e e e Asian e quite S (ex-J ap an) Preference: overweight ; . Recommendations MSCI Asia ex-Japan (27 June): 469 (last month: 466) UBS View MSCI Asia ex-Japan (6-month target): 515 Tactical (6 months) ¢ The region continued to show high volatility last month, with its P/BV temporarily close to 2008 lows. * We prefer Hong Kong banks, Singapore ¢ Hong Kong and Singapore markets' domestic fundamentals remain solid. Hong Kong should benefit high-dividend stocks and Chinese from China's gradual recovery in 2H 2012, while Singapore's economy is rebounding and corporate insurance and consumer plays. balance sheets and earnings remain solid. After the rate cut early June, we expect China to have more e We are concerned about India’s inflation policies to support growth in 2H 2012. China is our most preferred market, while Indonesia is least pressure, but wie SEE Op par tunities in the preferred in the region. We are more concerned about Indonesia's fiscal deficit, since the fuel price hike power and banking sectors. did not happen. Domestic problems for Indonesia include current account deficits, potential capital Strategic (1 to 2 years) outflows, bottomed-out inflation and hiccups in economic and market reforms, in our view. ° Rising consumption is the long-term trend ° We expect 10% earnings-per-share growth over 12 months for the MSCI Asia ex-Japan, which trades on in Asia ex-Japan that we expect will 11.6x 12-month trailing earnings. We expect this multiple to expand slightly in the next six months, as the continue to play out. current earnings downgrade cycle is approaching its end. Nevertheless, MSCI Asia ex-Japan is likely to see « In China, sectorssthat contribute to further volatility in the near term due to global macro risk factors. improved labor productivity or deliver _ . ; goods and services for the elderly should A Positive scenario MSCI Asia ex-Japan (6-month target): 610 benefit from demographic changes ¢ More supportive monetary and fiscal policy, stable