Key Trade and Risk June 21 2010

Emerging Markets
Equity Research
21 June 2010
Key Trades and Risks

Emerging Markets Equity Strategy
• Equities are fundamentally attractive. Global growth in our view is Emerging Markets Equity Strategy
sustainable. This growth is combined with low inflation and interest Adrian Mowat
AC
rates. (852) 2800-8599

adrian.mowat@jpmorgan.com
• This is likely to be a volatile summer. Markets will focus on PMI data J.P. Morgan Securities (Asia Pacific) Limited
for evidence of financial market weakness feeding through to the real
Ben Laidler
economy. We believe investors are over estimating their influence on the (1-212) 622-5252
real economy. Regulatory reform and fiscal policy are additional sources ben.m.laidler@jpmchase.com
of volatility. J.P. Morgan Securities Inc.
• The rebalancing of the Chinese economy from investment to Deanne Gordon

(27-21) 712-0875
consumption is healthy. But mind the gap, the near term impact would deanne.gordon@jpmorgan.com
be lower commodity prices and potentially lower profit margins. We
J.P. Morgan Equities Ltd.
expect that commodity prices will correct this summer which could
potentially lead to weaker EM equities. Rajiv Batra
(91-22) 6157-3568
• Our key trades ranked by conviction are: rajiv.j.batra@jpmorgan.com
J.P. Morgan India Private Limited

• CEMBI Surfers; Overweight India and Turkey Sanaya Tavaria
(91-22) 6157-3312
• Growth surprise from developed, not emerging, sanaya.x.tavaria@jpmorgan.com
economies. Overweight Mexico, Taiwan and Turkey J.P. Morgan India Private Limited
plus technology and transportation.
Ankita Kochar
• Macro policy and rising inflation - QR not QE in EM: (91-22) 6157-3263
ankita.x.kochar@jpmorgan.com
Underweight Brazil, China, energy and commodities
J.P. Morgan India Private Limited
• The main risk to our view is that financial market stress results in
Figure 1: MSCI EM relative performance
weaker European growth than a bearish consensus. For more on risks
see page 8. 140
120
• Key asset allocation calls:
OW: Taiwan, Korea, India, Mexico, South Africa, Turkey and the 100 v s World
Philippines
80
OW: Technology and industrial cyclicals (i.e. transportation)
60
UW: China and Brazil
UW: Commodities, energy, telecoms and Utilities 40 v s USA
20
• For our ‘Key Trade’ stock ideas, click here to download the Bloomberg
96 98 00 02 04 06 08 10
sheet.
Source: Bloomberg, 14 June 2010.
See page 90 for analyst certification and important disclosures, including non-US analyst disclosures.
J.P. Morgan does and seeks to do business with companies covered in its research reports. As a result, investors should be aware that the firm may
have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as only a single factor in making their
investment decision.
Adrian Mowat Emerging Markets Equity Research
(852) 2800-8599 21 June 2010
In this report, we highlight: Table of Contents

Our top trade ideas
Summer Swings........................................................................3
Risks
Risks to our strategy................................................................8
Our model portfolio
Global emerging markets model portfolio by country ........14
Valuation stress test
Key ratios for EMBIG 100

Global emerging markets model portfolio by sector...........15
Consensus country weights Key Trades ..............................................................................16
China: Mind the gap ...............................................................26
We have two pages on each Brazil: Better Outlook for Domestics....................................28
significant emerging market. The
first page has a qualitative South Korea: Buying opportunity .........................................30
review of events driving the past
12 months, the outlook and a Taiwan: Potentially Oversold ................................................32
comment on valuations; the
second page displays the Russia: Strong balance sheet and earnings ........................34
scorecard, which presents key
economic and equity market
India: Global concerns drag Indian equities ........................36
data South Africa: A low beta equity market................................38
Mexico: Cyclical Macro Momentum ......................................40
The extended markers: This
report contains 36 pages of data Malaysia: Reform agenda keeping the buzz ........................42
designed to help track emerging
economies and markets Thailand: Resilient despite turmoil .......................................44
Indonesia: An eye on politics ................................................46
The emerging market Turkey: Cyclical view… secular trend ..................................48
dashboards efficiently display
key economic, equity and debt Philippines: Market re-rating likely .......................................50
data, demonstrating change and
perspective. Extended markers ..................................................................53
Consensus Asset Allocation .................................................55
Hindsight trades: What has worked......................................56
Composite valuation indicators ............................................58
EMBIG100................................................................................62
Emerging Markets Strategy Dashboards .............................70
2
(852) 2800-8599 21 June 2010
Summer Swings
There is a conflict in our strategy. This is a serious economic advantages. It helps address China’s strained
conflict that could damage performance. Investors in our social contract by increasing household income as a share
view are too, and increasingly pessimistic, on the of GDP at the expense of corporate profits (see risk
sustainability of the recovery. Our base case remains that section on page 8). There is a leveraged impact on
the global recovery is led by the private sector and is discretionary income. Economists may argue that a
sustainable. Economic growth combined with falling stronger currency would indirectly boost real income due
core inflation is a strong fundamental backdrop for to lower inflation but there are higher tangible benefits to
equities. Note that J.P. Morgan's economists just pushed workers of higher wages rather than a lower cost of
out the first increase in Fed Funds rate to 4Q11 (See A imported goods.
change to our Fed call, Michael Feroli et al, 17 June
2010). But EM investors need to consider the risk of the Figure 2: Monitor European PMIs
correlation between EM equities and commodities. In our 65 Germany
view commodity investors are not pricing in China's 60
changing growth model. Euro area
55
50
Recognizing the conflict and risk, we are setting an
45
artificial time limit on the fear of a correction in
40 Spain
commodities. The time limit is September 2010. By then Greece
we believe that the decline in bulk commodity prices will 35
"scare" the new investors in commodities to redeem, 30
generating a broader correction. 25
Jun-07 May -08 Apr-09 Mar-10
Market confidence in a sustainable economic recovery is
Source: J.P. Morgan Economics, May 2010
waning. It is the risk of too rapid a fiscal consolidation
that is hitting confidence. We agree this risk has Figure 3: Domestic Savings as a percent of GDP in China
increased but we also believe that financial investors are
25 1997-99 2005-07 21 22
over estimating their influence on the real economy. Post
18
the sub-prime crisis, business and consumer respect for 20
financial institutions and markets has declined. In 13
15
responding to the conflicting signals of weaker capital 9
10
markets and stronger than expected demand (see Figure 3
2) manufacturers should be more influenced by their 5 1 1
customer orders than stock market levels. This is 0
Institutions
Enterprises
Households
Government
Financial
particularly true when investors appear shell-shocked in

their over-reaction to poor fundamental data.
Our expectation is that manufacturing PMIs will decline

Source: IMF
from their post recovery highs but remain in an
expansionary range. Growth should hopefully broaden to Figure 4: China consumption as a % of GDP
the service sectors. If this occurs then investor
55
confidence in a sustainable recovery would increase.
China's economic and policy dynamics are changing. 50

Consumption as a percentage of GDP declined in the last
decade. This is partly a function of the decline in the 45
share of household income as a percentage of GDP. The
tacit support for recent wage disputes may indicate a 40
more proactive policy to boost household income and
thus consumption (see Figure 4). Reducing China's 35
export competitiveness through higher wages, rather than 78 80 82 84 86 88 90 92 94 96 98 00 02 04 06 08
a stronger Renminbi, has a number of political and
Source: J.P. Morgan economics, 2008.
3
(852) 2800-8599 21 June 2010
With such a clear policy to boost consumption investors Commodity markets are technically weak. Investor
will desire exposure. But only 11% of MSCI China is confidence in the asset class is falling due to poor returns
consumer companies. High growth and low free floats and a diminished diversification benefit. A broad
result in high relative valuations. There is a similar trend correction in commodity prices would require these
in US where the EPS CAGR, since 1973, for consumer investors to reverse a long standing trend to increase
discretionary at 10.5% is a premium to the market's asset allocation to commodities (See Figure 15 and
7.5%. Its long term average PE at 20 is also a premium to Figure 16).
the market average of 15.
Figure 5: China iron ore spot and contract prices
A recent Xinhau news article was critical of state owned 200
enterprises. It noted that SoEs’ scale and influence on the China iron ore spot price
Chinese economy may hinder economic growth. The 150
government controls these companies and can accelerate
the shift of GDP from corporate to household. Note that 100
80% of MSCI China is SoEs.
50
There is a Mexican stand-off in the property market.
Landed cost of contract iron ore in China
Successive anti-asset-price-inflation measures have 0
discouraged buyers who now expect prices to fall. But Apr 02 Apr 04 Apr 06 Apr 08 Apr 10
cash rich property companies and home owners mean a
lack of forced sellers. The result is a sharp decline in Source: Bloomberg. Note: The landed cost of contract iron ore are Vale's SSF cost +
freight costs from Brazil to China. For 3Q10 forecasts, Vale's SSF costs are calculated as
property transactions. This in turn would lead to a fall in the average of the spot prices from Mar 10 to May 10. The freight costs in 3Q10 are
construction activity. Infrastructure spending is assumed to remain unchanged at today's levels.
decelerating. Bank loans funded the bulk of last year’s
stimulus program. Greater regulatory scrutiny of lending Figure 6: MSCI EM Energy relative to MSCI EM
to local government funding vehicles is likely to lead to 130
less capital for infrastructure. These measures are
consistent with a policy to rebalance growth from 120
investment to consumption.
110
The demand for bulk commodities and energy is 100

declining as the growth driver shifts from fixed asset
90
investment to consumption in China. There is renewed
focus on energy efficiency. The five year plan target to 80
reduce energy use per unit of GDP by 20% has not been Jan 07 Jul 07 Jan 08 Jul 08 Jan 09 Jul 09 Jan 10
met. Beijing is putting pressure on energy intensive and
polluting industries to close capacity. The market is also Source: Bloomberg. Note: Index rebased to 100 from January 2007.
applying pressure with steel prices declining while
contract iron ore and coking coal prices increase. Chinese Figure 7: MSCI EM Materials relative to MSCI EM
steel mills could make a loss in 3Q10. 140
130
Weak steel and aluminum prices may already be
indicating a slowdown in FAI. If our rebalancing thesis is 120
correct then steel prices should continue to fall. It is this 110
signal that we believe could lead to a broader correction 100
in commodity markets. The numerous presentations on
90
China’s significant demand for commodities at our China
conference this month reflects China’s key role in the 80
commodity super-cycle debate. Evidence of slowing Jan 07 Jul 07 Jan 08 Jul 08 Jan 09 Jul 09 Jan 10
Chinese demand when combined with increased supply
could lead to disproportionate corrections in commodity Source: Bloomberg. Note: Index rebased to 100 from January 2007.
prices.
4
(852) 2800-8599 21 June 2010
If the commodity market corrects then EM equities are Figure 8: MSCI Korea Forward PE relative to MSCI EM
likely to decline led by Brazil and Russia. This 1.3
potentially would lead to redemptions in EM funds
1.2
leading to a broader correction (See Figure 11and Figure
12). We would view this event as an exceptional buying 1.1 +1SD
opportunity.
1.0
Av g
Upgrading Korea to overweight 0.9
We upgraded Korea to overweight from neutral on 2 0.8

-1SD
June in both Asian and Emerging Market portfolios. The 0.7
market has underperformed EM by 3% since 3 May -05 Jan-06 Sep-06 May -07 Jan-08 Sep-08 May -09 Jan-10
September 2009. Prior to that, from 26 February 2008 to
9 March 2009, MSCI Korea outperformed MSCI EM by Source: IBES, MSCI, Datastream, 31 May 2010.
26%.
Figure 9: REER deviation from long term mean since 1975 -An
Our upgrade was opportunistic. On 20 May, the South undervalued Won
Korean government released a multinational combined 100
intelligence report that concluded that the South Korean 80
navy ship Cheonan was torpedoed by a DPRK 60
submarine. The report accelerated the correction in the 40
market and currency. 20
0
The Won declined by 9% in May. The result is that -20
MSCI Korea is the cheapest market in APxJ (PE 9.3) and -40
one of the most undervalued currencies in EM (REER). -60
IDR
TWD
PHP
THB
CHF
HUF
AUD
USD
KRW
BRL
RUB
CLP
CZK
CNY
TRY
ZAR
PLN
MXN
EUR
We are more positive on global growth than the
pessimistic consensus. This, plus a competitive currency Source: J.P. Morgan.
is positive for exporters (note Yen and NT dollar cross

Figure 10: Performance of KRW/USD
rates). Banks are inexpensive, in our view. The end of
price controls should boost domestic margins. 1600
Our preferred sectors are exporters, banks and domestics. 1400

Our top picks include Hyundai Mobis, HMC, Kia
05-07 Av erage FX rate: 969
Motors, Hyundai Department Store, Shinsegae, Lotte 1200
Shopping, KB Financial, Hynix and SEC.
1000
The risks to our view are: (1) a further deterioration in
the North Korean situation, (2) weaker global demand, 800
(3) price controls remaining, and (4) excessive tech Jan-05 Jan-06 Jan-07 Jan-08 Jan-09 Jan-10
capex.
5
(852) 2800-8599 21 June 2010
Conclusion 4. EM inflation and speed of policy normalization

Equities are fundamentally attractive with a backdrop of 5. Lack of G3 policy flexibility
sustainable growth and low core inflation. We wish to
6. Central banks target asset prices
add EM equity risk but fear a correction in commodity
prices. A change in China’s perceived demand for 7. Commodity EM equities feedback loop
commodities as its economy rebalances is the catalyst for
8. Trade friction
the correction in commodity prices. We hope this will
provide an outstanding buying opportunity. Evidence of 9. Tension between the two Koreas
China's slowing commodity demand should appear over
10. Thai political unrest
the next few months. If no correction occurs before
September we will review our thesis and are likely to add 11. Bond market volatility
risk then.
12. Election-induced volatility
Few investors share J.P. Morgan's optimism on For more details on these risks, please see page 8.
sustainable growth. European PMIs are forecast to
decline from recovery highs but remain above 50. Please see pages 26 to 50 for our detailed country views.
Key asset allocation calls Figure 11: S&P GSCI Industrial Metals Index
• OW: Taiwan, Korea, India, Mexico, South Africa, 2500
Turkey and the Philippines
2000
• OW: Technology and industrial cyclicals (i.e.
transportation)
1500
• UW: China and Brazil
1000
• UW: Commodities, energy, telecoms and Utilities
Our key trades ranked by conviction are: 500
1. CEMBI Surfers; OW India and Turkey Jan 07 Jul 07 Jan 08 Jul 08 Jan 09 Jul 09 Jan 10
2. Growth surprise from developed, not emerging, Source: Bloomberg

economies. OW Mexico, Taiwan and Turkey plus
technology and transportation Figure 12: Cumulative inflows into commodity fund by year (US
4billion)
3. Macro policy and rising inflation – QR not QE in
60 2004 2005 2006
EM: UW Brazil, China, energy and commodities 2007 2008 2009
50 2010 50.4
For more details on these key trades, please see page 16
40
Please see pages 13, 14, 15 for our Global Emerging 30

18.4
Markets model portfolio and descriptions of changes 20 16.3
10 16.0
made this month. 11.8
8.9
0
5.7
Risks – are many: -10
1. Strained social contract
Dec
Oct
Mar
Apr
Jan
Feb
Jun
Aug
Sep
Jul
May
Nov
2. Underestimating euro sovereign stress contagion risk

Source: J.P. Morgan, May 2010
3. Rising economic risks
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(852) 2800-8599 21 June 2010
Focus on sectors within countries rather than country recommendations

The table below provides a level summary of our views on sectors within countries. Financials is 25%, Materials is 15% and
Energy is 14% of EM. All recommendations are relative to EM. The Industrials sector consists of an eclectic group of
stocks. We are overweight technology and transportation.
Table 1: Key country and sector recommendations
Country/Sector Weight Reco US$ Return (%) PE 09 PE PE EPS EPS EPS DY ROE ROE
10E 11E Growth Growth Growth 10E 10E
09 10E (%)
1 yr 3 yr 5 yr X X X (%) (%) CAGR % % 03-08
05-10E Avg
EM 100 -- 18 (3) 86 14.3 11.2 9.6 2 28 8.8 2.9 15.3 16.2
China 18.7 UW 5 10 157 15.8 12.6 10.7 17 25 13.3 2.9 16.2 16.1
China Financials 7.1 N 7 23 265 14.5 11.5 9.4 25 25 28.5 3.2 17.8 13.3
China Energy 3.2 UW 10 14 161 13.4 10.6 9.6 (5) 26 8.3 3.8 17.8 21.4
China Telecom 2.5 UW (6) 11 174 12.3 12.1 11.5 (4) 1 14.8 3.6 15.0 18.2
China Industrials 1.4 n/a (10) (25) 55 20.3 13.3 11.8 58 53 5.4 2.1 11.0 12.8
Brazil 16.1 UW 20 28 243 13.5 11.2 9.0 7 20 6.1 3.4 16.1 18.8
Brazil Materials 4.3 UW 31 29 308 19.2 9.3 6.6 (40) 106 10.1 3.2 19.2 27.9
Brazil Energy 3.7 N (0) 62 310 10.3 10.8 9.5 (5) (5) 2.8 2.5 15.5 25.3
Brazil Financials 3.8 OW 27 21 243 11.9 11.5 9.5 45 4 5.9 3.6 16.1 22.4
Korea 13.1 OW 23 (22) 47 13.8 9.5 9.1 56 45 8.4 1.2 15.4 14.3
Korea IT 4.0 OW 40 3 38 18.1 10.0 11.1 (2,217) 81 13.7 0.2 18.1 17.0
Korea Financials 2.2 OW 16 (43) 32 15.6 8.8 7.6 (31) 77 3.0 2.2 11.7 13.3
Korea Industrials 1.8 n/a (3) (49) 71 14.9 11.4 10.4 26 30 10.6 1.3 11.4 12.0
Korea Materials 1.7 N 27 0 173 10.7 8.9 8.2 (2) 20 7.7 1.2 32.1 17.6
Korea CD 1.8 OW 50 23 72 9.3 8.1 7.8 125 15 16.9 0.8 20.2 13.4
Korea CS 0.6 N 12 (25) 46 15.0 13.7 11.8 7 9 11.3 1.7 14.4 14.9
Taiwan 10.7 OW 12 (12) 15 24.6 12.8 11.3 36 92 5.1 3.8 13.5 13.3
Taiwan IT 6.5 OW 16 (17) 12 29.1 12.0 10.9 9 143 11.5 3.6 16.9 14.3
Taiwan Financials 1.5 N (4) (21) (19) 19.6 13.2 10.6 859 48 9.3 3.3 8.7 6.6
Taiwan Materials 1.3 UW 16 7 78 17.1 14.5 12.0 NM 18 (7.8) 4.8 10.5 20.7
India 8.0 OW 15 9 143 21.4 17.2 13.6 3 25 13.4 1.3 16.3 21.0
India Financials 2.0 OW 14 3 148 23.5 19.3 15.3 0 22 13.7 1.2 12.3 14.9
India Energy 1.2 N (7) 12 285 20.5 14.4 12.0 (0) 42 14.7 1.2 16.3 21.1
India IT 1.3 OW 54 3 104 24.2 21.1 17.4 5 15 16.1 1.2 24.4 31.3
South Africa 7.4 OW 21 4 93 16.6 12.3 9.8 (18) 35 10.7 3.2 16.3 19.1
SA Materials 2.1 OW 15 (13) 97 47.0 16.8 11.9 (54) 179 22.2 2.1 13.5 9.9
SA Financials 1.9 OW 36 8 82 13.1 10.7 8.8 (15) 23 5.9 4.5 15.0 19.6
SA Telecom 0.9 UW (2) (1) 95 12.3 10.2 8.7 (10) 20 10.2 3.0 20.0 28.9
SA Cons Discr 0.9 N 50 25 119 16.2 13.2 10.5 10 23 10.9 2.4 17.0 23.1
SA Energy 0.7 UW (5) 18 59 11.9 9.9 7.7 (22) 20 6.3 3.6 17.2 23.8
Russia 6.5 N 11 (31) 56 8.2 6.4 5.1 (21) 29 9.1 2.2 13.8 16.6
Russia Energy 3.8 N (2) (33) 34 5.7 5.0 4.6 (12) 14 6.0 2.3 13.7 16.6
Mexico 4.8 OW 38 (14) 102 18.0 14.4 12.1 2 25 7.7 2.7 16.7 19.1
Mexico Telecom 1.9 UW 33 (13) 154 14.3 12.4 10.9 (2) 15 16.4 4.1 36.5 31.2
Mexico CS 1.1 N 52 21 133 18.9 19.0 15.8 54 (0) 14.1 1.7 15.1 16.0
Mexico Materials 0.8 OW 45 (41) 32 30.8 14.6 10.9 (16) 111 (8.8) 1.6 8.0 15.8
Malaysia 2.9 N 28 7 96 18.2 14.8 12.7 (1) 23 7.5 3.5 12.5 13.2
Indonesia 2.3 N 44 53 206 16.3 13.8 11.9 21 18 16.4 3.0 23.8 25.4
Turkey 1.6 OW 56 7 88 11.0 9.5 8.3 3 16 12.8 3.1 17.4 17.2
Turkey Financials 1.0 OW 74 29 129 9.7 8.8 7.8 30 11 18.4 2.4 18.1 16.6
Chile 1.5 n/a 26 25 127 18.7 16.2 13.5 NM 15 19.1 2.3 11.2 10.1
Thailand 1.5 N 25 23 79 12.8 11.2 9.6 33 14 (0.9) 4.0 15.1 19.4
Poland 1.4 N 22 (39) 28 15.2 13.2 11.0 (26) 15 (1.4) 3.7 11.7 17.0
Hungary 0.4 N 11 (40) (8) 12.1 10.9 8.5 (37) 11 (2.7) 3.6 11.9 23.8
Philippines 0.5 OW 25 (6) 114 17.3 15.4 13.4 25 13 5.5 3.9 15.6 14.4
Source: J.P. Morgan Asian strategy team, MSCI, Datastream. Table sorted by descending weight in index, countries first followed by country-sectors, 10 June 2010.
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(852) 2800-8599 21 June 2010
Risks to our strategy

Strained social contract banks continue to face a difficult funding environment.
Political and regulatory risk is high. The corporate sector The primary market for unsecured bank debt remains in
has emerged from the global recession and credit crunch hibernation. The contraction in the CP/CD issued by
stronger than the households. Note the profits as a share European banks in the US is accelerating. Note that
of GDP are near cycle highs but unemployment is 10%. European banks need to refinance nearly $130bn per
Policy makers constrained by high fiscal deficits are month for the remainder of the year.
likely to redress this imbalance through higher taxes and
increased regulation. Rising economic risks
Private payrolls at 41K for the month of May were
As is the case in the US, Chinese corporates share of disappointing. Note that firms are using their existing
GDP increased while the household share decreased. workers more intensively as they lengthen the work
Labour disputes and subsequent large pay increases may week, and companies cannot increase work hours
start to reverse this trend. This rebalancing is healthy and indefinitely. Private sector job creation should improve
should move China to a more sustainable growth model. over the rest of the year. However, if the job data
But near term the result is lower profit margins. continues to be below expectations, it could adversely
impact consumer spending and a sustained economic
Underestimating Euro sovereign stress contagion risk recovery.
After Greece, there is speculation that Spain might reach
out to the EU or IMF for financial support. The Spanish Figure 13: Strained social contract: US profit share and
banking system is under significant pressure to address unemployment
its solvency issues, especially among its saving banks. % sa
22 Profit share 0
These concerns have impaired the ability of Spanish
20
banks to raise market funding, and increased the 3
18
possibility of seeking external liquidity support. If this
16
were to be true, Spanish bond yields which have already 6
increased by 50 bps in the last one week would likely rise 14
further and issuance become more difficult. 12 9

Unemploy ment rate (inv erted)
10
Euro sovereign stress generates both economic and 8 12
market risk. The economic risk is that business in core 70 75 80 85 90 95 00 05 10
Europe slows investment decisions. As we witnessed in
2008, rational individual risk reduction results in a Source: J.P. Morgan. Note: Chart shows % share of gross value added, JPMorgan
forecast for 2010.
destructive downward spiral in risk assets.
Figure 14: Spread between Spanish and German 10 year bond
In Emerging Markets Outlook and Strategy, June 8, yield
2010, Joyce Chang, our Global head of Emerging
250
Markets and Credit Research, notes two scenarios.
Scenario 1: Deeper economic and financial crisis, but 200
contained to peripheral Europe. Scenario2: Crisis spreads
to core Europe due to contagion from the periphery, 150
pushing the Euro area into a double dip recession. If the
crisis were to spread to core Europe, it could have a 100
significant impact on emerging markets. In such a
50
scenario, emerging markets would reverse incipient
tightening. Emerging markets may also have to resort to 0
greater fiscal stimulus to offset the weakness in the Jan 08 Jul 08 Jan 09 Jul 09 Jan 10
private sector. (Please see Page 23 for more details)
Source: Bloomberg
The feedback loop between banks struggling to fund and
a subsequent reduction in the availability of credit is
another key risk. Nikolaos Panigirtzoglou in his weekly,
Flows and Liquidity, 4 June 2010 notes that: European
8
(852) 2800-8599 21 June 2010
EM inflation and speed of policy normalization Tension between the two Koreas
Our base case is that inflation plateaus mid-year as the On 20 May, the South Korean government released a
base effect becomes more favorable. If we are wrong and multinational combined intelligence task force report that
inflation continues to rise then this is bearish for equities. concluded that the South Korean navy warship was
The EM dashboard has a sheet designed to help monitor torpedoed by a DPRK submarine on 26 March. The
inflation across EM countries. Remember modeling Korean Won has weakened by 5% in the last one month
inflation in emerging economies is difficult due to the to KRW/USD1213.
short history of floating exchange rates and large
weighting of food and other primary products. Thai political unrest
The Thai market and baht are remarkably resilient
Lack of G3 policy flexibility considering the violence in Bangkok.
High fiscal deficits and record-low interest rates limit
policymakers’ ability to respond to a relapse in growth. A Figure 15: Oil forward curve ($/bbl)
growth relapse is not our base case. If it occurred, it 95 Crude Oil, WTI : 6/9/2010
would be a serious blow to risk assets. Credit spreads
could widen and equities would fall. 90
85
Central banks target asset prices
Central banks are targeting asset prices in EM, notably in 80
China. These policies introduce economic and sector
specific risk. Note how poorly real estate stocks have 75
performed in EM despite low interest rates.
70
Commodity EM equities feedback loop Jul-10 Jul-12 Jul-14 Jul-16 Jul-18

Commodity markets are in our view vulnerable. Investors
are frustrated by low to negative returns due to the high Source: Bloomberg. 9 June 2010.
roll cost in forward markets in contango. In 2009, net

Figure 16: Underperformance of TR Crude Oil Index and Energy
retail inflows into commodity funds were $50billion; this vs WTI
year, subscriptions have slowed sharply. A combination
of negative momentum and Chinese economic 220 WTI JPM Crude Oil TR JPM Energy TR
rebalancing could be a catalyst for significant
190
redemptions. The liquidation of contango arbitrage
inventory (i.e. leasing supertankers to buy spot and sell 160
forward) adds to the downside risk for commodities.
Weak commodity prices will drive Brazilian, Russian 130
and Indonesian markets lower, in our view. It is
100
reasonable to expect redemptions in BRIC funds.
70
Trade friction Jan-09 Apr-09 Jul-09 Oct-09 Jan-10 Apr-10
It is no fun being a politician today. High fiscal deficits
in the developed economies and rising inflation in Source: Bloomberg.
emerging economies will mean uncomfortable policy
choices. In this environment it is appealing to look for
others to blame. A building risk is trade sanctions against
China. The rhetoric on the Renminbi is heating up.
China's priority is to manage a rebalancing economy. We
doubt Beijing wishes to add currency volatility to the
mix. Hopefully this war will be fought in the media
rather than with sanctions. Our overweight exporters is
very exposed to a trade war.
9
(852) 2800-8599 21 June 2010
Bond market volatility Figure 17: Global bond supply ($tr)

The end of QE plus banks’ unwillingness to add to $7 Gov ernment Agencies, Supra, Muni, etc
duration risk is a dangerous technical situation for Corporates incl Gov t Guranteed Securitized
government bonds. Risk assets typically struggle as bond
$6
yields rapidly increase to “normal” levels. EM equities
typically correct when bond market volatility rises. Our
work on quantifying the relationship between the $5
direction of US Treasury yields and EM equity returns
suggests that the probability of such a correction in 2010 $4
is high if UST yields rise rapidly and increases the risk of
a rapid adjustment. We advise investors to monitor the
$3
pace of change in 10-year UST yields in 2010.
Election-induced volatility $2
Brazilian elections in October 2010 are likely to be a
source of volatility rather than a change in macro- $1
economic policy.
$0
2009 2010
Source: J.P. Morgan. Global bond supply and demand 2009 and 2010 in $tr, demand and
supply figures are annualized, supply is calculated by the change in bond out standings at
face value, demand is calculated by the change in bond out standings at market value.
Figure 18: Global bond demand ($tr)

QE Banks
FX Reserv es Retail Bond Funds
$7 Insurance + Pension Other
$6
$5
$4
$3
$2
$1
$0
2009 2010
Source: J.P. Morgan. Global bond supply and demand 2009 and 2010 in $tr, demand and
supply figures are annualized, supply is calculated by the change in bond out standings at
face value, demand is calculated by the change in bond out standings at market value.
10
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Figure 19: Public Debt and Fiscal Balance as a % of GDP for EM and DM in 2010
0
Korea
Peru
-2 ChinaIndonesia
Thai
Mex ico Brazil
EM
Australia Turkey
Russia
-4
Phil Hungary
Chile Czech
Malay sia Italy
India Germany
Poland
-6 S Africa
Fiscal Balance
Portugal
Euro area
Japan
-8 DM
France
Ireland
-10 Spain
UK US
Greece
-12
-14
0 50 100 Public Debt 150 200 250
Source: J.P. Morgan estimates
11
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12
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Model portfolio changes

This month’s model portfolio reflects the changes made Table 2: Country asset allocation relative to MSCI EM
in the Regional model portfolio in ‘Off Balance to
Rebalance', Perspectives and Portfolios, Mowat et al, 3 Country Deviation
June 2010 Taiwan 4.1
India 4.0
Mexico 3.8
In Russia, we replaced VTB with Sberbank. Sberbank’s Turkey 3.5
1Q10 earnings beat consensus estimates owing to South Africa 3.3
Korea 3.1
resilient net interest margin as well as other revenue Philippines 2.3
items. We believe that the stabilization of asset yield and Russia 0.7
asset mix is in the offing creating conditions for Thailand -0.3
Malaysia -1.1
stabilization of NIM. Indonesia -1.3
CE3 -1.3
In South Africa, we booked profits in Firstrand, Foschini Brazil -8.4
China -8.7
and JD Group. We are rebalancing our portfolio in South
Source: J.P. Morgan.
Africa in favor of high conviction, defensive names.
Table 3: Sector asset allocation relative to MSCI EM
In China, we added Belle International Holdings Ltd. Sector Deviation
We like consumer discretionary in China as the Chinese Financials 10.6
economy prepares itself for rebalancing towards Information Technology 9.1
consumption. Belle’s valuations are relatively high, but Consumer Discretionary 5.3
Industrials 4.7
still below big cap peers. Utilities 0.0
Health Care -2.4
In Malaysia, we replaced Digi.Com with Genting BHD. Consumer Staples -3.3
Materials -5.5
Genting had strong first quarter results, with 14% yoy Telecommunication Services -8.5
increase in revenue. We expect gaming revenue to Energy -10.2
benefit from the improving economy and cyclical Source: J.P. Morgan.
recovery through increased consumer spending. Its
Singapore resort (RWS), which begun operations in mid Figure 20: Performance of GEM Model Portfolio vs. MSCI EM
February 2010, is already experiencing slot wins that are 35 GEMs Model Portfolio MSCI EM
3-5x that of Macau. VIP revenue also surprised on the
upside, coming in at 50% of overall gaming revenue. 25
In ‘Off Balance to Rebalance, Perspectives and

15
Portfolios, Mowat et al, 6 May 2010, we added Hyundai
Department Stores, Hyundai Mobis, and KB
Financial in Korea and dropped Korean Air as we 5
upgraded the market to overweight.
-5
In India, we added DLF as the stock looked attractive 1M 3M 12M
post the recent correction. We expect the stock to benefit
Source: J.P. Morgan Strategy, Bloomberg, 15 June 2010. Note: This is capital only return
from an improvement in the commercial business and i.e. no reinvestment of divs.
volume growth returning back in the affordable homes
segment. We dropped BHEL. Please see pages 14 and 15 for our Global Emerging
Markets Model Portfolio.
Please note: Source for Data in Global emerging

market portfolio is: Bloomberg, MSCI, J.P. Morgan
estimates. Prices and valuations are as of 15 June 2010.
13
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Global emerging markets model portfolio by country

Ticker Price JPM Change Change Portfolio MSCI Deviation P/E P/E DY ROE
LC Rating 4 Wk (%) YTD (%) Weight(%) Weight(%) (%) 10E (x) 11E (x) 10E (%) 10E (%)
China 59.5 3.0 -6.7 10.1 18.7 -8.7 13.6 11.5 2.7 16.2
Bank of Communications 3328 HK 8.4 OW 7.3 -7.3 2.1 0.2 1.9 10.7 8.9 3.1 21.1
Belle International Holdings 1880 HK 10.7 OW 7.8 18.3 2.0 0.2 1.8 28.5 27.2 1.2 19.4
China High Speed Transmission 658 HK 16.9 OW -9.9 -11.1 1.4 0.1 1.3 15.6 12.5 2.1 27.6
China Shipping Container Lines 2866 HK 2.7 OW -10.7 -5.0 2.1 0.0 2.1 NM 24.0 0.0 0.4
Lenovo 992 HK 4.4 N -23.9 -10.3 1.3 0.1 1.3 37.1 15.0 0.1 9.8
Xinao Gas 2688 HK 16.5 N -31.5 -17.3 1.1 0.1 1.0 16.4 12.5 1.5 15.0
Brazil 219,725.3 0.1 -11.0 7.6 15.9 -8.4 11.3 9.0 3.4 18.0
BM&F Bovespa BVMF3 BZ 11.9 OW 3.5 -2.8 3.3 0.4 2.9 14.3 12.3 na na
PDG Realty PDGR3 BZ 16.0 OW 10.4 -7.8 1.7 0.2 1.6 12.8 8.4 1.4 14.2
Petrobras PBR/A US 32.0 N -4.0 -24.6 2.6 3.1 -0.5 8.5 6.7 2.8 15.2
Korea 481.8 -3.1 -3.3 16.6 13.5 3.1 10.4 9.4 1.2 13.4
Cheil Worldwide 030000 KS 13,050 NR 1.6 3.6 1.1 0.0 1.1 15.1 14.1 2.8 16.8
Hynix Semiconductor 000660 KS 27,100 N 1.9 17.1 2.0 0.4 1.6 6.7 10.0 0.0 33.8
Hyundai Department Stores 069960 KS 115,000 OW 11.1 2.2 1.6 0.0 1.5 10.6 9.6 0.5 13.8
Hyundai Mobis 012330 KS 200,500 OW 3.4 17.3 1.5 0.4 1.1 10.2 9.2 0.5 19.3
KB Financial 105560 KS 51,200 OW 1.2 -14.2 2.0 0.5 1.6 8.1 6.8 2.0 11.7
LG Chem 051910 KS 295,000 OW -0.2 29.1 2.0 0.4 1.6 11.0 10.8 1.2 27.5
Samsung Electronics 005930 KS 798,000 N -1.5 -0.1 4.4 2.4 1.9 10.0 11.4 0.0 18.0
SEMCO 009150 KS 146,500 OW -3.0 36.3 2.1 0.2 1.8 19.8 16.9 0.4 18.3
Taiwan 262.6 -4.1 -12.0 14.9 10.8 4.1 13.6 11.7 3.7 14.1
China Airlines 2610 TT 15.8 OW 18.4 39.2 2.1 0.0 2.1 NM 17.6 0.0 1.3
Fubon Financial Holdings 2881 TT 37.1 OW -3.4 -5.6 1.9 0.2 1.7 11.9 9.9 5.2 11.7
Hon Hai 2317 TT 121.0 OW -15.7 -20.1 1.8 1.0 0.9 12.3 10.9 1.7 17.6
Mediatek 2454 TT 516.0 N -1.7 -7.5 1.9 0.5 1.5 12.7 11.1 5.0 36.2
Nanya Technology Corporation 2408 TT 25.4 OW -6.6 -22.3 1.4 0.0 1.4 16.3 7.0 0.0 13.3
TSMC 2330 TT 61.4 OW 0.3 -4.8 2.1 1.5 0.5 10.8 10.7 4.9 27.6
UMC 2303 TT 14.7 OW -3.3 -14.5 1.9 0.2 1.8 10.6 11.0 3.5 8.0
Yuanta FHC 2885 TT 17.4 OW -7.2 -26.0 1.7 0.1 1.6 10.5 8.9 5.3 11.4
India 702.9 0.5 0.1 12.0 8.1 4.0 17.2 13.7 1.1 17.7
DLF DLFU IN 272.5 OW -8.7 -24.6 1.8 0.1 1.7 25.5 18.2 0.0 7.2
HDFC Bank HDFCB IN 1,963.9 OW 0.6 15.4 1.5 0.4 1.1 30.5 22.5 0.7 16.1
IDFC IDFC IN 165.3 OW 0.0 7.1 1.6 0.1 1.5 20.2 17.6 1.0 16.1
Infosys INFO IN 2,734.7 OW 3.1 5.1 1.9 0.9 1.0 25.2 22.5 0.9 28.8
Kotak Mahindra Bank KMB IN 770.7 OW 1.7 -4.5 2.0 0.1 1.9 21.8 17.9 0.2 16.7
Larsen & Toubro LT IN 1,724.5 OW 12.8 2.8 1.6 0.2 1.4 29.7 24.1 0.0 19.4
TCS TCS IN 766.1 OW 0.3 2.1 1.7 0.3 1.5 21.8 20.2 3.1 36.8
South Africa 708.1 -2.0 -2.3 10.6 7.3 3.3 12.1 9.7 3.3 17.5
ABSA Group Ltd ASA SJ 125.8 OW -6.8 -2.1 1.9 0.2 1.7 8.8 7.3 4.5 19.1
African Rainbow Minerals ARI SJ 172.1 OW -5.3 -1.0 2.2 0.1 2.1 4.8 4.5 2.5 25.7
Anglo Platinum AMS SJ 778.0 OW 4.0 1.0 2.0 0.2 1.8 21.6 16.2 1.4 25.7
Shoprite SHP SJ 85.0 OW 8.0 30.3 2.5 0.1 2.4 18.8 15.6 2.6 40.1
Standard Bank SBK SJ 105.6 N -3.8 3.5 2.0 0.5 1.5 10.9 8.7 3.6 16.4
Russia 722.9 -4.9 -7.7 7.0 6.4 0.7 6.5 5.2 2.2 14.8
Globaltrans Investments GLTR LI 13.2 OW 8.0 33.3 2.7 0.0 2.7 13.0 8.5 0.0 24.7
MRSK Holding MRKH RU 0.1 OW -16.0 8.8 1.3 0.0 1.3 NA NA NA NA
Rosneft ROSN LI 6.9 OW -5.6 -20.3 1.5 0.4 1.1 6.2 6.8 1.5 19.4
Sberbank SBER RU 2.4 OW -7.3 -15.8 1.5 0.0 1.5 9.8 5.1 8.5 18.8
Mexico 29,852.0 3.1 4.0 8.4 4.6 3.8 14.8 12.4 2.6 18.5
Cemex CX US 10.9 OW 2.2 -8.0 1.8 0.0 1.8 35.1 15.8 NA NA
First Cash Financial FCFS US 21.6 OW 0.6 -2.6 1.8 0.0 1.8 13.5 11.7 NA 18.0
ICA ICA* MM 30.1 OW -3.1 -1.2 1.5 0.0 1.5 28.1 20.4 0.0 3.6
Ternium TX US 35.6 OW 3.1 0.4 1.8 0.0 1.8 9.3 8.5 1.4 13.6
Urbi URBI* MM 24.0 OW -12.7 -18.5 1.4 0.0 1.4 11.0 9.0 0.0 12.9
Malaysia 472.7 -3.5 7.2 1.8 2.9 -1.1 13.7 11.8 3.5 14.8
Genting BHD GENT MK 7.2 OW 2.1 -2.3 1.8 0.2 1.6 22.3 13.7 1.0 8.3
Indonesia 3,810.4 -0.1 8.7 1.0 2.3 -1.3 15.0 12.9 3.0 25.9
Bank Danamon BDMN IJ 5,150.0 OW -1.9 13.2 1.0 0.1 0.9 15.1 11.3 2.2 16.7
Thailand 316.9 2.5 10.5 1.2 1.5 -0.3 11.6 10.0 3.6 16.0
Siam Commercial Bank SCB TB 82.0 N -2.4 -5.5 1.2 0.1 1.1 12.5 10.9 3.0 15.2
Turkey 811,914.4 -1.1 2.2 5.2 1.7 3.5 9.6 8.4 3.1 18.4
Sabanci SAHOL TI 6.5 NR 4.8 13.0 2.2 0.1 2.1 8.3 6.9 1.2 13.6
Vakifbank VAKBN TI 3.5 OW -1.1 -17.4 1.1 0.1 1.0 6.4 5.0 4.7 17.5
Yapi Kredi YKBNK TI 4.3 OW 4.9 31.1 1.9 0.1 1.8 9.5 6.4 0.0 20.7
CE3 NA NA NA 0.9 2.2 -1.3 11.9 10.0 4.4 13.6
Erste Bank EBS AV 28.5 OW -8.7 9.3 0.9 0.0 0.9 9.8 6.5 1.4 9.3
Philippines 615.6 -3.3 4.6 2.8 0.5 2.3 15.5 13.4 4.2 16.0
Ayala Corp AC PM 320.0 OW -0.8 5.8 1.6 0.0 1.6 18.8 15.3 1.3 8.1
PNOC-EDC EDC PM 4.6 OW -13.2 -2.1 1.2 0.0 1.1 12.2 12.4 8.2 24.2
Emerging Markets 41,339.3 -0.7 -4.9 100.0 100.0 0.0 11.4 9.7 2.8 16.1
Source: J.P. Morgan, MSCI, Datastream, IBES estimates for NR stocks
14
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Global emerging markets model portfolio by sector

Ticker Price JPM Change Change Portfolio MSCI Deviation P/E P/E DY ROE
LC Rating 4 Wk (%) YTD (%) Weight(%) Weight(%) (%) 10E (x) 11E (x) 10E (%) 10E (%)
Consumer Discretionary 525.6 3.3 4.4 11.0 5.7 5.3 12.4 10.7 1.8 16.8
Belle International Holdings Ltd. 1880 HK 10.7 OW 7.8 18.3 2.0 0.2 1.8 28.5 27.2 1.2 19.4
PDG Realty PDGR3 BZ 16.0 OW 10.4 -7.8 1.7 0.2 1.6 12.8 8.4 1.4 14.2
Cheil Worldwide 030000 KS 13,050.0 NR 1.6 3.6 1.1 0.0 1.1 15.1 14.1 2.8 16.8
Hyundai Department Stores 069960 KS 115,000.0 OW 11.1 2.2 1.6 0.0 1.5 10.6 9.6 0.5 13.8
Hyundai Mobis 012330 KS 200,500.0 OW 3.4 17.3 1.5 0.4 1.1 10.2 9.2 0.5 19.3
Urbi URBI* MM 24.0 OW -12.7 -18.5 1.4 0.0 1.4 11.0 9.0 0.0 12.9
Genting BHD GENT MK 7.2 OW 2.1 -2.3 1.8 0.2 1.6 22.3 13.7 1.0 8.3
Consumer Staples 442.3 4.0 6.9 2.5 5.8 -3.3 18.0 15.4 2.3 16.5
Shoprite SHP SJ 85.0 OW 8.0 30.3 2.5 0.1 2.4 18.8 15.6 2.6 40.1
Energy 891.4 3.4 2.9 4.0 14.2 -10.2 9.1 8.1 2.5 14.6
Petrobras PBR/A US 32.0 N -4.0 -24.6 2.6 3.1 -0.5 8.5 6.7 2.8 15.2
Rosneft ROSN LI 6.9 OW -5.6 -20.3 1.5 0.4 1.1 6.2 6.8 1.5 19.4
Financials 407.0 5.4 6.1 34.9 24.3 10.6 12.8 10.5 2.7 14.4
Bank of Communications 3328 HK 8.4 OW 7.3 -7.3 2.1 0.2 1.9 10.7 8.9 3.1 21.1
BM&F Bovespa BVMF3 BZ 11.9 OW 3.5 -2.8 3.3 0.4 2.9 14.3 12.3 NA NA
KB Financial 105560 KS 51,200.0 OW 1.2 -14.2 2.0 0.5 1.6 8.1 6.8 2.0 11.7
Fubon Financial Holdings 2881 TT 37.1 OW -3.4 -5.6 1.9 0.2 1.7 11.9 9.9 5.2 11.7
Yuanta FHC 2885 TT 17.4 OW -7.2 -26.0 1.7 0.1 1.6 10.5 8.9 5.3 11.4
DLF DLFU IN 272.5 OW -8.7 -24.6 1.8 0.1 1.7 25.5 18.2 0.0 7.2
HDFC Bank HDFCB IN 1,963.9 OW 0.6 15.4 1.5 0.4 1.1 30.5 22.5 0.7 16.1
IDFC IDFC IN 165.3 OW 0.0 7.1 1.6 0.1 1.5 20.2 17.6 1.0 16.1
Kotak Mahindra Bank KMB IN 770.7 OW 1.7 -4.5 2.0 0.1 1.9 21.8 17.9 0.2 16.7
ABSA Group Ltd ASA SJ 125.8 OW -6.8 -2.1 1.9 0.2 1.7 8.8 7.3 4.5 19.1
Standard Bank SBK SJ 105.6 N -3.8 3.5 2.0 0.5 1.5 10.9 8.7 3.6 16.4
Sberbank SBER RU 2.4 OW -7.3 -15.8 1.5 0.0 1.5 9.8 5.1 8.5 18.8
First Cash Financial FCFS US 21.6 OW 0.6 -2.6 1.8 0.0 1.8 13.5 11.7 NA 18.0
Bank Danamon BDMN IJ 5,150.0 OW -1.9 13.2 1.0 0.1 0.9 15.1 11.3 2.2 16.7
Siam Commercial Bank SCB TB 82.0 N -2.4 -5.5 1.2 0.1 1.1 12.5 10.9 3.0 15.2
Sabanci SAHOL TI 6.5 NR 4.8 13.0 2.2 0.1 2.1 8.3 6.9 1.2 13.6
Vakifbank VAKBN TI 3.5 OW -1.1 -17.4 1.1 0.1 1.0 6.4 5.0 4.7 17.5
Yapi Kredi YKBNK TI 4.3 OW 4.9 31.1 1.9 0.1 1.8 9.5 6.4 0.0 20.7
Ayala Corp AC PM 320.0 OW -0.8 5.8 1.6 0.0 1.6 18.8 15.3 1.3 8.1
Erste Bank EBS AV 28.5 OW -8.7 9.3 0.9 0.0 0.9 9.8 6.5 1.4 9.3
Health Care 542.3 2.0 11.0 0.0 2.4 -2.4 19.9 16.6 1.2 16.8
Industrials 218.7 4.0 7.7 11.5 6.8 4.7 13.2 11.2 2.0 12.6
China High Speed Transmission 658 HK 16.9 OW -9.9 -11.1 1.4 0.1 1.3 15.6 12.5 2.1 27.6
China Shipping Container Lines 2866 HK 2.7 OW -10.7 -5.0 2.1 0.0 2.1 NM 24.0 0.0 0.4
China Airlines 2610 TT 15.8 OW 18.4 39.2 2.1 0.0 2.1 NM 17.6 0.0 1.3
Larsen & Toubro LT IN 1,724.5 OW 12.8 2.8 1.6 0.2 1.4 29.7 24.1 0.0 19.4
Globaltrans Investments GLTR LI 13.2 OW 8.0 33.3 2.7 0.0 2.7 13.0 8.5 0.0 24.7
ICA ICA* MM 30.1 OW -3.1 -1.2 1.5 0.0 1.5 28.1 20.4 0.0 3.6
Information Technology 225.3 5.6 5.0 22.6 13.5 9.1 12.3 11.5 2.5 19.4
Lenovo 992 HK 4.4 N -23.9 -10.3 1.3 0.1 1.3 37.1 15.0 0.1 9.8
Hynix Semiconductor 000660 KS 27,100.0 N 1.9 17.1 2.0 0.4 1.6 6.7 10.0 0.0 33.8
Samsung Electronics 005930 KS 798,000.0 N -1.5 -0.1 4.4 2.4 1.9 10.0 11.4 0.0 18.0
SEMCO 009150 KS 146,500.0 OW -3.0 36.3 2.1 0.2 1.8 19.8 16.9 0.4 18.3
Hon Hai 2317 TT 121.0 OW -15.7 -20.1 1.8 1.0 0.9 12.3 10.9 1.7 17.6
Mediatek 2454 TT 516.0 N -1.7 -7.5 1.9 0.5 1.5 12.7 11.1 5.0 36.2
Nanya Technology Corporation 2408 TT 25.4 OW -6.6 -22.3 1.4 0.0 1.4 16.3 7.0 0.0 13.3
TSMC 2330 TT 61.4 OW 0.3 -4.8 2.1 1.5 0.5 10.8 10.7 4.9 27.6
UMC 2303 TT 14.7 OW -3.3 -14.5 1.9 0.2 1.8 10.6 11.0 3.5 8.0
Infosys INFO IN 2,734.7 OW 3.1 5.1 1.9 0.9 1.0 25.2 22.5 0.9 28.8
TCS TCS IN 766.1 OW 0.3 2.1 1.7 0.3 1.5 21.8 20.2 3.1 36.8
Materials 595.3 7.2 11.0 9.8 15.4 -5.5 12.6 9.9 2.4 15.3
LG Chem 051910 KS 295,000.0 OW -0.2 29.1 2.0 0.4 1.6 11.0 10.8 1.2 27.5
African Rainbow Minerals ARI SJ 172.1 OW -5.3 -1.0 2.2 0.1 2.1 4.8 4.5 2.5 25.7
Anglo Platinum AMS SJ 778.0 OW 4.0 1.0 2.0 0.2 1.8 21.6 16.2 1.4 25.7
Cemex CX US 10.9 OW 2.2 -8.0 1.8 0.0 1.8 35.1 15.8 NA NA
Ternium TX US 35.6 OW 3.1 0.4 1.8 0.0 1.8 9.3 8.5 1.4 13.6
Telecommunication Services 278.5 3.1 6.2 0.0 8.5 -8.5 12.3 11.1 4.3 18.6
Utilities 351.0 2.7 4.3 3.6 3.5 0.0 12.9 11.0 3.3 9.5
Xinao Gas 2688 HK 16.5 N -31.5 -17.3 1.1 0.1 1.0 16.4 12.5 1.5 15.0
MRSK Holding MRKH RU 0.1 OW -16.0 8.8 1.3 0.0 1.3 NA NA NA NA
PNOC-EDC EDC PM 4.6 OW -13.2 -2.1 1.2 0.0 1.1 12.2 12.4 8.2 24.2
Emerging Markets 41,339.3 -0.7 -4.9 100.0 100.0 0.0 11.4 9.7 2.8 16.1
Source: J.P. Morgan, MSCI, Datastream, IBES estimates for NR stocks
15
(852) 2800-8599 21 June 2010
Figure 21: European PMIs Key Trades

70 Euro Area Growth Surprise from DM not EM
60 Greece Confidence in a sustainable economic growth has declined. Investors fear that the
Euro sovereign stress will lead to excessive fiscal consolidation in developed
50 economies. We believe the market is exaggerating this risk. The key economic data
points still support a sustainable recovery driven by private sector demand. We
40
recommend investors buy exporters, technology, transportation, Korea and
Spain Mexico. The drivers are:
30
1. Sustainable US and a better core Europe. Private sector is driving US and
20 core European growth. Acceleration in business spending and recovering job growth
Jun-07 Jun-08 Jun-09 are generating strong lift in global demand. J.P. Morgan’s proxy of global final sales
grew at 9.7% saar in 1Q10, its fastest gain in over a decade. G-3 capital goods orders
Source: J.P. Morgan economics, May 2010.
and shipments are booming. Global capital spending is expected to rise at its fastest
pace in 25 years. Despite financial market stress, economic data from core Europe is
Table 4: Recovering exports impressive. Core Europe has a good fiscal position and is benefiting from a weak
euro. Germany’s manufacturing PMI has risen to 58.4 from 52.7 at end-2009. Euro
Country 3M/3M Current area industrial output was up 16% QoQ saar in the first quarter, after 8.8% in 4Q09.
SAAR %oya
Brazil 111.9 47.7 2. Delayed monetary stimulus.
India 94.0 54.5
Taiwan 84.7 57.9 3. A turn toward inventory restocking. The inventory cycle is turning from a
Korea 65.7 41.9 drag on GDP to a contributor to growth. The global economy was poorly prepared
Mexico 46.4 43.2
SA 27.5 24.7
for the 2008 demand shock. IP growth exceeded final demand from 2006, as rising
Philippines 23.8 43.8 inflation hit real purchasing power. The result was high inventories ahead of the
Thailand 21.9 34.6 synchronized global recession. It was a painful adjustment with global IP declining
Malaysia 20.4 41.3 by 21% peak to trough and many quarters of inventory de-stocking. With demand
Turkey 14.0 25.1
Indonesia 3.1 42.6
and production each rising at a rapid pace during 1Q10, inventories remain lean and
Chile (12.3) 27.4 the restocking cycle has only just begun. We think the consensus is underestimating
Russia (12.6) 61.3 the impact of this tailwind.
Poland (14.0) 27.0
China (30.9) 30.4 4. Strong recovery in exports (see table of 3M SAAR exports by country).
Hungary (33.0) 20.5
5. This is not a jobless recovery. The non-farm-payroll and working hours are
Source: Bloomberg.
now expanding; the result is a growth.
Table 5: Growth surprise from developed & emerging economies
Stock Ticker JPM Mkt cap Price P/E DY ROE
Figure 22: Non farm vs. Temporary Rating (US$B) (LC) 10E 11E 10E 10E
employment OW IT
Samsung Electronics 005930 KS N 94.0 793000 9.8 11.2 0.0 16.7
600 Temp. employ ment 100 TSMC 2330 TT OW 48.3 60.3 10.6 10.5 5.0 25.9
(RHS) Hon Hai 2317 TT OW 31.4 118.5 11.0 9.2 2.1 17.7
400
50 Mediatek 2454 TT OW 17.6 521.0 12.0 9.8 5.0 33.9
200 Hynix Semiconductor 000660 KS N 12.3 26000 6.4 9.5 0.0 28.9
0 Lg Display 034220 KS OW 11.8 41000 5.3 5.6 1.8 21.5
0 Lg Electronics 066570 KS N 11.0 94400 5.7 5.2 0.9 21.7
-200 -50 SEMCO 009150 KS OW 8.6 143000 19.1 16.4 0.4 17.0
Chimei Innolux 3481 TT OW 8.5 34.1 9.3 7.9 0.0 8.8
-400 Au Optronics 2409 TT N 8.3 30.3 11.3 23.2 0.0 7.9
Non-farm -100
-600 UMC 2303 TT OW 5.7 14.3 10.4 10.7 3.6 8.0
pay roll (LHS) Advanced Semicondctr 2311 TT OW 4.4 26.0 8.7 7.8 2.1 18.6
-800 -150 Inotera Memories 3474 TT N 2.7 19.2 22.4 7.6 0.0 6.0
00 02 04 06 08 10 Nanya Technology 2408 TT OW 2.6 25.1 16.1 6.9 0.0 12.5
OW Transportation
Air China Ltd-H 753 HK OW 16.9 8.1 14.0 12.6 0.0 17.7
Source: Bloomberg, 31 May 2010. Note: Chart Lan Airlines LFL US OW 6.5 19.1 20.5 15.9 1.6 NA
shows mom net change in non farm payrolls and China Shipping Container 2866 HK OW 5.5 2.5 230.1 19.9 0.0 0.4
temporary employment. Korean Air Lines 003490 KS N 4.4 76800 93.4 23.5 0.0 2.0
Embraer ERJ US UW 4.0 21.4 15.4 11.9 2.7 10.0
China Airlines Ltd 2610 TT OW 2.1 14.8 118.8 16.5 0.0 1.3
Copa Holdings CPA US N 2.1 47.5 8.8 7.7 1.4 22.7
Eva Airways Corp 2618 TT OW 1.6 17.6 NM 14.8 0.0 -1.6
Source: Bloomberg, IBES, J.P. Morgan estimates. Share prices as of 11 June 2010.
16
(852) 2800-8599 21 June 2010
Figure 23: Correlation of Bolsa with OW Mexico – Leveraged to the US

S&P 500 Index
Our bullish equity strategy case for Mexico remains unchanged, and we still see
90%
robust upside to our year-end Mexbol target of 38,500. The three key drivers are:
75%
Broadening Macro Recovery
60% Mexico’s beta to US economic growth is two times. J.P. Morgan's 2010 US GDP
growth forecast is 3.5%; this would suggest upside risk to the current forecast of
45%
1 Year Rolling 4.5% growth for Mexico. Based on the forecast the swing in GDP 09/10E is the third
30% Correaltion of largest. The macro recovery is manufacturing and auto led. March IP was up an
Weekly Returns above-consensus 7.6% oya. Construction is now showing positive growth, after
15% seven months. We have changed our monetary policy call to a low-for-long view; no
95 97 99 01 03 05 07 09 change in expecting no rate hike before 2H 2011, as inflation expectations remain
well anchored, the output gap remains wide, and we expect Banxico to wait for
developed market rates to rise first.
Figure 24: GDP ‘Swing’ 09/10e
India
Undervalued Mexican Peso
Ecuador The Mexican peso is still 15% below its pre-credit crunch level.
Indonesia
China Mexico is under-owned by global and local investors
Colombia Non-dedicated global investors are few, especially relative to larger EMs, such as
S. Africa Brazil. This is partly understandable given the market’s relatively small size (4.7% of
Euro EM, 7 stocks make up 75% of index), but also odd, given the clear leverage to a
Korea rebounding US. Local investors – pension funds and mutual funds – also remain UW
Peru their own market. We do not see them as upside drivers, but as a defensive floor as
EM
inflows remain robust, weightings low, and regulatory change pushing for greater
USA
equity involvement. This is notwithstanding the upcoming end of the voluntary afore
DW
UK
agreement to not invest inflows outside Mexico.
Chile
Brazil Table 6: OW Mexico
Stock Ticker JPM Mkt cap Price P/E DY ROE
Argentina
Japan Rating (US$B) (LC) 10E 11E 10E 10E
Cemex CX US OW 10.7 10.2 32.9 14.8 0.0 0.7
Turkey Ternium TX US OW 7.0 34.8 9.1 8.3 1.3 12.0
Mex ico Urbi URBI* MM OW 1.8 23.9 11.0 9.0 0.0 12.9
Taiw an ICA ICA* MM OW 1.5 29.9 27.9 20.2 0.0 3.6
Russia First Cash Finl Svcs FCFS US OW 0.6 21.4 13.4 11.5 na 18.0
(1.0) 4.0 9.0 14.0
Source: J.P. Morgan
17
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Figure 25: Domestic consumer Macro policy and rising inflation - QR not QE in EM
discretionary relative to MSCI EM
Underweight: Brazil, China, commodities and energy
130
China and Brazil are booming. GDP in China expanded at 13.1%q/q saar in 1Q10;
120 with strong contribution from domestic private-sector demand and a significant
upturn in exports. Brazil is leading LatAm growth. J.P. Morgan has increased the
110 2010 GDP growth forecast to 7.5%; the highest growth in 25 years. Consistent with
higher growth they have brought forward the timing of higher interest rates; the Selic
100 overnight rate is forecast to touch 12.5% by end 2010. Latin America is now
expected to grow 4.9% in 2010, nearly 2% above its estimated potential growth rate.
90
Dec-08 May -09 Oct-09 Mar-10 The exit from aggressive pro-growth policies and rising headline inflation are macro
headwinds for the consensus overweight EM consumption trade. Higher inflation
Source: Datastream, 9 June 2010. Note: Chart
shows the performance of J.P. Morgan index of
slows the growth in discretionary income – this is the opposite trend to 2009.
domestic consumer discretionary relative to EM.
QR not QE in EM
Figure 26: Valuation of Domestic QR= quantitative restrictions; this is the use of administrative policies to manage the
consumer discretionary relative to allocation of capital. The asset inflation trade (a consensus position in 2009) is
MSCI EM battling policymakers who are fighting asset inflation with quantitative restrictions in
29 EM. We have been underweight simple asset inflation trades for some time e.g.
property. Capital controls/taxes could slow EM F/X appreciation. After significant
25
underperformance we would not short these stocks.
21
17
13
9
00 01 02 03 04 05 06 07 08 09
Source: Datastream. Note: Chart shows the PE

of J.P. Morgan index of domestic consumer
discretionary relative to EM, 31 May 2010.
Figure 27: Performance of China

property and EM real estate rel EM
105
100
95
90 EM Real Estate rel
85 EM
80
75
70
65
60 China Property
55 rel EM
50
Jul-09 Oct-09 Jan-10 Apr-10
18
(852) 2800-8599 21 June 2010
With the downgrade of Brazil to

underweight (19 April 2010), we Underweight Brazil and China
are now predicting that the two
largest markets will So we are bullish on growth assets yet underweight the booming economies of
underperform MSCI EM. Brazil and China. The track record of these countries’ economic management is
good. These economies do not need low interest rates or fiscal stimulus. In our view
Figure 28: China: Squeezing the
steel margin the market is too complacent on the pace of normalization and eventual
tightening. In China it seems reasonable that Beijing will continue to concentrate
950 Iron Ore + Coking coal
HRC Price efforts to slow growth in investment, rather than exports or consumption, as they
850 attempt to rebalance growth. The 1H10 record commodity demand from China is
750 consistent with peak implementation of FAI. We are not willing to extrapolate this
650 growth. China’s share of world steel and iron demand is six times its share of global
GDP demand. Per capita consumption when adjusted for purchasing power is also
550
excessive. Evidence of economic rebalancing in China is already building. Property
450
transactions are slowing. Steel prices are falling. Recent wage increases suggest a
350 growing share of labor income to GDP (stronger consumption but less currency
250 appreciation). This is good for long-term sustainable growth but bad for bulk
07 08 09 10 commodities and manufacturers’ margins. Economic rebalancing in China has
implications for Brazilian commodity exports.
Source: Bloomberg. Note: Iron ore + coking coal
is the spot price of iron X 1.6 and spot coking Brazil’s link with China
coal price X 0.6
China is Brazil's largest customer. As noted earlier we believe that China will
Figure 29: China FAI & Retail Sales continue to slow fixed asset investment; both infrastructure and real estate. This
makes us nervous on iron ore demand from China.
40
35 The Presidential election
FAI
30 The October presidential race is yet another source of volatility regardless of the two
25 candidates, with greater market awareness as campaigning really starts, political
20
platforms are debated, and coalitions formed.
15
An overvalued Real
10 We remain somewhat concerned by the risk/reward for the BRL. Our base-case
Retail Sales
5 scenario is the real trading in a range. Aggressive FX intervention, deteriorating
04 05 06 07 08 09 current account deficit and fundamental BRL over valuation should set a ceiling to
BRL appreciation. Balancing these forces, however, the case for appreciation is that
Source: Bloomberg, April 2010. Chart shows terms of trade are at historical highs, growth-related capital inflows remains resilient,
%yoy growth in FAI and retail sales.
and increasing interest rates all set a cap to depreciation.
Figure 30: J.P. Morgan REER: Deviation (%) from long term mean Figure 31: Brazil CPI (%oya) and SELIC overnight rate
since 1975
28
100
24 Selic ov ernight target rate
80 20
60
16
40 12
20
8
0 4
-20 CPI
0
-40 00 02 04 06 08 10
IDR
TWD
PHP
THB
KRW
CHF
HUF
AUD
USD
BRL
RUB
CLP
CZK
CNY
TRY
ZAR
PLN
MXN
EUR

Source: J.P. Morgan estimates.
19
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Figure 32: CEMBI Yield and India CEMBI surfers – OW India, Turkey, South Africa
10Y Govt Yield
CEMBI is J.P. Morgan’s emerging market corporate bond index. CEMBI yield
16 CEMBI (JCBYBLYD Index) is 6.5% (year low 6.1% end April). Since 3 May, CEMBI
Yields spreads (JCBSBLSD Index) have increased by 93bp to 367bp reflecting the current
uncertainty in global financial markets. Supply is on hold. New issues from EM
12
Indian 10 corporates slowed to USD3.3 bn in May vs. an average of 16bn per month over Jan-
Year y ields April. J.P. Morgan’s full year supply target is 127.5 bn out of which 68bn has been
8 issued YTD. This forecast is at risk as we believe EM corporates will prefer to stay
out of the market rather than pay generous concessions to get investors in from the
sidelines.
4
J.P. Morgan forecasts CEMBI spreads to range between 350 to 400bp through mid
Apr 06 Oct 07 Apr 09
year. However, we remain confident in EM growth fundamentals and believe
Source: Bloomberg, 7 June 2010. that as the market stabilizes, spreads will recover to 300 bps by year-end. This is
also a function of the treasury yield which is forecast to increase from 3.26%
currently to 4% by Dec 10.
CEMBI is particularly important to India as the Indian private sector funds the
current account deficit. India's nominal GDP growth could be 17% this year. Long
term borrowing costs are half the level of nominal GDP (Indian 10Y bonds 7.6% and
CEMBI yields 6.5%). Many Indian companies will view today's monetary conditions
as supportive of growth.
In the past ECB data has been fairly volatile and does not seem to be affected from
the change in CEMBI spreads. The exception is the blowout after Oct-08 when ECBs
fell in line with the spike in spreads. In the current CEMBI spread rise so far, there
has not been much impact on ECB approvals/ utilization of pre-approved ECBs.
There might be a larger impact in the 2H. We are monitoring our OW on India
closely. In the recent past, corporate India has been borrowing substantial amounts
overseas and the relative importance of ECBs has also been increasing. Annual net
ECB borrowing rose from USD2 bn in 2005 to 23bn in 2008. It was 8bn in 2009 and
is forecast to be 11bn in 2010. Typically the spreads and markets are concurrently
negatively correlated.
Turkey is also a beneficiary of lower borrowing costs due to its reliance on external
financing. Its current account deficit is forecast to widen from 3.4% to 4.2% of GDP
in 2010. Nominal GDP growth is forecast to be 15% in 2010 versus 10 year bond
yields of 10% and 6.5% CEMBI. Turkish corporates should benefit from the delayed
monetary stimulus.
Table 7: Yields for government and corporate bonds plus earnings yield for US & EM equity
markets
High Low Avg 05-07 Spot Diff
US EARNINGS YIELD 11.4 6.1 6.6 7.9 1.3
US High Yield 21.0 7.5 8.4 9.5 1.1
EM EARNINGS YIELD 17.3 6.8 8.7 9.6 0.9
CEMBI 14.3 5.7 6.4 6.5 0.1
EMBI 12.0 6.2 7.0 6.5 (0.4)
JULI 8.7 4.8 5.7 5.1 (0.6)
US 10 Yr 5.2 2.1 4.6 3.2 (1.3)
1 Month T-Bill 5.2 (0.1) 4.0 0.0 (4.0)
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(852) 2800-8599 21 June 2010
OW South Africa
Figure 33: SA Real GDP growth
The drivers of our overweight on South Africa are:
%yoy
1. Positive SA growth surprises: The South African economy is finally starting to
6 deliver positive growth surprises. Leading economic indicators are positive. SA real
5 GDP growth surprised on the upside at 4.6%q/q saar in 1Q10. This was the fastest
4 growth pace in seven quarters as low interest rates worked through to boost domestic
3 demand. The MPC adopted a decidedly more upbeat tone on growth in the June
2
MPC meeting than at the last meeting and disclosed a growth forecast of 3.6% for
2011, but kept its growth projection for 2010 broadly unchanged at 2.6%y/y. J.P.
1
Morgan’s SA economics team forecast SA real GDP growth to surprise on the upside
0
at c3% in 2010.
-1
-2 2. Countercyclical accommodative monetary policy: The SARB kept the repo rate
00 02 04 06 08 10 unchanged at 6.5% in the Monetary Policy meeting in May. J.P. Morgan economists
now expect the first hike in the second quarter of 2011, given risks to the global
Source: J.P. Morgan economics. Grey are
denotes forecasts till 2011. recovery and the likely delay in the start of the hiking cycle in many developed
markets. In the Q&A session, the Governor indicated that the outlook for rates is to
Figure 34: Record low SA policy remain steady at 6.5% as inflation is expected to be contained below 6% throughout
rates – for now the forecast period. J.P. Morgan economists agree with the SARB’s benign view on
16 inflation in 2010, but highlight that relatively high wage settlements and base effects
from low food prices pose some risks that inflation could exceed the upper end of the
14 target band in the second half of 2011.
SA
12
3. Earnings recovery off a decimated base in 2009: The fall in SA earnings growth
10
in 2009 was the biggest on record (-29% vs. an average of -9.3% during previous
8 cyclical lows). We forecast EPS growth of c30-35% in both 2010 and 2011, one of
6
the highest in EM. This relative earnings growth outperformance of SA vs EM into
EM 2011 should drive the SA catch-up trade.
4
00 02 04 06 08 10 4. Relatively attractive valuations: SA offers a combination of low relative
valuations with high earnings growth.
5. The Rand - risk and reward: The Rand remains the wildcard, having appreciated
Figure 35: SA rates on hold vs
tightening for rest of EM 3% 2010-to-date. Our valuation tools suggest that the Rand is some 10% overvalued.
Brazil However, given the demand for carry as a function of global liquidity (J.P. Morgan
Turkey expectations of a first Fed hike in 2Q11), we expect the Rand to stay “stronger-for-
India
China longer” underpinned by an environment of high growth, strong commodity prices
Korea
Thailand and healthy risk appetite.
Taiw an
Malay sia
Philippines Our preferred domestic cyclical sectors are banks, food, retailers and General
SA
Mex ico Industrials. We are overweight banks for six reasons: (1) Sustained low SA interest
Indonesia rates through 2010 vs. tightening elsewhere in EM; (2) Recovery in loan growth; (3)
Czech
Russia Unwinding of bad debts; (4) Strongest forecast earnings growth rebound in EM in
Hungary
2010/11; (5) Attractive relative valuations; and (6) SA Banks are under-owned. Our
-100 0 100 200 top stock picks include ABSA, Standard Bank, Shoprite, ARM and AngloPlat.
Source: J.P. Morgan estimates. Note: Chart Table 8: OW South Africa

shows forecasted change in policy rates from
now till 4Q10. Stock Ticker JPM Mkt cap Price P/E DY ROE
Rating (US$B) (LC) 10E 11E 10E 10E
African Rainbow ARI SJ OW 4.6 16866 4.7 4.4 3.0 25.7
Anglo Platinum AMS SJ OW 25.7 75700 21.0 15.7 1.4 25.7
Standard Bank Gr SBK SJ N 20.5 10218 10.6 8.4 3.9 16.4
Absa Group Ltd ASA SJ OW 11.4 12365 8.7 7.2 4.6 19.1
Shoprite Hldgs SHP SJ OW 5.6 8008 18.1 15.0 2.8 40.1
21
(852) 2800-8599 21 June 2010
Country asset allocation changes

Table 9: Summary of country asset allocation changes from 2007
Country From To Recommendation Relative return from the date of YTD relative return
Recommendation
Taiwan 20-Feb-07 27-Aug-07 N (6.2)
Thailand 21-Mar-07 20-Jul-09 OW 2.8
Turkey 21-Mar-07 24-Sep-07 N 14.3
Poland 18-Apr-07 17-Jan-08 N (26.0)
Russia 18-May-07 27-Jul-08 N 3.3
Brazil 18-May-07 31-Jan-08 OW 22.4
Malaysia 14-Jun-07 24-Aug-07 N (7.3)
South Africa 14-Jun-07 24-Aug-07 N (8.0)
Malaysia 24-Aug-07 14-Mar-08 OW (0.8)
South Africa 24-Aug-07 5-Feb-08 OW (11.3)
Taiwan 24-Aug-07 28-Feb-08 UW 9.6
Turkey 27-Sep-07 27-Jul-08 UW 16.6
India 2-Nov-07 17-Jan-08 N 15.7
India 18-Jan-08 7-Jan-09 UW 15.3
Poland 18-Jan-08 18-Aug-09 UW 15.7
Mexico 1-Feb-08 26-Feb-09 OW (2.4)
Brazil 1-Feb-08 16-Jun-08 N 16.9
South Africa 6-Feb-08 16-Jun-08 N 2.1
Taiwan 29-Feb-08 2-Apr-08 OW 6.0
Malaysia 17-Mar-08 14-May-09 N 8.8
Taiwan 3-Apr-08 17-Apr-08 N 3.3
Taiwan 18-Apr-08 19-Nov-08 OW 0.2
China 16-May-08 16-Jun-08 N (4.7)
Brazil 17-Jun-08 22-Sep-08 UW 7.9
China 17-Jun-08 14-May-09 OW 14.1
South Africa 17-Jun-08 27-Jul-08 UW (7.7)
Russia 28-Jul-08 14-May-09 UW 21.0
Turkey 28-Jul-08 5-Oct-08 OW 7.0
South Africa 28-Jul-08 14-May-09 N 8.2
Brazil 23-Sep-08 16-Apr-10 N 4.6
Turkey 6-Oct-08 1-Dec-09 N (16.2)
Indonesia 3-Nov-08 30-Mar-09 UW (5.3)
Taiwan 19-Nov-08 30-Mar-09 N 3.9
India 8-Jan-09 5-Aug-09 N 27.0
South Korea 26-Feb-09 3-Sep-09 OW 25.6
Mexico 27-Feb-09 23-Mar-09 N 2.0
Philippines 16-Mar-09 3-Sep-09 N (2.0)
Mexico 23-Mar-09 18-Aug-09 OW 6.5
Taiwan 30-Mar-09 - OW (24.2) (24.2)
Indonesia 30-Mar-09 14-May-09 N 11.1
Russia 15-May-09 18-Oct-09 N 4.1
South Africa 15-May-09 17-Sep-09 UW (6.1)
China 15-May-09 17-Sep-09 N (3.3)
Indonesia 15-May-09 3-Sep-09 OW 21.2
Malaysia 15-May-09 2-Feb-10 UW 4.8
Thailand 20-Jul-09 17-Sep-09 N 0.3
India 6-Aug-09 - OW 7.8 7.8
Poland 19-Aug-09 25-Oct-09 OW 8.2
Mexico 19-Aug-09 1-Dec-09 N (3.1)
Indonesia 3-Sep-09 - N 18.2 18.2
Philippines 3-Sep-09 - OW 4.2 4.2
South Korea 3-Sep-09 6/1/2010 N (3.8)
South Africa 17-Sep-09 16-Apr-10 N (6.1)
China 17-Sep-09 - UW 7.3 7.3
Thailand 17-Sep-09 14-Dec-09 OW (8.2)
Russia 19-Oct-09 7-Dec-09 OW (8.2)
Poland 26-Oct-09 - N (12.9) (12.9)
Turkey 2-Dec-09 - OW 15.6 15.6
Mexico 2-Dec-09 - OW 7.2 7.2
Russia 8-Dec-09 - N 2.8 2.8
Thailand 15-Dec-09 - N 17.0 17.0
Malaysia 2-Feb-10 - N 6.8 6.8
South Africa 19-Apr-10 - OW 3.1 3.1
Brazil 19-Apr-10 - UW 2.6 2.6
South Korea 2-Jun-10 - OW 1.6 1.6
Source: J.P. Morgan, 16 June 2010.
22
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Stress testing our current baseline forecasts for EM : Resiliancy to hold

Joyce Chang AC, Global Head of Emerging Markets & Credit Research
Thus far, positive cyclical growth trends in the US and growth averaged less than 1% annualized, a powerful
EM have not been disrupted by financial market cyclical tailwind is pushing up economic activity into
volatility or concerns about growth in Europe. Beyond a midyear. Second, fiscal policy is actually neutral for
modest downward revision to the Euro area growth 2010. Indeed, despite the additional actions taken on the
forecast, J.P. Morgan’s economists have not materially periphery, the fiscal easing in Germany, the Netherlands,
altered their global outlook in the face of the latest wave Austria, and Finland leaves the region’s fiscal thrust
of financial market stress. For the past year, forecasting roughly neutral this year. However, fiscal tightening
global growth has been relatively easy given the becomes a large drag next year, with our forecast
consistency in activity indicators in the US and Emerging pointing to a tightening of a little more than 1% of GDP.
Asia. Our G-3 economists do acknowledge that the
financial shock emanating from Europe still has the Scenario 1: Deeper economic and financial crisis, but
capacity to temper growth, and may prompt downward contained to peripheral Europe. We assume a slowdown
forecast revisions at some point. There is a growing risk in Euro area growth to less than 0.5% this year and less
that the positive feedback loop between markets and the than 1% in 2011 (i.e., one full %-pt below our current
economy could shift into reverse. To be sure, there are forecasts of 1.4% and 1.9%, respectively), and a
important offsets to the fall in price of risk assets— sustained fall in oil prices to an average of $65-75/bbl in
notably lower energy prices and risk-free interest rates. 2010-2011. EUR/USD drops to 1.10-1.15 in this
While growth momentum across EM countries remains scenario. The impact on US growth is of around 1/2% to
largely positive, there are also signs the Emerging Asia is 3/4%-pts of lower US growth relative to J.P. Morgan’s
downshifting in responses to a policy induced cooling in current forecasts of 3.5%oya this year and 3.1% in 2011,
China. taking into account the impact of both the lower Euro
area growth and the appreciation of the USD.
We stress-test our growth, FX and policy rate forecasts
by considering two alternative scenarios for Europe. In Scenario 2: Crisis spreads to core Europe due to
considering alternative scenarios we note that the direct contagion from the periphery, pushing the Euro area into
effects of lower growth in Europe on the US are fairly a double-dip recession. In this case, the Euro area growth
minimal since US exports of goods and services to all of goes down to -0.5% this year (implying a 5.5% pace of
Europe account for only about 2% of US GDP. The contraction in 2H10) and -1% in 2011 (despite being still
major effect would occur through financial market negative in %oya terms, this implies a relevant recovery
contagion, i.e. sharply lower stock prices or a much in sequential terms next year). EUR/USD reaches parity
stronger dollar or both. Indeed, the usual rule-of-thumb in this scenario, and the impact on US growth is of
about effects of US exchange rates say that a 10% around 1% to 1.5%-pts of lower growth relative to our
decrease in EUR/USD would push up the trade-weighted current 2010 and 2011 forecasts (given the stronger
dollar 1.8% and would take about 0.4% off of US real growth momentum in the US, maybe it avoids a double-
GDP, spread over two years, or 0.2% per year. Taking dip recession itself, but the economy at least displays flat
these considerations into account, we contemplate two growth for a couple of quarters). This produces a
alternative scenarios for Europe to assess the impact on sustained fall in oil prices to an average of $50-60/bbl in
EM. 2010-2011.
The potential negative spillovers to growth are obviously Our current projections call for EM growth to reach an
greatest in the Euro area, which is the epicenter of the above-potential pace of 6.9%oya in 2010 (Latin America
financial shock. For now, our European economists view 5.1%, CEEMEA 4.1%, Emerging Asia 8.9%) and to
the financial shock as sufficient to limit the regional moderate to 5.8% in 2011 (Latin America 3.8%,
upturn to around 2% growth in the coming quarters; J.P. CEEMEA 4.8%, Emerging Asia 7.2%). Under Scenario
Morgan pencils in full-year growth forecasts for the Euro 1, EM growth performance remains above potential, with
area at 1.3%oya in 2010 and 1.9% in 2011. Looking to no material impact on Latin America and Emerging Asia
the second half of the year, growth prospects will in particular. Under Scenario 2, the impact is material
certainly be diminished by the latest developments even and the Euro sovereign and bank crisis is no longer a
if near term cyclical forces are still positive. In judging regional issue. Incipient tightening would be reversed
the magnitude of the drag, it is important to recognize and EM currencies would need to weaken considerably.
two points about the current position of the regional EM countries would likely resort to greater fiscal
economy. First, following three quarters in which GDP stimulus to offset weakness in the private sector.
23
(852) 2800-8599 21 June 2010
24
(852) 2800-8599 21 June 2010
Emerging Markets: Outlook & Scorecards
25
(852) 2800-8599 21 June 2010
China
Market Strategy China: Mind the gap
Issues over the last 12 months
Frank LiAC
(852) 2800-5811
China led both equity and the economic recovery in EM and the world in 2009. Late 2008’s
frank.m.li@jpmorgan.com aggressive monetary and fiscal stimuli brought about a strong economic recovery, which in
Recommendation turn, translated into strong stock market performance (+52%) in FY09. Entering 2010,
OW: (1) new economy stocks; (2) China’s stock market underperformed major stock markets this year because of (1) the
expressways; (3) consumer staples; expected sharp fall in China’s excess liquidity growth (M2growh minus nominal GDP
(4) menswear; (5) IPPs growth) from 21% in FY09 to 5% in FY10 due to the combined effect of the drop in M2
growth and the rise in nominal GDP growth; (2) a series of policy tightening risks as
UW: (1) property; (2) reflected in the three 50bp RRR hikes, the window guidance for banks to strictly follow the
commodities; (3) home appliances; quarterly lending quota, and the recent crackdown on the housing sector. YTD 2010, the
(4) energy MSCI China index declined -8.9%, underperforming MSCI EM by 3.5%.
Key drivers Outlook

Undemanding valuations for We stay cautious on MSCI China in the coming months, despite possible technical rebound
MSCI-China, more pro- because: (1) We see downside earnings risk to MSCI China due to the economic
consumption measures for the deceleration on the back of the combined ripple effect of the crack-down on property sector
remainder of the year, and solid and slowdown in banks’ lending to local government-funded investment projects. (2)
balance sheet conditions Policy risks, such as the resource tax, which may hurt the earnings of and de-rate the
multiples of the energy and upstream resources companies. (3) Tight liquidity situation in
Key risks China, as reflected in the recent rise in short-term interest rate in the repo market as well as
Downside earnings risk to MSCI inter-bank market. (4) Possible additional tightening measures in the property and FAI
China and policy risks areas, such as raising share capital funds requirement for investment projects, and property
tax on tier one cities on a pilot basis, etc. We recommend investors to wait for a better entry
point until the above-listed concerns are addressed before buying China’s secular growth
sectors. We firmly believe in China’s bright medium-term growth prospects: (1) Strong
balance sheet at the country, household, and consumer level. (2) Favorable demographics.
(3) Sectors with low penetration rates and solid secular growth. (4) Powerful central
Market Statistics (%)
government with strong execution capability to carry on the necessary economic reforms.
MSCI China Index 58.2
Weightings in Region (%) 18.9 Recommendations
CNY/US$ 6.83 We are bullish on: (1) consumer staples; (2) expressways with good dividend yields; (3)
Avg. Daily Turnover (US$MM) 3652
MSCI Total Mkt. Cap (US$B) 551 new economy plays such as high-tech manufacturing and strategic new industries, such as
Source: Datastream. Prices as of 10 June 2010. new materials, and new energy etc; (4) menswear with strong secular growth; (5) IPPs. We
stay cautious on commodities, property, home appliances, and energy.
JPM Mkt cap P/E EPS Div Yld. ROE

Price Code Rating (US$B) 10E 11E 10E 11E 10E 10E
(CNY) (x) (x) (CNY) (CNY) (%) (%)
Top picks
China Resources Power Holdings 16.0 836 HK OW 9.6 12.6 9.9 1.3 1.6 2.5 15.1
Huaneng Power 4.2 902 HK N 9.6 11.0 10.8 0.4 0.4 2.1 9.8
China Mengniu Dairy 23.5 2319 HK OW 5.2 30.1 22.5 0.8 1.0 0.7 14.9
Zhejiang Expressway 7.1 576 HK OW 4.0 15.1 13.5 0.5 0.5 4.4 14.1
Huabao International 9.3 336 HK N 3.7 21.6 17.7 0.4 0.5 0.0 39.7
Stocks to avoid
Guangzhou R&F 10.0 2777 HK OW 4.1 7.9 6.3 1.3 1.6 5.1 22.6
Aluminum Corp of China 6.1 2600 HK N 17.6 19.0 NA 0.3 NA 1.1 6.4
Source: Datastream, J.P. Morgan estimates. Note: The share price and valuations are as of 10 June 2010.
26
(852) 2800-8599 21 June 2010
China scorecard
Key Financial Data Summary Local Interest Rates and Inflation Trend
EPS Growth P/E ROE Yield Spot -3M ∆ +3M ∆
2008 -10.9 18.3 14.4 2.2 3 Month 3.3 1.1 -0.8
2009E 13.6 16.1 15.0 2.4 Long Bond 3.3 -0.2 0.7
2010E 21.3 13.3 16.2 2.8 Inflation 2.7 0.3 0.9
2011E 18.3 11.2 17.1 3.3 Real 3 Month 0.6 0.8 -1.7
Economic Forecasts Risk Appetite

GDP (YoY) Forecast -3M ∆ - EMF - Cons US$ Spread Spot -3M ∆ +3M ∆
2008 9.6 0.7 4.7 0.0 BAA 2.9 0.4 na
2009E 10.8 0.8 3.9 0.7 EMBI 3.3 0.7 0.7
2010E 9.4 0.0 3.6 0.2 Country 0.7 0.0 na
Country Relative -2.6 -0.7 na
Economic Momentum Foreign Fund Flows (US$ mils)
GDP Q1 10E Q2 10E Q3 10E Q4 10E Month 09 YTD Avg 12-Mo Avg
GDP SAAR 13.1 9.4 9.3 9.0 EM Funds* -4,759 2,095 3,840
Asia ex Japan* -2,251 438 880
China -576 -513 394
MSCI China Absolute and Relative (vs EMF) Index MSCI Fair value Range
800 Absolute Relativ e to MSCI EMF (28) (57)

FWD PER
700
PER (46) (80)
600
500 PBR (29) (70)
400 DY (46) (81)

300
BY/EY (59)
200
100 BY/DY (56)
0
10 30 50 70 90 110 130 150
Jan-03 Dec-03 Nov -04 Oct-05 Sep-06 Aug-07 Jul-08 Jun-09 May -10
Currency Outlook (CNY/USD) EPS Integer over Time

8.5 140 2010 2011
Spo t Fo recast Co nsensus
8.0 130
7.5 120
J .P . M o rgan f o rec a s t:
end Jun 10: 6.65
Co nsensus
end Sep 10: 6.58 110
7.0
end Dec 10: 6.50
100
6.5
J.P . M o rgan
90
6.0
Feb 09 May 09 Aug 09 Nov 09 Feb 10 May 10
Dec 04 Jul 06 Feb 08 Sep 09 M ar 11
Source: MSCI, Bloomberg, IBES, Datastream, CEIC, J.P. Morgan, Consensus Economics. Unless stated all forecasts are J.P. Morgan’s. The scorecards are designed to assist in tracking trends
and expectations. -3M∆ refers to the change in this factor over the past three months and +3M∆ refers to the forecast change in this factor over the next three months. The Economic Forecast
table contains J.P. Morgan’s real GDP forecasts, the change in these forecasts over the past three months, the difference between these forecasts and the average for emerging markets and the
final column is the difference between J.P. Morgan’s forecast and consensus expectations. The MSCI Fair Value chart is designed to show current valuations relative 10 year valuation history. The
vertical dotted line is the current index level. The five horizontal bars show a +/- one standard deviation range for these valuation measures. A dotted line to the left indicates a market that is cheap
relative to history. *US Mutual fund subscriptions.
27
(852) 2800-8599 21 June 2010
Brazil
Market Strategy Brazil: Better Outlook for Domestics
Issues over the past 12 months
Emy Shayo AC Brazil, along with China, has been the worst performing EM YTD. Heightened risk
(5511) 3048-6684 aversion has delivered poor equity flows in Brazil. YTD, flows are negative –US$2.5
emy.shayo@jpmorgan.com billion, with only March posting positive flows. Still, the economy has been very robust,
Recommendation with data for the real economy coming out consistently strong: unemployment is at a
OW: Financials, Homebuilders record low, both industrial production and retail sales are soaring, and credit growth
continues on a brisk pace.
Key drivers
Strong portfolio and FDI inflows Outlook
Brazil is the emerging market country that will undergo the highest interest rate hiking
7%+ growth driven by domestic cycle in 2010E: we see hikes of 375bp by December, brining rates to 12.5%. Still, there is
demand now much more visibility of the monetary policy dynamics, as the cycle has already
started and authorities appear committed to curb inflation, at the same time that the
Commodity prices Treasury is vowing to control spending so as to take some heat of an already red hot
economic growth. Also, the stabilization of inflation expectations after five months of rise
Key risks greatly diminishes the risk of even higher rate hikes. Better visibility on the rate cycle
Large Petrobras Capitalization reduces uncertainty and can allow the stock market to lift off, especially domestic sectors
that have been bearing the burden of the monetary adjustment. On the exchange rate front,
China slowdown/ hard landing the base case scenario is that the BRL remains range bound: on one hand the currency is
somewhat overvalued and the current account deficit is expected to double to more than
October 2010 presidential elections 3% of GDP. On the other hand, the huge interest rate differential with DM and high
growth continue to attract flows. The main local obstacle to stock market performance
over the next couple of months should be the Petrobras capitalization (expected at around
US$40 billion), as it could lead to significant overhang on the market as a whole. It is still
Market Statistics (%) early to gauge on the political process ahead of the October presidential race, but short
MSCI Brazil Index 219577 term risks have diminished some as candidates have pledged in several occasions to
Weightings in Region (%) 15.8
BRL/US$ 1.80 embrace current economic policies. On the external front, China deceleration or hard
Avg. Daily Turnover (US$MM) 2899 landing is the greatest risk to Brazilian markets, surpassing European woes as 50% of
MSCI Total Mkt. Cap (US$B) 461 Brazil’s MSCI is made of commodity names.
Source: Datastream. Prices as of 10 June 2010.
Recommendations
Brazil is relatively inexpensive at 10.2x 12M fwd PE, the lowest in over a year. Earnings
have some room to grow as a strong local and global GDP drive results up. We are
starting to see some interesting themes in domestics as local risks dissipate. We like
BM&F Bovespa and Bradesco. Our exposure to the homebuilder sector is via Gafisa.

(BRL) (x) (x) (BRL) (BRL) (%) (%)
Top picks
BM&F Bovespa 12.0 BVMF3 BZ OW 13.6 14.4 12.4 0.8 1.0 na na
Bradesco 29.9 BBDC4 BZ OW 51.4 11.3 9.7 2.7 3.1 2.9 20.3
Gafisa 10.8 GFSA3 BZ OW 2.6 12.9 9.7 0.8 1.1 1.5 13.1
Stocks to Avoid
CSN 15.0 SID US UW 22.7 8.5 6.4 1.8 2.3 10.3 43.9
Sabesp 35.1 SBSP3 BZ UW 4.4 6.5 7.1 5.4 5.0 5.4 10.2
28
(852) 2800-8599 21 June 2010
Brazil scorecard
2008 0.5 14.4 16.3 3.2 3 Month 10.4 1.2 na
2009E 6.6 13.5 16.7 3.0 Long Bond 11.5 0.7 0.0
2010E 19.9 11.2 18.0 3.4 Inflation 5.3 0.1 0.2
2011E 25.1 9.0 19.1 4.5 Real 3 Month 5.1 1.1 na

2008 5.1 -0.2 0.2 0.0 BAA 2.9 0.4 na
2009E 7.0 0.8 0.1 0.6 EMBI 3.3 0.7 0.7
2010E 4.0 0.0 -1.8 -0.5 Country 2.2 0.4 na
GDP SAAR 8.7 6.3 4.8 4.0 EM Funds* -4,759 2,095 3,840
LatAm* -1,552 -374 168
Brazil -828 -298 306
MSCI Brazil Absolute and Relative (vs EMF) Index MSCI Fair value Range
1200 Absolute Relativ e to MSCI EMF FWD PER (127325) (231098)
1000 PER (135046) (304544)
800 PBR (75515) (238255)
600 DY (137244) (250056)
400 (195392)
BY/EY
200
BY/DY (199027) (314239)
0
0 50000 100000 150000 200000 250000 300000 350000 400000
Currency Outlook (BRL/USD) EPS Integer over Time

2.8 Spot Fo recast Consensus
130 2010 2011
2.6 J .P . M o rga n f o re c a s t :
end Jun 10: 1.70 120
2.4 end Sep 10: 1.75
end Dec 10: 1.80 110
2.2
100
2.0 Consensus
90
1.8
80
1.6 J.P. M o rgan
70
1.4
Dec 04 Jul 06 Feb 08 Sep 09 M ar 11 Feb 09 May 09 Aug 09 Nov 09 Feb 10 May 10
relative to history. *US Mutual fund subscriptions
29
(852) 2800-8599 21 June 2010
South Korea
Market Strategy South Korea: Buying opportunity
Scott YH Seo AC
(82-2) 758 5759
Korea equity market has been trending upward since 1Q09 albeit volatility and has
scott.seo@jpmorgan.com
reached above 1750, which is the highest point since the beginning of 2009, helped by
stronger than expected economic activities across the globe and rebound in KRW. It was
Recommendation largely driven by strong buying flows by foreign and domestic retail investors and
OW: Banks, Auto, Tech, economic indicators that surprised on the upside. For sector performance, as expected,
Consumers large exporters led the market rally, including IT and auto, helped by a sharp depreciation
of the Won up to the 1500 level, while financial stocks pushed the market further up in
UW: Shipbuilding, Construction 2H09. However, in recent weeks, risk appetite dropped across all risk assets on the back
of the escalating sovereign credit crisis in Europe and North Korea related geopolitical
Key Drivers risks in Korea, although the latter proved to be short lived with KRW stabilizing below
Weak KRW likely to provide good 1200 within a week.
buying opportunity for foreign
investors Outlook
In coming quarters, major drivers in Korea equity market, in our view, will be 1) eased
Key risk price control by the government after the regional election, 2) rebound in KRW and 3)
Euro risks becomes contagious slowdown in equity fund outflows. After the regional election, the government is likely to
loosen their price control and hence consumer and financial sectors’ margin would
improve. Recent KRW depreciation provides buying opportunity of Korea equities, in our
view. Money outflows from equity funds are expected to slow down due to real interest
rate close to 0% or below at least in the near-term. Despite recent sharp price rally, we
still believe that share prices of large cap exporters with well-diversified consumer base
and competitiveness are likely to remain robust for the remainder of 2010, while eased
price control by the government will boost share price of domestic stocks, However, we
MSCI South Korea Index 468.9
still remain cautious on industrials. In particular, construction sector recovery will take
Weightings in Region (%) 13.3 more time given that 1) the government has already rolled out possible supportive
KRW/US$ 1242 measures and further measures are not likely and 2) it normally takes more than 3 years to
Avg. Daily Turnover (US$MM) 3871 resolve unsold housing units. In our view, it will take more time for construction sector to
MSCI Total Mkt. Cap (US$B) 388
fully recover from the recent housing downturn with the risk of housing price drop still
remaining.
Recommendations
We remain positive on auto makers, tech companies with global competitiveness, large
cap banks and consumer stocks, while selectively prefer construction companies with
large offshore project exposure and housing material companies.

(KRW) (x) (x) (KRW) (KRW) (%) (%)
Top picks
Hyundai Department Store 113500 069960 KS OW 2.1 10.4 9.5 10881.0 11954.0 0.5 13.8
Hyundai Motors 137500 005380 KS OW 24.3 7.3 7.4 18846.0 18535.9 1.1 15.7
LG Innotek 159000 011070 KS OW 2.6 16.9 11.4 9400.0 13900.0 NA 15.1
LG Display 41150 034220 KS OW 11.8 5.4 5.7 7617.5 7248.5 1.8 23.8
Woori Financial Group 14900 053000 KS OW 9.6 7.1 5.6 2088.6 2660.7 1.7 11.7
Stocks to Avoid
Hynix 152500 000660 KS N 14.2 6.4 9.5 4060.0 2721.5 0.0 33.8
S-Oil 51100 010950 KS N 4.6 8.7 7.4 5840.6 6915.4 3.5 16.3
Source: Datastream, J.P. Morgan estimates. Note: The share price and valuations are as of 10 June 2010
30
(852) 2800-8599 21 June 2010
South Korea scorecard

2008 -38.9 20.5 8.1 1.1 3 Month 2.7 -0.2 0.4
2009E 58.1 13.0 11.5 1.1 Long Bond 4.9 0.0 0.2
2010E 29.7 10.0 13.4 1.2 Inflation 2.7 0.3 0.5
2011E 10.8 9.0 13.3 1.4 Real 3 Month 0.0 -0.5 -0.1

2008 2.3 -0.2 -2.6 0.0 BAA 2.9 0.4 na
2009E 5.9 0.6 -1.0 0.6 EMBI 3.3 0.7 0.7
2010E 4.0 -0.1 -1.8 -0.3 Country na na na
Country Relative na na na
GDP SAAR 8.8 4.0 3.8 3.8 EM Funds* -4,759 2,095 3,840
Asia ex Japan* -2,251 438 880
Korea -5,358 903 1,905
MSCI Korea Absolute and Relative (vs EMF) Index MSCI Fair value Range

FWD PER
400
350 PER (412) (879)
300
PBR (321) (555)
250
200 DY (233) (398)
150
BY/EY (192)
100
50 BY/DY (209) (792)
0
Jan-03 Dec-03 Nov -04 Oct-05 Sep-06 Aug-07 Jul-08 Jun-09 May -10 0 300 600 900 1200
Currency Outlook (KRW/USD) EPS Integer over Time

1,650 Spot Fo recast Consensus 2010 2011
160
1,550
150
1,450 J .P . M o rga n f o re ca st :
end Jun 10: 1100 140
1,350 end Sep 10: 1120
end Dec 10: 1150 Co nsensus 130
1,250
120
1,150
110
1,050 J.P . M organ
100
950
90
850
Source: MSCI, Bloomberg, IBES, Datastream, CEIC, J.P. Morgan, Consensus Economics. Unless stated all forecasts are J.P. Morgan’s. The scorecards are designed to assist in tracking trends and
expectations. -3M∆ refers to the change in this factor over the past three months and +3M∆ refers to the forecast change in this factor over the next three months. The Economic Forecast table
contains J.P. Morgan’s real GDP forecasts, the change in these forecasts over the past three months, the difference between these forecasts and the average for emerging markets and the final
column is the difference between J.P. Morgan’s forecast and consensus expectations. The MSCI Fair Value chart is designed to show current valuations relative 10 year valuation history. The vertical
dotted line is the current index level. The five horizontal bars show a +/- one standard deviation range for these valuation measures. A dotted line to the left indicates a market that is cheap relative to
history.* US Mutual fund subscriptions
.
31
(852) 2800-8599 21 June 2010
Taiwan
Market Strategy Taiwan: Potentially Oversold
Nick LaiAC
(886-2) 27259864
In May, MSCI TW was down 9.1% but outperformed MSCI APxJ (-10%) over the same
nick.yc.lai@jpmorgan.com period (in USD terms). Transport sector (down 2.1%) was the best performer because the
Recommendations share was supported by pickup in cargo business, while the worst performing sector was
OW: Tech Plastics (down 11.7%). The declining oil price and the noise that petrochemical sector
may not be included on ECFA’s Early Harvest List caused share price correction.
UW: Financials
Outlook
Key Drivers Taiwan’s Legislative Yuen has passed the third reading of Industrial Innovation Bill in
Global capital spending which corporate tax will be cut to 17%, effective in 2011, from 20% this year and 25% in
2009 and before. With this, corporate tax in Taiwan will fall among the lowest in the
Cross-Strait developments on track region, only after Hong Kong (16.5%) and same as Singapore but lower than S. Korea
(20% for PAT above Won200mn) and Japan (22-30% depending on brackets).We believe
Corporate tax cut this is a positive driver for corporate earnings, and that non-tech collectively should
benefit more than tech as most non-tech companies pay higher tax due to lack of tax
Key risks credits.
Fade of economic recovery
Negotiation of ECFA and Early harvest List remains underway and signing of ECFA is
Policy risks expected in June/July during the 5th cross strait talk. Beijing authority will most likely use
its bargaining power to push political concession from Taiwan, whose dilemma is year-
end election where ruling party KMT worries politically it could lose majority support
despite ECFA benefiting Taiwan economically. As a result, net outcome in our view could
be smaller number of products or industries be included in the List and enjoy reduced
tariff or grant market access to China.
Recommendations
We maintain our positive view on Taiwan and are OW tech but selective in financial and
Market Statistics (%) material in our portfolio. Our Dec-10 index target remains 8,800 based on long-term
MSCI Taiwan Index 255.1 average PE of 16x and forward earnings estimates. The market is potentially oversold.
TWD/US$ 32.4 Our analysis indicates that 82% of entire listed companies have fallen below their 55-day
Avg. Daily Turnover (US$MM) 1888 MAVG now, and only 18% are above. Historically, this represents an attractive buying
MSCI Total Mkt. Cap (US$B) 311 signal for 6-12 month horizon, in our view.

(NTD) (x) (x) (NTD) (NTD) (%) (%)
Top picks
TSMC 61 2330 TT OW 48.4 10.6 10.5 5.7 5.8 5.0 27.6
Tripod 117 3044 TT OW 1.7 10.6 9.4 11.0 12.4 2.0 26.5
China Airlines 15 2610 TT OW 2.1 NM 16.6 0.1 0.9 0.0 1.3
Hung Poo 40 2536 TT OW 0.4 7.0 8.5 5.7 4.7 8.2 17.6
Fubon Financial 36 2881 TT OW 9.0 11.4 9.6 3.1 3.7 5.4 11.7
Stocks to Avoid
HTC 419 2498 TT N 10.0 13.4 14.3 31.3 29.3 5.5 30.5
Nan Ya Plastic 52 1303 TT UW 12.7 15.0 11.9 3.5 4.4 3.6 10.5
Formosa Plastic 71 1326 TT N 12.5 11.7 11.4 6.1 6.2 6.3 14.1
Taishin Holdings 12 2887 TT UW 1.9 9.2 10.1 1.3 1.1 0.0 9.8
Source: DataStream, J.P. Morgan estimates Note: The share price and valuations are as of 10 June 2010 .
32
(852) 2800-8599 21 June 2010
Taiwan scorecard
2008 -69.2 33.2 5.5 4.5 3 Month 0.9 0.0 -0.3
2009E 32.8 25.0 8.0 2.9 Long Bond 1.4 0.0 0.4
2010E 88.0 13.3 14.1 3.8 Inflation 0.6 0.0 0.6
2011E 16.7 11.4 15.1 4.7 Real 3 Month 0.3 0.0 -0.9

2008 0.7 0.6 -4.2 0.0 BAA 2.9 0.4 na
2009E 9.2 2.2 2.3 4.6 EMBI 3.3 0.7 0.7
2010E 4.8 0.0 -1.0 0.8 Country na na na
GDP SAAR 11.3 3.3 3.5 3.5 EM Funds* -4,759 2,095 3,840
Asia ex Japan* -2,251 438 880
Taiwan -3,999 116 901
MSCI Taiwan Absolute and Relative (vs EMF) Index MSCI Fair value Range
250 Absolute Relativ e to MSCI EMF

FWD PER(113) (237)
200
150 PER (236) (514)
100
PBR (226) (414)
50
0 DY (264) (1192)
-50
BY/EY (302) (2321)
-100
-150 BY/DY (362)
-200
Jan-03 Dec-03 Nov -04 Oct-05 Sep-06 Aug-07 Jul-08 Jun-09 May -10 0 500 1000 1500 2000 2500 3000 3500
Currency Outlook (TWD/USD) EPS Integer over Time

38 Spo t Fo recast Co nsensus 2009 2010
180
37
170
J .P . M o rga n f o re c a s t :
36 160
end Jun 10: 30.5
35 end Sep 10: 30.0 150
end Dec 10: 29.8
34 140
33 Co nsensus 130
32 120
31
110
J.P . M o rgan 100

30
90
29
expectations. -3M∆ refers to the change in this factor over the past three months and +3M∆ refers to the forecast change in this factor over the next three months. The Economic Forecast table contains
J.P. Morgan’s real GDP forecasts, the change in these forecasts over the past three months, the difference between these forecasts and the average for emerging markets and the final column is the
difference between J.P. Morgan’s forecast and consensus expectations. The MSCI Fair Value chart is designed to show current valuations relative 10 year valuation history. The vertical dotted line is the
current index level. The five horizontal bars show a +/- one standard deviation range for these valuation measures. A dotted line to the left indicates a market that is cheap relative to history. *US Mutual fund
subscriptions.
33
(852) 2800-8599 21 June 2010
Russia
Market Strategy Russia: Strong balance sheet and earnings
Alex KantarovichAC
(7-495) 967 3172
The Russian stocks have been seeing the recurring bouts of volatility; the May peak-to-
alex.kantarovich@jpmorgan.com through decline of 18% in MSCI Russia index was followed by a 14% rise. The external
pressures persisted as in May oil price dropped 21% before partially regaining grounds.
Recommendations However sellers were particularly visible in the FX sensitive segments such as Financials
• Gazprom and Consumers as in May-June the ruble plunged by 8%.
• Evraz Outlook
The EU budget problems may continue to result in the euro weakness putting pressure on
• Sberbank oil price and the ruble. In the short run, the market may stay range bound and volatile.
With the MSCI Russia Index trading on 2010 P/E of 6x, the Russian equities look very
• Comstar cheap, whether by historic or comparative measure. The implied aggregate equity risk
premium has risen to near 800 bp, in spite of Russia’s sovereign and corporate bond
Key drivers spreads rising some 150 bp and 200 bp respectively. The ERP is now more reminiscent of
Oil holding grounds the levels seen during the 2008-09 crisis. This betrays investors’ nervousness about the
global recovery reversal hurting earnings. However, confirmation that the recovery stays
Strong domestic macro on track would bring the stocks’ cheapness back into focus. We recommend building
positions in undervalued names with strong fundamentals.
End of easing cycle by the CBR
Recommendations
Key risks Not expecting the immediate recovery of the euro and oil price we underweight Russian
Recurring worries of EU debt, oils. Still, within the segment, we prefer quality upstream names such as Rosneft (OW)
Chinese tightening and Tatneft (OW) due to expected changes in taxation outlook. Gazprom should
outperform the segment on strong 1Q10 figures and as outlook improves. Within
Materials, we believe it is time to end underweighting integrated steels; the likes of Evraz
and Mechel are in a win-win situation: still riding the fading momentum in raw materials
Market Statistics (%) already pushing up steel prices. On the domestic front, the Utilities may enter a period of
MSCI Russia Index 706 underperformance due to the intensified talks about tariff cups; we remain neutral on
Weightings in Region (%) 6.5 Consumers where pricey multiples are balanced with the defensive features; start
RUB/US$ 31.7
Avg. Daily Turnover (US$MM) 1923 overweighting Financials after both Sberbank and VTB delivered stronger than expected
MSCI Total Mkt. Cap (US$B) 190 quarterly results and the CBR has finished the interest rate easing cycle; Sberbank offering
Source: Datastream. Prices as of 10 June 2010. attractive long term fundamentals may close the recent performance gap with VTB. In
telecoms the positive newsflow of Svyazinvest restructuring may continue to support
Comstar.

(US$) (x) (x) (RUB) (RUB) (%) (%)
Top picks
Gazprom 4.96 GAZP RU OW 117.4 4.54 3.39 1.09 1.46 1.35 12.30
Sberbank 2.34 SBER RU OW 50.5 9.67 5.02 0.24 0.47 1.00 18.80
Evraz 25.52 EVR LI OW 11.2 10.92 5.54 2.34 4.61 0.00 20.13
Comstar 6.52 CMST LI OW 2.7 11.54 10.18 0.57 0.64 1.30 17.84
Stocks to Avoid
Bank Vozrozhdenie 31.00 VZRZ RU UW 0.7 19.77 6.72 1.57 4.61 0.05 6.87
Lukoil 51.80 LKOH RU N 44.1 5.50 5.30 9.82 10.03 2.68 12.48
34
(852) 2800-8599 21 June 2010
Russia scorecard
2008 -24.2 6.5 16.6 0.9 3 Month 4.7 -0.3 na
2009E -21.3 8.2 12.5 0.9 Long Bond 4.7 -0.3 na
2010E 29.0 6.4 14.8 2.2 Inflation 6.0 -0.5 -0.2
2011E 25.2 5.1 16.1 2.9 Real 3 Month -1.3 0.2 na

2008 5.6 0.0 0.7 0.0 BAA 2.9 0.4 na
2009E 5.5 0.0 -1.4 1.5 EMBI 3.3 0.7 0.7
2010E 5.0 0.0 -0.8 0.8 Country 2.6 1.0 na
Country Relative -0.7 0.3 na
GDP SAAR 2.2 13.5 4.0 4.0 EM Funds* -4,759 2,095 3,840
EM Europe* -825 511 431
Russia 281 33 243
MSCI Russia Absolute and Relative (vs EMF) Index MSCI Fair value Range

FWD PER (634) (1311)
500 PER (405) (1870)
400
PBR (594) (1326)
300
DY (513) (1920)
200
BY/EY Not meaningful
100
BY/DY Not meaningful
0
Jan-03 Dec-03 Nov -04 Oct-05 Sep-06 Aug-07 Jul-08 Jun-09 May -10 0 500 1000 1500 2000 2500
Currency Outlook (RUB/USD) EPS Integer over Time

43 Spo t Forecast Consensus 170 2010 2011
160
39 J.P . M o rgan fo rec as t: 150
end Jun 10: 28.17
end Sep 10: 27.44 140
35 end Dec 10: 27.97
Co nsensus
130
120
31
110
100
27
90
J.P . M organ
80
23
current index level. The five horizontal bars show a +/- one standard deviation range for these valuation measures. A dotted line to the left indicates a market that is cheap relative to history. *US Mutual
fund subscriptions
35
(852) 2800-8599 21 June 2010
India India: Global concerns drag Indian equities

Market Strategy
Bharat Iyer A C Issues over the last 12 months

(91-22) 5639 3005 India's economy returned to strong growth in 2H09. With higher economic growth and
bharat.x.iyer@jpmorgan.com
surging inflation, Indian policy makers initiated the process of reversal in extra-
supportive policy stance in Q4 2009. Food inflation has been one of the key
contributors to the spike in inflation. Higher food inflation could be partially attributed
Recommendation to a weak monsoon last year. The Central Bank has also been explicit about its
OW: Private sector banks, discomfort over the sharp rise in asset price inflation. Separately, in the general election
Industrials, IT, Energy last year, the INC got a significantly higher number of seats and the mandate boosted
investor confidence. The BSE Sensex is up 10% over the past 12 months led by IT,
UW: Telecom, Consumer Health Care and Consumer Discretionary sectors.
Discretionary, SoE Banks
Outlook
Key drivers We are cautious on the near -term outlook for Indian equities. The caution is primarily
Long-term economic growth on account of relatively stretched valuations, reversal in supportive policy stance and
uncertain global growth outlook. India remains overly dependent on external capital
Continued cyclical recovery flows and a sustained global risk aversion may impact medium term growth outlook.
The Central Bank here has started monetary policy normalization and our economics
Key risks team expects it to continue over the current fiscal year. They expect benchmark rates to
Inflation be hiked by another 150 bps by June 2010. They also the INR to appreciate 8% vs. the
US$ by the fiscal year-end.
Global risk appetite
We believe that the current MSCI India consensus earnings growth expectation of 28%
and 20% for FY11 and FY12 respectively is achievable. The key risk to current year
earnings growth is from the Materials sector, which is contributing over 30% in FY11
growth. Metal prices have corrected sharply over the past two months and near -term
MSCI India Index 685.9
Weightings in Region (%) 8.0 outlook remains highly uncertain in the backdrop of European and Chinese
INR/US$ 46.8 developments.
Recommendations
Source: Datastream Prices as of 10 June 2010.
We have a constructive outlook on economic growth and expect second half of the
calendar year to be relatively better for Indian equities. Monsoon is a key risk to this
view. We are OW Industrials, private sector banks, Energy and IT services in our
portfolio. We are UW Consumption, Telecom, and SoE banks.

(INR) (x) (x) (INR) (INR) (%) (%)
Top picks
Larsen & Toubro 1677 LT IN OW 21.6 28.9 23.4 58.1 71.6 0.0 19.4
Reliance Inds 1046 RIL IN OW 73.0 21.7 13.9 48.1 75.4 0.7 14.6
ICICI Bank Ltd 846 ICICIBC IN N 20.1 23.4 18.5 36.1 45.7 1.4 8.0
Stock to Avoid
Bank of Baroda 729 BOB IN UW 5.7 9.8 8.8 74.2 82.4 1.8 21.6
36
(852) 2800-8599 21 June 2010
India scorecard
2008 -16.9 21.5 16.5 1.0 3 Month 5.7 0.5 -0.9
2009E 3.9 20.7 16.1 1.1 Long Bond 7.8 0.0 0.5
2010E 25.1 16.6 17.7 1.2 Inflation 14.9 0.0 1.2
2011E 25.4 13.2 18.9 1.5 Real 3 Month -9.2 0.5 -2.1

2008 6.7 0.5 1.8 0.0 BAA 2.9 0.4 na
2009E 8.3 0.5 1.4 0.1 EMBI 3.3 0.7 0.7
2010E 8.5 0.2 2.7 na Country na na na
GDP SAAR 9.1 7.8 7.4 8.7 EM Funds* -4,759 2,095 3,840
Asia ex Japan* -2,251 438 880
India -1,983 923 1,483
MSCI India Absolute and Relative (vs EMF) Index MSCI Fair value Range

700
PER (449) (780)
600
500 PBR (515) (858)
400 DY (404) (626)

300
BY/EY (436)
200
100 BY/DY (400) (868)
0
150 300 450 600 750 900 1050
Currency Outlook (INR/USD) EPS Integer over Time

54 Spot Forecast Consensus
140 2010 2011
52
130
50 end Jun 10: 45.0
end Sep 10: 44.0 Consensus
48 end Dec 10: 43.5 120
46
110
44
J.P . M o rgan
42 100
40
90
38
fund subscriptions.
37
(852) 2800-8599 21 June 2010
South Africa
Market Strategy South Africa: A low beta equity market
Deanne GordonAC
(27-21)712-0875
SA real GDP growth surprised on the upside at 4.6%q/q saar in 1Q10. This was the
deanne.gordon@jpmorgan.com fastest growth pace in seven quarters as low interest rates worked through to boost
domestic demand. The SARB kept the repo rate unchanged at 6.5% in the Monetary
Policy meeting in May. J.P. Morgan economists now expect the first hike in the second
Recommendations
quarter of 2011, given risks to the global recovery and the likely delay in the start of the
OW: Global and domestic cyclicals
hiking cycle in many developed markets.
UW: Food Producers, Life
Outlook
insurance
SA has outperformed EMF (SA 0.24% vs. -3.4% for EMF) in dollars in the last one
month. Global equities are oscillating near the lows reached on 7 May, just ahead of the
introduction of a raft of policy measures by ECB/EU/IMF. While the outperformance of
Key Drivers
SA equities in Rands is largely due to its low beta characteristics, in a global risk averse
Countercyclical accommodative
environment on European woes, the Rand has also surprisingly held up relatively well ,
monetary policy
depreciating only by 1.5 % against the dollar in the last one month. We reiterate OW
domestic cyclicals in SA given (1) Upside growth surprise risk in 2010/11E; (b)
Strong earnings recovery off a weak
Countercyclical accommodative SA monetary policy, with rates on hold throughout 2010
base
with a first rate hike only in 2Q 11, versus widespread monetary tightening in the rest of
EM in 2010; (c) Strong earnings recovery off weak base; (d) Relatively attractive
Upside growth risk in 2010/11E
valuations vs. EM from P/E vs EPS growth profile perspective. Looking at factors which
have driven SA stock outperformance year-to-date, it is interesting to note that the two
Attractive valuations from a P/E vs.,
winning factors contributing to stock outperformance appear to be quality-based RoE
EPS growth profile
and a small cap bias. Interestingly, valuation metrics - P/E, P/B, have not been as helpful
as in 2H09 in stock screening with “cheap” stocks not topping the pops. Stocks that have
Key Risks
outperformed are dominated by SA Retailers (Massmart, Woolworths, Truworths, Mr
Currency vulnerability
Price and Shoprite). From here on out, however, we believe that earnings momentum
should start driving stock performance in SA in 2H10 given the sharp improvement in
macroeconomic data, which should spill over into a strong earnings rebound. We
recommend rotating into stocks where positive earnings revisions have not yet been
priced in. In particular, sector performance which is lagging positive earnings
momentum includes Platinum, Mining and Banks.
MSCI South Africa Index 700.3
Weightings in Region (%) 7.4 Recommendations
ZAR/US$ 7.70 We continue to recommend overweight domestic and global cyclicals in SA .We
MSCI Total Mkt. Cap (US$B) 215 recommend a barbell equity portfolio to benefit from both the global and domestic
Source: Datastream Prices as of 10 June 2010 recovery in 2010. Favourite global cyclical sectors: Platinum, Oil & Gas and Mining
Houses; Favourite domestic cyclical sectors: Banks, Food Retailers and General
Industrials. Our top stock picks include ARM, Amplats, Standard Bank, ABSA and
Shoprite.

(ZAR) (x) (x) (ZAR) (ZAR) (%) (%)
Top picks
ARM 16981 ARI SJ OW 4.7 4.7 4.4 3597.0 3839.0 2.9 25.7
Amplats 76700 AMS SJ OW 26.2 21.2 15.9 3610.0 4820.0 1.4 25.7
Standard Bank 10322 SBK SJ N 20.9 10.7 8.5 962.3 1210.7 3.9 16.4
ABSA 12396 ASA SJ OW 11.5 8.7 7.2 1425.5 1725.1 4.6 19.1
Shoprite 8000 SHP SJ OW 5.6 18.1 15.0 442.4 532.5 2.8 40.1
38
(852) 2800-8599 21 June 2010
South Africa scorecard

2008 -25.3 13.7 17.1 3.2 3 Month 6.6 0.0 na
2009E -17.6 16.6 13.9 2.6 Long Bond 8.8 0.1 na
2010E 35.4 12.3 17.5 3.2 Inflation 4.8 -0.3 0.3
2011E 25.4 9.8 19.2 4.1 Real 3 Month 1.8 0.3 na

2008 3.1 0.0 -1.8 0.0 BAA 2.9 0.4 na
2009E 3.0 0.0 -3.9 -0.1 EMBI 3.3 0.7 0.7
2010E 3.5 0.0 -2.3 -0.1 Country 1.9 0.3 na
GDP SAAR 4.6 4.0 3.5 3.7 EM Funds* -4,759 2,095 3,840
EM Europe* -825 511 431
South Africa 507 459 709
MSCI South Africa Absolute and Relative (vs EMF) Index MSCI Fair value Range
FWD PER (588) (819)
350
300 PER (564) (764)
250
PBR (596) (811)
200
150 DY (562) (758)
100
50 BY/EY (557) (1215)
0
BY/DY (561) (1193)
-50
Currency Outlook (ZAR/USD) EPS Integer over Time

11.0 Spot Fo recast Consensus 115 2010 2011
10.0 J.P . M o rgan fo rec as t :

end Jun 10: 7.7 105
9.0 end Sep 10: 7.7
end Dec 10: 7.7 Co nsensus
8.0 95
7.0
J.P . M organ 85
6.0
75
5.0
fund subscriptions
39
(852) 2800-8599 21 June 2010
Mexico
Market Strategy Mexico: Cyclical Macro Momentum
Ben LaidlerAC
Mexico remains our core country OW, driven by the outlook for a sharp cyclical macro
(212) 622 5252
rebound, the undervalued FX, and the underowned market. Inflationary pressures remain low,
ben.m.laidler@jpmchase.com
keeping the Central Bank low-for-longer, whilst growth is beginning to tentatively broaden
out from the manufacturing and exports sectors.
Recommendation
OW: Domestic Cyclicals
Outlook
We see continued upside here towards our 4.5% forecast, with additional upside risk given
UW: Fixed line Telco, Staples
the historic over 2x beta of Mexico GDP to recovering global growth. The macro recovery
continues to be manufacturing and auto led. Manufacturing PMI came in at 53.6 in May,
Key drivers
indicating a healthy pace of expansion. The consumer is still skeptical, but recovery is
US Growth Rebound to drive
broadening. Consumer confidence index rose to 84.6 in May, from 82.5 a month earlier. In
Mexico turnaround
our view, the better growth environment and the strong manufacturing rebound are supporting
consumer sentiment. Credit conditions continue to lag and are the next indicator we expect to
Undervalued Mexican Peso
turn. May's inflation reading (-0.63% m/m) reiterates our benign view on inflation as output
gap will remain wide keeping wage negotiations and medium-term inflation expectations
Underowned Mexican Market
well-anchored. As a result, we believe Banco de México will remain on hold for the
remainder of 2010 and the first half of 2011 (Consensus: +25 bps in March 2011). On the
Mexican Peso, we still see incremental short term upside here, though we would be surprised
to see the Peso trade sustainably through 12, on stepped up reserve accumulation and
Key risks
concerns on the export driven recovery. That said, we think the bias is to the upside given the
US and Mexican GDP growth
cyclical recovery, our continued robust oil view (WTI $90 Q410e), the Peso’s fundamental
downsides.
REER under-valuation, and under-performance coming into the year.
Small and Shrinking Equity
Recommendations
Market
We remain OW focused on domestic cyclical plays. We like Cemex, given our view of
improving US recovery momentum, high operating leverage, very depressed earnings, and
Medium Term Structural issues
under-ownership. On the domestic side, we like First Cash Financial as an underowned SMid
Market Statistics (%) cap play on consumer recovery and increasing financial intermediation. The stock is also
MSCI Mexico Index 29620 leveraged to high gold prices.
MXN/US$ 12.75
Source: Datastream Prices as of 10 June 2010
(MXN) (x) (x) (MXN) (MXN) (%) (%)
Top picks
Cemex 10.2 CX US OW 10.7 32.9 14.8 0.3 0.7 0.0 0.7
Ternium 34.8 TX US OW 7.0 9.1 8.3 3.8 4.2 1.4 13.6
Urbi 23.9 URBI* MM OW 1.8 11.0 9.0 2.2 2.7 0.0 12.9
ICA 29.9 ICA* MM OW 1.5 27.9 20.2 1.1 1.5 0.0 3.6
First Cash 21.4 FCFS US OW 0.6 13.4 11.5 1.6 1.9 na 18.0
Stocks to Avoid
Telmex 14.4 TMX US UW 13.0 10.8 10.9 16.9 16.8 5.5 47.8
Walmex 28.7 WALMEXV MM N 40.5 23.9 20.7 1.2 1.4 1.3 17.8
Source: DataStream, J.P. Morgan estimates. Note: The share price and valuations are as of 10 June 2010.
40
(852) 2800-8599 21 June 2010
Mexico scorecard
2008 -27.2 18.4 8.9 2.0 3 Month 4.9 0.1 na
2009E 2.2 18.0 9.0 2.5 Long Bond 4.9 -0.2 na
2010E 24.8 14.4 18.5 2.7 Inflation 4.3 -0.7 0.3
2011E 19.3 12.1 19.7 3.4 Real 3 Month 0.6 0.8 na

2008 1.3 0.0 -3.6 0.0 BAA 2.9 0.4 na
2009E 4.5 0.0 -2.4 0.1 EMBI 3.3 0.7 0.7
2010E 3.5 0.0 -2.3 -0.1 Country 2.0 0.4 na
GDP SAAR -1.4 3.2 -1.8 4.2 EM Funds* -4,759 2,095 3,840
LatAm* -1,552 -374 168
Mexico 59 -169 -21
MSCI Mexico Absolute and Relative (vs EMF) Index MSCI Fair value Range
FWD PER (21735) (29419)
450
400 PER (13673) (41101)
350
PBR (14134) (33931)
300
250 DY (30524) (47412)
200
150 BY/EY (9419)
100 BY/DY (32851)

50
Jan-03 Dec-03 Nov -04 Oct-05 Sep-06 Aug-07 Jul-08 Jun-09 May -10 0 10000 20000 30000 40000 50000 60000
Currency Outlook (MXN/USD EPS Integer over Time

16.0 Spo t Forecast Consensus 130 2010 2011
15.0
J.P . M o rgan fo rec as t :
14.0 end Jun 10: 12.5 120
end Sep 10: 12.8 Consensus
13.0 end Dec 10: 13.0
110
12.0
J.P . M organ
11.0 100
10.0
90
9.0
fund subscriptions
41
(852) 2800-8599 21 June 2010
Malaysia
Market Strategy Malaysia: Reform agenda keeping the buzz
Chris OhAC
(60-3) 2270-4728
We are seeing incremental evidence of a government willing to tackle the difficult issues
chris.ch.oh@jpmorgan.com at hand. Consider the following news flow over the past few months:- 1) Improving
bilateral ties with Singapore; 2) Bringing to fore the deficiencies of the economy for public
discussion via the unveiling of the New Economic Model and raising the issue of subsidy
OW: Banks, GLCs and gaming
rationalization; 3) Public removal of the Sime Darby CEO for cost overruns in its energy
stocks, Construction, property and
division. On the macro front, domestic demand indicators since 2Q09 have been on a solid
oil and gas mid caps.
upward trajectory and, together with strong credit growth data, suggest that the underlying
N: Plantations
momentum remains firm. J.P. Morgan is forecasting real GDP of 7.7% for 2010. We
believe the positive macro story provides a solid backdrop for Malaysia equities in 2010
UW: Cyclical stocks that have run
from both an earnings growth perspective (CY10E earnings growth of 22% and CY11 of
ahead of valuations.
16%) as well as potential foreign capital inflows.
Key Drivers
Outlook
Strong macro economic recovery
Investors remain sidelined as they wait for PM Najib to implement previously announced
driving earnings growth
reform policy measures. Key events to look out for include:- 1) Part 2 of the New
Economic Model (NEM) document and the 10MP (which is expected to incorporate
Structural reforms, government
details of policy implementation to address structural weaknesses identified under NEM
pump-priming under 10MP
Part 1), 2) fiscal discipline, 3) greater economic corporation between Malaysia-Singapore,
and 4) more evidence of improvements in the government delivery system and the GLCs.
Pro-growth monetary policy,
Key risks include policy flip-flops, the long lead time to implement measures and the need
mergers & acquisitions
for political buy-in following the introduction of various reform initiatives. While we
believe a market re-rating is undeserved at this stage, we believe the risk is on the upside
Key Risks
should implementation happen given the low base of expectations.
Political uncertainty, policy flip
flops
Recommendation
Malaysia's market PE premium has now widened to around 20% in this market correction
External shocks which may derail
making it difficult for investors to justify on valuation grounds. However, the market
external demand momentum
remains relatively insular with domestic institutions (with consistent inflows) dominating
trading while foreign investors shy away due to the lack of secular growth and relatively
MSCI Malaysia Index 470.8 expensive valuations. Should external uncertainties clear (as is our base case), Malaysia's
Weightings in Region (%) 2.9 low beta status is likely to mean it lags on the rebound. That said, should reform
MYR/US$ 3.3 implementation surprise on the upside, we are of the view that the market could potentially
MSCI Total Mkt. Cap (US$B) 84 see a structural valuation re-rating. We would tactically be focused on owning companies
Source: Datastream Prices as of 10 June 2010.. that benefit from a recovering economy but have less downside risk. Key picks would be
AMMB, Public Bank, Tenaga, Genting and IJM Corp.

(MYR) (x) (x) (MYR) (MYR) (%) (%)
Top picks
AMMB Holdings 4.9 AMM MK OW 4.5 14.8 11.2 0.3 0.4 1.7 11.5
Genting 7.0 GENT MK OW 8.0 21.9 13.5 0.3 0.5 1.0 8.3
IJM Corp 2.1 IJMLD MK OW 0.7 24.3 15.6 0.1 0.1 0.4 6.0
Tenaga 8.3 TNB MK OW 11.1 13.3 11.8 0.6 0.7 2.6 10.1
Public Bank 11.6 PBKF MK OW 12.5 13.2 12.2 0.9 0.9 3.8 26.5
Stocks to Avoid
Bursa Malaysia 7.0 BURSA MK UW 1.1 23.4 21.4 0.3 0.3 3.8 19.2
BAT 44.0 ROTH MK UW 3.8 20.3 19.9 2.2 2.2 4.4 131.9
YTL Power 2.2 YTLP MK UW 4.8 12.9 11.6 0.2 0.2 8.3 15.9
42
(852) 2800-8599 21 June 2010
Malaysia scorecard
2008 -13.0 17.0 12.6 2.9 3 Month 2.7 0.3 0.3
2009E 2.7 16.6 12.6 3.2 Long Bond 4.0 -0.1 0.5
2010E 22.6 13.5 14.8 3.6 Inflation 1.6 0.2 1.1
2011E 16.0 11.6 15.6 4.0 Real 3 Month 1.1 0.1 -0.8

2008 4.7 -0.4 -0.2 0.0 BAA 2.9 0.4 na
2009E 7.7 2.7 0.8 2.7 EMBI 3.3 0.7 0.7
2010E 4.8 -0.3 -1.0 0.3 Country 1.6 0.3 na
GDP SAAR 5.0 4.0 5.0 5.0 EM Funds* -4,759 2,095 3,840
Asia ex Japan* -2,251 438 880
Malaysia -57 -56 26
MSCI Malaysia Absolute and Relative (vs EMF) Index MSCI Fair value Range

250
PER (465) (791)
200
150 PBR (345) (690)
100
DY (455) (872)
50
0 BY/EY (240) (1427)
-50
-100 BY/DY (405) (1684)
-150
0 300 600 900 1200 1500 1800 2100
Currency Outlook (MYR/USD) EPS Integer over Time

4.0 Spot Fo recast Co nsensus 125 2010 2011
3.9
3.8
3.7 115
3.6
Co nsensus
3.5
105
3.4
3.3 J .P . M o rga n f o re ca st :
end Jun 10: 3.25
3.2 95
end Sep 10: 3.20
3.1 end Dec 10: 3.15 J.P . M organ
3.0
85
2.9
43
(852) 2800-8599 21 June 2010
Thailand
Market Strategy Thailand: Resilient despite turmoil
Sriyan PieterszAC
(66-2) 684-2670
Despite violent protests, Thai equities are up YTD. Corporate and sovereign balance
sriyan.pietersz@jpmorgan.com sheets remained healthy. GDP growth in 1Q10 was significantly stronger than
expectations; +18% q/q (cf. +15.5% q/q in 4Q09). The disruption caused by the Red
Recommendations Shirt protest in Bangkok has hit tourist related businesses. The impact on industrial
OW: Banks, Consumer activity appears limited, if any.
Key drivers Outlook

Improving macroeconomic Despite making a downward adjustment to forecasts for the remaining three quarters
momentum based on the anticipated effects of the political unrest, overall FY10 GDP growth has
been revised up to 8.8% y/y due to the strength of the 1Q performance. J.P. Morgan
Earnings upgrades, political Economics notes the potential risks of a hit to high season tourism and/or private
roadmap for reconciliation and investment activity, and is consequently forecasting well-below trend quarterly growth in
elections, 2H10 of 3% q/q (2H03-1H08 avg. growth of 5.3%). High economic growth should
support earnings. (J.P. Morgan's EPS growth forecast is 21.8% for FY10 and 17.2% for
Stronger currency FY11). The political outlook remains uncertain. It is unclear when or if an early election
will be held. Further Red Shirt protests are likely especially if the current government
Key risks delays calling an election. While the political environment looks broadly unchanged
Continuation of political from the pre-rally period in Mar10, foreign funds have reversed, with net sales of
instability/global demand slump US$653m YTD from net purchases of US$1.2bn at the beginning of May10. Foreign
investors may not return in the near term, given increased global risk aversion, but we
Stalling of fiscal stimulus. see the SET well-underpinned.
Recommendations
Market Statistics (%) We continue to hold our positive view on Thailand given the economic momentum and
MSCI Thailand Index 311.8 the resilience of the fundamentals so far. Our base case remains stabilization from the
Weightings in Region (%) 1.5 current political situation by mid-year. Consequently, we view any market sell-off driven
THB/US$ 32.5 by political jitters as a buying opportunity. Our top large-cap picks are KBANK and
MSCI Total Mkt. Cap (US$B) 44 KTB, which we believe will benefit from potential upside to market loan growth
Source: Datastream Prices as of 10 June 2010. estimates, although slower policy rate increases are negative for NIM expansion
expectations. Small banks also benefit from extended low rates as well as strong auto
sales: we like TCAP. We also like PTT, SCC and LH which we expect to benefit from
stronger domestic spending, a premise that is supported by recent strong consumer data.
SCC is also defensively positioned against the potential fallout from a euro crisis - a
slump in demand driving oil prices lower would be a net positive for SCC.

(THB) (x) (x) (THB) (THB) (%) (%)
Top picks
Kasikornbank 91.3 KBANK TB OW 6.7 12.2 9.5 7.5 9.6 3.0 15.0
Krung Thai Bank 12.5 KTB TB OW 4.3 8.8 7.2 1.4 1.7 4.0 13.5
PTT 244.0 PTT TB OW 21.3 9.5 7.8 25.7 31.2 3.9 16.1
Siam Cement 272.0 SCC/F TB OW 10.0 12.5 10.9 21.8 25.1 3.1 23.3
Land and Houses 5.1 LH TB OW 1.6 11.9 10.3 0.4 0.5 6.7 16.1
Stock to Avoid
TMB Bank 1.4 TMB TB N 1.8 17.7 15.6 0.1 0.1 0.7 6.8
PTT Chemicals 97.0 PTTCH TB N 4.5 14.1 8.4 6.9 11.5 3.1 10.0
44
(852) 2800-8599 21 June 2010
Thailand scorecard
2008 14.6 17.2 12.0 3.2 3 Month 1.4 0.0 0.3
2009E 33.6 12.9 15.2 3.6 Long Bond 3.3 -0.7 0.7
2010E 15.1 11.2 16.0 3.8 Inflation 2.9 -0.4 2.6
2011E 16.5 9.6 16.8 4.2 Real 3 Month -1.5 0.4 -2.2

2008 2.5 -0.9 -2.4 0.0 BAA 2.9 0.4 na
2009E 8.5 2.0 1.5 3.2 EMBI 3.3 0.7 0.7
2010E 4.0 0.0 -1.8 -0.4 Country 0.5 0.0 na
GDP SAAR 16.0 -2.0 2.8 2.8 EM Funds* -4,759 2,095 3,840
Asia ex Japan* -2,251 438 880
Thailand -1,894 -142 20
MSCI Thailand Absolute and Relative (vs EMF) Index MSCI Fair value Range
350
PER (263) (552)
300
250 PBR (232) (495)
200
DY (189) (390)
150
100 BY/EY (163) (1288)
50 BY/DY (197) (1497)

0
Currency Outlook (THB/USD) EPS Integer over Time

43 Spot Forecast Consensus 140 2010 2011
41
130
39
37 120
Co nsensus
35
110
33
end Jun 10: 32
31 100
end Sep 10: 32
J.P . M organ
29 end Dec 10: 31
90
27
expectations. -3M∆ refers to the change in this factor over the past three months and +3M∆ refers to the forecast change in this factor over the next three months. The Economic Forecast table
contains J.P. Morgan’s real GDP forecasts, the change in these forecasts over the past three months, the difference between these forecasts and the average for emerging markets and the final column
is the difference between J.P. Morgan’s forecast and consensus expectations. The MSCI Fair Value chart is designed to show current valuations relative 10 year valuation history. The vertical dotted
line is the current index level. The five horizontal bars show a +/- one standard deviation range for these valuation measures. A dotted line to the left indicates a market that is cheap relative to history.
*US Mutual fund subscriptions
45
(852) 2800-8599 21 June 2010
Indonesia
Market Strategy Indonesia: An eye on politics
Aditya S SrinathAC
(62-21) 5291-8573
A resilient economy, combined with expectations of accelerated reform propelled the
aditya.s.srinath@jpmorgan.com JCI by 81% in 2009, its strongest advance since 1993. Healthy earnings, benign
inflation and consequently a stable and low interest rate regime has allowed for
Recommendation momentum to continue in 2010 after a brief pause for breath earlier in the year. An S&P
OW: Real estate, industrials. credit rating upgrade in March raised optimism on Indonesia’s potential to achieve an
consumer discretionary investment grade rating in the near future. Markets have focused on the growth
opportunity and decline in risk premiums, and as a result equity indices and the 10 year
N: Financials, Telcos Consumer Government Bond both hit record levels in late April-early May before easing just
staples slightly recently.
UW: Resources, utilities Outlook

The resignation of Finance minister and her replacement by well regarded Banker Agus
Key drivers Martwardojo, signals that fractious politics does not dilute the Government’s intent to
Recovering currency, declining pursue a reform oriented agenda. However, economic fundamentals remain strong. J.P.
inflation Morgan expects 2010 GDP to grow at 6.2% y/y and the earnings revision cycle remains
remain favorable. We are tactically neutral, but our medium term view is positive. A
Declining country risk perception sustaining of the re-rating we have seen over the last 12 months will need to be
predicated on continuing the reform path and accelerating infrastructure and policy
Strong growth, benign interest rates implementation. Political compunctions are undoubtedly playing a larger factor on
domestic policy making, which could slow the reform track, but still unlikely to derail
Improving terms of trade it; in our view BI remains focused on growth and we do not expect Indonesia to start
raising rates soon. Indonesia is now a widely held consensus overweight market, which
Key risks makes it vulnerable to a reversal in risk appetite, in our view.
Valuations & rising OW positions of
fund managers Recommendations
We prefer domestic facing sectors, and have Overweight ratings on Astra International,
Vulnerability to rising crude prices Semen Gresik, Indocement. Gresik in particular should benefit if the euro continues to
decline, since a substantial portion of its capex programme is denominated in the
Politics curbing reform prospects currency. Unilever, another major domestic demand beneficiary, does not have the
valuation cushion, and we rate it a Neutral. We have an Underweight rating on Bank
Market Statistics (%) Rakyat as we are worried that its stress on growth is resulting in new NPL formation
MSCI Indonesia Index 3723.7 running at a higher pace than its history or peers, which we think is not adequately
Weightings in Region (%) 2.3 appreciated by markets – even though the bank has underperformed market and
IDR/US$ 9228
Avg. Daily Turnover (US$MM) 275 domestic banking sector YTD. We have recently downgraded PGAS, fearing earnings
MSCI Total Mkt. Cap (US$B) 68 downside as gas supplies have declined more than expected.
Source: Datastream Prices as of 10 June 2010..
(IDR) (x) (x) (IDR) (IDR) (%) (%)
Top picks
Astra Internatiol 43000.0 ASII IJ OW 18.9 13.4 12.4 3219.6 3459.5 3.0 29.8
Indofood Sukses 3875.0 INDF IJ OW 3.7 15.6 11.8 248.2 327.9 2.5 20.6
Bank Mandiri 5450.0 BMRI IJ OW 12.4 12.7 11.3 429.5 481.8 2.8 23.5
Stocks to Avoid
Perusahaan Gas 3850.0 PGAS IJ UW 10.1 15.9 14.5 241.4 264.9 3.4 0.4
Bank Rakyat 8700.0 BBRI IJ UW 11.7 12.6 10.3 688.7 844.6 1.9 0.3
Source: DataStream, J.P. Morgan estimates. Note: The share price and valuations are as of 10 June 2010.
46
(852) 2800-8599 21 June 2010
Indonesia scorecard
2008 4.8 18.5 27.0 2.3 3 Month 6.6 0.0 0.1
2009E 16.4 15.9 27.3 2.7 Long Bond 8.9 -0.3 -0.1
2010E 9.8 14.5 25.9 3.1 Inflation 4.2 0.7 1.6
2011E 16.1 12.5 26.0 3.6 Real 3 Month 2.4 -0.7 -1.5

2008 6.1 0.0 1.2 0.0 BAA 2.9 0.4 na
2009E 6.2 0.7 -0.7 0.4 EMBI 3.3 0.7 0.7
2010E 5.8 -0.8 0.0 -0.4 Country na na na
GDP SAAR 5.4 6.0 4.0 5.0 EM Funds* -4,759 2,095 3,840
Asia ex Japan* -2,251 438 880
Indonesia -178 73 110
MSCI Indonesia Absolute and Relative (vs EMF) Index MSCI Fair value Range
FWD PER (1368) (3547)
700
PER (2528) (5733)
600
500 PBR (1620) (3417)
400
DY (2872) (6645)
300
200 BY/EY (3436)
100
BY/DY (1244)
0
Jan-03 Dec-03 Nov -04 Oct-05 Sep-06 Aug-07 Jul-08 Jun-09 May -10 0 1000 2000 3000 4000 5000 6000 7000 8000
Currency Outlook (IDR/USD) EPS Integer over Time

14,000 Spo t Forecast Consensus 150 2010 2011
13,000 J .P . M o rga n f o rec a st :

140
end Jun 10: 8800
end Sep 10: 9000
12,000
end Dec 10: 9300 130
11,000
Co nsensus 120
10,000
110
9,000
J.P . M o rgan 100

8,000
47
(852) 2800-8599 21 June 2010
Turkey Turkey: Cyclical view… secular trend

Market Strategy

Adrian MowatAC
(852) 2800 8599
From December 2009 to January 2010, MSCI Turkey outperformed MSCI EM by 24%.
adrian.mowat@jpmorgan.com This was followed by underperformance of 15% till mid-March. Since then it has
outperformed EM by 10%. The backdrop for Turkish equities continues to remain
Recommendation favorable.
OW: Domestic cyclicals
Outlook
UW: Defensive plays We remain positive on Turkey’s structural growth prospects. Despite Euro area concerns,
J.P. Morgan has revised Turkey’s GDP growth forecast for 2010 from 5.1% to 5.9% as
Key drivers Turkey has limited trade and banking exposure to the more troubled southern periphery.
Low borrowing costs We believe developed world economic growth will surprise on the upside. This along with
strengthening domestic demand and a structurally low interest rate environment are
Structural decline in interest rates supportive of economic growth. Despite strong growth, inflation fell from 10.2% in April
to 9.2% in May. Due to an improved inflation outlook and the looming problems in the
DM growth surprise Euro area, we now expect the CBRT to hike rates only by 75bp in 4Q10 versus the
previous forecast of 150 bps.
Key risks
Inflation and CBRT reaction Turkey’s structural transformation and the improvement in economic fundamentals
experienced over the past ten years have been largely attributed to the strong policy
Political noise with the anchors provided by IMF programs and the EU convergence process. These lost relevance
constitutional reform when the government decided to proceed without an IMF program and as the EU
negotiations lost momentum. The government is hopeful that the fiscal rule to be
Contagion from Euro sovereign implemented from 2011 onward will be the next powerful policy anchor. In our view, the
stress draft fiscal rule, which is scheduled to be approved by parliament by the end June, is based
on realistic assumptions and, if implemented rigorously, it could serve as a powerful
policy anchor, improve the government’s credibility, facilitate Turkey’s upgrade to
investment grade status, and enhance the attractiveness of Turkish financial assets. Being a
MSCI Turkey Index 797492
current account deficit economy, Turkey should benefit from lower dollar funding costs
Weightings in Region (%) 1.6 and increased availability of credit. Corporate and bank budgets for 2010 pencil in healthy
TRL/US$ 1.6 top-line and loan growth. Corporates are benefiting from lower funding costs and the
Avg. Daily Turnover (US$MM) 638 delayed monetary stimulus.
Source: Datastream Prices as of 10 June 2010.
Recommendations
We remain overweight Turkey and recommend domestic consumption and investment
names. We like the conglomerates that provide broad exposure to the economy. We
believe Turkish banks offer an attractive investment case supported by improving macro
outlook, improving volume growth and asset quality, and strong balance sheets. In
addition, provisions should decline dramatically in the next 2-4 quarters further boosting
EPS growth. Within financials we favor YKB and Vakifbank.

(TRL) (x) (x) (TRL) (TRL) (%) (%)
Top picks
Yapi Kredi Bank 4.2 YKBNK TI OW 11.5 9.3 6.2 0.5 0.7 0.0 20.7
Sabanci Hldg 6.4 SAHOL TI NR 8.8 8.3 6.9 0.8 0.9 1.2 13.6
Turkiye Vakifl 3.4 VAKBN TI OW 5.4 6.2 4.9 0.6 0.7 4.9 17.5
48
(852) 2800-8599 21 June 2010
Turkey scorecard
2008 1.8 11.4 18.1 3.3 3 Month 7.8 0.4 na
2009E 3.5 11.0 18.3 4.2 Long Bond 9.3 1.0 -2.3
2010E 16.1 9.5 18.4 3.1 Inflation 9.1 -0.3 -0.8
2011E 14.0 8.3 18.7 3.8 Real 3 Month -1.3 0.7 na

2008 0.9 -0.8 -4.0 0.0 BAA 2.9 0.4 na
2009E 5.9 1.6 -1.0 1.0 EMBI 3.3 0.7 0.7
2010E 5.0 -0.5 -0.8 1.0 Country 2.4 0.4 na
GDP SAAR 7.8 5.4 -4.7 -6.2 EM Funds* -4,759 2,095 3,840
EM Europe* -825 511 431
Turkey 32 -17 14
MSCI Turkey Absolute and Relative (vs EMF) Index MSCI Fair value Range
FWD PER (450226) (998695)
700
PER (455484) (1517444)
600
500 PBR (510011) (1460161)
400
DY (504208) (1542051)
300
200 BY/EY (482618)
100 BY/DY (1298170)

0
Jan-03 Dec-03 Nov -04 Oct-05 Sep-06 Aug-07 Jul-08 Jun-09 May -10 0 500000 1000000 1500000 2000000
Currency Outlook (TRL/USD) EPS Integer over Time

2.20 Spo t Fo recast Co nsensus 130 2010 2011
2.10
2.00 120
end Jun 10: 1.50
1.90 end Sep 10: 1.45
1.80 end Dec 10: 1.45 110
1.70
1.60 Co nsensus 100
1.50
1.40 90
1.30
J.P . M o rgan
1.20 80
1.10 Feb 09 May 09 Aug 09 Nov 09 Feb 10 May 10
49
(852) 2800-8599 21 June 2010
Philippines
Market Strategy Philippines: Market re-rating likely
Kelly LimAC
(63-2) 878-1188
The Philippines has been relatively insulated from the global crisis compared to its
kelly.s.lim@jpmorgan.com regional peers as remittances have remained surprisingly resilient and as trade accounts
for a much smaller proportion of the economy. The economy still managed to grow by
Recommendation 0.9% Y/Y in FY09 as private consumption (3.8% Y/Y) and government spending
OW: Banks, Property, Utilities (8.5% Y/Y) kept the economy afloat. During the year, the Bangko Sentral ng Pilipinas
joined regional central banks in cutting rates aggressively (200 bps) given the
Key drivers decelerating inflation trajectory, resulting in ample domestic liquidity. As a result,
Revival in domestic demand interest rates fell to a record low. Coupled with improved risk appetite and recovering
economy, the market rallied by +63% in 2009. More recently, the 1Q10 GDP release
Government pump-priming reflected strong recovery as the economy surged 12.9%q/q, saar following a strong
7.6% gain in 4Q09. This left growth up 7.3%oya, much higher than market expectation.
Earnings momentum
Outlook
Positive political outcome from We believe the Philippine market remains attractive as the domestic growth story is
elections intact. Key drivers are a rebound in private consumption, continued fiscal stimulus and
the secular growth in remittances and BPO activity. J.P. Morgan forecasts 2010 GDP
growth at 4.5%oya and full-year inflation to remain well within historical trend at
Key risks 5.4%oya. The Philippines has taken a big step in the right direction politically, with
Global economic slowdown incoming President Aquino being given a very strong mandate. Aquino’s platform of
change and anti corruption priority offers the most potential upside to the market, and
Sharp slowdown in remittances represents the favored choice for business. The main concern is limited experience, but
will be helped by a capable, reformist cabinet, with cracking down on tax inefficiencies
Monetary tightening and leakages being prioritized. Aquino’s biggest problem would the huge fiscal deficit
brought about by a low tax take. However his platform of clean government provides a
Market Statistics (%) solid starting point. Finally, corporate fundamentals are solid. Earnings growth, we
MSCI Philippines Index 607.7 believe, remains attractive driven by improved volumes and pricing for property and
Weightings in Region (%) 0.5 banks, and acquisitions and tariff hikes for utilities.
PHP/US$ 46.7
MSCI Total Mkt. Cap (US$B) 14 Recommendations
Source: Datastream Prices as of 10 June 2010. We believe a positive political outcome and improving macro fundamentals bode well
for a market re-rating. Given a unique positive position of having a business positive
leader with a strong mandate, the market should be well underpinned despite the
external volatility. Among the sectors, we find the property and banking sectors to offer
the greatest upside potential, especially with earnings likely to show the most growth
acceleration versus 2009. We like banking, utilities, and property sectors. Top picks in
the Philippines are Metrobank, Ayala Land, and EDC
(PHP) (x) (x) (PHP) (PHP) (%) (%)
Top picks
Ayala Land Inc 13.5 ALI PM OW 3.8 36.3 32.6 0.4 0.4 0.4 8.7
Metro Bank & Trust 54.5 MBT PM OW 2.1 11.8 7.9 4.6 6.9 2.2 11.7
Energy Development Corporation 4.7 EDC PM OW 1.9 12.3 12.6 0.4 0.4 8.1 24.2
Aboitiz Power 18.3 AP PM OW 2.9 13.3 13.2 1.4 1.4 2.3 27.1
Robinsons Land 14.3 RLC PM OW 0.8 11.0 9.6 1.3 1.5 5.0 13.6
50
(852) 2800-8599 21 June 2010
Philippines scorecard
2008 -13.2 22.1 12.3 3.4 3 Month 3.9 0.0 1.4
2009E 24.8 17.7 14.8 3.9 Long Bond 8.0 -0.1 0.0
2010E 14.0 15.5 16.0 4.2 Inflation 4.3 -0.1 2.1
2011E 15.6 13.4 17.3 4.1 Real 3 Month -0.4 0.1 -0.7

2008 3.7 -0.9 -1.2 0.0 BAA 2.9 0.4 na
2009E 6.8 2.3 -0.1 2.6 EMBI 3.3 0.7 0.7
2010E 4.3 0.0 -1.5 0.0 Country 2.3 0.3 na
GDP SAAR 12.9 3.6 4.9 4.0 EM Funds* -4,759 2,095 3,840
Asia ex Japan* -2,251 438 880
Philippines 4 72 22
MSCI Philippines Absolute and Relative (vs EMF) Index MSCI Fair value Range
FWD PER
400 PER (478) (983)
PBR (325) (791)

300
DY (790)
200
BY/EY (562) (1552)
100
BY/DY (925)
0
0 500 1000 1500 2000 2500 3000
Currency Outlook (PHP/USD) EPS Integer over Time

58 Spo t Fo recast Co nsensus 125 2010 2011
56
54 119
52
50 113
Co nsensus
48
46 107
44 J .P . M o rga n f o re c a s t :
end Jun 10: 45.0 J.P . M o rgan
42 101
end Sep 10: 44.0
40
end Dec 10: 43.5
38 95
36
relative to history. *US Mutual fund subscriptions
51
(852) 2800-8599 21 June 2010
Scorecard notes
Key financial data
Market forecast numbers are derived from bottom-up calculations of each MSCI
constituent where estimates are available from J.P. Morgan for covered stocks and
I/B/E/S for stocks not covered by J.P. Morgan.
Local interest rates and inflation trends

Interest rates
Country Long rate Three-month rate
South Korea 10 year treasury bond 91 day commercial paper
South Africa Longest dated bond 91 day treasury bill
Taiwan 10 year treasury bond 90 day money market
Brazil Fixed to floating swap 12 month Fixed to floating swap 3 month
China Government Bond maturing in 2011 3 month interbank
Mexico CETES 364 90 day 2nd market bankers acceptance
Russia 90 day interbank 90 day interbank
Turkey 3 month interbank 3 month interbank
Poland 1 year interbank 3 month interbank
Hungary 10 year treasury bond 3 month interbank
Czech Republic 10 year treasury bond 3 month interbank
India 10 year treasury bond 91 day bank CD
Malaysia 10 year treasury bond 3month interbank
Israel 1 year secondary treasury bill 3 month secondary treasury bill
Thailand 10 year treasury bond 3 month interbank
Chile Inflation Adjusted notes + coupon 8 year 3 month CD
Turkey 12 month interbank 3 month interbank
Indonesia SBI/DISC 90 day 3 month interbank
Philippines 10 year treasury bond 91 day T Bill
Inflation
Year-over-year change in Consumer Price Index used.
Real three-month rate

This is calculated using three-month rate minus latest inflation data available.
Risk appetite
Countries included in the Emerging Market Bond Index (EMBI) are South Africa,
Brazil, Mexico, Russia, Malaysia, Thailand, Chile and Turkey. Data for EMBI is as
such available only for these countries. Country relative is the Country EMBI
blended yield minus the EMBI Index blended yield.
Foreign fund flows

EM, Asia Ex Japan, LatAm and EM Europe Funds are net subscriptions of US
mutual funds data into specified regions. Country data where available is total net
foreign investment.
EPS integer over time

All year-ends are for December. EPS figures are normalized, starting at 100 on base
date February 2008 for ease of comparison. EPS integers are mean EPS forecasts for
each index.
52
(852) 2800-8599 21 June 2010
Extended markers
Table 10: Exports
Country Index Current %oya 3M/3M % One year ago %oya Latest data for Reporting lag
Australia AUITEXP Index 14.5 3.5 (7.7) Mar 10 One month
Brazil BZTBEXPM Index 23.0 12.1 (12.3) Apr 10 One month
Chile CHTBEXPM Index 27.4 (3.1) (35.2) Apr 10 One month
China CNFREXP$ Index 30.4 (7.7) (22.6) Apr 10 One month
Hong Kong HKETEXP Index 21.5 (3.7) (17.8) Apr 10 One month
Hungary HUTREXP Index 20.5 (8.3) (31.3) Mar 10 One quarter
India INMTEXIR Index 54.5 23.5 (24.9) Mar 10 One quarter
Indonesia IDEXP Index 42.6 0.8 (22.9) Apr 10 One month
Malaysia MAETEXP Index 52.5 1.8 (26.1) Mar 10 One month
Mexico MXTBBEXP Index 43.2 11.6 (35.5) Apr 10 One month
Philippines PHEXEXP Index 43.8 5.9 (30.8) Mar 10 One month
Poland POMECBGE Index 27.0 (3.5) (30.2) Mar 10 One month
Russia RUTBEX Index 61.3 (3.1) (47.7) Mar 10 One month
Singapore SIEXP Index 40.0 5.7 (32.1) Apr 10 One month
South Africa SATBEX Index 24.7 6.9 (35.5) Apr 10 One month
South Korea KOEXTOT Index 41.9 16.4 (29.4) May 10 One month
Taiwan TWTREXP Index 47.8 0.3 (34.3) Apr 10 One month
Thailand THNFEXP Index 34.6 5.5 (25.3) Apr 10 One month
Turkey TUTBEX Index 25.1 3.5 (33.4) Apr 10 One month
Source: Bloomberg.
Table 11: Imports

Country Index Current %oya 3M/3M % One year ago %oya Latest data for Reporting lag
Australia AUITIMP Index 36.3 2.0 (26.1) Mar 10 One month
Brazil BZTBIMPM Index 60.8 13.8 (30.0) Apr 10 One month
Chile CHTBIMPM Index 30.8 2.9 (37.7) Apr 10 One month
China CNFRIMP$ Index 50.1 7.4 (22.8) Apr 10 One month
Hong Kong HKETIMP Index 28.6 (2.0) (16.6) Apr 10 One month
Hungary HUTRIMP Index 18.7 (8.7) (35.5) Mar 10 One quarter
India INMTIMU$ Index 67.5 11.9 (29.3) Mar 10 One quarter
Indonesia IDIMPTL Index 67.4 5.0 (36.2) Apr 10 One month
Malaysia MAETIMP Index 62.4 (3.5) (37.8) Mar 10 One month
Mexico MXTBBIMP Index 43.9 9.3 (38.8) Apr 10 One month
Philippines PHIMIMP Index 38.9 12.4 (36.2) Mar 10 One month
Poland POMECBGI Index 29.9 (4.2) (38.0) Mar 10 One month
Russia RUTBIM Index 29.6 (24.5) (38.2) Mar 10 One month
Singapore SIIMP Index 42.4 6.0 (36.7) Apr 10 One month
South Africa SATBIM Index 25.5 10.4 (43.2) Apr 10 One month
South Korea KOIMTOT Index 50.0 11.1 (39.5) May 10 One month
Taiwan TWTRIMP Index 52.5 2.9 (41.2) Apr 10 One month
Thailand THNFIMP Index 43.1 6.2 (35.5) Apr 10 One month
Turkey TUTBIM Index 47.4 6.3 (43.4) Apr 10 One month
Source: Bloomberg.
Table 12: Retail sales

Country Index Current %oya Previous %oya One year ago %oya Latest data for Reporting lag
Argentina ARSSTOTL Index 24.1 23.9 13.9 Mar 10 One month
Australia AURSTTSA Index 1.8 1.6 6.9 Apr 10 One month
Brazil BZRTRETA INDEX 15.7 12.2 1.3 Mar 10 One month
Chile CHRSTOTL Index 10.5 10.9 (3.4) Apr 10 One month
China CNRSCONS INDEX 23.2 21.5 14.8 Apr 10 One month
Czech Republic CZRSYOY Index 3.9 (2.1) (0.7) Mar 10 One month
Hong Kong HKRSN INDEX 15.6 19.0 (4.6) Mar 10 One month
Hungary HURTAYOY Index (4.0) (4.3) (3.5) Mar 10 Variable
Mexico MXWRTRET Index 2.3 2.2 (0.4) Mar 10 One quarter
Poland PORSYOY Index (1.6) 8.7 1.0 Apr 10 One month
Russia RURSL INDEX 10.9 10.3 6.8 Apr 10 One month
Singapore SRSAT Index (2.3) (3.1) (6.1) Mar 10 One month
South Africa SARSCONY Index 1.0 (1.3) (5.1) Mar 10 One quarter
South Korea KODSDEPT Index 8.8 4.6 2.8 Apr 10 One month
Taiwan TARSTTL Index 8.1 6.1 (3.3) Apr 10 One month
Thailand THRSTOTL Index 17.5 6.9 (12.2) Mar 10 One month
Source: Bloomberg.
53
(852) 2800-8599 21 June 2010
Table 13: Industrial production

Country Index Current %oya One year ago %oya Latest data for Reporting lag
Brazil BZIPYOY% Index 17.4 (14.8) Apr 10 One quarter
Chile CHIPYOY Index (1.3) (11.1) Apr 10 One month
China CHVAIOY Index 17.8 8.3 Apr 10 One month
Hong Kong HKIPIYOY Index (4.9) (10.6) Dec 09 One quarter
Hungary HUIPIYOY Index 2.8 (19.3) Mar 10 One quarter
India INPIINDY Index 13.5 0.3 Mar 10 One month
Indonesia IDMPIYOY Index 5.7 (1.7) Jan 10 One quarter
Malaysia MAIPINDY Index 14.1 (13.0) Mar 10 One month
Mexico MXIPTYOY Index 7.6 (5.7) Mar 10 Irregular updates
Poland POISCYOY Index 9.9 (12.2) Apr 10 One month
Russia RUIPRNYY Index 10.4 (16.9) Apr 10 One month
Singapore SIIPYOY% Index 51.0 0.8 Apr 10 One month
South Africa SFPMYOY Index 6.5 (11.7) Mar 10 One month
South Korea KOIPIY Index 19.9 (8.2) Apr 10 One month
Taiwan TWINDPIY Index 31.4 (20.0) Apr 10 One month
Turkey TUIOIYOY Index 21.1 (20.8) Mar 10 One month
Source: Bloomberg.
Table 14: Consumer confidence

Country Index Current Previously One year ago Latest data for Reporting lag
Australia WMCCCONN Index 108.0 116.1 88.8 May 10 One month
Brazil BZCCIFGV Index 113.0 112.3 97.6 Apr 10 One month
China CHCSCONF Index 106.6 107.9 100.5 Apr 10 One month
Hungary HUCCINDX Index (28.7) (37.0) (68.3) May 10 One month
Indonesia IDCCI Index 110.7 107.4 102.5 Apr 10 One quarter
Malaysia MIERCSI Index 109.6 105.4 110.9 Dec 09 One quarter
Mexico MXCFCONF Index 82.5 81.8 82.1 Apr 10 Irregular updates
Poland POCCWOK Index 94.1 90.8 73.6 Apr 10 Irregular updates
Russia RUCISENT Index 102.0 108.0 113.0 Mar 09 Irregular updates
South Korea KOCCCSI Index 111.0 110.0 105.0 May 10 One month
Thailand THCCECON Index 67.2 69.8 65.1 Apr 10 One month
Turkey TUCNCC Index 85.8 84.7 80.8 Apr 10 One quarter
Source: Bloomberg.
Table 15: Auto/Motor vehicle sales

Country Index Current %oya 3m/3m % One year ago %oya Latest data for Reporting lag
Argentina ARVSCATA Index 33.2 15.0 (32.4) Apr 10 One month
Australia AUVHSALE Index 26.5 (1.6) (20.0) Apr 10 One month
Brazil BZVLTLVH Index 18.5 12.5 (10.3) Apr 10 One month
China* CNVSPSGR Index 33.7 (4.0) 37.4 Apr 10 One month
Hong Kong HKRSVOV Index 54.0 3.5 (34.0) Apr 10 One month
India INVSTOTL Index 31.9 9.3 8.1 Apr 10 One month
Indonesia* IDVHCLOC Index 88.5 25.0 (33.0) Apr 10 One month
Malaysia MAVSTTL Index 18.4 1.4 (18.2) Apr 10 One month
Mexico MXVHTOTL Index 17.6 (16.1) (38.2) Apr 10 One month
Philippines PHCSTOTL Index 42.7 8.2 (9.8) Apr 10 One month
Singapore SIRSMVEH Index (31.0) 8.5 (7.2) Mar 10 One month
South Africa NAAMTOTL Index 26.6 13.2 (43.1) Apr 10 One month
South Korea* KOVMTOTS Index 39.9 (13.8) (28.4) Mar 10 One month
Thailand* THVHSCAR Index 43.9 (2.4) (27.1) Apr 10 One month
Turkey TUCSMT Index 149.9 (67.8) (40.1) Apr 10 One quarter
Source: Bloomberg. *Motor/Passenger car sales.
54
(852) 2800-8599 21 June 2010
Consensus Asset Allocation

In this report we analyze the country asset allocation of Emerging Markets net fund flows:
the 44 EM fund managers surveyed by EPFR Global as • 2006 CY: Net inflows US$22.4 billion
of the end April 2010.
• 2007 CY: Net inflows US$40.8 billion
Consensus overweight markets
• 2008 CY: Net Outflows US$39.4 billion
Russia, Brazil, Turkey, and Indonesia
Consensus underweight markets • 2009 CY: Net inflows US$ 64.4 billion
Taiwan, Israel, China, Korea, Malaysia, South Africa,
India, Czech Republic, Philippines, Chile and Poland • 2010 YTD: Net inflows US$12.9 billion
Table 16: Survey of Key EM Managers Positioning Relative to Table 18: Average Asset Allocation of Global Emerging Market
MSCI EM – For major EMs Funds
Country > 2% OW < 2% UW OW-UW < 0.1% EM % Weights Performance (%)
Russia 18 (18) 9 (10) 9 (8) 3 (4) 6.3 Funds MSCI Rel Abs Rel
Brazil 10 (9) 8 (11) 2 (-2) 0 (0) 15.9 India 8.8 7.8 1 (0.2) -15.9 0.2
Mexico 7 (13) 7 (5) 0 (8) 4 (4) 4.5 Indonesia 3.1 2.1 1 (0.7) -19.3 -3.2
India 10 (9) 11 (13) -1 (-4) 1 (1) 7.8 Turkey 2.5 1.6 0.9 (1.3) -17.3 -1.2
China+HK 7 (7) 11 (12) -4 (-5) 0 (0) 17.3 Mexico 5.2 4.5 0.7 (0.7) -13.2 2.9
South Africa 5 (7) 11 (11) -6 (-4) 2 (2) 7.0 Thailand 1.9 1.4 0.5 (0.7) -7.7 8.4
Korea 9 (3) 17 (20) -8 (-17) 1 (1) 13.4 Hungary 1.0 0.6 0.4 (0.3) -29.2 -13.1
Malaysia 2 (2) 16 (16) -14 (-14) 10 (10) 2.9 Philippines 0.7 0.4 0.3 (0.2) -10.9 5.2
China 3 (3) 20 (20) -17 (-17) 0 (0) 17.3 South Africa 7.3 7.0 0.2 (-0.6) -14.6 1.5
Taiwan 1 (1) 22 (22) -21 (-21) 1 (1) 10.9 Egypt 0.7 0.6 0.2 (0.3) -21.3 -5.1
Israel 0 (0) 24 (17) -24 (-17) 15 (11) 2.7 Czech Republic 0.5 0.4 0.1 (0) -17.5 -1.4
Source: EPFR Global, MSCI, J.P. Morgan calculations Russia 6.4 6.3 0 (0.7) -22.1 -5.9
Peru 0.4 0.6 -0.2 (0) -2.5 13.6
Table 17: Survey of Key EM Managers Positioning Relative to Chile 1.2 1.4 -0.2 (-0.8) -9.0 7.1
Morocco 0.0 0.2 -0.2 (-0.2) -12.5 3.6
MSCI EM – For EMs that are less than 2% of the benchmark
Poland 0.8 1.3 -0.5 (-0.6) -22.6 -6.5
Country > 2% OW < 0.1% OW-Zero EM % Colombia 0.2 0.7 -0.5 (-0.6) -6.2 10.0
Turkey 17 (16) 3 (3) 14 (13) 1.6 Israel 1.7 2.7 -1 (-1.4) -7.0 9.1
Indonesia 11 (9) 6 (6) 5 (3) 2.1 Brazil 14.9 15.9 -1.1 (-0.3) -19.8 -3.7
Thailand 8 (9) 8 (10) 0 (-1) 1.4 Malaysia 1.8 2.9 -1.1 (-1.5) -12.5 3.7
Egypt 4 (4) 19 (20) -15 (-16) 0.6 China + HK 16.1 17.3 -1.2 (-1.1) -12.8 3.4
Hungary 3 (5) 19 (20) -16 (-15) 0.6 Korea (South) 10.8 13.4 -2.6 (-2.1) -20.4 -4.3
Peru 1 (2) 21 (23) -20 (-21) 0.6 Taiwan 8.2 10.9 -2.7 (-2.4) -13.9 2.3
Poland 1 (2) 22 (22) -21 (-20) 1.3 China 14.6 17.3 -2.7 (-3.5) -12.8 3.4
Philippines 1 (2) 22 (24) -21 (-22) 0.4 Asia 51.5 56.2 -4.8 (-5.2) -15.3 0.8
Chile 1 (1) 25 (23) -24 (-22) 1.4 Latam 21.9 23.1 -1.2 (-0.9) -17.1 -0.9
Czech Republic 2 (1) 30 (29) -28 (-28) 0.4 EMEA 21.0 20.7 0.3 (-0.2) -21.6 -5.5
Colombia 0 (0) 33 (36) -33 (-36) 0.7 Cash 1.9 0.0 1.9 (2.8)
Morocco 0 (0) 41 (42) -41 (-42) 0.2 Other GEMs 3.9 0.0 3.9 (3.6)
Other Markets Source: EPFR Global, MSCI, J.P. Morgan calculations. Note: (1) Fund weightings are as of
30 April 2010 and MSCI weightings as of 1 May 2010. (2) The survey covers 43 fund
Hong Kong 15 (16) 14 (14) 0.0
managers. Potentially China stocks have been misclassified as Hong Kong, hence the
Singapore 1 (1) 31 (32) 0.0
combined weight for Hong Kong and China. Hong Kong investment may be providing non-
Kazakhstan 1 (1) 33 (35) 0.0
China exposure Numbers in brackets are the previous month values. The performance is
Greece 1 (1) 40 (41) 0.0
from current month to date performance.
Source: EPFR Global, MSCI, J.P. Morgan calculations. Note: (1) <0.1% = zero weighting
or bearish view. (2) The fund weightings are simple average of global emerging market
funds country weights tracked by EPFR. The survey covers 43 fund managers. (3) The
calculation of OW is greater than 2% overweight versus the MSCI benchmark. UW is less
than -2% of benchmark weighting (4) Fund weightings are as of 30 April 2010 and MSCI
weightings as of 1 May 2010. Numbers in brackets are the previous month values.
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Hindsight trades: What has worked

Table 19: Performance of sectors in EM (in US$ terms)
Sector/Country 1M Sector/Country 3M Sector/Country YTD Sector/Country 12M
Turkey Financials 3.3 Korea CD 7.4 Thailand 7.3 India IT 66.3
Turkey 2.5 Thailand 5.7 Indonesia 4.8 Turkey Financials 65.2
Philippines 1.0 Philippines 4.7 Philippines 4.3 Korea CD 56.2
Chile 0.6 Turkey Financials 4.1 Malaysia 3.7 Turkey 49.3
South Africa CD 0.3 Indonesia 4.1 Korea CD 3.0 South Africa CD 48.7
Mexico Telecom Services 0.3 Turkey 2.5 China Telecom Services 1.9 Korea IT 46.7
Russia Energy 0.3 China Telecom Services 1.7 India IT 0.3 Indonesia 42.4
Indonesia 0.3 Mexico Telecom Services 0.5 Mexico Telecom Services (0.0) Mexico Cons. Staples 40.5
China Financials 0.3 Malaysia 0.2 Turkey Financials (0.8) Mexico Materials 35.5
Brazil Energy 0.1 Korea IT (1.0) Chile (1.6) South Africa Financials 33.0
Russia (0.3) India Energy (1.4) Korea IT (1.9) Thailand 30.3
South Africa Materials (0.6) India IT (2.9) South Africa Financials (2.8) Mexico 29.2
China Telecom Services (0.6) China Financials (3.8) India Financials (2.8) Mexico Telecom Services 27.9
Mexico (0.9) South Africa Materials (4.0) Mexico Cons. Staples (3.0) Korea Materials 27.4
Mexico Cons. Staples (1.0) India Financials (4.3) Turkey (3.1) Malaysia 27.0
Korea Consumer Staples (1.2) Mexico Materials (4.5) Mexico (3.3) Korea 25.8
Mexico Materials (1.3) Mexico (4.7) India (4.6) Philippines 24.8
India IT (1.3) India (5.1) South Africa CD (4.7) Brazil Materials 24.2
China (1.7) China Energy (5.4) Mexico Materials (6.0) Chile 22.1
South Africa (1.8) China (5.7) Korea Consumer Staples (6.1) Brazil Financials 20.1
South Africa Telecom (2.1) Chile (6.1) India Energy (6.9) Poland 19.3
South Africa Financials (2.8) South Africa CD (6.6) Korea (7.2) Korea Consumer Staples 17.9
India Energy (3.0) Korea (6.7) South Africa (7.4) Korea Financials 17.1
China Energy (3.1) Korea Consumer Staples (7.2) South Africa Materials (8.5) South Africa 16.5
Korea CD (3.3) South Africa (7.8) Russia (8.9) Hungary 16.5
China Industrials (3.4) EM (8.0) EM (9.1) India 15.9
India (3.4) Taiwan IT (8.2) China Energy (9.6) EM 15.7
EM (3.7) Mexico Cons. Staples (8.2) China (10.0) Brazil 15.1
Brazil (3.9) South Africa Energy (8.7) Russia Energy (11.0) Taiwan IT 11.7
Thailand (3.9) Taiwan (9.1) China Financials (11.0) Taiwan Materials 10.9
South Africa Energy (4.3) South Africa Financials (9.3) Korea Industrials (12.0) India Financials 10.9
India Financials (4.4) Russia Energy (10.7) Taiwan Materials (12.3) South Africa Materials 8.6
Malaysia (5.2) Korea Financials (11.4) China Industrials (12.9) China Financials 8.6
Korea IT (5.4) Korea Materials (12.2) South Africa Energy (13.9) Russia 8.1
Poland (5.4) Russia (12.5) Korea Financials (13.9) China Energy 6.7
Brazil Financials (5.4) China Industrials (13.2) Taiwan (15.2) Taiwan 6.6
Korea (6.8) Taiwan Financials (13.2) Brazil Materials (15.3) China 5.9
Taiwan (8.0) Brazil Financials (13.3) Taiwan IT (15.6) Russia Energy (3.7)
Taiwan Financials (8.3) Taiwan Materials (14.4) Korea Materials (16.2) Brazil Energy (4.3)
Taiwan IT (8.5) Brazil (15.0) South Africa Telecom (16.5) Korea Industrials (4.4)
Korea Financials (8.5) South Africa Telecom (15.2) Brazil (16.6) India Energy (5.1)
Korea Materials (9.4) Korea Industrials (16.1) Brazil Financials (16.9) South Africa Energy (6.1)
Brazil Materials (9.7) Brazil Energy (18.0) Poland (19.7) China Telecom Services (6.5)
Korea Industrials (10.1) Poland (19.6) Taiwan Financials (21.6) South Africa Telecom (7.1)
Taiwan Materials (10.7) Brazil Materials (20.0) Brazil Energy (21.9) China Industrials (10.2)
Hungary (11.4) Hungary (24.6) Hungary (23.1) Taiwan Financials (12.3)
Source: Datastream, MSCI. 7 June 2010.
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Table 20: Valuation of key sectors in EM – ranked by P/E 10E

MSCI Sector Index Value Market Value P/E 09 P/E 10E P/E 11E EPS Growth 09E EPS Growth 10E ROE 10E DY 10E
(US$M) (x) (x) (x) (%) (%) (%) (%)
Russia Energy 906 110,832 5.7 5.0 4.6 (12.4) 13.9 13.7 2.3
Russia 713 190,071 8.2 6.4 5.1 (21.3) 29.0 13.8 2.2
Korea CD 1,291 52,865 8.8 8.5 8.2 123.8 2.7 16.8 1.0
Turkey Financials 466 28,366 9.7 8.8 7.8 30.5 11.3 18.1 2.4
Korea Materials 555 50,461 10.1 8.8 8.0 (2.0) 15.2 14.1 1.3
Korea Financials 217 64,978 14.8 8.9 7.3 (31.0) 66.0 11.0 2.3
Brazil Materials 1,636 117,875 19.2 9.3 6.6 (40.0) 106.4 19.2 3.2
Turkey 500 47,650 11.0 9.5 8.3 3.5 16.1 17.4 3.1
South Africa Energy 312 19,838 11.9 9.9 7.7 (21.7) 20.0 17.2 3.6
Korea 300 391,736 13.0 10.0 9.0 58.1 29.7 12.8 1.2
Korea Industrials 167 52,399 12.7 10.2 9.5 37.5 24.5 12.2 1.2
South Africa Telecom 798 25,236 12.3 10.2 8.7 (9.7) 20.4 20.0 3.0
South Africa Financials 184 55,276 13.1 10.7 8.8 (15.0) 22.5 15.0 4.5
Brazil Energy 1,218 105,523 10.3 10.8 9.5 (4.9) (4.8) 15.5 2.5
Hungary 564 11,895 12.1 10.9 8.5 (36.6) 10.8 11.9 3.6
Thailand 237 44,097 12.9 11.2 9.6 33.6 15.1 15.4 3.8
EM 890 2,900,825 14.3 11.2 9.6 2.3 27.6 15.3 2.9
Brazil 2,981 450,938 13.5 11.2 9.0 6.6 19.9 16.1 3.4
Brazil Financials 703 107,676 11.9 11.5 9.5 44.6 3.5 16.1 3.6
China Energy 592 91,240 13.3 11.8 10.3 (3.0) 12.4 16.2 3.3
China Financials 455 208,644 15.1 11.9 9.6 21.6 27.0 17.4 3.3
South Africa 428 210,497 16.6 12.3 9.8 (17.6) 35.4 16.3 3.2
Mexico Telecom Services 825 54,246 14.3 12.4 10.9 (1.6) 15.5 36.5 4.1
Korea IT 464 121,926 17.4 12.5 11.9 (1,982.5) 38.5 14.0 0.2
Taiwan IT 124 191,292 29.5 12.6 11.1 6.0 133.3 16.8 3.5
China Telecom Services 115 70,964 12.5 12.7 13.3 (14.3) (2.1) 13.2 3.5
Taiwan Financials 62 45,394 18.9 13.0 10.4 798.9 45.2 8.9 4.4
South Africa CD 610 25,671 16.2 13.2 10.5 10.2 23.1 17.0 2.4
Poland 722 39,151 15.2 13.2 11.0 (26.5) 15.4 11.7 3.7
India Energy 1,143 36,199 19.0 13.2 11.5 4.4 43.4 17.3 1.3
Korea Consumer Staples 486 18,734 14.4 13.2 11.2 3.8 8.5 14.2 1.8
China 57 547,357 16.1 13.3 11.2 13.6 21.3 15.3 2.8
Taiwan 224 315,554 25.0 13.3 11.4 32.8 88.0 13.5 3.8
Malaysia 351 83,739 16.6 13.5 11.6 2.7 22.6 14.4 3.6
Mexico 4,945 134,392 18.0 14.4 12.1 2.2 24.8 16.7 2.7
Indonesia 663 66,940 15.9 14.5 12.5 16.4 9.8 24.1 3.1
Mexico Materials 215 21,535 30.8 14.6 10.9 (16.5) 110.6 8.0 1.6
Taiwan Materials 183 38,313 18.1 14.8 11.9 19.5 22.4 11.1 4.5
China Industrials 148 40,917 20.2 14.9 12.0 61.6 35.3 10.0 2.0
Philippines 274 13,963 17.7 15.5 13.4 24.8 14.0 15.5 4.2
Chile 1,986 44,089 18.7 16.2 13.5 11.3 15.2 11.2 2.3
India 445 233,430 20.7 16.6 13.2 3.9 25.1 16.5 1.2
South Africa Materials 487 59,454 47.0 16.8 11.9 (54.4) 179.4 13.5 2.1
Mexico Consumer Staples 320 32,223 18.9 19.0 15.8 54.2 (0.5) 15.1 1.7
India Financials 3,658 58,325 22.7 19.0 15.8 2.1 19.4 12.3 1.2
India IT 554 39,987 24.2 20.6 17.3 3.6 17.3 25.8 1.1
Source: Datastream, IBES, MSCI 7 June 2010.
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Composite valuation indicators

Our composite valuation indicators (CVIs) monitor valuations relative to each market’s valuation history with a focus on
valuation variables that have historically been indicative of 12-month forward performance.
India is the most expensive market followed by Korea, Brazil, South Africa and Mexico.
On the other side, the inexpensive markets compared to its history are Australia, Thailand, Russia, Taiwan, Turkey, China,
Czech Republic, Philippines, Indonesia, Hong Kong, Singapore, Chile, Hungary, Malaysia and Poland.
The CVI assumes mean reversal. After years of structural decline in interest rates, reflation in Asia and economic stability
helped drive a structural re-rating of emerging equity markets; arguably we are in a stage of mean reversal now.
Figure 36: CVI ranking

Australia
Thailand
Russia
Taiw an
Turkey
China
Czech
Philippines
Indonesia
Hongkong
Singapore
Chile
Hungary
Malay sia
Poland
Mex ico
S. Africa
Brazil
Korea
India
-1.0 -0.8 -0.6 -0.4 -0.2 0.0 0.2 0.4 0.6 0.8
Cheap Expensive
Source: MSCI, Datastream, J.P. Morgan. 11 June 2010.
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Table 21: Updated market valuations

Country 11 June LT LT 3Y 3Y LT Index LT Index Percent from #SD #SD
Valuation Measure Index Avg SD Avg SD High Level Low Level High Low (LT) (ST) CVI
US 1039
P/E 16.4 21.3 5.0 18.3 3.0 34.6 1079 11.6 784 -52% 42% (0.97) (0.60)
P/B 2.0 3.1 0.9 2.5 0.4 5.5 1446 1.4 701 -64% 38% (1.34) (1.22)
D/Y 2.1 2.2 0.7 2.2 0.4 4.0 282 1.1 1453 -47% 93% 0.16 0.25
12m Fwd PER 12.5 16.3 3.6 14.4 1.3 25.2 1367 10.2 282 -50% 23% (1.05) (1.44)
Bond/Earnings Yield Ratio 0.6 1.1 0.4 0.7 0.2 1.9 1465 0.3 854 -72% 78% (1.49) (1.25)
Bond / Dividends Yield Ratio 1.6 2.7 1.0 1.9 0.5 5.7 1465 0.8 854 -72% 107% (1.09) (0.68)
Composite Score (1.11) (1.22) -1.14
Australia 927.4
P/E 16.7 17.8 2.3 17.5 2.1 22.8 1001 11.4 268 -26% 47% (0.48) (0.38)
P/B 1.8 2.1 0.3 2.2 0.4 2.8 1361 1.4 690 -34% 34% (0.78) (0.99)
D/Y 4.3 3.9 0.8 4.4 0.6 6.5 690 2.8 624 -34% 51% (0.41) 0.16
12m Fwd PER 11.8 14.3 2.5 13.8 1.7 20.7 624 8.0 307 -43% 47% (1.03) (1.16)
Hong Kong 9522.5

P/E 16.1 14.9 3.2 16.7 2.1 22.8 7022 7.8 7533 -30% 106% 0.38 (0.29)
P/B 1.4 1.6 0.3 1.6 0.3 2.6 8220 0.9 3962 -48% 53% (0.66) (0.80)
D/Y 3.3 3.6 0.8 3.3 0.7 6.2 1995 2.3 14463 -48% 39% 0.42 0.05
12m Fwd PER 14.4 14.0 3.3 15.9 2.1 21.9 8525 7.1 2170 -34% 103% 0.12 (0.72)
Singapore 330.0
P/E 14.7 18.7 4.9 14.0 2.1 37.7 212 8.0 193 -61% 85% (0.81) 0.37
P/B 1.7 1.8 0.4 1.7 0.3 2.7 322 0.9 130 -37% 79% (0.31) (0.19)
D/Y 3.5 2.7 1.2 4.0 0.7 6.0 193 1.2 365 -42% 189% (0.66) 0.69
12m Fwd PER 13.2 15.9 2.9 14.0 1.9 24.0 210 8.2 215 -45% 61% (0.94) (0.45)
Bond/Earnings Yield Ratio 0.4 0.7 0.3 0.4 0.1 1.7 212 0.2 193 -76% 150% (0.92) 0.08
Bond / Dividends Yield Ratio 0.8 1.6 0.8 0.7 0.1 3.3 327 0.3 193 -76% 134% (0.93) 0.39
Composite Score (0.44) 0.15 -0.44
Korea 477.1
P/E 11.3 15.5 5.5 12.2 2.4 45.5 121 7.7 256 -75% 47% (0.76) (0.38)
P/B 1.56 1.3 0.3 1.6 0.2 2.1 558 0.5 63 -25% 232% 0.83 0.01
D/Y 1.1 1.8 0.5 1.7 0.5 2.9 87 1.0 481 -63% 9% 1.52 1.20
12m Fwd PER 8.8 11.9 4.1 10.0 1.6 25.5 121 5.5 126 -66% 61% (0.75) (0.75)
Composite Score 0.83 0.11 0.39
Taiwan 259.5
P/E 16.8 24.9 9.2 17.4 4.6 68.9 477 11.7 245 -76% 44% (0.88) (0.13)
P/B 1.8 2.4 0.7 1.9 0.2 4.4 232 1.2 160 -58% 47% (0.83) (0.46)
D/Y 3.3 2.0 1.3 3.9 1.1 7.6 160 0.6 477 -56% 500% (0.96) 0.49
12m Fwd PER 11.9 18.7 6.6 14.3 4.5 61.6 199 9.5 244 -81% 25% (1.02) (0.52)
China 59.1
P/E 14.0 15.5 4.2 15.9 3.8 31.2 26 7.2 20 -55% 94% (0.37) (0.51)
P/B 2.2 1.8 0.7 2.4 0.6 4.8 103 0.5 20 -55% 376% 0.46 (0.41)
D/Y 2.7 2.6 0.7 2.6 0.5 5.7 20 1.2 26 -53% 126% (0.07) (0.21)
12m Fwd PER 11.8 13.1 4.5 13.0 3.1 35.0 33 6.0 20 -66% 98% (0.29) (0.39)
Source: Datastream, MSCI, J.P. Morgan calculations. Note: #SD refers to the number of standard deviations from the long-term (LT) and short-term (ST) means.
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Valuation Measure Index Avg SD Avg SD High Level Low Level High Low (LT) (ST) Index
India 691.7
P/E 19.1 16.4 4.4 17.1 2.8 33.7 169 10.4 102 -43% 83% 0.59 0.70
P/B 3.0 2.9 0.7 3.4 0.7 4.6 148 1.7 340 -35% 71% 0.10 (0.57)
D/Y 1.2 1.6 0.3 1.5 0.3 2.5 126 0.9 169 -54% 29% 1.23 0.91
12m Fwd PER 15.7 13.7 3.4 15.6 3.0 23.6 163 8.2 383 -33% 91% 0.59 0.03
Bond / Dividends Yield Ratio 6.6 6.3 2.3 5.4 1.3 12.5 169 2.3 126 -47% 185% 0.14 0.91
Malaysia 471.5
P/E 16.3 20.1 5.0 16.3 2.2 45.5 257 11.8 317 -64% 38% (0.75) 0.01
P/B 1.9 2.1 0.7 2.0 0.3 4.9 455 0.6 101 -61% 198% (0.28) (0.08)
D/Y 3.1 2.6 0.8 3.3 0.4 5.1 101 1.1 455 -40% 182% (0.58) 0.43
12m Fwd PER 13.9 16.0 3.8 13.9 1.4 27.2 455 7.8 101 -49% 77% (0.56) (0.04)
Thailand 313.5
P/E 11.9 15.4 5.5 12.3 3.9 43.2 114 8.2 267 -72% 45% (0.64) (0.09)
P/B 1.8 2.0 0.7 1.9 0.3 5.1 639 0.6 74 -65% 187% (0.30) (0.40)
D/Y 3.7 3.2 1.0 4.0 0.7 6.2 166 0.9 217 -40% 302% (0.52) 0.47
12m Fwd PER 10.5 14.3 7.7 10.0 1.2 44.9 156 5.4 345 -77% 94% (0.50) 0.41
Indonesia 3769.3
P/E 15.0 16.6 6.4 15.2 3.7 49.0 829 5.3 451 -69% 181% (0.26) (0.05)
P/B 3.6 2.5 0.9 3.3 0.9 5.5 3960 0.9 316 -34% 314% 1.20 0.33
D/Y 2.7 2.7 1.0 3.1 0.5 5.9 475 0.8 961 -55% 230% 0.04 0.95
12m Fwd PER 13.0 12.0 5.3 11.5 2.3 35.4 860 3.7 406 -63% 253% 0.19 0.65
Phil 615.6
P/E 16.3 19.1 6.6 16.6 3.3 47.7 256 7.9 277 -66% 106% (0.42) (0.09)
P/B 2.5 2.2 0.9 2.2 0.4 4.7 830 0.9 210 -47% 191% 0.35 0.55
D/Y 4.0 2.0 1.2 3.5 0.8 5.1 374 0.6 884 -22% 594% (1.72) (0.63)
12m Fwd PER 14.3 13.6 3.8 13.3 1.9 21.8 777 4.0 176 -34% 262% 0.19 0.56
SouthAfrica 708.7
P/E 14.4 13.2 1.9 12.8 1.7 17.7 182 9.1 221 -19% 59% 0.62 0.93
P/B 2.2 2.1 0.3 2.4 0.3 2.9 248 1.4 138 -25% 59% 0.23 (0.63)
D/Y 2.8 3.2 0.5 3.2 0.4 4.7 221 2.3 248 -39% 23% 0.76 1.13
12m Fwd PER 10.9 10.8 1.8 10.6 1.3 15.5 174 6.7 545 -30% 62% 0.05 0.21
Brazil 219583
P/E 12.5 12.4 4.8 12.8 2.9 42.6 21547 6.5 24255 -71% 93% 0.03 (0.09)
P/B 2.1 1.4 0.8 2.3 0.4 3.2 291681 0.4 17017 -34% 446% 0.82 (0.49)
D/Y 3.2 4.0 1.2 3.4 0.8 7.6 25508 2.1 263964 -58% 52% 0.71 0.31
12m Fwd PER 11.9 8.3 2.7 9.9 2.7 15.8 291681 4.2 50366 -25% 183% 1.32 0.74
Composite Score 1.32 (0.56) 0.38
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Valuation Measure Index Avg SD Avg SD High Level Low Level High Low (LT) (ST) Index
Mexico 29117
P/E 16.1 15.1 7.5 13.9 1.8 79.1 2566 9.0 2558 -80% 79% 0.14 1.20
P/B 2.7 2.2 0.9 2.9 1.3 6.0 18728 0.7 17106 -55% 269% 0.53 (0.17)
D/Y 2.6 2.0 0.4 2.1 0.6 3.5 17106 1.0 18728 -26% 169% (1.24) (0.74)
12m Fwd PER 13.3 11.6 1.7 12.7 1.7 16.2 26503 8.0 17106 -18% 65% 0.92 0.30
Russia 716.5
P/E 7.4 11.6 7.4 9.5 2.5 54.0 83 3.6 379 -86% 106% (0.56) (0.84)
P/B 1.0 1.3 0.5 1.5 0.5 2.4 1567 0.2 38 -59% 404% (0.62) (1.06)
D/Y 1.5 1.4 0.8 1.4 0.5 3.2 265 0.1 223 -52% 1042% (0.18) (0.22)
12m Fwd PER 6.0 8.2 2.8 8.8 2.4 22.8 332 2.5 59 -74% 141% (0.76) (1.15)
Poland 1647.9
P/E 14.5 16.2 10.6 12.3 2.0 98.7 861 6.7 917 -85% 117% (0.16) 1.14
P/B 1.7 1.8 0.4 2.0 0.4 3.1 589 1.0 1192 -44% 77% (0.29) (0.57)
D/Y 2.4 2.4 1.3 3.7 1.2 6.3 2253 0.8 1463 -62% 186% 0.05 1.15
12m Fwd PER 12.3 12.0 3.4 12.1 2.0 25.1 1630 5.5 618 -51% 126% 0.10 0.11
Composite Score 0.07 (0.21) -0.05
Turkey 802127
P/E 10.3 12.6 6.8 11.6 3.1 46.2 234490 5.1 9691 -78% 103% (0.34) (0.41)
P/B 1.8 2.1 1.0 1.6 0.3 6.7 237918 1.0 527988 -73% 89% (0.33) 0.60
D/Y 3.5 3.8 1.9 3.7 1.4 9.4 13825 1.0 237918 -63% 252% 0.16 0.13
12m Fwd PER 9.0 8.2 3.1 9.3 1.8 18.7 264873 2.7 34351 -52% 232% 0.28 (0.14)
Composite Score 0.07 (1.24) -0.53
Hungary 1259.2
P/E 12.2 11.9 4.4 8.5 2.7 22.1 872 3.9 559 -45% 217% 0.08 1.41
P/B 1.7 2.1 0.7 2.0 0.5 3.7 616 0.6 148 -54% 204% (0.52) (0.52)
D/Y 2.3 2.1 0.9 2.9 0.6 5.3 857 0.9 752 -57% 149% (0.21) 1.08
12m Fwd PER 9.5 10.2 2.0 9.8 1.9 17.0 872 4.3 810 -44% 123% (0.34) (0.15)
Composite Score (0.23) 0.86 -0.23
Czech 363.1
P/E 11.9 14.8 5.1 16.1 3.9 39.6 111 7.3 76 -70% 63% (0.59) (1.09)
P/B 2.1 1.4 0.8 2.2 0.5 3.1 480 0.5 104 -32% 299% 0.93 (0.21)
D/Y 5.2 4.0 2.8 5.8 2.6 10.0 374 0.8 540 -49% 539% (0.40) 0.25
12m Fwd PER 10.6 13.4 3.7 13.6 2.9 28.7 135 6.7 318 -63% 58% (0.75) (1.04)
Chile 4698.4
P/E 17.3 19.9 6.0 18.1 3.2 52.4 1660 11.4 910 -67% 52% (0.44) (0.25)
P/B 1.9 1.6 0.3 1.8 0.2 2.6 1806 0.9 910 -27% 103% 0.71 0.41
D/Y 2.3 3.2 1.2 3.5 1.8 8.9 2601 1.9 2077 -74% 19% 0.75 0.68
12m Fwd PER 14.9 15.3 2.3 16.3 2.0 20.8 1806 8.2 953 -29% 80% (0.20) (0.74)
Bond/Earnings Yield Ratio 0.6 1.8 0.9 1.1 0.5 4.8 1660 -0.1 4119 -88% -608% (1.34) (0.99)
Bond / Dividends Yield Ratio 1.4 3.1 1.5 2.1 1.5 7.2 1478 -0.3 4119 -81% -634% (1.14) (0.46)
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EMBIG100
Table 22: Cheaper valuations and The equity EMBIG100 is the top 100 companies in the MSCI Emerging markets free
higher ROE than the US index sorted by MSCI free float market capitalization. We are interested in tracking
EMBIG US the major stocks in the emerging market universe as country and sector aggregates
Median Median can hide key trends. Also these names need to be attractive relative to global
2010 PE 12.4 14.6 valuations and growth in order to attract net flows in emerging markets. This table
2011 PE 10.5 12.7
2010 DY 2.8 1.3
gives a valuation summary for these stocks.
2010 ROE 18.4 14.4
Source: J.P. Morgan. Table 25: EMBig100 valuation summary (ranked by 2010 PE)
Stock Code Country Rec Price P/E P/E DY ROE
8-Jun-10 2010 2011E 2010E 2010E
Table 23: Quartile valuation ranking Mobile Tele MBT US Russia OW 18.9 3.6 3.0 10.1 NA
P/E Gazprom GSPBEX RU Russia OW 169.0 4.6 3.4 1.4 12.3
Lukoil LKOH RU Russia N 50.3 5.3 5.1 3.9 13.6
2010E 2011E
LG Display 034220 KS Korea OW 42000.0 5.5 5.8 1.7 23.8
Min 3.6 3.0 KGHM KGH PW Poland NR 90.1 5.8 5.7 9.7 26.4
Lower Quartile 9.9 8.1 LG Electronics 066570 KS Korea N 101000.0 6.1 5.6 0.8 21.1
Median 12.4 10.5 Rosneft ROSN LI Russia OW 6.7 6.3 6.9 1.6 19.4
Top Quartile 15.5 13.5 Hynix Semi 000660 KS Korea N 26450.0 6.5 9.7 0.0 33.8
Max 36 27.5 Vale Pn VALE/P US Brazil OW 21.2 6.8 6.8 2.5 23.6
Source: J.P. Morgan. Hyundai Motor 005380 KS Korea OW 139000.0 7.4 7.5 1.1 15.7
Sinopec 386 HK China OW 5.9 7.5 6.5 3.3 17.1
Garanti Bankasi GARAN TI Turkey OW 6.5 7.5 6.8 4.0 23.8
Table 24: Quartile valuation ranking OTP Bank OTP HB Hungary OW 4863.0 7.6 5.5 3.9 13.4
Div Yld ROE Sider Nacional SID US Brazil UW 13.8 7.8 5.9 11.3 43.9
2010E 2010E Banco Brasil On BBAS3 BZ Brazil N 26.6 8.0 7.5 5.0 20.2
KB Financial 105560 KS Korea OW 51400.0 8.1 6.8 1.9 11.7
Min 0.0 3.9
Posco 005490 KS Korea OW 450000.0 8.5 NA 1.4 12.8
Lower Quartile 1.3 14.7
Bank Of China 3988 HK China OW 3.8 8.8 7.0 4.8 19.6
Median 2.8 18.4
Sberbank SBER RU Russia OW 2.3 9.0 4.7 8.5 18.8
Top Quartile 4.0 24.4
Petrobras PETR4 BZ Brazil N 29.9 9.0 6.8 3.0 14.9
Max 11.3 49.9
PTT PTT TB Thailand OW 243.0 9.5 7.8 3.9 16.1
Source: J.P. Morgan. Itausa PN ITSA4 BZ Brazil NR 10.7 9.5 7.6 3.8 16.4
CEZ CEZ CP CZ NR 890.0 9.8 9.5 5.9 21.8
Figure 37: ROE vs. P/E Hyundai Mobis 012330 KS Korea OW 192500.0 9.8 8.8 0.6 19.3
Samsung Electro 005930 KS Korea N 785000.0 9.8 11.2 0.0 18.0
50 MTN Group MTN SJ SA OW 9949.0 10.0 8.1 2.2 19.5
Enersis ENERSIS CI Chile N 207.0 10.2 9.6 5.9 15.1
40 Shinhan Financial 055550 KS Korea OW 44900.0 10.3 8.7 1.6 10.0
TSMC 2330 TT Taiwan OW 58.5 10.3 10.2 5.1 27.6
30 Hon Hai Precision 2317 TT Taiwan OW 111.5 10.3 8.6 2.3 19.0
Firstrand FSR SJ SA OW 1825.0 10.6 8.1 4.2 17.1
ROE 10 E
20 Standard Banking SBK SJ SA N 10212.0 10.6 8.4 3.9 16.4

China Const Bank 939 HK China OW 6.1 10.6 9.0 4.1 21.6
10
Femsa FMX US Mexico OW 43.3 10.7 9.4 1.3 10.7
US Bank of Comm. 3328 HK China OW 8.4 10.7 8.9 3.1 20.6
PLDT TEL PM Philippines NR 2420.0 10.7 10.2 8.2 40.4
0
LG Chem 051910 KS Korea OW 288000.0 10.8 10.5 1.2 27.5
1 9 17 25 33 Bradesco BBDC4 BZ Brazil OW 29.3 11.1 9.5 3.0 20.3
PE 10 E Banco Itau ITUB4 BZ Brazil OW 33.2 11.3 9.5 3.0 24.6
Sasol SOL SJ SA OW 27077.0 11.3 7.3 0.0 NA
Source: J.P. Morgan, IBES. Scatter plot of ROE
and P/E. Stocks in second quadrant have higher Source: IBES, Datastream, J.P. Morgan estimates. All estimates are for the calendar year. IBES estimates for non-rated (NR) stocks.
ROE and lower P/E than the MSCI US median. NM = not meaningful due to negative numbers. SA stands for South Africa, CZ stands for Czech Republic.
US position is indicated by the red dot.
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EMBig100 valuation summary (cont’d)

Stock Code Country Rec Price P/E P/E DY ROE
8-Jun-10 2010 2011E 2010E 10E
Fubon Financial 2881 TT Taiwan OW 35.6 11.4 9.5 5.4 11.7
ICBC 1398 HK China OW 5.6 11.4 9.3 3.9 22.1
Petrochina 857 HK China UW 8.3 11.5 11.0 3.9 15.0
Mediatek 2454 TT Taiwan OW 515.0 11.9 9.6 5.0 38.0
KEPCO 015760 KS Korea OW 33550.0 12.1 8.8 0.0 3.9
Grupo Mexico GMEXICOB MM Mexico OW 28.6 12.1 10.9 6.9 26.3
CNOOC 883 HK China N 12.2 12.1 11.8 4.5 24.9
Telkom TLKM IJ Indonesia NR 7950.0 12.3 11.1 4.6 27.4
Gerdau GGBR4 BZ Brazil NR 23.4 12.3 6.9 1.9 NA
Siam Comm Bank SCB TB Thailand N 81.8 12.4 10.9 3.1 15.2
MMC Norilsk Nickel GMKN RU Russia N 153.0 12.5 10.0 2.4 16.2
China Mobile 941 HK China NR 75.3 12.7 12.3 3.5 20.6
Bank Rakyat Indo BBRI IJ Indonesia UW 8750.0 12.7 10.4 1.8 27.8
Tenaga TNB MK Malaysia OW 8.3 13.2 11.7 2.6 10.1
Chunghwa Telecom 2412 TT Taiwan NR 61.6 13.3 13.5 7.0 11.9
Astra International ASII IJ Indonesia OW 43250.0 13.4 12.5 3.0 29.8
High Tech Computer 2498 TT Taiwan N 425.0 13.6 14.5 5.4 30.5
Ecopetrol ECOPETL CB Colombia UW 2690.0 13.6 9.2 4.4 27.1
AMX AMX US Mexico OW 48.0 13.7 11.7 3.1 23.6
Brasil Foods BRFS3 BZ Brazil N 23.8 13.7 7.0 2.0 5.5
Credicorp BAP US Peru OW 88.2 13.8 12.2 2.4 21.1
Malayan Banking MAY MK Malaysia N 7.4 13.8 12.8 3.6 14.7
CIMB Group Holdings CIMB MK Malaysia N 6.9 13.9 11.7 2.9 16.4
PKO Bank PKO PW Poland UW 37.7 14.0 9.4 1.8 15.5
Bmf Bovespa BVMF3 BZ Brazil OW 11.7 14.1 12.1 NA NA
Itissalat Al Maghrib IAM MC Morocco NR 155.0 14.4 14.1 6.8 49.9
China Steel 2002 TT Taiwan OW 29.8 14.5 9.8 3.5 10.4
Nan Ya Plastics 1303 TT Taiwan UW 50.7 14.5 11.5 3.7 10.5
Televisa TLEVICPO MM Mexico OW 45.2 14.7 13.0 3.4 17.5
Turkcell TCELL TI Turkey N 8.5 15.0 12.7 3.1 NA
Orascom Construction OCIC EY Egypt NR 224.0 15.0 10.8 4.6 16.8
China Overseas 688 HK China OW 14.7 15.1 12.5 1.2 18.1
CMB - H 3968 HK China N 17.7 15.3 12.0 1.3 21.4
Ambev ABV US Brazil N 96.9 15.5 14.5 4.7 29.2
Formosa Plastics 1301 TT Taiwan UW 64.4 15.5 14.0 6.2 11.2
Perusahaan Gas PGAS IJ Indonesia UW 3800.0 15.7 14.3 3.4 44.3
Anglogold Ashanti ANG SJ SA OW 33465.0 16.0 13.6 1.2 30.7
NHN 035420 KS Korea NR 182000.0 16.7 14.2 0.0 33.8
China Shenhua Enrgy 1088 HK China N 29.4 16.8 NA 2.1 18.9
Bank Central Asia BBCA IJ Indonesia OW 5600.0 18.6 15.3 2.5 24.8
IOI IOI MK Malaysia N 5.0 19.1 16.5 2.7 17.8
Naspers NPN SJ SA OW 28110.0 19.5 15.0 1.2 15.6
Reliance Industries RIL IN India OW 996.4 20.7 13.2 0.7 14.6
Impala Platinum IMP SJ SA N 17750.0 20.8 11.4 1.2 12.1
Tata Consltncy Servcs TCS IN India OW 750.2 21.4 19.8 3.1 36.8
Cathay Financial 2882 TT Taiwan N 44.0 21.5 14.6 2.6 9.3
Gold Fields GFI SJ SA OW 10580.0 22.3 12.0 1.2 7.8
ICICI Bank ICICIBC IN India N 817.5 22.6 17.9 1.4 8.0
COPEC COPEC CI Chile NR 8340.0 23.3 17.6 1.7 9.4
Walmex WALMEXV MM Mexico N 28.1 23.4 20.2 1.3 17.8
Infosys Technologies INFO IN India OW 2654.5 24.5 21.9 1.0 28.8
China Life 2628 HK China NR 33.4 26.0 21.8 1.4 15.0
HDFC HDFC IN India N 2702.2 27.4 22.5 1.3 20.0
Larsen & Toubro LT IN India OW 1627.4 28.0 22.7 0.0 19.4
HDFC Bank HDFCB IN India OW 1862.7 28.9 21.4 0.7 16.1
Ping An Insurance 2318 HK China NR 61.6 28.9 23.1 0.9 15.4
Sime Darby SIME MK Malaysia N 7.8 32.3 14.2 2.8 6.6
Cemex CX US Mexico OW 10.1 32.5 14.6 NA NA
Tencent Hldg 700 HK China OW 143.7 35.5 27.5 0.0 46.8
OGX Petroleo OGXP3 BZ Brazil OW 16.1 NM NM 0.0 4.1
Source: IBES, Datastream, J.P. Morgan estimates. All estimates are for the calendar year. IBES estimates for non-rated (NR) stocks.
NM = not meaningful due to negative numbers. SA stands for South Africa, CZ stands for Czech Republic.
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Table 26: Quartile earning growth Table 27: EMBig100 earnings growth
ranking NAME RIC Country Reco CAGR
Earnings Growth
Earnings growth 2009 2010E 2011E 2008-11E
2010E 2011E Ping An Insurance 2318 HK China NR 1.9 2.2 2.7 306.7
Min -40.0 -12.5 Cathay Financial 2882 TT Taiwan N 404.3 79.9 46.9 137.1
Lower Quartile 12.3 9.9 Perusahaan Gas Negara PGAS IJ Indonesia UW 882.7 -7.1 9.7 115.6
Median 24.1 18.9 Walmex WALMEXV MM Mexico N 809.1 -40.0 15.8 84.9
Top Quartile 34.2 23.3 LG Electronics 066570 KS Korea N 325.2 15.8 9.5 75.3
Max 610.8 92.6 Nan Ya Plastics 1303 TT Taiwan UW 69.7 67.3 26.3 53.1
Tencent Hldg 700 HK China OW 84.8 44.8 29.2 51.2
Source: J.P. Morgan calculations.
Mediatek 2454 TT Taiwan OW 88.0 27.9 23.3 43.6
Sinopec 386 HK China OW 116.5 11.3 14.4 40.2
Sberbank of Russia SBER RU Russia OW -80.4 610.8 92.6 38.9
Fubon Financial Holdings 2881 TT Taiwan OW 70.7 29.9 19.7 38.5
Hyundai Motor 005380 KS Korea OW 104.5 25.9 -1.6 36.3
LG Display 034220 KS Korea OW 6.1 136.4 -4.8 33.6
China Overseas 688 HK China OW 47.1 29.4 21.4 32.2
Itausa PN ITSA4 BZ Brazil NR 0.9 1.1 1.4 30.9
Samsung Electronics 005930 KS Korea N 76.6 40.1 -12.5 29.4
Bmf Bovespa BVMF3 BZ Brazil OW 35.6 36.1 16.9 29.2
Bank Of China 3988 HK China OW 26.0 35.6 25.8 29.1
Garanti Bankasi GARAN TI Turkey OW 63.9 16.0 10.1 27.9
LG Chem 051910 KS Korea OW 70.5 18.9 2.2 27.5
China Life 2628 HK China NR 1.2 1.3 1.5 27.0
CIMB Group Holdings CIMB MK Malaysia N 37.5 24.1 18.9 26.6
Hon Hai Precision 2317 TT Taiwan OW 23.8 32.8 19.9 25.4
Femsa FMX US Mexico OW 12.3 53.4 13.8 25.2
Gold Fields GFI SJ SA OW -2.0 6.7 86.3 24.9
HDFC Bank HDFCB IN India OW 17.6 22.1 35.3 24.8
Larsen & Toubro LT IN India OW 30.7 13.3 23.3 22.2
ICBC 1398 HK China OW 16.1 27.8 22.2 21.9
Bank Rakyat Indonesia BBRI IJ Indonesia UW 22.6 16.1 22.6 20.4
China Const Bank 939 HK China OW 15.3 26.1 17.8 19.6
Hyundai Mobis 012330 KS Korea OW 51.0 2.0 10.9 19.5
PTT PTT TB Thailand OW 14.8 22.3 21.4 19.4
Naspers NPN SJ SA OW 5.6 22.4 30.1 18.9
Credicorp BAP US Peru OW 31.2 8.7 13.3 17.3
Bank of Comm. 3328 HK China OW 5.6 27.5 19.9 17.3
NHN 035420 KS Korea NR 9225 10711 12646 16.7
Bank Central Asia BBCA IJ Indonesia OW 17.9 8.8 22.0 16.1
Astra International ASII IJ Indonesia OW 12.0 29.8 7.5 16.0
Infosys Technologies INFO IN India OW 29.8 6.3 11.9 15.6
TSMC 2330 TT Taiwan OW -9.8 64.4 1.4 14.5
Gerdau GGBR4 BZ Brazil NR 1.5 2.0 3.0 14.2
Tata Consltncy Servcs TCS IN India OW 3.5 32.9 8.0 14.1
Banco Itau ITUB4 BZ Brazil OW -1.3 26.7 18.4 14.0
China Steel 2002 TT Taiwan OW -21.9 28.0 47.3 13.8
Ambev ABV US Brazil N 4.6 30.6 6.5 13.3
Reliance Industries RIL IN India OW -7.7 -0.6 56.5 12.8
Grupo Mexico GMEXICOB MM Mexico OW -14.3 50.0 11.1 12.6
HDFC HDFC IN India N -6.4 22.7 22.2 11.9
NM = not meaningful due to negative numbers. SA stands for South Africa. CZ stands for Czech Republic Recommendations: OW =
Overweight, N = Neutral, UW = Underweight, NR = Not rated. 8 June 2010.
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EMBig100 earnings growth (cont’d)

Stock RIC Country Reco Earnings Growth CAGR
2009 2010E 2011E 2008-11E
Enersis ENERSIS CI Chile N 30.1 0.1 7.0 11.7
MTN Group MTN SJ SA OW -16.6 32.5 23.3 10.9
CMB - H 3968 HK China N -13.5 21.5 26.9 10.1
Formosa Plastics 1301 TT Taiwan UW 30.6 -7.5 10.4 10.1
KB Financial 105560 KS Korea OW -71.0 274.9 19.7 9.2
Telkom TLKM IJ Indonesia NR 576.1 632.5 696.5 9.0
Standard Banking SBK SJ SA N -19.8 28.2 25.8 9.0
Televisa TLEVICPO MM Mexico OW 1.8 3.1 3.5 8.9
Mobile Tele MBT US Russia OW -25.8 46.5 18.1 8.7
PKO Bank PKO PW Poland UW -21.4 10.2 48.1 8.6
Orascom Construction OCIC EY Egypt NR 11.4 15.0 21.0 8.2
Rosneft ROSN LI Russia OW -41.7 62.7 33.2 8.1
ICICI Bank ICICIBC IN India N -9.7 6.9 26.5 6.9
Firstrand FSR SJ SA OW -31.2 36.4 30.1 6.9
COPEC COPEC CI Chile NR 233.6 354.2 469.3 6.7
PLDT TEL PM Philippines NR 210.4 226.9 238.0 6.6
Petrochina 857 HK China UW -9.7 28.0 4.2 6.4
Siam Commercial Bank SCB TB Thailand N -1.9 7.8 13.9 6.4
Vale Pn VALE/P US Brazil OW -61.7 210.0 1.3 6.4
Tenaga TNB MK Malaysia OW -64.7 197.9 12.7 5.9
Petrobras PETR4 BZ Brazil N -12.2 0.3 32.9 5.4
Shinhan Financial 055550 KS Korea OW -47.7 86.5 18.4 4.9
KGHM KGH PW Poland NR 11.8 15.6 15.9 4.8
AMX AMX US Mexico OW 29.5 -24.9 16.9 4.3
Gazprom GSPBEX RU Russia OW -31.7 22.1 33.6 3.7
Sasol SOL SJ SA OW -25.5 -6.1 56.4 3.1
China Mobile 941 HK China NR 5.7 5.9 6.0 2.2
CEZ CEZ CP CZ NR 96.6 90.4 92.9 1.3
CNOOC 883 HK China N -33.6 51.8 2.6 1.1
Banco Brasil On BBAS3 BZ Brazil N 14.1 -15.9 6.3 0.7
Ecopetrol ECOPETL CB Colombia UW -46.3 27.9 48.0 0.6
Itissalat Al Maghrib IAM MC Morocco NR 10.7 10.6 10.9 0.2
Lukoil LKOH RU Russia N -21.5 2.7 20.9 -0.9
Malayan Banking MAY MK Malaysia N -80.0 346.5 8.1 -1.2
OTP Bank OTP HB Hungary OW -37.3 10.8 37.9 -1.4
IOI IOI MK Malaysia N -11.9 -6.5 16.0 -1.5
Sime Darby SIME MK Malaysia N -35.1 -36.5 127.3 -2.1
Chunghwa Telecom 2412 TT Taiwan NR 5.0 4.6 4.6 -6.3
High Tech Computer 2498 TT Taiwan N -21.0 8.8 -6.3 -6.9
Turkcell TCELL TI Turkey N -3.4 -29.5 17.3 -7.2
Cemex CX US Mexico OW -80.8 -84.5 122.6 -7.5
Sider Nacional SID US Brazil UW -71.7 66.0 32.4 -14.7
Impala Platinum IMP SJ SA N -65.6 -14.6 82.0 -18.8
OGX Petroleo OGXP3 BZ Brazil OW 2700.0 -96.4 -66.7 -30.7
Hynix Semi 000660 KS Korea N NM NM -33.0 NM
Brasil Foods BRFS3 BZ Brazil N NM 91.2 94.8 NM
Korea Electric Power 015760 KS Korea OW NM NM 36.5 NM
MMC Norilsk Nickel GMKN RU Russia N NM 42.9 24.8 NM
Bradesco BBDC4 BZ Brazil OW NA 18.3 16.6 NA
Posco 005490 KS Korea OW -43.1 58.2 NA NA
Anglogold Ashanti ANG SJ SA OW NA NA 17.5 NA
China Shenhua Enrgy 1088 HK China N 10.6 6.5 NA NA
NM = not meaningful due to negative numbers. SA stands for South Africa. CZ stands for Czech Republic. Recommendations: OW =
Overweight, N = Neutral, UW = Underweight, NR = Not rated. 8 June 2010.
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Table 28: Ranked total returns of EMBig100

%
Name 3-month return Name 6-month return Name 12-month return
LC US$ LC US$ LC US$
High Tech Computer 25.9 23.9 Astra International 27.8 30.4 Grupo Mexico 103.0 110.8
Hyundai Mobis 32.3 21.5 Hyundai Motor 33.6 25.1 Tata Consltncy Servcs 106.5 109.3
LG Chem 27.7 17.3 Hynix Semi 31.6 23.2 LG Chem 103.8 106.9
Bank Rakyat Indonesia 17.5 16.5 Bank Central Asia 20.1 22.6 Hyundai Motor 103.7 106.8
Credicorp 15.4 15.4 High Tech Computer 22.3 21.7 Astra International 89.1 105.0
Anglogold Ashanti 19.4 13.8 Credicorp 21.3 21.3 Hyundai Mobis 96.9 99.9
Hyundai Motor 21.9 11.9 LG Chem 28.9 20.7 Hynix Semi 93.8 96.7
Hynix Semi 21.1 11.1 MMC Norilsk Nickel 20.2 15.5 Garanti Bankasi 82.3 76.9
Gold Fields 16.1 10.6 LG Display 22.8 15.0 Bank Central Asia 52.1 64.8
LG Display 20.0 10.2 Brasil Foods 22.4 14.4 CIMB Group Holdings 53.8 62.8
Bank Central Asia 9.1 8.2 Hyundai Mobis 22.0 14.2 Tencent Hldg 60.8 59.7
Astra International 7.5 6.6 PTT 12.1 13.9 MMC Norilsk Nickel 59.0 57.2
Tenaga 5.2 5.6 Bank Rakyat Indonesia 10.8 13.0 PKO Bank 66.7 56.9
Brasil Foods 10.0 4.9 Malayan Banking 10.7 12.9 Infosys Technologies 54.8 56.8
Cemex 6.4 4.1 CIMB Group Holdings 8.3 10.4 Shinhan Financial 52.1 54.4
China Mobile 3.7 3.1 Infosys Technologies 9.4 8.8 OGX Petroleo 46.2 54.4
PTT 2.5 2.8 Ecopetrol 5.7 7.7 Ambev 45.9 54.0
AMX 5.0 2.7 COPEC 16.8 7.7 Walmex 46.6 52.3
Siam Commercial Bank 0.4 0.7 Tata Consltncy Servcs 7.7 7.1 Bank Rakyat Indonesia 40.2 52.0
Itissalat Al Maghrib 12.1 0.5 China Mobile 6.0 5.3 Naspers 42.5 50.6
Malayan Banking (0.3) 0.2 Itissalat Al Maghrib 23.9 4.4 Firstrand 39.9 47.8
Chunghwa Telecom 1.8 0.1 AMX 4.5 3.7 Credicorp 47.4 47.4
HDFC Bank 2.7 (0.4) Garanti Bankasi 10.5 3.7 Sberbank of Russia 46.8 45.1
Ping An Insurance 0.2 (0.4) Standard Banking 6.6 3.4 Malayan Banking 35.6 43.5
Ambev 4.3 (0.5) Tenaga 1.2 3.2 Samsung Electronics 37.9 40.0
Ecopetrol 3.1 (0.6) CNOOC 3.9 3.2 Perusahaan Gas Negara 27.5 38.2
Larsen & Toubro 2.5 (0.6) Anglogold Ashanti 5.8 2.5 LG Display 35.1 37.1
Perusahaan Gas Negara 0.0 (0.8) HDFC Bank 1.7 1.1 Mediatek 34.1 36.0
CIMB Group Holdings (1.4) (1.0) Grupo Mexico 1.8 1.0 Banco Itau PN 28.8 35.9
HDFC 1.5 (1.5) Mobile Tele 0.8 0.8 HDFC Bank 33.8 35.6
Reliance Industries 1.3 (1.8) Enersis 8.6 0.1 Banco Brasil On 28.3 35.5
Bank Of China (1.3) (1.9) Firstrand 3.1 (0.1) KB Financial 31.4 33.4
China Const Bank (1.5) (2.0) Siam Commercial Bank (1.9) (0.3) Standard Banking 25.3 32.5
Bmf Bovespa 2.6 (2.1) Ambev 6.4 (0.6) AMX 27.2 32.1
Bank of Comm. (1.5) (2.1) Perusahaan Gas Negara (3.6) (1.6) Vale Pn 24.5 31.4
Garanti Bankasi 2.7 (2.2) Larsen & Toubro (1.8) (2.3) KGHM 39.2 31.0
ICBC (2.1) (2.7) Chunghwa Telecom (1.9) (2.4) Femsa 24.6 29.4
CNOOC (2.3) (2.9) Cemex (1.7) (2.5) Brasil Foods 22.2 29.0
COPEC 4.4 (3.1) China Steel (2.1) (2.6) Banco Itau 19.9 26.6
Infosys Technologies (0.5) (3.5) OGX Petroleo 4.2 (2.6) Ecopetrol 18.8 26.5
China Life (3.2) (3.7) KEPCO 3.7 (2.9) COPEC 17.8 22.3
Sinopec (3.3) (3.9) Formosa Plastics (2.7) (3.2) Sime Darby 14.9 21.6
Mediatek (3.2) (4.8) Impala Platinum (0.3) (3.3) China Const Bank 21.5 20.7
MMC Norilsk Nickel 1.8 (4.9) Gold Fields (0.3) (3.3) Fubon Financial Holdings 18.9 20.7
Tata Consltncy Servcs (2.6) (5.5) Mediatek (3.0) (3.5) Nan Ya Plastics 18.6 20.4
Fubon Financial Holdings (4.2) (5.8) PLDT (2.6) (3.7) Formosa Plastics 18.5 20.2
Femsa (4.0) (6.0) Tencent Hldg (3.1) (3.8) IOI 12.7 19.2
TSMC (4.6) (6.1) HDFC (3.3) (3.8) HDFC 17.5 19.1
PLDT (4.6) (6.2) Lukoil 0.1 (3.9) ICBC 19.5 18.7
Lukoil 0.3 (6.3) Samsung Electronics 2.7 (3.9) OTP Bank 37.0 18.7
IOI (7.6) (7.2) Walmex (3.6) (4.3) PLDT 15.2 17.8
Shinhan Financial 0.3 (7.9) IOI (7.0) (5.1) CMB - H 18.4 17.6
OGX Petroleo (3.9) (8.2) Sberbank of Russia (1.9) (5.8) Gold Fields 11.2 17.6
Samsung Electronics (0.1) (8.3) Fubon Financial Holdings (5.3) (5.8) Bradesco 11.2 17.3
Televisa (6.4) (8.4) Bmf Bovespa 0.7 (5.9) Siam Commercial Bank 11.4 17.3
Petrochina (8.1) (8.7) TSMC (6.3) (6.7) Bank Of China 17.8 17.0
Sime Darby (9.6) (9.3) ICICI Bank (6.3) (6.8) China Steel 14.6 16.3
Banco Itau PN (5.2) (9.5) Naspers (4.2) (7.1) Telkom 7.1 16.1
Firstrand (5.1) (9.5) Sinopec (6.7) (7.4) ICICI Bank 14.5 16.0
Formosa Plastics (8.0) (9.5) Femsa (6.9) (7.6) KEPCO 14.1 15.9
Enersis (2.9) (9.8) Reliance Industries (7.2) (7.7) PTT 10.0 15.8
Source: Datastream. 8 Jun 2010.
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Table 40: Ranked total returns of EMBig 100 (cont’d)

%
Name 3-month return Name 6-month return Name 12-month return
LC US$ LC US$ LC US$
Telkom (9.1) (9.9) Vale Pn (1.3) (7.8) Sider Nacional 9.5 15.6
Orascom Construction (6.8) (10.0) Gazprom (4.5) (8.2) CNOOC 16.3 15.5
Turkcell (5.9) (10.3) Shinhan Financial (2.0) (8.3) Enersis 11.2 15.4
Naspers (5.9) (10.3) CMB - H (7.7) (8.3) China Life 16.0 15.2
Sasol (6.1) (10.5) Bank Of China (8.5) (9.2) Gerdau 8.6 14.7
CMB - H (10.0) (10.5) Bank of Comm. (8.8) (9.5) Posco 12.0 13.7
KB Financial (2.7) (10.6) Nan Ya Plastics (10.0) (10.4) Tenaga 7.2 13.5
Walmex (8.9) (10.8) Sime Darby (12.2) (10.4) China Shenhua Enrgy 13.9 13.1
LG Electronics (2.9) (10.8) Sasol (8.0) (10.8) Bank of Comm. 13.7 12.9
Tencent Hldg (10.4) (11.0) Banco Itau PN (5.3) (11.5) Mobile Tele 12.9 12.9
Impala Platinum (6.9) (11.2) ICBC (10.9) (11.6) Anglogold Ashanti 6.3 12.4
Bradesco (7.2) (11.5) China Const Bank (12.2) (12.8) Larsen & Toubro 10.8 12.3
Grupo Mexico (9.6) (11.6) Telkom (15.2) (13.4) TSMC 9.7 11.3
China Steel (10.2) (11.7) Petrochina (13.0) (13.6) Impala Platinum 2.3 8.1
China Overseas (12.4) (12.9) Rosneft (11.0) (14.5) Rosneft 9.0 7.7
NHN (5.2) (13.0) NHN (8.8) (14.6) Chunghwa Telecom 5.3 6.8
Banco Brasil On (9.3) (13.4) Televisa (14.0) (14.7) Cemex 2.3 6.3
CEZ 0.3 (13.4) CEZ 5.3 (15.2) Orascom Construction 7.3 6.0
Mobile Tele (14.3) (14.3) Sider Nacional (9.4) (15.4) Turkcell 9.2 5.9
ICICI Bank (11.7) (14.3) Ping An Insurance (15.0) (15.6) Sinopec 6.2 5.4
Banco Itau (10.3) (14.4) MTN Group (13.1) (15.8) Hon Hai Precision 3.7 5.3
Standard Banking (10.3) (14.5) China Life (15.4) (16.0) High Tech Computer 3.7 5.2
China Shenhua Enrgy (14.4) (14.9) Orascom Construction (12.9) (16.0) Ping An Insurance 5.2 4.5
Gazprom (9.7) (15.6) Banco Brasil On (10.3) (16.2) Televisa 0.0 3.9
Rosneft (11.2) (17.0) Turkcell (11.0) (16.5) Itissalat Al Maghrib 16.4 3.1
Gerdau (14.0) (18.0) LG Electronics (12.0) (17.6) Bmf Bovespa (2.7) 2.7
Vale Pn (14.9) (18.7) Banco Itau (13.7) (19.4) NHN 1.1 2.7
PKO Bank (1.2) (19.3) Bradesco (13.8) (19.4) China Mobile (1.6) (2.3)
Cathay Financial (18.5) (19.9) PKO Bank (0.7) (19.7) Sasol (8.3) (3.1)
MTN Group (16.0) (19.9) China Overseas (19.2) (19.8) Petrobras (8.3) (3.2)
KEPCO (12.9) (20.0) Hon Hai Precision (20.1) (20.5) Lukoil (2.6) (3.7)
Hon Hai Precision (19.2) (20.5) KB Financial (15.4) (20.8) Reliance Industries (7.8) (6.6)
Petrobras (17.5) (21.3) China Shenhua Enrgy (21.1) (21.6) Petrochina (6.5) (7.2)
Nan Ya Plastics (21.9) (23.2) Gerdau (16.8) (22.3) Cathay Financial (10.1) (8.8)
Sider Nacional (20.0) (23.6) Petrobras (19.5) (24.8) CEZ 1.5 (9.5)
Sberbank of Russia (18.6) (23.9) Posco (19.8) (24.9) China Overseas (9.3) (10.0)
Posco (20.4) (26.9) Cathay Financial (24.7) (25.0) LG Electronics (12.0) (10.7)
KGHM (11.3) (27.6) OTP Bank (8.0) (28.2) Gazprom (9.8) (10.9)
OTP Bank (18.3) (33.2) KGHM (16.4) (32.5) MTN Group (16.0) (11.3)
Source: Datastream. Price as of 8 Jun 2010.
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Emerging Market
Emerging Dashboards
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Emerging Markets Strategy Dashboards

Summary: Regional and Countries Valuations
P/E (x) Div. Yield (%) P/BV (x) Earnings growth (%) ROE (%)
16-Jun-10 Hist.^ P/ EPS Current 12m Prospective Hist.^ Current Prospective Hist.^ Current Prospective
MSCI
Index Trough (Trend) Trailing Fwd 2009 2010E 2011E Peak Trailing 2010E 2011E Trough Trailing 2010E 2011E 2008 2009E 2010E 2011E 2009E 2010E 2011E
Global* 313 9.7 12.1 14.1 11.8 15.6 12.7 10.8 4.3 2.6 2.7 3.0 1.2 1.7 1.6 1.5 -33.4 -11.5 22.7 17.1 11.5 13.4 14.5
USA 1,061 11.6 11.4 18.2 12.6 28.6 13.5 11.5 4.0 1.9 2.1 2.2 1.4 2.2 1.9 1.7 -30.6 2.1 27.0 20.3 11.8 14.1 15.4
Europe* 1,087 7.0 9.8 14.8 10.4 18.7 11.2 9.4 6.1 3.3 3.9 4.4 1.1 1.7 1.5 1.4 -24.6 -21.1 27.6 21.0 12.7 15.9 18.1
Japan* 554 11.5 24.8 NM 14.5 NM 15.7 13.0 3.0 1.6 2.2 2.4 0.9 1.3 1.0 1.0 -17.8 NM NM 21.5 NM 6.8 7.8
Emerging Markets* 41,776 9.2 12.1 13.1 10.7 14.7 11.5 9.9 3.7 2.6 2.8 3.3 1.0 1.9 1.8 1.6 4.9 2.8 27.3 17.0 13.2 16.0 16.8
EMF Asia 590 10.3 15.0 13.9 11.4 15.9 12.1 10.7 3.4 2.4 2.6 3.0 1.0 1.9 1.8 1.6 -32.0 13.6 31.5 13.2 13.3 16.0 16.3
EMF LatAm* 7,096,411 8.6 12.7 14.1 11.5 15.5 12.7 10.3 5.5 2.8 3.1 4.0 0.6 2.2 2.0 1.9 2.3 4.2 22.0 23.8 11.0 17.2 18.9
EMF EMEA* 379 6.2 8.1 10.7 8.5 12.2 9.4 7.6 5.0 2.7 3.0 3.7 1.0 1.5 1.4 1.2 -18.9 -22.1 29.9 23.9 13.1 15.8 17.2
China 60 7.2 10.3 14.1 11.6 15.8 12.6 10.7 5.7 2.6 2.9 3.4 0.5 2.2 2.0 1.8 -10.9 17.2 25.4 17.2 15.4 17.2 17.9
Brazil* 223,916 6.5 7.9 12.9 10.4 14.2 11.6 9.3 7.6 3.1 3.3 4.4 0.4 2.1 1.8 1.7 1.4 1.4 22.2 25.5 16.1 17.8 19.0
Korea 486 7.7 10.5 11.4 9.3 13.8 9.5 9.1 2.9 1.1 1.2 1.4 0.5 1.4 1.3 1.2 -38.9 56.4 45.0 5.0 11.5 14.8 13.7
Taiwan 265 11.7 13.2 17.3 12.1 24.6 12.8 11.3 7.3 3.3 3.8 4.7 1.3 1.8 1.7 1.6 -69.2 36.0 92.1 13.3 8.1 14.3 14.7
South Africa* 716 9.1 10.5 14.3 10.9 16.6 12.2 9.7 4.7 2.9 3.3 4.1 1.4 2.2 2.0 1.8 -24.8 -17.6 35.8 25.9 13.9 17.6 19.4
India 708 10.4 19.2 19.2 15.3 21.4 17.2 13.6 2.5 1.2 1.3 1.5 1.8 3.0 2.8 2.4 -16.9 2.6 25.1 26.0 15.9 17.4 18.9
Russia* 721 3.5 3.5 7.9 6.1 9.1 6.8 5.4 3.2 1.4 2.1 2.8 0.2 1.0 0.9 0.8 -23.4 -28.1 34.1 24.9 12.0 15.1 16.3
Mexico* 30,351 9.0 10.2 16.1 13.7 17.4 14.8 12.5 3.5 2.5 2.6 3.3 0.7 2.4 2.6 2.5 -27.2 19.9 17.2 19.0 8.7 16.3 20.3
Malaysia 475 11.9 16.2 16.5 13.7 18.2 14.8 12.7 5.1 3.1 3.5 3.8 0.6 1.9 1.9 1.7 -13.0 -0.7 23.1 16.8 11.2 13.0 14.1
Chile* 4,920 11.4 22.4 19.5 15.5 22.4 16.9 14.1 8.9 2.2 2.3 3.0 0.9 2.0 1.8 1.7 -9.3 -2.7 32.8 19.7 8.8 11.5 12.5
Indonesia 3,864 5.3 14.8 15.1 12.8 16.3 13.8 11.9 5.9 2.6 3.0 3.6 0.9 3.7 3.3 2.8 4.8 20.7 17.9 16.7 26.4 26.0 25.7
Turkey* 823,106 5.1 5.9 10.5 9.1 11.3 9.7 8.5 4.0 3.6 3.0 3.7 1.4 1.8 1.7 1.5 3.6 3.5 17.2 13.6 18.3 18.6 18.9
Thailand 321 8.2 6.2 12.0 10.4 12.8 11.2 9.6 6.2 3.7 4.0 4.3 0.6 1.8 1.7 1.5 14.6 32.9 14.2 16.3 15.2 15.8 16.6
Poland* 1,633 6.5 11.9 13.8 11.7 14.9 12.7 10.7 6.3 2.4 3.6 4.5 0.9 1.6 1.5 1.4 -28.1 -25.7 17.3 18.3 11.3 12.6 13.6
Czech Republic* 357 7.3 6.9 11.4 11.1 11.2 11.5 10.6 10.0 5.4 5.9 6.2 0.5 2.0 2.0 1.9 1.2 2.8 -2.6 9.3 19.2 17.6 18.2
Egypt* 1,305 5.9 5.6 13.4 10.5 15.5 11.5 9.4 8.4 3.0 3.5 4.3 1.0 1.5 1.5 1.3 -31.3 -34.0 34.1 22.4 12.0 12.7 14.8
Philippines 620 7.9 20.9 16.4 14.4 17.3 15.4 13.4 5.1 4.0 3.9 3.5 0.9 2.5 2.4 2.2 -13.2 24.7 12.9 14.4 15.2 16.2 17.2
Hungary* 1,216 3.6 5.9 11.2 9.6 11.5 10.9 8.4 5.3 2.8 3.6 4.7 0.6 1.3 1.2 1.1 -36.6 -36.6 5.5 30.1 12.8 12.1 14.0
Source: I/B/E/S, MSCI, J.P. Morgan. Updated 16 June 2010.
* Market forecast numbers are derived from bottom-up calculations of each individual MSCI constituents using I/B/E/S estimates. IBES Estimates are not available for Morocco, Jordan, Peru and Colombia.
For all other markets, forecast numbers are derived from bottom-up calculations of each individual MSCI constituents using JPM estimates for covered stocks and I/B/E/S estimates for the rest.
Hist.^ refers to the historically lowest valuation of the MSCI indices since Jan 1991. Trough PE represents the lowest 12 month trailing PE. For dividend yield the highest values are taken to represent the best multiple.
P / EPS (Trend) uses the trend EPS for the indices calculated by the linear regression on the natural log of trailing EPS. For more, please refer to 'Mayday call for the shorts - Perspectives and Portfolios', 5 May 2009, Mowat et al.
P / EPE (Trend)' is NM for indices where the modeled relationship is weak with a less than 0.50 R-square. The start dates China and Singapore models are modified to make them more relevant. Sector indices inputs have not been altered.
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Market Performance: MSCI AC Performance by Regions, Countries and Sectors
North America
Philippines
EMF Latin
Indonesia
EMF Asia
EMF Asia
Malaysia
Thailand
America
Europe
Taiwan
Global
Japan
EMEA
Korea
China
India
EMF
2010 Year to Date
Consumer Discretionary 2.7% 10.5% -4.7% -7.2% -0.5% 4.2% -11.5% -6.8% 4.2% 11.3% -6.8% -9.5% 12.4% 1.2% 0.0% 33.9% 16.4%
Consumer Staples -2.1% -0.3% -5.9% -0.8% 3.2% 1.2% 4.1% 0.2% 1.2% 1.2% -3.7% -2.8% 5.6% -3.5% 36.2% 15.5%
Energy -9.8% -3.7% -20.7% 4.1% -9.4% -3.9% -16.7% -9.6% -3.9% -5.1% -1.5% -4.8% -2.6% 5.1% 2.3% -9.7%
Financials -6.9% 3.7% -19.0% -4.1% -5.2% -5.9% -5.0% -7.2% -5.9% -6.2% -15.2% -9.2% 3.0% 4.6% 3.6% 15.8% 8.6%
Healthcare -7.1% -4.7% -12.1% -8.5% 4.9% 6.1% 0.0% 5.3% 6.1% 0.0% 18.9% 6.2% 0.0%
Industrials 1.4% 6.5% -4.7% 0.5% -4.7% -5.1% -1.3% -5.3% -5.1% -1.9% -2.8% -10.1% -2.6% -3.9% 20.0% 27.7%
Information Technology -2.9% -2.6% -6.9% 2.7% -7.0% -7.2% 1.8% -10.4% -7.2% 6.7% -11.7% -19.0% 4.6%
Materials -7.5% -2.8% -12.2% -5.2% -5.5% -10.4% -3.1% -0.4% -10.4% -6.2% -6.2% -20.2% -11.7% 6.4% 24.3% 8.6%
Telecoms -8.6% -4.1% -17.6% 0.5% -0.9% 2.2% 0.6% -8.9% 2.2% 4.7% 0.6% 4.9% 11.6% 8.4% 1.3% -14.5% -7.4%
Utilities -9.7% -3.5% -21.3% 3.7% -3.8% -3.5% -6.6% 2.3% -3.5% -3.5% -8.6% -4.5% -0.1% 11.4% -0.6% -6.2%
Region / Country -4.9% 0.2% -13.8% -2.5% -4.7% -4.6% -5.3% -5.7% -4.6% 1.2% -9.8% -7.6% 0.1% 1.1% 6.2% 6.9% 3.8%
Benchmark
Change vs dollar 1.8% -4.3% -0.9% 0.0% -0.1% 4.8% 2.9% 2.6% -0.1%
Czech Republic
South Africa
EMF Latin
Argentina
Colombia
Morocco
Hungary
America
Mexico
Poland
Russia
Turkey
EMEA
Egypt
Brazil
Chile
Peru
2010 Year to Date
Consumer Discretionary -11.5% -12.1% -14.0% 15.5% -6.8% -0.3% -7.9% 14.4% 0.0%
Consumer Staples 4.1% 3.8% 1.1% 27.2% -9.9% -9.2% 0.2% 19.6% -19.2% 12.9% 0.0% 0.0%
Energy -16.7% -16.0% 1.7% 10.6% -9.6% -3.5% -6.5% 7.6% 6.4% 7.1% 0.0%
Financials -5.0% -7.6% 18.3% 19.4% 6.9% 22.0% 8.2% -7.2% 4.8% -6.0% 10.1% 2.8% -6.5% -8.4% 18.4% 16.3%
Healthcare 0.0% 0.0% 5.3% 5.3% -0.7% 4.2% 0.0%
Industrials -1.3% -8.8% 6.6% 14.5% -5.3% -4.3% 3.9% 9.7% -6.4% 25.7%
Information Technology 1.8% 4.3% -10.4% -6.9%
Materials -3.1% -4.1% 2.8% 11.0% 3.3% 2.3% -0.4% 0.4% 11.7% -8.0% -11.7% 6.6% 0.0%
Telecoms 0.6% -9.4% 1.5% -1.1% 11.9% -8.9% -4.9% 2.1% -11.4% -10.2% -12.3% -5.4% -5.6% 16.5%
Utilities -6.6% -5.1% -2.8% -1.8% 2.3% 0.0% 0.0% -13.0% 6.4%
Region / Country -5.3% -7.8% 0.9% 9.6% 5.9% 8.5% 5.4% -5.7% 1.2% -2.4% 5.9% -0.3% -1.6% -0.5% 3.3% 17.8%
Benchmark
Change vs dollar -2.4% 3.9% -4.2% -3.2% 1.8% 6.9% -3.1% -3.5% -4.1% -13.7% -17.0% -11.8% -3.4% -11.9%
Source: Bloomberg, MSCI. 16 June 2010.
Notes: Regional headings first sorted by regional weights in the MSCI EMF and then country headings from left to right by relative weights within the MSCI EMF
Indices: Regions in US$ and countries in local currency. Local currency movements against the dollar: appreciation / (depreciation).
Country and sector cross sections in italic blue have outperformed their indices by more than 2%; numbers in red have underperformed their indices by more than 2%.
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Equity Markets Liquidity Monitor

Country Stock
FF Daily Trading Value Daily Velocity BRIC Trading value (US$ bn, 3MMA)
Mkt Cap (US$ bn) Ratio (%)
40 8
Exchange (US$ Bn) 1 Wk Avg 3 MMA 09 Avg 1 Wk Avg 3M Avg 09 Avg China (LHS) India Brazil Russia
35 7
Developed Markets
US NYSE + NASDAQ + AMEX 12,887 41 52 40 0.32 0.39 0.35 30 6
UK London Stk Exchange 2,508 7.9 9.0 7.7 0.31 0.34 0.32 25 5
Japan Tokyo Stk Exchange 2,677 18 17 15 0.66 0.62 0.47 20 4
Australia ASX 1,061 4.1 5.1 3.3 0.39 0.45 0.39 15 3
HK HKSE 1,379 4.1 6.3 6.0 0.30 0.43 0.34
10 2
Singapore SSE 257 0.8 1.1 1.0 0.30 0.43 0.30
EM Asia 5 1
China Shanghai & Shenzhen A 1,350 16 23 30 1.19 1.57 1.09 0 0

India BSE & NSE 459 3.7 3.9 4.3 0.80 0.83 0.46 00 01 02 03 04 05 06 07 08 09 10
Indonesia JSE 103 0.3 0.6 0.4 0.31 0.55 0.26
Korea KSE 526 4.2 4.7 4.6 0.79 0.88 0.72
Malaysia Bursa Malaysia 125 0.2 0.4 0.3 0.19 0.30 0.14 Korea, Taiwan, HK & Singapore Trading Value (US$ bn, 3MMA)
Philippines PSE 31 0.1 0.1 0.1 0.21 0.36 0.16
12.5
Taiwan TWSE & OTC 473 2.9 4.1 4.2 0.62 0.83 0.78 Korea Taiw an HK Singapore
Thailand TSE 69 0.7 0.7 0.5 1.01 1.11 0.39 10.0

EMEA
Russia RTS + MICEX + DR 259 1.9 2.4 1.9 0.72 0.93 0.52 7.5
South Africa Johannesburg Stk Exchange 473 1.3 1.6 1.2 0.28 0.34 0.27 5.0
Turkey Istanbul Stk Exchange 80 1.1 1.7 1.2 1.40 2.12 0.75
Poland Warsaw Stk Exchange 62 0.5 0.6 0.4 0.74 0.92 0.44 2.5
Egypt Egyptian Exchange 35 0.1 0.0 0.0 0.41 0.08 0.00

0.0
LatAm
04 05 06 07 08 09 10
Brazil Bovespa + DR 707 5.3 6.5 4.6 0.75 0.90 0.49
Mexico Mexico Stk Exchange + DR 238 1.2 1.2 0.9 0.51 0.56 0.31
Chile Santiago Stk Exchange 90 0.13 0.18 0.14 0.14 0.21 0.08
Colombia Bogota Stk Exchange 37 0.05 0.06 0.05 0.12 0.18 0.05 Emerging ASEAN Trading Value (US$ bn, 3MMA)
Peru Lima Stk Exchange 36 0.01 0.02 0.02 0.03 0.05 0.04 1.2 Malay sia Indonesia Thailand Philippines
Argentina Argentina Stk Exchange 377 0.08 0.09 0.08 0.02 0.03 0.02
1.0
Source: Bloomberg, J.P. Morgan. Notes: Market cap uses all exchanges covered by Bloomberg for a specific country and primary security of
company only.
0.8
The latest one week average is red (gray box in B&W, dark blue in blue scale) if less than 90% of the three month average or blue (solid black box in
B&W, light blue in blue scale) if greater than 110% of the three month average. 0.6
To calculate the free float we use the MSCI free float factor for all markets except for Hong Kong, Russia and South Africa where we calculate the
free float for the Hong Kong Composite Index, MICEX, and JSE. 0.4
Trading value calculation for Russia, Mexico and Brazil, includes value of depository receipts traded (DR) along with local stock exchange turnover.
0.2
South Africa and Australia market capitalization and trading value includes only local listed portion of dual listed stocks. Velocity Ratio = (Trading
Value / Free float market cap) * 100 0.0
Updated 16 June 2010 04 05 06 07 08 09 10
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Monitoring Inflation: The real threat to EM equities

Central bank Policy
Inflation JPM f'cast CPI (YoY) CPI (YoY) Food CPI (YoY) CPI (%) FX (%) Rate Policy Rate Policy Rate
Country Inflation Rate Target/Est (%) CY2010 Date Previous Latest Previous Latest MoM 3M ann YoY 3M ann Current Last Change Next Change
United States Chained CPI na 1.6 Apr-10 2.4 2.2 0.0 0.3 (0.1) (0.0) 7.0 30.5 0.1 16 Dec 08 (-87.5bp) 2Q 11 (+25bp)
US core PPI Core PPI SA na na May-10 1.0 1.3 - - 0.2 2.1 7.7 34.3 - - -
US core CPI Urban core CPI na na Apr-10 1.2 0.9 - - 0.0 0.6 7.0 30.5 - - -
US Unit Labor Cost LC Nonfarm na na Mar-10 (5.2) (4.2) - - NA (1.3) 7.0 30.5 - - -
Euro Area CPI Under 2% 1.4 May-10 1.5 1.6 (0.2) (0.2) 0.1 6.1 (11.2) (31.6) 1.0 7 May 09 (-25bp) On hold
Japan CPI na -1.1 Apr-10 (1.1) (1.2) (1.6) (0.7) 0.0 0.8 4.9 (4.0) 0.1 19 Dec 08 (-20bp) 4Q 11 (+15bp)
Australia CPI 2-3 3.5 Mar-10 2.1 2.9 1.9 0.7 NA 3.6 8.9 (21.9) 4.5 4 May 10 (+25bp) Aug 10 (+25bp)
Hong Kong CPI na 2.3 Apr-10 2.0 2.4 1.3 1.9 0.4 4.0 (0.5) (1.4) 0.5 17 Dec 08 (-100bp) 2Q 11 (+25bp)
Singapore CPI # 2.5 - 3.5 3.2 Apr-10 1.6 3.2 0.9 1.2 0.9 5.7 4.5 0.7 - - -
EM Asia
China CPI # 3% 3.2 May-10 2.8 3.1 34.2 43.3 (0.1) (2.4) 0.1 (0.2) 5.3 22 Dec 08 (-27bp) 3Q 10 (+27bp)
Korea CPI 2-4 3.0 May-10 2.6 2.7 3.1 2.9 0.1 3.9 4.3 (22.7) 2.0 12 Feb 09 (-50bp) 3Q 10 (+25bp)
Indonesia CPI 4-6 4.4 May-10 3.9 4.2 5.9 6.7 0.3 1.2 11.4 (0.5) 6.5 5 Aug 09 (-25bp) 1Q 11 (+25bp)
India WPI # 8.5% 5.0 May-10 9.6 10.2 na na 1.7 12.7 3.7 (8.4) 5.3 20 Apr 10 (+25bp) 2Q 10 (+25bp)
India (CPI) CPI Ind. Workers na 6.5 Apr-10 14.9 13.3 16.9 16.5 0.0 (4.6) 3.7 (8.4) - - -
Malaysia CPI na 2.2 Apr-10 1.3 1.5 1.7 2.2 0.0 0.0 8.3 5.8 2.5 13 May 10 (+25bp) 3Q 10 (+25bp)
Philippines CPI 3.5 - 5.5 5.3 May-10 4.4 4.3 3.1 3.1 (0.2) 2.5 4.5 (4.8) 4.0 9 Jul 09 (-25bp) 24 Aug 10 (+25bp)
Thailand CPI # 3.5 - 5.5 4.8 May-10 2.9 3.5 3.7 4.6 0.2 3.8 5.4 (1.3) 1.3 8 Apr 09 (-25bp) 20 Oct 10 (+25bp)
Taiwan CPI # 0.9 1.0 May-10 1.3 0.7 1.3 (0.4) (0.2) (1.2) 2.0 (6.1) 1.3 18 Feb 09 (-25bp) 3Q 10 (+25bp)
Latin America
Argentina CPI na 8.0 May-10 10.2 10.7 14.5 15.1 0.7 11.5 (4.7) (6.8) - - -
Brazil CPI IPCA 4.5 (±2) 5.4 May-10 5.3 5.2 6.9 6.8 0.4 6.3 10.4 1.4 10.3 9 Jun 10 (+75bp) 21 Jul 10 (+75bp)
Colombia CPI 4.0 (±0.5) 2.5 May-10 2.0 2.1 0.9 1.0 0.1 3.3 8.7 (3.7) 3.0 30 Apr 10 (-50bp) 1Q 11 (+50bp)
Mexico CPI 3.0 (±1) 4.7 May-10 4.3 3.9 4.5 3.0 (0.6) (1.0) 6.8 (1.1) 4.5 17 Jul 09 (-25bp) Oct 10 (+25bp)
Peru CPI 2.0 (±1) 1.4 May-10 0.8 1.0 0.8 1.3 0.2 2.2 5.6 0.0 1.8 10 Jun 10 (+25bp) 8 Jul 10 (+25bp)
Chile CPI NSA 3.0 (±1) 2.5 May-10 0.9 1.5 1.2 1.4 0.4 3.7 3.1 (1.6) 1.0 15 Jun 10 (+50bp) Jul 10 (+50bp)
Europe, Middle East and Africa
Czech Republic CPI 2.0 (±1) 1.9 May-10 1.0 1.2 (0.6) (0.2) 0.1 2.8 (7.9) (35.3) 0.8 6 May 10 (-25bp) 2Q 11 (+25bp)
Hungary CPI 3.0 (±1) 4.8 May-10 5.9 5.1 2.4 (1.3) 0.9 8.7 (10.2) (46.4) 5.3 26 Apr 10 (-25bp) 3Q 11 (+25bp)
Poland CPI 2.5 (±1) 2.5 May-10 2.3 2.2 1.9 1.9 0.3 4.1 (1.3) (43.8) 3.5 24 Jun 09 (-25bp) 2Q 11 (+25bp)
Russia CPI 6.5 - 7.5 6.3 May-10 6.1 6.0 4.6 4.6 0.5 5.7 0.8 (20.0) 2.8 31 May 10 (-25bp) 2Q 11 (+25bp)
South Africa CPI 3.0 - 6.0 5.3 Apr-10 5.1 4.8 0.5 0.3 0.2 6.7 6.2 (13.6) 6.5 25 Mar 10 (-50bp) 2Q 11 (+50bp)
Turkey CPI 6.5 (±2) 8.6 May-10 10.2 9.1 11.8 6.7 (0.4) 3.3 (0.3) (9.5) 7.0 - 14 Oct 10 (+25bp)
Source: J.P. Morgan Economics, Bloomberg. Note: Current inflation data for countries which outside/above target range is highlighted.
# Countries where central banks target is not available. We have given J.P. Morgan Economic estimates.
No target is available for China, but general expectation is that the Central Bank would continue raising rates when the headline CPI rises above 3.0 % Updated as of 16 June 2010
In case of Taiwan, Estimate by DGBAS,CB targets M2 growth (2.5-6.5% for 2010)
Russia's CBR is not yet in a full-fledged inflation targeting, so they can change the target during the year.
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Outlook: Market Drivers
Global and developed market drivers
Country Positive Negative
Global Unprecedented significant policy response to the financial crisis, but markets need to see results, equity Developed economies in recession, ongoing deleveraging depressing most asset classes, no
valuations discounting a recession confidence in policy makers
US Passage of TARP Sub-prime & housing issues, slower earnings growth and inflation, confusion over implementation of
TARP
Europe Cheap valuations, weaker Euro Weakening economic growth, wage pressures, earning downgrades to come
UK Valuations cheap, currency weakness, wage growth under control, aggressive cut rates Weak consumer, falling property prices, economy in recession
Japan New credit cycle, reasonable valuations Cyclical earnings, recent weak manufacturing and yen volatility, economy in a recession
Australia Consumer tax cuts on the way, corporate pricing power, Larger than expected easing by RBA Falling property prices, bank funding costs and asset quality issues, lower commodity prices, slowdown
in economic activity
Hong Kong Fiscal stimulus, lower mortgage rates Property (which is 34% of index) unlikely to perform due to tight credit, weak capital markets, global
recession, exposure to slowing global trade and poor outlook for employment in financial services
Singapore Pro-growth fiscal policy, negative real rates and attractive valuations Weaker Singapore dollar policy, significant growth slowdown - export related and economy in a
recession
Emerging Market Drivers
Country Positive Negative
China Large fiscal stimulus. falling CPI, aggressive monetary easing policy, reform & liberalization on track, Slowing economic momentum, social stability issues, broader and deeper US/global recession, policy
lower corporates tax rates, trade weighted RMB appreciation, strong domestic demand, eased loan mis-step risks, poor sentiment in the property market, slowdown in Rmb appreciation
growth control, stamp duty tax cut and CIC investment
Brazil Cheap Valuations, Beta Play, Easing Interest Rate Cycle, Under owned Domestic Sector Redemption pressures, Commodity Driven Market, Downside risks to Earning and Growth
Korea Fiscal stimulus, tax cut (including property, income and corporate tax), falling commodities prices Weak domestic economy with deleveraging consumer, delay in deregulations dampening sentiment in
the housing market
Taiwan Fiscal stimulus, Corporate Tax cuts, realizing closer cross-straits links, investment positioning Tech is unlikely to perform with global recession, SME exposure of banks and increased political tension
(consensus UW position among FIs), compelling valuation due to the prosecution of the previous president
South Africa SA under owned by foreigners, infrastructure investment, cheap valuations, deep domestic investor base Rand exchange rate wildcard, political uncertainty, portfolio outflows by domestic fund managers on FX
relaxation, viewed as a commodity play, electricity shortage
India Aggressive monetary policy measure by RBI, fiscal stimulus and indirect tax cuts, long term economic Current account and Fiscal deficits, elections in 1H 09, slowdown impact on Indian IT
growth, attractive valuations, demographics, cash flow into insurance companies
Russia Government's pro-active response to liquidity crisis Severe liquidity deficit, Monetary tightening, heavy commodity exposure, high inflation, lack of monetary
flexibility, consensus overweight going into financial crisis
Mexico Re rating upside on Calderon reform agenda and boast to Potential GDP, Fiscal Stimulus Program and Delay in US strengthening, Mexican credit availability, Foreign owned banking system, Deteriorating
Policy Rate flexibility, Lower corporate risks, competitive FX public security situation.
Malaysia Strong domestic demand, soft commodity play, 9MP pump priming Near term political uncertainty, limited GLC reform, delays in 9 MP infrastructure projects, trading at a
premium to region
Indonesia Lower oil prices reducing pressure on subsidies, external balances remain healthy Limited policy flexibility, high inflation, increase in bond issuance to meet subsidies, currency weakness,
Bakrie brothers issue
Turkey Falling commodity prices, robust banking sector, policy rates likely to have peaked, inexpensive Lira weakness, exposure to growth slowdown in developed Europe, low earnings growth, delays in
valuations, CBRT rate cuts on growth worries securing IMF stand-by agreement, political tensions
Thailand Fiscal stimulus, aggressive monetary easing, Newly elected democratic govt should speed up fiscal Politics, uncertainty on macro economic policy
spending
Poland Domestic demand, market-friendly political setting Wage and margin pressures, loss of momentum in manufacturing, local mutual fund redemptions,
exposure to growth slowdown in developed Europe, relatively expensive compared to the region
Czech Republic Diversified growth, low interest rates, reformed banking sector High exposure to growth slowdown in developed Europe via auto manufacturing sector
Philippines Fiscal consolidation, resilient OFW remittances, BPO sector to see continued strength, investment cycle Global risks to affect risk appetite on emerging economies, low liquidity, political noise
upturn, falling food and oil prices
Hungary Continued fiscal restraint, IMF support High exposure to FX-denominated loans by households, poor growth prospects, exposure to growth
slowdown in developed Europe, tight monetary policy
Updated as of 16 June 2010.
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Profit Outlook: Earnings Forecasts Matrix for Countries and Sectors
Weight EPS Growth Weight EPS Growth Weight EPS Growth
Emerging Markets (%) JPMorgan Consensus China (%) J.P. Morgan Consensus India (%) JPMorgan Consensus
Median 2010 2011 Median 2010 2011 Median 2010 2011 Median 2010 2011 Median 2010 2011 Median 2010 2011
Total Market 100.0 - - - 19.0 27.3 17.0 Total Market 100.0 23.9 25.4 17.2 22.1 24.6 16.5 Total Market 100 21.7 25.1 26.0 19.1 22.7 18.2
Consumer Discretionary 6.3 - - - 18.4 19.3 17.0 Consumer Discretionary 4.6 23.6 25.2 14.6 21.0 22.7 17.0 Consumer Discretionary 4.8 22.6 23.7 11.7 13.4 14.7 16.2
Consumer Staples 6.7 - - - 17.6 15.9 17.5 Consumer Staples 5.7 17.2 16.7 16.1 19.8 14.5 18.0 Consumer Staples 5.6 18.4 18.2 25.6 15.4 17.8 20.5
Energy 14.4 - - - 19.5 15.2 13.5 Energy 16.9 12.8 25.9 10.4 33.8 31.0 12.8 Energy 15.6 34.8 41.8 20.6 12.3 16.8 9.8
Financials 25.1 - - - 21.0 25.6 21.8 Financials 38.1 26.8 25.3 22.2 22.0 19.8 18.9 Financials 25.2 22.3 21.5 26.7 23.7 25.1 21.3
Health Care 0.8 - - - 23.4 22.7 18.2 Health Care 0.9 24.2 17.6 30.2 22.1 17.5 31.3 Health Care 3.9 29.1 33.9 18.4 29.1 33.9 18.4
Industrials 6.7 - - - 18.6 20.8 18.1 Industrials 7.6 22.0 53.1 12.5 19.8 64.3 18.5 Industrials 10.0 31.0 28.4 66.4 40.4 33.3 38.9
Information Technology 13.4 - - - 31.9 56.1 6.7 Information Technology 6.2 54.0 132.6 34.8 40.3 94.1 40.9 Information Technology 17.0 15.5 14.7 21.4 13.1 12.2 23.4
Materials 14.5 - - - 38.5 58.4 27.4 Materials 5.4 39.5 43.1 31.3 39.0 86.3 21.1 Materials 11.1 19.3 35.5 26.5 19.3 39.5 14.4
Telecommunication Services 8.4 - - - 6.1 10.0 9.6 Telecommunication Services 12.6 4.4 1.2 5.1 4.4 1.2 5.1 Telecommunication Services 0.7 -31.2 -31.2 35.4 -1.1 -1.1 23.7
Utilities 3.7 - - - 9.0 12.3 14.4 Utilities 2.0 NM NM 20.4 NM NM 21.4 Utilities 6.1 8.3 8.6 16.4 13.3 13.9 9.3
Indonesia (%) JPMorgan Consensus Korea (%) JPMorgan Consensus Malaysia (%) JPMorgan Consensus
Total Market 100.0 15.7 17.9 16.7 17.7 20.1 18.9 Total Market 100.0 17.3 45.0 5.0 18.1 51.2 6.7 Total Market 100.0 12.6 23.1 16.8 16.0 22.3 100.0
Consumer Discretionary 13.7 29.8 29.8 7.5 21.8 21.8 13.6 Consumer Discretionary 13.7 12.2 14.6 4.5 12.0 14.9 9.9 Consumer Discretionary 11.5 3.9 -2.7 40.0 21.0 18.9 13.7
Consumer Staples 10.7 17.4 14.4 20.6 17.3 16.0 13.4 Consumer Staples 4.6 16.6 9.3 16.5 16.9 10.7 8.8 Consumer Staples 13.4 32.4 13.9 2.5 34.3 19.4 10.7
Energy 12.9 0.5 23.5 48.9 -4.6 29.1 41.8 Energy 2.2 18.5 18.6 12.4 72.5 63.1 14.1 Energy 0.8 4.9 4.9 3.2 4.9 4.9 12.9
Financials 28.0 24.5 17.8 20.4 23.2 24.9 18.3 Financials 16.5 25.8 76.8 15.8 24.9 83.8 14.4 Financials 31.1 14.3 29.0 16.1 16.4 18.1 28.0
Health Care 0.0 NA NA NA NA NA NA Health Care 0.5 25.6 20.8 25.0 25.6 20.8 25.0 Health Care 0.0 NA NA NA NA NA 0.0
Industrials 4.3 7.5 7.5 -7.0 9.7 9.7 15.4 Industrials 13.4 14.4 29.8 10.4 15.5 37.3 10.4 Industrials 18.9 33.7 44.4 28.7 30.5 40.1 4.3
Information Technology 0.0 NA NA NA NA NA NA Information Technology 30.9 66.4 80.9 -10.3 66.4 86.1 -2.7 Information Technology 0.0 NA NA NA NA NA 0.0
Materials 10.2 60.5 35.3 -3.3 53.2 30.0 15.8 Materials 13.2 11.5 19.8 9.4 11.5 20.9 4.9 Materials 0.8 -1.0 -1.0 9.8 -1.0 -1.0 10.2
Telecommunication Services 13.6 12.1 10.4 11.0 12.1 10.4 11.0 Telecommunication Services 3.1 20.0 54.4 11.9 20.0 54.4 11.9 Telecommunication Services 11.1 9.5 8.5 9.1 8.9 6.5 13.6
Utilities 6.6 -7.1 -7.1 9.7 4.6 4.6 15.8 Utilities 1.9 NM NM NM NM NM NM Utilities 12.3 9.3 36.3 8.5 9.3 36.5 6.6
Philippines (%) JPMorgan Consensus Taiwan (%) JPMorgan Consensus Thailand (%) JPMorgan Consensus
Total Market 100.0 13.3 12.9 14.4 15.9 23.0 12.2 Total Market 100.0 27.9 92.1 13.3 23.2 84.4 12.6 Total Market 100.0 9.5 14.2 16.3 14.4 18.8 18.7
Consumer Discretionary 3.9 16.6 16.6 12.6 16.6 16.6 12.6 Consumer Discretionary 2.6 -4.8 77.1 34.2 6.2 92.8 30.2 Consumer Discretionary 1.5 8.8 8.8 5.0 11.9 11.9 9.0
Consumer Staples 0.0 NA NA NA NA NA NA Consumer Staples 1.5 17.5 17.7 10.3 20.5 19.2 10.9 Consumer Staples 8.1 13.9 13.7 7.3 17.2 16.0 9.3
Energy 0.0 NA NA NA NA NA NA Energy 0.8 -2.6 -2.6 8.3 -3.9 -3.9 11.0 Energy 41.7 5.7 15.6 17.8 5.6 20.5 19.3
Financials 45.5 11.6 14.0 21.9 16.1 17.1 17.1 Financials 14.5 31.7 48.3 25.2 24.7 31.5 23.9 Financials 35.3 20.0 13.5 15.9 18.6 19.7 18.3
Health Care 0.0 NA NA NA NA NA NA Health Care 0.0 NA NA NA NA NA NA Health Care 0.0 NA NA NA NA NA NA
Industrials 11.2 13.6 13.6 12.1 10.7 10.7 16.5 Industrials 3.2 37.9 -368.3 36.9 24.1 1050 12.1 Industrials 0.0 NA NA NA NA NA NA
Information Technology 0.0 NA NA NA NA NA NA Information Technology 60.8 33.1 142.8 9.5 32.8 128.6 12.1 Information Technology 0.0 NA NA NA NA NA NA
Materials 0.0 NA NA NA NA NA NA Materials 12.1 28.0 18.0 21.5 35.1 31.9 7.4 Materials 7.6 29.4 16.7 29.5 32.0 17.2 36.1
Telecommunication Services 21.7 1.7 5.3 4.3 1.7 5.3 4.3 Telecommunication Services 4.4 2.8 -3.1 0.8 2.8 -3.1 0.8 Telecommunication Services 4.7 5.6 5.6 3.8 5.6 5.6 3.8
Utilities 17.7 25.8 26.8 19.4 127.2 112.6 13.2 Utilities 0.0 NA NA NA NA NA NA Utilities 1.1 10.2 10.2 -4.6 12.4 12.4 10.7

South Africa (%) JPMorgan Consensus Brazil (%) JPMorgan Consensus Mexico (%) JPMorgan Consensus
Total Market 100.0 - - - 23.1 35.8 25.9 Total Market 100.0 - - - 25.7 22.2 25.5 Total Market 100.0 - - - 20.2 17.2 19.0
Consumer Discretionary 11.6 - - - 25.8 23.2 24.1 Consumer Discretionary 4.7 - - - 63.5 31.9 34.5 Consumer Discretionary 9.9 - - - 20.2 46.6 12.6
Consumer Staples 5.5 - - - 12.2 10.7 14.8 Consumer Staples 8.6 - - - 17.7 37.6 26.6 Consumer Staples 25.1 - - - 10.9 -0.7 20.3
Energy 9.6 - - - 20.5 20.5 27.9 Energy 22.7 - - - 56.7 -2.0 15.0 Energy 0.0 - - - NA NA NA
Financials 26.1 - - - 24.0 22.0 21.7 Financials 24.0 - - - 25.7 8.3 20.8 Financials 6.7 - - - 155.8 52.7 30.2
Health Care 2.1 - - - 25.3 25.2 18.4 Health Care 0.0 - - - NA NA NA Health Care 0.0 - - - NA NA NA
Industrials 4.3 - - - -4.7 2.1 18.6 Industrials 2.9 - - - -7.5 -43.5 28.4 Industrials 4.1 - - - 53.1 47.2 18.4
Information Technology 0.0 - - - NA NA NA Information Technology 2.3 - - - 12.9 12.9 5.2 Information Technology 0.0 - - - NA NA NA
Materials 28.2 - - - 44.1 186.5 43.6 Materials 26.6 - - - 56.3 104.4 41.0 Materials 17.5 - - - 39.1 28.3 42.1
Telecommunication Services 12.5 - - - 9.3 20.0 17.1 Telecommunication Services 2.9 - - - 66.7 5.6 21.0 Telecommunication Services 36.7 - - - 6.3 13.3 9.5
Utilities 0.0 - - - NA NA NA Utilities 5.3 - - - -1.9 3.0 10.2 Utilities 0.0 - - - NA NA NA
Russia (%) JPMorgan Consensus Poland (%) JPMorgan Consensus Turkey (%) JPMorgan Consensus
Total Market 100.0 - - - 43.4 34.1 24.9 Total Market 100.0 - - - 13.7 17.3 18.3 Total Market 100.0 - - - 12.6 17.2 13.6
Consumer Discretionary 0.0 - - - NA NA NA Consumer Discretionary 2.7 - - - 7.6 4.5 22.6 Consumer Discretionary 1.4 - - - -6.7 -6.7 3.6
Consumer Staples 2.8 - - - 33.3 31.1 35.8 Consumer Staples 1.6 - - - 13.7 13.7 13.8 Consumer Staples 10.3 - - - 13.0 15.5 21.2
Energy 58.6 - - - 13.9 14.1 9.7 Energy 14.8 - - - -26.8 -18.7 27.2 Energy 5.0 - - - 38.0 38.0 10.4
Financials 11.8 - - - 516.7 516.7 64.4 Financials 56.4 - - - 29.9 55.2 26.3 Financials 60.0 - - - 14.0 12.8 12.4
Health Care 0.0 - - - NA NA NA Health Care 0.0 - - - NA NA NA Health Care 0.0 - - - NA NA NA
Industrials 0.0 - - - NA NA NA Industrials 1.6 - - - 4.2 4.2 11.7 Industrials 9.5 - - - 9.0 24.9 20.9
Information Technology 0.0 - - - NA NA NA Information Technology 2.7 - - - -13.8 -13.8 5.6 Information Technology 0.0 - - - NA NA NA
Materials 13.9 - - - 66.2 139.3 51.5 Materials 9.4 - - - 36.0 36.0 -0.1 Materials 2.1 - - - NA -408.6 48.1
Telecommunication Services 7.0 - - - 94.9 172.1 21.8 Telecommunication Services 6.8 - - - -7.8 -7.8 6.7 Telecommunication Services 11.7 - - - 12.3 11.9 9.3
Utilities 5.9 - - - NM NM NM Utilities 4.0 - - - -20.3 -20.3 16.9 Utilities 0.0 - - - NA NA NA
Source: I/B/E/S, MSCI, J.P. Morgan. Note: Average earnings growth calculated based on earnings aggregate of MSCI constituents. Consensus numbers are used for stocks not covered by J.P. Morgan under J.P. Morgan forecasts calculation. Median numbers are for
the year 2009. Updated as of 16 June 2010.
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Profit Outlook: Changes in 2010 and 2011 EPS Forecasts
World Emerging Markets (EM) EM Asia EM Europe
130 150 160 2011 150
2011 2011
140 150 140
120 2011
140
130 130
130
110 120 120 2010
2010 120
2010 2010 110
110 110
100
100 100
100
90 90 90
90
Feb-09 Sep-09 Apr-10 Feb-09 Sep-09 Apr-10 Feb-09 Sep-09 Apr-10
Feb-09 Sep-09 Apr-10
EM Latin America Korea Taiwan China

140 160 180 130
2011 2011 2011
130 150 170
160 120 2011
120 140
150
130
110 140 110
120 130 2010
100 2010
110 120 2010
100
90 110
2010 100
100
80 90 90
90
Brazil Russia South Africa Mexico

130 160 120 130
2011
150 2011
120 2011
110 120
2011 140
110
130 100
100 110
120 2010
90 2010
90
110 100
80 2010
100 80
70 90 90
2010 70
Feb-09 Sep-09 Apr-10 80 Feb-09 Sep-09 Apr-10
Source: I/B/E/S
Notes: The dashboard aims to show changes in earnings expectations. All year ends are for December. EPS figures are normalized, starting at 100 on base date Feb 2009 for ease of comparison. These numbers are directly from IBES aggregate and may differ from
those in the growth expectations pages where adjustments are made for exceptional items. Countries earnings revisions are in local currencies term whereas APxJ regions earnings revisions is in US $ term. Updated 16 June 2010.
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Profit Outlook: Changes in 2010 and 2011 EPS Forecasts

India Malaysia Thailand Poland
140 130 140 110
2011 2011 2011
130 120 2011
130 100
120 110 120 90
110 100 110 80
100 2010 90 2010 2010

100 70
2010
90 80
90 60
Feb-09 Sep-09 Apr-10 Feb-09 Sep-09 Apr-10
Chile Turkey Philippines Indonesia
140 130 130 150

2011 2011
2011 2011
130 120 140
120
120 130
110
110 120
110
100
100 2010 110
100
2010 90 100 2010
90 2010
90
80 80 90
Hungary Czech. Republic

130 110
2011
120
2011
110
2010
100 100
90
80
2010
70 90
Source:I/B/E/S Notes: The dashboard aims to show changes in earnings expectations. All year ends are for December. EPS figures are normalized, starting at 100 on base date Feb 2009 for ease of comparison. These numbers are directly from IBES aggregate and
may differ from those in the growth expectations pages where adjustments are made for exceptional items. Countries earnings revisions are in local currencies term whereas APxJ regions earnings revisions is in US $ term. Updated 16 June 2010.
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Value: PE Matrix for Countries and Sectors
EMF LATAM
Philippines
EMF EMEA
Indonesia
Emerging
EMF Asia
Malaysia
Thailand
Markets
Taiwan
Korea
China
India
USA
12-month forward PE
Consumer Discretionary 14.3 11.7 12.3 12.2 11.0 8.0 15.8 13.9 12.5 15.2 12.5 16.1 19.5
Consumer Staples 13.2 16.9 15.0 17.2 15.4 12.8 14.8 16.9 21.0 15.3 17.0 13.4 NA
Energy 11.9 7.9 5.4 10.3 10.2 7.2 18.4 10.2 13.3 10.8 11.3 10.1 NA
Financials 11.7 11.0 9.6 10.9 11.1 8.3 12.0 10.6 17.5 12.5 12.7 10.1 17.4
Health Care 11.1 17.9 13.8 NA 19.7 14.1 NA 29.9 17.9 NA NA NA NA
Industrials 14.4 12.2 9.8 18.4 11.4 10.9 18.3 12.6 20.4 14.9 14.8 NA 13.7
Information Technology 12.9 11.2 11.8 11.8 11.1 10.5 11.5 22.9 19.4 NA NA NA NA
Materials 14.5 10.1 11.4 9.5 9.9 8.6 13.3 11.5 9.6 13.0 13.9 10.5 NA
Telecom Services 13.4 11.3 9.9 11.4 11.5 7.9 13.0 11.9 10.0 15.7 11.7 12.0 10.2
Utilities 12.3 11.6 9.8 9.6 13.0 NM NA 12.9 17.7 12.4 14.7 11.4 15.5
Market Aggregate 12.6 10.7 8.5 11.5 11.4 9.3 12.1 11.6 15.3 13.7 12.8 10.4 14.4
Sector Neutral** 12.8 10.7 9.5 11.3 11.1 8.8 13.6 12.4 14.4 12.7 12.7 11.1 12.2
South Africa
EMF LATAM
EMF EMEA
Republic
Hungary
Mexico
Poland
Russia
Turkey
Czech
Brazil
Chile
12-month forward PE
Consumer Discretionary 12.3 NA 12.0 17.4 9.7 NA -19.9 12.2 11.1 13.4 26.8
Consumer Staples 15.0 20.2 13.8 NA 18.9 NA NA 17.2 16.3 17.5 20.3
Energy 5.4 4.8 8.9 12.4 8.2 9.2 NA 10.3 10.2 NA NA
Financials 9.6 8.3 9.8 13.9 8.3 8.6 11.1 10.9 10.6 13.3 11.9
Health Care 13.8 NA 12.7 NA NA 16.0 NA NA NA NA NA
Industrials 9.8 NA 9.3 12.7 8.4 NA NA 18.4 20.0 14.0 20.0
Information Technology 11.8 NA NA 11.8 NA NA NA 11.8 11.8 NA NA
Materials 11.4 8.2 14.6 6.4 11.0 NA NA 9.5 8.1 12.9 17.4
Telecom Services 9.9 9.6 9.5 15.8 8.6 9.8 12.0 11.4 10.2 11.7 10.4
Utilities 9.8 11.3 NA 11.3 NA NA 9.8 9.6 8.5 NA 11.3
Market Aggregate 8.5 6.1 10.9 11.7 9.1 9.6 11.1 11.5 10.4 13.7 15.5
Sector Neutral** 9.5 8.6 10.7 11.7 9.6 10.2 11.8 11.3 10.7 11.8 12.4
Source: IBES, MSCI, J.P. Morgan. Note: Market forecast numbers are derived from bottom-up calculations of each individual MSCI constituents using I/B/E/S estimates. IBES Estimates are not available for Morocco, Jordan, Peru and Colombia.
**Sector neutral PE are calculated by using sector weights of MSCI EM and sector PE of respective markets (MSCI EM sector PE used where country sector does not exist) Updated 16 June 2010.
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Value: Distribution Tables for PE, PBR, DY and RoE

2010E: Price to Earnings Ratio (x) 2010E: Price to Book Value Ratio (x)
Weighted Quartiles Weighted Quartiles
Average Min Lower Median Higher Max Average Min Lower Median Higher Max
Global* 12.7 3.6 11.2 14.1 18.1 828 Global* 1.6 0.3 1.1 1.6 2.6 46.5
USA* 13.5 4.4 11.7 14.6 18.9 467 USA* 1.9 0.5 1.3 2.0 3.1 46.5
Europe* 11.2 4.6 10.7 14.2 17.5 828 Europe* 1.5 0.3 1.0 1.7 2.7 30.9
Japan* 15.7 5.2 13.0 15.3 19.6 53.1 Japan* 1.0 0.3 0.8 1.1 1.4 6.8
Emerging Markets* 11.5 3.6 10.1 13.1 17.1 250 Emerging Markets* 1.8 0.4 1.3 1.8 2.7 36.7
China 12.6 4.3 10.3 14.0 21.9 250 China 2.0 0.5 1.3 1.8 2.8 12.1
Brazil* 11.6 6.4 9.6 12.5 17.1 215 Brazil* 1.8 0.4 1.4 1.8 3.0 25.1
Korea 9.5 3.6 7.6 10.1 13.5 90.8 Korea 1.3 0.4 0.9 1.3 1.8 6.7
Taiwan 12.8 6.3 10.5 12.7 16.4 115 Taiwan 1.7 0.7 1.1 1.6 2.3 7.9
South Africa* 12.2 6.8 10.0 11.1 14.7 74.6 South Africa* 2.0 0.5 1.5 2.1 3.4 12.3
India 17.2 6.9 12.0 17.7 22.2 64.7 India 2.8 0.7 1.8 2.4 3.8 18.3
Russia* 6.8 4.4 7.3 10.0 14.8 26.9 Russia* 0.9 0.5 0.9 1.5 2.0 4.6
Mexico* 14.8 8.4 13.8 15.8 18.1 23.6 Mexico* 2.6 0.7 1.7 2.4 3.5 11.3
Malaysia 14.8 5.8 12.7 14.7 17.7 23.2 Chile* 1.9 0.9 1.5 1.7 2.6 36.7
Chile* 16.9 10.7 12.3 19.5 23.5 60.0 Indonesia 1.8 1.3 1.3 2.2 2.3 4.1
Indonesia 13.8 9.3 12.0 14.4 15.8 30.0 Turkey* 3.3 1.4 2.5 3.2 4.2 23.7
Turkey* 9.7 6.3 8.7 9.5 13.2 24.8 Thailand 1.7 0.7 1.1 1.8 2.0 13.2
Thailand 11.2 7.9 9.9 11.8 12.9 20.4 Poland* 1.7 1.1 1.2 1.6 2.6 7.0
Poland* 12.7 5.8 12.1 14.2 16.1 22.5 Czech Republic* 1.5 0.6 1.1 1.6 2.2 8.7
Czech Republic* 11.5 10.2 10.9 11.7 11.8 11.9 Egypt* 2.0 1.3 1.7 1.9 2.0 2.2
Egypt* 11.5 8.6 9.9 10.8 12.4 15.9 Philippines 1.5 0.7 1.0 1.6 2.5 4.3
Philippines 15.4 9.9 13.1 16.0 19.4 36.8 Hungary* 2.4 1.4 1.8 2.6 3.0 4.3
Hungary* 10.9 9.1 9.7 10.2 12.0 16.4 Global* 1.2 1.0 1.1 1.2 1.5 2.0
2010E: Dividend Yield (%) 2010E: Return on Equity (%)

Weighted Quartiles Weighted Quartiles
Average Min Lower Median Higher Max Average Min Lower Median Higher Max
Global* 2.7 0.0 1.1 2.2 3.7 15.2 Global* 13.4 -4.0 7.7 12.5 18.6 266
USA* 2.1 0.0 0.0 1.4 2.8 15.2 USA* 14.1 0.3 8.6 13.7 19.6 266
Europe* 3.9 0.0 1.9 3.0 4.7 12.4 Europe* 15.9 0.1 8.0 13.1 18.9 193
Japan* 2.2 0.0 1.4 1.8 2.4 7.0 Japan* 6.8 1.0 5.2 7.0 9.6 56.2
Emerging Markets* 2.8 0.0 1.2 2.3 3.9 14.5 Emerging Markets* 16.0 -4.0 10.3 14.9 20.4 197
China 2.9 0.0 1.1 1.9 2.9 6.8 China 17.2 0.4 10.5 14.6 19.8 51.4
Brazil* 3.3 0.0 1.6 2.8 4.4 14.5 Brazil* 17.8 -4.0 10.0 15.3 22.0 197
Korea 1.2 0.0 0.5 1.4 2.6 6.1 Korea 14.8 2.0 10.1 13.4 17.5 34.0
Taiwan 3.8 0.0 1.8 3.4 5.0 8.7 Taiwan 14.3 1.3 7.8 11.8 17.7 37.8
South Africa* 3.3 0.4 2.6 3.8 4.8 9.4 South Africa* 17.6 1.5 13.5 18.3 26.1 98.6
India 1.3 0.0 0.6 1.1 1.6 3.5 India 17.4 2.5 11.3 17.6 21.5 88.3
Russia* 2.1 0.0 0.0 1.3 2.8 5.5 Russia* 15.1 5.3 12.8 15.6 22.2 40.5
Mexico* 2.6 0.0 0.9 1.7 2.9 7.5 Mexico* 16.3 3.3 11.4 13.8 20.7 62.2
Malaysia 3.5 0.0 2.0 3.1 4.5 8.4 Malaysia 13.0 5.0 9.5 13.4 16.2 219
Chile* 2.3 0.7 1.4 1.8 3.9 6.0 Chile* 11.5 6.0 6.6 7.2 11.7 21.3
Indonesia 3.0 1.3 2.3 2.8 3.4 5.6 Indonesia 26.0 9.0 19.5 23.9 28.0 78.9
Turkey* 3.0 0.0 0.9 2.4 3.1 9.3 Turkey* 18.6 3.9 13.4 17.1 20.0 53.5
Thailand 4.0 2.8 3.2 3.9 5.0 10.2 Thailand 15.8 8.6 13.6 15.1 21.5 39.7
Poland* 3.6 0.0 0.4 2.3 3.6 10.2 Poland* 12.6 4.6 8.6 10.7 14.6 62.1
Czech Republic* 5.9 0.0 3.7 5.3 6.7 10.0 Czech Republic* 17.6 -2.2 11.3 15.9 17.5 21.8
Egypt* 3.5 0.7 2.6 2.8 4.6 6.9 Egypt* 12.7 7.7 10.5 14.8 16.4 42.8
Philippines 3.9 0.4 1.8 2.4 4.9 9.0 Philippines 16.2 7.9 10.9 14.0 17.5 40.7
Hungary* 3.6 1.7 2.6 3.0 5.2 11.6 Hungary* 12.1 10.7 10.9 11.7 12.8 14.3
Source: Datastream, IBES, MSCI, J.P. Morgan. Updated 16 June 2010.
Note: Weighted average numbers based on aggregate of MSCI constituents. Consensus numbers are used for stocks not covered by J.P. Morgan. * only consensus numbers are used
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Value: Demand Classification: MSCI Emerging Markets Index Composition by Countries

MSCI Emerging Domestic Global Capex Global Global Price Total EM Domestic Demand Sector Absolute and relative (vs EMF) Index
Markets Free Index Demand Consumer Takers
400 100
China 13.9 0.5 0.2 3.9 18.5 350 Absolute (lhs) 90
India 4.3 1.4 0.0 2.3 8.0 300
80
Indonesia 2.0 0.0 0.0 0.3 2.3 250
200 70
Korea 5.5 2.4 3.6 2.0 13.5 Relative to EM (rhs)
150
Malaysia 2.3 0.0 0.0 0.6 2.8 60
100
Philippines 0.5 0.0 0.0 0.0 0.5 50
50
Taiwan 3.0 3.3 3.2 1.3 10.8 0 40
Thailand 1.0 0.0 0.0 0.5 1.5 Jan-90 Jul-92 Jan-95 Jul-97 Jan-00 Jul-02 Jan-05 Jul-07 Jan-10
Asia 32.3 7.5 7.1 11.0 57.9 EM
Czech Republic 0.4 0.0 0.0 0.0 0.4 Global Capex Sector Absolute and relative (vs EMF) Index
Egypt 0.5 0.0 0.0 0.0 0.5 1200 500
Hungary 0.2 0.0 0.0 0.2 0.4 1000
Absolute (lhs)
400
Morocco 0.2 0.0 0.0 0.0 0.2 800
Poland 1.1 0.0 0.0 0.2 1.4 300
600
Russia 1.8 0.1 0.0 4.6 6.5 200
400
South Africa 4.5 0.0 0.0 2.8 7.4 100
200
Turkey 1.6 0.0 0.0 0.0 1.7 Relative to EM (rhs)
EMEA 10.4 0.1 0.1 7.8 18.4 0

Jan-90 Jul-92 Jan-95 Jul-97 Jan-00 Jul-02 Jan-05 Jul-07 Jan-10
0
Brazil 8.5 0.0 0.0 7.6 16.1

Chile 1.4 0.0 0.0 0.1 1.6 EM Global Consumer Sector Absolute and relative (vs EMF) Index
Colombia 0.5 0.1 0.0 0.2 0.8
Mexico 3.9 0.3 0.0 0.4 4.6 800 300
Absolute (lhs)
Peru 0.2 0.0 0.0 0.5 0.7 700
250
600
LatAm 14.5 0.4 0.0 8.7 23.7 200
500
Total 57.2 8.1 7.2 27.5 100.0
400 150
300
100
200
Relative to EM (rhs) 50
100
0 0
EM Global Price Taker Sector Absolute and relative (vs EMF) Index
450 110
400 Absolute (lhs)
350 90
300
70
250
200 Relative to EM (rhs)
50
150
100 30
50
0 10
Source: Datastream, MSCI. J.P. Morgan. MSCI emerging markets companies have been classified in five categories. Of the five categories, Global Consumer/Capex (Tech-Hardware) weighting equally divided between Global consumer and Global Capex. The above
table contains MSCI free float market capitalization as a percentage of MSCI emerging markets. Charts show the relative absolute and relative performance of emerging markets sectors by demand classification. Updated 16 June 2010.
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Value: Equities relative to Bonds

Relative out performance of equities versus bonds by country (%)
36-month
1-month 3-month 6-month 12-month 36-month
Country annualized
Brazil -1.5 -8.1 -9.8 2.2 10.3 3.3
Chile 3.4 0.9 10.9 14.6 21.7 6.8
China -1.2 -8.2 -12.0 9.7 4.8 1.6
Colombia -0.2 -3.1 -1.2 17.1 53.4 15.3
Czech -0.6 -5.2 -2.7 -7.7 -22.1 -8.0
Hungary -6.9 -10.1 -2.8 10.0 -36.6 -14.1
India -1.3 -5.7 -5.7 11.6 13.1 4.2
Indonesia -0.7 -3.8 -5.0 12.6 45.3 13.3
Malaysia -3.4 -3.1 0.4 17.4 -2.2 -0.7
Mexico -3.4 -6.9 -8.8 12.3 -12.2 -4.2
Peru 13.4 7.9 8.0 34.3 30.0 9.1
Poland 0.1 -3.1 -3.6 21.5 -35.5 -13.6
Russia 0.3 -10.4 -7.8 -8.3 -42.5 -16.8
South Africa -1.7 -5.8 -2.5 4.6 1.5 0.5
Thailand -4.9 2.7 6.2 14.9 9.1 2.9
Turkey 2.1 3.0 5.9 40.9 4.7 1.6
Relative value of equities versus bonds by country

Bond DDM
Generic 10 Maturity Bond Yield Earnings Dividend Implied
Country years (years) To Maturity Yield Yield Growth
Brazil 12.3 11.5 10.2 9.6 3.8 13.1
Chile 5.5 5.6 2.6 6.5 2.6 7.7
China 3.3 6.7 3.1 8.6 2.9 5.1
Colombia 8.3 10.5 6.4 8.0 4.1 8.2
Czech 4.3 6.7 3.8 9.0 6.1 2.3
Hungary 7.5 5.1 7.3 10.5 4.1 8.8
India 7.6 8.5 7.7 6.5 1.3 10.6
Indonesia 8.6 11.6 9.1 7.8 3.0 10.9
Malaysia 4.1 5.4 3.8 7.3 3.5 5.3
Mexico 6.9 7.6 6.7 7.3 2.9 9.0
Peru 6.3 16.0 6.5 11.2 5.5 4.7
Poland 5.9 4.8 5.3 8.5 4.0 4.9
Russia 5.0 2.4 6.0 16.5 2.4 8.2
South Africa 8.8 10.0 8.6 9.1 3.6 9.5
Thailand 3.2 7.5 3.2 9.6 4.0 3.9
Turkey 9.4 2.3 9.0 11.0 3.3 10.2
Source: Bloomberg, J.P. Morgan, DataStream, MSCI, IBES Note: GBI-EM Bond Maturity and Yield to Maturity are used for each country. Updated 16 June 2010.
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Economic Forecasts: Changes in Real GDP Forecasts

Real GDP Growth (% Y/Y) Change in Forecasts Past 3 months (%) Economic Momentum Inflation
JPM Consensus JPM Consensus GDP SAAR (% Y/Y)
2010E 2011E 2010E 2011E 2010E 2011E 2010E 2011E 1Q 10E 2Q 10E 3Q 10E 4Q 10E 2010E 2011E
US 3.5 3.1 3.2 3.0 -0.1 0.0 0.2 0.0 3.0 4.0 4.0 3.5 1.6 1.1
Euro 1.3 1.4 1.1 1.4 -0.3 -0.7 -0.1 -0.1 0.8 3.0 2.0 1.0 1.4 1.0
Japan 3.6 2.2 2.2 1.9 1.3 0.3 0.8 0.1 5.0 2.5 2.7 2.7 -1.1 -0.1
China 10.8 9.4 10.1 9.3 0.8 0.0 0.6 0.4 13.1 9.4 9.3 9.0 3.2 2.5
Brazil 7.5 4.0 6.5 4.5 1.3 0.0 1.7 0.3 11.4 6.0 4.0 3.3 5.4 5.0
S Korea 5.9 4.0 5.3 4.3 0.6 -0.1 0.3 -0.2 8.8 4.0 3.8 3.8 3.0 3.5
Taiwan 9.2 4.8 4.6 4.0 2.2 0.0 0.0 0.0 11.3 3.3 3.5 3.5 1.0 1.8
South Africa 3.0 3.5 3.2 3.6 0.0 0.0 0.3 0.1 4.6 4.0 3.5 3.7 5.3 5.8
India 8.3 8.5 8.2 8.3 0.5 0.2 0.2 na 9.1 7.8 7.4 8.7 8.0 6.0
Russia 5.5 5.0 4.1 4.2 0.0 0.0 0.7 0.0 2.2 13.5 4.0 4.0 6.3 6.9
Mexico 4.5 3.5 4.4 3.6 0.0 0.0 0.9 0.2 -1.4 3.2 -1.8 4.2 4.7 4.0
Malaysia 7.7 4.8 5.0 4.5 2.7 -0.3 0.5 0.0 5.0 4.0 5.0 5.0 2.2 2.4
Chile 5.0 6.0 4.6 5.1 0.0 1.0 0.6 0.7 -5.9 10.0 20.0 10.0 2.5 3.8
Indonesia 6.2 5.8 5.8 6.2 0.7 -0.8 0.2 0.1 5.4 6.0 4.0 5.0 4.4 5.4
Turkey 5.9 5.0 4.9 4.0 1.6 -0.5 0.9 -0.2 - - - - 8.6 6.6
Thailand 8.5 4.0 5.3 4.2 2.0 0.0 1.3 -0.1 16.0 -2.0 2.8 2.8 4.8 4.0
Poland 3.2 3.7 2.7 3.5 0.0 -0.5 0.5 0.3 2.0 3.0 2.5 2.5 2.5 2.8
Czech Republic 2.0 3.2 1.6 2.7 0.0 -0.8 -0.4 0.2 2.0 2.5 2.5 2.3 1.9 2.7
Peru 6.5 6.0 6.0 5.5 1.0 0.0 1.7 0.5 7.3 4.5 4.1 4.0 1.4 2.3
Egypt na na na na na na na na na na na na na na
Colombia 4.0 4.1 3.0 4.1 1.0 0.0 0.5 0.0 4.9 4.2 3.8 3.0 2.5 3.8
Philippines 6.8 4.3 4.2 4.3 2.3 0.0 -0.2 0.2 12.9 3.6 4.9 4.0 5.3 4.9
Hungary 0.8 3.0 0.0 3.0 0.3 -1.0 0.0 0.4 3.6 2.0 2.0 1.0 4.8 3.5
Morocco na na na na na na na na na na na na na na
2010E GDP Growth in EM: J.P. Morgan and Consensus Forecasts Consensus Forecasts for 2010E GDP growth in EM and DM
7.6 6.5 2.6
7.0
2.4
J.P.Morgan EM growth forecast 5.9
DM consensus growth forecast (RHS) 2.2
6.4
5.3 2
5.8 1.8
4.7 1.6
5.2
4.1 1.4
4.6 Consensus EM growth forecast
EM consensus growth forecast (LHS) 1.2
4.0 3.5 1
Jan-09 Apr-09 Jul-09 Oct-09 Jan-10 Apr-10 Jan-09 Apr-09 Jul-09 Oct-09 Jan-10 Apr-10
Source: Bloomberg, J.P. Morgan estimates. Updated 16 June 2010.

Note: Consensus estimates for Jordan, Egypt, and Pakistan sourced from WES and Morocco from EIU.
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Economic Forecasts: Policy Rate Trend and Forecasts

Policy Rate
Country Official interest rate 3Q'09 4Q'09 1Q'10F Current 2Q'10F 3Q'10F 4Q'10F 1Q'11F Last Change Next Change
Developed Markets
United States Federal funds rate 0.13 0.125 0.125 0.125 0.125 0.125 0.125 0.125 16 Dec 08 (-87.5bp) 2Q 11 (+25bp)
Euro Area Refi Rate 1.00 1.00 1.00 1.00 1.00 1.00 1.00 1.00 7 May 09 (-25bp) On hold
Japan Overnight Call Rate 0.10 0.10 0.10 0.10 0.10 0.10 0.10 0.10 19 Dec 08 (-20bp) 4Q 11 (+15bp)
Latin America
Brazil SELIC overnight rate 8.75 8.75 8.75 10.25 10.25 11.50 12.50 12.50 9 Jun 10 (+75bp) 21 Jul 10 (+75bp)
Mexico Repo rate 4.50 4.50 4.50 4.50 4.50 4.50 4.50 4.50 17 Jul 09 (-25bp) Oct 10 (+25bp)
Chile Discount rate 0.50 0.50 0.50 1.00 0.75 1.50 2.25 3.75 15 Jun 10 (+50bp) Jul 10 (+50bp)
Europe, Middle East and Africa
Czech Republic 2-week repo rate 1.25 1.00 1.00 0.75 0.75 0.75 0.75 0.75 6 May 10 (-25bp) 2Q 11 (+25bp)
Hungary 2-week deposit rate 8.00 6.25 5.50 5.25 5.25 5.25 5.25 5.25 26 Apr 10 (-25bp) 3Q 11 (+25bp)
Poland 7-day intervention rate 3.50 3.50 3.50 3.50 3.50 3.50 3.50 3.50 24 Jun 09 (-25bp) 2Q 11 (+25bp)
Russia 1-week deposit rate 5.75 4.00 3.50 2.75 2.75 2.75 2.75 2.75 31 May 10 (-25bp) 2Q 11 (+25bp)
South Africa Repo rate 7.00 7.00 6.50 6.50 6.50 6.50 6.50 6.50 25 Mar 10 (-50bp) 2Q 11 (+50bp)
Turkey 1 week repo rate 7.25 6.50 6.50 7.00 7.00 7.00 7.75 7.75 - 14 Oct 10 (+25bp)
EM Asia
China 1-year working capital 5.31 5.31 5.31 5.31 5.31 5.58 5.85 6.12 22 Dec 08 (-27bp) 3Q 10 (+27bp)
Korea Overnight call rate 2.00 2.00 2.00 2.00 2.00 2.25 2.50 2.75 12 Feb 09 (-50bp) 3Q 10 (+25bp)
Indonesia BI rate 6.50 6.50 6.50 6.50 6.50 6.50 6.50 6.75 5 Aug 09 (-25bp) 1Q 11 (+25bp)
India Repo rate 4.75 4.75 5.00 5.25 5.50 6.00 6.00 6.50 20 Apr 10 (+25bp) 2Q 10 (+25bp)
Malaysia Overnight policy rate 2.00 2.00 2.25 2.50 2.50 3.00 3.00 3.00 13 May 10 (+25bp) 3Q 10 (+25bp)
Philippines Reverse repo rate 4.00 4.00 4.00 4.00 4.00 4.25 4.25 4.50 9 Jul 09 (-25bp) 24 Aug 10 (+25bp)
Thailand 1-day repo rate 1.25 1.25 1.25 1.25 1.25 1.25 1.75 2.00 8 Apr 09 (-25bp) 20 Oct 10 (+25bp)
Taiwan Official discount rate 1.25 1.25 1.25 1.25 1.25 1.50 1.75 2.00 18 Feb 09 (-25bp) 3Q 10 (+25bp)
Change in policy rates Emerging Markets policy rate

Brazil
Russia 22
Japan
Malaysi
China 18
Poland Change from Aug 07
Taiwan
Thailand 14
India
Forecast change from now to Q4 10
Czech Nominal Policy Rates
Korea 10
Indonesi
Hungary
Mexico 6
Chile Real Rates
S Africa
EU
Philippin 2
USA
Turkey
-2
-1150 -1050 -950 -850 -750 -650 -550 -450 -350 -250 -150 -50 50 150 250 350 98 99 00 01 02 03 04 05 06 07 08 09 10
Source: J.P. Morgan Economics, Bloomberg. Bold figures on next column indicate tightening. Updated 16 June 2010.
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Economic Forecasts: Currency Movements and Forecasts

Euro (EUR) Japanese Yen (JPY) ) South Korean Won (KRW) Taiwan Dollar (TWD) Chinese Yuan Renminbi (CNY) Brazilian Real (BRL)
124 1,600 J.P. Morgan forecast: 37 J.P.Morgan forecast: 2.9 J.P. Morgan forecast:
8.4
J.P.Morgan forecast: 120 end Sep 10: 31.25 Consensus end Sep 10: 1.80
1,500 end Sep 10: 1070 36 2.7
1.52 end Sep 10: 1.25 116 8.0
Consensus 112 end Dec 10: 1100 35 end Dec 10: 30.75 end Dec 10: 1.80
Consensus 1,400 2.5
end Dec 10: 1.20 108 end Mar 11: 30.60 7.6
end Mar 11: 1110 Consensus 34 end Mar 11: 1.80
end Mar 11: 1.18 104 1,300 2.3
100 33 7.2
1,200 J.P.Morgan forecast: Consensus
1.32 96 J.P. Morgan forecast: 32 2.1
6.8 end Sep 10: 6.70
92 end Sep 10: 90 1,100 31 Consensus
88 end Dec 10: 6.60 1.9
end Dec 10: 93 1,000 6.4
J.P. Morgan 84 J.P. Morgan 30 J.P. Morgan
J.P. Morgan J.P. Morgan end Mar 11: 6.50 1.7
1.12 80 end Mar 11: 96 900 29 6.0
1.5 J.P. Morgan
Dec 04 Aug 06 Mar 08 Nov 09 Jun 11 Dec 04 Aug 06 Mar 08 Nov 09 Jun 11 Dec 04 Aug 06 Mar 08 Nov 09 Jun 11 Dec 04 Aug 06 Mar 08 Nov 09 Jun 11 Dec 04 Aug 06 Mar 08 Nov 09 Jun 11
Dec 04 Aug 06 Mar 08 Nov 09 Jun 11
Source:
Russian Rouble (RUB) South African Rand (ZAR) Mexican Peso (MXN) Indian Rupee (INR) Malaysian Ringgit (MYR) Colombian Peso (COP)
43 14.0 J.P.Morgan forecast: 15.7 J.P.Morgan forecast: J.P.Morgan forecast: 3.9 J.P.Morgan forecast:
J.P.Morgan forecast: 52.5 2,600
13.0 end Sep 10: 7.85 15.1 end Sep 10: 12.15 Consensus end Sep 10: 44.0 end Sep 10: 3.10
39 end Sep 10: 30.11 Consensus 3.7
12.0 14.5 end Dec 10: 12.25 50.5 end Dec 10: 46.5 Consensus end Dec 10: 3.02 2,400
end Dec 10: 30.28 end Dec 10: 7.90
35 11.0 13.9 48.5 end Mar 11: 2.98
end Mar 11: 30.06 end Mar 11: 7.95 end Mar 11: 12.25 end Mar 11: 43.0 3.5 J.P. Morgan 2,200 Consensus
13.3
Consensus
10.0 46.5 J.P. Morgan forecast:
31 12.7 2,000
9.0 44.5 3.3
12.1 end Sep 10: 1950
27 8.0 11.5 1,800
42.5 end Dec 10: 2000
7.0 J.P. Morgan 3.1 J.P. Morgan
J.P. Morgan
10.9 40.5 J.P. Morgan Consensus end Mar 11: 2080
23 6.0 1,600
J.P.Morgan 10.3
38.5 2.9
Dec 04 Aug 06 Mar 08 Nov 09 Jun 11 5.0 9.7 Dec 04 Aug 06 Mar 08 Nov 09 Jun 11
Dec 04 Aug 06 Mar 08 Nov 09 Jun 11 Dec 04 Aug 06 Mar 08 Nov 09 Jun 11
Polish Zloty (PLN) Chilean Peso (CLP) Turkish Lira (TRL) Thai Baht (THB) Indonesian Rupiah (IDR) Hungarian Forint (HUF)
J.P.Morgan forecast: 2.0 J.P.Morgan forecast: 44 J.P.Morgan forecast: 13,500 J.P. Morgan forecast:
3.9 Consensus 725 J.P.Morgan forecast: 270 J.P. Morgan forecast:
3.7 end Sep 10: 3.12 1.9 end Sep 10: 1.50 42 end Sep 10: 31.5 end Sep 10: 8700 257 end Sep 10: 220
end Sep 10: 520 J.P. Morgan
675 12,500 end Dec 10: 8900 244
3.5 end Dec 10: 3.21 end Dec 10: 520 1.8 end Dec 10: 1.50 40 end Dec 10: 31.0 end Dec 10: 229
3.3 Consensus 1.7 end Mar 11: 9000 231
625 end Mar 11: 505 end Mar 11: 1.49 Consensus 38 end Mar 11: 30.5 11,500 end Mar 11: 229
end Mar 11: 3.22 218
3.1 1.6 36 205
2.9 575 1.5 Consensus
34 10,500 192
2.7 1.4 32 Consensus 179
525 Consensus
2.5 1.3 J.P.Morgan 30 9,500 166
J.P. Morgan
2.3 475 1.2 153
28 J.P. Morgan 140
2.1 J.P. Morgan J.P. Morgan 1.1 8,500
425
1.9 Dec 04 Aug 06 Mar 08 Nov 09 Jun 11 Dec 04 Aug 06 Mar 08 Nov 09 Jun 11 Dec 04 Aug 06 Mar 08 Nov 09 Jun 11
Czech Koruna (CZK) Peruvian Nuevo Sol (PEN) Philippine Peso (PHP)
26 3.8 J.P. Morgan forecast: 60 J.P. Morgan forecast:
end Sep 10: 2.84 end Sep 10: 43.25
24 3.5 56
end Dec 10: 2.85
end Dec 10: 42.75
Consensus
22 3.3 end Mar 11: 2.85 52 Consensus
end Mar 11: 42.75
20 J.P. Morgan 48
J.P. Morgan forecast: 3.0
18 44
end Sep 10: 20.60 2.8
end Dec 10: 21.25 Consensus 40 J.P. Morgan
16
J.P. Morgan 2.5
end Mar 11: 21.36 36
14
Expected % Gain vs USD till December 2010 (J.P. Morgan) Expected % Loss vs USD till December 2010 (J.P. Morgan)
12 0
-2
9
-4
6
-6
3 -8
0 -10
HUF
CZK
JPY
COP
ARS
EUR
ZAR
BRL
TWD
IDR
KRW
PHP
THB
ILS
INR
CLP
CNY
RUB
TRL
MYR
MXN
PLN
Source: Datastream, J.P. Morgan estimates Source: Datastream, J.P. Morgan estimates
Source: Bloomberg, Datastream, J.P. Morgan estimates. Updated 16 June 2010.
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Economic Forecasts: Credit Risk

External (2010E) Fiscal Position Sovereign Ratings (Long Term Foreign Debt)
Foreign Current Account External Debt Fiscal Deficit Public Sector Debt
Reserves 2010F** 2011F** 2010F** 2010F** 2010F** 2011F** 2009** 2010F** Moody’s S&P
(US$bil) % GDP % GDP (US$bil) %GDP % GDP % GDP % GDP % GDP Rating Action Date Rating Action Date
China 2447 4.6 3.8 414 7.0 -2.1 -1.8 20.0 20.0 A1 O/L changed to (+), Affirmed Nov-09-09 A+ Affirmed, O/L stable Jan-12-10
Brazil 244 -3.2 -3.4 294 14.5 -3.4 -2.5 66.9 69.6 Baa3 (+) Upgrade, O/L (+) Sep-22-09 BBB- Upgrade, O/L stable Apr-30-08
Korea 272 1.8 0.4 365 35.3 -0.5 0.5 47.6 43.5 A1 Upgrade, O/L stable Apr-14-10 A Affirmed, O/L stable Jan-12-10
Taiwan 355 6.6 6.2 80 18.1 -2.5 -2.0 na na Aa3 Affirmed, O/L stable Jan-24-02 Jan-24-02 AA- O/L changed to (-), Affirmed Apr-14-09
South Africa 38 -4.0 -4.7 73 20.4 -6.1 -4.9 33.5 37.9 A3 Upgrade, O/L changed to stable Jul-16-09 BBB+ O/L changed to (-), Affirmed Nov-11-08
India 253 -2.3 -2.3 260 16.1 -5.5 -4.8 45.0 45.7 Baa3 Upgrade, O/L stable Jan-22-04 BBB- O/L changed to stable, Affirmed Mar-18-10
Russia 423 5.0 3.9 496 32.3 -3.5 -2.0 7.2 7.4 Baa1 O/L changed to stable, Affirmed Dec-12-08 BBB O/L changed to stable, Affirmed Dec-21-09
Mexico 96 -0.8 -1.3 189 17.8 -2.8 -2.2 35.5 35.6 Baa1 Upgrade, O/L stable Jan-06-05 BBB Downgrade, O/L changed to stable Dec-14-09
Malaysia 95 14.7 15.8 65 29.2 -5.2 -4.5 48.5 44.3 A3 Upgrade, O/L stable Dec-16-04 A- O/L changed to stable, Affirmed May-15-08
Chile 26 1.2 -3.5 68 35.1 -4.5 -1.2 10.8 9.1 A1 Upgrade, O/L (+) Mar-23-09 A+ Affirmed, O/L stable Dec-29-09
Indonesia 72 1.2 0.5 132 18.9 -2.0 -1.0 33.3 34.5 Ba2 Affirmed, O/L stable Jan-21-10 BB+ Upgrade, O/L (+) Mar-12-10
Poland 85 -2.5 -3.5 260 48.3 -5.8 -4.5 52.6 52.7 A2 Affirmed, O/L stable Jan-05-10 A- O/L changed to stable, Affirmed Oct-27-08
Turkey 64 -3.9 -4.2 271 36.6 -3.7 -1.8 55.1 50.2 Ba2 Upgrade, O/L stable Jan-08-10 BB Upgrade, O/L (+) Feb-19-10
Thailand 139 4.8 3.3 69 22.0 -2.5 -2.0 35.8 39.1 Baa1 Affirmed, O/L (-) Apr-13-10 BBB+ Affirmed, O/L (-) Apr-13-10
Czech
Republic 40 -1.7 -3.0 84 40.1 -4.5 -3.5 34.9 37.8 A1 O/L changed to stable, Affirmed Dec-08-08 A Affirmed, O/L stable Dec-21-09
Peru 35 -0.5 -1.5 38 25.6 -1.8 -1.0 26.3 25.0 Baa3 Upgrade, O/L changed stable Dec-16-09 BBB- Upgrade, O/L stable Jul-14-08
Egypt* 17 -2.6 -2.1 na na na na na na Ba1 O/L changed to stable, Affirmed Aug-19-09 BB+ Affirmed, O/L stable Mar-26-10
Colombia 26 -2.8 -3.5 53 19.4 -3.7 -3.5 44.6 43.7 Ba1 Upgrade, O/L stable Jun-19-08 BB+ Affirmed, O/L stable Feb-25-08
Philippines 46 5.3 4.6 59 32.5 -3.5 -2.5 65.1 62.3 Ba3 Affirmed, O/L stable Mar-29-10 BB- Affirmed, O/L stable Apr-18-08
Hungary 46 -1.0 -2.4 208 143.4 -4.2 -3.5 78.8 80.2 Baa1 Downgrade, O/L (-) Mar-31-09 BBB- O/L changed to stable, Affirmed Oct-2-09
Morocco* 14 -5.0 -4.4 na na na na na na Ba1 O/L changed to stable Jun-18-03 BB+ Upgrade, O/L stable Mar-23-10
Emerging Asia 3690 4.4 3.6 1449 14.3 - - na na - - - - - -
Emerging Euro 756 0.5 -0.3 1372 41.4 - - na na - - - - - -
Latin America 473 -1.1 -1.5 896 21.3 - - na na - - - - - -
EMBI Global Spreads and Yields EMBI Asia Spreads and Yields EMBI Europe Spreads and Yields EMBI Latin America Spreads and Yields
1000 12.0 900 12 1000 12.0 1000 13.0
900 11.0 800 11 900 11.0 900 12.0
800 700 800 800
10.0 10 10.0 11.0
700 700 700
600
600 9.0 9 600 9.0 600 10.0
500
500 8.0 8 500 8.0 500 9.0
400 400 400 400
7.0 7 7.0 8.0
300 300 300 300
200 6.0 200 6 6.0 200 7.0
200
100 5.0 100 5 100 5.0 100 6.0
Jun-08 Feb-09 Oct-09 Jun-10 Jun-08 Feb-09 Oct-09 Jun-10 Jun-08 Feb-09 Oct-09 Jun-10 Jun-08 Feb-09 Oct-09 Jun-10
Spread (L) Yield Spread (L) Yield Spread (L) Yield Spread (L) Yield
Source: Bloomberg, J.P. Morgan. Source: CEIC, JP Morgan estimates, Moody's, Standard & Poor's, Bloomberg * Data from World Economic Outlook for April 2010 for Current Account data, ** F denotes forecast Note: Forex reserves as of 30 April 2010 or latest
available data. Updated 16 June 2010.
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Perspective: Emerging Markets Balance Sheets
No. of Companies Debt/Equity Debt/Assets Debt/Market. Cap Asset Turnover Current Ratio Interest Coverage Altman Z Score
China 105 0.56 0.26 0.66 0.77 1.03 7.8 4.9
Brazil 67 0.59 0.27 0.49 0.56 1.58 7.4 3.3
Korea 78 0.39 0.20 0.21 0.94 1.13 7.3 3.4
Taiwan 99 0.32 0.19 0.15 1.04 1.36 7.7 3.9
South Africa 34 0.46 0.22 0.17 0.87 1.31 5.2 4.3
India 52 0.80 0.33 0.23 0.73 1.42 5.9 4.1
Russia 25 0.60 0.32 0.66 0.53 1.28 9.8 3.7
Mexico 21 0.56 0.26 0.32 0.66 1.25 6.4 4.1
Malaysia 33 0.75 0.34 0.38 0.47 1.68 4.5 4.2
Chile 14 0.66 0.31 0.16 0.61 1.10 5.8 3.0
Indonesia 17 0.61 0.28 0.11 0.84 1.21 11.2 7.7
Turkey 12 0.67 0.27 0.37 1.14 1.17 6.1 3.3
Thailand 15 0.70 0.34 0.34 1.45 1.44 6.8 4.6
Poland 11 0.43 0.23 0.38 1.03 1.03 5.5 3.6
Czech Republic 2 0.40 0.19 0.17 0.43 0.85 22.6 3.1
Peru 2 0.38 0.22 0.05 0.65 2.11 22.2 9.7
Egypt 9 0.65 0.27 0.22 0.56 1.22 5.9 2.2
Colombia 5 0.35 0.23 0.17 0.44 1.30 1.1 5.5
Philippines 8 0.62 0.27 0.20 0.62 1.12 7.2 2.8
Hungary 3 0.56 0.28 0.35 1.00 1.35 4.6 5.1
Morocco 3 0.79 0.29 0.21 0.59 1.17 14.2 3.5
Debt to Equity Ratios Quartile Distribution Chart (x)
8
0
South Africa
India
Indonesia
Israel
Korea
China
Russia
Thailand
Chile
Poland
Peru
Morocco
Colombia
Brazil
Hungary
Czech Republic
Philippines
Egypt
Taiwan
Mexico
Malaysia
Turkey
Source: Datastream, Bloomberg, J.P. Morgan. Data as of 10 February 2010

Note: 1. All ratios are calculated from latest financial reports available ex Financial sector and calculations are based on weighted average of companies in the MSCI EMF universe. For Altman z-score, its application on company level is such that a score of less than
1.8 indicates bankruptcy likely, between 1.8-2.7 bankruptcy likely within 2 years and more than 3 most likely safe from bankruptcy. For market as a whole, the ratio is a weighted average of companies' z-score, thereby giving a general quality of companies in the
market.2. For the debt to equity distribution chart, each box indicates quartile levels and markets with values exceeding the scale are indicated by the open-ended top box. The diamond indicates weighted average for each market. 3. Quartile Distribution Charts: each
quartile is separated by a line, with the exception of the top quartile which is subdivided in order to show the top decile of companies, shaded in blue. Markets with values exceeding the scale are indicated by the open-ended top box. The diamond indicates the
weighted mean for each market.
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Perspective: Demographic and Key Economic Statistics

Population and demographics Nominal GDP Real GDP
Population## Age Gross 2010 10 year CAGR*** 10 year CAGR***
2010 Growth Dependency Ratio* Enrollment Ratio US$ Per capita Total Per capita Total Per capita
million %YoY Young Old Secondary** billion (US$) (%) (%) (%) (%)
USA 310 1.0 na na 98 14,839 47,836 4.2 3.2 3.0 2.0
China 1354 0.6 0.3 0.1 73 6044 4465 17.6 16.8 9.9 9.3
Brazil# 194 1.2 0.4 0.1 102 2089 10793 12.5 11.1 3.1 1.7
Russia# 141 -0.1 0.2 0.2 93 1710 12109 20.7 21.2 5.9 6.4
India 1184 1.3 0.5 0.1 54 1675 1415 13.8 12.1 9.5 8.3
Mexico 111 1.0 0.5 0.1 80 1048 9462 6.1 4.8 1.5 0.4
Korea 48 0.1 0.3 0.1 91 1045 21673 7.0 6.6 6.3 5.6
Turkey 76 1.2 0.4 0.1 79 733 9686 14.0 12.5 3.2 1.9
Indonesia 233 1.2 0.4 0.1 64 727 3121 16.0 14.5 5.1 3.8
Poland 38 -0.1 0.2 0.2 97 510 13413 11.5 11.7 3.6 3.8
Taiwan 23 0.3 0.3 0.1 na 445 19222 3.1 2.8 3.0 2.7
Argentina 41 1.0 0.4 0.2 86 368 9071 2.6 1.6 3.2 2.2
South Africa 49 0.7 0.5 0.1 90 354 7229 10.3 9.2 3.2 2.2
Thailand 68 0.7 0.3 0.1 77 321 4703 10.2 9.2 4.0 3.3
Colombia 46 1.5 0.5 0.1 75 281 6066 12.9 11.8 3.9 2.2
Malaysia 28 2.0 0.5 0.1 76 238 8463 10.2 8.1 10.4 8.1
Egypt 78 2.0 0.5 0.1 87 236 3018 9.1 6.9 4.9 2.8
Czech Rep. 10 0.2 0.2 0.2 96 203 19530 13.6 13.4 3.1 3.0
Chile 17 1.0 0.4 0.1 89 194 11306 9.9 8.6 3.6 2.3
Philippines 94 1.8 0.6 0.1 86 192 2054 9.8 7.7 4.5 2.5
Peru 30 1.2 0.5 0.1 92 149 5044 10.8 9.1 5.4 3.8
Hungary 10 -0.1 0.2 0.2 97 137 13713 11.1 11.3 1.9 2.1
MSCI EM 3,918 1.0 19,038 4,859 13.8 13.3
Source: CEIC, Datastream, Bloomberg, US Consensus Bureau, World Bank, UNESCO, J.P. Morgan estimates
* Age dependency ratio defined as dependents to working-age population.
** Gross Enrollment Ratio is defined as pupils enrolled in a secondary level, regardless of age expressed as a percentage of the population in the relevant official age group
*** 10-year CAGR for period 2000-2010, in local currency. # CAGR for period 2000-2010 ## Population data based on IMF estimate as on October 2009.
Data for Gross enrollment data for 2004 except for Malaysia, Brazil and Argentina which is for 2003. Updated 16 June 2010.
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Perspective: Global Emerging Capital Markets

MSCI EMF Index Markets Concentration JPM EMBI Global
% of
Stocks
Total Average Emerging Stocks constituting
Estimated Weighting in constituting
Market Companies Daily Market 75% of Country Market Cap Issues
Free Float MSCI EMF 75% of Country
Cap Turnover Trading Market Cap
Market Cap
Volume
US $ bn. (%) Number US $ mn. % (%) Number (%) US $ bn. Number
China 1177 48 123 3645 19.8 18.5 9 15 7.0 8
Brazil 835 59 76 2831 15.4 16.1 16 17 49.5 23
Korea 654 64 99 3899 21.2 13.5 28 18 na na
Taiwan 468 71 117 1906 10.4 10.8 31 25 na na
India 710 35 61 336 1.8 8.0 22 33 na na
South Africa 329 69 45 1022 5.6 7.4 17 40 4.3 4
Russia 571 35 28 1907 10.4 6.5 5 25 32.8 4
Mexico 246 57 21 360 2.0 4.6 7 29 49.5 29
Malaysia 215 40 40 216 1.2 2.8 20 60 9.1 7
Indonesia 172 41 22 271 1.5 2.3 10 41 5.7 5
Turkey 160 32 20 644 3.5 1.7 11 60 22.0 14
Thailand 131 36 16 105 0.6 1.6 9 69 4.9 8
Chile 130 35 20 430 2.3 1.5 14 70 na na
Poland 98 43 21 289 1.6 1.4 7 24 3.4 3
Colombia 99 24 8 28 0.2 0.8 4 50 7.4 7
Peru 44 47 3 161 0.9 0.7 2 67 7.8 8
Hungary 35 46 10 101 0.5 0.5 7 30 1.2 1
Egypt 44 33 12 39 0.2 0.5 7 67 19.0 14
Philippines 21 60 4 142 0.8 0.4 2 75 1.4 1
Czech Republic 38 33 4 58 0.3 0.4 3 50 na na
Morocco 26 21 3 12 0.1 0.2 4 100 0.7 1
Total 6202 50 753 18400 100 100 232 141
AC World Index Market Capitalization MSCI Regional Market Capitalization Top 8 versus Rest of Emerging Markets
Emerging India Russia

EM Latin
7% Rest of EM
Markets America 8%
Mex ico 15%
13% North America 24%
5% Korea
48%
Japan
14%
9% EM Europe and
EM Asia
Middle East China
Dev eloped 58% Taiw an
18% 18%
Asia 11%
South Africa
5% Dev eloped Brazil
7%
Europe 15%
25%
Source: MSCI, J.P. Morgan. Updated 16 June 2010.
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Perspective: MSCI Emerging Market Index Composition by Countries and Sectors

Number of Companies: 753 Total Market Capitalization (in billion US$): 6202 Estimated Free float : 50%
Consumer Staples
Telecom Services
Discretionary
Technology
Information
Health care
Industrials
Consumer
Financials
Materials
Utilities
Energy
MSCI Emerging
Total
Markets Free Index
China 0.9 1.1 3.2 7.1 0.2 1.4 1.0 1.0 2.4 0.4 18.5
Korea 1.8 0.6 0.3 2.2 0.1 1.9 4.2 1.8 0.4 0.3 13.5
Taiwan 0.3 0.2 0.1 1.6 0.4 6.5 1.3 0.5 10.8
India 0.4 0.5 1.2 2.0 0.3 0.8 1.4 0.9 0.1 0.5 8.0
Malaysia 0.3 0.4 0.0 0.9 0.5 0.0 0.3 0.3 2.8
Indonesia 0.3 0.2 0.3 0.7 0.1 0.2 0.3 0.2 2.3
Thailand 0.0 0.1 0.6 0.5 0.1 0.1 0.0 1.5
Philippines 0.0 0.2 0.1 0.1 0.1 0.5
Asia 4.1 3.1 5.7 15.2 0.6 5.1 13.0 5.3 4.2 1.7 57.9
South Africa 0.9 0.4 0.7 1.9 0.2 0.3 2.1 0.9 7.4
Russia 0.2 3.7 0.9 0.9 0.4 0.4 6.5
Poland 0.0 0.0 0.2 0.8 0.0 0.0 0.1 0.1 0.1 1.4
Turkey 0.0 0.2 0.1 1.0 0.2 0.0 0.2 1.7
Hungary 0.1 0.2 0.1 0.0 0.4
Egypt 0.2 0.1 0.0 0.1 0.5
Czech Republic 0.0 0.1 0.1 0.2 0.4
Morocco 0.1 0.1 0.2
EMEA 0.9 0.8 4.8 5.1 0.2 0.6 0.0 3.1 2.0 0.7 18.4
Brazil 0.8 1.4 3.7 3.9 0.5 0.4 4.3 0.5 0.8 16.1
Mexico 0.5 1.1 0.3 0.2 0.8 1.7 4.6
Chile 0.1 0.2 0.1 0.3 0.3 0.0 0.4 1.6
Peru 0.2 0.5 0.7
Colombia 0.0 0.2 0.3 0.2 0.1 0.8
LatAm 1.3 2.8 3.8 4.8 1.0 0.4 6.0 2.2 1.4 23.7
Total 6.3 6.7 14.4 25.1 0.8 6.7 13.4 14.5 8.4 3.7 100.0
Source: MSCI, J.P. Morgan. Updated 16 June 2010.
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Companies Recommended in This Report (all prices in this report as of market close on 18 June 2010)
Bank Rakyat Indonesia (BBRI.JK/Rp9,100/Underweight), Bharat Heavy Electricals (BHEL)
(BHEL.BO/Rs2,417.15/Overweight), Foschini (FOSJ.J/6,730c/Overweight), Hite Brewery
(103150.KS/W149,000/Underweight), Hynix Semiconductor (000660.KS/W28,150/Neutral), Hyundai Department Stores
(069960.KS/W113,500/Overweight), Hyundai Mobis (012330.KS/W207,500/Overweight), Hyundai Motor Company
(005380.KS/W144,500/Overweight), Indocement (INTP.JK/Rp16,050/Overweight), JD Group
(JDGJ.J/4,449c/Overweight), KB Financial Group (105560.KS/W49,700/Overweight), KEPCO
(015760.KS/W32,800/Overweight), Kia Motors (000270.KS/W31,900/Overweight), Korean Air
(003490.KS/W79,400/Neutral), LG Chem Ltd (051910.KS/W306,500/Overweight), LG Display
(034220.KS/W42,600/Overweight), LG Electronics (066570.KS/W97,300/Neutral), LG Innotek
(011070.KS/W166,000/Overweight), Lotte Shopping Co (023530.KS/W347,000/Overweight), Mechel
(MTL/$21.07/Overweight), POSCO (005490.KS/W465,000/Overweight), Samsung Electro-Mechanics
(009150.KS/W152,000/Overweight), Samsung Electronics (005930.KS/W822,000/Neutral), Semen Gresik (Persero) Tbk
(SMGR.JK/Rp9,000/Overweight), Shinhan Financial Group (055550.KS/W46,000/Overweight), Shinsegae
(004170.KS/W518,000/Overweight), S-Oil Corp (010950.KS/W52,300/Neutral), Tatneft (TATN.RTS/$4.60/Overweight),
Thanachart Capital (TCAP.BK/Bt26.00/Overweight), Unilever Indonesia Tbk (UNVR.JK/Rp16,800/Neutral), VTB
(VTBRq.L/$5.02/Overweight), Woori Financial Group (053000.KS/W16,050/Overweight)
Analyst Certification:
The research analyst(s) denoted by an “AC” on the cover of this report certifies (or, where multiple research analysts are primarily
responsible for this report, the research analyst denoted by an “AC” on the cover or within the document individually certifies, with
respect to each security or issuer that the research analyst covers in this research) that: (1) all of the views expressed in this report
accurately reflect his or her personal views about any and all of the subject securities or issuers; and (2) no part of any of the research
analyst’s compensation was, is, or will be directly or indirectly related to the specific recommendations or views expressed by the
research analyst(s) in this report.
Important Disclosures
• Market Maker/ Liquidity Provider: JPMSL and/or an affiliate is a market maker and/or liquidity provider in Mechel, Tatneft,
VTB.
• Lead or Co-manager: JPMSI or its affiliates acted as lead or co-manager in a public offering of equity and/or debt securities for
Hyundai Motor Company, Kia Motors, Lotte Shopping Co, POSCO, Semen Gresik (Persero) Tbk, Unilever Indonesia Tbk, VTB,
Woori Financial Group within the past 12 months.
• Beneficial Ownership (1% or more): JPMSI or its affiliates beneficially own 1% or more of a class of common equity securities of
Hyundai Department Stores, Hyundai Motor Company, Unilever Indonesia Tbk.
90
(852) 2800-8599 21 June 2010
• Client of the Firm: Bank Rakyat Indonesia is or was in the past 12 months a client of JPMSI; during the past 12 months, JPMSI
provided to the company non-investment banking securities-related services and non-securities-related services. Bharat Heavy
Electricals (BHEL) is or was in the past 12 months a client of JPMSI. Hynix Semiconductor is or was in the past 12 months a client
of JPMSI. Hyundai Mobis is or was in the past 12 months a client of JPMSI; during the past 12 months, JPMSI provided to the
company non-investment banking securities-related services. Hyundai Motor Company is or was in the past 12 months a client of
JPMSI; during the past 12 months, JPMSI provided to the company investment banking services, non-investment banking securities-
related services and non-securities-related services. Indocement is or was in the past 12 months a client of JPMSI; during the past 12
months, JPMSI provided to the company non-investment banking securities-related services. KB Financial Group is or was in the
past 12 months a client of JPMSI; during the past 12 months, JPMSI provided to the company non-investment banking securities-
related services and non-securities-related services. KEPCO is or was in the past 12 months a client of JPMSI; during the past 12
months, JPMSI provided to the company non-investment banking securities-related services. Kia Motors is or was in the past 12
months a client of JPMSI; during the past 12 months, JPMSI provided to the company investment banking services, non-investment
banking securities-related services and non-securities-related services. Korean Air is or was in the past 12 months a client of JPMSI;
during the past 12 months, JPMSI provided to the company non-investment banking securities-related services. LG Chem Ltd is or
was in the past 12 months a client of JPMSI. LG Display is or was in the past 12 months a client of JPMSI; during the past 12
months, JPMSI provided to the company investment banking services and non-investment banking securities-related services. LG
Electronics is or was in the past 12 months a client of JPMSI; during the past 12 months, JPMSI provided to the company investment
banking services, non-investment banking securities-related services and non-securities-related services. Lotte Shopping Co is or was
in the past 12 months a client of JPMSI; during the past 12 months, JPMSI provided to the company investment banking services.
POSCO is or was in the past 12 months a client of JPMSI; during the past 12 months, JPMSI provided to the company investment
banking services and non-investment banking securities-related services. Samsung Electro-Mechanics is or was in the past 12
months a client of JPMSI. Samsung Electronics is or was in the past 12 months a client of JPMSI; during the past 12 months, JPMSI
provided to the company investment banking services, non-investment banking securities-related services and non-securities-related
services. Semen Gresik (Persero) Tbk is or was in the past 12 months a client of JPMSI; during the past 12 months, JPMSI provided
to the company investment banking services. Shinhan Financial Group is or was in the past 12 months a client of JPMSI; during the
past 12 months, JPMSI provided to the company investment banking services, non-investment banking securities-related services
and non-securities-related services. Tatneft is or was in the past 12 months a client of JPMSI. Thanachart Capital is or was in the past
12 months a client of JPMSI; during the past 12 months, JPMSI provided to the company non-investment banking securities-related
services and non-securities-related services. Unilever Indonesia Tbk is or was in the past 12 months a client of JPMSI; during the
past 12 months, JPMSI provided to the company investment banking services. VTB is or was in the past 12 months a client of
JPMSI; during the past 12 months, JPMSI provided to the company investment banking services, non-investment banking securities-
related services and non-securities-related services. Woori Financial Group is or was in the past 12 months a client of JPMSI; during
the past 12 months, JPMSI provided to the company investment banking services, non-investment banking securities-related services
and non-securities-related services.
• Investment Banking (past 12 months): JPMSI or its affiliates received in the past 12 months compensation for investment banking
services from Hyundai Motor Company, Kia Motors, LG Display, LG Electronics, Lotte Shopping Co, POSCO, Samsung
Electronics, Semen Gresik (Persero) Tbk, Shinhan Financial Group, Unilever Indonesia Tbk, VTB, Woori Financial Group.
• Investment Banking (next 3 months): JPMSI or its affiliates expect to receive, or intend to seek, compensation for investment
banking services in the next three months from Hyundai Motor Company, KB Financial Group, Kia Motors, LG Chem Ltd, LG
Display, LG Electronics, Lotte Shopping Co, POSCO, Samsung Electronics, Semen Gresik (Persero) Tbk, Shinhan Financial Group,
Unilever Indonesia Tbk, VTB, Woori Financial Group.
• Non-Investment Banking Compensation: JPMSI has received compensation in the past 12 months for products or services other
than investment banking from Bank Rakyat Indonesia, Hyundai Mobis, Hyundai Motor Company, Indocement, KB Financial Group,
KEPCO, Kia Motors, Korean Air, LG Display, LG Electronics, POSCO, Samsung Electronics, Shinhan Financial Group, Thanachart
Capital, VTB, Woori Financial Group. An affiliate of JPMSI has received compensation in the past 12 months for products or
services other than investment banking from Bank Rakyat Indonesia, Hyundai Motor Company, KB Financial Group, KEPCO, Kia
Motors, Korean Air, LG Chem Ltd, LG Display, LG Electronics, Samsung Electronics, Shinhan Financial Group, Thanachart
Capital, Unilever Indonesia Tbk, VTB, Woori Financial Group.
• J.P. Morgan Securities (Far East) Ltd, Seoul branch is acting as a Market Maker (Liquidity Provider) for the Equity Linked Warrants
of Hynix Semiconductor and owns 3,497,790 as of 21-Jun-10.
of Hyundai Mobis and owns 3,264,900 as of 21-Jun-10.
of Hyundai Motor Company and owns 7,048,910 as of 21-Jun-10.
of KB Financial Group and owns 3,497,810 as of 21-Jun-10.
of Korea Electric Power Corporation and owns 3,445,000 as of 21-Jun-10.
91
(852) 2800-8599 21 June 2010
of Kia Motors and owns 3,500,000 as of 21-Jun-10.
of LG Chem Ltd and owns 7,099,890 as of 21-Jun-10.
of LG Display and owns 3,490,000 as of 21-Jun-10.
of LG Electronics and owns 2,514,600 as of 21-Jun-10.
of POSCO and owns 7,023,030 as of 21-Jun-10.
of Samsung Electro-Mechanics Co. Ltd. and owns 6,961,470 as of 21-Jun-10.
of Samsung Electronics and owns 3,500,000 as of 21-Jun-10.
• MSCI: The MSCI sourced information is the exclusive property of Morgan Stanley Capital International Inc. (MSCI). Without prior
written permission of MSCI, this information and any other MSCI intellectual property may not be reproduced, redisseminated or
used to create any financial products, including any indices. This information is provided on an 'as is' basis. The user assumes the
entire risk of any use made of this information. MSCI, its affiliates and any third party involved in, or related to, computing or
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(852) 2800-8599 21 June 2010
Figure 38: History of corrections in MSCI Emerging Markets: 20% corrections common in a bull market
16 Feb 94, 563 10 Jul 97, 571 10 Feb 00, 531.0 10 May 06, 879
24 Aug 94, 454 5 Oct 98, 241 3 Oct 01, 247 13 Jun 06, 665
Decline 19% Decline 58% Decline 54% 12-April-04, 497 Decline 24%
Duration 59 day s Duration 323 day s Duration 430 day s 17-May -04, 396 Duration 25 day s
Fed tightening Asian Crisis 2000 Global Correction Decline 20% Fear of Fed ov ertightening
1 Aug 90, 257
Duration 26 day s
16 Jan 91, 175
Start of Fed tightening
Decline 32%
Duration 121 day s 26 Feb 07, 940
Iraq inv ades Kuw ait 5 Mar 07, 844
Decline 10%
Duration 8 day s
22 Sep 94, 586 A-shares fall, US profit
9 Mar 95, 396 f
Decline 33%
22 Apr 92, 353 Duration 121days 23 July 07, 1163
24 Aug 92, 286 Mexican Tequila Crisis 31 October 2007, 1338
19 Feb 90, 239 25%rally 16 August 07, 957
Decline 19% 27 October 2008, 454
9 Apr 90, 198 Decline 18%
Duration 89 day s Decline 66%
Decline 17% Duration 19 day s
Brazilian Fall 18-Apr-02, 364 Duration 268 day s
Duration 36 day s 10-Oct-02, 254 US sub-prime and
Credit Crisis and EM
Decline 30% global credit market
Inflation
concerns
4.4
Jan-90 Jan-91 Jan-92 Jan-93 Jan-94 Jan-95 Jan-96 Jan-97 Jan-98 Jan-99 Jan-00 Jan-01 Jan-02 Jan-03 Jan-04 Jan-05 Jan-06 Jan-07 Jan-08 Jan-09 Jan-10
Source: Datastream, J.P. Morgan.
J.P. Morgan Emerging Market Strategy Team

Chief Equity Strategists
Adrian Mowat Asia and Emerging Market (852) 2800 8599 adrian.mowat@jpmorgan.com
Ben Laidler Latin America (212) 622 5252 ben.m.laidler@jpmchase.com
Deanne Gordon CEEMEA, South Africa (27-21) 712 0875 deanne.gordon@jpmorgan.com
Sriyan Pietersz ASEAN and Frontier Markets (66-2) 684 2670 sriyan.pietersz@jpmorgan.com
Christian Kern MENA (971) 4428 1789 christian.a.kern@jpmorgan.com
Thomas J Lee US (1) 212 622 6505 thomas.lee@jpmorgan.com
Mislav Matejka Europe (44-20) 7325 5242 mislav.matejka@jpmorgan.com
Hajime Kitano Japan (81-3) 5545 8655 hajime.x.kitano@jpmorgan.com
Country Strategists
Frank Li China (852) 2800 8511 frank.m.lli@jpmorgan.com
Bharat Iyer India (91-22) 6157 3600 bharat.x.iyer@jpmorgan.com
Aditya Srinath Indonesia (62-21) 5291 8573 aditya.s.srinath@jpmchase.com
Nick Lai Taiwan (886-2) 27259864 nick.yc.lai@jpmorgan.com
Scott Seo Korea (82-2) 758 5759 scott.seo@jpmorgan.com
Chris Oh Malaysia (60-3) 2270 4728 chris.ch.oh@jpmorgan.com
Emy Shayo Brazil (55-11) 3048 6684 emy.shayo@jpmorgan.com
Ben Laidler Mexico (212) 622 5252 ben.m.laidler@jpmchase.com
Alex Kantarovich Russia (7-495) 967 3172 alex.kantarovich@jpmorgan.com
Brian Chase Southern Cone & Andean (562) 425 5245 brian.p.chase@jpmorgan.com
Deanne Gordon South Africa (27-21) 712 0875 deanne.gordon@jpmorgan.com
Kelly Lim-Bate Philippines (63-2) 8781 188 kelly.s.lim@jpmorgan.com
Economic & Policy Research
Joyce Chang Global Head, Emerging Markets Research (1-212) 834 4203 joyce.chang@jpmorgan.com
David Fernandez Emerging Asia (65) 6882 2461 david.g.fernandez@jpmorgan.com
Jiwon Lim Korea (82-2) 758 5509 jiwon.c.lim@jpmorgan.com
Jahangir Aziz India (9122) 6157 3385 jahangir.x.aziz@jpmorgan.com
Qian Wang China, Taiwan and Hong Kong (852) 2800 7009 qian.li.wang@jpmorgan.com
Vladimir Werning Argentina, Chile (1-212) 834 4144 vladimir.werning@jpmorgan.com
Fabio Akira Brazil (55-11) 3048 3634 fabio.akira@jpmorgan.com
Gabriel Casillas Mexico (52-55)-5540-9558 gabriel.casillas@jpmchase.com
Michael Marrese Regional Head, Emerging Europe (44-20) 7777 4627 michael.marrese@jpmorgan.com
Yarkin Cebeci Turkey (90-212) 326 5890 yarkin.cebeci@jpmorgan.com
Sonja Keller South Africa (27-11) 507 0376 sonja.c.keller@jpmorgan.com
Nina A Chebotareva Russia (7-095) 937 7321 nina.a.chebotareva@jpmorgan.com
Nora Szentivanyi Hungary, Poland & Czech Republic (44-20) 7777 3981 nora.szentivanyi@jpmorgan.com
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Emerging Markets

Key Trades and Risks

rates. (852) 2800-8599

• The rebalancing of the Chinese economy from investment to Deanne Gordon

• Our key trades ranked by conviction are: rajiv.j.batra@jpmorgan.com

J.P. Morgan India Private Limited

In this report, we highlight: Table of Contents

Key ratios for EMBIG 100

particularly true when investors appear shell-shocked in

Our expectation is that manufacturing PMIs will decline

China's economic and policy dynamics are changing. 50

The demand for bulk commodities and energy is 100

We upgraded Korea to overweight from neutral on 2 0.8

is positive for exporters (note Yen and NT dollar cross

Our preferred sectors are exporters, banks and domestics. 1400

Conclusion 4. EM inflation and speed of policy normalization

2. Growth surprise from developed, not emerging, Source: Bloomberg

Please see pages 13, 14, 15 for our Global Emerging 30

2. Underestimating euro sovereign stress contagion risk

Focus on sectors within countries rather than country recommendations

Risks to our strategy

further and issuance become more difficult. 12 9

Commodity EM equities feedback loop Jul-10 Jul-12 Jul-14 Jul-16 Jul-18

roll cost in forward markets in contango. In 2009, net

Bond market volatility Figure 17: Global bond supply ($tr)

Figure 18: Global bond demand ($tr)

Source: J.P. Morgan estimates

Model portfolio changes

In ‘Off Balance to Rebalance, Perspectives and

Please note: Source for Data in Global emerging

Global emerging markets model portfolio by country

Global emerging markets model portfolio by sector

Figure 21: European PMIs Key Trades

Figure 23: Correlation of Bolsa with OW Mexico – Leveraged to the US

Source: J.P. Morgan

Source: Datastream. Note: Chart shows the PE

Figure 27: Performance of China

Source: Bloomberg, 7 June 2010.

With the downgrade of Brazil to

Source: J.P. Morgan.

Source: J.P. Morgan estimates. Note: Chart Table 8: OW South Africa

Country asset allocation changes

Stress testing our current baseline forecasts for EM : Resiliancy to hold

Emerging Markets: Outlook & Scorecards

Key drivers Outlook

JPM Mkt cap P/E EPS Div Yld. ROE

Economic Forecasts Risk Appetite

800 Absolute Relativ e to MSCI EMF (28) (57)

400 DY (46) (81)

Currency Outlook (CNY/USD) EPS Integer over Time

JPM Mkt cap P/E EPS Div Yld. ROE

Economic Forecasts Risk Appetite

1200 Absolute Relativ e to MSCI EMF FWD PER (127325) (231098)

1000 PER (135046) (304544)

800 PBR (75515) (238255)

600 DY (137244) (250056)

Currency Outlook (BRL/USD) EPS Integer over Time

JPM Mkt cap P/E EPS Div Yld. ROE

South Korea scorecard

Economic Forecasts Risk Appetite

450 Absolute Relativ e to MSCI EMF (189) (390)

Currency Outlook (KRW/USD) EPS Integer over Time

JPM Mkt cap P/E EPS Div Yld. ROE