e e Eurozone equilies Preference: neutral ; Euro Stoxx (24 Oct): 247 (last publication: 247) | Recommendations UBS View Euro Stoxx (6-month target): 249 = Tactical (6 months) ¢ We keep our neutral stance on Eurozone equities. While the sovereign debt crisis remains a risk factor e We continue to recommend defensive (see slide 8), the conditional bond buying program by the ECB (OMT) and the introduction of the ESM have sectors like Consumer Staples and significantly reduced downside risks. Healthcare. We also like the Energy ¢ Near-term we might see volatility increasing as politicians wrangle about the steps needed to provide a sector. . . . . .. . . . . e We are negative on Industrials and more lasting solution to the debt crisis (setup of a single banking regulator, solving the banking related Consumer Discretionary as industry problems in Spain, etc. ). We think that attractive valuations sufficiently compensate for those risks. sentiment remains subdued. ¢ The weak economic environment with recessions in the southern countries continues to weigh on e We remain cautious on Financials — corporate earnings. Consensus expectations (bottom up) of about 10% to 15% earnings growth in 2013 is especially Banks and diversified too high, in our view. In contrast, we forecast just about 3-5% earnings growth next year. Financials. The need for recapitalization remains a major concern. 4 Positive scenario Euro Stoxx (6-month target): 320 . ; ; ; Strategic (1 to 2 years) ¢ Global economic growth reaccelerates and Eurozone growth shows clear signs of bottoming out, ° We have a preference for stocks paying enabling mid-single-digit earnings growth over the next six months. The trailing P/E ratio could re-rate to high-quality dividends. about 14.5x from its current reading of about 11.7x. © We like companies with high exposure & Negative scenario Euro Stoxx (6-month target): 200 to rapidly growing emerging markets. ¢ The debt crisis leads to renewed pressure on Spain and Italy. H