Macro update

Emerging markets

Schroders Economic Infographic Nov 2014 Marketing material

Oct 2014:FED ended quantitative easing programme June 2015:Expected interest rate rise

Consumption tax affected growthJapan faces challenges to eliminate deflation and repair its fiscal position

Higher rates in US could risk capital outflows from emerging markets

EZ recovery set to improve as budget deficits and credit conditions ease

Global inflation

US JAPAN EUROZONE

Spotlight on China

EMERGING MARKETS

EuropeGermany, engine of European growth is spluttering

However, European banking sector looks more promising

• Limited growth knock-on impact on Germany’s trading partners• Growth for Q3 in EZ but deflationary pressures will continue to build

• No shocks from European Central Bank asset quality review• Unshackling of banking sector and return to lending = alleviate concerns as growth accelerates in 2015... but won’t resolve longer-term lack of competitiveness

OPTIMISM REVERSED

GDP expanded 7.3% YoY, slower than Q2 reading of 7.5%

EXPECTED DOWNTURN IN HOUSING MARKET

Property continues to slow: fears that reform commitment is wavering, expectation for a long

downturn in the market

UNCERTAINTY AROUND CHINA’SLONG-TERM PROSPECTS

Change of stance on free-market reforms and re-centralisation of power leave us uneasy about the

longer-term prospects

CHINA SAFE FOR NOW

China safe, however intervention in 2015/2016 to prevent a crisis looks high

Weaker demand + increased oil supply = price reduction

Low global inflation

PROS CONS

Deflationfears

Support to spending and growth

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