19 Sep 2022
Market Watch
Will the Fed or markets blink first?
Summary
Inflation, and the Fed’s response, remains the pivotal factor in markets today. Markets are already looking for over 4% Fed policy rates by end-2022.
A pessimistic scenario would involve the Fed taking policy rates well above 4% in 2023. Inflation hedges, rising rate winners likely to outperform in such a scenario.
An optimistic scenario is one where the Fed pivots towards supporting growth in 2023. Equities and credit are likely to perform well in such an outcome.
Background – Inflation and why the Fed response is the pivotal factor today
A shift in the outlook for policy rates, driven by the Fed, continues to be a pivotal factor in markets this year. Since the start of 2022, the market’s expectations of Fed policy have moved from expecting just three 25bps rate hikes to now expecting a Fed policy rate of over 4% by year-end. We also now know that Fed efforts to shift these expectations have been a key factor behind the correlated fall across major asset classes, including equities and bonds, and the rise in the US Dollar. This has meant there were very few places to escape negative returns year-to-date, outside of cash and select commodities and hedge fund strategies.
Does this move have further to go? One of the most common questions among investors today is whether this move is now complete (ie. markets have now fully priced the likely extent of the Fed hiking cycle) or whether there is room for these expectations to rise further, with the resultant negative implications for major asset classes. While there have been several points at which the market believed the hiking cycle was fully priced, the Fed ended up pushing expectations even higher amid elevated inflation, regardless of rising concerns over the growth outlook (with FedEx’s profit-warning last week likely to raise concerns on this front given its perception as an economic bellwether).
Market expectations of Fed policy have shifted significantly through 2022
Market pricing of Fed rates at each quarter in 2022
A hawkish Fed has kept the market’s inflation expectations from accelerating further, but they remain above the 5-year average of around 2%
The market’s expectation of 5-year inflation in 5-years’ time
Inflation, and factors that influence it, remain the key to possible scenarios from here. From the Fed’s point of view, there are several ways to view inflation:
Supply side inflation (i) – energy prices: Rising energy prices, led by disruptions triggered by the Ukraine conflict, have been one driver of higher inflation. This suggests any worsening, or improvement, in the conflict is likely to influence the Fed’s response.
Supply side inflation (ii) – supply chain disruptions: These were a second driver of supply-led inflation. Several indices suggest these have started to moderate, but the pace of improvement is likely to be a second key input into inflation and the Fed’s response.
Demand-led inflation – the housing market: US house prices, either directly or via estimated rents, form the largest single component of US inflation indices. This suggests the housing market would need to cool (or at least stop strengthening) for the Fed to be less concerned about this source of inflation.
The labour market – low unemployment: One concern for the Fed is the risk that wages start rising in response to higher inflation, setting up a ‘wage-price’ spiral where higher wages, in turn, feed even higher inflation. This likely helps explain why the Fed may be placing much greater weight on demand-side inflation factors in the context of a tight labour market. A cooling of the labour market would likely be key to the Fed pivoting.
Our Central Scenario
Against this context, we maintain a central scenario of Fed policy largely in line with market expectations. We rank this scenario highest of the three scenarios in terms of probability of occurrence. We attach around a 50% probability of a US recession in the next 12 months, but critically assume that any such recession is shallow and short-lived in nature. We believe this is largely priced by financial markets, although it does suggest more volatility in the months ahead.
Our preferred approach to asset allocation in this scenario is captured in our current tactical asset allocation – a balanced approach between equities and bonds, a preference for easing policy cycles (Chinese equities), high dividend yield (UK equities), higher quality bonds (Asia USD bonds and a shift away from HY towards IG bonds across US/Europe/Asia) and gold as a hedge. See our Global Market Outlook for more details.
Having said that, we explore pessimistic and optimistic scenarios for Fed policy, what could drive these and what asset classes could prove best in each. The scenario-based approach can also help investors prepare should one of these scenarios start to look increasingly likely.
Gold, commodities and private real estate historically outperformed in high and very high inflation regimes*
Average 12m returns under high and very high inflation regimes (since index inception to April 2022)
The c.24% peak-to-trough drop in the S&P 500 this year suggests the market is pricing a mild US recession
US equity market drawdowns during past recessions
The pessimistic scenario – The Fed goes well above 4%
There is a scenario where the Fed does not stop hiking rates at 4%, but goes much further because inflation fails to cool or growth remains strong (or both) – and the inflation print last week certainly has got more investors more focused on this risk. We rank this scenario second of the three scenarios in terms of probability of occurrence.
Inflation failing to slow is likely to be a key driver of such a scenario, either because supply side factors like oil prices take a new leg higher (following a removal of significant Russian output from global supply, for example) or demand-led factors prove to be stronger than expected. This would imply a scenario where even a 4% Fed Funds rate remains well below the inflation rate, raising fears among policymakers that real (net-of-inflation) policy rates remain negative and too low to bring inflation down. Under such a scenario, the Fed is likely to guide markets to reprice their expectations significantly higher from today’s levels.
Equities and other risky assets may face further downside in this pessimistic scenario, consistent with past bear markets, as higher interest rate expectations would imply a further leg lower in valuations, especially for rate-sensitive parts of the market like growth equities. Bond yields would likely move higher, though here the pain may be more contained than that witnessed in H1 2022 because (i) any rise in longer-maturity bond yields is likely to be limited by rising growth concerns, and (ii) the higher yield today offers a greater offset to price declines over a 12-month horizon.
In such an outcome, key outperformers are likely to include:
Assets that historically did well during periods of very high (>4%) inflation: gold, commodities and private real estate. Global REITs have also demonstrated some long-term inflation hedge characteristics, though with greater volatility given their interest rate sensitivity.
Assets that usually rise alongside rising interest rates, including floating rate loans and the USD.
US government bonds, which history shows ultimately benefit from the rise in bond yields and growth concerns over 12-18 month horizons, despite initially witnessing price declines during the period of rising interest rates.
The Fed policy rate has risen, but remains far behind inflation for the time being
Fed rates, PCE inflation and the implied ‘real’ Fed rate
History suggests equities may have further to fall in a pessimistic, bear market scenario, though magnitudes remain debatable based on the depth of any recession
The S&P500 index in 2022 relative to an average* bear market pattern
The optimistic scenario – inflation slows, growth worries dominate and the Fed pivots
At the other extreme, there is a scenario where the Fed proves more dovish than the market’s current expectations, either because inflation starts to rapidly cool or growth starts to weaken unexpectedly rapidly (or both). We rank this scenario last among the three scenarios in terms of probability of occurrence.
Such a scenario is likely to be led by a significant improvement in inflation.
On the supply side, one likely driver is energy prices. An improvement in the Ukraine conflict, for example, of a nature that allows for Western sanctions on Russian energy supplies to ease, would be one event that could rapidly cool both actual and expected inflation and reduce the Fed’s concerns to a significant extent. A rapid easing of supply chain disruptions would also help, though the composition of US inflation suggests this factor alone may not be sufficient to significantly cool inflation and Fed concerns.
On the demand side, a sharp turn lower in the US housing market (activity and prices) is likely to be an important factor that would help alleviate Fed worries about inflation, given it remains the single largest component of the US inflation basket and (at least in the Fed’s view) one key to mitigating the risk of a wage price spiral in a tight job market.
Finally, a weakening of the job market (such as a sustained rise in unemployment or significant slowing of new job addition) would also reduce Fed concerns of a wage spiral. A slowing of either demand-side factor is likely to be naturally accompanied by rising concerns of slowing growth. This, in turn, can be the combination that drives a dovish Fed pivot and move the focus away from the Fed’s inflation goal to the Fed’s full employment mandate.
In such a scenario, key outperformers are likely to include:
Equities, particularly interest-rate sensitive styles like growth equities (eg. technology sector equities) which would benefit from expectations of lower interest rates
Corporate/EM bonds, as expectations of falling interest rates and bond yields, and a reduced risk/severity of a global recession is priced in, pushes bond prices higher
Cyclical currencies like the AUD and ‘anti-USD’ currencies with extreme positioning, like the JPY
— Manpreet Gill, Chief Investment Officer, AMEE
Fig. 1 Inflation outlook remains the key variable across our scenarios
Possible macroeconomic scenarios with likely policy and market implications over the next 6-12 months
Disclosure
This document is confidential and may also be privileged. If you are not the intended recipient, please destroy all copies and notify the sender immediately. This document is being distributed for general information only and is subject to the relevant disclaimers available at our Standard Chartered website under Regulatory disclosures. It is not and does not constitute research material, independent research, an offer, recommendation or solicitation to enter into any transaction or adopt any hedging, trading or investment strategy, in relation to any securities or other financial instruments. This document is for general evaluation only. It does not take into account the specific investment objectives, financial situation or particular needs of any particular person or class of persons and it has not been prepared for any particular person or class of persons. You should not rely on any contents of this document in making any investment decisions. Before making any investment, you should carefully read the relevant offering documents and seek independent legal, tax and regulatory advice. In particular, we recommend you to seek advice regarding the suitability of the investment product, taking into account your specific investment objectives, financial situation or particular needs, before you make a commitment to purchase the investment product. Opinions, projections and estimates are solely those of SC at the date of this document and subject to change without notice. Past performance is not indicative of future results and no representation or warranty is made regarding future performance. The value of investments, and the income from them, can go down as well as up, and you may not recover the amount of your original investment. You are not certain to make a profit and may lose money. Any forecast contained herein as to likely future movements in rates or prices or likely future events or occurrences constitutes an opinion only and is not indicative of actual future movements in rates or prices or actual future events or occurrences (as the case may be). This document must not be forwarded or otherwise made available to any other person without the express written consent of the Standard Chartered Group (as defined below). Standard Chartered Bank is incorporated in England with limited liability by Royal Charter 1853 Reference Number ZC18. The Principal Office of the Company is situated in England at 1 Basinghall Avenue, London, EC2V 5DD. Standard Chartered Bank is authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and Prudential Regulation Authority. Standard Chartered PLC, the ultimate parent company of Standard Chartered Bank, together with its subsidiaries and affiliates (including each branch or representative office), form the Standard Chartered Group. Standard Chartered Private Bank is the private banking division of Standard Chartered. Private banking activities may be carried out internationally by different legal entities and affiliates within the Standard Chartered Group (each an “SC Group Entity”) according to local regulatory requirements. Not all products and services are provided by all branches, subsidiaries and affiliates within the Standard Chartered Group. Some of the SC Group Entities only act as representatives of Standard Chartered Private Bank and may not be able to offer products and services or offer advice to clients.
Copyright © 2024, Accounting Research & Analytics, LLC d/b/a CFRA (and its affiliates, as applicable). Reproduction of content provided by CFRA in any form is prohibited except with the prior written permission of CFRA. CFRA content is not investment advice and a reference to or observation concerning a security or investment provided in the CFRA SERVICES is not a recommendation to buy, sell or hold such investment or security or make any other investment decisions. The CFRA content contains opinions of CFRA based upon publicly-available information that CFRA believes to be reliable and the opinions are subject to change without notice. This analysis has not been submitted to, nor received approval from, the United States Securities and Exchange Commission or any other regulatory body. While CFRA exercised due care in compiling this analysis, CFRA, ITS THIRD-PARTY SUPPLIERS, AND ALL RELATED ENTITIES SPECIFICALLY DISCLAIM ALL WARRANTIES, EXPRESS OR IMPLIED, INCLUDING, BUT NOT LIMITED TO, ANY WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR USE, to the full extent permitted by law, regarding the accuracy, completeness, or usefulness of this information and assumes no liability with respect to the consequences of relying on this information for investment or other purposes. No content provided by CFRA (including ratings, credit-related analyses and data, valuations, model, software or other application or output therefrom) or any part thereof may be modified, reverse engineered, reproduced or distributed in any form by any means, or stored in a database or retrieval system, without the prior written permission of CFRA, and such content shall not be used for any unlawful or unauthorized purposes. CFRA and any third-party providers, as well as their directors, officers, shareholders, employees or agents do not guarantee the accuracy, completeness, timeliness or availability of such content. In no event shall CFRA, its affiliates, or their third-party suppliers be liable for any direct, indirect, special, or consequential damages, costs, expenses, legal fees, or losses (including lost income or lost profit and opportunity costs) in connection with a subscriber’s, subscriber’s customer’s, or other’s use of CFRA’s content.
Market Abuse Regulation (MAR) Disclaimer
Banking activities may be carried out internationally by different branches, subsidiaries and affiliates within the Standard Chartered Group according to local regulatory requirements. Opinions may contain outright “buy”, “sell”, “hold” or other opinions. The time horizon of this opinion is dependent on prevailing market conditions and there is no planned frequency for updates to the opinion. This opinion is not independent of Standard Chartered Group’s trading strategies or positions. Standard Chartered Group and/or its affiliates or its respective officers, directors, employee benefit programmes or employees, including persons involved in the preparation or issuance of this document may at any time, to the extent permitted by applicable law and/or regulation, be long or short any securities or financial instruments referred to in this document or have material interest in any such securities or related investments. Therefore, it is possible, and you should assume, that Standard Chartered Group has a material interest in one or more of the financial instruments mentioned herein. Please refer to our Standard Chartered website under Regulatory disclosures for more detailed disclosures, including past opinions/ recommendations in the last 12 months and conflict of interests, as well as disclaimers. A covering strategist may have a financial interest in the debt or equity securities of this company/issuer. This document must not be forwarded or otherwise made available to any other person without the express written consent of Standard Chartered Group.
Sustainable Investments
Any ESG data used or referred to has been provided by Morningstar, Sustainalytics, MSCI or Bloomberg. Refer to 1) Morningstar website under Sustainable Investing, 2) Sustainalytics website under ESG Risk Ratings, 3) MCSI website under ESG Business Involvement Screening Research for more information. The ESG data is as at the date of publication based on data provided, is for informational purpose only and is not warranted to be complete, timely, accurate or suitable for a particular purpose, and it may be subject to change. Sustainable Investments (SI): This refers to funds that have been classified as ‘Sustainable Investments’ by Morningstar. SI funds have explicitly stated in their prospectus and regulatory filings that they either incorporate ESG factors into the investment process or have a thematic focus on the environment, gender diversity, low carbon, renewable energy, water or community development. For equity, it refers to shares/stocks issued by companies with Sustainalytics ESG Risk Rating of Low/Negligible. For bonds, it refers to debt instruments issued by issuers with Sustainalytics ESG Risk Rating of Low/Negligible, and/or those being certified green, social, sustainable bonds. For structured products, it refers to products that are issued by any issuer who has a Sustainable Finance framework that aligns with Standard Chartered’s Green and Sustainable Product Framework, with underlying assets that are part of the Sustainable Investment universe or separately approved by Standard Chartered’s Sustainable Finance Governance Committee.
Country/Market Specific Disclosures
Botswana: This document is being distributed in Botswana by, and is attributable to, Standard Chartered Bank Botswana Limited which is a financial institution licensed under the Section 6 of the Banking Act CAP 46.04 and is listed in the Botswana Stock Exchange. Brunei Darussalam: This document is being distributed in Brunei Darussalam by, and is attributable to, Standard Chartered Bank (Brunei Branch) | Registration Number RFC/61 and Standard Chartered Securities (B) Sdn Bhd | Registration Number RC20001003. Standard Chartered Bank is incorporated in England with limited liability by Royal Charter 1853 Reference Number ZC18. Standard Chartered Securities (B) Sdn Bhd is a limited liability company registered with the Registry of Companies with Registration Number RC20001003 and licensed by Brunei Darussalam Central Bank as a Capital Markets Service License Holder with License Number BDCB/R/CMU/S3-CL and it is authorised to conduct Islamic investment business through an Islamic window. China Mainland: This document is being distributed in China by, and is attributable to, Standard Chartered Bank (China) Limited which is mainly regulated by National Financial Regulatory Administration (NFRA), State Administration of Foreign Exchange (SAFE), and People’s Bank of China (PBOC). Hong Kong: In Hong Kong, this document, except for any portion advising on or facilitating any decision on futures contracts trading, is distributed by Standard Chartered Bank (Hong Kong) Limited (“SCBHK”), a subsidiary of Standard Chartered PLC. SCBHK has its registered address at 32/F, Standard Chartered Bank Building, 4-4A Des Voeux Road Central, Hong Kong and is regulated by the Hong Kong Monetary Authority and registered with the Securities and Futures Commission (“SFC”) to carry on Type 1 (dealing in securities), Type 4 (advising on securities), Type 6 (advising on corporate finance) and Type 9 (asset management) regulated activity under the Securities and Futures Ordinance (Cap. 571) (“SFO”) (CE No. AJI614). The contents of this document have not been reviewed by any regulatory authority in Hong Kong and you are advised to exercise caution in relation to any offer set out herein. If you are in doubt about any of the contents of this document, you should obtain independent professional advice. Any product named herein may not be offered or sold in Hong Kong by means of any document at any time other than to “professional investors” as defined in the SFO and any rules made under that ordinance. In addition, this document may not be issued or possessed for the purposes of issue, whether in Hong Kong or elsewhere, and any interests may not be disposed of, to any person unless such person is outside Hong Kong or is a “professional investor” as defined in the SFO and any rules made under that ordinance, or as otherwise may be permitted by that ordinance. In Hong Kong, Standard Chartered Private Bank is the private banking division of SCBHK, a subsidiary of Standard Chartered PLC. Ghana: Standard Chartered Bank Ghana Limited accepts no liability and will not be liable for any loss or damage arising directly or indirectly (including special, incidental or consequential loss or damage) from your use of these documents. Past performance is not indicative of future results and no representation or warranty is made regarding future performance. You should seek advice from a financial adviser on the suitability of an investment for you, taking into account these factors before making a commitment to invest in an investment. To unsubscribe from receiving further updates, please send an email to feedback.ghana@sc.com. Please do not reply to this email. Call our Priority Banking on 0302610750 for any questions or service queries. You are advised not to send any confidential and/or important information to Standard Chartered via e-mail, as Standard Chartered makes no representations or warranties as to the security or accuracy of any information transmitted via e-mail. Standard Chartered shall not be responsible for any loss or damage suffered by you arising from your decision to use e-mail to communicate with the Bank. India: This document is being distributed in India by Standard Chartered in its capacity as a distributor of mutual funds and referrer of any other third party financial products. Standard Chartered does not offer any ‘Investment Advice’ as defined in the Securities and Exchange Board of India (Investment Advisers) Regulations, 2013 or otherwise. Services/products related securities business offered by Standard Charted are not intended for any person, who is a resident of any jurisdiction, the laws of which imposes prohibition on soliciting the securities business in that jurisdiction without going through the registration requirements and/or prohibit the use of any information contained in this document. Indonesia: This document is being distributed in Indonesia by Standard Chartered Bank, Indonesia branch, which is a financial institution licensed, registered and supervised by Otoritas Jasa Keuangan (Financial Service Authority). Jersey: In Jersey, Standard Chartered Private Bank is the Registered Business Name of the Jersey Branch of Standard Chartered Bank. The Jersey Branch of Standard Chartered Bank is regulated by the Jersey Financial Services Commission. Copies of the latest audited accounts of Standard Chartered Bank are available from its principal place of business in Jersey: PO Box 80, 15 Castle Street, St Helier, Jersey JE4 8PT. Standard Chartered Bank is incorporated in England with limited liability by Royal Charter in 1853 Reference Number ZC 18. The Principal Office of the Company is situated in England at 1 Basinghall Avenue, London, EC2V 5DD. Standard Chartered Bank is authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and Prudential Regulation Authority. The Jersey Branch of Standard Chartered Bank is also an authorised financial services provider under license number 44946 issued by the Financial Sector Conduct Authority of the Republic of South Africa. Jersey is not part of the United Kingdom and all business transacted with Standard Chartered Bank, Jersey Branch and other SC Group Entity outside of the United Kingdom, are not subject to some or any of the investor protection and compensation schemes available under United Kingdom law. Kenya: This document is being distributed in Kenya by, and is attributable to Standard Chartered Bank Kenya Limited. Investment Products and Services are distributed by Standard Chartered Investment Services Limited, a wholly owned subsidiary of Standard Chartered Bank Kenya Limited that is licensed by the Capital Markets Authority as a Fund Manager. Standard Chartered Bank Kenya Limited is regulated by the Central Bank of Kenya. Malaysia: This document is being distributed in Malaysia by Standard Chartered Bank Malaysia Berhad. Recipients in Malaysia should contact Standard Chartered Bank Malaysia Berhad in relation to any matters arising from, or in connection with, this document. Nigeria: This document is being distributed in Nigeria by Standard Chartered Bank Nigeria Limited, a bank duly licensed and regulated by the Central Bank of Nigeria. Standard Chartered accepts no liability for any loss or damage arising directly or indirectly (including special, incidental or consequential loss or damage) from your use of these documents. You should seek advice from a financial adviser on the suitability of an investment for you, taking into account these factors before making a commitment to invest in an investment. To unsubscribe from receiving further updates, please send an email to clientcare.ng@sc.com requesting to be removed from our mailing list. Please do not reply to this email. Call our Priority Banking on 01-2772514 for any questions or service queries. Standard Chartered shall not be responsible for any loss or damage arising from your decision to send confidential and/or important information to Standard Chartered via e-mail, as Standard Chartered makes no representations or warranties as to the security or accuracy of any information transmitted via e-mail. Pakistan: This document is being distributed in Pakistan by, and attributable to Standard Chartered Bank (Pakistan) Limited having its registered office at PO Box 5556, I.I Chundrigar Road Karachi, which is a banking company registered with State Bank of Pakistan under Banking Companies Ordinance 1962 and is also having licensed issued by Securities & Exchange Commission of Pakistan for Security Advisors. Standard Chartered Bank (Pakistan) Limited acts as a distributor of mutual funds and referrer of other third-party financial products. Singapore: This document is being distributed in Singapore by, and is attributable to, Standard Chartered Bank (Singapore) Limited (Registration No. 201224747C/ GST Group Registration No. MR-8500053-0, “SCBSL”). Recipients in Singapore should contact SCBSL in relation to any matters arising from, or in connection with, this document. SCBSL is an indirect wholly owned subsidiary of Standard Chartered Bank and is licensed to conduct banking business in Singapore under the Singapore Banking Act, 1970. Standard Chartered Private Bank is the private banking division of SCBSL. IN RELATION TO ANY SECURITY OR SECURITIES-BASED DERIVATIVES CONTRACT REFERRED TO IN THIS DOCUMENT, THIS DOCUMENT, TOGETHER WITH THE ISSUER DOCUMENTATION, SHALL BE DEEMED AN INFORMATION MEMORANDUM (AS DEFINED IN SECTION 275 OF THE SECURITIES AND FUTURES ACT, 2001 (“SFA”)). THIS DOCUMENT IS INTENDED FOR DISTRIBUTION TO ACCREDITED INVESTORS, AS DEFINED IN SECTION 4A(1)(a) OF THE SFA, OR ON THE BASIS THAT THE SECURITY OR SECURITIES-BASED DERIVATIVES CONTRACT MAY ONLY BE ACQUIRED AT A CONSIDERATION OF NOT LESS THAN S$200,000 (OR ITS EQUIVALENT IN A FOREIGN CURRENCY) FOR EACH TRANSACTION. Further, in relation to any security or securities-based derivatives contract, neither this document nor the Issuer Documentation has been registered as a prospectus with the Monetary Authority of Singapore under the SFA. Accordingly, this document and any other document or material in connection with the offer or sale, or invitation for subscription or purchase, of the product may not be circulated or distributed, nor may the product be offered or sold, or be made the subject of an invitation for subscription or purchase, whether directly or indirectly, to persons other than a relevant person pursuant to section 275(1) of the SFA, or any person pursuant to section 275(1A) of the SFA, and in accordance with the conditions specified in section 275 of the SFA, or pursuant to, and in accordance with the conditions of, any other applicable provision of the SFA. In relation to any collective investment schemes referred to in this document, this document is for general information purposes only and is not an offering document or prospectus (as defined in the SFA). This document is not, nor is it intended to be (i) an offer or solicitation of an offer to buy or sell any capital markets product; or (ii) an advertisement of an offer or intended offer of any capital markets product. Deposit Insurance Scheme: Singapore dollar deposits of non-bank depositors are insured by the Singapore Deposit Insurance Corporation, for up to S$100,000 in aggregate per depositor per Scheme member by law. Foreign currency deposits, dual currency investments, structured deposits and other investment products are not insured. This advertisement has not been reviewed by the Monetary Authority of Singapore. Taiwan: SC Group Entity or Standard Chartered Bank (Taiwan) Limited (“SCB (Taiwan)”) may be involved in the financial instruments contained herein or other related financial instruments. The author of this document may have discussed the information contained herein with other employees or agents of SC or SCB (Taiwan). The author and the above-mentioned employees of SC or SCB (Taiwan) may have taken related actions in respect of the information involved (including communication with customers of SC or SCB (Taiwan) as to the information contained herein). The opinions contained in this document may change, or differ from the opinions of employees of SC or SCB (Taiwan). SC and SCB (Taiwan) will not provide any notice of any changes to or differences between the above-mentioned opinions. This document may cover companies with which SC or SCB (Taiwan) seeks to do business at times and issuers of financial instruments. Therefore, investors should understand that the information contained herein may serve as specific purposes as a result of conflict of interests of SC or SCB (Taiwan). SC, SCB (Taiwan), the employees (including those who have discussions with the author) or customers of SC or SCB (Taiwan) may have an interest in the products, related financial instruments or related derivative financial products contained herein; invest in those products at various prices and on different market conditions; have different or conflicting interests in those products. The potential impacts include market makers’ related activities, such as dealing, investment, acting as agents, or performing financial or consulting services in relation to any of the products referred to in this document. UAE: DIFC – Standard Chartered Bank is incorporated in England with limited liability by Royal Charter 1853 Reference Number ZC18.The Principal Office of the Company is situated in England at 1 Basinghall Avenue, London, EC2V 5DD. Standard Chartered Bank is authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and Prudential Regulation Authority. Standard Chartered Bank, Dubai International Financial Centre having its offices at Dubai International Financial Centre, Building 1, Gate Precinct, P.O. Box 999, Dubai, UAE is a branch of Standard Chartered Bank and is regulated by the Dubai Financial Services Authority (“DFSA”). This document is intended for use only by Professional Clients and is not directed at Retail Clients as defined by the DFSA Rulebook. In the DIFC we are authorised to provide financial services only to clients who qualify as Professional Clients and Market Counterparties and not to Retail Clients. As a Professional Client you will not be given the higher retail client protection and compensation rights and if you use your right to be classified as a Retail Client we will be unable to provide financial services and products to you as we do not hold the required license to undertake such activities. For Islamic transactions, we are acting under the supervision of our Shariah Supervisory Committee. Relevant information on our Shariah Supervisory Committee is currently available on the Standard Chartered Bank website in the Islamic banking section For residents of the UAE – Standard Chartered Bank UAE does not provide financial analysis or consultation services in or into the UAE within the meaning of UAE Securities and Commodities Authority Decision No. 48/r of 2008 concerning financial consultation and financial analysis. Uganda: Our Investment products and services are distributed by Standard Chartered Bank Uganda Limited, which is licensed by the Capital Markets Authority as an investment adviser. United Kingdom: In the UK, Standard Chartered Bank is authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and Prudential Regulation Authority. This communication has been approved by Standard Chartered Bank for the purposes of Section 21 (2) (b) of the United Kingdom’s Financial Services and Markets Act 2000 (“FSMA”) as amended in 2010 and 2012 only. Standard Chartered Bank (trading as Standard Chartered Private Bank) is an authorised financial services provider (license number 45747) in terms of the South African Financial Advisory and Intermediary Services Act, 2002. The Materials have not been prepared in accordance with UK legal requirements designed to promote the independence of investment research, and that it is not subject to any prohibition on dealing ahead of the dissemination of investment research. Vietnam: This document is being distributed in Vietnam by, and is attributable to, Standard Chartered Bank (Vietnam) Limited which is mainly regulated by State Bank of Vietnam (SBV). Recipients in Vietnam should contact Standard Chartered Bank (Vietnam) Limited for any queries regarding any content of this document. Zambia: This document is distributed by Standard Chartered Bank Zambia Plc, a company incorporated in Zambia and registered as a commercial bank and licensed by the Bank of Zambia under the Banking and Financial Services Act Chapter 387 of the Laws of Zambia.