Asia Derivatives Focus 230212 2

FOR PROFESSIONAL INVESTORS ONLY
Equit y Deri va ti ve Strateg y ( Asia)
23 February 2012
Asia Derivatives Focus Hanjeongsik Korean set meal

Asia Equity Derivatives Analyst
Anthony Wong, +852 2108 5638, anthony.c.wong@asia.bnpparibas.com
Head, Asia Equity Derivatives Strategy
Winner Lee, +852 2108 5658, winner.lee@asia.bnpparibas.com
Market activity: Upside Call on NKY, Japanese dispersion, Call on Dispersion on Asian underlying
Since the BOJ easing last week, long-dated upside Calls on NKY were bought, and investors were returning interest on
Japanese dispersion with significant size traded. Also, the Call on Dispersion (Talisman) on Asian underlying that
capped the downside at the premium is in favour. Some investors are getting a bit more cautious purchasing downside
protection in decent size. The China RRR cut came in later than expected, China properties rallied and outperformed.
Theme of the Week Global Easing Impact on Korea Equities
JPY continued to weaken since the BOJ easing and finally broke the JPY80/USD level yesterday. According to BNPP
Japan Equity Strategist, Shun Maruyama, most analysts and company assumptions on JPY are still JPY75-80/USD. As
such, breaking the JPY80/USD level would likely trigger a wave of re-rating on Japanese earnings forecasts. Korean
exporters have outperformed Japanese exporters for a long time as a result of strong JPY vs KRW. The consensus is
predicting JPY/KRW to reach 13.5 by end-2012 and 12.1 by 2013; if investors are anticipating this trend to be realized,
the significant outperformance on Korean exporters over Japanese exporters would gradually narrow. Besides, China
easing will lead to more demand on Korean basic materials and machinery sectors.
Idea of the Week Japanese Exporters vs. Korean Exporters, Korean Beneficiaries on China Easing
Buy Japanese Exporters (BNJPEXPO) and Sell Korean Exporters (BNKREXPO)
Buy Dec-12 19% Call on Dispersion on Korean and Japanese Exporters at 2.8% (indicative)
Buy Korean Beneficiaries on China Easing Basket (BNKRCNBE) and Sell Kospi2
A high conviction arbitrage opportunity is to position Buy Samsung Electronics Preference and Sell Samsung
Electronics: the preference shares are trading at a 41.5% discount to its ordinary shares, only 4.3ppt above its all-time
low, staying at 5%-tile. Samsung Electronics Preference shares are the most liquid with USD210m daily turnover, versus
USD360m for its ordinary shares. Interestingly, it is a high mean-reverting pair with 95% confidence level.
Buy Samsung Electronics Preference (005935 KS) and Sell Samsung Electronics (005930 KS) [Borrow
fee: 75bps]
Alert: Ways to position on Chinas RRR cut, prefer A-shares than H-shares
Hidden Assets Nikkei volatility up, Fear index on India is alarming
The biggest movement is on NKY implied volatility, up 1 vol-pt across all tenors. INVIXN (India NSE Volatility Index) is
going up by 10.7%, trading above 80%-tile over a two-year horizon.
Winner Lee
CONTENT
CHART OF THE WEEK JAPAN AND KOREA EXPORTERS
Theme: Global Easing Impact on Korea Equities.............. 2

Idea: Japanese Exporters vs. Korean Exporters **** 4
Korean Preference-Ordinary Shares Arbitrage ****.. 7
Alert: Ways to position on China RRR cut ....................... 9
HSCEI 2013 Dividends, more upside than downside ..... 10
A Sharpe way to play Japan ........................................ 12
Short Selling in Asia ........................................................ 13
Convertible bonds ........................................................... 16
Volatility and term structure............................................. 15
Skew and convexity ........................................................ 15
Risk Barometer ............................................................... 18
Index Volatility ................................................................. 19
Convexity ........................................................................ 28
Single Stock Volatility Screener ...................................... 29
(Index, Jan-11=100)
120.0
Korean Exporters
Japanese Exporters
110.0
100.0
90.0
80.0
70.0
60.0
Jan-2011 Apr-2011
Jul-2011
Oct-2011 Jan-2012
Note: data as of 21 February 2012; Source: Bloomberg
Asia Equity Derivatives Strategy: Winner Lee (852) 2108 5658, Anthony Wong (852) 2108 5638, Samuel Cheng (852) 2108 5671
Flow Sales: Hong Kong (852) 2108 5639, Singapore (65) 6210 1883
Bloomberg Page - BEDR
Theme of the Week Global Easing Impact on Korea Equities

Winner Lee and Sun Chung (Head of Korean Research, sun.chung@asia.bnpparibas.com,
+822 2125 0532)
The strong yen has led to Japanese exporters losing their competitiveness to Korean
exporters: JPY appreciated 45.8% against the USD since late 2008. Meanwhile, KRW
depreciated 5% and Korean manufacturers also continue to improve their product quality.
Between early 2009 and now, the key Korean exporters (autos and electronic equipments)
rocketed by around 138.2%, and substantially outperformed Japanese exporters by over
90%.
BOJ easing led to JPY weakening: BOJ surprised the market on 15 February 2012 by
expanding its asset-purchase programme and USD/JPY rose from recent lows of
JPY76.2/USD to the current JPY80.2/USD, implying the JPY weakened by 5.3% against the
USD. Indeed, most analysts are not factoring in a weak JPY in their earning models.
According to BNPP Japan Equity Strategist, Shun Maruyama, most analysts and company
assumptions on JPY are still JPY75-80/USD. As such, breaking the JPY80/USD level would
likely trigger a wave of re-rating on Japanese earnings forecasts.
Japan credit rating is a concern: S&P on 20 February reaffirmed Japan's sovereign debt
rating at AA-, but warned the possibility of lowering its long and short term ratings if Japanese
authorities fail to improve the debt trajectory from its current situation. S&P would maintain its
negative outlook on Japanese sovereigns, citing a weak government policy footing, fiscal
deficits, persistent deflation, shrinking population and high debt. This news flow is indeed
supporting our longer-term view of bearish JGBs, weakening yen and bullish
Japanese equities.
Consensus is predicting JPY/KRW to reach 13.5 by end-2012 and 12.1 by 2013:
Weakening of JPY versus KRW would help Japanese exporters regain competitiveness over
Korean exporters. If investors are anticipating this trend, the significant outperformance on
Korean exporters over Japanese exporters would gradually narrow.
JPYKRW Consensus Views and Forward
(JPYKRW)
16
Consensus View on JPYKRW at 12.1 in 2013
Consensus Median Forecast

Forw ard
15
14
13
12
11
1Q10 3Q10 1Q11 3Q11 1Q12 3Q12
2013
2015
(JPYKRW)
17
16
15
14
13
12
11
10
9
8
Jan-08
Consensus view on JPYKRW

at 12.1 in 2013
Jan-09
Jan-10
Source: Bloomberg FXFC [Go]
Jan-11
Jan-12
Fundamental Perspective (Sun Chung)

JPY/KRW movement appears to warrant a short-term trading opportunity: as KRW
appreciation (BNPP FX Team is forecasting USD/KRW to reach 1080 by end-2012 and 1050
in 2013) could raise concerns towards the exporters. Korean blue-chip technology and auto
companies have enjoyed strong outperformance over Japanese peers thanks to the price
competitiveness gained via a sharp decline in KRW relative to JPY. Prior to the 2008 crisis,
JPY/KRW cross-rate traded at 9x compared to over 14x currently. The incremental changes
with JPY depreciating against KRW, could lead to pair trade ideas between Japanese and
Korean shares, in our view. Likewise, we see some pressure from the profit taking activities
in Korean exporters. However, we would advocate a short-term trading strategy since the
cross-rate remains skewed towards leading Korean companies such as Samsung Electronics
(005930 KS) and Hyundai Motor (005380 KS), companies which can continue to re-rate with
solid earnings momentum.
China easing will lead to more demand on Korean basic materials and machinery
sectors: Regarding China easing, we are getting more bullish towards Korean basic
materials and machinery sectors. This is consistent with our positive view of global cyclical
stocks amidst a liquidity driven rally. Globally the top two economies' outlooks are improving
as we have stated in the New Year Strategy reports. China easing will likely help to boost
fixed asset investments which in turn will drive demand for basic materials. Property market
remains a hot issue for Chinese authorities and they probably don't want any risk of a
housing bubble. However, they can stimulate growth from public projects which bodes well
for Korean commodities players that are geared to China demand. Hence buying chemical,
steel, and machinery stocks should be preferred. Also, refiners could see demand for fuel to
increase factory operating rates. POSCO (005490 KS), Hyundai Steel (004020 KS), Korea
Zinc (010130 KS), LG Chemical (051910 KS), S-Oil (010950 KS), Doosan Heavy (034020
KS), Daelim Industrial (000210 KS) are preferred on the China easing investment case.
Japanese Exporters vs. Korean Exporters
Idea of the Week
Implementation 1: Buy Japanese Exporters and Sell Korean Exporters
Buy Japanese Exporters (BNJPEXPO) vs Sell Korean Exporters (BNKREXPO)
Korean exporters rallied 53.9% since late-August and outperformed Japanese exporters by
42.1%. The outperformance should narrow when JPY/KRW weakens overtime.
Japanese Exporters vs Korean Exporters
(Index, Jan-11=100)
Korean Exporters
120.0
Japanese Exporters
110.0
100.0
90.0
80.0
70.0
60.0
Jan-2011 Apr-2011
Jul-2011
Oct-2011
Jan-2012
Sources: Bloomberg; BNP Paribas
Code
Nam e
Korean Exporters Basket

005930 KS Samsung Electronics
066570 KS LG Electronics
000660 KS Hynix Semiconductor
005380 KS Hyundai Motor
000270 KS Kia Motors
034220 KS LG Display
Weighted average
Sector
Tech Hardw are

Leisure Goods
Tech Hardw are
Autos & Parts
Autos & Parts
Tech Hardw are
Price
Mkt Cap
USD m
Est T/O
(USD m )
P/BV (x)
1197000
88000
29000
224000
71600
29000
156,587
12,790
15,251
43,821
25,728
9,216
380.2
133.1
204.2
148.4
150.0
73.4
1.9
1.0
2.1
1.5
2.9
1.0
1.7
Mkt Cap
USD m
Est T/O
(USD m )
P/BV (x)
145,714
67,855
21,128
7,624
59,784
22,267
360.1
213.7
158.3
112.9
216.8
137.4
1.0
1.0
0.7
0.8
1.6
0.9
1.0
PE (x) PE (x)
Cur Yr Nxt Yr
10.3
20.1
24.5
6.6
7.0
20.1
14.8
9.3
12.5
11.6
6.1
6.4
12.5
9.7
DY (%) DY (%) Weight

Cur Yr Nxt Yr
(%)
0.8
0.4
0.3
0.8
0.9
1.6
0.8
0.8
0.5
0.4
0.8
1.0
1.6
0.9
16.5%
16.7%
16.7%
16.8%
16.7%
16.7%
100.0%
Code
Name
Japanese Exporters Basket

7203 JP
Toyota Motor
7267 JP
Honda Motor
6758 JP
Sony
6753 JP
Sharp
7751 JP
Canon
6752 JP
Panasonic
Weighted average
Sector
Autos & Parts

Autos & Parts
Leisure Goods
Leisure Goods
Tech Hardw are
Leisure Goods
Price
3380
2996
1682
549
3585
726
PE (x) PE (x)
Cur Yr Nxt Yr
37.6
22.3
na
na
15.1
na
12.4
16.0
11.3
24.8
39.2
13.0
15.7
20.1

Cur Yr Nxt Yr
(%)
1.5
2.0
1.5
1.9
3.5
1.4
1.9
1.9
2.4
1.5
2.2
3.5
1.5
2.2
Buy Japanese Exporter and sell Korean exporters

TRS Spread for USD30m to 50m vs USD Libor 1M:
Long leg: BNPP can offer the swap maturity 1Y on the Japanese Exporters basket:
BNPP pays performance and pays 93% dividends to client
Execution: total cost included.
Short leg: BNPP bid the swap maturity 1Y on the Korean Exporters basket
BNPP receives performance and receives gross dividend from client
Execution: 17 bps in and out
BNP receives 70 bps. Total Return Swaps have to be traded together
16.9%
16.8%
16.8%
17.1%
15.7%
16.8%
100.0%
Implementation 2: Call on Dispersion on Korean and Japanese Exporters
Buy Dec-12 Call on Dispersion with strike 19% on Korean and Japanese
Exporters at 2.8% (indicative)
n Diversified into two markets and five sectors: We select 10 Japanese and Korean
exporters which are likely to have diverging performances under the potential Chinese
and Japanese easing. The USD/JPY breaking the JPY80 level is a key trigger to reverse
the outperformance of Korean exporters over Japanese exporters.
n Buy Call on Dispersion is a structure to get equities exposure by going 1) long delta and
2) long volatility but 3) sell correlation.
Constituents of the Basket
Stocks
Code
Sector
Weight (%)
Toyota
7203 JP
Autos
10%
Isuzu
7202 JP
Autos
10%
Canon
7751 JP
Electronics/Office Equip
10%
Nintendo
7974 JP
Toys/Games/Hobbies
10%
Hitachi
6501 JP
Electronics & Electricals
10%
Japan
Korea
LG Electronics
066570 KS
Electronics & Electricals
10%
Hynix
000660 KS
Semiconductors
10%
Hyundai Motor
005380 KS
Autos
10%
Kia Motors
000270 KS
Autos
10%
LG Display
034220 KS
Electronics
10%
Source: Bloomberg, BNP Paribas
Backtest on Call on Dispersion with strike 19%
Source: Bloomberg; BNP Paribas
Implementation 3: Buy Korean Beneficiaries on China Easing Basket
Buy Korean Beneficiaries on China Easing Basket (BNKRCNBE) and Sell

Kospi2
According to Sun Chung, BNPP Head of Korean Research, regarding China easing they are
getting more bullish towards Korean basic materials and machinery sectors. This is
consistent with their positive view of global cyclical stocks amidst a liquidity driven rally.
Korean Beneficiaries on China Easing Basket
(Index, Jan-11=100)
120.0
Korean Benef on China Easing

Kospi2
110.0
100.0
90.0
80.0
70.0
Jan-2011 Apr-2011
Jul-2011
Oct-2011 Jan-2012
Code
Nam e
Sector
Korean Beneficiaries on China Easing Basket

005490 KS POSCO
Industrial Metals & Mining
004020 KS Hyundai Steel
010130 KS Korea Zinc
051910 KS LG Chem
Chemicals
010950 KS S-Oil
Oil & Gas Producers
034020 KS Doosan Heavy
Alternative Energy
000210 KS Daelim Industrial
Construction & Materials
Weighted average
Price
Mkt Cap
USD m
Est T/O
(USD m )
P/BV (x)
32,056
8,297
7,164
24,101
13,648
6,486
3,817
78.0
48.7
27.0
135.7
69.8
32.3
36.3
0.9
1.0
1.9
2.2
2.6
1.6
0.9
1.6
414000
109500
427500
409500
136500
69000
123500
PE (x) PE (x)
Cur Yr Nxt Yr
9.3
9.4
10.0
11.8
10.2
12.1
8.6
10.2
8.1
8.5
9.2
10.1
10.1
9.1
7.3
8.9

Cur Yr Nxt Yr
(%)
2.4
0.5
0.6
1.1
3.8
1.0
0.2
1.4
Long Korean Beneficiaries on China Easing Basket

Total Return Swap Compo USD vs Libor 1M:
BNPP can offer the swap maturity 1Y on the Korean Beneficiaries on China Easing Basket
BNPP pays performance and pays net dividends to client
BNP receives USD Libor 1m + 60 bps
Execution: 17 bps in and out
2.4
0.5
0.6
1.1
4.0
1.0
0.2
1.4
14.3%
14.3%
14.2%
14.4%
14.3%
14.3%
14.2%
100.0%
Korean Preference-Ordinary Shares Arbitrage Opportunity

Winner Lee
Buy Samsung Electronics Preference (005935 KS) and Sell Samsung

Electronics (005930 KS) [Borrow fee: 75bps]
Buy Hyundai Motor 7 Series (005387 KS) and Sell Hyundai Motor (005380 KS)
[Borrow fee: 75bps]
Buy LG Chem Preference (051915 KS) and Sell LG Chem (051910 KS) [Borrow
fee: 75bps]
Buy LG Electronics Preference (066575 KS) and Sell LG Electronics (066570

KS) [Borrow fee: 1%]
Excellent arbitrage opportunity: Korean preference shares are trading at a deep discount
to their corresponding ordinary shares. We advise hedge fund investors to go long the
preference shares and short the ordinary shares, on expectation the deep discount will
narrow over time. Indeed, long-only investors can also consider switching into preference
shares in order to gain better yield (slightly higher dividend payout) and purchase at a deep
discount.
Poor liquidity and without voting rights: Koreans preference and ordinary shares are
exposed to the same fundamentals, but the preference shares have much poorer daily
liquidity and are without voting rights, which are the key reasons why they are trading at a
discount to their ordinary shares. However, we believe the current deep discount is
unjustified.
Filtering criteria: We only select those preference shares with daily turnovers of over
USD10m and trading at a deep discount to common shares. When choosing between
Hyundai Motor 5 series and 7 series, we prefer 7 series due to its higher average daily
turnover.
Preference shares Pref shares
Com pany
Code
Price (KRW)
Est T/O
USD m
Ordinary Share
code
Com m on
Est T/O
discount/
Percentile
Price (KRW)
USD m
prem ium
(%)
4.8
Sam sung Electronics
005935 KS
694000
209.95
005930 KS
1180000
359.29
(41.2)
Hyundai Motor "7" Series
005387 KS
67400
56.06
005380 KS
226500
134.95
(70.2)
0.3
LG Chem
051915 KS
128500
39.99
051910 KS
421000
157.68
(69.5)
0.0
Hyundai Motor "5" Series
005385 KS
66500
23.74
005380 KS
226500
134.95
(70.6)
0.8
LG Electronics
066575 KS
27900
10.94
066570 KS
88700
106.97
(68.5)
0.3
5.8
S-Oil Corp
010955 KS
63000
3.92
010950 KS
130500
68.67
(51.7)
Samsung Electro-Mech
009155 KS
28950
3.41
009150 KS
95800
64.03
(69.8)
0.8
Daishin Securities
003545 KS
7960
3.30
003540 KS
12600
1.73
(36.8)
54.0
7.9
WOOR Investment
005945 KS
5620
2.86
005940 KS
14100
24.36
(60.1)
Samsung Corp
000835 KS
22350
1.66
000830 KS
76700
56.38
(70.9)
0.1
Daew oo Securities
006805 KS
5590
1.63
006800 KS
14300
26.46
(60.9)
32.7
2.4
Daelim Industrial
000215 KS
27600
1.48
000210 KS
123000
29.68
(77.6)
Samsung SDI
006405 KS
48700
1.45
006400 KS
141500
59.18
(65.6)
1.1
Samsung Fire & Marine
000815 KS
75100
1.38
000810 KS
209500
28.64
(64.2)
12.3
6.4
GS Holdings
078935 KS
21500
1.00
078930 KS
68600
37.14
(68.7)
LG Corp
003555 KS
24100
0.95
003550 KS
73500
33.97
(67.2)
1.2
SK Corp
003605 KS
46550
0.55
003600 KS
160000
31.12
(70.9)
3.8
5.3
Hanw ha Chem
009835 KS
9160
0.50
009830 KS
30150
66.26
(69.6)
CJ Corp
001045 KS
19250
0.39
001040 KS
80900
9.91
(76.2)
0.2
Hite Brew ery
000145 KS
8560
0.23
000140 KS
12100
0.34
(29.3)
86.0
Amorepacific Corp
002795 KS
72600
0.09
002790 KS
236500
1.50
(69.3)
6.4
High Conviction Samsung Electronics Preference-Ordinary pair: Samsung Electronics

Preference shares are trading at a 41.5% discount to its ordinary shares, only 4.3ppt above
its all-time low, staying at 5%-tile. Among the four preference-ordinary pairs, we prefer the
Samsung Electronics pair the most because Samsung Electronics Preference shares are the
most liquid with USD210m daily turnover, versus USD360m for its ordinary shares.
Interestingly, it is a high mean-reverting pair with Dickey Fuller T-stat equal to -3.4769,
indicating very high confidence level at 95%, half life equal to 49 days is a rough estimation to
revert by one standard deviation.
Hyundai Motor 7 Series is trading at a 70.2% discount to its ordinary shares, at the alltime low level.
Samsung Electronics Preference / Ordinary
Hyundai Motor 7 Series over Hyundai Motor
(%)
(10.0)
(%)
(20.0)
(30.0)
+2
+1
(40.0)
+1
mean
(50.0)
-1
(60.0)
-2
(70.0)
+2
(20.0)
(30.0)
(40.0)
(50.0)
mean
-1
-2
(80.0)
04
05
06
07
08
09
10
11
12
04
05
06
07
08
09
10
11
12
Sources: Bloomberg ; BNP Paribas
LG Chem Preference shares are trading at a 69.5% discount to its ordinary shares; also
hitting its all-time low level.
LG Electronics Preference shares are trading at 68.5% discount to its ordinary shares, very
close to historical lows, at 1%-tile.
LG Chem Preference / Ordinary
LG Electronics Preference / Ordinary
(%)
(20.0)
+2
(%)
(20.0)
(30.0)
+2
(40.0)
+1
(40.0)
+1
(50.0)
mean
(50.0)
mean
(60.0)
-1
(60.0)
-1
(70.0)
-2
(30.0)
(70.0)
-2
(80.0)
04
05
06
07
08
09
10
11
12
(80.0)
04
05
06
07
08
09
10
11
12
Alert: Ways to position on China RRR cut

Winner Lee
Buy Jun-12 105/120% Call on FTSE China A50 (XIN50) at 3.3% (indicative)
[USD quanto, Size: USD15m]
Buy Mar-12 105% Call on A50 Tracker (2823 HK) at 1.93% (indicative)
Buy Mar-12 105% Call on HSCEI at 1.69% (indicative)
Sell Mar-12 ATM Call on HSI and Buy Mar-12 ATM Call on HSCEI at 1.1%
(indicative)
Buy Jun-12 ATM or 105% Worst-of Call on ABC (1288 HK), ICBC (1398 HK) and
BOC (3988 HK) at 3.65% or 2.35% (indicative)
PBOC announced to cut the Required Requirement Ratio (RRR) by 50bps, which came
in later than expected, investors were expecting this to happen near the CNY.
Our China Economist Ken Peng sees several points to highlight for this important second
step in easing policy:
n Just two weeks ahead of the National People's Congress, this aims to fortify confidence in
the economy among the thousands of local officials who would attend the meetings
starting 5 March.
n When activity picks up after the budgeting process at the NPC, more policy support will
have to be put in place, without which investment would be at risk of weakening much
further.
n The pace of total financing is likely to pick up in coming months, which becomes more
important as funding needs pick up with economic activity.
n This is a net positive for markets to fuel lending and support economic growth in order to
cushion against external shocks.
H-shares are likely to gain further but we believe A-shares will catch-up: Back in early
February, we argued China's domestic liquidity was due to improve, while the flood of
external liquidity has largely been priced-in; H-shares rebounded 32% since its bottom in
early October, A-shares underperformed by 25.8%. With the first RRR cut of this cycle in
December, the average daily turnover of the Shanghai and Shenzhen Stock Exchanges
rebounded by 31% m-m to USD13.2b in January.
Sell Call on HSI to finance upside Call on HSCEI: HSCEI outperformed HSI by 1.28%
YTD; HSCEI is supposed to be a higher beta bet on China than the HSI, investors can pay a
small premium at 1.1% to capture the outperformance between HSCEI over HSI.
Cash extraction: the recent rally has been driven by liquidity due to global easing. We
advise investors to consider cash extraction and switch to call options in order to continue
their upside exposure. Implied volatility normalised for the past few months: volatility levels
are now attractive in order to implement strategies via options.
HSCEI 2013 Dividends, more upside than downside

Anthony Wong
HSCEI 2013 Dividends assuming a 30% payout for big banks
Sell Put on HSCEI 2013 Dividends with a strike of 325 dips and buy Call on
HSCEI 2013 Dividends with a strike of 350 dips at 12.0dips.
Sell Put on HSCEI 2013 Dividends with a strike of 325 dips at 13.5dips
We apply a conservative payout of 30% for big banks: CCB (939 HK) and ICBC (1398
HK) have been reducing payout ratios since 2008 while BOC (3988 HK) started in 2009.
Following speculation of China big banks further trimming dividend payout ratios for FY2011E
to 35%, for CCB, ICBC and BOC we are going to apply a 30% payout (5% less from
FY2011E) for FY2012E; while we apply a 25% payout for ABC (1288 HK). For the other
constituents in HSCEI, we are applying a similar payout ratio as we estimated for FY2011
(HSCEI 2012 Divs).
Payout ratio by the big 4 banks
Payout Ratio
2007
2008
2009
2010
2011E
2012E
CCB (939 HK)

67.5%
49.0%
44.2%
39.3%
35.0%
30.0%
ICBC (1398 HK)

54.5%
49.7%
44.1%
38.9%
35.0%
30.0%
BOC (3988 HK)

45.1%
51.3%
44.0%
39.0%
35.0%
30.0%
ABC (1288 HK)

na
na
na
52.3%
35.0%
25.0%
Upside is 9.6% according to our base case of 386.78: The base case on HSCEI 2013 divs
is 386.78 which implies an upside potential of 9.6%. However, we believe there is further
upside risk due to the conservative payout ratio applied on the banks.
1) As we have mentioned in our Asia Derivatives Focus before, BOC mentioned in their 2011
interim report that During the reporting period, the Board of the Directors of the Bank
reviewed and approved the Dividend Distribution Plan of Bank of China Limited (2011
version), according to which the dividends will be distributed at a ratio of 35%~45% of the
Groups current net profit for years 2010 to 2013.
2) In the 2007 annual report of ICBC, it is written that The Bank will honour its undertakings
set out in the IPO prospectus, and distribute 45%60% of its distributable profit as dividends
in accordance with applicable legal procedures. The retained profit shall be applied to
supplement the existing capital base to enable shareholders to benefit from the Banks high
rate of growth in profit.
Bear case is 325.42: For the bear case, we are assuming a 25% payout ratio for CCB, ICBC
and BOC and a 20% payout ratio for ABC. For earnings, we have calculated the implied
growth rate from BNPP or consensus EPS forecasts, we apply the lesser of the implied
growth rate or the estimated GDP growth rate at 8.3%.
Based on our bear case and bull case, we suggest positioning by a 325/350 risk reversal on
HSCEI 2013 Dividends. On the other hand, we also suggest selling a 325dips put and
collecting 13.5dips.
10
HSCEI 2013 Implied Dividends

(DIPs)
2013 Implied dividend
2013 BNPP estimates
450
400
350
300
250
200
150
100
Jan-08
Jul-08
Jan-09
Jul-09
Jan-10
Jul-10
Jan-11
Jul-11
Jan-12
Source: Bloomberg; BNP Paribas
11
A Sharpe way to play Japan

Nadejda Semenova
The Q3 earnings announcement season (Sept-Dec 2011) for Japanese companies
(members of the Nikkei index) finished last week. As we expected, most of the companies
(102 out of 200) revised down their full FY earnings targets due to weaker demand from
Europe and China and a stronger JPY forecast, while only 16 revised their targets higher.
Sharp negative earnings revisions did not hamper the NKY dividends rally, which started in
December 2011. An unexpected BOJ announcement of a 1% inflation target combined with
an expanded asset-purchase programme last week helped fuel the rally further.
2013 NKY div futures, which we recommended on 15 December 2011, have gained +9%
since then. They had one of the highest realised Sharpe ratios relative to the NKY index and
other NKY dividends futures.
Mid to long term NKY dividend futures (beyond 2014) outperformed the NKY index spot since
15th December in terms of realised returns (cf. Table 1).
Whilst they showed much higher volatility than short-term 12-14 NKY dividend futures, they
compensated investors with better return per unit of risk vs. NKY spot. This is demonstrated
by their higher Sharpe ratios.
NKY 2013 dividend swaps yielded 70% of NKY spot performance with only 42% of the
volatility. This has been effectively a Sharpe way of going long Japan.
Realized returns, volatility and Sharpe ratio for NKY

index vs. NKY dividend futures
Realized returns vs. volatility for NKY dividend futures vs.

NKY index
Dividend Futures
NKY spot
2012
2013
2014
2015
2016
2017
2018
2019
2020
Sharpe ratio
(since Dec 15th)
Returns
(since Dec 15th)
Volatility
(60 days,annualized)
0.26
13%
16.5%
0.46
0.44
0.35
0.35
0.34
0.32
0.36
0.32
0.34
5%
9%
12%
15%
17%
19%
20%
19%
19%
3.5%
7.0%
10.9%
14.1%
15.4%
17.3%
17.8%
18.5%
18.7%
Volatility (60 days, annualized)
22%
20%
2017
18%
2016
16%
2015
14%
NKY spot
12%
2014
10%
2013
The lowest Sharpe ratio for

NKY vs. entire dividend
8%
6%
0%
5%
10%
Returns (since Dec 15th)
12
2018
2020
2019
15%
20%
Short Selling in Asia

Samuel Cheng
HK short selling activities decelerate this week: HK main board short sell to turnover ratio
dropped from 8.6% early last week to 7% this week.
Hong Kong Short Sell as % of Market Turnover
HKEx Main Board Turnover (RHS)
Short Sell as % of Turnover (LHS)
(%)
HKD (b)
16
140
14
120
12
100
10
80
60
40
20
2
2/21/2011
4/21/2011
6/21/2011
8/21/2011
10/21/2011
12/21/2011
0
2/21/2012
Data as of 21 February 2012

Sources: Bloomberg, BNP Paribas
HK Propertys short sell turnover increased 56% w-w to HKD2.2b, with SHK Property
(16 HK) leading the sector with a short sell ratio of 18%. Also, Internet Software & Services
ranked tops by short sell to turnover ratio of 24.5%, which was mainly contributed by
Tencent (700 HK).
Hong Kong Top 10 Short Sell Sectors by Value
Sector
China Banks
Short Sell Turnover

(HKD m)
2,958.2
% as Total Short Sell

6.17%
Short Sell to Turnover

Ratio
9.75%
HK Property
2,242.4
4.68%
13.42%
China Insurance
1,715.4
3.58%
12.85%
Oil & Gas

Internet Software &
Services
China Property
1,610.7
3.36%
9.04%
1,236.2
2.58%
24.54%
1,145.5
2.39%
10.91%
Metals & Mining
1,089.4
2.27%
15.22%
China Telcos
1,014.1
2.11%
8.66%
HK Banks
983.7
2.05%
10.59%
Automobiles
900.5
1.88%
15.91%

Source; Bloomberg; BNP Paribas
13
Japan weekly aggregate short sell turnover rose a further 9.5% to JPY1.65t last week,
with the short sell ratio also trending up sharply by 2 ppt to 25.6%. Sector-wise, the
short sell turnover of Real Estate took a big jump; it almost doubled (+99.8% w-w).
Japan Short Sell as % of Market Turnover
(%)
Short Selling Ratio WITH Price Restrictions
40
Short Selling Ratio WITHOUT Price Restrictions
35
TOTAL Short Sell Ratio
30
25
20
15
10
5
0
Feb-11
Apr-11
Jun-11
Aug-11
Oct-11
Dec-11

Sources: Bloomberg, BNP Paribas
Japan Top 10 Short Sell Sectors by Value

Short Sell Last
% Change w-w
Week (JPY m)
Code
Electric Appliances
% as Total
Short Sell
% Change w-w
0.9%
261,314
16.5%
15.8%
Transportation Equipment
167,119
11.5%
10.1%
0.2%
Information & Communication
123,955
5.6%
7.5%
(0.3%)
Banks
122,127
21.3%
7.4%
0.7%
Machinery
107,678
1.6%
6.5%
(0.5%)
Chemicals
82,058
0.5%
5.0%
(0.4%)
Retail Trade
76,053
10.7%
4.6%
0.0%
Real Estate
65,572
99.8%
4.0%
1.8%
Services
62,400
(2.7%)
3.8%
(0.5%)
Wholesale Trade
58,784
0.2%
3.6%
(0.3%)

Source: Tokyo Stock Exchange, BNP Paribas
14
Convertible bonds
Denis OSullivan
Although overall this was a much quieter week in terms of volumes (around -25% trading in
the IDB market vs. the previous weeks) there was still a lot of volatility to be had as the Greek
situation came to a breaking point sending credits skyrocketing before crashing back down
again. CBs for choice felt softer all week with a lot of momentum having ebbed out but we
continue to see wild swings caused by liquidity on the offer side when risk comes back on
again
The early part of the week saw recovery from the swift sell-down instigated on Friday the
previous week as it appeared the Greek situation would be resolved in the end. Prices by no
means gapped higher but steadily the sellers were taken out and most names across the
board edged higher helped by tightening in the credit markets. However, once more this was
a fragile recovery with credits blowing out midweek on fears that Greece really could default
we saw the sellers return in force once more. But lesson learned from the last time, there
were few serious trades down and whilst bids pulled, they were quickly reinstated the next
day...panic over for now!
Trading in the week was very name specific with Hynix very much to the fore as not only was
the company upgraded by S&P after the stake taken by SK Telecom (which was downgraded)
but also Elpida warned as to the possibility of closing up shop if the government wouldn't
agree to continue to fund them. The stock surged and buyers of the bonds scurried around
looking to pick up one of the few genuine vol names which havent been mostly asset
swapped. Given the strong performance of the stock these bonds are now up to trading on a
40-50% delta and with good volatility (100d vol of 46%) combined with a healthy credit, this
type of name is very much in demand.
And in some respects that is what makes it so strange to see other swap names generally
being sold down this week, albeit after a decent performance since the start of the year. We
have seen names such as China Unicom, Gome, Hengdeli, Guangdong and Wilmar all suffer
at the hands of sellers despite the generally volatile underliers and supportive credit
environment. Of course it is perfectly understandable to see profit taking after such a good
run, but with a dearth of new issues these are exactly the types of names people will be
scrambling for once more if and when equities push higher. We would continue to
recommend looking at names with some yield (3-5%) but with premiums of 50-80% with light,
if any, deltas to benefit from a supportive buy-on-dips mentality if we pullback but
accelerating participation in the upside if we push further.
The yield names in general were quieter this week with the gyrations in sentiment not giving
anyone a large impetus to continue to squeeze them further. However it is worth noting that
the straight bond market continues to see buyers of recent paper such as Wharf which keeps
a floor under any profit taking of the CBs, hence the appearance in the top names of the
week despite any real driver from the equity. Capitaland also puts in an appearance for the
2nd time this year as the performance of the stock (+30% Dec 30 to Feb 17) has brought the
name back to life with HFs and long only funds alike both looking to add at these levels. One
interesting perspective to take on this market is that if a lot of names can start to trade on
swap once more, we do lessen the need for new issues as we ought to have a transference
of bonds from long-term yield holders into the HFs hands as the equity component becomes
more important than the debt component once more.
Credit markets actually ended the week more or less flat with iTraxx widening by +1bp only
from 164 to 165; however the swings on the Greek situation were wild with moves of as much
as +10bps midweek only to retrace in again by Friday
15
Top 5 Active Asian CBs

CB
Next
Yield to
Redemption
Put/Maturity
Event
Maturity
Stock
CB Price
Stock Ref
Parity
Premium
Wharf 2.3% '14
0004.HK
97.75%
48.35
53.70%
82.00%
3.40%
07 Jun '14
07 Jun '14
Agile 4% '16
3383.HK
92.00%
9.92
55.80%
65.00%
8.10%
28 Apr '14
28 Apr '16
Capitaland 2.875
'16
CATL.SI
98.00%
2.98
63.10%
55.40%
3.40%
03 Sep '16
03 Sep '16
Hynix 2.65% '15
000660.KS
109.50%
28,500
83.50%
31.20%
-4.80%
14 May '13
14 May '15
0762.HK
111.00%
14.3
90.30%
22.90%
-5.50%
18 Oct '13
18 Oct '15
China Unicom
0.75% '15
Note: Pricing as of 22 Feb 2012, Sources: Bloomberg; BNP Paribas
16
Implied vol on major Asian indices rose, with NKY up 1 vol-pt

During the week, we saw the biggest movement on the implied volatility of the Nikkei which
went up 1 vol-pt across all tenors. TWSE saw its 3M implied volatility up more than 1 vol-pt
while other tenors recorded increases of greater than 0.5 vol-pt. MSCI Sing and AS51 were
the indices with implied volatility surface shifting downward.
The implied volatility term structure on HSI, HSCEI, TWSE and Kospi2 flattened over the
week with short term implied volatility going up more than long term implied volatility.
VHSI futures started to trade on Monday and the current open interest is now 12 lots
which is equivalent to HKD60,000 vega.
Over the week, we have seen interests on buying put on variance swap.
Crash Premium (Convexity) on NKY came down

The Japan market was squeezed on the upside during the week with buying pressure on vols
while skews slightly lowered. The 1Y convexity (Variance Swap - ATM Straddle) went down
by 1 vol-pt.
The rest of the Asian indices did not see significant changes with the parameters on skew
and convexity.
Hong Kong Warrants and CBBCs

The outstanding notional of bull contracts is around USD950m: The Bear to Bull ratio is
now 0.58x. The bull contracts with a knockout barrier at 20,900 have a total outstanding
notional of USD155.7m.
HSI Callable Bull or Bear Contract Knock Out Zone with Total Outstanding Notional
(USD$ k)
180,000
Bull
Bear
160,000
140,000
120,000
100,000
80,000
60,000
40,000
20,000
20100
20288
20438
20588
20750
20880
21100
21550
22000
22188
22350
(Index-Points)
17
22688
Risk Barometer
We observed increased levels of caution in India with the INVIXN going up by 10.7%. The
INVIXN is now above 80%-tile over a two-year history.
The upside skew on NKY and Topix is now trading under 3%-tile. We suggest investors
buying call spreads or knock-out calls to monetize the cheap upside skew.
Risk Barometer
Implied Volatility and Skew
Index
NKY
TPX
Kospi2
HSI
HSCEI
TWSE
SIMSCI
Nifty
AS51
3M
Implied
Vol
18.96
17.71
20.57
22.09
27.75
20.03
16.54
21.20
16.55
Percentile
(2Y historic)
20.9
26.2
65.8
58.3
65.4
57.3
36.2
53.1
29.1
3M
Realised
Vol
15.51
14.20
22.15
21.08
28.90
20.13
16.43
20.15
17.03
Percentile 3M 90-110 Percentile 3M 90-100 Percentile 3M 100-110 Percentile

(2Y historic)
Skew
(2Y historic) Down Skew (2Y historic) Up Skew (2Y historic)
14.3
14.5
72.9
72.7
74.6
67.3
61.6
70.6
59.3
5.30
5.27
5.81
6.09
5.74
5.60
5.38
6.52
7.94
10.9
9.7
21.8
68.5
68.9
64.1
58.9
16.5
61.9
4.06
4.10
3.94
4.11
3.80
3.71
4.25
4.20
5.13
32.6
32.2
35.1
70.0
67.9
60.8
77.5
20.9
64.4
Risk Indicator
Volatility
Index
VIX
V2X
VNKY
VKOSPI
VHSI
INVIXN
Current
18.19
23.90
21.37
21.19
22.93
26.25
1W Change 1M Change 3M Change Percentile

(%)
(%)
(%)
(2Y historic)
(4.5)
(0.5)
(43.1)
28.9
(8.2)
(4.5)
(39.6)
37.1
2.8
14.0
(16.1)
31.3
6.9
(8.3)
(40.1)
65.8
6.1
5.1
(33.6)
64.4
10.7
19.5
(1.2)
80.6
(India NSE Volatility Index)
Credit Spreads
5Y Corp
CDS
Marit iTraxx
Asia ex JP
Marit iTraxx
Japan
Current
1W Change 1M Change 3M Change Percentile

(%)
(%)
(%)
(2Y historic)
159.57
(3.64)
(16.27)
(27.37)
140.83
(5.37)
(18.01)
(29.17)
78.3
34.9

18
1.24
1.17
1.88
1.98
1.94
1.89
1.13
2.33
2.81
3.2
3.0
13.2
67.3
68.9
64.2
33.9
17.6
55.8
Index Volatility
HSI Volatility
As of 22 February 2012, HSI = 21,549.28
HSI (HSI Index)
3M Im plied vs 3M Realised
HSI
10 per. Mov. Avg. (HSI)
25000
50 per. Mov. Avg. (HSI)
24000
23000
22000
21000
20000
19000
18000
17000
16000
2/21/2011 5/21/2011 8/21/2011 11/21/2011 2/21/2012
(Index)
Im plied And Realised Volatility (Indicative Mid Price)

(%)
3M
6M
9M
12M
Implied Vol
22.1
22.8
23.3
23.4
1Wk Change
0.6
0.4
0.4
0.3
1Mo Change
(0.1)
0.1
0.4
0.4
Percentile Rank
58.3
53.3
48.5
42.9
Realised Vol
21.2
30.0
28.4
25.8
Percentile Rank
72.1
85.7
97.1
88.8
2Y
24.5
0.2
0.6
42.6
21.9
34.5
Im plied Volatility Term Structure

(%)
25.0
21-Feb-12
(%)
3M Implied
3M Realised
45.0
40.0
35.0
30.0
25.0
20.0
15.0
10.0
2/22/2010
8/22/2010
2/22/2011
8/22/2011
Im plied Spread, Skew And Term Structure

(%)
3M
6M
9M
12M
Implied - Realised
0.9
(7.2)
(5.1)
(2.4)
1Wk Change
1.4
0.9
0.4
0.3
1Mo Change
6.9
2.8
0.3
0.6
Percentile Rank
23.9
6.5
4.6
10.3
Skew
6.1
5.0
4.4
4.0
Percentile Rank
68.5
67.5
67.1
64.6
Volatility Cone
14-Feb-12
22-Jan-12
Implied
5% Realised High
(%)
72.0
24.5
64.0
24.0
56.0
23.5
48.0
23.0
40.0
22.5
32.0
22.0
24.0
21.5
16.0
Realised
5% Realised Low
8.0
21.0
3M
6M
9M
12M
(%)
34.0
21-Feb-12
14-Feb-12
22-Jan-12
30.0
28.0
26.0
24.0
22.0
20.0
18.0
90%
6M
9M
3M
13.0
12.0
11.0
10.0
9.0
8.0
7.0
6.0
5.0
4.0
3.0
2.0
1.0
2/22/2010 8/22/2010
6M
12M
2Y
90 - 110 Skew
32.0
80%
3M
2Y
3M Im plied Volatility Sm ile
100%
110%
120%
(Skew , %)
2/22/2011
1Y
8/22/2011
Source: BNP Paribas
19
2Y
2.7
0.2
0.7
70.4
3.3
67.7
2Y
KOSPI 200 Volatility
As of 22 February 2012, KOSPI2 = 266.63
KOSPI 200 (KOSPI2 Index)
KOSPI 200
10 per. Mov. Avg. (KOSPI 200)
310
50 per. Mov. Avg. (KOSPI 200)
300
290
280
270
260
250
240
230
220
210
200
2/21/2011 5/21/2011 8/21/2011 11/21/2011 2/21/2012
(%)
(Index)

(%)
3M
6M
9M
12M
Implied Vol
20.6
21.3
21.8
22.1
1Wk Change
0.6
0.5
0.5
0.5
1Mo Change
(1.7)
(1.1)
(0.5)
(0.4)
Percentile Rank
65.8
66.2
66.7
66.9
Realised Vol
22.4
30.1
30.0
27.7
Percentile Rank
72.9
80.2
91.1
92.1
21-Feb-12
3M Realised
40.0
35.0
30.0
25.0
20.0
15.0
10.0
2/22/2010
2Y
22.6
0.4
0.1
68.7
22.3
54.3

(%)
23.0
3M Implied
45.0
8/22/2010
2/22/2011
8/22/2011

(%)
3M
6M
9M
Implied - Realised
(1.8)
(8.8)
(8.2)
1Wk Change
1.1
2.5
0.7
1Mo Change
4.1
3.7
0.1
Percentile Rank
21.4
8.4
3.0
Skew
5.8
4.7
4.0
Percentile Rank
21.8
37.2
46.0
2Y
0.3
0.4
0.2
45.1
2.8
48.3
Volatility Cone
14-Feb-12
22-Jan-12
(%)
55.0
Implied
5% Realised High
Realised
5% Realised Low
50.0
45.0
22.5
22.0
40.0
35.0
21.5
30.0
25.0
21.0
20.0
15.0
20.5
20.0
10.0
3M
6M
9M
12M
2Y

(%)
34.0
21-Feb-12
14-Feb-12
22-Jan-12
30.0
28.0
26.0
24.0
22.0
20.0
18.0
80%
90%
3M
6M
9M
12M
2Y
90 - 110 Skew
32.0
100%
110%
120%
(Skew , %)
14.0
13.0
12.0
11.0
10.0
9.0
8.0
7.0
6.0
5.0
4.0
3.0
2.0
1.0
0.0
2/22/2010
3M
8/22/2010
6M
2/22/2011
1Y
8/22/2011
Source: BNP Paribas
20
12M
(5.6)
0.6
(0.1)
1.7
3.7
47.4
2Y
MSCI Singapore Volatility
As of 22 February 2012, MSCI Singapore = 346.70
MSCI Singapore (SIMSCI Index)
(%)
MSCI Singapore
10 per. Mov. Avg. (MSCI Singapore)
50 per. Mov. Avg. (MSCI Singapore)
(Index)
390
380
370
360
350
340
330
320
310
300
2/21/2011 5/21/2011
30.0
25.0
20.0
15.0
10.0
2/22/2010
8/21/2011 11/21/2011 2/21/2012
2Y
20.6
(0.0)
(0.7)
22.4
16.9
38.5

21-Feb-12
8/22/2010
2/22/2011
8/22/2011

(%)
3M
6M
9M
Implied - Realised
0.1
(3.1)
(1.7)
1Wk Change
0.4
0.4
(0.2)
1Mo Change
3.7
1.7
(0.7)
Percentile Rank
12.8
4.7
0.0
Skew
5.4
4.5
4.0
Percentile Rank
58.9
60.2
62.7
14-Feb-12
22-Jan-12
2Y
3.7
(0.0)
(0.7)
58.7
2.8
67.3
Implied
5% Realised High
(%)
50.0
45.0
Realised
5% Realised Low
40.0
35.0
20.0
30.0
25.0
19.0
20.0
15.0
18.0
17.0
10.0
5.0
16.0
3M
6M
9M
12M
21-Feb-12
14-Feb-12
22-Jan-12
25.0
23.0
21.0
19.0
17.0
15.0
90%
6M
9M
12M
2Y
90 - 110 Skew
27.0
80%
3M
2Y
100%
110%
120%
(Skew , %)
10.0
9.0
8.0
7.0
6.0
5.0
4.0
3.0
2.0
1.0
0.0
2/22/2010
3M
8/22/2010
6M
2/22/2011
1Y
8/22/2011
Source: BNP Paribas
21
12M
0.1
0.1
(0.6)
9.9
3.6
62.5
Volatility Cone
21.0
(%)
29.0
3M Realised
35.0

(%)
3M
6M
9M
12M
Implied Vol
16.5
18.1
19.0
19.4
1Wk Change
(0.3)
(0.2)
(0.1)
(0.0)
1Mo Change
(0.7)
(0.8)
(0.8)
(0.8)
Percentile Rank
36.2
35.8
33.9
31.6
Realised Vol
16.5
21.2
20.6
19.3
Percentile Rank
61.8
84.0
96.1
85.7
(%)
22.0
3M Implied
40.0
2Y
TWSE Volatility
As of 22 February 2012, TWSE = 8001.68
TWSE (TWSE Index)
TWSE
10 per. Mov. Avg. (TWSE)
50 per. Mov. Avg. (TWSE)
(Index)
9500
(%)
9000
35.0
8500
30.0
8000
25.0
7500
20.0
7000
15.0
6500
2/21/2011
5/21/2011
8/21/2011
11/21/2011 2/21/2012

(%)
3M
6M
9M
12M
Implied Vol
20.0
21.0
21.6
21.8
1Wk Change
1.1
0.8
0.7
0.5
1Mo Change
(0.8)
(0.9)
(1.0)
(1.4)
Percentile Rank
57.3
55.6
52.0
42.9
Realised Vol
20.7
23.8
23.8
21.8
Percentile Rank
71.5
85.0
99.2
87.5
2Y
23.5
0.6
(1.3)
40.8
18.9
37.4

(%)
26.0
21-Feb-12
3M Implied
3M Realised
40.0
10.0
2/22/2010
8/22/2010
2/22/2011
8/22/2011

(%)
3M
6M
9M
Implied - Realised
(0.6)
(2.8)
(2.3)
1Wk Change
2.0
1.6
0.7
1Mo Change
1.8
2.3
(1.4)
Percentile Rank
13.0
5.3
2.6
Skew
5.6
4.7
4.1
Percentile Rank
64.1
73.7
76.1
12M
(0.0)
0.5
(1.3)
9.4
3.7
75.6
2Y
4.6
0.6
(1.4)
61.8
2.8
76.5
Volatility Cone
14-Feb-12
22-Jan-12
25.0
Implied
5% Realised High
(%)
43.0
Realised
5% Realised Low
38.0
24.0
33.0
23.0
28.0
22.0
23.0
21.0
20.0
18.0
19.0
13.0
18.0
8.0
3M
6M
9M
12M
2Y

(%)
30.0
21-Feb-12
3M
6M
9M
12M
90 - 110 Skew
14-Feb-12
22-Jan-12
28.0
(Skew , %)
12.0
3M
6M
1Y
10.0
26.0
8.0
24.0
6.0
22.0
4.0
20.0
2.0
18.0
16.0
80%
90%
100%
110%
120%
0.0
2/22/2010
8/22/2010
2/22/2011
8/22/2011
Source: BNP Paribas
22
2Y
2Y
HSCEI Volatility
As of 22 February 2012, HSCEI = 11,823.60
HSCEI (HSCEI Index)
HSCEI
10 per. Mov. Avg. (HSCEI)
50 per. Mov. Avg. (HSCEI)
(Index)
14000
(%)
13000
12000
11000
10000
9000
8000
2/21/2011 5/21/2011 8/21/2011 11/21/2011 2/21/2012

(%)
3M
6M
9M
12M
Implied Vol
27.8
28.2
28.5
28.4
1Wk Change
0.4
0.4
0.4
0.3
1Mo Change
0.5
0.7
1.1
1.1
Percentile Rank
65.4
62.9
60.8
54.5
Realised Vol
28.9
39.1
36.5
32.8
Percentile Rank
74.8
86.9
98.2
92.8
2Y
29.5
0.3
1.4
50.8
27.8
38.7

(%)
8/22/2010
3M Realised
2/22/2011
8/22/2011

(%)
3M
6M
9M
Implied - Realised
(1.2)
(11.0)
(8.0)
1Wk Change
1.7
1.2
0.4
1Mo Change
8.1
3.3
0.8
Percentile Rank
19.3
6.9
4.9
Skew
5.7
5.0
4.5
Percentile Rank
68.9
70.0
68.7
30.0
29.5
78.0
29.0
68.0
28.5
58.0
28.0
48.0
27.5
38.0
27.0
28.0
26.5
18.0
14-Feb-12
22-Jan-12
2Y
1.6
0.3
1.5
72.5
3.3
76.1
Implied
5% Realised High
Realised
5% Realised Low
8.0
26.0
3M
6M
9M
12M
(%)
21-Feb-12
3M
2Y
6M
9M
12M
14-Feb-12
22-Jan-12
(Skew , %)
39.0
14.0
37.0
12.0
35.0
10.0
3M
6M
1Y
8/22/2010
2/22/2011
8/22/2011
8.0
31.0
6.0
29.0
27.0
4.0
25.0
2.0
23.0
80%
90%
2Y
90 - 110 Skew
33.0
100%
110%
120%
0.0
2/22/2010
Source: BNP Paribas
23
12M
(4.4)
0.3
1.1
5.5
4.1
70.8
Volatility Cone
(%)
88.0
21-Feb-12
3M Implied
55.0
50.0
45.0
40.0
35.0
30.0
25.0
20.0
15.0
10.0
2/22/2010
2Y
S&P ASX 200 Volatility
As of 22 February 2012, S&P ASX 200 = 4,293.10
S&P ASX 200 (AS51 Index)

(Index)
(%)
ASX 200
10 per. Mov. Avg. (ASX 200)
50 per. Mov. Avg. (ASX 200)
5200
3M Implied
3M Realised
35.0
5000
30.0
4800
25.0
4600
20.0
4400
15.0
4200
10.0
4000
3800
2/21/2011 5/21/2011 8/21/2011 11/21/2011 2/21/2012

(%)
3M
6M
9M
12M
Implied Vol
16.6
18.0
19.2
19.8
1Wk Change
(0.9)
(0.8)
(0.7)
(0.5)
1Mo Change
(1.5)
(1.5)
(1.3)
(1.2)
Percentile Rank
29.1
34.3
41.4
42.4
Realised Vol
17.2
21.7
21.7
20.2
Percentile Rank
59.5
81.3
93.0
99.8
5.0
2/22/2010
2Y
21.7
(0.4)
(1.0)
46.8
17.8
47.7

(%)
24.0
21-Feb-12
14-Feb-12
22-Jan-12
22.0
21.0
20.0
19.0
18.0
17.0
16.0
6M
9M
12M
2Y

21-Feb-12
8/22/2011

(%)
3M
6M
9M
Implied - Realised
(0.7)
(3.7)
(2.5)
1Wk Change
(1.0)
(0.2)
(0.8)
1Mo Change
1.3
1.4
(1.1)
Percentile Rank
0.0
4.0
0.0
Skew
7.9
6.4
5.6
Percentile Rank
61.9
61.0
60.6
Implied
5% Realised High
(%)
44.0
40.0
36.0
32.0
28.0
24.0
20.0
16.0
12.0
8.0
4.0
3M
(%)
35.0
2/22/2011
12M
(0.3)
(0.6)
(1.4)
0.0
4.9
60.6
6M
Realised
5% Realised Low
9M
12M
2Y
90 - 110 Skew
14-Feb-12
22-Jan-12
(Skew , %)
11.0
30.0
3M
6M
1Y
9.0
25.0
7.0
20.0
5.0
15.0
3.0
10.0
80%
90%
100%
110%
120%
1.0
2/22/2010
8/22/2010
2/22/2011
8/22/2011
Source: BNP Paribas
24
2Y
4.0
(0.5)
(1.0)
65.8
3.7
51.0
Volatility Cone
23.0
3M
8/22/2010
2Y
Nikkei 225 Volatility
As of 22 February 2012, Nikkei 225 = 9,554.00
Nikkei 225 (NKY Index)
3M Im plied vs 3M Realised (1 Year Chart)

(%)
Nikkei 225
10 per. Mov. Avg. (Nikkei 225)
50 per. Mov. Avg. (Nikkei 225)
(Index)
11500
11000
40.0
10500
35.0
10000
30.0
9500
25.0
9000
20.0
8500
15.0
8000
2/21/2011 5/21/2011
8/21/2011 11/21/2011 2/21/2012

(%)
3M
6M
9M
12M
Implied Vol
19.0
20.0
20.9
21.3
1Wk Change
1.5
1.1
1.1
1.1
1Mo Change
0.4
0.9
1.4
1.7
Percentile Rank
20.9
26.1
33.3
35.1
Realised Vol
15.7
19.0
18.8
23.6
Percentile Rank
14.7
12.8
3.0
77.9
2Y
22.4
1.2
2.0
49.9
21.8
4.6

(%)
23.0
21-Feb-12
10.0
2/22/2010
8/22/2010
2/22/2011
3M Realised
8/22/2011

(%)
3M
6M
9M
Implied - Realised
3.2
1.1
2.1
1Wk Change
1.0
1.3
1.0
1Mo Change
3.4
2.7
1.5
Percentile Rank
71.4
53.7
76.5
Skew
5.3
4.6
4.2
Percentile Rank
10.9
1.3
0.9
14-Feb-12
22-Jan-12
Implied
5% Realised High
(%)
65.0
55.0
21.0
45.0
20.0
35.0
19.0
25.0
18.0
15.0
17.0
2Y
0.6
1.1
2.2
88.6
3.0
0.9
Realised
5% Realised Low
5.0
3M
6M
9M
12M
2Y
3M
6M
9M
12M
2Y
90 - 110 Skew
(Skew , %)
21-Feb-12
14-Feb-12
22-Jan-12
29.0
27.0
14.0
3M
6M
1Y
12.0
10.0
25.0
23.0
8.0
21.0
19.0
6.0
4.0
17.0
15.0
2.0
13.0
80%
90%
100%
110%
120%
0.0
2/22/2010
8/22/2010
2/22/2011
8/22/2011
Source: BNP Paribas
25
12M
(2.3)
1.1
1.7
23.9
3.8
0.0
Volatility Cone
22.0
(%)
31.0
3M Implied
45.0
2Y
Topix Volatility
As of 22 February 2012, Topix = 825.40
TOPIX (TPX Index)

(Index)

(%)
Topix
10 per. Mov. Avg. (Topix)
50 per. Mov. Avg. (Topix)
1000
3M Implied
3M Realised
45.0
40.0
950
35.0
900
30.0
850
25.0
800
20.0
750
15.0
700
2/21/2011 5/21/2011 8/21/2011 11/21/2011 2/21/2012
10.0
2/22/2010

(%)
3M
6M
9M
12M
Implied Vol
17.7
18.6
19.4
19.8
1Wk Change
1.6
1.2
1.2
1.3
1Mo Change
0.4
0.8
1.3
1.7
Percentile Rank
26.2
27.6
36.4
39.9
Realised Vol
14.4
17.9
17.6
22.7
Percentile Rank
15.7
32.0
20.5
85.2
2Y
21.1
1.3
2.0
55.8
20.0
26.1

(%)
21-Feb-12
14-Feb-12
22-Jan-12
21.0
20.0
19.0
18.0
17.0
16.0
6M
9M
12M
21-Feb-12
8/22/2011

(%)
3M
6M
9M
Implied - Realised
3.3
0.7
1.8
1Wk Change
1.3
1.4
1.1
1Mo Change
3.4
2.3
1.4
Percentile Rank
68.5
33.9
58.5
Skew
5.3
4.6
4.2
Percentile Rank
9.7
1.5
0.9
Implied
5% Realised High
(%)
58.0
53.0
48.0
43.0
38.0
33.0
28.0
23.0
18.0
13.0
8.0
3M
2Y

(%)
2/22/2011
14-Feb-12
22-Jan-12
6M
Realised
5% Realised Low
9M
12M
2Y
(Skew , %)
29.0
27.0
25.0
23.0
21.0
19.0
17.0
15.0
13.0
11.0
6.0
3M
6M
1Y
2/22/2011
8/22/2011
12.0
10.0
8.0
4.0
2.0
90%
2Y
1.1
1.2
2.1
85.6
3.0
0.9
90 - 110 Skew
14.0
80%
100%
110%
120%
0.0
2/22/2010
8/22/2010
Source: BNP Paribas
26
12M
(2.9)
1.3
1.8
15.3
3.8
0.0
Volatility Cone
22.0
3M
8/22/2010
2Y
Nifty Volatility
As of 22 February 2012, Nifty = 5,505.35
NIFTY (Nifty Index)

NIFTY
10 per. Mov. Avg. (NIFTY)
50 per. Mov. Avg. (NIFTY)
(Index)
6100
(%)
3M Implied
3M Realised
35.0
5900
30.0
5700
5500
25.0
5300
5100
20.0
4900
15.0
4700
4500
2/21/2011 5/21/2011
8/21/2011 11/21/2011 2/21/2012

(%)
3M
6M
9M
12M
Implied Vol
21.2
21.2
21.4
21.9
1Wk Change
0.8
0.1
(0.1)
(0.1)
1Mo Change
0.4
(1.2)
(1.8)
(1.8)
Percentile Rank
53.1
23.6
10.7
7.2
Realised Vol
20.4
22.3
20.9
20.1
Percentile Rank
74.2
90.4
90.4
71.0
2Y
23.7
(0.2)
(1.4)
19.1
18.8
31.4

(%)
21-Feb-12
10.0
2/22/2010
8/22/2010
2/22/2011
8/22/2011

(%)
3M
6M
9M
Implied - Realised
0.8
(1.1)
0.5
1Wk Change
1.9
0.3
(0.1)
1Mo Change
1.7
(0.7)
(1.7)
Percentile Rank
22.6
2.3
3.8
Skew
6.5
5.3
4.6
Percentile Rank
16.5
14.2
17.4
2Y
4.9
(0.2)
(1.6)
62.3
3.1
21.3
Volatility Cone
14-Feb-12
22-Jan-12
26.0
25.0
(%)
53.0
48.0
Implied
5% Realised High
Realised
5% Realised Low
43.0
38.0
24.0
33.0
28.0
23.0
23.0
18.0
22.0
21.0
13.0
8.0
20.0
3M
6M
9M
12M
2Y

(%)
21-Feb-12
3M
6M
9M
12M
14-Feb-12
22-Jan-12
(Skew , %)
12.0
3M
6M
1Y
10.0
8.0
6.0
4.0
2.0
80%
90%
2Y
90 - 110 Skew
33.0
31.0
29.0
27.0
25.0
23.0
21.0
19.0
17.0
15.0
100%
110%
120%
0.0
2/22/2010
8/22/2010
2/22/2011
8/22/2011
Source: BNP Paribas
27
12M
1.9
0.1
(1.0)
12.4
4.1
18.6
2Y
NOT For
Convexity
1Y Implied Convexity (Var Swap minus ATM Straddles)
(%)
10.0
9.0
8.0
7.0
6.0
5.0
4.0
3.0
2.0
2/22/2010
(%)
(%)
HSI
8/22/2010
2/22/2011
8/22/2011
10.0
9.0
8.0
7.0
6.0
5.0
4.0
3.0
2.0
2/22/2010
4.5
3.5
4.0
3.0
3.5
2.5
2.0
3.0
1.5
2.0
1.0
1.5
8/22/2010
2/22/2011
8/22/2011
8/22/2011
TWSE
8/22/2010
1.0
2/22/2010
2/22/2011 8/22/2011
5.0
4.5
4.0
3.5
3.0
2.5
2.0
1.5
1.0
2/22/2010
10.0
10.0
8.0
8.0
6.0
6.0
4.0
4.0
2.0
2.0
2/22/2011
8/22/2011
2/22/2011
8/22/2011
ASX200
8/22/2010
(%)
Nikkei 225
8/22/2010
8/22/2010
(%)
HSCEI
(%)
0.0
2/22/2010
2/22/2011
2.5
(%)
10.0
9.0
8.0
7.0
6.0
5.0
4.0
3.0
2.0
2/22/2010
8/22/2010
(%)
MSCI Singapore
4.0
0.5
2/22/2010
KOSPI 200
0.0
2/22/2010 8/22/2010
2/22/2011
8/22/2011
Topix
2/22/2011 8/22/2011
Note: Data as of 21 February 2012

Source: BNP Paribas
28
NOT For
Single Stock Volatility Screener

Explanation on Option Strategies:
Long Call: Leverage on the upside and capping downside to the premium paid.
Long Put: Long protection and capping downside to the premium paid.
Short Call/Short Put: Collect premium on yield enhancement; obliged to sell underlying
(call-writer) and buy underlying (put-writer) at strike price.
HK and China
Short Put
80
Hong Kong and China H-Shares
Long Call
Upside (% )
5 HK
11 HK
60
2388 HK
1099 HK
23 HK
1171 HK
40
1088 HK
916 HK
388 HK
688 HK
386 HK
20
1898 HK
100
90
80
941 HK
70
60
1398 HK
50
1138 HK
2777 HK
1044 HK
40
30
20
10
857 HK
3968 HK
2601 HK
763 HK
2328 HK
836 HK
3328 HK
3988 HK
2318 HK
2628 HK
2883 HK
1109 HK
1211 HK
-20
-40
1919 HK
Short Call
Long Put
-60
Expensive Vol
Percentile (% )
Cheap Vol

29
NOT For
Japan and Korea

Short Put
50
Korea & Japan
Long Call
Upside (% )
012330 KS
40
000810 KS
030200 KS
017670 KS
30
005380 KS
7267 JP
9432 JP
20
000660 KS
4452 JP
033780 KS
10
100
90
80
70
60
50
40
30
20
10
004170 KS
6857 JP
-10
9983 JP
066570 KS
-20
034220 KS
-30
7261 JP
Short Call
Long Put
-40
Expensive Vol
Percentile (% )
Cheap Vol

30
NOT For
Contacts Global Equity Derivatives Strategy

Europe
Gerry Fowler (Global Head)
+44 207 595 8619
gerry.fowler@uk.bnpparibas.com
Kokou Agbo-Bloua
+44 207 595 8919
kokou.agbo-bloua@eu.bnpparibas.com
Antoine Deix
+33 1 40 14 06 22
antoine.deix@bnpparibas.com
Ankit Kumar Gheedia
+44 207 595 1215
ankitkumar.gheedia@bnpparibas.com
Francesca Guinane
+44 207 595 8907
francesca.guinane@uk.bnpparibas.com
Benoit Le Pape
+44 207 595 1216
benoit.lepape@uk.bnpparibas.com
Nadedja Semenova
+44 207 595 1278
nadedja.semenova@uk.bnpparibas.com
Orrin Sharp-Pierson
+44 207 595 1128
orrin.sharppierson@uk.bnpparibas.com
Anand Omprakash
+1 212 841 2886
anand.omprakash@americas.bnpparibas.com
Bouhari Arouna
+1 212 841 2675
bouhari.arouna@americas.bnpparibas.com
Winner Lee (PanAsia Head)
+852 2108 5658
winner.lee@asia.bnpparibas.com
Anthony Wong
+852 2108 5638
anthony.c.wong@asia.bnpparibas.com
Samuel Cheng
+852 2108 5671
samuel.k.cheng@asia.bnpparibas.com
US
Asia
Contacts Pan-Asia Flow Desk

Hong Kong
Robert Musetti
Head of Institutional Sales Cash

Equities & Derivatives
+852 2825 1811
robert.musetti@asia.bnpparibas.com
Valery Bloud
Regional Head of Volatility Sales

(Pan-Asia)
+852 2108 5639
valery.bloud@asia.bnpparibas.com
Christopher Littell
Volatility Product Specialist
+852 2108 5706
christopher.littel@asia.bnpparibas.com
Will Chen
+852 2108 5787
will.chen@asia.bnpparibas.com
Andrea Baumeister
Institutional Equity Derivatives

Sales
+852 2108 5649
andrea.baumeister@asia.bnpparibas.com
Guillaume Derville
Head, Asia Equity Derivatives

Strategy Marketing
+852 2825 1055
guillaume.derville@asia.bnpparibas.com
+852 2108 5730
stephanie.wong@asia.bnpparibas.com
Stephanie Wong
Hedge Fund
Relationship Manager
Singapore
Robert Newcombe
Head of Volatility Sales (Singapore) +65 6210 1883
robert.newcombe@asia.bnpparibas.com
Jonathan Berguig
+65 6210 1881
jonathan.berguig@asia.bnpparibas.com
Nadia Poilane
+65 6210 1880
nadia.poilane@asia.bnpparibas.com
31
NOT For
Important Notice
THE MATERIAL IN THIS DOCUMENT WAS PRODUCED BY A BNP PARIBAS GROUP COMPANY. THIS
DOCUMENT MAY NOT BE DISTRIBUTED IN CANADA TO PERSONS OTHER THAN QUALIFIED INSTITUTIONAL
BUYERS. THIS DOCUMENT MAY NOT BE DISTRIBUTED IN THE UNITED STATES TO PERSONS OTHER THAN
MAJOR INSTITUTIONAL INVESTORS AS DEFINED IN RULE 15A-6 UNDER THE SECURITIES EXCHANGE ACT OF
1934, AS AMENDED) AND IS NOT INTENDED FOR THE USE OF ANY PERSON OR ENTITY THAT IS NOT A
MAJOR INSTITUTIONAL INVESTOR. IN HONG KONG THIS REPORT IS FOR DISTRIBUTION ONLY TO
PROFESSIONAL INVESTORS WITHIN THE MEANING OF SCHEDULE 1 TO THE SECURITIES AND FUTURES
ORDINANCE (CAP 571) OF HONG KONG AND ANY RULES MADE THEREUNDER AND MAY NOT BE
REDISTRIBUTED IN WHOLE OR IN PART IN HONG KONG TO ANY PERSON. THIS DOCUMENT MAY ONLY BE
DISTRIBUTED IN THE UNITED KINGDOM TO ELIGIBLE COUNTERPARTIES AND PROFESSIONAL CLIENTS AND
IS NOT INTENDED FOR, AND SHOULD NOT BE CIRCULATED TO, RETAIL CLIENTS (AS SUCH TERMS ARE
DEFINED IN THE MARKETS IN FINANCIAL INSTRUMENTS DIRECTIVE 2004/39/EC (MiFID)). THIS DOCUMENT
MAY NOT BE CIRCULATED OR DISTRIBUTED, WHETHER DIRECTLY OR INDIRECTLY, TO ANY PERSON IN
SINGAPORE OTHER THAN (i)TO AN INSTITUTIONAL INVESTOR PURSUANT TO SECTION 274 OF THE
SECURITIES AND FUTURES ACT, CHAPTER 289 OF SINGAPORE (SFA), (ii) TO AN ACCREDITED INVESTOR
OR OTHER RELEVANT PERSON UNDER SECTION 275 OF THE SFA OR (iii) OTHERWISE PURSUANT TO, AND IN
ACCORDANCE WITH THE CONDITIONS OF, ANY APPLICABLE PROVISIONS OF THE SFA. IN JAPAN, THIS
DOCUMENT IS BEING DISTRIBUTED TO JAPANESE BASED CLIENTS BY A SUBSIDIARY OR AFFILIATE OF BNP
PARIBAS NOT REGISTERED AS A FINANCIAL INSTRUMENTS FIRM IN JAPAN AND IS INTENDED FOR
PROFESSIONAL CLIENTS ONLY (AS DEFINED UNDER JAPANESE LAW). IT MAY NOT BE DISTRIBUTED TO ANY
OTHER PERSON IN JAPAN.
THIS DOCUMENT IS NOT A PRODUCT OF THE RESEARCH DEPARTMENT. IT IS NOT SUBJECT TO THE LEGAL
REQUIREMENTS APPLICABLE TO INVESTMENT RESEARCH AND CONSTITUTES NON-INDEPENDENT
RESEARCH FOR THE PURPOSES OF THE FSA CONDUCT OF BUSINESS SOURCEBOOK. ACCORDINGLY IN
CONNECTION WITH THE DISTRIBUTION OF THIS DOCUMENT BNPP IS NOT SUBJECT TO ANY PROHIBITION
ON DEALING AHEAD OF THE DISSEMINATION OF INVESTMENT RESEARCH.
This document is for information purposes only and there is no assurance that a transaction(s) will be entered into on
such indicative terms. The indicative price(s) above have been prepared in good faith in accordance with BNP Paribas'
own internal models and calculation methods and/or are based on or use available price sources where considered
relevant. Indicative price(s) based on different models or assumptions may yield different results. Numerous factors may
affect the price(s), which may or may not be taken into account. Therefore, these indicative price(s) may vary
significantly from indicative price(s) obtained from other sources or market participants. BNP Paribas expressly
disclaims any responsibility for the accuracy or completeness of its own internal models or calculation methods, the
accuracy or reliability of any price sources used, any errors or omissions in computing or disseminating these indicative
price(s), and for any use you make of the price(s) provided. The indicative price(s) do not represent (i) the actual terms
on which a new transaction could be entered into, (ii) the actual terms on which any existing transactions could be
unwound, (iii) the calculation or estimate of an amount that would be payable following an early termination of the
transactions or (iv) the price(s) given to the transactions by BNP Paribas in its own books of account for financial
reporting, credit or risk management purposes.
This document may contain certain performance data based on back-testing, i.e. simulations of performance of a
strategy, index or assets as if it had actually existed during a defined period of time. To the extent any such performance
data is included, the scenarios, simulations, development expectations and forecasts contained in this document are for
illustrative purposes only. All estimates and opinions included in this document constitute the judgment of BNP Paribas
S.A. and its affiliates as of the date of the document and may be subject to change without notice. This type of
information has inherent limitations which recipients must consider carefully. While the information has been prepared in
good faith in accordance with BNPPs own internal models and other relevant sources, an analysis based on different
models or assumptions may yield different results. Unlike actual performance records, simulated performance returns or
scenarios may not necessarily reflect certain market factors such as liquidity constraints, fees and transactions costs.
Actual historical or back tested past performance does not constitute an indication of future results or performance.
This document is only intended to generate discussion regarding particular products and investments and is subject to
change and may be discontinued. We are willing to discuss it with you on the assumption that you have sufficient
knowledge, experience and professional advice to understand and make your own independent evaluation of the merits
and risk of the proposed structures. The information contained herein is not and under no circumstances is to be
construed as, a prospectus, an advertisement, a public offering, an offer to sell securities described herein, or
solicitation of an offer to buy securities described herein, in Canada, the U.S. or any other province or territory nor shall
it be deemed to provide investment, tax, accounting or other advice. Transactions involving the product(s) described in
this document may involve a high degree of risk and the value of such transactions may be highly volatile. Such risks
include, without limitation, risk of adverse or unanticipated market developments, risk of counterparty or issuer default,
risk of adverse events involving any underlying reference obligation or entity and risk of illiquidity. In certain transactions,
counterparties may lose their entire investment or incur an unlimited loss. U.S. investors considering options trading
may wish to review the Options Disclosure Document: Characteristics and Risks of Standardized Options
(http://www.optionsclearing.com/publications/risks/riskchap1.jsp). The risk of loss in trading options and other
derivatives can be substantial. Options involve risk and are not suitable for all investors. This brief statement does not
disclose all the risks and other significant aspects in connection with transactions of the type described in the document.
The information relating to performance contained in this document is illustrative and no assurance is given that any
indicated returns, performance or results will be achieved. Moreover, past performance is not indicative of future results.
Information herein is believed reliable but BNP Paribas and its affiliates do not warrant or guarantee its completeness or
accuracy. All information, terms and pricing set forth herein reflect our judgment at the date and time hereof and are
subject to change without notice. In the event that we were to enter into a transaction with you, we will do so as principal
(and not as agent or in any other capacity, including, without limitation, as your fiduciary, advisor or otherwise). Only in
the event of a potential transaction will an offering document be prepared, in which case, you should refer to the
prospectus or offering document relating to the above potential transaction which includes important information,
including risk factors that relate to an investment in the product(s) described herein.
As an investment bank with a wide range of activities, BNPP may face conflicts of interest, which are resolved under
applicable legal provisions and internal guidelines. You should be aware, however, that BNPP may engage in
32
NOT For
transactions in a manner inconsistent with the views expressed in this document, either for its own account or for the
account of its clients.
Prior to transacting, you should ensure that you fully understand (either on your own or through the use of independent
expert advisors) the terms of the transaction and any legal, tax and accounting considerations applicable to them. You
should also consult with independent advisors and consultants (including, without limitation, legal counsel) to determine
whether entering into of any securities transactions contemplated herein would be contrary to local laws. The
information contained herein is provided to you on a strictly confidential basis and you agree that it may not be copied,
reproduced or otherwise distributed by you, whether in whole or in part (other than to your professional advisers),
without our prior written consent. As a principal, we will generally conduct our business without regard to the
consequences of such conduct (adverse or otherwise) to you. Neither we, nor any of our affiliates, nor any of their
respective directors, partners, officers, employees or representatives accepts any liability whatsoever for any direct or
consequential loss arising from any use of this document or their content; and any of the foregoing may from time to
time act as manager, co-manager or underwriter of a public offering or otherwise, in the capacity of principal or agent,
deal in, hold or act as market makers or advisors, brokers or commercial and/or investment bankers in relation to the
securities or related derivatives that are discussed herein. BNP Paribas and its affiliates may (or may in the future) hold
a position or act as a market maker in the financial instruments discussed, or act as an advisor, manager, underwriter or
lender to such issuer. In no circumstances shall BNP Paribas or its affiliates be obliged to disclose any information that it
has received on a confidential basis or to disclose the existence thereof.
This document will have been approved for publication and distribution in the United Kingdom by BNP Paribas London
Branch, a branch of BNP Paribas SA whose head office is in Paris, France. BNP Paribas London Branch is registered in
England and Wales under No. FC13447. Registered Office: 10 Harewood Avenue, London NW1 6AA. BNP Paribas SA
is incorporated in France with limited liability with its registered office at 16 boulevard des Italiens, 75009 Paris. BNP
Paribas London Branch is authorised and supervised by the Autorit de Contrle Prudentiel and is authorised and
subject to limited regulation by the Financial Services Authority ("FSA") for the conduct of its designated investment
business in the United Kingdom. Details of the extent of its authorisation and regulation by the Financial Services
Authority is available upon request. BNP Paribas SA, a limited company, is registered as a bank with the Comit des
Etablissements de Crdit et des Entreprises dInvestissement (CECEI) and is regulated by the Autorit des Marchs
Financiers (AMF) for the conduct of its designated investment business in France. BNP Paribas Securities Corp. in
the United States accepts responsibility for the contents of this document in circumstances where the document has
been distributed to U.S. recipients.
Any offer or sale of securities described herein in Canada will be made only under an exemption from the requirements
to file a prospectus with the relevant Canadian securities regulators and only by a dealer properly registered under
applicable laws or, alternatively, pursuant to an exemption from the dealer registration requirement in the relevant
province or territory of Canada in which such offer or sale is made. No securities commission or similar regulatory
authority in Canada has reviewed or in any way passed judgement upon these materials, the information contained
herein, or the merits of any securities described herein, and any representation to the contrary is an offence.
In Singapore, clients should contact BNP Paribas Securities Singapore Pte Ltd in respect of any matters arising from, or
in connection with, the contents of this document.
Clients should contact and execute transactions through a BNP Paribas entity in their home jurisdiction unless
governing law permits otherwise.
By accepting this document you agree to be bound by the foregoing limitations.
IMPORTANT DISCLOSURES
The disclosure column in the following table lists the important disclosures applicable to each company that has been
rated and/or recommended in this report:
Company
Disclosure (as applicable)
Cheung Kong (1 HK)

Hang Lung Prop (101 HK)
Hengan Int'l (1044 HK)
China Shenhua (1088 HK)
Sinopharm Group (1099 HK)
Hang Seng Bank (11 HK)
CR Land (1109 HK)
Wynn Macau (1128 HK)
China Shipping Dev (1138 HK)
Yanzhou Coal (1171 HK)
China Railway Cons (1186 HK)
COSCO Pacific (1199 HK)
Henderson Land (12 HK)
BYD (1211 HK)
Hutchison (13 HK)
ICBC (1398 HK)
China Merchants (144 HK)
SHK Prop (16 HK)
Tsingtao Brewery (168 HK)
New World Dev (17 HK)
China Com Cons (1800 HK)
Belle Int'l (1880 HK)
China Coal Energy (1898 HK)
Swire Pacific (19 HK)
China COSCO (1919 HK)
Sands China (1928 HK)
Minsheng Bank (1988 HK)
33
5
5
5
5
5
5
5
5
5
5
5
5
5
5
5
1, 2, 3, 5
5
5
5
5
5
5
5
5
5
5
5
NOT For
CLP (2 HK)
BEA (23 HK)
Ping An (2318 HK)
PICC P&C (2328 HK)
BOC HK (2388 HK)
CHALCO (2600 HK)
CPIC (2601 HK)
China Life (2628 HK)
Citic Pacific (267 HK)
Shui ON (272 HK)
Guangzhou R&F (2777 HK)
China Oilfield Services (2883 HK)
Standard Chartered (2888 HK)
Zijin Mining (2899 HK)
China Resources (291 HK)
Cathay Pacific (293 HK)
HK&China Gas (3 HK)
Esprit (330 HK)
CNBM (3323 HK)
BoComm (3328 HK)
Agile Prop (3383 HK)
Hengdeli (3389 HK)
Angang Steel (347 HK)
Jiangxi Copper (358 HK)
Sinopec (386 HK)
HKEx (388 HK)
China Railway (390 HK)
CM Bank (3968 HK)
Bank of China (3988 HK)
Wharf (4 HK)
Dongfeng Motor (489 HK)
Li & Fung (494 HK)
HSBC (5 HK)
Power Assets (6 HK)
MTRC (66 HK)
COLI (688 HK)
Tencent (700 HK)
China Telecom (728 HK)
Air China (753 HK)
China Unicom (762 HK)
ZTE Corp (763 HK)
Sino Land (83 HK)
CR Power (836 HK)
PetroChina (857 HK)
CNOOC (883 HK)
Huaneng Power (902 HK)
Anhui Conch (914 HK)
Longyuan Power (916 HK)
CCB (939 HK)
China Mobile (941 HK)
Citic Bank (998 HK)
5
5
5
5
5
5
5
5
5
2
2, 5
5
5
5
5
5
5
5
5
1, 5
5
2
5
5
5
5
5
1, 5
5
5
5
2, 3, 5
5
5
5
5
5
5
5
5
2, 5
5
5
5
5
5
5
5
5
5
5
BNP Paribas represents that:

1. Within the past year, it has managed or co-managed a public offering for this company, for which it received fees.
2. It had an investment banking relationship with this company in the last 12 months.
3. It received compensation for investment banking services from this company in the last 12 months.
4. It beneficially owns 1% or more or the market capitalization of this company.
5. It makes a market in securities issued by this company.
6. The analyst(s) or an individual who assisted in the preparation of this report (or a member of his/her household) has a
financial interest position in securities issued by this company or derivatives thereof.
7. The analyst (or a member of his/her household) is an officer, director, or advisory board member of this company.
2012 BNP Paribas
34

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FOR PROFESSIONAL INVESTORS ONLY

Equit y Deri va ti ve Strateg y ( Asia)

Asia Derivatives Focus Hanjeongsik Korean set meal

Buy Japanese Exporters (BNJPEXPO) and Sell Korean Exporters (BNKREXPO)

CHART OF THE WEEK JAPAN AND KOREA EXPORTERS

Theme: Global Easing Impact on Korea Equities.............. 2

Note: data as of 21 February 2012; Source: Bloomberg

FOR PROFESSIONAL INVESTORS ONLY

Theme of the Week Global Easing Impact on Korea Equities

Consensus View on JPYKRW at 12.1 in 2013

Consensus Median Forecast

Consensus view on JPYKRW

Source: Bloomberg FXFC [Go]

FOR PROFESSIONAL INVESTORS ONLY

Fundamental Perspective (Sun Chung)

FOR PROFESSIONAL INVESTORS ONLY

Japanese Exporters vs. Korean Exporters

Idea of the Week

Implementation 1: Buy Japanese Exporters and Sell Korean Exporters

Buy Japanese Exporters (BNJPEXPO) vs Sell Korean Exporters (BNKREXPO)

Sources: Bloomberg; BNP Paribas

Korean Exporters Basket

Tech Hardw are

DY (%) DY (%) Weight

Sources: Bloomberg; BNP Paribas

Japanese Exporters Basket

Autos & Parts

DY (%) DY (%) Weight

Sources: Bloomberg; BNP Paribas

Buy Japanese Exporter and sell Korean exporters

FOR PROFESSIONAL INVESTORS ONLY

Implementation 2: Call on Dispersion on Korean and Japanese Exporters

Electronics & Electricals

Electronics & Electricals

Source: Bloomberg, BNP Paribas

Backtest on Call on Dispersion with strike 19%

Source: Bloomberg; BNP Paribas

FOR PROFESSIONAL INVESTORS ONLY

Implementation 3: Buy Korean Beneficiaries on China Easing Basket

Buy Korean Beneficiaries on China Easing Basket (BNKRCNBE) and Sell

Korean Benef on China Easing

Sources: Bloomberg; BNP Paribas

Korean Beneficiaries on China Easing Basket

DY (%) DY (%) Weight

Sources: Bloomberg; BNP Paribas

Long Korean Beneficiaries on China Easing Basket

FOR PROFESSIONAL INVESTORS ONLY

Korean Preference-Ordinary Shares Arbitrage Opportunity

Buy Samsung Electronics Preference (005935 KS) and Sell Samsung

Buy LG Electronics Preference (066575 KS) and Sell LG Electronics (066570

Sam sung Electronics

Hyundai Motor "7" Series

Hyundai Motor "5" Series

Samsung Fire & Marine

Hite Brew ery

Sources: Bloomberg; BNP Paribas

FOR PROFESSIONAL INVESTORS ONLY

High Conviction Samsung Electronics Preference-Ordinary pair: Samsung Electronics

Samsung Electronics Preference / Ordinary

Hyundai Motor 7 Series over Hyundai Motor

Sources: Bloomberg ; BNP Paribas

LG Electronics Preference / Ordinary

Sources: Bloomberg ; BNP Paribas

FOR PROFESSIONAL INVESTORS ONLY