Morgan Stanley - Asia GEMS Strategy by riteshbhansali

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									September 13, 2012

Asia/GEMS Equity Strategy

                                                                                                                                                                                    MORGAN STANLEY RESEARCH
Asia/GEMS Strategy: APxJ & EM Miss Earnings in 2Q12 - Asia                                                                                                                          Asia Pacific / Japan

Does Better than EMEA and LATAM                                                                                                                                                     Morgan Stanley Asia Limited+

                                                                                                                                                                                    Jonathan Garner
In our final cut of 2Q12 results season, APxJ and EM earnings have missed consensus estimates by 4.0%                                                                               jonathan.garner@morganstanley.com
                                                                                                                                                                                    +852 2848 7288
and 7.7%, respectively. Within EM, LATAM and EMEA companies significantly missed earnings expectations,
by 19% and 9%, respectively. Some 93% of the companies in EM (94% in APxJ) have reported on a market-                                                                               Pankaj Mataney
                                                                                                                                                                                    pankaj.mataney@morganstanley.com
cap basis. In terms of breadth, 29% of EM companies (32% in APxJ) have beaten consensus earnings                                                                                    +852 2239 7830
expectations while 43% have missed (40% in APxJ). Revenues for both APxJ and EM have come exactly in
line with consensus.                                                                                                                                                                Corey Ng
                                                                                                                                                                                    corey.ng@morganstanley.com
                                                                                                                                                                                    +852 2848 5523
Regionally for 2Q12, S&P 500 (US) companies have reported an earnings beat of 3.9% and MSCI Europe
companies have reported an earnings miss of 4.1%.

At a country level in EM/APxJ: Czech Republic, Philippines, Hong Kong, Indonesia and Turkey are the top                                                                            2Q12 Earnings Surprise Breadth
5 countries with the greatest earnings beats in terms of magnitude and breadth. On the misses, Brazil,
Korea, Egypt, Chile and Mexico are the top 5 countries with the greatest earnings misses in terms of                                                                                                     Surprise Ratios
                                                                                                                                                                                  Region Above           In-Line Below Net +ve
magnitude and breadth.
                                                                                                                                                                                  EM           29%        28%         43%       -15%
                                                                                                                                                                                  APxJ         32%        28%         40%        -9%
At an industry group level in EM: Real Estate, Paper & Forest Products, Food & Staples Retailing,
                                                                                                                                                                                   •Note: Data as of Sept 11, 2012
Healthcare and Banks are the top 5 industry groups with the greatest earnings beats in terms of magnitude                                                                          Source: Bloomberg, Thomson Financials,
and breadth, while Oil & Gas Refining and Marketing, Chemicals, Consumer Durables, Media and Integrated                                                                            FactSet, IBES, Morgan Stanley Research
Oil & Gas industries are the top 5 in terms of earnings misses and negative surprise breadth.

In APxJ: Media, Real Estate, Healthcare, Banks and Consumer Services are the top 5 industry groups with
the greatest earnings beats in terms of magnitude and breadth, while Oil & Gas Refining and Marketing,
Chemicals, Steel, Integrated Oil & Gas and Food Beverage & Tobacco are the top 5 in terms of highest
earnings misses and negative surprise breadth.

Morgan Stanley does and seeks to do business with companies covered in Morgan Stanley Research. As a result, investors should be aware that the firm may have a conflict of interest that could affect the
objectivity of Morgan Stanley Research. Investors should consider Morgan Stanley Research as only a single factor in making their investment decision.

**For analyst certification and other important disclosures, refer to the Disclosure Section, located at the end of this report. ***Type MSNJ <Go> to access the Morgan Stanley Asia Delta One home
page and select Macro Baskets for more details on the Asia Pacific ex Japan dividend basket. Please contact your Morgan Stanley Sales Representative or delta1asia@ms.com for more details.

+= Analysts employed by non-U.S. affiliates are not registered with FINRA, may not be associated persons of the member and may not be subject to NASD/NYSE restrictions on communications with a subject company, public appearances and
trading securities held by a research analyst account.
                                                                                                                                                 MORGAN STANLEY RESEARCH
                                                                                                            2Q12 Earnings Miss in APxJ/EM - Asia does better than EMEA and LATAM
                                                                                                                                                                      September 13, 2012




 Magnitude of Earnings Surprise* by Country (MSCI)
   Czech Republic                                                                                     32%         On a regional level, in APxJ and EM earnings
        Philippines                                                            14%                                 have missed consensus estimates by 4% and
        Hong Kong                                                   7%
          Indonesia                                                6%
                                                                                                                   8%, respectively.
             Turkey                                              3%
 #China (Non MSCI)                                              2%                                                Czech Republic (32%), Philippines (14%),
           Malaysia                                             2%                                                 Hong Kong (7%), Indonesia (6%) and Turkey
               India                                   0%                                                          (3%) are the top 5 countries that have beaten
      China (MSCI)                                   -1%
                Peru                                -2%                                                            consensus earnings expectations in terms of
           Australia                               -3%                                                             magnitude and breadth.
               APxJ                               -4%
             Poland                              -5%                                                              Brazil (-24%), Korea (-22%), Egypt (-20%),
         Singapore                              -5%
           Hungary                            -7%
                                                                                                                   Chile (-17%) and Mexico (-14%) are the top 5
          Colombia                           -7%                                                                   countries with greatest earnings misses in
       South Africa                         -7%                                                                    terms of magnitude and breadth.
                 EM                         -8%
              EMEA                         -9%
           Thailand                     -11%
             Taiwan                    -12%
             Russia                   -13%
             Mexico                  -14%
               Chile              -17%
              Latam             -19%
              Egypt           -20%
              Korea         -22%
              Brazil     -24%

                     -30%        -20%         -10%         0%          10%         20%          30%


Source: Bloomberg, Thomson Financials, FactSet, IBES, Morgan Stanley Research. *Net Profit Weighted. #China (Non MSCI) List comprises MS-covered stocks that are not part of the
MSCI China Index. The list has 234 stocks, mainly US listed and China A or B shares. Companies with Semi Annual reporting also included in this exercise, for calculation methodology
please refer to Slide 26 of this report. Data as of September 11, 2012.

                                                                                                                                                                                           2
                                               We thank Monil Chheda for his contribution to this report.
                                                                                                                                                                                                                                                                                   MORGAN STANLEY RESEARCH
                                                                                                                                                                                                                    2Q12 Earnings Miss in APxJ/EM - Asia does better than EMEA and LATAM
                                                                                                                                                                                                                                                                                                                      September 13, 2012




MSCI Country Level Earnings Surprise Breadth
      On a regional level, 29% of EM companies have beaten consensus earnings estimates while 43% have missed. For
       APxJ, 32% of the companies have beaten earnings estimates while 40% have missed estimates.
         100%



          80%



          60%



          40%



          20%



           0%
                                                                                          Malaysia




                                                                                                                                                                                                                                                                  LATAM
                                                                                                                                                                                                                                                                          Russia




                                                                                                                                                                                                                                                                                                              Egypt
                                             Indonesia
                                                         Turkey




                                                                                                     Czech Republic




                                                                                                                                                   APxJ




                                                                                                                                                                                  South Africa




                                                                                                                                                                                                                                                                                   Colombia
                                                                                                                                       Australia
                                                                  Poland




                                                                                                                                                                                                                                       Thailand
                                                                                                                                                                             EM




                                                                                                                                                                                                                                                  Brazil
                                                                                                                                                          EMEA




                                                                                                                                                                                                 China (Non MSCI)
                   Philippines




                                                                                                                               India




                                                                                                                                                                 Singapore




                                                                                                                                                                                                                             Hungary




                                                                                                                                                                                                                                                                                              Chile
                                 Hong Kong




                                                                                                                                                                                                                                                           Peru
                                                                                                                      Taiwan




                                                                                                                                                                                                                    Mexico
                                                                           China (MSCI)




                                                                                                                                                                                                                                                                                                      Korea
                                                                                                                                                                                                      #
                                                                                                                               Above                  In-Line                 Below


Note: Above > 5%; Below < -5%. Source: Bloomberg, Thomson Financials, FactSet, IBES, Morgan Stanley Research. #China A-Share + Overseas listed Chinese stocks . Data as of
September 11, 2012.                                                                                                                                                                                                                                                                                                                        3
                                                                                                                                        MORGAN STANLEY RESEARCH
                                                                                                     2Q12 Earnings Miss in APxJ/EM - Asia does better than EMEA and LATAM
                                                                                                                                                             September 13, 2012




MSCI EM 2Q12 Earnings Results by Country
    In EM, 90% of the companies have reported so far, and they represent 93% of market capitalization. In APxJ, 91% of
     the companies have reported, which is 94% of the market capitalization.

                                                                                           Surprise Ratios
                                                                                                                            Weighted
                                        No. of Cos. % of Cos.                                                               Surprise
                    Region/Country       Reported Reported %Mkt Cap           Above      In-Line      Below      Net +ve      (%)
                    EM                      697       90%      93%             29%         28%         43%        -15%        -8%
                    APxJ                    591       91%      94%             32%         28%         40%         -9%        -4%
                    EMEA                     92       77%      76%             30%         30%         39%         -9%        -9%
                    LATAM                   121       93%      95%             19%         28%         53%        -34%       -19%
                    Australia               49        86%     92%              31%         31%         39%         -8%        -3%
                    Brazil                  72        97%      96%             18%         32%         50%        -32%       -24%
                    Chile                   20       100%     100%             20%         10%         70%        -50%       -17%
                    China (MSCI)            114       83%      95%             36%         31%         33%          3%        -1%
                    Colombia                 7        64%      75%             14%         29%         57%        -43%        -7%
                    Czech Republic            3      100%     100%             33%         33%         33%          0%        32%
                    Egypt                     8       89%      93%             13%         13%         75%        -63%       -20%
                    Hong Kong               30        79%      82%             53%         27%         20%         33%         7%
                    Hungary                   4      100%     100%             25%         25%         50%        -25%        -7%
                    India                   72        99%      99%             26%         42%         32%         -6%         0%
                    Indonesia               24        96%      97%             50%         25%         25%         25%         6%
                    Korea                   101      100%     100%             14%         16%         70%        -56%       -22%
                    Malaysia                32        82%      90%             38%         25%         38%          0%         2%
                    Mexico                  19        90%      96%             21%         37%         42%        -21%       -14%
                    Peru                      3       75%      90%             33%          0%         67%        -33%        -2%
                    Philippines             16        84%     84%              63%         19%         19%        44%         14%
                    Poland                  21       100%     100%             43%         24%         33%         10%        -5%
                    Russia                  11        46%     75%               9%         45%         45%        -36%       -13%
                    Singapore                28       90%      94%             29%         32%         39%        -11%        -5%
                    South Africa            21        60%      62%             29%         24%         48%        -19%        -7%
                    Taiwan                  107       94%      97%             36%         23%         40%         -4%       -12%
                    Thailand                18       100%     100%             11%         50%         39%        -28%       -11%
                    Turkey                   24      100%     100%             38%         42%         21%         17%         3%
                    China (Non MSCI)        234         --      --             32%         17%         51%        -19%         2%


Note: Above > 5%; Below < -5%. Source: Bloomberg, Thomson Financials, FactSet, IBES, Morgan Stanley Research. #China A-Share + Overseas listed Chinese stocks . Data as of
September 11, 2012.                                                                                                                                                               4
                                                                                                                                     MORGAN STANLEY RESEARCH
                                                                                                      2Q12 Earnings Miss in APxJ/EM - Asia does better than EMEA and LATAM
                                                                                                                                                        September 13, 2012




China’s Earnings Surprise: A-Share and MSCI China
 MSCI China                      No. of Cos      % of Cos         %Mkt Cap                     Net Profit (CNY mn)                           Sales (CNY mn)
 Surprise                        Reported        Reported         Reported          Estimate         Actual      % Surprise      Estimate         Actual    % Surprise
 Consumer Discretionary              14            78%              85%               8495            8506          0.1%          97701            96440      -1.3%
 Consumer Staples                     9            90%              97%               3919            4164          6.3%          100560          93646       -6.9%
 Energy                               9           100%             100%              83177            73272        -11.9%        1376735         1379099      0.2%
 Financials                          30            97%              99%              263661          271264         2.9%             0               0          --
 Health Care                          4           100%             100%               1484            1563          5.4%          47353            51860      9.5%
 Industrials                         17            59%              67%              12505            10849        -13.2%         231858         231332       -0.2%
 Information Technology               5           100%             100%               4899            4324         -11.7%         97978           96729       -1.3%
 Materials                           16            80%              89%               9435            7168         -24.0%         163613         168120       2.8%
 Telecommunication Services           4           100%             100%              41970            41972         0.0%          283710          283444      -0.1%
 Utilities                            6            86%              91%               4118            4647         12.8%          81361           72979      -10.3%
 MSCI China                          114            83%              95%             433662          427730         -1.4%        2480870        2473650         -0.3%




  China A-Share              No. of Cos           % of Cos        %Mkt Cap                      Net Profit (CNY mn)                          Sales (CNY mn)
  Surprise                   Reported             Reported        Reported           Estimate         Actual      % Surprise      Estimate       Actual     % Surprise
  Consumer Discretionary         54                 NA              NA                13935            13276         -4.7%         244173        234169       -4.1%
  Consumer Staples               24                 NA              NA                 7260            6833          -5.9%         38991          39052        0.2%
  Energy                         13                 NA              NA                 9377            7861         -16.2%         576393        572471       -0.7%
  Financials                     22                 NA              NA                96966           106210          9.5%            0             0            --
  Health Care                    21                 NA              NA                 2962            2942          -0.7%         10537          10253       -2.7%
  Industrials                    39                 NA              NA                 8351            6364         -23.8%         78802          73544       -6.7%
  Information Technology         20                 NA              NA                 5083            7350         44.6%          96400          95107       -1.3%
  Materials                      33                 NA              NA                15398            12467        -19.0%         349860        348212       -0.5%
  Telecommunication Services      2                 NA              NA                 1436            1604         11.7%          135268        130589       -3.5%
  Utilities                       6                 NA              NA                 3222            2741         -14.9%         42398          35337      -16.7%
  China A-Share                       234            NA               NA              163992          167647         2.2%         1572822        1538734        -2.2%




Source: Bloomberg, Thomson Financials, FactSet, IBES, Morgan Stanley Research. Data as of September 11, 2012.                                                                5
                                                                                                                                      MORGAN STANLEY RESEARCH
                                                                                                       2Q12 Earnings Miss in APxJ/EM - Asia does better than EMEA and LATAM
                                                                                                                                                         September 13, 2012




 Earnings Surprise* by Region: Earnings Beat in US while Others Miss

                   6.0%

                                         3.9%
                   4.0%


                   2.0%


                   0.0%


                  -2.0%


                  -4.0%
                                                                        -4.1%                          -4.0%

                  -6.0%


                  -8.0%                                                                                                            -7.7%


                -10.0%
                                      S&P 500                     MSCI Europe                      MSCI APxJ                     MSCI EM

Source: Bloomberg, Thomson Financials, FactSet, IBES, Morgan Stanley Research. *Net Profit Weighted.



                                                                                                                                                                              6
                                                                                                                                           MORGAN STANLEY RESEARCH
                                                                                                       2Q12 Earnings Miss in APxJ/EM - Asia does better than EMEA and LATAM
                                                                                                                                                         September 13, 2012




 MSCI EM & APxJ Quarterly Earnings Surprise* History

                   4.0%
                                         MSCI EM
                                                                                                    2.3%
                                         MSCI APxJ
                   2.0%
                                                                                                             1.3%


                   0.0%



                  -2.0%


                  -4.0%
                                                                                                                                               -4.0%

                                    -5.0%
                  -6.0%
                                                                             -5.8%

                                             -7.0%
                  -8.0%                                                                                                                -7.7%
                                                                   -7.9%


                -10.0%
                                        3Q11                            4Q11                            1Q12                             2Q12#

Source: Bloomberg, Thomson Financials, FactSet, IBES, Morgan Stanley Research. *Net Profit Weighted. #Data as of September 11, 2012.



                                                                                                                                                                              7
                                                                                                                                       MORGAN STANLEY RESEARCH
                                                                                                      2Q12 Earnings Miss in APxJ/EM - Asia does better than EMEA and LATAM
                                                                                                                                                        September 13, 2012




MSCI EM Industry-level Earnings Surprise* by Magnitude
                     Real Estate                                                                10%    On an industry level, Real Estate (10%), Paper
        Paper & Forest Products                                                                 9%
       Food & Staples Retailing                                                            5%           & Forest Products (9%, Food & Staples
                      Healthcare                                                          4%            Retailing (5%), Healthcare (4%) and Banks
                           Banks                                                         2%
Household & Personal Products                                                           0%
                                                                                                        (2%) are the top 5 industry groups with greatest
                           Autos                                                        0%              earnings beats in terms of magnitude and
                       Insurance                                                  -1%
                        Retailing                                                -2%
                                                                                                        breadth.
                              Coal                                               -2%
            Software & Services                                                 -3%                    Oil & Gas Refining and Marketing (-60%),
          Oil & Gas Exploration                                                -3%                      Chemicals (-58%), Consumer Durables (-37%),
                Semiconductors                                                 -3%
         Construction Materials                                               -4%                       Media (-35%) and Integrated Oil & Gas (-24%)
          Diversified Financials                                             -5%                        are the top 5 industry groups that had the
                          Utilities                                        -7%
      Food Beverage & Tobacco                                              -7%                          highest earnings misses and negative surprise
             Consumer Services                                             -8%                          breadth.
                                EM                                         -8%
                         Telecom                                        -10%
     Diversified Metals & Mining                                       -11%
                  Capital Goods                                      -14%
                EM ex Financials                                    -14%
                 Tech Hardware                                    -16%
     Precious Metals & Minerals                                   -17%
                             Steel                             -21%
            Integrated Oil & Gas                            -24%
                  Transportation                          -26%
                           Media                   -35%
 Consumer Durables & Apparel                     -37%
                                   -58%
                      Chemicals
                                  -60%
 Oil & Gas Refining & Marketing

                                 -60%     -50%   -40%     -30%    -20%     -10%     0%     10%




  Source: Bloomberg, Thomson Financials, FactSet, IBES, Morgan Stanley Research. *Net Profit Weighted. Data as of September 11, 2012                                         8
                                                                                                                                         MORGAN STANLEY RESEARCH
                                                                                                       2Q12 Earnings Miss in APxJ/EM - Asia does better than EMEA and LATAM
                                                                                                                                                           September 13, 2012




 MSCI EM Industry-level Earnings Surprise Breadth
                         Real Estate
                         Cons Svcs.
                               Banks
                              Utilities
            Food & Staples Retailing
                      Transportation
            Paper & Forest Products
                                Autos
                          Healthcare
                           Insurance
                    Semiconductors
              Construction Materials
               Oil & Gas Exploration
           Cons. Durables & Apparel
                                    EM
                            Software
                Food Bev & Tobacco
                                 Coal
              Household & Personal
                    EM ex Financials
                       Capital Goods
                      Tech Hardware
                            Retailing
                      Div. Financials
                Div. Metals & Mining
                                 Steel
                     Precious Metals
                               Media
                             Telecom
                           Chemicals
               Oil & Gas Ref & Mktg
                Integrated Oil & Gas

                                          0%       10%        20%        30%         40%        50%        60%        70%        80%          90%   100%
                                                                            Above            In-Line          Below


Note: Above > 5%; Below < -5%. Source: Bloomberg, Thomson Financials, FactSet, IBES, Morgan Stanley Research. Data as of September 11, 2012                                     9
                                                                                                                                                MORGAN STANLEY RESEARCH
                                                                                                           2Q12 Earnings Miss in APxJ/EM - Asia does better than EMEA and LATAM
                                                                                                                                                             September 13, 2012




 MSCI EM 2Q12 Earnings Results by Sector and Industry Group
                                                                                                  Surprise Ratios
                                                      No. of Cos. % of Cos.                                                       Weighted
                     Sector/Ind. Group                 Reported Reported      %Mkt Cap   Above   In-Line      Below    Net +ve   Surprise (%)
                     EM                                   697       90%         93%       29%      28%         43%      -15%         -8%
                     EM ex Financials                    543        95%         93%      26%      26%         48%       -22%        -14%
                     Consumer Discretionary              46         90%        96%       30%      33%         37%        -7%         -5%
                     Autos                               22          92%        98%      32%      36%         32%         0%          0%
                     Consumer Durables & Apparel         14         88%        83%       36%      14%         50%       -14%        -37%
                     Consumer Services                    5         83%        93%       40%      40%         20%        20%         -8%
                     Media                                5         100%       100%       0%      60%         40%       -40%        -35%
                     Consumer Staples                    81         91%        90%       21%      37%         42%       -21%        -3%
                     Retailing                           19         86%         71%      16%      37%         47%       -32%        -2%
                     Food & Staples Retailing            12          80%        83%      17%      50%         33%       -17%         5%
                     Food Beverage & Tobacco             40          95%        97%      25%      33%         43%       -18%        -7%
                     Household & Personal Products       10         100%       100%      20%      40%         40%       -20%         0%
                     Energy                              41         89%        89%       17%      22%         61%       -44%        -21%
                     Coal                                11         100%       100%      36%       9%         55%       -18%         -2%
                     Integrated Oil & Gas                10          83%        87%       0%      20%         80%       -80%        -24%
                     Oil & Gas Exploration                8          89%        88%      25%      38%         38%       -13%         -3%
                     Oil & Gas Refining & Marketing      12          86%        95%       8%      25%         67%       -58%        -60%
                     Financials                          154        87%         92%      38%      34%         29%        9%         2%
                     Banks                                85        90%         94%      36%      41%         22%        14%         2%
                     Diversified Financials               24        77%         76%      25%      17%         58%       -33%        -5%
                     Insurance                            18        86%         94%      33%      33%         33%         0%        -1%
                     Real Estate                          27        87%         85%      56%      26%         19%        37%        10%
                     Healthcare                          17         94%         85%      29%      41%         29%        0%          4%
                     Industrials                         92         84%         92%      34%      15%         51%       -17%        -16%
                     Capital Goods                       62         83%         92%      31%      13%         56%       -26%        -14%
                     Transportation                      30         86%         92%      40%      20%         40%        0%         -26%
                     IT                                  72         99%        99%       24%      32%         44%       -21%         -5%
                     Semiconductors                      21          95%        99%      29%      38%         33%        -5%         -3%
                     Software & Services                 13         100%       100%      23%      38%         38%       -15%         -3%
                     Tech Hardware                       38         100%       100%      21%      26%         53%       -32%        -16%
                     Materials                           98         89%         90%      26%      18%         56%       -31%        -20%
                     Chemicals                           26          87%        86%      19%      19%         62%       -42%        -58%
                     Construction Materials              17         94%         93%      35%      24%         41%        -6%         -4%
                     Diversified Metals & Mining         14          78%        69%      21%      21%         57%       -36%        -11%
                     Paper & Forest Products              5          83%        94%      40%      20%         40%         0%          9%
                     Precious Metals & Minerals          11         100%        99%      27%       9%         64%       -36%        -17%
                     Steel                               25          93%        98%      24%      16%         60%       -36%        -21%
                     Telecom                             39         95%         99%      13%      33%         54%       -41%        -10%
                     Utilities                           48         89%         90%      42%      21%         38%        4%         -7%


Note: Above > 5%; Below < -5%. Source: Bloomberg, Thomson Financials, FactSet, IBES, Morgan Stanley Research. Data as of September 11, 2012                                   10
                                                                                                                                      MORGAN STANLEY RESEARCH
                                                                                                    2Q12 Earnings Miss in APxJ/EM - Asia does better than EMEA and LATAM
                                                                                                                                                      September 13, 2012




MSCI APxJ Industry-level Earnings Surprise* by Magnitude
                        Media                                                            11%         On an industry level, Media (11%), Real
                  Real Estate                                                            11%          Estate (11%), Healthcare (3%), Banks (3%)
                   Healthcare                                                       3%
                        Banks                                                       3%
                                                                                                      and Consumer Services (2%) are the top 5
           Consumer Services                                                       2%                 industry groups with greatest earnings beats in
Household & Personal Products                                                     1%                  terms of magnitude and breadth.
                        Autos                                                     0%
         Oil & Gas Exploration                                             -1%
                                                                                                     Oil & Gas Refining and Marketing (-127%),
                            Coal                                           -2%
      Food & Staples Retailing                                             -2%                        Chemicals (-58%), Steel (-25%), Integrated Oil
               Semiconductors                                            -3%                          & Gas (-20%) and Food Beverage & Tobacco
                      Insurance                                          -3%
                        Telecom                                          -3%
                                                                                                      (-18%) are the top 5 industry groups with the
           Software & Services                                           -4%                          highest earnings misses and negative surprise
                           APxJ                                         -4%                           breadth.
    Diversified Metals & Mining                                        -5%
       Construction Materials                                          -6%
        Diversified Financials                                       -7%
                Capital Goods                                        -8%
                     Retailing                                      -9%
 Consumer Durables & Apparel                                         -9%
          APxJ ex Financials                                       -10%
                       Utilities                            -17%
              Tech Hardware                                -18%
    Food Beverage & Tobacco                                -18%
            Integrated Oil & Gas                        -20%
                            Steel                   -25%
                  Transportation                    -25%
                                    -50%
                      Chemicals
 Oil & Gas Refining & Marketing -127%

                               -60%   -50%   -40%   -30%    -20%      -10%       0%   10%   20%




 Source: Bloomberg, Thomson Financials, FactSet, IBES, Morgan Stanley Research. *Net Profit Weighted. Data as of September 11, 2012                                    11
                                                                                                                                    MORGAN STANLEY RESEARCH
                                                                                                 2Q12 Earnings Miss in APxJ/EM - Asia does better than EMEA and LATAM
                                                                                                                                                   September 13, 2012




MSCI APxJ Industry-level Earnings Surprise Breadth
                         Real Estate
                               Media
                              Utilities
                         Cons Svcs.
           Cons. Durables & Apparel
                               Banks
               Oil & Gas Exploration
                          Healthcare
                      Transportation
                               Autos
                                APxJ
                    Semiconductors
                  APxJ ex Financials
            Food & Staples Retailing
                           Insurance
                Food Bev & Tobacco
                             Telecom
                            Retailing
                            Software
                       Capital Goods
                                 Coal
             Construction Materials
      Household & Personal Products
                      Div. Financials
                Div. Metals & Mining
                      Tech Hardware
                            Materials
                           Chemicals
                                 Steel
                Integrated Oil & Gas
               Oil & Gas Ref & Mktg

                                          0%       10%        20%      30%          40%         50%       60%         70%        80%        90%   100%
                                                                 Above             In-Line            Below


  Note: Above > 5%; Below < -5%. Source: Bloomberg, Thomson Financials, FactSet, IBES, Morgan Stanley Research. Data as of September 11, 2012
                                                                                                                                                                    12
                                                                                                                                      MORGAN STANLEY RESEARCH
                                                                                                     2Q12 Earnings Miss in APxJ/EM - Asia does better than EMEA and LATAM
                                                                                                                                                       September 13, 2012




MSCI APxJ 2Q12 Earnings Results by Sector and Industry Group
                                                                                            Surprise Ratios
                                               No. of Cos. % of Cos.                                                        Weighted
              Sector/Ind. Group                 Reported Reported      %Mkt Cap   Above    In-Line     Below     Net +ve   Surprise (%)
              APxJ                                 591       91%         94%       32%       28%        40%       -9%          -4%
              APxJ ex Financials                  446        95%         95%      29%       26%         45%       -16%        -10%
              Consumer Discretionary              46         88%        93%       43%       28%         28%       15%          0%
              Autos                               21          91%        98%      33%       33%         33%        0%           0%
              Consumer Durables & Apparel          9         82%        82%       56%       11%         33%       22%          -9%
              Consumer Services                   13         87%        86%       54%       23%         23%       31%           2%
              Media                                3         100%       100%      33%       67%          0%       33%          11%
              Consumer Staples                    56         92%        95%       21%       34%         45%       -23%        -11%
              Food & Staples Retailing             6          86%        98%       0%       50%         50%       -50%         -2%
              Food Beverage & Tobacco             28         93%        95%       29%       25%         46%       -18%        -18%
              Household & Personal Products        7         100%       100%      14%       43%         43%       -29%          1%
              Retailing                           15          88%        84%      20%       40%         40%       -20%         -9%
              Energy                              28         88%        92%       25%       14%         61%       -36%         -16%
              Coal                                11         100%       100%      36%        0%         64%       -27%          -2%
              Integrated Oil & Gas                 3          75%        79%       0%       33%         67%       -67%         -20%
              Oil & Gas Exploration                7         100%       100%      43%       29%         29%        14%          -1%
              Oil & Gas Refining & Marketing       7          70%        89%       0%       14%         86%       -86%        -127%
              Financials                          145        91%        94%       41%       32%         27%       14%          3%
              Banks                                62        94%         99%      40%       39%         21%        19%          3%
              Diversified Financials               20         83%        82%      25%       20%         55%       -30%         -7%
              Insurance                            17        100%       100%      29%       24%         47%       -18%         -3%
              Real Estate                          46         88%        83%      54%       30%         15%        39%         11%
              Healthcare                          17        100%        100%      35%       41%         24%       12%          3%
              Industrials                         96         81%         86%      32%       21%         47%       -15%        -11%
              Capital Goods                       62         79%         88%      29%       18%         53%       -24%         -8%
              Transportation                      34         85%         83%      38%       26%         35%        3%         -25%
              IT                                  70         97%        99%       23%       30%         47%       -24%         -6%
              Semiconductors                      22         96%        99%       27%       36%         36%        -9%         -3%
              Software & Services                  9          90%        96%      22%       33%         44%       -22%         -4%
              Tech Hardware                       39         100%       100%      21%       26%         54%       -33%        -18%
              Materials                           71         92%        99%       18%       20%         62%       -44%        -14%
              Chemicals                           22          88%        98%      18%       14%         68%       -50%        -50%
              Construction Materials              18         100%       100%      22%       28%         50%       -28%         -6%
              Diversified Metals & Mining         13          87%        99%      23%       23%         54%       -31%         -5%
              Steel                               14         100%       100%      14%       14%         71%       -57%        -25%
              Telecom                             27         96%        100%      19%       44%         37%       -19%         -3%
              Utilities                           28         90%         94%      57%       18%         25%       32%         -17%
Note: Above > 5%; Below < -5%. Source: Bloomberg, Thomson Financials, FactSet, IBES, Morgan Stanley Research. Data as of September 11, 2012                             13
                                                                                                                                           MORGAN STANLEY RESEARCH
                                                                                                        2Q12 Earnings Miss in APxJ/EM - Asia does better than EMEA and LATAM
                                                                                                                                                               September 13, 2012




  APxJ/EM Magnitude of Revenue Surprise by Country (MSCI- ex Financials)*
   #China (Non MSCI)                                                                              8%          On a regional level, both APxJ and EM
          Philippines                                                                        7%
                                                                                                               reported in-line revenue vs. consensus
            Indonesia                                                              4%
             Thailand                                                              4%                          estimates.
             Malaysia                                                             4%
     Czech Republic                                                          4%
             Hungary                                                    2%
               Mexico                                            1%
                 India                                          1%
           Singapore                                            1%
                 Chile                                         1%
               Taiwan                                         0%
                 APxJ                                        0%
                Latam                                        0%
                   EM                                        0%
                Korea                                  0%
               Poland                                 0%
        China (MSCI)                                  0%
                Brazil                               0%
            Colombia                               -1%
         South Africa                           -1%
                  Peru                          -1%
          Hong Kong                             -2%
                EMEA                          -2%
               Turkey                       -3%
               Russia                      -3%
             Australia                    -3%
                Egypt          -6%

                       -8%      -6%     -4%      -2%      0%       2%        4%         6%    8%       10%




Source: Bloomberg, Thomson Financials, FactSet, IBES, Morgan Stanley Research. * Revenue Weighted. #China A-Share + Overseas listed Chinese stocks . Data as of September 11, 2012.
                                                                                                                                                                                  14
                                                                                                                                                                                                                                                                                MORGAN STANLEY RESEARCH
                                                                                                                                                                                2Q12 Earnings Miss in APxJ/EM - Asia does better than EMEA and LATAM
                                                                                                                                                                                                                                                                                                                       September 13, 2012




MSCI APxJ/EM Country-level Revenue Surprise Breadth
      On a regional level, 18% of EM companies ex Financials have beaten consensus revenue estimates while 15% have
       missed estimates. For APxJ, 17% of the companies have beaten revenue estimates while 17% have missed estimates.
        100%



          80%




          60%



          40%




          20%



           0%
                                                                                                                                    LATAM




                                                                                                                                                                                                                                  Australia
                                Thailand




                                                                                                                                                                                                                                                                                Hong Kong
                                                                                                                   Brazil




                                                                                                                                            EM




                                                                                                                                                                                                                                              China (Non MSCI)




                                                                                                                                                                                                                                                                                                               Egypt
                  Philippines




                                                    Indonesia

                                                                Turkey

                                                                         India

                                                                                 Chile




                                                                                                                                                                                           Czech Republic
                                                                                                                                                                                 Hungary




                                                                                                                                                                                                                       Malaysia
                                                                                                  Korea




                                                                                                                                                 APxJ

                                                                                                                                                        South Africa

                                                                                                                                                                       Russia




                                                                                                                                                                                                            Colombia
                                                                                                                            EMEA
                                           Poland




                                                                                         Mexico



                                                                                                          Taiwan




                                                                                                                                                                                                                                                                                                        Peru
                                                                                                                                                                                                                                                                 China (MSCI)



                                                                                                                                                                                                                                                                                            Singapore
                                                                                                                                                                                                                                                 #
                                                                                                          Above                    In-Line         Below

Note: Above > 5%; Below < -5%. Source: Bloomberg, Thomson Financials, FactSet, IBES, Morgan Stanley Research. #China A-Share + Overseas listed Chinese stocks . Data as of
September 11, 2012.                                                                                                                                                                                                                                                                                                                     15
                                                                                                                                         MORGAN STANLEY RESEARCH
                                                                                                      2Q12 Earnings Miss in APxJ/EM - Asia does better than EMEA and LATAM
                                                                                                                                                              September 13, 2012




MSCI APxJ/EM 2Q12 Revenue Results by Country

                                                                                                    Surprise Ratios
                                                                                                                                    Weighted
                                                 No. of Cos. % of Cos.                                                              Surprise
                             Region/Country       Reported Reported %Mkt Cap           Above      In-Line     Below       Net +ve     (%)
                             EM                      523       87%      93%             18%         67%        15%           2%        0%
                             APxJ                    429       87%      95%             17%         66%        17%           0%        0%
                             EMEA                     64       77%      73%             16%         72%        13%           3%       -2%
                             LATAM                    99       95%      99%             17%         69%        14%           3%        0%
                             Australia                35       88%      89%             17%         60%        23%          -6%       -3%
                             Brazil                   59       97%     100%             19%         66%        15%           3%        0%
                             Chile                    16      100%     100%             25%         56%        19%           6%        1%
                             China (MSCI)             83       78%     92%              12%         63%        25%         -13%        0%
                             Colombia                 5        83%     89%              20%         60%        20%           0%       -1%
                             Czech Republic            2      100%     100%              0%        100%         0%           0%        4%
                             Egypt                     4      100%     100%              0%         25%        75%         -75%       -6%
                             Hong Kong                15       75%     91%               7%         73%        20%         -13%       -2%
                             Hungary                  3       100%     100%              0%        100%         0%           0%        2%
                             India                    49       88%      99%             20%         69%        10%          10%        1%
                             Indonesia                19       95%     96%              32%         53%        16%          16%        4%
                             Korea                    79       98%     100%             15%         73%        11%           4%        0%
                             Malaysia                 25       83%     87%              20%         56%        24%          -4%        4%
                             Mexico                   17       94%     98%               6%         94%         0%           6%        1%
                             Peru                     2        67%     85%               0%         50%        50%         -50%       -1%
                             Philippines               9       69%      95%             56%         22%        22%          33%        7%
                             Poland                   15      100%     100%             27%         67%         7%          20%        0%
                             Russia                   10       48%     73%               0%        100%         0%           0%       -3%
                             Singapore                19      100%     89%              11%         63%        26%         -16%        1%
                             South Africa             15       65%     59%              20%         60%        20%           0%       -1%
                             Taiwan                   83       88%     98%              16%         72%        12%           4%        0%
                             Thailand                 13      100%     100%             31%         62%         8%          23%        4%
                             Turkey                   15      100%     100%             20%         73%         7%          13%       -3%
                             China (Non MSCI)        157         --      --             25%         36%        38%         -13%       -2%




Note: Above > 5%; Below < -5%. Source: Bloomberg, Thomson Financials, FactSet, IBES, Morgan Stanley Research. #China A-Share + Overseas listed Chinese stocks . Data as of
September 11, 2012.
                                                                                                                                                                               16
                                                                                                                                                        MORGAN STANLEY RESEARCH
                                                                                                              2Q12 Earnings Miss in APxJ/EM - Asia does better than EMEA and LATAM
                                                                                                                                                                                   September 13, 2012




MSCI EM & APxJ Industry-level Magnitude of Revenue Surprise*
  MSCI EM Industry-level Magnitude of Revenue Surprise* MSCI APxJ Industry-level Magnitude of Revenue Surprise*
                    Healthcare                                                        8%                             Healthcare                                                                 6%
                    Chemicals                                               5%                                       Chemicals                                                             5%
    Diversified Metals & Mining                                             5%                                   Capital Goods                                                2%
                         Media                                    2%                                                      Media                                          2%
                Transportation                              1%
                                                                                                 Oil & Gas Refining & Marketing                                          2%
                Capital Goods                               1%
                                                                                                           Software & Services                                       1%
Oil & Gas Refining & Marketing                             1%
                                                                                                          Oil & Gas Exploration                                      1%
          Software & Services                              1%
                                                                                                                           Coal                                     1%
           Consumer Services                               1%
                         Autos                         0%                                            Diversified Metals & Mining                                    1%

Household & Personal Products                          0%                                                  Integrated Oil & Gas                                 1%
     Food Beverage & Tobacco                           0%                                                                 Autos                                 1%
                      Telecom                         0%                                                                  APxJ                                 0%
                            EM                   0%                                                    Food & Staples Retailing                                0%
         Oil & Gas Exploration                   0%                                              Household & Personal Products                            0%
                       Utilities                 0%
                                                                                                                       Telecom                            0%
                      Retailing              0%
                                                                                                                        Utilities                   -1%
                          Coal               0%
                                                                                                                 Tech Hardware                      -1%
          Integrated Oil & Gas              -1%
                                                                                                                           Steel                  -2%
                Tech Hardware              -1%
                          Steel        -1%                                                                             Retailing              -2%

    Precious Metals & Minerals        -1%                                                                Construction Materials              -2%
        Construction Materials        -1%                                                                   Consumer Services               -2%
      Food & Staples Retailing       -2%                                                                       Semiconductors          -3%
      Paper & Forest Products        -2%                                                                         Transportation       -3%
              Semiconductors -3%                                                                  Consumer Durables & Apparel         -3%
 Consumer Durables & Apparel -3%
                                                                                                      Food Beverage & Tobacco         -3%
                               -4%    -2%         0%         2%        4%        6%   8%   10%
                                                                                                                                -5%         -3%         -1%     1%            3%         5%      7%




 Source: Bloomberg, Thomson Financials, FactSet, IBES, Morgan Stanley Research. * Revenue weighted. Data as of September 11, 2012
                                                                                                                                                                                                      17
                                                                                                                                       MORGAN STANLEY RESEARCH
                                                                                                     2Q12 Earnings Miss in APxJ/EM - Asia does better than EMEA and LATAM
                                                                                                                                                       September 13, 2012




MSCI EM Industry-level Revenue Surprise Breadth
                     Healthcare
                 Transportation
                    Cons Svcs.
          Oil & Gas Ref & Mktg
           Div. Metals & Mining
               Semiconductors
                     Chemicals
           Integrated Oil & Gas
                            Coal
                  Capital Goods
                        Utilities
               EM ex Financials
 Household & Personal Products
                           Autos
                          Media
                       Software
         Construction Materials
                            Steel
                       Retailing
           Food Bev & Tobacco
                 Tech Hardware
                       Telecom
          Oil & Gas Exploration
       Food & Staples Retailing
                Precious Metals
       Paper & Forest Products
      Cons. Durables & Apparel

                                           0%       10%        20%       30%       40%        50%       60%       70%        80%       90%    100%
                                                                 Above            In-Line           Below

Note: Above > 5%; Below < -5%. Source: Bloomberg, Thomson Financials, FactSet, IBES, Morgan Stanley Research. Data as of September 11, 2012                             18
                                                                                                                                  MORGAN STANLEY RESEARCH
                                                                                               2Q12 Earnings Miss in APxJ/EM - Asia does better than EMEA and LATAM
                                                                                                                                                  September 13, 2012




MSCI EM 2Q12 Revenue Results by Sector and Industry Group
                                                                                                 Surprise Ratios
                                                                                                                                  Weighted
                                               No. of Cos. % of Cos.                                                              Surprise
             Region/Country                     Reported Reported %Mkt Cap          Above       In-Line     Below      Net +ve      (%)
             EM ex Financials                      523       87%     93%             17%          67%        15%         3%         0%
             Consumer Discretionary                43        84%         96%         16%         63%         21%         -5%         0%
             Autos                                 20         83%         98%        15%         70%         15%          0%          0%
             Consumer Durables & Apparel           13         81%        83%          8%         62%         31%        -23%         -3%
             Consumer Services                      5         83%        93%         40%         40%         20%         20%          1%
             Media                                  5        100%        100%        20%         60%         20%          0%          2%
             Consumer Staples                      80        90%         90%         10%         73%         18%         -8%         0%
             Retailing                             19         86%         71%        11%         74%         16%         -5%          0%
             Food & Staples Retailing              12         80%         83%         0%         83%         17%        -17%         -2%
             Food Beverage & Tobacco               39         93%         97%        13%         67%         21%         -8%          0%
             Household & Personal Products         10        100%        100%        10%         80%         10%          0%          0%
             Energy                                40        87%         89%         18%         73%         10%         8%          0%
             Coal                                  11        100%        100%        27%         55%         18%          9%          0%
             Integrated Oil & Gas                  11         92%        87%          9%         91%          0%         9%          -1%
             Oil & Gas Exploration                  7         78%        88%          0%         86%         14%        -14%          0%
             Oil & Gas Refining & Marketing        11        79%         95%         27%         64%          9%         18%          1%
             Healthcare                            16         89%        85%         38%         63%         0%          38%         8%
             Industrials                           87         79%        92%         28%         59%         14%         14%         1%
             Capital Goods                         58         77%        92%         26%         57%         17%          9%         1%
             Transportation                        29         83%        92%         31%         62%          7%         24%         1%
             IT                                    72        99%         99%         11%         78%         11%         0%          -1%
             Semiconductors                        21        95%         99%         24%         67%         10%         14%         -3%
             Software & Services                   13        100%        100%         8%         85%          8%          0%          1%
             Tech Hardware                         38        100%        100%         5%         82%         13%         -8%         -1%
             Materials                             92        84%         90%         21%         61%         18%         2%          1%
             Chemicals                             24         80%        86%         29%         54%         17%         13%          5%
             Construction Materials                14         78%        93%         14%         71%         14%         0%          -1%
             Diversified Metals & Mining           14         78%        69%         21%         71%          7%         14%          5%
             Paper & Forest Products                5         83%        94%          0%         80%         20%        -20%         -2%
             Precious Metals & Minerals            11        100%        99%         18%         45%         36%        -18%         -1%
             Steel                                 24         89%        98%         21%         58%         21%         0%          -1%
             Telecom                               39         95%        99%          0%         90%         10%        -10%         0%
             Utilities                             47         87%        90%         26%         57%         17%         9%          0%

   Note: Above > 5%; Below < -5%. Source: Bloomberg, Thomson Financials, FactSet, IBES, Morgan Stanley Research. Data as of September 11, 2012.                    19
                                                                                                                                        MORGAN STANLEY RESEARCH
                                                                                                     2Q12 Earnings Miss in APxJ/EM - Asia does better than EMEA and LATAM
                                                                                                                                                            September 13, 2012




MSCI APxJ Industry-level Revenue Surprise Breadth
           Integrated Oil & Gas
                          Media
                     Healthcare
          Oil & Gas Ref & Mktg
          Oil & Gas Exploration
               Semiconductors
                            Coal
                  Capital Goods
                     Chemicals
                        Utilities
                 Transportation
 Household & Personal Products
                           Autos
             APxJ ex Financials
                       Software
                       Materials
                       Retailing
        Construction Materials
                           Steel
                       Telecom
           Div. Metals & Mining
                 Tech Hardware
                    Cons Svcs.
       Food & Staples Retailing
  Consumer Durables & Apparel
           Food Bev & Tobacco

                                       0%        10%        20%        30%        40%       50%        60%        70%        80%       90%       100%
                                                               Above            In-Line            Below

Note: Above > 5%; Below < -5%. Source: Bloomberg, Thomson Financials, FactSet, IBES, Morgan Stanley Research. ** Mcap reported < 30%. Data as of September 11, 2012          20
                                                                                                                                   MORGAN STANLEY RESEARCH
                                                                                                2Q12 Earnings Miss in APxJ/EM - Asia does better than EMEA and LATAM
                                                                                                                                                  September 13, 2012




MSCI APxJ 2Q12 Revenue Results by Sector and Industry Group
                                                                                              Surprise Ratios
                                                                                                                               Weighted
                                         No. of Cos. % of Cos.                                                                 Surprise
      Region/Country                      Reported Reported %Mkt Cap            Above       In-Line     Below       Net +ve      (%)
      APxJ ex Financials                     429       87%     95%               17%          66%        17%          0%         0%
      Consumer Discretionary                 43         83%         93%          12%         70%         19%          -7%         0%
      Autos                                  19          83%         98%         16%         68%         16%           0%          1%
      Consumer Durables & Apparel             8         73%         82%           0%         75%         25%         -25%         -3%
      Consumer Services                      13         87%         86%           8%         69%         23%         -15%         -2%
      Media                                   3         100%        100%         33%         67%          0%          33%          2%
      Consumer Staples                       56         92%         95%          13%         59%         29%         -16%         -2%
      Food & Staples Retailing                6          86%         98%          0%         83%         17%         -17%          0%
      Food Beverage & Tobacco                27          90%         95%         15%         44%         41%         -26%         -3%
      Household & Personal Products           7         100%        100%         14%         71%         14%           0%          0%
      Retailing                              16         94%         84%          13%         69%         19%          -6%         -2%
      Energy                                 28         88%         92%          29%         61%         11%          18%         1%
      Coal                                   11         100%        100%         27%         55%         18%           9%         1%
      Integrated Oil & Gas                    3          75%         79%         33%         67%          0%          33%         1%
      Oil & Gas Exploration                   7         100%        100%         14%         86%          0%          14%         1%
      Oil & Gas Refining & Marketing          7          70%         89%         43%         43%         14%          29%         2%
      Healthcare                             16          94%        100%         38%         56%          6%          31%         6%
      Industrials                            93          79%         86%         23%         61%         16%          6%          1%
      Capital Goods                          60          77%         88%         23%         62%         15%          8%           2%
      Transportation                         33          83%         83%         21%         61%         18%          3%          -3%
      IT                                     70         97%         99%          10%         79%         11%          -1%         -2%
      Semiconductors                         22          96%         99%         23%         68%          9%          14%         -3%
      Software & Services                     9          90%         96%          0%         100%         0%           0%          1%
      Tech Hardware                          39         100%        100%          5%         79%         15%         -10%         -1%
      Materials                              66         86%         99%          17%         64%         20%          -3%         1%
      Chemicals                              20         80%         98%          25%         55%         20%           5%          5%
      Construction Materials                 15         83%         100%          7%         80%         13%          -7%         -2%
      Diversified Metals & Mining            13         87%         99%           8%         77%         15%          -8%          1%
      Steel                                  14         100%        100%         21%         50%         29%          -7%         -2%
      Telecom                                27          96%        100%          0%         93%          7%          -7%         0%
      Utilities                              26          84%         94%         27%         50%         23%          4%          -1%

   Note: Above > 5%; Below < -5%. Source: Bloomberg, Thomson Financials, FactSet, IBES, Morgan Stanley Research. Data as of September 11, 2012.                    21
                                                                                                                              MORGAN STANLEY RESEARCH
                                                                                               2Q12 Earnings Miss in APxJ/EM - Asia does better than EMEA and LATAM
                                                                                                                                                 September 13, 2012




Post Earnings Performance for MSCI EM/APXJ Stocks
                  Earnings Surprise vs. 3 day Forward Median performance relative to MSCI EM
     1.5%


     1.0%


     0.5%


     0.0%


    -0.5%


    -1.0%


    -1.5%


    -2.0%


    -2.5%
                 > 15%        15% - 10%        10% - 5%        5% - 0%        0% - -5%      -5% - -10% -10% - -15%         < - 15%




     Source: Bloomberg, Thomson Financials, FactSet, IBES, Morgan Stanley Research. Data as of September 11, 2012.
                                                                                                                                                                  22
                                                                                                                                          MORGAN STANLEY RESEARCH
                                                                                                       2Q12 Earnings Miss in APxJ/EM - Asia does better than EMEA and LATAM
                                                                                                                                                          September 13, 2012




 MSCI APxJ & EM Magnitude of Earnings and Revenue Surprise* by Market Cap


                2%
                                                                           0.9%
                                                                                                             0.3%
                0%
                                         -0.5%                                                                                                    -0.8%
               -2%


               -4%


               -6%                                                                                                                   -5.1%


               -8%
                                                                 -7.9%

             -10%                                                                                  -9.5%                                 Net Profit
                                                                                                                                         Sales
             -12%
                              -12.5%
             -14%
                                    <2 bn                            2-5 bn                           5-15 bn                            >15 bn
                                                                           Market Cap (USD Bn)
Source: Bloomberg, Thomson Financials, FactSet, IBES, Morgan Stanley Research. Data as of September 11, 2012. * Net Profit and Revenue weighted
                                                                                                                                                                           23
                                                                                                                                               MORGAN STANLEY RESEARCH
                                                                                                            2Q12 Earnings Miss in APxJ/EM - Asia does better than EMEA and LATAM
                                                                                                                                                                         September 13, 2012




Top 40 Companies with Highest Earnings Beats and Market Cap More than US$2bn
                                                                                                                          2CQ12 Net Profit (MM)                  2CQ12 Sales (MM)
 MS TickerSymbol            Company name                               Country     Sector      Currency   Rating   Estimate Actuals      Surprise (%)   Estimate Actuals      Surprise (%)
          000830-KR         Samsung C&T Corp.                          Korea       Industrials    KRW         --   137,914   264,582            91.8%   6,299,627 6,496,088           3.1%
 PCAR4.SA PCAR4-BR          Companhia Brasileira de Distribuicao Grupo Brazil      Cons Stap      BRL       NAV    144       265                84.7%   12,211     12,037            -1.4%
          SM-PH             SM Investments Corp.                       Philippines Industrials    PHP         --   2,829     4,858              71.7%   55,033     58,340             6.0%
 MGNTq.L  MGNT-GB           Magnit JSC GDR                             Russia      Cons Stap      RUB       OW     3,324     5,646              69.9%   105,831    107,139            1.2%
 CEZP.PR  CEZ-CZ            Cez A.S.                                   Czech RepubUtilities       CZK       OW     8,399     12,862             53.1%   50,151     52,231             4.1%
 TENA.KL  5347-MY           Tenaga Nasional Bhd                        Malaysia    Utilities      MYR         --   421       619                47.2%   8,794      9,191              4.5%
 MGR.AX   MGR-AU            Mirvac Group                               Australia   Financials     AUD       OW     80        117                46.6%   --         --                    --
 GPT.AX   GPT-AU            GPT Group                                  Australia   Financials     AUD       UW     105       153                46.5%   --         --                    --
 PKNA.WA PKN-PL             Polski Koncern Naftowy ORLEN S.A.          Poland      Energy         PLN         --   440       638                45.1%   29,221     27,955            -4.3%
 1102.TW  1102-TW           Asia Cement Corp.                          Taiwan      Materials      TWD       EW     1,683     2,428              44.3%   2,813      2,885              2.6%
 GGBR4.SA GGBR4-BR          Gerdau SA COSG Pref                        Brazil      Materials      BRL       EW     374       536                43.4%   9,956      9,975              0.2%
 QRN.AX   QRN-AU            QR National Ltd.                           Australia   Industrials    AUD       EW     88        126                43.2%   920        774              -15.8%
 BBCA.JK  BBCA-ID           Bank Central Asia                          Indonesia   Financials      IDR      EW     2,107,500 3,000,000          42.3%   --         --                    --
 2892.TW  2892-TW           First Financial Holding Co. Ltd.           Taiwan      Financials     TWD       EW     2,622     3,661              39.6%   --         --                    --
 0001.HK  1-HK              Cheung Kong (Holdings) Ltd.                Hong Kong Financials       HKD       OW     5,588     7,728              38.3%   --         --                    --
 CWN.AX   CWN-AU            Crown Ltd.                                 Australia   Cons Disc      AUD       OW     88        119                36.5%   653        649               -0.5%
 ILU.AX   ILU-AU            Iluka Resources Ltd.                       Australia   Materials      AUD       EW     101       135                34.0%   329        331                0.8%
          BN4-SG            Keppel Corp. Ltd.                          Singapore Industrials      SGD         --   394       521                32.3%   2,771      3,482             25.6%
 GAIL.BO  532155-IN         GAIL (India) Ltd.                          India       Utilities       INR      UW     8,580     11,338             32.1%
 0762.HK  762-HK            China Unicom (Hong Kong) Ltd.              China (MSCI Telecom        CNY       OW     1,848     2,423              31.1%   61,457       60,497          -1.6%
          GOAU4-BR          Metalurgica Gerdau S.A.                    Brazil      Materials      BRL         --   200       262                31.0%   9,796        9,975            1.8%
 SIAL.SI  C6L-SG            Singapore Airlines Ltd.                    Singapore Industrials      SGD       EW     60        78                 30.0%   3,754        3,777            0.6%
 CATL.SI  C31-SG            CapitaLand Ltd.                            Singapore Financials       SGD       EW     162       210                29.3%   --           --                  --
 0004.HK  4-HK              Wharf (Holdings) Ltd.                      Hong Kong Financials       HKD       EW     2,140     2,764              29.2%   --           --                  --
 ERJ.N    EMBR3-BR          Embraer S.A.                               Brazil      Industrials    BRL       OW     90        115                27.5%   3,435        3,385           -1.5%
 CIPL.BO  500087-IN         Cipla Ltd.                                 India       Health Care     INR      OW     3,161     4,008              26.8%
 HPHT.SI  NS8U-SG           Hutchison Port Holdings Trust              Singapore Industrials      SGD       EW     75        95                 25.3%   462          507              9.8%
 2886.TW  2886-TW           Mega Financial Holding Co. Ltd.            Taiwan      Financials     TWD       OW     4,840     6,056              25.1%   --           --                  --
 ASII.JK  ASII-ID           Astra International                        Indonesia   Cons Disc       IDR        --   4,029,534 5,028,000          24.8%   45,475,028   49,569,000       9.0%
 0902.HK  902-HK            Huaneng Power International Inc.           China (MSCI Utilities      CNY       UW     1,035     1,289              24.6%   37,619       32,765         -12.9%
 1114.HK  1114-HK           Brilliance China Automotive Holdings Ltd. China (MSCI Cons Disc       CNY       UW     535       666                24.5%   1,420        1,405           -1.0%
 GENM.KL 4715-MY            Genting Malaysia Bhd                       Malaysia    Cons Disc      MYR       EW     403       496                23.1%   1,915        2,119           10.7%
 SUN.BO   524715-IN         Sun Pharmaceutical Industries Ltd.         India       Health Care     INR      OW     6,499     7,956              22.4%   22,236       26,581          19.5%
 BRML3.SA BRML3-BR          BR Malls Participacoes S/A                 Brazil      Financials     BRL       OW     90        110                22.4%   --           --                  --
 2308.TW  2308-TW           Delta Electronics Inc.                     Taiwan      IT             TWD       OW     3,282     3,997              21.8%   45,284       45,962           1.5%
 2891.TW  2891-TW           Chinatrust Financial Holding Co. Ltd.      Taiwan      Financials     TWD       EW     4,639     5,646              21.7%   --           --                  --
 2890.TW  2890-TW           SinoPac Financial Holdings Co. Ltd.        Taiwan      Financials     TWD       EW     1,772     2,156              21.7%   --           --                  --
 0003.HK  3-HK              Hong Kong & China Gas Co. Ltd.             Hong Kong Utilities        HKD       OW     1,695     2,060              21.5%   6,532        6,268           -4.0%
          APA-AU            APA Group                                  Australia   Utilities      AUD         --   26.3      31.9               21.5%   246          273             11.1%
 ADRO.JK  ADRO-ID           Adaro Energy                               Indonesia   Energy          IDR      OW     1,059,459 1,285,279          21.3%   9,006,563    9,416,771        4.6%



Note: Above > 5%; Below < -5%. Source: Bloomberg, Thomson Financials, FactSet, IBES, Morgan Stanley Research. Data as of September 11, 2012                                                   24
                                                                                                                                                                     MORGAN STANLEY RESEARCH
                                                                                                                           2Q12 Earnings Miss in APxJ/EM - Asia does better than EMEA and LATAM
                                                                                                                                                                                              September 13, 2012




 Top 40 Companies with Highest Earnings Misses and Market Cap More than US$2bn
                                                                                                                                          2CQ12 Net Profit (MM)                     2CQ12 Sales (MM)
   MS Ticker Symbol                 Company name                        Country      Sector              Currency     Rating      Estimate Actuals      Surprise (%)       Estimate Actuals      Surprise (%)
   1303.TW   1303-TW                Nan Ya Plastics Corp.               Taiwan       Materials              TWD         EW        53         -2,925          -5619.1%      40,762     74,198             82.0%
   6505.TW   6505-TW                Formosa Petrochemical Corp.         Taiwan       Energy                 TWD         UW        -979       -13,105         -1238.1%      222,186    206,461            -7.1%
   PDGR3.SA  PDGR3-BR               PDG Realty S/A Empreendimentos e PaBrazil        Cons Disc              BRL         EW        71         -438             -716.2%      1,521      1,060             -30.3%
   1326.TW   1326-TW                Formosa Chemicals & Fibre Corp.     Taiwan       Materials              TWD         EW        2,053      -6,135           -398.8%      67,619     74,840             10.7%
   010950.KS 010950-KR              S-Oil Corp.                         Korea        Energy                 KRW         EW        106,752    -161,855         -251.6%      8,673,503 8,797,791            1.4%
             CRF-AU                 Centro Retail Australia             Australia    Financials             AUD           --      52         -61              -219.3%      --         --                     --
   034220.KS 034220-KR              LG Display Co. Ltd.                 Korea        IT                     KRW         OW        -36,687    -111,175         -203.0%      6,851,497 6,910,373            0.9%
   096770.KS 096770-KR              SK Innovation Co. Ltd.              Korea        Energy                 KRW         EW        296,137    -239,037         -180.7%      17,763,993 18,877,344          6.3%
   036570.KS 036570-KR              NCsoft Corp.                        Korea        IT                     KRW         OW        12,659     -7,263           -157.4%      149,092    146,808            -1.5%
   1301.TW   1301-TW                Formosa Plastics Corp.              China        Materials              TWD         OW        2,964      -1,187           -140.0%      40,234     46,466             15.5%
   HARJ.J    HAR-ZA                 Harmony Gold Mining Co. Ltd.        South Africa Materials              ZAR         EW        277        -108             -139.0%      4,104      3,935              -4.1%
   PBR.N     PETR3-BR               Petrobras Petroleo Brasileiro (Ord) Brazil       Energy                 BRL         OW        3,690      -1,346           -136.5%      67,886     68,047              0.2%
   ROSNq.L   ROSN-RU                Rosneft                             Russia       Energy                 RUB          ++       26,600     -8,000           -130.1%      746,926    718,000            -3.9%
   HYPE3.SA HYPE3-BR                Hypermarcas S/A                     Brazil       Cons Stap              BRL         EW        -12        -27              -122.5%      954        957                 0.3%
   011170.KS 011170-KR              Honam Petrochemical Corp.           Korea        Materials              KRW         OW        102,961    -12,663          -112.3%      3,755,358 4,005,932            6.7%
   BRFS3.SA BRFS3-BR                BRF-Brasil Foods S.A.               Brazil       Cons Stap              BRL         EW        105        6                  -93.9%     6,862      6,842              -0.3%
   015760.KS 015760-KR              Korea Electric Power Corp.          Korea        Utilities              KRW         EW        -983,643 -1,784,329           -81.4%     11,002,018 10,612,260         -3.5%
   000660.KS 000660-KR              SK hynix Inc                        Korea        IT                     KRW         OW        -30,000    -53,307            -77.7%     2,607,038 2,631,953            1.0%
   03600.KS  003600-KR              SK Holdings Co. Ltd.                Korea        Industrials            KRW           --      338,000    78,292             -76.8%     29,137,549 30,472,120          4.6%
   009540.KS 009540-KR              Hyundai Heavy Industries Co. Ltd.   Korea        Industrials            KRW         OW        457,385    134,100            -70.7%     13,795,711 13,700,400         -0.7%
   078930.KS 078930-KR              GS Holdings Corp.                   Korea        Energy                 KRW         UW        116,873    37,732             -67.7%     2,286,496 2,448,125            7.1%
             F34-SG                 Wilmar International Ltd.           Singapore Cons Stap                 SGD           --      450        148                -67.1%     14,671     13,929             -5.1%
   2354.TW   2354-TW                Foxconn Technology Co. Ltd.         Taiwan       IT                     TWD         OW        -1,220     -2,023             -65.9%     21,088     18,944            -10.2%
   CAR.SN    CMPC-CL                Empresas CMPC S.A.                  Chile        Materials              CLP           --      54,755     19,140             -65.0%     611,033    576,691            -5.6%
             000210-KR              Daelim Industrial Co. Ltd.          Korea        Industrials            KRW           --      108,644    38,828             -64.3%     2,467,286 2,468,717            0.1%
   CSNA3.SA CSNA3-BR                Companhia Siderurgica Nacional      Brazil       Materials              BRL         UW        -640       -1,032             -61.3%     4,181      4,137              -1.1%
   2885.TW   2885-TW                Yuanta Financial Holding Co. Ltd.   Taiwan       Financials             TWD         EW        1,283      528                -58.8%     --         --                     --
   LKOH.RTS LKOH-RU                 Lukoil Holdings                     Russia       Energy                 RUB         OW        75,816     31,605             -58.3%     1,028,571 1,005,788           -2.2%
             BRAP4-BR               Bradespar S/A                       Brazil       Materials              BRL           --      521        219                -57.9%
   BRP.N     OIBR3-BR               Oi S.A. Pref                        Brazil       Telecom                BRL           --      147        63                 -57.5%     7,045        6,909               -1.9%
   COP.SN    COPEC-CL               Empresas Copec S.A.                 Chile        Industrials            CLP           --      85,854     42,679             -50.3%     2,977,126    2,809,883           -5.6%
   4938.TW   4938-TW                Pegatron Corp.                      Taiwan       IT                     TWD         OW        1,644      822                -50.0%     175,997      219,206             24.6%
   005490.KS 005490-KR              POSCO                               Korea        Materials              KRW         OW        887,054    465,756            -47.5%     17,407,114   16,488,239          -5.3%
             900948-CN              Inner Mongolia Yitai Coal Co. Ltd.  China (MSCI Energy                  CNY           --      3,164      1,682              -46.9%     13,235       13,886               4.9%
   AMX.N     AMXL-MX                America Movil S.A.B. de C.V.        Mexico       Telecom                MXN         UW        24,211     13,250             -45.3%     189,081      191,739              1.4%
   PTTE.BK   PTTEP-TH               PTT Exploration & Production PCL    Thailand     Energy                 THB         EW        13,935     7,733              -44.5%     49,382       50,113               1.5%
             PE&OLES-MX             Industrias Penoles S.A.B. de C.V.   Mexico       Materials              MXN           --      3,836      2,195              -42.8%     25,380       25,868               1.9%
   BVTJ.J    BVT-ZA                 Bidvest Group Ltd.                  South Africa Industrials            ZAR         OW        1,772      1,016              -42.7%
   CEN.SN    CENCOSUD-CL            Cencosud S.A.                       Chile        Cons Stap              CLP         UW        62,463     36,167             -42.1%      2,191,848 2,197,784              0.3%
   066570.KS 066570-KR              LG Electronics Inc.                 Korea        Cons Disc              KRW         OW        273,972    158,996            -42.0%      13,413,115 12,858,999           -4.1%


++ Estimates, rating and/or price target for this company have been removed from consideration in this report because, under applicable law and/or Morgan Stanley policy, Morgan Stanley may be precluded
from issuing such information with respect to this company at this time. Note: Above > 5%; Below < -5%. Source: Bloomberg, Thomson Financials, FactSet, IBES, Morgan Stanley Research. Data as of                   25
September 11, 2012
                                                                                                                      MORGAN STANLEY RESEARCH
                                                                                       2Q12 Earnings Miss in APxJ/EM - Asia does better than EMEA and LATAM
                                                                                                                                         September 13, 2012




Product Guide & Methodology
Purpose: This product aims to highlight earnings and sales surprises versus consensus estimates.

Surprise definition: We define surprise as earnings /revenues (ex Financial) greater or less than 5% from consensus estimates. Aggregate
earnings and revenue surprise are calculated on a net profit weighted and revenue weighted basis, respectively.

Coverage: Our coverage is the MSCI APxJ/EM universe. We breakdown earnings data by region, country, industry group and stocks. We also
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profit and sales numbers are distributed equally between two quarters. Countries that have majority of their earnings reported on a semi-annual
basis are Australia, South Africa, China, Hong Kong and New Zealand.




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                                                                                                    2Q12 Earnings Miss in APxJ/EM - Asia does better than EMEA and LATAM
                                                                                                                                                           September 13, 2012




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                                                generates earnings.

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                                                                                                                                                         September 13, 2012




Disclosure section (cont.)
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Disclosure section (cont.)
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                                                                                                              2Q12 Earnings Miss in APxJ/EM - Asia does better than EMEA and LATAM
                                                                                                                                                                          September 13, 2012




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                                                                                                            MORGAN STANLEY RESEARCH
                                                                             2Q12 Earnings Miss in APxJ/EM - Asia does better than EMEA and LATAM
                                                                                                                               September 13, 2012




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