31 January 2013 Economics Research http://www.credit-suisse.com/researchandanalytics European Economics Research Analysts €uro back in fashion Yiagos Alexopoulos +44 20 7888 7536 A strengthening euro is a risk for the euro area’s subdued recovery but email@example.com this risk could be limited as long as global demand does not falter. Christel Aranda-Hassel Global demand has become more important than the price effect for core Director +44 20 7888 1383 northern European economies, specifically Germany and the countries firstname.lastname@example.org closely linked to its production chain, the Netherlands and Austria. Southern periphery countries have become more dependent on exporting outside the Steven Bryce +44 20 7883 7360 euro area in recent years. That and the make-up of their export products email@example.com render them more vulnerable to a stronger euro. Violante Di Canossa It is important to note at this point that as long as core Europe and especially Vice President Germany do not contribute more to rebalancing the euro area through +44 20 7883 4192 firstname.lastname@example.org stronger internal demand satisfied partly through goods from the periphery, the latter remains particularly vulnerable to a slowdown in global trade and/or Neville Hill a strengthening of the euro. Director +44 20 7888 1334 This year, the euro area economy will continue enjoying the tailwinds email@example.com stemming from last year’s currency weakness. But a trade-weighted Axel Lang appreciation of 5% from current levels, equivalent to just over EURUSD 1.40, +44 20 7883 3738 undoes the positive impact the euro area is still enjoying from past weakness. firstname.lastname@example.org A EURUSD above 1.45 would have significantly negative repercussions Giovanni Zanni on economic activity. Director +44 20 7888 6827 The ECB is unlikely to take action before the EURUSD gets past 1.40. email@example.com This was the average level prevailing in the first half of 2011 before the breakup panic started to spread. But strengthening beyond that level starts having significant economic costs and is likely to see the ECB responding. The initial ECB response is likely to be cutting the repo rate further. Verbal intervention of the currency is also an option although traditionally the effect of this is not long lasting. Finally, there is always going back to expanding the balance sheet further, which could be taken care of if the OMT gets triggered. The latter cannot be excluded in the event of the euro appreciating further. The strain this puts on economic activity, especially in the periphery, is likely to bring back periphery debt sustainability worries and result in rising periphery yields. This might force periphery authorities to ask for ECB assistance. Ultimately, this may prove to be the mechanism by which the euro’s appreciation is reversed. ANALYST CERTIFICATIONS AND IMPORTANT DISCLOSURES ARE IN THE DISCLOSURE APPENDIX. FOR OTHER IMPORTANT DISCLOSURES, PLEASE REFER TO https://firesearchdisclosure.credit-suisse.com. CREDIT SUISSE SECURITIES RESEARCH & ANALYTICS BEYOND INFORMATION® Client-Driven Solutions, Insights, and Access 31 January 2013 Christel Aranda-Hassel +44 20 7888 1383 €uro back in fashion firstname.lastname@example.org Draghi’s promise to do what it takes last summer countered euro area redenomination Axel Lang risks in the periphery. The result was initially a halting and since then a sharp reversal of +44 20 7883 3738 email@example.com the flight out of peripheral European assets. This has resulted in a significant easing of monetary conditions, to the tune of 350 bp as we pointed out when reviewing European public finances. Allaying redenomination fears is also restoring business confidence. Leading economic indicators, such as the German ifo expectations component, have risen for four consecutive months. And after stabilizing since last summer, the euro area composite PMI has also turned in the last two months. This supports our view that euro area growth will gradually improve from the Q4 trough. Exhibit 1: Euro area composite PMI and GDP growth 60 1.0 55 0.5 50 0.0 45 -0.5 Euro area composite PMI, lhs 40 -1.0 35 -1.5 30 Euro area GDP, q/q, rhs -2.0 25 -2.5 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 Source: Thomson Reuters Datastream, Credit Suisse Diminished fears of periphery redenomination risks have been accompanied by a significant increase in appetite for higher yielding European assets. This appetite is being reflected in the euro. In their FX Compass: The Slow Demise of the Fear Trade, our FX strategists expect the gradual normalization of investment flows out of safe havens and back to the euro area to take the EURUSD back to 1.40. This was the average EURUSD level prevailing in the first half of 2011, before the euro breakup panic started to spread. A strengthening euro is a risk to the economic outlook. As the composite PMI shows, although the indicator has turned, any recovery remains fragile. Fiscal headwinds, although not as strong as in the preceding two years, persist and structural adjustment will take time to bear fruit. Against this backdrop, an undue strengthening of the currency is bound to be viewed with trepidation since it puts the modest recovery at risk. Economic activity is also key to debt sustainability in periphery countries and a renewed faltering of activity is bound to increase the fear factor. But it is important to put the strengthening euro into perspective. First, although off the low seen last summer, the EURUSD would need to rise above 1.45 to have a significantly negative effect on economic activity. And the impact on economic activity only comes with a lag. This year, the economy will continue enjoying the tailwinds stemming from last year’s currency weakness. A second point to keep in mind is that while the ECB dislikes targeting the exchange rate, it has in the past stated that sharp and abrupt currency moves are not welcome. There is no reason to think that the ECB would stand idle if the euro strengthens rapidly beyond 1.45. European Economics 2 31 January 2013 A final point is that while the euro matters, nowadays it is global demand rather than price which is more important to exports. This is especially true for northern European core countries with the exception of France, but also Spain has become more resilient to the exchange rate over the last decade. For the euro area, it is thus crucial that the global recovery continues and if that is the case, some euro appreciation can be weathered. 1. Estimating the euro pain threshold The euro is not in the stratosphere yet. The trade-weighted euro has strengthened by 8% from the low last summer, when all revolved around the break-up scare. But compared to last year’s average, the trade-weighted increase amounts to half of that at 4%, and is still below its long-term average. Although it only accounts for 7% of the trade-weighted euro, the yen is the main culprit of the effective exchange rate appreciation, having weakened by 20% from last year’s average. This contrasts with the more modest weakening of around 5% of both the US dollar and sterling over the same period. Excluding the US dollar, sterling and yen from the trade-weighted euro shows that the euro has only strengthened by 2% from last year’s average. Exhibit 2: Trade-weighted euro Exhibit 3: Broad-based strengthening Average 2012 = 100 108 116 USD, GBP and JPY 112 106 EUR trade weighted x-USD, GBP and JPY 108 104 104 102 100 96 100 92 98 88 EUR trade weighted EUR trade weighted, 5yr ma 96 84 80 94 1999 2001 2003 2005 2007 2009 2011 2013 Jan-2012 Apr-2012 Jul-2012 Oct-2012 Jan-2013 Source: Thomson Reuters Datastream, Credit Suisse Source: Thomson Reuters Datastream , Credit Suisse The rising importance of emerging Exhibit 4: Trade weights in the euro’s markets and, in particular Asia, means effective exchange rate that the latter now accounts for one- % quarter of the weight in the effective 25 1995-97 euro exchange rate. Asia accounted for 2007-09 only one-tenth nearly two decades ago. 20 Over the same time frame, the importance of the US, UK and Japan has fallen from nearly 60% of the trade 15 weight to only 40%. But this is still a sizeable share of euro area trade. 10 It is also likely that at 17%, the weight of the US dollar is understated. 5 Although the ECB takes third-market effects into account, many emerging 0 market currencies use the US dollar as UK US Japan China a reference, including China and its Source: European Central Bank, Credit Suisse managed floating regime. European Economics 3 31 January 2013 The impact of a stronger euro can be assessed using a global growth model. We have quantified the impact using the OECD global model, which takes into account past changes of the euro. This year, the euro area enjoys a significant positive impact on growth of nearly 1 pp as a result of the sharp decline in the trade-weighted euro last year. And last year’s decline came on top of weaker euro averages in the preceding two years. The positive impact, although only worth 0.1 pp, persists into next year if the trade- weighted euro remains at its current level throughout the remainder of the year. Next year’s positive impact is only undone if we estimate a broad-based strengthening of the trade-weighted euro of 5% from its current level by the end of Q2. This would take the EURUSD to just above 1.40 and is in line with the three-month forecast of our FX strategy team. Assuming the euro stays at that level detracts 0.2pp from GDP growth next year and half a point in 2015. Increasing the trade-weighted euro by 10% in Q2 and assuming a broad-based appreciation would translate into the EURUSD increasing nearer to 1.50. Next year, this would detract nearly half a point from growth and nearly 1 point in 2015. Exhibit 5: Estimated impact of past euro trade- Exhibit 6: Factoring in a stronger trade-weighted weighted changes on euro area real GDP growth euro Trade-weighted euro remains unchanged from current level, pp Pp 1.0 0.9 1.0 0.7 5% trade-weighted appreciation 0.5 0.5 10% trade-weighted appreciation 0.7 0.5 0.4 0.2 0.2 0.2 0.5 0.4 0.1 0.0 0.2 0.0 0.0 -0.1 -0.1 0.0 -0.5 -0.3 -0.4 -0.1 -0.2 -0.6 -0.3 -0.5 -0.4 -1.0 -0.5 -0.4 -1.0 -0.7 -1.5 -1.3 -1.0 1999 2001 2003 2005 2007 2009 2011 2013 2015 2007 2009 2011 2013 2015 Source: Thomson Reuters Datastream, Credit Suisse Source: Credit Suisse 2. Sharp and abrupt currency changes are not welcome A level near to EURUSD 1.50 was last seen in spring 2011 when the ECB had embarked on tightening monetary policy by increasing its key repo rate. In retrospect, this was premature and more than reversed as the sovereign debt crisis unfolded. Once again, the perception is that the ECB is taking a different path from other key central banks. A shrinking ECB balance sheet is being contrasted with those expanding in the US and Japan while the BoE has not closed the door to adding further to its balance sheet if needed. Part of the problem is that the ECB has left banks to decide the size of its balance sheet rather than steering the supply as do the other major central banks. A shrinking balance sheet as excess liquidity is returned thus conveys a money market that is becoming healthier. In the absence of another longer-term LTRO or triggering the OMT, the ECB will need to convince financial markets that a shrinking balance sheet is not analogous to preparing the ground for exiting non-conventional measures. European Economics 4 31 January 2013 An appreciation of 5% from current levels in coming months would result in the trade- weighted euro strengthening by over 8% from last year’s average (and a 10% appreciation would lead to a strengthening of over 13%). This is equivalent to a monetary tightening of more than 130 bp up to 220 bp. A tightening of this magnitude would have serious repercussions on the nascent euro area recovery. Our view is that the ECB is unlikely to take action below and up to the EURUSD 1.40 level. On average, this was the prevalent level in the first half of 2011 before the euro breakup scare started to take hold. But a rapid appreciation towards 1.45 is unlikely to be tolerated without some form of response. The question is what to do. In the short term, the repo rate could be cut further from its current 0.75 bp. We continue to expect another 25 bp cut in Q2 and the rate might have to go even lower. Intervening with the currency is also an option, although the ECB has hinted in the past that this only works if it is coordinated. With other central banks endorsing weaker currencies at home, support for coordinated intervention is unlikely to be forthcoming. Verbal intervention is likely if a lower rate has not taken care of the strengthening exchange rate. Verbal intervention has been used in the past - at the end of 2007, the ECB stated that sharp and abrupt currency movements are never welcome – but the life- span of intervening verbally is traditionally limited. And finally, there is always going back to expanding the balance sheet further. This could be taken care of if the OMT gets triggered. The latter cannot be excluded in the event of the euro appreciating further. The strain this puts on economic activity, especially in the periphery, is likely to bring back periphery debt sustainability worries and result in rising periphery yields. This might force periphery authorities to ask for ECB assistance. Ultimately, this may prove to be the mechanism by which the euro’s appreciation is reversed. 3. FX sensitivities and the importance of global demand The impact of the stronger trade-weighted euro using the OECD model provides results for the euro area aggregate. But the impact differs depending on how exposed a country is to trade outside the euro area and also how price sensitive the exports of particular countries are. The latter, in turn, depends on the degree of outsourcing lower added value elements in the production chain or on the degree of product specialization. A key point is the importance of global demand. In the case of Germany, studies1 have shown that over the last two decades, the influence of trading partners’ economic activity on German exports has outweighed the effects of price competitiveness. Comparing the average growth of extra- euro area exports with global export market growth in two previous episodes of strong trade-weighted euro appreciation shows that this has not only been true for Germany, but to a lesser extent, also for core countries closely linked to the German production chain, the Netherlands and Austria. We looked at two previous episodes of sharp euro appreciation. From January 2001 to December 2003, the trade-weighted euro increased by slightly more than 20% and from January 2006 to March 2008, the currency strengthened by over 10%. Using a lag of two quarters, which is the commonly accepted period before exchange rate changes start feeding through, we look at average extra-euro area export growth and compare this to the 1 See Deutsche Bundesbank, Monthly Report March 2008 "Macroeconomic effects of changes in real exchange rates" and K. Stahn "Has the impact of key determinants of German exports changed? Results from estimations of Germany's intra euro-area and extra euro-area exports" in Deutsche Bundesbank, Discussion Paper No 07/2006. European Economics 5 31 January 2013 growth in global export markets over the two periods of currency appreciation. In the 2001- 03 period, global export market growth amounted to 3% and had accelerated sharply to around 8% from 2006 until the full break-out of the financial crisis in the autumn of 2008. On average, and in spite of sharp currency appreciations, German export growth outpaced the strength of the global market by nearly 1 pp over the two episodes, joined by both the Netherlands and Austria. In fact, the latter saw its exports growing more than 1 pp faster. Despite the currency appreciation, and helped by strong increases in global demand especially in the 2006-08 period, average export growth increased in all of the euro area countries apart from France and Greece. With the exception of Germany, the Netherlands and Austria, however, all countries suffered export share losses as the euro appreciated. But the loss of export share varies, with Spain suffering relatively little compared to the other periphery countries. Among core European countries, France stands out as suffering the largest loss of market share, indicative of structural competitiveness problems which go beyond the exchange rate. Exhibit 7: Average extra-EA export vs global export Exhibit 8: Average extra-EA export growth in growth in periods of sharp € appreciation periods of sharp € appreciation Average annual growth rate differential to global export growth, pp Average annual growth rates, % Periods 2001 Q3- 2003 Q2 and 2006 Q3-2008 Q3 Periods 2001 Q3- 2003 Q2 and 2006 Q3-2008 Q3 7 1 6 0 5 -1 4 -2 3 -3 2 -4 1 -5 0 -6 -1 -7 -2 -8 -3 GER FRA ITA SPA NET BEL AUT GRE POR IRE GER FRA ITA SPA NET BEL AUT GRE POR IRE Source: Thomson Reuters Datastream, Credit Suisse Source: Thomson Reuters Datastream, Credit Suisse There are a series of factors which determine the sensitivity of exports to the exchange rate. The destination of exports is one of them. It is commonly assessed that countries which send a larger share of their total exports outside the euro area will suffer relatively more from the strength of the euro. With the exception of Ireland, the other periphery countries seem relatively more shielded on this account while northern European core countries are more exposed. Exports have a smaller share of GDP in southern periphery countries, but all those countries have registered dynamic export growth over the last 12 months and it has been extra-euro area destinations which have almost entirely contributed to countries’ export growth. European Economics 6 31 January 2013 Exhibit 9: Exports by destination (EA vs extra-EA) Exhibit 10: Dynamic export growth % of GDP, 2011 Average annual growth of exports in the last 12 months 60 16 EA 14 50 Extra-EA Extra-EA EA 12 Total 40 10 8 30 6 20 4 2 10 0 0 -2 BEL IRE NET GER AUT ITA FRA SPA POR GRE GRE POR NET GER FRA ITA SPA AUT BEL IRE Source: Credit Suisse, Eurostat Source: Credit Suisse, Eurostat This is because periphery countries have increased efforts to diversify outside the euro area, which has been helped by an improvement in competitiveness as wages have declined relative to the euro area average. This is true for both Spain and Portugal. For the latter, Spain is the main trading partner but Portuguese exporters are trying to reduce this dependence, targeting destinations outside the euro area instead. As a result, these countries will be more vulnerable to an appreciating euro. Exhibit 11: Spain: Diversifying exports… Exhibit 12:Portugal: …outside Europe Export growth, y/y%, YTD average Export growth, y/y%, YTD average 7% 45 5% 30 40 25 35 9% 20 7% 30 15 37% 8% 11% Weight 25 29% 4% 10 in total 20 8% exports 100% Weight 5 15 in total 63% 10 exports 0 100% -5 5 71% EU Extra-EU Africa America Asia USA World 0 x-USA EU Extra EU Africa OPEP America Asia World Source: Thomson Reuters Datastream, Credit Suisse Source: Thomson Reuters Datastream, Credit Suisse The degree of outsourcing and product specialization also plays a role when determining the impact of the exchange rate. Outsourcing low value-added production in the production chain tends to shield from exchange rate appreciation. This is because outsourcing low value added processes tends to increase margins and thus provides a buffer when the exchange rate appreciates. But this is also true because export goods that contain a high share of non- euro denominated components benefit from cheaper import prices as the euro strengthens. European Economics 7 31 January 2013 We have no data for the extra-euro area share of imported components, but it is probably fair to conclude that countries whose exports have a large imported component are relatively more exposed to the global and hence also extra-euro area production chain. Ireland and the northern European core countries (Germany, Netherlands and Belgium) are thus likely to suffer less from an appreciating euro. Higher tech goods are associated with a lower price elasticity of demand. Type and quality of export goods are other important factors when assessing the effects of the exchange rate. Studies have shown that the effect of the exchange rate on export growth becomes smaller the higher the share of high tech exports. This, because high tech goods are usually associated with relatively low price elasticity of demand meaning that the demand for those goods remains relatively unaffected if prices increase2. Another reason is that higher tech goods are traditionally associated with higher margins as a result of less competition, a lack of substitutes and higher value added. The higher the margin, the better a firm can withstand the impact of exchange rate appreciation as it is able to buffer the effect. Northern euro area countries export a relatively large share of high- and medium-tech goods. Ireland’s high share is mainly driven by pharmaceutical exports which are relatively price insensitive. But Spain and Italy are also close to the OECD average and likely to suffer less from an appreciating currency than Portugal and Greece, which look less advanced on the product scale. Exhibit 13: Intermediate inputs that are re-exported Exhibit 14: High and medium-high tech exports % of total intermediate imports, all sectors including services, 2009 Share as% total exports, 2010 70 80 High 60 70 Medium-high 60 50 OECD average 50 40 40 30 30 20 20 10 10 0 0 IRE NET BEL GER POR FRA ITA SPA GRE IRE GER FRA BEL ESP AUT NET ITA POR GRE Source: Credit Suisse, OECD Source: Credit Suisse, OECD The large high- and medium-high tech share of total German exports should also allow Germany to buffer yen weakness. The sharp depreciation of the yen against the euro is often mentioned as a particular problem for German industry since both, Germany and Japan are higher technology exporters. But throughout the last decade, Germany increasingly overtook Japan, expanding its share in high-tech good exports. And this happened while the euro appreciated by 60% (!) against the yen. 2 See Lucke, Dorothea; Schröder, Philipp J. H.; Schumacher, Dieter (2004) : "R&D and price elasticity of demand", DIW-Diskussionspapiere European Economics 8 31 January 2013 Exhibit 15: High-tech global export share differential vs EURJPY Annual high-tech global export share data up to 2011 6 170 Global export share differential in high tech 4 goods (GER minus JAP) (lhs) 160 EUR/JPY (rhs) 2 150 0 140 -2 130 -4 120 -6 -8 110 -10 100 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011 2013 Source: Credit Suisse, OECD On balance: A strengthening euro is a risk for the euro area’s subdued recovery but this risk could be limited as long as global demand does not falter. Global demand has become more important than the price effect for core northern European economies, specifically Germany and the countries closely linked to its production chain, the Netherlands and Austria. Southern periphery countries have become more dependent on exporting outside the euro area in recent years. That and the make-up of their export products render them more vulnerable to a stronger euro. It is important to note at this point that as long as core Europe and especially Germany do not contribute more to rebalancing the euro area through stronger internal demand satisfied partly through goods from the periphery, the latter remains particularly vulnerable to a slowdown in global trade and/or a strengthening of the euro. This year, the euro area economy will continue enjoying the tailwinds stemming from last year’s currency weakness. But a trade-weighted appreciation of 5% from current levels, equivalent to just over EURUSD 1.40, undoes the positive impact the euro area is still enjoying from past weakness. A EURUSD above 1.45 would have significantly negative repercussions on economic activity. The ECB is unlikely to take action before the EURUSD gets past 1.40. This was the average level prevailing in the first half of 2011 before the breakup panic started to spread. But strengthening beyond that level starts having significant economic costs and is likely to see the ECB responding. The initial ECB response is likely to be cutting the repo rate further. Verbal intervention of the currency is also an option although traditionally the effect of this is not long lasting. Finally, there is always going back to expanding the balance sheet further, which could be taken care of if the OMT gets triggered. European Economics 9 31 January 2013 The latter cannot be excluded in the event of the euro appreciating further. The strain this puts on economic activity, especially in the periphery, is likely to bring back periphery debt sustainability worries and result in rising periphery yields. This might force periphery authorities to ask for ECB assistance. Ultimately, this may prove to be the mechanism by which the euro’s appreciation is reversed. European Economics 10 GLOBAL FIXED INCOME AND ECONOMIC RESEARCH Dr. Neal Soss, Managing Director Eric Miller, Managing Director Chief Economist and Global Head of Economic Research Global Head of Fixed Income and Economic Research +1 212 325 3335 +1 212 538 6480 firstname.lastname@example.org email@example.com US AND CANADA ECONOMICS Dr. Neal Soss, Managing Director Jonathan Basile, Director Jay Feldman, Director Henry Mo, Director Head of US Economics +1 212 538 1436 +1 212 325 7634 +1 212 538 0327 +1 212 325 3335 firstname.lastname@example.org email@example.com firstname.lastname@example.org email@example.com Dana Saporta, Director Jill Brown, Vice President Isaac Lebwohl, Associate Peggy Riordan, AVP +1 212 538 3163 +1 212 325 1578 +1 212 538 1906 +1 212 325 7525 firstname.lastname@example.org email@example.com firstname.lastname@example.org email@example.com LATIN AMERICA ECONOMICS AND STRATEGY Alonso Cervera, Managing Director Casey Reckman, Vice President Daniel Chodos, Vice President Di Fu, Analyst Head of Non-Brazil Latam Economics +1 212 325 5570 +1 212 325 7708 +1 212 538 4125 +52 55 5283 3845 firstname.lastname@example.org email@example.com firstname.lastname@example.org email@example.com Argentina, Venezuela Colombia, Latam Strategy Mexico, Chile Nilson Teixeira, Managing Director Daniel Lavarda, Vice President Tales Rabelo, Vice President Iana Ferrao, Associate Leonardo Fonseca, Associate Head of Brazil Economics +55 11 3701 6352 +55 11 3701 6353 +55 11 3701 6345 +55 11 3701 6348 +55 11 3701 6288 firstname.lastname@example.org email@example.com firstname.lastname@example.org email@example.com firstname.lastname@example.org Brazil Brazil Brazil Brazil EURO AREA AND UK ECONOMICS Neville Hill, Managing Director Christel Aranda-Hassel, Director Giovanni Zanni, Director Violante di Canossa, Vice President Head of European Economics +44 20 7888 1383 +44 20 7888 6827 +44 20 7883 4192 +44 20 7888 1334 email@example.com firstname.lastname@example.org email@example.com firstname.lastname@example.org Axel Lang, Associate Steven Bryce, Analyst Yiagos Alexopoulos, Analyst +44 20 7883 3738 +44 20 7883 7360 +44 20 7888 7536 email@example.com firstname.lastname@example.org email@example.com EASTERN EUROPE, MIDDLE EAST & AFRICA ECONOMICS AND STRATEGY Berna Bayazitoglu, Managing Director Sergei Voloboev, Director Carlos Teixeira, Director Gergely Hudecz, Vice President Head of EEMEA Economics +44 20 7888 3694 +27 11 012 8054 +33 1 7039 0103 +44 20 7883 3431 firstname.lastname@example.org email@example.com firstname.lastname@example.org email@example.com Russia, Ukraine, Kazakhstan South Africa Czech Republic, Hungary, Poland Turkey Alexey Pogorelov, Vice President Saad Siddiqui, Vice President Natig Mustafayev, Associate Nimrod Mevorach, Associate +7 495 967 8772 +44 20 7888 9464 +44 20 7888 1065 +44 20 7888 1257 firstname.lastname@example.org email@example.com firstname.lastname@example.org email@example.com Russia, Ukraine, Kazakhstan EEMEA Strategy EM and EEMEA cross-country analysis EEMEA Strategy, Israel JAPAN ECONOMICS Hiromichi Shirakawa, Managing Director Takashi Shiono, Associate +81 3 4550 7117 +81 3 4550 7189 firstname.lastname@example.org email@example.com NON-JAPAN ASIA ECONOMICS Dong Tao. Managing Director Robert Prior-Wandesforde, Director Christiaan Tuntono, Vice President Santitarn Sathirathai, Vice President Head of NJA Economics +65 6212 3707 +852 2101 7409 +65 6212 5675 +852 2101 7469 firstname.lastname@example.org email@example.com firstname.lastname@example.org email@example.com Regional, India, Indonesia Hong Kong, Korea, Taiwan Malaysia, Philippines, Thailand China Michael Wan, Analyst Weishen Deng, Analyst +65 6212 3418 +852 2101 7162 firstname.lastname@example.org email@example.com Singapore Disclosure Appendix Analyst Certification The analysts identified in this report each certify, with respect to the companies or securities that the individual analyzes, that (1) the views expressed in this report accurately reflect his or her personal views about all of the subject companies and securities and (2) no part of his or her compensation was, is or will be directly or indirectly related to the specific recommendations or views expressed in this report. 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