ETF RESEARCH · 2012. 8. 28. · US fiscal cliff. It is when Bush-era tax cuts expire and automatic spending cuts (~US$600b) kick-in at the start of January 2013. ... US elections

Please refer to important disclosures at the back of this document. MICA (P) 032/06/2012

With equity indices trending sideways on low volume, investors remain uncertain on which way the market will point. Coupled with upcoming key events in September and beyond, we are unlikely to see a significant near-term pickup in trading appetite and volumes aside from the usual headlines news risks. Although near-term prospects seem dim and uninspiring, we view this trading break as a rest point that has emerged for investors to take stock, and evaluate the various scenarios ahead before adjusting their portfolios accordingly. From our analysis, we derived three strategies utilizing ETFs from 1) the apparently growing complacency amongst investors via a low VIX reading, 2) the roadblocks ahead for the Eurozone and 3) the insipid US economy that investors should consider.

CAUTION FOR SEPTEMBER & BEYOND • Current uncertainty and low volume urge caution

• Watch out for key events in September and beyond

• Three plays (Vol, bonds, EM) to ride the waves

Asia Pacific Equity Research | Singapore

22 Aug 2012

ETF RESEARCH Lim Siyi ● (65) 6531 9824 ● [email protected]

OCBC Investment Research Singapore Equities

2

Table of Contents Section A: Market Recap 3

i. European woes refuse to go away 4

ii. Bleak American theatre 6

iii. VIX is low – time to go? 8

Section B: What can investors do? 9

i. Volatility plays 9

ii. Fixed income bonds 12

iii. Emerging market allocation 14


3

Section A Market recap

Despite the vast array of troubling headlines and macro developments, the first half of the year saw decent returns across most equity markets. The developed markets – particularly the US – outperformed emerging markets as investors moved towards a “safer” refuge in the face of economic uncertainty.

Exhibit 1: Developed vs. Emerging market performance

1000

1100

1200

1300

1400

Dec/11 Jan/12 Feb/12 Mar/12 Apr/12 May/12 Jun/12 Jul/12

800

900

1000

1100

MSCI DM (LHS) MSCI EM (RHS)

Sources: BLOOMBERG, OIR

Uncertainty remains

Entering the 2H of the year, one thing is for sure: investors are still suffering from jitters and risk aversion. The lingering European debt crisis, a potential structural slowdown in China and US have weighed down on investors, and left them uninspired and unsure as to how to proceed from here. Will we have a recovery similar to that of the past two years or will we continue on a path of sporadic and piddling rallies?

What are we looking at? 1. Same ol’ European woes 2. Insipid US economy 3. VIX is low – time to go?


4

i. European woes refuse to go away Greece still off track

Despite the election of a pro-austerity government, Greece remains a ticking time bomb. Greece will probably need debt restructuring given its inability to repay its loans and this time, the ECB and other Eurozone governments will have to absorb a haircut on the Greek debt that they own (~€200b). This is likely to further exacerbate the Greek Prime

Minister’s estimate that the economy could contract by more than 7% this year. Spanish joining the fray It now appears that Spain may potentially need a sovereign bailout on top of the €100b that it requested previously. The yields on its

government bonds climbed to record levels, and interest rates on shorter-term five-year bonds have exceeded 10-year yields. The markets are increasingly pricing in the probability of a default or debt restructuring. The question now is not if Spain requires a bailout, but when will it request for one. A reluctant ECB

Although the ECB has cut interest rates, it still seems reluctant to re-start its bond buying programme. Economists have pointed to the ECB’s meeting in late September as the decision making point but even then it seems unlikely.

Is Italy next? With Italy implementing a week-long short-selling ban, talk of Italy being next to require a bailout has increased. The bond yields on its government bonds have inched higher to mirror the Spanish situation while Italy’s debt-to-GDP ratio is now 123% (second only to Greece).

Exhibit 2: Spanish & Italian 10-year bond yields

4

5

6

7

8

Feb-12

Mar-12

Mar-12

Apr-12

Apr-12

May-12

May-12

Jun-12

Jun-12

Jul-12

Jul-12

Jul-12

Aug-12

Spanish 10-year Italian 10-year



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Can the ECB handle both? The permanent rescue facility, the European Stability Mechanism (ESM),

which is targeted to work alongside the European Financial Stability Facility (EFSF) from mid-2012 for a year before replacing it entirely, has yet to be ratified. This means that the EFSF is alone at the moment. Its €440b effective lending capacity is contingent on guarantees mainly from Europe’s AAA-rated countries, and this AAA party has now dwindled to only four countries: Germany, Luxembourg, Finland and Netherlands.

On its own, the EFSF will not be able to cope with both Spain and Italy. Until the ESM is ratified – it will operate like a bank and have a paid-in capital of €80b and callable capital of €620b, and will have a new voting system in place for ESM to pass decisions on loans to distressed nations (85% majority instead of unanimity previously) – any pledges by Eurozone officials will seem like empty promises. A lot of attention will be

on the German Constitutional Court’s September 12 ruling on whether the ESM violates German law.


6

ii. Bleak American Theatre Fiscal cliff: something to fear?

One of the issues concerning investors at the moment is the impending US fiscal cliff. It is when Bush-era tax cuts expire and automatic spending cuts (~US$600b) kick-in at the start of January 2013. Unless Congress and the President come together to extend these tax cuts, the nascent recovery of the US economy could be dealt a death knell. The

Congressional Budget Office (CBO) estimates the impact of the spending cuts to be about 4% of US GDP while Federal Reserve Chairman Bernanke recently placed the decline at around 5%. The CBO also stated that a failure to act would lead to a recession in 2013. However, with the US elections looming in November, US politicians are posturing to placate disenfranchised voters, and a swift resolution before the end of the year is highly unlikely.

Back in late 2010, a similar scenario had played out with the Democrats and Republicans bickering till the last minute before a compromise was made to extend the Bush tax cuts. In 2012, Republicans are sticking to their guns – full extension of tax cuts across the board for at least another year – while Democrats want the higher income brackets to pay more taxes by advocating lower taxes for the first US$250K of an

individual’s income and increases for those that earn beyond this level. Currently, the market is unperturbed about this issue with most investors assuming that an agreement will be achieved at the end albeit with much bickering. Despite this optimism, the severity of the situation needs to be

understood. a. Operation Twist ending 31 Dec In Fed Chairman Bernanke’s latest speech (23 July 2012), he talked about how the US economy has slowed during the second quarter of the year due to the lingering Eurozone issues and uncertainty over US fiscal

policy, and that greater headwinds are to be expected going forward. While he reiterated the willingness of the Federal Reserve to provide further stimulus, at the current moment, the Fed will continue Operation Twist till the end of the year with the hope of exerting downward pressure on longer-term interest rates to make the environment more “accommodative”. (The Fed’s balance sheet will not increase with Operation Twist as it merely shifts the maturity of its holdings into the

longer-term.) b. Reduction in domestic consumption The timing of the tax hikes and spending cuts cannot come at a worst time. The spending cuts are expected to affect both discretionary and

mandatory spending: defence programme will see the largest reductions, discretionary spending cuts for all government agencies, mandatory cuts in Medicare payments, and fewer government debts issued to the public will result in declines in interest payments i.e. less debt servicing. More importantly, should an extension fail to be enacted, US consumers will be the hardest hit. Disposable incomes will be reduced and domestic

consumption fall correspondingly. A delay in any agreements will likely see US consumers tighten their purse strings ahead of the dead-line and that would create a multiplying effect throughout the US economy.


7

So what is likely to happen? - NOTHING Voter sentiment will likely drive the outcome of how the agreement will

be structured. Some polls are showing most voters favouring an increase in taxes for the wealthy and an extension of tax cuts for the middle class. This scenario could potentially help maintain, or even improve on current consumption levels and help to narrow the budget deficit. Unfortunately, a clear resolution is still some ways away. What is certain

is more volatility and uncertainty in the markets. Coupled with a weaker corporate earnings season and poor earnings outlooks for the rest of the year, there is little cheer for the US investor and by extension, the global investor.


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iii. VIX is low – time to go? Despite the continued uncertainty in equity markets, VIX remains low.

The S&P 500 has climbed higher – albeit on lower average volumes – as forward volatility expectations seem muted. However, as VIX expresses the 30-day average of first/second month volatility, it is unsurprising to see it at current levels given the dearth of significant policy meetings ahead and/or macro-economic events. We seem to be experiencing a continuous loop of policy makers repeating and regurgitating standard

lines. Even the CBOE S&P 500 Implied Correlation Index (which measures changes in the relative premium between index options and single-stock options) has continued to diminish over time and is now hovering at low levels similar to August 2008. This means that market correlation has declined i.e. moving less in unison. Part of the reason is due to the

upward push of defensive sector plays or search for yields and away from cyclical sectors as investors seek relatively safer areas to park their cash.

Exhibit 3: CBOE Implied Correlation Index vs. S&P 500

1200

1300

1400

1500

Dec-11

Jan-12

Jan-12

Feb-12

Feb-12

Mar-12

Mar-12

Apr-12

Apr-12

May-12

May-12

Jun-12

Jun-12

Jun-12

Jul-12

Jul-12

Aug-12

55

65

75

85

SPX (LHS) ICJ (RHS)


September could see a spike coming However, with certain key events coming in September, we could see a spike in volatility as investors grapple with deciphering action plans of

policy makers in US and Europe. Upcoming key events are Fed Chairman Bernanke’s Jackson Hole speech (Fed meeting September 12-13), German Constitutional Court’s ruling on the ESM, and the two ECB meetings slated for early and late September.


9

Section B What can investors do?

Despite the likelihood of persistence market uncertainty, there are still some areas that investors can consider. We continue to reiterate our previous recommendations for VIX, fixed income bonds as well as some emerging market plays via South Korea and Turkey. We decided to stay away from the defensive sectors this time around as the search for yield

has pushed up the valuations of these sectors and made them relatively expensive. 1. Short-term volatility play and “flattener” strategy 2. Fixed income bonds 3. Emerging market allocation

i. Volatility plays a. Long short-term volatility In the current low-volatility regime that we are experiencing, purchasing of downside risk protection i.e. long volatility is cheap, and we advocate investors allocate some of their portfolio into this area ahead of the

events in September. Given the current steepness of the volatility curve, near-term volatility is cheaper than longer-term volatility i.e. VIX futures get more expensive as they move out further on the time-line. Therefore, investors can take advantage of this relative cheapness by taking a LONG position on near-term VIX futures.

Exhibit 4a: VXX ETN

BB ETF Price NAV Exp AUM Prem. ADV1 Tracking Ann

Ticker (USD) (USD) Ratio (%)

(USm) /Disc (USm) Error2 Ret.

2

VXX US Equity

iPath S&P 500 Short-Term Futures ETN

11.20 11.14 0.89 1,716 -

0.28% 455.2 0.0% -65.6%

1 20-day moving average calculation

2 One-year annualized calculation

Data as of 20 August 2012

Sources: Bloomberg, OIR

iPath S&P 500 VIX Short-Term Futures ETN (VXX) Underlying Index: S&P 500 VIX Short-Term Futures TR Index VXX is an ETN (Exchange Traded Note), which is different from the typical ETF. It is essentially a debt note: a senior, unsecured, unsubordinated debt security issued by an underwriting bank, which in

this case is Barclays. The note is backed by the creditworthiness of the issuing bank and has a maturity date. It will provide investors with the returns or performance of a benchmark or strategy (after applicable fees) if held to maturity, although ETN positions can be exited before maturity via exchange trading or redemption (typically of at least 50,000 units) directly from the bank. ETNs also do no pay interest during its tenure, and do not have any voting rights as it does not own any underlying

securities. VXX tracks the S&P 500 VIX Short-Term Futures Total Return Index, which offers exposure to the daily rolling long position in the first and second month VIX futures contracts.


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b. Flattener Given the relative cheapness of near-term volatility, investors can utilize

this strategy before the relationship potentially breaks following the events in September. This “flattening” strategy involves the purchasing of near-term volatility and selling longer-term volatility since longer-term volatility is more expensive at the moment. This will take advantage of the steepness of the volatility curve. This trade succeeds when volatility spikes, nearer-term volatility will increase in value while longer-term

volatility will lower in value.

Exhibit 4b: VXZ ETN




2

VXZ US Equity

iPath S&P 500 Mid-Term Futures ETN

40.56 40.67 0.89 201 -

0.02% 12.6 0.0% -30.5%





iPath S&P 500 VIX Mid-Term Futures ETN (VXZ) Underlying Index: S&P 500 VIX Mid-Term Futures TR Index VXZ tracks the S&P 500 VIX Mid-Term Futures Total Return Index, which

provides exposure to the daily rolling long position in the fourth, fifth, sixth and seventh month VIX futures contracts. c. What about when volatility picks up? Should September trigger another sell-down event and near-term volatility spikes, there is another strategy that investors can utilize.

Using the XVIX (ETRACS Daily Long-Short VIX ETN), which holds a 100% long position in the S&P 500 VIX Mid-Term Futures Excess Return Index, and a corresponding short 50% position in the S&P 500 VIX Short-Term Futures Excess Return Index, the ETN will capitalize on the steepness of the short-end of the VIX futures curve i.e. lock in gains from spikes in near-term volatility while simultaneously purchasing relatively cheaper

medium-term volatility (which should appreciate going forward).

Exhibit 4c: XVIX ETN




2

XVIX US Equity

ETRACS Daily Long-Short VIX ETN

24.50 N/A 0.85 24 -

0.94% 0.1 1.1% 1.1%






11

ETRACS Daily Long-Short VIX ETN (XVIX) Underlying Index: S&P 500 VIX Futures Term-Structure Excess Return Index

XVIX is an ETN issued by UBS and tracks the S&P 500 VIX Futures Term-Structure Excess Return Index, which provides returns through the daily rolling of 100% long position in the S&P 500 VIX Mid-Term Futures Excess Return Index and a short 50% position in the S&P 500 VIX Short-Term Futures Excess Return Index. XVIX essentially longs mid-term VIX

futures contracts and shorts the short-term VIX futures contract. Key Risk A key risk to this strategy is when the spike in near-term volatility fails to materialize and the current situation continues. Possible triggers could be a QE announcement or major improvements in ECB resolve to tackle

the debt crisis.


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ii. Fixed income bonds Fixed income bonds tend to exhibit low betas when compared to general

broad market trends, so naturally these vehicles have seen significant inflows following the weaker equity market performance and have performed very well already as hoped for during our previous recommendations in March. The question most investors are asking now is whether there is still room

for further appreciation. The possible window for QE3 seems to be closing ahead of the US elections although most economists and market commentators remained mixed about the likelihood. Given the lack of general support (both political and public sentiments), we work on the assumption that another round of QE similar in nature to that of the previous two is remote. As such, fixed income bonds are likely to see continued inflows versus the general outflows/low volumes in equity

markets. We persist in our call to maintain allocation into fixed income bonds although we move away from Treasuries given their depressed yields. a. Investment Grade bonds

Exhibit 5a: Investment Grade Bonds ETF




2

LQD US Equity

iShares iBoxx $ Investment Grade Corporate Bond Fund

118.79 118.16 0.15 23,806 -0.28% 260.5 2.9% 4.7%





iShares iBoxx $ Investment Grade Corporate Bond Fund (LQD) Underlying Index: iBoxx $ Investment Grade Corporate Index Beta (vs. S&P 500): 0.30 LQD is designed to replicate the performance of the US dollar

denominated liquid investment grade corporate bond market. While there is no fixed number of underlying bonds in the index per rebalancing, it holds mainly investment grade i.e. AAA to BBB- rated bonds, with a small percentage (


13

Exhibit 5b: High Yield Bond ETFs




2

HYG US Equity

iShares iBoxx $ High Yield Corporate Bond

91.65 91.16 0.50 16,075 -0.50% 296.6 1.9% 6.6%

AHYG SP Equity

iShares Barclays Capital USD Asia High Yield Bond Fund

10.87 10.85 0.50 23 -0.06% 0.1 3.8% 14.4%





iShares iBoxx $ High Yield Corporate Bond (HYG) Underlying Index: iBoxx $ Liquid High Yield Index Beta (vs. S&P 500): 0.63 The iBoxx $ Liquid High Yield Index consists of USD denominated high yield corporate bonds offered for sale in the US and is designed to

provide a broad representation of the US high yield corporate bond market. HYG employs a full replication methodology to replicate the performance of its underlying index although it may at any time have more holdings than the index. The underlying bonds are rated between BBB- to C (S&P rating) and have a weighted average maturity of 4.58 years. With an annual yield of 7% and monthly dividend distributions,

HYG is an attractive proposition for investors seeking to boost their income portion of their portfolio. iShares Barclays Capital USD Asia High Yield Bond Fund (AHYG) Underlying Index: Barclays Capital Asia USD High Yield Diversified Credit Index Beta (vs. S&P 500): 0.46

AHYG tracks the Barclays Capital Asia USD High Yield Diversified Credit Index, which provides exposure to Asia ex-Japan fixed rate USD denominated government related and corporate high yield debt. At the index level, bond issuer exposure is capped at 4% of the overall market value of the index for diversification purposes, and the index is rebalanced monthly. The ETF employs a representative sampling method

to replicate its underlying index and currently holds around 78 bonds as compared to the index’s 92 constituents. China tops the country exposure at 30%, followed by Hong Kong and Indonesia at around 18% and 14% respectively. AHYG has a flat yield of 7.9% and it distributes its dividends on a quarterly basis.

Key Risk These fixed-income ETFs should continue to perform well as long as equity markets remain weak. Therefore, a key risk to this allocation is upticks in the general market sentiment through improvements in macro-economic data and/or announcement of QE3, which would trigger outflows from fixed income assets back into equity markets.


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iii. Look for growth elsewhere Are defensive plays still worthwhile?

Traditionally, low-beta defensive sectors like utilities, telecommunications and consumer staples are the go-to areas that investors look to in times of market stress. With their stable revenue streams and decent yields, these sectors are generally less-affected by selloffs. However, these sectors have seen relatively greater returns on a

YTD basis and may actually be expensive at the moment. For instance, according to iShares Chief Investment Strategist Russ Kosterich, the US utilities sector is now trading at a premium to the S&P 500 despite it trading at an average discount of 25% since 1995 . He commented that with the sector “currently less profitable than its long-term average”, the premium commanded cannot be justified. We agree with his assessment and advocate investors to consider against adding on positions to the

defensives at this juncture. Where else then? We turn to the overlooked area of emerging markets, which have largely underperformed the developed markets in the first half of the year. Given their sounder balance sheets, EM central banks have more

manoeuvrability, and hence are more active in promoting growth in their respective economies. With reduced export opportunities into Europe, Americas and even China, EM valuations have come off and are looking attractive relative to DM. Furthermore, these economies have started to focus on increasing domestic consumption in a bid to spur growth. Although potential weaknesses could come in the form of oil price

increases and food inflation, we assess these risks to be minimal. a. South Korea – cheap valuations South Korean equities have largely underperformed the EM benchmark despite strength in its technology and transportation sectors. This underperformance has led the central bank to lower rates to 3% (3.25%

previously) and revise GDP forecasts for the year to 3% (3.5% previously) as well. While these developments have contributed in lowering valuations for South Korean equities, we do not see a cause for concern but rather an area for opportunity. Firstly, the central bank remains ready to implement additional rate cuts and/or monetary easing if necessary to stimulate the economy. This

should provide some floor support for investor sentiment. Secondly, employment figures have grown in July (+80K jobs vs. -48K in June) with the manufacturing sector providing the most help. Lastly, given its reliance on the consumer, technology and transportation sectors, a boost in domestic consumption for the last quarter of the year and boost from possible China easing could help to stir up demand in terms of industrial

production and exports.

Exhibit 6a: South Korean linked ETF




2

EWY US Equity

iShares MSCI South Korea

57.98 57.50 0.59 2,684 0.00% 91.9 5.8% 21.2%






15

iShares MSCI South Korea Index Fund (EWY) Underlying Index: MSCI South Korea Index Beta (vs. S&P 500): 1.23

The MSCI South Korea Index is a market capitalization weighted index that aims to represent 85% of the total publically available market capitalization in South Korea. The average market capitalization of index constituents is approximately US$45b and the index is rebalanced on a quarterly basis. The corresponding ETF that tracks this index, EWY,

employs a full replication methodology to replicate the index performance. Dividends are paid on a semi-annual basis and the annual yield is about 0.6%. b. Philippines – star performer Philippine equities have performed astonishingly well this year relative to

other EM. With increasing optimism over the government’s ability to finally deliver on its promises as well as progress made over infrastructure projects (via the Public Private Partnership project), the Filipino market has exceeded expectations. Going forward, we expect this trend to continue with the ongoing infrastructure projects underpinning growth in the construction and financial sectors. In addition, reliance on overseas remittances has come off in the past months, which

hopefully signify a gradual rebalancing of the economy towards one driven by domestic growth. Despite the optimism surrounding the Philippines, the main gripe against investing in the country is the lack of liquidity as compared to other more established markets. However, through the use of an ETF, we can get

around this issue of liquidity and gain exposure to the underlying Filipino market.

Exhibit 6b: Philippines-linked ETFs


Ticker (USD/ HKD)

(USD/ HKD)

Ratio (%)

(USm/ HKDm)

/Disc (USm/ HKDm)

Error2 Ret.

2

EPHE US Equity

iShares MSCI Philippines Investable Market Index Fund

29.19 29.23 0.59 131 0.25% 3.8 3.3% 23.9%

3037 HK Equity

XIE Shares Philippines (PSEi) ETF

8.68 8.66 0.39 13 0.15% 0.1 na 19.4%





iShares MSCI Philippines Investable Market Index Fund (EPHE)

Underlying Index: MSCI Philippines Investable Market Index Beta (vs. S&P 500): 0.83 The objective of the index is to represent 99% of the total publically available market capitalization of the Philippines stock exchanges. It is market capitalization weighted and currently holds 40 constituents. EPHE employs the full replication methodology to track the underlying index.

Dividends are paid out semi-annually and its annual yield is about 1.1%.


16

XIE Shares Philippines (PSEi) ETF (3037 HK) Underlying Index: Philippines Stock Exchange Ps Ei Index (PCOMP)

Beta (vs. S&P 500): 0.50 For investors seeking an ETF trading in Asian time, an alternate ETF choice for Filipino exposure is the XIE Shares Philippines ETF (3037 HK). It seeks to provide the returns of the PSEi or PCOMP Index, which is the main index of the Philippines Stock Exchange. Constituting a fixed basket

of the 30 largest companies by market capitalization, the index is considered the barometer of the Filipino equity market. While the index is denominated in Philippines peso, the corresponding ETF trades in HK dollars. In addition, to get around the issue of liquidity as mentioned earlier, this ETF employs the synthetic replication methodology i.e. holds a derivative asset (swap). While most investors get jittery upon knowing this, it is important to point out that counterparty exposure for the ETF

has been minimized down to 5% of the Net Asset Value of the fund. That means that at any point in the time, the maximum loss to the fund in the event of a counterparty default – barring any further deterioration in asset values – is 5%. Furthermore, new regulations in place in HK have called for stricter collateral management policies with regards to these kinds of products.

Because of its synthetic nature, tracking error for this ETF is supposed to be lower as compared to its US counterpart, which employs the full replication method and is also susceptible to delayed market timings. However, given the relatively short operating period of this fund (inception Feb 2012), there is insufficient data points to make a reasonable comparison. In other key attributes, this ETF charges a lower

expense ratio of 39 basis points as compared to 59 for EPHE. c. Turkey – ongoing rebalancing a plus point Its close proximity to Europe has led some investors to fear investing in Turkey. However, Turkey has generally outperformed the other Ems following sound economic management, which was also aided by the fall

in fuel/commodity prices. Its exports have also remained resilient after a gradual but successful rebalancing in export targets from Europe to the Middle East and Asia while its current account deficit continues to narrow with increasing foreign direct investments.

Exhibit 6c: Turkey-linked ETF




2

TUR US Equity

iShares MSCI Turkey Investable Market Index Fund

55.19 55.18 0.59 552 -0.33% 11.2 5.9% 27.2%





iShares MSCI Turkey Investable Market Index Fund (TUR) Underlying Index: MSCI Turkey Investable Market Index

Beta (vs. S&P 500): 1.14 The objective of the index is to represent 99% of the total publically available market capitalization of the Turkish equity market. It is market capitalization weighted and currently holds 93 constituents, which are evaluated i.e. rebalanced on a quarterly basis. With a 99% market


17

representation, this index is one the better Turkish market barometers available. Typical of US-listed ETFs, TUR employs the full replication methodology to replicate the performance of the index although it may

hold more holdings than the index. In terms of dividend distributions, TUR pays them on a semi-annual basis with an approximate annual yield of 2.1%. Key Risk

Naturally, key risks to our recommendations would be missteps by policy makers, unexpected natural disasters/political developments and a surge in oil prices. Given the heavy oil dependence of these countries i.e. net importers, a spike in oil prices could derail efforts to boost domestic consumption and infrastructure projects.


Important disclosures

SHAREHOLDING DECLARATION: The analyst/analysts who wrote this report hold NIL shares in the above security. DISCLAIMER FOR RESEARCH REPORT This report is solely for information and general circulation only and may not be published, circulated, reproduced or distributed in whole or in part to any other person without our written consent. This report should not be construed as an offer or solicitation for the subscription, purchase or sale of the securities mentioned herein. Whilst we have taken all reasonable care to ensure that the information contained in this publication is not untrue or misleading at the time of publication, we cannot guarantee its accuracy or completeness, and you should not act on it without first independently verifying its contents. Any opinion or estimate contained in this report is subject to change without notice. We have not given any consideration to and we have not made any investigation of the investment objectives, financial situation or particular needs of the recipient or any class of persons, and accordingly, no warranty whatsoever is given and no liability whatsoever is accepted for any loss arising whether directly or indirectly as a result of the recipient or any class of persons acting on such information or opinion or estimate. You may wish to seek advice from a financial adviser regarding the suitability of the securities mentioned herein, taking into consideration your investment objectives, financial situation or particular needs, before making a commitment to invest in the securities. OCBC Investment Research Pte Ltd, OCBC Securities Pte Ltd and their respective connected and associated corporations together with their respective directors and officers may have or take positions in the securities mentioned in this report and may also perform or seek to perform broking and other investment or securities related services for the corporations whose securities are mentioned in this report as well as other parties generally. Privileged / confidential information may be contained in this document. If you are not the addressee indicated in this document (or responsible for delivery of this message to such person), you may not copy or deliver this message to anyone. Opinions, conclusions and other information in this document that do not relate to the official business of OCBC Investment Research Pte Ltd, OCBC Securities Pte Ltd and their respective connected and associated corporations shall not be understood as neither given nor endorsed. RATINGS AND RECOMMENDATIONS: - OCBC Investment Research’s (OIR) technical comments and recommendations are short-term and trading oriented. - OIR’s fundamental views and ratings (Buy, Hold, Sell) are medium-term calls within a 12-month investment horizon. - As a guide, OIR’s BUY rating indicates a total return in excess of 10% given the current price; a HOLD trading indicates total returns within +/-10% range; a SELL rating indicates total returns less than -10%. - For companies with less than S$150m market capitalization, OIR’s BUY rating indicates a total return in excess of 30%; a HOLD trading indicates total returns within a +/-30% range; a SELL rating indicates total returns less than -30%. Co.Reg.no.: 198301152E

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For OCBC Investment Research Pte Ltd

Published by OCBC Investment Research Pte Ltd

Documents

ETF RESEARCH · 2012. 8. 28. · US fiscal cliff. It is when Bush-era tax cuts expire and automatic spending cuts (~US$600b) kick-in at the start of January 2013. ... US elections