalves, CAIA

BANCA MARCH MARKET STRATEGIES TEAM

13. S&P HEALTHCARE /S&P500 RELATIVE VALUATION (P/E RATIO)

Source: DataStream, IBES, Banca March

60

70

80

90

100

110

120

130

140

150

95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 19


WE REDUCE RISK 10

0

-0.25

-0.20

-0.15

-0.10

-0.05

MAR.16 JUN.16 SEP.16 DEC.16 MAR.17 JUN.17 SEP.17 DEC.17 MAR.18 JUN.18 SEP.18 DEC.18

1.00

1.05

1.10

1.15

1.20

1.25

1.30

MAR.16 JUN.16 SEP.16 DEC.16 MAR.17 JUN.17 SEP.17 DEC.17 MAR.18 JUN.18 SEP.18 DEC.18

MAR.16 JUN.16 SEP.16 DEC.16 MAR.17 JUN.17 SEP.17 DEC.17 MAR.18 JUN.18 SEP.18 DEC.18-0.5

0

0.5

1.0

1.5

2.0

2.5

SEP.15 DEC.15 MAR.16 JUN.16 SEP.16 DEC.16 MAR.17 JUN.17 SEP.17 DEC.17 MAR.18 JUN.18

12M

11M

10M

9M

8M

7M

6M

EURIBOR 12 MONTHS (3 YEARS)

EUR/USD (3 YEARS)

TEN YEAR GOVERNMENT YIELDS (SPAIN VS GERM.)

IBEX (3 YEARS)

Source: Bloomberg* All Countries

COMMODITIESLAST 1 MONTH YTD 1 YEAR

BRENT 66.03 61.89 53.80 66.63

GOLD 1313.3 1321.2 1282.5 1318.3

CORPORATE BONDS (1 YEAR SPREAD)

LAST 1 MONTH YTD 1 YEAR

AA -0.18 -0.15 -0.18 -0.28

A -0.13 -0.07 -0.09 -0.24

BBB 0.03 0.10 0.05 -0.16

EURIBORLAST 1 MONTH YTD 1 YEAR

1 MONTH -0.37 -0.37 -0.36 -0.37

3 MONTHS -0.31 -0.31 -0.31 -0.33

6 MONTHS -0.23 -0.24 -0.24 -0.27

12 MONTHS -0.11 -0.11 -0.12 -0.19

CURRENCIESLAST 1 MONTH YTD 1 YEAR

EUR/USD 1.145 1.145 1.145 1.241

EUR/GBP 0.873 0.898 0.898 0.877

EUR/CHF 1.138 1.126 1.126 1.160

EUR/JPY 124.6 125.6 125.6 135.0

GOVERNMENT BONDSLAST 1 MONTH YTD 1 YEAR

USA

2 YEARS 2.51 2.46 2.49 2.25

5 YEARS 2.51 2.44 2.51 2.64

10 YEARS 2.72 2.63 2.68 2.86

30 YEARS 3.08 3.00 3.01 3.12

GERMANY

2 YEARS -0.52 -0.56 -0.61 -0.54

5 YEARS -0.28 -0.32 -0.31 0.02

10 YEARS 0.18 0.15 0.24 0.66

30 YEARS 0.81 0.75 0.88 1.30

SPAIN

2 YEARS -0.26 -0.26 -0.24 -0.21

5 YEARS 0.18 0.20 0.34 0.39

10 YEARS 1.17 1.20 1.42 1.54

30 YEARS 2.42 2.38 2.61 2.55

UK

2 YEARS 0.83 0.76 0.75 0.78

5 YEARS 1.02 0.87 0.90 1.16

10 YEARS 1.30 1.22 1.28 1.50

30 YEARS 1.82 1.72 1.82 1.89

EQUITY INDICESLAST 1 MONTH YTD 1 YEAR

MSCI WORLD* 503.48 2.50% 10.49% 35.47%

SP500 2784.49 2.97% 11.08% 44.11%

EUROSTOXX50 3298.26 4.39% 9.89% 11.97%

TOPIXX 1607.66 2.56% 7.60% 23.87%

IBEX35 9277.7 2.44% 8.64% 9.65%

FOOTSIE100 7074.73 1.52% 5.15% 16.03%

MSCI BRAZIL 2166.67 -5.29% 11.46% 113.93%

MSCI CHINA 82.01 3.48% 15.18% 61.56%

MSCI EMERGING 1050.95 0.10% 8.82% 41.96%


WE REDUCE RISK 11

140%

160%

120%

100%

80%

60%OCT.15 ENE.16 ABR.16 JUL.16 OCT.16 ENE.17 ABR.17 JUL.17 OCT.17 ENE.18 ABR.18 JUL.18

EQUITY INDICES PERFORMANCE (3 YEARS)Source: Bloomberg

IBEX REL

MSCI EMERGENTES REL

SP500 REL

DATE AS OF 28TH FEBRUARY 2019

RETURN DURATION PORTFOLIO DISTRIBUTION CURRENCY EXP.

WEEK MONTH YTD YEAR ACTUAL 1 MONTH AGO LIQUIDITY DEPOSITS FI EQUITY ALT. INV. TOTAL USD

MARCH MONETARIO F.I. -0.01% -0.03% -0.07% -0.41% 0.216 0.291 56.69% 8.21% 36.06% 0.00% 0.00% 0.00% 0.00%

MARCH RENTA FIJA CORTO PLAZO F.I. 0.05% 0.13% 0.24% -2.01% 0.488 0.465 24.45% 0.00% 77.25% 0.00% 0.00% 0.00% 0.00%

MARCH PREMIER R.F. C.P. F.I. 0.07% 0.21% 0.32% -1.76% 0.504 0.493 17.57% 0.00% 84.29% 0.00% 0.00% 0.00% 0.00%

MARCH PATRIMONIO C.P. F.I. 0.04% 0.17% 0.31% -1.78% 0.705 0.693 20.64% 0.00% 79.56% 0.00% 0.00% 0.00% 0.00%

FONMARCH F.I. 0.12% 0.32% 0.70% -1.38% 2.125 2.072 2.80% 0.00% 96.29% 0.00% 0.00% 0.00% 0.00%

MARCH EUROPA F.I. -0.74% 0.04% 8.90% -11.20% 0.003 0.003 1.27% 0.00% 0.00% 98.79% 0.00% 4.30% 4.95%

MARCH INTL - VALORES IBERIAN EQUITY 0.80% 2.26% 10.36% -7.38% 0.000 0.000 0.00% 0.00% 0.00% 98.00% 0.00% 0.00% 0.00%

MARCH GLOBAL F.I. -0.17% 2.56% 9.78% -7.85% 0.003 0.003 1.60% 0.00% 0.00% 97.98% 0.00% 16.62% 16.03%

MARCH INTL - MARCH VINICATENA -0.03% 1.78% 8.63% -4.97% 0.000 0.000 0.00% 0.00% 0.00% 97.67% 0.00% 24.32% 18.59%

MARCH INTL - THE FAMILY BUSINESSES FUND 0.33% 4.12% 11.05% -5.13% 0.000 0.000 0.00% 0.00% 0.00% 100.56% 0.00% 24.54% 19.09%

MARCH NEW EMERGING WORLD F.I. 0.59% 1.30% 7.74% -11.96% 0.003 0.003 20.03% 0.00% 0.00% 97.86% 0.00% -30.50% -29.92%

MARCH INTL - TORRENOVA LUX 0.18% 1.04% 2.99% -2.07% 0.9 0.8 0.00% 0.00% 73.74% 20.49% 0.00% -0.44% 6.07%

TORRENOVA DE INVERS. S.I.C.A.V. S.A. 0.19% 1.07% 2.90% -1.46% 0.892 0.828 15.04% 0.00% 70.57% 20.53% 0.00% 0.36% 12.23%

CARTERA BELLVER S.I.C.A.V., S.A. 0.23% 2.19% 6.24% -4.17% 0.806 0.829 11.01% 0.00% 41.00% 50.39% 0.00% 1.03% 36.57%

LLUC VALORES S.I.C.A.V., S.A. 0.27% 2.94% 9.62% -5.65% 0.003 0.003 13.71% 0.00% 0.00% 85.31% 0.00% 7.39% 68.16%

MARCH PATRIMONIO DEFENSIVO FI 0.10% 0.61% 1.88% -2.64% 0.003 0.003 7.04% 0.00% 65.04% 12.19% 13.48% -0.14% 0.42%

MARCH CARTERA CONSERVADORA FI 0.15% 1.19% 3.67% -2.83% 0.003 0.003 8.38% 0.00% 52.94% 25.52% 13.61% -0.49% 0.38%

MARCH CARTERA MODERADA FI 0.24% 2.00% 5.59% -3.19% 0.003 0.003 7.35% 0.00% 38.47% 46.81% 9.82% 0.72% 0.38%

MARCH CARTERA DECIDIDA FI 0.35% 2.85% 8.19% -5.12% 0.003 0.003 8.50% 0.00% 17.02% 69.31% 10.98% 0.41% -2.54%

PLAN PENSION CRECIENTE, F.P. 0.06% 0.21% 0.43% -2.23% 1.578 1.478 10.43% 0.00% 92.36% 0.00% 0.00% 0.00% 0.00%

MARCH PENSIONES 80/20, F.P. 0.08% 1.10% 3.15% -2.76% 2.243 2.245 2.70% 0.00% 74.78% 24.10% 0.00% 4.90% 4.65%

MARCH PENSIONES 50/50, F.P. 0.04% 1.75% 5.31% -3.52% 2.073 2.030 3.61% 0.00% 50.45% 46.78% 0.00% 9.17% 8.65%

MARCH ACCIONES, F.P. 0.03% 3.21% 10.63% -5.64% 0.003 0.003 5.45% 0.00% 0.00% 93.90% 0.00% 18.43% 17.54%

MARCH AHORRO, F.P. 0.12% 1.29% 3.78% -2.89% 2.318 2.297 3.32% 0.00% 68.53% 30.58% 0.00% 6.36% 6.31%

PLAN OPTIMO, F.P. 0.09% 1.18% 3.43% -2.41% 2.164 2.095 10.37% 0.00% 64.52% 27.28% 0.00% 5.51% 5.43%

MARCH MODERADO EPSV 0.09% 1.15% 3.42% -2.40% 2.132 2.059 5.03% 0.00% 68.95% 27.48% 0.00% 4.77% 4.86%

MARCH ACCIONES EPSV -0.03% 3.24% 10.45% -4.17% 0.003 0.003 8.32% 0.00% 0.00% 90.81% 0.00% 17.47% 16.70%


WE REDUCE RISK 12

IMPORTANT REMARK:

The contents of this document are merely illustrative and do not pretend, are not and cannot be considered under any circumstances as an investment recommendation towards the contracting of financial products. This document has only been prepared to help the customer make an independent and individual decision but does not intend to replace any type of advice needed for the contracting of such products. The terms and conditions described in this document are to be viewed as preliminary terms only, subject to discussion and negotiation as well as to the agreement and final drafting of the terms affecting the transaction, which will appear in the contract or certificate to be issued. Consequently, Banca March, S.A. and its customers are not bound by this document unless both parties decide to embark on a specific transaction and agree on the terms and conditions concerning the final documents to be approved. Banca March, S.A. does not offer any guarantee, expressly or implicitly, in relationwith the information shown in this document. All terms, conditions and prices contained in this document are merely informative and subject to modifications depending on the market circumstances, changes in laws, jurisprudence, administrative procedures or any other issue which may affect them. The customer should be aware that the products mentioned in this document may not be appropriate for his/her specific investment targets, financial situation or risk profile. For this reason the customer must make his/her own decisions by taking into account such circumstances and by obtaining specialised advice in tax, legal, financial, regulatory, accounting issues or any other type of information required. Banca March, S.A. does not assume anyresponsibility for any direct or indirect costs or loss which may result from the use of this document or its contents. No part of this document can be copied, photocopied or duplicated in any way or through any means, redistributed or quoted without a previous written authorisation by Banca March, S.A.

Please note this document has been translated for your information only. In case of any errors or misinterpretations, the Spanish text will always prevail.

strategy report march 2019 we reduce risk

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