Equities overview | Global equity markets — Key points Preferences (6 months) ¢ We keep an overall neutral allocation to equities (see summary on slide 3). = neutral ++ ¢ The US remains our preferred developed market. The domestic economy is expected to continue to <8 us grow. This should underpin earnings growth for US companies. With labour costs in check, profit margins 5 ° eres should stay around the current high levels. = ¢ We keep our overweight position on EM equities. Monetary easing in key countries continues, and EMU relatively attractive valuations remain key supporting factors. However, near-term economic and currency 2 UK weakness remains a major concern for investors — especially those domiciled in hard currency regions (e.g. 3 switzerland USD, EUR). Until year-end, we expect some growth acceleration and therefore stay overweight. ¢ The UK remains a preferred market. It offers a solid earnings outlook compared to other European eta markets. Moreover, the valuation is attractive at a trailing P/E ratio close to 10. Australia ° We keep our negative stance on Eurozone equities. The economy remains very weak affecting y Hong Kong earnings growth negatively. The sovereign debt crisis remains a major risk (see page 8). a Japan ¢ We remain cautious on Australian equities. The earnings prospects are still being revised down by ; analysts. The domestic economy is moving at two speeds with the strong part getting its impulse from the Singapere mining sector. We maintain a small underweight. @ Global EM ¢ We keep a moderate underweight in Swiss equities, as valuation looks expensive relative to world equities. The negative earnings impact of the strong Swiss franc should ease further in coming quarters. _— old Note: Preference in hedged terms (excl. currencies) Global equity sectors - Key points os neutral ++ ¢ Consumer Staples and Healthcare remain preferred among defensive sectors, as their long-term Consumer Discretionary earnings prospects are very solid. Bot