Stress-Testing the Balance of Payments
March 11, 2009
By Luis Arcentales & Daniel Volberg | New York
With the peso reaching historically weak levels in early March, Mexico watchers are increasingly wondering if the sell-off is overdone or reflects Mexico’s greater vulnerability to the US and global downturn. The list of concerns is a long one, starting with the strong link on the industrial front between the Mexican and the US economies and the impact of lower crude prices on the fiscal accounts, which derive nearly 40% of revenues from oil (see “Mexico: No Oil, No Problem?” EM Economist, February 27, 2009). And more recently, with exports collapsing, capital flows under pressure and remittances declining at double-digit rates, concerns about the sustainability of Mexico’s balance of payments have resurfaced.
Market concerns about the sustainability of Mexico’s balance of payments appear to be overblown, in our view. Indeed, Mexico’s external accounts during 2009 appear to be quite manageable based on our stress-test exercise. On the current account front, plunging demand for Mexico’s manufacturing exports is almost fully offset by lower imports of intermediate goods. Meanwhile, the deterioration due to the collapse in crude prices on the current account front is largely compensated by an inflow in the capital account from the government’s oil hedge. Remittances will be a major drag, but the services deficit is unlikely to deteriorate. Indeed, we estimate that the deterioration in Mexico’s trade account is more than offset by the combination of declines in capital and consumer goods imports (on the current account front) and the inflows from the oil hedge (on the capital account front). Current Angst The one-two punch of plunging demand for manufacturing exports and lower oil prices seems to spell trouble for Mexico’s trade account. Indeed, this trend became evident in 4Q08 when the trade deficit soared to US$8.2 billion due to sharply lower manufacturing (-8.9%) and oil exports (-42.3%); meanwhile, imports held up relatively better, down just 6.4% from a year earlier. Simply extrapolating from 4Q would have led to the trade shortfall more than doubling in 2009 to over US$37 billion from US$16.8 billion in 2008. Combined with declining remittances – which plummeted 11.9% in January – and it is not hard to see how some analysts might have concluded that Mexico’s current account deficit was set to widen significantly. The results from simple extrapolation, however, overstate the potential current account deterioration, which is likely to amount to a manageable shortfall of less than 2.2% of GDP this year (US$20.8 billion) from 1.4% in 2008, based on our analysis. Merchandise trade is the most important factor driving the current account: last year’s -US$7.4 billion worsening in the current account was almost fully explained by a -US$6.8 billion swing in trade. While the outlook for exports during 2009 is indeed grim, our work suggests that imports are likely to contract significantly as well due to the combination of lower growth and a weaker currency. First, manufacturing exports are largely a function of US growth: using our US team’s forecast of a contraction of 3.3% in 2009, Mexico’s manufacturing exports are likely to plunge by almost 22%, according to our modeling work. In turn, intermediate goods imports – which accounted for 72% of total imports last year – are largely a function of manufacturing exports, moving in almost perfect lockstep and thus providing a powerful offset. It is worth noting that much of Mexico’s export sector has its roots in the maquiladora industry, where just-in-time inventory management is the norm and twin-plant operations are very common. Second, lower crude is likely to open a major hole in the trade account, which is only partially compensated by lower gasoline imports. But just as manufacturing exports are highly sensitive to US growth, imports of capital and ex-fuel consumer goods – which jumped 8.6% last year, accounting for a fifth of total growth in imports – depend heavily on Mexican GDP growth and the real exchange rate. Assuming that the peso stays at around 15 per dollar on average and the economy contracts by 4% in 2009, the decline in capital and ex-fuel consumer imports (-22%) would offset almost the entire oil-related shortfall. The downturn in remittances has accelerated in recent months, and no rebound appears to be in sight. Indeed, last year’s 3.6%Y drop masks a sharp worsening in November and December, when remittances fell on average 10.3%Y. We assume a deeper downturn in remittances of -13%, matching the worst month in all of 2008 (August), translating into a shortfall of US$3.3 billion. Swings in the services account tend to be modest, and we suspect that 2009 will be no different. Just as in the merchandise trade account, several factors act in a stabilizing way. The economic slump is likely to hurt repatriation of earnings, which reached US$10.1 billion last year, and hit tourism inflows as well, while weaker trade activity should ease some of the pressure from outflows related to freight and insurance. In a recent exercise, the Finance Ministry projected that the services balance would actually improve by US$4 billion in 2009; however, even if we assume an improvement of just half that magnitude, the current account shortfall remains manageable. Capital Flight? The pressures on the capital account side of Mexico’s balance of payments also appear to be limited. To help with the analysis, we break the capital account into four categories: the proceeds from the oil hedge, public sector borrowing, private sector credit and net foreign investment. We find that the oil hedge should contribute an inflow of US$11.6 billion, public sector borrowing is set to generate an inflow of US$9.6 billion, our estimate of the private sector exposure is at most US$11.7 billion and we estimate that net foreign investment may generate an inflow of only US$5.8 billion. Combining these flows, we estimate that the net impact may be to generate a final capital account surplus of US$15.3 billion in 2009, compared to US$21.0 billion in 2008. Our oil hedge estimate is straightforward. The Finance Ministry has hedged its net oil exports by buying a put option with a US$70 per barrel oil price strike for the Mexican crude basket. We assume that the current spot price of US$35 per barrel will be the average price for the year and so the oil hedge generates an inflow of US$11.6 billion in December 2009. We assume a lower average oil price than the authorities, resulting in a larger oil hedge inflow (the authorities assume oil hedge proceeds of US$9.2 billion). However, the net effect on the balance of payments is similar, given the larger hit on the trade account side from the lower oil exports. Mexico has little risk on the external public sector debt front, in our view. Our estimate for public sector borrowing is in line with the targets laid out by the authorities. The Finance Ministry has tapped international capital markets twice since December last year, raising US$2.0 billion on December 18 and another US$1.5 billion on February 11. And the authorities have indicated that they intend to raise a total of US$9.6 billion, with over half coming from the international financial institutions (IFIs). We do not anticipate the authorities having difficulty raising these funds. Even if markets were to close to Mexico entirely for the remainder of the year, Mexico appears to have significant headroom to tap the IFIs. Indeed, Mexico has been in multilateral talks with the IMF to increase its potential access to an IMF ‘safety net’ program, which could amount to more than $35 billion with a long repayment schedule (at least three to five years, little if any conditionality and an expedited process to obtain the funding). The greatest risk likely lies in external private sector debt. According to Finance Ministry data, there is US$27.7 billion in non-financial private sector and an additional US$7.7 billion in financial sector foreign currency obligations coming due this year. Of the non-financial private sector obligations, US$10 billion are in trade financing, which we expect to be fully rolled over. Indeed, there have been no significant problems with trade financing so far; moreover, the US$30 billion Fed swap line more than covers trade financing lines and is ideally suited to support any trade financing difficulties. Although the Fed swap line currently expires in October, we expect that the line will be renewed (or substituted with another instrument) for as long as the current turmoil represents a potential balance of payments threat to Mexico. The remaining US$17.7 billion is split between US$2.1 billion in bonded debt, US$11.8 billion in bank debt and US$3.8 billion in other debt obligations. So far, however, nearly US$6 billion of the bank debt has already been rolled over. As a conservative assumption, we assume no further rollover for the bonded debt or the rest of the bank debt. We further assume that 50% of other non-financial debt is rolled over and there is a 75% rollover of the US$7.7 billion in financial sector obligations, given the relative strength of Mexican banks. The net impact is that the private sector generates an outflow of US$11.7 billion. Even under very conservative assumptions for net foreign investment, the potential stress on the capital account remains limited. We estimate net foreign investment by assuming FDI more than halves and continued portfolio outflows. We assume that quarterly FDI inflows reach only the US$2.2 billion registered in 4Q08 for a total of a US$8.8 billion inflow in 2009 – less than half the pace of every year’s inflow in more than a decade. In fact, this is roughly the same pace as FDI inflows during the 1995 Tequila Crisis when the Mexican economy was only a fraction of its current size. In contrast, we assume that portfolio flows remain a significant drag. In particular, we assume that portfolio flows will cancel the aggregate of such inflows from 2Q07 through 2Q08, after deflating those inflows by the adjustment in market prices. This may be an overly conservative assumption that would imply portfolio outflows of US$2.9 billion in 2009; therefore, we find that net foreign investment may amount to an inflow of just US$5.8 billion this year. In short, our balance of payments analysis suggests that Mexico’s current account shortfall of US$20.8 billion in 2009 will be largely offset by a capital account inflow of US$15.3 billion, with the resulting pressure on international reserves in the magnitude of US$5.5 billion. Of course, our assumptions in some cases may seem extreme: we are assuming, for example, zero rollover of all remaining private bank and bonded external debt (beyond what has already been financed in the first months of the year). In contrast, the authorities are now assuming that they will be able to recycle or return to the exchange markets up to US$22 billion in 2009 via dollar sales – based on a positive mismatch of more than US$3 billion in the capital versus current accounts. Different assumptions will yield somewhat different results, but the range of negative outcomes is fairly limited and so we find it difficult to conclude that Mexico’s peso is likely to suffer from a significant balance of payments stress, absent an extreme bout of capital flight. Bottom Line Mexico faces a series of long-term structural challenges that need to be addressed. The near-term cyclical challenges in 2009 and into 2010, however, are unlikely to be as severe as they might appear at first glance. Mexico is a small, open economy and relies heavily on trade with the US for manufacturing employment. A prolonged downturn in the US is likely to pose significant risks to Mexico’s labor markets and, in turn, the growth dynamic for the economy. But the narrower question of a balance of payments shortfall that could have an impact on currency markets appears to be limited. Neither Mexico’s balance of payments challenge nor its fiscal challenge appear to justify a significant weakening of the Mexican peso from here. Of course, our fundamental analysis provides little guidance as to how the Mexican peso will trade in the near term. It does suggest, however, that the extreme stress being experienced by the Mexican peso today likely represents an opportunity for reversal, rather than a step to a permanently weaker level.
Important Disclosure Information at the end of this Forum
Policy Uncertainty Fogs the Outlook
March 11, 2009
By Richard Berner & David Greenlaw | New York
Thanks to aggressive policy stimulus, the risks around our baseline outlook are more evenly balanced than at the start of the year. But uncertainty about economic policy has created disarray and fear in financial markets, threatening to worsen the credit crunch and intensify an already-deep recession. The lack of clarity on key issues related to the Administration’s Financial Stability Plan and the growing chorus of opinion that at least temporary nationalization of some institutions may be required to fix the financial system has reduced investor confidence. That uncertainty is clearly showing up in risky asset markets, as well as in unsecured interbank lending markets, where forward LIBOR-OIS spreads have widened by as much as 50 basis points through the end of 2008. | 2008E | 2009E | 2010E | Real GDP | 1.1% | -3.3% | 1.8% | Inflation (CPI) | 3.8 | -1.4 | 2.4 | Unit Labor Costs | 0.9 | 3.1 | 1.2 | After-Tax “Economic” Profits | -7.9 | -33.0 | 11.5 | After-Tax “Book” Profits | -15.1 | -24.3 | 12.5 |
Source: Morgan Stanley Research; E = Morgan Stanley Research estimates We strongly believe that uncertainty is the enemy of growth, because it causes investors, businesses and consumers to disengage. Progress in or at least clarity about several policies would help diminish this uncertainty: Additional actions to backstop the financial system would give comfort to intermediaries that the authorities stand ready to help over a protracted period of deleveraging. One example would be extending the duration of FDIC guarantees for senior debt. Further clarity on already-announced initiatives to strengthen the financial system and clean up lenders’ balance sheets and recapitalize them is also in order. Together with success in restarting securitization through the just-launched TALF program, these actions would ease the recent tightening in financial conditions and get investors and lenders to re-engage. We discuss these issues in more detail below. Despite that uncertainty, our big-picture US economic outlook for deep recession followed by modest recovery is virtually unchanged from a month ago. In our baseline outlook, we still expect that the recession will end late in 2009, followed by a moderate recovery. Initiatives to fix the financial system, coupled with aggressive monetary and fiscal stimulus, remain the key factors promoting the upturn. We continue to note that two factors should backload the impact of the $787 billion, multi-year American Recovery and Reinvestment Act, delaying its impact on growth: The spending and tax benefits come more in 2010 than this year, and the ongoing credit crunch will limit policy traction in both years, but by more this year (see Policy Traction: The Key to Recovery, February 17, 2009). While the broad outlook is similar to last month’s, there are four noteworthy changes below the headline numbers. First, incoming data suggest a change in the composition of growth. Consumer spending, while still weak, looks a bit stronger than a month ago. Tumbling energy quotes and pent-up demand apparently promoted a rebound in non-automotive consumer spending in January and February − despite the perfect storm of forces depressing spending. That bounce followed a two-quarter plunge at a 4.1% annual rate in the second half of 2008, the sharpest 6-month decline on record except during the credit-control-induced contraction in 1980. Although this strength is unlikely to last given the rebound in energy quotes, ongoing credit restraint, and sharp declines in wage and salary income, we expect tax cuts and increased government assistance will cushion the blow on consumers. We now look for flat consumer spending in this year’s first six months and modest gains in the second half. Thanks to consumer caution and deleveraging, we still expect two-thirds to three-quarters of the tax cuts will be saved, resulting in a further upward drift in the personal saving rate towards 6%. In contrast with a slightly less-bad consumer outlook, sharper-than-expected declines in indicators for capital spending, construction outlays, and exports late in 2008 and early in 2009 point to a deeper near-term contraction in those highly-cyclical spending areas. Falling operating rates, tight credit, and recessions abroad continue to mean a prolonged retrenchment in those areas (see Too Soon for an Inflection Point, March 4, 2009). Second, the recession will be slightly deeper than we thought a month ago, primarily courtesy of a sharp downward revision to the official estimate for Q4 2008. Based on data stretching back to 1976, that revision, from -3.8% annualized to -6.2%, was the sharpest on record. On a year-over-year basis, the lower entry point at the start of the year pulled our 2009 GDP estimate to -3.3% from -2.7% last month, while 2010 is unchanged at +1.8%. From the cyclical peak in Q4 2007, we now expect a 3.5% decline in real output (or 4.3% from the numerical peak in real GDP in Q2 2008). Both would easily eclipse the postwar record of -3.1% set in the 1973-75 recession. Last month, we expected a 2.7% peak-to trough contraction between Q4 2007 and Q3 2008. While this deeper recession primarily reflects a weaker Q4 2008, it does imply lower industrial operating rates, a wider output gap, and thus more downward pressure on inflation. Indeed, our projected level for real GDP in Q4 2010 is lower than the numerical peak in Q2 2008. Accordingly, we expect that core inflation will be lower through 2010. In our view, a record output gap will push core inflation measured by the CPI below 1% in 2009, and only the pass-through from rising energy quotes in 2010 will lift it back to 1¼% in 2010. The latter is 0.4% lower than last month. Thanks to aggressive monetary ease and coming corporate actions to cut capacity, we don’t think deflation is the most likely outcome, but upcoming inflation readings could well reignite a deflation scare (see Deflation Still Unlikely But Mind the Risks, February 25, 2009). However, our forecast for headline inflation is little changed as the rise in energy quotes that our commodities team expects will likely translate more fully into prices at the gasoline pump. Finally, we have further downgraded our already-bearish view on corporate profits. We expect that after-tax ‘economic’ profits measured in the national income and products accounts (NIPAs) will contract by 33% in 2009, compared with 29.8% last month. The profit cycle is more volatile and can last longer than the cycle for the overall economy. Indeed, we expect a 47% peak-to-trough decline in earnings between Q307 and Q409. Our equity strategy team thinks that such a bearish economic and earnings view is increasingly reflected in stock prices. Against this backdrop, the burden of policy stimulus will continue to fall on the Fed. The good news on policy is that the Fed will continue to expand its credit and quantitative easing initiatives while maintaining a zero-interest rate policy. The first incarnation of the Term Asset-Backed Securities Lending Facility (TALF) will be operational on March 17, with the goal of restarting the securitization markets for new consumer auto, credit card and other ABS lending. TALF 2.0 likely will follow with an extension to CMBS and private label RMBS. The initial TALF credit facility will expand the Fed’s balance sheet by $200 billion, and version 2.0 could take it up by $1 trillion. Moreover, the Fed has clearly left the door open to purchasing Treasury debt if required to keep the overall level of interest rates down. That will help support credit-sensitive demand and facilitate foreclosure mitigation, needed to arrest housing imbalances and home price declines. Admittedly, Fed officials have signaled some discomfort with the prospect that the central bank’s balance sheet would balloon with holdings of illiquid securities for what could be years. Although the Fed’s main concern right now is preventing deflation, officials are also looking ahead to the time when they will have to reverse course on policy, stressing that they must be able to control the amount of reserves that they provide to the banking system in order to achieve the appropriate level of the fed funds rate. To this point, the Fed has been able to argue that it can eventually unwind the growth in its balance sheet as financial conditions normalize because the bulk of the assets have a relatively short maturity and thus will roll off quickly, while agency and MBS assets can be easily sold in the secondary market. However, the same logic is probably not applicable to some types of ABS, CMBS and RMBS. Thus, a recent joint statement indicated that: “Treasury and the Federal Reserve will seek legislation to give the Federal Reserve the additional tools it will need to enable it to manage the level of reserves …” In practice, such legislation is likely to involve one or more of the following: 1) authorize the Fed to issue its own bills; 2) extend the Supplementary Financing Program and devise a way to avoid debt ceiling constraints; 3) expand payment of interest on reserves to include nonbank institutions (such as the GSEs). One or more of these changes should allow the Fed to eventually start to hike the target rate for fed funds − even with a bloated balance sheet. That’s important because a TALF 3.0 could expand the Fed’s balance sheet even more. It seems that the public/private partnership investment fund (PPIF) component of the Administration's financial stability package likely will be structured as a ‘legacy TALF’ aimed at the secondary market. In place of other mechanisms like a ‘bad’ or aggregator bank, this will serve as a warehouse in which to park bad assets removed from the books of financial institutions. The objective of the new public/private partnership is to absorb aged securities across a wide range of asset classes. The deals could be attractive to investors because the Fed may provide leverage in the form of nonrecourse financing, limiting the downside. As in TALF 1.0, the Treasury might cover any losses – after a first loss borne by current holders – with TARP funds, and the Fed may be willing to use its balance sheet to provide some financing. Unlike TALF 1.0 and 2.0, however, private investors would be invited to provide both capital and financing. Asking investors to have skin in the game, perhaps in multiple funds, will improve the prospects for timely price discovery for these legacy assets, which in turn should also help speed the process of balance sheet cleanup and market functioning. Buying time. Does TARP have sufficient resources to underwrite this type of investment vehicle? Probably not. By our tally, $556 billion of the $700 billion authorized for the TARP has been allocated and $305 billion has been spent. Given the scope of the financing needs, the $144 billion in remaining authority would quickly be absorbed. However, the recent budget submission from the Obama Administration indicated that another funding request could be forthcoming. Moreover, there are preliminary indications that Congress, the Administration and the Fed may try to arrange for additional financing via the FDIC. Legislation recently introduced by Senator Chris Dodd (reportedly at the request of Messrs. Geithner and Bernanke) would increase the FDIC’s credit line with the Treasury from $30 billion to $100 billion, with a temporary increase to as much as $500 billion through the end of 2010. Such a funding mechanism might help to address political concerns because losses incurred by the FDIC are the responsibility of the banks. So, in a sense, the policy would be to push the bad asset problem to a period in the future when a better-capitalized financial system can deal with it. Buying time makes sense as Betsy Graseck, our large-cap bank analyst, believes that the earnings power of the core banking business is sufficient for banks to earn their way out of an $800 billion (pretax, pre-provision, pre-mark-to-market) problem in two to three years. Despite current concerns, the industry has already made good progress on that front.
Important Disclosure Information at the end of this Forum
Trouble Zone and Debt Rollover Risks
March 11, 2009
By Chetan Ahya | Singapore & Sumeet Kariwala | India
World of Deleveraging Hurting the Trouble Zone In a world of deleveraging, within the AXJ region, the ‘Trouble Zone’, which includes India, Korea and Indonesia (accounting for 35% of the AXJ region’s GDP) has been suffering the most (see Rising Risk of Disruptive Growth Shock in 2009, November 4, 2008). Indeed, equity markets in USD terms in these three countries have underperformed the other markets in the region since the Lehman event in September 2008. These countries had two key factors in common: high trailing credit growth relative to their nominal GDP growth, and their current accounts were in deficit before the aggressive global deleveraging trend began in September 2008. Trailing two-year average credit growth as of September 2008 was 29.3% for Indonesia, 23.3% for India and 15.8% for Korea. High credit growth reflects that these economies were addicted to credit before the global deleveraging trend unfolded. Sharp declines in capital inflows at a time when their current accounts are in deficit pushed their overall balance of payments (BoP) suddenly into deficit. With their banking systems already facing tight liquidity conditions, this BoP deficit and foreign exchange outflow resulted in a disruptive rise in the cost of capital. The BoP deficit continues to push their currencies lower. The Korean won, Indian rupee and Indonesian rupiah have fallen the most in the region. To be sure, apart from these common adverse factors, each of the three economies has had an added idiosyncratic factor compounding the pain. Korea had an extremely vulnerable banking system with a very high loan to deposit ratio of 139% as of September 2008. The gap between loans and deposits was funded through wholesale funds, and part of that was in the form of short-term external debt. Indonesia had very high dependence on the commodity bubble-driven income growth and liquidity. Commodity exports had reached a high of 20.5% of GDP (monthly, annualized) as of May 2008. India had an extremely high reliance on capital inflows to support its domestic demand boom. Capital inflows peaked at 9.2% of GDP annualized during the quarter ended March 2008. Payback After Era of Excesses Now Underway The surge in the cost of capital is now causing a significant deceleration in domestic demand. Consumer discretionary spending and capex have started retrenching in a big way. Aggressive private sector deleveraging is underway. Non-performing loans (NPLs) are rising rapidly. Korea has been the most transparent on this front. We expect a significant further increase in NPLs over the next 12 months. Rising NPLs are making the banking system extremely risk-averse. During the last three months, credit growth has decelerated significantly in the Trouble Zone. While the nominal borrowing cost is declining, it is still very high in the context of the level of growth. Industrial production is declining year on year, but the spread of AAA commercial paper rate over 91-day T-bill is still higher than it was in early 2008. A forced reduction in growth rates is helping to improve the current account (C/A) balance. The deceleration in domestic demand is reflected in the decline in non-oil imports. This, coupled with the decline in oil/other commodity prices, is helping to reduce the C/A deficit pressures. However, their C/As are unlikely to swing into meaningful-sized surpluses over the next 4-6 months as exports are also suffering. Debt Rollover Risk – the Last Leg of Pain Ahead The Trouble Zone is now facing the challenge of external debt repayment-related capital outflows. Indeed, in 4Q08, capital outflows from debt repayments not rolled over have probably been higher than portfolio equity outflows in Korea and India. These three countries have the highest ratio of external debt to FX reserves. They also have the highest ratio of short-term debt to FX reserves. Korea and Indonesia stand out on this measure, leaving India a distant third in the ranking. The Eastern European credit turmoil has aggravated the problems for the Trouble Zone in AXJ. Deleveraging in the European banking system is indeed more concerning for the Trouble Zone than the deleveraging in the US banking system. According to the BIS, as of September 2008, about 52% of foreign debt claims on these countries were by European banks. While some of the large, decent-quality companies should be able to roll over their external debt (albeit at higher rates), the small and mid-sized companies are likely to find it hard to get their debt rolled over. In Korea and India, small and medium-sized companies had raised a significant amount of external debt over the last few years. These debt repayment-related outflows will keep the BoP in deficit even while the trade deficit is narrowing. Over the next 4-6 months, we believe that the Trouble Zone may continue to face this challenge from the global deleveraging trend. Bottom Line The risk of further impairment in the financial balance sheet remains high for the Trouble Zone economies. We believe that, over the next 4-6 months, the macro environment is likely to remain extremely challenging before their C/As move into meaningful-sized surpluses by 4Q09.
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}