FX Forecasts - Crédit Agricole CIB

It’s all about centralbanks3

Risk appetite firms but with bumps along the way4110Credit Agricole CIB Risk Aversion Barometer (CARAB)10510095908580Jun-12 Jul-12 Aug-12 Sep-12 Oct-12 Nov-12 Dec-12 Jan-13 Feb-13 Mar-13 Apr-13 May-13 Jun-13Source: Bloomberg, Crédit Agricole CIBLow Risk Aversion BandHigh Risk Aversion BandRisk appetite has improved throughout 2012 and into 2013. Central bank stimulus and the threatof ECB OMT have provided a major boost to risk appetite. However, nervousness about Fedtapering led to lower risk appetite (higher risk aversion) in May/June.

Risk assets outperform but for how long?40302010A risk and yield seeking environment has lent support to equities in general as well asEuropean peripheral bonds, Metals and energy lose out. Will tapering change things?Japanese equities have significantly outperformed even with the recent pull back.0%Japanese equitiesoutperformed onBoJ stance,followed by USequitiesAsset peformanceRISKIER2013 YTD ReturnPreciousmetalsbiggest loser5-10-20-30Japan equitiesUS equitiesDollar IndexPeri. BondsGerman bundsEuropeanequitiesUS AAA GradebondsEnergyUST 10YUS BAA GradebondsAsian Non-InvGrade BondsBase MetalsEM Sov. BondsAsian Inv GradeBondsEM equitiesPrecious MetalsSource: Bloomberg, Crédit Agricole CIB

It’s all been about central banks6US Europe JapanJul 12: ECB President MarioDraghi made “whatever it takes”speech in LondonSep 12: The Fed embarked onQE3Nov 12: Barack Obama beat MittRomney to win the 2nd term ofUS presidencyDec 12: Operation Twist came toan end while QE3 continuedJan 13: Full fiscal cliff avoidedSep 12: ECB launched theOutright Monetary Transactions(OMT) – yet to be activatedNov 12: The Eurogroup reached adeal on the second aid packagefor GreeceFeb 13: Italy held generalelectionsNov 12: Prime Minister YoshihikoNoda announced early electionsDec 12: The Liberal DemocraticParty won parliamentaryelections; Shinzo Abe becamePrime MinisterMar 13: Sequestration orderissuedMay 13: Bernanke discussestapering Fed asset purchasesMar 13: Cyprus imposed levieson bank deposits as part ofbailoutApr 13: Enrico Letta was namedPrime Minister, ending politicalimpasse in ItalyMar 13: Haruhiko Kuroda tookover from Masaaki Shirakawa asBank of Japan GovernorApr 13: Bank of Japan adoptedthe monetary base target andinflation target

BoJ is last in, Fed will be first outCentral banks to continue to expand balance sheets. The Fed remains committed to purchasing$85bn of assets every month although will likely taper purchases by Q4, while the BoJ hasintroduced easing measures that will nearly double its monetary base in 2 years.7500Rebased 2007=100Central Banks Balance Sheet SizeFed QE3450400350Fed QE1Fed QE23002502001501005002007 2008 2009 2010 2011 2012 2013Source: Bloomberg, Crédit Agricole CIBBoJ ECB BOE Fed

Subdued inflation highlights room for sustained easy policy87.0%CPI Inflation (YoY%)3.0%5-year Breakeven rate6.0forecast2.55.04.0Japan CPI set to riseabove 2% next year butwill it be sustained?2.01.53.02.01.00.5Inflation expectationsremain well anchored1.00.00.0-0.5-1.0-1.0-2.0-3.0Jan 08 Jan 09 Jan 10 Jan 11 Jan 12 Jan 13 Jan 14US Euro-zone Japan-1.5-2.0* US and Japan breakeven based onbonds; EUR breakeven based on swapsJan-10 Jul-10 Jan-11 Jul-11 Jan-12 Jul-12 Jan-13US Eurozone JapanSource: Bloomberg, Crédit Agricole CIBExcess capacity and weak pricing power will mean that inflation pressures will remaincontained. Only Japan will see any significant increase in inflation in line with Japanese policystimulus. Central banks will be in no rush to reverse policy.

Core bond yields to rise furtherWe expect the Fed to be successful in preserving confidence in the recovery likelyaccompanied by a move higher in US Treasury yields to around 2.85% by end year. Eurozonecore bonds will likely mirror US rate moves, led by the medium and long term tenors.98.0%6%10Y Gov't Bond Yieldsforecast7.06.054G4 yields set to rise ledby the USUKEuroUSJapan5.04.033.02.01.0Equity risk premiumdropping as US bondssell off210.02007 2008 2009 2010 2011 2012 2013US Equity Risk Premium02006 2007 2008 2009 2010 2011 2012 2013 2014Source: Bloomberg, Crédit Agricole CIB

Growth recovery toresume after Q2 slippage10

G3 manufacturing confidence to improve furtherManufacturing survey indicators to turn higher after recent softening. Europe continues tocontract, albeit less so than before. A gradual strengthening is likely in the months ahead.11635853484338Many manufacturing surveysremain in contraction territory butare reversing33Jul-09Oct-09Jan-10Apr-10Jul-10Oct-10Jan-11Apr-11Jul-11Oct-11Jan-12Apr-12Jul-12Oct-12Jan-13Apr-13US ISM Eurozone PMI Japan PMI UK PMISource: Bloomberg, Crédit Agricole CIB

Gradual recovery, with limited jobs growth12864OECD leading indicatorpoints to upsidepotential to G7 GDPgrowth6421412%G4 Unemployment ratesEurozoneunemployment likely toedge higher to around12.5%forecast210008-2-26-4-4-6G7 GDP growth (YoY%)OECD G7 leading indicator (YoY chg, rhs)-64-8-8Mar-92 Mar-95 Mar-98 Mar-01 Mar-04 Mar-07 Mar-10 Mar-13Source: Bloomberg, Crédit Agricole CIB2Jan-07 Jul-08 Jan-10 Jul-11 Jan-13 Jul-14US Eurozone Japan UKForward looking indicators point to gradual acceleration of growth in H2 13. Jobs marketimprovement to take place only slowly however, which will dampen consumer spending.Eurozone has the biggest jobs problem, especially youth unemployment.

US to outperform in the next few quarters…133.0%2.8%Real GDP growth forecasts2.52.01.9%2.0%2.0%Most major economies will stillgrow below trend except Japan1.51.5%1.00.51.0%0.7%0.0-0.5-1.0Source: Bloomberg, Crédit Agricole CIBUS Japan Eurozone UK2013 CA-CIB 2013 Consensus 2014 CA-CIB 2014 ConsensusGlobal growth recovery will look rather uneven although the weakness evident in Q2 13 islikely to give way to firmer growth over the remainder of the year. US and Japaneseeconomies will lead the way in 2013. Eurozone GDP to contract this year.-0.7%

…But growth will look paltry compared to EMs7.0 YoY%Real GDP growth forecasts (CA-CIB)6.05.020132014144.03.02.01.00.0-1.0-2.0Asia Africa &Middle EastSource: Bloomberg, Crédit Agricole CIBLatamEmergingEuropeJapan USA UK EurozoneG4 growth set to look paltry compared to emerging markets growth, suggesting that assetreturns will look more impressive in EM. However, recent selling of EM assets suggests thatmarkets need to transition to a new environment of Fed tapering.

US recovery looks sustainable15

Upside potential for US manufacturingThe Baltic Dry Index highlights the prospects of a strengthening in the US ISM manufacturingindex following the recent decline in manufacturing confidence. Consistent with the signal from theBaltic Dry Index, equity markets point to gains in manufacturing confidence and activity.160.31.5103mth chg.(point)3mth chg. (%)300.21.05150.10.50.00.000-0.1-0.5-5-15-0.2-1.0-10-30-0.307 08 09 10 11 12 13US ISM (3m/3m change lagged 3m)Baltic Dry Index (3m/3m change, RHS)-1.5-1507 08 09 10 11 12 13ISM Overall Composite RHS S&P 500-45Source: Bloomberg, Crédit Agricole CIB

US growth recovery looks sustainableEconomic growth is on a gradual upwards trajectory as reflected by corporate bond yields.Another good indicator of GDP growth is the jump in building permits reflecting a significantimprovement in the US housing market.8.0-2.51.010%176.0-2.00.87%4.0-1.50.62.0-1.0-0.50.44%0.0-2.00.00.50.20.01%-4.01.0-0.2-2%-6.01.5-0.4-8.02.096 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 134-quarter change in y/y GDP growth, % pts10 -year Baa industrials, 4-quarter change, rhs-0.668 72 76 80 84 88 92 96 00 04 08 12Building Permits 3Q lead, YoY,% US GDP YoY, rhs-5%Source: Bloomberg, Crédit Agricole CIB

Housing market recovery spurs spending1845YoY, %20351525155-5-15US housing market is undergoinga broad based recovery, leading toa sharp recovery in householdwealth and spending power1050-5-25-10-3501 02 03 04 05 06 07 08 09 10 11 12 13US Existing single family home sales, lead by 3 quarters US Building material & Furniture Retails sales, 6M avg rhsSource: Bloomberg, Crédit Agricole CIBThe US economy lost momentum over Q2 13. Consumer spending slowed in Q2 but will gentlyaccelerate in H2 13, with spending lifted by reduced deleveraging and wealth gains. In partthese wealth gains will continue to be driven by a recovery in the housing market.-15

Transitional volatility as the Fed edges towards the taperWhile the Fed Funds rate is set to be kept in its current 0 to 0.25% range well into 2015 theFed will taper its asset purchases as the economy gains traction, possibly in September. In themeantime markets will continue to face a period of transitional volatility.1976%Unemployment rate long way off the6.5% level that the Fed has noted(000's) 3would be required before policysettings were tightened.46.05.0YoY%US Inflation4.0553.0462.0371.00.02819-1.0-2.0The Fed’s preferred inflation gauge iswell below the 2% inflation target.010Jan-00 Jan-02 Jan-04 Jan-06 Jan-08 Jan-10 Jan-12Fed Funds Target Rate US unemployment rate, rhs inverse-3.0Jan-07 Jan-08 Jan-09 Jan-10 Jan-11 Jan-12 Jan-13PCE Deflator CPI Core CPISource: Bloomberg, Crédit Agricole CIB

Europe lagging behind on thegrowth front20

Kick starting the economy2165European PMIs15%Unit Labour Costs in Euro-zone (YoY %)6055Manufacturingconfidence stillcontracting but less sothan before10550045-540Germany France35ItalyEurozone302007 2008 2009 2010 2011 2012 2013-10-15Most countries areregisteringcompetiveness gainsversus GermanyMar-08 Mar-09 Mar-10 Mar-11 Mar-12 Mar-13Germany Spain FranceGreece Ireland ItalySource: Bloomberg, Crédit Agricole CIBAlthough the Eurozone is no longer in crisis mode, the economic news will continue to remaindownbeat, albeit less so than in past months. Nonetheless, confidence gauges are turninghigher, albeit from low levels and most countries are registering competitiveness gains.

Is recovery on the horizon?Eurozone economy has contracted for six straight quarters. While recent forward looking indicatorssuggest growth will be less negative any improvement will continue to be gradual and led onceagain by Northern Europe. GDP is set to contract in 2013 before a mild recovery in 2014.2220Eurozone consumer confidence (rebased Jan 2007)125610115401052-10950-20-308575Eurozone GDP set tocontract by 0.7% in2013 before growing 1%in 2014-2-4-40Dec-06 Dec-07 Dec-08 Dec-09 Dec-10 Dec-11 Dec-12Germany France Spain Italy Portugal65-695 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12EU12 economic confidence EU12 GDP, YoY %, right scaleSource: Bloomberg, Crédit Agricole CIB

OMT threat still doing its magicEurozone core bonds will likely mirror US rate moves, led by the medium and long term tenors.While peripheral bond yields will benefit from the threat of ECB OMT further yield declineswill need to be justified by concrete improvements in fiscal / debt positions.2320%European Peripheral 10Y Yields%401816141210864Spain Portugal Ireland Italy Greece, rhsPeripheral yields haveremained relatively wellbehaved despitevarious Europeanconcerns largely due tothe Draghi put353025201510520Jan-12 Mar-12 May-12 Jul-12 Sep-12 Nov-12 Jan-13 Mar-13 May-13 Jul-13note: 8-year yield for IrelandSource: Bloomberg, Crédit Agricole CIB

ECB in no rush to ease24450EUR bnECB funding by country5.0YoY%400350300SpainItalyPortugalIrelandGreece4.54.03.53.0EMU headline CPIEMU headline CPI (F)ECBInflationtarget rate =2%EMU core CPI2502.5200150Reliance on ECBfunding has fallen2.01.51.0100500.50.0-0.5Inflation to remain wellbelow target006 07 08 09 10 11 12 13-1.003 04 05 06 07 08 09 10 11 12 13 14Source: Bloomberg, Crédit Agricole CIBECB unlikely to ease, with modest recovery in H2 supporting the status quo. However, therisks are to the downside if the economy fails to improve and/or inflation remains too low. Depositrate cut unlikely but ECB will continue to be under pressure to provide initiatives to support SMEs.

Is Japan’s ‘shock and awe’working?25

Kick starting the consumerThe first two arrows (monetary and fiscal stimulus) of ‘Abenomics’ have proven successful but thethird arrow (reforms, deregulations, etc) missed, threatening the recovery process. We mayneed to wait until the Autumn before the growth strategy is fleshed out.267Japan Department Store Sales, % YoY, 3m average1.0Japan wages contractual earnings, YoY %50.53“Abenomics spurringconsumer spending0.01-0.5-1-1.0-3-5-1.5-2.0Wages need to rise toensure that consumersare not worse off fromhigher inflation-7-2.5-9-11-132004 2005 2006 2007 2008 2009 2010 2011 2012 2013-3.0-3.507 08 09 10 11 12 13Japan wages contractual earnings, YoY %Source: Bloomberg, Crédit Agricole CIB

Kick starting the economy27864%GDP grew at a veryrobust annualized paceof 4.1% in Q1.JPY trn620610600JPY bn1000800Trade deficit haswidened despite JPYweakness13012020590580600400110200-25700100-4560-20090-6550-400-8540-60080-10-12GDP YoYGov't Expenditure (RHS)forecast byCACIB/OECD00 01 02 03 04 05 06 07 08 09 10 11 12 13 14530520-80006 07 08 09 10 11 12 13Japan Trade BalanceUSD/JPY, rhs70Source: Bloomberg, Crédit Agricole CIBGovernment expenditure is a major contributor to growth. However, other areas of growth will needto pick up over coming months. The trade balance is deteriorating. A weaker JPY will help but softexternal demand will make it difficult, especially given the drop in trade with China.

Government and BoJ aiming high…BoJ aiming to expand monetary base to JPY 200 trillion by end 2013 and JPY 270 trillion by end2014 but open ended nature of policy means that the monetary base could end up being muchhigher although this would come with risks attached.288YoY%160Japan Monetary Base6150414020130-2120-4110-6100-8-1092 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13Japan Corporate Goods Price IndexJapan Corporate Service Price IndexSource: Bloomberg, Crédit Agricole CIB9080Monetary base alreadyrising sharply07 08 09 10 11 12 13

…but need to be careful about fuelling volatility29120%Volatility of Japanese assets (3M historical annualised)2.00%10 year JGB yield1001.80801.60601.401.20401.00200.800.600Jan-11 Jul-11 Jan-12 Jul-12 Jan-13 Jul-13JPY Nikkei 225 JGB 10-year yieldSource: Bloomberg, Crédit Agricole CIB0.4004 05 06 07 08 09 10 11 12 13Expectations that the BoJ may be successful in fuelling inflation in addition to prospects of Fedtapering asset purchases have prompted strong volatility and higher JGB yields despite BoJ bondbuying. The danger is that higher yields could strangle the nascent economic recovery

30FX DiscriminationGold slide not over yet

EUR to decline, albeit graduallyRelative growth points to lower EUR1.61.51.41.31.21.11.00.9%QoQannualised0.81996 1998 2000 2002 2004 2006 2008 2010 2012 2014EUR/USD (2Y in advace)Relative grow th EZ-US, rhsRelative grow th EZ-US fc, rhs3210-1-2-3-4Yield differentials are not EUR supportive0.70.3-0.1-0.5-0.9Jan-11 May-11 Sep-11 Jan-12 May-12 Sep-12 Jan-13 May-13rate spread (EU-US 10Y Yield) EUR/USD rhs1.501.451.401.351.301.251.20314003002001000-100-200EUR bn-30098 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13EMU Basic Balance, 12M rolling sumBasic balance helping EUR3M 6M 9M 12MEUR/USD 1.28 1.25 1.23 1.22Returns (long position vs USD) -1.81 -4.12 -5.69 -6.53consensus forecast -1.77 -2.56 -3.38 -4.22EUR/USD, YoY%, rhs302520151050-5-10-15-201.361.341.321.301.281.261.241.221.20forecast1.18Jan-12 Jul-12 Jan-13 Jul-13 Jan-14 Jul-14EUR/USD CA-CIB forecast consensus forecastForecasts bearish vs. consensusSource: Bloomberg, Crédit Agricole CIB

JPY still a long way to dropJPY direction influenced by risk appetite1401351301251201151107580859095Yield differentials to pressure JPY105801001009510570Jan-12 Mar-12 May-12 Jul-12 Sep-12 Nov-12 Jan-13 Mar-13 May-13Jan-10 Oct-10 Jul-11 Apr-12 Jan-13 Oct-13 Jul-14Credit Agricole CIB Risk Aversion Barometer USD/JPY RHS invertedUSD/JPY US-Japan 2Yr Yield (RHS)3M 6M 9M 12MUSD/JPY 107.07 110.04 112.02 113.02Returns (long position vs USD) -6.92 -9.50 -11.16 -12.07consensus forecast -3.27 -5.39 -6.11 -7.121351251151059585Fed emarked QE, reducing ratio ofBoJ/Fed balance sheet size sharply752007 2008 2009 2010 2011 2012 2013USD/JPY Ratio of BoJ/Fed bal. sheet size, rhs13212211210292827262524212011010090JPYtrnUSD/JPYJapanese net purchase of foreign securities(cumulative since Jan 2011)forecastAbe w ins28electionBeginning of JPY23w eakness181383-2-7Jan-11 May-11 Sep-11 Jan-12 May-12 Sep-12 Jan-13 May-13Equity Bonds MM instruments Totalppt2.01.61.20.80.40.032Further BoJ expansion to weaken JPYLikely capital outflows will hit JPYSource: Bloomberg, Crédit Agricole CIB

GBP looks good versus EURYield differentials call for stable GBP1.01.680.81.640.61.600.41.560.21.520.01.48Jan-11 May-11 Sep-11 Jan-12 May-12 Sep-12 Jan-13 May-13rate spread (3m UK-US futures)GBP/USD RHSEUR/GBP will eventually decline1.501.451.401.351.301.251.201.15Jan-11 May-11 Sep-11 Jan-12 May-12 Sep-12 Jan-13 May-13EUR/USD EUR/GBP rhs0.930.910.890.870.850.830.810.790.770.753380400-40-80-120Jan-11 May-11 Sep-11 Jan-12 May-12 Sep-12 Jan-13 May-13Net Speculative GBP Contracts (000's)Potential short covering may support GBP3M 6M 9M 12MGBP/USD 1.54 1.54 1.56 1.56Returns (long position vs USD) 1.53 1.65 2.59 3.13consensus forecast -0.56 -1.17 -1.12 -1.05GBP/USD rhs1.681.641.601.561.521.481.641.621.601.581.561.541.521.50forecast1.48Jan-12 Jul-12 Jan-13 Jul-13 Jan-14 Jul-14GBP/USD CA-CIB forecast consensus forecastForecasts bullish vs. consensusSource: Bloomberg, Crédit Agricole CIB

AUD looking oversoldNarrower yield differentials drag AUD lower2.51.111.062.01.011.50.961.00.91Jan-11 May-11 Sep-11 Jan-12 May-12 Sep-12 Jan-13 May-13rate spread (AU-US 10Y Yield) AUD/USD rhsFalling terms of trade weigh on AUD11010090807060504000 01 02 03 04 05 06 07 08 09 10 11 12 13Australia Terms of Trade AUD/USD rhs1.201.101.000.900.800.700.600.500.40343M 6M 9M 12MAUD/USD 0.95 0.97 0.98 0.99Returns (long position vs USD) 4.09 6.90 8.64 10.40consensus forecast 2.96 3.63 5.23 0.63601.101.10forecast551.001.06500.901.02450.800.98400.700.943508 09 10 11 12 13China manufacturing PMI AUD/USD (RHS)China growth will eventually help AUD0.600.90Jan-12 Jul-12 Jan-13 Jul-13 Jan-14 Jul-14AUD/USD CA-CIB forecast consensus forecastForecasts bullish vs. consensusSource: Bloomberg, Crédit Agricole CIB

3520151050-5-10-15JPYCHFEURSEKUSDPLNTWDCZKHUFGBPSGDCNYNOKTHBMYRKRWNZDRUBBRLCADPHPINRMXNAUDRUBBRLZARPHPINRMXNIDRTRYZARAUD12840-4-8-12JPYCHFEURSEKPLNUSDHUFCZKTWDSGDGBPCNYMYRTHBKRWNZDIDRCADTRYNOKCarry adjusted forecast returns6 month carry adjusted returns%12 month carry adjusted returns%Majors FX and CEEcurrencies at thebottomMost Asian FX in themiddleCommodity and LatamFX at the top of the gridSource: Bloomberg, Crédit Agricole CIB

Gold price risks remain on the downside36Source: Reuters, Crédit Agricole CIBOur forecast model for gold based on based on our oil price, 2 year US Treasury yield and USDIndex forecasts suggest that gold may have much further to fall.

Gold forecasts37Precious metals 2013 Annual 2014AnnualQ3 Q4 Average Q1 Q2 Q3 Q4 AverageGold USD/oz 1,200 1,150 1,315 1,120 1,090 1,060 1,050 1,094Higher bond yields and stronger USD will contribute in large part to expected further goldprice declines.The technical picture for gold is bearish, trading way below its 100 and 200 day movingaverages. RSI also very negative as well as the “fear and greed” index.Our quantitative model highlights the potential for a deeper correction lower.Investor appetite to continue to weaken. ETF, ETP and speculative investors show no sign ofreversing their outflows from gold.Over the longer term, central bank diversification into gold will lend some support to the yellowmetal limiting the pace of price decline although demand pick up remains weak.Any pickup in inflation expectations amid aggressive easing could also limit the drop in gold.However, inflation gauges and expectations remain very low, suggesting this will not help forsome time.Over the longer run, though, we will likely see a slower pace of gold price decline, underpinned bycontinued purchases from the official sector.

Fasten your seat beltsGlobal growth recovery will look rather uneven although the weakness evident in Q2 13 islikely to give way to firmer growth over the remainder of the year. US economy closely followedby Japan will lead the way in the G4. Europe will lag behind.G4 growth set to look paltry compared to emerging markets growth, suggesting that assetreturns will look more impressive in EM.Risk appetite will continue to improve but the prospects of a shift in Fed policy will likely fuelfurther market nervousness and volatility ahead.Most central banks will maintain ultra easy policy settings amid relatively benign inflationpressures although there will likely be a contrast between the Fed and BoJ.While we believe that core bond yields will continue to rise over H2 13 we also believe thatthe growth outlook will justify higher yields.A theme of FX discrimination based on fundamentals will move into place as investors lookpast the general ‘risk off / risk on’ theme to particular factors driving individual currencies.The USD will take a bullish tone against the JPY, CHF and EUR in particular but. Commoditycurrencies in particular AUD look oversold and are set to recover some lost ground.Gold price to decline further as higher US yields, stronger USD, and speculative / ETF sellingweigh. Physical demand is unlikely to compensate.38

FX Forecasts39Sep-13 Dec-13 Mar-14 Jun-14 Sep-14 Dec-14USD Exchange rateIndustrialised countriesEuro EUR/USD 1.28 1.25 1.23 1.22 1.21 1.20Japan USD/JPY 107 110 112 113 114 115United Kingdom GBP/USD 1.54 1.54 1.56 1.56 1.57 1.56Sw itzerland USD/CHF 0.98 1.01 1.03 1.05 1.07 1.08Canada USD/CAD 1.02 1.00 0.98 0.97 0.96 0.95Australia AUD/USD 0.95 0.97 0.98 0.98 0.99 1.00New Zealand NZD/USD 0.79 0.80 0.81 0.82 0.82 0.82Source: Crédit Agricole CIBAsiaChina USD/CNY 6.13 6.10 6.08 6.05 6.03 6.00Hong Kong USD/HKD 7.77 7.77 7.77 7.77 7.76 7.76India USD/INR 59.00 57.60 56.70 55.90 55.00 54.10Indonesia USD/IDR 10130 9890 9730 9570 9410 9250Malaysia USD/MYR 3.15 3.11 3.08 3.05 3.02 2.99Philippines USD/PHP 43.4 41.9 41.3 40.6 39.9 39.3Singapore USD/SGD 1.27 1.26 1.24 1.23 1.22 1.21South Korea USD/KRW 1140 1110 1095 1080 1065 1045Taiwan USD/TWD 30.1 29.8 29.5 29.3 29.0 28.8Thailand USD/THB 31.0 30.4 30.1 29.8 29.6 29.3Vietnam USD/VND 21500 21500 21500 21500 21900 21900Euro Cr os s r ate sIndustrialised countriesJapan EUR/JPY 137 138 138 138 138 138United Kingdom EUR/GBP 0.83 0.81 0.79 0.78 0.77 0.77Sw itzerland EUR/CHF 1.25 1.26 1.27 1.28 1.29 1.30Sw eden EUR/SEK 8.50 8.57 8.55 8.53 8.51 8.49Norw ay EUR/NOK 7.29 7.25 7.23 7.21 7.19 7.17

Interest Rate ForecastsSep-13 Dec-13 Mar-14 Jun-14 Sep-14 Dec-14USAFed funds 0-0.25 0-0.25 0-0.25 0-0.25 0-0.25 0-0.253M 0.30 0.30 0.50 0.50 0.50 0.602Y 0.60 1.10 1.30 1.40 1.60 1.8010Y 2.75 2.85 3.10 3.20 3.30 3.3540JapanCall 0-0.10 0-0.10 0-0.10 0-0.10 0-0.10 0-0.103M 0.16 0.16 0.16 0.16 0.16 0.162Y 0.10 0.10 0.10 0.10 0.10 0.1010Y 0.90 1.00 1.20 1.20 1.30 1.40EurozoneRepo 0.50 0.50 0.50 0.50 0.50 0.503M 0.20 0.25 0.30 0.35 0.40 0.452Y (Ger) 0.20 0.35 0.50 0.60 0.70 0.8510Y (Ger) 1.70 1.90 2.10 2.30 2.50 2.70United KingdomBase rate 0.50 0.50 0.50 0.50 0.50 0.503M 0.50 0.55 0.55 0.55 0.60 0.602Y 0.35 0.35 0.45 0.55 0.65 0.7510Y 2.15 2.25 2.40 2.60 2.90 3.10SwedenRepo 1.00 1.00 1.00 1.00 1.00 1.00Norw ayDeposit 1.50 1.50 1.50 1.50 1.50 1.50CanadaOvernight Target 1.00 1.00 1.00 1.00 1.25 1.50AustraliaCash Target 2.50 2.50 2.75 3.00 3.25 3.25Source: Crédit Agricole CIBNew ZealandOfficial Cash Rate 2.50 2.50 2.75 3.00 3.00 3.25

Macro Forecasts2012 20132014Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4Real GDP grow th, QoQ %USA (annualised) 2.0 1.3 3.1 0.1 2.4 1.5 2.5 3.0 2.7 3.1 3.2 3.5JAPAN 1.2 -0.2 -0.9 0.3 1.0 0.7 1.0 0.8 1.0 -1.1 0.9 0.5EUROZONE -0.1 -0.2 -0.1 -0.6 -0.2 0.0 0.1 0.2 0.3 0.3 0.4 0.441Source: Crédit Agricole CIBReal GDP (YoY. %) CPI (YoY. %) Current Account (% GDP)12 13 14 12 13 14 12 13 14USA 2.2 1.9 2.8 2.1 1.4 1.6 -3.0 -2.7 -2.7JAPAN 1.9 2.0 2.0 -0.1 0.1 2.3 1.0 1.4 1.9EUROZONE -0.5 -0.7 1.0 2.5 1.4 1.4 1.2 2.2 2.2Germany 0.9 0.2 1.4 2.1 1.6 1.6 7.0 6.2 5.9France 0.0 -0.1 0.9 2.2 1.2 1.6 -2.3 -2.1 -2.2Italy -2.4 -2.1 0.5 3.3 1.5 1.4 -0.7 0.7 0.7Spain -1.4 -1.8 0.4 2.4 1.6 1.0 -1.1 1.4 2.5Greece -6.4 -4.1 0.6 1.0 -0.5 0.7 -2.9 -5.0 -4.0Other developed countriesUnited Kingdom 0.3 0.7 1.5 2.8 2.8 2.5 -3.7 -3.0 -2.5Norw ay 3.1 2.5 2.7 0.7 1.5 2.0 14.2 13.5 13.0Sw eden 0.8 1.5 2.5 0.9 1.0 1.8 7.0 6.5 6.3Sw itzerland 1.0 1.3 1.5 -0.7 0.0 1.2 13.5 12.0 11.0Canada 1.7 1.6 2.3 1.5 1.1 1.7 -3.4 -2.9 -2.5Australia 3.6 2.7 3.0 1.8 2.6 2.8 -3.7 -3.6 -3.2New Zealand 2.3 3.0 3.0 1.1 2.0 2.2 -5.0 -5.2 -4.8Asia 6.1 6.3 6.6 3.8 3.4 4.0 1.0 1.1 0.9China 7.8 7.7 7.8 2.6 2.6 3.4 2.3 2.4 1.9Hong Kong 1.4 3.5 3.8 4.7 4.6 4.5 3.3 4.5 4.9India 5.0 5.5 6.5 7.3 5.7 6.0 -5.6 -4.9 -4.7Indonesia 6.2 5.7 5.7 4.3 4.8 5.1 -2.8 -3.1 -3.1Korea 2.0 2.8 3.9 2.2 1.7 3.0 2.3 2.6 2.7Malaysia 5.6 4.8 5.2 1.7 1.6 1.7 6.1 4.8 4.0Philippines 6.8 7.0 5.7 3.1 3.3 3.7 3.5 2.7 2.4Singapore 1.3 2.3 4.4 4.6 4.0 4.3 19.0 16.0 19.5Taiw an 1.3 3.0 2.7 1.9 1.5 1.7 10.7 9.0 9.5Thailand 6.4 4.6 4.0 3.0 3.3 3.0 0.7 2.0 1.6Vietnam 5.0 5.5 5.7 9.3 6.7 7.9 0.0 -0.1 -0.7

Japan Economicand FinancialMarket OutlookWhat does “Abenomics” meanfor the global economy andJapan’s future?Kazuhiko OgataChief Economist - Japan+81-3-4580-5360kazuhiko.ogata@ca-cib.comhttps://catalystresearch.ca-cib.comCrédit Agricole Corporate and Investment Bank is authorised by the Autorité de Contrôle Prudentiel (ACP) and supervised by the ACP and the Autoritédes Marchés Financiers (AMF) in France and subject to limited regulation by the Financial Services Authority. Details about the extent of our regulationby the Financial Services Authority are available from us on request.

Japan, the third biggest economy in the world, shows signs of economic boomJapan’s 1Q GDP jumped annualized 4.1% QoQ, a dramatic recovery from a technical recessionin mid-2012Breakdown of global GDP(Nominal GDP in 2012: USD 71.7 trillion)60Economy Watchers Survey(Japan)Improving4350OthersUSD 18.0 trn(25.1%)USUSD 15.7 trn(21.9%)40Latin AmericaUSD 5.8 trn(8.0%)Other AsiaUSD 6.3 trn(8.7%)ChinaUSD 8.2 trn(11.5%)Euro-zoneUSD 11.8 trn(16.5%)3020EarthquakeOct. 2012WorseningJapanUSD 6.0 trn(8.3%)1005 06 07 08 09 10 11 12 13Current conditions indexOutlook indexSource: IMF, Cabinet Office, Crédit Agricole CIB

Japanese politics a game changer for the financial marketsPoint19001700150013001100900700500The yen's exchange rates andJapanese equity prices2006 2007 2008 2009 2010 2011 2012 2013TOPIX(lhs)Source: Bloomberg, Crédit Agricole CIB, as of 17 June 2013October 2012Dollar-yen exchange rates(rhs)USDJPY130120110100908070Abe’s comeback to LDP presidentJapan’s economic boom was triggered by ShinzoAbe’s comeback to the Liberal Democratic Party(LDP) president last SeptemberFinancial market focus started to shift to his economicpolicy, so-called “Abenomics”Shift of political leadershipThe LDP won a landslide victory in the Lower Houseelection last December, due mainly to disappointmentto the former ruling Democratic Party of Japan (DPJ)Abe’s comeback to Prime MinisterConsequently, the LDP dominated the Lower Houseof the parliament, and the LDP president Abe becameprime ministerJuly Upper House electionThe LDP has chance to control the Upper House aswell, if the party wins the election in JulyPM Abe’s approval rating is above 70% at themomentParliamentary dominance by the LDPThe LDP’s dominance of the both houses of theparliament implies that the Abe government couldsustain long, as there will be no election in 3 yearsthereafter44

Asset-price effects and domestic demand are key to higher economic growthWith the weaker yen leading to higher stock prices, positive asset-price effects boost household spending andcapex. Japanese equity price index (TOPIX) has risen by 50% to date, compared to the level at end of lastSeptember. In our estimate, this has generated asset-price gains of JPY 28 trn for households, JPY 32 trn fornon-financial corporates and JPY 6 trn for financials, all of which total JPY 66 trn, equivalent to 14% of GDP45Index108Real consumption composite indexJPY trn sa1.4Core machinery orders(Demand from domestic-private sector)1061.31.21041.11021.00.9March20131000.80.7980.69604 05 06 07 08 09 10 11 12 130.588 90 92 94 96 98 00 02 04 06 08 10 12Source: Cabinet Office, Crédit Agricole CIB

What is “Abenomics”?“Keynesian” stimulus plus “supply-side” reformsThree arrows of “Abenomics”:Bold monetary policySelection of “super-dovish” new BoJ leadersIntroduction of 2% inflation target, with exact deadline of 2 yearsUnprecedented scale of quantitative easingAggressive fiscal spendingAbe government already announced a massive fiscal stimulus package in early JanuaryThe package size totals JPY 20 trn, with government spending at JPY 10 trn (2% of GDP),focusing on public works spending (JPY 5.2 trn, over 1% of GDP)The LDP’s “National Territory Reinforcing Plan” calls for a government outlay of JPY 200 trnin a coming decade for public works and infrastructure spending, focusing on disasterprevention and reconstructionPro-growth strategy to facilitate business spendingSupply-side reforms, helping enhance the corporate sector’s competitivenessEnhancement on labour market flexibilityFull-scale deregulation and corporate tax cutsFacilitation of free trade: Participation in the Trans-Pacific Partnership (TPP)46

This time is different? Three powerful backbones for “Abenomics”47Dramatic shift of the BoJ leadershipHighly favourable political environmentUS economic normalization

Dramatic shift of the BoJ governorship for the first time in 15 years“Super-dovish” new BoJ governor Haruhiko Kuroda (former Asian Development Bankgovernor) took office on 21 March this year. Kuroda is an ex-MoF (Ministry of Finance)official with no BoJ background at all, implying a stark contrast to the BoJ leadership in thepast 15 years, when the governorship was taken by Masaru Hayami (1998-2003),Toshihiko Fukui (2003-2008) and Masaaki Shirakawa (2008-2013), all of whom had beenthe BoJ officials, originallyA new deputy governor Kikuo Iwata (a university professor) is widely known as one of themost harsh critics on the BoJ’s reluctance to fight deflation in the past decades, calling fora regime change in the BoJ policies. The BoJ-bred governors failed to end deflation in thepast 15 years.The crucial difference between the new and oldBoJ regimes is that the new BoJ leaders haveclarified that their primary focus is to beatdeflation, while the former BoJ leaders werereluctant to fight deflation, with deep regrets inhaving generated huge asset-price bubbles inlate 1980sKuroda and Iwata show no hesitation inexpressing their wills that they will do everythingto achieve the 2% inflation target as soon aspossible within two years9876543210-1-2-3% Core CPI inflation and policy rates80 82 84 86 88 90 92 94 96 98 00 02 04 06 08 10 12Core CPIHayami Fukui ShirakawaOvernight call market rateSource: Bloomberg, Ministry of Internal Affairs and Communication, Crédit Agricole CIB48Kuroda

New BoJ decided to expand monetary base as aggressively as the FedNew BoJ leaders’ very first monetary policydecisions at the 3-4 April meetingAsset Purchase Program (APP) and Rimban operationsare integrated on JGB purchasesTotal monthly JGB purchase doubles to JPY 7.5 trn, fromJPY 3.8 trn (APP: JPY 2 trn, Rimban: JPY 1.8 trn)BoJ’s JGB holdings thereby expand JPY 50 trn per yearTarget maturity on JGB purchases is totally “open”across the curve, including 40-year bonds, and averageduration of the BoJ’s JGB holdings extends to 7 yearsfrom 3 years (APP bought only JGBs with 1-3 yearmaturity before)The “banknote rule” on JGB holdings is abolishedMonetary base target is introduced, aiming to expand theoutstanding monetary base to JPY 200 trn by end-2013and to JPY 270 trn by end-2014, from JPY 138 trn atend-2012Total AssetsUSD trillion3.02.52.01.51.00.50.0Major central banks' monetary base00 01 02 03 04 05 06 07 08 09 10 11 12 13 14Fed ECB BoJTotal LiabilitiesMonetary Base JGB CP Corporte Bond ETF J-REIT Loan Support Banknotes Current DepositsEnd-2012 actual 138 158 89 2.1 2.9 1.5 0.11 3.3 158 87 47End-2013 projection 200 220 140 2.2 3.2 2.5 0.14 13 220 88 107End-2014 projection 270 290 190 2.2 3.2 3.5 0.17 18 290 90 175Source: Bank of Japan, Crédit Agricole CIBBoJ will also expand ETF and J-REIT holdings byJPY 1 trn and JPY 30 bn respectively every yearBoJ's Monetary Base Target and Balance Sheet Projection (JPY Trillion)49

Highly favourable political environment to promote drastic reforms50Shift of political leadershipThe LDP won a landslide victory in the Lower House election last December, andconsequently, political leadership shifted to the LDP, from the DPJParliamentary dominanceIf the LDP wins the Upper House election in coming July, the party would dominate bothhouses of the parliament, and there is no election for 3 years thereafter. That wouldimply a very rare but highly favourable political environment, which was seen only threetimes in nearly 70 years postwar. This clearly means a stark contrast to the past sevenyears, when Japan’s prime minister was replaced nearly every yearStable administrationConsequently, stable administration would enable PM Abe to work much harder onlonger-term issues, and also to take tough but effective choices for structural reforms,as his administration would have legislative free hand on passing any policies in theparliamentAbe’s revenge and LDP politicians’ resolvePM Abe learned a lot from his failure during his previous tenure as PM in 2006-2007.Abe is eager to get back his face, with deep reflection on his mistakes six year ago.Given such a favourable political environment in perspective, the LDP politicians appearto share a resolve that they can never miss this rare chance to drive Japan back to agenuine revival, after two-decade economic slump

Quadruple factors help weaken the JPY powerfully51Factor #1:BoJ’s intensified commitment to inflation targetFactor #2:BoJ’s aggressive expansion of monetary baseFactor #3:J-curve effect and record trade deficitFactor #4:Wider US-Japan interest rate differentials

Japan’s record trade deficit weighs on the yen52JPY trillion s.a.2.5Monthly current account balance2.01.51.00.50.0-0.5-1.0-1.5J-curve effect96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13Current account balance Trade balance Income balanceSource: Ministry of Finance, Crédit Agricole CIB

The Fed looking for an “exit”, the BoJ just starting a full-scale “easing”53% pointUS-Japan interest rate gapsUSDJPYand USDJPY3.5*Long-term Treasury purchases*Data-based forward guidance1303.0QE1QE2MEP1202.5Time-basedforwardguidance1102.01.5QE3MBSpurchases100901.0800.52006 2007 2008 2009 2010 2011 2012 201310-yr govt bond yield gaps (US-Japan, lhs)USDJPY (rhs)70Source: Bloomberg, Crédit Agricole CIB, as of 20 June 2013

Kuroda struggles in controlling the JGB market, dampening QE impact10-year JGB yields plunged to the historical low of 0.315% on 4 April, upon the new BoJ leaders’ surpriseannouncement, which, however, led to violent swings thereafter, due to 1) unwinding of “overdonespeculation” well ahead of BoJ’s 4 April decisions, 2) concerns on much thinner market liquidity, and 3)fluctuating inflation expectations. Unless the BoJ finds effective ways to help lower the JGB yieldsmeaningfully, the QE impact, e.g., weakening the yen and boosting equity prices, should be dampened%2.8Japanese government bond yields by durationLDP’s victory in thelower house election542.42.01.61.20.80.40.02007 2008 2009 2010 2011 2012 20132-yr 5-yr 10-yr 20-yr 30-yr New BoJ’s surprisedecisions on 4 AprilSource: Bloomberg, Crédit Agricole CIB, as of 17 June 2013

100 is a crucial threshold for USDJPY for Japan to avoid “currency war” criticism55USDJPY130120124Shift of USD/JPY exchange rate110100100908070752006 2007 2008 2009 2010 2011 2012 2013Source: Bloomberg, Crédit Agricole CIB, as of 17 June 2013

Achieving the 2% inflation target is truly challenging for the BoJThe “hit” ratio in terms of 2% or above inflation was just 12.6% in the past 28 years since 1985YoY %5Consumer price inflationYoY %5Underlying inflation, base salaryand job supply-demand conditionTimes1.456432BoJ target 2%432CPI ex-food/energy (lhs)all-industry base salary (lhs)Ratio of job offers to applicants(rhs)1.21.0110.80-10-10.6-2-20.4-384 86 88 90 92 94 96 98 00 02 04 06 08 10 12CPICore CPI ex-fresh food-392 94 96 98 00 02 04 06 08 10 120.2Sustained wage increase across industries, particularly on base salary, is indispensable to end deflation. To realizethis, the economy needs to go through the processes of 1) sustained high economic growth, 2) significantly tighterlabour market or labour shortage, and 3) turnaround of deflationary mindset among business management. Wewould guess that it takes 3-4 years for the process 1), another 2-3 years for the process 2), and additional 2-3 yearsfor the process 3). If our guess is correct, it would take at least 7 years until deflation is endedSource: Ministry of Internal Affairs and Communication, Ministry of Health, Labour and Welfare, Crédit Agricole CIB

Dilemma for PM Abe and BoJ KurodaAlbeit with very little likelihood, new BoJ leaders may achieve the 2% inflation target within two years as theyintend. In this case, however, high inflation with no wage growth could dampen economic growth notably andthereby impair Abe’s popularity, as the headline CPI inflation for fiscal 2014 could jump to a 33-year high of 5%,with the underlying inflation of 2% plus the consumption tax hike effect of 3%. This could be a serious shockfor the Japanese households, which have long remained familiarized with deflation.57YoY %9876543210-1-2-3CPI inflation and base salary growth80 82 84 86 88 90 92 94 96 98 00 02 04 06 08 10 12 14Core CPIAll-industry base salarySource: Ministry of Internal Affairs and Communication, Ministry of Health, Labour and Welfare, Crédit Agricole CIB

Basic framework of PM Abe’s “growth strategy”58【First Arrow】Bold monetary policy【Third Arrow】Growth strategy【Second Arrow】Aggressive fiscal spendingFacilitation of private sector, Activation of labour market, Creation of new business frontierIndustrial revitalization Strategic market creation Global development strategyIndustrial structural changeEmployment system reformScience technology innovationPromotion of IT utilizationCompetitive industry start-upSME reformFacilitating longevity communityClean energy supplyNext generation infrastructureRevitalization of local economyStrategic trade partnershipDeveloping new export marketFacilitation of incoming FDI+3% nominal GDP and +2% real GDP growth over the next decadeIncrease in per-capita GNI by over JPY 1.5 million in 10 yearsSource: Prime Minister of Japan and his Cabinet, Crédit Agricole CIB

It remains unclear how these ambitious numerical goals can be achievedIndustrial revitalizationSpecific numerical goals1. Industrial structural change ・B oosting capex by 10% in 3 years,back to a pre-Lehm an-crisis le vel o f J P Y 7 0 trn2. Employment system reform・20% reduction in 5 years on the unemployed for over 6 months, increase in job turnover ratio to 9% (7.4% as of 2011)・Raising female job participation with age of 25-44 to 73%, from 68% in 2012・More than 10 Japanese universities raked in the top 100 in global ranking in 10 years3. Science technology innovation ・Ranked #1 in global technology innovation ranking in 5 years4. Global standard IT society ・More than 10 thousand sets (biggest in the world) of public data disclosure in FY20155. Competitive industry set-up ・Ranked in #3 among developed countries in the World Bank's business enviornment ranking by 2020 (currently ranked6. SME reformStrategic market creation1. Facilitating longevity community・Increasing company turnover ratio to more than 10% (currently 8%)・Doubling the number of SMEs in profit to 1.4 million by 2020・Increasing the number of SMEs operating abroad by another 10 thousand in 5 years・Expanding domestic markets to JPY 26 trn by 2020 and to JPY 37 trn by 2030 (currengly JPY 16 trn)・Expanding foreign markets to JPY 311 trn by 2020 and to JPY 525 trn by 2030 (currently JPY 163 trn)・Expanding employment of related markets to 1.6 million by 2020 and to 22.3 million by 2030 (currengly 0.73 million)592. Clean energy supply・Expanding domestic markets to JPY 10 trn by 2020 and to JPY 11 trn by 2030 (currengly JPY 4 trn)・Expanding foreign markets to JPY 108 trn by 2020 and to JPY 160 trn by 2030 (currently JPY 40 trn)・Expanding employment of related markets to 1.68 million by 2020 and to 2.10 million by 2030 (currengly 0.55 million)3. Next generation infrastructure4. Revitalization of local economyGlobal development strategy・Expanding domestic markets to JPY 16 trn by 2020 and to JPY 33 trn by 2030 (currengly JPY 2 trn)・Expanding foreign markets to JPY 167 trn by 2020 and to JPY 374 trn by 2030 (currently JPY 56 trn)・Expanding employment of related markets to 0.75 million by 2020 and to 1.90 million by 2030 (currently 0.06 million)1. Strategic trade partnership ・Increasing the trade share of FTA to 70% by 2018 (currently 19%)2. Developing new export market3. Globalization of economySource: Prime Minister of Japan and his Cabinet, Crédit Agricole CIB・Expanding the infrastructure system export to JPY 30 trn by 2020 (currently JPY 10 trn)・Doubling the potentially competitive SME export by 2020 compared to that in 2010・Trebling the foreign sales of broadcast contents by 2018 (currently JPY 0.63 brn)・Doubling the size of incoming FDI to JPY 35 trn by 2020 (JPY 17.8 trn as of 2012)・Increasing the domestic food production to JPY 120 trn by 2020 (currently JPY 100 trn)・Doubling the size of foreign food market to JPY 680 trn by 2020 (currently JPY 340 trn)・Increasing the consumption of incoming foreign tourist to JPY 4.7 trn by 2030 (currently JPY 1.3 trn)・Doubling the agriculture employment under age of 40 to 0.40 million in 10 years (currently 0.20 million)・Increasing employment in tourist industry to 0.83 million by 2030 (currently 0.25 million)

Mountain of other issues have yet to be addressed for Japan’s revivalCan PM Abe show much clearer visions on the following key issues after the July election, tohelp sustain a rising trend in the Japanese equity market?60Fiscal consolidationDemographic issueSocial security system reformsConsumption tax hikeCorporate tax cutRegional economy and government issueEnergy issue

“Growth” is key to fiscal consolidation61% Transition of general government250gross debt as % of nominal GDPfor G7 countries20015010050090 92 94 96 98 00 02 04 06 08 10 12Japan US Germany France UK Italy CanadaY1990=1008007006005004003002001000Transition of general governmentgross debt for G7 countries(Year 1990=100)90 92 94 96 98 00 02 04 06 08 10 12Japan US Germany France UK Italy CanadaY1990=100300250Transition of nominal GDP levelsfor G7 countries(Year 1990=100)SwedenItalyUKMajor nations' VAT rates200France150100GermanyRussiaChina50090 92 94 96 98 00 02 04 06 08 10 12Japan US Germany France UK Italy CanadaSource: IMF, Japan’s Indirect Tax Association 2012, Crédit Agricole CIBBrazilKoreaSwitzerlandJapan%0 5 10 15 20 25

Demographic issues need to be addressed in the “growth initiatives”62Million people Population Million people14090JPY trillion (s.a.)600GDP levels12010080604020858075706560555004003002001000501960 1965 1970 1975 1980 1985 1990 1995 2000 2005 2010Age 0 to 14 15 to 64 65 or over 15 to 64 (rhs)IndexIndustrial production12011010090807060504070 72 74 76 78 80 82 84 86 88 90 92 94 96 98 00 02 04 06 08 10 120Million people Employment and unemployment rate%68666646260585654525070 72 74 76 78 80 82 84 86 88 90 92 94 96 98 00 02 04 06 08 10 12Nominal GDPReal GDP70 75 80 85 90 95 00 05 10Total employment (lhs) Unemployment rate (rhs)543210Source: Cabinet Office, Ministry of International Trade and Industry, Ministry of Internal Affairs and Communication, CEIC, Crédit Agricole CIB

Japan’s sovereign debt crisis is a myth…at least for nowOutsized government debt is completely financed by domestic excess savings, which are still growingJPY trillion16001400120010008006004002000121086420-2-4-6-8-10Japan's financial assets/liabilities balance sheetOthers(As of end-2012)JPY 73 trnHouseholdJPY1,193 trnExcess saversSocialsecurityfundsJPY 195 trnNon-financialcorporatesJPY346 trn% Private-sector savings rateOverseasJPY 301 trnGeneralgovernmentJPY814 trnNet borrowers80 82 84 86 88 90 92 94 96 98 00 02 04 06 08 10 12Household Non-financial corporate Private sector totalJPY trillion3002001000-100-200-300-400JPY trillion300250200150100500Net external assets (assets minus liabilities)(As of end-2012)Japan China Germany HongKongJapan's net external assets(Net national savings)France UK USUSD trillion3.595 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12JPY-denominated (lhs) USD-denominated (rhs)3.02.52.01.51.00.50.063Source: Cabinet Office, Bank of Japan, Ministry of Finance, Crédit Agricole CIB

Asia: soft patchFrances CheungSenior Strategist – Asia ex-Japan+852 2826 1520frances.cheung@ca-cib.comDariusz KowalczykSenior Economist / Strategist –Asia ex-Japan+852 2826 1519dariusz.kowalczyk@ca-cib.comhttps://catalystresearch.ca-cib.comCrédit Agricole Corporate & Investment Bank is authorised by the Autorité de Contrôle Prudentiel (ACP) and supervised by the ACP and the Autoritédes Marchés Financiers (AMF) in France and subject to limited regulation by the Financial Conduct Authority and the Prudential Regulation Authority.Details about the extent of our regulation by the Financial Conduct Authority and the Prudential Regulation Authority are available from us on request.

China: Still on track65

Disappointing growthGrowth slowed to 1.6% QoQ in Q1136610%unexpected slowdown tobelow targetGDP growthForecast86420Q111 Q112 Q113 Q114 Q115QoQ QoQ annualised YoY TargetSources: CEIC, Crédit Agricole CIB

Household spending weakensSlowdown to just 6.0% YoY in real terms6715129Household real income and spending37%36%35%634%333%0Jan-09 Jul-09 Jan-10 Jul-10 Jan-11 Jul-11 Jan-12 Jul-12 Jan-13Incomes (urban - disposable, rural - cash), %, YoY Spending, %, YoYSavings rate (12-month rolling), % (RHS)32%Sources: CEIC, Crédit Agricole CIB

Short-term momentum fragile in Q2Retail sales, investment and IP data in April - May indicates a mixed performance68%, MoM, SAIndustrial output, retail sales, fixed asset investmentdeclining trend in demand, output fragile210Mar-11 Jun-11 Sep-11 Dec-11 Mar-12 Jun-12 Sep-12 Dec-12 Mar-13Industrial output - real Retail sales - nominal Fixed asset investment - nominalSources: CEIC, Crédit Agricole CIB

Solid demandDemand growth exceeded GDP growth by an unusually large margin6924Indicators of domestic demand vs GDP, %, YoY402016321224840Gap between growth rates of investment and sales vs GDPhas widened too muchAll three demand indicators are risingfaster than GDP, two are acceleratingQ111 Q211 Q311 Q411 Q112 Q212 Q312 Q412 Q113GDP Retail sales Fixed asset investment Government expenditure (nominal), RHS1680Sources: CEIC, Crédit Agricole CIB

Ample fundingSocial financing has been rising fast7060504030% YoY*data for January and February isaveraged to remove Lunar New YeareffectsChina: social financing (12M rolling)*Unusually strong growth offunding for the economy20100-10Total New yuan loans-20Feb-11 Aug-11 Feb-12 Aug-12 Feb-13Sources: CEIC, Crédit Agricole CIB

No rate change this yearContained inflation means rate hikes can be delayed beyond 2013718%CPI and monetary policyForecast6420-2CPI - headline 7-day repo rate (monthly avg) 1Y PBoC lending rate09 10 11 12 13 14Sources: Bloomberg, CEIC, Crédit Agricole CIB

REER gainsTrade – weighted appreciation was excessive72125120115CNY spot effective exchange rates*CNY spot value has surged in trade-weighted termsbetween Sep '12 and May '13:by 6.9% in NEER terms andby 6.6% in REER termsrecord highs1101051009590NEERREER8501 02 03 04 05 06 07 08 09 10 11 12 13Sources: Bloomberg, CEIC, Crédit Agricole CIB

Upward market pressureOnshore spot traded close to the top of the band for much of the year731.00%CNY spot versus fixing0.75%0.50%current bets on band widening may backfire: following the doubling ofthe band in the spring of 2012, CNY spot fell versus fixing0.25%0.00%-0.25%-0.50%-0.75%-1.00%Jan-11 Jul-11 Jan-12 Jul-12 Jan-13 Jul-13Sources: Bloomberg, Crédit Agricole CIB

CNH gaining importanceCNH spot tracked CNY spot pretty closely743%CNH spot vs CNY spot (premium / discount)2%1%0%-1%-2%Aug-10 Dec-10 Apr-11 Aug-11 Dec-11 Apr-12 Aug-12 Dec-12 Apr-13Sources: Bloomberg, Crédit Agricole CIB

New offshore centres emergedThe offshore RMB pool is growing751,000RMB client deposits (bn)80060040099,3112000London Singapore Taiwan Hong Kong China MainlandSources: Bloomberg, CEIC, HKMA, Crédit Agricole CIB

Internationalisation progressesCNY-settled transactions are on the rise761200CNY bnTransactions settled in CNY1000800600Merchandise tradeOther current account itemsDirect investment4002000Q1 10 Q3 10 Q1 11 Q3 11 Q1 12 Q3 12 Q1 13Sources: CEIC, Crédit Agricole CIB

Asia: Soft patch77

Asia slowed in Q113Most economies reported disappointing Q113 GDP data.Seven out of eleven showed a YoY slowdown7812% YoYEmerging Asia ex. Vietnam: GDP growth963Arithmetic averageWeighted average0-3Q109 Q309 Q110 Q310 Q111 Q311 Q112 Q312 Q113Sources: Bloomberg, CEIC, Crédit Agricole CIB

External demand disappointedQ1 exports to China from other Asian markets fell 2.7% YoY.Exports to the US contracted 3.5% YoY, to the EU by 5.8% YoY and to Japan by 6.9% YoY.7960%Asia (ex. China) exports: top destinations* (YoY)4530150-15-30USEU12JapanChina* ex. Vietnam-4508 09 10 11 12 13Sources: CEIC, Crédit Agricole CIB

Manufacturing cycle weakenedIn April, the arithmetic average of YoY industrial output growth picked up slightly but remained ata low level, and may reverse course given export and sentiment data.Asian shipments abroad barely expanded, rising by only about 3% YoY, down from alreadyweak growth in Q113.8070ptsManufacturing PMI, industrial output, exports*% YoY40602050040Manufacturing PMI**Industrial output*** (RHS)Exports (RHS)-2030* Arithmetic averages for: Asia-11: China, Hong Kong, India, Indonesia, Korea, Malaysia, Philippines, Singapore,Taiwan, Thailand, Vietnam** ex. Indonesia, Malaysia, Philippines, Thailand, Vietnam; *** ex. Hong Kong* and ***, Jan and Feb data = average for the two months-40Jan-08 Jul-08 Jan-09 Jul-09 Jan-10 Jul-10 Jan-11 Jul-11 Jan-12 Jul-12 Jan-13Sources: Bloomberg, CEIC, Crédit Agricole CIB

Weak sentiment a riskIn May, the average for the eight markets reporting manufacturing PMIs fell below 50 – the leastsince early Q412.We expect Asian GDP growth to rebound in H213. The region should expand by 6.3% in 2013and 6.6% in 2014, versus 6.1% in 2012.8154.5Manufacturing PMIs53.051.550.048.5Jan-13 Feb-13 Mar-13 Apr-13 May-1347.0China Hong Kong India Indonesia Korea Singapore Taiwan VietnamSources: Bloomberg, Crédit Agricole CIB

Rate cutting cycle continued but is largely overAsian central banks cut benchmark rates by an average of 120bp between Q411 and May 2013.825.0IDRAsia: cuts in the current easing cycle and average benchmark policy rate (%)PHP, THBPHP, VND4.5IDR, THBIDRVNDCNY, KRW, PHP, VNDINR, VNDVND4.0CNY, VNDINR, VNDKRW, THB, PHPINR3.5KRW, VND, THBJun-11 Dec-11 Jun-12 Dec-12Sources: Bloomberg, Crédit Agricole CIB

Asian FX: rebound may nottake place until Q41383

External surpluses narrowedAsian current account surplus should widen to 1.1% of GDP in 2013 from 1.0% in 2012.845%Asia-11*: current account & trade balances (12M rolling)USD bn3004Current account / GDP**Trade / share of GDP **Trade balance (RHS)***240318021201600-1-2* China, Hong Kong, India, Indonesia, Korea, Malaysia, Philippines, Singapore, Taiwan,Thailand, Vietnam** ex. China & Vietnam*** from trade data07 08 09 10 11 12 130-60-120Sources: Bloomberg, CEIC, Crédit Agricole CIB

Portfolio inflows still solid but at riskAsian markets reporting daily data showed a net inflow of USD19bn into equities and USD35bninto bonds over the first five months of 2013, while the entire region had a USD4bn trade gapThe first three weeks of June showed a large outflow8575USD bnEquity capital flows into Asian equity markets*6045* India, Indonesia, Philippines, S. Korea, Taiwan, Thailand, Vietnam30150-15-30Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec2009 2010 2011 2012 2013Sources: Bloomberg, Crédit Agricole CIB

There is upside for currencies… but it may be too early to buyRebound may not take place until Q41386180USD bnADXY vs equities flowsForecast130150Equities flows since 2005 (cumulative)*125120ADXY - RHS1209011560110301050* India, Indonesia, Korea, Philippines, Taiwan, Thailand,Vietnam-3005 06 07 08 09 10 11 12 13 1410095Sources: Bloomberg, Crédit Agricole CIB

Supportive implied yieldsPositive implied yields are adding to the attractiveness of Asian FX.We believe that the PHP is the best bet for the remainder of 2013.872018%NDF implied yields (annualised)16141M 3M 6M 12M121086420-2-4IDR INR CNY VND MYR KRW PHP TWDSources: Bloomberg, Crédit Agricole CIB

Asian rates: a USD rate story88

Local factors give way to USD rates89Front-end correlations with USD rates have become higher in the CNY, MYR, SGD and TWDmarkets1.00Correlation between 2Y LCY IRS and USD IRS3M12M0.750.500.250.00-0.25HKD SGD KRW PHP TWD MYR CNY INR THBSources: Bloomberg, Crédit Agricole CIB

Upside to mid- to long-end rates90Correlations with USD rates are relatively high in the HKD, KRW and SGD markets across the5-10Y segment1.00Correlation between 5Y LCY IRS and USD IRS3M12M0.750.500.250.00-0.25HKD SGD PHP KRW TWD MYR CNY THB INRSources: Bloomberg, Crédit Agricole CIB

USD curve to lead91If the upward moves in Asian rates are to gain momentum, it would be a USD rate story200bp2/5Y USD IRS 2/5Y IRS Asia average*160120* CNY, HKD, KRW, SGD,THB, TWD8040008 09 10 11 12 13Sources: Bloomberg, Crédit Agricole CIB

Strong directionality – HKD, SGD and TWD92We expect some Asian rates curves tosteepen in a rising rate environment,including the HKD, the SGD and the TWDcurves which have shown strongdirectionality1.31.21.11.05Y (%)TWD IRS - past one year0.90.85 10 15 20 25 302/5 (bp)1.91.71.55Y (%)SGD IRS - past one year1.71.51.35Y (%)HKD IRS - past one year1.31.11.10.90.90.70.730 40 50 60 70 80 90 100 1102/5 (bp)0.520 40 60 80 1002/5(Sources: Bloomberg, Crédit Agricole CIB

Directionality – others934.55Y (%)CNY IRS - past one year3.45Y (%)KRW IRS - past one yeaer4.03.23.53.03.02.82.52.62.0-30 -10 10 30 502/5 (bp)2.4-5 0 5 10 15 20 25 30 352/5 (bp)7.65Y (%)INR IRS - past one year3.75Y (%)THB IRS - past one year7.43.57.23.33.17.02.96.82.76.6-30 -25 -20 -15 -10 -5 0 5 102/5 (bp)2.50 20 40 60 80 1002/5 (bp)Sources: Bloomberg, Crédit Agricole CIB

Basic balance94Most Asian economies maintain external surpluses50%Basic balance to GDP4030Mar-11Mar-12Mar-1320100-10ThailandTaiwanSingaporePhilippinesMalaysiaKoreaIndonesiaIndiaHong KongChinaSources: CEIC, Crédit Agricole CIB

95Vietnam (BB-)*Reserves to external debtReserves to external debt levels are broadly healthyReserves to External Debt%600500Dec-08 Dec-10 Dec-12400* Latest data at Dec-103002001000Indonesia(BB+)Philippines(BBB-)India (BBB-)Thailand (A-)Malaysia (A)Korea (AA-)Taiwan (AA-)China (AA-)HK (AAA)Singapore(AAA)(S&P LT LCY rating)Sources: Bloomberg, CEIC, Crédit Agricole CIB

Relative value – fiscal position96Fixed income portfolios, including FX reserves, still have to pick relative values765Y gov'tbond yield %Indonesia543MalaysiaPhilippinesThailandChinaKorea21USTaiwanGermanySingaporeHong Kong0-8 -4 0 4Fiscal balance (latest), % to GDPSources: Bloomberg, CEIC, Crédit Agricole CIB

Relative value – credit rating97Sovereign bonds in China, Korea and Malaysia are garnering investor interestPhilippines (BBB-)Indonesia (BB+)Thailand (A-)Malaysia (A)South Korea (AA-)Taiwan (AA-)(S&P LT LCY ratings)China (AA-)Japan (AA-)US (AA+)HK (AAA)Germany (AAA)UK (AAA)Singapore (AAA)5Y gov't bond yields, %0 1 2 3 4 5 6 7Sources: Bloomberg, CEIC, Crédit Agricole CIB

Macroeconomic forecasts98Real GDP (YoY. %) CPI (YoY. %) Current Account (% GDP)12 13 14 12 13 14 12 13 14Asia 6.1 6.3 6.6 3.8 3.4 4.0 1.0 1.1 0.9China 7.8 7.7 7.8 2.6 2.6 3.4 2.3 2.4 1.9Hong Kong 1.4 3.5 3.8 4.7 4.6 4.5 3.3 4.5 4.9India 5.0 5.5 6.5 7.3 5.7 6.0 -5.6 -4.9 -4.7Indonesia 6.2 5.7 5.7 4.3 4.8 5.1 -2.8 -3.1 -3.1Korea 2.0 2.8 3.9 2.2 1.7 3.0 2.3 2.6 2.7Malaysia 5.6 4.8 5.2 1.7 1.6 1.7 6.1 4.8 4.0Philippines 6.8 7.0 5.7 3.1 3.3 3.7 3.5 2.7 2.4Singapore 1.3 2.3 4.4 4.6 4.0 4.3 19.0 16.0 19.5Taiw an 1.3 3.0 2.7 1.9 1.5 1.7 10.7 9.0 9.5Thailand 6.4 4.6 4.0 3.0 3.3 3.0 0.7 2.0 1.6Vietnam 5.0 5.5 5.7 9.3 6.7 7.9 0.0 -0.1 -0.7Sources: Crédit Agricole CIB

Interest rate forecasts99Sep-13 Dec-13 Mar-14 Jun-14 Sep-14 Dec-14AsiaChina 1Y lending rate 6.00 6.00 6.25 6.25 6.50 6.50Hong Kong Base rate 0.50 0.50 0.50 0.50 0.50 0.50India Repo rate 7.25 7.00 6.75 6.75 6.75 6.75Indonesia BI rate 6.00 6.00 6.00 6.00 6.00 6.00Korea Call rate 2.50 2.50 2.50 2.50 2.75 3.00Malaysia OPR 3.00 3.25 3.25 3.25 3.25 3.25Philippines Repo rate 3.50 3.75 3.75 3.75 3.75 3.75Singapore 6M SOR 0.69 0.70 0.86 0.91 1.22 1.33Taiw an Redisc 1.88 1.88 2.00 2.13 2.25 2.25Thailand Repo 2.50 2.50 2.75 2.75 3.00 3.25Vietnam Refinancing rate 7.00 7.00 7.00 7.00 7.00 7.00Sources: Crédit Agricole CIB

FX forecasts100Sep-13 Dec-13 Mar-14 Jun-14 Sep-14 Dec-14AsiaChina USD/CNY 6.13 6.10 6.08 6.05 6.03 6.00Hong Kong USD/HKD 7.77 7.77 7.77 7.77 7.76 7.76India USD/INR 59.00 57.60 56.70 55.90 55.00 54.10Indonesia USD/IDR 10130 9890 9730 9570 9410 9250Malaysia USD/MYR 3.15 3.11 3.08 3.05 3.02 2.99Philippines USD/PHP 43.4 41.9 41.3 40.6 39.9 39.3Singapore USD/SGD 1.27 1.26 1.24 1.23 1.22 1.21South Korea USD/KRW 1140 1110 1095 1080 1065 1045Taiw an USD/TWD 30.1 29.8 29.5 29.3 29.0 28.8Thailand USD/THB 31.0 30.4 30.1 29.8 29.6 29.3Vietnam USD/VND 21500 21500 21500 21500 21900 21900Sources: Crédit Agricole CIB

Rankings and bios101

FX Forecasts - Bloomberg102Bloomberg currency forecastsIn the Bloomberg FX poll (Q213), Crédit Agricole CIB wasranked number 1 for NZD/USD, number 2 for USD/RMBand EUR/RON, as well as number 4 for USD/PHP andUSD/PLN. We were also ranked number 1 for EUR/USD inQ4 2012.This table is updated each quarter and provides an indicationof which banks give the most consistently accurate forecastsover past quarter, measured across different time-frames andcurrencies.2012Q4 – EUR/USDBEST EUR/USD FORECASTERSRank Firm AME*1 Credit Agricole CIB 1.50%2 Canadian Imperial Bank of Commerce 2.85%3 Monex Europe 3.07%4 Petrocommerce Bank 3.25%5 Alpha Bank AE 3.45%2013Q2 – EUR/RONBEST EUR/RON FORECASTERSRank Firm Score1 Rabobank 67.272 Credit Agricole CIB 62.263 Barclays 61.83Source: Bloomberg currency forecasts, Jul 13*AME=Average Margin of Error2013Q2 – NZD/USDBEST NZD/USD FORECASTERSRank Firm Score1 Credit Agricole CIB 65.972 Banco Santander 64.913 Bank of America Merrill Lynch 60.234 Banco Bilbao Vizcaya Argentaria 60.095 JPMorgan Chase 59.362013Q2 – USD/PHPBEST USD/PHP FORECASTERSRank Firm Score1 National Australia Bank 66.242 Societe Generale 64.863 Scotiabank 59.554 Credit Agricole CIB 57.255 Standard Chartered 57.252013Q2 – USD/PLNBEST USD/PLN FORECASTERSRank Firm Score1 Royal Bank of Scotland 72.762 BNP Paribas 60.113 X-Trade Brokers Dom Maklerski 58.784 Credit Agricole CIB 58.032013Q2 – USD/RMBBEST USD/RMB FORECASTERSRank Firm Score1 Westpac Banking 76.762 Credit Agricole CIB 74.263 BMO Capital Markets 69.534 Bank of Tokyo-Mitsubishi UFJ 68.305 Macquarie Bank 65.90

FX Forecasts - Reuters103Reuters currency forecastsIn the Reuters poll, Crédit Agricole CIB moved up from position 5in 2011 to position 4 in 2012, and recently climbed to no. 1 so farin 2013. This is out of around 60 respondentsThis table is updated each month and provides an indication ofwhich banks give the most consistently accurate one-monthforecasts for dollar rates. Banks are awarded points only for themonths when they contributed to the Reuters poll2012Rank Bank1 BTMU2 UniCredit3 ZKB4 Credit Agricole CIB5 Alpha Bank6 DZ Bank7 IHS Glbl Insight8 Scotia Capital9 Banco BPI10 Wells Fargo Bank2013 YTDRank Bank1 Crédit Agricole CIB2 AIB3 Eurobank EFG4 Mizuho Corp Bank5 Swedbank6 BMO Capital Mkts7 IFR Markets8 UniCredit9 Alpha Bank10 BTMU"I believe that eventually the yen will succumb to a relatively lower yield, compared to the U.S. in particular,"said Mitul Kotecha, head of global FX strategy at CA-CIB, who was the most accurate forecaster on the yenlast month."I think increasingly yield will become important as drivers of many currencies, in particular the dollar-yenwhere our forecasts show quite a sharp move in terms of relative yields between the U.S. and Japan."Source: Reuters currency forecasts, May 2013

FX Forecasts – FX Week104FX Weekly Currency ForecastsCrédit Agricole CIB was ranked no. 2 and no.4 in the twelvemonthand one-month ranking respectively according to FXWeek. This continues an impressive performance for the global FXstrategy team which was ranked number 1 in this category for2008, 2009, 2010 & 2011.The survey looks at forecast accuracy regarding the Euro, USdollar, Japanese, British Pound and Swiss Franc and covers morethan 40 suppliers of forecasts, including investment banks andindependent research units.Twelve-month rankings, FX weekRank Bank1 Bank of Montreal2 Credit Agricole CIB3 Rabobank4 Informa Global Markets5 Bank of America Merrill Lynch6 TD Securities7 SEB8 Gain Capital9 Bank of China10 NomuraSource: FX Week, 23 Mar 2013One-month rankings, FX weekRank Bank1 Barclays2 SEB3 Wells Fargo4 Crédit Agricole CIB5 Westpac6 Thomson Reuters - IFR Markets7 Royal Bank of Scotland8 BNP Paribas9 CIBC10 TMS BrokersSource: FX Week, 20 May 2013

FX Research and Market Coverage - Asiamoney105Asiamoney FX Poll 2012Crédit Agricole CIB has been ranked No.5 for best FX Research and MarketCoverage.Financial Institutions FX PollBest for FX Research and Market CoverageRank Bank1Citi2ANZ3BNP Paribas4CIMB5 Credit Agricole CIBBest Foreign FX Providers - ChinaBest for FX Research and Market CoverageRank Bank1Citi2 Bank of America-Merrill Lynch3 Credit Agricole CIBBest Foreign FX Providers - TaiwanBest for FX Research and Market CoverageRank Bank1 Credit Agricole CIB2Citi3 J.P. MorganBest Overall FX Research AnalystBest Overall FX Research AnalystRank Name Firm1 Rohini Malkani Citi2Helmi ArmanCiti3 Frances Cheung Credit Agricole CIB4 Mitul Kotecha Credit Agricole CIBSource: Asiamoney

Research Rankings106Asiamoney Fixed Income Poll 2012Regional Best Teams for Asian Macroeconomic ResearchRank Bank1Citi2OCBC3 Credit Agricole CIB4 Societe Generale5CIMBAsiamoney Fixed Income Poll 2012Best Interest Rates Research & Market Coverage(Local Currency Interest Rates)CurrencyRankCNH 1HKD 1KRW 1Asiamoney Fixed Income Poll 2012Best for Overall Interest-Rate Research AnalystRank Analyst Firm1 Frances Cheung Credit Agricole2 Xiaoqing Xu CICC3 Danny Suwanapruti Standard CharteredFinance Asia Fixed Income Research Poll 2012Analyst Ranking (Local Currency Bond)Rank Analyst Firm1 Frances Cheung Credit Agricole CIB2 Dariusz Kowalczyk Credit Agricole CIB3 Jerry Gwee OCBC4 Joey Cuyegkeng ING5 Bert Gochet JP MorganAsiamoney FX Poll 2012Financial Institutions FX PollBest for FX Research and Market CoverageRank Bank1Citi2ANZ3BNP Paribas4CIMB5 Credit Agricole CIBAsiamoney FX Poll 2012Best Overall FX Research AnalystRank Name Firm1 Rohini Malkani Citi2 Helmi Arman Citi3 Frances Cheung Credit Agricole CIB4 Mitul Kotecha Credit Agricole CIBSource: Asiamoney, Finance Asia, Crédit Agricole CIB

Speaker BiographyMitul KotechaHead of Global Markets Research Asia and Global Head of Foreign Exchange StrategyGlobal Markets ResearchMitul Kotecha has 19 years of experience in the analysis of Economies, Foreign Exchange, Fixed Income and EquityMarkets. Mitul began his career in Swiss Bank Corporation (Now UBS) in June 1994 as a Fixed Income Analyst(London). He later moved to ING Baring Securities (London) as a Quantitative Strategist where he was involved indeveloping models for equity portfolios for the Emerging Markets group. Following this Mitul became a SeniorTreasury Economist at Standard Chartered Bank (London) where he was responsible for currency strategy for majorand emerging markets. In December 1999 he moved to Crédit Agricole CIB (London) where he is a Managing Directorand Head of Global Foreign Exchange Strategy. In August 2008, Mitul moved to Hong Kong remaining in the sameposition.Mitul is very involved with Crédit Agricole CIB’s client franchise, presenting his and the Global Market’s Researchteam views on a regular basis. Mitul is also frequently asked to participate in external FX conferences globally. He hasa significant exposure to the press/media where he is regularly consulted.Mitul and his FX strategy team rank highly in various FX polls including FX Week (number 1 consistently during 2008,2009, 2010, 2011 and 2012), Reuters and Bloomberg. In the Asiamoney FX Poll 2012 Mitul was ranked 4 as BestResearch analyst. His team was ranked 5 for FX Research and Market Coverage, 3rd for China FX Research and 1stfor Taiwan FX research.Mitul holds a Masters Degree in Economics and Finance from the University of Warwick and holds an HonoursDegree in Economics. Mitul maintains a popular blog on the financial markets called econometer.org and is theauthor of the book, “Chronology of a Crisis”.

Speaker BiographyKazuhiko OgataChief Economist-JapanGlobal Markets ResearchKazuhiko Ogata joined Crédit Agricole CIB Japan in October 2012, as Chief Economist responsible for Japan’seconomic and financial market analysis.He has 18 years experience as both as a sell-side and buy-side economist covering Japan. Most recently, he was abuy-side economist for UBS wealth management, after working for the American asset management companyAlliance Bernstein Japan Limited.He also has background as a sell-side economist for more than a decade at Jardine Fleming Securities (currently JPMorgan), ABN AMRO Securities Japan, as well as HSBC. He initiated his career at Sakura Bank (currently MitsuiSumitomo Bank).Kazuhiko graduated from Waseda University with a Bachelor’s degree of Economics and then went to CornellUniversity in US to receive a Master’s in Business Management. He also completed a Development EconomistCourse in the International Development Center of Japan under the jurisdiction of the former Ministry of InternationalTrade and Industry.

Speaker BiographyFrances CheungSenior Strategist, Asia ex-JapanGlobal Markets ResearchFrances Cheung has over 10 years experience as an economist and rates strategist, covering Asian economies andmarkets. She joined Crédit Agricole CIB in April 2010 as Senior Strategist for Asia ex Japan, with a focus on the ratesmarkets.She is in charge of formulating rates strategies for markets in Asia ex-Japan. She is involved in relationships with thebank’s clients, presenting her and the Global Markets Research team’s views on a regular basis. She also markets thebank’s economic and market views with the media.Frances was working with Standard Chartered Bank previously, covering the rates markets in China, Hong Kong andTaiwan, and regional economies. Prior to that, she worked with Primasia (Securities) Asia and the HKSARgovernment on economic research for Greater China and North East Asia.She received her Master of Philosophy (Economics) and Bachelor of Social Science (Economics) degrees from theChinese University of Hong Kong. Frances is also a CFA charter holder.She was ranked No. 1 as Best Local Currency Analyst in FinanceAsia Fixed Income Research Poll 2012; No.1 of“Best for Overall Interest-Rate Research Analyst” in Asia Money Fixed Income Poll 2012, No. 3 of “Best for Overall FXResearch Analyst” in Asia Money FX Poll 2012; No. 1 as Best analyst in FinanceAsia Fixed Income Research Poll2011.

Speaker BiographyDariusz KowalczykSenior Economist & Strategist, Asia ex-JapanGlobal Markets ResearchDariusz has 14 years of experience in fixed income trading, sales and research, including in currencies, bonds, rates,equities and commodities. Previously, he worked for Bayerische Hypovereinsbank, the Chicago Mercantile Exchange,Standard & Poor's MMS and SJS Markets. He has been covering emerging Asia for the past 9 years.Dariusz joined Crédit Agricole CIB in June 2010 as the regional economist for Asia ex. Japan. He is also in charge offundamental currency research in the region.Dariusz is very involved in relationships with the Bank's clients, regularly presenting his and the Bank's views. He isalso a frequent speaker at internal and external conferences and is often interviewed by financial TV networksand other media, primarily on the economies and markets of China, India and other countries in emerging Asia.Dariusz holds an MBA degree in International Finance from Brandeis University, as well as a Masters degree inInternational Economic & Political relations from the University of Krakow. He was ranked #3 in Bloomberg pool ofcurrency forecasters during the Lehman crisis, #3 in Finance Asia poll of fixed income research analysts in 2011, #2 inFinance Asia poll of local currency bond analysts in 2012. Together with the Crédit Agricole CIB team, he was ranked- #1 in Bloomberg poll of CNY forecasters in Q3 2012, as well as #5 in Asian FX Research and #1 in CNH InterestRates Research in Asiamoney Fixed Income Poll 2012.

DisclaimerGlobal Markets Research contact details111CertificationThe views expressed in this report accurately reflect the personal views of the undersigned analyst(s). In addition, the undersigned analyst(s) has not and will not receive any compensation for providing a specific recommendation or view in this report.Mitul Kotecha, Kazuhiko Ogata, Frances Cheung, Dariusz KowalczykMacro Strategy(Facilitator:Hervé Goulletquer)Interest Rates(Head:David Keeble)EmergingMarkets(Head:Sébastien Barbé)ForeignExchange(Head:Mitul Kotecha)Asia (Hong Kong &Tokyo)Mitul KotechaHead of Global MarketsResearch for Asia andGlobal Head of FX Strategy+852 2826 9821Kazuhiko OgataChief Economist – Japan+81 3 4580 5360Yoshiro SatoEconomist – Japan+81 3 4580 5337Frances CheungSenior Strategist – Asia ex-Japan+852 2826 1520Frances CheungSenior Strategist – Asia ex-Japan+852 2826 1520Dariusz KowalczykSenior Economist/Strategist –Asia ex-Japan+852 2826 1519Mitul KotechaGlobal Head of FX Strategy+852 2826 9821Hervé Goulletquer Head of Global Markets Research +33 1 41 89 88 34Europe (London & Paris)Sébastien BarbéHead of Global Markets Research for Europe andHead of EM Research and Strategy+33 1 41 89 15 97Frederik DucrozetSenior Economist – Eurozone+33 1 41 89 98 95Slavena NazarovaEconomist – Eurozone/UK+33 1 41 89 99 18Jean-François PerrinSenior Asset Allocation Strategist+33 1 41 89 94 22Luca JellinekHead of European Interest Rates Strategy+44 20 7214 6244Peter ChatwellSenior Interest Rates Strategist+44 20 7214 5289Orlando GreenSenior Interest Rates Strategist+44 20 7214 7467Sébastien BarbéHead of EM Research and Strategy+33 1 41 89 15 97Jakub BorowskiChief Economist - Crédit Agricole Bank Polska SA+ 48 22 544 89 41Alexander PecherytsynChief Economist – Crédit Agricole Bank Ukraine+ 38 44 493-9014Guillaume TrescaSenior Emerging Market Strategist+33 1 41 89 18 47Adam MyersEuropean Head of FX Strategy+44 20 7214 7468Manuel OliveriFX Strategist+44 20 7214 7469Americas (New York)David KeebleHead of Global Markets Research for theAmericas andGlobal Head of Interest Rates Strategy+1 212 261 3274Michael P. CareyChief Economist – North America+1 212 261 7134David KeebleGlobal Head of Interest Rates Strategy+1 212 261 3274Jonathan RickIRD Strategist+1 212 261 4096Disclaimer© 2013, CRÉDIT AGRICOLE CORPORATE AND INVESTMENT BANK All rights reserved.This research report or summary has been prepared by Crédit Agricole Corporate and Investment Bank or one of its affiliates (collectively “CréditAgricole CIB”) from information believed to be reliable. Such information has not been independently verified and no guarantee, representation orwarranty, express or implied, is made as to its accuracy, completeness or correctness.This report is a “commercial communication” as defined in article 6 of the Directive 2000/31/CE of 8 June 2000. For the avoidance of doubt, it is not a“communication à caractère promotionnel” within the meaning of the Règlement General AMF. It is provided for information purposes only. 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