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Check out the global equity strategy us by greg blotnick

STRATEGY NOTE

USA | Equity Strategy

9 November 2016

Global

Global Equity Strategy

US: The Winner is…..You're Hired!

EQUITY STRATEGY GLOBAL

Key Takeaway

After one of the most tightly fought elections, Mr Donald Trump is set to be

the 45th President of the US in what looks to be a clean sweep. The most under-

rated theme is the slashing of the corporate tax rate and the end of Grid lock.

We would be very cautious on the reach for yield theme.

Political Polarization Index and Gini Index of Incom e Inequality

1.1

0.49

1

0.47

0.9

0.45

0.8

0.43

0.7

0.41

0.6

0.39

0.5

0.37

0.4

0.3

0.35

The Republican/Donald Trump victory would mean a knee-jerk drop in the

dollar and fall in US indices. However, the weak dollar would actually help the bulk of

the S&P 500 given that around 35-40% of revenues come from overseas. Although there

would be some uncertainty over monetary policy, the Fed is unlikely to be deterred from

raising rates in December. It should be remembered that Donald Trump sought for the

US corporate tax rate to be slashed. Tax cuts get spent! The share of labour vs capital is

likely to grow and this is good news for consumption. We remain bullish on Gold shares

given that real rates would probably be negative under Trump. Equally, the yield curve is

likely to be steep, reinforcing our bullish view on US banks. A more interventionist policy

towards trade ought to help domestic intermediate producers (we like materials). We have

highlighted before that both parties had committed to infrastructure investment and that the

government purse strings had already been loosened. Sentiment towards the Healthcare

sector ought to swing initially away from draconian fears over drug pricing. We upgrade

the transport sector to modestly bullish on better economic growth prospects. We own

no reach for yield themes. The main risk is monetary policy uncertainty and unwinding tight

credit spreads.

1879

1883

1887

1891

1895

1899

1903

1907

1911

1915

1919

1923

1927

1931

1935

1939

1943

1947

1951

1955

1959

1963

1967

1971

1975

1979

1983

1987

1991

1995

1999

2003

2007

2011

2015

Political Polarization Index (LHS)

Gini Index of Income Inequality (RHS)

Source: Bloomberg, www.voteview.com, Jefferies

VXST Index/ VIX Index

1.50

1.40

1.30

1.20

1.10

1.00

0.90

0.80

Source: Bloomberg,Jefferies

0.70

0.60

Mar-15

Sep-15

Mar-16

Sep-16

Jan-15

Jun-15

Jun-16

Jul-16

Jul-15

Jan-16

Feb-15

Apr-15

May-15

Aug-15

Apr-16

May-16

Aug-16

Oct-15

Dec-15

Feb-16

Oct-16

Nov-15

Nov-16

Source: Bloomberg, Jefferies

US Econom ic Policy Un certainty In dex

300

250

200

150

100

50

Source: www.policyuncertainty.com,Jefferies

0

86

88

90

92

94

96

98

00

02

04

06

08

10

12

14

16

Source: www.policyuncertainty.com, Jefferies

Flows into Global Money Market Funds

200,000

160,000

120,000

In exhibit 21, we highlight the major policy differences between Donald Trump and Mrs

Hilary Clinton.

80,000

40,000

0

(40,000)

(80,000)

It should be recalled, post the US Presidential Election, a series of European

elections will unfold alongside the invoking of ‘Article 50’ by the UK before

March 2017. Tuesday Nov 8th won’t be the last news on elections with the Italian

constitutional referendum to be held on Sunday, 4th Dec 2016.

Nov-14

Feb-15

May-15

Aug-15

Nov-15

Feb-16

May-16

Aug-16

Total (LHS, US$mn)

Source: EPFR, Jefferies

Upcom ing Im portant Dates 2016-17

30-Nov

OPEC Meeting

2-Dec

Italian Referendum

20-Jan

US Presidential inauguration

By March

Invoking of Article 50 by the UK

April/May

French Presidential

TBD

German Federal Election

Source: Jefferies

Since 1932, the average return of the S&P 500 one month after an US election

is -1.0%. 6 months afterwards, the dollar tends to strengthen marginally while

government yields tend to drop alongside a fall in the VIX spot index.

We are hosting two calls today on global equity markets post the US election.

The PowerPoint can be viewed here LINK.

Same Dial-in Details for both calls (Asia Call: 2:00pm Hong Kong / 3:00pm

Tokyo; US Call: 9:30pm Hong Kong / 8:30am New York ).

Dial-in Details

Passcode: Jefferies

Sean Darby *

Chief Global Equity Strategist

+852 3743 8073 [email protected]

Kenneth Chan *

Quantitative Strategist

+852 3743 8079 [email protected]

Hong Kong +852-3001-3802

Australia +61-2-8211-1366 / 1-800-750-141

China +86-400-810-4731 / 10800-712-1470

Japan + 81-3-6868-2676 / 00531-12-0955

London + 44-20-7108-6382 / 0800-917-6808

Mumbai +91 22 4941 2804/ 00080 0852 1197/ 0008000016231/ 180030000449

Singapore +65-6883-9177 / 800-120-5226

Taiwan +886-2-2795-7315 / 00801-137-864

US + 1-210-795-0512 / 866-844-9413

Irene Zhou *

Equity Associate

+852 3743 8769 [email protected]

* Jefferies Hong Kong Limited

^Prior trading day's closing price unless

otherwise noted.

(Cont overleaf)

Please see analyst certifications, important disclosure information, and information regarding the status of non-US analysts on pages 14 to 17 of this report.


Check out the global equity strategy us by greg blotnick

Equity Strategy

Global

9 November 2016

Ahead of the election, US capex….

Exhibit 1: US Capital Expenditure (US$ bn)

6000

5000

4000

3000

2000

1000

0

52

56

60

64

68

72

76

80

84

88

92

96

00

04

08

12

16

Source: Federal Reserve System, FactSet, Jefferies

Note: Capital expenditure includes Households and Nonprofit Organizations,

Nonfinancial Business, State and Local Governments, Federal Government, Domestic

Nonfinancial Sectors and Domestic Financial Sectors

…softened considerably

Exhibit 2: US Capital Expenditure as % of GDP

36

34

32

30

28

26

24

22

20

52

56

60

64

68

72

76

80

84

88

92

96

00

04

08

12

16

Source: Federal Reserve System, US Bureau of Economic Analysis, FactSet, Jefferies

Note: Capital expenditure includes Households and Nonprofit Organizations,

Nonfinancial Business, State and Local Governments, Federal Government, Domestic

Nonfinancial Sectors and Domestic Financial Sectors

In the run up to the election, risk

indicators…

Exhibit 3: Fear And Greed Index Over Time

Source: money.cnn.com

, Chief Global Equity Strategist, +852 3743 8073, [email protected]

Sean Darby

page 2 of 17

Please see important disclosure information on pages 14 - 17 of this report.


Check out the global equity strategy us by greg blotnick

Equity Strategy

Global

9 November 2016

…..……. had moved to extreme

pessimism

Exhibit 4: VXST Index/ VIX Index

1.50

1.40

1.30

1.20

1.10

1.00

0.90

0.80

Source: Bloomberg, Jefferies

0.70

0.60

Oct-15

Oct-16

Dec-15

Feb-15

Apr-15

Aug-15

Feb-16

Apr-16

Aug-16

Sep-15

Sep-16

May-15

May-16

Nov-16

Jun-15

Nov-15

Jun-16

Jan-15

Jan-16

Mar-15

Jul-15

Mar-16

Jul-16

Source: Bloomberg, Jefferies

We equally weighted the Mexico

Peso, US Biotech Index and Gold

Price to create a US 2016 Presidential

risk index

Exhibit 5: US 2016 Presidential Risk Index

130

125

120

115

110

105

100

95

Source: Bloomberg, Jefferies

90

Jan-16

Feb-16

Mar-16

Apr-16

May-16

Jun-16

Jul-16

Aug-16

Sep-16

Oct-16

Nov-16

Source: Bloomberg, Jefferies

Note: We use inverse of US Biotech index in calculation

Ironically, economic uncertainty has

remained reasonably calm

Exhibit 6: US Economic Policy Uncertainty Index

300

250

200

150

100

50

Source: www.policyuncertainty.com, Jefferies

0

86

88

90

92

94

96

98

00

02

04

06

08

10

12

14

16

Source: www.policyuncertainty.com, Jefferies

, Chief Global Equity Strategist, +852 3743 8073, [email protected]

Sean Darby

page 3 of 17

Please see important disclosure information on pages 14 - 17 of this report.


Check out the global equity strategy us by greg blotnick

Equity Strategy

Global

9 November 2016

Funds had been parked on the

sideline ahead of the US vote

Exhibit 7: Flows into Global Money Market Funds

200,000

160,000

120,000

80,000

40,000

0

(40,000)

(80,000)

Nov-14

Feb-15

May-15

Aug-15

Nov-15

Feb-16

May-16

Aug-16

Total (LHS, US$mn)

Source: EPFR, Jefferies

The OPEC meeting will be the next

event

Exhibit 8: Upcoming Important Dates 2016-17

30-Nov

2-Dec

20-Jan

By March

April/May

TBD

OPEC Meeting

Italian Referendum

US Presidential inauguration

Invoking of Article 50 by the UK

French Presidential

German Federal Election

Source: Jefferies

We analyzed equity returns before

and after the US election. The Hang

Seng tends to do well one month

before the election and then

performs till the end of the year. The

Nikkei 225 tends to do well one

month afterwards. Interestingly, the

VIX consistently rises one and three

months before the election while the

dollar tends to strengthen. Bonds

tend to do better after the election

result going into the year-end

Exhibit 9: Asian Markets, Asian Dollar and Gold Performance Before and After

US Elections

Australia AOI

From 1980

From 1972 From 1972 From 1952

1-month Return % Before Election

Average (%)

0.26

Hit Ratio (%)

66.7

1-month Return % After Election

Average (%)

(3.03)

Hit Ratio (%)

44.4

After Election Till Year-End Return %

Average (%)

(0.91)

Hit Ratio (%)

44.4

HSI

Nikkei 225

Topix

Asian Dollar

From 1996 From 1976

Gold

5.44

72.7

(1.59)

45.5

(0.06)

50.0

(0.24)

40.0

(0.92)

40.0

(0.88)

63.6

0.61

72.7

1.21

56.3

(0.54)

40.0

0.72

50.0

5.08

72.7

3.12

63.6

3.86

62.5

0.12

40.0

0.39

40.0

Source: Bloomberg, Jefferies

Note: Local currency returns.

, Chief Global Equity Strategist, +852 3743 8073, [email protected]

Sean Darby

page 4 of 17

Please see important disclosure information on pages 14 - 17 of this report.


Check out the global equity strategy us by greg blotnick

Equity Strategy

Global

9 November 2016

As far back as US history can show,

we have never seen such a degree of

political polarization alongside some

of the worst income inequality

Exhibit 10: Political Polarization Index and Gini Index of Income Inequality

1.1

0.49

1

0.47

0.9

0.45

0.8

0.43

0.7

0.41

0.6

0.39

0.5

0.37

0.4

0.3

0.35

1879

1883

1887

1891

1895

1899

1903

1907

1911

1915

1919

1923

1927

1931

1935

1939

1943

1947

1951

1955

1959

1963

1967

1971

1975

1979

1983

1987

1991

1995

1999

2003

2007

2011

2015

Political Polarization Index (LHS)

Gini Index of Income Inequality (RHS)

Source: Bloomberg, www.voteview.com, Jefferies

Equally, the US misery index (the

sum of the unemployment rate and

the inflation rate) has just bounced

from near fifty year lows

Exhibit 11: United States Misery Index

25

20

15

10

5

Source: Bloomberg, Jefferies

0

48 50 53 55 58 60 63 65 68 70 73 75 78 80 83 85 88 90 93 95 98 00 03 05 08 10 13 15

Source: Bloomberg, Jefferies

Government spending has picked

up….

Exhibit 12: US Federal Government Outlays % y-y (US$bn, rolling 12-month)

25.0

20.0

15.0

10.0

5.0

0.0

(5.0)

Source: CEIC, Jefferies

(10.0)

00

01

02

03

04

05

06

07

08

09

10

11

12

13

14

15

16

Source: CEIC, Jefferies

, Chief Global Equity Strategist, +852 3743 8073, [email protected]

Sean Darby

page 5 of 17

Please see important disclosure information on pages 14 - 17 of this report.


Check out the global equity strategy us by greg blotnick

Equity Strategy

Global

9 November 2016

Global trade was already suffering

before the US election…

Exhibit 13: World Merchandise Trade Volume % yoy (sa, 2010=100)

25

20

15

10

5

0

(5)

(10)

(15)

(20)

(25)

01

03

05

07

09

11

13

15

Source: CPB, Jefferies

…although the worst of the price

deflation appears over

Exhibit 14: World Merchandise Trade Value % yoy (sa, USD, 2010=100)

25

20

15

10

5

0

(5)

(10)

(15)

(20)

(25)

01

03

05

07

09

11

13

15

Source: CPB, Jefferies

The US is not a major exporter

Exhibit 15: US Main Export Destinations (%)

EU28, 16.7

Canada, 19

Japan , 4.1

China, 7.7

Mexico, 14.3

Canada

Mexico

China

Japan

EU28

Source: Pocket World in Figures, Jefferies

, Chief Global Equity Strategist, +852 3743 8073, [email protected]

Sean Darby

page 6 of 17

Please see important disclosure information on pages 14 - 17 of this report.


Check out the global equity strategy us by greg blotnick

Equity Strategy

Global

9 November 2016

The US imports a great deal from

Asia and its two NAFTA partners

Exhibit 16: US Main Origins of Imports (%)

EU28, 17

China, 20.3

Japan , 6.3

Canada, 14.9

Mexico, 12.5

China

Canada

Mexico

Japan

EU28

Source: Pocket World in Figures, Jefferies

Hence, the US runs a large trade

deficit…

Exhibit 17: US Trade Balance of Goods and Services SA (USD bn)

0

(10)

(20)

(30)

(40)

(50)

(60)

(70)

(80)

92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16

Source: Bloomberg, Jefferies

..and a very large deficit in its overall

international position

Exhibit 18: US Net International Investment Position (USD mn)

0

(1,000,000)

(2,000,000)

(3,000,000)

(4,000,000)

(5,000,000)

(6,000,000)

(7,000,000)

(8,000,000)

(9,000,000)

06

07

08

09

10

11

12

13

14

15

16

Source: Bloomberg, Jefferies

, Chief Global Equity Strategist, +852 3743 8073, [email protected]

Sean Darby

page 7 of 17

Please see important disclosure information on pages 14 - 17 of this report.


Check out the global equity strategy us by greg blotnick

Equity Strategy

Global

9 November 2016

…on most measures after a period of

self-imposed austerity

Exhibit 19: US Real GDP: State & Local Government % Q-Q (annualized, 2009p,

12-Month Moving Avg.)

12

10

8

6

4

2

0

(2)

Source: CEIC, Jefferies

(4)

56

60

64

68

72

76

80

84

88

92

96

00

04

08

12

16

Source: CEIC, Jefferies

On the surface, the US corporate tax

rate is well above its OECD peers

Exhibit 20: Corporate tax rates: US vs OECD

Source: OECD

, Chief Global Equity Strategist, +852 3743 8073, [email protected]

Sean Darby

page 8 of 17

Please see important disclosure information on pages 14 - 17 of this report.


Check out the global equity strategy us by greg blotnick

Equity Strategy

Global

9 November 2016

xxxxxxxx

Exhibit 21: Views towards Two Candidates

GOP

Democrat

Mrs Clinton has waived on trade. She originally supported

NAFTA but has since retracted that view. She initially

supported TPP but she has recognised it was not the best

deal for the US. Mrs Clinton seeks to raise production in US

by offering tax incentives.

As secretary of State, Mrs Clinton orchestrated the 'pivot'

towards Asia and away from the Middle East. She would

likely take a tougher stance on Chinese activity in the South

China Sea

President Obama championed climate change policies and

promoted a green and low-carbon world. Mrs Clinton would

probably continue the policy aiming to reduce carbon

emissions. This helped underwrite new and clean energy

themes.

More adversarial, isolationist and would seek to renegotiate

trade deals to favour the US. Mr Trump would pursue cases

against trade violations with the WTO and apply tariffs if

required. He would label China a 'currency manipulator'

Both voiced opposition to the deal since it is not in

the interests of US workers

TransPacific Partnership

Japan and South Korea host large US military bases which

might be threatened. Furthermore, they may find themselves

receiving huge bills for security maintenance.

Defence and security

South China seas and intra-Asia stability

Mr Trump is more sceptical over climate change and is more

supportive of traditional energy industries such as coal.

Climate change /Energy

Lighter regualtion of energy companies?

Mr Trump favours cutting taxes across the board while

reducing the number of tax brackets from seven to three

(12%, 25% and 33%). He has reiterated that he would seek to

reduce company tax to 15% from 35%.

Mrs Clinton would seek to keep tax level same for most

Americans but introduce an additional bracket for higher

earners.

Both candidates have proposed closing tax loopholes

for the rich. They have both declined to make

significant reductions in spending on public pension

and healthcare programmes

Tax

The additional tax revenue would fund programmes such as

free university for students from low and middle-income

families

Mr Trump proposes a child care deduction

General agreement

General agreement

Ending corporate tax inversion

Eliminating carried interest tax

Mrs Clinton has focused on job training partly paid by tax

revenue from wealthier individuals. She seeks to create 'good-

paying jobs' by offering tax credits for businesses that hire

apprentices or undertake profit sharing

US$2 trn in new spending including US$275bn on new

Federal infrastructure funding by US$275bn over 5 years

Mr Trump has focused mainly on increasing manufacturing

jobs

Labour markets

Infrastructure

Both supportive

Mr Trump has been very critical of the current immigration

policy. He would seek greater border controls while building

a wall along the US-Mexican border. He would enforce

current immigration laws and remove illegal immigrants.

Introduce a comprehensive reform to immigration laws. She

is a supporter of the 'Border Security, Economic Opportunity,

and Immigration Modenisation act of 2013'

Immigration

Source: Jefferies, Tax Policy Center

, Chief Global Equity Strategist, +852 3743 8073, [email protected]

Sean Darby

page 9 of 17

Please see important disclosure information on pages 14 - 17 of this report.


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Global

9 November 2016

xxxxxxxx

Exhibit 22: US Indices 1-month, 3-month and 6-month % Changes Before and 6-month % Change After Election

1-month price change before election (%)

3-month price change before election (%)

6-month price change before election (%)

6-month price change after election (%)

Federal

funds

effectiv

e rate

Change

(ppt)

Federal

funds

effectiv

e rate

(%)

Dow

Jones

Industrial

Average

US 10 year

gov't

bond

yield

Dow

Jones

Industrial

Average

US 10 year

gov't

bond

yield

Dow

Jones

Industrial

Average

US 10 year

gov't

bond

yield

Dow

Jones

Industrial

Average

US 10 year

govt bond

yield

US Dollar

Index

US Dollar

Index

US Dollar

Index

US Dollar

Index

Year

Election Day US President

Party

Term

VIX Index

S&P 500

VIX Index

S&P 500

VIX Index

S&P 500

VIX Index

S&P 500

1904

8-Nov-04

Theodore Roosevelt

Republican

30

14.23

25.56

35.93

12.55

1908

3-Nov-08

William Howard Taft

Republican

31

2.94

2.26

18.56

7.07

1912

5-Nov-12

Woodrow Wilson

Democratic

32

(3.64)

0.29

1.50

(11.45)

1916

7-Nov-16

Woodrow Wilson

Democratic

33

4.24

20.62

21.13

(14.93)

1920

2-Nov-20

Warren G Harding, Calvin Coolidge

Republican

34

1.76

0.62

(8.62)

(6.82)

1924

4-Nov-24

Calvin Coolidge

Republican

35

1.22

0.59

13.32

18.26

1928

6-Nov-28

Herbert Hoover

Republican

36

7.13

6.03

18.13

14.91

18.34

11.17

26.62

16.98

1932

8-Nov-32

Franklin D Roosevelt

Democratic

37

3.05

3.13

(4.62)

(2.56)

9.44

18.88

18.66

15.19

1936

3-Nov-36

Franklin D Roosevelt

Democratic

38

3.46

5.02

6.87

7.92

20.13

23.79

(1.18)

(4.08)

1940

5-Nov-40

Franklin D Roosevelt

Democratic

39

1.06

3.53

6.94

8.56

(8.43)

(7.92)

(14.33)

(16.31)

1944

7-Nov-44

Franklin D Roosevelt, Harry S Truman

Democratic

40

(0.62)

(0.08)

1.79

2.29

6.61

7.28

12.58

15.20

1948

2-Nov-48

Harry S Truman

Democratic

41

5.50

6.57

4.76

5.36

5.12

7.88

(8.03)

(11.50)

1952

4-Nov-52

Dwight D Eisenhower

Republican

42

(0.12)

0.41

(3.44)

(3.26)

3.93

4.41

3.00

1.63

1956

2.96

6-Nov-56

Dwight D Eisenhower

Republican

43

2.69

2.48

(3.60)

(2.58)

(4.08)

(1.88)

0.19

(2.79)

1960

2.47

(0.49)

8-Nov-60

John F Kennedy, Lyndon B Johnson

Democratic

44

1.91

2.00

(2.79)

(0.74)

(1.64)

0.66

15.30

20.50

1964

3.36

0.89

3-Nov-64

Lyndon B Johnson

Democratic

45

(0.72)

0.33

0.97

(0.95)

4.18

2.63

(1.66)

7.15

6.25

1.45

5.32

4.75

1968

5.91

2.55

5-Nov-68

Richard Nixon, Gerald Ford

Republican

46

0.04

1.99

(0.71)

(0.59)

(0.13)

4.84

8.45

6.45

0.01

(2.93)

2.94

4.50

0.19

9.94

1.34

1.23

1972

5.04

(0.87)

7-Nov-72

Gerald Ford

Republican

47

0.51

(3.83)

4.17

3.98

0.97

1.79

3.32

3.05

1.19

1.62

4.63

6.89

(7.58)

8.61

(3.46)

(3.03)

1976

5.02

(0.02)

2-Nov-76

Jimmy Carter

Democratic

48

0.26

(1.47)

(1.41)

(1.03)

(0.27)

(5.99)

(1.65)

(0.09)

(0.12)

(3.78)

(3.09)

1.44

(1.59)

0.95

(3.61)

(4.04)

1980

12.81

7.79

4-Nov-80

Ronald Reagan

Republican

49

3.31

9.30

(1.42)

(0.22)

2.91

16.55

0.66

6.66

(0.29)

21.68

15.57

22.22

14.85

16.13

4.47

1.26

1984

9.99

(2.82)

6-Nov-84

Ronald Reagan

Republican

50

(3.07)

(6.44)

5.21

4.75

1.47

(9.06)

3.42

4.80

7.27

(11.26)

6.77

7.10

8.57

(3.63)

0.29

5.62

1988

8.30

(1.69)

8-Nov-88

George H W Bush

Republican

51

(3.69)

2.08

(1.06)

(1.05)

(4.69)

(2.54)

0.95

1.91

4.98

(1.47)

5.98

6.86

5.51

2.01

11.70

11.21

1992

3.10

(5.20)

3-Nov-92

Bill Clinton

Democratic

52

8.84

9.72

(2.59)

1.62

2.30

8.12

2.09

25.31

(4.21)

(1.22)

(0.64)

(9.25)

4.33

(2.51)

1.79

0.87

(13.25)

(25.56)

5.96

5.37

1996

5.24

2.14

5-Nov-96

Bill Clinton

Democratic

53

(0.89)

(3.24)

19.26

1.47

1.81

1.25

(4.13)

1.67

7.17

8.17

(0.58)

(9.09)

5.69

11.01

11.30

11.24

6.08

14.05

18.64

16.26

2000

6.51

1.27

7-Nov-00

George W Bush

Republican

54

0.66

0.93

9.69

3.36

1.62

4.29

(1.51)

30.90

0.78

(3.21)

3.86

(9.82)

(9.52)

3.54

(0.05)

(0.25)

(11.40)

(0.20)

(0.16)

(11.76)

2004

1.76

(4.75)

2-Nov-04

George W Bush

Republican

55

(2.46)

(3.36)

26.90

(1.54)

(0.08)

(4.77)

(9.05)

5.27

(1.41)

2.16

(5.54)

(10.18)

(5.88)

(1.86)

2.10

(1.15)

3.44

(6.55)

2.15

2.80

2008

0.97

(0.79)

4-Nov-08

Barack Obama

Democratic

56

5.57

3.37

5.74

(6.78)

(8.50)

15.41

(5.99)

103.19

(14.70)

(19.48)

15.35

(3.38)

162.54

(26.29)

(28.87)

(0.96)

(15.39)

(27.66)

(12.45)

(9.79)

2012

0.16

(0.81)

6-Nov-12

Barack Obama

Democratic

57

1.61

0.45

22.68

(2.68)

(2.23)

(2.01)

11.77

10.22

0.98

2.45

1.40

(6.81)

(8.25)

1.59

4.33

2.11

0.46

(27.99)

13.01

13.24

Average since 1904

0.89

0.68

13.61

1.62

1.40

1.88

(0.17)

29.43

2.93

2.01

2.24

(3.56)

24.82

5.60

5.01

2.65

0.41

(12.32)

3.60

3.09

Average since 1992

2.22

1.31

13.61

(0.76)

(0.85)

3.72

(1.14)

29.43

(1.90)

(1.85)

2.31

(8.09)

24.82

(2.42)

(1.57)

1.98

(5.01)

(12.32)

4.53

2.68

Source: Bloomberg, Jefferies

, Chief Global Equity Strategist, +852 3743 8073, [email protected]

Sean Darby

page 10 of 17

Please see important disclosure information on pages 14 - 17 of this report.


Check out the global equity strategy us by greg blotnick

Equity Strategy

Global

9 November 2016

xxxxxxxx

Exhibit 23: S&P 500 and Sector Returns From President Inaugurations to Mid-Term Elections

Election

Year

PI to MTE MTE to NPI PI to MTE MTE to NPI PI to MTE MTE to NPI PI to MTE MTE to NPI PI to MTE MTE to NPI PI to MTE MTE to NPI PI to MTE MTE to NPI PI to MTE MTE to NPI PI to MTE MTE to NPI PI to MTE MTE to NPI PI to MTE MTE to NPI PI to MTE MTE to NPI

1928

(32.8)

(65.9)

N/A

N/A

N/A

N/A

N/A

N/A

N/A

N/A

N/A

1932

54.5

97.8

N/A

N/A

N/A

N/A

N/A

N/A

N/A

N/A

N/A

1936

(24.7)

(22.0)

N/A

N/A

N/A

N/A

N/A

N/A

N/A

N/A

N/A

1940

(9.5)

41.8

N/A

N/A

N/A

N/A

N/A

N/A

N/A

N/A

N/A

1944

14.1

1.1

N/A

N/A

N/A

N/A

N/A

N/A

N/A

N/A

N/A

1948

24.9

35.0

N/A

N/A

N/A

N/A

N/A

N/A

N/A

N/A

N/A

1952

21.6

39.7

N/A

N/A

N/A

N/A

N/A

N/A

N/A

N/A

N/A

1956

16.1

16.3

N/A

N/A

N/A

N/A

N/A

N/A

N/A

N/A

N/A

1960

(2.7)

48.4

N/A

N/A

N/A

N/A

N/A

N/A

N/A

N/A

N/A

1964

(6.8)

26.0

N/A

N/A

N/A

N/A

N/A

N/A

N/A

N/A

N/A

1968

(17.2)

41.0

N/A

N/A

N/A

N/A

N/A

N/A

N/A

N/A

N/A

1972

(36.8)

37.1

N/A

N/A

N/A

N/A

N/A

N/A

N/A

N/A

N/A

1976

(8.9)

40.3

N/A

N/A

N/A

N/A

N/A

N/A

N/A

N/A

N/A

1980

4.4

27.4

N/A

N/A

N/A

N/A

N/A

N/A

N/A

N/A

N/A

1984

40.5

16.4

N/A

N/A

N/A

N/A

N/A

N/A

N/A

N/A

N/A

1988

8.7

39.1

N/A

81.0

N/A

47.1

N/A

(3.8)

N/A

100.2

N/A

1992

7.4

66.8

2.4

30.5

3.5

77.7

18.0

56.1

2.0

99.7

3.7

1996

43.0

20.9

56.5

22.4

37.5

(10.9)

16.4

18.5

39.5

31.4

74.8

2000

(33.4)

31.4

(25.4)

39.8

(4.0)

15.4

(18.8)

58.8

(21.3)

33.5

(18.3)

2004

17.6

(41.8)

9.6

(48.0)

9.6

(11.0)

51.5

(17.8)

19.6

(77.3)

13.8

2008

48.2

24.5

83.8

41.0

27.1

26.8

25.3

25.5

81.2

17.8

23.0

2012

35.4

6.2

34.9

17.6

28.7

10.1

9.8

(15.5)

39.4

0.4

59.5

S&P 500 (% return)

Cons Discret (%)

Cons Staples (%)

Energy (%)

Financials (%)

Health Care (%)

Industrials (%)

Info Tech (%)

Materials (%)

Real Estate (%)

Telecom Serv (%)

Utilities (%)

N/A

N/A

N/A

N/A

N/A

N/A

N/A

N/A

N/A

N/A

N/A

N/A

N/A

N/A

N/A

24.2

96.9

16.6

6.7

(24.2)

34.2

4.4

N/A

N/A

N/A

N/A

N/A

N/A

N/A

N/A

N/A

N/A

N/A

N/A

N/A

N/A

N/A

N/A

11.4

24.7

(30.6)

13.9

52.5

36.9

N/A

N/A

N/A

N/A

N/A

N/A

N/A

N/A

N/A

N/A

N/A

N/A

N/A

N/A

N/A

44.1

71.6

29.7

43.3

(41.9)

23.5

3.9

N/A

N/A

N/A

N/A

N/A

N/A

N/A

N/A

N/A

N/A

N/A

N/A

N/A

N/A

N/A

N/A

33.6

62.5

(60.7)

13.3

83.3

42.6

N/A

N/A

N/A

N/A

N/A

N/A

N/A

N/A

N/A

N/A

N/A

N/A

N/A

N/A

N/A

26.0

120.1

62.7

36.9

(38.4)

19.1

18.2

N/A

N/A

N/A

N/A

N/A

N/A

N/A

N/A

N/A

N/A

N/A

N/A

N/A

N/A

N/A

N/A

17.4

(4.7)

(3.2)

17.5

68.7

20.3

N/A

N/A

N/A

N/A

N/A

N/A

N/A

N/A

N/A

N/A

N/A

N/A

N/A

N/A

N/A

42.6

38.5

(9.8)

51.2

(37.9)

14.3

(2.4)

N/A

N/A

N/A

N/A

N/A

N/A

N/A

N/A

N/A

N/A

N/A

N/A

N/A

N/A

N/A

N/A

N/A

N/A

N/A

43.5

94.5

17.0

N/A

N/A

N/A

N/A

N/A

N/A

N/A

N/A

N/A

N/A

N/A

N/A

N/A

N/A

N/A

N/A

N/A

N/A

40.7

(63.2)

32.1

3.6

N/A

N/A

N/A

N/A

N/A

N/A

N/A

N/A

N/A

N/A

N/A

N/A

N/A

N/A

N/A

N/A

3.7

73.2

(52.9)

24.3

23.5

10.6

N/A

N/A

N/A

N/A

N/A

N/A

N/A

N/A

N/A

N/A

N/A

N/A

N/A

N/A

N/A

19.4

29.3

(1.7)

11.4

(33.8)

18.4

2.2

N/A

N/A

N/A

N/A

N/A

N/A

N/A

N/A

N/A

N/A

N/A

N/A

N/A

N/A

N/A

N/A

(11.7)

25.6

(51.0)

27.7

11.9

27.3

N/A

N/A

N/A

N/A

N/A

N/A

N/A

N/A

N/A

N/A

N/A

N/A

N/A

N/A

N/A

17.0

28.8

14.9

54.9

(19.4)

12.6

3.2

Avg (from 1928)

7.5

24.0

26.9

26.3

17.1

22.1

17.0

17.4

26.7

29.4

26.1

22.7

18.1

24.9

29.1

35.0

19.3

13.8

51.6

3.3

13.7

6.5

5.0

16.0

Avg (from 1992)

16.6

20.4

25.4

17.2

14.7

19.6

18.5

28.2

24.2

21.0

19.4

26.0

14.4

25.2

26.4

40.1

19.2

11.3

69.0

3.2

14.4

4.7

0.5

18.3

Source: Bloomberg, Jefferies

Note: (1) PI to MTE is from president inauguration to mid-term election.

(2) MTE to NPI is from mid-term election to next president inauguration.

All sectors (except for Real Estate from 2000) have sector returns statistics from 1992. Latest return is as at the close of 11 October 2016 in the US.

, Chief Global Equity Strategist, +852 3743 8073, [email protected]

Sean Darby

page 11 of 17

Please see important disclosure information on pages 14 - 17 of this report.


Check out the global equity strategy us by greg blotnick

Equity Strategy

Global

9 November 2016

xxxxxxxx

Exhibit 24: S&P 500 and Sector Returns From Presidential Elections to Mid-Term Elections

Election

Year

PE to MTE MTE to NPE PE to MTE MTE to NPE PE to MTE MTE to NPE PE to MTE MTE to NPE PE to MTE MTE to NPE PE to MTE MTE to NPE PE to MTE MTE to NPE PE to MTE MTE to NPE PE to MTE MTE to NPE PE to MTE MTE to NPE PE to MTE MTE to NPE PE to MTE MTE to NPE

1928

(23.9)

(57.7)

N/A

N/A

N/A

N/A

N/A

N/A

N/A

N/A

N/A

1932

24.6

90.4

N/A

N/A

N/A

N/A

N/A

N/A

N/A

N/A

N/A

1936

(21.8)

(16.9)

N/A

N/A

N/A

N/A

N/A

N/A

N/A

N/A

N/A

1940

(15.1)

36.7

N/A

N/A

N/A

N/A

N/A

N/A

N/A

N/A

N/A

1944

18.3

8.9

N/A

N/A

N/A

N/A

N/A

N/A

N/A

N/A

N/A

1948

15.9

27.1

N/A

N/A

N/A

N/A

N/A

N/A

N/A

N/A

N/A

1952

29.2

49.7

N/A

N/A

N/A

N/A

N/A

N/A

N/A

N/A

N/A

1956

8.3

6.9

N/A

N/A

N/A

N/A

N/A

N/A

N/A

N/A

N/A

1960

5.9

46.0

N/A

N/A

N/A

N/A

N/A

N/A

N/A

N/A

N/A

1964

(5.2)

27.7

N/A

N/A

N/A

N/A

N/A

N/A

N/A

N/A

N/A

1968

(18.3)

35.3

N/A

N/A

N/A

N/A

N/A

N/A

N/A

N/A

N/A

1972

(34.1)

37.3

N/A

N/A

N/A

N/A

N/A

N/A

N/A

N/A

N/A

1976

(9.0)

37.5

N/A

N/A

N/A

N/A

N/A

N/A

N/A

N/A

N/A

1980

6.5

23.9

N/A

N/A

N/A

N/A

N/A

N/A

N/A

N/A

N/A

1984

44.5

11.8

N/A

N/A

N/A

N/A

N/A

N/A

N/A

N/A

N/A

1988

13.3

34.8

N/A

67.7

N/A

51.3

N/A

(1.2)

N/A

77.3

N/A

1992

10.9

53.4

10.5

28.9

0.6

62.2

14.9

38.5

15.2

83.4

(3.2)

1996

55.5

28.9

58.4

18.8

50.6

(10.3)

31.2

25.0

51.9

34.4

87.1

2000

(37.5)

26.4

(23.2)

35.0

(4.7)

7.1

(23.0)

50.9

(23.1)

29.4

(22.7)

2004

22.3

(27.3)

13.5

(37.7)

18.1

(1.2)

59.5

(4.0)

23.3

(53.7)

21.8

(18.2)

2008

18.7

19.7

53.6

32.5

14.5

22.6

7.3

21.7

(11.2)

10.8

13.9

2012

40.9

6.2

43.6

17.6

33.1

10.1

13.2

(15.5)

48.3

0.4

67.4

S&P 500 (% return)

Cons Discret (%)

Cons Staples (%)

Energy (%)

Financials (%)

Health Care (%)

Industrials (%)

Info Tech (%)

Materials (%)

Real Estate (%)

Telecom Serv (%)

Utilities (%)

N/A

N/A

N/A

N/A

N/A

N/A

N/A

N/A

N/A

N/A

N/A

N/A

N/A

N/A

N/A

33.1

84.0

23.2

(0.3)

N/A

N/A

N/A

N/A

N/A

N/A

N/A

N/A

N/A

N/A

N/A

N/A

N/A

N/A

N/A

N/A

16.8

32.8

(34.6)

17.9

19.7

45.7

N/A

N/A

N/A

N/A

N/A

N/A

N/A

N/A

N/A

N/A

N/A

N/A

N/A

N/A

N/A

37.4

61.1

37.5

38.5

(25.9)

16.1

3.9

N/A

N/A

N/A

N/A

N/A

N/A

N/A

N/A

N/A

N/A

N/A

N/A

N/A

N/A

N/A

N/A

44.2

96.2

(66.8)

14.0

49.6

44.0

N/A

N/A

N/A

N/A

N/A

N/A

N/A

N/A

N/A

N/A

N/A

N/A

N/A

N/A

N/A

16.8

82.2

92.7

36.0

(24.6)

18.0

18.2

N/A

N/A

N/A

N/A

N/A

N/A

N/A

N/A

N/A

N/A

N/A

N/A

N/A

N/A

N/A

N/A

17.4

1.3

(1.4)

23.7

33.0

29.1

N/A

N/A

N/A

N/A

N/A

N/A

N/A

N/A

N/A

N/A

N/A

N/A

N/A

N/A

N/A

42.6

30.4

(11.4)

43.7

(21.2)

6.5

(2.4)

N/A

N/A

N/A

N/A

N/A

N/A

N/A

N/A

N/A

N/A

N/A

N/A

N/A

N/A

N/A

N/A

N/A

N/A

N/A

45.9

23.6

23.6

N/A

N/A

N/A

N/A

N/A

N/A

N/A

N/A

N/A

N/A

N/A

N/A

N/A

N/A

N/A

N/A

N/A

N/A

38.4

(42.1)

25.1

3.6

N/A

N/A

N/A

N/A

N/A

N/A

N/A

N/A

N/A

N/A

N/A

N/A

N/A

N/A

N/A

N/A

14.9

88.4

(52.8)

22.4

7.1

7.7

N/A

N/A

N/A

N/A

N/A

N/A

N/A

N/A

N/A

N/A

N/A

N/A

N/A

N/A

N/A

7.7

18.9

(1.9)

13.1

(23.6)

21.5

2.2

N/A

N/A

N/A

N/A

N/A

N/A

N/A

N/A

N/A

N/A

N/A

N/A

N/A

N/A

N/A

N/A

(9.9)

26.8

(55.0)

35.9

6.3

27.8

N/A

N/A

N/A

N/A

N/A

N/A

N/A

N/A

N/A

N/A

N/A

N/A

N/A

N/A

N/A

14.7

27.6

25.1

45.5

(15.1)

12.1

3.2

27.8

4.4

Avg (from 1928)

6.8

23.0

26.1

23.2

18.7

20.2

17.2

16.5

17.4

26.0

27.4

22.0

16.4

24.1

30.2

34.2

17.2

12.6

31.0

6.2

14.6

5.4

5.3

16.1

Avg (from 1992)

14.0

20.2

22.6

15.5

15.8

16.1

18.0

26.4

11.2

20.9

19.4

23.3

10.5

25.5

27.4

40.9

14.8

9.6

34.7

7.1

16.0

5.6

0.8

19.0

Source: Bloomberg, Jefferies

Note: (1) PE to MTE is from presidential election to mid-term election.

(2) MTE to NPE is from mid-term election to next presidential election.

All sectors (except for Real Estate from 2000) have sector returns statistics from 1992. Latest return is as at the close of 11 October 2016 in the US.

xxxxxx

, Chief Global Equity Strategist, +852 3743 8073, [email protected]

Sean Darby

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xxxxxxxx

Exhibit 25: Global Valuation Table

Consensus Valuations

EPS Revisions

EPS Revisions

12M Forward Looking PE

12M Forward Looking PB

12M Forward EPSG, %

24M Forward EPSG, %

12M Forward ROE, %

24M Forward ROE, %

12M Forward PEG, x

24M Forward PEG, x

12M Forward DY, %

24M Forward DY, %

12M Chg in FY1, %

12M Chg in FY2, %

3M Chg in FY1, %

3M Chg in FY2, %

24M Forward, x

24M Forward, x

Altman Z Score

Current, x

Current x

5Y Avg, x

5Y Avg, x

Country

Australia

15.7

14.6

14.4

1.76

1.79

1.69

1.5

1.4

11.4

8.4

11.3

11.7

4.52

4.80

(0.7)

1.0

3.8

9.6

9.89

Brazil

14.4

11.0

11.6

1.38

1.15

1.30

1.4

1.2

13.2

24.8

9.4

11.0

3.17

4.08

8.6

(2.2)

19.2

6.4

1.93

Canada

16.5

15.1

15.1

1.68

1.65

1.61

1.3

1.2

25.4

8.9

10.4

10.8

2.94

2.86

(2.8)

(0.8)

(0.2)

3.2

4.00

Chile

15.9

14.7

14.6

1.58

1.77

1.51

2.8

2.5

7.6

8.8

9.2

9.8

2.73

2.95

(0.2)

(1.1)

19.7

5.9

2.11

China

11.2

9.6

10.2

1.27

1.34

1.15

1.4

1.2

8.0

10.6

11.4

11.5

2.80

3.13

(2.1)

(1.6)

(11.1)

(7.5)

0.00

Colombia

10.7

13.6

8.9

1.22

1.88

1.16

0.2

0.2

48.2

18.0

11.8

13.7

3.13

4.59

(0.2)

(6.1)

(2.7)

11.6

1.53

Denmark

16.0

16.5

14.2

2.46

2.25

2.29

1.1

1.0

11.1

12.3

15.4

16.1

2.72

2.98

(1.1)

(2.5)

3.6

4.6

11.93

France

14.3

13.4

13.0

1.38

1.32

1.31

1.7

1.5

9.0

10.0

9.7

10.1

3.53

3.71

0.1

0.1

3.3

4.0

3.59

Germany

13.1

12.5

11.9

1.50

1.48

1.40

1.6

1.5

10.6

10.1

11.6

11.8

3.08

3.35

(1.4)

(0.8)

5.5

7.0

4.05

Greece

12.1

10.7

11.9

0.71

0.73

0.71

0.7

0.7

11.8

1.7

5.9

5.7

3.57

3.72

(3.8)

(3.7)

(62.4)

(78.7)

1.71

Hong Kong*

10.6

9.6

9.5

1.01

1.14

0.94

1.1

1.0

9.9

11.1

9.6

9.9

3.50

3.79

(1.5)

(0.9)

(9.7)

(5.0)

0.00

India

16.7

14.3

14.1

2.40

2.10

2.16

1.0

0.8

22.5

18.3

14.4

15.3

1.64

1.87

0.6

0.6

4.2

3.9

5.85

Indonesia

17.6

15.0

15.3

2.56

2.67

2.33

1.4

1.3

17.8

14.9

14.7

15.3

2.22

2.52

0.5

1.3

12.6

16.1

10.10

Ireland

14.9

5.2

13.6

1.94

2.30

1.76

0.8

0.8

12.4

9.4

13.2

13.1

1.43

1.69

(5.1)

(1.8)

4.4

1.5

4.92

Israel

10.0

11.2

9.3

1.15

1.55

1.05

1.3

1.2

11.0

8.2

12.8

12.7

3.30

3.73

1.6

0.5

1.8

6.0

14.64

Italy

13.3

13.2

11.4

0.96

0.99

0.93

0.7

0.6

29.3

15.3

7.4

8.2

4.32

4.80

(4.3)

0.6

(11.0)

0.7

2.87

Japan

13.9

13.9

12.8

1.16

1.15

1.09

1.6

1.5

11.0

8.3

8.4

8.6

2.29

2.43

(3.7)

(3.0)

11.5

11.4

4.51

Korea

10.2

10.2

9.4

0.95

1.04

0.88

0.9

0.8

14.7

8.4

9.3

9.3

1.83

1.90

(3.6)

(1.6)

10.9

10.5

6.27

Malaysia

16.0

15.2

14.7

1.52

1.79

1.44

2.2

2.0

9.6

8.9

9.5

9.7

3.23

3.44

(8.0)

(6.4)

(1.2)

(1.6)

4.57

Mexico

17.8

18.0

15.5

2.20

2.49

2.04

1.0

0.9

21.3

14.8

12.3

13.1

2.27

2.57

(0.8)

1.6

(4.6)

0.3

3.33

New Zealand

18.5

17.2

17.1

1.79

1.66

1.76

2.3

2.1

10.0

8.1

9.6

10.1

4.68

4.91

2.4

1.3

21.4

19.3

5.35

Netherlands

14.9

13.9

13.2

1.70

1.75

1.60

7.9

7.1

7.2

12.8

11.5

12.1

3.22

3.53

(1.2)

(5.7)

6.0

3.6

2.99

Norway

15.6

11.9

12.7

1.36

1.32

1.30

0.8

0.7

26.7

22.3

8.8

10.3

4.40

4.73

(5.0)

(3.3)

(24.2)

(4.8)

4.50

Philippines

15.6

16.0

14.1

2.00

2.20

1.83

1.3

1.2

9.3

10.8

12.8

12.9

1.87

2.02

(2.7)

(3.6)

12.3

5.4

3.06

Russia

6.3

5.8

5.4

0.75

0.68

0.68

0.4

0.3

15.1

15.6

12.0

12.5

4.95

5.61

8.5

3.7

5.1

10.3

2.83

Singapore

13.0

13.8

12.0

1.08

1.30

1.04

2.23

2.1

7.3

8.6

8.1

8.5

4.16

4.32

(0.6)

(2.1)

2.5

1.2

3.30

South Africa

13.2

13.4

12.1

1.79

2.07

1.68

0.8

0.7

18.9

8.6

13.7

14.2

3.59

3.96

(4.1)

(2.2)

18.8

22.1

3.80

Spain

14.6

14.0

12.9

1.31

1.31

1.25

1.3

1.1

18.0

12.4

9.1

9.7

4.28

4.36

(1.5)

(1.9)

(12.0)

(1.2)

2.77

Sweden

15.8

14.7

14.5

2.05

2.00

1.94

1.8

1.7

8.0

8.9

13.0

13.4

3.77

3.99

(5.0)

(5.7)

(4.3)

(4.1)

8.35

Switzerland

16.9

15.8

15.3

2.20

2.31

2.10

2.1

1.9

7.6

10.5

13.1

13.8

3.53

3.73

0.6

(1.3)

(2.9)

(2.9)

5.25

Taiwan

14.0

14.0

12.9

1.67

1.65

1.59

1.9

1.8

8.8

8.6

11.9

12.4

4.09

4.35

0.1

(0.4)

(1.2)

1.9

8.86

Thailand

14.9

13.4

13.0

1.89

2.00

1.69

1.2

1.1

10.6

14.2

12.7

13.0

3.21

3.61

2.4

(1.2)

5.5

2.0

8.43

Turkey

8.0

9.7

7.0

1.01

1.29

0.91

0.5

0.4

16.1

14.3

12.7

13.1

3.82

4.28

(5.9)

(4.9)

13.1

6.8

3.26

United Kingdom

14.7

13.4

13.1

1.74

1.69

1.63

1.2

1.1

13.2

11.8

11.9

12.6

4.02

4.40

(0.8)

0.0

(14.8)

(6.8)

7.32

United States

17.1

15.6

15.1

2.51

2.30

2.35

1.5

1.4

11.6

12.9

14.8

15.6

2.25

2.42

0.4

(1.1)

0.4

4.0

15.46

Source: FactSet, Jefferies

page 13 of 17

, Chief Global Equity Strategist, +852 3743 8073, [email protected]

Sean Darby

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Analyst Certification:

I, Sean Darby, certify that all of the views expressed in this research report accurately reflect my personal views about the subject security(ies) and

subject company(ies). I also certify that no part of my compensation was, is, or will be, directly or indirectly, related to the specific recommendations

or views expressed in this research report.

I, Kenneth Chan, certify that all of the views expressed in this research report accurately reflect my personal views about the subject security(ies) and

subject company(ies). I also certify that no part of my compensation was, is, or will be, directly or indirectly, related to the specific recommendations

or views expressed in this research report.

I, Irene Zhou, certify that all of the views expressed in this research report accurately reflect my personal views about the subject security(ies) and

subject company(ies). I also certify that no part of my compensation was, is, or will be, directly or indirectly, related to the specific recommendations

or views expressed in this research report.

Registration of non-US analysts: Sean Darby is employed by Jefferies Hong Kong Limited, a non-US affiliate of Jefferies LLC and is not registered/

qualified as a research analyst with FINRA. This analyst(s) may not be an associated person of Jefferies LLC, a FINRA member firm, and therefore may

not be subject to the NASD Rule 2241 and Incorporated NYSE Rule 472 restrictions on communications with a subject company, public appearances

and trading securities held by a research analyst.

Registration of non-US analysts: Kenneth Chan is employed by Jefferies Hong Kong Limited, a non-US affiliate of Jefferies LLC and is not registered/

qualified as a research analyst with FINRA. This analyst(s) may not be an associated person of Jefferies LLC, a FINRA member firm, and therefore may

not be subject to the NASD Rule 2241 and Incorporated NYSE Rule 472 restrictions on communications with a subject company, public appearances

and trading securities held by a research analyst.

Registration of non-US analysts: Irene Zhou is employed by Jefferies Hong Kong Limited, a non-US affiliate of Jefferies LLC and is not registered/

qualified as a research analyst with FINRA. This analyst(s) may not be an associated person of Jefferies LLC, a FINRA member firm, and therefore may

not be subject to the NASD Rule 2241 and Incorporated NYSE Rule 472 restrictions on communications with a subject company, public appearances

and trading securities held by a research analyst.

As is the case with all Jefferies employees, the analyst(s) responsible for the coverage of the financial instruments discussed in this report receives

compensation based in part on the overall performance of the firm, including investment banking income. We seek to update our research as

appropriate, but various regulations may prevent us from doing so. Aside from certain industry reports published on a periodic basis, the large majority

of reports are published at irregular intervals as appropriate in the analyst's judgement.

Investment Recommendation Record

(Article 3(1)e and Article 7 of MAR)

Recommendation Published

Recommendation Distributed

, 00:44 ET. November 9, 2016

, 00:43 ET. November 9, 2016

Explanation of Jefferies Ratings

Buy - Describes securities that we expect to provide a total return (price appreciation plus yield) of 15% or more within a 12-month period.

Hold - Describes securities that we expect to provide a total return (price appreciation plus yield) of plus 15% or minus 10% within a 12-month period.

Underperform - Describes securities that we expect to provide a total return (price appreciation plus yield) of minus 10% or less within a 12-month

period.

The expected total return (price appreciation plus yield) for Buy rated securities with an average security price consistently below $10 is 20% or more

within a 12-month period as these companies are typically more volatile than the overall stock market. For Hold rated securities with an average

security price consistently below $10, the expected total return (price appreciation plus yield) is plus or minus 20% within a 12-month period. For

Underperform rated securities with an average security price consistently below $10, the expected total return (price appreciation plus yield) is minus

20% or less within a 12-month period.

NR - The investment rating and price target have been temporarily suspended. Such suspensions are in compliance with applicable regulations and/

or Jefferies policies.

CS - Coverage Suspended. Jefferies has suspended coverage of this company.

NC - Not covered. Jefferies does not cover this company.

Restricted - Describes issuers where, in conjunction with Jefferies engagement in certain transactions, company policy or applicable securities

regulations prohibit certain types of communications, including investment recommendations.

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on the investment merits of the company are provided.

Valuation Methodology

Jefferies' methodology for assigning ratings may include the following: market capitalization, maturity, growth/value, volatility and expected total

return over the next 12 months. The price targets are based on several methodologies, which may include, but are not restricted to, analyses of market

risk, growth rate, revenue stream, discounted cash flow (DCF), EBITDA, EPS, cash flow (CF), free cash flow (FCF), EV/EBITDA, P/E, PE/growth, P/CF,

P/FCF, premium (discount)/average group EV/EBITDA, premium (discount)/average group P/E, sum of the parts, net asset value, dividend returns,

and return on equity (ROE) over the next 12 months.

Jefferies Franchise Picks

Jefferies Franchise Picks include stock selections from among the best stock ideas from our equity analysts over a 12 month period. Stock selection

is based on fundamental analysis and may take into account other factors such as analyst conviction, differentiated analysis, a favorable risk/reward

ratio and investment themes that Jefferies analysts are recommending. Jefferies Franchise Picks will include only Buy rated stocks and the number

can vary depending on analyst recommendations for inclusion. Stocks will be added as new opportunities arise and removed when the reason for

inclusion changes, the stock has met its desired return, if it is no longer rated Buy and/or if it triggers a stop loss. Stocks having 120 day volatility in

the bottom quartile of S&P stocks will continue to have a 15% stop loss, and the remainder will have a 20% stop. Franchise Picks are not intended

, Chief Global Equity Strategist, +852 3743 8073, [email protected]

Sean Darby

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to represent a recommended portfolio of stocks and is not sector based, but we may note where we believe a Pick falls within an investment style

such as growth or value.

Risks which may impede the achievement of our Price Target

This report was prepared for general circulation and does not provide investment recommendations specific to individual investors. As such, the

financial instruments discussed in this report may not be suitable for all investors and investors must make their own investment decisions based

upon their specific investment objectives and financial situation utilizing their own financial advisors as they deem necessary. Past performance of

the financial instruments recommended in this report should not be taken as an indication or guarantee of future results. The price, value of, and

income from, any of the financial instruments mentioned in this report can rise as well as fall and may be affected by changes in economic, financial

and political factors. If a financial instrument is denominated in a currency other than the investor's home currency, a change in exchange rates may

adversely affect the price of, value of, or income derived from the financial instrument described in this report. In addition, investors in securities such

as ADRs, whose values are affected by the currency of the underlying security, effectively assume currency risk.

For Important Disclosure information on companies recommended in this report, please visit our website at https://javatar.bluematrix.com/sellside/

Disclosures.action or call 212.284.2300.

Distribution of Ratings

IB Serv./Past 12 Mos.

Count

324

171

17

Rating

Count

1108

863

163

Percent

51.92%

40.44%

7.64%

Percent

29.24%

19.81%

10.43%

BUY

HOLD

UNDERPERFORM

, Chief Global Equity Strategist, +852 3743 8073, [email protected]

Sean Darby

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page 16 of 17

Sean Darby

, Chief Global Equity Strategist, +852 3743 8073, [email protected]

Please see important disclosure information on pages 14 - 17 of this report.


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Equity Strategy

Global

9 November 2016

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© 2016 Jefferies Group LLC

, Chief Global Equity Strategist, +852 3743 8073, [email protected]

Sean Darby

page 17 of 17

Please see important disclosure information on pages 14 - 17 of this report.


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