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CIMB -Commodity Pulse Fed vs

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					July 3, 2013




   ASIA PACIFIC
                                                    COMMODITIES STRATEGY



               Notes from the Field
                                                     Commodity Pulse: Fed vs
                                                     fundamentals
                                                     Macro sentiment and fund flows have been overshadowing solid
                                                     fundamentals in many commodity markets in recent weeks and we
 —————————————————————————————————————————           continue to see improvement in many markets over the coming northern
 Daniel HYNES                                        hemisphere summer. However, recent comments by Ben Bernanke have
 T (61) 2 9694 6092
 E daniel.hynes@cimb.com                             refocused investors on US monetary policy and they appear to be
 Warren EDNEY                                        already pricing in an end to the quantitative easing programme. At the
 T (61) 3 9631 1012
 E warren.edney@cimb.com
                                                     same time, we have seen weak PMI numbers from China and tight
                                                     liquidity, which is driving a steep correction in risky assets globally.
                                                     These will remain headwinds for commodities over coming weeks.




‘‘
                                                       Figure 1: Short term (0-3 month) commodity outlook
        Mining companies in
Australia were still adjusting                                             Overall            Overweight           Neutral
                                                                                                                   Gas, uranium, thermal
                                                                                                                                         Underweight

to a slowdown in demand for                             Energy             Neutral            Brent, WTI           coal
                                                                                                                   Lead, zinc, nickel,
commodities and lower prices                            Base metals        Slightly bullish   Copper, tin          aluminium
                                                        Precious metals    Neutral            PGM                  Gold, silver
and we need a united plan of                            Steel making raw
attack to counter this.”                                materials          Slightly bearish                        Met coal              Iron ore
                                                                                                                                     SOURCE: CIMB ESTIMATES
          – Mark Cutifani, Anglo American CEO

                                                     Overall we maintain a Neutral                          which has been tempered by
                                                     weighting in commodities, although                     disruptions in Brazil and falling
                                                     we see opportunities in several of them                exports (due to a ban on illegal mining)
                                                     driven mainly by supply-side issues.                   in India. On the flipside, a lack of
                                                     We continue to favour positioning in                   supply growth in the crude oil market
                                                     base metals, with copper our standout                  is likely to keep prices well supported
                                                     commodity. Crude oil is likely to                      at current levels. After strong growth
                                                     remain range-bound, although we                        in recent years, low prices are
                                                     expect a gradual move higher in                        beginning to curtail the expansion of
                                                     coming months. On a three-month                        nickel, thermal coal and aluminium
                                                     view, we see iron ore prices coming                    supply, which in turn should reduce
                                                     under some pressure, although the                      downward price pressure.
                                                     downside may be relatively limited.
                                                                                                            Finally a positive for coal
                                                     Supply growth the key                                  In a move we believe is long overdue,
                                                     These headwinds are likely to batter                   the Indian government has decided to
                                                     commodity markets in the short term.                   allow some power companies to pass
                                                     Within this broad trend, however,                      on the costs of foreign coal to
                                                     supply growth is likely to remain the                  customers. This move has the
                                                     key differentiator among individual                    potential to open the floodgates for
                                                     commodities. With strong supply                        imported thermal coal. Recent import
                                                     growth coming over the next six                        volumes have been very strong (1Q13
                                                     months, we suspect iron ore and                        +120% yoy) and, if continued, this
                                                     coking coal prices may come under                      could help balance a severely
                                                     further pressure this year. Most of the                oversupplied market quickly.
                                                     growth in iron ore is expected in 2014,



IMPORTANT DISCLOSURES, INCLUDING ANY REQUIRED RESEARCH CERTIFICATIONS, ARE PROVIDED AT THE END OF THIS REPORT.
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Asia Pacific | COMMODITIES STRATEGY
July 3, 2013




KEY CHARTS

 Iron ore to experience its highest supply                         2%
 improvement in recent years                                       0%
 With much uncertainty around global growth over the
                                                                  -2%
 coming months and Chinese activity expected to enter its
 normal seasonal lull in early 3Q, the commodity complex          -4%

 is likely to remain under pressure in the short term.            -6%

 Within this broad trend, however, supply growth is likely        -8%
 to remain the key differentiator among individual
                                                                  -10%
 commodities.


                                                                                                   Percentage difference between avg 2010-2012 and 12m forward forecast




 Chinese economic data remains patchy                                    % change yoy
 In Asia, Apr-May data (PMI, trade, loan and external             30
                                                                  28
 trade) were generally weaker for China, suggesting the           26
 weakness in growth persisted in 2Q. We believe 2Q real           24

 GDP growth could come in at 7.5%, compared to 7.7% in            22
                                                                  20
 1Q. We expect China to grow by 7.5-7.8% this year, in            18

 line with the reduced growth estimates from the IMF              16
                                                                  14
 (from 8% to 7.75%) and World Bank (from 8.4% to                  12
 7.7%). There are growing market concerns around                  10
                                                                   8
 slowing economic growth amid worries about tight credit
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 conditions.
                                                                                                                                                                               China IP                                        China FAI




 Indian thermal coal imports                                      12
                                                                           Mt                                                                                                                                                                                                                            % chg yoy
                                                                                                                                                                                                                                                                                                                                                          150%

 In a move we believe is long overdue, the Indian                                                                                                                                                                                                                                                                                                         130%
                                                                  10
 government has decided to allow some power companies                                                                                                                                                                                                                                                                                                     110%

 to pass on the costs of foreign coal to customers. We             8
                                                                                                                                                                                                                                                                                                                                                          90%

 have long argued that the growing strain from India's                                                                                                                                                                                                                                                                                                    70%

 energy demand on its domestic coal market would result            6                                                                                                                                                                                                                                                                                      50%

 in its reliance on international thermal coal rising              4
                                                                                                                                                                                                                                                                                                                                                          30%

 substantially, but to date this has been held back for                                                                                                                                                                                                                                                                                                   10%


 economic reasons. This move has the potential to open             2
                                                                                                                                                                                                                                                                                                                                                          -10%


 the floodgates for imported thermal coal.                                                                                                                                                                                                                                                                                                                -30%

                                                                   0                                                                                                                                                                                                                                                                                      -50%
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                                                                                                                                                   Thermal Coal Imports                                                                      % change yoy



 6.1 Chinese steel production looks toppy
                                                                                  US$/t                                                                                                                                                                                                                                             Mt/d
 For the moment, iron ore supply/demand fundamentals               210                                                                                                                                                                                                                                                                                          2.30

 remain supportive. Chinese steel production remains at            190
                                                                                                                                                                                                                                                                                                                                                                2.20

 historically high levels above 780Mtpa. We have also                                                                                                                                                                                                                                                                                                           2.10
                                                                   170
 seen iron ore inventories held at Chinese ports remain at                                                                                                                                                                                                                                                                                                      2.00

 low levels. However, there does appear to be an                   150                                                                                                                                                                                                                                                                                          1.90

 overshoot when compared with the country’s current                130
                                                                                                                                                                                                                                                                                                                                                                1.80
                                                                                                                                                                                                                                                                                                                                                                1.70
 economic fundamentals. Consequently, we expect                    110
                                                                                                                                                                                                                                                                                                                                                                1.60
 China’s steel production to at least slow along seasonal           90                                                                                                                                                                                                                                                                                          1.50
 lines over the course of 2H13, but with the risk
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 (particularly if steel inventory backs up further down the
 production chain) that run-rate cuts will be even harsher                         Spot Iron Ore Price ($/t CFR China)                                                                                            Average Daily Chinese Steel Production (Mt/d)

 when they emerge.
                                                                                                                                                                                                                                SOURCE: CIMB, COMPANY REPORTS




                                                              2
Asia Pacific | COMMODITIES STRATEGY
July 3, 2013




                                          Commodity Pulse
 Table of Contents
                                          1. DIVERGENCE AMONG COMMODITIES TO RISE
 1. DIVERGENCE AMONG COMMODITIES
                                    p.3
 TO RISE
                                          1.1 Fundamentals not forgotten as macro concerns persist
 2. MACRO OUTLOOK                   p.6
                                          Macro sentiment and fund flows have been overshadowing solid fundamentals
 3. COMMODITY PERFORMANCE           p.8
                                          in many commodity markets in recent weeks.
 4. PRECIOUS METALS                p.11
 5. ENERGY                         p.18   Fundamentals appear to be firm and we continue to see improvement in many
 6.STEEL-MAKING RAW MATERIALS      p.21   markets over the coming northern hemisphere summer. However, recent
 7. CHARTS                         p.23   comments by Fed Chairman Bernanke have refocused investors on US
 8. RESEARCH REPORTS               p.28   monetary policy and they appear to be already pricing in an end to the
                                          quantitative easing programme. At the same time, we have seen weak PMI
                                          numbers from China and tight liquidity drive a steep correction in risky assets
                                          globally. All of this has had a significant impact on commodity markets, with
                                          most experiencing double-digit falls over the past month.
                                          1.2 Supply-side issues will drive commodity divergence
                                          With much uncertainty around global growth over the coming months and
                                          Chinese economic activity expected to enter its normal seasonal lull in early 3Q,
                                          the commodity complex is likely to remain under pressure in the short term.
                                          Within this broad trend, however, supply growth is likely to remain the key
                                          differentiator among individual commodities.

                                            Figure 2: Iron ore to experience the highest supply improvement in recent years
                                              2%



                                              0%



                                             -2%



                                             -4%



                                             -6%



                                             -8%



                                            -10%
                                                   Thermal   Nickel      Zinc      Met Coal    Copper       Lead     Aluminium      Tin      Oil   Iron ore
                                                    Coal
                                                                      Percentage difference between avg 2010-2012 and 12m forward forecast

                                                                                                                                              SOURCES: CIMB




                                          With strong supply growth likely over the next six months, we suspect iron ore
                                          and coking coal prices may come under further pressure this year. Most of the
                                          growth in iron ore is expected in 2014, which has been tempered by disruptions
                                          in Brazil and falling exports (due to a ban on illegal mining) in India (Figure 3).
                                          Metallurgical coal has also seen strong supply growth after severe disruptions
                                          in 2011 saw exports fall to record lows (Figure 4). With most of the growth now
                                          likely to peter out over the coming months, this should start to become less of a
                                          negative factor for the coking coal market.




                                                                 3
Asia Pacific | COMMODITIES STRATEGY
July 3, 2013




  Figure 3: Incremental growth in iron ore supply likely to be                               Figure 4: After severe disruptions in 2011, coking coal supply
  dominated by Australia, although Brazil should see some                                    has been strong and we expect it to remain strong in 2013
  improvement in 2014
          Mt                                                                                          Mt
    15                                                                                         16                                                                                                                                     60%
                                                                                                                                                 Title:
                                                                                               15
                                                                                                                                                 Source:
                                                                                                                                                                                                                                      40%
                                                                                               14
    10
                                                                                               13                                                Please fill in the values above to have them entered in your rep
                                                                                                                                                                                                                                      20%
                                                                                               12
     5
                                                                                               11                                                                                                                                     0%

                                                                                               10
     0                                                                                                                                                                                                                                -20%
                                                                                               9

                                                                                               8
                                                                                                                                                                                                                                      -40%
     -5
                                                                                               7

                                                                                               6                                                                                                                                      -60%




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    -10
          2Q12   3Q12   4Q12      1Q13F     2Q13F     3Q13F      4Q13F   1Q14F   2Q14F
                               India      Australia     Brazil                                                                                              Exports                yoy change

                                       SOURCES: CIMB FORECASTS, COMPANY REPORTS                                                                              SOURCES: CIMB FORECASTS, COMPANY REPORTS




                                                                  On the flipside, a lack of supply growth in the crude oil market is likely to keep
                                                                  prices well supported at current levels.
                                                                  After strong growth in recent years, low prices are beginning to curtail the
                                                                  expansion of nickel, thermal coal and aluminium supply, which in turn should
                                                                  reduce downward price pressure. For aluminium in particular, however, it may
                                                                  not be until 2014 that we start to see prices stage a sustainable recovery.


                                                                  1.3 Gold to stay out of favour
                                                                  Investor sentiment has been crushed by the collapse in prices over the past few
                                                                  months and looks likely to remain low. While the exact drivers of gold can be
                                                                  elusive, it is clear that both technical and fundamental gauges are now pointing
                                                                  towards further downside over the next 12 months.
                                                                  On the technical side, the 10-year upward trend has clearly been broken. On the
                                                                  fundamental level, however, markets have clearly started pricing risk much
                                                                  more efficiently as the broad risk-on risk-off period has subsided. As such, gold
                                                                  is no longer considered a safe haven.
                                                                  Exchange-traded fund (ETF) outflows continue unabated and have wiped out
                                                                  all the gains seen over the past two years. In fact, ETF holdings have fallen
                                                                  nearly 20% since the start of the year (Error! Reference source not
                                                                  found.).
                                                                  We have also seen no significant increase in inflation as a result of the huge
                                                                  increase in liquidity around the world, although recent increases in US yields
                                                                  have spooked the market. In a world of higher rates, a non-yielding asset is
                                                                  always likely to struggle.
                                                                  Therefore, with the need for tail-risk protection and inflation protection
                                                                  significantly reduced, it is unlikely that gold will see the levels of investor
                                                                  demand it has experienced over the past couple of years.




                                                                                         4
Asia Pacific | COMMODITIES STRATEGY
July 3, 2013




  Figure 5: ETF holdings continue to see heavy outflows as                 Figure 6: USD vs Gold
  investor sentiment wanes
         Moz                                                                                 US$/oz                                                                                                      USD (trade
    90                                                                                                                                                                                               w eighted, inverse)
                                                                            2,000                                                  Title:
                                                                                                                                   Source:
                                                                                                                                                                                                                                0.015
    85                                                                      1,900
                                                                                                                                   Please fill in the values above to have them entered in your report
                                                                            1,800
    80                                                                                                                                                                                                                          0.014
                                                                            1,700

    75                                                                      1,600
                                                                                                                                                                                                                                0.014
                                                                            1,500
    70

                                                                            1,400
                                                                                                                                                                                                                                0.013
    65
                                                                            1,300
                                                                                                                                                                                           Gold                 USD
    60                                                                      1,200                                                                                                                                               0.013




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                                            SOURCES: Bloomberg, CIMB                                                                                                                       SOURCES: Bloomberg, CIMB




                                            1.4 We favour oil and copper, with undersold base metals
                                            representing some value
                                            Overall, we maintain a Neutral weighting in commodities despite the sell-off in
                                            recent weeks. In fact, we see opportunities in several commodities, driven
                                            mainly by supply-side issues.
                                            We continue to favour positioning in base metals, with copper our standout
                                            commodity. This sector has seen some heavy selling recently on the back of
                                            weaker-than-expected data from China. However, with prices for several metals
                                            now sitting well below cost support levels, we believe the extent of the selling
                                            has been unwarranted.
                                            Crude oil is likely to remain range-bound, although we expect a gradual move
                                            higher in coming months as supply growth peters out.
                                            The price performance outlook for precious metals is also mixed, with strong
                                            consumer demand the only supporting factor in the gold market in the short
                                            term. While we see little upside in gold, structural supply issues should see
                                            platinum group metals (PGM) markets perform well.
                                            On a three-month view, we see iron ore prices coming under some pressure,
                                            although the downside may be relatively limited.

                                              Figure 7: Short-term (0-3 month) commodity outlook

                                                                  Overall                                 Overweight                                    Neutral               Underweight
                                                                                                                                                        Gas, uranium, thermal
                                              Energy              Neutral                                 Brent, WTI                                    coal
                                                                                                                                                        Lead, zinc, nickel,
                                              Base metals         Slightly bullish                        Copper, tin                                   aluminium
                                              Precious metals     Neutral                                 PGM                                           Gold, silver
                                              Steel making raw
                                              materials           Slightly bearish                                                                      Met coal                                     Iron ore
                                                                                                                                                                                           SOURCES: CIMB ESTIMATES




                                                                       5
Asia Pacific | COMMODITIES STRATEGY
July 3, 2013




                                                                                                     2. MACRO OUTLOOK
                                                                                                     2.1 Patchy recovery amid market volatility
                                                                                                     Our economics team continues to see more evidence of patchy recoveries in
                                                                                                     some advanced economies and Asia, although we believe growth is likely to
                                                                                                     improve gradually.
                                                                                                     In the US, we view the Fed’s talk of unwinding QE3 and rising yields as a sign of
                                                                                                     recovery, provided the exit from easy monetary policy is orderly. Looking ahead,
                                                                                                     the recovering US economy suggests corporate bonds and equities will benefit
                                                                                                     from improving earnings and hence will be in a better position to absorb an
                                                                                                     incremental rise in bond yields. Backed by gains in household wealth and home
                                                                                                     equity, the US household sector is ready to support the recovery through
                                                                                                     housing investment and consumer spending. Retail sales inched up 0.3% mom
                                                                                                     in May amid a softening of consumer sentiment. US households have benefited
                                                                                                     from rising wealth via equity and housing market recoveries.
                                                                                                     The net wealth of the US household sector increased from US$54.2trn at
                                                                                                     end-2008 to US$70.3trn at end-1Q13 (an increase of US$16.2trn), and
                                                                                                     household debt has been pared down, reducing the debt service ratio from
                                                                                                     14.01% in 3Q07 to 10.49% in 4Q12. The eurozone recession continues to deepen,
                                                                                                     prompting the ECB to consider unconventional policies such as charging banks
                                                                                                     interest on deposits in order to force banks to lend to small companies. Amid
                                                                                                     mixed data flow in 2Q13, the extreme volatility in Japan's equity markets, bond
                                                                                                     markets and exchange rate could undermine the budding revival of consumer
                                                                                                     and business confidence. The capex recovery remains weak as core machinery
                                                                                                     orders (a leading indicator of capex) retreated to -8.8% mom in April from
                                                                                                     +14.2% in March. Machine tool orders also fell, albeit by a smaller margin in
                                                                                                     May (-7.4% yoy versus -23.6% in April).

  Figure 8: US durable goods new orders                                                                                                               Figure 9: US retail sales
           % change yoy                                                                                                                                       % change yoy
    2.0%                                                                                                                                                8.0
                                                                                                                                                                                                  Title:
                                                                                                                                                        7.0
                                                                                                                                                                                                  Source:
    1.5%
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    1.0%
                                                                                                                                                        5.0


    0.5%                                                                                                                                                4.0


                                                                                                                                                        3.0
    0.0%
                                                                                                                                                        2.0

   -0.5%
                                                                                                                                                        1.0


   -1.0%                                                                                                                                                0.0
                             May-11




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                                                                           SOURCES: BLOOMBERG, CIMB RESEARCH                                                                                                                 SOURCES: BLOOMBERG, CIMB RESEARCH




                                                                                                     In Asia, the Apr-May data (PMI, trade, loan and external trade) were generally
                                                                                                     weaker for China, suggesting the weakness in growth persisted in 2Q. Recent
                                                                                                     economic data indicates that 2Q real GDP growth could come in at 7.5%
                                                                                                     compared to 7.7% in 1Q. We expect China to grow by 7.5-7.8% this year (versus
                                                                                                     Bloomberg consensus 7.9%), in line with the reduced growth estimates from
                                                                                                     the IMF (from 8% to 7.75%) and World Bank (from 8.4% to 7.7%). There are
                                                                                                     growing market concerns of slowing economic growth amid worries about tight
                                                                                                     credit conditions. Easing inflation and weak economic data bolster the case for
                                                                                                     lower interest rates and more fiscal spending to support growth.
                                                                                                     In our view, it is likely the Chinese authorities will tolerate moderate economic
                                                                                                     growth of around 7.0-7.5% before hitting the stimulus button. The policy
                                                                                                     priority now is to maintain macro financial stability (keeping an eye on
                                                                                                     property prices, local government borrowing and shadow banking) while


                                                                                                                                                  6
Asia Pacific | COMMODITIES STRATEGY
July 3, 2013




                                                                                                                                         ensuring stable growth. Recent comments from Beijing officials suggest they
                                                                                                                                         are somewhat reluctant to step in with further stimulus at a time when the
                                                                                                                                         economy is rebalancing growth away from an export- and investment-driven
                                                                                                                                         model, and towards consumption.
                                                                                                                                         Beijing has reaffirmed its commitment to provide credit support for the real
                                                                                                                                         economy amid concerns around slowing output growth and rising risk in the
                                                                                                                                         financial sector. At a recent meeting of the State Council chaired by Premier Li
                                                                                                                                         Keqiang, the cabinet unveiled a raft of initiatives to spur economic
                                                                                                                                         restructuring and maintain balanced growth. These included: 1) guiding credit
                                                                                                                                         flows into the real economy while curbing the influx of money into sectors
                                                                                                                                         struggling with overcapacity; 2) giving small businesses and borrowers in the
                                                                                                                                         agricultural sector preferential access to financing; and 3) offering financing
                                                                                                                                         support to spur consumption in areas such as schooling, tourism and affordable
                                                                                                                                         housing as well as purchases of big-ticket household goods, while maintaining a
                                                                                                                                         prudent monetary policy.

  Figure 10: China IP and FAI is falling                                                                                                                                                                 Figure 11: China money supply and loan growth weakening
        % change yoy                                                                                                                                                                                                    % change yoy
   30                                                                                                                                                                                                     45
                                                                                                                                                                                                                                                                                Title:
   28                                                                                                                                                                                                     40
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   26
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   22
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   20

   18                                                                                                                                                                                                     20

   16                                                                                                                                                                                                     15
   14
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   12
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   10

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                                                                                                                                                                                                                                                                       Jun-09




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                                                                                                                                                                                                                                                                                                                                                Jun-11




                                                                                                                                                                                                                                                                                                                                                                                    Jun-12




                                                                                                                                                                                                                                                                                                                                                                                                                        Jun-13
                                                                                                                                                                                                                                                                                                                                                                           Mar-12




                                                                                                                                                                                                                                                                                                                                                                                                               Mar-13
                                                                                                                                                                                                                         Mar-08




                                                                                                                                                                                                                                                             Mar-09




                                                                                                                                                                                                                                                                                                  Mar-10




                                                                                                                                                                                                                                                                                                                                       Mar-11
                                                                                                                                                                                                               Dec-07




                                                                                                                                                                                                                                                    Dec-08




                                                                                                                                                                                                                                                                                         Dec-09




                                                                                                                                                                                                                                                                                                                             Dec-10




                                                                                                                                                                                                                                                                                                                                                                  Dec-11




                                                                                                                                                                                                                                                                                                                                                                                                      Dec-12
                                                                                                                                                                                                                                           Sep-08




                                                                                                                                                                                                                                                                                Sep-09




                                                                                                                                                                                                                                                                                                                    Sep-10




                                                                                                                                                                                                                                                                                                                                                         Sep-11




                                                                                                                                                                                                                                                                                                                                                                                             Sep-12
                          May-10




                                                                                May-11




                                                                                                                                      May-12




                                                                                                                                                                                            May-13
        Jan-10




                                                              Jan-11




                                                                                                                    Jan-12




                                                                                                                                                                          Jan-13
                 Mar-10




                                                                       Mar-11




                                                                                                                             Mar-12




                                                                                                                                                                                   Mar-13
                                   Jul-10




                                                                                         Jul-11




                                                                                                                                               Jul-12
                                            Sep-10




                                                                                                  Sep-11




                                                                                                                                                        Sep-12
                                                     Nov-10




                                                                                                           Nov-11




                                                                                                                                                                 Nov-12




                                                                                                                                                                                                                                                                      M1                           M2                                 Financial Insitution Loans
                                                                                  IP                                FAI

                                                                                                                                                    SOURCE: BLOOMBERG                                                                                                                                                                                                      SOURCE: BLOOMBERG




                                                                                                                                                                                                     7
Asia Pacific | COMMODITIES STRATEGY
July 3, 2013




                                  3. COMMODITY PERFORMANCE
                                  Energy and livestock were the only commodity sectors to record positive price
                                  performance in June. WTI prices rallied further to narrow the WTI-Brent
                                  spread as flooding in western Canada shut in Canadian production, tightening
                                  the North American balance. In general, commodities posted a broad-based
                                  downward move last month, with the S&P GSCI spot index ending the month
                                  down 1.9% as the market reacted to Bernanke’s comments that the quantitative
                                  easing programme will start to be wound back towards the end of 2013 if data
                                  continues to improve. The only encouraging point we see is that the market
                                  now appears to be already pricing in the Fed’s actions, and thus performance
                                  from here should be based more on fundamentals.

                                      Figure 12: Monthly performance by commodity sector
                                       4%    Monthly Performance, % return
                                                                                                               2.7%
                                                                                                                                               2.4%                 2.4%
                                       2%


                                       0%

                                                                        -0.6% -0.3%                                   -0.6% -0.5%      -0.7%
                                      -2%                                                      -1.4%
                                                                                                       -1.9%

                                      -4%

                                               -4.7%           -4.7%
                                      -6%
                                                       -5.6%

                                      -8%                                                                                                             -7.0%


                                      -10%
                                                                                                                                                           -10.5%
                                      -12%
                                                               Apr-13                                      May-13                                     Jun-13

                                                                        Spot          Energy             Ind Metals           Ags       Livestock

                                                                                                                                SOURCES: BLOOMBERG, CIMB RESEARCH




                                  Copper was one of the worst performers last month (-7.1% mom), resuming a
                                  downward trend that has been largely in play all year. Copper has been driven
                                  by concerns around supply from Grasberg, which has been shut since an
                                  accident in a training tunnel killed 28 people. However, late in the month, this
                                  was overtaken by concerns around US monetary policy.
                                  Nickel (-7.5% mom) also came under heavy selling despite no discernible
                                  deterioration in fundamentals. The market instead focused on the US Fed’s
                                  intent to scale back its bond-buying programme in order to help lower
                                  long-term interest rates and tighter Chinese lending regulations.
                                  At the other end of the spectrum, iron ore appears to have stabilised, rising
                                  3.2% mom to US$116/t. Chinese steel production remains near record highs
                                  and iron ore inventories remain low. Clearly the market is focused on future
                                  demand, with fears of rising steel inventories the main concern.
                                  Precious metals continue to battle several headwinds, with gold (-11.1%) and
                                  silver (-11.8%) both down over the past month. It is clear that investors have
                                  deserted gold, with investor positioning hitting a record low net-long level and
                                  ETF outflows continuing unabated.
                                  The energy sector held up relatively well over the past month, with most major
                                  sub-sectors finishing the month higher. Both WTI and Brent were the standout
                                  performers, up 1.1% and 0.7% respectively, while thermal coal managed to eke
                                  out a small gain (+0.1 mom) as demand conditions stabilised. US Henry Hub
                                  natural gas continued to suffer under weakening demand due to
                                  warmer-than-expected weather in the US, ending the month down 3.8%.




                                                                  8
Asia Pacific | COMMODITIES STRATEGY
July 3, 2013




  Figure 13: Monthly commodity performance                                                                   Figure 14: 3-month commodity performance
                                                                                            WTI                                                                                                        Soy
                                                                                   Cotton                                                                                                   WTI
                                                                      Sugar                                                                                                              Zinc
                                                                      Zinc                                                                                                             Lead
                                                                 Iron Ore                                                                                                          Cotton
                                                                Brent                                                                                                             Corn
                                                              Soy                                                                                                             Wheat
                                                            Lead                                                                                                            Sugar
                                                    Coking Coal                                                                                                         Aluminium
                                                  Aluminium                                                                                                                 Brent
                                                 Thermal                                                                                                               Thermal
                                              Wheat                                                                                                                 Copper
                                              Tin                                                                                                                 Nat Gas
                                           Corn                                                                                                        Coking Coal
                                     Copper                                                                                                              Platinum
                                       Nickel                                                                                                            Iron Ore
                                 Platinum                                                                                                                     Tin
                         Gold                                                                                                                         Nickel
                Silver                                                                                                                    Gold
    Nat Gas                                                                                                          Silver

    -16%       -14%      -12%    -10%     -8%      -6%      -4%      -2%      0%       2%         4%            -35%          -30%        -25%        -20%      -15%       -10%      -5%          0%          5%

                                                      SOURCES: BLOOMBERG, CIMB RESEARCH                                                                           SOURCES: BLOOMBERG, CIMB RESEARCH




  Figure 15: Ytd commodity performance                                                                       Figure 16: 12-month commodity performance
                                                                                               Nat Gas                                                                                                       Nat Gas
                                                                                                Cotton                                                                                          WTI
                                                                                              WTI                                                                                           Lead
                                                                    Soy                                                                                                                     Cotton
                                                           Brent                                                                                                                    Tin
                                                       Zinc                                                                                                                         Brent
                                                   Thermal                                                                                                               Soy
                                                     Lead                                                                                                               Zinc
                                               Platinum                                                                                                       Thermal
                                           Aluminium                                                                                                       Aluminium
                                         Coking Coal
                                                                                                                                                            Platinum
                                                Corn
                                                                                                                                                             Corn
                                             Copper
                                                                                                                                                        Copper
                                             Sugar
                                                                                                                                                      Iron Ore
                                               Tin
                                                                                                                                                  Wheat
                                        Wheat
                                                                                                                                                   Nickel
                                    Iron Ore
                                                                                                                                               Sugar
                                      Nickel
                                                                                                                                              Gold
                          Gold
                                                                                                                                     Silver
      Silver
                                                                                                               Coking Coal
    -40%                 -30%             -20%              -10%              0%                  10%
                                                                                                              -50%        -40%          -30%         -20%       -10%           0%     10%         20%          30%


                                                     SOURCES: BLOOMBERG, CIMB RESEARCH                                                                              SOURCES: BLOOMBERG, CIMB RESEARCH




                                                                                                         9
Asia Pacific | COMMODITIES STRATEGY
July 3, 2013




  Figure 17: Commodity prices and data
  COMMODITY PRICES                              Close    1 Day   1 week    1 mth    3 mth       6 mth         12 mth
  LME Base Metals
  Copper (US$/lb, US$/t)                  3.062 / 6750   0.0%      1.2%     -7.1%   -10.5%      -14.7%        -11.5%
  Aluminium (US$/lb, US$/t)                 0.8 / 1773   0.5%      0.1%     -4.8%    -6.9%      -14.8%         -7.1%
  Nickel (US$/lb, US$/t)                 6.219 / 13710   -1.0%     0.6%     -7.5%   -17.7%      -20.6%        -18.2%
  Zinc (US$/lb, US$/t)                     0.84 / 1853   0.1%      1.6%     -1.6%    -2.3%      -11.9%         -1.0%
  Lead (US$/lb, US$/t)                     0.93 / 2051   -0.0%     2.8%     -3.5%    -2.9%      -12.2%         9.2%
  Tin (US$/lb, US$/t)                     8.92 / 19675   -0.5%     0.5%     -6.5%   -15.3%      -15.9%         4.1%
  Steel Making Raw Materials
  Iron Ore (US$/t CFR China)                   116.50    1.0%      -0.1%    3.2%    -15.1%      -16.4%        -12.7%
  Premium HCC (US$/t FOB Aus)                  136.75              -0.4%    -3.5%   -14.7%      -13.0%        -39.1%
  Precious Metals
  Gold (US$/oz)                              1,236.40    2.0%      -3.2%   -11.1%   -22.5%      -25.6%        -22.6%
  Silver (US$/oz)                               19.84    7.3%      0.7%    -11.8%   -30.3%      -34.2%        -27.8%
  Platinum (US$/oz)                          1,341.80    1.4%      0.5%     -7.7%   -14.6%      -12.5%         -7.8%
  Energy
  Oil - WTI (US$/bbl)                           96.25    -0.8%     1.1%     3.4%     -1.0%       5.9%         14.9%
  Oil - Brent (US$/bbl)                        101.84    -1.0%     0.7%     -0.6%    -7.4%       -8.1%         4.6%
  Natural Gas (HH, US$/bcf)                      3.60    0.4%      -3.8%   -13.3%   -10.6%       7.2%         27.3%
  Thermal Coal (Newc, US$/t)                    83.00    0.0%      0.1%     -5.4%    -8.4%      -11.2%         -7.7%
  Soft Commodities
  Soybeans (US$/bu)                             12.42    -2.6%     -2.4%    -3.6%    -0.7%       -4.6%         -2.7%
  Corn (US$/bu)                                  5.05    -6.2%     -7.6%   -10.7%    -6.2%      -15.3%        -13.9%
  Wheat (US$/bu)                                 6.54    -2.9%     -4.9%    -8.0%    -6.5%      -18.6%        -19.3%
  Coffee (US$/lb)                                1.20    -1.2%     0.2%     -7.0%   -15.4%      -22.9%        -35.8%
  Cotton (US c/lb)                              84.01    0.2%      1.0%     0.8%     -3.8%       7.0%          9.0%
  Sugar (US c/lb)                               16.92    -0.5%     -1.3%   -0.2%    -6.8%       -15.5%        -21.2%
  INVENTORIES                                   Close    1 Day   1 week    1 mth    3 mth        6 mth        12 mth
  LME Metals (kt)
  Copper                                      665,775    -0.2%     -1.8%    8.5%    16.8%      109.4%        159.8%
  Aluminium                                 5,435,600    -0.1%     -0.1%    4.5%     3.8%        4.1%         12.7%
  Nickel                                      187,488    -0.1%     0.7%     4.3%    13.3%       35.2%         81.4%
  Zinc                                      1,061,475    0.4%      -0.4%    -3.1%    -9.7%      -13.3%         6.7%
  Lead                                        198,300    0.2%      1.2%    -11.9%   -24.5%      -39.5%        -43.3%
  Tin                                          14,320    1.1%      0.9%     3.2%     2.1%       14.0%         17.7%
  Energy
  DOE Crude Oil ('000 bbl)                    394,139              0.0%     -0.9%    1.4%        6.2%          2.9%
  DOE NatGas (bcf)                              2,533              0.0%    18.3%    50.1%       -30.6%        -18.3%
  Thermal Coal - China (Mt)                     28.50              0.0%    35.2%    14.1%       22.1%         11.5%
  Other
  Iron Ore - China Ports (Mt)                   76.50              -0.4%    -0.1%    -0.8%       -8.9%        -21.7%
  China Steel (Mt)                              19.71              -2.6%    -5.2%   42.9%       53.0%         11.6%
  Gold ETF Holdings (Moz)                       65.87              -2.0%    -4.8%   -16.4%      -22.2%        -14.9%
  Platinum ETF Holdings (Moz)                    2.05              0.1%     7.5%    29.4%       36.5%          52.8%
  MACRO DATA                                    Close    1 Day   1 week    1 mth    3 mth       6 mth         12 mth
  Key Indices
  S&P 500                                     1606.28    -0.4%     2.1%     -2.6%    2.4%       13.3%         17.6%
  VIX                                           16.86    0.0%     -16.2%   13.7%    32.8%       -13.4%         0.4%
  CRB Index                                    275.62    -0.6%     -0.7%    -3.0%    -7.0%       -6.7%         -3.0%
  LME Index                                    2940.5    0.0%      1.0%     -6.0%    -9.9%      -15.0%         -9.2%
  SP GSCI Commodity Spot Index                  611.3    -0.7%     0.2%     -1.9%    -6.7%       -5.3%         2.3%
  MSCI World Metals & Mining Index             244.87    0.7%      -3.3%   -12.3%   -20.4%      -30.2%        -19.6%
  MSCI World Energy Sector Index               243.09    0.3%      0.2%     -5.3%    -2.7%       3.4%         11.1%
  Currencies
  AUD                                          0.9151    -1.3%     -1.1%    -5.0%   -12.2%      -11.8%        -10.7%
  EUR                                          1.3011    -0.2%     -0.8%    0.5%     1.5%        -1.7%         3.5%
  JPY                                           99.29    1.0%      1.6%     -1.8%    5.4%       15.3%         24.9%
  CAD                                          1.0514    0.4%      0.1%     1.6%     3.3%        5.6%          3.4%
  ZAR                                           9.897    -0.5%     -1.7%    0.7%     7.2%       16.7%         21.3%
  Other
  US Govt TII 5 year                          -0.4218    7.1%    -109.2%   55.4%    76.2%       71.7%         60.4%
                                                                                             SOURCES: BLOOMBERG, CIMB




                                                          10
Asia Pacific | COMMODITIES STRATEGY
July 3, 2013




                                  4. PRECIOUS METALS
                                  We have moved to a Neutral weighting on gold in the short term due to
                                  concerns around an end to monetary easing, a stronger USD, and lack of
                                  inflationary pressure. One positive is persistently strong physical demand,
                                  along with the fact that much of the impact of rising yields and a stronger USD
                                  appears to have already been priced in.
                                  We have made significant cuts to our price deck to reflect the current reality
                                  facing the gold market, as well as what we see as significant headwinds over the
                                  next two to three years. We now forecast gold to average US$1,280/oz in 2H13,
                                  before moving to a range of US$1150-1200/oz over the following two years.

                                      Figure 18: Quarterly gold price forecasts
                                      US$/oz           1Q13      2Q13F       3Q13F        4Q13F       1Q14F        2Q14F       3Q14F           4Q14F
                                      Old              1,631      1,530        1,500       1,400        1,400       1,350        1,350          1,300
                                      New              1,631      1,420        1,280       1,290        1,250       1,230        1,200          1,200
                                      % Change         0.0%       -7.2%      -14.7%        -7.9%      -10.7%        -8.9%      -11.1%           -7.7%
                                                                                                              SOURCES: CIMB, COMPANY REPORTS




                                  Lack of conviction has tainted gold price action, with the precious metal
                                  unlikely to re-establish itself as a safe-haven asset any time soon. While Europe
                                  still faces structural issues, we believe the risk of a financial collapse has fallen
                                  significantly.
                                  We have also seen relatively stable prices over the past 12 months, despite a
                                  massive injection of liquidity, while inflationary expectations have remained
                                  well-contained.
                                  The sudden move back into the USD in recent weeks also shows it has not lost
                                  its status as the global reserve currency.
                                  Most of all, the cost of holding a non-yielding asset such as gold when yields are
                                  rising and an increase in interest rates is within sight has increased significantly.
                                  In this new world, we think investor appetite will remain subdued.

                                      Figure 19: Gold heat map

                                      Macro        Bullish     Most macro risks are well known, so have been priced in.
                                                               Stronger US data in 1Q12 damaged the gold market. Nevertheless, we believe
                                                               growth will slow down in the coming weeks.
                                                               Fiscal cliff expected to be bullish.
                                      Investor     Neutral     Another round of QE by the Fed/ fiscal cliff should bring new buyers into the
                                      Flows                    market.
                                                               Chinese ETF to be launched in 2013.
                                                               Deterioration of investor sentiment; immediate increase of risk aversion leads to
                                                               cross-asset reduction of risk.
                                      Fundamentals Neutral     High gold prices deter buyers of physical gold; increased scrap supply.
                                                               South African supply under pressure as labour disputes hit miners.
                                                               Indian demand likely subdued after consumers brought forward purchases to
                                                               avoid increased duties.
                                                               Chinese demand strong during Chinese New Year. Growth should pick up as
                                                               economic recovery takes place.
                                      Technicals   Bearish     Price has broken below 50- and 200-day moving averages.
                                                               Has hit the bottom support level of the current downward channel, suggesting a
                                                               short-term bounce is possible.
                                                                                                                                    SOURCES: CIMB



                                  4.1 Investment demand
                                  Importance of investor flows is increasing
                                  The importance of investment demand has reached extremely high levels and,
                                  as such, should be the main catalyst for price movements over the next 12
                                  months.
                                  The jewellery sector traditionally has been the mainstay of gold consumption.
                                  When combined with other industrial applications, it made up more than 90%
                                  of the market in 2005 (Figure 20). However, the emergence of the gold

                                                         11
Asia Pacific | COMMODITIES STRATEGY
July 3, 2013




                                                    investment market has seen that share dwindle quickly. As ETF and OTC
                                                    markets took off, investment demand’s market share has increased rapidly to
                                                    consume around 47% of all demand in 2012 (Figure 21). Therefore, gold prices
                                                    will remain extremely sensitive to the global interest rate environment, in our
                                                    opinion.

  Figure 20: Fabrication demand                                                   Figure 21: Investment
         % of total demand                                                                 % of total demand
    1                                                                               0.50

   0.9                                                                              0.45

   0.8                                                                              0.40

   0.7                                                                              0.35

   0.6                                                                              0.30

   0.5                                                                              0.25


   0.4                                                                              0.20


   0.3                                                                              0.15


   0.2                                                                              0.10

                                                                                    0.05
   0.1

                                                                                    0.00
    0                                                                                         2005       2006      2007         2008    2009      2010      2011      2012
            2005       2006   2007   2008   2009   2010       2011   2012

                                                          SOURCES: BLOOMBERG,                                                                         SOURCES: BLOOMBERG




                                                    Given the importance of investors to the gold market, we have analysed a
                                                    variety of macroeconomic variables. Our analysis suggests investors have
                                                    traded gold for many different reasons. The most important variables (on a
                                                    statistical basis) include exchange rate risk, hedges against inflation, risk off-on
                                                    trade and even the break-up of the eurozone (Figure 22).
                                                    The influence of these variables has also changed over time. While over the past
                                                    year the gold price and S&P500 Index have had a good correlation (41%), so far
                                                    this year that correlation has broken down (-29%).

                                                      Figure 22: Various macro variables are influencing gold
                                                             100%

                                                              80%

                                                              60%

                                                              40%

                                                              20%

                                                              0%

                                                             -20%

                                                             -40%

                                                             -60%

                                                             -80%

                                                            -100%
                                                                       S&P 500             USD Index             SP GSCI Spot      US Govt 2yr Bond Yield Greek-German Yield
                                                                                                                                                                Spread


                                                                                                          2013    1yr   3yr

                                                                                                                                                SOURCES: BLOOMBERG, CIMB


                                                    An end to monetary easing is now in sight
                                                    Ben Bernanke’s comments last week on how the Fed plans to wind down the
                                                    stimulus programme resulted in a heavy sell-off across all markets, but in
                                                    particular equities and bonds. While gold also suffered some weakness, it was
                                                    relatively muted, partly a reflection of the conjecture that has been swirling
                                                    around the gold market for some time.



                                                                             12
Asia Pacific | COMMODITIES STRATEGY
July 3, 2013




                                                                                                                                          This has removed most of the near-term uncertainty around the monetary
                                                                                                                                          policy outlook and markets can now anchor themselves to the fundamentals.
                                                                                                                                          We expect the bond market to continue to sell off and yield curves to steepen,
                                                                                                                                          but in line with the improvement we expect in the data.
                                                                                                                                          The Fed statement was broadly unchanged and in line with our expectations.
                                                                                                                                          However, Bernanke stated in the press conference that the asset purchase
                                                                                                                                          programme would most likely be tapered before year-end and that it would be
                                                                                                                                          terminated probably around the middle of next year. He maintained the link
                                                                                                                                          between the asset purchase programme and the economy by stating the end of
                                                                                                                                          the programme would be consistent with an unemployment rate of around 7%.
                                                                                                                                          Rising bond yields remain a headwind for gold
                                                                                                                                          Gold has been a major beneficiary of monetary easing around the world, but
                                                                                                                                          particularly in the US. This has pushed US rates to record low levels, a trend
                                                                                                                                          that has been in play for more than 30 years (Figure 23).
                                                                                                                                          Over the past couple of years, risks emanating from continued monetary easing
                                                                                                                                          have been a key reason behind investors adding gold to their portfolios. This
                                                                                                                                          has been exacerbated by persistent falls in opportunity costs, which benefit
                                                                                                                                          non-yielding assets such as gold.
                                                                                                                                          So far, the massive liquidity creation has not caused inflationary pressures
                                                                                                                                          because of sustained large output gaps in many countries. This easing resulted
                                                                                                                                          in US rates falling to extremely low levels on the back of QE1, QE2 and QE3.
                                                                                                                                          This is important for gold, as yields and gold prices have shown a strong
                                                                                                                                          correlation in the past (Figure 23). However, in recent months, gold has
                                                                                                                                          suffered headwinds including a rise in longer-dated yields (Figure 24). With the
                                                                                                                                          Fed’s path to an end in quantitative easing now much clearer, we expect yields
                                                                                                                                          to continue to rise, putting further downward pressure on gold markets.

  Figure 23: Real yields and gold have been strongly correlated                                                                                                                                                  Figure 24: US bond yields have picked strongly as the end to
                                                                                                                                                                                                                 QE3 nears
              US$/oz                                                                                                                                                                             %                                %
   2,000                                                                                                                                                                                                  -2.0    1.5

   1,900                                                                                                                                                                                                          1.0
   1,800                                                                                                                                                                                                  -1.5
                                                                                                                                                                                                                  0.5
   1,700
                                                                                                                                                                                                                  0.0
   1,600                                                                                                                                                                                                  -1.0

   1,500                                                                                                                                                                                                          -0.5

   1,400                                                                                                                                                                                                  -0.5
                                                                                                                                                                                                                  -1.0
   1,300
                                                                                                                                                                                                                  -1.5
   1,200                                                                                                                                                                                                  0.0
                                                                                                                                                                                                                  -2.0
   1,100

   1,000                                                                                                                                                                                                  0.5     -2.5
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                                                                                                                                                                                                                                                                                                                              Sep-12
                                                                                                                                                                                                                                                                                                                              Oct-12
                                                                                                                                                                                                                                                                                                                                       Nov-12
                                                                                                                                                                                                                                                                                                                                       Dec-12
                                                                                                                                                                                                                         Mar-11


                                                                                                                                                                                                                                  May-11




                                                                                                                                                                                                                                                                                                                                                                  Apr-13
                                                                                                                                                                                                                                                                                         Feb-12
                                                                                                                                                                                                                                                                                         Mar-12


                                                                                                                                                                                                                                                                                                  May-12




                                                                                                                                                                                                                                                                                                                                                         Feb-13
                                                                                                                                                                                                                                                                                                                                                         Mar-13


                                                                                                                                                                                                                                                                                                                                                                  May-13




                                                                            Gold                              US 5yr Real Yield                                                                                                                                             10yr                     2yr                      5yr


                                                                                                                                                            SOURCE: BLOOMBERG                                                                                                                                                       SOURCE: BLOOMBERG



                                                                                                                                          Not surprisingly, investor positioning has turned southward
                                                                                                                                          Speculative interest in gold continues to fall, driven by the establishment of
                                                                                                                                          fresh shorts, although longs have been paring back their exposure in recent
                                                                                                                                          weeks.
                                                                                                                                          Since gold threatened to breach the US$1800/oz mark in October last year,
                                                                                                                                          long positions have fallen by 10.7Moz or 40% to 16.2Moz (as of 25 June 2013).
                                                                                                                                          Over the same period, shorts have increased by nearly 369% to reach 11.9Moz.
                                                                                                                                          According to Bloomberg data, this is a level never seen in the 20 years it has
                                                                                                                                          collected data (Figure 25).



                                                                                                                                                                                                          13
Asia Pacific | COMMODITIES STRATEGY
July 3, 2013




                                                                                                                                                       The percentage of bullish traders (net long position over shorts) has also fallen
                                                                                                                                                       significantly. After breaching 1000% in October 2012, it has recently hit 36%, a
                                                                                                                                                       level not seen since 2002.

  Figure 25: Non-commercial traders’ positions – gold                                                                                                                                                                       Figure 26: Non-commercial traders – % bullish
                       contracts
   350,000

   300,000                                                                                                                                                                                                                    1400%

   250,000
                                                                                                                                                                                                                              1200%
   200,000

   150,000                                                                                                                                                                                                                    1000%

   100,000
                                                                                                                                                                                                                               800%
    50,000

         0                                                                                                                                                                                                                     600%

    -50,000                                                                                                                                                                                                                    400%
   -100,000
                                                                                                                                                                                                                               200%
   -150,000
              Jan-08


                                 Jul-08




                                                                     Jul-09




                                                                                                         Jul-10




                                                                                                                                              Jul-11




                                                                                                                                                                                   Jul-12
                                                   Jan-09




                                                                                       Jan-10




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                                                                                                                                                                                                     Jan-13
                        Apr-08


                                          Oct-08


                                                            Apr-09


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                                                                                                Apr-10


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                                                                                                                                     Apr-11


                                                                                                                                                        Oct-11


                                                                                                                                                                          Apr-12


                                                                                                                                                                                            Oct-12


                                                                                                                                                                                                              Apr-13


                                                                                                                                                                                                                                 0%




                                                                                                                                                                                                                                                                                     Jul-10




                                                                                                                                                                                                                                                                                                                                                                     Jul-11




                                                                                                                                                                                                                                                                                                                                                                                                                                                     Jul-12


                                                                                                                                                                                                                                                                                                                                                                                                                                                                             Nov-12
                                                                                                                                                                                                                                              Jan-10




                                                                                                                                                                                                                                                                                                                 Nov-10
                                                                                                                                                                                                                                                                                                                               Jan-11




                                                                                                                                                                                                                                                                                                                                                                                   Sep-11
                                                                                                                                                                                                                                                                                                                                                                                                 Nov-11
                                                                                                                                                                                                                                                                                                                                                                                                              Jan-12




                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         Jan-13
                                                                                                                                                                                                                                                                                                   Sep-10
                                                                                                                                                                                                                                                           Mar-10
                                                                                                                                                                                                                                                                        May-10




                                                                                                                                                                                                                                                                                                                                         Mar-11
                                                                                                                                                                                                                                                                                                                                                       May-11




                                                                                                                                                                                                                                                                                                                                                                                                                           Mar-12
                                                                                                                                                                                                                                                                                                                                                                                                                                        May-12


                                                                                                                                                                                                                                                                                                                                                                                                                                                                 Sep-12




                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    Mar-13
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               May-13
                                                                          Long                                    Short                                Net



                                                                                                                                              SOURCE: BLOOMBERG, CFTC                                                                                                                                                                                                                                                                                                          SOURCE: CFTC




                                                                                                                                                       Therefore, it is not surprising that ETFs have started to see some extensive
                                                                                                                                                       outflows. The trickle of flows out of funds earlier this year has turned into a
                                                                                                                                                       flood as investor sentiment has turned bearish. According to Bloomberg data,
                                                                                                                                                       so far this year we have seen outflows to the tune of 16Moz (Figure 27 and
                                                                                                                                                       Figure 28). The bulk of the net redemptions have stemmed from US-listed
                                                                                                                                                       products, with some net inflows in Canadian-listed products.

  Figure 27: Global ETF holdings have fallen significantly in 2013                                                                                                                                                           Figure 28: Net cumulative flows in ETF holdings in 2013
        million ounces                                                                                                                                                                                                                    million ounces
   90                                                                                                                                                                                                                           0


                                                                                                                                                                                                                                -2
   85

                                                                                                                                                                                                                                -4
   80
                                                                                                                                                                                                                                -6

   75                                                                                                                                                                                                                           -8


                                                                                                                                                                                                                               -10
   70

                                                                                                                                                                                                                               -12
   65
                                                                                                                                                                                                                               -14

   60                                                                                                                                                                                                                          -16
         Jul-11




         Jul-12
        Jan-11




        Jun-11




        Nov-11
        Dec-11
        Jan-12




        Jun-12
        Feb-11




        Oct-11




        Oct-12
        Nov-12
        Dec-12
        Jan-13
        Apr-11
        May-11



        Aug-11
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        Apr-12
        May-12



        Aug-12
        Sep-12




        Apr-13
        Mar-11




        Feb-12
        Mar-12




        Feb-13
        Mar-13

        May-13




                                                                                                                                                                                                                                     01-Jan
                                                                                                                                                                                                                                                  08-Jan
                                                                                                                                                                                                                                                               15-Jan
                                                                                                                                                                                                                                                                            22-Jan
                                                                                                                                                                                                                                                                                          29-Jan
                                                                                                                                                                                                                                                                                                        05-Feb
                                                                                                                                                                                                                                                                                                                      12-Feb
                                                                                                                                                                                                                                                                                                                                    19-Feb
                                                                                                                                                                                                                                                                                                                                                  26-Feb
                                                                                                                                                                                                                                                                                                                                                                05-Mar
                                                                                                                                                                                                                                                                                                                                                                              12-Mar
                                                                                                                                                                                                                                                                                                                                                                                            19-Mar
                                                                                                                                                                                                                                                                                                                                                                                                          26-Mar
                                                                                                                                                                                                                                                                                                                                                                                                                       02-Apr
                                                                                                                                                                                                                                                                                                                                                                                                                                    09-Apr
                                                                                                                                                                                                                                                                                                                                                                                                                                                 16-Apr
                                                                                                                                                                                                                                                                                                                                                                                                                                                              23-Apr
                                                                                                                                                                                                                                                                                                                                                                                                                                                                          30-Apr
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      07-May
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  14-May
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             21-May
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        28-May




                                                                                                                                                                 SOURCES: BLOOMBERG                                                                                                                                                                                              SOURCES: BLOOMBERG, CIMB RESEARCH



                                                                                                                                                       Central banks remain net gold buyers
                                                                                                                                                       After 20 years of consistent selling, central banks switched to net buyers in
                                                                                                                                                       2009 and have been adding to their total reserves holdings ever since. In fact,
                                                                                                                                                       over the past couple of years they have intervened heavily to combat an
                                                                                                                                                       appreciation of domestic currencies.
                                                                                                                                                       This has been supported by limited central bank selling from signatories of the
                                                                                                                                                       Central Bank Gold Agreement (currently under its third version). Data released
                                                                                                                                                       by the World Gold Council in September shows that total gold sales under
                                                                                                                                                       CBGA3 slumped to their lowest level since the first agreement in 1999. Total
                                                                                                                                                       sales during the third year of CBGA3 amounted to only 5.9t or 189,691oz.

                                                                                                                                                                                                                       14
Asia Pacific | COMMODITIES STRATEGY
July 3, 2013




                                                                                                                      On the flipside, many central banks have been strong buyers, such as Russia,
                                                                                                                      South Korea, Kazakhstan, Sri Lanka and Paraguay.

  Figure 29: IMF gold reserves continue to climb                                                                                                                            Figure 30: Gold sales under CBGA3 have fallen significantly
                                                                                                                                                                            over the past two years
             Million Troy Ounces                                                                                                                                                        Gold Sales, tonnes
     1,150                                                                                                                                                                     160

     1,130
                                                                                                                                                                               140
     1,110
                                                                                                                                                                               120
     1,090

     1,070                                                                                                                                                                     100

     1,050
                                                                                                                                                                                80

     1,030
                                                                                                                                                                                60
     1,010

      990                                                                                                                                                                       40


      970                                                                                                                                                                       20

      950
             1991
                    1992
                           1993
                                  1994
                                         1995
                                                1996
                                                       1997
                                                              1998
                                                                     1999
                                                                            2000
                                                                                   2001
                                                                                          2002
                                                                                                 2003
                                                                                                        2004
                                                                                                               2005
                                                                                                                      2006
                                                                                                                             2007
                                                                                                                                    2008
                                                                                                                                           2009
                                                                                                                                                  2010
                                                                                                                                                         2011
                                                                                                                                                                2012



                                                                                                                                                                                    0
                                                                                                                                                                                                      Year 1                               Year 2                               Year 3                       Year 4 (Current)


                                                                                                                                                  SOURCES: IMF                                                                                                                                      SOURCES: WGC, CIMB



                                                                                                                      4.2 Fundamentals
                                                                                                                      Physical demand remains a rare positive for gold
                                                                                                                      India and China are the most important markets, accounting for 55% of world
                                                                                                                      jewellery demand. However, both markets have faced headwinds in recent
                                                                                                                      months and we expect this to continue in the short term.
                                                                                                                      The Indian government is attempting to reign in the inward flow of gold that
                                                                                                                      occurred when gold prices started correcting in April/May this year. It has
                                                                                                                      attempted this by placing restrictions on gold consignment trade, as well as
                                                                                                                      raising the import duty from 6% to 8%. Combined with the sharp depreciation
                                                                                                                      in the INR, it has added a significant cost burden to Indian gold buyers.
                                                                                                                      While we don’t expect this action to fundamentally change the buying habits of
                                                                                                                      retail buyers, it does present the government’s strongest attempt to limit gold
                                                                                                                      imports. As such, it is likely to have a mild impact on trade over the short to
                                                                                                                      medium term.

  Figure 31: Gold in INR terms                                                                                                                                               Figure 32: Chinese consumer and investment demand
                     Rupee/oz                                                                                                                                                            tonnes
    12,000                                                                                                                                                                    400

                                                                                                                                                                              350
    11,000
                                                                                                                                                                              300
    10,000
                                                                                                                                                                              250

     9,000
                                                                                                                                                                              200

     8,000                                                                                                                                                                    150


     7,000                                                                                                                                                                    100

                                                                                                                                                                               50
     6,000
                                                                                                                                                                                0
                                                                                                                                                                                                       Jul-09




                                                                                                                                                                                                                                            Jul-10




                                                                                                                                                                                                                                                                                  Jul-11




                                                                                                                                                                                                                                                                                                                         Jul-12
                                                                                                                                                                                    Jan-09




                                                                                                                                                                                                                         Jan-10




                                                                                                                                                                                                                                                              Jan-11




                                                                                                                                                                                                                                                                                                    Jan-12




                                                                                                                                                                                                                                                                                                                                           Jan-13
                                                                                                                                                                                                                Oct-09




                                                                                                                                                                                                                                                                                                               Apr-12
                                                                                                                                                                                             Apr-09




                                                                                                                                                                                                                                  Apr-10



                                                                                                                                                                                                                                                     Oct-10



                                                                                                                                                                                                                                                                       Apr-11



                                                                                                                                                                                                                                                                                           Oct-11




                                                                                                                                                                                                                                                                                                                                  Oct-12




     5,000
                 Jul-09




                 Jul-10




                 Jul-11




                 Jul-12
                Nov-11




                Jan-13
                Jan-09




                Nov-09
                Jan-10




                Nov-10
                Jan-11




                Jan-12




                Nov-12
                Sep-09
                Mar-09
                May-09




                Mar-10
                May-10

                Sep-10




                Sep-11




                Sep-12
                Mar-11
                May-11




                Mar-12
                May-12




                Mar-13
                May-13




                                                                                                                                                                                                                           Investment demand                            Consumer demand



                                                                                                                                    SOURCE: BLOOMBERG                                                                                                                                                                   SOURCE: WGC




                                                                                                                                                                       15
Asia Pacific | COMMODITIES STRATEGY
July 3, 2013




                                  In China, solid imports and the increasing availability of investment products
                                  have kept overall demand strong.
                                  According to Bloomberg data, gold imports into mainland China from Hong
                                  Kong rose 94% to an all-time high last year. Mainland China imported 834.5
                                  tonnes (including scrap and coins), compared with about 431.2 tonnes in 2011.
                                  However, recently released data suggests gold jewellery demand has remained
                                  strong. Consumption jumped more than 36% to 456.2 tonnes in the four
                                  months this year, according to the Chinese Gold Association.

                                  4.3 Technicals
                                  Gold reaches our US$1,300 target; look for a bounce soon?
                                  Our regional chartist Nigel Foo had a US$1,300/oz target price on gold, which
                                  it went through this week. He is now looking for at least an immediate-term
                                  bottom soon. Daily MACD and RSI are showing positive divergence signs, likely
                                  signs of a tired downtrend. However, gold’s long-term trend remains
                                  downwards, in our view. Monthly charts show its support trendline broken at
                                  US$1,350, with its technical indicators remaining negative.

                                      Figure 33: Daily chart for gold (US$1,285)




                                                                                     SOURCES: CIMB RESEARCH, ,BLOOMBERG




                                      Figure 34: Monthly chart for gold (US$1,285)




                                                                                     SOURCES: CIMB RESEARCH, BLOOMBERG




                                                        16
Asia Pacific | COMMODITIES STRATEGY
July 3, 2013




                                           4.4 Supply and demand forecasts
  Figure 35: Gold supply/demand model
  Tonnes                           2009         2010          2011     2012         2013             2014            2015
  SUPPLY
  Total Mine Production            2,611        2,583         2,835    2,848        2,862            2,869           2,898
    YoY % Change                   6.4%        -1.1%          9.8%     0.4%         0.5%             0.2%            1.0%
  Gold Scrap                       1,695        1,719         1,669    1,626        1,640            1,610           1,530
    YoY % Change                  69.5%         1.4%         -2.9%    -2.6%         0.9%            -1.8%           -5.0%
  Net Producer De-Hedging           -236         -108            11      -20            0                0               0
  TOTAL SUPPLY                     4,070        4,194         4,515    4,453        4,502            4,479           4,427
    YoY % Change                  17.9%         3.0%          7.6%    -1.4%         1.1%            -0.5%           -1.2%
  DEMAND
  Jewellery                        1,814        2,017     1,974        1,908        2,004           2,084            2,167
  Other                              410          466       453          428          424             428              439
  Total Fabrication                2,224        2,483     2,427        2,336        2,427           2,512            2,606
    YoY % Change                 -19.6%        11.7%     -2.3%        -3.7%         3.9%            3.5%             3.7%
  ETF's                              623          382       185          279         -200             -10                0
  Bar & Coin Demand                  780         1205      1515         1256         1382            1409             1437
  Central Bank Sales                 -34           77       457          535          400             300              200
  TOTAL DEMAND                     3,593        4,147     4,584        4,406        4,009           4,211            4,243
    YoY % Change                  -3.4%        15.4%     10.5%        -3.9%        -9.0%            5.0%             0.8%
  IMPLIED NET INVESTMENT            478           47           -69       47          493              268             184

                                                                               SOURCES: WGC, IMF, BLOOMBERG, CIMB FORECASTS




                                                        17
Asia Pacific | COMMODITIES STRATEGY
July 3, 2013




                                  5. ENERGY
                                  5.1 Crude markets remain finely balanced
                                  Despite a plethora of supply-side issues, as well as increased uncertainty
                                  around economic growth in China and fears of the Fed withdrawing liquidity
                                  from the market, crude oil prices have remained surprisingly stable.
                                  There is no doubt that risks to Chinese growth have increased over the past
                                  month. The economy continues to weaken and in our view offers little scope for
                                  upside surprise in the coming months. Growth expectations for 2014 continue
                                  to be taken down, with the risk that 2014 will more than likely show a further
                                  decline relative to 2013. Liquidity is tightening and, while rates should begin to
                                  normalise from current distress levels, the new normal will be one where the
                                  cost of interbank funding remains around 150-200bp higher than in the first
                                  half of the year, with the availability lower as corporate deleveraging continues.
                                  However, supply-side issues will remain an important balance force in this
                                  market and, as such, we continue to see the overall market dynamic conducive
                                  to prices moving to the top end of our forecast price range of US$100-120/bbl
                                  over 2H13.

  Figure 36: Non-OPEC supply                              Figure 37: OPEC supply
        million b/d                                             million b/d
   54                                                      33
                                                                              Title:
                                                                              Source:
   53
                                                           32
                                                                              Please fill in the values above to have them entered in your rep
   52
                                                           31

   51

                                                           30
   50


   49                                                      29



   48
                                                           28
        May-11




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        Jun-12
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        Jan-12




        Jan-13
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        Mar-13
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        Apr-13
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                                                                Nov-12
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                                                                Aug-12
                                                                Sep-12



                                           SOURCE: EIA                                                                 SOURCE: EIA




                                  Geopolitical risks are never far from the surface in the oil market and they have
                                  once again raised their head over the past month:
                                   Turkey: The Kirkuk-to-Ceyhen pipeline that transports crude from the
                                    Kirkuk field in the north of Iraq to Turkey was bombed twice in June,
                                    following a similar spate of attacks in May. During May, around 275,000b/d
                                    were exported through the pipeline, down from a typical average of between
                                    300,000b/d and 350,000b/d. The attacks have contributed to Iraq’s
                                    inability to reach its own export target of 2.9mmb/d during 2013.
                                   Syria: Unrest in Syria shows no signs of slowing, and the US and Russia
                                    were unable to agree on a course of action during a meeting at the recent G8
                                    summit in Northern Ireland. The Obama administration has pledged to arm
                                    the rebel forces in Syria in order to facilitate a more swift removal of
                                    President Assad and his regime. With this in mind, we now see no end to the
                                    problems faced in Syria or for the resumption of former crude supply levels
                                    until beyond 2014, with overall liquids production to remain at around
                                    150,000b/d until 2015 at the earliest.
                                   Iran: Despite the election of a new president, Hassan Rohani, in Iran, we
                                    are not expecting enough of a change in Iran’s nuclear enrichment
                                    programme to allow for the US, which has not changed its stringent
                                    demands on Iran, to push for a near-term lifting of sanctions. This should
                                    see output remain at 2.7mmb/d for the foreseeable future.

                                                     18
Asia Pacific | COMMODITIES STRATEGY
July 3, 2013




                                  There have also been numerous other supply-side issues impacting the market,
                                  including flooding in western Canada which shut in Canadian production. Also:
                                   Nigeria: Production from the Total-operated Usan development was halted
                                    in late May and force majeure was declared on exports. Although
                                    production restarted in late June, around four weeks after shut-down, force
                                    majeure remains in place. Production was reported to have reached around
                                    80,000b/d, down from a first quarter 2013 average of 111,000b/d. The loss
                                    of Usan crude exacerbates an already bleak outlook for Nigeria, where crude
                                    theft continues to plague onshore and delta operations.
                                   Canada: Severe flooding in Alberta during late June and subsequent
                                    ground movement led to its shutdown. Throughput at a number of the most
                                    affected parts of the export pipeline system was also reduced as a
                                    precautionary measure and this has had a knock-on effect on production
                                    levels at some projects. The scale of the impact is in the order of 100,000b/d.
                                    Total Canada liquids production in 2013 is expected to average 3.96mmb/d
                                    (revised down by 7,000b/d), an increase of 250,000b/d from 2012 (revised
                                    up by 7,000b/d).
                                  All that said, we remain convinced that fundamentals will remain supportive in
                                  the short term, which should allow Saudi Arabia to manage supply and guide
                                  prices back to their comfort zone of US$110-120/bbl (Brent).
                                  However, the premium associated with geopolitical risks has become much
                                  more muted than before and to date has only helped support crude oil prices,
                                  rather than provide an upward catalyst with great force. As such, spikes in
                                  prices are unlikely.
                                  We think fundamentals will improve incrementally over the course of 2013.
                                  Global crude oil markets have just come out of a spring soft patch and appear to
                                  be entering a more supportive 3Q, although risks to this scenario have
                                  increased over the past few weeks.

                                  5.2 Signs of improving demand emerge in thermal coal
                                  In a move long overdue, in our view, the Indian government has decided to
                                  allow some power companies to pass on the costs of foreign coal to customers.
                                  To date, utilities have been able to obtain low-cost coal from domestic
                                  producers (mainly Coal India). However, with supply growth struggling to keep
                                  up with demand, utilities have been forced onto the international market. In
                                  many cases, they have pushed back from using the higher-cost international
                                  coal due to government-regulated electricity tariffs. This has caused a massive
                                  power shortage in India, with black-outs occurring regularly.
                                  It is our understanding that any power company with a Fuel Supply Agreement
                                  (FSA) from Coal India and facing domestic coal shortages (on lower coal
                                  production from Coal India) can import coal and pass the additional cost
                                  burden (ie, the difference between the imported coal price and the domestic
                                  coal price) on to consumers.
                                  We have long argued that the growing strain from India's energy demand on its
                                  domestic coal market would result in its reliance on the international thermal
                                  coal growing substantially. To date, this has been held back by economic
                                  reasons. This move has the potential to open the flood gates for the imported
                                  thermal coal.
                                  Recent import volumes have actually been very strong. According to data from
                                  exporting countries, volumes actually increased by 120% yoy to 36.3Mt in 1Q13
                                  (Figure 38). At that run rate, we estimate we could see India imports hitting
                                  nearly 190Mt this year, up from 88Mt in 2012.




                                                    19
Asia Pacific | COMMODITIES STRATEGY
July 3, 2013




  Figure 38: Indian thermal coal imports                                                                                                                                                                  Figure 39: India's installed capacity of power utilities
          Mt                                                                                                                                                      % chg yoy                                       gigaw att
   12                                                                                                                                                                                         150%
                                                                                                                                                                                                            160                  Title:
                                                                                                                                                                                              130%                               Source:
   10                                                                                                                                                                                                       150
                                                                                                                                                                                              110%
                                                                                                                                                                                                                                 Please fill in the values above to have them entered in your report
                                                                                                                                                                                                            140
                                                                                                                                                                                              90%
    8
                                                                                                                                                                                              70%           130

    6                                                                                                                                                                                         50%           120

                                                                                                                                                                                              30%
                                                                                                                                                                                                            110
    4
                                                                                                                                                                                              10%
                                                                                                                                                                                                            100
                                                                                                                                                                                              -10%
    2
                                                                                                                                                                                              -30%           90

    0                                                                                                                                                                                         -50%           80
                          May-10




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                                                                                                                                                                                                                  Aug-12
                                                               Thermal Coal Imports                                          % change yoy                                                                                         Total Thermal Capacity   Coal

                                                                                                                                                                             SOURCE: GTIS                                                                           SOURCE: BLOOMBERG




                                                                                                                                                Our bottom-up analysis suggests India’s thermal coal demand should grow at a
                                                                                                                                                CAGR of 13% (FY11-15F) driven by rising demand from the power sector
                                                                                                                                                (expected to grow at a 14% CAGR). However, India's domestic supply has been
                                                                                                                                                lagging demand due to issues such as delays in environmental/forest clearance
                                                                                                                                                and restrictions imposed on coal projects in highly polluted clusters. This has
                                                                                                                                                resulted domestic production growing by only 3.2% (CAGR) since 2007, despite
                                                                                                                                                India have extensive coal reserves (with a reserve life of more than 100 years,
                                                                                                                                                based on current production levels). Based on this, we calculate India's coal
                                                                                                                                                deficit could run as high as 350Mt by 2015.
                                                                                                                                                In the short term, with the monsoon season still setting in in India, we expect
                                                                                                                                                imports to ease back slightly over the next few months as coal transportation
                                                                                                                                                around the country becomes more difficult. Demand has also been impacted by
                                                                                                                                                uncertainty surrounding the potential ban on imported low rank coal in China.
                                                                                                                                                When combined with tepid industrial growth in China, thermal coal prices are
                                                                                                                                                unlikely to see much upside in the short term.
                                                                                                                                                However, with Indian demand expected to pick up strongly again later this year,
                                                                                                                                                we believe this move could tighten up the currently oversupplied markets over
                                                                                                                                                the course of the next six months and therefore push coal prices higher.




                                                                                                                                                                                                     20
Asia Pacific | COMMODITIES STRATEGY
July 3, 2013




                                                                                                                                                               6. STEEL-MAKING RAW MATERIALS
                                                                                                                                                               6.1 Chinese steel production looking toppy
                                                                                                                                                               Iron ore prices came under further downward pressure this month as concerns
                                                                                                                                                               around Chinese growth and weakening rebar markets weighed on the bulk
                                                                                                                                                               commodity. For the moment, however, supply/demand fundamentals remain
                                                                                                                                                               supportive. Chinese steel production remains at historically high levels of above
                                                                                                                                                               780Mtpa (Figure 40). We have also seen iron ore inventories held at Chinese
                                                                                                                                                               ports remain at low levels (Figure 41).

  Figure 40: Daily Chinese steel production versus iron ore price                                                                                                                                                     Figure 41: Iron ore inventories held at Chinese ports
              US$/t                                                                                                                                                                        Mt/d                                   Mt
   210                                                                                                                                                                                                  2.30           105
                                                                                                                                                                                                                                                                                      Title:
                                                                                                                                                                                                        2.20
                                                                                                                                                                                                                       100
                                                                                                                                                                                                                                                                                      Source:
   190
                                                                                                                                                                                                        2.10
                                                                                                                                                                                                                        95
                                                                                                                                                                                                                                                                                      Please fill in the values above to have them entered in your rep
   170
                                                                                                                                                                                                        2.00

                                                                                                                                                                                                                        90
   150                                                                                                                                                                                                  1.90

                                                                                                                                                                                                        1.80            85
   130
                                                                                                                                                                                                        1.70
                                                                                                                                                                                                                        80
   110
                                                                                                                                                                                                        1.60
                                                                                                                                                                                                                        75
    90                                                                                                                                                                                                  1.50
                                             Jun-11




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                                                                                                                                                                                                                             Sep-12
                              Spot Iron Ore Price ($/t CFR China)                                                                              Average Daily Production (Mt/d)

                                                                                                                                                            SOURCES: CIMB, BLOOMBERG                                                                                                                                                                                    SOURCES: BLOOMBERG




                                                                                                                                                               However, there does appear to be an overshoot when compared with the
                                                                                                                                                               country’s current economic fundamentals. Increasingly, this year looks like a
                                                                                                                                                               repeat of 2011, when steel production turned negative in the second half as the
                                                                                                                                                               broader economy also struggled. Although steel supply growth has now
                                                                                                                                                               stagnated, raw production runs remain at a high level and steel continues to
                                                                                                                                                               outperform other components of industrial production, such as electricity
                                                                                                                                                               generation (Figure 42).
                                                                                                                                                               Consequently, we expect China’s steel production to, at least, slow along
                                                                                                                                                               seasonal lines over the 2H but with the risk (particularly if steel inventory backs
                                                                                                                                                               up further down the production chain) that run-rate cuts will be even harsher
                                                                                                                                                               when they emerge.

  Figure 42: Chinese steel vs electricity production                                                                                                                                                                  Figure 43: Chinese construction activity
                   % change yoy                                                                                                                                                                                               % change yoy
    20                                                                                                                                                                                                                 60
                                                                                                                                                                                                                                                                                              Title:
                                                                                                                                                                                                                       50                                                                     Source:
    15
                                                                                                                                                                                                                       40                                                                     Please fill in the values above to have them entered in your r
    10
                                                                                                                                                                                                                       30


     5                                                                                                                                                                                                                 20

                                                                                                                                                                                                                       10
     0
                                                                                                                                                                                                                        0

     -5                                                                                                                                                                                                                -10

                                                                                                                                                                                                                       -20
    -10
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                                                                                          Electricity                                       Steel                                                                                                                                   Starts                                Completions                                   Sales

                                                                                                                                               SOURCES: CHINA NBS, BLOOMBERG                                                                                                                                                                                            SOURCES: BLOOMBERG




                                                                                                                                                                                                                 21
Asia Pacific | COMMODITIES STRATEGY
July 3, 2013




                                                                                                                                                So far in 2013, outside of Australia supply growth has been limited. This has
                                                                                                                                                kept the market tight. Any change to this situation either way will have a large
                                                                                                                                                bearing and how prices will perform in 2H13.
                                                                                                                                                We estimate more than 75% of India’s iron ore supply is either uneconomic or
                                                                                                                                                constrained by increasingly stringent environmental and regulatory issues. The
                                                                                                                                                ban on iron ore exports from Goa and Karnataka is unlikely to be resolved soon.
                                                                                                                                                On top of this, we have seen a significant increase in cash costs in India. The
                                                                                                                                                combined effect of higher export duties and rail rates increased the mines’ FOB
                                                                                                                                                cash cost from US$77/t in 2012 to US$126/t in 2013. As such, we believe it is
                                                                                                                                                highly likely that Indian iron ore exports will continue to fall to a point where
                                                                                                                                                the country will become self-sufficient.
                                                                                                                                                In Brazil, Vale is finding it difficult to maintain output, let alone ramp up in
                                                                                                                                                Brazil, while Africa is taking time to justify its status as the new frontier.

  Figure 44: Indian iron ore exports remain at depressed levels                                                                                                                                           Figure 45: Growth in Brazilian iron ore exports has stagnated
           Mt                                                                                                                                             % change yoy                                           Mt                                                                                                                    % change yoy
   14                                                                                                                                                                                        100%           40                                                                                                                                                  50%
                                                                                                                                                                                                                                                               Title:
                                                                                                                                                                                                            35
                                                                                                                                                                                                                                                               Source:                                                                                          40%
   12
                                                                                                                                                                                             50%
   10
                                                                                                                                                                                                            30                                                 Please fill in the values above to have them entered in your rep
                                                                                                                                                                                                                                                                                                              30%


                                                                                                                                                                                             0%             25                                                                                                                                                  20%
    8
                                                                                                                                                                                                            20                                                                                                                                                  10%
    6
                                                                                                                                                                                             -50%
                                                                                                                                                                                                            15                                                                                                                                                  0%

    4
                                                                                                                                                                                                            10                                                                                                                                                  -10%
                                                                                                                                                                                             -100%
    2                                                                                                                                                                                                        5                                                                                                                                                  -20%

    0                                                                                                                                                                                        -150%           0                                                                                                                                                  -30%
                                                                                                                                                                                                                                    May-11




                                                                                                                                                                                                                                                                                                                                                       May-13
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                                                                                                   Sep-11




                                                                                Exports                         % chg yoy                                                                                                                                                 Exports                      % chg yoy

                                                                                 SOURCES: BLOOMBERG, CIMB, COMPANY REPORTS                                                                                                                                                              SOURCES: GTIS, CIMB, COMPANY REPORTS




                                                                                                                                                Overall, we still expect the market to remain relatively tight over the next six
                                                                                                                                                months, and therefore prices will need to remain between the 90th percentile
                                                                                                                                                and highest-cost producer to keep the market balanced.
                                                                                                                                                Clearly, the weak rebar market could push prices lower, but we believe
                                                                                                                                                ultimately they will be well supported at around US$110/t by high-cost Chinese
                                                                                                                                                domestic iron ore supply (which has already showed signs of easing back).




                                                                                                                                                                                                     22
Asia Pacific | COMMODITIES STRATEGY
July 3, 2013




                                                               7. CHARTS
                                                               7.1 Commodity prices
  Figure 46: Copper price                                      Figure 47: Aluminium price                                     Figure 48: Nickel price
           $/t                                                            $/t                                                          $/t
   8,500                                                       2,300                                                          19,500

   8,300

   8,100                                                       2,200                                                          18,500


   7,900
                                                               2,100                                                          17,500
   7,700

   7,500                                                       2,000                                                          16,500

   7,300
                                                               1,900                                                          15,500
   7,100

   6,900
                                                               1,800                                                          14,500
   6,700

   6,500                                                       1,700                                                          13,500
       Jul-12     Sep-12   Nov-12   Jan-13   Mar-13   May-13       Jul-12       Sep-12 Nov-12      Jan-13 Mar-13 May-13            Jul-12     Sep-12   Nov-12   Jan-13   Mar-13   May-13


                                       SOURCES: BLOOMBERG                                              SOURCES: BLOOMBERG                                          SOURCES: BLOOMBERG




  Figure 49: Zinc price                                        Figure 50: Lead price                                          Figure 51: Tin price
           $/t                                                            $/t                                                          $/t
  2,300                                                        2,600                                                          26,000

                                                               2,500                                                          25,000
  2,200
                                                               2,400                                                          24,000

  2,100                                                        2,300                                                          23,000

                                                               2,200                                                          22,000
  2,000
                                                               2,100                                                          21,000
  1,900
                                                               2,000                                                          20,000

  1,800                                                        1,900                                                          19,000

                                                               1,800                                                          18,000
  1,700
                                                               1,700                                                          17,000

  1,600                                                        1,600                                                          16,000
      Jul-12     Sep-12    Nov-12   Jan-13   Mar-13   May-13       Jul-12       Sep-12   Nov-12    Jan-13   Mar-13   May-13        Jul-12     Sep-12   Nov-12   Jan-13   Mar-13   May-13


                                       SOURCES: BLOOMBERG                                              SOURCES: BLOOMBERG                                          SOURCES: BLOOMBERG




  Figure 52: Gold price                                        Figure 53: Silver price                                        Figure 54: Platinum price
           $/oz                                                        $/oz                                                            $/oz
  1,900                                                         36                                                            1,800

                                                                34                                                            1,750
  1,800
                                                                                                                              1,700
                                                                32
  1,700
                                                                                                                              1,650
                                                                30
  1,600
                                                                                                                              1,600
                                                                28
  1,500                                                                                                                       1,550
                                                                26
                                                                                                                              1,500
  1,400
                                                                24
                                                                                                                              1,450
  1,300
                                                                22
                                                                                                                              1,400
  1,200                                                         20                                                            1,350

  1,100                                                         18                                                            1,300
      Jul-12     Sep-12    Nov-12   Jan-13   Mar-13   May-13     Jul-12     Sep-12       Nov-12    Jan-13   Mar-13   May-13       Jul-12     Sep-12    Nov-12   Jan-13   Mar-13   May-13


                                       SOURCES: BLOOMBERG                                              SOURCES: BLOOMBERG                                          SOURCES: BLOOMBERG




                                                                                                  23
Asia Pacific | COMMODITIES STRATEGY
July 3, 2013




  Figure 55: Iron ore price                                           Figure 56: Hard coking coal price                                     Figure 57: Thermal coal (newc) price
              $/t                                                                $/t                                                                $/t
              CFR                                                                FOB                                                                FOB
   170        China                                                   250                                                                    98

   160                                                                                                                                       96
                                                                      230
   150                                                                                                                                       94

   140                                                                210                                                                    92

   130                                                                                                                                       90
                                                                      190
   120                                                                                                                                       88

   110                                                                170                                                                    86

   100                                                                                                                                       84
                                                                      150
    90                                                                                                                                       82

    80                                                                130                                                                    80
     Jul-12      Sep-12   Nov-12       Jan-13     Mar-13    May-13      May-12        Jul-12     Sep-12    Nov-12        Jan-13   Mar-13      Jul-12       Sep-12   Nov-12   Jan-13   Mar-13   May-13


                                           SOURCES: BLOOMBERG                                             SOURCES: BLOOMBERG, CIMB                                              SOURCES: BLOOMBERG




  Figure 58: Brent oil price                                          Figure 59: WTI oil price                                              Figure 60: Henry Hub nat gas price
            $/bbl                                                             $/bbl                                                                 $/mcf
   125                                                                100                                                                     5.0

                                                                       98
   120                                                                                                                                        4.5
                                                                       96

   115                                                                 94                                                                     4.0

                                                                       92
   110                                                                                                                                        3.5
                                                                       90
   105                                                                                                                                        3.0
                                                                       88

   100                                                                 86                                                                     2.5

                                                                       84
    95                                                                                                                                        2.0
                                                                       82

    90                                                                 80                                                                     1.5
     Jul-12      Sep-12   Nov-12       Jan-13     Mar-13    May-13      Jul-12     Sep-12        Nov-12    Jan-13       Mar-13    May-13        Jul-12     Sep-12   Nov-12   Jan-13   Mar-13    May-13


                                           SOURCES: BLOOMBERG                                                     SOURCES: BLOOMBERG                                            SOURCES: BLOOMBERG




  Figure 61: Soybeans price                                           Figure 62: Wheat price                                                Figure 63: Sugar price
              $/bu                                                               $/bu                                                               c/lb
                                                                                                                                             24.0
     14.5                                                               9.5

                                                                                                                                             23.0
     14.0                                                               9.0
                                                                                                                                             22.0

     13.5                                                               8.5
                                                                                                                                             21.0


     13.0                                                               8.0                                                                  20.0

                                                                                                                                             19.0
     12.5                                                               7.5

                                                                                                                                             18.0
     12.0                                                               7.0
                                                                                                                                             17.0

     11.5                                                               6.5
                                                                                                                                             16.0


     11.0                                                               6.0                                                                  15.0
        Jul-12       Sep-12   Nov-12     Jan-13    Mar-13    May-13       Jul-12        Sep-12    Nov-12       Jan-13    Mar-13    May-13       Jul-12     Sep-12   Nov-12   Jan-13   Mar-13   May-13


                                           SOURCES: BLOOMBERG                                                     SOURCES: BLOOMBERG                                            SOURCES: BLOOMBERG




                                                                                                          24
Asia Pacific | COMMODITIES STRATEGY
July 3, 2013




                                                                               7.2 Commodity forward curves
  Figure 64: Aluminium forward curve                                           Figure 65: Copper forward curve                          Figure 66: Nickel forward curve
                $/t                                                                    $/t
                                                                               7,900                                                     17,500
   2,700                                                                                                                                          $/t
   2,600                                                                       7,800
                                                                                                                                         17,000

   2,500                                                                       7,700
                                                                                                                                         16,500
   2,400                                                                       7,600
                                                                                                                                         16,000
   2,300                                                                       7,500
                                                                                                                                         15,500
   2,200                                                                       7,400
                                                                                                                                         15,000
   2,100                                                                       7,300

   2,000                                                                       7,200                                                     14,500

   1,900                                                                       7,100                                                     14,000

   1,800                                                                       7,000                                                     13,500
   1,700                                                                       6,900                                                     13,000
           1M

                      13M

                            26M

                                   38M

                                         50M

                                               62M

                                                      74M

                                                            86M

                                                                  98M

                                                                        110M




                                                                                         7M




                                                                                        38M




                                                                                        86M
                                                                                         1M

                                                                                        13M
                                                                                        20M
                                                                                        26M
                                                                                        32M

                                                                                        44M
                                                                                        50M
                                                                                        56M
                                                                                        62M
                                                                                        68M
                                                                                        74M
                                                                                        80M

                                                                                        92M
                                                                                        98M


                                                                                       116M
                                                                                       104M
                                                                                       110M




                                                                                                                                                  26M




                                                                                                                                                  44M
                                                                                                                                                   1M
                                                                                                                                                   4M
                                                                                                                                                   7M
                                                                                                                                                  10M
                                                                                                                                                  13M
                                                                                                                                                  16M
                                                                                                                                                  20M
                                                                                                                                                  23M

                                                                                                                                                  29M
                                                                                                                                                  32M
                                                                                                                                                  35M
                                                                                                                                                  38M
                                                                                                                                                  41M

                                                                                                                                                  47M
                                                                                                                                                  50M
                                                                                                                                                  53M
                                                                                                                                                  56M
                                                                                                                                                  59M
                                                                                                                                                  62M
                        Latest             1-Jun-13               2-Apr-13                    Latest         1-Jun-13      2-Apr-13                     Latest                    1-Jun-13                        2-Apr-13


                                  SOURCES: CIMB, COMPANY REPORTS                                       SOURCES: CIMB, COMPANY REPORTS                             SOURCES: CIMB, COMPANY REPORTS




  Figure 67: Lead forward curve                                                Figure 68: Zinc forward curve                            Figure 69: Tin forward curve
    2,400                                                                      2,200    $/t                                              23,500    $/t
                 $/t
                                                                                                                                         23,000
    2,300                                                                      2,100
                                                                                                                                         22,500

    2,200                                                                      2,000                                                     22,000

                                                                                                                                         21,500
    2,100                                                                      1,900
                                                                                                                                         21,000

    2,000                                                                      1,800                                                     20,500

                                                                                                                                         20,000
    1,900                                                                      1,700
                                                                                                                                         19,500

    1,800                                                                      1,600                                                     19,000
                                                                                                                                                  1M
                                                                                                                                                        2M
                                                                                                                                                             3M
                                                                                                                                                                  4M
                                                                                                                                                                       5M
                                                                                                                                                                            6M
                                                                                                                                                                                 7M
                                                                                                                                                                                      8M
                                                                                                                                                                                           9M
                                                                                                                                                                                                10M
                                                                                                                                                                                                      11M
                                                                                                                                                                                                            12M
                                                                                                                                                                                                                  13M
                                                                                                                                                                                                                        14M
                                                                                                                                                                                                                              15M
                                                                                                                                                                                                                                    16M
              4M
              1M

              7M
             10M




             50M

             56M

             62M
             13M
             16M
             20M
             23M
             26M
             29M
             32M
             35M
             38M
             41M
             44M
             47M

             53M

             59M




                                                                                        1M
                                                                                        4M
                                                                                        7M




                                                                                       56M
                                                                                       59M
                                                                                       10M
                                                                                       13M
                                                                                       16M
                                                                                       20M
                                                                                       23M
                                                                                       26M
                                                                                       29M
                                                                                       32M
                                                                                       35M
                                                                                       38M
                                                                                       41M
                                                                                       44M
                                                                                       47M
                                                                                       50M
                                                                                       53M


                                                                                       62M




                        Latest             1-Jun-13               2-Apr-13                    Latest         1-Jun-13      2-Apr-13                     Latest                    1-Jun-13                        2-Apr-13


                                  SOURCES: CIMB, COMPANY REPORTS                                       SOURCES: CIMB, COMPANY REPORTS                             SOURCES: CIMB, COMPANY REPORTS




  Figure 70: Iron ore forward curve                                            Figure 71: Thermal coal (newc) forward                   Figure 72: US coal forward curve
                                                                               curve
   140      $/t CFR                                                             120    $/t FOB
                                                                                                                                         80
                                                                                                                                              $/t FOB
             China
                                                                                115
   130                                                                                                                                   75

                                                                                110
   120                                                                                                                                   70
                                                                                105

   110                                                                          100                                                      65


                                                                                 95
   100                                                                                                                                   60

                                                                                 90
    90                                                                                                                                   55
                                                                                 85

    80                                                                           80                                                      50
           22M



           30M
            1M
            3M
            5M
            7M
            9M
           11M
           13M
           15M
           17M
           20M

           24M
           26M
           28M

           32M
           34M
           36M
           38M
           40M
           42M
           44M




                                                                                                                                               5M




                                                                                                                                              32M
                                                                                                                                               1M
                                                                                                                                               3M

                                                                                                                                               7M
                                                                                                                                               9M
                                                                                                                                              11M
                                                                                                                                              13M
                                                                                                                                              15M
                                                                                                                                              17M
                                                                                                                                              20M
                                                                                                                                              22M
                                                                                                                                              24M
                                                                                                                                              26M
                                                                                                                                              28M
                                                                                                                                              30M

                                                                                                                                              34M
                                                                                                                                              36M
                                                                                                                                              38M
                                                                                                                                              40M
                                                                                       1M
                                                                                       5M
                                                                                       9M




                                                                                      46M
                                                                                      13M
                                                                                      17M
                                                                                      22M
                                                                                      26M
                                                                                      30M
                                                                                      34M
                                                                                      38M
                                                                                      42M

                                                                                      50M
                                                                                      54M
                                                                                      58M
                                                                                      62M
                                                                                      66M
                                                                                      70M




                        Latest             1-Jun-13               2-Apr-13                    Latest        15-Dec-12     16-Oct-12                    Latest                    15-Dec-12                        16-Oct-12


                                  SOURCES: CIMB, COMPANY REPORTS                                       SOURCES: CIMB, COMPANY REPORTS                             SOURCES: CIMB, COMPANY REPORTS




                                                                                                            25
Asia Pacific | COMMODITIES STRATEGY
July 3, 2013




  Figure 73: Gold forward curve                            Figure 74: Silver forward curve                          Figure 75: Platinum forward curve
   1700       $/oz                                          31     $/oz                                              1,600      $/oz
   1650
                                                            29                                                       1,550
   1600

   1550
                                                            27                                                       1,500
   1500

   1450                                                     25
                                                                                                                     1,450

   1400
                                                            23
   1350                                                                                                              1,400

   1300
                                                            21
                                                                                                                     1,350
   1250

   1200                                                     19




                                                                  15M
                                                                   1M
                                                                   2M
                                                                   3M
                                                                   4M
                                                                   5M
                                                                   6M
                                                                   7M
                                                                   8M
                                                                   9M
                                                                  10M
                                                                  11M
                                                                  12M
                                                                  13M
                                                                  14M

                                                                  16M
                                                                  17M
                                                                  18M
                                                                                                                     1,300
           5M
           1M
           2M
           3M
           4M

           6M
           7M
           8M
           9M



          12M
          10M
          11M

          13M
          14M
          15M
          16M
          17M
          18M




                                                                                                                                                        3M
                                                                                                                                     1M



                                                                                                                                                2M




                                                                                                                                                                 4M



                                                                                                                                                                            5M
                 Latest         1-Jun-13      2-Apr-13                    Latest         1-Jun-13       2-Apr-13                     Latest          1-Jun-13         2-Apr-13


                          SOURCES: CIMB, COMPANY REPORTS                           SOURCES: CIMB, COMPANY REPORTS                             SOURCES: CIMB, COMPANY REPORTS




  Figure 76: WTI forward curve                             Figure 77: Brent forward curve                           Figure 78: HH gas forward curve
   100    $/bbl                                             115     $/bbl                                           5.50     $/MMBtu

                                                            110
    95                                                                                                              5.00
                                                            105


                                                            100
    90                                                                                                              4.50

                                                             95

    85                                                                                                              4.00
                                                             90


                                                             85
    80                                                                                                              3.50
                                                             80


    75                                                       75                                                     3.00
           1M
           5M
           9M




          34M
          38M




                                                                    1M
                                                                    4M
                                                                    7M




                                                                   23M




                                                                   53M




                                                                                                                            1M
                                                                                                                            5M
                                                                                                                            9M




                                                                                                                           30M
                                                                                                                           34M




                                                                                                                           70M
          13M
          17M
          22M
          26M
          30M


          42M
          46M
          50M
          54M
          58M
          62M
          66M
          70M
          74M
          78M




                                                                   10M
                                                                   13M
                                                                   16M
                                                                   20M

                                                                   26M
                                                                   29M
                                                                   32M
                                                                   35M
                                                                   38M
                                                                   41M
                                                                   44M
                                                                   47M
                                                                   50M




                                                                                                                           13M
                                                                                                                           17M
                                                                                                                           22M
                                                                                                                           26M



                                                                                                                           38M
                                                                                                                           42M
                                                                                                                           46M
                                                                                                                           50M
                                                                                                                           54M
                                                                                                                           58M
                                                                                                                           62M
                                                                                                                           66M

                                                                                                                           74M
                 Latest         1-Jun-13      2-Apr-13                    Latest         1-Jun-13       2-Apr-13                     Latest          1-Jun-13         2-Apr-13


                          SOURCES: CIMB, COMPANY REPORTS                           SOURCES: CIMB, COMPANY REPORTS                             SOURCES: CIMB, COMPANY REPORTS




                                                           7.3 Inventories
  Figure 79: Copper inventories                            Figure 80: Aluminium inventories                         Figure 81: Nickel inventories
   750    kt                                               5,500     kt                                             200        kt


                                                           5,400
   650                                                                                                              180

                                                           5,300

   550                                                                                                              160
                                                           5,200


   450                                                     5,100                                                    140


                                                           5,000
   350                                                                                                              120
                                                           4,900

   250                                                                                                              100
                                                           4,800


   150                                                     4,700
                                                               Jul-12     Sep-12 Nov-12 Jan-13 Mar-13 May-13         80
     Jul-12    Sep-12 Nov-12 Jan-13 Mar-13 May-13                                                                     Jul-12        Sep-12 Nov-12    Jan-13 Mar-13 May-13

                           SOURCES: LME, BLOOMBERG, CIMB                            SOURCES: LME, BLOOMBERG, CIMB                              SOURCES: LME, BLOOMBERG, CIMB




                                                                                        26
Asia Pacific | COMMODITIES STRATEGY
July 3, 2013




  Figure 82: Zinc inventories                                     Figure 83: Lead inventories                                  Figure 84: Tin inventories
   1,300        kt                                                 380       kt                                                 16        kt


                                                                   360
                                                                                                                                15
   1,200
                                                                   340
                                                                                                                                14
                                                                   320
   1,100
                                                                                                                                13
                                                                   300

   1,000                                                           280                                                          12

                                                                   260
                                                                                                                                11
    900
                                                                   240
                                                                                                                                10
    800                                                            220

                                                                                                                                 9
                                                                   200

    700
      Jul-12          Sep-12 Nov-12 Jan-13 Mar-13 May-13           180                                                           8
                                                                     Jul-12        Sep-12 Nov-12    Jan-13 Mar-13 May-13         Jul-12        Sep-12   Nov-12   Jan-13 Mar-13 May-13

                                 SOURCES: LME, BLOOMBERG, CIMB                                SOURCES: LME, BLOOMBERG, CIMB                               SOURCES: LME, BLOOMBERG, CIMB




  Figure 85: Iron ore (China) inventories                         Figure 86: Gold ETF holdings                                 Figure 87: Platinum ETF holdings
           Mt                                                            Moz                                                         Moz
  105                                                             90                                                           2.5


  100                                                             85
                                                                                                                               2.0
                                                                  80
   95

                                                                  75
                                                                                                                               1.5
   90

                                                                  70
   85
                                                                                                                               1.0
                                                                  65

   80
                                                                  60
                                                                                                                               0.5
   75
                                                                  55


   70                                                             50                                                           0.0
    Jul-12       Sep-12       Nov-12   Jan-13 Mar-13 May-13        Jul-12         Sep-12   Nov-12   Jan-13   Mar-13   May-13     Jul-12        Sep-12   Nov-12   Jan-13 Mar-13 May-13

                                       SOURCES: BLOOMBERG, CIMB                                     SOURCES: BLOOMBERG, CIMB                                     SOURCES: BLOOMBERG, CIMB




  Figure 88: DOE crude oil inventories                            Figure 89: DOE HH gas inventories                            Figure 90: China thermal coal inventories
           '000 bbl                                               4.5    bcf                                                    31   Mt
  410


  400                                                                                                                           29
                                                                  4.0

  390                                                                                                                           27

                                                                  3.5
  380                                                                                                                           25


  370                                                             3.0                                                           23


  360                                                                                                                           21
                                                                  2.5
  350
                                                                                                                                19

  340                                                             2.0
                                                                                                                                17

  330
    Jul-12           Sep-12   Nov-12   Jan-13 Mar-13 May-13       1.5                                                           15
                                                                    Jul-12        Sep-12   Nov-12   Jan-13 Mar-13 May-13         Jul-12        Sep-12   Nov-12   Jan-13   Mar-13   May-13

                                       SOURCES: BLOOMBERG, CIMB                                     SOURCES: BLOOMBERG, CIMB                                     SOURCES: BLOOMBERG, CIMB




                                                                                                    27
Asia Pacific | COMMODITIES STRATEGY
July 3, 2013




                                  8. RESEARCH REPORTS
                                  Commodities Strategy: Good as gold? Not this time (26 June 2013)
                                  Commodities Update: China Commodity Trade Data April 2013 (24 June 2013)
                                  Commodities Update: Chalco production cuts too little too late (6 June 2013)
                                  Commodities Strategy: Commodity Pulse – Timing the turnaround (4 June
                                  2013)
                                  Commodities Update: China Commodity Trade Data April 2013 (22 May 2013)
                                  Commodities Strategy: Australia-China Chartpack (14 May 2013)
                                  Commodities Strategy: Bearish sentiment overdone (16 May 2013)
                                  Commodities Strategy: A copper-bottomed guarantee (22 April 2013)
                                  Commodities Strategy: Iron ore – Two sides to every story (28 March 2013)
                                  Commodities Strategy: One last hurrah for gold (20 February 2013)




                                                   28
Asia Pacific | COMMODITIES STRATEGY
July 3, 2013




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 invitation or inducement to engage in investment activity (within the meaning of section 21 of the Financial Services and Markets Act 2000) in connection with any investments to which
 this report relates may otherwise lawfully be communicated or caused to be communicated (all such persons together being referred to as “relevant persons”). This report is directed
 only at relevant persons and must not be acted on or relied on by persons who are not relevant persons. Any investment or investment activity to which this report relates is available
 only to relevant persons and will be engaged in only with relevant persons.
 Only where this report is labelled as non-independent, it does not provide an impartial or objective assessment of the subject matter and does not constitute independent "investment
 research" under the applicable rules of the Financial Services Authority in the UK. Consequently, any such non-independent report will not have been prepared in accordance with
 legal requirements designed to promote the independence of investment research and will not subject to any prohibition on dealing ahead of the dissemination of investment research.
 United States: This research report is distributed in the United States of America by CIMB Securities (USA) Inc, a U.S.-registered broker-dealer and a related company of CIMB
 Research Pte Ltd, CIMB Investment Bank Berhad, PT CIMB Securities Indonesia, CIMB Securities (Thailand) Co. Ltd, CIMB Securities Limited, CIMB Securities (Australia) Limited,
 CIMB Securities (India) Private Limited,and is distributed solely to persons who qualify as "U.S. Institutional Investors" as defined in Rule 15a-6 under the Securities and Exchange Act
 of 1934. This communication is only for Institutional Investors whose ordinary business activities involve investing in shares, bonds and associated securities and/or derivative securities
 and who have professional experience in such investments. Any person who is not a U.S. Institutional Investor or Major Institutional Investor must not rely on this communication. The
 delivery of this research report to any person in the United States of America is not a recommendation to effect any transactions in the securities discussed herein, or an endorsement
 of any opinion expressed herein. CIMB Securities (USA) Inc, is a FINRA/SIPC member and takes responsibility for the content of this report. For further information or to place an order
 in any of the above-mentioned securities please contact a registered representative of CIMB Securities (USA) Inc.
 Other jurisdictions: In any other jurisdictions, except if otherwise restricted by laws or regulations, this report is only for distribution to professional, institutional or sophisticated
 investors as defined in the laws and regulations of such jurisdictions.

   Distribution of stock ratings and investment banking clients for quarter ended on 31 May 2013
   1042 companies under coverage
                                                                Rating Distribution (%)                                       Investment Banking clients (%)
   Outperform/Buy/Trading Buy                                   52.1%                                                         7.6%
   Neutral                                                      34.2%                                                         4.9%
   Underperform/Sell/Trading Sell                               13.7%                                                         5.5%

                                                                   Recommendation Framework #1 *
                                       Stock                                                                                   Sector
 OUTPERFORM: The stock's total return is expected to exceed a relevant                OVERWEIGHT: The industry, as defined by the analyst's coverage universe, is
 benchmark's total return by 5% or more over the next 12 months.                      expected to outperform the relevant primary market index over the next 12 months.
 NEUTRAL: The stock's total return is expected to be within +/-5% of a relevant       NEUTRAL: The industry, as defined by the analyst's coverage universe, is expected
 benchmark's total return.                                                            to perform in line with the relevant primary market index over the next 12 months.
 UNDERPERFORM: The stock's total return is expected to be below a relevant            UNDERWEIGHT: The industry, as defined by the analyst's coverage universe, is
 benchmark's total return by 5% or more over the next 12 months.                      expected to underperform the relevant primary market index over the next 12 months.
 TRADING BUY: The stock's total return is expected to exceed a relevant               TRADING BUY: The industry, as defined by the analyst's coverage universe, is
 benchmark's total return by 5% or more over the next 3 months.                       expected to outperform the relevant primary market index over the next 3 months.
 TRADING SELL: The stock's total return is expected to be below a relevant            TRADING SELL: The industry, as defined by the analyst's coverage universe, is
 benchmark's total return by 5% or more over the next 3 months.                       expected to underperform the relevant primary market index over the next 3 months.
 * This framework only applies to stocks listed on the Singapore Stock Exchange, Bursa Malaysia, Stock Exchange of Thailand, Jakarta Stock Exchange, Australian Securities
 Exchange, Taiwan Stock Exchange and National Stock Exchange of India/Bombay Stock Exchange. Occasionally, it is permitted for the total expected returns to be temporarily outside
 the prescribed ranges due to extreme market volatility or other justifiable company or industry-specific reasons.
 CIMB Research Pte Ltd (Co. Reg. No. 198701620M)

                                                                 Recommendation Framework #2 **
                                    Stock                                                                                     Sector
 OUTPERFORM: Expected positive total returns of 10% or more over the next 12        OVERWEIGHT: The industry, as defined by the analyst's coverage universe, has a
 months.                                                                            high number of stocks that are expected to have total returns of +10% or better over
                                                                                    the next 12 months.
 NEUTRAL: Expected total returns of between -10% and +10% over the next 12          NEUTRAL: The industry, as defined by the analyst's coverage universe, has either (i)
 months.                                                                            an equal number of stocks that are expected to have total returns of +10% (or better)
                                                                                    or -10% (or worse), or (ii) stocks that are predominantly expected to have total returns
                                                                                    that will range from +10% to -10%; both over the next 12 months.
 UNDERPERFORM: Expected negative total returns of 10% or more over the next 12      UNDERWEIGHT: The industry, as defined by the analyst's coverage universe, has a
 months.                                                                            high number of stocks that are expected to have total returns of -10% or worse over
                                                                                    the next 12 months.
 TRADING BUY: Expected positive total returns of 10% or more over the next 3        TRADING BUY: The industry, as defined by the analyst's coverage universe, has a
 months.                                                                            high number of stocks that are expected to have total returns of +10% or better over
                                                                                    the next 3 months.
 TRADING SELL: Expected negative total returns of 10% or more over the next 3       TRADING SELL: The industry, as defined by the analyst's coverage universe, has a
 months.                                                                            high number of stocks that are expected to have total returns of -10% or worse over
                                                                                    the next 3 months.
 ** This framework only applies to stocks listed on the Korea Exchange, Hong Kong Stock Exchange and China listings on the Singapore Stock Exchange. Occasionally, it is permitted
 for the total expected returns to be temporarily outside the prescribed ranges due to extreme market volatility or other justifiable company or industry-specific reasons.




                                                                                             31
Asia Pacific | COMMODITIES STRATEGY
July 3, 2013




  Corporate Governance Report of Thai Listed Companies (CGR). CG Rating by the Thai Institute of Directors Association (IOD) in 2012.
  AAV – not available, ADVANC - Excellent, AEONTS – Good, AMATA - Very Good, ANAN – not available, AOT - Excellent, AP - Very Good, BANPU - Excellent , BAY - Excellent ,
  BBL - Excellent, BCH – not available, BCP - Excellent, BEC - Very Good, BGH - not available, BJC – Very Good, BH - Very Good, BIGC - Very Good, BTS - Excellent, CCET -
  Good, CENTEL – Very Good, CK - Very Good, CPALL - Very Good, CPF - Very Good, CPN - Excellent, DELTA - Very Good, DTAC - Very Good, EGCO – Excellent, ERW –
  Excellent, GLOBAL - Good, GLOW - Very Good, GRAMMY – Excellent, HANA - Very Good, HEMRAJ - Excellent, HMPRO - Very Good, INTUCH – Very Good, ITD – Very Good,
  IVL - Very Good, JAS – Very Good, KAMART – not available, KBANK - Excellent, KK – Excellent, KTB - Excellent, LH - Very Good, LPN - Excellent, MAJOR - Good, MAKRO –
  Very Good, MCOT - Excellent, MINT - Very Good, PS - Excellent, PSL - Excellent, PTT - Excellent, PTTGC - Excellent, PTTEP - Excellent, QH - Excellent, RATCH - Excellent,
  ROBINS - Excellent, RS – Excellent, SAMART – Excellent, SC – Excellent, SCB - Excellent, SCC - Excellent, SCCC - Very Good, SIRI - Good, SPALI - Very Good, SRICHA – not
  available, SSI – not available, STA - Good, STEC - Very Good, TCAP - Very Good, THAI - Excellent, THCOM – Very Good, TICON – Very Good, TISCO - Excellent, TMB -
  Excellent, TOP - Excellent, TRUE - Very Good, TTW – Very Good, TUF - Very Good, VGI – not available, WORK – Good.




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Description: Commodity Pulse: Fed vs fundamentals