Weekly Investment Insight

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1 *INVESTMENT PRODUCTS: NOT A BANK DEPOSIT. NOT GOVERNMENT INSURED. NO BANK GUARANTEE. MAY LOSE VALUE Citibank Wealth Management Aug 8, 2016 with data as of Aug 5 Weekly Citi analysts forecasts Market Overview 02 Equity 03 Bond & Commodities 04 Weekly Commentary Hong Kong Stocks Update & Sector Outlook Equity Index 07 Commodities 08 Foreign Exchange 09 Please note and carefully read the Important Disclosure on the last part

2 Weekly Market Overview Chart 1:Weekly Performance S&P 500 Index STOXX Europe 600 Nikkei 225 Hang Seng Index HSCEI Shanghai Comp. US Gov't Bond Index ^ World IG Corp Bond Index ^ US HY Bond Index ^ US Dollar Index COMEX Gold Futures WTI Crude Oil Futures -1.9% -0.1% -0.1% -0.7% -0.4% -0.7% 0.4% 1.2% 1.9% 0.5% 0.7% 0.5% Key Economic Releases / Events over the Week Brazil Olympic Games kicked off on Friday: Olympic Games impact on equity market: Four out of the last five Summer Olympic host countries have outperformed global equity market in the subsequent 12 months. One year after the beginning of the games, Australia, Greece and China equities outperformed the MSCI Global equity market by 25% to 30%. UK is the only hosting country to underperform following the games: -4%. Citi analysts anticipate the Brazil Boverpsa Index to reach 60,000 by end-2016 (potential upside: 4%) Host countries have outperformed following the Olympic games* Source: Bloomberg L.P., as of Aug 5, 2016 ^Reference Indices: Citigroup Bond Indices Series Market Overview Last week, global equities and fixed income were little changed as investors assess new easing measures adapted by the Bank of England and the US job data released on Friday. Please note and carefully read the Important Disclosure on the last part These developments may point to potential monetary divergence for major central banks. (Pls see Page 3) *Sample includes only the last 5 Olympic games: Atlanta (1996), Sidney (2000), Athens (2004), Beijing (2008), London (2012). Each city is represented by its country MSCI equity index. Source: Bloomberg, Citi, as of July 31,

3 Potential monetary divergence for major central banks US Non-Farm Payroll: Payrolls rose by 255,000 in July, exceeding the market estimate of 180,000. The outsized print followed an upwardly-revised 292,000 additions in June. Rate Hike expectation went up: Following the release of the job data, market now price in 39% probability of Fed rate hike in Dec 2016, up from 33%. Bank of England announced additional easing: 1) a cut to Bank Rate by 25bp to 0.25%, 2) a total of 70bn in new asset purchases and 3) a 100bn cheap funding facility for banks. Please note and carefully read the Important Disclosure on the last part Implied probability of Fed rate hike in Dec /15 02/16 04/16 06/16 Source: Bloomberg L.P., as of Aug 5, 2016 Potential monetary divergence Loosening outside US: Post Brexit, the BOE will join the ECB in buying corporate debt. With inflation subsiding and the USD stabilizing, key emerging markets such as Brazil look to eventually ease monetary policy. US likely to tighten further: With 274,000 avg monthly job gains in the past 2 months and cycle-high wage gains, the Fed will see its monetary policy stance as out of position for the longer run stability of the US economy if it keeps Fed funds rate below 0.5% indefinitely. Investment Implications: UK equities: Given the FTSE 100 has 50% of sales/profits outside of EU, 70% outside of the UK, weaker GBP may boost EPS for UK. EPS may return to positive territory in 2017, the 1st time in 5 years. We expect FTSE 100 to reach 7,600 by end-2017 (upside:12%). Investment Implications: US equities: The President Election focus may emerge in Oct in the run-up to the Nov 8 vote similar to Brexit about 2-3 weeks before the referendum. EPS growth is likely to improve due to favourable base effects as drags from low oil prices and strong US$ dissipate later in the year. The 7th month in a row of ISM manufacturing new orders above 50 may further supports earnings acceleration. Our mid-2017 target for S&P 500 is 2,250 (upside: 4%) 3

4 Chart 3: Weekly Equity Market Performance Chart 4: Weekly Bond and Commodities Performance Equity 5-Aug Close Weekly Change Change (%) Weekly 1-Month 3-Month 6-Month YTD Global / US MSCI AC World Index (Local) % 4.5% 5.6% 12.0% 2.5% S&P 500 Index 2, % 4.5% 6.4% 16.1% 6.8% DJ Industrial Average 18, % 3.9% 5.0% 14.4% 6.4% Russell 2000 Index 1, % 8.1% 11.1% 24.9% 8.4% Europe STOXX Europe % 5.3% 2.6% 4.7% -6.7% FTSE 100 Index 6, % 3.8% 11.1% 16.2% 8.8% DAX Index 10, % 8.8% 5.2% 11.6% -3.5% CAC 40 Index 4, % 5.9% 2.1% 5.0% -4.9% Japan Topix 1, % 1.9% -1.5% -6.5% -17.3% Nikkei , % 3.7% 0.7% -3.4% -14.6% Emerging Market MSCI EM Index % 6.5% 9.4% 19.7% 11.5% Asia MSCI Asia ex Japan % 5.7% 8.9% 16.4% 6.8% Shanghai Composite 2, % -1.0% -0.7% 7.7% -15.9% CSI 300 3, % -0.1% -0.3% 8.1% -14.1% Hang Seng Index 22, % 6.7% 8.3% 14.8% 1.1% HS China Enterprise Index 9, % 5.6% 5.9% 13.4% -5.5% MSCI China Index % 5.4% 6.4% 14.8% -1.8% S&P/ASX 200 5, % 5.2% 4.1% 10.5% 3.8% Taiwan TAIEX Index 9, % 4.3% 11.3% 12.8% 9.0% Kospi Index 2, % 1.4% 2.1% 5.2% 2.9% BSE Sensex 30 Index 28, % 3.4% 11.1% 14.1% 7.5% Jakarta Composite Index 5, % 9.0% 12.4% 12.9% 18.0% Straits Times Index 2, % -1.3% 2.2% 7.8% -1.9% FTSE Bursa Malaysia KLCI 1, % 0.8% 1.2% 0.1% -1.7% SET Index 1, % 4.7% 9.2% 16.3% 17.9% Latin America Brazil Ibovespa Index 57, % 11.2% 11.6% 42.1% 33.0% Mexico IPC Index 47, % 3.0% 4.5% 9.2% 9.8% Emerging Europe Russia RTS Index $ % 1.1% 2.1% 28.9% 23.6% Fixed Income Bond Indices 5-Aug Close Weekly Weekly 1-Month 3-Month 6-Month Change YTD Citigroup US Gov't Bond Index % -1.1% 1.5% 2.4% 5.0% Citigroup WBIG - Corporate Index % 0.4% 3.0% 7.9% 8.2% Citigroup High Yield Market Index % 2.6% 5.8% 16.6% 13.0% JPM HY Bond Spread-to-Worst Glbl % -10.3% -14.7% -30.4% -21.9% US Treasury Yields 3-Month - Yield (%) Year - Yield (%) Year - Yield (%) Year - Yield (%) Year - Yield (%) Change (%) Commodity Energy 5-Aug Weekly Weekly 1-Month 3-Month 6-Month Close Change YTD WTI Crude Futures ($/barrel) % -10.3% -5.7% 35.3% 12.9% Brent Crude Futures ($/barrel) % -7.7% -1.6% 30.0% 18.8% Natural Gas Futures (MMBtu) % 0.3% 33.5% 34.4% 18.6% Base Metals LME Aluminum Futures ($/MT) % -0.6% 2.3% 9.7% 9.2% LME Copper Futures ($/MT) % -0.6% 0.1% 3.4% 1.8% Precious Metals Change (%) Change in Yield (in bps) Comex Gold Futures ($/oz.) % -1.4% 5.3% 15.7% 26.3% Comex Silver Futures ($/oz.) % -0.5% 14.4% 34.1% 43.6% Source: Bloomberg L.P., as of Aug 5, 2016 Please note and carefully read the Important Disclosure on the last part 4

5 Hong Kong Stocks Update Chart 5: Top/Bottom Five HSI Constituents HSBC HOLDINGS PL CCB-H CHINA RES LAND BANKCOMM-H BANK OF CHINA-H Top 5 Performers 3.46% 3.11% 2.68% 2.51% 5.84% Source: Bloomberg L.P., as of Aug 5, 2016 Hang Seng Index (HSI) rose 1.2% last week boosted by the long awaited monetary easing from the Bank of England and as crude oil rebounded. Banking sector led the rally. SWIRE PACIFIC-A CHINA MER HOLD WHARF HLDG HANG SENG BANK LI & FUNG LTD Bottom 5 Performers -5.15% -3.25% -1.94% -2.20% -2.34% HSBC (5) rose 5.8% and Standard Chartered (2888) gained 5.3% following the release of their 1H results. Sector Update: Global Banks Latest Updates: HSBC reported a year-on-year drop of almost 29% in 1H profit before tax, on restructuring costs and weak revenues. HSBC announced a US$2.5 billion share buyback plan. Standard Chartered PLC said net profit for 1H was US$394 million, down more than 40% year-on-year but a significant improvement from the US$3.8 billion net loss in 2H The value of bad loans on its books dropped to US$1.1 billion from US$1.65 billion in 1H 2015 and from US$2.36 billion in 2H Citi analysts views: Outlook for Global Banks We prefer US banks that are better positioned vs EU banks in the rate cycle and for capital return/balance sheet. EM banks are in an NPL deterioration cycle albeit valuations are already close to decade lows. In Europe, the recent European Banks Stress Test 2016 showed that all 51 banks, except one Italian bank, maintain capital levels above Pillar 1 transitional capital requirements in the adverse scenario. As such practically all banks passed the 2016 stress test. Please note and carefully read the Important Disclosure on the last part 5

6 Citi analysts : Global Equity Index (Remarks: as of Aug 5, 2016) Citi forecasts Valuation Past Performance 5-Aug End-2016 Expected Forecast P/E ratio Forecast P/B ratio Region / Index 1-Week 3-Month YTD Close Change Global MSCI AC World Index (Local) 0.1% 5.6% 2.5% % MSCI EM Index 1.4% 9.4% 11.5% % US S&P 500 Index 0.4% 6.4% 6.8% 2,183 2, % DJ Industrial Average 0.6% 5.0% 6.4% 18, Russell 2000 Index 0.9% 11.1% 8.4% 1, Europe STOXX Europe % 2.6% -6.7% % FTSE 100 Index 1.0% 11.1% 8.8% 6,793 7, % DAX Index 0.3% 5.2% -3.5% 10, CAC 40 Index -0.7% 2.1% -4.9% 4, Japan Topix -3.2% -1.5% -17.3% 1,280 1, % Nikkei % 0.7% -14.6% 16, Asia MSCI Asia ex Japan 1.3% 8.9% 6.8% % Shanghai Composite -0.1% -0.7% -15.9% 2, CSI % -0.3% -14.1% 3,205 3, % Hang Seng Index 1.2% 8.3% 1.1% 22,146 21, % HS China Enterprise Index 1.9% 5.9% -5.5% 9,132 9, % MSCI China 1.5% 6.4% -1.8% % S&P/ASX % 4.1% 3.8% 5, Taiwan TAIEX Index 1.2% 11.3% 9.0% 9, Kospi Index 0.1% 2.1% 2.9% 2, BSE Sensex 30 Index 0.1% 11.1% 7.5% 28, Jakarta Composite Index 3.9% 12.4% 18.0% 5, Straits Times Index -1.4% 2.2% -1.9% 2, FTSE Bursa Malaysia KLCI 0.7% 1.2% -1.7% 1, SET Index -0.4% 9.2% 17.9% 1, Latin America Brazil Ibovespa Index 0.6% 11.6% 33.0% 57, Mexico IPC Index 1.1% 4.5% 9.8% 47, Emerging Europe Russia RTS Index $ 0.9% 2.1% 23.6% Source: Bloomberg L.P. and Citi, performance and market data as of Aug 5, 2016 Note: * = mid-2016 forecasts Please note and carefully read the Important Disclosure on the last part 6

7 Citi analysts : Commodity Future Price (Remarks: as of Aug 5, 2016) Past Performance 1-Week 3-Month YTD Citi analysts' forecasts Months Months Energy NYMEX WTI Crude USD/bbl 0.5% -5.7% 12.9% % ICE Brent Crude USD/bbl 4.3% -1.6% 18.8% % NYMEX Natural Gas USD/MMBtu -3.6% 33.5% 18.6% % Base Metals Aluminum (LME) USD/MT 0.1% 2.3% 9.2% 1, % Copper (LME) USD/MT -2.8% 0.1% 1.8% 4, % Lead (LME) USD/MT -2.1% 2.9% -0.4% 1, % Nickel (LME) USD/MT 0.8% 18.8% 21.5% 10, % Tin (LME) USD/MT 2.8% 5.8% 26.1% 18, % Zinc (LME) USD/MT 1.0% 21.8% 40.8% 2, % Precious Metals Gold (Comex) USD/oz -0.7% 5.3% 26.3% 1, % Silver (Comex) USD/oz -2.6% 14.4% 43.6% % Platinum (NYMEX) USD/oz 0.1% 8.2% 29.1% 1, % Palladium (NYMEX) USD/oz -1.9% 15.9% 23.9% % Agriculture Corn (CBT) USd/bu -3.1% -13.2% -9.6% % Wheat (CBT) USd/bu 2.0% -10.2% -11.5% % Soybean (CBT) USd/bu -4.3% -2.4% 13.4% % Rice (CBT) USD/cwt -6.4% -18.2% -19.5% % Cotton (NYB-ICE) USd/lb 3.3% 24.0% 21.1% % Sugar (NYB-ICE) USd/lb 6.8% 28.5% 33.5% % Coffee (NYB-ICE) USd/lb -2.5% 17.3% 12.5% % Cocoa (NYB-ICE) USD/MT 6.6% -4.3% -5.9% 3, % 5-Aug Close Expected Change (6-12 Months) Please note and carefully read the Important Disclosure on the last part 7 Source: Bloomberg L.P. and Citi, performance and market data as of Aug 5, 2016

8 Citi analysts : Foreign Exchange (Remarks: as of Aug 5, 2016) Past Performance 5-Aug Citi analysts' forecasts Expected Change 1-Week 3-Month YTD Close 0-3 Months 6-12 Months (6-12 Months) Major Pairs Dollar Index 0.7% 2.6% -2.5% % Euro -0.8% -2.8% 2.1% % Japanese Yen -0.2% -5.1% -15.3% % British Pound -1.2% -9.7% -11.3% % Swiss Franc 1.2% 1.3% -2.1% % Australian Dollar 0.3% 2.1% 4.6% % New Zealand Dollar -0.8% 3.8% 4.6% % Canadian Dollar 1.1% 2.5% -4.8% % Asia Chinese Renminbi -0.4% -2.3% -2.5% % Indonesian Rupiah 0.0% 1.7% 5.1% 13,117 13,100 13, % Indian Rupee 0.3% -0.3% -0.9% % Korean Won 0.9% 4.8% 5.8% 1,111 1,155 1, % Malaysian Ringgit 0.9% -0.5% 6.6% % Philippine Peso 0.5% 0.7% 0.0% % Singapore Dollar -0.5% 0.9% 5.3% % Thai Baht -0.9% 0.3% 2.7% % Taiwan Dollar 1.5% 2.8% 4.4% % EMEA Russian Ruble 0.7% 0.7% 10.8% % Turkish Lira -0.3% -2.5% -2.7% % South African Rand 1.1% 9.1% 12.7% % Latin America Brazilian Real 2.6% 11.7% 25.1% % Mexico Peso 0.0% -4.6% -8.2% % Source: Bloomberg L.P. and Citi, performance and market data as of Aug 5, 2016 Please note and carefully read the Important Disclosure on the last part 8

9 Important Disclosure Citi analysts refers to investment professionals within Citi Research (CR) and Citi Global Markets (CGM) and voting members of the Global Investment Committee of Global Wealth Management. Citibank N.A. and its affiliates / subsidiaries provide no independent research or analysis in the substance or preparation of this document. Investment products are not available to US persons and not all products and services are provided by all affiliates or are available at all locations. This document is for general informational purposes only and is not intended as a recommendation or an offer or solicitation for the purchase or sale of any security, currency, investment, service or to attract any funds or deposits. Information in this document has been prepared without taking account of the objectives, financial situation or needs of any particular investor. Therefore, investment products mentioned in this document may not be suitable for all investors. Any person considering an investment should seek independent advice on the suitability or otherwise of a particular investment. Before making any investment, each investor must obtain the investment offering materials, which include a description of the risks, fees and expenses and the performance history, if any, which may be considered in connection with making an investment decision. Each investor should carefully consider the risks associated with the investment and make a determination based upon the investor s own particular circumstances, that the investment is consistent with the investor s investment objectives In any event, past performance is no guarantee of future results, and future results may not meet our expectations due to a variety of economic, market and other factors. Further, any projections of potential risk or return are illustrative and should not be taken as limitations of the maximum possible loss or gain. Investments are not deposits or other obligations of, guaranteed or insured by Citibank N.A., Citigroup Inc., or any of their affiliates or subsidiaries, or by any local government or insurance agency, and are subject to investment risk, including the possible loss of the principal amount invested. Investors investing in funds denominated in non-local currency should be aware of the risk of exchange rate fluctuations that may cause a loss of principal. Neither Citigroup nor its affiliates can accept responsibility for the tax treatment of any investment product, whether or not the investment is purchased by a trust or company administered by an affiliate of Citigroup. Citigroup assumes that, before making any commitment to invest, the investor and (where applicable, its beneficial owners) have taken whatever tax, legal or other advice the investor/beneficial owners consider necessary and have arranged to account for any tax lawfully due on the income or gains arising from any investment product provided by Citigroup. If an investor changes country of residence, citizenship, nationality, or place of work, it is his/her responsibility to understand how his/her investment transactions are affected by such change and comply with all applicable laws and regulations as and when such becomes applicable Citibank Citi and Citibank and Arc Design are registered service marks of Citibank, N.A. or Citigroup Inc. Citibank (Hong Kong) Limited

10 Important Disclosure Although information in this document has been obtained from sources believed to be reliable, Citigroup and its affiliates do not guarantee its accuracy or completeness and accept no liability for any direct or consequential losses arising from its use. Opinions expressed herein may differ from the opinions expressed by other businesses or affiliates of Citigroup, and are not intended to be a forecast of future events, a guarantee of future results or investment advice, and are subject to change based on market and other conditions. The information contained herein is also not intended to be an exhaustive discussion of the strategies or concepts. At any time, Citigroup companies may compensate affiliates and their representatives for providing products and services to clients. This is not an official statement of Citigroup Inc. and may not reflect all of your investments with or made through Citibank. For an accurate record of your accounts and transactions, please consult your official statement. If this document shows information coming from Citi Research, please refer to the attached link: which contains the important disclosures regarding companies covered by Citi's Equity Research analysts, and please refer to the attached link: for details on the Citi Research ratings system. This document may not be reproduced or circulated without Citigroup written authority. The manner of circulation and distribution may be restricted by law or regulation in certain countries. Persons who come into possession of this document are required to inform themselves of, and to observe such restrictions. Any unauthorised use, duplication, or disclosure of this document is prohibited by law and may result in prosecution. This document is distributed in Hong Kong by Citibank (Hong Kong) Limited ( CHKL ). Prices and availability of financial instruments can be subject to change without notice. Certain high-volatility investments can be subject to sudden and large falls in value that could equal the amount invested Citibank Citi and Citibank and Arc Design are registered service marks of Citibank, N.A. or Citigroup Inc. Citibank (Hong Kong) Limited

11 Important Disclosure on High Yield Bonds Unrated or non investment grade Debt Securities typically offer a higher yield than investment grade Debt Securities, but also present greater risks with respect to liquidity, volatility, and non-payment of principal and interest. As a result of being classified as non investment grade Debt Securities, these Debt Securities present a greater degree of credit risk relative to many other fixed income Debt Securities. Higher Credit Risk Unrated or non investment grade Debt Securities generally have predominantly speculative characteristics with respect to the issuer s capacity to pay interest and repay principal. There is greater risk of non-payment of interest and loss of principal. Many issuers of these Debt Securities have experienced substantial difficulties in servicing their debt obligations, which has led to default and restructurings. The issuers of these Debt Securities generally have to pay a higher rate of interest than investment grade Debt Securities. Higher Liquidity and Secondary Market Risk The markets in which unrated or non investment grade Debt Securities are traded are generally more limited than those in which investment grade Debt Securities are traded. This lack of liquidity may make it more difficult to resell these Debt Securities and obtain market quotations. Downgrade Risk Downgrades in the credit rating of unrated or non investment grade Debt Securities by rating agencies are generally accompanied by declines in the market value of these Debt Securities. In some circumstances, investors in the unrated or non investment grade Debt Securities market may anticipate such downgrades as a result of these credits being placed on credit watch by rating agencies, causing volatility and speculation of further credit deterioration. Higher Vulnerability to economic cycles - During economic downturns, unrated or non investment grade Debt Securities are typically more susceptible to price volatility and fall more in value than investment grade Debt Securities as i) investors may reevaluate holdings in lower-quality bonds in favor of investment-grade corporate Debt Securities; ii) investors become more risk averse; and iii) default risk rises. This is often referred to a flight to quality. Event Risk This includes any of a variety of events that can adversely affect the issuer of unrated or non investment grade Debt Securities, and therefore the issuer s ability to meet debt service obligations to repay principal and interest to Debt Securities holders. Event risk may pertain to the issuer specifically, the industry or business sector of the issuer, or generally upon the overall economy. It could have a direct or indirect impact on the issuer and their outstanding debts Citibank Citi and Citibank and Arc Design are registered service marks of Citibank, N.A. or Citigroup Inc. Citibank (Hong Kong) Limited

12 Important Disclosure on RMB Risk relating to RMB If you choose RMB as the base currency or the alternate currency, you should also note the following: RMB is currently not freely convertible through banks in Hong Kong. Due to exchange controls and/or restrictions imposed on the convertibility, utilisation or transferability of RMB (if any) which in turn is affected by, amongst other things, the PRC government's control, there is no guarantee that disruption in the transferability, convertibility or liquidity of RMB will not occur. There is thus a likelihood that you may not be able to convert RMB received into other freely convertible currencies. CNH exchange rates and CNY exchange rates are currently quoted in different markets with different exchange rates, whereby their exchange rate movements may not be in the same direction or magnitude. Therefore, the CNH exchange rate may be different from the CNY exchange rate Citibank Citi and Citibank and Arc Design are registered service marks of Citibank, N.A. or Citigroup Inc. Citibank (Hong Kong) Limited