Guide to the Markets

MARKET INSIGHTS

Asia | 2Q 2018 | As of March 31, 2018

Global Market Insights Strategy Team

Hannah AndersonHong Kong

Manuel Arroyo Ozores, CFAMadrid

Lucia Gutierrez MelladoMadrid

Vincent JuvynsLuxembourg

Tilmann Galler, CFAFrankfurt

Maria Paola ToschiMilan

Tai HuiHong Kong

Ian HuiHong Kong

Marcella ChowHong Kong

Dr. Jasslyn Yeo, CFASingapore

Kerry Craig, CFAMelbourne

Chaoping Zhu, CFAShanghai

Alex Dryden, CFANew York

Dr. David Kelly, CFANew York

Samantha AzzarelloNew York

Gabriela SantosNew York

David LebovitzNew York

Jordan JacksonNew York

Abigail Yoder, CFANew York

John ManleyNew York

Tyler VoigtNew York

Yoshinori ShigemiTokyo

Shogo MaekawaTokyo

Nandini RamakrishnanLondon

Michael Bell, CFALondon

Jai MalhiLondon

Ambrose CroftonLondon

Karen WardLondon

Dr. Cecelia MundtNew York

3

| 3GTM – Asia

Fixed income45. Global fixed income: Yields and returns46. Global fixed income: Interest rate risk47. Global fixed income: Valuations48. Global fixed income: U.S. business cycles and yield curve49. Global fixed income return composition50. Global government bonds51. U.S. high yield bonds52. Emerging market debt: Fundamentals53. Asia fixed income markets

Other asset classes54. Asset class returns55. Volatility56. Correlations57. Treasury yield and asset class performance58. Currencies59. U.S. dollar drivers60. Oil: Short-term market dynamics61. Alternative sources of income

Investing principles62. Real return on cash and yields63. Investors’ market timing64. Annual returns and intra-year declines65. The compounding effect66. Portfolio construction, asset class returns and volatility67. The benefits of diversification and long-term investing68. The benefits of saving and investing early69. Environmental, social and governance investing

Regional and local economy4. Asia: Economic snapshot5. ASEAN: Economic snapshot6. China: Economic snapshot7. China: Cyclical indicators8. China: Monetary policy9. China: Credit and leverage10. China: Investment and industrial capacity11. China: Exchange rate and foreign reserves12. India: Economic snapshot13. Japan: Economic snapshot

Global economy14. Global growth15. Global Purchasing Managers’ Index (PMI): Manufacturing 16. Global trade17. Capital expenditures and workforce productivity18. Inflation and policy rates19. Central bank policy rates20. Central bank balance sheets 21. Political calendar22. United States: Economic growth and the composition of GDP23. United States: Cyclical indicators24. United States: Employment and wages25. United States: Inflation26. United States: Monetary policy27. Eurozone: Economic snapshot28. Eurozone: Inflation and lending

Equities29. Global and Asia equity market returns30. Global equities: Earnings expectations and returns31. Global equities: Valuations32. Global equities: Profit margins33. Global equities: High dividend34. Emerging market equities: Performance drivers35. APAC ex-Japan and U.S. equities36. APAC ex-Japan: Equities snapshot37. APAC ex-Japan: Cyclical versus defensive equities38. APAC ex-Japan: Sector returns and valuations39. China A-shares versus H-shares: Earnings and valuations40. Japan: Earnings, currency and equities41. United States: Earnings and valuations42. United States: Bear markets and subsequent bull returns43. United States: Interest rates and equities44. Europe: Earnings and currencies

Page reference

|GTM – Asia 4

4

Regi

onal

and

loca

l eco

nom

y

-20%

-15%

-10%

-5%

0%

5%

10%

15%

20%

25%

30%

'01 '03 '05 '07 '09 '11 '13 '15 '17

Asia: Economic snapshot

EM Asia* contribution to real GDP growthYear-over-year growth

Investment and exportsEM Asia* nominal investment, export volumes, y/y change, 3MMA

Source: CEIC, J.P. Morgan Economic Research, National Statistics Agencies, J.P. Morgan Asset Management; (Right) Netherlands Bureau of Policy Analysis.*EM Asia includes China, Hong Kong, India, Indonesia, Korea, Malaysia, Philippines, Singapore, Taiwan and Thailand. **Consumption includes both private/household and public/government consumption.Guide to the Markets – Asia. Data reflect most recently available as of 31/3/18.

Investment

Export volumes

InvestmentConsumption**

Net exportsGDP

-2%

0%

2%

4%

6%

8%

10%

'12 '13 '14 '15 '16 '17

|GTM – Asia 5

5

Regi

onal

and

loca

l eco

nom

y

-20%

-15%

-10%

-5%

0%

5%

10%

15%

20%

25%

'12 '13 '14 '15 '16 '17 '18

-3%

0%

3%

6%

9%

12%

15%

18%

'12 '13 '14 '15 '16 '17

0%

1%

2%

3%

4%

5%

6%

7%

Indonesia Malaysia Philippines Singapore Thailand

ASEAN: Economic snapshot

ExportsYear-over-year change, 3-month moving average

Consumption growthYear-over-year change

Infrastructure spending as % of GDP

Source: National Statistics Agencies, J.P. Morgan Asset Management; (Left) FactSet; (Top right) CEIC; (Bottom right) HSBC.Guide to the Markets – Asia. Data reflect most recently available as of 31/3/18.

Singapore

Thailand

IndonesiaPhilippines

MalaysiaThailand

Indonesia

Philippines

Malaysia

Singapore

2018 forecast

2010

|GTM – Asia 6

6

Regi

onal

and

loca

l eco

nom

y

46

48

50

52

54

56

'11 '12 '13 '14 '15 '16 '17 '18

-8%

-4%

0%

4%

8%

12%

16%

20%

'80 '85 '90 '95 '00 '05 '10 '15-6%

-3%

0%

3%

6%

9%

12%

15%

18%

21%

'11 '12 '13 '14 '15 '16 '17 '18

China: Economic snapshot

Contribution to real GDP growthYear-over-year change

Caixin/Markit Purchasing Managers’ IndicesLevel

Electricity consumptionYear-over-year change, year-to-date

Source: J.P. Morgan Asset Management; (Left and bottom right) CEIC, FactSet, National Bureau of Statistics of China; (Top right) Caixin/Markit.Guide to the Markets – Asia. Data reflect most recently available as of 31/3/18.

Manufacturing

Services

Net exports

Gross capital formation (investment) Consumption

GDP

Secondary

Tertiary

2017: 6.9%3/2018: 51.0

3/2018: 52.3

2/2018: 18.8%

2/2018: 11.5%

|GTM – Asia 7

7

Regi

onal

and

loca

l eco

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y

|

-50%

-25%

0%

25%

50%

75%

100%

-15%

-10%

-5%

0%

5%

10%

15%

20%

25%

30%

'10 '11 '12 '13 '14 '15 '16 '17 '18

-4%

-2%

0%

2%

4%

6%

8%

10%

12%

'06 '08 '10 '12 '14 '16 '18

China: Cyclical indicators

China inflationYear-over-year change

Industrial profits and PPI inflationYear-over-year change

Property prices and land salesYear-over-year change

Source: CEIC, National Bureau of Statistics of China, J.P. Morgan Asset Management.Guide to the Markets – Asia. Data reflect most recently available as of 31/3/18.

CPI-Services

Consumer Price Index (CPI)

CPI-Goods

Industrial profits Producer Price Index (PPI)

Retail and online salesYear-over-year change, 3-month moving average

Retail sales

Online sales

Residential property prices (lagged 12m)

Land area sold

-6%

-3%

0%

3%

6%

9%

-10%

0%

10%

20%

30%

40%

'11 '12 '13 '14 '15 '16 '17 '18

25%

30%

35%

40%

45%

50%

9%

10%

11%

12%

'16 '17 '18

|GTM – Asia 8

8

Regi

onal

and

loca

l eco

nom

y

0.0%

1.5%

3.0%

4.5%

6.0%

7.5%

'15 '16 '17 '18 01/16 07/16 01/17 07/17 01/182.0%

2.2%

2.4%

2.6%

2.8%

3.0%

3.2%

3.4%

3.6%

3.8%

4.0%

4.2%

China: Monetary policy

Key policy ratesPer annum

Chinese government bond yields

Source: People’s Bank of China, J.P. Morgan Asset Management; (Left) CEIC; (Right) FactSet. Past performance is not a reliable indicator of current and future results. Guide to the Markets – Asia. Data reflect most recently available as of 31/3/18.

Lending rate (1-year)

Interbank repo (7-day)

Standing lending facility (7-day)

Deposit rate (1-year)

10-year

1-year

5-year

Interest on excess reserves

|GTM – Asia 9

9

Regi

onal

and

loca

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y

0%

5%

10%

15%

20%

25%

30%

35%

40%

'07 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17 '18

0.0x0.5x1.0x1.5x2.0x2.5x3.0x3.5x4.0x4.5x

'07 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17 '18

China: Credit and leverage

Credit growthYear-over-year change

Debt level by sector% of GDP

Credit growth to GDP growthBroad credit measure*, ratio, year-over-year growth, 3-month moving average

Source: J.P. Morgan Asset Management; (Top and bottom left) CEIC, China Central Depository & Clearing Co., People’s Bank of China, Shanghai Clearing House; (Bottom right) BIS. Credit growth to GDP growth ratio utilizes rolling 12-month nominal GDP and broad credit. *The broad credit measure consists of all reported bank claims on the domestic economy, plus bankers’ acceptances, entrusted loans, trust loans, new net corporate bond and non-financial equity financing, issuance of asset-backed securities and interbank loans. **Wenzhou SME crisis refers to the wave of bankruptcies and funding problems faced by a large number of SMEs in Wenzhou in 2011. ***LGFV refers to local government financing vehicle. Guide to the Markets – Asia. Data reflect most recently available as of 31/3/18.

Total social financing Broad credit*

RMB bank lending

Global Financial Crisis

Loosening: 216bp rate cuts, 4tn stimulus

Tightening: 125bp rate hikes, BASEL III adoption

Wenzhou small and medium enterprise (SME) crisis**

Interbank liquidity crunchLoosening: 56bp

rate cuts, trust boom

Tightening: shadow banking tightening

Loosening: 165bp rate cuts, LGFV debt swap***

A-share market crash

Tightening

Rate cut

Rapid rebound in CPI & PPI

'08 '09 '10 '11 '12 '13 '14 '15 '16 '1780%

100%

120%

140%

160%

180%

200%

10%

20%

30%

40%

50% Government

Non-financial corporations

Households

|GTM – Asia 10

10

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and

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China: Investment and industrial capacity

Fixed asset investment Year-over-year change, year-to-date

Source: CEIC, FactSet, National Bureau of Statistics, J.P. Morgan Asset Management. *Industrial capacity utilization rate is defined as the percent of total available production capacity being used to produce finished goods.Guide to the Markets – Asia. Data reflect most recently available as of 31/3/18.

Private

Total

Capacity utilizationIndustrial capacity utilization rate*

State-owned enterprises

0%

10%

20%

30%

40%

'11 '12 '13 '14 '15 '16 '17 '1872%

73%

74%

75%

76%

77%

78%

79%

'13 '14 '15 '16 '17

|GTM – Asia 11

11

Regi

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and

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01/16 07/16 01/17 07/17 01/1890

92

94

96

98

100

102

104

106

'13 '14 '15 '16 '17 '18-120

-90

-60

-30

0

30

60

90

120 6.0

6.1

6.2

6.3

6.4

6.5

6.6

6.7

6.8

6.9

7.0

China: Exchange rate and foreign reserves

Chinese yuan exchange rate: CFETS RMB* vs. USDIndex, Jan. 2016 = 100

USD / CNY and change in FX reserves

Source: FactSet, J.P. Morgan Asset Management; (Left) China Foreign Exchange Trade Center, J.P. Morgan Economic Research; (Right) People’s Bank of China.*CFETS RMB index is the China Foreign Exchange Trade System basket of 24 currencies traded against the Chinese renminbi. Past performance is not a reliable indicator of current and future results.Guide to the Markets – Asia. Data reflect most recently available as of 31/3/18.

Weaker yuan

Stronger yuan

USD / CNY

Change in monthly FX reserves (USD billions)

USD / CNY (inverted)

CFETS RMB index

|GTM – Asia 12

12

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and

loca

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|

-6%

-2%

2%

6%

10%

14%

18%

'05 '07 '09 '11 '13 '15 '17 '06 '08 '10 '12 '14 '16 '180%

5%

10%

15%

20%

25%

30%

35%

40%

India: Economic snapshot

Real GDP growth Year-over-year change

Inflation and repo rateYear-over-year change, % per annum*

Credit and deposit growthYear-over-year change

Source: J.P. Morgan Asset Management; (Top left) J.P. Morgan Economic Research, Ministry of Statistics and Programme Implementation; (Top right) Society of Indian Automobile Manufacturers; (Bottom left and right) Reserve Bank of India; (Bottom right) Reuters. *Reserve Bank of India (RBI) repo rate is % per annum.Guide to the Markets – Asia. Data reflect most recently available as of 31/3/18.

10-yr avg. 4Q17Real GDP growth 7.1% 7.2%

Repo rate*

Wholesale Price Index (WPI)

Consumer Price Index (CPI)Latest

WPI 2.5%Repo rate 6.0%CPI 4.4%

Domestic credit

Deposits

'06 '08 '10 '12 '14 '16 '1840

80

120

160

200

240

280

Average: 173.0

Jan. 2018: 225.6

Vehicle salesNumber of passenger vehicles, thousands

0%

2%

4%

6%

8%

10%

12%

14%

'06 '08 '10 '12 '14 '16

|GTM – Asia 13

13

Regi

onal

and

loca

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nom

y

|

-40%

-20%

0%

20%

40%

60%

80%

'11 '12 '13 '14 '15 '16 '17

-20%

-15%

-10%

-5%

0%

5%

10%

15%

20%

'11 '12 '13 '14 '15 '16 '17 '18

'80 '85 '90 '95 '00 '05 '10 '15-6%

-4%

-2%

0%

2%

4%

6%

8% 1%

2%

3%

4%

5%

6%

Japan: Economic snapshot

Corporate inflation expectations*Tankan business conditionsDiffusion Index, all enterprises

Operating profitsYear-over-year change

Real wage growth and labor marketYear-over-year change, 6-month moving average Inverted scale

Source: J.P. Morgan Asset Management; (Top left and right) Bank of Japan; (Bottom left and right) FactSet; (Bottom left) Ministry of Finance; (Bottom right) Japanese Statistics Bureau and Statistics Center, Ministry of Health, Labor and Welfare. *Inflation expectations are calculated from the responses to the Bank of Japan’s all firm survey of business expectations and are for inflation expectations 1, 3 and 5 years from each point in time. Past performance is not a reliable indicator of current and future results.Guide to the Markets – Asia. Data reflect most recently available as of 31/3/18.

Non-manufacturing

Manufacturing

Non-manufacturing

Manufacturing

3 years ahead

1 year ahead

5 years ahead

Latest5 years ahead 1.1%3 years ahead 1.1%1 year ahead 0.8%

Total real cash earnings Unemployment rate

0.4%

0.8%

1.2%

1.6%

2.0%

'14 '15 '16 '17 '18

|GTM – Asia 14

14

Glob

al e

cono

my

-6%

-4%

-2%

0%

2%

4%

6%

8%

10%

'80 '85 '90 '95 '00 '05 '10 '15 '20

Forecast*

Global growth

Source: IMF, J.P. Morgan Asset Management.*Forecasts are from the IMF’s October 2017 World Economic Outlook. Guide to the Markets – Asia. Data reflect most recently available as of 31/3/18.

Real GDP growthYear-over-year change

DM growth outperforms EM

EM growth outperforms DM

Developed market (DM) GDP growthEmerging market (EM) GDP growth

EM less DM growth

|GTM – Asia 15

15

Glob

al e

cono

my

30

35

40

45

50

55

60

'06 '07 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17 '18

Global Purchasing Managers’ Index (PMI): Manufacturing

Source: Australian Industry Group, J.P. Morgan Economic Research, Markit, J.P. Morgan Asset Management.PMI’s are relative to 50, which indicates contraction (below 50) or expansion (above 50) of the sector. *% of reporters available with a manufacturing PMI above 50.Guide to the Markets – Asia. Data reflect most recently available as of 31/3/18.

Developed and emerging market manufacturing PMI Global manufacturing activity% of markets in expansionary territory*

DM PMI

EM PMI

0%

20%

40%

60%

80%

100%

'06 '07 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17 '18

|GTM – Asia 16

16

Glob

al e

cono

my

8.0%

12.5%

14.3%

25.5%

10.5%

12.1%

19.1%

24.2%

35.8%

16.5%

36.7%

47.7%

52.8%

0% 10% 20% 30% 40% 50% 60%

U.S.

EU*

Japan

Canada

Brazil

India

China

Russia

Mexico

Australia

Korea

ASEAN

Taiwan

Tariffs on importsEffectively applied tariff rate, all products, simple average

Global trade

Source: FactSet, J.P. Morgan Asset Management; (Left) IMF; (Top right) U.S. Bureau of Economic Analysis; (Bottom right) WITS, World Bank, WTO, United Nations. *EU exports as a percentage of GDP excludes intra-EU trade as the European Union is considered one regional economy.Guide to the Markets – Asia. Data reflect most recently available as of 31/3/18.

U.S. trade balance with key partners – 2017Goods and services, USD billions

Exports as a share of GDP – 2017Goods exports

U.S.

EU

China

Other

JapanTrade balance

Exports

Imports

-800 -600 -400 -200 0 200 400 600

China

EU

Mexico

Japan

Korea

Canada

0%

10%

20%

30%

40%

'92 '96 '00 '04 '08 '12 '16

U.S.

China

World

|GTM – Asia 17

17

Glob

al e

cono

my

-20%

-15%

-10%

-5%

0%

5%

10%

15%

20%

25%

-6%

-4%

-2%

0%

2%

4%

6%

8%

'98 '00 '02 '04 '06 '08 '10 '12 '14 '16

Capital expenditures and workforce productivity

Source: J.P. Morgan Economics Research, J.P. Morgan Asset Management.*Investment measured as GDP-weighted business investment in fixed capital and productivity measured as real output per worker. Excludes China and India.Guide to the Markets – Asia. Data reflect most recently available as of 31/3/18.

Developed market investment and productivity*Year-over-year change

Emerging market investment and productivity*Year-over-year change

Productivity (lagged 2Q) Investment Productivity Investment

-25%

-20%

-15%

-10%

-5%

0%

5%

10%

15%

20%

-4%

-3%

-2%

-1%

0%

1%

2%

3%

4%

'98 '00 '02 '04 '06 '08 '10 '12 '14 '16

|GTM – Asia 18

18

Glob

al e

cono

my

Inflation and policy rates

Source: FactSet, various central banks, J.P. Morgan Economic Research, J.P. Morgan Asset Management.All inflation numbers refer to headline CPI inflation. *Arrows and dates indicate the direction and date of last change, respectively. The central bank’s policy rates used are: the one-year benchmark lending rate (China), Reserve Bank of India policy repo rate (India), Bank Indonesia 7-day reverse repo rate (Indonesia), the Bank of Japan’s (BoJ) policy rate on the aggregate balance of all financial institutions’ current accounts at the BoJ (Japan), Bank of Korea base rate (Korea), overnight policy rate (Malaysia), discount rate (Taiwan), one-day repurchase rate (Thailand), fed funds rate (U.S.), Eurozone main refinancing operations rate (Eurozone) and Bank of England official bank rate (UK). Past performance is not a reliable indicator of current and future results.Guide to the Markets – Asia. Data reflect most recently available as of 31/3/18.

Monthly inflation trendYear-over-year change Below target by more than

0.5% or below range Within +/- 0.5% of target or within range

Above target by more than 0.5% or above range

Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb2017 2017 2017 2017 2017 2017 2017 2017 2017 2017 2017 2018 2018

China 0.8 0.9 1.2 1.5 1.5 1.4 1.8 1.6 1.9 1.7 1.8 1.5 2.9 3.0 4.35 ( 10/2015)

India 3.7 3.9 3.0 2.2 1.5 2.4 3.3 3.3 3.6 4.9 5.2 5.1 4.4 2.0 – 6.0 6.00 ( 8/2017)

Indonesia 3.8 3.6 4.2 4.3 4.4 3.9 3.8 3.7 3.6 3.3 3.6 3.3 3.2 3.0 – 5.0 4.25 ( 9/2017)

Japan 0.3 0.2 0.4 0.4 0.4 0.4 0.7 0.7 0.2 0.6 1.0 1.4 1.5 2.0 -0.1 – 0.0 ( 2/2016)

Korea 1.9 2.2 1.9 2.0 1.9 2.2 2.6 2.1 1.8 1.3 1.5 1.0 1.4 2.0 1.5 ( 11/2017)

Malaysia 4.5 4.9 4.3 3.8 3.4 3.1 3.6 4.2 3.7 3.3 3.4 2.7 1.4 2.0 – 3.0 3.25 ( 1/2018)

Taiwan -0.1 0.2 0.1 0.6 1.0 0.8 1.0 0.5 -0.3 0.3 1.2 0.9 2.2 2.0 1.375 ( 6/2016)

Thailand 1.4 0.8 0.4 0.0 0.0 0.2 0.3 0.9 0.9 1.0 0.8 0.7 0.4 1.0 – 4.0 1.5 ( 4/2015)

U.S. 2.7 2.4 2.2 1.9 1.6 1.7 1.9 2.2 2.0 2.2 2.1 2.1 2.2 2.0 1.5 – 1.75 ( 3/2018)

Eurozone 2.0 1.5 1.9 1.4 1.3 1.3 1.5 1.5 1.4 1.5 1.4 1.3 1.1 2.0 0.00 ( 3/2016)

UK 2.3 2.3 2.7 2.9 2.6 2.6 2.9 3.0 3.0 3.1 3.0 3.0 2.7 2.0 0.5 ( 11/2017)

Central bank target ( easing, tightening)

Key policy rate*Market

|GTM – Asia 19

19

Glob

al e

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my

-0.8

-0.7

-0.6

-0.5

-0.4

-0.3

-0.2

-0.1

0.0

0.1

0.2

0.3

0.4

'00 '02 '04 '06 '08 '10 '12 '14 '16'00 '02 '04 '06 '08 '10 '12 '14 '16 '18-1%

0%

1%

2%

3%

4%

5%

6%

7%

Central bank policy rates

Source: Bloomberg Finance L.P., J.P. Morgan Asset Management; (Left) FactSet. G4 are the Bank of England, the Bank of Japan, the European Central Bank and the U.S. Federal Reserve. *Key deposit rates that central banks charge commercial banks on their excess reserves. **The BoJ is adopting a three-tier system in which a negative interest rate of -0.1% will be applied to the policy rate balance of the aggregate amount of all financial institutions that have current accounts at the BoJ. ***Diffusion index covers 24 central banks weighted by each market’s share of global debt securities outstanding on an ultimate issuer basis. A rate hike is considered tightening, a rate cut loosening and no change neutral; 1 = all banks tightening, 0 = all banks on hold, -1 = all banks loosening. Past performance is not a reliable indicator of current and future results.Guide to the Markets – Asia. Data reflect most recently available as of 31/3/18.

G4 central bank key policy rates Global central bank policyCentral bank policy rate diffusion index***, 6-month moving average

Policy rate Deposit rate*

Eurozone 0.0% -0.4%Japan** -0.1 to 0.0% -0.1%UK 0.5% 0.0%U.S. 1.5 to 1.75% 1.75%

Policy tightening globally

Policy easing globally

|GTM – Asia 20

20

Glob

al e

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-1000

-500

0

500

1000

1500

2000

'16 '17 '18 '19

Central bank balance sheets

Source: Bloomberg Finance L.P., J.P. Morgan Asset Management.*New purchases of assets are based on monthly holdings as reported by each respective G4 central bank (the Bank of England (BoE), the Bank of Japan (BoJ), the European Central Bank (ECB) and the U.S. Federal Reserve (Fed)) and announced purchase plans of these central banks and J.P. Morgan Asset Management projections. Guide to the Markets – Asia. Data reflect most recently available as of 31/3/18.

Central bank asset purchases 12-month rolling bond purchases by G4 central banks*, USD billions

Projections U.S.Eurozone

JapanNet

UK

|GTM – Asia 21

21

Glob

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Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar

Emerging markets political timeline

Developed markets political timeline

Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar

7 & 28 October BrazilGeneral election

October/NovemberChina 4th Party Plenum

1 July MexicoGeneral election

October Ireland Presidential election

30 June U.S.Trade Promotion Authority expires*

24 August MalaysiaParliamentary election

Source: Bloomberg, J.P. Morgan Asset Management.*Without the Trade Promotion Authority, the U.S. Congress may amend the trade agreements negotiated by the U.S. president.Guide to the Markets – Asia. Data reflect most recently available as of 31/3/18.

Political calendar

6 November U.S.U.S. Midterm elections

12 May U.S.U.S. potentially exits Iran nuclear agreement

20 May VenezuelaPresidential election

27 May ColombiaPresidential election

March China Annual session of the National People’s Congress (NPC)

September JapanLiberal Democratic Party Presidential election

29 March UKUK officially leaves the EU

2019

2019

April to June U.S. – China Ongoing trade negotiations

|GTM – Asia 22

22

Glob

al e

cono

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-6%

-4%

-2%

0%

2%

4%

6%

8%

10%

'17'12'07'02'97'92'87'82'77'72'67 -1

1

3

5

7

9

11

13

15

17

19

21

United States: Economic growth and the composition of GDP

Source: Bureau of Economic Analysis, FactSet, J.P. Morgan Asset Management.*SAAR stands for the seasonally adjusted annualized rate.Guide to the Markets – Asia. Data reflect most recently available as of 31/3/18.

Real GDPYear-over-year change

Components of GDP4Q17 nominal GDP, USD trillions

12.8% Investment ex-housing

69.1% Consumption

17.2% Gov’t spending

3.9% Housing

-3.0% Net exports

Average: 2.8%Average post-Global Financial Crisis: 2.3%

Real GDP 4Q17

Year-over-year change: 2.6%

Quarter-over-quarter SAAR* change: 2.9%

|GTM – Asia 23

23

Glob

al e

cono

my

United States: Cyclical indicators

Investment and demand for creditYear-over-year change % reporting stronger demand*

Light vehicle salesMillions, seasonally adjusted annualized rate

Housing starts Thousands, seasonally adjusted annualized rate

Savings and sentimentQuarterly change Index

2/2018: 17.0

Average: 15.7

'94 '96 '98 '00 '02 '04 '06 '08 '10 '12 '14 '16 '180

500

1,000

1,500

2,000

2,500

2/2018: 1,236Average: 1,324

'00 '02 '04 '06 '08 '10 '12 '14 '16 '1850

60

70

80

90

100

110

120

0%

2%

4%

6%

8%

10%

12% Personal savings rate Consumer sentiment

'00 '02 '04 '06 '08 '10 '12 '14 '16 '18-80%

-60%

-40%

-20%

0%

20%

40%

60%

-20%

-15%

-10%

-5%

0%

5%

10%

15% Investment** Demand for business loans

Source: J.P. Morgan Asset Management; (Top left) U.S. Bureau of Economic Analysis; (Top right, bottom left and right) FactSet; (Bottom left and right) U.S. Census Bureau. *Net percent of participants in the Senior Loan Officer Survey. **Private investment in non-residential fixed assets in real terms. Guide to the Markets – Asia. Data reflect most recently available as of 31/3/18.

8

10

12

14

16

18

20

22

24

'98 '00 '02 '04 '06 '08 '10 '12 '14 '16 '18

|GTM – Asia 24

24

Glob

al e

cono

my

'85 '90 '95 '00 '05 '10 '150%

2%

4%

6%

8%

10%

12%

United States: Employment and wages

Source: FactSet, U.S. Bureau of Labor Statistics, J.P. Morgan Asset Management.*Average hourly earnings are calculated from the wages of production and non-supervisory workers.Guide to the Markets – Asia. Data reflect most recently available as of 31/3/18.

Unemployment rate and average hourly earnings*Percent of labor force, year-over-year change, seasonally adjusted

Average hourly earnings

Unemployment rate

Recessions

2/2018: 4.1%

2/2018: 2.5%

|GTM – Asia 25

25

Glob

al e

cono

my

United States: Inflation

Source: FactSet, U.S. Bureau of Labor Statistics, J.P. Morgan Asset Management; (Left) U.S. Bureau of Economic Analysis.*Core CPI and core PCE are the Consumer Price Index (CPI) and Personal Consumption Expenditure (PCE) deflator ex-food and energy.Guide to the Markets – Asia. Data reflect most recently available as of 31/3/18.

Core inflationYear-over-year change, seasonally adjusted

CPI contributionContribution to latest year-over-year headline CPI

'85 '90 '95 '00 '05 '10 '150.5%

1.0%

1.5%

2.0%

2.5%

3.0%

3.5%

4.0%

4.5%

5.0%Avg. since

1985Avg. since

2000 2/2018

Core CPI* 2.7% 2.0% 1.9%Core PCE* 2.2% 1.7% 1.6%

0.0% 0.4% 0.8% 1.2% 1.6% 2.0% 2.4%

Headline

Food & Beverage

Energy

Core CPI

Shelter

Healthcare

Transportation

Others

|GTM – Asia 26

26

Glob

al e

cono

my

2.08%

2.44%

2.52%

2.10%

2.90%

3.40%

2.90%

0%

1%

2%

3%

4%

5%

6%

'05 '07 '09 '11 '13 '15 '17 '19 '210

1

2

3

4

5

'03 '05 '07 '09 '11 '13 '15 '17 '19 '21

Forecast*

Oct. 2014:End of QE3; balance sheet stands at $4.5T

Nov. 2010:QE2 begins

United States: Monetary policy

Source: FactSet, Federal Reserve, J.P. Morgan Asset Management.*Market expectations are calculated from the rate implied by the fed futures market. **Balance sheet reduction assumes reduction from current level, beginning October 2017 and lasting four years, concluding in October 2021. Reduction of Treasuries and MBS is per FOMC guidelines from the September 2017 meeting minutes: Treasury securities will be reduced USD 6billion per month initially and reduction rate will increase in steps of USD 6billion at three-month intervals over 12 months until reaching USD 30billion per month; MBS will be reduced USD 4billion per month initially and reduction rate will increase in steps of USD 4billion at three-month intervals over 12 months until reaching USD 20billion per month; Other assets are reduced in proportion. Forecasts do not take into account months where maturing assets do not exceed the stated cap nor do they consider the reinvestment of principal or interest repayment in excess of the stated cap. Past performance is not a reliable indicator of current and future results. Guide to the Markets – Asia. Data reflect most recently available as of 31/3/18.

Federal funds rate expectations*FOMC and market expectations for the fed funds rate

Federal Reserve balance sheet**USD trillions

Federal funds rate

Long run

Treasuries

(MBS)

Other

Dec. 2008:QE1 begins

Sep. 2012:QE3 begins

Jan. 2014:Tapering of

purchases begins

Sep. 2011:Operation

Twist

Market expectations (as of 31/3/18)

FOMC median projections (as of 22/3/18)

FOMC long-run projection (as of 22/3/18)

Oct. 2017: Balance sheet reduction begins

|GTM – Asia 27

27

Glob

al e

cono

my

-15%

-10%

-5%

0%

5%

10%

-4%

-3%

-2%

-1%

0%

1%

2%

'08 '09 '10 '11 '12 '13 '14 '15 '16 '17 '18

Unemployment rateHarmonized rate, seasonally adjusted

'01 '03 '05 '07 '09 '11 '13 '15 '176%

7%

8%

9%

10%

11%

12%

13%

Businesses and investmentBusiness confidence y/y change fixed asset investment lagged 1Q

'09 '10 '11 '12 '13 '14 '15 '16 '17 '18-4%

-3%

-2%

-1%

0%

1%

2%

3%

4%

5%

-40

-35

-30

-25

-20

-15

-10

-50

5

Consumer confidence* and retail salesYear-over-year change, 3-month moving average

Eurozone: Economic snapshot

Source: Eurostat, FactSet, J.P. Morgan Asset Management; (Top and bottom right) European Commission.*Eurozone consumer confidence as reported by the European Commission, which measures the level of optimism that consumers have about the economy. Guide to the Markets – Asia. Data reflect most recently available as of 31/3/18.

01/2018: 8.6%

Eurozone business confidence

Fixed investment

Retail sales

Consumer confidence

Recession

|GTM – Asia 28

28

Glob

al e

cono

my

-1.5%

-1.0%

-0.5%

0.0%

0.5%

1.0%

1.5%

2.0%

2.5%

3.0%

'12 '13 '14 '15 '16 '17 '18 '06 '08 '10 '12 '14 '16 '181%

2%

3%

4%

5%

6%

7%

'06 '08 '10 '12 '14 '16 '18-5%

0%

5%

10%

15%

Eurozone bank lendingYear-over-year change

Eurozone: Inflation and lending

Source: ECB, FactSet, J.P. Morgan Asset Management; (Left) Eurostat.*Core rate is CPI inflation (HICP) excluding energy, food, alcohol and tobacco. **Interest on new business lending up to €1 million, on a 1-5 year maturity.Guide to the Markets – Asia. Data reflect most recently available as of 31/3/18.

Eurozone CPI inflationContribution to headline inflation, year-over-year change

Corporate lending rates to smaller companiesInterest rate**, non-financial corporations

Household

Corporate

Food, alcohol, tobaccoCore rate*EnergyCPI

ItalyGermany

Spain

France

ECB inflation target: 2%

|GTM – Asia 29

29

Equi

ties

Global and Asia equity market returns

Source: FactSet, MSCI, J.P. Morgan Asset Management.Returns are total returns based on MSCI indices in U.S. dollar terms. 10-yr total (net) return data is used to calculate annualized returns (Ann. Ret.) and 10-yr price return data is used to calculate annualized volatility (Ann. Vol.) and reflect the period 31/3/08 – 31/3/18. Past performance is not a reliable indicator of current and future results.Guide to the Markets – Asia. Data reflect most recently available as of 31/3/18.

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 1Q '18 Ann. Ret. Ann. Vol.

India Japan India ASEAN U.S. HK U.S. India Japan Taiwan China Taiwan U.S. India

73.1% -29.1% 102.8% 32.4% 2.0% 28.3% 32.6% 23.9% 9.9% 19.6% 54.3% 5.7% 9.5% 29.1%

China U.S. Taiwan Korea ASEAN India Japan U.S. U.S. U.S. Korea ASEAN HK Korea

66.2% -37.1% 80.2% 27.2% -6.1% 26.0% 27.3% 13.4% 1.3% 11.6% 47.8% 1.9% 7.4% 26.9%

HK Taiwan ASEAN HK Europe China Europe Taiwan HK Korea India China Taiwan China

41.2% -45.9% 75.0% 23.2% -10.5% 23.1% 26.0% 10.1% -0.5% 9.2% 38.8% 1.8% 6.4% 24.3%

ASEAN Europe APAC ex-JP

Taiwan Korea ASEAN HK China Europe APAC ex-JP

APAC ex-JP

Japan China Taiwan

39.2% -46.1% 73.7% 22.7% -11.8% 22.8% 11.1% 8.3% -2.3% 7.1% 37.3% 1.0% 6.2% 21.6%APAC ex-JP

ASEAN Korea India Japan APAC ex-JP

Taiwan ASEAN India ASEAN HK Korea ASEAN APAC ex-JP

37.2% -47.6% 72.1% 20.9% -14.2% 22.6% 9.8% 6.4% -6.1% 6.2% 36.2% -0.4% 5.8% 21.4%

Korea China China APAC ex-JP

APAC ex-JP

Korea Korea HK Korea Japan ASEAN APAC ex-JP

APAC ex-JP

HK

32.6% -50.8% 62.6% 18.4% -15.4% 21.5% 4.2% 5.1% -6.3% 2.7% 30.1% -0.6% 5.4% 21.2%

Europe HK HK Japan HK Europe China APAC ex-JP

China HK Taiwan U.S. Korea ASEAN

14.4% -51.2% 60.2% 15.6% -16.0% 19.9% 4.0% 3.1% -7.6% 2.3% 28.5% -0.6% 5.4% 20.3%

Taiwan APAC ex-JP

Europe U.S. China Taiwan APAC ex-JP

Japan APAC ex-JP

China Europe HK Japan Europe

9.1% -51.6% 36.8% 15.4% -18.2% 17.7% 3.7% -3.7% -9.1% 1.1% 26.2% -1.4% 4.3% 20.2%

U.S. Korea U.S. China Taiwan U.S. India Europe Taiwan Europe Japan Europe India Japan

6.0% -55.1% 27.1% 4.8% -20.2% 16.1% -3.8% -5.7% -11.0% 0.2% 24.4% -1.9% 3.0% 15.7%

Japan India Japan Europe India Japan ASEAN Korea ASEAN India U.S. India Europe U.S.

-4.1% -64.6% 6.4% 4.5% -37.2% 8.4% -4.5% -10.7% -18.4% -1.4% 21.9% -7.0% 2.7% 15.1%

10-yrs ('08 - '18)

|GTM – Asia 30

30

Equi

ties

'09 '10 '11 '12 '13 '14 '15 '16 '17 '1820

40

60

80

100

120

140

160

180

Global equities: Earnings expectations and returns

Source: FactSet, MSCI, Standard & Poor’s, J.P. Morgan Asset Management. *EPS growth outlook is based on next 12 month aggregate (NTMA) earnings estimates. Past performance is not a reliable indicator of current and future results. Guide to the Markets – Asia. Data reflect most recently available as of 31/3/18.

Forward earnings per shareIndex, U.S. dollar, Jan. 2008 = 100

Return compositionLast 12 months, U.S. dollar

Asia Pacific ex-Japan

Europe

Japan

U.S.

EM

25%

21%15% 15%

14%

-10%

-5%

0%

5%

10%

15%

20%

25%

30%

EM Asia Pacificex-Japan

World Europe U.S.

Total returnCurrency returnMultiple expansion

EPS growth outlook*

Dividend yield

|GTM – Asia 31

31

Equi

ties

2.6

1.71.9

1.7 1.8 2.0 2.2 2.2 2.1

1.4

3.0

1.4 1.3

1.9

1.0

2.7

1.7 1.6

3.3

1.81.7

1.6 1.7 1.8 1.9 2.0 2.0

1.4

3.1

1.4

1.11.9

0.9

2.3 2.0

1.4

0x

1x

2x

3x

4x

5x

S&P 500 Europeex-UK

Asia Pacex-Japan

AsiaPacific

Emergingmarkets

ASEAN Australia China A(CSI 300)

China HongKong

India Japan Korea Taiwan Russia Mexico Brazil Turkey

Global equities: Valuations

Source: Bloomberg Finance L.P., China Securities Index, FactSet, MSCI, Standard & Poor’s, J.P. Morgan Asset Management.Price-to-earnings (P/E) and price-to-book (P/B) ratios are in local currency terms. China A valuations based on the CSI300 Index and use 10 years of data due to availability. China H valuations are based on the MSCI China. 15-year range for P/E and P/B ratios are cut off to maintain a more reasonable scale for some indexes. Past performance is not a reliable indicator of current and future results. Guide to the Markets – Asia. Data reflect most recently available as of 31/3/18.

Equity market valuations – Price to bookTrailing P/B ratios

Equity market valuations – Price to earningsForward P/E ratios

15-yr. averageLatest

15-yr. range38.3 35.830.8

15-yr. averageLatest

15-yr. range5.2

14.712.8 12.5

13.9

11.113.3 13.8

13.911.7

15.5 15.7 16.2

9.2

13.9

7.3

14.8

10.3 9.6

16.414.1

12.913.0 12.1

15.0 14.712.9

12.6 15.3

17.7

13.1

8.6

13.8

6.4

15.3

12.9

7.6

0x

10x

20x

30x

S&P 500 Europeex-UK

Asia Pacex-Japan

AsiaPacific

Emergingmarkets

ASEAN Australia China A(CSI 300)

China HongKong

India Japan Korea Taiwan Russia Mexico Brazil Turkey

|GTM – Asia 32

32

Equi

ties

-50%

-40%

-30%

-20%

-10%

0%

10%

20%

30%

40%

50%

-12%

-8%

-4%

0%

4%

8%

12%

'99 '01 '03 '05 '07 '09 '11 '13 '15 '17 '07 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17 '186%

7%

8%

9%

10%

11%

12%

U.S. labor share of income and profit margins**

Global equities: Profit margins

Source: FactSet, J.P. Morgan Asset Management; (Left) J.P. Morgan Economic Research; (Top right) U.S. Bureau of Economic Analysis; (Bottom right) Standard & Poor’s. (Left and bottom right) MSCI. *PPI is producer price index. **Employee compensation % nominal GDP, after-tax corporate profits with inventory & valuation adjustment % nominal GDP, seasonally adjusted annualized rate.Guide to the Markets – Asia. Data reflect most recently available as of 31/3/18.

MSCI World EPS and developed market inflationChange year-on-year

Europe vs. U.S. operating profit margins%, earnings per share / sales per share

MSCI Europe

S&P 500

'90 '92 '94 '96 '98 '00 '02 '04 '06 '08 '10 '12 '14 '16 '1850%

51%

52%

53%

54%

55%

56%

57%

58%

59%

3%

4%

5%

6%

7%

8%

9%

10%

11%Profit marginRecessionPPI Inflation* Earnings per share

Labor share

|GTM – Asia 33

33

Equi

ties 0

100

200

300

400

500

600

700

800

'00 '02 '04 '06 '08 '10 '12 '14 '16 '18

289

209

130 130

55

0

50

100

150

200

250

300

350

Asia Pac. ex-Japan

Europe EM ex-Asia U.S. Japan

Global equities: High dividend

Source: FactSet, MSCI, J.P. Morgan Asset Management; (Top) CLSA.*Total returns based on MSCI indices in U.S. dollar terms. **Sector weight data as of 28/2/18.Positive yield does not imply positive return. Past performance is not a reliable indicator of current and future results.Guide to the Markets – Asia. Data reflect most recently available as of 31/3/18.

Composition of MSCI High Dividend Equity Indices** Number of companies yielding greater than 3% by regionConstituents of MSCI AC World Index

MSCI AC Asia Pacific ex-Japan: Performance by dividend yield*USD cumulative total return by tertile with quarterly rebalancing (Jan. 2000 = 100)

2nd tertile

Bottom tertileAll stocks

Top tertile

Defensives Cyclicals Financials

MSCI AC World 40.4% 43.8% 15.8%

MSCI World (DM) 44.2% 42.2% 13.6%

MSCI EM 22.8% 44.7% 32.4%

MSCI AC AsiaPacific ex-Japan 33.6% 33.1% 33.3%

|GTM – Asia 34

34

Equi

ties

0

20

40

60

80

100

120

140

160

-1%

0%

1%

2%

3%

4%

5%

'95 '97 '99 '01 '03 '05 '07 '09 '11 '13 '15 '17 '97 '99 '01 '03 '05 '07 '09 '11 '13 '15 '170

50

100

150

200

250 90

100

110

120

130

'97 '99 '01 '03 '05 '07 '09 '11 '13 '15 '1740

80

120

160

200

240

280

100

200

300

400

500

EM equity relative performance and commoditiesRelative index level, Dec. 1997 = 100 Index level

Source: FactSet, MSCI, J.P. Morgan Asset Management; (Left) J.P. Morgan Economic Research; (Top right) Bloomberg Finance L.P.*REER is the real effective exchange rate. Past performance is not a reliable indicator of current and future results.

Guide to the Markets – Asia. Data reflect most recently available as of 31/3/18.

EM vs. DM growth and equity performance%, next 12 months’ growth estimates (LHS); index level (RHS)

Relative EM / DM equity performance and USD REERRelative index level, Dec. 1997 = 100 Index levelEq

uitie

s

EM growth & equity outperformance

EM growth & equity underperformance

EM minus DM GDP growth

MSCI EM / MSCI DM

MSCI EM / MSCI DM

Bloomberg Commodity Index

USD REER (inverted)*

MSCI EM / MSCI DM

Emerging market equities: Performance drivers

|GTM – Asia 35

35

Equi

ties

0

50

100

150

200

250

300

350

400

'97 '99 '01 '03 '05 '07 '09 '11 '13 '15 '17

APAC ex-Japan and U.S. equities

Source: FactSet, MSCI, Standard & Poor’s, J.P. Morgan Asset Management.Forward price-to-earnings ratio is a bottom-up calculation based on the most recent index price, divided by consensus estimates for earnings in the next 12 months (NTM), and is provided by FactSet Market Aggregates. Returns are cumulative and based on price movement only, and do not include the reinvestment of dividends.Past performance is not a reliable indicator of current and future results.Guide to the Markets – Asia. Data reflect most recently available as of 31/3/18.

MSCI AC Asia Pacific ex-Japan and S&P 500 IndexJanuary 1997 = 100, U.S. dollar, price return

P/E 15-yr avg. Div. yield 15-yr. avg.

S&P 500 16.4x 14.7x 1.8% 1.9%

MSCI AC APxJ 12.9x 12.5x 2.4% 2.7%

+94%

+111%

31/10/00P/E (fwd.) = 24.4x

-49%

31/12/99P/E (fwd.) = 17.4x

31/10/07P/E (fwd.) = 15.2x

31/10/07P/E (fwd.) = 16.9x

+101%

+359%-65%

-51%

+290%

31/3/18P/E (fwd.) = 16.4x

31/3/18P/E (fwd.) = 12.9x

+175%

-57%

|GTM – Asia 36

36

Equi

ties

'11 '12 '13 '14 '15 '16 '17 '180

20

40

60

80

100

120

140

160

180

200

Earnings by sectorNext 12-month consensus earnings per share, USD, Jan. 2011 = 100

Telecom

MSCI AC Asia Pacific ex-Japan P/B ratioTrailing P/B ratio

APAC ex-Japan: Equities snapshot

Source: FactSet, MSCI, J.P. Morgan Asset Management; (Bottom right) CEIC, national statistics agencies. Earnings per share (EPS) used is next 12 months’ aggregate estimate. *EM Asia ex-China includes Hong Kong, Korea, Malaysia, Singapore, Taiwan, Thailand and Vietnam. Overall exports aggregate is GDP-weighted. Past performance is not a reliable indicator of current and future results.Guide to the Markets – Asia. Data reflect most recently available as of 31/3/18.

Growth in nominal exports and earnings per shareUSD, year-over-year change

Discr.

Financials

Tech

MSCI AC Asia Pacific ex-JP EPS

EM Asia ex-China exports*

MaterialsEnergy

Indust.

Staples

Utilities

Health care

'00 '02 '04 '06 '08 '10 '12 '14 '16 '181.0x

1.5x

2.0x

2.5x

3.0x

3/2018: 1.7x

+1 SD: 2.0x

-1 SD: 1.5x

Average: 1.8x

-60%

-40%

-20%

0%

20%

40%

60%

80%

'01 '03 '05 '07 '09 '11 '13 '15 '17

|GTM – Asia 37

37

Equi

ties

-2

-1

0

1

2

3

4

'00 '02 '04 '06 '08 '10 '12 '14 '16 '07 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17 '181.0%

1.5%

2.0%

2.5%

3.0%

3.5%

4.0%

4.5%

5.0%

5.5%

0.8

0.9

1.0

1.1

1.2

1.3

1.4

1.5

APAC ex-Japan: Cyclicals versus defensive equities

Source: FactSet, MSCI, J.P. Morgan Asset Management.*Cyclical sectors include Consumer Discretionary, Information Technology, Industrials, Financials and Materials. REITs are excluded from this analysis. It is more appropriate to value a REIT by looking at its price relative to its funds from operations (FFO), an income measure that excludes depreciation. Price-to-earnings (P/E) ratios look at price relative to net income, a measure that includes depreciation, making the comparison of valuations across sectors inappropriate. Defensive sectors include Telecommunications, Health Care, Utilities and Consumer Staples. Sector valuations are equal weighted. **Cyclicals represent the MSCI AC Asia Pacific ex-Japan Cyclical Sector index and defensives represent the MSCI AC Asia Pacific ex-Japan Defensive Sector index. Past performance is not a reliable indicator of current and future results. Guide to the Markets – Asia. Data reflect most recently available as of 31/3/18.

Cyclicals ex-energy vs. defensive valuations*MSCI AC APxJ cyclicals ex-energy / defensives fwd. P/E ratio, z-score

Cyclicals vs. defensives relative performance and rates**MSCI AC APxJ cyclical / defensive performance 10-year U.S. Treasury yield

Cyclicals vs. defensives 10-year UST

Current: -1.44

Cyclicals expensive relative to defensives

Cyclicals cheap relative to defensives

|GTM – Asia 38

38

Equi

ties

APAC ex-Japan: Sector returns and valuations

Source: FactSet, MSCI, J.P. Morgan Asset Management. *Correlation to interest rates is calculated using daily sector returns and daily 10-year U.S. Treasury yield over the last 10 years. Returns are total (gross) returns in U.S. dollar terms. Past performance is not a reliable indicator of current and future results.Guide to the Markets – Asia. Data reflect most recently available as of 31/3/18.

Finan

cials

Real E

state

Health

Care

Cons.

Staples

Cons.

Discr.

Industr

ials

Materia

ls

Energ

y

Telec

om

Utilitie

s

Tech

nolog

y

APAC ex-JP

APAC ex-JPWeights 26.3% 6.2% 3.8% 5.1% 7.8% 6.5% 6.8% 4.6% 3.5% 2.8% 26.7% 100%

Wei

ghts

1Q18 return -1.2 -1.8 7.0 -0.8 -3.9 -2.4 -2.9 0.1 -7.4 1.2 2.2 -0.6

2017 return 30.1 39.6 39.5 29.9 41.1 22.6 33.9 33.0 11.7 18.4 61.5 37.3

From peak (October 2007)

33.1 10.3 178.6 67.6 44.8 -31.8 -13.4 -24.2 -1.1 53.3 167.9 32.9

From trough (March 2009)

313.1 276.3 387.5 232.2 280.0 148.1 150.0 119.1 107.0 144.4 519.4 262.7

Beta to APAC ex-JP 1.09x 1.09x 0.50x 0.58x 0.95x 1.06x 1.13x 1.22x 0.74x 0.59x 0.99x 1.00x β

Correl to int rates* 0.14 0.11 0.08 0.09 0.16 0.17 0.12 0.16 0.12 0.11 0.14 0.15 ρ

Forward P/E Ratio 10.4x 11.3x 28.8x 21.7x 15.4x 13.5x 12.3x 11.3x 14.1x 14.4x 13.9x 12.9x

10-yr avg. 11.1x 12.3x 21.1x 17.4x 11.7x 13.8x 12.7x 12.0x 13.8x 14.3x 14.1x 12.4x

Trailing P/B Ratio 1.4x 1.0x 5.4x 3.2x 2.0x 1.4x 1.6x 1.3x 1.7x 1.4x 2.9x 1.7x

10-yr avg. 1.4x 0.9x 4.3x 2.6x 1.8x 1.5x 1.8x 1.6x 2.1x 1.5x 2.2x 1.7x

Dividend Yield 3.1% 3.2% 0.9% 2.3% 1.5% 2.2% 2.7% 2.0% 5.3% 4.5% 1.3% 2.4%

10-yr avg. 3.5% 3.6% 1.5% 2.9% 2.3% 2.4% 2.4% 2.3% 4.1% 2.9% 2.1% 2.8%

Ret

urn

Div

P/E

P/B

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Equi

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80

90

100

110

120

130

140

150

160

'10 '11 '12 '13 '14 '15 '16 '17 '18

-0.1

0.0

0.1

0.2

0.3

0.4

0.5

0.6

0.7

0.8

'07 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17 '18'12 '13 '14 '15 '16 '17 '1870

80

90

100

110

120

130

140

A-share vs. H-share premiumIndex*, price disparity between shares listed as A vs. H

China A-shares versus H-shares: Earnings and valuations

Source: J.P. Morgan Asset Management; (Left and bottom right) FactSet, MSCI; (Top right) HSI Services Limited.*The Hang Seng Stock Connect China AH Premium Index (“HSAHP”) tracks the average price difference of A-shares over H-shares for the most liquid Chinese companies with both A-share and H-share listings (“AH Companies”), which are eligible for Northbound and Southbound trading under the Stock Connect Scheme. An index value of 100 means prices are equal.**Both Financials and Real Estate are classified as financials sectors and all constituent securities from these two sectors are included accordingly. Past performance is not a reliable indicator of current and future results.Guide to the Markets – Asia. Data reflect most recently available as of 31/3/18.

A-share vs. H-share earningsNext 12-month consensus earnings per share, USD, Jan. 2012 = 100

A-share, H-share correlation with global equity marketRolling 6-month correlation, daily returns

Relative sector weights:

A-share H-share

Cyclicals 43.3% 60.2%

Defensives 18.6% 11.5%

Financials** 38.1% 28.3%

CSI 300 (A-share)

MSCI China (H-share)

A-shares more expensive

H-shares more expensive

Average: 114

A-share correlation

H-share correlation

|GTM – Asia 40

40

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0

2

4

6

8

10

12

100

200

300

400

500

600

700

800

'80 '84 '88 '92 '96 '00 '04 '08 '12 '16

'00 '02 '04 '06 '08 '10 '12 '14 '16 '183%

4%

5%

6%

7%

8%

9%

10%

11%

2%

4%

6%

8%

10%

12%

14%

16%

1/15 7/15 1/16 7/16 1/17 7/17 1/1814,000

16,000

18,000

20,000

22,000

24,000

26,000

95

100

105

110

115

120

125

130

Japan: Earnings, currency and equities

Source: FactSet, J.P. Morgan Asset Management; (Top Left) Japan Cabinet Office, MSCI; (Bottom Left) Economic and Social Research Institute, Ministry of Finance; (Right) Nikkei.*Correlation based on the daily change between the currency and the Nikkei 225 index. Past performance is not a reliable indicator of current and future results. Guide to the Markets – Asia. Data reflect most recently available as of 31/3/18.

Nikkei 225 and Japanese yen Index USD / JPY

Domestic demand and corporate profitsJPY trillions

Corporate profits and return on equity

Weaker yen

Stronger yen

1/15 - 3/18

Correlation*: 0.27

Nikkei 225 USD / JPYCorporate profits % of nominal GDP

MSCI Japan ROE

Domestic demand Ordinary profits

|GTM – Asia 41

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-1

3

7

11

15

19

23

27

31

35

39

43

'05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17 '180x

5x

10x

15x

20x

25x

30x

35x

40x

45x

50x

'20 '30 '40 '50 '60 '70 '80 '90 '00 '10

Geographical sources of revenue

United States: Earnings and valuations

Source: FactSet, Standard & Poor’s, J.P. Morgan Asset Management; (Left) Compustat; (Bottom right) Yale University Department of Economics.EPS levels are based on operating earnings per share.*4Q earnings estimates are Standard & Poor’s (S&P) consensus analyst expectations, based on actual earnings for the 99% of (S&P) companies that have reported and earnings estimates for the remaining 1% of companies. **Shiller P/E is a valuation measure applied to the U.S. S&P 500 equity market, which is based on the average inflation-adjusted earnings from the previous 10 years. Past performance is not a reliable indicator of current and future results.Guide to the Markets – Asia. Data reflect most recently available as of 31/3/18.

S&P 500 earnings per shareQuarterly operating earnings (USD)

Shiller S&P 500 price earnings (P/E) ratio**

S&P consensus analyst estimates*4Q 2017* USD33.861Q 2018 USD35.642Q 2018 USD38.493Q 2018 USD40.154Q 2018 USD41.84

Others

EuropeU.S.

Asia Pacific

-1 SD: 9.8x

+1 SD: 24.9x

Avg.: 17.3x

3/2018: 32.8x

Forecast

70%80%

11%7%11%6%

9% 7%

0%

20%

40%

60%

80%

100%

S&P 500 S&P Small Cap 600

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Characteristics of bull and bear markets

-100%

-80%

-60%

-40%

-20%

0%

1926 1931 1936 1941 1946 1951 1956 1961 1966 1971 1976 1981 1986 1991 1996 2001 2006 2011 2016

7

9

8

6

54

3

2

1

Market corrections

Bear markets Macro environment Bull markets

Mkt. Peak Bear return

Duration (months) Recession Commodity

spikeAggressive

FedExtreme

valuationsBull begin

dateBull

returnDuration (months)

1 Crash of 1929 - excessive leverage, irrational exuberance Sep 1929 -86% 32 Jul 1926 152% 37 2 1937 Fed tightening - premature monetary tightening Mar 1937 -60 61 Mar 1935 129 23 3 Post WWII crash - post-war demobilisation, recession fears May 1946 -30 36 Apr 1942 158 49 4 Flash crash of 1962 - flash crash, Cuban Missile Crisis Dec 1961 -28 6 Oct 1960 39 13 5 Tech crash of 1970 - economic overheating, civil unrest Nov 1968 -36 17 Oct 1962 103 73 6 Stagflation - OPEC oil embargo Jan 1973 -48 20 May 1970 74 31 7 Volcker tightening - whip inflation now Nov 1980 -27 20 Mar 1978 62 32 8 1987 crash - programme trading, overheating markets Aug 1987 -34 3 Aug 1982 229 60 9 Tech bubble - extreme valuations, dotcom boom/bust Mar 2000 -49 30 Oct 1990 417 113

10 Global financial crisis - leverage/housing, Lehman collapse Oct 2007 -57 17 Oct 2002 101 60 Current cycle Mar 2009 290 108

Averages - -45% 25 - 159% 54

United States: Bear markets and subsequent bull returns

Source: FactSet, NBER, Robert Shiller, Standard & Poor’s, J.P. Morgan Asset Management. *A bear market represents a 20% or more decline from the previous market high using a monthly frequency. Periods of recession are defined using the NBER’s business cycle dates. Commodity spike is defined by a significant upward movement in oil prices. Periods of extreme valuation are defined as periods where the forward P/E multiple on the S&P 500 were approximately two standard deviations above the long-run average. Aggressive Fed tightening is defined as Federal Reserve monetary tightening that was unexpected and/or significant in magnitude. Past performance is not a reliable indicator of current and future results.Guide to the Markets – Asia. Data reflect most recently available as of 31/3/18.

S&P 500 Composite declines from all-time highs

20% market decline*

Recession

Equi

ties

10

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-0.8

-0.6

-0.4

-0.2

0.0

0.2

0.4

0.6

0.8

0% 2% 4% 6% 8% 10% 12% 14% 16%

Source: FactSet, Federal Reserve System, Standard & Poor’s, J.P. Morgan Asset Management.Returns are based on price index only and do not include dividends. Markers represent monthly 2-year correlations only.Past performance is not a reliable indicator of current and future results.Guide to the Markets – Asia. Data reflect most recently available as of 31/3/18.

Correlations between weekly stock returns and interest rate movements Weekly S&P 500 returns, 10-year Treasury yield, rolling 2-year correlation, May 1963 – March 2018

United States: Interest rates and equities

Positive relationship between yield movements and stock returns

Negative relationship between yield movements and stock returns

10-year Treasury yield

Cor

rela

tion

coef

ficie

nt

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84

88

92

96

100

104

Jan Feb Apr Jun Aug Oct Dec

Europe: Earnings and currencies

Source: MSCI, J.P. Morgan Asset Management; (Left) Thomson Reuters; (Right) FactSet.*Euro area is represented by the MSCI EMU index. Past performance is not a reliable indicator of current and future results.Guide to the Markets – Asia. Data reflect most recently available as of 31/3/18.

Euro area yearly earnings trend*Earnings per share, January of each year = 100

Euro area earnings vs. the euroLast 12 months’ earnings per share EUR / USD

EUR / USD20172014

20162013 2015

2018

'00 '02 '04 '06 '08 '10 '12 '14 '16 '180.8

0.9

1.0

1.1

1.2

1.3

1.4

1.5

1.6

1.7

0

5

10

15

20

25MSCI EMU EPS EUR / USD

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Global fixed income: Yields and returns

Source: Bloomberg Finance L.P., FactSet, J.P. Morgan Economic Research, J.P. Morgan Asset Management. Based on Bloomberg Barclays U.S. Aggregate Credit - Corporate High Yield Index (U.S. Corporate HY), Bloomberg Barclays U.S. Aggregate Credit – Corporate Investment Grade Index (U.S. Corporate IG), J.P. Morgan Government Bond Index – EM Global (GBI-EM) (Local EMD), J.P. Morgan Emerging Market Bond Index Global (EMBIG) (USD EMD), J.P. Morgan Asia Credit Index (JACI) (USD Asian), Bloomberg Barclays Pan European High Yield (Europe HY), J.P. Morgan Government Bond Index – Global Traded (DM Gov’t), J.P. Morgan Asia Credit Index – Non-investment Grade Corporate (Asia Corporate HY), Bloomberg Barclays Global U.S. Treasury – Bills (3-5 years) (U.S. Treasury) and Bloomberg Barclays U.S. Treasury – Bills (1-3 months) (Cash). 5-year data is used to calculate annualized returns (Ann. Ret.). Returns are in USD and reflect the period from 31/3/13 – 31/3/18. *Duration is a measure of the sensitivity of the price (the value of the principal) of a fixed-income investment to a change in interest rates and is expressed as number of years. Rising interest rates mean falling bond prices, while declining interest rates mean rising bond prices. **Correlation to the 10-year U.S. Treasury is a measure over 10 years of data. Positive yield does not imply positive return. Past performance is not a reliable indicator of current and future results.Guide to the Markets – Asia. Data reflect most recently available as of 31/3/18.

USD EMD

Global bond opportunities

Asia Corporate HY

U.S. Corporate IG

USD Asian Bond

DM Government Bond

Local EMD

U.S. Treasury

Cash

Fixed income sector returns

U.S. Corporate HY

Europe HY

YTM Duration* (years)

Correl. to 10-yearUST**

7.2% 4.8 -0.06

6.7% 4.7 0.07

6.5% 4.1 -0.22

6.0% 7.0 0.24

5.0% 5.3 0.26

3.6% 3.9 -0.24

3.8% 7.5 0.46

2.5% 6.1 0.99

1.5% 8.0 0.62

1.7% 0.2 -0.02

5-yrs2012 2013 2014 2015 2016 2017 1Q '18 Ann. Ret.

Europe HY

Europe HY

USD Asian Asia HY U.S. HY

Europe HY

Local EMD Asia HY

30.5% 14.9% 8.3% 5.8% 17.1% 21.0% 5.2% 5.9%

Asia HY U.S. HY U.S. IGUSD

AsianLocal EMD

Local EMD

DM Gov't

Europe HY

25.4% 7.4% 7.5% 2.8% 11.4% 15.4% 2.2% 5.3%Local EMD Asia HY Asia HY

USDEMD Asia HY

USDEMD

Europe HY U.S. HY

19.9% 4.3% 5.5% 1.2% 11.4% 9.3% 2.2% 5.0%USDEMD Cash

USDEMD

U.S.Treas

USDEMD U.S. HY Cash

USD Asian

18.5% 0.0% 5.5% 0.8% 10.2% 7.5% 0.3% 3.9%

U.S. HYUSD

AsianU.S.

Treas Cash U.S. IGDM

Gov't U.S. HYUSDEMD

15.8% -1.4% 5.1% 0.0% 6.1% 6.8% -0.9% 3.9%USD

Asian U.S. IG U.S. HY U.S. IGUSD

Asian U.S. IG Asia HY U.S. IG

14.3% -1.5% 2.5% -0.7% 5.8% 6.4% -0.9% 3.0%

U.S. IGU.S.

TreasDM

Gov'tDM

Gov'tEurope

HY Asia HYU.S.

TreasDM

Gov't9.8% -2.7% 0.7% -2.6% 3.4% 6.2% -1.2% 1.3%U.S.

TreasDM

Gov't Cash U.S. HYDM

Gov'tUSD

AsianUSD

AsianU.S.

Treas2.0% -4.5% 0.0% -4.5% 1.6% 5.8% -1.4% 1.1%DM

Gov'tLocal EMD

Europe HY

Europe HY

U.S.Treas

U.S.Treas

USDEMD Cash

1.3% -5.5% -6.0% -7.6% 1.0% 2.3% -1.8% 0.3%

CashUSDEMD

Local EMD

Local EMD Cash Cash U.S. IG

Local EMD

0.1% -6.6% -6.1% -18.0% 0.3% 0.8% -2.3% -0.4%

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Global fixed income: Interest rate risk

Source: Barclays, Bloomberg Finance L.P., FactSet, J.P. Morgan Economic Research, J.P. Morgan Asset Management.Based on Bloomberg Barclays U.S. Treasury indices (U.S. Treasury, 1-3 years, 5-7 years, 7-20 years), J.P. Morgan Asia Credit Index (JACI) (USD Asia Credit), Barclays Global Aggregate – Corporates (Global Investment-grade credit), Barclays Global High Yield (Global High Yield), Barclays Emerging Markets – Sovereign (EMD USD sovereign), Barclays Emerging Markets – Corporate (EMD USD corporate), Barclays Emerging Markets Local Currency Government (EMD local cur. sovereign). For illustrative purposes only. Change in bond price is calculated using both duration and convexity. Past performance is not a reliable indicator of current and future results.Guide to the Markets – Asia. Data reflect most recently available as of 31/3/18.

Illustration of the impact a 1% rise in interest rates may have on selected indices Assumes a parallel shift in the yield curve and spreads are maintained

Price return + couponPrice return

-12%

-8%

-4%

0%

4%

EMD local cur.sovereign

EMD USDcorporate

EMD USDsovereign

Global highyield

Globalinvestmentgrade credit

USD Asiancredit

7-20 years5-7 years1-3 yearsU.S. Treasury

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651

199

649

135

274

458

350388

511

410

135

388

60

179

366 343

250

413

372

111

299

43157

274236 217

382

0

500

1,000

1,500

U.S. highyield

U.S.investment

grade

Euro highyield

Euroinvestment

grade

USDAsiancredit

USD Asianhigh yield

EMD USDsovereign

EMD USDcorporate

EMD local cur.sovereign

Global fixed income: Valuations

Source: BofA/Merrill Lynch, iBoxx, J.P. Morgan Economic Research, J.P. Morgan Asset Management.Based on J.P. Morgan Domestic High Yield Index (U.S. High Yield), J.P. Morgan U.S. Liquid Index (JULI) (U.S. Investment Grade), BofA/Merrill Lynch Euro Non-Financial High Yield Constrained (Euro High Yield), iBoxx EUR corporates (Euro Investment Grade), J.P. Morgan Asia Credit Index (JACI) (USD Asian Credit), J.P. Morgan Asia Credit High Yield Index (USD Asian High Yield), J.P. Morgan EMBI+ (EMD USD Sovereign), J.P. Morgan Corporate Emerging Markets Bond Index – CEMBI (EMD USD Corporate), J.P. Morgan GBI-EM (EMD Local Cur. Sovereign). Positive yield does not imply positive return. Past performance is not a reliable indicator of current and future results.Guide to the Markets – Asia. Data reflect most recently available as of 31/3/18.

Spread to worst across fixed income sub-sectorsBasis points

10-yr. averageLatest

10-yr. range2,200

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'70 '75 '80 '85 '90 '95 '00 '05 '10 '15-2.5%

-2.0%

-1.5%

-1.0%

-0.5%

0.0%

0.5%

1.0%

1.5%

2.0%

2.5%

3.0%

3.5%

Global fixed income: U.S. business cycles and yield curve

Source: J.P. Morgan Economics Research, J.P. Morgan Asset Management; (Left) FactSet, Federal Reserve; (Right) Standard & Poor’s. Past performance is not a reliable indicator of current and future results.Guide to the Markets – Asia. Data reflect most recently available as of 31/3/18.

Yield curve spreadThe spread between the 2-year and 10-year U.S. Treasury yields

Yield curve inversions and recessionsNumber of months

Yield curve inversion

date

From curve

inversion to S&P 500

peak

From S&P 500 peak to start of recession

From curve

inversion to

recession

Dec ’67 11 14 25

Mar ’73 7 2 9

Nov ’78 15 0 14

Aug ’80 3 8 11

Dec ’88 19 1 19

Mar ’00 5 7 12

Aug ’06 13 3 16

Median 11 3 14

Average 10 5 15

Recessions

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Global fixed income return composition

Source: J.P. Morgan Economic Research, J.P. Morgan Asset Management.Based on J.P. Morgan Developed Market HY (DM USD high yield), J.P. Morgan Domestic High Yield (U.S. USD High Yield), J.P. Morgan EMBI+ (EM USD sovereigns), J.P. Morgan CEMBI (EM USD corporates), JACI Asia HY (Asian USD high yield), J.P. Morgan GBI-EM (EM local cur. sovereigns), JACI Asia Credit (Asian USD corporates), J.P. Morgan GBI-DM (DM local cur. sovereigns). Past performance is not a reliable indicator of current and future results.Guide to the Markets – Asia. Data reflect most recently available as of 31/3/18.

Debt return compositionLast 12 months

Income returnPrice returnCurrency return

Total return

-6%

-4%

-2%

0%

2%

4%

6%

8%

10%

12%

EM sovereigns(Local)

DM sovereigns(Local)

EM sovereigns(USD)

U.S. high yield(USD)

DM highyield (USD)

EM corporates(USD)

Asia high yield(USD)

Asia corporates(USD)

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0

10

20

30

40

50

60

0 10 20 30 40 50 60# of trading days

CorrelationCorrelation** between U.S. Treasury and German Bund yields

Global government bonds

Source: FactSet, U.S. Federal Reserve, J.P. Morgan Asset Management; (Left) Bank of Japan; (Left and top right) European Central Bank. *Data begins, and averages calculated from, 1/1/70 for U.S. Treasuries, 2/10/72 for German Bunds and 3/2/86 for Japanese Government Bonds. **Rolling six-month correlation of weekly change in yield. ***Other drivers of changes in the 10-year U.S. Treasury include: changing expectations for growth, currency, rates and investorrepositioning. Past performance is not a reliable indicator of current and future results. Guide to the Markets – Asia. Data reflect most recently available as of 31/3/18.

10-year government bond yields

Inflation expectations and bond yields Year-to-date change in 10-year UST yield by driver, basis points

'70 '75 '80 '85 '90 '95 '00 '05 '10 '15-2%

0%

2%

4%

6%

8%

10%

12%

14%

16%

18%Average

since 1970* Latest

U.S. 6.5% 2.7%Germany 5.6% 0.5%Japan 2.4% 0.0%

2-yr. bonds

10-yr. bonds

Change from inflation expectations

Change from other***

-0.2

0.0

0.2

0.4

0.6

0.8

1.0

'10 '11 '12 '13 '14 '15 '16 '17 '18

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3.0x

3.5x

4.0x

4.5x

5.0x

'12 '13 '14 '15 '16 '17

0

400

800

1,200

1,600

2,000

0%

4%

8%

12%

16%

20%

'90 '95 '00 '05 '10 '15

U.S. high yield bonds

Source: J.P. Morgan Economic Research, J.P. Morgan Asset Management. *Default rate is defined as the par value percentage of the total market trading at or below 50% of par value and includes any Chapter 11 filing, prepackaged filing or missed interest payments. Spreads indicated are benchmark yield-to-worst less comparable maturity Treasury yields. **Net leverage is net debt divided by adjusted earnings before interest, tax, depreciation and amortization (EBITDA). ***Interest coverage ratio is EBITDA over interest expense. U.S. corporate high yield is represented by the J.P. Morgan Domestic High Yield Index. Europe corporate high yield is represented by J.P. Morgan Euro High Yield Index. EM corporate high yield is represented by J.P. Morgan CEMBI NON-IG Index. TMT represents Telecommunications, Media & Technology. Positive yield does not imply positive return. Past performance is not a reliable indicator of current and future results. Guide to the Markets – Asia. Data reflect most recently available as of 31/3/18.

U.S. high yield leverage measuresNet leverage** and interest coverage ratio***

Sector breakdown across high yield indices

U.S. high yield spread and default rate*10-yr average Latest

HY spread to worst 650bps 410bpsHY spread to worst (ex-energy) 646bps 395bpsHY spread to worst (energy) 664bps 493bps

HY default rate 2.6% 2.2%

Net leverageInterest coverage ratio

Default rate Spread to worst

Commodities

OtherTMT

Health careIndustrialReal estate

ConsumerFinancial

24% 31%

8%

7%

13%

31%

13%

10%4%

5%

7%4%

4%

5%

20% 7%23%

21% 19% 12%

6% 11% 13%

0%

20%

40%

60%

80%

100%

U.S. Europe EM

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2%

4%

6%

8%

10%

12%

14%

'06 '08 '10 '12 '14 '16 '18 '06 '08 '10 '12 '14 '16 '18 '20 '22-8%

-7%

-6%

-5%

-4%

-3%

-2%

-1%

0%

InflationYear-over-year change

Emerging market debt: Fundamentals

Source: J.P. Morgan Asset Management; (Left and top right) J.P. Morgan Economic Research; (Bottom right) IMF.Based on J.P. Morgan GBI-EM (EMD local cur. sovereign), J.P. Morgan EMBI+ (EMD USD sovereign), J.P. Morgan CEMBI (EMD USD corporate). Yield to worst is shown for EM sovereign (USD) and EM corporate (USD) indexes. *Latin America index excludes Argentina, Ecuador and Venezuela. **Forecasts are from the IMF World Economic Outlook. Positive yield does not imply positive return. Past performance is not a reliable indicator of current and future results.Guide to the Markets – Asia. Data reflect most recently available as of 31/3/18.

Emerging market debt yields

Fiscal positionsNominal deficit, % of GDP

Average 3/2018Local cur. sovereigns 6.8% 6.0%USD sovereigns 6.2% 6.2%USD corporates 6.1% 5.1%

Forecast**

EM AsiaEM EuropeEM Latin America

Latin America*EM Asia

Russia

0%

2%

4%

6%

8%

10%

12%

14%

16%

18%

'06 '08 '10 '12 '14 '16 '18

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3.0%

3.5%

4.0%

4.5%

5.0%

5.5%

6.0%

'15 '16 '17

Bond market comparisonsUSD trillion Ratio

25.4

12.0 12.0

1.7 1.20.4 0.4 0.4 0.3 0.3

0.0x

0.5x

1.0x

1.5x

2.0x

2.5x

3.0x

0

5

10

15

20

25

30

U.S

.

Chi

na

Japa

n

Kor

ea

Aus

tralia

Mal

aysi

a

Thai

land

Sin

gapo

re

Indo

nesi

a

Taiw

an

Annualized returns**Daily data from the period April 2008 through March 2018

Asia fixed income markets

Source: J.P. Morgan Asset Management; (Left) IMF; (Left and bottom right) Bloomberg Finance L.P.; (Left and top right) FactSet; (Top and bottom right) J.P. Morgan Economic Research. *Bond market outstanding refers to the total U.S. dollar value of bonds (corporate and government) in the market and does not reflect mandatory prepayment. **Based on total returns of the MSCI All Country Asia ex-Japan Index (AC Asia ex JP), S&P 500 Index (S&P 500), J.P. Morgan Asia Corporate Credit Index (JACI IG), J.P. Morgan Asia Corporate Credit High Yield Index (JACI HY) and J.P. Morgan China Credit Index (JACI China (USD). ***ChinaBond Inter-bank fixed-rate corporate bond (AA) 5-year used as a proxy for onshore corporate bond yield while J.P. Morgan Corporate Emerging Markets Subindex – China is used as a proxy for offshore corporate bond yield. Positive yield does not imply positive return. Past performance is not a reliable indicator of current and future results. Guide to the Markets – Asia. Data reflect most recently available as of 31/3/18.

China’s bond market: Onshore vs. offshoreYield to worst

Onshore corporate bond yield***

Offshore corporate bond yield***

Bond market outstanding* Bond market to GDP

5.4% 5.8%6.8%

8.6%9.5%

0%

2%

4%

6%

8%

10%

JACI IG AC Asia ex-JP JACI China (USD) JACI HY S&P 500

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Asset class returns

Source: Bloomberg Finance L.P., Dow Jones, FactSet, J.P. Morgan Economic Research, MSCI, J.P. Morgan Asset Management. The “Diversified” portfolio assumes the following weights: 20% in the MSCI The World Index (DM Equities), 20% in the MSCI AC Asia Pacific ex-Japan (APAC ex-JP), 5% in the average of the MSCI EM Latin America and MSCI EM EMEA Indices (EM ex-Asia), 10% in the J.P. Morgan EMBIG Index (EMD), 10% in the Bloomberg Barclays Aggregate (Global Bonds), 10% in the Bloomberg Barclays Global Corporate High Yield Index (Global Corporate High Yield), 15% in J.P. Morgan Asia Credit Index (Asian Bonds), 5% in MSCI U.S. REITs Index (U.S. REITs) and 5% in Bloomberg Barclays U.S. Treasury – Bills (1-3 months) (Cash). Diversified portfolio assumes annual rebalancing. All data represent total return in U.S. dollar terms for the stated period. 10-year total return data is used to calculate annualized returns (Ann. Ret.) and 10-year price return data is used to calculate annualized volatility (Ann. Vol.) and reflects the period 31/3/08 – 31/3/18. Please see disclosure page at end for index definitions. Past performance is not a reliable indicator of current and future results. Guide to the Markets – Asia. Data reflect most recently available as of 31/3/18.

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 1Q '18 Ann. Ret. Ann. Vol.EM ex-

AsiaGlobal Bonds

EM ex-Asia U.S. REITs U.S. REITs

APAC ex-JP

DM Equities U.S. REITs

Asian Bonds

EM ex-Asia

APAC ex-JP

EM ex-Asia

Global Corp HY

EM ex-Asia

41.1% 4.8% 91.3% 28.5% 8.7% 22.6% 27.4% 30.4% 2.8% 27.1% 37.3% 5.0% 8.1% 26.5%APAC ex-JP Cash

APAC ex-JP

APAC ex-JP EMD

Global Corp HY

Global Corp HY

Asian Bonds U.S. REITs

Global Corp HY

DM Equities

Global Bonds EMD U.S. REITs

37.2% 1.8% 73.7% 18.4% 8.5% 18.9% 8.4% 8.3% 2.5% 14.0% 23.1% 1.4% 6.8% 25.3%

DiversifiedAsian Bonds

Global Corp HY

EM ex-Asia

Global Bonds EMD Diversified EMD EMD EMD

EM ex-Asia Cash

DM Equities

APAC ex-JP

13.5% -9.8% 63.9% 16.6% 5.6% 18.5% 5.6% 5.5% 1.2% 10.2% 20.3% 0.3% 6.5% 21.4%DM

Equities EMD DiversifiedGlobal

Corp HYAsian Bonds U.S. REITs

APAC ex-JP

DM Equities Cash U.S. REITs Diversified

Global Corp HY U.S. REITs

DM Equities

9.6% -10.9% 41.0% 13.8% 4.1% 17.8% 3.7% 5.5% 0.0% 8.6% 17.0% -0.2% 6.3% 16.3%Global Bonds

Global Corp HY

DM Equities Diversified

Global Corp HY

EM ex-Asia U.S. REITs Diversified

DM Equities Diversified

Global Corp HY

APAC ex-JP

Asian Bonds Diversified

9.5% -27.9% 30.8% 13.1% 2.6% 17.0% 2.5% 4.1% -0.3% 8.3% 10.3% -0.6% 6.3% 12.4%

EMD Diversified U.S. REITsDM

Equities CashDM

Equities CashAPAC ex-JP

Global Bonds

DM Equities EMD Diversified Diversified

Global Corp HY

6.3% -27.9% 28.6% 12.3% 0.1% 16.5% 0.0% 3.1% -3.2% 8.2% 9.3% -0.8% 5.6% 11.6%Asian Bonds U.S. REITs

Asian Bonds EMD Diversified Diversified

Asian Bonds

Global Bonds Diversified

APAC ex-JP

Global Bonds

DM Equities

APAC ex-JP EMD

5.4% -38.0% 28.3% 12.0% -2.4% 15.9% -1.4% 0.6% -3.2% 7.1% 7.4% -1.2% 5.4% 8.9%

CashDM

Equities EMDAsian Bonds

DM Equities

Asian Bonds

Global Bonds

Global Corp HY

Global Corp HY

Asian Bonds

Asian Bonds

Asian Bonds

Global Bonds

Asian Bonds

4.8% -40.3% 28.2% 10.6% -5.0% 14.3% -2.6% 0.2% -4.9% 5.8% 5.8% -1.4% 2.6% 7.4%Global

Corp HYAPAC ex-JP

Global Bonds

Global Bonds

APAC ex-JP

Global Bonds EMD Cash

APAC ex-JP

Global Bonds U.S. REITs EMD Cash

Global Bonds

2.6% -51.6% 6.9% 5.5% -15.4% 4.3% -6.6% 0.0% -9.1% 2.1% 5.1% -1.8% 0.3% 5.7%

U.S. REITsEM ex-

Asia Cash CashEM ex-

Asia CashEM ex-

AsiaEM ex-

AsiaEM ex-

Asia Cash Cash U.S. REITsEM ex-

Asia Cash

-16.8% -57.2% 0.1% 0.1% -21.2% 0.1% -8.5% -20.2% -22.7% 0.3% 0.8% -8.1% -1.7% 0.1%

10-yrs ('08 - '18)

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Volatility

Source: FactSet, J.P. Morgan Asset Management.*The VIX-CBOE Volatility Index measures market expectations of near-term volatility conveyed by S&P 500 Index (SPX) option prices. **First day when VIX breaks 35; subsequent spikes above 35 within the next six months are not included. ***Number of days for VIX to return to its long-term average of 19.3 after initial VIX spikes above 35. Past performance is not a reliable indicator of current and future results.Guide to the Markets – Asia. Data reflect most recently available as of 31/3/18.

VIX index*

Vix index*

'90 '91 '92 '93 '94 '95 '96 '97 '98 '99 '00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17 '180

10

20

30

40

50

60

70

80

90

1 2

3 4 5

6

7 89 10

Recession

VIX breaks 35 in six months** Related event

S&P 500 Performance VIX returns to long-term average***

(days)On the day After 1 month After 3 months After 12 months

1 6-Aug-90 Recession - oil price shock, central banks tightening -3.0% -4.2% -5.9% 16.8% 2182 30-Oct-97 Asian crisis -1.7% 7.5% 9.1% 21.6% 1133 27-Aug-98 Long-Term Capital Management -3.8% 0.6% 13.8% 29.3% 3094 17-Sep-01 Recession - collapse of the dot-com bubble, 9/11 attack -4.9% 2.9% 9.2% -15.9% 1725 15-Jul-02 Enron accounting scandal -0.4% 1.3% -8.3% 9.0% 3046 17-Sep-08 Recession - Lehman crisis, Global financial crisis -4.7% -14.8% -21.8% -7.9% 4767 7-May-10 Greek government debt crisis -1.5% -5.0% 1.0% 21.2% 1578 8-Aug-11 Fears of contagion of European sovereign debt crisis -6.7% 5.9% 12.7% 25.2% 1659 24-Aug-15 Chinese yuan devaluation -3.9% 2.1% 10.2% 15.5% 4410 5-Feb-18 Worries about rising inflation and pace of interest rate hikes -4.1% 3.4% N/A N/A 9

Median -3.9% 1.7% 9.1% 16.8%Average -3.5% 0.0% 2.2% 12.8%Median ex-recession -3.8% 2.1% 9.6% 21.4%Average ex-recession -3.2% 2.3% 6.4% 20.3%

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0.0

0.1

0.2

0.3

0.4

0.5

0.6

0.7

'98 '00 '02 '04 '06 '08 '10 '12 '14 '16 '18

Correlations

Source: FactSet, MSCI, J.P. Morgan Asset Management; (Top) Barclays, Standard & Poor’s.*Rolling six-month pairwise correlations between weekly returns in equity (S&P 500 and MSCI All Country World Index price indexes) and bond (Bloomberg Barclays U.S. Aggregate Government and Bloomberg Barclays Global Aggregate Government price indexes) markets. **Rolling six-month pairwise correlation between daily price returns in USD of the MSCI China, Korea, Taiwan, Indonesia, Hong Kong, India, Thailand, Philippines, Malaysia, Singapore, Japan and Australia equity indices. Past performance is not a reliable indicator of current and future results.Guide to the Markets – Asia. Data reflect most recently available as of 31/3/18.

Correlations between Asian equity marketsDaily rolling six-month equity markets correlation**

Correlations between stocks and sovereign bondsWeekly rolling six-month correlation of equities and sovereign bond yields*

Stocks and bonds moving in the same direction

Stocks and bonds moving in the opposite direction

MSCI AC World / Global government bonds*

S&P 500 / U.S. government bonds*

Average: 0.41

31/3/18: 0.44

-1.0-0.8-0.6-0.4-0.20.00.20.40.60.8

'01 '03 '05 '07 '09 '11 '13 '15 '17

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USD rising and U.S. 10-year yield rising**

Treasury yield and asset class performance

Source: Barclays, Bloomberg Finance L.P., FactSet, MSCI, J.P. Morgan Asset Management. Based on MSCI World Index (DM Equity), MSCI World High Dividend Index (High div. DM Equity), MSCI Emerging Market Index (EM Equity), MSCI Emerging Market High Dividend Index (High div. EM Equity), MSCI AC Asia Pacific ex-Japan Index (Asia Pac. ex-JP), MSCI AC Asia Pacific Index (Asia Pac.), MSCI U.S. REIT Index (U.S. REITs), Bloomberg Barclays U.S. Aggregate Index (U.S. Agg.), Bloomberg Barclays U.S. Aggregate Credit High Yield Corporate Index (U.S. HY), Bloomberg Barclays U.S. Aggregate Credit Investment Grade Index (IG corporate), J.P. Morgan Government Bond Index – EM Global (GBI-EM) (EMD LLC), J.P. Morgan Emerging Market Bond Index Global (EMBIG) (EMD USD), Gold NYM $/ozt (Gold). *Trigger to count returns is if the 10-year yield rose more than 25bps in prior 3 months. **Trigger to count returns is if the US dollar real effective exchange rate rose more than 2% in prior 12 months and the 10-year yield rose more than 50bps in prior 12 months. Returns are based on monthly returns from 31/1/94 – 31/3/18. Past performance is not a reliable indicator of current and future results. Guide to the Markets – Asia. Data reflect most recently available as of 31/3/18.

Total return in a rising yield environment*Annualized average of rolling 3-month total return (USD), 1994-2018*

USD flat/falling and U.S. 10-year yield rising**

12-month rolling return3-month rolling return annualized

12-month rolling return3-month rolling return annualized

0%

5%

10%

15%

20%

25%

30%

35%

DM equity EM equity U.S. aggregate U.S. high yield Gold

-10%

-5%

0%

5%

10%

15%

20%

25%

30%

35%

DM equity EM equity U.S. aggregate U.S. high yield Gold

-3.4%

-0.9%

-0.8%

0.8%

1.0%

2.3%

2.4%

4.1%

4.2%

4.7%

5.7%

6.5%

6.5%

7.9%

8.5%

-6% -4% -2% 0% 2% 4% 6% 8% 10%

U.S. 10-year Treasury

U.S. aggregate

IG corporate

EMD (LLC)

EMD (USD)

U.S. high yield

U.S. REITs

Convertible bonds

High div. DM equities

DM equities

Asia Pac. equities

Asia Pac. ex-JP equities

High div. Asia Pac. ex-JP equities

EM equities

High div. EM equities

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-2.3-1.4 -1.4 -1.1 -1.0

-1.0 -0.9 -0.9 -0.8 -0.7 -0.50.1

0.6 0.8 1.1 1.2 1.2 1.3 1.0

-4

-2

0

2

4

'74 '76 '78 '80 '82 '84 '86 '88 '90 '92 '94 '96 '98 '00 '02 '04 '06 '08 '10 '12 '14 '16 '1870

80

90

100

110

120

130

Currencies

Source: FactSet, J.P. Morgan Asset Management; (Top) Bloomberg Finance L.P., U.S. Federal Reserve; (Bottom) J.P. Morgan Economic Research.*The real trade-weighted exchange rate index is the weighted average of a market’s currency relative to a basket of other major currencies adjusted for the effects of inflation. The weights are determined by comparing the relative trade balances, in terms of one market’s currency, with other markets within the basket. **The Dollar Index is a trade-weighted index calculated using seven major U.S. trade partners’ currencies – Australian dollar, British pound, Canadian dollar, euro, Japanese yen, Swedish kroner and Swiss franc. Past performance is not a reliable indicator of current and future results.Guide to the Markets – Asia. Data reflect most recently available as of 31/3/18.

Currency deviation from 10-year average in real effective exchange rate* termsNumber of standard deviations away from average

U.S. dollar performanceU.S. Dollar Index (DXY)**Real trade-weighted exchange rate index (REER)*

3/2018: 90.2 3/2018: 95.3

FX above long-term average

FX belowlong-term average

CurrentMax

Min

Fed hiking cycle

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U.S. dollar drivers

Source: FactSet, Federal Reserve, J.P. Morgan Asset Management; (Left) U.S. Bureau of Economic Analysis; (Right) BIS, Federal Reserve, Tullett Prebon.*Interest rate differential is the difference between the 10-year U.S. Treasury yield and a basket of the 10-year yields of each of the markets included in the Federal Reserve’s Broad Nominal Trade-Weighted Index (except Chile, Saudi Arabia and Venezuela due to data limitations), weighted by each market’s share of total global debt securities outstanding. Europe is defined as the 19 countries in the Euro area. Past performance is not a reliable indicator of current and future results.Guide to the Markets – Asia. Data reflect most recently available as of 31/3/18.

Dollar supplyCurrent account balance, % of nominal GDP USD broad nominal index

Dollar demandU.S. minus international 10-year yields* USD broad nominal index

'96 '98 '00 '02 '04 '06 '08 '10 '12 '14 '16 '1885

90

95

100

105

110

115

120

125

130

135

-7%

-6%

-5%

-4%

-3%

-2%

-1%

0% Yield difference USDCurrent account balance USD

85

90

95

100

105

110

115

120

125

130

135

-0.5%

0.0%

0.5%

1.0%

1.5%

2.0%

2.5%

3.0%

3.5%

'95 '98 '01 '04 '07 '10 '13 '16

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-1.0

-0.5

0.0

0.5

1.0

1.5

2.0

2.5

3.0

'15 '16 '17 '18'13 '14 '15 '16 '17 '1820

40

60

80

100

120

140 80

85

90

95

100

105

110

'09 '10 '11 '12 '13 '14 '15 '16 '17 '180

400

800

1,200

1,600

2,000

2,400

0.95

1.00

1.05

1.10

1.15

1.20

1.25

U.S. oil inventory and rig count* Number of rigs Billion barrels

Oil: Short-term market dynamics

Source: FactSet, J.P. Morgan Asset Management; (Top right) Baker Hughes, U.S. Department of Energy; (Bottom right) U.S. Energy Information Administration.*Weekly U.S. crude oil and petroleum ending inventory includes strategic petroleum reserve, and active rig count represents both natural gas and oil rigs. Past performance is not a reliable indicator of current and future results.Guide to the Markets – Asia. Data reflect most recently available as of 31/3/18.

Brent crude and USD real effective exchange rate (REER)USD / bbl Index

Crude oil production growthYear-over-year change, million barrels per day

USD depreciation

USD appreciation

Brent crude oil USD REER (inverted) Rig count U.S. oil inventory

Forecast

OPEC + RussiaU.S.

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Alternative sources of income

Source: Alerian, Bank of America, Bloomberg Finance L.P., Clarkson, Drewry Maritime Consultants, FactSet, Federal Reserve, FTSE, MSCI, NCREIF, Standard & Poor’s, J.P. Morgan Asset Management. Global Transport: Levered yields for transport assets are calculated as the difference between charter rates (rental income), operating expenses, debt amortization and interest expenses, as a percentage of equity value. Yields for each of the sub-vessel types above are calculated and respective weightings are applied to each of the sub-sectors to arrive at the current levered yields for Global Transportation; asset classes are based on NCREIF ODCE (Private Real Estate), FTSE NAREIT Global/USA REITs (Global/U.S. REITs), MSCI Global Infrastructure Asset Index (Infrastructure Assets), Bloomberg Barclays U.S Convertibles Composite (Convertibles), J.P. Morgan Government Bond Index EM Global (GBI-EM) (Local EMD), J.P. Morgan Emerging Market Bond Index Global (EMBIG) (USD EMD), J.P. Morgan Asia Credit Index Non-investment Grade Corporate (Asia HY bonds), MSCI Emerging Markets (EM Equity), MSCI The World Index (DM Equity), MSCI Emerging Markets High Dividend Yield Index (EM High Div. Equity), MSCI The World High Dividend Yield Index (DM High Div. Equity), MSCI Europe (Eur. Equity), MSCI USA (U.S. Equity). Transport yield is as of 31/12/17, Infrastructure 30/9/17, EM High Div. Equity and DM High Div. Equity (28/2/18). Past performance is not a reliable indicator of current and future results.Guide to the Markets – Asia. Data reflect most recently available as of 31/3/18.

Asset class yields

EquityFixed incomeAlternatives

8.9%

7.2%

6.7%

6.0%5.7%

4.6% 4.6%4.2% 4.1%

3.8%3.5% 3.3%

2.7%2.4% 2.4%

1.9%

0%

2%

4%

6%

8%

10%

Globaltransport

Asia HYbonds

Local cur.EMD

USDEMD

Infrastructureassets

GlobalREITs

U.S.REITs

EM highdiv. equity

Private realestate

DM highdiv. equity

Eur.equity

Convertibles U.S.10-year

DMequity

EMequity

U.S.equity

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-0.9% -0.7%

1.8% 2.1%

0.1%

0.0% -0.2%

-2.9%

0.6%

-1.0%

-3.3%

2.9%

1.5% 1.0% 0.8% 0.5%0.0%

-0.3%

0.4% 0.5%

-0.8%

-2.4%

2.7%

0.8% 0.4% 0.2% 0.0%

-0.3% -0.3% -0.6% -0.7%-1.7% -1.9%

-6%

-3%

0%

3%

6%

India Thailand Korea Australia Taiwan China Japan Singapore Malaysia U.S. Hong Kong

Real return on cash and yields

Source: FactSet, various central banks, J.P. Morgan Asset Management; (Top) IMF.*Post crisis time period defined as 2008-2014. Post 1st Fed rate hike defined as 2015-2017. YTD average annual real deposit rate is as of 28/2/18, except for France, Germany, Italy, Spain, Indonesia and Thailand (30/3/2018), and Australia (29/12/2017). **Real yield is calculated based on the last 12-month average CPI for each respective market. Nominal yields are the 10-year government bond yield for each respective market. Past performance is not a reliable indicator of current and future results.Guide to the Markets – Asia. Data reflect most recently available as of 31/3/18.

Real and nominal yields**

Average annual real deposit rateBased on respective market’s deposit rate less year-over-year inflation

Nominal yield

Real yield

Post crisis*Post 1st Fed rate hike*2018 YTD*

1.4%0.5% 0.7% 0.0% 0.0%

1.2% 0.7%0.9%

2.1% 1.8% 2.6% 2.7% 2.6%

7.3%

3.8% 2.7%

6.6% 6.9% 7.4%

9.3%

-1.5% -1.2% -1.1% -0.6% -0.5% -0.5% -0.3%

0.2%0.5% 0.5%

0.6% 0.7% 0.8% 1.2%2.1% 2.2%

2.9% 3.7% 3.9%

6.8%

-4%

-2%

0%

2%

4%

6%

8%

10%

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2,446,6062,192,675

1,498,650

1,180,592915,560

11,581

45,465

75,781

101,862

242,350

902,491 1,190,233

1,429,184

0

400,000

800,000

1,200,000

1,600,000

2,000,000

2,400,000

2,800,000

Stay invested Missed top1 day

Missed top5 days

Missed top10 days

Missed top15 days400

600

800

1,000

1,200

1,400

1,600

1,800

2,000

2,200

2,400

2,600

2,800

3,000

-80

-60

-40

-20

0

20

40

60

80

100

120

'95 '97 '99 '01 '03 '05 '07 '09 '11 '13 '15 '17

Investors’ market timing

Source: FactSet, Standard & Poor’s, J.P. Morgan Asset Management; (Left) Investment Company Institute (ICI). Mutual fund and ETF flows are through 28/2/18.*More than 9,900 trading days used to calculate the total cumulative price return of S&P 500 since 1/1/80. Past performance is not a reliable indicator of current and future results.Guide to the Markets – Asia. Data reflect most recently available as of 31/3/18.

Market timing of retail investorsRolling 3-month U.S. equity flows (USD billions) S&P 500 Index

S&P 500 cumulative price return since 1980*Hypothetical investment of $100,000

S&P 500Mutual fund + ETF flows

Under different scenarios

Actual loss from missing daysImplied compounding loss

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Annual returns and intra-year declines

Source: FactSet, MSCI, J.P. Morgan Asset Management.Returns are price returns based on MSCI AC Asia Pacific ex-Japan Index in U.S. dollar terms. Intra-year decline is the largest peak to trough decline during the respective year. Past performance is not a reliable indicator of current and future results.Guide to the Markets – Asia. Data reflect most recently available as of 31/3/18.

MSCI AC Asia Pacific ex-Japan intra-year declines vs. calendar year returnsDespite average intra-year drops of -20% (median: -16%), annual returns are positive in 19 of 31 years (61%)

Calendar year returnIntra-year decline

26%

17%

-16%

27%

6%

80%

-14%

4%9%

-36%

-7%

47%

-31%

-5% -8%

44%

19% 17%

29%33%

-53%

68%

15%

-18%

19%

0.5%

-0.2%

-12%

4%

34%

-1%

-10% -14%

-24%

-8% -12%-5%

-21%

-12% -11%

-41% -40%

-13%

-34% -34%

-25%

-13%-18%

-9%

-18% -19%

-62%

-21% -19%

-30%

-16% -16% -13%

-27%

-13%

-4%-10%

-80%

-60%

-40%

-20%

%

20%

40%

60%

80%

100%

'88 '89 '90 '91 '92 '93 '94 '95 '96 '97 '98 '99 '00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17 '18

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0

3,000

6,000

9,000

'70 '75 '80 '85 '90 '95 '00 '05 '10 '15

Total return**: Dividends vs. capital appreciationAverage annualized returns over 10 years

-1.0%

2.2% 1.2%0.9%

3.9% 2.9% 3.4% 2.6% 4.2%6.0% 6.5%

-7.0% -6.5% -4.7%-1.6% -1.4%

3.0%

-1.0%0.6%

2.2%

7.2%4.3%

2.6% 3.6% 4.1%2.1% 3.4% 3.7% 4.7%

4.4%4.5%

5.7%

1.9% 2.2% 2.4% 1.6% 2.6%

4.0%

3.4% 2.9%

3.8%

4.0%

-10%

-5%

0%

5%

10%

15%

Australia Japan Malaysia Singapore Korea Indonesia China Taiwan Hong Kong Philippines Thailand Russia Poland Brazil Mexico Turkey SouthAfrica

Europe EM(EmergingMarkets)

AC AsiaPacific

ex-Japan

U.S.(S&P 500)

The compounding effect

Source: FactSet, MSCI, J.P. Morgan Asset Management.*Reinvestment in cash based on the same month U.S. three-month Treasury bill (secondary market) yield.**Returns are total (gross) returns based on MSCI indices in U.S. dollar terms. Past performance is not a reliable indicator of current and future results.Guide to the Markets – Asia. Data reflect most recently available as of 31/3/18.

MSCI World Index: Performance under different scenariosIndex, 1970 = 100

Annualized return Total return (dividends received and reinvested back into equities) 9.6%Total return (dividends received and reinvested in cash)* 8.8%Total return (dividends received but not reinvested) 7.2%Price return 6.5%

Capital appreciationDividends with compounding

Asia Pacific Other EM Regions

5,859

8,369

2,925

2,067

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ples

Portfolio construction, asset class returns and volatility

Source: Bloomberg Finance L.P., Dow Jones, FactSet, MSCI, Standard & Poor’s, J.P. Morgan Asset Management. Hypothetical portfolios were created to illustrate different risk/return profiles and are not meant to represent actual asset allocation. USD total return calculations are based on MSCI Total Return, Bloomberg Barclays and J.P. Morgan indices. AxJ stands for MSCI AC Asia ex-Japan and APxJ stands for MSCI AC Asia Pacific ex-Japan. *Monthly total returns between 31/12/02 and 29/3/18 used for all asset classes.Past performance is not a reliable indicator of current and future results.Guide to the Markets – Asia. Data reflect most recently available as of 31/3/18.

Annualized returns and volatilityTotal returns in USD*

Annualized volatility

Annu

aliz

ed r

etur

ns

EquitiesBonds and cash

Portfolios

High dividend (HD) equities

Alternatives

Hypothetical portfolio constructionConservative Balanced Aggressive

DM equities 10% 30% 20%EM equities 5% 10% 40%U.S. HY 10% 15% 10%U.S. bonds 25% 10% 5%Cash 35% 10% 0%EMD 10% 15% 5%REITs 5% 10% 20%

DM

EM

Europe

AxJAPxJ

U.S.

U.S. HY

U.S. bonds

Cash

Hedge fund - mkt neutral

Hedge fund - macro

Hedge fund - distressed

Hedge fund - rel val

Private real estate

APxJ HD

DM HD Gold

Commodities

REITs

EMD

Asian bonds

Conservative

Balanced

Aggressive

-2%

0%

2%

4%

6%

8%

10%

12%

14%

0% 5% 10% 15% 20% 25%

|GTM – Asia 67

67

Inve

stin

g pr

inci

ples

-39%

-8%-15% -3% -2% 1% -1% 1% 2% 7% 1% 5%

47% 43%33% 28% 23% 21% 19% 16% 16% 17% 12% 14%

-50%-40%-30%-20%-10%

0%10%20%30%40%50%60%

40

90

140

190

240

'06 '07 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17 '18

The benefits of diversification and long-term investing

Source: Bloomberg Finance L.P., FactSet, J.P. Morgan Asset Management; (Top) Robert Shiller, Strategas/Ibbotson, U.S. Federal Reserve; (Bottom) MSCI. Returns shown are based on calendar year returns from 1950 to 2017. “Large cap equity” represents the S&P 500 Shiller Composite Index and “Bonds” represents the Strategas/Ibbotson Index for periods from 1950 to 1980 and the Bloomberg Barclays Aggregate after index inception in 1980. Global equities represented by MSCI AC World Index, global bonds represented by Bloomberg Barclays Aggregate Global Bond Index. Past performance is not a reliable indicator of current and future results.Guide to the Markets – Asia. Data reflect most recently available as of 31/3/18.

Portfolio returns: Global equities, global bonds vs. equity and fixed income blendTotal returns, 2006 = 100

Range of U.S. equity, U.S. bond and blended total returnsAnnual total returns, 1950-2017 Large cap equity

Bonds50/50 portfolio

1-yr rolling 5-yr rolling 10-yr rolling 20-yr rolling

Portfolio returns since 2006 Annualized return

Annualized volatility

Global equities 6.8% 15.8%Global bonds 3.9% 5.6%50/50 equity & bond mix 5.5% 9.0%

|GTM – Asia 68

68

Inve

stin

g pr

inci

ples

0%

5%

10%

15%

20%

25%

30%

35%

40%

Korea Australia China Singapore HongKong

Japan Taiwan*

The benefits of saving and investing early

Source: J.P. Morgan Asset Management; (Left) National Development Council of Taiwan (NDC), United Nations Population Project (UN). For illustrative purposes only, assumes a 5% return on investment and a 2% return on cash. Actual investments may incur higher or lower growth rates and charges. *All data from UN except for Taiwan, which is from NDC. Guide to the Markets – Asia. Data reflect most recently available as of 31/3/18.

Aging populationPopulation over 65

Accumulation of investment at 5% growth per yearInvestment return

20252000

2050

$1,395,216

$2,536,795

$1,232,200

$0

$500,000

$1,000,000

$1,500,000

$2,000,000

$2,500,000

$3,000,000

25 30 35 40 45 50 55 60 65Age

Blue invests $20,000 annually between the ages of 25 and 65

Orange invests $20,000 annually between the ages of 35 and 65

Green invests $20,000 annually in cash only between the ages of 25 and 65

|GTM – Asia 69

69

Inve

stin

g pr

inci

ples

20

40

60

80

100

120

140

160

'08 '09 '10 '11 '12 '13 '14 '15 '16 '17 '18

Environmental, social and governance investing

Source: J.P Morgan Asset Management; (Bottom left) Global Sustainable Investment Alliance; (Right) MSCI.*Represents assets managed using one or more sustainable investment strategies, including sharia-compliant funds, excluding Japan and Australia. **MSCI AC World ESG Leaders is a capitalization-weighted index that provides exposure to companies with high Environmental, Social and Governance (ESG) rankings relative to their sector peers and companies with involvement in alcohol, gambling, tobacco, nuclear power and weapons are excluded. Rankings are given based on MSCI framework. Past performance is not a reliable indicator of current and future results.Guide to the Markets – Asia. Data reflect most recently available as of 31/3/18.

Sustainable investing strategies consider: Sustainable investing performanceEquity index total return, 2008 = 100

Demand for sustainable investing strategies in AsiaUSD billions managed under sustainable investing guidance*

Environmental: Issues relating to the quality and functioning of the natural environment and natural systems, e.g., carbon emissions, environmental regulations, water stress and waste

Social: Issues relating to the rights, well-being and interests of people and communities, e.g., labor management, health and product safety

Governance: Issues relating to the management and oversight of companies and other investee entities, e.g., board, ownership and pay

34.0

44.9

52.1

$30

$35

$40

$45

$50

$55

2012 2014 2016

+32%

+16%

MSCI AC World ESG Leaders**

MSCI AC World

70

J.P. Morgan Asset Management: Index DefinitionsAll indexes are unmanaged and an individual cannot invest directly in an index. Index returns do not include fees or expenses. The S&P 500 Index is widely regarded as the best single gauge of the U.S. equities market. This world-renowned index includes a representative sample of 500 leading companies in leading industries of the U.S. economy. Although the S&P 500 Index focuses on the large-cap segment of the market, with approximately 75% coverage of U.S. equities, it is also an ideal proxy for the total market. An investor cannot invest directly in an index. The Tokyo Stock Price Index ('TOPIX') is a composite index of all common stocks listed on the First Section of Tokyo Stock Exchange (TSE).The index is basically a measure of the changes in aggregate market value of TSE common stocks. The base for the index is the aggregate market value of its component stocks as of the close on January 4, 1968. The aggregate market value is calculated by multiplying the number of listed shares of each component stock by its price and totaling the products derived there from.The Bombay Exchange Sensitive Index (‘SENSEX), first compiled in 1986, was calculated on a "Market Capitalization-Weighted" methodology of 30 component stocks representing large, well-established and financially sound companies across key sectors. The base year of SENSEX was taken as 1978-79. SENSEX today is widely reported in both domestic and international markets through print as well as electronic media. It is scientifically designed and is based on globally accepted construction and review methodology. Since September 1, 2003, SENSEX is being calculated on a free-float market capitalization methodology.The Korea Composite Stock Price Index (‘KOSPI) is market capitalization based index on all common stocks listed on the Stock Market Division of the Korea Exchange (KRX) and excludes preferred stocks. The stock price index is calculated using the actual price traded on the market and not the “base price” used for market management such as establishment of price change limits. When no market price is available for issues that are not being traded or have halted trading, the latest closing price is used. KOSPI was a assigned a base index of 100 set to January 4, 1980.The China Shenzhen Composite Index is an actual market-cap weighted index that tracks the stock performance of all the A-share and B-share lists on Shenzhen Stock Exchange. The index was developed on April 3, 1991 with a base price of 100. The Euro Stoxx 600 Index represents large, mid and small capitalization companies across 18 European countries.The MSCI® EAFE (Europe, Australia, Far East) Net Index is recognized as the pre-eminent benchmark in the United States to measure international equity performance. It comprises 21 MSCI country indexes, representing the developed markets outside of North America. The MSCI Emerging Markets IndexSM is a free float-adjusted market capitalization index that is designed to measure equity market performance in the global emerging markets. As of June 2007, the MSCI Emerging Markets Index consisted of the following 25 emerging market country indices: Argentina, Brazil, Chile, China, Colombia, Czech Republic, Egypt, Hungary, India, Indonesia, Israel, Jordan, Korea, Malaysia, Mexico, Morocco, Pakistan, Peru, Philippines, Poland, Russia, South Africa, Taiwan, Thailand, and Turkey.The MSCI ACWI (All Country World Index) Index is a free float-adjusted market capitalization weighted index that is designed to measure the equity market performance of developed and emerging markets. As of June 2009 the MSCI ACWI consisted of 45 country indices comprising 23 developed and 22 emerging market country indices.The following MSCI Total Return IndicesSM are calculated with gross dividends:This series approximates the maximum possible dividend reinvestment. The amount reinvested is the dividend distributed to individuals resident in the country of the company, but does not include tax credits.The MSCI Europe IndexSM is a free float-adjusted market capitalization index that is designed to measure developed market equity performance in Europe. As of June 2007, the MSCI Europe Index consisted of the following 16 developed market country indices: Austria, Belgium, Denmark, Finland, France, Germany, Greece, Ireland, Italy, the Netherlands, Norway, Portugal, Spain, Sweden, Switzerland and the United Kingdom. The MSCI Pacific IndexSM is a free float-adjusted market capitalization index that is designed to measure equity market performance in the Pacific region. As of June 2007, the MSCI Pacific Index consisted of the following 5 Developed Market countries: Australia, Hong Kong, Japan, New Zealand, and Singapore.

The MSCI Europe ex UK IndexSM is a free float-adjusted market capitalization weighted index that is designed to measure the equity market performance of the developed markets in Europe, excluding the United Kingdom. The MSCI Europe ex UK Index consists of the following 15 developed market country indices: Austria, Belgium, Denmark, Finland, France, Germany, Greece, Ireland, Italy, the Netherlands, Norway, Portugal, Spain, Sweden, and Switzerland.The MSCI Pacific ex Japan IndexSM is a free float-adjusted market capitalization index that is designed to measure equity market performance in the Pacific region, excluding Japan. As of June 2007, the MSCI Pacific Index consisted of the following 4 Developed Market countries: Australia, Hong Kong, New Zealand, and Singapore. The MSCI USA IndexSM is designed to measure the performance of the large and mid cap segments of the U.S. market. With 586 constituents, the index covers approximately 84% of the free float-adjusted market capitalization in the U.S.. The MSCI USA Index was launched on Dec ember 31, 1969.The MSCI China IndexSM captures large and mid cap representation across China H shares, B shares, Red chips and P chips. With 148 constituents, the index covers about 84% of this China equity universe. The MSCI China Index was launched on December 31, 1992.The MSCI Indonesia IndexSM is designed to measure the performance of the large and mid cap segments of the Indonesian market. With 25 constituents, the index covers about 84% of the Indonesian equity universe. The MSCI Indonesia Index was launched on December 31, 1990.The MSCI Korea IndexSM is designed to measure the performance of the large and mid cap segments of the South Korean market. With 105 constituents, the index covers about 84% of the Korean equity universe. The MSCI Korea Index was launched on December 31, 1989.The MSCI India IndexSM is designed to measure the performance of the large and mid cap segments of the Indian market. With 71 constituents, the index covers about 84% of the Indian equity universe. The MSCI India Index was launched on December 31, 1993.The MSCI Japan IndexSM is designed to measure the performance of the large and mid cap segments of the Japan market. With 315 constituents, the index covers approximately 84% of the free float-adjusted market capitalization in Japan. The MSCI Japan Index was launched on December 31, 1969.The MSCI Hong Kong IndexSM is designed to measure the performance of the large and mid cap segments of the Hong Kong market. With 42 constituents, the index covers approximately 84% of the free float-adjusted market capitalization of the Hong Kong equity universe. The MSCI Hong Kong Index was launched on December 31, 1972.The MSCI Taiwan IndexSM is designed to measure the performance of the large and mid cap segments of the Taiwan market. With 113 constituents, the index covers approximately 84% of the free float-adjusted market capitalization in Taiwan. The MSCI Taiwan Index was launched on December 31, 1989.The MSCI Environmental, Social and Governance (ESG) Universal Indices are designed to address the needs of asset owners who may look to enhance their exposure to ESG while maintaining a broad and diversified universe to invest in. By re-weighting free-float market cap weights based upon certain ESG metrics tilting away from free-float market cap weights, the indices enhance exposure to those companies that demonstrate both a higher MSCI ESG Rating and a positive ESG trend, while maintaining a broad and diversified investment universe.

71

West Texas Intermediate (WTI) is the underlying commodity for the New York Mercantile Exchange's oil futures contracts. The Bloomberg Commodity Index is calculated on an excess return basis and reflects commodity futures price movements. The index rebalances annually weighted 2/3 by trading volume and 1/3 by world production and weight-caps are applied at the commodity, sector and group level for diversification. Roll period typically occurs from 6th-10th business day based on the roll schedule.The Bloomberg Commodity Subindexes represent commodity groups and sectors, as well as single commodities, that make up the Bloomberg Commodity Index. The subindexes track exchange-traded futures of physical commodities, and the commodity groups and sectors, like in the case of the broad index, are weighted to account for economic significance and market liquidity. The various subindexes include Agriculture, Energy, Livestock, Grains, Industrial Metals, Precious Metals and Softs.The Bloomberg Barclays High Yield Index covers the universe of fixed rate, non-investment grade debt. Pay-in-kind (PIK) bonds, Eurobonds, and debt issues from countries designated as emerging markets (e.g., Argentina, Brazil, Venezuela, etc.) are excluded, but Canadian and global bonds (SEC registered) of issuers in non-EMG countries are included. Original issue zeroes, step-up coupon structures, and 144-As are also included.The Bloomberg Barclays 1-3 Month U.S. Treasury Bill Index includes all publicly issued zero-coupon U.S. Treasury Bills that have a remaining maturity of less than 3 months and more than 1 month, are rated investment grade, and have $250 million or more of outstanding face value. In addition, the securities must be denominated in U.S. dollars and must be fixed rate and non convertible.The Bloomberg Barclays Corporate Bond Index is the Corporate component of the U.S. Credit index.The Bloomberg Barclays TIPS Index consists of Inflation-Protection securities issued by the U.S. Treasury.The J.P. Morgan EMBI Global Index includes U.S. dollar denominated Brady bonds, Eurobonds, traded loans and local market debt instruments issued by sovereign and quasi-sovereign entities.The J.P. Morgan GBI-EM Global Diversified consists of regularly traded, liquid fixed-rate, domestic currency government bonds to which international investors can gain exposure. The weightings among the countries are more evenly distributed within this index.The J.P. Morgan Corporate Emerging Markets Bond Index (CEMBI): The CEMBI tracks total returns of US dollar-denominated debt instruments issued by corporate entities in Emerging Markets countries, and consists of an investable universe of corporate bonds.The J.P. Morgan Domestic High Yield Index is designed to mirror the investable universe of the U.S. dollar domestic high yield corporate debt market.The VIX-CBOE Volatility Index measures market expectations of near-term volatility conveyed by S&P 500 Index (SPX) option prices. The MOVE-Merrill Lynch Option Volatility Index is a blended implied normal volatility for constant one-month at-the-money options on U.S. Treasuries.

Price to forward earnings is a measure of the price-to-earnings ratio (P/E) using forecasted earnings. Price to book value compares a stock's market value to its book value. Price to cash flow is a measure of the market's expectations of a firm's future financial health. Price to dividends is the ratio of the price of a share on a stock exchange to the dividends per share paid in the previous year, used as a measure of a company's potential as an investment.Bonds are subject to interest rate risks. Bond prices generally fall when interest rates rise.The price of equity securities may rise, or fall because of changes in the broad market or changes in a company’s financial condition, sometimes rapidly or unpredictably. These price movements may result from factors affecting individual companies, sectors or industries, or the securities market as a whole, such as changes in economic or political conditions. Equity securities are subject to “stock market risk” meaning that stock prices in general may decline over short or extended periods of time.Small-capitalization investing typically carries more risk than investing in well-established "blue-chip" companies since smaller companies generally have a higher risk of failure. Historically, smaller companies' stock has experienced a greater degree of market volatility than the average stock.Mid-capitalization investing typically carries more risk than investing in well-established "blue-chip" companies. Historically, mid-cap companies' stock has experienced a greater degree of market volatility than the average stock.Real estate investments may be subject to a higher degree of market risk because of concentration in a specific industry, sector or geographical sector. Real estate investments may be subject to risks including, but not limited to, declines in the value of real estate, risks related to general and economic conditions, changes in the value of the underlying property owned by the trust and defaults by borrower.International investing involves a greater degree of risk and increased volatility. Changes in currency exchange rates and differences in accounting and taxation policies can raise or lower returns. Also, some markets may not be as politically and economically stable as other nations. Investments in emerging markets can be more volatile. The normal risks of international investing are heightened when investing in emerging markets. In addition, the small size of securities markets and the low trading volume may lead to a lack of liquidity, which leads to increased volatility. Also, emerging markets may not provide adequate legal protection for private or foreign investment or private property.Investments in commodities may have greater volatility than investments in traditional securities, particularly if the instruments involve leverage. The value of commodity-linked derivative instruments may be affected by changes in overall market movements, commodity index volatility, changes in interest rates, or factors affecting a particular industry or commodity, such as drought, floods, weather, livestock disease, embargoes, tariffs and international economic, political and regulatory developments. Use of leveraged commodity-linked derivatives creates an opportunity for increased return but, at the same time, creates the possibility for greater loss.Derivatives may be riskier than other types of investments because they may be more sensitive to changes in economic or market conditions than other types of investments and could result in losses that significantly exceed the original investment. The use of derivatives may not be successful, resulting in investment losses, and the cost of such strategies may reduce investment returns.There is no guarantee that the use of long and short positions will succeed in limiting an investor's exposure to domestic stock market movements, capitalization, sector swings or other risk factors. Investing using long and short selling strategies may have higher portfolio turnover rates. Short selling involves certain risks, including additional costs associated with covering short positions and a possibility of unlimited loss on certain short sale positions.

J.P. Morgan Asset Management: Index Definitions, Risks and Disclosures

72

J.P. Morgan Asset Management: Risks and DisclosuresThe Market Insights program provides comprehensive data and commentary on global markets without reference to products. Designed as a tool to help clients understand the markets and support investment decision-making, the program explores the implications of current economic data and changing market conditions.

For the purposes of MiFID II, the JPM Market Insights and Portfolio Insights programmes are marketing communications and are not in scope for any MiFID II / MiFIR requirements specifically related to investment research. Furthermore, the J.P. Morgan Asset Management Market Insights and Portfolio Insights programmes, as non-independent research, have not been prepared in accordance with legal requirements designed to promote the independence of investment research, nor are they subject to any prohibition on dealing ahead of the dissemination of investment research.

This document is a general communication being provided for informational purposes only. It is educational in nature and not designed to be taken as advice or a recommendation for any specific investment product, strategy, plan feature or other purpose in any jurisdiction, nor is it a commitment from J.P. Morgan Asset Management or any of its subsidiaries to participate in any of the transactions mentioned herein. Any examples used are generic, hypothetical and for illustration purposes only. This material does not contain sufficient information to support an investment decision and it should not be relied upon by you in evaluating the merits of investing in any securities or products. In addition, users should make an independent assessment of the legal, regulatory, tax, credit, and accounting implications and determine, together with their own professional advisers, if any investment mentioned herein is believed to be suitable to their personal goals. Investors should ensure that they obtain all available relevant information before making any investment. Any forecasts, figures, opinions or investment techniques and strategies set out are for information purposes only, based on certain assumptions and current market conditions and are subject to change without prior notice. All information presented herein is considered to be accurate at the time of production, but no warranty of accuracy is given and no liability in respect of any error or omission is accepted. It should be noted that investment involves risks, the value of investments and the income from them may fluctuate in accordance with market conditions and taxation agreements and investors may not get back the full amount invested. Both past performance and yields are not a reliable indicator of current and future results.

J.P. Morgan Asset Management is the brand for the asset management business of JPMorgan Chase & Co. and its affiliates worldwide. This communication is issued by the following entities: in the United Kingdom by JPMorgan Asset Management (UK) Limited, which is authorized and regulated by the Financial Conduct Authority; in other European jurisdictions by JPMorgan Asset Management (Europe) S.à r.l.; in Hong Kong by JF Asset Management Limited, or JPMorgan Funds (Asia) Limited, or JPMorgan Asset Management Real Assets (Asia) Limited; in Singapore by JPMorgan Asset Management (Singapore) Limited (Co. Reg. No. 197601586K), or JPMorgan Asset Management Real Assets (Singapore) Pte Ltd (Co. Reg. No. 201120355E); in Taiwan by JPMorgan Asset Management (Taiwan) Limited; in Japan by JPMorgan Asset Management (Japan) Limited which is a member of the Investment Trusts Association, Japan, the Japan Investment Advisers Association, Type II Financial Instruments Firms Association and the Japan Securities Dealers Association and is regulated by the Financial Services Agency (registration number “Kanto Local Finance Bureau (Financial Instruments Firm) No. 330”); in Korea by JPMorgan Asset Management (Korea) Company Limited; in Australia to wholesale clients only as defined in section 761A and 761G of the Corporations Act 2001 (Cth) by JPMorgan Asset Management (Australia) Limited (ABN 55143832080) (AFSL 376919); in Brazil by Banco J.P. Morgan S.A.; in Canada for institutional clients’ use only by JPMorgan Asset Management (Canada) Inc., and in the United States by JPMorgan Distribution Services Inc. and J.P. Morgan Institutional Investments, Inc., both members of FINRA/SIPC.; and J.P. Morgan Investment Management Inc.

In APAC, distribution is for Hong Kong, Taiwan, Japan and Singapore. For all other countries in APAC, to intended recipients only.

Copyright 2018 JPMorgan Chase & Co. All rights reserved.

Prepared by: David Kelly, Tai Hui, Kerry Craig,Yoshinori Shigemi, Jasslyn Yeo, Marcella Chow, Ian Hui, Shogo Maekawa, Chaoping Zhu and Hannah Anderson.

Unless otherwise stated, all data are as of March 31, 2018 or most recently available.

MI-GTMASIA-E MARCH 2018

Material ID: 0903c02a820d1638