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Global Equity Research 10 September 2014

Top Stories European Quant Strategy (Khuram Chaudhry) , Global EPS Revision Landscape - Europe's EPS revisions continue to rise, helped by a big jump in Spain Europe’s earnings expectations continue to improve Europe’s 1-month and 3-month EPS revisions improved in August.

Global Investment Bank Tracker (Kian Abouhossein) , Europe Cash equities and credit leading the way - OW UBS and DBIB revenue environment in Q3 14 so far has been in line with normal seasonality in our view on a q/q basis, however, we note that September is normally the busiest month and is likely to be the key driver for 3Q14 IB performance.

Novartis (NOVN VX, OW – SF86.95) (Richard Vosser) , Europe More than one string to the bow: On top of LCZ696, oncology pipeline to drive further upgrades in next 12 monthsWe reiterate our Overweight rating on Novartis and raise our mid 2015 price target from SFr95 to SFr100 per share, implying 15% upside.

Apple iPhones/Watch Asia read-through (Gokul Hariharan) , Asia Pacific Impressive hardware as expected, Watch looks like a good startToday’s Apple (AAPL, covered by JPM US Analyst, Rod Hall) product launch event was along expected lines, with two iPhones (iPhone 6 and 6 Plus with 4.7’ and 5.5" displays respectively) announced along with an entry into wearables with the new Apple Watch.

India Consumer Staples (Latika Chopra, CFA) , Asia Pacific Relative Trades for Peak ValuationsIn this report, we identify three key relative value themes in the Indian consumer staples sector.

▲China Hongqiao Group (1378.HK, OW – HK$6.32) (Daniel Kang) , Asia PacificHeadwinds clear - Upgrade to OW, raise price target to HKD8.00The rally in aluminium prices and China Hongqiao (HQ)’s recent placement have removed our concerns of Street earnings risks and an equity raising.

China Metals & Mining (Daniel Kang) , Asia Pacific August Trade - Disappoints with iron ore and coal imports down, steel exports lower - ALERTChina’s preliminary commodities trade data for August were disappointing, in our view.

QIWI (QIWI, OW – $35.80) (Alexei Gogolev) , Russia Mail.ru Group sells ~4% stake in Qiwi; Reiterate high-conviction OW - ALERTAccording to an SEC filing yesterday, Mail.ru Group announced the sale of 2.165 mn Qiwi shares (equivalent to ~4% stake).

Xinyi Solar (0968.HK, OW – HK$2.41) (Leon Chik, CFA) , Asia Pacific Lifting PT to HK$3.8 - Downstream road block finally comes downXinyi Solar (XYS) is the largest maker of solar cover glass in the world, with over a 20% global market share.

India Oil & Gas (Neil Gupte) , Asia Pacific Gas infrastructure: Near term headwinds persist; prefer Petronet LNGWhile we continue to believe in the long-term potential for gas usage in India, we see a lack of near-term catalysts for the gas infrastructure players.

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GLOBAL Stock Guide J.P. Morgan Markets Daily Economic Briefing Regional First to Market

Inside this Report:

Research by Region Key Rating, Price Target & EPS Changes

Market at a Glance Market Monitor Economics Calendar J.P. Morgan Forecasts - Economics and Commodities

Analyst Focus List

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Global Published Research TOP

Europe

Price Target and Estimate Changes Aberdeen Asset Management (ADN LN – Overweight) (Gurjit S Kambo) Asset Manager Update: Recent pullback provides an opportunity to revisit the sector; Schroder and Jupiter remain top picks Ashmore Group (ASHM LN – Neutral) (Gurjit S Kambo) Asset Manager Update: Recent pullback provides an opportunity to revisit the sector; Schroder and Jupiter remain top picks Henderson Group (HGG LN – Neutral) (Gurjit S Kambo) Asset Manager Update: Recent pullback provides an opportunity to revisit the sector; Schroder and Jupiter remain top picks AFL Jupiter (JUP LN – Overweight) (Gurjit S Kambo) Asset Manager Update: Recent pullback provides an opportunity to revisit the sector; Schroder and Jupiter remain top picks Man Group (EMG LN – Underweight) (Gurjit S Kambo) Asset Manager Update: Recent pullback provides an opportunity to revisit the sector; Schroder and Jupiter remain top picks Morgan Stanley (MS US – Overweight) (Kian Abouhossein) Global Investment Bank Tracker: Cash equities and credit leading the way - OW UBS and DB

Results and Company Views, continued Fenner (FENR LN – Neutral) (Andrew J Wilson) Pre-close statement confirms trading inline, some light relief after a tough FY14 Goldman Sachs (GS US – Underweight) (Kian Abouhossein) Global Investment Bank Tracker: Cash equities and credit leading the way - OW UBS and DB HellermannTyton (HTY LN – Overweight) (Andrew J Wilson) Sales presentation feedback - Market growth plus share gains to sustain high growth rates - ALERT Iberdrola (IBE SM – Neutral) (Javier Garrido) News flow on Cleco and Scottish independence vote likely to weigh near term - ALERT Michael Page (MPI LN – Neutral) (Robert Plant) Feedback from today's investor seminar, with a generally upbeat tone - ALERT Novo Nordisk (NOVOB DC – Overweight) (Richard Vosser) Liraglutide FDA briefing docs read more benign than expected, approval seems more likely - ALERT Richemont (CFR VX – Neutral) (Melanie A Flouquet) 5 months trading update Preview - ALERT

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Oxford Instruments (OXIG LN – Overweight) (Andrew J Wilson) AGM statement confirms orders ahead y-o-y, underpinning full-year revenue outlook Schroders (SDR LN – Overweight) (Gurjit S Kambo) Asset Manager Update: Recent pullback provides an opportunity to revisit the sector; Schroder and Jupiter remain top picks Whitbread (WTB LN – Overweight) (Komal Dhillon) Strong trading expected to drive 60bps margin expansion in H115E

Results and Company Views ABB (ABBN VX – Neutral) (Andreas Willi) Buyback and yield to support stock - new targets in-line Barclays (BARC LN – Overweight) (Kian Abouhossein) Global Investment Bank Tracker: Cash equities and credit leading the way - OW UBS and DB BNP Paribas (BNP FP – Neutral) (Kian Abouhossein) Global Investment Bank Tracker: Cash equities and credit leading the way - OW UBS and DB Credit Suisse Group (CSGN VX – Underweight) (Kian Abouhossein) Global Investment Bank Tracker: Cash equities and credit leading the way - OW UBS and DB Deutsche Bank (DBK GR – Overweight) (Kian Abouhossein) Global Investment Bank Tracker: Cash equities and credit leading the way - OW UBS and DB

Sanofi (SAN FP – Neutral) (Richard Vosser) Key Takeaways from the CEO Conference Call - ALERT Société Générale (GLE FP – Overweight) (Kian Abouhossein) Global Investment Bank Tracker: Cash equities and credit leading the way - OW UBS and DB AFL UBS (UBSN VX – Overweight) (Kian Abouhossein) Global Investment Bank Tracker: Cash equities and credit leading the way - OW UBS and DB Whitbread (WTB LN – Overweight) (Komal Dhillon) Strong Q215 trading bodes well for margins

Strategy European Quant Strategy (Khuram Chaudhry) EPS Revision Landscape - Europe's EPS revisions continue to rise, helped by a big jump in Spain

Sector Research UK Banks (Raul Sinha) Scottish referendum: Base case and exposures

Asia

Recommendation Changes

▲China Hongqiao Group (1378.HK – Overweight), China (Daniel Kang) Headwinds clear - Upgrade to OW, raise price target to HKD8.00

▲Colgate-Palmolive (India) Limited (COLG.BO – Overweight), India (Latika Chopra, CFA) India Consumer Staples: Relative Trades for Peak Valuations

▼Godrej Consumer Products Limited (GOCP.BO – Neutral), India (Latika Chopra, CFA) India Consumer Staples: Relative Trades for Peak Valuations

Price Target and Estimate Changes

Adaro Energy (ADRO.JK – Neutral), Indonesia (Lydia J Toisuta) Cost saving offers upside; valuation at top of range

Price Target and Estimate Changes, continued

Xinyi Solar (0968.HK – Overweight), China (Leon Chik, CFA) Lifting PT to HK$3.8 - Downstream road block finally comes down

Results and Company Views

AFL Aozora Bank (8304) (8304.T – Neutral), Japan (Josh Klaczek) The recent rally and public funds repayment

Cafe de Coral Holdings Ltd (0341.HK – Neutral), Hong Kong (Ebru Sener Kurumlu) Supplier alleged to have used "gutter oil" lard

Hiwin (2049.TW – Overweight), Taiwan (William Chen) August sales hit a historical high

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China Hongqiao Group (1378.HK – Overweight), China (Daniel Kang) Headwinds clear - Upgrade to OW, raise price target to HKD8.00

Colgate-Palmolive (India) Limited (COLG.BO – Overweight), India (Latika Chopra, CFA) India Consumer Staples: Relative Trades for Peak Valuations

Dabur India Limited (DABU.BO – Overweight), India (Latika Chopra, CFA) India Consumer Staples: Relative Trades for Peak Valuations

Everlight Electronics (2393.TW – Overweight), Taiwan (Narci Chang) Monthly sales set another record-high; Reiterate OW

Gas Authority of India Limited (GAIL.BO – Neutral), India (Neil Gupte) India Oil & Gas: Gas infrastructure: Near term headwinds persist; prefer Petronet LNG

GlaxoSmithKline Consumer Healthcare Limited (GLSM.BO – Overweight), India (Latika Chopra, CFA) India Consumer Staples: Relative Trades for Peak Valuations

Godrej Consumer Products Limited (GOCP.BO – Neutral), India (Latika Chopra, CFA) India Consumer Staples: Relative Trades for Peak Valuations

Hindustan Unilever Limited (HLL.BO – Underweight), India (Latika Chopra, CFA) India Consumer Staples: Relative Trades for Peak Valuations

ITC Limited (ITC.BO – Overweight), India (Latika Chopra, CFA) India Consumer Staples: Relative Trades for Peak Valuations

Nestlé India Limited (NEST.BO – Neutral), India (Latika Chopra, CFA) India Consumer Staples: Relative Trades for Peak Valuations

Petronet LNG Ltd. (PLNG.BO – Neutral), India (Neil Gupte) India Oil & Gas: Gas infrastructure: Near term headwinds persist; prefer Petronet LNG

Reliance Infrastructure Ltd (RLIN.BO – Overweight), India (Sumit Kishore) Annual Report Analysis

United Spirits Limited (UNSP.BO – Neutral), India (Latika Chopra, CFA) India Consumer Staples: Relative Trades for Peak Valuations

PTT Public Company (PTT.BK – Neutral), Thailand (Scott L Darling) LPG / NGV prices set to rise? Positive for share price but potential impact less certain

Tata Motors (TAMO.BO – Overweight), India (Aditya Makharia) The new 'XE' is revealed, model to be built on the iQ(AL) platform, it is likely to be a volume driver for Jaguar

United Spirits Limited (UNSP.BO – Neutral), India (Latika Chopra, CFA) FY14 Annual Report Takeaways

Strategy

Vietnam Vista, Vietnam (Aditya Srinath, CFA) Bi-weekly (25 Aug-9 Sep 2014): Strong volume, await potential rate cut

Economics

August exports picked up notably, led by tech sector, Taiwan (Grace Ng)

Sector Research

China Metals & Mining, China (Daniel Kang) August Trade - Disappoints with iron ore and coal imports down, steel exports lower - ALERT

Container Shipping, Asia Pacific (Corrine Png) Industry concentration will rise as 4th alliance forms, but rising capacity could cap rate recovery in 2015

India Coal, India (Pinakin Parekh, CFA) Govt affidavit: OK with all coal blocks being cancelled but wants a speedy resolution so that blocks can be re-allocated

India Steel, India (Pinakin Parekh, CFA) August another weak month for demand with NO improvement so far; Imports remain elevated at ~+20%

Taiwan Contact Lens Sector, Taiwan (Andre Chang, CFA) August sales support our OW on Ginko/Formosa Optical and UW on St. Shine

Australia

Publications Wesfarmers Limited (WES, N – A$44.27) (Shaun Cousins) Conglomerate Review – Share Price Implies Premium to SOTP Valuation, Justifying Current Structure

Brambles Limited (BXB, OW – A$9.48) (Carolyn Holmes) Adds scale to Containers with Ferguson acquisition

Publications, continued Australia Economic Update (Ben Jarman) NAB business survey realigns somewhat with subdued fundamentals

Australian Economic Update (Tom Kennedy) Aussie housing finance data buoyed by booming investor activity

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WorleyParsons Limited (WOR, OW – A$15.91) (Anthony Passe-de Silva) Taking bigger step out into consulting

Regis Resources Ltd (RRL, N – A$1.83) (Mark Busuttil) Reserve grades lowered by 25%

Australian REITs (Scott Molloy) REITail Sales – International retailers close in on Pitt Street

New Zealand Economic Update (Ben Jarman) Fuel holds back NZ retail spending again

Homebuilding (Michael Rehaut, CFA) Sector Update: Rally Likely Through Year-End; We Lower Our 15E-16E But Remain Above Street; Ratings Refreshed

Japan

Price Target and Estimate Changes Canon (7751) (Underweight) (Hisashi Moriyama) 3Q Preview: We Forecast Operating Profit of ¥87 Billion

Tamron (7740) (Overweight) (Hisashi Moriyama) 3Q Preview: Expecting Operating Profit of ¥1.5 billion

Results and Company Views AFL Aozora Bank (8304) (Neutral) (Josh Klaczek) The recent rally and public funds repayment

Sector Research Food/Toiletry and Retail Store Survey (Vol. 2) (Ritsuko Tsunoda) Trying to Offer Both Higher Value Added and Reasonable Prices

July US Cement Shipments (Shogo Umeda) Taiheiyo Cement and Mitsubishi Materials Off To Slightly Slow Starts in 2H

LatAm

Recommendation, Price Target and Estimate Changes

▼Kimberly Clark Mexico (KIMBERA.MX – Underweight) (Andrea Teixeira, CFA) Mexico Retail & HPC: Top Picks Walmex and Liverpool on Potential Recovery in 2015. Downgrade KIMBERA to UW

Comerci (COMEUBC.MX – Underweight) (Andrea Teixeira, CFA) Mexico Retail & HPC: Top Picks Walmex and Liverpool on Potential Recovery in 2015. Downgrade KIMBERA to UW

Genomma Lab (LABB.MX – Neutral) (Andrea Teixeira, CFA) Mexico Retail & HPC: Top Picks Walmex and Liverpool on Potential Recovery in 2015. Downgrade KIMBERA to UW

Liverpool (LIVEPOLC1.MX – Overweight) (Andrea Teixeira, CFA) Mexico Retail & HPC: Top Picks Walmex and Liverpool on Potential Recovery in 2015. Downgrade KIMBERA to UW

Organizacion Soriana (SORIANAB.MX – Underweight) (Andrea Teixeira, CFA) Mexico Retail & HPC: Top Picks Walmex and Liverpool on Potential Recovery in 2015. Downgrade KIMBERA to UW

Wal-Mart de Mexico (WALMEXV.MX – Overweight) (Andrea Teixeira, CFA) Mexico Retail & HPC: Top Picks Walmex and Liverpool on Potential Recovery in 2015. Downgrade KIMBERA to UW

LatAm Company and Sector News, continued LatAm Capital Goods and Agribusiness (Cassio Lucin) Final 2013/14 Forecast of 195.5 MT, +3.6% Y/Y - All Eyes on October Numbers Strategy EM Corporate Weekly Monitor (Yang-Myung Hong) Global environment remains supportive with ECB easing and low UST yields

Economics Costa Rica (Franco A Uccelli) Public debt stock rises modestly in 1H14

Honduras (Franco A Uccelli) Annual inflation moderates to 6.3% in August

Jamaica (Franco A Uccelli) NIR ease somewhat in August

Mexico (Steven Palacio) Spike in non-core prices keeps inflation above 4%

Mexico Auction Preview (Steven Palacio) 5-year Mbono and 10-year Udibono

Mexico Auction Results (Steven Palacio) 5-year Mbono and 10-year Udibono

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LatAm Company and Sector News Duratex (DTEX3.SA – Neutral) (Lucas Ferreira) 3Q Recovery Going Beyond Restocking; We Think a Wood Panel Price Hike Is Probable - ALERT

Marcopolo (POMO4.SA – Overweight) (Cassio Lucin) Meetings with ANTT - Bus Rules Will Have to Wait until 2015 - ALERT

Brazilian Higher Education (Marcelo Santos, CFA) Education Census 2013: Growth Remains Soft, Reinforcing Our View of Limited Changes to FIES/Prouni In 2015

Mexico Color (Gabriel Lozano) August inflation to remain above 4%

LatAm reference pieces LatAm TMT Weekly (Andre Baggio, CFA) Valuation

CEEMEA

Results and Company Views

FirstRand Ltd (FSR SJ – Neutral) (Nana Francois, CFA) In-line earnings, solid asset quality, Africa organic investments preferred over special divs - ALERT

Magnit (MGNT LI – Overweight) (Elena Jouronova, CFA) August sales above expectations, growth set to accelerate - ALERT

Steinhoff (SHF SJ – Overweight) (Stephen Carrott) FY14 result - International Operations impress - ALERT

Economics

Middle East and North Africa Today (Brahim Razgallah)

Commodities and FX

JPMorgan Natural Gas Storage Preview (Scott C. Speaker) Working gas storage seen 88 Bcf higher

US

Price Target and Estimate Changes Accenture plc (ACN – Overweight) (Tien-tsin Huang, CFA) IT and BPO Services: Prefer SMid Cap IT Over Large Cap; Establishing 2015 Price Targets

Burlington Stores (BURL – Overweight) (Brian J. Tunick) Solid Progress in Improving Execution as Capital Structure Accelerates Earnings Growth; Reiterate OW & Raise PT to $40

CDW (CDW – Overweight) (Tien-tsin Huang, CFA) IT and BPO Services: Prefer SMid Cap IT Over Large Cap; Establishing 2015 Price Targets

Cognizant (CTSH – Neutral) (Tien-tsin Huang, CFA) IT and BPO Services: Prefer SMid Cap IT Over Large Cap; Establishing 2015 Price Targets

Computer Sciences (CSC – Neutral) (Tien-tsin Huang, CFA) IT and BPO Services: Prefer SMid Cap IT Over Large Cap; Establishing 2015 Price Targets

ExlService Holdings Inc. (EXLS – Underweight) (Tien-tsin Huang, CFA) IT and BPO Services: Prefer SMid Cap IT Over Large Cap; Establishing 2015 Price Targets

Results and Company Views Barclays (BARC.L – Overweight) (Kian Abouhossein) Global Investment Bank Tracker: Cash equities and credit leading the way - OW UBS and DB

BNP Paribas (BNPP.PA – Neutral) (Kian Abouhossein) Global Investment Bank Tracker: Cash equities and credit leading the way - OW UBS and DB

Credit Suisse Group (CSGN.VX – Underweight) (Kian Abouhossein) Global Investment Bank Tracker: Cash equities and credit leading the way - OW UBS and DB

Deutsche Bank (DBKGn.DE – Overweight) (Kian Abouhossein) Global Investment Bank Tracker: Cash equities and credit leading the way - OW UBS and DB

eBay, Inc (EBAY – Overweight) (Doug Anmuth) Early Take on Apple Pay: Increased Competition at Physical POS and in Mobile Apps but Will Depend on Implementation - ALERT

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Globant (GLOB – Overweight) (Tien-tsin Huang, CFA) IT and BPO Services: Prefer SMid Cap IT Over Large Cap; Establishing 2015 Price Targets

HealthEquity (HQY – Overweight) (Lisa C. Gill) F2Q15 Results: Solid Results; Guidance Looks Good; Well Positioned for Future Growth

IBM (IBM – Neutral) (Tien-tsin Huang, CFA) IT and BPO Services: Prefer SMid Cap IT Over Large Cap; Establishing 2015 Price Targets

Leidos (LDOS – Neutral) (Joseph B. Nadol III) Commercial Health and Engineering Challenges Come to a Head

Morgan Stanley (MS – Overweight) (Kian Abouhossein) Global Investment Bank Tracker: Cash equities and credit leading the way - OW UBS and DB

Syntel, Inc. (SYNT – Neutral) (Tien-tsin Huang, CFA) IT and BPO Services: Prefer SMid Cap IT Over Large Cap; Establishing 2015 Price Targets

Verint Systems, Inc. (VRNT – Overweight) (Paul Coster, CFA) Raising Price Target to $62.00 to Reflect the Value of Cyber Initiatives

Virtusa Corp. (VRTU – Overweight) (Tien-tsin Huang, CFA) IT and BPO Services: Prefer SMid Cap IT Over Large Cap; Establishing 2015 Price Targets

Xerox Corporation (XRX – Neutral) (Tien-tsin Huang, CFA) IT and BPO Services: Prefer SMid Cap IT Over Large Cap; Establishing 2015 Price Targets

Results and Company Views Agilent Technologies (A – Overweight) (Tycho W. Peterson) Introducing Stand-Alone Model for New Agilent; Risk/Reward Remains Favorable Ahead of Spin

Akamai Technologies, Inc. (AKAM – Overweight) (Sterling Auty, CFA) iOS 8 Likely to Benefit 3Q14 & 4Q14

Apple Inc. (AAPL – Overweight) (Rod Hall, CFA) Apple Watch impressive, iPhone6/6+ availability better, Apple Pay rolls out - ALERT

Genpact (G – Neutral) (Tien-tsin Huang, CFA) IT and BPO Services: Prefer SMid Cap IT Over Large Cap; Establishing 2015 Price Targets

Goldman Sachs (GS – Underweight) (Kian Abouhossein) Global Investment Bank Tracker: Cash equities and credit leading the way - OW UBS and DB

Intel (INTC – Overweight) (Harlan Sur) IDF Day 1 Recap: Impressive Show as Intel Looks Ahead to the Post-PC Era; Reiterate Overweight

Kennametal Inc. (KMT – Neutral) (Ann Duignan) Takeaways From IMTS Show - ALERT

M/A-COM (MTSI – Overweight) (Harlan Sur) Management Meetings: Positioned to Grow 2x Faster Than the Market Through Technology Leadership & Acquisitions

QIWI (QIWI – Overweight) (Alexei Gogolev) Mail.ru Group sells ~4% stake in Qiwi; Reiterate high-conviction OW - ALERT

Société Générale (SOGN.PA – Overweight) (Kian Abouhossein) Global Investment Bank Tracker: Cash equities and credit leading the way - OW UBS and DB

TASER International Inc. (TASR – Overweight) (Paul Coster, CFA) INVITE: Call with Management Today - ALERT

AFL UBS (UBSN.VX – Overweight) (Kian Abouhossein) Global Investment Bank Tracker: Cash equities and credit leading the way - OW UBS and DB

Walgreen Company (WAG – Overweight) (Lisa C. Gill) Incremental Leverage Could Drive EPS Accretion While Maintaining Investment Grade Credit Rating

WNS Holdings Ltd. (WNS – Neutral) (Tien-tsin Huang, CFA) IT and BPO Services: Prefer SMid Cap IT Over Large Cap; Establishing 2015 Price Targets

Sector Research Monthly Tire Review: September 2014 (Ryan Brinkman) Tire Industry Fundamentals Remain Solid; 2-Year Shipment Comps Accelerate; Leading Indicators Positive

Payment Services (Tien-tsin Huang, CFA) Apple Pay - More Comprehensive Than Expected, More Collaborative Than Disruptive

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Global Quantitative and Derivatives Strategy 10 September 2014

European Quant Strategy

EPS Revision Landscape - Europe's EPS revisions continue to rise, helped by a big jump in Spain

Global Quantitative Strategy

Khuram Chaudhry AC

(44-20) 7134 6297

[email protected]

J.P. Morgan Securities plc

Viquar Shaikh (44-20) 7134-5908

[email protected]


Dubravko Lakos-Bujas (1-212) 622-3601

[email protected]

J.P. Morgan Securities LLC

Robert Smith (852) 2800 8569

[email protected]

J.P. Morgan Securities (Asia Pacific) Limited

Berowne Hlavaty (61-2) 9003-8602

[email protected]

J.P. Morgan Securities Australia Limited

Global Head of Quantitative and Derivatives Strategy

Marko Kolanovic (1-212) 272-1438

[email protected]


See page 20 for analyst certification and important disclosures, including non-US analyst disclosures. J.P. Morgan does and seeks to do business with companies covered in its research reports. As a result, investors should be aware that the firm may have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as only a single factor in making their investment decision.

Europe’s earnings expectations continue to improve Europe’s 1-month and 3-month EPS revisions improved in August. EPS downgrades persist, however the good news is the pace of EPS revisions continues to improve. The cover chart suggests as long as this trend holds, equity prices are positively supported.

Spain’s EPS revisions make a new ‘all time high’ Spain’s 3-month EPS revisions ‘ballooned’ in August, pushing the level of EPS revisions to a record high (data since 1989). This increase was the biggest rise amongst European countries. By contrast, Italy, France and the Netherlands saw their EPS revisions fall the most.

EPS revisions suggest neither a Cyclical nor a Defensive sector bias Consumer Discretionary, Telecoms, and Utilities saw their 3-month EPS revisions rise more than the European market last month. The largest negative change vs. the market was for Energy, Staples, Financials, Industrials and Materials.

Japan, GEM & Europe improving, Asia Pac and the USA falling Japanese companies are in a ‘sweet-spot’, they show EPS upgrades which continue to improve (EPS boom). Europe and GEM now have a declining level of EPS downgrades (EPS recovery). American companies are being upgraded but now at a slower pace (EPS slow-down), Asia Pacific ex Japan show an accelerating pace of EPS downgrades (EPS recession).

Rising/ Falling EPS Expectations and Equity Prices – Pages 7 & 14 When EPS expectations are rising the risk vs. reward balance suggests Small Caps perform better than Large Caps, Value beats Growth, and low Quality stocks outpace high Quality stocks. Similarly, cyclical sectors often beat defensives. The opposite is true when EPS expectations are falling.

Figure 1: Pan European 3mth EPS Revisions (bars) & YoY Change in MSCI Europe (line)

Source: J.P. Morgan Quantitative and Derivatives Strategies, MSCI, I/B/E/S

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Europe Equity Research10 September 2014

Global Investment Bank TrackerCash equities and credit leading the way - OW UBS and DB

Global IBs

Kian Abouhossein AC

(44-20) 7134-4575

[email protected]

Bloomberg JPMA ABOUHOSSEIN <GO>

Amit Ranjan

(44-20) 7134-4576

[email protected]

Vivek Gautam

(44-20) 7742 3244

[email protected]

Delphine Lee AC

(44-20) 7134-3971

[email protected]

Bloomberg JPMA DLEE <GO>

Raul Sinha AC

(44-20) 7742-2190

[email protected]

Bloomberg JPMA SINHA <GO>


See page 55 for analyst certification and important disclosures, including non-US analyst disclosures.J.P. Morgan does and seeks to do business with companies covered in its research reports. As a result, investors should be aware that the firm may have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as only a single factor in making their investment decision.

IB revenue environment in Q3 14 so far has been in line with normal seasonality in our view on a q/q basis, however, we note that September is normally the busiest month and is likely to be the key driver for 3Q14 IB performance. We forecast total IB revenues in 3Q14 to be down -13% q/q with FICC -16% q/q, equities -11% q/q and IBD -12% q/q. Within businesses, Cash equity is doing well in a relative context followed by credit-related products in our view. We now have 3 IB/wholesale banks in our Eurobanks top picks portfolio: UBS, DBK and SG; as we see capital concerns related to litigation being overdiscounted at this point for these banks. Our pecking order within Global IBs is UBS, DB, SG, Barclays, MS, BNP, CSG and GS.

We estimate 3Q14E FICC revenues to be down -16% Q/Q; however, we note that September is normally the key driver for 3Q FICC performance.Rates & FX continue to be impacted by low volatility leading to low activity levels, however, we note that FX volatility has shown signs of pickup in Q3. Credit is holding up well with FINRA trading volumes up +25% y/y in July and August and CDS spreads continue to tighten QTD (iTraxx Europe Main -7bps).

We estimate 3Q14E Equity revenues to be down -11% Q/Q with cash equities expected to be flat to slightly down and equity derivatives expected to be down double digits as low volatility continues to impact client activity.Cash equities volumes are down -6% q/q but markets are up (SXXP +1%).

We estimate 3Q14E IBD revenues -12% Q/Q with advisory +10% q/q, ECM -16% q/q and DCM -20% q/q. Dealogic data indicates very weak trends in IBD in August however we note that September is normally the key driver (~38-40% of Q3).

UBS remains our top global IB pick trading at 9.1x P/E 2016E for the largest WM globally, with 66% of Equity geared IB revenues in 2015E and material dividend payout potential (dividend yield 10.6% in 2016E). We also added DBK and SG trading at average 6.8x P/E 2016E (vs. U.S. IBs at 11.2x) to our Eurobanks top picks portfolio as we see capital concerns as overdiscounted both on a stress test basis as well as concerns related to litigation cost. In this context we see the high BNPP litigation expense on U.S. sanction related issues as specific to the company.

Table 2: Summary Overview, local currency (revenues in millions)Price EPS 14E EPS 15E Equity Rev.

3QEFI Rev.

3QEIB div.

Rev 3QEB3CET1*

2015ETBV/Share**

2014ETBV/Share**

2015ERoNAV**

2014ERoNAV**

2015E

CS 26 2.40 3.00 1,051 1,203 837 11.6% 20.40 22.08 11.5% 13.8%UBS 16 1.30 1.65 837 315 835 14.4% 11.14 11.19 11.7% 14.8%DB 27 3.25 4.10 628 1,552 722 11.0% 33.68 34.95 10.3% 11.4%GS 178 15.85 15.75 1,511 1,890 1,593 10.5% 150.59 159.23 11.0% 10.2%MS 34 2.22 2.66 1,607 875 1,271 12.8% 29.06 30.16 8.9% 8.8%BNP 53 4.90 5.45 490 790 - 10.0% 49.80 51.73 9.6% 10.7%Socgen 41 4.30 5.10 600 480 - 10.5% 50.08 51.13 8.6% 10.1%Barclays 2.26 18.82 26.44 482 666 579 10.9% 2.75 2.88 6.8% 9.5%

Source: J.P. Morgan estimates, Bloomberg. Priced on 9th Sep 2014 EOD ex GS and MS (intraday ); * B3ET1 Is Basel 3 equity T1 assuming no phase in of deductions. **Ex own debt

Table 1: Global IBs: clean average IB revenues progression

3Q 14E / 2Q 14

3Q 14E/3Q 13

14E/ 13 15E/ 14E

FICC -16% 10% -3% -3%

Equity -11% -2% -3% 2%

IBD -12% 30% 14% 2%

Total -13% 12% 2% 0%

Source: J.P. Morgan estimates, Company data.

Please also look at our note:

European Banks: Top picks portfolio: adding Northern Euro-Banks to the portfolio published 1st September 2014

European Banks: Stress Test Analysis and Stock Selection published 1st September 2014







Europe Equity Research09 September 2014

NovartisOverweightNOVN.VX, NOVN VX

More than one string to the bow: On top of LCZ696, oncology pipeline to drive further upgrades in next 12 months

▲

Price: SF86.95

Price Target: SF100.00Previous: SF95.00

European Healthcare (Pharma, Biotech)

Richard Vosser AC

(44-20) 7742-6652

[email protected]

Bloomberg JPMA VOSSER <GO>

James D Gordon

(44-20) 7742-6654

[email protected]

Diana Na

(44 20) 7742 7922

[email protected]


For Specialist Sales advice please contact:

Marjan Daeipour

(44 20) 7134-1329

[email protected]

Novartis (NOVN.VX;NOVN VX)

FYE Dec 2013A 2014E 2015E(Prev)

2015E(Curr)

Adj.EPS FY ($) 5.09 5.22 6.10 6.13Adj.P/E FY 18.4 17.9 15.3 15.2Headline EPS FY ($) 3.76 4.48 4.65 4.68Headline P/E FY 24.8 20.8 20.1 19.9Revenue FY ($ mn) 57,920 58,697 57,842 57,946EBIT FY ($ mn) 10,910 12,778 12,154 12,237EBIT Margin FY 18.8% 21.8% 21.0% 21.1%FCF FY ($ mn) 10,841 12,487 15,035 15,108Source: Company data, Bloomberg, J.P. Morgan estimates.

Company DataPrice (SF) 86.95Date Of Price 08 Sep 14Price Target (SF) 100.00Price Target End Date 30-Jun-1552-week Range (SF) 87.25-66.30Market Cap (SF mn) 212,245.00Shares O/S (mn) 2,441


65

70

75

80

85

90

SwF

Sep-13 Dec-13 Mar-14 Jun-14 Sep-14

Price Performance

NOVN.VX share price (SwF)

MSCI-Eu (rebased)

We reiterate our Overweight rating on Novartis and raise our mid 2015 price target from SFr95 to SFr100 per share, implying 15% upside.Although the stock is up 22% YTD, we believe current levels continue to undervalue LCZ696’s impact on the business and also overlooking the billion $ sales potential from a portfolio of Oncology assets with data and launches over the next 12-24 months. Based on the first time inclusion of this Oncology potential, we are increasing our price target by SFr5 to SFr100 [17.5x 2015E Core EPS vs. Sector 16.9x], as we believe Novartis deserves to trade at a premium, given the superior 2015-18E Core EPS CAGR of 10% relative to 7% for the sector.

Detailed examination of Novartis’ oncology pipeline reveals seven Phase III Oncology assets with combined peak sales potential of $4.5bn (unadjusted) with multiple datapoints to drive upgrades over the next 12-24 months. We believe the number of Oncology assets with modest individual potential has counted against Novartis, meaning that the market overlooks the potential of the portfolio. Our analysis of the Phase III Onocolgy portfolio leads us to the first time inclusion of risk adjusted peak sales of $3.3bn (worth SFr2.3 per share) resulting in Core EPS upgrades of 1-6% (2015-20E), following on from our LCZ696 driven upgrades on Sept 1, 2014: LCZ696 data surpasses expectations; confidence in >$5bn blockbuster to increase: PT raised to SFr95).

LEE011 (CDK4/6 inhibitor) for treatment of a subtype of breast cancer (HR+/HER2-) has the largest commercial opportunity with peak sales potential of $2.2bn. The key Phase III (MONALESSA-2) data for LEE011reports in 2016. However, proof of concept data from palbociclib (Pfizer) and potential differentiation from better tolerability and novel proprietarycombinations, already drive our confidence in the $2.2bn opportunity.Ongoing combination trials with BKM120 and BYL719 (2 PI3K inhibitors for breast cancer) reporting over the next 24 months, together with BKM120 Phase III (BELLE-2/3) data in 2015, should substantially increase confidence in Novartis’ combination strategy, driving further upside. We provide a detailed Breast Cancer model to sort through the increasing complexity in this space.

Figure 1: Oncology Peak Sales ($,m)

Source: J.P. Morgan estimates

205

392

393

373

430

465

2,255

CTL019

LDE225

BKM120

Zykadia

LBH589

PKC412

LEE011



Asia Pacific Equity Research 10 September 2014

Apple iPhones/Watch Asia read-through

Impressive hardware as expected, Watch looks like a good start

Today’s Apple (AAPL, covered by JPM US Analyst, Rod Hall) product launch event was along expected lines, with two iPhones (iPhone 6 and 6 Plus with 4.7’ and 5.5" displays respectively) announced along with an entry into wearables with the new Apple Watch. Hardware specs are as expected, with the exception of lack of sapphire display on the iPhone 6 Plus. Better availability of the iPhone 6 Plus is a positive, but the small price differential between the two models (only $100, similar to iPhone 5S/5C) with more features packed into the 6 Plus could move demand towards the 6 Plus (the supply chain currently expects a 30% mix for 6 Plus). Apple Watch hardware is as expected (key component winners being AAC and ASE) with design and user interface/applications appearing to be quite innovative, but product availability in early 2015 is a slight disappointment. We also believe that Apple’s foray into the payments market is a key differentiating move which could create more stickiness within the iOS ecosystem. We believe the iPhone 6 Plus may encroach upon iPad Mini territory, causing meaningful shortfall for iPad Mini demand, which is potentially negative for vendors like Casetek and Pegatron. Our top picks are Hon Hai, LG Display, Taiyo Yuden, Alps Electric, Largan, Quanta, Hynix and Japan Display. We would avoid Pegatron and TPK among the Apple supply chain vendors.

iPhones – Hardware as expected, no sapphire display, better availability: iPhone 6 and 6 Plus hardware announcements were in-line with expectations - 4.7" and 5.5" displays, 20nm A8 processors, 2.5D glass designs, new, slimmer industrial designs, 8MPx Camera modules and NFC. Negative surprise was the complete absence of Sapphire display on the iPhone 6 Plus (negative for TPK), while the positive surprise compared to expectations was a major upgrade for NAND Flash density (128GB now the high-end for both models) and immediate availability of the 6 Plus model. Key beneficiaries are Largan, Catcher, Hynix and TSMC.

Upgrade potential remains large, but narrow price gap between 6 and 6Plus could create demand cannibalization: We are expecting 85M+ iPhone 6/6Plus to be shipped by EMS vendors in 2H14, with 30% of the mix accounted for by the iPhone 6 Plus. We do see some upside potential to numbers due to strong upgrade activity, but demand migration towards 6 Plus is a risk for some vendors (like Pegatron) since the price gap is narrow ($100), while the 6 Plus offers a better display, much longer battery life and optical image stabilization on the camera. We believe the eventual split may not be as severe as for iPhone 5C/5S, but feel that 6 Plus could see more traction, especially for users switching from Android to iOS.

Apple Watch impressive, availability slightly later than expected: As we had expected, Apple announced its Apple watch, with prices starting at $349. Functionality appears impressive with haptic feedback, newly designed user interface, and integrated health tracking capabilities. However, availability by early-2015 is a bit later than expectations. Key component winners are AAC Tech (haptic feedback) and ASE (SiP module housing the processor and sensors), while Quanta should benefit from near 100% share in EMS.

“Apple Pay” likely to lock in users to iOS: Apple also announced its NFC enabled payment service, coined Apple Pay, available initially on the iPhone 6/6 Plus in the US (starting next month) and eventually on the Watch. Previous iPhone models won't be able to enjoy Apple Pay given the lack of NFC functionality. We believe the Apple Pay functionality should create more lock-in for the iOS ecosystem and could increase the adoption of fingerprint functionality in other smartphone models as well.


Asia Pacific Equity Research10 September 2014

India Consumer StaplesRelative Trades for Peak Valuations

India

Consumer, Retail, Media

Latika Chopra, CFA AC

(91-22) 6157-3584

[email protected]

Bloomberg JPMA CHOPRA <GO>

J.P. Morgan India Private Limited

Ebru Sener Kurumlu

(852) 2800-8521

[email protected]



In this report, we identify three key relative value themes in the Indian consumer staples sector. Our three top ideas are: a) Among large caps, we prefer ITC (OW) over HUL, b) Among mid-tier domestic companies, we prefer Dabur (OW) over GCPL (downgraded to N), and c) Among MNCs, we prefer Colgate India (upgraded to OW)/ GSK Consumer (OW) vs Nestle India (N).

Investment case for the sector remains compelling despite high valuations. While sector valuations remain high at 31x FY16E P/E, we believe the medium to long term growth outlook is still healthy. We still view the sector as a relative safe haven but would cherry pick stocks with strong internal momentum driven by healthy market share trends, good pricing power and margin enhancement opportunities. After a jump in valuation multiples, we are skeptical about a further upward rerating. Yet downside seems limited too, as EBITDA and EPS growth should not decelerate as much as volumes, thanks to pricing power, RM tailwinds and operating leverage.

Gradual improvement in demand growth likely ahead. While there are limited signs of demand revival yet, our discussions with various industry players indicate that growth is nearing the bottom. There is rising probability of gradual recovery in demand growth over 2H and FY16 supported by improving macro indicators, positive consumer sentiment and recovery seen in certain discretionary segments like automobiles in recent months. Pricing remains firm supporting revenue growth prospects. Sustained investments in product innovation/distribution/talent would be significant enablers too. Mid to high teens organic growth for overseas operations would also act as a key growth driver for domestic companies like Dabur and GCPL.

Rational competitive environment supporting pricing and moderate A&P inflation. While we do not deny that Indian FMCG market will continue to remain competitive given structural attractiveness of this market, we do note that competition has been more rational of late. Companies are focused on profitable growth and discounting route is not being preferred. A&P spends (on aggregate basis for key staple names) have risen steeply (18% CAGR) over the past two years (partly led by investments behind new product launches) and we expect moderate growth over FY15.

Raw material inflation easing in certain pockets. Prices for most of the key raw materials (palm oil, PFAD, crude and crude derivatives, wheat, sugar) have been stable to declining over past few months. This bodes well for overall margins, though we are cognizant that some of the gross margin gains will likely be reinvested in brand investments.

Performance/stock picks. Indian staples sector has been a significant outperformer over the past two months. Discretionary plays (Titan and Asian Paints) have fared better YTD. We think ITC has the ability to outperform given low expectations and ability to drive margins (led by cigarette pricing). Dabur should benefit from steady volume growth, niche product portfolio and recovery in Namaste operations. Colgate India and GSK Consumer are single category focused companies benefiting from market share gains, pricing power and scope for margin enhancement.

Table 1: India Consumer Staples –Rating and TP

RatingTarget Price

ITC OW 415HUL UW 700Nestle India N 6050Dabur OW 245

Godrej Consumer N 1050

UNSP N 2475GSK Consumer OW 5775

Colgate India OW 1760

Source: J.P. Morgan.

Figure 1: MSCI India Staples v/s MSCI India

Index

Source: Bloomberg.



China Hongqiao Group▲ Overweight

Previous: Neutral

1378.HK, 1378 HK

Headwinds clear - Upgrade to OW, raise price target to HKD8.00

▲

Price: HK$6.32

Price Target: HK$8.00Previous: HK$6.00

China

Asia Metals and Mining

Daniel Kang AC

(852) 2800 8570

[email protected]

Bloomberg JPMA KANG <GO>

Waiyin Karen Li, CFA

(852) 2800-8561

[email protected]


YTD 1m 3m 12mAbs 19.9% 1.0% 16.8% 40.1%Rel 11.6% -1.4% 7.6% 29.2%

China Hongqiao Group (Reuters: 1378.HK, Bloomberg: 1378 HK)

Rmb in mn, year-end Dec FY12A FY13A FY14E FY15E FY16ERevenue (Rmb mn) 24,805 29,404 36,382 37,813 40,677Net Profit (Rmb mn) 5,453 5,593 5,424 6,124 6,715EPS (Rmb) 0.91 0.92 0.88 0.99 1.09DPS (Rmb) 0.21 0.21 0.20 0.22 0.24Revenue growth (%) 5.0% 18.5% 23.7% 3.9% 7.6%EPS growth (%) (12.2%) 1.6% (4.5%) 12.9% 9.6%ROCE 18.3% 13.7% 10.7% 10.9% 11.2%ROE 26.8% 22.8% 18.3% 17.5% 16.7%P/E (x) 5.5 5.4 5.7 5.0 4.6P/BV (x) 1.3 1.1 0.9 0.8 0.7EV/EBITDA (x) 3.9 5.0 4.6 4.3 3.1Dividend Yield 4.1% 4.2% 3.9% 4.4% 4.9%Source: Company data, Bloomberg, J.P. Morgan estimates.

Company DataShares O/S (mn) 5,885Market Cap (Rmb mn) 29,473Market Cap ($ mn) 4,799Price (HK$) 6.32Date Of Price 08 Sep 14Free Float(%) -3M - Avg daily vol (mn) 8.833M - Avg daily val (HK$ mn) 55.213M - Avg daily val ($ mn) 7.1HSI 2,5190.45Exchange Rate 7.75Price Target End Date 31-Dec-15


4.0

5.0

6.0

7.0

HK$


Price Performance

1378.HK share price (HK$)

HSI (rebased)

The rally in aluminium prices and China Hongqiao (HQ)’s recent placement have removed our concerns of Street earnings risks and an equity raising. We view the aluminium markets to be well supported in the near term by declining inventories as we enter the seasonally strong 4Q demand period. Despite its strong outperformance over the past year, HQ is cheap against global peers. We expect further re-rating in the near term from a strong 3Q14 performance. Upgrade to OW, lift PT to HK$8.00.

Aluminium markets tightening. Global LME aluminum inventories have fallen by almost 560kt (-10%) since the beginning of May as the premium has continued to increase, while Chinese stockpiles are down nearly 100kt (-24%) in the same period. LME and SHFE aluminium prices have rallied 20% and 15% respectively, in this time. The main driver of the improved aluminium picture has been supply discipline. Between 2013 and 1H2014, we estimate over 4mt of capacity has been removed from the market–c2.4mt ex-China and c1.7mt China (mainly curtailed between January and May this year). We expect the global balance will be in deficit for the first time in six years in 2014, moving to a slight surplus in 2015.

Catalysts – Strong 3Q, rising self sufficiency in power and alumina, growing volume. In the near term, the recent rally in aluminium prices should see HQ report strong 3Q results. We estimate NP may be close to Rmb2.0B, +67% q/q. In this note, we upgrade domestic aluminium price assumptions to reflect the stronger than expected 3QTD and raise FY14 and FY15 NP forecasts by 5% and 10% respectively. This more than offsets the dilutionary impact of HQ’s placement (+4.7% of new shares). Operationally, HQ continues to progress toward its goal of self sufficiency in power and alumina, which we expect will help contain 2H14 costs. Finally, HQ’s plans should deliver 17% volume growth by 2015, in contrast to its global peers.

Upgrade to OW rating, lift PT to HKD8.00/share. We expect HQ to continue its re-rating toward our revised PT of HKD8.00, which implies c5.5x EBITDA, in line with normalized industry levels. The key risk lies inrestarts of idled capacity pushing aluminium markets back to surplus.



China Metals & MiningAugust Trade - Disappoints with iron ore and coal imports down, steel exports lower - ALERT

Asia Metals and Mining

Daniel Kang AC

(852) 2800 8570

[email protected]

Bloomberg JPMA KANG <GO>

Waiyin Karen Li, CFA

(852) 2800-8561

[email protected]



China’s preliminary commodities trade data for August were disappointing, in our view. Imports of iron ore and coal fell meaningfully while refined copper imports were broadly flat. Meanwhile, exports of steel products eased but aluminum product exports rose to three year highs. Taken together with China’s broader trade data which revealed disappointing imports, J.P. Morgan’s economists expect the government to roll out selective pro-growth measures in the coming months. We see attractive risk reward on selective sector plays: Anhui Conch, Zijin Mining and Yanzhou Coal are our top picks.

Copper imports flat, aluminum product exports hit 3 year highs. Total copper (and product) imports in August slipped marginally for the forth consecutive month to 340kt (-1% m/m, -12% y/y), the lowest level since April 2013. We suspect demand for metal financing remains soft following the Qingdao port probe. However, copper concentrates imports rose to 960kt (+7% m/m, +28% y/y), suggesting a shift in copper demand as Chinese smelters ramp up. For 8M14, total copper product imports totaled 3.2Mt (+14% y/y). We estimate bonded and SHFE warehouses together now hold 26.2 days of copper (against July 26.1 days), inline with trend levels of 25.8days. On aluminum, exports of aluminum products (0.39Mt) hit a three-year high. No scrap data for copper and aluminum were released.

Bulks – Iron ore imports pull back. August iron ore imports retreated to 74.9Mt (-9% m/m, +9% y/y), as buyers hold a wait-and-see attitude given falling prices. For 8M14, iron ore imports totaled 615Mt, +17% y/y. Destocking inventories at mills and the sharp fall in late August CISA steel output may weigh on imports near term. Elsewhere, August coal imports (including lignite) fell further to 19Mt (-18% m/m, -27% y/y) while for 8M14, coal imports totaled 202Mt (-5% y/y). With domestic coal prices still near multi year lows, we believe seaborne coal imports will continue to find it challenging to price into China.

Steel – August exports soften. After rebounding in July, net finished steel exports fell to 6.59Mt (-4% m/m, +34% y/y), easing from July’s high level (6.84Mt). Finished steel exports declined to 7.8Mt (-4% m/m, +26% y/y) or 93mtpa, along with lower imports of 1.2Mt (-4% m/m, -5% y/y). This was in line with China’s July Steel PMI (released 1 August), which revealed export orders sliding back below 50 (to signal contraction). On a more positive note, the August Steel PMI showed export orders back above 50 (ie. expansion) so we would expect some recovery in steel exports in September.

Risk reward remains attractive for selective sector exposures. Recent macro data have been less than expected (trade, PMI, CISA output),suggesting a soft patch in domestic activity. With Beijing likely to continue with pro-growth policies in 2H14 and given undemanding valuations, we see attractive risk-reward with our preferred sector exposures in Anhui Conch (914), Zijin Mining (2899) and Yanzhou Coal (1171).

Figure 1: China iron ore imports retreat

Source: China Customs, J.P. Morgan

Figure 2: China steel imports, exports and net trade trend(Mt)

Source: China Customs, J.P. Morgan

30

50

70

90

Aug-10 Aug-11 Aug-12 Aug-13 Aug-14

Series1

-8.0

-6.0

-4.0

-2.0

0.0

2.0

Aug-10 Aug-11 Aug-12 Aug-13 Aug-14

Imports Export Net trade


Russia Equity Research10 September 2014

QIWIOverweightQIWI, QIWI US

Mail.ru Group sells ~4% stake in Qiwi; Reiterate high-conviction OW - ALERT

Price: $35.80

09 September 2014

Russian Payments

Alexei Gogolev AC

(7-495) 967-1029

[email protected]

Bloomberg JPMA GOGOLEV <GO>

J.P. Morgan Bank International LLC

Tien-tsin Huang, CFA

(1-212) 622-6632

[email protected]


Reginald L. Smith, CFA

(1-212) 622-6743

[email protected]



According to an SEC filing yesterday, Mail.ru Group announced the sale of 2.165 mn Qiwi shares (equivalent to ~4% stake). Russian media reports that the shares were sold via an accelerated book-build at $37.5/ADS (~3% discount to Monday COB). Mail.ru Group is expected to receive ~$80 mn from the placement. We welcome the development and highlight reducing overhang risk at Qiwi (free-float would increase to over 61%). Mail.ru Group has been consistently selling its stake in Qiwi since the IPO in May 2013 and the development should be fully priced in at this stage. We view the current pullback in the shares as a buying opportunity and reiterate our high-conviction Overweight on the name.

Mail.ru Group sells ~4% in Qiwi. Mail.ru Group has filed a registration statement with the SEC for a public offering of 2.165 mn Qiwi shares, which is equivalent to ~4% of the company. According to Kommersant, the shares have been sold via an accelerated book-build at $37.5/ADS (a 2.8% discount to Monday COB).

Mail.ru Group stake reduced to 1.3%. Mail.ru Group is the only selling shareholder and following the placement will own ~1.3% of Qiwi shares. The Group is expected to receive ~$80 mn in sale proceeds. In line with its strategy to dispose non-core assets, Mail.ru Group has been consistently reducing its stake from ~21% at the time of the Qiwi IPO in May 2013 (most recently in June 2014, when Mail.ru Group sold ~2.54 mn Qiwi shares; see our alert for more details here).

Free-float to exceed 61%; expect improvement in liquidity. Post the placement we estimate Qiwi free-float to exceed 61% (vs. ~57% as of June 2014). Company CEO Sergey Solonin remains the largest shareholder with ~23% of Qiwi. Mitsui current owns ~3%, while top-management, company employees and other early shareholders own a combined 11%. We expect further improvement of average daily share liquidity, which exceeded $25 mn/day over the past three months.

J.P. Morgan view. We continue to favor Qiwi shares among our Russian TMT universe given low cyclicality of the payments industry compared to most consumer-related sectors of the economy. Structural penetration momentum is still in place as Qiwi’s market share remains low within key verticals of operation. We expect Qiwi to continue delivering robust topline growth and margin enhancement as it gains market share of the Russian consumer wallet (see detailed discussion of the company fundamental outlook here). We view yesterday’s pull-back in Qiwi’s shares as a buying opportunity and reiterate our high-conviction OW on the name.

Figure 1: Qiwi ownership structure prior to public placementEconomic ownership

Source: Company data

Figure 2: Qiwi ownership structure post public offeringEconomic ownership

Source: JPMorgan estimate

CEO23%

Mail5%

Mitsui3%

Other11%

Free-float57%

CEO23%

Mail1%

Mitsui3%

Other11%

Free-float61%





Xinyi SolarOverweight0968.HK, 968 HK

Lifting PT to HK$3.8 - Downstream road block finally comes down

▲

Price: HK$2.41

Price Target: HK$3.80Previous: HK$3.40

China

SMID-Caps

Leon Chik, CFA AC

(852) 2800-8590

[email protected]

Bloomberg JPMA CHIK <GO>

Liwen Yin

(852) 2800-8528

[email protected]


YTD 1m 3m 12mAbs 51.9% 9.0% 16.8% 113.2

%Rel 45.7% 5.7% 7.1% 103.2

%

Xinyi Solar (Reuters: 0968.HK, Bloomberg: 968 HK)

HK$ in mn, year-end Dec FY12A FY13A FY14E FY15E FY16ERevenue (HK$ mn) 1,533 1,968 2,646 5,661 7,645Net Profit (HK$ mn) 119 304 521 1,158 1,526EPS (HK$) 0.03 0.07 0.09 0.19 0.25DPS (HK$) 0.00 0.02 0.04 0.08 0.10Revenue growth (%) 24.3% 28.3% 34.5% 114.0% 35.0%EPS growth (%) (63.0%) 115.7% 21.1% 113.9% 31.9%ROCE 11.9% 17.9% 14.4% 18.2% 17.1%ROE 12.0% 18.0% 18.2% 30.9% 29.7%P/E (x) 70.9 32.9 27.1 12.7 9.6P/BV (x) 7.9 5.9 4.3 3.6 2.6EV/EBITDA (x) 61.1 31.2 21.5 9.8 7.9Dividend Yield 0.0% 0.7% 1.5% 3.2% 4.2%Source: Company data, Bloomberg, J.P. Morgan estimates.

Company DataShares O/S (mn) 6,080Market Cap (HK$ mn) 14,653Market Cap ($ mn) 1,891Price (HK$) 2.41Date Of Price 08-Sep-14 Free Float(%) -3M - Avg daily vol (mn) 45.663M - Avg daily val (HK$ mn) 100.323M - Avg daily val ($ mn) 12.9HSCEI 1,1368.34Exchange Rate 7.75Price Target End Date 31-Dec-15


1.0

1.5

2.0

2.5

3.0

HK$


Price Performance

0968.HK share price (HK$)

HSCEI (rebased)

Xinyi Solar (XYS) is the largest maker of solar cover glass in the world, with over a 20% global market share. The stock is up 17% over the past three months (HSCEI index up 8% over the same period). The new rules last week issued by the government should boost demand for rooftop solar projects and this can benefit XYS in 3 ways: more EPC contracts, more demand for solar glass and a greater potential to invest in rooftop projects. We remain OW and lift our Dec-15 PT to HK$3.8 (prev. HK$3.4).

Looking forward to a better second half. We believe these new solar policies should boost sentiment and earnings for 2H14. Seasonally, 2H is stronger than 1H, due to more working days and better weather for construction, leading to higher utilization and margins. For 2014, we also expect XYS to start to generate significant sales and earnings from its downstream solar farm assets, starting at the end of 3Q14.

Lifting net profit estimates for FY15 and setting a new price target. We are adjusting our FY15 estimates to reflect more EPC contracts for XYS but we haven’t lifted the solar glass price or margins yet as we need to see more signs that the new rules will boost solar glass demand faster than the rate of growth in supply. Our revised FY15 EPS estimate is 23% higher than consensus.

Price target, risks. The stock is trading at a FY15E P/E of 12.8x. Our PT (Dec-15, DCF-derived) of HK$3.8 (WACC 9.5% and 4% terminal growth) implies a forward P/E of 15.2x (FY16E). The key downside risks to our PT are slower-than-expected recovery in global demand and delays in solar panel approvals in China. Higher cost of natural gas is a key risk to margins.



India Oil & Gas

GAIL.BO, GAIL INNeutralPrice: Rs458.70

Price Target: Rs420.00

Gas infrastructure: Near term headwinds persist; prefer Petronet LNG

PLNG.BO, PLNG INNeutralPrice: Rs187.85

Price Target: Rs195.00

India

India Oil, Gas and Petrochemicals

Neil Gupte AC

(91-22) 6157 3592

[email protected]

Bloomberg JPMA GUPTE <GO>

J.P. Morgan India Private Limited

Scott L Darling

(852) 2800 8578

[email protected]


Equity Ratings and Price Targets

Mkt Cap Rating Price TargetCompany Ticker (Rs mn) Price (Rs) Cur Prev Cur PrevGas Authority of India Limited GAIL IN 581,851.80 458.70 N n/c 420.00 405.00Petronet LNG Ltd. PLNG IN 140,887.50 187.85 N n/c 195.00 n/c

Source: Company data, Bloomberg, J.P. Morgan estimates. n/c = no change. All prices as of 09 Sep 14.


While we continue to believe in the long-term potential for gas usage in India, we see a lack of near-term catalysts for the gas infrastructure players. Volume growth remains constrained (for PLNG/GAIL), whileprovisional tariffs (for GAIL) could potentially see limited adjustments. With lower regulatory exposure, and with the stock reflecting low Kochi utilizations, we prefer Petronet LNG to GAIL in the space.

Tariff revisions – may be limited: GAIL’s tariffs, which were provisionally set in 2010 are to be reviewed next year – given the low utilizations (against normative assumptions by the PNGRB), there has been hope that these are revised upwards – our regulatory interactions suggest this may not be the case, with only changes in capex/opex possibly considered. A 10% hike in HVJ/DVPL tariffs will add c.5% to FY15/16 earnings.

Petronet LNG faces less regulatory exposure: With the PNGRB not likely to regulate LNG terminals, in the near/medium term, we see PLNG as relatively less exposed to regulatory processes.

Volume growth remains muted: Gas volumes remain constrained, with domestic output growth weak, and with LNG volumes unlikely to move up sharply near term (either through capacity or pipeline constraints).

Resolution of delays in pipeline construction would be a positive: Any resolution to the delay that has held up GAIL's south Indian pipelines (which provide connectivity to the Kochi LNG terminal) will be a positive for both, GAIL and PLNG - we do not currently factor in a quick resolution, with volumes reaching 3mmt at Kochi only in FY19.

Chemicals profitability likely to be impacted by gas price hikes: A higher proportion of LNG used in the chemicals business (post Pata expansion), coupled with an increase in domestic gas prices is likely to impact chemicals profitability – dragging earnings.

Prefer PLNG: We continue to prefer PLNG in the gas infrastructure space. While volume growth is a concern near term for both PLNG and GAIL, we see PLNG as less exposed to regulatory processes. GAIL could see limited adjustments to tariffs (if lower capacity utilizations are not considered when finalizing provisional tariffs), while subsidies are another source of earnings uncertainty.

Figure 1: GAIL/PLNG vs. NIFTY (rebased)

Source: Bloomberg.

80

100

120

140

160

Dec-13 Mar-14 Jun-14

GAIL PLNG NIFTY

Appendix TOP

Key Rating, Price Target & EPS Changes Europe

Price Target Changes Price Target Company Rating New Old Increases

Ashmore Group N 370 p 345 p Man Group UW 117 p 96 p Henderson Group N 245 p 240 p Schroders OW 2,985 p 2,850 p Decreases Aberdeen Asset Management OW 500 p 520 p Jupiter OW 465 p 474 p Source: J.P. Morgan estimates.

J.P. Morgan EPS Estimate Changes Company Current FY Next FY Increases

Aberdeen Asset Management +0.2% +1.5% Ashmore Group +5.5% Credit Suisse Group +0.2% +0.1% Henderson Group +3.2% +7.7% Schroders +0.5% +2.0% Decreases Whitbread -0.3% -0.3% Revisions Jupiter -0.0% +0.2% Man Group +16.7% -16.9% Oxford Instruments -0.0% +0.0% UBS -0.3% +0.1% Source: J.P. Morgan estimates

Asia

Rating Changes Company New Rating Old Rating Increases

China Hongqiao Group

OW N Colgate-Palmolive (India) Limited

OW UW

Decreases

Godrej Consumer Products Limited

N OW


Xinyi Solar OW HK$3.80 HK$3.40 China Hongqiao Group OW HK$8.00 HK$6.00 Adaro Energy N Rp1,275.00 Rp1,230.00 Colgate-Palmolive (India) Limited OW INR1,760.0 INR1,425.0 Dabur India Limited OW INR245.0 INR215.0 Gas Authority of India Limited N INR420.0 INR405.0 GlaxoSmithKline Consumer Healthcare Limited OW INR5,775.0 INR4,850.0 Godrej Consumer Products Limited N INR1,050.0 INR880.0 Hindustan Unilever Limited UW INR700.0 INR655.0 ITC Limited OW INR415.0 INR410.0 Nestlé India Limited N INR6,050.0 INR5,350.0 Source: J.P. Morgan estimates.


Adaro Energy +0.5% +7.4% China Hongqiao Group +0.7% +5.3% Dabur India Limited +0.4% +2.3% Godrej Consumer Products Limited +0.9% +2.3% Hindustan Unilever Limited +1.0% Petronet LNG Ltd. +2.8% +0.3% Decreases Gas Authority of India Limited -1.0% -5.3% GlaxoSmithKline Consumer Healthcare Limited -1.0% -1.5% ITC Limited -0.2% -0.4% Nestlé India Limited -1.0% -0.6% Reliance Infrastructure Ltd -0.3% -0.7% Revisions Colgate-Palmolive (India) Limited -0.1% +3.3% Everlight Electronics -10.5% +5.3% United Spirits Limited -2.3% +1.6% Xinyi Solar -1.1% +5.9% J.P. Morgan DPS Estimate Changes Company Current FY Next FY Increases

China Hongqiao Group +1.3% +0.7% Petronet LNG Ltd. +37.2% +2.8% Decreases Everlight Electronics -100.0% -100.0% Gas Authority of India Limited -7.2% -1.0% Xinyi Solar nc -1.1% Revisions London Sumatra Indonesia +48.6% -11.8%

18

Australia

Estimate Changes* Company FY_14 FY_15 Downgrade RRL -18.6% -0.2%

* EPS Changes > +/- 1%

Price Target Changes

Target Company New Old Upgrade BXB 9.82 9.77

Source: J.P. Morgan estimates.

Japan


Canon (7751) UW ¥3,400 ¥3,250 Decreases Tamron (7740) OW ¥2,700 ¥3,500 Source: J.P. Morgan estimates.


Canon (7751) +1.4% +1.3% Revisions Tamron (7740) +1.1% -10.1% Source: J.P. Morgan estimates. Note: Numbers and companies above may differ from the corresponding numbers or companies in the individual notes inside the FTM.

LatAm

Rating Changes

Company New Rating Old Rating Decreases

Kimberly Clark Mexico UW N Price Target Changes

Price Target Company Rating New Old Increases

Comerci UW 50.00 48.00 Decreases Kimberly Clark Mexico UW 32.00 40.00 Genomma Lab N 40.00 41.00 Liverpool OW 170.00 174.00 Organizacion Soriana UW 44.00 45.00 Source: J.P. Morgan estimates.

J.P. Morgan EPS Estimate Changes

Company Current FY Next FY Increases

Wal-Mart de Mexico +21.7% +1.4% Decreases Genomma Lab -5.7% -7.0% Kimberly Clark Mexico -19.6% -15.6% Liverpool -1.8% -0.5% Organizacion Soriana -1.9% -0.3% Revisions Comerci -0.1% +2.0%

19

US

Price Target Changes

Price Target Company Rating New Old Increases

Accenture plc OW 91.00 88.00 Burlington Stores OW 40.00 36.00 CDW OW 35.00 34.00 Computer Sciences N 65.00 63.00 Cognizant N 51.00 45.00 ExlService Holdings Inc. UW 29.00 28.00 Globant OW 16.00 15.00 IBM N 215.00 197.00 Morgan Stanley OW 34.00 31.00 Syntel, Inc. N 95.00 91.00 Verint Systems, Inc. OW 62.00 58.00 Xerox Corporation N 15.00 14.00 Decreases Leidos N 34.00 42.00 Source: J.P. Morgan estimates.

J.P. Morgan EPS Estimate Changes*

Company Current FY Next FY Increases

Burlington Stores +4.5% +3.4% HealthEquity +10.2% +1.4% Decreases Leidos -257.8% -12.0% * EPS Changes > +/- 1%

20

Conference Calls TOP Today Apple Event Roundup and Q&A, Hosted by: Rod Hall (Networking and Mobile Technology Equity Analyst), , on Wednesday, September 10 @ 10:00am ET / 15:00 UK, DIAL-IN: 888-989-7592 (US); +1-773-756-4791(outside US); Passcode: APPLE, Replay through 9/17: 800-216-6081 (US); +1-402-220-3895 (Outside US); Passcode: 91014

Applied and Emerging Technologies: Conference Call with TASR Management, Hosted by: Paul Coster (Applied & Emerging Technologies Equity Analyst), Featuring: Rick Smith (CEO of TASER International, INC. (TASR), on Wednesday, September 10 @ 11:00am ET / 16:00 UK, DIAL-IN: 888-790-1965 (US); +1-312-470-7045 (outside US); Passcode: TASR, Replay through 9/17: 866-424-7873 (US); +1-203-369-0863 (outside US); Passcode: 91014 (PODCAST AVAILABLE)

European Healthcare CEO Conference Calls Series 2014 - GSK, Hosted by: James Gordon (European Pharma Equity Analyst), Featuring: Andrew Witty (CEO of GSK), on Wednesday, September 10 @ 10:00am ET / 15:00 UK, DIAL-IN: +1-334-323-6201 (US); +44 207 162 00 25 (UK); Passcode: 943510, Replay through 9/17: +1-954-334-0342 (US); +44 207 031 4064 (UK); Passcode: 459524

Scotland Referendum, Hosted by: Allan Monks (UK Economic research), Paul Meggyesi (Global FX Strategy), Francis Diamond (Global Rates Strategy), on Wednesday, September 10 @ 9:00am ET / 14:00 UK, Please pre-register for the call; Dial-in details will be provided on registration: Event Audio Registration link: https://eventreg1.conferencing.com/webportal3/reg.html?Acc=385446&Conf=191144

Upcoming Agribusiness and Capital Goods, Hosted by: Cassio Lucin, on Thursday, September 11, 2014 at 10:00 ET, Dial in: 866-803-2143 (US); +1-210-795-1098 (outside US) International Toll Free Dial-in Numbers: Brazil 0800-8911992 | Chile 1230-020-2846 | Colombia 01800-9-156448 | Mexico 001-866-888-0267 | Peru 0800-53744 | United Kingdom 0800-279-3953 Passcode: JPMORGAN, Replay through 9/14: 800-294-9493 (US); +1-402-220-3767 (outside US) Passcode: 54192 Electrical Equipment / Multi-industry: Sector Update, Hosted by: Steve Tusa (Electrical Equipment / Multi-industry Equity Analyst), on Thursday, September 11 @ 10:00am ET / 15:00 UK, DIAL-IN: 800-779-1507 (US); +1-203-827-7006 (outside US); Passcode: TUSA Replay through 09/18: 866-513-4384 (US); + 1-203-369-1983 (Outside US); Passcode: 9112014 (SLIDES & PODCAST AVAILABLE)

European Healthcare CEO Conference Calls Series 2014 - AstraZeneca, Hosted by: James Gordon (European Pharma Equity Analyst), Featuring: Pascal Soriot (CEO), Marc Dunoyer (CFO or AstraZeneca), on Thursday, September 11 @ 7:30am ET / 12:30 UK, DIAL-IN: +1-334-323-6201 (US); +44 207 162 00 25 (UK); Passcode: 943510, Replay through 9/18: +1-954-334-0342 (US); +44 207 031 4064 (UK); Passcode: 532084

European Healthcare CEO Conference Calls Series 2014 - Actelion, Hosted by: James Gordon (European Pharma Equity Analyst), Featuring: Jean-Paul Clozel (CEO of Actelion), on Monday, September 15 @ 10:00am ET / 15:00 UK, DIAL-IN: +1-334-323-6201 (US); +44 207 162 00 25 (UK); Passcode: 943510; Passcode: 943510, Replay through 9/22: +1-954-334-0342 (US); +44 207 031 4064 (UK); Passcode: 75453

European Healthcare CEO Conference Calls Series 2014 - Vectura, Hosted by: James Gordon (European Pharma Equity Analyst), Featuring: Chris Blackwell (CEO of Vectura), on Tuesday, September 16 @ 10:00am ET / 15:00 UK, DIAL-IN: +1-334-323-6201 (US); +44 207 162 00 25 (UK); Passcode: 943510, Replay through 9/23: +1-954-334-0342 (US); +44 207 031 4064 (UK); Passcode: 882098

Conference Call Replays European Bank Outlook, Hosted by: Kian Abouhossein & Team (Head of European Banks & Global Investment Banks), Replay through 9/10: 866-415-2343 (US); +1-203-369-0688 (Outside US); Passcode: 9032014 (PODCAST AVAILABLE)

European Healthcare CEO Conference Calls Series 2014 - Novartis, Hosted by: Richard Vosser (European Pharma Equity Analyst), Featuring: Joe Jimenez (CEO of Novartis), Replay Through 9/12: +1-954-334-0342 (US); +44 207 031 4064 (UK); Passcode: 748124

PCL and WY Initiations, Hosted by: Tyler Langton (Paper and Packaging Equity Analyst), Replay through 9/12: 866-380-8121 (US); +1-203-369-0353 (Outside US); Passcode: 9052014 (SLIDES & PODCAST AVAILABLE)

Apple iWallet – Discussion Ahead of Possible Product Launch on Sept. 9, Hosted by: Rod Hall (Networking and Mobile Technology), Tien-Tsin Huang (Computer Services & IT Consulting), Kaizad Gotla (Internet), Replay through 9/12: 800-337-6849 (US); +1-402-220-0213 (Outside US); Passcode: 90514 (PODCAST AVAILABLE)

U.S. Economic Outlook, Speaker: Bruce Kasman (J.P. Morgan Chief Economist) , Replay through 9/13: 888-458-8113 (US); +1-402-998-1351 (outside US); Passcode: 6909591 (PODCAST AVAILABLE)

European Healthcare CEO Conference Calls Series 2014 - Sanofi, Hosted by: Richard Vosserz (European Pharma Equity Analyst), Featuring: Chris Viehbacher (CEO of Sanofi), Replay Through 9/15: +1-954-334-0342 (US); +44 207 031 4064 (UK); Passcode: 638408

JP Morgan Bi-Weekly US Fixed Income Market Update, Hosted by: Jay Barry (US Interest Rate Strategy), Eric Beinstein (Corporate Credit Strategy) and Gareth Davies (European Securitized Products), Replay through 9/15: 800-839-5110 (US); +1-203-369-3123 (Outside US); Passcode: 71414

European Healthcare CEO Conference Calls Series 2014 - Roche, Hosted by: Richard Vosserz (European Pharma Equity Analyst), Featuring: Severin Schwan (CEO) and Alan Hippe (CFO of Roche), Replay Through 9/16: +1-954-334-0342 (US); +44 207 031 4064 (UK); Passcode: 797011

Homebuilding Sector Update, Hosted by: Michael Rehaut, CFA (Homebuilding and Building Products Equity Analyst), Replay through 09/16: 866-485-0036 (US); +1-203-369-1608 (outside US); Passcode: 91714 (PODCAST AVAILABLE)

21

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Upcoming Conferences

Homepage

September 3 – 4, 2014 - APAC Equity Investor Conference Ritz-Carlton Hotel, Boston

September 8 – 9, 2014 - ASEAN London 1x1 Forum J.P. Morgan, 25 Bank Street, London

September 9, 2014 - Global Oil & Gas Investor Forum J.P. Morgan, 25 Bank Street, London

September 10—11, 2014 - 3rd Southern Cone and Andean Conference Country Club Lima Hotel, Lima, Peru

September 10, 2014 - London Small/Mid Cap Conference J.P. Morgan, 25 Bank Street, London

September 16—17, 2014 - U.S. ‘All Stars’ Conference J.P. Morgan, 25 Bank Street, London

September 18, 2014 - J.P. Morgan SDN Forum 2014 J.P. Morgan, 560 Mission Street

September 23 – 24, 2014 – Asia and CEEMEA Emerging Markets Corporate Conference London, UK, J.P. Morgan offices, 25 Bank Street

September - 29, 2014 - J.P. Morgan Italian Conference Four Seasons Hotel Milano, Via Gesù, 6/8, 20121, Milan, Italy

September - 30, 2014 - Milan Investor Forum Four Seasons Hotel Milano, Via Gesù, 6/8, 20121, Milan, Italy

October 2 – 3, 2014 - Australasian Investment Conference - London J.P. Morgan, 25 Bank Street, London

October 6, 2014 - Australasian Investment Conference - Edinburgh Balmoral Hotel, Edinburgh

October 10, 2014 - Quantitative Conference London, UK, J.P. Morgan, 25 Bank Street, Canary Wharf, E14 5JP

November 6 –7, 2014 - China Opportunities Forum Mandarin Oriental Hotel, Hong Kong

November 12, 2014 – Ultimate Services Investor Conference New York, NY, Westin Grand Central Hotel, 212, East 42nd Street

November 17 –18, 2014 - Global Technology, Media & Telecom Conference Conrad Hotel, Hong Kong

November 20 –28, 2014 - Asia Rising Dragons 1x1 Forum J.P. Morgan, Tokyo

November 25, 2014 - Consumer Ingredients Conference J.P. Morgan, 25 Bank Street, London

November 26, 2014 - Utility & Infrastructure Conference J.P. Morgan offices, 25 Bank Street, Canary Wharf, E14 5JP, London, UK

January 5, 2015 - Tech Forum at the 2015 CES Las Vegas, NV, Bellagio Hotel

For additional conference information contact your J.P. Morgan representative or email [email protected].

Please remember that all J.P. Morgan conferences are by invitation only. Invitations are non-transferable.

Corporate Marketing Calendar TOP

Fri May-30-14 Mon Jun-2-14 Tue Jun-3-14 Wed Jun-4-14 Thu Jun-5-14

AMADEUS (AUSTIN) BIG C SUPERCENTER (BOSTON) BUNZL (BOSTON, NEW YORK) GDF SUEZ (NEW YORK) GREEN REIT (NEW YORK) JUST EAT (NEW YORK) MELROSE (LOS ANGELES) NUSTAR ENERGY LP (CHICAGO, EVANSTON, LAFAYETTE HILL) SINOPEC (BRIDGEWATER, PHILADELPHIA, PRINCETON) TPG SPECIALTY LENDING (ARLINGTON, BALTIMORE, WILMINGTON) UMPQUA HOLDINGS CORPORATION (NEW YORK)

ABB (BALTIMORE, PHILADELPHIA, PRINCETON, WILMINGTON) AMADEUS (KANSAS CITY) FORTESCUE METALS GROUP LTD (NEW YORK) FOUNDATION MEDICINE, INC. (NEW YORK) JUST EAT (NEW YORK) LENTA (NEW YORK) MELROSE (LOS ANGELES) NUSTAR ENERGY LP (PHILADELPHIA, PLYMOUTH MEETING, RADNOR, WAYNE) SCIODERM INC (BOSTON) SINOPEC (WASHINGTON, WILMINGTON)

ABB (NEW YORK) FORTESCUE METALS GROUP LTD (BOSTON) GREEN REIT (BOSTON) LENTA (NEW YORK) SCIODERM INC (NEW YORK) STANDARD CHARTERED PLC (BOSTON)

ANNIES INC. (DALLAS) DORIAN LPG (NEW YORK) FORTESCUE METALS GROUP LTD (SAN FRANCISCO) GS YUASA CORP (NEW YORK, PRINCETON) XEROX CORPORATION (ATLANTA)

ABB (CONNECTICUT) ANNIES INC. (DALLAS, HOUSTON) APOLLO GLOBAL MANAGEMENT (LOS ANGELES) DORIAN LPG (BOSTON) GENTHERM (NEW YORK) GS YUASA CORP (NEW YORK) OPUS BANK (CHICAGO) SCIENCE APPLICATIONS INTERNATIONAL CORP (NEW YORK)

22

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Markets at a glance TOP

China

Hong Kong

India SHASHR Index 2,435.66

HSI Index 25,191.45

Sensex Index 27,265.32

Chg from previous day 0.00%


Chg from previous day -0.20% T/O value (CNYmn / US$MM) 173,187 / 28,221

T/O value (HK$ mn / US$MM) 83,972 / 10,835

T/O value (INR MM / US$MM) 3,913 / 65

Chg from previous day -7.07%


Chg from previous day 688.73% Exchange rate CNY6.1 / US$1

Exchange rate HKD7.75 / US$1

Exchange rate INR60.6 / US$1

O/N interbank (%) 3.00


O/N interbank (%) 8.00 Market cap (CNYBn) 17,177.4

Market cap (HK$Bn) 30,408.3

Market cap (US$Bn) 1590.2

Market cap (US$ Bn) 2,799


Market cap (INR Bn) 96,374 FY1E Market P/E 14.6

FY1E Market P/E 14.1




FY2E Market P/E 18.9 Indonesia

Malaysia

Philippines

JCI Index 5,197.12

KLCI Index 1,874.12

PSE Index 7,253.67 Chg from previous day -0.94%



T/O value (Rp bn / US$MM) 3,978 / 338

T/O value (MYR MM / US$MM) 2,017 / 631

T/O value (Php MM / US$MM) 8,628 / 197 Chg from previous day -15.72%



Exchange rate Rp11,771 / US$1

Exchange rate MYR3.19 / US$1

Exchange rate Php43.85 / US$1 O/N interbank (%) 7.50



Market cap (US$Bn) 438.8

Market cap (US$ bn) 332.7

Market cap (US$ bn) 185.2 Market cap (Rp bn) 5,165,065

Market cap (MYR bn) 1,062

Market cap (Php bn) 8,122



FY1E Market P/E 19.8 FY2E Market P/E 16.3



Singapore

South Korea

Taiwan

STI Index 3,342.96

KOSPI Index 2,050.41

TWSE Index 9,434.77 Chg from previous day 0.23%


DoD Change 0.29%

T/O value (SGD MM / US$MM) 413 / 328

T/O value (KRW bn / US$MM) 4,009 / 3,886

52-Week Range 9,594 / 8,094 Chg from previous day -24.59%


T/O value (NT$ mn / US$MM) 98,715 / 3,293

Exchange rate SGD1.26 / US$1

Exchange rate KRW1031.62 / US$1

Chg from previous day 6.57% O/N interbank (%) 0.06


Exchange rate TWD30.0 / US$1


Market cap (KRW Bn) 1,333,028

O/N interbank (%) 0.39 Market cap (SGD bn) 771


10 Year Gov Bond Yield (%) 2.64



Market cap (NT$Bn) 26,916.0 FY2E Market P/E 16.1





Thailand

Japan

Australia

SET Index 1,583.18

TPX Index 1,299.62

ASX200 Index 5,607.90



Chg from previous day 0.55% T/O value (Bt bn / US$MM) 56 / 1,752

T/O value (JPY bn / US$bn) 1,761 / 17

T/O value (AUD MM / US$MM) 3,058 / 3,296



Chg from previous day 2.85% Exchange rate Bt32.10 / US$1

Exchange rate JPY106.19 / US$1

Exchange rate AUD0.93 / US$1



O/N interbank (%) 2.50 Market cap (US$Bn) 443.9


Market cap (AUD$ bn) 1549.1

Market cap (Bt bn) 14,249

Market cap (JPY bn) 460,957

Market cap (US$ bn) 1,437 FY1E Market P/E 15.6





FY2E Market P/E 15.0 UK

Euro Stoxx

US

UKX Index 6,834.77

SX5E Index 3,267.54

S&P Index 2,001.54



Chg from previous day -0.31% T/O value (GBP Bn / US$bn) 3.60 / 5.80

T/O value (Euro bn / US$bn) 5.48 / 7.07

T/O value (US$ bn) 23.65



Chg from previous day -13.84% Exchange rate US$1.61 / GBP1

Exchange rate US$1.29 / EURO1




Market cap (US$ bn) 18332.5 Market cap (US$ bn) 3000.5



Market cap (GBP bn) 1,863

Market cap (Euro bn) 2,473

FY2E Market P/E 15.1 FY1E Market P/E 14.0




Source: Bloomberg, J.P. Morgan estimates.

23

Market Monitor TOP

September 09, 2014 as of market close

Change Average High Low

Level 1 Day Week Trailing 30 days MTD YTD 4-Wk 26-Wk 12-Wk 12-Wk

Equities* S&P 500

1988 -0.7% -0.7% 2.7% -0.7% 7.6% 1983 1923 2008 1910

NASDAQ 100

4062 -0.8% -0.8% 3.9% -0.5% 13.1% 4036 3774 4096 3780 Dow Jones Industrials

17014 -0.6% -0.3% 2.7% -0.5% 2.6% 16948 16681 17138 16368

FTSE

6829 -0.1% 0.0% 3.0% 0.1% 1.2% 6775 6739 6878 6567 Euro STOXX 50

3245 -0.7% 2.0% 6.5% 2.3% 4.4% 3145 3174 3315 3007

Hang Seng

25190 0.0% 1.8% 2.2% 1.8% 8.1% 24998 23254 25318 22805 Sector Performance* S&P Telecom Services

158 -1.1% -1.2% 0.5% -1.4% 1.8% 159 158 167 157

S&P Energy

690 -0.5% -2.4% -1.7% -3.6% 5.9% 705 693 737 690 S&P Materials

315 -0.8% -0.7% 1.4% -1.1% 7.9% 316 307 319 307

S&P Financial

312 -1.0% -0.9% 3.6% -0.6% 5.9% 310 302 315 298 S&P Consumer Discretionary

540 -1.0% -1.0% 2.2% -0.9% 1.9% 541 523 548 518

S&P Healthcare

739 -0.3% 0.2% 5.6% 0.2% 15.1% 728 694 742 689 S&P Information Technology

662 -0.6% -0.7% 3.2% -0.5% 13.0% 658 622 666 625

S&P Utilities

216 -1.2% -0.1% 3.3% -1.2% 11.9% 215 214 225 204 S&P Consumer Staples

463 -0.3% -0.1% 1.9% -0.1% 4.7% 461 454 468 444

S&P Industrials

464 -0.4% -0.1% 2.9% 0.1% 2.6% 462 459 474 443 Fixed Income** Treasury (%): 2-Yr 0.56% 3bp 3bp 12bp 7bp 18bp 0.48% 0.44% 0.56% 0.41%

10-Yr 2.50% 3bp 8bp 8bp 16bp -51bp 2.41% 2.57% 2.65% 2.33%

30-Yr 3.23% 1bp 6bp 0bp 15bp -71bp 3.18% 3.39% 3.48% 3.07%

Credit** HG Credit (JULI, Z-spread)1

97bp -0.1bp 0.4bp -0.3bp 2.0bp -16.0bp 97bp 99bp 99bp 93bp

HY Credit (T-spread)

444bp 4.1bp 10.8bp -20.0bp 8.4bp 3.7bp 442bp 422bp 475bp 393bp Currency** JPY/USD

106.24 1.13 1.42 4.10 2.41 0.92 103.75 102.36 106.24 101.24

USD/EUR

1.29 0.00 -0.02 -0.05 -0.03 -0.09 1.32 1.36 1.37 1.29 USD/GBP

1.61 -0.01 -0.04 -0.07 -0.05 -0.04 1.66 1.68 1.72 1.61

Commodities Gold ($/ounce)*

1255.50 0.06 -9.90 -53.05 -32.31 49.85 1285.10 1298.60 1338.62 1255.44

Volatility** VIX Index 13.50 0.84 1.25 -0.73 1.52 -0.22 12.43 13.06 17.03 10.32 Source: *Bloomberg, **J.P. Morgan

24

Upcoming US Economics Releases (Time: EDT) TOP

Bruce Kasman

Chief Global Economist [email protected] (1-212) 834-5515

Monday Tuesday Wednesday Thursday Friday

8 Sep Consumer credit (3:00pm) Jul

9 Sep NFIB survey (7:30am) Aug JOLTS (10:00am) Jul Auction 3-year note $27bn Fed Governor Tarullo testifies to Senate (10:00am)

10 Sep Wholesale trade (10:00am) Jul Auction 10-year note (r) $21bn

11 Sep Initial claims (8:30am) w/e Sep 6 300,000 QSS (10:00am) 2Q Federal budget (2:00pm) Aug Auction 30-year bond (r) $13bn Announce 10-year TIPS (r) $13bn

12 Sep Retail sales (8:30am) Aug 0.8% Ex. auto 0.2% Import prices (8:30am) Aug -0.8% Consumer sentiment (9:55am) Sep preliminary 83.5 Business inventories (10:00am) Jul 0.6%

15 Sep Empire State survey (8:30am) Sep Industrial production (9:15am) Aug

16 Sep PPI (8:30am) Aug TIC data (4:00pm) Jul FOMC meeting

17 Sep CPI (8:30am) Aug Current account (8:30am) 2Q NAHB survey (10:00am) Sep FOMC statement and projections (2:00pm) and press conference (2:30pm)

18 Sep Initial claims (8:30am) w/e Sep 13 Housing starts (8:30am) Aug Philadelphia Fed survey (10:00am) Sep Auction 10-year TIPS (r) $13bn Announce 2-year note $29bn Announce 2-year FRN (r) $13bn Announce 5-year note $35bn Announce 7-year note $29bn

19 Sep Leading indicators (10:00am) Aug

22 Sep Existing home sales (10:00am) Aug New York Fed President Dudley speaks in New York (10:05am)

23 Sep FHFA HPI (9:00am) Jul Manufacturing PMI (9:45am) Sep flash Richmond Fed survey (10:00am) Sep Auction 2-year note $29bn St. Louis Fed President Bullard and Kansas City Fed President George speak at conference in St. Louis (9:00am and 9:30am) Kansas City Fed President George speaks on economy in Wyoming (9:15pm)

24 Sep New home sales (10:00am) Aug Auction 2-year FRN (r) $13bn Auction 5-year note $35bn Cleveland Fed President Mester speaks on monetary policy in Cleveland (12:05pm) Chicago Fed President Evans speaks in Washington, DC (1:00pm)

25 Sep Initial claims (8:30am) w/e Sep 20 Durable goods (8:30am) Aug Services PMI (9:45am) Sep flash KC Fed survey (11:00am) Sep Auction 7-year note $29bn Atlanta Fed President Lockhart speaks in Mississippi (1:20pm)

26 Sep Real GDP (8:30am) 2Q final Consumer sentiment (9:55am) Sep final

29 Sep Personal income (8:30am) Aug Pending home sales (10:00am) Aug Dallas Fed survey (10:30am) Sep Chicago Fed President Evans speaks in Chicago (9:00am)

30 Sep S&P/Case-Shiller HPI (9:00am) Jul Chicago PMI (9:45am) Sep Consumer confidence (10:00am) Sep

1 Oct ADP employment (8:15am) Sep Manufacturing PMI (9:45am) Sep final ISM manufacturing (10:00am) Sep Construction spending (10:00am) Aug Light vehicle sales Sep

2 Oct Initial claims (8:30am) w/e Sep 27 Factory orders (10:00am) Aug Announce 3-year note $27bn Announce 10-year note (r) $21bn Announce 30-year bond (r) $13bn

3 Oct Employment (8:30am) Sep International trade (8:30am) Aug Services PMI (9:45am) Sep final ISM nonmanufacturing (10:00am) Sep

25

Latin America Economic Calendar Monday Tuesday Wednesday Thursday Friday

8 Sep Chile: CPI Aug: 0.12%m/m CPI Aug: 4.34%oya Trade balance Aug: US$530mn Colombia: Core CPI Aug

9 Sep Brazil: IGP-M 1st release Sep Mexico: CPI Aug: Headline: 0.37%m/m Headline: 4.16%oya Core: 0.20%m/m Core: 3.36%oya Central bank reserves (prior week) Peru: Trade balance Jul

10 Sep Mexico: GFI Jun: 3.3%oya Nominal wages Aug: 4.6%oya

11 Sep Brazil: COPOM minutes Retail sales Jul 1.0% oya 0.2%m/m sa Chile: BCCh meeting: 3.25% Mexico: Industrial production Jul: 2.2%oya Peru: BCRP meeting Uruguay: Industrial production Jul

12 Sep Argentina: CPI Aug Brazil: Economic activity Jul -1.0%oya 1.0% m/m sa Colombia: BanRep minutes

During the week: Brazil: Auto report Aug Colombia: Consumer confidence Aug Mexico: Formal employment Aug Auto report Aug 15 Sep Colombia: Retail sales Jul Industrial production Jul Peru: Economic activity Jul Unemployment rate Aug Uruguay: GDP 2Q

16 Sep

17 Sep Brazil: IGP-10 Sep Mexico: Central bank reserves (prior week)

18 Sep Colombia: GDP 2Q

19 Sep Brazil: IGP-M 2nd release Sep IPCA-15 Sep Colombia: Trade balance Jul Mexico: Aggregate supply and demand 2Q Banxico minutes

During the week: Brazil: Tax collection Aug Formal job creation Aug Colombia: Outstanding loans Jul 22 Sep Mexico: Unemployment rate Aug Banamex economic survey

23 Sep Argentina: Consumer confidence Sep Mexico: Retail sales Jul Central bank reserves (prior week)

24 Sep Argentina: GDP 2Q Brazil: Consumer confidence Sep Current account balance Aug FDI Aug Mexico: Economic activity index Jul CPI Sep 1H

25 Sep Brazil: Unemployment rate Aug

26 Sep Argentina: Current account 2Q Economic activity Jul Brazil: PPI manufacturing Aug BCB credit report Aug Colombia: BanRep meeting Mexico: Trade balance Aug

During the week: Colombia: Industrial confidence Aug Retail confidence Aug Vehicle sales Aug 29 Sep Brazil: IGP-M Sep Central government budget balance Aug

30 Sep Argentina: Industrial production Aug Construction activity Aug Brazil: Net debt % GDP Aug Nominal budget balance Aug Primary budget balance Aug Chile: Manufacturing index Aug Unemployment rate Aug Retail sales Aug BCCh minutes Colombia: Unemployment rate Aug Mexico: Central bank reserves (prior week) Bank credit Aug PS budget balance Aug Uruguay: Current account 2Q

1 Oct Brazil: PMI manufacturing Sep Trade balance Sep Mexico: Remittances Aug HSBC manufacturing PMI Sep IMEF manufacturing PMI Sep IMEF non-manufacturing PMI Sep Peru: CPI Sep WPI Sep Uruguay: Trade balance Sep

2 Oct Brazil: FIPE CPI Sep Industrial production Aug

3 Oct Argentina: Auto report Sep Colombia: PPI Sep Mexico: Consumer confidence Sep Banxico economic survey Sep Uruguay: Unemployment rate Aug CPI Sep

During the week: Argentina: Tax collection Sep Colombia: Current account balance 2Q

Link to Global Economics Calendar on J.P. Morgan Markets page

26

http://www.jpmm.com/research/content/publication/4287

Australia TOP

J.P. Morgan Forecasts - Economics and Commodities 13Q1A 13Q2A 13Q3A 13Q4A 14Q1A 14Q2A 14Q3E 14Q4E 15Q1E 15Q2E 15Q3E 15Q4E CY13A CY14E CY15E Long Term Economic (%, annualised growth) GDP 0.4 0.7 0.7 0.8 1.1 0.5 0.6 0.7 0.8 0.9 1.1 1.1 2.3 3.1 3.3 CPI 2.3 2.2 2.3 2.5 2.6 2.9 2.6 2.4 2.4 2.1 2.3 2.3 2.3 2.6 2.3 Currency A$/US$ (period end) 1.04 0.91 0.93 0.89 0.93 0.94 0.92 0.91 0.90 0.91 0.91 0.91 0.93 0.91 0.89 0.80 A$/US$ (period average) 1.04 0.99 0.92 0.93 0.90 0.93 0.93 0.92 0.91 0.91 0.91 0.91 0.97 0.92 0.91 0.80 Commodities (period average) Gold (US$ per ounce) 1,634 1,417 1,330 1,272 1,292 1,289 1,260 1,285 1,275 1,275 1,275 1,275 1,413 1,282 1,275 1,300 Silver (US$ per ounce) 30.2 23.2 21.5 20.8 20.5 19.6 21.5 21.8 22.0 22.0 22.0 22.0 23.9 20.8 22.0 17.5 Oil (WTI) (US$/bbl) 94 94 106 98 99 103 93 91 88 83 85 85 98 96 85 80 Aluminium (US$/lb) 0.91 0.83 0.81 0.80 0.78 0.82 0.84 0.84 0.86 0.86 0.86 0.86 0.84 0.82 0.86 1.00 Copper (US$/lb) 3.60 3.25 3.21 3.25 3.19 3.08 3.06 3.15 3.18 3.18 3.18 3.18 3.33 3.12 3.18 3.40 Lead (US$/lb) 1.04 0.93 0.95 0.96 0.95 0.95 1.03 1.07 1.02 1.02 1.02 1.02 0.97 1.00 1.02 0.91 Nickel (US$/lb) 7.87 6.79 6.33 6.31 6.64 8.37 8.39 9.98 10.89 10.89 10.89 10.89 6.82 8.35 10.89 8.16 Zinc (US$/lb) 0.92 0.84 0.84 0.86 0.92 0.94 0.93 0.94 1.02 1.02 1.02 1.02 0.87 0.93 1.02 0.91 Iron ore spot CFR (US$/t) 149 126 133 135 120 103 100 100 96 97 97 98 135 106 97 80 Iron Ore - Fines (USc/Fe%) 228 191 199 200 180 152 145 145 139 139 140 141 204 156 140 113 Iron Ore - Lump (USc/Fe%) 240 203 211 212 192 164 157 157 151 152 153 154 216 168 152 125 Coking Coal (US$/t) 165 172 145 165 143 120 120 125 130 130 135 140 162 127 134 160 Thermal Coal (US$/t) 92 86 77 82 78 73 75 77 77 78 78 79 84 76 78 85 Uranium (US$/lb) 42.6 40.5 36.0 35.1 35.3 29.9 40.2 45.6 50.9 51.3 51.6 51.9 38.6 37.7 51.4 60.0

Source: J.P. Morgan

This material is provided for information only and is not intended as a recommendation or an offer or solicitation for the purchase or sale of any security or financial instrument. This material is not a research report, although it may refer to information and data contained in J.P. Morgan published research reports or models from all J.P. Morgan affiliated regions. Opinions and estimates constitute our judgment as of the date of this material and are subject to change without notice. Past performance is not indicative of future results. Securities, financial instruments or strategies mentioned herein may not be suitable for all investors. The opinions and recommendations herein do not take into account individual client circumstances, objectives, or needs and are not intended as recommendations of particular securities, financial instruments or strategies to particular clients. The recipient of this publication must make its own independent decisions regarding any securities or financial instruments mentioned herein. Please refer to the most recent published research or model for complete information on the specific stocks mentioned in this publication, including important disclosures and analysts' certifications. © 2014 JPMorgan Chase & Co.

27

Analyst Focus List TOP

European Analyst Focus List

J.P. Morgan AFL 10 September

Ticker Name Industry Ccy Close Price Analyst

Focus list add date

Focus List add price

Price Target

Potential Upside

/Downside* Position Rating PT end

date UBSN VX UBS Diversified Financials CHF 16.4 Kian Abouhossein 06-Sep-11 10.46 23.00 40% Long OW Dec-15 WPP LN WPP Group Media GBp 1,291.0 Filippo Pietro Lo Franco 06-Jun-13 1,120 1,621 26% Long OW Dec-15 ABI BB Anheuser Busch InBev Food, Beverage & Tobacco EUR 86.3 Mike Gibbs 14-Jun-13 69.56 93.00 8% Long OW May-15 AIR FP Airbus Group Capital Goods EUR 48.6 David Perry 15-Jul-13 41.84 62.50 29% Long OW Dec-15 EZJ LN easyJet Transportation GBp 1,387.0 Jamie Baker 16-Sep-13 1,299 1,909 38% Long OW Dec-14 OR FP L'Oréal Household & Personal Products EUR 125.5 Celine Pannuti 16-Sep-13 124.90 135.00 8% Long OW Dec-14 FP FP TOTAL Energy EUR 50.5 Nitin Sharma 16-Sep-13 42.80 57.00 13% Long OW Jun-15 PNDORA DC PANDORA Consumer Durables & Apparel DKK 427.5 Chiara Battistini 16-Sep-13 222.80 515.00 20% Long OW Dec-15 SMDS LN D S Smith Materials GBp 284.5 Alexander Mees 16-Sep-13 284 368 29% Long OW Dec-15 HEXAB SS Hexagon Electronic Equip., Instruments SEK 232.1 Stacy Pollard 16-Sep-13 197.40 250.00 8% Long OW Jun-15 TSCO LN Tesco Food & Staples Retailing GBp 233.2 Jaime Vazquez 25-Sep-13 374 210 10% Short UW Feb-15 SMP LN St. Modwen Real Estate GBp 371.3 Neil Green 8-Oct-13 309 425 14% Long OW Jul-15 JMAT LN Johnson Matthey Materials GBp 3,168.0 Martin Evans 14-Oct-13 2,821 3,850 22% Long OW Dec-14 RTN LN Restaurant Group Consumer Services GBp 646.0 Victoria Greer 06-Dec-13 549 755 17% Long OW Apr-15 SOLB BB Solvay Materials EUR 118.9 Ben Scarlett 07-Jan-14 112.5 90.00 24% Short UW Dec-15 JUP LN Jupiter Diversified Financials GBp 361.9 Gurjit Kambo 10-Jan-14 382 465 28% Long OW Dec-15 LAND LN Land Securities Real Estate GBp 1,066.0 Tim Leckie 14-Jan-14 989.50 1,200 13% Long OW Jul-15 RIO LN Rio Tinto Plc Materials GBp 3,224.0 Dominic O’Kane 12-May-14 3,188 4,250 32% Long OW Jun-15 BAB LN Babcock Intl Group Commercial & Professional Serv GBp 1,078.0 Robert Plant 19-May-14 1,185 1,500 39% Long OW Dec-14 ABF LN Associated British Foods Food Products GBp 2,700.0 Catherine Farrant 23-May-14 3,020 3,500 30% Long OW Apr-15 RMG LN Royal Mail Group Air Freight & Logistics GBp 425.5 Christopher Combe 27-May-14 526 695 63% Long OW Mar-15 IRV LN Interserve Construction & Engineering GBp 642.0 Jolyon Wellington 26-Jun-14 575 800 25% Long OW Dec-15 HOLN VX Holcim Ltd Materials CHF 73.9 Elodie Rall 26-Jun-14 76.90 88.00 19% Long OW Jul-15 LG FP Lafarge Materials EUR 59.4 Elodie Rall 26-Jun-14 63.00 76.00 28% Long OW Jun-15 UG FP Peugeot Automobiles & Components EUR 11.0 Jose Asumendi 14-Jul-14 10.76 17.00 55% Long OW Dec-14 MUV2 GR Munich Re Insurance EUR 151.8 Michael Huttner 22-Jul-14 159.58 185.00 22% Long OW Dec-14 NN NA NN Group Insurance EUR 22.1 Ashik Musaddi 01-Sep-14 22.11 25.29 14% Long OW Dec-15 TALK LN TalkTalk Telecommunication Services GBp 313.4 Carl Murdock-Smith 03-Sep-14 306 380 21% Long OW Mar-16 FP FR Valeo SA Automobiles & Components EUR 94.8 Jose Asumendi 09-Sep-14 94.32 119.00 26% Long OW Dec-15 Source: Bloomberg, J.P. Morgan estimates. Share price data as at COB 09 September 2014. *From Latest Closing Price J.P. Morgan may remove a stock from the AFL pursuant to applicable law and/or J.P. Morgan policy without any further notice.

28


J.P. Morgan AFL 10 September - Performance

Absolute performance Country performance MSCI Europe Industry Performance

Ticker Name Position

Price Returns

since addition to

AFL

Total Returns since

addition to AFL (incl.

dvds)

1M 3M YTD

Total Returns

since addition to AFL

1M 3M YTD

Total Returns

since addition to

AFL

1M 3M YTD

UBSN VX UBS Long 56.6% 61.6% 4.1% (7.5%) (1.9%) 76.5% 6.0% 1.8% 9.9% 59.9% 5.9% (4.0%) (1.6%) WPP LN WPP Group Long 15.3% 20.6% 5.6% (1.3%) (4.7%) 13.3% 3.6% 0.8% 4.3% 32.8% 4.0% 0.8% 4.5% ABI BB Anheuser Busch InBev Long 24.1% 25.6% 6.6% 4.2% 13.9% 27.5% 3.8% 0.9% 12.1% 17.4% 5.6% 2.4% 13.4% AIR FP Airbus Group Long 16.1% 17.8% 12.1% (6.3%) (11.7%) 18.5% 6.1% (2.2%) 6.2% 13.7% 4.0% (3.4%) 0.2% EZJ LN easyJet Long 6.8% 9.6% 10.3% (7.6%) (5.1%) 7.1% 3.6% 0.8% 4.3% 21.2% 7.8% (2.7%) 8.0% OR FP L'Oréal Long 0.5% 0.9% 0.3% (2.1%) 0.3% 10.6% 6.1% (2.2%) 6.2% 12.2% 2.7% (1.0%) 4.5% FP FP TOTAL Long 18.0% 23.8% 3.3% (3.6%) 16.2% 10.6% 6.1% (2.2%) 6.2% 15.1% 1.4% (2.6%) 10.2% PNDORA DC PANDORA Long 91.9% 93.5% 12.1% 5.8% 48.1% 34.1% 4.4% 0.6% 23.8% (3.6%) 4.5% (4.8%) (1.6%) SMDS LN D S Smith Long 0.1% 2.8% 3.8% (9.9%) (13.4%) 7.1% 3.6% 0.8% 4.3% 7.8% 0.2% (0.3%) 6.6% HEXAB SS Hexagon AB Long 17.6% 20.0% 5.5% 6.8% 15.6% 12.2% 1.9% (1.0%) 7.6% 10.0% 7.6% 7.4% 10.5% TSCO LN Tesco Short 37.7% 31.9% 5.3% 20.2% 27.6% 8.2% 3.6% 0.8% 4.3% (12.1%) (0.1%) (9.5%) (12.0%) SMP LN St. Modwen Long 20.2% 19.8% (0.3%) (2.5%) 2.3% 11.4% 3.6% 0.8% 4.3% 24.4% 3.4% (0.0%) 18.1% JMAT LN Johnson Matthey Long 12.3% 8.3% 5.6% (1.6%) (1.9%) 8.9% 3.6% 0.8% 4.3% 11.3% 0.2% (0.3%) 6.6% RTN LN Restaurant Group Long 17.7% 20.4% 3.0% 7.5% 11.8% 7.5% 3.6% 0.8% 4.3% 20.3% 3.9% 1.7% 12.5% SOLB BB Solvay Short (5.7%) (12.5%) (2.4%) 0.3% -- 12.5% 3.8% 0.9% -- 8.0% 0.2% (0.3%) -- JUP LN Jupiter Long (5.3%) (2.5%) (1.5%) (11.8%) -- 4.5% 3.6% 0.8% -- (5.8%) 5.9% (4.0%) -- LAND LN Land Securities Long 7.7% 9.4% 1.4% (0.1%) -- 4.1% 3.6% 0.8% -- 16.6% 3.4% (0.0%) -- RIO LN Rio Tinto plc Long 1.1% (1.7%) (6.2%) 7.4% -- 1.2% 3.6% 0.8% -- (0.7%) 0.2% (0.3%) -- BAB LN Babcock Intl Group Long (9.0%) (7.1%) (0.5%) (10.1%) -- 1.1% 3.6% 0.8% -- (0.3%) 1.9% (2.4%) -- ABF LN Associated British Foods Long (10.6%) (8.5%) (0.6%) (11.6%) -- 1.4% 3.6% 0.8% -- 3.5% 5.6% 2.4% -- RMG LN Royal Mail Group Long (19.1%) (16.9%) (0.8%) (12.5%) -- 1.0% 3.6% 0.8% -- (2.8%) 7.8% (2.7%) -- IRV LN Interserve Long 11.7% 9.0% (1.9%) -- -- 2.4% 3.6% -- -- (0.8%) 4.0% -- -- HOLN VX Holcim Ltd Long (3.9%) (5.3%) 4.7% -- -- 3.4% 6.0% -- -- 0.4% 0.2% -- -- LG FP Lafarge Long (5.8%) (5.7%) 6.6% -- -- 0.3% 6.1% -- -- 0.4% 0.2% -- -- UG FP Peugeot Long 1.9% (1.7%) 7.5% -- -- 2.4% 6.1% -- -- (4.0%) 4.8% -- -- MUV2 GR Munich Re Long (4.9%) (6.9%) 1.8% -- -- (0.2%) 5.8% -- -- 1.8% 5.4% -- -- NN NA NN Group Long (0.0%) (0.0%) -- -- -- 1.0% -- -- -- 0.7% -- -- -- TALK LN TalkTalk Long 2.4% 3.7% -- -- -- (0.6%) -- -- -- 0.1% -- -- -- FP FR Valeo SA Long 0.5% (0.7%) -- -- -- -- -- -- -- -- -- -- -- Source: Bloomberg, J.P. Morgan estimates. Share price data as at COB 09 September 2014. Returns not shown where the period on the AFL is less than 1M/3M. J.P. Morgan may remove a stock from the AFL pursuant to applicable law and/or J.P. Morgan policy without any further notice.

29

Asia Analyst Focus List

Open Trades (as of September 09, 2014 close)

Country OW UW

Sector OW UW China PetroChina Sun Art Retail Group Limited

Autos DongFeng Motor Co., Ltd. Zhongsheng Group Holdings

India Sesa Sterlite Bharat Heavy Electricals (BHEL)

Basic Materials Tata Steel Ltd CSR Limited Indonesia Vale Indonesia Bank Danamon

Consumer Lotte Himart Sun Art Retail Group Limited

Malaysia Tenaga Maxis Berhad

Emerging Technology BYD Company Limited Pegatron Corp Philippines Universal Robina Corp Globe Telecom

Financials Fubon Financial Holdings AMMB Holdings

Singapore Pacific Radiance Ltd. Genting Singapore

Infrastructure Beijing Capital International Airport Siemens India South Korea Lotte Himart Hanjin Shipping Co Ltd

Oil and Gas PetroChina Hindustan Petroleum Corporation (HPCL)

Taiwan MediaTek Inc. ASUSTek Computer

Property China Overseas Land & Investment UEM Sunrise Bhd Thailand KASIKORNBANK LPN Development

SMID-Caps TAL Education Group VTech Holdings

Technology LG Display SPIL

Telecommunications Maxis Berhad

Transportation Pacific Basin Shipping Hanjin Shipping Co Ltd

Utilities & Power Equipment China Everbright International Shanghai Electric Group

Source: J.P. Morgan

Country relative performance in US$ (MSCI AC Asia Pacific ex JP)

Source: J.P. Morgan, Bloomberg.

Sector relative performance in US$ (MSCI AC Asia Pacific ex JP)

Source: J.P. Morgan, Bloomberg.

Last Four Weeks’ Additions

Company Name BBG Ticker Analyst Name Rating Add Date Add Price Current Price Price Target Siemens India SIEM IN Karen Li, CFA UW 14-Aug-14 851.00 911.10 645.00 Pegatron Corp 4938 TT Alvin Kwock UW 19-Aug-14 62.60 59.90 46.00 LPN Development LPN TB Anne Jirajariyavech, CFA UW 19-Aug-14 22.60 21.60 14.00 Zhongsheng Group Holdings 881 HK Nick Lai UW 20-Aug-14 9.36 8.87 9.00 Universal Robina Corp URC PM Jeanette Yutan OW 21-Aug-14 167.40 174.10 195.00 Lotte Himart 071840 KS Scott YH Seo OW 21-Aug-14 74300 77500 84000 Vale Indonesia INCO IJ Aditya Srinath, CFA OW 21-Aug-14 4130.00 4470.00 4700.00 Hindustan Petroleum Corporation (HPCL) HPCL IN Scott L Darling UW 21-Aug-14 467.45 494.35 340.00 China Overseas Land & Investment 688 HK Cusson Leung OW 21-Aug-14 23.00 22.75 29.00 UEM Sunrise Bhd UEMS MK Cusson Leung UW 21-Aug-14 1.97 1.92 1.85 Lotte Himart 071840 KS Ebru Sener Kurumlu OW 22-Aug-14 75900.00 77500.00 84000.00 Sun Art Retail Group Limited 6808 HK Ebru Sener Kurumlu UW 22-Aug-14 9.05 9.31 8.20 AMMB Holdings AMM MK Josh Klaczek UW 25-Aug-14 6.93 7.00 6.20 Beijing Capital International Airport 694 HK Karen Li, CFA OW 24-Aug-14 5.33 6.27 8.60 Pacific Radiance Ltd. PACRA SP James R. Sullivan OW 26-Aug-14 1.47 1.45 1.75 Genting Singapore GENS SP James R. Sullivan UW 26-Aug-14 1.21 1.21 1.21 Source: J.P. Morgan, Bloomberg. Priced at Sept 09, 2014

30


Last Four Weeks’ Deletions

Company Name BBG Ticker Analyst Name Rating Removal Date Add Price Removal Date Price Price Target GS Engineering & Construction 006360 KS Karen Li, CFA UW 14-Aug-14 37550 36400.00 27000.00 Lite-On Technology Corporation 2301 TT Alvin Kwock UW 19-Aug-14 49.75 48.40 42.00 Sun Hung Kai Properties 16 HK Cusson Leung OW 21-Aug-14 100.80 116.70 128.00 Sino-Ocean Land 3377 HK Cusson Leung UW 21-Aug-14 4.03 4.31 3.75 Ayala Land ALI PM Jeanette Yutan OW 21-Aug-14 32.50 33.35 36.00 Hyundai Motor 005380 KS Scott YH Seo OW 21-Aug-14 233500 224000 310000 Esprit Holdings 330 HK Ebru Sener Kurumlu UW 22-Aug-14 11.72 12.82 11.30 Far East Hospitality Trust FEHT SP James R. Sullivan, CFA UW 25-Aug-14 0.80 0.83 0.80 ANZ Banking Group ANZ AU Josh Klaczek UW 25-Aug-14 32.66 33.22 34.70 Weichai Power 2338 HK Karen Li, CFA OW 25-Aug-14 29.60 32.50 43.00 21Vianet Group Inc. VNET US James R. Sullivan, CFA OW 4-Sep-14 25.85 25.71 35.00 Source: J.P. Morgan, Bloomberg.

AFL – Country team stocks All stock and market returns shown in local currency (LC) terms, and reflect performance since date added to the AFL. All aggregates include cumulative returns since inception of the AFL on September 2, 2013. Country AFL total aggregate returns are shown in US$ terms. Aggregate US$ return spread uses the MSCI AC Asia Pacific ex JP Index as the benchmark.

Country/Company Name BBG Ticker Analyst Name Country Rating1 Add Date Add

Price Current

Price Price

Target1

Price Target End

Date

Abs. Perf Since Add

Date (%)

Spread Over MSCI Country

Index (%)2 PetroChina 857 HK Scott L Darling China OW 19-May-14 9.28 11.46 12.50 12/31/15 23.5 8.3 Sun Art Retail Group Limited 6808 HK Shen Li, CFA China UW 19-May-14 9.98 9.31 8.20 12/31/15 -6.7 -21.9 Aggregate China performance 40.8 40.2 Sesa Sterlite SSLT IN Pinakin Parekh, CFA India OW 20-May-14 245.75 281.80 345.00 6/30/15 14.7 2.3 Bharat Heavy Electricals (BHEL) BHEL IN Sumit Kishore India UW 20-May-14 277.80 221.20 175.00 9/30/15 -20.4 -32.7 Aggregate India performance 90.2 89.8 Vale Indonesia INCO IJ Lydia J Toisuta Indonesia OW 21-Aug-14 4130.00 4470.00 4700.00 6/30/15 8.2 8.9 Bank Danamon BDMN IJ Harsh Wardhan Modi Indonesia UW 24-Apr-14 4355.00 3810.00 3000.00 6/30/15 -12.5 -18.9 Aggregate Indonesia performance 45.1 52.3 Tenaga TNB MK Ajay Mirchandani Malaysia OW 19-May-14 12.20 12.54 16.50 8/31/15 2.8 4.1 Maxis Berhad MAXIS MK Princy Singh Malaysia UW 2-Sep-13 6.87 6.49 5.25 6/30/15 -5.5 -12.9 Aggregate Malaysia performance 17.1 23.6 Universal Robina Corp URC PM Princy Singh Philippines OW 21-Aug-14 167.40 174.10 195.00 9/30/15 4.0 1.1 Globe Telecom GLO PM Princy Singh Philippines UW 19-Feb-14 1778.00 1911.00 1570.00 6/30/15 7.5 -8.9 Aggregate Philippines performance -15.4 -9.6 Pacific Radiance Ltd. PACRA SP Ajay Mirchandani Singapore OW 26-Aug-14 1.47 1.45 1.75 12/31/15 -1.4 -1.2 Genting Singapore GENS SP Cusson Leung Singapore UW 26-Aug-14 1.21 1.21 1.21 12/31/14 -0.4 -0.2 Aggregate Singapore performance -7.4 -8.7 Lotte Himart 071840 KS Youna Kim Korea OW 21-Aug-14 74300.00 77500.00 91000.00 6/30/15 4.3 5.0 Hanjin Shipping Co Ltd 117930 KS Corrine Png Korea UW 19-May-14 6150.00 5930.00 3300.00 6/30/15 -3.6 -1.7 Aggregate South Korea performance -4.1 -2.7 MediaTek Inc. 2454 TT Alvin Kwock Taiwan OW 1-Aug-14 496.50 520.00 600.00 6/30/15 4.7 1.2 ASUSTek Computer 2357 TT Gokul Hariharan Taiwan UW 15-May-14 309.00 312.50 265.00 12/31/14 1.1 -7.0 Aggregate Taiwan performance 4.3 52.2 KASIKORNBANK KBANK TB Anne Jirajariyavech, CFA Thailand OW 8-Oct-13 177.50 236.00 230.00 12/31/14 33.0 23.8 LPN Development LPN TB Anne Jirajariyavech, CFA Thailand UW 19-Aug-14 22.60 21.60 16.50 12/31/15 -4.4 -7.4 Aggregate Thailand performance -3.3 -8.7 Average Country OW (US$)

Asia Pacific ex JP

11.0 10.8

Average Country UW (US$)

Asia Pacific ex JP

2.0 1.8 Aggregate Country (US$)3

Asia Pacific ex JP

9.0 8.8

1 - Rating and price targets reflect J.P. Morgan's fundamental long-term views. 2 – Spread over MSCI country indices except for Shanghai listed A-Shares which are spread over SHASHR. 3 - Spread over MSCI country index incorporates the impact of currency movements Source: Bloomberg, J.P. Morgan. Priced at Sept 09, 2014 (prices and price-related data based on current day's close)

31

AFL – Sector team stocks All returns shown in US$ terms, and reflect performance since date added to the AFL. All aggregates include cumulative returns since inception of the AFL on September 2, 2013. Aggregate US$ return spread uses the MSCI AC Asia Pacific ex JP Index as the benchmark.

Company Name

BBG Ticker Analyst Name MSCI Sector Indices Rating1 Add Date

Add Price

Current Price

Price Target1

Price Target

End Date

Abs. Perf Since

Add Date (%)

Spread Over MSCI

Sector Index (%)2

DongFeng Motor Co., Ltd. 489 HK Nick Lai Autos OW 23-Jun-14 13.3 14.1 23.0 6/30/15 5.7 1.0 Zhongsheng Group Holdings 881 HK Nick Lai Autos UW 20-Aug-14 9.36 8.87 8.00 6/30/15 -5.2 -3.3 Aggregate Autos performance 14.7 14.6 Lotte Himart 071840 KS Youna Kim Consumer OW 22-Aug-14 75900.00 77500.00 91000.00 6/30/15 1.9 1.6 Sun Art Retail Group Limited 6808 HK Shen Li, CFA Consumer UW 22-Aug-14 9.05 9.31 8.20 12/31/15 2.9 2.6 Aggregate Consumer performance 2.7 2.3 BYD Company Limited 1211 HK Alvin Kwock Emerging Technology OW 14-May-14 39.30 57.00 68.00 6/30/15 45.1 28.0 Pegatron Corp 4938 TT Gokul Hariharan Emerging Technology UW 19-Aug-14 62.60 59.90 46.00 6/30/15 -4.2 -5.2 Aggregate Emerging Technology performance 44.5 44.4 Fubon Financial Holdings 2881 TT Jemmy S Huang Financials OW 19-May-14 41.00 50.20 54.00 12/31/15 23.2 10.5 AMMB Holdings AMM MK Harsh Wardhan Modi Financials UW 25-Aug-14 6.93 7.00 6.20 6/30/15 0.1 -0.6 Aggregate Financials performance 17.0 16.9 Beijing Capital International Airport 694 HK Karen Li, CFA Infrastructure OW 24-Aug-14 5.33 6.27 8.60 12/31/15 17.6 17.5 Siemens India SIEM IN Sumit Kishore Infrastructure UW 14-Aug-14 851.00 911.10 645.00 9/30/15 7.7 7.4 Aggregate Infrastructure performance 10.5 10.5 Tata Steel Ltd TATA IN Pinakin Parekh, CFA Metals & Mining OW 11-Nov-13 360.80 518.65 645.00 6/30/15 50.8 42.2 CSR Limited CSR AU Jason Steed Metals & Mining UW 19-May-14 3.32 3.59 3.00 12/31/14 7.5 -0.4 Aggregate Metals & Mining performance -18.1 -18.6 PetroChina 857 HK Scott L Darling Oil and Gas OW 2-Sep-13 8.54 11.46 12.50 12/31/15 34.3 16.7 Hindustan Petroleum Corporation (HPCL) HPCL IN Neil Gupte Oil and Gas UW 21-Aug-14 467.45 494.35 340.00 3/31/15 5.7 1.6 Aggregate Oil and Gas performance 3.0 2.3 TAL Education Group XRS US Leon Chik, CFA SMID-Caps OW 24-Apr-14 23.33 34.71 48.00 12/31/15 48.8 49.8 VTech Holdings 303 HK Leon Chik, CFA SMID-Caps UW 9-Jan-14 100.60 93.85 69.00 12/31/15 -6.7 -10.0 Aggregate SMID-Caps performance 57.6 57.6 LG Display 034220 KS JJ Park Technology OW 17-Jul-14 33750.00 34100.00 42000.00 6/30/15 1.7 4.8 SPIL 2325 TT Gokul Hariharan Technology UW 24-Jul-14 46.40 43.65 38.00 12/31/14 -5.9 -2.3 Aggregate Technology performance -0.3 -0.4 Maxis Berhad MAXIS MK Princy Singh Telecommunications UW 19-Feb-14 6.95 6.49 5.25 6/30/15 -3.5 -30.6 Aggregate Telecom performance -0.4 -1.3 Pacific Basin Shipping 2343 HK Corrine Png Transportation OW 7-Aug-14 4.34 4.80 5.80 6/30/15 10.6 6.1 Hanjin Shipping Co Ltd 117930 KS Corrine Png Transportation UW 25-Mar-14 6480.00 5930.00 3300.00 6/30/15 -3.7 -18.7 Aggregate Transportation performance -37.2 -37.3 China Overseas Land & Investment 688 HK Ryan Li, CFA Property OW 21-Aug-14 23.00 22.75 29.00 6/30/15 -1.1 -2.1 UEM Sunrise Bhd UEMS MK Simone Yeoh Property UW 21-Aug-14 1.97 1.92 1.85 12/31/14 -3.2 -4.2 Aggregate Property performance 10.7 10.7 China Everbright International 257 HK Elaine Wu Utilities & Power Equipment OW 15-May-14 9.36 10.96 13.00 6/30/15 17.1 8.7 Shanghai Electric Group 2727 HK Boris Kan Utilities & Power Equipment UW 2-Sep-13 2.84 3.64 2.80 6/30/15 28.2 2.4 Aggregate Utilities & Power Equipment performance 25.5 25.7 Average Sector OW (US$)

8.2 8.0

Average Sector UW (US$)

5.0 4.8 Aggregate Sector Performance

3.1 2.9

1 - Rating and price targets reflect J.P. Morgan's fundamental long-term views. 2 – Spread over MSCI sector indices except for Shanghai listed A-Shares which are spread over SHASHR. Source: Bloomberg, J.P. Morgan. Priced at Sept 08, 2014 (prices and price-related data based on previous day's close) J.P Morgan’s Asia Analyst Focus List (AFL) is a selection of high-conviction stocks collaboratively chosen by each Country and Sector research team across Asia-Pacific. The AFL includes Overweight- and Underweight-rated stocks, Overweight having superior outperformance prospects in a team’s universe over the horizon of rating (6-12 months), and Underweight stocks having among the poorer relative performance prospects over the horizon of rating (6-12 months). The aim is to have one Overweight and one Underweight idea from each Research team in the AFL. Analysts can add or delete recommendations at any time and changes will be published, with the analyst’s rationale, on J.P. Morgan Markets. Please check J.P. Morgan Markets https://www.jpmorganmarkets.com for the most up-to- date AFL at any time, or contact your J.P. Morgan representative.

The Analyst Focus List is not a model portfolio. Please refer to specific company research for the fundamental investment thesis for each stock included in this list as well as the analysts’ complete views. If a stock is placed under research restriction, J.P. Morgan may remove the stock from the AFL pursuant to applicable law and/or J.P. Morgan policy without any further notice. Important disclosures, including price charts for all companies under coverage for at least one year, are available through the search function on J.P. Morgan's website https://jpmm.com/research/disclosures. Total returns exclude commissions. Past results are not indicative of future performance.

Additional information available upon request.

Japanese stocks included in the Asia AFL are chosen according to the Asia AFL methodology above, independent of the Japanese Analyst Focus List (Japan AFL). Japan stocks are not included at the Country Team level, but may appear in Sector Team selections. To view the Japan AFL and its methodology, click here: Japan Analyst Focus List (Japan AFL)

32

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Japan Analyst Focus List

Most Preferred Stocks over the Next 3 Months Code Company Code Company 1925 Daiwa House 7261 Mazda Motor 3391 Tsuruha Holdings 8031 Mitsui & Co 4555 Sawai Pharmaceutical 8113 Unicharm 4902 Konica Minolta 8411 Mizuho Financial Group 5713 Sumitomo Metal Mining 8795 T&D Holdings 6366 Chiyoda 9107 Kawasaki Kisen 6740 Japan Display 9503 Kansai Electric Power 6976 Taiyo Yuden 9684 Square Enix Holdings 7011 Mitsubishi Heavy Industries 066570 KS LG Electronics


Least Preferred Stocks over the Next 3 Months Code Company Code Company 2002 Nisshin Seifun Group 7731 Nikon 4523 Eisai 8253 Credit Saison 5214 Nippon Electric Glass 8267 Aeon 5232 Sumitomo Osaka Cement 8304 Aozora Bank 5423 TOKYO STEEL MFG 8804 Tokyo Tatemono 6481 THK 9064 Yamato Holdings 6758 Sony 9508 Kyushu Electric Power 7240 NOK 9697 CAPCOM 7262 Daihatsu Motor 006360 KS GS Engineering & Construction


33


Japan Analyst Focus List

Sector Analyst Most/Least Code Stock Rating Add Date Add

Price Current

Price Price

Target

Price Target

End Date

AFL Abs. Perf since Add Date

(%)

Return Relative to

Analyst Coverage (%)

Infrastructure Hirokazu Anai Most 1925 Daiwa House OW 9/2/2014 1979 1898 2,500 Dec-15 -4.1 -2.6

Least 8804 Tokyo Tatemono N 9/2/2014 923 920 920 Dec-15 -0.3 -1.1

Food and Toiletry Ritsuko Tsunoda

Most 8113 Unicharm OW 8/11/2014 6692 6971 7,300 Dec-15 4.2 5.0

Least 2002 Nisshin Seifun Group N 9/2/2014 1198 1194 1,100 Dec-15 -0.3 -1.4 Pharmaceutical Masayuki Onozuka

Most 4555 Sawai Pharmaceutical OW 8/27/2013 6470 5870 8,300 Dec-15 -9.3 -21.0

Least 4523 Eisai UW 2/21/2014 3947 4271 3,300 Dec-14 8.2 -3.1

Machinery Toru Nakahashi

Most 7011 Mitsubishi Heavy Industries OW 9/2/2014 653 668 740 Dec-15 2.3 0.7

Least 6481 THK UW 9/2/2014 2523 2665 2,100 Dec-15 5.6 -4.1 Electronic Component Masashi Itaya

Most 6976 Taiyo Yuden OW 9/2/2014 1093 1080 1,540 Dec-15 -1.2 -14.7

Least 7240 NOK UW 9/2/2014 2283 2312 2,040 Dec-15 1.3 12.2

Precision/SPE Hisashi Moriyama

Most 4902 Konica Minolta OW 9/2/2014 1178 1206 1,100 Dec-14 2.4 1.4

Least 7731 Nikon UW 9/2/2014 1514 1536 1,450 Dec-15 1.5 -0.4 Retail Dairo Murata

Most 3391 Tsuruha Holdings OW 2/21/2014 4870 5550 6,300 Dec-14 14.0 11.2

Least 8267 Aeon UW 3/5/2014 1226 1093 950 Dec-15 -10.8 15.6

Financial Natsumu Tsujino

Most 8795 T&D Holdings OW 6/3/2014 1347 1370 2,200 Dec-15 1.7 2.0

Least 8253 Credit Saison UW 9/2/2014 2112 2140 2,200 Dec-15 1.3 0.5 Games/Internet Haruka Mori

Most 9684 Square Enix Holdings OW 6/3/2014 1647 2330 2,400 Dec-15 41.5 38.9

Least 9697 CAPCOM N 10/8/2013 1878 1761 1,700 Dec-15 -6.2 -50.6

Chemicals and Energy/Utilities Yuji Nishiyama

Most 9503 Kansai Electric Power OW 9/2/2014 972 991 1,200 Dec-15 1.9 0.9

Least 9508 Kyushu Electric Power UW 9/2/2014 1062 1056 900 Dec-15 -0.6 1.6

Glass and Display Industry Narci Chang

Most 6740 Japan Display OW 9/2/2014 585 598 800 Dec-15 2.2 2.4 Least 5214 Nippon Electric Glass UW 2/21/2014 457 548 380 Dec-15 19.9 -12.0 Bank Josh Klaczek Most 8411 Mizuho Financial Group OW 2/21/2014 215 202 265 Dec-14 -6.0 0.9 Least 8304 Aozora Bank N 2/21/2014 295 379 310 Dec-14 28.5 -35.4 Shipbuilding & Plant Engineering Sokje Lee

Most 6366 Chiyoda OW 9/2/2014 1176 1216 2100 Dec-14 3.4 7.7 Least 006360 KS GS Engineering & Construction UW 6/3/2014 32800 37350 27000 Dec-14 13.9 -27.6 Transportation Dan Lu Most 9107 Kawasaki Kisen OW 8/26/2014 243 259 310 Dec-15 6.6 8.7 Least 9064 Yamato Holdings N 7/3/2014 2090 2032 1800 Dec-15 -2.8 5.3 Consumer Electronics JJ Park Most 66570 LG Electronics OW 6/3/2014 76300 72600 90000 Jun-15 -4.8 -25.6 Least 6758 Sony N 2/21/2014 1766 2042 1500 Dec-15 15.6 -1.8 Autos & Auto Parts Kishimoto, Akira Most 7261 Mazda Motor OW 4/4/2014 2395 2569 3400 Dec-15 7.3 -1.5 Least 7262 Daihatsu Motor UW 7/3/2014 1753 1795 1600 Dec-15 2.4 2.2 Trading Companies Mori, Kazuhisa Most 8031 Mitsui & Co OW 3/4/2014 1564 1717 2180 Dec-15 9.8 1.8 Least 5423 TOKYO STEEL MFG UW 7/9/2014 530 606 550 Dec-15 14.3 -14.5 Nonferrous Metals / Other Basic Materials Umeda, Shogo

Most

5713 Sumitomo Metal Mining OW 7/14/2014 1722 1731 1960 Dec-15 0.5 3.1 Least 5232 Sumitomo Osaka Cement UW 7/14/2014 377 379 360 Dec-15 0.5 -3.1 Source: Bloomberg, J.P. Morgan Note: Share prices as of September 09, 2014. The Japan Analyst Focus List (Japan AFL) comprises Most Preferred and Least Preferred stocks over the next three months, selected by sector analysts. Analysts select their Most Preferred stocks from stocks in their coverage that are rated Overweight, and their Least Preferred stocks from stocks that are rated Underweight, although Least Preferred stocks may also include stocks rated Neutral that the covering analyst thinks will underperform the sector in the near term. The Japan AFL ordinarily includes each analyst’s Most Preferred stock and Least Preferred stock as of the time of selection, but this does not constitute a pair-trade recommendation. Constituents of the Japan AFL may be changed in company reports published by analysts or in the Best of Japan periodic report published by the Japan Equity Research Department. For report details, please visit J.P. Morgan’s website at https://www.jpmorganmarkets.com, or contact your J.P. Morgan representative. The Japan Analyst Focus List is not a model portfolio. Please refer to the latest published report on each constituent stock for fundamental analysis and investment analysis. Stocks may be removed from the Japan AFL without prior notification when restrictions have been placed on them, or if required by regulatory authorities, or as dictated by J.P. Morgan’s internal policies. Please refer to J.P. Morgan’s research website at https://jpmm.com/research/disclosures for share price charts and other important disclosures. Total returns exclude commissions. Past results are not indicative of future performance. Additional information is available upon request.

34

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CEEMEA Analyst Focus List J.P. Morgan CEEMEA AFL — 09 September 2014

Company Ticker Sector Analyst Rec

Local MSCI Index for Rel Valuation / Ccy

Focus List Add Price Close Price Price Target

Potential Up/

Downside*

Rel Perf since Add to

AFL (vs Local

MSCI Index)**

Price Target End Date

Focus List Add Date

First Gulf Bank FGB UH Banks Bilandani OW UAE (AED) 8.95 19.00 22.50 18% 47% Dec-15 22-Dec-10 Emaar Properties EMAAR DB Property Hasan OW UAE (UAE) 3.17 11.45 13.00 14% 193% Dec-14 06-Apr-11 LW Bogdanka LWB PW Mining Kuzawinski OW Poland (PLN) 124.00 119.00 171.00 44% -19% Feb-15 08-May-12 Sberbank SBER RX Banks Kantarovich OW MICEX (RUB) 93.80 78.69 116.00 47% -18% Dec-14 31-Aug-12 Vakifbank VAKBN TI Banks Formanko OW Turkey (TL) 4.88 5.14 6.90 34% -7% Dec-15 24-Jun-13 STC STC AB Telecoms Sharma OW S. Arabia (SAR) 52.75 75.04 85.00 13% 19% Dec-15 17-Dec-13 Energa ENG PW Utilities Kuzawinski OW Poland (PLN) 15.75 23.50 23.40 0% 41% Aug-15 13-Jan-14 Alpha Bank ALPHA GA Banks Formanko OW Greece (EUR) 0.69 0.70 1.01 45% -2% Dec-15 17-Apr-14 Tatneft TATN RX Oils Gromadin OW Russia (RUB) 224.30 246.19 380.00 54% 21% Dec-15 11-Jul-14 Lukoil LKOD LI Oils Gromadin OW Russia (USD) 61.10 58.19 81.80 41% 6% Dec-15 11-Jul-14 Source: Bloomberg, J.P. Morgan estimates. Share price data as at COB 08 September 2014. * From Latest Closing Price. **Stock Performance relative to MSCI Saudi Arabia, MSCI Turkey, MSCI Poland, MSCI UAE, MICEX, MSCI Austria, MSCI Greece. J.P. Morgan may remove a stock from the AFL pursuant to applicable law and/or J.P. Morgan policy without any further notice.

U.S. Equity Analysts' Focus List: Current Snapshot The U.S. Equity Analyst Focus List is a selection of stocks, chosen by individual analysts, that they believe will provide an annualized total return in excess of +/-20%. The Focus List can include Overweight- and Underweight-rated stocks, provided they meet the return criteria (a positive return for Overweights and a negative return for Underweights). Performance Relative to Benchmark indicates the relative performance to the index in which the stock trades (eg, Apple – NASD). The "Target beginning date" may differ from the "Focus List add date" because of changes to the target price made while the stock was on the Focus List.

The Analyst Focus List is not a model portfolio. Please refer to specific company research for the fundamental investment thesis for each stock included in this list as well as the analysts’ complete views. If a stock is placed under research restriction, J.P. Morgan may remove the stock from the AFL pursuant to applicable law and/or J.P. Morgan policy without any further notice. Important disclosures, including price charts for all companies under coverage for at least one year, are available through the search function on J.P. Morgan's website https://jpmm.com/disclosures/company . Total returns exclude commissions. Past results are not indicative of future performance. Additional information available upon request. If you have questions regarding stocks on the Focus List, please contact your salesperson or the covering analyst.

Mkt. Cap. ($MMs)

Focus List

Focus List Prev.Close Focus List % Change

Performance Relative

Target Beginning Target

Company Name Ticker Analyst Rating 9/9/2014 Add Date Add Price 9/9/2014

Target Price Since Add to Benchmark Date End Date

American Airlines AAL Jamie Baker OW $27,335 12/11/13 $24.88 $37.96 $55.50 52.57% 52.57% Jul-14 Dec-14

Cliffs Natural Resources CLF Michael F. Gambardella OW $2,123 04/01/13 $19.01 $13.86 $18.00 -27.09% -27.09% Jul-14 Dec-15

Compania de Minas Buenaventura BVN John Bridges OW $3,600 08/05/14 $11.85 $13.06 $18.00 10.21% 10.21% Aug-14 Dec-14 CVS Caremark Corp. CVS Lisa Gill OW $93,646 08/01/11 $36.35 $80.86 $91.00 122.45% 122.45% Aug-14 Dec-15 General Motors GM Ryan Brinkman OW $53,067 12/11/13 $40.90 $33.07 $50.00 -19.14% -19.14% Apr-14 Dec-14 Gilead Sciences GILD Geoff Meacham OW $160,071 08/16/11 $19.43 $105.89 $110.00 445.12% 445.12% Jul-14 Dec-15 Illumina, Inc. ILMN Tycho W. Peterson OW $24,416 01/17/14 $125.26 $175.15 $230.00 39.83% 39.83% Jul-14 Dec-15 Las Vegas Sands Corp LVS Joseph Greff OW $50,615 08/15/11 $43.59 $62.85 $83.00 44.18% 44.18% Jul-14 Dec-14 Navistar Int'l NAV Ann Duignan OW $3,186 03/08/13 $31.89 $39.15 $44.00 22.77% 22.77% Jun-14 Dec-14 NCR Corporation NCR Paul Coster OW $5,593 01/13/14 $35.52 $33.27 $46.00 -6.33% -6.33% Jul-14 Dec-15 Och-Ziff Capital Management OZM Ken Worthington OW $5,811 01/06/12 $8.45 $12.27 $17.00 45.21% 45.21% Aug-14 Dec-14 The Carlyle Group CG Ken Worthington OW $10,360 06/16/14 $32.13 $31.48 $45.00 -2.02% -2.02% Jun-14 Dec-15 Verizon Communications VZ Philip Cusick OW $202,702 02/27/14 $46.35 $48.90 $59.00 5.50% 5.50% Jul-14 Dec-15 Source: J.P. Morgan estimates and Bloomberg data.

35



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Morgan Grupo Financiero is a member of the Mexican Stock Exchange and authorized to act as a broker dealer by the National Banking and Securities Exchange Commission. Singapore: This material is issued and distributed in Singapore by or through J.P. Morgan Securities Singapore Private Limited (JPMSS) [MCI (P) 199/03/2014 and Co. Reg. No.: 199405335R] which is a member of the Singapore Exchange Securities Trading Limited and is regulated by the Monetary Authority of Singapore (MAS) and/or JPMorgan Chase Bank, N.A., Singapore branch (JPMCB Singapore) which is regulated by the MAS. This material is provided in Singapore only to accredited investors, expert investors and institutional investors, as defined in Section 4A of the Securities and Futures Act, Cap. 289. Recipients of this document are to contact JPMSS or JPMCB Singapore in respect of any matters arising from, or in connection with, the document. Japan: JPMorgan Securities Japan Co., Ltd. is regulated by the Financial Services Agency in Japan. Malaysia: This material is issued and distributed in Malaysia by JPMorgan Securities (Malaysia) Sdn Bhd (18146-X) which is a Participating Organization of Bursa Malaysia Berhad and a holder of Capital Markets Services License issued by the Securities Commission in Malaysia.

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Pakistan: J. P. Morgan Pakistan Broking (Pvt.) Ltd is a member of the Karachi Stock Exchange and regulated by the Securities and Exchange Commission of Pakistan. Saudi Arabia: J.P. Morgan Saudi Arabia Ltd. is authorized by the Capital Market Authority of the Kingdom of Saudi Arabia (CMA) to carry out dealing as an agent, arranging, advising and custody, with respect to securities business under licence number 35-07079 and its registered address is at 8th Floor, Al-Faisaliyah Tower, King Fahad Road, P.O. Box 51907, Riyadh 11553, Kingdom of Saudi Arabia. Dubai: JPMorgan Chase Bank, N.A., Dubai Branch is regulated by the Dubai Financial Services Authority (DFSA) and its registered address is Dubai International Financial Centre - Building 3, Level 7, PO Box 506551, Dubai, UAE. Country and Region Specific Disclosures U.K. and European Economic Area (EEA): Unless specified to the contrary, issued and approved for distribution in the U.K. and the EEA by JPMS plc. Investment research issued by JPMS plc has been prepared in accordance with JPMS plc's policies for managing conflicts of interest arising as a result of publication and distribution of investment research. Many European regulators require a firm to establish, implement and maintain such a policy. This report has been issued in the U.K. only to persons of a kind described in Article 19 (5), 38, 47 and 49 of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005 (all such persons being referred to as "relevant persons"). This document must not be acted on or relied on by persons who are not relevant persons. Any investment or investment activity to which this document relates is only available to relevant persons and will be engaged in only with relevant persons. In other EEA countries, the report has been issued to persons regarded as professional investors (or equivalent) in their home jurisdiction. Australia: This material is issued and distributed by JPMSAL in Australia to "wholesale clients" only. This material does not take into account the specific investment objectives, financial situation or particular needs of the recipient. The recipient of this material must not distribute it to any third party or outside Australia without the prior written consent of JPMSAL. For the purposes of this paragraph the term "wholesale client" has the meaning given in section 761G of the Corporations Act 2001. Germany: This material is distributed in Germany by J.P. Morgan Securities plc, Frankfurt Branch and J.P.Morgan Chase Bank, N.A., Frankfurt Branch which are regulated by the Bundesanstalt für Finanzdienstleistungsaufsicht. Hong Kong: The 1% ownership disclosure as of the previous month end satisfies the requirements under Paragraph 16.5(a) of the Hong Kong Code of Conduct for Persons Licensed by or Registered with the Securities and Futures Commission. (For research published within the first ten days of the month, the disclosure may be based on the month end data from two months prior.) J.P. Morgan Broking (Hong Kong) Limited is the liquidity provider/market maker for derivative warrants, callable bull bear contracts and stock options listed on the Stock Exchange of Hong Kong Limited. An updated list can be found on HKEx website: http://www.hkex.com.hk. Japan: There is a risk that a loss may occur due to a change in the price of the shares in the case of share trading, and that a loss may occur due to the exchange rate in the case of foreign share trading. In the case of share trading, JPMorgan Securities Japan Co., Ltd., will be receiving a brokerage fee and consumption tax (shouhizei) calculated by multiplying the executed price by the commission rate which was individually agreed between JPMorgan Securities Japan Co., Ltd., and the customer in advance. Financial Instruments Firms: JPMorgan Securities Japan Co., Ltd., Kanto Local Finance Bureau (kinsho) No. 82 Participating Association / Japan Securities Dealers Association, The Financial Futures Association of Japan, Type II Financial Instruments Firms Association and Japan Investment Advisers Association. Korea: This report may have been edited or contributed to from time to time by affiliates of J.P. Morgan Securities (Far East) Ltd, Seoul Branch. Singapore: JPMSS and/or its affiliates may have a holding in any of the securities discussed in this report; for securities where the holding is 1% or greater, the specific holding is disclosed in the Important Disclosures section above. India: For private circulation only, not for sale. Pakistan: For private circulation only, not for sale. New Zealand: This material is issued and distributed by JPMSAL in New Zealand only to persons whose principal business is the investment of money or who, in the course of and for the purposes of their business, habitually invest money. JPMSAL does not issue or distribute this material to members of "the public" as determined in accordance with section 3 of the Securities Act 1978. The recipient of this material must not distribute it to any third party or outside New Zealand without the prior written consent of JPMSAL. Canada: The information contained herein is not, and under no circumstances is to be construed as, a prospectus, an advertisement, a public offering, an offer to sell securities described herein, or solicitation of an offer to buy securities described herein, in Canada or any province or territory thereof. Any offer or sale of the securities described herein in Canada will be made only under an exemption from the requirements to file a prospectus with the relevant Canadian securities regulators and only by a dealer properly registered under applicable securities laws or, alternatively, pursuant to an exemption from the dealer registration requirement in the relevant province or territory of Canada in which such offer or sale is made. The information contained herein is under no circumstances to be construed as investment advice in any province or territory of Canada and is not tailored to the needs of the recipient. To the extent that the information contained herein references securities of an issuer incorporated, formed or created under the laws of Canada or a province or territory of Canada, any trades in such securities must be conducted through a dealer registered in Canada. No securities commission or similar regulatory authority in Canada has reviewed or in any way passed judgment upon these materials, the information contained herein or the merits of the securities described herein, and any representation to the contrary is an offence. Dubai: This report has been issued to persons regarded as professional clients as defined under the DFSA rules. Brazil: Ombudsman J.P. Morgan: 0800-7700847 / [email protected].

"Other Disclosures" last revised June 21, 2014.

This message is provided for information purposes only and should be read in conjunction with the latest research report on this company. The information is believed to be reliable, but J.P. Morgan does not warrant its completeness or accuracy. Opinions, estimates and assumptions constitute our judgment as of the date hereof and are subject to change without notice. Past performance is not indicative of future results. This material is not intended as an offer or solicitation for the purchase or sale of any financial instrument. All J.P. Morgan research is subject to a standard form global hedge clause as well as company specific disclosures included on all research and incorporated herein by reference. The recipient of this material must not distribute it to any third party without the prior written consent of J.P. Morgan. Additional information is available upon request © 2014 JPMorgan Chase & Co.

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