RECBATIVGITT seer acy peacenti< of THAT tae bye ee RE OIOILI ED 28 15.9 PERCENTRUE OF THAT 68D VIHKE Bk08AL MRT CAD AE A PERCENTAGE OF GaP 16 AGAIN CLOSING IN ON THE 007, MARE, A BIEL ONLY PREVIDUILY SEEN 1”) 2003 AWWA 2007 ‘ Global Total Market Cap of Stocks vs Global GDP. GLOBAL Ty oe 7 ° ‘0p w % $50.000 § 40.000 $30,000 4903 1995 1997 1989-2001 2008 2005-2007 2008-2011 20132015 Global debt he increased by 857 rillon since 2007, outpacing world GOP growth J CLobak DEBT COMPARED To biopae. 6d? CteBaL STOCK OF DEBT OUTSTANBINE Compound annual . by rice (f rantions) growth rate (%) However ts Ar 2000-07 2007-14 Mus TeRicAL HIGHS 199 73 83 AS DEbr LEVELS oa 4ST tition 40 Household 8S 28 Cnriwe To RE 142 Work KINSEY'S = 58 Corporate «57 ty LATEST UPDATE (mDICATING A RATIO OF 2867. Government 5.8 a3 The SITUATION Financial = 842.8 BY CoonTpaY 4000 Totaldebt 246 8% of GDP 4. 2044 dan franca cores ad Chin 4013 defor ter delay economies NOTE nants may ota non -_ SOURCE: Hr Ans: nen sources Wed einai outok NF BS Mekisey cbt nee ants 0000 Weeed GDP 40000 © HAs DOURLES SINCE 2002 © AL A UVALUATION TOOL VGLORAL MKT ee CAP STULL HAS UPSIDE Room 20000 CusToenaeey) Bey (007. Word ine. AKARMS 1S FACING AN ePHKE SATs Toppy EAViE THE GLOBAL DEBT MOUNTAIN wp ges TRS ARTI TTS bap oda) TSETSES TSSTSST | TEETISO T 2000 Zod Wer weed Price 75621.859 T High on 12/31/13 75621.859 Average 24351.266, tow on 12/31/63 “1685.235 5-008 | aod F014ese. SEES TEES TIEEE SEE ETSSE TESTES SEES TEEESIEEESTERSETESEEESSTEEESTESIEEES PesESrSTESEESISSESIEEE SISTA SE SISTESLESSEEEESSSTISIEIE! With [0 OF THETM ALS® HAVING A MIAT CAP-To-6or RATIO > 1007. (see "K") By country : GDP, Debt-to-GDP and Mkt Caj GDI Annual GDP (USD Total Debt-to- GDP ratio (%) (2) World United States China Japan Germany France United Kingdom Brazil ttaly Russia India Canada Australia Spain S.Korea Mexico Indonesia Netherlands Turkey Saudi Arabia Switzerland Argenti Sweden Poland Belgium Nigeria Norway Austria UAE Colombia Thailand South Africa Denmark Malaysia Singapore Israel Egypt Hong Kong Philippines Chile Finland Greece Ireland Portugal Czech Republic (1) GDP data - Asia is CLSA, remainder Bloomberg (2) Mekinsey - based on 20 1014 (Dev Mkt) and 2013 (Em Mkt) data bn) (1) 78,116 17,703 10,329 4,880 3,782 2812 2,743, 2,240 2,139 2,105 2,044 1,865 1,445 1,429 1,409 1,294 880 865 843 ™ 698 612 595 542 530 587 531 529 429 435 392 374 371 341 327 308 300 291 288 285 282 267 245 242 229 21 286 233, 27 400 188 280 252 128 259 65 120 221 213 313 231 B 88 325 104 59 34 33 290 134 327 46 244 225 76 187 133, 302 222 382 178 106 116 136 238 317 390 358 128 includes debt of households, non-fin corps and government 3) Bloomberg Market Cap (USD Bn) (3) 71,583 24,807 7.973, 5,037 1972 2,105, 3,932 780 637 528 1534 2,100 1,267 784 1,326 435 399 432 232 564 477 69 693 184 396 57 1,034 269 108 229 136 408 526 387 457 583 165 70 5,165, 272 246 200 43 153, n 28 Mkt Cap-to- GDP ratio (%) 92 140 x ‘ 7 ve 103 « Ew 32 75 noe 143 x ae 35 per plt 30 pw 25 ax 88 55 94 34 45 50 28 3 246 u 116 ¥ 3 7s 10 195 51 2s 53 35 109 wax ax 140¥ 189 x 55 24 1796 96 37 3 18 63 31 B WARREN BUFFETT C/E THI MEAGURE - 1M LESS KEEN ON IT GIVEN PIO RELIES ON WHAT conpoearions ARE ANTES, Ain 17 DoBLWIT PRK OP (AD) ITOMAL OFFSHORE INCOMENo WondER THE BUFFETT /a/CATOR' IS RicG -Look AT THE RE SINCE 2009 OF GOP COMPARED To Mir CAP Foe 6L08AL AMS Us in GDP versus Mkt Cap _ L Giobal @DP, Global mactat we _USGDP, US market market cap current price captogiobal © @S¥rerkst current price cap to global ($US bn) ($US bn) GDP (%) ? (SUS bn) GDP (9%) 2009 45,438 59,711 76 9,770 14,383.68 2015 71,583 78,136 92 24,807 17,703 (24) 140 change (%) 58 31 154 23 u~~- HENCE THIS RISE Market Cap to GDP: The Buffett Valuation Indicator by Doug Short Market Cap to GDP is a long-term valuation indicator that has become popular in recent years, thanks to Warren Buffett. Back in 2001 he remarked in a Fortune Magazine interview that "it is probably the best single measure of where valuations stand at any given moment." ‘The Latest Data ‘The denominator in the charts below now includes the Advance Estimate of QI GDP. The latest numerator value is an extrapolation of the Fed's "Corporate Equities; Liability" using the Wilshire 5000 index quarterly growth, The indicator remains over 2 standard deviations above its mean at an interim high of 132.0%. Now Tivo $7b-dEVE OVER AVE 1s to GDP oe a Advancetstimate The Buffett indicator: Corporate Equi ity from the Federal Reserve's ‘Quarterly 7.1 Balance Sheot (6.102). This series ix alzo published inthe FRED repository as MVEONWMVBSNNCB. Denominator: Nominal Quarterly GDP2 see ee ‘The ratio of debt to GDP has Increased in all advanced economies since 2007 ‘Change in debt-to-GDP ratio,’ 2007—14 Percentage points 180 © Advanced © © Developing Increasing leverage 170. 130 120 — ALL ARE ABovE THE Leveraging ° Irelana ° ‘Singapore ee 907. THRESHOL) CITED PY REINHART © ROGOFF Ai THE . 100 ever (foe bev must) where rence © Portal a DEBT LEVELS STYOE beowat Abo/Tioms | pone cMnA HAL GEARED Up SCE THORE THAN mos Poo Te © spain © Nethertands 7 en Finland FAC Becium —apan tay 50 Slovakia —§ ygieysiq © Sweden Korea 0 Thalende creaintioty roams SIE, w oan ‘Australi 20 ene a ere ale ormee : eae saa Austria 20 | i pus Fccinntce mess 9 [Indonesia Vietnam © Norway 10 | Nigeriae Colombia "s Germany Pers) @ Philippines ° India —— - oo -so | Menine Romaris§ eye | © Saudi Arabia | S © Israel 30 40 eae, —s Deteveraging 0% 6 8 120 160 180 210 240 270 30 30 360 390 420 Credit Debt-to-GDP ratio, 201412 Counseling CURRENT LEVELS “The government Is trillions of dollars in debt. Being in debt is how I show my patriotism.”BEITING: WE HAVE A PROBLEM China's debt reached 282 percent of GDP in 2014, higher than debt levels in some advanced economies oabtto.c0P ato Government Non Soa corporte : © Fanelintiions —— Hawstoe hina By country, 2014 mea ' china ws | 0 |@) south Korea wo [ot [oe ' —— FS 4 ~ | unted states lM ° | nm | ae - “ Zz Geman os 258 Enns ’ 4 | | ied FT | 0 CHM er | cms EB | me See re | hee 2000 2007 ata num @ Neatly hat o China's debts related to rea estate Total debt 2.1 74 282 a } Deb exposure to property, ea economy 2214! tlio 505 bre vests =, Ea 2 propert? Pes peated SAYS ag e, MS. MeRMEEY up $0 aay BT Household? Realestate Real estate. Government* Total exposure mnie avin EOWTY sector related sectors? toproperty APE Tepe PowF iy heh 8 10-15 10-15 10 4045 As DER e THE ae otdebt quer PAE Go $0 + esl art tes tanctancerat it istic Capital Rais . 5 SE Et mara, nd er Hoy one oct ene wens 4 Cocganrment tency ester rsosntong once cosctn fae SALES VIEW; Raise money when you can, not when you want to. Tis is what seems to be happening in the Chine Property space at the moment. Last week we argued that some investors are getting rightfully concerned that valuations have run and listed property developers are at risk of recapitalization exercises. What surprised us was that this came from our top pick CR Land who announced a 1.2 bln USD capital raising «. The company has only HKS 6bn to pay in cash for its asset injection announced in Dect ard the net gearing had dropped to only 46% by end- FY from 61% ot FY13 end. If we try hard to justify this move , the likely reasons for the placement would be to reduce currency debt ( 64% of gross debt of HKS 86bn is USS/ HKS) and to increase land bank in tier 1 and 2 cities. The placement of new shares by a big SOE with relatively reasonable gearing level will trigger concerns for more to follow, especially among the higher leverage/high appetite for acquisition category. We think Evergrande, and Sunac may be next, We think investors should be selective when choosing to participate or not in these. True, the sector fundamentals are improving ~ Gans later propery monthly shows tht listed developer raised price in Apel triggering theft MoM increase in 96 off Chas brood nme price inden 13 months wth pres mbites under more ste resin That beng said we og Py would opt for Agile and Country Garden (who already issued new shares) instead of Evergrande for third tier cy BYaAh etal eynocure and KWG (low M&A apcetite ) instead of Sunac for first tier city exposure. vee oy,