Easing Cycle Begins
January 13, 2009
By Gray Newman, Luis Arcentales | New York & Marcelo Carvalho | Sao Paulo
The great global monetary easing of 2008 has finally arrived in Latin America…in 2009. Chile’s central bank surprised most market participants last week with a much larger-than-expected 100bp cut to its target interest rate. The move followed the 50bp cut by Colombia’s central bank in late December, which was also larger than expected. The actions of Chile and Colombia have investors asking whether Mexico’s central bank, which meets this week, and Brazil’s central bank, which meets next week, will join the camp of the front-loaders. We suspect that Mexico’s central bank may disappoint the growing enthusiasm for a large rate cut. In Brazil, we are calling for a 50bp rate cut, but we admit that risks seem biased to a larger move.
Mexico: Proceed with Caution There seems little doubt that Mexico’s central bank will cut interest rates this month. After suggesting in its past two communiqués (in October and November) that its next move would be to reduce interest rates, Banco de Mexico appears ready to ease interest rates on Friday, January 16. We would highlight three changes since the central bank last met to decide on interest rate policy in late November that are driving the decision to cut interest rates. First, economic activity has weakened substantially. Industrial production, where the link with the US is the strongest, has posted annual declines in every month since May. And conditions for Mexico’s struggling industrial sector are set to get much worse before they get better: demand for manufacturing exports – which plunged 7.3% in November – has dried up at a remarkable pace while most automakers in Mexico have announced extraordinary technical stops starting mid-December due to falling demand. Meanwhile, the outlook for consumers isn’t encouraging either: consumers are losing income support rapidly due to falling real wages and mounting job losses. In fact, jobs contracted at a sequential annualized clip in excess of 3% in 4Q, a rate comparable to the worst pace during the 2001 recession, based on our calculations. Coupled with a sharp slowdown in credit to the consumer – which in 3Q grew at an anemic annual rate of just 1.6% in real terms – and it is not surprising to find that consumer confidence at the end of 2008 was at near record-low levels. In early October when we were calling for zero growth in 2009, we were viewed as holding an overly pessimistic outlook for the year. In December, our call for a contraction of 1.5% in 2009 seemed excessive to many and stood in contrast to the budget’s revised assumptions of 1.8% growth. By January 9, the governor of Banco de Mexico was suggesting that growth could drop below zero. Second, the peso appears to have stabilized. While we are still seeing volatility in the peso market and volumes have remained reduced, the extreme moves seen in October and November appear to be behind us. The measures adopted in the US have helped to calm some of the most extreme stress seen in fixed income markets there; meanwhile, Banco de Mexico’s sales of international reserves (US$15.4 billion through this past week) also appear to have helped smooth some of the volatility, which had been exacerbated by the string of derivative contracts gone bad by Mexican corporates and families last year. Mexico’s return to capital markets in mid-December with the issuance of US$2.0 billion in 10-year bonds signals the re-opening of investor appetite for Mexican assets and has likely eased concerns at the central bank that any move to reduce interest rates would trigger capital flight. Third, Mexico is no longer feeling the impact of rising energy prices and is seeing some price relief. Energy prices, particularly gasoline, never rose in Mexico as sharply as in the US because they were subject to government controls, and thus there is less room to see a dramatic decline of the sort that is driving headline prints in the US into deflationary territory. But the latest move by the administration to freeze gasoline prices and cut residential natural gas prices should help to reverse headline inflation pressures in Mexico. Nonetheless, we would caution against a front-loading cut in Mexico of the magnitude seen in Chile. Precisely because Mexico never saw the same soaring energy prices in 2008 as seen in Chile, we don’t expect to see as sharp a reversal. Further, Mexico’s inflationary damage appears to have become a bit more deep-rooted than in Chile. Core inflation has been rising and is now at its highest level in over seven years. While processed foods were a major contributor to core’s rise, evidence from other components has remained mixed: the ‘other services’ category has maintained its upward trend, while ‘other goods’ and ‘housing’ appear to be only now starting to stabilize after rising almost uninterruptedly during most of 2008. Meanwhile, nearly two-thirds of CPI components, excluding food, posted annual increases in excess of the central bank’s 3% target in December. We expect Banco de Mexico to balance its rate cut of 25bp with some hawkish comments on Friday, January 16, emphasizing that the board will need to see an improvement in the inflation dynamic in order to justify rate cuts of the magnitude that markets are now beginning to price in. We can’t rule out a 50bp cut, but believe that calls for an even larger rate reduction are highly unlikely. Brazil to Cut: How Fast, How Much? As in Mexico, there seems little doubt that Brazil will also cut interest rates this month. While the COPOM kept rates unchanged in December in a unanimous vote, the accompanying policy statement went out of its way to underscore that a majority of board members already discussed a (25bp) rate cut at that meeting. The subsequent December COPOM minutes and the 4Q inflation report reinforced the impression that the COPOM is about to embark on a monetary easing cycle. Although the COPOM initially discussed a 25bp rate cut in December, we suspect that recent data – benign inflation and very weak activity numbers – support the notion of a larger move. Our forecast assumes a 50bp rate cut at the January 21 policy meeting. However, Marcelo Carvalho warns that a larger cut cannot be ruled out – he suspects that the central bank board members might be willing to consider 75bp or even 100bp. After all, recent growth data suggest a sharp contraction in 4Q08 – and a contraction that seems more severe than what the authorities themselves may have envisaged. And other central banks – in the region and elsewhere – have surprised with larger-than-expected rate cuts, if anything. Marcelo also notes that last year, when the central bank embarked on a tightening cycle, the COPOM made the case that a front-loaded approach should prove more effective in achieving the central bank’s goals, in part through the expectations channel, as this could send a strong, clear message to markets. If this view also applies to an easing cycle, then the central bank might judge that it has a case for front-loaded rate cuts. Recent benign inflation data should facilitate the central bank’s job. Pass-through from currency depreciation into inflation has been surprisingly low so far. It is hard to be sure whether this is just a temporary phenomenon or not. Global disinflation and falling international commodity prices surely help, but it is also possible that an inventory correction might be keeping the pass-through temporarily low. It appears possible that inflation might still move up in the coming months (in lagged response to previous currency depreciation) before it heads down again later on. In fact, the latest quarterly inflation report has warned that inflationary pressures from currency might materialize faster than the eventual disinflationary help from slower demand. In sum, IPCA inflation turned out at 5.9% for 2008 as a whole – above the 4.5% target center but below the 6.5% target ceiling. In all, while pass-through from the currency remains a potential concern, recent data have proved benign so far. Limited Traction But whether Mexico and Brazil adopt a front-loaded strategy or not, we doubt that the actions of the Latin American central banks are going to stimulate growth in the region as much as some hope. Indeed, we suspect that even with the rate cuts to come, Latin America growth is likely to fall short of most forecasts. Our cautious stance on monetary policy and the growth record for 2009 is based on four concerns: First, we do not expect to see a dramatic reduction in interest rates of the magnitude of what we are seeing in the developed world. We expect Banco de Mexico to ease policy rates by 175bp this year with the first cut likely of 25bp on Friday, January 16. For the year as a whole, we cannot rule out cuts of 200bp or slightly more, but we think there is little chance that the authorities are heading towards zero as in the case of the US. In Brazil, we are counting on 200bp of cuts starting with 50bp on Wednesday, January 21. While we could contemplate 300bp this year, that would still place nominal rates at 10.75% – a far cry from what we are seeing in the US or Euroland. It is no coincidence that Latin America’s central banks have lagged their counterparts around the world in easing monetary policy. Latin America’s resistance to easing interest rates stems in part from the region’s unfortunate past as the epicenter of hyperinflation. Central banks throughout the region remain concerned, rightly or wrongly, that currency pass-through may rear its head and produce a greater bout of inflation and contaminate expectations. Second, the level of financial intermediation and the role of credit in most of Latin America are still extremely limited. While the effectiveness of monetary policy is not limited to the credit channel, the under-intermediated state of most Latin economies is likely to limit the traction of monetary policy. Bank credit to GDP in Mexico stood at around 16% of GDP as of 3Q08. Even if non-bank financing is added, total credit to GDP is around 35%, less than half that of Chile. In Brazil, loans stand at near 40% of GDP. Third, it is difficult to imagine that credit growth will play a meaningful role in boosting economic activity even as monetary policy is eased, given the sharp declines we envision in consumer and business confidence, the weakness in labor markets and the risks to the quality of the loan portfolio. In some countries, credit growth already appears to be suffering as caution from international headquarters appears to be taking its toll. Finally, what appears to be motivating the ‘front-loaders’ is a sharper-than-expected decline in activity. Since the Chilean central bank’s December 11 meeting, economic activity has decelerated sharply: January’s statement cited a “relevant deterioration” in the pace of economic activity during 4Q08. Indeed, Luis Arcentales argues that real economy data since October have reflected a significant deterioration, which has been remarkable in its speed, breath and magnitude. Chile’s monthly GDP proxy (IMACEC) showed that the economy contracted at a sequential 3.4% annualized clip in the three months ending November. On the consumer front, November sales performed poorly despite earlier-than-normal holiday promotional activity by retailers, and partial data for December show no improvement. Meanwhile, industrial output, which was already sluggish, posted a sharp 5.7%Y decline in November – the deepest annual slump since the 1999 recession. We are not arguing that monetary policy won’t have any traction, only that its effectiveness is likely to be limited. We expect to see some easing, but for it to be modest compared with the reduction in interest rates in the developed economies. We would underscore the modest impact it is likely to have, given the under-intermediated nature of most of the economies in the region. And we would warn that the downturn in activity that is prompting action today is likely to be much more severe than most forecasters or policymakers had anticipated even just a month ago. This means that the starting point for the downturn may be that much worse. Bottom Line The good news is that Latin America is now joining the global monetary easing cycle that began in earnest a year ago in developed economies. But the good news needs to be tempered by the fact that central banks in the region are now responding precisely because the global downturn has now hit Latin America. And we would warn against overestimating the magnitude of the interest rate cuts to come and overstating the traction that monetary easing is likely to have. As important as Latin American monetary policy is, its impact on the region is likely to pale relative to the greatest threat to the region – the outcome of the current global downturn.
Important Disclosure Information at the end of this Forum
Review and Preview
January 13, 2009
By Ted Wieseman | New York
Treasuries traded dramatically mixed across different parts of the curve the past week – with very large gains by the 5-year contract and off-the-run 5s leading on the positive side and big losses by the longest-dated bonds on the negative – as investors were largely focused on supply through the week even as the key employment report loomed. Supply was very heavy from various sources – Treasury, agency, TLG (FDIC guaranteed bank debt), corporate and non-US sovereign, including, notably, a pick-up in emerging market issuance. While the market was busy taking down this supply, which had big impacts at various times on different parts of the Treasury curve and on swap spreads, expectations for the employment report appeared to be getting more and more negative. So there was an initial sell-off when the results, as terrible as they were, only more or less matched the economists’ consensus rather than more acute market fears. It didn’t take long for a post-supply relief rally to re-emerge to end the week on a positive note, however, with a poor performance by stocks helping Friday’s rally. While supply and the employment report were the main focus through the week, there were some very encouraging signs that the Fed’s quantitative easing strategy is gaining traction. There’s very little doubt that the economic outlook for 4Q through the first part of 2009 remains dismal, and the incoming economic data flow will almost certainly continue to be dreadful for the foreseeable future, but the significant early signs that Fed policy is working provide increasing reasons for hope that a bottom in the economy can be hit around mid-year. Success in the past week was seen from both aspects of the Fed’s policy shift. The initial, blunter approach of broadly flooding the banking system with overwhelming amounts of excess reserves appears to be having a pronounced positive impact on interbank lending spreads after getting the financial system through year-end without any obvious problems. Term Libor settings fell significantly on the week, and both spot and forward Libor/OIS spreads came way down. Meanwhile, the more recent shift towards a more targeted quantitative easing approach also had a major impact, with yields on mortgage-backed securities plunging to new historical lows as the Fed began its purchases, with US$10 billion bought through Wednesday of the initial US$500 billion in purchases planned by mid-year. The collapse in MBS yields has thus far been slow to flow through to rates being offered to consumers, but average 30-year rates still hit a new all-time low of 5% in the latest week, and given where the MBS market is trading, they should be heading below 4.5% in coming weeks (or maybe months depending on how slow the pass-through continues to be), which would send conventional measures of housing affordability soaring to new record-highs by a very wide margin. On the week, moves in benchmark Treasury coupon yields had hugely divergent performances ranging from a 20bp rally to a 24bp sell-off. The 2-year yield fell 11bp to 0.76%, 5-year 20bp to 1.53% – off-the-run 5s were actually the week’s best performer, well outpacing this move as the 5-year contract surged – and 10-year 1bp to 2.41%, while losses were seen beyond the 10-year, with the 30-year yield up 24bp to 3.06%. It’s been a bad few weeks for the long end but only enough to erase a little more than a quarter of the huge prior rally. From October 31 through its best close on December 18, the long bond’s yield plunged 184bp; since then, it’s risen 52bp. There wasn’t much sign of relief of the squeeze at the very short end, with the 4-week’s bill up 1bp to 0.03% and the 3-month yield down 2bp to 0.07%. There was notable positive news to start the year in the money markets in commercial paper, though. Total CP outstanding surged US$83 billion (+5%) in the latest week, and almost all the new issuance was to private sector investors, as Fed holdings grew only marginally. Our CP desk, however, is focused on how CP outstandings and Fed holdings look in a few weeks when the initial flood of CP issuance to the Fed through the CPFF begins to mature. Clearly, it would be a positive sign if a significant amount of refinancing of these maturing issues is done with investors instead of through the Fed. TIPS had a very good week after a surprisingly strong 10-year TIPS auction Tuesday. The WI issue was trading at 2.35% just ahead of the auction, was awarded 10bp through at 2.25%, and rallied much further to close the week at 1.83%. The 5-year TIPS yield fell 31bp to 1.52%, while the 20-year posted a smaller 5bp improvement to 2.37%, but this far outperformed the sell-off at the long end of the nominal market. Mortgages had a very good week as the Fed began its buying. 4% and 4.5% MBS yields fell about 30bp on the week to near 3.75%, breaking out of the range around 4-4.25% that they had been in since the FOMC meeting. Such MBS yields should be leading to 30-year mortgage rates well below recent levels near 5%, and likely will eventually, but the pass-through has been slow to this point. The Fed also resumed agency buying Friday. Agencies and TLG debt largely kept pace with Treasuries on the week amid heavy new supply, but lagged a major tightening in swap spreads. The benchmark 2-year swap spread dropped 23.5bp to 54.25bp, 5-year 9.5bp to 52bp, 10-year 23bp to 14bp, and 30-year 30bp to -18bp. Substantial improvement in interbank lending markets, swapping of some of the week’s heavy issuance and the strength in mortgages all contributed to these big moves. While the Fed’s more recent shift toward targeted quantitative easing has had a big positive impact on the MBS and agency markets, its prior blunter approach also continued to gain traction after getting the financial system through year-end without any obvious problems, a prospect that seemed very unlikely back in the aftermath of the Lehman collapse when Libor surged higher for a month. 3-month Libor fell 15bp on the week to 1.26%, a new cycle low (the all-time low was just above 1% in mid-2003 when the fed funds target was at 1% and Libor spreads were at their pre-crisis norms) and down drastically from the post-Lehman peak of 4.82% hit October 10. The spot 3-month Libor/OIS spread – in our view the best real-time gauge of stresses on bank balance sheets – also fell 15bp on the week to 107bp, a post-Lehman low, down from the October 10 peak of 364bp, and not too far from levels around 80-85bp ahead of the Lehman collapse. Forward spreads saw even more dramatic improvement as the white eurodollar futures surged (Mar 09 to Dec 09) an average 39bp on the week. The forward Libor/OIS spreads to March, June, September and December all fell roughly 30bp on the week to near 67bp, 57bp, 50bp and 53bp, respectively. Just a month ago, the market wasn’t expecting this spread to get back to pre-Lehman levels until the first part of 2010. Now, with the January eurodollar contract, which settles imminently on January 19, surging 25bp on the week to 1.05%, investors think we’ll be there in a week-and-a-half. While there had been steady and substantial progress in getting Libor setting down since the mid-October extremes as the enormous growth in the Fed’s balance sheet flooded the banking system with cash and greatly reduced liquidity fears, the trigger for the stepped-up pace of improvement in the latest week was a notable pick-up in actual transactions in the term interbank markets midweek and out to terms that hadn’t been seen in a long time, with good activity in nine-month maturities especially catching investors’ attention. A rough end to the week for stocks helped Treasuries get over whatever disappointment they may have had that the employment report didn’t reach the most severe forecasts. For the week, the S&P 500 fell 4% to more than wipe out what had been a good initial start to 2009 and move into negative territory year to date. Credit saw much smaller losses on the week but also didn’t see the initial rally stocks did in the first few days of January, so small year-to-date credit and equity losses are similar. In late trading Friday, the investment grade CDX index was 4bp wider on the week at 202bp. The high yield index was 25bp wider at 1,168bp through Thursday’s close, and the index was trading down slightly further Friday. The leveraged loan LCDX index sold a decent amount from the best levels hit Tuesday but wound up little changed for the week as a whole. As of midday Friday, the index was 1bp tighter on the week at 1,294bp but was showing a bit of weakness relative to that level in Friday afternoon trading. The subprime ABX and commercial mortgage CMBX markets both had bad weeks. The AAA ABX index (lower-rated indices were little changed) fell 5.59 points to 33.50, a low since December 16, after having hit a two-month high of 40.14 Tuesday. An agreement between Senate leaders and Citigroup to change the law to allow bankruptcy judges to write down the principal on already originated mortgages on primary residences, basically just closing a loophole in the bankruptcy laws, appeared to be a significant contributor to the reversal. Increasing pessimism about underlying fundamentals seemed to be behind the CMBX sell-off (though spreads were already pricing in extraordinarily severe conditions), with the AAA index widening 86bp to 611bp and junior AAA 104bp to 1,547bp, the worst closes in over a month. Non-farm payrolls plunged 524,000 in December on top of downwardly revised drops in November (-584,000) and October (-423,000). Payroll weakness in December was again very broadly based, with big declines in manufacturing, construction, retail, business services, wholesale trade, transportation, leisure and information. Healthcare remained the only sector showing significant growth. Other details of the report were also very weak. The unemployment rate rose a half point to a 16-year high of 7.2%. The average workweek fell 0.2 hours to an all-time low of 33.3, which caused aggregate hours worked to fall 1.1%, one of the biggest drops ever. Aggregate weekly payrolls fell 0.9%, which should lead to a drop in real wage and salary income even with another big decline in inflation in December. A couple of reports bearing on GDP growth led us to trim our 4Q estimate marginally to -6.1% from -5.9%. Factory orders fell 4.6% in November, as the previously reported aircraft-driven drop in the durables component was revised down to -1.5% from -1.0% and non-durables collapsed by a record 7.4%. Manufacturing orders have now plunged at a 42% annual rate in the past four months. Overall factory shipments fell 5.3%, far outpacing a 0.3% dip in inventories and causing the inventory/sales ratio to surge up to 1.41 from 1.33, one of the highest levels in the past decade and indicative of a growing inventory overhang in the factory sector. The inventory result in November was a bit lower than we expected. We also cut our November trade balance estimate to -US$51 billion from -US$50 billion. These results for factory inventories and the adjustment to our trade estimate led to the small reduction in our GDP forecast. Meanwhile, wholesale inventories fell 0.6% in November on top of a downwardly revised 1.2% drop in October. These results were in line with our estimates and did not impact our GDP forecast further. The wholesale trade report overall, however, was extraordinarily weak, with wholesale sales declining a record 7.1%. As in the factory sector, this more than outpaced the drop in inventories, sending the I/S ratio soaring to 1.25 from 1.16, a five-year high and up from a record low of 1.06 hit just in June. With retail sales also falling 2% in November, total business sales (manufacturing, wholesale and retail combined) collapsed by 5 – the worst month in the 40 years of available data. And early indications for December consumer spending were very weak, though results were in line with pessimistic expectations. After hitting a 26-year low of 10.1 million units annualized in November, motor vehicle sales rose slightly in December to 10.3 million. This brought full year 2008 sales to just 13.2 million, a low since 1992 and down from 16.1 million in 2007. Meanwhile, December chain store sales results extended the weakness seen in November for one of the worst holiday shopping seasons on record. With another large price-related drop in gas station sales likely, we see overall retail sales falling another 1.8% and ex-auto sales 1.6%. Real consumption appears to be on pace for a 1.7% decline in 4Q on top of the 3.8% decline posted in 3Q. There is a very busy data calendar in the coming week, highlighted by retail sales Wednesday and CPI Friday. Prior to that, Fed Chairman Bernanke will be speaking Tuesday morning on “The Crisis and the Policy Response”. The Fed will also release what is sure to be a dismal Beige Book on Wednesday ahead of the upcoming January 28-29 FOMC meeting. Other data releases due out include the trade balance and Treasury budget Tuesday, business inventories Wednesday, PPI Thursday and industrial production Friday: * We look for the trade deficit to narrow US$6 billion in November to a four-and-a-half-year low of US$51 billion, with exports down 2.1% and imports 4.5%. On the export side, although production has ramped back up since the strike ended, industry figures indicate that overseas aircraft deliveries were still severely depressed in November, while major weakness in prices is likely to contribute to further significant declines in industrial materials and food. On the import side, a surge in volumes led to a surprising increase in oil imports last month. But with Energy Department figures pointing to major weakness in both prices and volumes in November, petroleum product imports should plummet. Port data also point to another decline in non-energy goods imports. * We expect the federal government to report an US$87 billion budget deficit in December, a huge turnaround relative to the US$48 billion surplus that was recorded a year earlier. The major contributing factors were TARP outlays of US$53 billion, a calendar shift which boosted spending by about US$40 billion, and a sharp fall-off in both individual and corporate tax payments. On a cash flow basis, the budget deficit appears headed for about US$2 trillion (or 14% of GDP) in the current fiscal year. This estimate assumes a stimulus package totaling about US$800 billion with a first year deficit impact of roughly half that amount. * We look for a 1.8% decline in overall retail sales in December and a 1.6% drop ex-autos, which coincidentally would match the results posted in November. And the underlying story is quite similar as well. Specifically, we look for another price-driven drop at gas stations and widespread weakness across a number of key discretionary categories, such as home electronics, general merchandise and apparel. Our estimates incorporate an anticipated unwind of the upside relative to company reports that surfaced in November. We suspect that the seasonal adjustment factors overcompensated for the late Thanksgiving and that there will now be an offsetting payback in December, which should reinforce underlying weakness. Our forecast implies a 1.7% decline in 4Q consumer spending. * The results for the manufacturing and wholesale stages point to a sizeable fall-off in overall business inventories in November – especially after factoring in an anticipated downtick at the retail level – and we forecast a 0.2% decline. Meanwhile, a sharp drop in sales points to another jump in the I/S ratio to 1.41. * We forecast a 2.7% drop in the overall producer price index in December and a 0.1% decline excluding food and energy. A further slide in wholesale gasoline prices should lead to anther sharp drop in the headline PPI. Also, the food category is expected to show some notable softness this month. And the core is likely to be restrained by weakness in motor vehicles prices. Looking ahead, the latest quotes for energy-related items point to a flattening out of headline PPI in January on the heels of the very sharp declines that were registered in late 2008. * We forecast a 0.8% decline in the overall consumer price index in December and a 0.1% uptick excluding food and energy. The energy category is expected to post another sharp drop, leading to a fifth consecutive monthly decline in headline CPI – the longest such string in the 60-year history of the series. The core is also expected to be restrained this month, with ongoing softness in categories such as hotels, air fares and motor vehicles. On a year-on-year basis, the core is expected to slip to 1.9% and should show further deceleration in coming months, reaching 1.0% by the end of 2009. * We look for a 1.3% drop in December industrial production. The December employment report pointed to significant weakness in the manufacturing sector, with sharp declines in both employment and hours worked. In particular, we look for softness in industries such as metals, high tech, machinery and textiles. Surprisingly, one of the best performers in December is expected to be the auto sector, where production is expected to show a slight uptick following some sizeable declines in prior months. However, the latest assembly schedules point to an extremely sharp drop in vehicle production during January. Finally, electricity output is expected to register little change this month following a string of gains in recent months.
Important Disclosure Information at the end of this Forum
Disclosure Statement
The information and opinions in Morgan Stanley research were prepared or are disseminated by Morgan Stanley & Co. Incorporated and/or Morgan Stanley C.T.V.M. S.A. and/or Morgan Stanley & Co. International plc and/or Morgan Stanley Japan Securities Co., Ltd. and/or Morgan Stanley Asia Limited and/or Morgan Stanley Asia (Singapore) Pte. (Registration number 199206298Z) and/or Morgan Stanley Asia (Singapore) Securities Pte Ltd (Registration number 200008434H) and/or Morgan Stanley Taiwan Limited and/or Morgan Stanley & Co International plc, Seoul Branch, and/or Morgan Stanley Australia Limited (A.B.N. 67 003 734 576, holder of Australian financial services licence No. 233742, which accepts responsibility for its contents), and/or Morgan Stanley India Company Private Limited and their affiliates (collectively, "Morgan Stanley"). As used in this disclosure section, Morgan Stanley includes RMB Morgan Stanley (Proprietary) Limited, Morgan Stanley & Co International plc and its affiliates.
Global Research
Conflict Management Policy
Morgan Stanley Research observes our conflict management policy, available at www.morganstanley.com/institutional/research/conflictpolicies.
Important Disclosures
Morgan Stanley Research does not provide individually tailored investment advice. It has been prepared without regard to the circumstances and objectives of those who receive it. Morgan Stanley recommends that investors independently evaluate particular investments and strategies, and encourages them to seek a financial adviser's advice. The appropriateness of an investment or strategy will depend on an investor's circumstances and objectives. Morgan Stanley Research is not an offer to buy or sell any security or to participate in any trading strategy. The value of and income from your investments may vary because of changes in interest rates or foreign exchange rates, securities prices or market indexes, operational or financial conditions of companies or other factors. Past performance is not necessarily a guide to future performance. Estimates of future performance are based on assumptions that may not be realized.
With the exception of information regarding Morgan Stanley, research prepared by Morgan Stanley Research personnel is based on public information. Morgan Stanley makes every effort to use reliable, comprehensive information, but we do not represent that it is accurate or complete. We have no obligation to tell you when opinions or information in Morgan Stanley Research change apart from when we intend to discontinue research coverage of a company. Facts and views in Morgan Stanley Research have not been reviewed by, and may not reflect information known to, professionals in other Morgan Stanley business areas, including investment banking personnel.
To our readers in Taiwan: Morgan Stanley Research is distributed by Morgan Stanley Taiwan Limited; it may not be distributed to or quoted or used by the public media without the express written consent of Morgan Stanley. To our readers in Hong Kong: Information is distributed in Hong Kong by and on behalf of, and is attributable to, Morgan Stanley Asia Limited as part of its regulated activities in Hong Kong; if you have any queries concerning it, contact our Hong Kong sales representatives.
Morgan Stanley Research is disseminated in Japan by Morgan Stanley Japan Securities Co., Ltd.; in Canada by Morgan Stanley Canada Limited, which has approved of and takes responsibility for its contents in Canada; in Germany by Morgan Stanley Bank AG, Frankfurt am Main, regulated by Bundesanstalt fuer Finanzdienstleistungsaufsicht (BaFin);in Spain by Morgan Stanley, S.V., S.A., a Morgan Stanley group company, supervised by the Spanish Securities Markets Commission(CNMV), which states that it is written and distributed in accordance with rules of conduct for financial research under Spanish regulations; in the US by Morgan Stanley & Co. Incorporated, which accepts responsibility for its contents. Morgan Stanley & Co. International plc, authorized and regulated by Financial Services Authority, disseminates in the UK research it has prepared, and approves solely for purposes of section 21 of the Financial Services and Markets Act 2000, research prepared by any affiliates. Private UK investors should obtain the advice of their Morgan Stanley & Co. International plc representative about the investments concerned. In Australia, Morgan Stanley Research and any access to it is intended only for "wholesale clients" within the meaning of the Australian Corporations Act. RMB Morgan Stanley (Proprietary) Limited is a member of the JSE Limited and regulated by the Financial Services Board in South Africa. RMB Morgan Stanley (Proprietary) Limited is a joint venture owned equally by Morgan Stanley International Holdings Inc. and RMB Investment Advisory (Proprietary) Limited, which is wholly owned by FirstRand Limited.
Trademarks and service marks in Morgan Stanley Research are their owners' property. Third-party data providers make no warranties or representations of the accuracy, completeness, or timeliness of their data and shall not have liability for any damages relating to such data. The Global Industry Classification Standard (GICS) was developed by and is the exclusive property of MSCI and S&P. Morgan Stanley bases projections, opinions, forecasts and trading strategies regarding the MSCI Country Index Series solely on public information. MSCI has not reviewed, approved or endorsed these projections, opinions, forecasts and trading strategies. Morgan Stanley has no influence on or control over MSCI's index compilation decisions. Morgan Stanley Research or portions of it may not be reprinted, sold or redistributed without the written consent of Morgan Stanley. Morgan Stanley research is disseminated and available primarily electronically, and, in some cases, in printed form. Additional information on recommended securities/instruments is available on request.
The information in Morgan Stanley Research is being communicated by Morgan Stanley & Co. International plc (DIFC Branch), regulated by the Dubai Financial Services Authority (the DFSA), and is directed at wholesale customers only, as defined by the DFSA. This research will only be made available to a wholesale customer who we are satisfied meets the regulatory criteria to be a client.
The information in Morgan Stanley Research is being communicated by Morgan Stanley & Co. International plc (QFC Branch), regulated by the Qatar Financial Centre Regulatory Authority (the QFCRA), and is directed at business customers and market counterparties only and is not intended for Retail Customers as defined by the QFCRA.
As required by the Capital Markets Board of Turkey, investment information, comments and recommendations stated here, are not within the scope of investment advisory activity. Investment advisory service is provided in accordance with a contract of engagement on investment advisory concluded between brokerage houses, portfolio management companies, non-deposit banks and clients. Comments and recommendations stated here rely on the individual opinions of the ones providing these comments and recommendations. These opinions may not fit to your financial status, risk and return preferences. For this reason, to make an investment decision by relying solely to this information stated here may not bring about outcomes that fit your expectations.
|
![](/img/clear.gif"){kind=spacer}