From: Ens, Amando Sent: 11/17/2016 8:55:12 PM To: jeffrey E. [[email protected]]; Richard Kahn nnn Subject: USDJPY testing 110. Buy Japan upside Attachments: image001.png; image002.png; image003.png; image004.jpg; image00S.jpg; image006.jpg; image007.jpg; image008.png; image009.jpg; image010.jpg; image011.jpg; image012.gif; Nikkei to 20000.pdf; Japan - Ready for ignition.pdf; Japan Macro Watch.pdf Importance: — High We can also discuss single stock and Topix banks index (TPNBNK) ideas The Republican sweep means higher USD and yields are a foregone conclusion. We see USDJPY reaching 120 next year and Japanese reflation, bullish for Japanese equities, particularly the banks. > Huge focus on Banks/Financials post Trump election, they're the big winners. > The Banking sector is the main beneficiary of higher rates/less regulation overhang. > Investors are still underweight Japan. Especially in financials, so the move can have legs > Valuation still at depressed levels. Japanese Banks are cheap versus their peers. > Having said that, uncertainty still there so buying calls and call spreads makes sense. Some investors are still skeptical. Instead of building a large cash position, we believe options are a better play in case the market reverses and initiates a risk off move again. -BAML expects USDJPY 115-120 by end of 2017. NKY target of 20,000 (12% upside) -BOJ’s intentions to refrain from further flattening of local yield curve positive for Banks and Insurers. -DXJ carries a 12% weight in banks whereas NKY is only 1.07% and even TPX is only 8.55%. -Positioning light. DXJ shares outstanding at 3year lows as foreigners have net sold $52bIn of JP equities ytd. -DXJ skew remains flat. 2m 25d Put /Call skew at 19%tile over the past year. Japan Investment Strategy, Japan Econ Outlook and Japan Macro Watch attached DXJ 2m 25d Put/Call over the past year. : id ” Ratio : pxJ [1-40 i (1.) Delt Ivol (25 Put 2 Months LIVE - LIVE Bloomberg) 135 1.30 | hi 1.235 TT 1.20 1.15 pe p