ERP in Pictures Japan 2012

7/29/2019 ERP in Pictures Japan 2012

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Societe Generale (SG) does and seeks to do business with companies covered in its research reports. As a result, investors should beaware that SG may have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as only a

single factor in making their investment decision. PLEASE SEE APPENDIX AT THE END OF THIS REPORT FOR THE ANALYST(S)

CERTIFICATION(S), IMPORTANT DISCLOSURES AND DISCLAIMERS AND THE STATUS OF NON-US RESEARCH ANALYSTS

Macro Commodities Forex Rates Equity Credit Derivatives

07 March 2012

Global Asset AllocationSpecial Report

www.sgresearch.com

Risk Premium in PicturesJapanese risk premium high enough to prefer Nikkei to JGBs

Asset Allocation StrategyAlain Bokobza(33) 1 42 13 84 [email protected]

Roland Kaloyan(33) 1 58 98 04 [email protected]

Philippe Ferreira(33) 1 42 14 69 [email protected]

Arthur van Slooten(33) 1 42 13 45 [email protected]

URL links to our proprietary

methodology in English

URL links to our proprietary

methodology in French

In this monthly report, we outline our proprietary risk premium for 27 developed and

23 emerging markets in the Americas, Europe, Africa, Asia, Australia and New Zealand.

On page 23/24, we provide tables highlighting the results for these 50 markets.

Prefer Nikkei to JGB. Japanese equities have been by far the best index performer over the

last month. The BoJs more pro-active stance has weakened the yen versus the US dollar.

The Japanese equity risk premium has started to decrease from its recent all-time high level.

However, the upside potential on Japanese equities remains high, as their valuation (including

the risk premium itself) remains attractive.

After the recent rally, risks abound on Italian equities. The drop in Italian bond yields in

February (-73bp) due to ECB monetary action brought some relief to Italian companies. Italian

equities recovered very quickly last month in line with the move in the risk premium. However,

consensus earnings growth expectations remain too optimistic in our view (2012: +20%, 2013:+16% and 2014: +12%) given austerity issues and the weak macro growth outlook.

Emerging Asia equities vulnerable to profit warnings. Most of Asian emerging equity

markets were on the upside over last month. In terms of valuation (including risk premium),

these markets appear attractive. However, emerging companies in Asia look very vulnerable to

profit warnings to us as 2012 earnings growth expectations remain above 10% (ranging from

11% in China to 20% in Thailand), at a time when China policy makers (with the concurrence

of SGs economics team) confirm that 2012 should be a year of sub-normative growth.

Japanese risk premium started to decrease Double-digit 2012 EPS growth for EM Asiamarkets2012 2013 2014

China 11% 13% 8%India 17% 15% 6%Indonesia 13% 16% 17%Korea 15% 14% 12%Malaysia 13% 11% 6%Philippines 12% 11% 10%Taiwan 18% 21% 10%Thailand 20% 15% 7%

Source: Datastream, SG Cross Asset Research Source: Datastream, IBES

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90 92 94 96 98 00 02 04 06 08 10 12

Bonds cheap relative to Equities

Equities cheap relative to Bonds

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http://www.sgresearch.com/p/en/2/181427/0/1846AFBD49F05754C125790C004C6B2C.html?sid=61e74dc880e16c9c1a1aaf19ca641652http://www.sgresearch.com/p/en/2/181427/0/1846AFBD49F05754C125790C004C6B2C.html?sid=61e74dc880e16c9c1a1aaf19ca641652http://www.sgresearch.com/p/en/2/181427/0/1846AFBD49F05754C125790C004C6B2C.html?sid=61e74dc880e16c9c1a1aaf19ca641652http://www.sgresearch.com/p/fr/2/181427/0/1846AFBD49F05754C125790C004C6B2C.html?sid=61e74dc880e16c9c1a1aaf19ca641652http://www.sgresearch.com/p/fr/2/181427/0/1846AFBD49F05754C125790C004C6B2C.html?sid=61e74dc880e16c9c1a1aaf19ca641652http://www.sgresearch.com/p/fr/2/181427/0/1846AFBD49F05754C125790C004C6B2C.html?sid=61e74dc880e16c9c1a1aaf19ca641652http://www.sgresearch.com/p/fr/2/181427/0/1846AFBD49F05754C125790C004C6B2C.html?sid=61e74dc880e16c9c1a1aaf19ca641652http://www.sgresearch.com/p/fr/2/181427/0/1846AFBD49F05754C125790C004C6B2C.html?sid=61e74dc880e16c9c1a1aaf19ca641652http://www.sgresearch.com/p/en/2/181427/0/1846AFBD49F05754C125790C004C6B2C.html?sid=61e74dc880e16c9c1a1aaf19ca641652http://www.sgresearch.com/p/en/2/181427/0/1846AFBD49F05754C125790C004C6B2C.html?sid=61e74dc880e16c9c1a1aaf19ca641652


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Risk Premium in Pictures

07 March 20122

Developed markets in pictures Emerging markets in pictures

G3: US, Europe and Japan p4 ASIA

EUROPE China, India and Indonesia p14

EMU, UK and Small Cap (Europe) p5Korea, Malaysia and Philippines p15

Austria, Belgium and Denmark p6 Taiwan and Thailand p16

Finland, France and Germany p7 LATIN AMERICA

Greece, Ireland and Italy p8 Argentina, Brazil and Chile p17

Netherlands, Norway and Portugal p9 Colombia, Mexico and Peru p18

Spain, Sweden and Switzerland p10 EUROPE/MIDDLE EAST/AFRICA

REST OF THE WORLD Croatia, Czech Republic and Egypt p19

Australia, Canada and Hong-Kong p11Hungary, Poland and Romania p20

Israel, New Zealand and Singapore p12 Russia, South Africa and Turkey p21

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07 March 20124

G3: US, Europe and JapanUS key inputs US risk premiumRisk premium Earnings GrowthCURRENT 5.7% 2012e 9%Average 3.7% 2013e 13%

Minimum 1.2% 2014e 11%

Maximum 6.8% Historical average 7.0%

10Y Bond Yield 2.0% Historical GDP growth (g) 3.9%Cost of Capital 7.7% Payout Ratio 33.6%Data since January 1980. Historical EPS growth, historical GDP growth and Payout ratio based on their 10-year average. Cost of Capital = Risk Premium + 10Y Bond Yield.

Source: Datastream, SG Cross Asset Research

EUROPE key inputs EUROPE risk premiumRisk premium Earnings growthCURRENT 5.9% 2012e 7%Average 4.4% 2013e 11%

Minimum 2.1% 2014e 9%


10Y Bond Yield 2.6% Historical GDP growth (g) 2.9%Cost of Capital 8.5% Payout Ratio 43.3%European risk premium and the 10Y bond yield are the average of national equity risk premiums and 10Y bond yields, weighted every month for each countrys total equity market capitalisation. Cost of

Capital = Risk Premium + 10Y Bond Yield Source: Datastream, SG Cross Asset Research

JAPAN key inputs JAPAN risk premiumRisk premium Earnings growthCURRENT 4.0% 2011e -21%Average 2.1% 2012e 60%

Minimum 0.2% 2013e 18%


10Y Bond Yield 1.0% Historical GDP growth (g) -0.5%

Cost of Capital 5.0% Payout Ratio 37.1%Data since January 1980. Historical EPS growth, historical GDP growth and Payout ratio based on their 10-year average. Cost of Capital = Risk Premium + 10Y Bond Yield. Source: Datastream, SG

Cross Asset Research

1%

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4%

5%

6%

7%

1%

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3%

4%

5%

6%

7%

90 92 94 96 98 00 02 04 06 08 10 12

Bonds cheap relative

to Equities


0%

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4%

6%

8%

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90 92 94 96 98 00 02 04 06 08 10 12



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90 92 94 96 98 00 02 04 06 08 10 12



F441


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07 March 2012 5

Europe (1): EMU, UK and Small Cap (Europe)EMU Key inputs EMU Risk premiumRisk premium Earnings growthCURRENT 4.9% 2012e 9%Average 3.8% 2013e 12%

Minimum 1.1% 2014e 10%


10Y Bond Yield 3.4% Historical GDP growth (g) 2.9%Cost of Capital 8.3% Payout Ratio 44.5%EMU risk premium and the 10Y bond yield are the average of national equity risk premiums and 10Y bond yields, weighted everymonth for each countrys total equity market capitalisation. Cost of Capital = RiskPremium + 10Y Bond Yield Source: Datastream, SG Cross Asset Research

UK Key inputs UK Risk premiumRisk premium Earnings growthCURRENT 7.7% 2012e 4%Average 5.6% 2013e 10%

Minimum 3.2% 2014e 7%


10Y Bond Yield 2.1% Historical GDP growth (g) 3.9%Cost of Capital 9.8% Payout Ratio 45.5%Data since January 1980. Historical EPS growth, historical GDP growth and Payout ratio based on their 10-year average. Cost of Capital = Risk Premium + 10Y Bond Yield. Source: Datastream, SG


SMALL CAP (Europe) Key inputs SMALL CAP (Europe) Risk premiumRisk premium Earnings growthCURRENT 5.1% 2012e 23%Average 5.3% 2013e 19%

Minimum 3.1% 2014e 12%




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90 92 94 96 98 00 02 04 06 08 10 12



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90 92 94 96 98 00 02 04 06 08 10 12



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06 08 10



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07 March 20126

Europe (2): Austria, Belgium and DenmarkAUSTRIA Key inputs AUSTRIA Risk premiumRisk premium Earnings growthCURRENT 6.7% 2012e 26%Average 3.9% 2013e 17%

Minimum 1.7% 2014e 13%




BELGIUM Key inputs BELGIUM Risk premiumRisk premium Earnings growthCURRENT 3.0% 2012e 27%Average 4.0% 2013e 12%

Minimum 0.9% 2014e 9%

Maximum 11.1% Historical average -2.1%



DENMARK Key inputs DENMARK Risk premiumRisk premium Earnings growthCURRENT 4.2% 2012e 30%Average 2.0% 2013e 28%

Minimum -2.2% 2014e 22%


10Y Bond Yield 1.9% Historical GDP growth (g) 3.0%



0%

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93 95 97 99 01 03 05 07 09 11



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93 95 97 99 01 03 05 07 09 11



-3%

-1%

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-3%

-1%

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91 93 95 97 99 01 03 05 07 09 11



F441


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07 March 2012 7

Europe (3): Finland, France and GermanyFINLAND Key inputs FINLAND Risk premiumRisk premium Earnings growthCURRENT 5.0% 2012e -5%Average 3.7% 2013e 20%

Minimum -1.9% 2014e 8%


10Y Bond Yield 2.3% Historical GDP growth (g) 3.6%Cost of Capital 7.3% Payout Ratio 54.6%Data since April 1989. Historical EPS growth, historical GDP growth and Payout ratio based on their 10-year average. Cost of Capital = Risk Premium + 10Y Bond Yield. Source: Datastream, SG Cross

Asset Research

FRANCE Key inputs FRANCE Risk premiumRisk premium Earnings growthCURRENT 5.7% 2012e 3%Average 3.8% 2013e 11%

Minimum -0.2% 2014e 11%




GERMANY Key inputs GERMANY Risk premiumRisk premium Earnings growthCURRENT 5.1% 2012e 10%Average 2.4% 2013e 11%

Minimum -1.3% 2014e 9%




-2%

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93 95 97 99 01 03 05 07 09 11



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90 92 94 96 98 00 02 04 06 08 10 12



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-1%

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90 92 94 96 98 00 02 04 06 08 10 12



F441


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07 March 20128

Europe (4): Greece, Ireland and ItalyGREECE Key inputs GREECE Risk premiumRisk premium Earnings growthCURRENT -32.7% 2012e naAverage 6.2% 2013e 38%

Minimum -32.7% 2014e -2%

Maximum 13.5% Historical average -9%



IRELAND Key inputs IRELAND Risk premiumRisk premium Earnings growthCURRENT -2.7% 2012e 15%Average 7.5% 2013e 25%

Minimum -6.2% 2014e 32%




ITALY Key inputs ITALY Risk premiumRisk premium Earnings growthCURRENT 4.7% 2012e 20%Average 3.8% 2013e 16%

Minimum -2.5% 2014e 12%



Cost of Capital 9.6% Payout Ratio 56.8%Data since February 1987. Historical EPS growth, historical GDP growth and Payout ratio based on their 10-year average. Cost of Capital = Risk Premium + 10Y Bond Yield. Source: Datastream, SG


-35%

-30%

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00 02 04 06 08 10 12



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-10%

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93 95 97 99 01 03 05 07 09 11



-2%

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10%

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-2%

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6%

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92 94 96 98 00 02 04 06 08 10 12



F441


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07 March 2012 9

Europe (5): Netherlands, Norway and PortugalNETHERLANDS Key inputs NETHERLANDS Risk premiumRisk premium Earnings growthCURRENT 5.4% 2012e 15%Average 4.5% 2013e 11%

Minimum 0.6% 2014e 7%




NORWAY Key inputs NORWAY Risk premiumRisk premium Earnings growthCURRENT 9.0% 2012e 9%Average 4.3% 2013e 11%

Minimum -0.1% 2014e 9%


10Y Bond Yield 2.3% Historical GDP growth (g) 6.4%Cost of Capital 11.3% Payout Ratio 37.3%Data since February 1981. Historical EPS growth, historical GDP growth and Payout ratio based on their 10-year average. Cost of Capital = Risk Premium + 10Y Bond Yield. Source: Datastream, SG


PORTUGAL Key inputs PORTUGAL Risk premiumRisk premium Earnings growthCURRENT -3.5% 2012e 12%Average 5.4% 2013e 14%

Minimum -4.4% 2014e 3%



Cost of Capital 10.1% Payout Ratio 52.3%Data since February 1991. Historical EPS growth, historical GDP growth and Payout ratio based on their 10-year average. Cost of Capital = Risk Premium + 10Y Bond Yield. Source: Datastream, SG


0%

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6%

8%

10%

12%

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90 92 94 96 98 00 02 04 06 08 10 12


to Equities


-1%

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5%

7%

9%

11%

13%

15%

-1%

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90 92 94 96 98 00 02 04 06 08 10 12



-6%

-4%

-2%

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98 00 02 04 06 08 10 12



F441


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07 March 201210

Europe (6): Spain, Sweden and SwitzerlandSPAIN Key inputs SPAIN Risk premiumRisk premium Earnings growthCURRENT 6.3% 2012e 1%Average 6.1% 2013e 12%

Minimum 0.7% 2014e 8%


10Y Bond Yield 4.9% Historical GDP growth (g) 4.7%Cost of Capital 11.2% Payout Ratio 44.5%Data since March 1988. Historical EPS growth, historical GDP growth and Payout ratio based on their 10-year average. Cost of Capital = Risk Premium + 10Y Bond Yield. Source: Datastream, SG Cross

Asset Research

SWEDEN Key inputs SWEDEN Risk premiumRisk premium Earnings growthCURRENT 6.3% 2012e 10%Average 4.7% 2013e 11%

Minimum 1.5% 2014e 13%


10Y Bond Yield 1.8% Historical GDP growth (g) 4.0%Cost of Capital 8.1% Payout Ratio 43.2%Data since February 1983. Historical EPS growth, historical GDP growth and Payout ratio based on their 10-year average. Cost of Capital = Risk Premium + 10Y Bond Yield. Source: Datastream, SG


SWITZERLAND Key inputs SWITZERLAND Risk premiumRisk premium Earnings growthCURRENT 5.2% 2012e 12%Average 3.0% 2013e 11%

Minimum 1.3% 2014e 8%





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92 94 96 98 00 02 04 06 08 10 12



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94 96 98 00 02 04 06 08 10 12



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90 92 94 96 98 00 02 04 06 08 10 12



F441


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07 March 2012 11

Rest of the world (1): Australia, Canada and HongKongAUSTRALIA Key inputs AUSTRALIA Risk premiumRisk premium Earnings growthCURRENT 9.3% 2011e 2%Average 5.5% 2012e 11%

Minimum 1.6% 2013e 9%




CANADA Key inputs CANADA Risk premiumRisk premium Earnings growthCURRENT 6.4% 2012e 9%Average 3.3% 2013e 13%

Minimum -0.2% 2014e 4%




HONG KONG Key inputs HONG KONG Risk premiumRisk premium Earnings growthCURRENT 6.9% 2012e -12%Average 4.8% 2013e 13%

Minimum 0.6% 2014e 6%




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90 92 94 96 98 00 02 04 06 08 10 12

Bonds chea relative to E uities


-1%

1%

3%

5%

7%

9%

11%

-1%

1%

3%

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7%

9%

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90 92 94 96 98 00 02 04 06 08 10 12


to Equities


-1%

3%

7%

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15%

-1%

3%

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11%

15%

97 99 01 03 05 07 09 11



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07 March 201212

Rest of the world (2): Israel, New Zealand andSingaporeISRAEL Key inputs ISRAEL Risk premiumRisk premium Earnings growthCURRENT 3.4% 2012e 9%Average 3.8% 2013e 9%

Minimum 1.3% 2014e -2%




NEW ZEALAND Key inputs NEW ZEALAND Risk PremiumRisk premium Earnings growthCURRENT 6.0% 2011e -8%Average 4.5% 2012e 13%

Minimum 0.8% 2013e 14%


10Y Bond Yield 4.1% Historical GDP growth (g) 5.1%Cost of Capital 10.1% Payout Ratio 74.0%Data since February 1989 Historical EPS growth, historical GDP growth and Payout ratio based on their 10-year average. Cost of Capital = Risk Premium + 10Y Bond Yield. Source: Datastream, SG


SINGAPORE Key inputs SINGAPORE Risk premiumRisk premium Earnings growthCURRENT 7.6% 2012e 6%Average 4.5% 2013e 11%

Minimum 2.3% 2014e 16%




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07 March 2012 13

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07 March 201214

Equity Risk PremiumEmerging Markets

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07 March 2012 15

Asia (1): China, India and IndonesiaCHINA Key inputs CHINA Risk premiumRisk premium Earnings growthCURRENT 12.0% 2012e 11%Average 9.4% 2013e 13%

Minimum 6.4% 2014e 8%


Bond Yield 3.5% Historical GDP growth (g) 11.4%Cost of Capital 15.6% Payout Ratio 30.5%Data since August 1994. Historical EPS growth, historical GDP growth and Payout ratio based on their 10-year average. Cost of Capital = Risk Premium + 10Y Bond Yield. Source: Datastream, SG Cross

Asset Research

INDIA Key inputs INDIA Risk premiumRisk premium Earnings growthCURRENT 5.6% 2012e 17%Average 6.6% 2013e 15%

Minimum 4.4% 2014e 6%


Bond Yield 8.3% Historical GDP growth (g) 12.1%Cost of Capital 13.9% Payout Ratio 23.4%Data since January 1991. Historical EPS growth, historical GDP growth and Payout ratio based on their 10-year average. Cost of Capital = Risk Premium + 10Y Bond Yield. Source: Datastream, SG


INDONESIA Key inputs INDONESIA Risk premiumRisk premium Earnings growthCURRENT 9.1% 2012e 13%Average 3.6% 2013e 16%

Minimum -0.2% 2014e 17%


Bond Yield 6.0% Historical GDP growth (g) 10.2%

Cost of Capital 15.1% Payout Ratio 40.0%Data since April 1992. Historical EPS growth, historical GDP growth and Payout ratio based on their 10-year average. Cost of Capital = Risk Premium + 10Y Bond Yield. Source: Datastream, SG Cross

Asset Research

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04 06 08 10 12



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02 04 06 08 10 12



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03 05 07 09 11



F441


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07 March 201216

Asia (2): Korea, Malaysia and PhilippinesKOREA Key inputs KOREA Risk premiumRisk premium Earnings growthCURRENT 4.7% 2012e 15%Average 4.8% 2013e 14%

Minimum 2.3% 2014e 12%




MALAYSIA Key inputs MALAYSIA Risk premiumRisk premium Earnings growthCURRENT 7.1% 2012e 13%Average 6.0% 2013e 11%

Minimum 4.8% 2014e 6%


Bond Yield 3.4% Historical GDP growth (g) 6.6%Cost of Capital 10.4% Payout Ratio 46.1%Data since February 1987. Historical EPS growth, historical GDP growth and Payout ratio based on their 10-year average. Cost of Capital = Risk Premium + 10Y Bond Yield. Source: Datastream, SG


PHILIPPINES Key inputs PHILIPPINES Risk premiumRisk premium Earnings growthCURRENT 6.4% 2012e 12%Average 6.0% 2013e 11%

Minimum 5.2% 2014e 10%



Cost of Capital 11.5% Payout Ratio 34.5%Data since October 1988. Historical EPS growth, historical GDP growth and Payout ratio based on their 10-year average. Cost of Capital = Risk Premium + 10Y Bond Yield. Source: Datastream, SG


2%

4%

6%

8%

10%

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10%

01 03 05 07 09 11


to Equities


4%

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02 04 06 08 10 12



5.0%

5.5%

6.0%

6.5%

7.0%

7.5%

5.0%

5.5%

6.0%

6.5%

7.0%

7.5%

Nov-10 Jan-11 Mar-11May-11 Jul-11 Sep-11Nov -11Jan-12 Mar-12



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07 March 2012 17

Asia (3): Taiwan and ThailandTAIWAN Key inputs TAIWAN Risk premiumRisk premium Earnings growthCURRENT 6.7% 2012e 18%Average 5.9% 2013e 21%

Minimum 4.6% 2014e 10%


Bond Yield 1.0% Historical GDP growth (g) 2.7%Cost of Capital 7.6% Payout Ratio 52.6%Data since May 1989. Historical EPS growth, historical GDP growth and Payout ratio based on their 10-year average. Cost of Capital = Risk Premium + 10Y Bond Yield. Source: Bloomberg, Datastream,

SG Cross Asset Research

THAILAND Key inputs THAILAND Risk premiumRisk premium Earnings growthCURRENT 8.5% 2012e 20%Average 6.9% 2013e 15%

Minimum 2.5% 2014e 7%




4%

5%

6%

7%

8%

4%

5%

6%

7%

8%

02 04 06 08 10



2%

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8%

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2%

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8%

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12%

02 04 06 08 10 12



F441


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07 March 201218

Latam (1): Argentina, Brazil and ChileARGENTINA Key inputs ARGENTINA Risk premiumRisk premium Earnings growthCURRENT 10.9% 2012e 2%Average 3.3% 2013e 15%

Minimum -6.5% 2014e 6%


Bond Yield 14.1% Historical GDP growth (g) 13.0%Cost of Capital 24.9% Payout Ratio 48.7%Data since July 1992. Historical EPS growth, historical GDP growth and Payout ratio based on their 10-year average. Cost of Capital = Risk Premium + 10Y Bond Yield. Source: Datastream, SG Cross

Asset Research

BRAZIL Key inputs BRAZIL Risk premiumRisk premium Earnings growthCURRENT 2.8% 2012e 8%Average * 2.1% 2013e 11%

Minimum -12.1% 2014e 5%


Bond Yield 10.3% Historical GDP growth (g) 7.2%Cost of Capital 13.1% Payout Ratio 42.3%*Average takes into account data after September 2003. Data since June 2000. Historical EPS growth, historical GDP growth and Payout ratio based on their 10-year average. Cost of Capital = Risk

Premium + 10Y Bond Yield. Source: Datastream, SG Cross Asset Research

CHILE Key inputs CHILE Risk premiumRisk premium Earnings growthCURRENT 5.7% 2012e 14%Average 5.2% 2013e 10%

Minimum 4.1% 2014e 11%



Cost of Capital 10.3% Payout Ratio 55.6%Data since July 1990. Historical EPS growth, historical GDP growth and Payout ratio based on their 10-year average. Cost of Capital = Risk Premium + 10Y Bond Yield. Source: Datastream, SG Cross

Asset Research

-8%

-6%

-4%

-2%

0%

2%

4%

6%

8%

10%

12%

-8%

-6%

-4%

-2%

0%

2%

4%

6%

8%

10%

12%

Feb-10 Aug-10 Feb-11 Aug-11 Feb-12



-2%

0%

2%

4%

6%

8%

-2%

0%

2%

4%

6%

8%

04 06 08 10 12



3.5%

4.0%

4.5%

5.0%

5.5%

6.0%

6.5%

7.0%

7.5%

3.5%

4.0%

4.5%

5.0%

5.5%

6.0%

6.5%

7.0%

7.5%

Oct-10Dec-10Feb-11Apr-11 Jun-11Aug-11Oct-11Dec-11Feb-12



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Latam (2): Colombia, Mexico and PeruCOLOMBIA Key inputs COLOMBIA Risk premiumRisk premium Earnings growthCURRENT 7.5% 2012e 8%Average 1.8% 2013e 6%

Minimum -2.7% 2014e 23%


Bond Yield 6.7% Historical GDP growth (g) 7.2%Cost of Capital 14.2% Payout Ratio 55.8%Data since March 1994. Historical EPS growth, historical GDP growth and Payout ratio based on their 10-year average. Cost of Capital = Risk Premium + 10Y Bond Yield. Source: Datastream, SG Cross

Asset Research

MEXICO Key inputs MEXICO Risk premiumRisk premium Earnings growthCURRENT 4.8% 2012e 35%Average 2.0% 2013e 21%

Minimum -0.1% 2014e 72%



Asset Research

PERU Key inputs PERU Risk premiumRisk premium Earnings growthCURRENT 6.4% 2012e 5%Average 6.5% 2013e 5%

Minimum 3.3% 2014e 4%





-4%

-2%

0%

2%

4%

6%

8%

-4%

-2%

0%

2%

4%

6%

8%

03 05 07 09 11



-1%

0%

1%

2%

3%

4%

5%

-1%

0%

1%

2%

3%

4%

5%

02 04 06 08 10 12



2%

4%

6%

8%

10%

12%

14%

16%

2%

4%

6%

8%

10%

12%

14%

16%

07 09 11



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EMEA* (1): Croatia, Czech Republic and EgyptCROATIA Key inputs CROATIA Risk premiumRisk premium Earnings growthCURRENT 5.2% 2012e 18%Average 5.3% 2013e 7%

Minimum 3.1% 2014e 8%



Asset Research

CZECH REPUBLIC Key inputs CZECH REPUBLIC Risk premiumRisk premium Earnings growthCURRENT 12.6% 2012e 3%Average 8.7% 2013e 2%

Minimum 3.3% 2014e 9%


Bond Yield 1.8% Historical GDP growth (g) 3.9%Cost of Capital 14.4% Payout Ratio 70.8%Data since December 1994. Historical EPS growth, historical GDP growth and Payout ratio based on their 10-year average. Cost of Capital = Risk Premium + 10Y Bond Yield. Source: Datastream, SG


EGYPT Key inputs EGYPT Risk premiumRisk premium Earnings growthCURRENT 4.6% 2012e 44%Average 7.8% 2013e 22%

Minimum 2.0% 2014e 19%


Bond Yield 13.8% Historical GDP growth (g) 13.7%Cost of Capital 18.4% Payout Ratio 49.9%Data since October 1997. Historical EPS growth, historical GDP growth and Payout ratio based on their 10-year average. Cost of Capital = Risk Premium + 10Y Bond Yield. Source: Datastream, SG


*EMEA: Europe Middle East Africa

3%

4%

5%

6%

7%

8%

3%

4%

5%

6%

7%

8%

Nov-10 Jan-11 Mar-11 May -11 Jul-11 Sep-11 Nov-11 Jan-12 Mar-12



0%

4%

8%

12%

16%

0%

4%

8%

12%

16%

01 03 05 07 09 11



0%

2%

4%

6%

8%

10%

12%

14%

0%

2%

4%

6%

8%

10%

12%

14%

Oc t-07 J ul-08 Apr-09 J an-10 Oc t-10 J ul-11 Apr-12



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EMEA* (2): Hungary, Poland and RomaniaHUNGARY Key inputs HUNGARY Risk premiumRisk premium Earnings growthCURRENT 4.7% 2012e 5%Average 6.1% 2013e 22%

Minimum 2.4% 2014e 43%



Asset Research

POLAND Key inputs POLAND Risk premiumRisk premium Earnings growthCURRENT 4.4% 2012e -12%Average 3.3% 2013e 0%

Minimum 1.4% 2014e 7%



Asset Research

ROMANIA Key inputs ROMANIA Risk premiumRisk premium Earnings growthCURRENT 6.7% 2012e -9%Average 6.6% 2013e 16%

Minimum 5.4% 2014e 1%



Cost of Capital 13.4% Payout Ratio 31.8%Data since March 2009. Historical EPS growth, historical GDP growth and Payout ratio based on their 10-year average. Cost of Capital = Risk Premium + 10Y Bond Yield. Source: Datastream, SG Cross

Asset Research

0%

2%

4%

6%

8%

10%

12%

0%

2%

4%

6%

8%

10%

12%

02 04 06 08 10 12



1%

2%

3%

4%

5%

6%

1%

2%

3%

4%

5%

6%

02 04 06 08 10 12



5.0%

6.0%

7.0%

8.0%

9.0%

5.0%

6.0%

7.0%

8.0%

9.0%

Feb-11 Apr-11 Jun-11 Aug-11 Oct-11 Dec-11 Feb-12




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EMEA* (3): Russia, South Africa and TurkeyRUSSIA Key inputs RUSSIA Risk premiumRisk premium Earnings growthCURRENT 6.3% 2012e -9%Average 6.8% 2013e -5%

Minimum 3.4% 2014e -1%




SOUTH AFRICA Key inputs SOUTH AFRICA Risk premiumRisk premium Earnings growthCURRENT 5.0% 2012e 28%Average 6.2% 2013e 14%

Minimum 2.2% 2014e 4%




TURKEY Key inputs TURKEY Risk premiumRisk premium Earnings growthCURRENT 5.3% 2012e 11%Average 0.5% 2013e 14%

Minimum -11.1% 2014e 12%


Bond Yield 9.1% Historical GDP growth (g) 7.3%Cost of Capital 14.4% Payout Ratio 25.5%Data since April 1991. Historical EPS growth, historical GDP growth and Payout ratio based on their 10-year average. Cost of Capital = Risk Premium + 10Y Bond Yield. Source: Datastream, SG Cross

Asset Research


2%

4%

6%

8%

10%

2%

4%

6%

8%

10%

05 07 09 11


Equities cheap relative

to Bonds

2%

4%

6%

8%

10%

2%

4%

6%

8%

10%

02 04 06 08 10 12



-12%

-7%

-2%

3%

8%

-12%

-7%

-2%

3%

8%

04 06 08 10 12



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Developed Markets (1)Risk Premium Developed 10Y Bonds Yield Cost of capital Equity Index

Last 1 month change Markets Last 1 month change Last 1 month change 1 month changeG3

5.7% 4bp USA 2.0% 19bp 7.7% 23bp 3.8%5.9% 10bp Europe 2.6% -2bp 8.5% 8bp 2.8%4.0% -56bp Japan* 1.0% 0bp 5.0% -56bp 10.6%

EUROPE4.9% 30bp EMU 3.4% -15bp 8.3% 15bp 3.2%7.7% -11bp United Kingdom 2.1% 9bp 9.8% -1bp 2.5%5.1% 24bp Small Cap 2.6% 0bp 7.7% 24bp 3.2%6.7% 28bp Austria 2.8% -12bp 9.5% 16bp 4.9%3.0% -5bp Belgium 3.5% -5bp 6.5% -11bp 5.5%4.2% 6bp Denmark 1.9% 8bp 6.1% 14bp 10.6%5.0% -3bp Finland 2.3% 1bp 7.3% 0bp 2.8%5.7% 34bp France 2.8% -25bp 8.5% 9bp 4.0%5.1% 9bp Germany 1.9% 2bp 7.0% 11bp 4.9%

-32.7% -450bp Greece 40.6% 448bp 7.9% -2bp -8.5%-2.7% 43bp Ireland 6.9% -36bp 4.2% 7bp 2.3%4.7% 114bp Italy 5.0% -73bp 9.6% 41bp 3.2%5.4% -7bp Netherlands 2.2% 1bp 7.6% -6bp 0.5%9.0% -17bp Norway 2.3% 36bp 11.3% -21bp 7.2%-3.5% 89bp Portugal 13.6% -180bp 10.1% -91bp 4.2%6.3% -6bp Spain 4.9% 3bp 11.2% -3bp -1.6%6.3% -9bp Sweden 1.8% 17bp 8.1% 8bp 4.3%5.2% 11bp Switzerland 0.6% 3bp 5.9% 14bp 1.1%

REST OF THE WORLD9.3% -98bp Australia* 4.1% 35bp 13.5% -63bp 0.1%6.4% -5bp Canada 2.0% 9bp 8.4% 4bp 1.8%6.9% -46bp Hong Kong 1.3% 3bp 8.2% -43bp 7.6%3.4% -35bp Israel 4.5% 36bp 7.9% 1bp -1.4%6.0% -78bp New Zealand* 4.1% 33bp 10.1% -45bp 1.7%7.6% 14bp Singapore 1.5% -5bp 9.1% 9bp 3.8%

Source: SG Cross Asset Research, Datastream, IBES

Developed Markets (2)Pay-Out Growth Developed Earning Earning Earning

(g) Markets Growth 2012 Growth 2013 Growth 2014G3

34% 3.9% USA 9% 13% 11%43% 2.9% Europe 7% 11% 9%37% -0.5% Japan* -21% 60% 18%

EUROPE45% 2.9% EMU 9% 12% 10%46% 3.9% United Kingdom 4% 10% 7%43% 2.9% Small Cap 23% 19% 12%33% 3.4% Austria 26% 17% 13%44% 3.6% Belgium 27% 12% 9%29% 3.0% Denmark 30% 28% 22%55% 3.6% Finland -5% 20% 8%47% 2.9% France 3% 11% 11%36% 2.1% Germany 10% 11% 9%49% 4.4% Greece na 38% -2%29% 3.1% Ireland 15% 25% 32%57% 2.4% Italy 20% 16% 12%46% 3.0% Netherlands 15% 11% 7%37% 6.4% Norway 9% 11% 9%52% 2.4% Portugal 12% 14% 3%45% 4.7% Spain 1% 12% 8%43% 4.0% Sweden 10% 11% 13%35% 2.7% Switzerland 12% 11% 8%

REST OF THE WORLD65% 7.1% Australia* 2% 11% 9%41% 4.5% Canada 9% 13% 4%42% 3.8% Hong Kong -12% 13% 6%39% 5.3% Israel 9% 9% -2%74% 5.1% New Zealand* -8% 13% 14%37% 8.3% Singapore 6% 11% 16%

*2011, 2012 and 2013 earnings growth. Source: SG Cross Asset Research, Datastream, IBES

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Emerging Markets (1)Risk Premium Emerging Long Term Bond Yield Cost of capital Equity Index

Last 1 month change Markets Last 1 month change Last 1 month change 1 month changeASIA12.0% -53bp China 3.5% 12bp 15.6% -42bp 4.8%

5.6% -40bp India 8.3% 8bp 13.9% -33bp 2.2%9.1% 28bp Indonesia 6.0% 12bp 15.1% 39bp -2.1%4.7% 9bp Korea 3.5% 7bp 8.2% 16bp 4.1%7.1% -11bp Malaysia 3.4% 0bp 10.4% -11bp 2.7%6.4% 23bp Philippines 5.0% -37bp 11.5% -14bp 5.2%6.7% 20bp Taiwan 1.0% 1bp 7.6% 20bp 6.3%8.5% -44bp Thailand 3.5% 34bp 12.0% -9bp 9.3%

LATIN AMERICA10.9% 196bp Argentina 14.1% 0bp 24.9% 196bp -13.3%2.8% -19bp Brazil 10.3% -18bp 13.1% -37bp 2.6%5.7% 27bp Chile 4.6% -31bp 10.3% -4bp 5.3%7.5% 17bp Colombia 6.7% 7bp 14.2% 24bp 6.1%4.8% 104bp Mexico 6.5% 28bp 11.3% 132bp 1.0%6.4% 28bp Peru 5.9% -15bp 12.3% 13bp -0.1%

EMEA5.2% 73bp Croatia 7.1% -36bp 12.4% 37bp -4.5%12.6% -64bp Czech Republic 1.8% 8bp 14.4% 55bp 2.2%4.6% -187bp Egypt 13.8% 0bp 18.4% -187bp 14.3%4.7% 232bp Hungary 8.1% -54bp 12.8% 179bp 0.9%4.4% 26bp Poland 5.1% -7bp 9.5% 19bp -1.8%6.7% -58bp Romania 6.7% -39bp 13.4% -97bp 8.0%6.3% -44bp Russia 7.3% 0bp 13.5% -52bp 4.2%5.0% -53bp South Africa 7.9% 21bp 12.9% -32bp 1.3%5.3% 34bp Turkey 9.1% -21bp 14.4% 13bp 1.5%


Emerging Markets (2)Pay-Out Growth Emerging Earning Earning Earning

(g) Markets Growth 2012 Growth 2013 Growth 2014ASIA31% 11.4% China 11% 13% 8%23% 12.1% India 17% 15% 6%40% 10.2% Indonesia 13% 16% 17%21% 4.1% Korea 15% 14% 12%46% 6.6% Malaysia 13% 11% 6%35% 9.1% Philippines 12% 11% 10%53% 2.7% Taiwan 18% 21% 10%38% 7.3% Thailand 20% 15% 7%

LATIN AMERICA49% 13.0% Argentina 2% 15% 6%42% 7.2% Brazil 8% 11% 5%56% 4.2% Chile 14% 10% 11%56% 7.2% Colombia 8% 6% 23%25% 5.6% Mexico 35% 21% 72%97% 6.3% Peru 5% 5% 4%EMEA64% 5.0% Croatia 18% 7% 8%71% 3.9% Czech Republic 3% 2% 9%50% 13.7% Egypt 44% 22% 19%34% 4.7% Hungary 5% 22% 43%40% 5.2% Poland -12% 0% 7%32% 8.5% Romania -9% 16% 1%18% 9.7% Russia -9% -5% -1%43% 8.7% South Africa 28% 14% 4%26% 7.3% Turkey 11% 14% 12%


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APPENDIX

ANALYST CERTIFICATIONThe following named research analyst(s) hereby certifies or certify that (i) the views expressed in the research report accuratelyreflect his or her personal views about any and all of the subject securities or issuers and (ii) no part of his or her compensationwas, is, or will be related, directly or indirectly, to the specific recommendations or views expressed in this report : Alain

Bokobza, Roland Kaloyan, Philippe Ferreira, Arthur van Slooten.

SG RATINGSBUY: expected upside of 10% or more over a 12 month period.HOLD: expected return between -10% and +10% over a 12month period.SELL: expected downside of -10% or worse over a 12 monthperiod.

Sector Weighting Definition:The sector weightings are assigned by the SG Equity ResearchStrategist and are distinct and separate from SG researchanalyst ratings. They are based on the relevant MSCI.

OVERWEIGHT: sector expected to outperform the relevant broadmarket benchmark over the next 12 months.

NEUTRAL: sector expected to perform in-line with the relevantbroad market benchmark over the next 12 months.

UNDERWEIGHT: sector expected to underperform the relevantbroad market benchmark over the next 12 months.

Ratings and/or price targets are determined by the rangesdescribed above at the time of the initiation of coverage or achange in rating or price target (subject to limited managementdiscretion). At other times, the price targets may fall outside ofthese ranges because of market price movements and/or othershort term volatility or trading patterns. Such interim deviationsfrom specified ranges will be permitted but will become subjectto review by research management.

Equity rating and dispersion relationship

Source: SG Cross Asset Research

MSCI DISCLAIMER: The MSCI sourced information is the exclusive property of Morgan Stanley Capital International Inc. (MSCI). Withoutprior written permission of MSCI, this information and any other MSCI intellectual property may not be reproduced, redisseminated or

used to create any financial products, including any indices. This information is provided on an as is basis. The user assumes the entire

risk of any use made of this information. MSCI, its affiliates and any third party involved in, or related to, computing or compiling the

information hereby expressly disclaim all warranties of originality, accuracy, completeness, merchantability or fitness for a particularpurpose with respect to any of this information. Without limiting any of the foregoing, in no event shall MSCI, any of its affiliates or any

third party involved in, or related to, computing or compiling the information have any liability for any damages of any kind. MSCI, Morgan

Stanley Capital International and the MSCI indexes are service marks of MSCI and its affiliates or such similar language as may be

provided by or approved in advance by MSCI.

FOR DISCLOSURES PERTAINING TO COMPENDIUM REPORTS OR RECOMMENDATIONS OR ESTIMATES MADE ON

SECURITIES OTHER THAN THE PRIMARY SUBJECT OF THIS RESEARCH REPORT, PLEASE VISIT OUR GLOBALRESEARCH DISCLOSURE WEBSITE AThttp://www.sgresearch.com/compliance.rha or call +1 (212).278.6000 in the U.S.

The analyst(s) responsible for preparing this report receive compensation that is based on various factors including SGs total revenues, a portion ofwhich are generated by investment banking activities.

47%

41%

12%

46%44%

43%

0

50

100

150

200

250

Buy Hold Sell

Updated on 01/03/12

Companies Covered Cos. w/ Banking Relationship

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07 March 2012 27

Non-U.S. Analyst Disclosure: The name(s) of any non-U.S. analysts who contributed to this report and their SG legal entity are listed below. U.S.analysts are employed by SG Americas Securities LLC. The non-U.S. analysts are not registered/qualified with FINRA, may not be associated personsof SGAS and may not be subject to the FINRA restrictions on communications with a subject company, public appearances and trading securities heldin the research analyst(s) account(s):Alain Bokobza Socit Gnrale Paris, Roland Kaloyan Socit Gnrale Paris, Philippe Ferreira Socit GnraleParis, Arthur van Slooten Socit Gnrale Paris

IMPORTANT DISCLAIMER: The information herein is not intended to be an offer to buy or sell, or a solicitation of an offer to buy or sell, any securitiesand has been obtained from, or is based upon, sources believed to be reliable but is not guaranteed as to accuracy or completeness. SG does, fromtime to time, deal, trade in, profit from, hold, act as market-makers or advisers, brokers or bankers in relation to the securities, or derivatives thereof, ofpersons, firms or entities mentioned in this document and may be represented on the board of such persons, firms or entities. SG does,, from time totime, act as a principal trader in debt securities that may be referred to in this report and may hold debt securities positions. Employees of SG, orindividuals connected to them, may from time to time have a position in or hold any of the investments or related investments mentioned in thisdocument. SG is under no obligation to disclose or take account of this document when advising or dealing with or on behalf of customers. The viewsof SG reflected in this document may change without notice. In addition, SG may issue other reports that are inconsistent with, and reach differentconclusions from, the information presented in this report and is under no obligation to ensure that such other reports are brought to the attention of anyrecipient of this report. To the maximum extent possible at law, SG does not accept any liability whatsoever arising from the use of the material orinformation contained herein. This research document is not intended for use by or targeted to retail customers. Should a retail customer obtain a copyof this report he/she should not base his/her investment decisions solely on the basis of this document and must seek independent financial advice.

The financial instrument discussed in this report may not be suitable for all investors and investors must make their own informed decisions and seektheir own advice regarding the appropriateness of investing in financial instruments or implementing strategies discussed herein. The value ofsecurities and financial instruments is subject to currency exchange rate fluctuation that may have a positive or negative effect on the price of suchsecurities or financial instruments, and investors in securities such as ADRs effectively assume this risk. SG does not provide any tax advice. Pastperformance is not necessarily a guide to future performance. Estimates of future performance are based on assumptions that may not be realized.Investments in general, and derivatives in particular, involve numerous risks, including, among others, market, counterparty default and liquidity risk.Trading in options involves additional risks and is not suitable for all investors. An option may become worthless by its expiration date, as it is adepreciating asset. Option ownership could result in significant loss or gain, especially for options of unhedged positions. Prior to buying or selling anoption, investors must review the "Characteristics and Risks of Standardized Options" athttp://www.optionsclearing.com/publications/risks/riskchap.1.jsp.

Important European MIFID Notice: The circumstances in which material provided by SG European Fixed Income (Credit) & Forex Research, SGCommodity Research, SG Convertible Research and SG Equity Derivatives Research have been produced are such (for example, because of reportingor remuneration structures or the physical location of the author of the material) that it is not appropriate to characterize it as independent investmentresearch as referred to in the European Markets in Financial Instruments Directive and that it should be treated as marketing material even if it containsa research recommendation (recommandation dinvestissement caractre promotionnel). However, it must be made clear that all publicationsissued by SG will be clear, fair and not misleading. For more details please refer to SGs Policies for Managing Conflicts of Interest in Connection withInvestment Research posted on SGs disclosure website referenced herein.

Notice to French Investors: This publication is issued in France by or through Socit Gnrale ("SG") which is authorised and supervised by theAutorit de Contrle Prudentiel and regulated by the Autorite des Marches Financiers.

Notice to U.K. Investors: This publication is issued in the United Kingdom by or through Socit Gnrale ("SG"), London Branch . Socit Gnrale isa French credit institution (bank) authorised and supervised by the Autorit de Contrle Prudentiel (the French Prudential Control Authority). SocitGnrale is subject to limited regulation by the Financia l Services Authority (FSA) in the U.K. Details of the extent of SG's regulation by the FSA areavailable from SG on request. The information and any advice contained herein is directed only at, and made available only to, professional clients andeligible counterparties (as defined in the FSA rules) and should not be relied upon by any other person or party.

Notice to Polish Investors: this document has been issued in Poland by Societe Generale S.A. Oddzial w Polsce (the Branch) with its registeredoffice in Warsaw (Poland) at 111 Marszakowska St. The Branch is supervised by the Polish Financial Supervision Authority and the French Autorit deContrle Prudentiel. This report is addressed to financial institutions only, as defined in the Act on trading in financial instruments. The Branch certifiesthat this document has been elaborated with due dilligence and care.

Notice to U.S. Investors: For purposes of SEC Rule 15a-6, SG Americas Securities LLC (SGAS) takes responsibility for this research report. Thisreport is intended for institutional investors only. Any U.S. person wishing to discuss this report or effect transactions in any security discussed hereinshould do so with or through SGAS, a broker-dealer registered with the SEC and a member of FINRA, 1221 Avenue of the Americas, New York, NY10020. (212)-278-6000.

Notice to Singapore Investors: This document is provided in Singapore by or through Socit Gnrale ("SG"), Singapore Branch and is provided onlyto accredited investors, expert investors and institutional investors, as defined in Section 4A of the Securities and Futures Act, Cap. 289. Recipients ofthis document are to contact Socit Gnrale, Singapore Branch in respect of any matters arising from, or in connection with, the document. If you arean accredited investor or expert investor, please be informed that in SG's dealings with you, SG is relying on the following exemptions to the Financial

Advisers Act, Cap. 110 (FAA): (1) the exemption in Regulation 33 of the Financial Advisers Regulations (FAR), which exempts SG from complyingwith Section 25 of the FAA on disclosure of product information to clients; (2) the exemption set out in Regulation 34 of the FAR, which exempts SGfrom complying with Section 27 of the FAA on recommendations; and (3) the exemption set out in Regulation 35 of the FAR, which exempts SG fromcomplying with Section 36 of the FAA on disclosure of certain interests in securities.

Notice to Hong Kong Investors: This report is distributed in Hong Kong by Socit Gnrale, Hong Kong Branch which is licensed by the Securitiesand Futures Commission of Hong Kong under the Securities and Futures Ordinance (Chapter 571 of the Laws of Hong Kong) ("SFO"). This documentdoes not constitute a solicitation or an offer of securities or an invitation to the public within the meaning of the SFO. This report is to be circulated onlyto "professional investors" as defined in the SFO.

Notice to Japanese Investors: This publication is distributed in Japan by Societe Generale Securities (North Pacific) Ltd., Tokyo Branch, which isregulated by the Financial Services Agency of Japan. This document is intended only for the Specified Investors, as defined by the FinancialInstruments and Exchange Law in Japan and only for those people to whom it is sent directly by Societe Generale Securities (North Pacific) Ltd., TokyoBranch, and under no circumstances should it be forwarded to any third party. The products mentioned in this report may not be eligible for sale inJapan and they may not be suitable for all types of investors.

Notice to Australian Investors: This document is issued in Australia by Socit Gnrale (ABN 71 092 516 286) ("SG"). SG is regulated by APRA andASIC and holds an AFSL no. 236651 issued under the Corporations Act 2001 (Cth) ("Act"). The information contained in this document is only directedto recipients who are wholesale clients as defined under the Act.

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Notice to Canadian Investors: This document is for information purposes only and is intended for use by Permitted Clients, as defined under NationalInstrument 31-103, Accredited Investors, as defined under National Instrument 45-106, Accredited Counterparties as defined under the Derivatives Act(Qubec) and "Qualified Parties" as defined under the ASC, BCSC, SFSC and NBSC Orders

http://www.sgcib.com. Copyright: The Socit Gnrale Group 2012. All rights reserved.This publication may not be reproduced or redistributed in whole in part without the prior consent of SG or its affiliates.

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